Good morning, and welcome to the Norwegian Cruise Line Holdings First Quarter 2024 Earnings Conference Call. My name is Joe, and I will be your operator. Operator provided instructions. As a reminder to all participants, this conference call is being recorded. I would now like to turn the conference over to your host, Sarah Inman. Ms. Inman, please proceed.

Thank you, Joe, and good morning, everyone. Thanks for joining us for our first quarter 2024 earnings and business update call. I'm joined today by Harry Sommer, President and CEO of Norwegian Cruise Line Holdings; and Mark Kempa, Executive Vice President and CFO. As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at www.nclhltd.com/investors. Throughout the call, we will refer to a slide presentation that can be found on our Investor Relations website. Both the conference call and presentation will be available for replay for 30 days following today's call. Before we begin, I would like to cover a few items. Our press release with first quarter 2024 results was issued this morning and is available on our Investor Relations website. This call includes forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements. These statements should be considered in conjunction with the cautionary statement contained in our earnings release. Our comments may also refer to non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation. With that, I'd like to turn the call over to Harry Sommer. Harry?

Thank you, Sarah, and good morning, everyone. Thank you all for joining us today for our first quarter 2024 earnings call. It's such an exciting time for our company with wonderful new products available across all three of our award-winning brands, strong demand and some recent noteworthy announcements that have solidified our trajectory for years to come. The demand for cruise vacations continues to be at an all-time high, as evidenced by record booking, record book position and record advanced ticket sales as the continued innovation and service delivery on board our ships lead to exceptional guest satisfaction scores. The combined effect is strong financial performance in the quarter and an even brighter outlook for the year ahead. Today, it's my pleasure to discuss some of our Q1 milestones, including the recent newbuild ship announcement and pier development, our strong performance in the quarter and the exciting booking trends that are driving our improved guidance for the remainder of 2024. I'll also be diving into the significant progress we've made on our global sustainability program, Sail & Sustain. Later in the call, I'll turn it over to Mark, who will provide more color on our first quarter performance and updated guidance for 2024. We kicked off the year with impressive momentum carrying forward several positive trends from the end of 2023. As you can see on Slide 4, we sustained strong demand throughout the quarter, achieving record bookings in this period, which led to our most successful WAVE season ever. As a result, our 12-month forward book position remains at an all-time high. In terms of financial results, adjusted EBITDA nearly doubled during the first quarter compared to last year on the back of stronger pricing and higher occupancy levels. Our margins also noticeably improved during the period, with our core costs essentially flat year-over-year, leading to robust growth in adjusted operational EBITDA margin, which is adjusted EBITDA divided by adjusted gross margin now approaching 33% for the trailing 12 months. As a result, we reduced our leverage by a full turn during the quarter when compared to the end of 2023, ending the first quarter at 6.3x net leverage, marking an important milestone in our journey to strengthen our balance sheet and well on our path for the 1.5 turn improvement in net leverage we guided for the year. These strides were recognized by S&P, which upgraded both our issuer credit rating and issue-level ratings during the quarter. While we'll give more details later in the call, I can't help but share that we have exceeded essentially all of our guidance metrics for the first quarter of 2024 and consequently raised guidance on our key metrics for the full year, including net yield, adjusted EBITDA, adjusted net income and adjusted EPS. Another key milestone during the first quarter was our historic newbuild order, which we shared on our last conference call during Seatrade Cruise Global. Encompassing eight new ships across all three of our award-winning brands, this is the most transformative newbuild program in our company's history. We also announced the construction of the two-ship pier at Great Stirrup Cay, which will enhance our existing infrastructure on the private island making it an even more attractive destination for our guests. I am thrilled about our future as I know we're paving the way for our continued growth in the next decade and beyond. Our first quarter successes are due to our continued focus on our near-term priorities, which are detailed on Slide 5. We successfully grew capacity 8% compared to 2023, while achieving a record 12-month forward book position, all while increasing price and reducing our net leverage by a full turn, and we're seeing strong results across the board. Turning to Slide 6. We have shown you frequently in the past, I want to once again emphasize our long-term strategy of delivering measured capacity growth and optimizing our fleet to drive strong financial returns. Our newbuild pipeline increased from five to 13 ships in the quarter, representing a capacity CAGR of 6% from 2023 to 2028 and 4% from 2023 to 