Good morning. My name is Shelby, and I'll be your conference operator today. At this time, I would like to welcome everyone to Royal Caribbean Group Business Update and First Quarter 2021 Earnings Call. I would now like to introduce Chief Financial Officer, Mr. Jason Liberty. Mr. Liberty, the floor is yours.

Thank you, Shelby. Good morning everybody and thank you for joining us today for our business update and first quarter earnings call. Joining me are Richard Fain, our Chairman and Chief Executive Officer; Michael Bayley, President and CEO, Royal Caribbean International; and Carola Mengolini, our Vice President of Investor Relations. This is actually Carola's last call with us as she is retiring. I just want to sincerely thank her for all of her efforts and we all really wish her the very best with lots of love. So, thank you, Carola. During this call, we will be referring to a few slides, which have been posted on our investor website www.rclinvestor.com. Before we get started, I would like to refer you to our notice about forward-looking statements which is on our first slide. During this call we will be making comments that are forward-looking. These statements do not guarantee future performance and do involve risks and uncertainties. Examples are described in our SEC filings and other disclosures. Please note that we do not undertake to update the information in our filings as circumstances change. Also, we will be discussing certain non-GAAP financial measures, which are adjusted as defined and a reconciliation of non-GAAP historical items can be found on our website. Richard will begin the call by providing a strategic overview of the business and an update on the latest news from the CDC. I will follow up with a recap of our first quarter results and then I will provide an update on our latest liquidity actions and on the current booking environment. We will then open up the call for your questions. Richard?

Thank you, Jason, and thank you all for joining the call and thank you Carola for your help and consistent support over many years of Royal Caribbean. You all know it's been painful to pass the one-year mark since we suspended sailings in March of 2020 and to keep seeing most of our beautiful ships still sitting at anchor. However, I'd like to comment on some of the dramatic positive developments that we've just mentioned. The big change has been a significant improvement in the extent and the quality of our dialogue with the CDC. As I have said elsewhere, scientific knowledge does not advance well in a vacuum. More and better exchange of information and more and better understanding of all the perspectives always leads to a better and healthier outcome. The CDC has recently significantly increased its efforts in this regard and we really appreciate and want to thank them for undertaking this important effort. Last night the CDC issued multiple very constructive clarifications and amplifications of the conditional sail order and addressed many of the items of concern in the order in a manner that takes into account the recent advances in vaccines and medical science. We believe that this communication really helps us to see a clear and achievable pathway forward to safe and healthy cruising in the near future. But an important caveat is this is a very complex area and we only received the letter last night. Furthermore, there are still a great many details to be provided in the future and others that need to be resolved. We need to be cautious about all of those. Nevertheless, we now have high hopes that these details can be resolved quickly. It could be possible to restart cruising by mid-July. I would also emphasize that the restart does not mean that we will immediately go into full operation. While we are hopeful about restarting, that restart will be gradual and deliberate. Furthermore, our business books long in advance, so it takes some time for the machinery to get back into full swing, but the recent CDC communication is a very constructive part of this process and it indicates both the value of good communications, and indicates the CDC's desire to see cruise reopening in a safe and healthy manner. As I said before, we share a common goal: both the CDC and the cruise industry are determined to do this right. One of our strongest discussion points in these meetings with the CDC has been the data that we've collected from our cruises in Asia and Europe. As mentioned earlier, we have successfully carried over 125,000 passengers with only 21 COVID-19 cases. That's a positivity rate we have described as extremely low and as we've emphasized, all of this was experienced without the availability of vaccines. Our goal throughout this pandemic has been to make a cruise ship an environment we can control and safely bring to Main Street USA. We've already demonstrated our ability to do that and we are now eager to resume life as so many other businesses are doing and we are pleased that the CDC letter really does reflect an intention to treat us similarly to other industries in similar circumstances. In addition to this particularly positive development in the U.S., there are other activities going on. For example, last month Odyssey of the Seas, our newest quantum-class ship, joined the Royal Caribbean International fleet along with Celebrity Apex and Silversea's Silver Moon. We now have three brand-new ships, each with the most amazing technology to ensure safety, security and, of course, unbelievable guest experiences. There has been such demand for our current sailings; for example, in Singapore on Quantum of the Seas we've extended our season there now through the end of October. And of course, we've also taken additional steps to strengthen our financial position even further and you're going to hear more about that from Jason. Before I describe all the energy we see and feel within the Group, I want to acknowledge once again the dedication and hard work of our people. It's always been our people who have made us successful and it's our people who have gotten us through this past 13 months of living with COVID-19. Everyone has suffered during the pandemic, but working for cruise lines has been a real test of endurance, trust and agility. Over and over our people have passed that test. I'd like to also thank our investors and our travel partners who have been the strongest advocates with our guests over these months of uncertainty. We're grateful for their commitment to work with us. While a lot of what we're doing right now is directed toward a healthy return to service, we're also focusing on our commitments in other areas including on ESG—environmental, social and governance responsibility. Of course this focus isn't new for us. From our partnership with the World Wildlife Fund to support sustainable destinations, to active engagement on diversity and inclusion to aggressive emission reduction, our commitment to progress on the ESG agenda is long-standing. But we believe strongly that we need to reflect on what we have been doing and get ready for what's next and plan for how we will meet the challenges of the future. You will hear more about this initiative in future calls but I want to take this opportunity to make you aware of this intensified focus. With that, I'll turn the microphone back to Jason. Jason?

