Viking Holdings Ltd (VIK) Q2 2026 Earnings Call Transcript

My name is Matthew, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Viking 2nd Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question-and-answer session. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, press star 2. Thank you. I would now like to turn the program to your host for today's conference, Vice President of Investor Relations, Carola Mangalini.

Good morning, everyone, and welcome to Vikings' second quarter 2026 earnings conference call. I am joined by Leah Talaktak, President and Chief Executive Officer, and Lynn Ban, Chief Financial Officer. Also available during the Q&A session is Thor Hagen, Executive Chairman. Before we get started, please note our cautionary statement regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release, as well as in our filings with the SEC. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-IFRS financial metrics, which are reconciled and described in our press release posted on our Investor Relations website at ir.viking.com. Leah and Lynn will provide a strategic overview of the company, a recap of our second quarter results, and an update of the current booking environment. We will then open the call for your questions. To supplement today's call, we have prepared an earnings presentation that is available on our investor relations website. With that, I'm pleased to turn the call over to Leah.

Thank you, Carola. Good morning, everyone, and thank you for joining us. We are very pleased to have delivered another quarter of strong year-over-year performance. As we reported this morning, during the second quarter, revenue increased 16.5%, driving an 18.2% growth in adjusted EBITDA. These results reflect the continued strong demand for our destination-focused travel experiences and the great execution of our teams across the organization. On slide three, you can see that demand for Viking is strong. From an advanced booking perspective, our 2026 season is effectively sold out with 96% of the capacity for our core products already booked. Looking further ahead, our focus is on continuing to build our booked position for 2027. As of August 9th, 53% of the capacity for our core products for 2027 was booked, and this includes a 15% year-over-year increase in capacity. Overall, we are very encouraged by the early booking trends for 2027. As you can tell from these trends, the visibility provided by our advanced bookings gives us confidence in the demand for our product, allows us to manage pricing dynamically, and supports our thoughtful approach to capacity growth. As you can see on slide four and since our last earnings call, we have continued to expand our fleet, adding four new river vessels and one ocean ship, consistent with our long-term growth strategy. During 2026, we expect to take delivery of 12 ships in total, 10 for river and two for ocean. As we grow the Viking fleet, we remain committed to the characteristics that make our ships unique and support the distinctive earnings profile of our business. First, we operate one of the youngest fleets in the industry, which contributes to lower maintenance costs, greater operational reliability and long earnings power. Second, our ships have been thoughtfully designed to maximize operational efficiency while providing the consistent and great experience that our guests expect. And third, within each of our product categories, our ships are designed to be almost identical and indistinguishable to our guests. Guests choose Viking because of the destinations and itineraries we offer, not because of a particular ship. As a result, when ships are deployed on similar itineraries, they are generally able to achieve comparable yields regardless of when they entered service. We believe this is a significant competitive advantage and an important driver of the long-term returns generated by our fleet. Moreover, our almost identical ships also create significant operational advantages because our ships are built to common specifications we benefit from efficiencies across sales and marketing operations deployment purchasing and shipbuilding this approach simplifies everything from crew training and maintenance to inventory management and fleet deployment taken together we believe that these advantages reinforce the strength of our business model and the distinctive earnings power of the Viking fleet. Now, while a thoughtful fleet expansion remains the engine of our growth, we are also focused on further enhancing the experiences we offer our guests. Moving to slide five, you can see that we continue to increase our offering of land extensions and optional shore excursions, providing guests with more opportunities to explore the destinations they visit before during and after their voyage one example is our new saint moritz lombardi and alpine train extension which takes guests through the swiss alps aboard the bernina express this four night fully guided trip can be added before or after the cruise and we have also expanded our shore excursion portfolio with experiences such as a zeppelin flight over cologne which offers breathtaking aerial views of the city's most iconic landmarks additions such as these reinforce our commitment to providing meaningful and memorable ways for our guests to explore the world we believe that they are an important differentiator for viking as our fleet continues to grow so does the range of experiences available to our guests. Now, before turning the call over to Lynn to discuss our financials, I would like to address the low water levels currently affecting some rivers in Europe. As we have discussed in the past, river cruising is inherently dependent on natural conditions and no two seasons are alike. This year, portions of several European rivers, particularly the Danube and the Rhine, have experienced historically low water levels, creating operational challenges across the industry. Generally, Viking's purpose-built river fleet deployment flexibility and well-established ship swap capabilities are significant competitive advantages that enable us to minimize disruptions as much as possible. That said, the historically low water levels this year, combined with conditions that have deteriorated week by week have impacted guests on some of our itineraries this season. Delivering a great guest experience is one of our highest priorities, and our teams are working tirelessly to ensure that any necessary adjustments are handled as smoothly as possible. With our guests at the center of every decision we make, we are also enhancing our communication protocols to ensure they understand what to expect on disrupted itineraries. We are doing this through more proactive outreach and more frequent operational updates. We are also issuing future cruise vouchers to certain affected guests. While we believe this is the right approach from both a guest satisfaction and loyalty perspective, these vouchers will have a financial impact extending beyond 2026 and into 2027 and 2028 as they are redeemed. We believe this investment reinforces the trust that our guests place in Viking and supports the long-term loyalty that has been fundamental to Viking's success. Our focus remains on taking care of our guests, operating our European river fleet through these challenges, and continuing to deliver the exceptional experiences for which Viking is known. With that, I'll turn it over to Lynn to discuss our financials.