2036. Historically, capacity growth has driven outsized revenue and adjusted EBITDA growth, and we expect this trend to continue with the incorporation of larger and more efficient state-of-the-art vessels to our fleet. Turning our attention to the current booking environment shown on Slide 7 and we are witnessing robust and resilient consumer demand across all three of our brands in all of our markets. As a result, during the first quarter of this year, we noted record bookings culminating a record WAVE season, leading to a continued record book position for the next 12 months, extending into 2025. We continue to see healthy demand across all markets, brands and products, including Europe and Alaska, which continue to perform very well and make up the majority of our deployment over the summer. All of this strength is despite the cancellation and rerouting of our itineraries that we announced in the Middle East and Red Sea earlier this year. We also recently announced the cancellation of all Red Sea sailings across all three of our brands for the spring of 2025 and replacement sailings are already on sale. By adjusting these sailings well in advance, we can ensure a full sales cycle for the replacement itineraries and no impact to our 2025 yield. Overall, we are encouraged by the strength in our book position for the next 12 months, which remains at all-time highs with commensurate higher pricing. As a result, yield growth is strong. During the first quarter, yield growth exceeded guidance coming in at 16.2% on a constant currency basis, up 70 basis points from the guidance we provided just two months ago in late February. 2024 is shaping up to be a strong year. And as a result, we are raising our full year yield guidance 100 basis points from 5.4% to approximately 6.4% on a constant currency basis on the back of the strong first quarter and strong demand for the remainder of 2024. Please note that our occupancy guidance remains unchanged as we are essentially already guiding to full ships. So the entire increase in our guidance is on the back of stronger pricing. Onboard revenue also remains a highlight with strength seen across the board. This is a positive sign that our target consumer remains healthy and resilient. We continue to absorb strong demand from pre-cruise purchases, which were up 16% compared to 2023. Preselling of pre-cruise packages typically leads to a higher overall spending during a guest's cruise journey. Turning to Slide 8. To continue cementing our leading industry position beyond 2024, I'm excited to announce that this first quarter reached an all-time high in advanced ticket sales. This success was driven by robust pricing, a dynamic deployment mix, coupled with increased presale packages and capacity growth. Our advance ticket sales balance rose 13% year-on-year, reaching a record $3.8 billion. Over the past quarter, we have taken considerable strides in our sustainability efforts through our Sail & Sustain program, which you can see on Slide 9. We kicked off the year seeking out government grants to support our green initiatives by applying to the EU Innovation Fund with the goal of accelerating the transition of our six Prima-class vessels for being methanol-ready to be fully methanol-capable. We continue to be committed to our short- and long-term decarbonization goals. We're also proud to announce that 50% of our company-wide fleet is now equipped with shoreside technology, achieving our year-end 2024 target well ahead of schedule. This is key to our journey to minimizing emissions during port stays and contributing to cleaner air in the port communities we visit. Our proactive approach to environmental impacts didn't go unnoticed. CDP Climate gave us a notable B rating in recognition of the steps we've taken to measure and manage our risks and opportunities related to climate change. This acknowledgment endorses our efforts and pushes us to continue enhancing our sustainability initiatives. Our commitment to operating ethically and with integrity also gained us recognition in the equity markets. JUST Capital in their restaurant and leisure category of America's Most JUST Companies Index named us as a top five company. This recognition is a testament to our dedication to fair and equitable operations and the prioritization of our stakeholders' wellbeing. Also, we completed the purchase of three million carbon offsets invested in renewable energy projects. These offsets not only support our decarbonization journey, but invest in cleaner energy sources and local job creation in the communities where these projects are located. Finally, we were recently honored with being one of Forbes' Best Employers for Diversity in 2024. This award is a testament to our dedicated efforts in fostering an inclusive workforce, where diverse backgrounds are represented, engaged and empowered to generate and execute on innovative ideas. I want to express my gratitude to our entire team for their efforts in making our company a welcoming place for all of our talented team members. This recognition motivates us to continue creating a workplace where every individual feels valued and empowered. This progress underscores our unwavering commitment to environmental sustainability, ethical business practices and the well-being of all of our stakeholders. These accomplishments serve as building blocks in our ongoing journey towards a more sustainable and responsible future. I couldn't be more proud of our entire team for all of these impressive accomplishments. With that, I'll turn it over to Mark to walk you through our financial results and outlook. Mr. Kempa?

