Greetings, and welcome to the Carnival Corporation & plc Fourth Quarter 2025 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Beth Roberts, Senior Vice President, Investor Relations. Thank you, Beth. You may begin.

Thank you. Good morning, and welcome to our fourth quarter 2025 earnings conference call. I'm joined today by our CEO, Josh Weinstein; our CFO, David Bernstein; and our Chair, Micky Arison. Before we begin, please note that some of our remarks on this call will be forward-looking. Therefore, I will refer you to today's press release and our filings with the SEC for additional information on factors and risks that could cause actual results to differ from our expectations. We will be referencing certain non-GAAP financial measures, including yields, cruise costs without fuel, EBITDA, net income, ROIC and related statistics for all, which are on a net basis or adjusted as defined, unless otherwise stated. A reconciliation to U.S. GAAP is included in our earnings press release and our investor presentation. References to ticket prices yields and cruise costs without fuel are in constant currency unless we note otherwise. Please visit our corporate website where our earnings press release and investor presentation can be found. For further information on our proposed DLC unification and shift in legal incorporation, please visit carnivalcorp.com/unify. With that, I'd like to turn the call over to Josh.

Thanks, Beth. It is definitely gratifying to begin this call by saying we delivered yet another very strong quarter to finish a fantastic year. Not only did we deliver historical fourth quarter highs for revenues, yields, operating income and EBITDA, we achieved these record results in each and every quarter of the year and for the full year. 2025 was clearly another step change forward for us. We delivered over $3 billion to the bottom line, a 60% increase over 2024 and an all-time high net income for our company. This was over 30% greater than our initial guidance. Full year yields improved more than 5.5% over last year and topped our initial guidance by almost 1.5 points, driven by successful commercial execution across our industry-leading cruise lines, and all while absorbing the heightened volatility we encountered periodically throughout the year. We also brought unit costs in over 1 point better than initial guidance at a 2.6% increase for the year with successful cost management mitigating inflation, higher dry dock expenses and the inclusion of costs for our amazing new destination Celebration Key Grand Bahama. This combination pushed operating margins and EBITDA margins up by over 250 basis points year-over-year, leading to the highest operating income per ALBD in almost 20 years and EBITDA per ALBD reaching an all-time high. For all of these incredible achievements, full credit goes to our hard-working and dedicated team, the best in all of travel and leisure for the consistent outperformance throughout the year that resulted in ROIC in excess of 13%, the highest level this company has seen in 19 years. Having said that, we are very well positioned to top 2025's fantastic results in 2026. We are already about two-thirds booked in line with where we were a year ago at this time and at historical high prices for both North America and Europe. And over the last three months, we achieved booking volumes that were at record levels for both 2026 and 2027. At the same time, closing demand remains strong, as demonstrated by the outperformance in our fourth quarter by our onboard revenue per diem significantly outperforming prior year levels and our customer deposits up 7% year-over-year, hitting an all-time high for year-end. Our book position and recent performance are all despite Michigan's U.S. consumer sentiment readings dipping quite low for several months throughout 2025, and in fact, last month dropping pretty close to its lowest level in recorded history. It is a true testament to the strength of the product offering across our portfolio of world-class cruise lines and our guests prioritizing their spending with us. In reality, the disconnect between consumer sentiment and actual booking behavior continues to reinforce what we've said for a long time. Demand for our cruise lines is proving far more resilient than traditional macro indicators would suggest. We are expecting another year of same-ship yield improvement marking our fourth consecutive year of low or mid-single-digit per diem growth. Normalizing for the accounting changes from the implementation of Carnival Cruise Line's beneficial new loyalty program and late-stage deployment changes necessitated by geopolitical uncertainties in the Arabian Gulf, we are forecasting a 3% yield increase in 2026. And while I think it's obvious, to address the question we've been getting most often, our 2026 guidance fully incorporates the 14% increase in non-Carnival Corporation capacity growth in the Caribbean taking that to a 27% increase in just 2 years as well as our 4% growth over that time period. Now even against that backdrop, we continue to drive the business forward underscoring the advantage of our diversified global portfolio. We are also continuing to successfully mitigate inflation through effective cost management. And again, with no ship deliveries for 2026, we don't have the advantage of offsetting large cost increases with significant capacity growth. On