Thank you, Leah, and good morning, everyone. I will start by reviewing our very strong second quarter results. On a consolidated basis, total revenue for the quarter increased 16.5% year-over-year to $2.2 billion. The year-over-year increase was mainly driven by increased capacity and higher revenue per PCD. During the second quarter of 2026, capacity PCDs increased 10.9% compared to the same period in 2025. This year-over-year growth was mainly driven by the expansion of our fleet, which included the addition of seven river vessels and two ocean ships. The growth also reflects additional capacity of the Viking Eden, an ocean ship dedicated to our guests from Asia. It is now sailing in Europe, and we are pleased to be expanding our European itinerary offerings to this important and growing customer base. Adjusted gross margin increased 16.3% year-over-year to $1.4 billion, resulting in a net yield of $645, 6.2% higher than the second quarter of 2025. Vessel expenses excluding fuel per capacity PCD increased 2.7% this quarter compared to the same period last year. Regarding SG&A, expenses were slightly lower as a percentage of adjusted gross margin when compared to the same time last year. As we have mentioned in the past, our priority is to invest in our teams as well as in sales and marketing to support future growth and drive demand generation. Adjusted EBITDA for the second quarter was $748 million, 18.2% higher than the same period last year. This significant year-over-year increase was mainly driven by higher capacity and higher net yields in both the ocean and river segments. As we have shared before, capacity growth coupled with net yield growth translates into strong EBITDA improvement and margin expansion. Net income was $588 million, an improvement of $148 million when compared to the same period in 2025. Adjusted net income attributable to Viking Holdings Limited was $587 million, 33.8% higher than the same period in 2025. Adjusted EPS was $1.31 for the second quarter, 33% higher than the same period in 2025. Before moving to our reportable segments, which are on slide eight, I would like to highlight that for the first half of the year, our consolidated adjusted gross margin increased 16.5% year-over-year to over $2.1 billion, and our adjusted EBITDA was $853 million, 20.9% higher than in the same period last year. It is important to note that the prolonged low water conditions we are experiencing across some of our European rivers are not yet reflected in our financial results. As conditions evolve, we will see some impact in the periods ahead, although it is too early to determine the extent. Now I will briefly discuss our two reportable segments, river and ocean. Unless noted, I will be referring to the year-to-date metrics, or six months ended June 30, 2026. For the river segment, capacity PCDs increased 3.2% year-over-year, and occupancy for the period was 94.8%. Adjusted gross margin grew 11.3% year-over-year, and net yield was $660, up 8.8%. year-over-year, driven by strong demand across all regions and favorable itinerary mix. For ocean, capacity PCDs increased 11.4% year-over-year, mainly due to the addition of the Viking Vesta in July of 2025. Occupancy for the period was 95.4%. Adjusted gross margin increased 20.3% year-over-year to $1.1 billion, dollars, while net yield increased 7.7 percent to $593. Similar to River, the year-over-year increase was driven by strong demand and favorable itinerary mix. Now moving to the balance sheet. On slide 9, you can see that as of June 30, 2026, we had total cash and cash equivalents of $4 billion, and we also have an undrawn revolver facility of $1 billion. Our net debt was $2.4 billion, and our net leverage was 1.2 times. As of June 30, 2026, deferred revenue was $5 billion. Also on slide 9, we show our bond maturity outlook. As you can see, maturities are in 2028 and beyond. With this, I'd like to confirm our debt amortization for 2026 and 2027. As of June 30, 2026, the scheduled principal payments for the remainder of 2026 were $117 million and $234 million for the full year 2027. From a committed capital expenditure perspective, and for the full year 2026, the total committed ship capex is about $1.9 billion, or $650 million, net of financing. And for the full year 2027, the total expected committed ship capex is about $1.0 billion, or $260 million, net of financing. We will now dive into the booking curves, which are all as of August 9, 2026. On slide 11, we show our consolidated metrics for our core products. As you can see, we are in very good shape for both the 2026 and the 2027 seasons. The 2026 season already has 96% of the capacity PCDs booked. Advanced bookings equal $6.4 billion, which is 13% higher than the 2025 season at the same point in time, while capacity is increasing by 7%. And for 2027, we are already 53% booked, with capacity increasing by 15% year-over-year. We have $4.7 billion of advanced bookings, which are 21% higher than the 2026 season at the same point of time in 2025. I will now talk about the advanced bookings curves for the segments. On the next slide, you will see our curves for ocean cruises. This is slide 12. I will start with the yellow line, which shows the bookings for 2026. Overall, we have sold 96% of our capacity PCDs for the year and have $2.9 billion of advanced bookings, which is 17% higher than last year at this point in time. Capacity is increasing by 9%, and rates have remained strong as we finish selling the year. If you look at the gray line, you will see the booking trend for the 2027 season, which is in very good shape, too. As of August 9th, we had sold about 62% of the 2027 capacity for Ocean, which is quite notable since the capacity is increasing by 18% year over year. Advanced bookings are 29% higher than last year, with rates equal to $877 compared to $781 for the 2026 season at the same point in time. Now we move to slide 13, you will see the curves for the river segment. I will start with the advanced bookings for 2026, which is the yellow line. As you can see, we are having a very good year, with 96% of the 2026 capacity already sold. We have over $3 billion in advanced bookings, which is 11% higher than last year at this point in time. Similarly to Ocean, we have continued to book our remaining inventory at very attractive rates. Capacity for the river segment is growing approximately 6% during 2026. Now looking at the gray line, these are the advanced bookings for the 2027 season. As you can see, we have sold about $1.8 billion in advanced bookings, which is 11% higher than the 2026 season at the same point in time. Our operating capacity for river is up 13% year-over-year, and we are already 42% booked. These are good trends for 2027, with relatively high rates equal to $1,029 compared to $942 in 2026. Keep in mind that the river operation is seasonal, as our core European product starts in March. Given this, the booking curve builds through the year. So recapping, demand for our product is strong, and we are very pleased with how the booking curves are developing. Now Leah will add some color to our order book and capacity.