Thank you, Harry, and good morning, everyone. I'm a little under the weather today, so if my voice cracks, I apologize in advance. My commentary today will focus on our strong first quarter 2024 financial results, our improved full year 2024 guidance and our increasingly solid financial position. Unless otherwise noted, my commentary on 2024 net yield and adjusted net cruise cost, excluding fuel per capacity day metrics are on a constant currency basis and comparisons are to the same period in 2023. Let's begin with our first quarter results, which are highlighted on Slide 10. We had an exceptional start to the year, and we exceeded guidance across the board, beating our already ambitious targets for the first quarter, which we only announced two months ago. Starting with the top line. Results were impressive with net yield increasing 16.2%, materially exceeding our guidance of 15.5%. As discussed last quarter, several factors contributed to the exceptionally strong top line growth we saw this quarter, including the lapping of lower load factors and a less-than-optimized itinerary mix in the first quarter of 2023. But more importantly, we experienced unprecedented demand for Caribbean sailings in the first quarter of 2024, which represented approximately 58% of our total deployment in the quarter. Looking at costs. Adjusted net cruise costs, excluding fuel per capacity day, came in slightly below guidance at $164. As expected, this number includes approximately $5 from the increased dry-dock days and related costs in the quarter compared to 2023. Excluding the impact of dry docks, our adjusted net cruise costs, excluding fuel, would have been essentially flat year-over-year, demonstrating our ability to offset the impacts of inflation with our disciplined cost savings initiatives across the organization. Adjusted EBITDA was approximately $464 million, exceeding guidance of $450 million and almost doubling the prior year's results. We returned to first quarter profitability with adjusted EPS of $0.16, exceeding guidance of $0.12 in the quarter and well above the loss of $0.30 in the prior year. Overall, we are incredibly pleased with the results we generated in the first quarter. Strong top line growth, combined with continued progress in reducing costs, allowed us to essentially beat all of our guidance metrics in the quarter. We are building on this momentum and with our revised expectations for 2024 are raising our full year guidance on several metrics, which can be seen on Slide 11. We raised our full year net yield growth a full percentage point from 5.4% to approximately 6.5%. This 100 basis point increase reflects the strength we experienced in the first quarter, but more importantly, our higher expectations through the rest of the year as a result of strong demand and record bookings that we have experienced for the remainder of 2024. Last quarter, we mentioned the impact on our business due to cancellations and redeployment of itineraries in the Middle East and Red Sea. The strength we have seen in the business through WAVE season, however, has allowed us to almost fully offset this impact. Our full year guidance implies net yield growth for the remainder of the year in the low to mid-single-digit range and is exceeding our pre-pandemic growth rate. Adjusted EBITDA guidance for the year increased $50 million to $2.5 billion building on the first quarter guidance beat of $14 million. Adjusted EPS guidance for the year increased on a net basis of $0.09 to $1.32, made up of our $0.04 beat in the first quarter, a $0.10 raise for the balance of the year due to higher demand and pricing, which was partially offset by higher fuel costs and interest expense of approximately $0.04. These strong numbers and related guidance raise would not be possible without the continued focus and efforts from our entire team, both shoreside and shipboard. Now let's take a look at our guidance for the second quarter. We expect a strong second quarter with net yield growth expected to increase approximately 4.3%, which is slightly above our historical averages despite the impacts of the canceled itineraries and redeployments in the Middle East and Red Sea. Adjusted net cruise costs, excluding fuel per capacity day is expected to be approximately $165 or approximately 5.8% above the same quarter last year. As we mentioned last quarter, dry-dock days in 2024 will make comparisons to prior year more challenging. Second quarter '24 has approximately 70 more dry-dock days scheduled than last year. This increase for the quarter results in a $9 or 550 basis point impact on an adjusted net cruise cost ex fuel in the quarter. Excluding the dry-dock impact, adjusted net cruise cost excluding fuel is expected to be approximately $156, essentially flat year-over-year, demonstrating once more the continued success of our cost savings initiatives across the organization. As a result, adjusted EBITDA for the second quarter is expected to be approximately $555 million, adjusted net income is expected to be about $160 million and adjusted EPS to be approximately $0.32. Moving to Slide 12. I want to dive a bit deeper into our margin enhancement initiatives. We remain fully committed to boosting margins and reducing costs across the organization. With a meticulous approach supported by our transformation office, we are continuously pinpointing opportunities irrespective of their scale across every facet of our business. The results of these efforts are clear in the first quarter of 2024 where adjusted net cruise cost ex fuel per capacity day was $165 but was essentially flat compared to the first quarter in 2023, excluding the dry-dock impact. Our guidance on adjusted net cruise cost ex fuel remains unchanged for the full year 2024 and is expected to be $159, net of the approximate $5 impact from dry-docks in the full year, which ex the dry-docks are essentially expected to be flat. For your models, I would remind you that we expect to see about two-thirds of the dry-dock impact during the first half of the year with the remainder in the fourth quarter. Turning over to Slide 13. I want to focus on an important metric that we track internally, which is our adjusted operational EBITDA margin which is calculated by dividing adjusted EBITDA by adjusted gross margin. Looking at the last 12 months, you can see the significant improvements we have made as we have returned the business to full operations and focused on rightsizing our cost basis. In Q1, trailing 12-month adjusted operational EBITDA margin was 32.7%, improving 200 basis points compared to the full year 2023. We expect to see this margin continue to improve throughout the year, ending 2024 at approximately 33.5% based on our updated guidance. As you know, we are striving to improve our margins, and this journey will be fueled by two main drivers: First, capitalizing on the strong demand in the market, and converting this into quality and sustainable net yield growth; and second, continued focus on net cruise costs and rightsizing our cost base. Shifting to the balance sheet and debt maturity profile on Slide 14. During the quarter, we completed the refinancing of our $650 million backstop commitment from a secured to an unsecured basis. In connection with this refinancing, we repaid $250 million 9.75% secured notes due in 2028, which was our highest interest rate debt. This refinancing reduces our interest expense and improved leverage while also releasing all related collateral, another important step forward in strengthening our balance sheet. Moving to leverage on Slide 15. We have a track record of delivering on net leverage reduction, as we have discussed in many previous earnings calls, and we are currently on a path to do so again. In the first quarter alone, we reduced our net leverage by a full turn from year-end and turned the quarter at 6.3x. This is a significant reduction for one quarter, and we expect to continue to improve net leverage over time propelled by our organic cash generation and scheduled debt amortization payments. By the end of 2024, we anticipate reducing our net leverage by approximately 1.5 turns from year-end 2023, ending 2024 in the upper 5x range, with sequential improvements in each quarter. We are currently refining a multiyear plan to further continue the reduction of leverage and derisk our balance sheet to drive shareholder value. I plan to share more on this plan at our Investor Day on May 20. Closing out my section, I want to reiterate, this has been a fantastic quarter, where we beat guidance on all key metrics. The strong momentum we have seen in the quarter is carrying over to the full year, and we've been able to raise our guidance for the full year on yield, adjusted EBITDA, adjusted net income and adjusted EPS. This quarter is a testament to our ability to use strong top line results, coupled with efficiencies to enhance margins and drive strong EBITDA and related cash flows, resulting in lower leverage and derisking the balance sheet. We are excited to see how the rest of the year plays out after the strong start. With that, I'll turn it back to Harry for closing remarks.