that basis, we've guided to unit cost growth of 3.25%, which includes a partial year of operating costs from our successful new destination developments and the timing of expenses hitting in the first quarter of 2026 rather than Q4 2025. David will provide more color around the costs, but normalized just for these two items, net cruise cost ex fuel per ALBD are expected to be up about 2.5% for the full year. All told, in 2026, we will bring over $350 million more to the bottom line year-over-year and generate over $7.6 billion of EBITDA. With this strong cash flow, no new ship deliveries this year and the fantastic balance sheet improvements we've made over the last 2 years, we're about a year ahead of schedule and can now embark on a capital allocation strategy that will return even more value to shareholders. Having reached a better-than-expected investment-grade leverage ratio of 3.4x at year-end, I am pleased to say we are now formally resuming our dividend at an initial rate of $0.15 per quarter, which we expect to grow responsibly over time. Reinstating the dividend reflects both our confidence in the durability of our cash generation and the structural improvements we've made to our balance sheet. Alongside the dividend, we will continue to delever to get below 3x net debt to EBITDA, while still allowing for opportunistic share repurchases in the future. In fact, we just kick-started that a bit by calling the last of our convertible debt and in the process, using some cash to take out 18 million shares. We will also have ample opportunity to deliver even greater shareholder value over time as we continue to reinvest in our future, through our disciplined newbuild program, return-generating vessel enhancement programs like our successful AIDA Evolution project, which will soon expand to several of our other brands, and our ongoing destination development efforts. We see much more pricing opportunity ahead as we transition our destination strategy from what has historically been a utilitarian asset base to a marketable growth driver for years to come. Celebration Key is a real differentiator for us and will be complemented by the expansion at RelaxAway, Half Moon Cay later this year. This will soon be followed by Isla Tropicale, as we lean into the rest of our Paradise collection even harder. And as recently announced, we'll also be looking forward to a great guest experience we're developing with our partners in Ensenada, Mexico, showcasing the culture and natural beauty of Baja California, Mexico that will greatly benefit our West Coast deployments. Our significant competitive lane advantage in the incredibly profitable Alaska trade will continue to serve us well for decades to come. On top of these important attributes, cruising has clearly become a mainstream vacation alternative. We have positioned our company with the most diversified portfolio of world-class cruise lines in the industry. And in fact, we hold the number one or number two brand in every major market for cruising today. Our well-recognized cruise lines have been honing in on their target markets, sharpening their marketing messages and reaching target consumers in an incredibly efficient manner. Moreover, we are continuously improving upon our yield management tools and techniques to generate the most revenue possible from our asset base. We're also leaning into AI to further improve in areas such as marketing effectiveness and enhanced personalization and to find further efficiency gains across the business. And the good news is the price to experience ratio to land-based alternatives is still at a fantastic value and provides enormous headroom for many years to come. That's despite what will be an approximately 20% cumulative yield increase for us since 2023. So while we are not immune to things like the lowest consumer sentiment in years, or capacity spikes in our most concentrated market or geopolitical conflicts around the world, having two-thirds of the business on the books at higher prices underscores the resilience of our business model. Against all of that background noise, we plan to deliver another double-digit earnings growth on top of the 60% increase we achieved in 2025, leaving us well positioned to continue to outperform in the consumer discretionary and travel space yet again. Again, thank you so much to each of our team members, ship and shore, who have delivered such phenomenal results in 2025 and set us up well for another step forward in 2026. At the end of the day, this is about delivering unforgettable happiness to over 13.5 million people around the world by providing them with extraordinary cruise vacations while honoring the integrity of every ocean we sail, place we visit and life we touch, and that is something we do incredibly well. Thanks also goes out to our travel agent partners who have contributed immensely to this success. Likewise, a heartfelt thanks is owed to our loyal guests, investors, destination partners and other stakeholders. Suffice it to say, these accomplishments reflect the effort, support and loyalty we've received from all of you. I continue to be very proud of what we've been able to accomplish together while at the same time, remain incredibly excited about the runway ahead that leads to continued improvement to our business and results for years to come. With that, I'll turn the call over to David.