Thank you, Richard. Before I start like Richard, I want to again thank our teams across the whole enterprise for their dedication and tireless efforts during these unprecedented times. I will now start to discuss our first quarter performance. This morning we reported an adjusted net loss of $1.1 billion or $4.44 per share for the first quarter of 2021. While reporting these types of results continues to be painful, we are excited about the fact that little by little the flywheel is starting to spin. Furthermore, the latest news by the CDC, as it relates to our resumption of service in the U.S. is quite encouraging. During the first quarter of 2021, we delivered memorable vacations to over 55,000 guests through our Royal Caribbean, TUI Cruises International, and Hapag-Lloyd brands. Moreover, our teams are diligently working on the health protocols and startup activities needed to begin operations on an additional 11 ships this summer. While these activities are extremely encouraging they also put some additional pressure on our cash burn in the short term. Having said this, we are also very encouraged by our customer deposit balance, which as of today is approximately $2 billion compared to the $1.8 billion that was shared this morning related to the end of the first quarter. Moreover, the latest balance reflects the reduction in deposits that related to the Azamara brand, which was sold just a few months ago, demonstrating an even larger improvement versus our December 2020 customer deposit balance. This improved balance has been disproportionately driven by new bookings versus the issuance of more future cruise credits. At this point approximately 45% of our customer deposit balance is associated with FCCs versus about 50% at the time of our last call. Now we’ll shift our remarks to our liquidity actions during the quarter. As you all know we pride ourselves on having industry-leading brands with a world-class and highly innovative fleet and a history of strong financial discipline. These assets and attributes have been instrumental in helping us raise more than $12.3 billion in new capital since March of last year. During the first quarter of 2021 we continued our efforts to enhance our liquidity position and manage our maturity profile. To this end, we successfully executed two capital raises with cumulative gross proceeds of $3 billion. Connected to this we amended two debt facilities totaling approximately $2.5 billion, which were due in 2022, and extended the maturities for construction lenders by 18 months. I will highlight that since we are refinancing guaranteed debt with unsecured and unguaranteed debt, we are starting our journey back to an unencumbered, investment-grade balance sheet. Altogether during this quarter, we paid down approximately $800 million of debt related to principal on the amended facilities and on the U.K. commercial paper programs that were due in March. Now, as it pertains to the cash burn during the quarter, the average monthly cash burn was approximately $300 million, which was slightly higher than our previously announced range. This was mainly driven by restart expenses which were related to the new health protocols and some cruise movements. It is important to note that our previously announced ranks do not include any expenses that related to the restarting of operations as they assumed a status of prolonged suspension of operations. When excluding the return-to-service expenses, our cash burn was in line with the previously announced range. Overall, we closed the first quarter with $5.8 billion in available liquidity. As I previously mentioned, we are very encouraged with the latest news, current momentum and the restart of operations around the globe but the environment remains extremely fluid and for this reason, we are not providing the cash burn estimate or the related offsets generated by revenue and new customer deposits that come from returning ships. I will highlight that the burn rate for the ships that are kept in layup is expected to be consistent with our previous expectations on a relative basis. Now, as it pertains to our debt maturities and in addition to the extensions of the 2022 facilities that I previously mentioned, we also completed the amendment to our export credit facilities deferring $1.15 billion of principal amortization and waiving financial covenants through at least the end of the third quarter of 2022. After all these negotiations our scheduled debt maturities for the remainder of 2021 and 2022 are $200 million and $2.2 billion respectively. I will now update you on our business outlook as I know this is top of mind for many and I'll start by providing an update on our summer capacity. Over the last two months we have announced a return to service for nine ships across our three global brands and have extended the Singapore season for Quantum of the Seas through the fall. These 176 sailings in the Caribbean, Europe and Asia now represent 19% of our fleet capacity for the summer season. Six of these ships will sail in Europe offering Greek Isles and U.K. itineraries to guests from the U.S., the U.K., Israel and Europe. These guests will have the opportunity to experience our three newer ships Odyssey of the Seas, Celebrity Apex and the Silver Moon for the first time ever. In addition, three ships will cater to the U.S. market offering Caribbean itineraries departing from Nassau, St. Martin and Bermuda. Many of these sailings will call on our private island Perfect Day at CocoCay. On top of this, Quantum of the Seas will continue to offer cruises from Singapore for the local market. Regarding our two-ship JV, they have announced two additional ships sailing this summer in addition to three vessels that have been operating out of the Canary Islands since this past November. We look forward to announcing the return of additional ships and remain committed to a safe, thoughtful and financially sensible resumption of cruising across the entire fleet. Now, I will provide an update on our bookings. When we opened the first set of sailings for Quantum of the Seas in October of 2020 we immediately saw the pent-up demand for cruising in Singapore. Because of that we hoped and expected that the same would be true in other markets and these expectations were confirmed when we launched our new deployment. We have been very pleased with booking levels and pricing for sailings in both Europe and the Caribbean and as a result, our load factors and revenues are building up nicely. After less than three weeks of sales for more ships, we already have about 30% of our expected revenue booked for June through September sailings. We expect to start our initial operations with lower load factors and ramp up gradually over time. On our last earnings call, I shared that we received 30% more bookings in January when compared to November and December. Despite minimal sales and marketing activities, demand continued to accelerate and new bookings in March exceeded January and February levels by approximately 80%. In addition to new bookings, guests continue to utilize FCCs and take advantage of the Lift & Shift program. Now overall, the booking activity for the second half of 2021 is in line with our anticipated resumption of cruising and pricing on these bookings is higher than 2019 both including and excluding the dilutive impact of future cruise credits. Regarding 2022 sailings, it is still early in the booking window to provide too much detail, but I will share that our booked load factors for the first half of 2022 remain within historical ranges and pricing on booked business is up nicely versus 2019, even when including the dilutive impact of FCCs. While a portion of this improvement is related to our new ships, pricing is also up for the existing fleet. I will close by saying that we are prepared and eager for the flywheel to start turning again. We feel very optimistic about our future and are thrilled to see more and more guests around the globe enjoying incredible vacations onboard our ships. With that, I will ask Shelby to open up the call for a question-and-answer session.