Well, thank you, Mark, and I wish you a speed of recovery. Moving forward, our entire team will be focused on our most important work, as shown on Slide 16. First, we will continue to focus on execution, capitalizing on the strong demand from our target upskill demographics to drive net yield while delivering experiences that guests value. Second, we will build upon the progress already made over the last quarters from our ongoing margin enhancement efforts with further improvements in cost reduction and efficiencies throughout the organization. And finally, we will continue to improve our financial stability by further strengthening our balance sheet and continuing to reduce net leverage over time. In a few weeks' time, we will be having the privilege of hosting an Investor Day. We hope you are able to attend either in person at the New York Stock Exchange or virtually through our webcast. It is an occasion that we are eagerly looking forward to as it provides us with a platform to articulate our long-term strategy and financial metrics for the business. This strategic road map will offer insight into our ambitions and aspirations for the future of Norwegian Cruise Line Holdings. We will outline the key initiatives and measures that will underpin our drive towards providing our guests with the experiences they value while delivering long-term profitable growth and shareholder value. The future is certainly bright, and we are excited to share this journey with you. And with that, I'll hand the call back to the operator to begin our Q&A session.

Operator provided instructions. And our first question comes from the line of Dan Politzer with Wells Fargo.

I was hoping we could dive in a little bit more on kind of the pricing and set up for the remainder of the year. I mean it seems certainly the first quarter was very strong. As we think about the tweaks to your capacity allocation for the rest of 2024 and certainly similar Europe and at least in the second quarter, but kind of falling off in the back half. How should we think about the relationship between that capacity allocation relative to pricing? And put more simplistically, can you maybe classify the pockets where you're seeing outsized strength versus maybe a little bit more modest strength in terms of pricing?

So Dan, and thanks for joining us today. Listen, I wouldn't say that there are any areas that are outsized or undersized. We're seeing good pricing yield strength across all three of our brands, across all the major areas that we deploy our ships. We're doing well in Europe, we're doing well in Alaska, Bermuda, Hawaii, of course, the Caribbean. I think the only place where we've talked before, where we had a little bit of a challenge is the voyages in Q2 and Q4 that had previously visited the Red Sea and had to redeploy to other itineraries. But outside of those, we're seeing broad-based demand across the board. We're very happy with our yield growth in the back three quarters. As we discussed, both Mark and myself, we're increasing our yield guidance by a full point, which I think underscores the strengths that we're seeing. We continue to be at record book positions, record pricing. We're very happy with where we are.

Got it. And then just pivoting to the cost side. Can you just remind us a couple of those pockets where you really seem to be cutting the fat, right? I think food is an area where you've seen some success. Also I think on marketing, you've talked about the expenses you've cut there. So as we think about the kind of the buckets across the cost structure, where have you seen more success? And where is kind of the additional opportunity that you see looking ahead?

Dan, it's Mark. I want to clarify that I wouldn't describe this as simply cutting the fat — that's a bit generous. We're focused on making the entire organization much more efficient. As I said on our prior earnings call, the first major effort was examining our fuel and bunkering processes. If I recall, I said that generated double-digit million savings, which shows up in our latest fuel guidance: while fuel curves moved up mid-to-upper single digits, we only increased our cost estimate by about 2%. Beyond that, we're trimming marketing and items on the vessel that customers don't value. Importantly, we're not cutting for the sake of cutting; we're improving the experiences customers care about while reducing things they don't. There are no silver bullets — just many small improvements across the board. We're excited about the progress, which is reflected in our reiterated cost guidance, and I'm hopeful we can continue to improve going forward.