Thank you, Josh. I'll start today with a summary of our 2025 fourth quarter results. Next, I will provide a recap of our 2025 deleveraging and refinancing efforts. Then I'll give some color on our 2026 full year December guidance as well as some key insights into our 2026 first quarter and then finish up with some comments on the recommended simplification of our corporate structure. Turning to the summary of our fourth quarter results. Net income of $454 million was nearly 2.5 times the prior year and exceeded September guidance by $154 million or $0.11 per share as we outperformed once again. The performance versus September guidance was driven mainly by two things: First, favorability in revenue was $0.03 per share as yields came in up 5.4% compared to the prior year, and that was on top of last year's robust increase of nearly 7%. This was 110 basis points better than September guidance, driven by continued strong close-in demand, which resulted in higher ticket prices and an acceleration of strong onboard spending. The increase in yield was driven by improvements on both sides of the Atlantic. Second, cruise cost without fuel per available lower-berth day, or ALBD, were only up 0.5% compared to the prior year. This was 2.7 points better than September guidance and was worth $0.04 per share. The favorability was driven by both cost-saving initiatives, which we firmed up during the quarter as well as timing of certain expenses between the years. The balance of the favorability $0.04 per share was a combination of better fuel prices, favorability in fuel consumption and fuel mix, slightly less depreciation than expected favorable net interest expense and a variety of other small factors. Next, I will provide a recap of our 2025 deleveraging and refinancing efforts. We have reached a meaningful turning point achieving an investment-grade net debt to adjusted EBITDA ratio of 3.4x as of the end of the fiscal year 2025. We successfully completed our $19 billion refinancing plan in less than a year. These efforts strengthened our balance sheet by simplifying our capital structure, reducing interest expense and debt, optimizing our future debt maturities and enhancing our financial flexibility. In total, we have reduced our debt by over $10 billion since the peak less than three years ago. These efforts and our strong continued operating performance resulted in multiple credit rating upgrades throughout the year, culminating in reaching investment grade with Fitch and being one notch away with a positive outlook from S&P. All of this is expected to result in an over $700 million improvement in net interest expense in 2026 as compared to 2023, which is fully reflected in our guidance. Now I will provide some color on our 2026 full year December guidance. On top of the 17% yield growth over the last two years, we are expecting to deliver further yield improvement in 2026 with our guidance forecasting an increase of approximately 2.5%, which is really 3% when normalized for the Carnival Cruise Line loyalty program accounting and the last-minute changes we made to our Arabian Gulf deployment and certain dry dock schedules. The 2.5% yield growth is worth over $0.35 per share when compared to 2025, which is a result of both an increase in ticket prices and higher onboard spending, which has continued to remain strong. Turning to costs. Cruise costs without fuel per ALBD are expected to be up approximately 3.25% costing $0.27 per share for 2026 versus 2025. This is really a normalized rate of 2.5% when factoring in two things. First, operating expenses for full year operations of Celebration Key Grand Bahama and the midyear opening of our new pier at RelaxAway, Half Moon Cay will impact our overall year-over-year cost comparisons by 0.5 point. Second, the sliding of some costs from fourth quarter 2025 to 2026 will impact our overall year-over-year cost comparisons by about 0.3 point. The three main drivers of our normalized 2.5% cost increase are: First, 3% attributable to inflation and higher advertising expenses; second, about 0.6 point from dry dock expense on our income statement. In 2026, after optimizing our dry dock schedule, we are expecting 604 dry dock days. While the total actual spending for our dry docks in 2026 is expected to be roughly in line with 2025 as a result of the nature of the 2026 work more of the spending is classified as operating expense and less as capital expenditures. And third, cost mitigation of approximately 1.1% from efficiency initiatives and further leveraging our industry-leading scale. Regulatory costs related to emission allowances and higher income taxes driven by Pillar 2 will cost us $0.11 per share. Benefits from net interest expense, fuel consumption and capacity were partially offset by increased depreciation for a net favorable impact of $0.06 per share. The net impact of fuel price and currency is expected to favorably impact 2026 by $0.20 per share, with fuel prices favorable by $0.17 and the change in currency exchange rates adding $0.03. In summary, putting all these factors together, our net income guidance for the full year 2026 is over $3.45 billion, an improvement of more than 12% versus 2025 or $0.23 per share. In addition, this will result in $7.6 billion of EBITDA. As we mentioned on the last earnings call, for the longer term, we're targeting a net debt-to-EBITDA ratio under 3x. While I'm happy to report that even with four dividend payments modeled into our guidance for 2026, we are projecting to get there by the end of the year. Before I leave our 2026 guidance, I did want to update you on the impact of Carnival Cruise Line's new loyalty program, Carnival Rewards, which will now start in September 2026, impacting results for the fourth quarter. As a reminder, while the program will be cash flow positive from day one, it does impact our yields in 2026. The impact is expected to be 0.2 point in 2026, 0.5 points in 2027, 0.2 point in 2028 and turn positive thereafter. Now some key insights into our 2026 first quarter. Yield improvement is approximately 1.6% or 2.4% when normalizing for the last-minute changes to our Arabian Gulf deployment and certain dry docks in the first quarter. First quarter 2026 has a difficult prior year comparison as 2025 was at a record level with a 7.3% increase compared to 2024. In addition, the quarter is being affected by the Caribbean double-digit industry-wide growth along with the first quarter having the largest absolute quarterly capacity in the Caribbean during the year, as well as the impact of volatility in the first half of last year on our advanced booking curve. Adjusted cruise costs, excluding fuel per ALBD are expected to be up approximately 5.9% compared to the prior year and higher than the full year. This results from the fact that all of the items that are expected to impact the full year will have a greater impact on the first quarter. I'll finish up with some comments on the recommended simplification of our corporate structure. We are recommending to our shareholders that we unify the dualistic company or DLC framework into a single company listed solely on the New York Stock Exchange. This aligns with the marketplace. We are aware of 15 dual-listed companies or DLCs created over the last four decades, including our DLC in 2003. A substantial number of those have been unified in recent years for many of the same reasons we are recommending our unification. Today, we know of only three other major DLCs remaining. Under our plan, Carnival plc shareholders would receive Carnival Corporation shares on a one-for-one basis and Carnival plc shares and ADSs would be delisted. Carnival plc would become a wholly owned U.K. subsidiary of Carnival Corporation. This would create a single global share price, streamlined governance and reporting and reduce administrative costs. We believe we will also increase liquidity for stock trades and increased weighting of the stock in major U.S. stock indices. We intend to hold meetings of our shareholders in April to consider the recommendation. Subject to shareholders approving our recommendation, we intend to complete the unification in the second quarter of 2026.