We will now open the call for questions. Your first question is from Robin Farley of UBS.

I have a question about the restart—obviously great news. I'm trying to understand: is there likely to be two different restart time frames? One that allows a fully vaccinated ship to sail out of the U.S. and a separate timeline for restarting with ships that have a mix of vaccinated and unvaccinated passengers? I just wanted clarification on that. And as a follow-up: regarding return-to-service expenses versus typical layup—what is the per-month lay-up cost per ship, and what might the incremental restart costs look like for, say, a three-month period heading into restart? What's the difference between lay-up costs and lay-up plus restart costs?

So Robin, on the first question—which I'm sure is an important question—your line was breaking up earlier so we didn't hear everything. I'll just comment quickly on the cost side, and then you can re-ask the first part if you'd like. Yes, we have really tuned our lay-up costs and we've generally kept our ships in a warm state so that when we restart our ships, we can do that expeditiously and at a reasonable cost. But as it relates to return-to-service, as we ramp the ships back up, those costs are still very fluid, which is why we're not providing detailed guidance on them. We need to take into consideration testing, crew movements, vaccinations and other factors that might be part of that equation. That might be different itinerary by itinerary. So we're not yet ready to guide on that in a precise way. What I would tell you is we are being very thoughtful about our spend. At the same time as we're launching these ships, we're also getting the revenues and customer deposits that are associated with that.

