Royal Caribbean Cruises Ltd. Price & Performance (RCL)

It's when all your senses become aware. You are present. [indiscernible] [indiscernible] That's traveling to me.

Experience the best family vacation in the world Icon of the Seas. It's the first of a whole new class of ships. Where everyone in your crew will have the time of their life multiple times a day.

You'll never forget the feeling of plunging down six record breaking slides at Thrill Island or finding the courage to conquer the crown's edge, a test of bravery like nothing you've ever dared, dangling high above the ocean, and dial up your downtime at the Surfside neighborhood where little cruisers can get drenched in fun at Splashaway Bay Aqua Park while adults can soak up the views from the water's edge pool. Awe inspiring by day, iconic by night, the Aqua Dome, perched at the crown of the ship, is home to mesmerizing performances beneath a towering waterfall gourmet dining, and dramatic ocean view. Icon of the Seas is everything you've ever loved about every vacation, all rolled into one. Experience it all with your family onboard seven night Caribbean Adventures from Miami, Florida. And in summer twenty twenty five, we're introducing even more new Wow thrills, and shells for everyone. Introducing the next icon of vacation, star of the seas. Learn more about icon class ships at RoyalCaribbean.com. At Celebrity Cruises, we elevate every detail beyond what you thought a vacation could be. With globally inspired food, exclusive destinations, and exciting itineraries, We're nautical miles ahead of any other vacation.

From bartenders who remember your favorite cocktails, to concierges who you'll swear can read minds, He'll always feel like a regular. Once you explore the world with us, you'll never want a vacation any other way. Nothing comes close to Celebrity Cruises.

We look forward to seeing you onboard soon.

It's when all your sense become aware You are present. And focused that's traveling to me. It's an urgent need to go and observe this world that we all share. A ray of light a pair of eyes that tell a story, an instant of perfection. Images printing on your soul. This is authentic beauty. It's all out there Trust me. There's always room for this discovery.

Discover more on Silversea.com.

Reset all expectations for what you can do in one day at the award winning private island in The Bahamas Perfect day at CocoCay. Plunge down 13 water slides at Thrill Waterpark, including the tallest slide in North America, Daredevil's Peak. Take flight on a helium balloon ride that soars 450 feet up, then play it cool at the largest freshwater pool in The Caribbean, Oasis Lagoon. And kids can have even more fun by the gallon at the biggest splashaway bay park yet. Or board the shipwreck splash pad for splashbuckling thrills like slides rope bridges, and 30 water cannons. So whether you're riding 1,600 feet of zipline, getting your game on at South Beach, or enjoying the ultimate beach day at Chill Island, you've got countless adventures to choose from all in one day, all in one island, only on Royal Caribbean. Learn more at Royal Caribbean dot com slash perfect day at CocoCay. With Celebrity Cruises, you're going to need a bigger bucket list. We can take you to over 300 destinations across seven continents and offer authentic experiences in each one. Feel like a local on anything but ordinary excursions. From the Great Barrier Reef in Australia to the glaciers of Alaska.

From secluded beaches in The Caribbean to the Colosseum in Rome, Whichever destinations you've been dreaming about, we're here to take you there. And what really makes us different is our ships. Which offers so much to explore along the way. You'll never ask, are we there yet?

It's when all your sense become aware. You are present. And focused That's traveling.

To me.

Experience the best family vacation in the world icon of the sea. It's the first of a whole new class of ships. Where everyone in your crew will have the time of their life multiple times a day. You'll never forget the feeling of plunging down six record breaking slides at Thrill Island or finding the courage to conquer the crown's edge, a test of bravery like you've ever dared dangling high above the ocean. And dial up your downtime at the Surfside neighborhood where little cruisers can get drenched in fun at Flashaway Bay Aqua Park while adults can soak up the views from the water's edge pool. Awe inspiring by day, iconic by night, the Aqua Dome, perched at the crown of the ship, is home to mesmerizing performances beneath a towering waterfall gourmet dining, and dramatic ocean view. Icon of the Seas is everything you've ever loved about every vacation, all rolled into one. Experience it all with your family onboard seven night Caribbean Adventures from Miami, Florida. And in summer twenty twenty five, we're introducing even more new Wow's thrills, and shells for everyone. Introducing the next icon of vacation, star of the seas. Learn more about icon class ships at RoyalCaribbean.com.