Thank you, Lynn. As we reported this morning and since our last earnings call, we took delivery of four river vessels and one ocean ship and exercised our options for two additional ocean ships scheduled for delivery in 2032. We are very pleased with our performance here to date, and our ongoing fleet expansion underscores confidence in the business, the resilience of demand, and the long-term growth opportunity before us. We look forward to updating you on our progress in the quarters to come. With that, operator, we are ready to open the line for questions.

Certainly. At this time, we'll be conducting a question and answer session. In the interest of time, we ask that participants limit themselves to one question on today's call. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we poll for questions. Your first question is coming from Steve Wysinski from Stiefel. Your line is live. Yeah, hey, guys. Steve, your line is not coming through clearly. Are you able to repeat your question?

And once again, Steve, your line is not coming through very clearly. Are you able to repeat your question, please? Yep. Can you hear that? Your next question coming from Zee and Sue from BNP Paribas.

Your line is live.

Hi, guys. Thanks for the question. Maybe on the low water levels, are you seeing kind of any near-term indicators that suggest consumers might be kind of avoiding river cruising at all? Just given the low water levels, are you seeing any near-term impact on demand? And then maybe longer term, how do you think about how low water levels might impact guest experience and brand loyalty. I know in the past instances of, I think it was in 2022, low water levels in the Rhine, guest ratings were similar for itineraries with ship swaps and to those without, and maybe it's a little bit more difficult this year, but anything you could kind of share in terms of brand loyalty over time and guest satisfaction. Thank you.

Hi, thanks for the question so for nearly 30 years viking has successfully operated on europe's rivers through a wide range of water conditions so river levels they naturally fluctuate from year to year some seasons we experience high water other seasons we experience low water so that's really the reason why our river fleet was designed with these realities in mind and we have over the course of 30 years have really, you know, worked on our operational expertise that allows us to minimize disruptions through proven solutions, including ship swaps when necessary, so that our guests continue to enjoy the itineraries that we offer. This year was exceptionally low water. We understand that, you know, it was not ideal conditions, but nevertheless, you know, we continue to operate without any cancellations. I think our booking curves for the river segment speak for themselves. We have not seen any particular impact in terms of booking cadence, but I'll let Lynn expand on that.

Thanks, Leah. I mean, I think I concur with what Leah said. If you look at our 27 curves as of August 9th, we are already over 40% booked for rivers, and that is a great position to be in. So based on that, we don't believe low water is impacting our bookings and we're pleased with how the curve is tracking.