Great. Hopefully you can hear me a little better. On the first question, I just wanted to understand: is it accurate to interpret the CDC guidance as having two pathways—one pathway for ships with largely vaccinated crew and vaccinated guests that allows a faster route without simulated voyages, and a separate pathway for ships that don't meet that threshold, which would have different protocols and timing?

Hi, Robin. As Richard commented, we received these modifications late yesterday evening. We've been in active dialogue with the CDC to clarify some of the comments. Fundamentally, yes, you're correct. There will be two pathways. One pathway for vaccinated crew and largely vaccinated guests that meet the thresholds they've defined, and that would mean that there wouldn't be a requirement for a simulated voyage and there would be a different expectation on protocols and planning. So it's a faster route. And then for ships that wouldn't meet that threshold for whatever reason, there would be a different timeline and a different set of protocols and requirements. So fundamentally, there are two pathways. It's not that simple in all cases, but that's a reasonable simplification.

I think we need to emphasize, as Michael just did, that there's still a lot of uncertainty about this. I don't think you should think of these as two completely divergent processes. Obviously, as there are in other areas of society, you treat people who have been vaccinated differently than situations where you don't have vaccinations. But what is nice about this is that, in effect, both are viable pathways under the CDC letter that we received.

I'll just add that the acknowledgement that the vaccines are transformational is very helpful. It's something we all knew was coming, but it's very positive.

Your next question is from Steve Wieczynski of Stifel.

I have a three-part CDC question. First, the CDC guidance calls for thresholds like 98% of crew and 95% of passengers to be vaccinated. Do you think getting to those thresholds will be easy to achieve? Second, how are kids accounted for under those percentages? It seems like getting kids on board might be difficult during the conditional sail order timeframe—how are children treated? Third, do you think the CDC's cautionary travel outlook for the Bahamas could cause concern with your potential customer base?

Steve, on the 98% and 95% thresholds—remember, they're guidelines. You can meet that threshold and take the faster pathway, or you can choose the other pathway. We know from surveys of our customers who've been booking since January that over 80% of our customers have already told us they are either vaccinated or will be vaccinated when they cruise. That percentage increases as you skew older because vaccination prioritized older age groups earlier. For crew, we typically offer flu vaccines every year and crew vaccination rates for flu are around the mid-90s percent; crew members tend to voluntarily take vaccines. We surveyed our crew some months ago and had over 98% positive response from crew saying they plan to get vaccinated. We do understand that for health or religious reasons some people won't want to get vaccinated, and that's been in place for years with flu vaccination policies. On kids: vaccinations are now eligible for those 16 and over, and we expect that limit to drop to 12 in coming weeks or months. For kids 11 and under, we carry many, but as a percent of total guest count they are relatively small, so we're not overly concerned. Again, we received these modifications late last night and really need to sit, study and discuss with the CDC to understand all nuances, but we're not discouraged by this in any way.

Okay, got you.

We should make it clear that we've been operating and have announced cruises—some of which are requiring full vaccination and some of which do not. So I think it's constructive that the CDC has looked at this with a dual pathway approach, much as we have taken.

Second question for Jason: If the timeline is correct and you can start North American cruising in the next couple of months and continue to bring ships back online over an extended period, do you feel your current liquidity position is adequate at this point? In other words, are you comfortable with where you sit today?

I think we feel we are in a very strong liquidity position and our real focus is getting the ships back on the water. As that occurs, customer deposits and revenues will start coming in. We feel very good and we remain opportunistic and are looking at ways to improve our balance sheet and reduce negative carry. Overall, we believe we've taken prudent actions to ensure we're in a position of strength.

Your next question is from Jaime Katz of Morningstar.

I'm curious if you have any comments on consideration of selling more of the fleet or whether you feel the fleet is good as is, given there have been so many deals across the industry recently. Also, can you comment on the percentage of your workforce that comes from India and whether that might constrain your ability to staff ships going forward given recent developments in India?