And Dan, I'll just add one more thing, specifically related to the food. I just want to emphasize we have in no way reduced the quality of food that we serve our guests. We still serve, especially on Oceania, the best quality food that we can and in Norwegian very good quality food as well, where we have seen the efficiencies, if you will, are in things like buying direct as opposed to intermediaries and in logistics. We have made massive improvements in logistics, warehousing, shipping that obviously will show up in the food, but do not reflect lower quality food. I can't emphasize that enough. We believe that our three brands in their respective places in the industry have the best food quality and the most food options, and we are committed to that, but we think we can do that and still save money through the other items that I mentioned.

Operator provided instructions. And our next question comes from the line of Vince Ciepiel with Cleveland Research.

I wanted to zoom in a little bit more on the second half. I think at one point, you guys had quantified the Red Sea impact. I think it was like one to two points for 2Q through 4Q. I think there was a view that third quarter might be the highest yield growth quarter of 2Q through 4Q because it had the least Red Sea impact. And I was just curious if you still expected that to be the case?

Vince, yes, you are correct. We still expect third quarter to be the highest yield growth quarter. And I will remind everybody that in Q4 of '23, if I recall correctly, we had pricing growth of 15% and yield growth of 9%. So we are rolling over a very healthy Q4 of 2023. So that's not to be implied that Q4 of this year is not doing well, but it is just certainly rolling over a much higher comp, but we do expect third quarter to be the highest.

Great. A slightly bigger-picture strategy question: you and peers across the industry seem to be investing in private islands and ramping efforts there, with marketing leaning in. I'm curious what you're seeing that leads you to believe the returns are there, that that's what customers want, and how you went about making that decision?

Yes. So when we look at our two private islands we have today, Great Stirrup Cay in the Bahamas and Harvest Caye in Belize, those are our two highest-rated destinations. Now we really had a pier at Harvest Caye. So there were no issues in that area. But in Great Stirrup Cay, the lack of a pier caused us to miss much more frequently than we would have liked. So for us, it almost pays on an ROI basis just by us being able to visit there. But of course, once we have the confidence that we can visit there almost 100% of the time, we certainly believe that it will be worth making the investments to continue to improve the guest experience as long as we focus, as Mark said before, on the things that get value. I will say, listen, we've seen geopolitical uncertainty in various places of the world over time. So clearly, places like Belize and the Bahamas have an added benefit of being perhaps more certain zones closer to home, which continues to give us confidence to invest. But we think what we're doing with Great Stirrup Cay is fantastic. We think the pier, which will be available just in a year from now, so it's not like multi-years in the future, will be a great addition. We're committed to the area. Our guests love it. I think the experience on the island is already fantastic, more of a resort-type experience, and we'll continue to improve it.

Great. Looking forward to Investor Day.

Operator provided instructions. And our next question comes from the line of Steven Wieczynski with Stifel.

So if we kind of stay on yields and if we think about breaking down your revised yield guidance for the remainder of the year, I mean, look, it's pretty clear that the demand remains extremely strong. So I guess it seems to us that maybe your revised yield guidance is somewhat conservative. And I guess the question is around how you're thinking about pricing versus onboard for the rest of the year. It seems like you might be taking a pretty conservative view around onboard metrics, which makes sense, or possibly the onboard opportunity just isn't as great as what we're used to witnessing given the strong book position. So just any help there would be appreciated?

I'll maybe take the second part of the question on onboard business versus ticket, and I'll let Mark comment on the first part. With the way that we package and presell our onboard items, I think the distinction between onboard and ticket is much less important than it is in the past. So I would just encourage you and the other analysts, the other listeners, to focus on the total revenue number because really the split is a little bit arbitrary. That being said, obviously, we're happy with the future sales, as we talked about in our prepared remarks, and in our press release. We're happy with the onboard packages that are being sold in advance. And that's what gives us confidence for raising our yield guidance by a full point for the year. In terms of conservatism, maybe Mark can talk to that.

Yes, Steve. Maybe as an example, we continue to see the consumer very, very healthy. We continue to see very strong trends across every revenue stream on the ship, so we remain very, very optimistic on that front. If you think about our prior guidance for the first quarter, we had been two months into the quarter when we provided that guidance, and when you look at where we ended, we beat by almost 0.75 point. That's predominantly driven by onboard revenue. While I don't want to say we are ultra conservative, we do expect the consumer to spend. Given our extended booking curve, most of the upside in the quarter, if we see any, will be driven by onboard revenue. I want to reiterate that we continue to see a very, very strong consumer in that respect.