Maybe could I add a point? It's Tor here and I'm in Europe. I'm in Oslo, as a matter of fact, and my daughter, Karina, was on board with Wikimera here in Oslo and 100 guests there had been on the combined river cruise down the Rhine, and then on to the Mira. And, of course, we all are a little bit concerned how our guests' reactions. As you know, we tried to go a bit overboard to treat our guests well. She said that the people she had spoke to said that they were very pleased with the way Viking handled the whole situation. And, of course, we have the benefits that we can do the ship swaps and all that. So, of course, it's not ideal, but I think we've been able to handle it very well. We were a little bit slow initially, but I think we have handled it very well.

Thank you. Your next question is coming from Matthew Boss from J.P. Morgan. Your line is live.

Great, thanks, and congrats on another nice quarter.

Thank you.

So, Leah, with your 27 advanced bookings per PCD up 10%, more or less unchanged, relative to a quarter ago, Can you touch on recent pricing trends across river relative to cruise or just any constraints to delivering at least the mid single digit historical yields in 2027, despite the impact that you cited from vouchers and Lynn on expenses and any transitory impact to expect in costs, excluding fuel for this year or just any constraints to your ability to manage costs below yields for this year and next year? As we think about the impact from the water levels.

Hey, Matt. So I think our booking curves show that our rates are actually pretty good. And also the pacing is also good with 40% of the river capacity and more than 60% of ocean capacity for 2027 already being booked as of this point in time. We don't see an impact on demand and in what, you know, the bookings that are coming in based on recent events. You know, we've seen our guests kind of prove to be resilient and are continuing to book 2027 and future seasons. Lynn, do you want to add additional color?

Sure. Thanks, Leah. So for 2027, you know, as Leah noted, our net yields are quite nice, about 10% higher compared to the same point in time prior season. And so I think this goes to the same, you know, our curve reflects some favorable product mix. And so we see that 10%. I think our goal remains mid-single-digit yield growth for 2027. as it relates to expenses you know as you know we don't guide but um you know the first half has has shown where expenses have been um cadence of expenses may differ from one period to the next it's not always like for like so we wouldn't say we should extrapolate but our goal is always obviously to be prudent um and diligent with cost management we noted earlier that there may be some impact from low water. We'll possibly see that in the third quarter. And then also from the voucher issuances. So as vouchers are issued and utilized for future periods, those future periods will reflect the voucher value.

Thank you. Your next question is coming from Robin Farley from UBS. Your line is live.

Great. Thanks for taking the question. If you could help us quantify a little bit, the vouchers issued. It's interesting that you're saying you've done that even though you haven't had any cancellations. Just thinking about, you know, assuming if all those vouchers were to be used in 27, kind of what the total impact would be. I would assume it's relatively small across, you know, across the base of your fleet. But if you can help us quantify the value that you've issued. And then also on that 10% increase in 27 booked revenue per day, you mentioned there's favorable product mix in there. Is it fair to assume there's also some benefit that that's a gross revenue number that airfares are maybe higher in 27 versus 26? And any color you could give us on how the cruise ticket price itself is trending if you didn't have that higher airfare in there, just even, you know, in whatever way you can help us quantify that.

Hi, Robin. This is Leah. So, yeah, we did proactively issue future cruise vouchers, as Tor mentioned earlier during the call. You know, we want to be, we want to make sure that the guests feel that we understand that the, you know, nobody wants a disrupted cruise. we understand that this was not what they had hoped for when they first initially booked and so really that future cruise voucher generates the goodwill and in the hopes that they will return for future seasons so that they can experience the experience that viking is known for based on conditions they continue to evolve week to week so at this stage our focus is on the direct impact to our third quarter so as of mid-august more than 50 percent of the river capacity cruise days were affected with about 10 to 12% ultimately canceling. So we have proactively started to issue vouchers for these guests to acknowledge that we understand what's going on. We understand that this is not what they had purchased. And hopefully to Lynn's point, these vouchers would encourage them to really come back to Viking and experience what we are known for, the experiences that we're known for. And with that, I'll turn it over to Lynn for, you had some cost questions about airfare.

Thanks, Leah. So as it relates to 2027 and net yields, our curves show advanced bookings per PCD, which is revenue that we generate from our guests that have booked thus far. So it is favorable product mix. We price to demand is the reality. keeping in mind that, you know, we want to ensure that our pricing is, we have good pricing for our guests to ensure that they come back. What we would point to is net yields, if you want to look at airfare. So net yields will reflect costs. And, you know, as many of us know, airfare is something that most companies are seeing pressure with. That being said, you know, our goal remains mid-single-digit yield growth year over year. That remains the same for 26 and the same for 2027.

Thank you. Your next question is coming from Trey Bowers from Wells Fargo. Your line is live.

Hey, guys. Thanks for the question. I just want to confirm when we look at the booking curves, is there any impact of that from the issued vouchers, or is that a totally clean number? And then I guess as well, kind of unrelated, the sales and marketing spend was really solid this quarter. It was down year over year.