Our first question comes from Robin Farley with UBS.

Great. That was a lot of information that covered a lot of the initial questions. Maybe just one thing when we think about your guidance. It sounds like if we were just taking up the accounting accrual, it will be closer to sort of 2.8% yield growth for next year. You mentioned that a lot of the beat in Q4, similar to what you said during the year, was this acceleration in onboard spend and better close-in demand. Would you say that when you're thinking about your guidance for 2026, are you factoring in that those things will continue at that level? Or are you kind of assuming that those would be at the rate that you'd originally thought? In other words, I'm just thinking about whether that acceleration and good close in demand is in your guidance or that would really be upside to your guidance?

Robin, so I think the fair thing to say, look, this is our guidance based on what we expect to happen at this point in time when we look into 2026, taking into account the business we've got on the books, the momentum we've got and the fact that the world changes on a pretty daily basis. And so we're always going to try to continue the momentum on the onboard side. We're always going to try to make sure that the close-in bookings are going to hopefully beat our expectations. But at this point in time, it's truly our best guess. And as we always do around this time of year, you could say that we started early. It always starts early at this point, which I do believe, and it's really something that takes off as we get into the latter part of November. We're still right in the mix of it, as you know. And so we do need some more time to see how it all develops.

Okay, great. You mentioned the increase in Caribbean capacity, which is primarily focused on the first quarter. Typically, at this time, would you be over 80% booked for the first quarter? Can you clarify where you currently stand? I know you discussed your overall plans for the year being in line with record highs. For the first quarter, would you say you're ahead of schedule compared to usual, or are you on track with the typical timeline regarding how quickly you've processed bookings for the Caribbean?