Okay. That's great. And then, Mark, if I'm looking at Slide 13, you guys are projecting just about a 34% EBITDA margin towards the end of this year. And I guess if we look a little bit further out, how should we think about the longer-term margin opportunity, especially as you think about where margins were pre-pandemic versus where they are now. Will the driver of margin improvement just be more on the yield side of the equation? I guess what I'm trying to get at here is about the opportunity to take a significant amount of cost out of the equation, given what you guys have already done so far and maybe this is something you'll address more on May 20.

Yes. Thank you for that last sentence, because that was the answer I was going to give you. Listen, we're super focused in this call on Q1 and our guidance for Q2 in 2024, which I think we've laid out. As for the longer term, we'll have to wait 19 more days until May 20 to discuss it.

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

Brandt?

We lost Brandt.

Brandt? Okay. Maybe we should move on to the next.

Operator provided instructions. And our next question will come from the line of Conor Cunningham with Melius Research.

In your prepared remarks, or even in the press release, I think you mentioned that you're at a record book position over the next 12 months. I know you want to talk only about '24, but just curious on how '25 is shaping up? I assume pricing is up. Just any details around that would be helpful.

Thank you for that, Conor. So I'll just point out that the next 12 months would include Q1 of '25. So I think that gives you some guidance. And of course, that would be, at this point in the booking cycle, the best booked quarter of 2025. So not really prepared to give guidance for the last three quarters, but I think that gives you some insights into how '25 is shaping up.

Okay. And then I appreciate the details on the dry-dock headwinds, and I realize that kind of lingers throughout '24, but does that roll off in '25? Or is it more of a '26? Just trying to understand, your exit rate on cost is obviously going to be really good in '24. So just curious on how we should think about dry-dock specifically next year and the year after?

Yes, Conor. So look, I think we've said this before, '24 is really a normalization year in terms of dry-docks as we took advantage during the shutdown to dry-dock most of our ships. But if you look at the size and composition of our fleet, as you go forward, whether it's '24, '25, '26, you're going to see about the same level of dry-docks given the size of our fleet. So it might go up a couple of days (no, I shouldn't say a couple of points). It might go up or down a few days, but there's not going to be any material step up or step down going forward as we get back into a more normalized cycle for the next few years.

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

Brandt?

Well, we'll try again on Brandt. Let's go to the next caller.

Let's go to the next question, Joe.

Operator provided instructions. And the next question will come from the line of Patrick Scholes with Truist Securities.

Great. My first question concerns commissions paid out to the trade. It looks like your ticket revenues were up 21% year-over-year, though commissions, transportation and other items were up 6%. Can you give a little more color on what's driving the divergence there? Is it increases in direct bookings or a change in the mix toward new-to-cruise customers who typically book direct? More color, please. And then I'll have a follow-up question.

Yes. Thanks, Patrick. No, what we're seeing is not a reflection of changes in direct bookings or significant changes in passenger mix. It's really more driven by the airline. As a cruise line, we package air across all three of our brands. As participation rates shift from year to year and because we're buying air a little better this year versus last year, the air component cost goes down. So it's a combination of a slightly lower participation rate for air and us buying air a little more efficiently than we did last year. But our general direct versus trade and new-to-cruise mix has remained substantially the same year over year across the brands.

Okay. Interesting. And then you've talked about your book position up significantly, whatnot year-over-year. Can you give a little bit more granularity on percentage-wise. How much ahead you are for the rest of the year versus the same time last year? And then also how much ahead, in fact, if you are ahead for next year versus, say, the same time last year for the comparable period?

Yes, Patrick. Look, we won't give an exact percentage. What I can tell you is, if you refer to our prior remarks on our calls, generally speaking, we had said our sweet spot is somewhere in that 60% to 65% on a forward 12-month basis or at any given time, I should say. And so if you think of it from that reference, we could be up from there, but I won't give any specific percentages on that, other than the fact that we continue to see a very strong consumer, consumers who are willing to book further out and who are willing to pay higher prices. So I think all of that lends itself to a great environment to continue to capitalize on this demand.

Can you, without giving a percentage, say whether your 2025 book position is ahead compared to where you were a year ago?

Well, I think if you think about, as Harry said, our forward 12 months, which would include Q1, would imply that Q1 is ahead. But we won't comment on the rest of the year other than bookings are in line with our expectations where we believe they should be.

The only additional color that I'll give is related to Europe, which is a large part of our deployment this year in Q2 and Q3, where because we've had the benefit of a full booking cycle, we're seeing more Americans on our European deployment this year, which tends to elongate the booking curve a little bit and also tends to deliver slightly higher yields as opposed to selling those cabins a little closer into locals in Europe.

Operator provided instructions. Our next question comes from the line of Ben Chaiken with Mizuho.