Jamie, on fleet dispositions: the way we approach fleet decisions is to understand whether a ship is a good fit for the brand and whether we can invest in it to make sure it remains a fit. If not, we look opportunistically at sales. We typically sell about a ship a year. Overall, we feel really good about the fleet and as you've heard us say in the past, these ships are typically cash flow positive. For us to part ways with them there has to be a convincing strategic reason to do so.

On the crewing situation in India: the recent situation in India is unfortunate. Multiple travel restrictions have been placed which affected crewing activities, and we temporarily suspended crewing activities in India as we understand how this will work out. The beauty of our crewing model is that we recruit from over 100 countries around the world. Some countries like India have significant volumes of employees, but we have large populations coming from many other countries. We're sympathetic given the many loyal employees from India, but we're confident this will work out in the coming months. Our crewing model is robust and allows us to staff ships from varied sources.

Your next question is from Brandt Montour of JPMorgan.

Hi, good morning. With respect to the CDC, with the conditional sail order still in place outside of the vaccination-specific pathway, what was the biggest change or changes overnight for you? Does this change your view of the ultimate capacity you think you'll have sailing at the end of this summer versus what you thought 24 hours ago?

Brandt, as Richard commented, we've been in very constructive dialogue with the CDC and other government agencies. That dialogue allowed the industry to talk realistically about many elements of the conditional sail order that were unrealistic or unable to be executed. What we saw last night was very encouraging because it wasn't just one or two things; it was multiple additions and corrections to many of the challenging elements of the existing order, particularly those related to vaccines. The tone across the industry was positive after last night's communications. I wouldn't point to a single change—it's multiple changes—and vaccines are the major game-changing element.

Just a quick follow-up on occupancy: Jason, you mentioned that bookings to date for the summer sailings are around 30% of expected revenue. To clarify, is that 30% of your target revenue for those sailings rather than 30% of total capacity? And do you have an expected range for target load factors for vaccination-only sailings versus more open sailings?

The 30% comment relates to expected revenue for those sailings at the time of our announcement—not 30% of physical capacity. For initial operations we expect to start with lower load factors and ramp up gradually. We've been thoughtful about our expectations for each sailing in each region. The sailings we've announced so far are mostly outside of the U.S., but this is an evolving story. As long as we can operate safely, provide an incredible guest experience and improve our financial position, those are the guiding principles for our decisions.

Your next question is from Stephen Grambling of Goldman Sachs.

Turning to ship growth and capacity increases: what is a reasonable range of net capacity growth over the next couple of years? Have any of the dispositions effectively been a pull-forward of future retirements so we should expect less sailing capacity going forward?

Industry-wide, where growth was probably around 6% pre-COVID, it's likely to be around 4% going forward, so you'll see less growth industry-wide. For us, planned capacity growth is laid out with the ships coming online. I wouldn't focus too much on the retirement story; we continue to be thoughtful and opportunistic about selling ships if it makes strategic sense. The fleet we have today plus the new ships coming online is how we expect our business to grow. There might be some retirements, but it's not an accelerated retirement program compared to our historical approach.

On cost improvements and efficiency: can you give color on how the mix of new ships might impact net yield and net cruise costs, or any big buckets of opportunity for permanent changes in how you operate?

The new ships are more efficient, especially on fuel, and they generate a higher yield profile because of onboard revenue opportunities and inventory mix. During this time, we've reviewed our cost structure and taken actions to improve margins—we've identified and implemented several cost actions. We want to protect guest and employee experience; many improvements come through automation and better enterprise coordination to make better margin decisions.

Following up: between vaccine-only cruises and those that are more open, are you seeing differences in the cost structure between the two approaches?

There is a different cost profile; non-vaccinated sailings will have more protocols and testing requirements, so there will be additional costs. We need more time to fully understand and quantify that, but our teams are working through the specifics and we expect more clarity in the coming days and weeks.

Your next question is from Paul Golding of Macquarie.

I noticed you cited roughly a 75% new booking rate versus 25% FCC usage. Is there something structural about that in the near to medium term that might allow savings in marketing if demand is strong despite lower marketing spend? And on the Caribbean versus U.S. homeport question, is there anything structural that led you not to pursue a robust U.S. homeport setup for the season—are there cost differentials that make other homeports more attractive?