Yes. I mean for our Q1 sailings, there's not that much left to go. And we are, at least at this point in time, we're a little bit better positioned tiny bit versus last year on the fringes. So not much to say about the first quarter.

Our next question comes from the line of Brandt Montour with Barclays.

Congratulations on the dividend and the results. So the first question is on the bookings. You guys called out the momentum, and it was clear in the release and the commentary. We had heard that there had been some slightly less robust demand, still good, but it's just not quite what some folks have seen last year. So just wondering from a revenue management perspective, as you guys have chosen to take any volume at the expense of slightly less pricing growth this year, if that was a strategy at all for you guys?

Yes. Thank you for the question. We're, as you said, our revenue managers brand by brand, voyage by voyage are doing the right things to maximize ultimately the amount of revenue we have in the bank by the time the ship comes back to port. And so the momentum has been good. We're doing things that we think are going to continue to help support the guidance and support the business, not only for 2026, but for 2027 and even some that we're getting into 2028. So we feel good about the way our teams are going about managing the curve.

Okay. That's great. And then on the Caribbean commentary, we hear about that capacity lift. A lot of it is in the close end market, 3- and 4-day itineraries. I don't know if you want to comment in terms of your exposure to that market specifically or if you could get in the weeds and kind of help us understand if you have a little bit of different mix versus what you guys see coming into that market for this first quarter specifically?

I actually don't have it offhand with respect to the first quarter. But clearly, there's all sorts coming into the Caribbean, right? You've got the 7 others, you got the shorts from others. When it comes to us, Carnival has been America's cruise line operating in the Caribbean on shorts for, I don't know, five decades. And they'll continue to do that and do that thoughtfully. We like the portfolio approach we're taking even into the Caribbean because, when you think about our mix and you look at the first quarter, 20% of our Caribbean capacity is actually from our European brands that have flare programs going into places like Barbados and Dominica, and it works very well for us. So probably in a roundabout way to answer your question, there is short, there is 7-nighters, and there's things that are even longer, and we play in all of it.

Our next question comes from the line of Matthew Boss with JPMorgan.

Congrats on another nice quarter. So Josh, could you elaborate on the momentum carrying into '26 that you cited, specifically maybe the cadence of booking volumes that you've seen up through holiday, prices in North America and Europe, which I think you cited at historical highs? And maybe even to say it a different way, have you seen anything irrational at all? And does your guidance for the 3% normalized yields for the year, does that require today's level of momentum to sustain? Did you bake in benefit for Celebration Cay Half Moon? Is there anything in there for lapping up against the tariff volatility from a year ago that you saw in bookings? And did you put anything in at all for stimulus in terms of potential benefit?

Yes. Thanks for the question, Matt. Let me see if I can answer it holistically. So as a starting point, like I said in an earlier call, we are very happy with the momentum that's taken us through the end of the first quarter and into the last few weeks and volume is up nicely. And we're doing that the way that we always do that, which is managing the curve and putting out our product and our experiences to our guests who are looking for value, and that's what we do, and that's what we've done over the last couple of years as our yields have gone up 17%, and we'll continue to do that. With respect to all of the ins and outs of what's been baked in, like I said before, every forecast to some extent, is a guess and it's based on some assumptions. So as far as stimulus specifically, we didn't really bake anything into that. As far as the macroeconomic impacts that we saw this year, yes, that did play into it to some extent. I mean, we know that we're going to lap some of the volatility in the spring. And we also know we didn't have the volatility of the spring on our radar screen this time last year. Things do happen all the time, all around the world. And so we just got to be prepared to deliver in light of that. I just keep going back to the well. The one thing I'd reiterate to everybody is the fact that things happen in cycles, things happen differently in different geographies, and the diversity that we've got sets us up very well to be able to withstand volatility. And the fact that we're guiding to a normalized yield increase of 3%, I think is very good. And I'd just remind you that if you remember, what we've talked about with respect to the volatility last spring, it was really having an impact on the second half of '25 into the first half of '26, which is what's been built in exactly to our forecast. So as always, we're going to try to exceed everything. That's always the goal, but this is our guess at this time. Best guess.