Your comments on 2Q yields onboard forward booking trends are all very helpful. Just attacking this a little differently. Curious how you're thinking about 2Q yields on the net yield side. There are some headwinds and tailwinds. It'd be great if you could help us think about the different moving parts, specifically for 2Q, I guess I'm asking. So for example, those less Caribbean, but as you've suggested earlier, it sounds like the mix is not a factor. You've got Red Sea. Anything else just big picture? And maybe to put a finer point on it, however you cut it year-over-year versus '19 sequentially, it just seems like optically, there's a step down, and I guess I'm trying to open this up and understand the moving parts.

Well, Ben, I think there is a step down from Q1, but that's purely as a result of the comparison in the same quarter of 2023. So as we said on our last call and this call, we are not, and I will repeat this, we are not seeing deceleration. I don't know how many more times I can say that across different calls and conferences. We are getting back to what we call a more normalized yield growth in terms of our business, which we have always said would be somewhere in the low to mid-single digits. And obviously, we continue to pursue much better than that. So yes, there is an impact in both Q2 and Q4 as a result of the Middle East and Red Sea. We've been very specific about that. But even absent that, we still continue to see very healthy pricing and yield growth. So I just want to make it clear. It's not a deceleration issue. It really is a comparison issue from quarter to quarter.

Sure. The premise of the question was actually not a deceleration. It was that you've said that in the past. So I'm trying to understand the moving parts that might kind of help us explain the nuances, but that's helpful.

Yes. Ben, the moving parts in Q2 are really the Mid East and Red Sea for the most part, and that also impacts Q4 as well as Q4 having a significant rollover versus the same quarter in 2023.

Okay. And then as you think about Great Stirrup Cay, you announced the pier construction, which makes a lot of sense. Were you suggesting earlier in the call that you wait for the pier to be built and then wait a year or so to get kind of the demand picture under your belt before you start to invest in the island? Or is that not the correct interpretation?

I wouldn't interpret it that way. I'm not prepared at this time to discuss our full long-term plans for Great Stirrup Cay. We'll talk a little bit more about that in three weeks. I was just saying my comment was meant to convey that the pier was the gating item; before we committed and had a schedule for the pier, it would not have been prudent for us to make substantial additional investments in the island, which, for the record, is already a great experience. But now that we have the pier, it allows us to take a slightly more long-term view of it. I don't want to indicate whether anything is happening imminently or later. We'll talk a little bit more about that in three weeks.

Operator provided instructions. Our next question comes from the line of Lizzie Dove with Goldman Sachs.

To kind of belabor this net yield point, but I just want to understand the moving pieces in terms of the quarterly cadence. Like as we think of your 2Q guidance of 4.3% growth and 3Q being higher. I would have thought that means quite a steep step down in 4Q, especially I would have thought you maybe get some occupancy recovery from the Hawaii comp last year. Anything you can say that can kind of help me think about that kind of quarterly cadence?

Lizzie, as we said, we believe that in the back half of the year the third quarter will be the highest-yielding quarter. Regarding the fourth quarter, if you think about fourth quarter 2023, there was a small impact on occupancy due to Hawaii. As we look at the comp rolling over, if I recall correctly it was around 14% pricing growth and roughly 9% to 10% yield last year, which is a very strong comp to roll over. So stay tuned. There's still time in the fourth quarter and we're still building it, but everything we see today indicates the environment remains healthy, and we expect strong results across all our quarters.

I mean the only additional color I'll add, which Mark talked about in an earlier question and not this one is a slight headwind related to Red Sea cancellations in Q4, which would be a little bit less than the headwind in Q2 because we had a little more time to have the replacement voyages on sale. And that's why it was so critical for us to get well ahead of this for 2025. So we've already canceled all of our voyages that have previously gone to Israel for 2025 and all the Red Sea crossings in the first half of '25 so that we wouldn't have the same headwind challenges to our 2025 growth.

Perfect. That's really helpful. And it feels like the very premium luxury market is more on focus, especially with the capital markets activity. Anything you can share there in terms of pricing on your more premium brands versus the Norwegian brands? And also any step you might take to protect share? Or is this competitor has some pretty aggressive supply growth targets?

I'm trying to distill that question into a few thoughts. We're obviously excited to see new entrants to the market. Anything that draws more attention to this market, the public markets, and the excellent opportunity cruising represents is positive for all of us. I sent an email this morning congratulating him on the successful IPO and we wish him the best of luck. We see growth at Viking House, and we have measured, absorbable growth on the Oceania brand that we're happy about.

Operator provided instructions. Our next question comes from the line of Fred Wightman with Wolfe Research.

I just wanted to return to the Red Sea impact for next year. Are you expecting to fully offset this year's yield impact? Was that comment referring to costs? I just want to understand whether it's yield dilutive if you have to do repositionings and end up with less desirable itineraries.