On the bookings mix, the profile of new bookings versus FCC usage is similar into 2022, but it's early to draw definitive conclusions. If demand remains strong and marketing can generate bookings more efficiently, that's encouraging. On homeports and costs: there are different port fees, testing and other protocol-related costs that can affect itineraries, but for the most part it isn't a large structural cost differential; it's often more about our ability to get passengers to those locations and deliver a high-quality experience.

On sales and marketing: we anticipated there wouldn't be a traditional January wave this year. Instead, March turned out to be very strong for bookings. We compared March bookings this year to peak wave month in 2019 and found March bookings equaled the peak wave month in 2019, even though our marketing and sales investment in March was well below 2019 levels. That suggests strong pent-up demand. U.S. consumer savings rates have increased and credit card debt is down, and surveys show consumers are increasingly optimistic. We interpret March as a very positive indicator for demand, particularly for 2022.

Thanks for the color.

Your next question is from Greg Badishkanian of Wolfe Research. Fred Wightman is on for Greg.

Have you seen a change in the SKU of where bookings are taking place—2021 versus 2022—given improving dialogue with the CDC? And what do you think that means for the prospects of a potential July restart domestically?

Over the past few weeks we've introduced multiple products home-porting outside the U.S. in the Caribbean, and demand for those products has been robust. We also see bookings moving into 2022, which is natural as we head into June—June traditionally skews bookings toward next year. So what we're seeing aligns with that trend.

Booking activity is skewing a little older, which you'd expect given vaccination rollouts. 2022 bookings out of North American and U.K. markets look similar to what you'd see in a typical year, while 2021 bookings have gravitated to sailings we've announced in the Bahamas, Israel and elsewhere. We see many macro indicators that consumers are ready to travel again. So far, 2022 looks like it's behaving pre-COVID.

You mentioned the prospect of returning to Alaska this year. Can you touch on the mechanics and how realistic that is? What needs to happen for that season to proceed?

Alaska is a bit complex because Canada has a stop on cruise traffic through at least the season. To restart the Alaska season, we would need a waiver from the relevant Canadian authorities or for Canada to allow technical stops. We are working on both approaches but cannot predict the outcome with certainty. Given the momentum we're seeing, there is reason for hope, but it's complex and we can't put odds on it. We're optimistic and working to find solutions that would allow Alaska sailings to occur for the season.

Your next question is from Patrick Scholes of Truist Securities.

It appears the next step the CDC is looking for is completion of Phase 2A. In your opinion, what is a realistic timeline at this moment to complete Phase 2A?

I can't give you a precise week or day, but I can say that based on what we received last night, if you're planning a highly vaccinated cruise there will be no requirement for a simulated voyage and the previous 30-day notification and simulation process has effectively been removed for that pathway. Where previously there was a 60-day notification for a first revenue sailing, that process has been modified. For highly vaccinated sailings you can submit your port plan and the CDC will try to respond within five days. Given that, and considering time to crew and vaccination processes, the mid-July target that has been discussed is looking very realistic based on last night's communication. We still have details to clarify, but the timeline toward mid-July looks feasible.

Our final question is from Vince Ciepiel of Cleveland Research.

Are there factors to keep in mind that would make 2022 yields not as comparable to 2019, even though pricing on booked business is up? Could mix, itineraries or occupancy differences affect comparability of 2022 yields to 2019? And a follow-up: deposits have been stable around $1.8 billion for several quarters but are now building—what do you think it takes for deposits to rebuild meaningfully and could that happen in the second half of this year as confidence returns?

It's too early to be definitive. Structurally, new capacity tends to be more efficient and can be a yield tailwind, and while we did sell Azamara which is a relatively higher-yielding brand, for the most part we don't see a structural change that would significantly alter 2022 yields compared to 2019. It will depend on how the business builds going into next year. On deposits: deposits have been stable and are now building because we're able to provide clarity on ships and deployments scheduled to return to service. Consumers are gaining confidence as barriers begin to evaporate and as we provide clarity on which ships will sail and when, deposits are likely to rebuild. We hope that as confidence returns, deposits will increase further, potentially in the second half of the year.

Thanks Vince. Thank you all for your participation and interest in the company. Carola will be available all day today for any follow-up questions you might have, and as always we wish everybody a great day and please stay healthy.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.