Great. It's great color. And then, David, just relative to your 3.25 net cruise cost outlook for the full year, what have you embedded if anything, as it relates to cost management? Last two quarters, you've shown really nice results on the cost side. I think you cited hundreds of items that you found to leverage scale as potential offsets to the transitory cost headwinds. What have you embedded on the cost management side that could be potential offsets to the cost headwinds that are in your forecast, if anything?

Yes. So no, as I mentioned in my prepared remarks, we did put in about 1.1% of cost mitigation from efficiencies and other initiatives, sourcing, which leverage our scale, etc. So we put in a substantial amount, which offset inflation.

Our next question comes from the line of Steven Wieczynski with Stifel.

Happy holidays to all you guys. So Josh, I want to dig into the Caribbean a little bit more. And I know it's a topic you probably haven't been asked about a lot recently. But if we think about 2026, can you maybe give us some color on what you're seeing right now in terms of demand for your Caribbean products? And maybe that's not the right way to ask it, and maybe a better way to ask that is your ability to take pricing action right now in the Caribbean? And then maybe how you're thinking about pure Caribbean yields in '26 relative to your overall 2.5% yield guidance?

Yes, I feel like I might be repeating myself here, but we are managing the business in the way we believe is best. I won't comment on our competitors individually. What I can share is that our growth has been 4% over the last two years between 2025 and 2026. When you consider the industry's growth without us, it's significant. That's the context, but we are confident about our achievements and how we've integrated that into our forecasts. If you have a different perspective you'd like to explore, we're optimistic about the way we've approached our business.

Let me ask it this way then. Caribbean yields will be positive in 2026?

Caribbean yields will absolutely help support the momentum of this business. And we look forward to talking at the end of the year when we find out what happens.

Our next question comes from the line of David Katz with Jeffries.

David, could you just help us with fixed versus variable costs within where you're at today? I know we're not going to be able to predict the future necessarily, but we'd love to get a sense for how we might find leverage in the model, should it turn out to be a better year than anticipated.

So it's a difficult question to answer because we do operate at full capacity and essentially sell every cabin. So once you have that basic premise in the business. What you're basically saying is a ship size, most of your costs are fixed. However, that doesn't mean that you can find better ways and optimize the business by doing things differently, which is whether it's been using AI or other things in order to improve your cost structure. We're doing that shore side as well. Shore side, you find that obviously, somebody could say your advertising expense is variable. But in the long run, it really isn't. So what we have to do and what we focus on continually is being most efficient with every single dollar we spend and finding ways to do more with less.

Our next question comes from the line of Jaime Katz with Morningstar.

Nice quarter guys. Can I ask a little bit about consumer demand. I think you guys did a nice job of dissecting demand by geography, but maybe can you talk a little bit about the behavior of consumers between income levels? Because we've been hearing a lot about this K-shaped demand pattern and how they've differentiated. Are we seeing things like seaborne consumers being more resilient than Carnival consumers or vice versa? Is there any way to parse that out to a better degree for us?

Yes, sure. So when you look at the segments, you got contemporary premium and luxury. We're not seeing any meaningful difference across the segments, I would say. And this has been asked before when you think about our U.S. consumer across the big brands that we've got in the U.S., excluding sea-borne, the range of our household income is something in the $100,000 to $150,000 range. So it's certainly in the middle class. And now having said that, our guests don't live in a vacuum. They live in the same world as every other consumer does, and they see the headlines. And they're looking, I think, in a lot of cases, to figure out how do they get more value for what they're spending. That's been a pretty constant theme for a long time, and it certainly was in the fall, as you heard, not only us and people in the cruise space talk. But I think as you hear retailers talk and as we've been getting into the holiday season. Some people are looking to make sure that they are getting the most they can get for the money that they spend. And they're specifically looking to preserve and protect things that are dearly important to them like spending time with their friends and family on holidays. And when you put all of that together, that is a very nice tailwind for what we have to offer because we are an amazing value, we give an amazing experience, and we can help you make your money go further than what the land-based alternatives are. And so we feel good about the positioning. I'm happy to always have a gap to land and always be a value and close the gap over time and always have a gap and be a value. I think that's a great thing that we can provide to our guests.