Fred, so we have announced all cancellations of our Red Sea and Mid East itineraries for 2025, with the exception, I believe we may have one sailing still on sale in the back half of '25 for the Oceania brand. Apart from that, we have canceled all those sailings. And the thinking there is, obviously, the earlier you reroute those and create better itineraries, the better sales cycle you have. So the improved yield and economics that you can garner from that should improve. That said, if I had a choice of doing other areas in the world versus those select Mid-East and Red Sea, those are always a premium. But certainly, it won't be a significant tailwind, but at the same point, it won't be a significant drag.

Okay. That's fair. And then just trying to understand where there could potentially be some upside for yields throughout the year. It sounded like in response to an earlier question that you were saying the potential upside would come largely from onboard. I think that was in response to 2Q specifically. But just thinking about the back half of the year, especially in 4Q when that Caribbean exposure increases again? I mean you guys still feel like you have the ability to take price and grow yields from a ticket perspective later in the year, right?

Yes. So Fred, that's the job of our brands. We look at the booking curve, the consumer demand, and we do everything we can to raise price at any time that we can. I think as Mark mentioned, Q2 and most of Q3 is pretty big, given where we are in the booking curve. Is there potential in Q4? Absolutely, and we'll do everything that we can to optimize that potential.

Operator provided instructions. Our next question comes from the line of Robin Farley with UBS.

I have two questions. First, in your release you showed that a one percentage-point change in net yield would add about $67 million to EBITDA. You raised net yield by one point and increased EBITDA by $50 million. It looks like maybe half of the gap is due to higher fuel, leaving about $17 million that didn't show up in the EBITDA increase. Is the remaining difference just conservatism, leaving a little dry powder, or is there another factor keeping that amount off the EBITDA line? Second, can you give any color on your new ship orders in terms of cost per berth compared with previous orders? I understand there's inflation at the yards, but I'm trying to quantify it.

Thanks for your exacting calculations, Robin. Obviously there's some slight rounding when you look at the yield and the sensitivity. Essentially, yes, we did carry over about a 100 basis point increase. If you look at my prepared remarks, most of that carried through and some of it was partially offset by higher fuel and higher interest expense for two reasons: first, about 5% to 6% of our debt portfolio is not fixed; and second, commitment fees related to some of our newbuild announcements that went effective. All in all, when you look at the back half of the year, as I said, we're raising yield guidance by about $0.10 to $0.11, offset by approximately $0.04 to $0.05 of interest and fuel. I didn't catch the back end of your question, I apologize.

She asked about any color on inflation.

Yes, just the cost per berth or kind of getting a sense of the change in building costs at the yards, understanding that there will be inflation there, but just trying to get a ballpark for it. And the prior questions have been about the EBITDA. I fully understand the interest expense impact on the EPS. I was looking for the extra $10 million in EBITDA. But anything on the cost per berth?

Just to be really clear on the EBITDA side, we calculated the one percent raise that we had at just over $60 million. So it wasn't exactly a full point. It was more like 97 basis points or something like that. So the $60 million minus the fuels should get you to almost exactly the $50 million EBITDA range. So we apologize for that confusion between the $60 million and $67 million. Listen, in terms of inflation on newbuilds, I think what you'll see is sort of two factors offsetting each other. I think the inflation on newbuild is similar to the inflation you see in the general population, at least when we do our calculations. I think what we can do to help offset that inflation is the same as what you're seeing in our general cost structure where the same transformation office process that looks to doing things more efficiently and effectively will allow us to offset part of the impact of inflation, certainly not all of it. So that would be our guide, if you will, going forward. And then I think we have time for one last question, operator.

Operator provided instructions. And our last question will come from the line of James Hardiman with Citi.

So just quickly I wanted to circle back to the cost conversation. Obviously, a lot of noise around dry-dock, pretty flattish, though ex the dry-dock step-up for the first half. Is that the assumption for the second half that ex the dry-dock movement that costs are going to be pretty flattish year-over-year. And if so, how long can that last, particularly as dry docks flatten out in 2025?

So the quick answer is yes. We believe that the cost will be essentially flat, excluding dry-dock, as you mentioned for the back half of the year. We're very proud of the efforts that the team are making, not really prepared to comment on '25 and beyond at this point.

James, all I would add to that is, again, we have talked about we have a laser focus on rightsizing and leveraging our scale. We continue to do that. This is a permanent activity for us, not a one-time exercise. So while obviously, it gets harder further down the stream you go, we are just relooking at every facet of our business, and we continue to believe that there's opportunity out there all without impacting the guest experience and actually delivering a better product than what we've had today.

Well, what a wonderful set of comments in the call. I share Mark's passion for continuing to improve our operating margins while delivering a fantastic guest experience. I want to thank all of you for your time today, and I really am looking forward to talking about our long-term targets and strategy when we meet on May 20. Thank you all very much.

Thank you. This concludes today's conference. You may now disconnect your lines at this time. Enjoy the rest of your day.