Okay. And then I think there was a comment on always sailing full, but can you talk a little bit about how you guys are thinking about managing occupancy in 2026 just relative to the past, given that prices are at an all-time high and maybe the experience improves with fewer people on the ship? So maybe how is the occupancy being optimized in the year ahead?

Sure. I think that's a valid point. I'm not requiring my teams to report exact occupancy figures to the last decimal. Ultimately, our goal is to maximize revenue. This means that even if we miss occupancy by a small margin, we can still generate more revenue than we initially forecasted, as our teams are effectively managing that balance. There will always be opportunities to consider whether it's worth bringing in a few extra guests or maintaining price integrity for long-term gains. We allow our brands the flexibility to make those decisions, and they have been doing well in that regard, and I anticipate this will continue.

Our next question comes from the line of Conor Cunningham with Melius Research.

You've put a lot of effort into the balance sheet. I believe you're aiming for a target below 3 billion. Why do you consider that the appropriate level? Is there a goal to exceed the 2.6 billion that you have due this year?

Sure. So overall, if you calculate using our guidance where we'll wind up the year, we will wind up less than 3. We wind up at about 2.8x. So we are moving in the right direction and feel very good about that. I would say we had said sub-3. But overall, we're probably targeting something in the range of 2.75 that should get us around a BBB rating, and we feel that, that is strong at this point in time for a company like ours.

Okay. There's been a lot of discussion about the Caribbean, but it's fairly typical in this industry to experience significant fluctuations in supply from time to time. Not long ago, we were mentioning that Alaska had an oversupply, but that situation normalized fairly quickly. Can you elaborate on core pricing compared to occupancy? The most notable change seems to be that Carnival is less inclined to offer discounts to maintain occupancy. I understand you've mentioned the goal of maximizing revenue, but could you provide a broader perspective on how this approach has evolved compared to the past? This seems to be an important aspect to address.

Sure. First of all, let me clearly express that the Caribbean is, and always will be, a fantastic market for us. We have successfully managed elevated supply in the Caribbean, Europe, and Alaska multiple times over the decades. This supply comes and goes, gets absorbed, and we move forward. My perspective on the long-term outlook remains unchanged despite this current situation because we have a strong track record in managing these dynamics. Regarding our philosophy, I believe we are operating on a rational basis, aiming to maintain price integrity in the market. At the same time, we want to ensure that our guests are satisfied and spending money both on tickets and onboard activities. Over the past few years, we have evolved with bundled pricing and packages, which has changed how we position ourselves in the market and communicate our value. We've been implementing these strategies for a couple of years, and our yields have increased by 17%. Promoting our offerings and engaging our customer base is part of our strategy to maximize revenue while ensuring that our guests are happy. While there isn't a specific formula to share, this describes our general approach.

Our last question comes from the line of Sharon Zackfia with William Blair.

I wanted to ask about marketing because clearly, you had a lot of success with increasing your marketing spend, and I think that was called out at someday you will increase more in '26. Can you talk about where you ended with marketing as a percent of sales in '25, how do you think about that for '26? And then there's a lot of talk about the way to get to consumers kind of changing with maybe SEO and things like that being less effective. I mean how do you think about targeting consumers as the way to get to them, maybe shifting, particularly in the digital landscape?

Yes. I will address the last part first. You are absolutely right; this area of our business is evolving rapidly, especially regarding technology and the use of AI tools, both by us and consumers, and how we are integrating these changes. There are many existing solutions from third-party companies that we are leveraging to stay aligned with how consumers now approach planning not just vacations but everything. This will be a recurring theme in the coming years, and we need to be adaptable and thoughtful, as significant changes are expected in the next five years, and we must keep pace. Therefore, we are reallocating resources and discussing with our operators the need to adapt spending strategies accordingly. However, we will still pursue essential top-of-funnel initiatives to get into the consideration set. We're exploring how to optimize our presence to ensure we reach the right audience effectively to close bookings. Regarding advertising, we are not seeing any dramatic spikes as a percentage of revenue; we are focused on doing what’s best for our brands and business, which is around 3.5%. While this is a metric we monitor, it doesn't solely dictate advertising expenditures, as our strategies evolve in real-time. Thank you very much, and happy holidays to everyone. I appreciate the support from our corporation, our guests, and trade partners. Enjoy a well-deserved break next week.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.