At Celebrity Cruises, we elevate every detail beyond what you thought a vacation could be. With globally inspired food, ex exclusive destinations, and exciting itineraries, We're nautical miles ahead of any other vacation. From bartenders who remember your favorite cocktails, to concierges who you'll swear can read minds, You'll always feel like a regular. Once you explore the world with us, you'll never want a vacation any other way. Nothing comes close to Celebrity Cruises. We look forward to seeing you onboard soon.

It's when all your sense become aware. You are present. And focused that's troubling to me. It's an urgent need to go and observe this world that we all share. [indiscernible] a pair of eyes that tell a story, an instant of perfection [indiscernible] Printing on your soul. This is authentic beauty. It's all out there. Trust me. There's always room for discovery.

Discover more on Silversea.com. Reset all your expectations for what you can do in one day at the award winning private island in The Bahamas Perfect day at CocoCay. Plunge down 13 water slides at Thrill Waterpark.

Including the tallest slide in North America, Daredevil's Peak. Take flight on a helium balloon ride that soars 450 feet up, then play it cool at the largest freshwater pool in The Caribbean, Oasis Lagoon, and can have even more fun by the gallon at the biggest splashaway bay aqua park yet, or board the shipwreck splash pad for splashbuckling thrills like slides, rope bridges, and 30 water cannons. So whether you're riding 1,600 feet of zip line, getting your game on at South Beach, or enjoying the ultimate beach day at Chill Island, you've got countless adventures to choose from all in one day, all in one island, only on Royal Caribbean. Learn more at RoyalCaribbean.com slash perfect day at CocoCay. With Celebrity Cruises, you're going to need a Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group First Quarter twenty twenty five Earnings Call.

All participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone keypad. I would now like to introduce Blake Banyard, Vice President, Investor Relations. Mr. Vanya, the floor is yours.

Good morning, everyone, and thank you for joining us today for our first quarter twenty twenty five earnings call. Joining me here in Miami are Jason Liberty, our Chief Executive Officer Naftali Holtz, our Chief Financial Officer and Michael Bailey, President and CEO of the Royal Caribbean brand. Before we get started, I'd like to note that we will be making forward looking statements during this call. These statements are based on management's current expectations, are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors. We do not undertake to update any forward looking statements as circumstances change. Also, we will be discussing certain non GAAP financial measures, which are adjusted as defined a reconciliation of all non GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency adjusted basis. Jason will begin the call by providing a strategic overview and update on the business, Naftali will follow with a recap of our first quarter the current booking environment and our outlook for 2025.

We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason. Thank you, Blake, and good morning, everyone.

I am pleased to share our strong first quarter results updated outlook for the year. During the first quarter, we delivered over 2,000,000 unforgettable vacations at exceptional guest satisfaction scores and achieve financial results. That exceeded our expectations. Likewise, Wave season was the best in our company's history putting us in a strong book position for the remainder of the year and for 2026. Clearly, consumers continue to choose our vacations because we consistently deliver the best experiences and provide value to our guests. We look across the current macro landscape, we recognize that there is heightened uncertainty. However, research including the direct surveying of our customers, continue to show that the propensity to cruise remains encouraging. The combination of the world class experiences we deliver continued strong secular tailwinds and the persistent value gap to land based vacation positions us well to navigate the current environment. I'll touch more on this in a little bit. Are certainly not immune to macro volatility. But what we're seeing on the ground in our bookings and the real time spending occurring on our ships is that consumers are still prioritizing experiences planning to spend more on them this year, and are seeking value that we are well positioned to offer.

At this point, it's still too early to determine how exactly the current macro environment could impact the broader economy or consumer behavior. What I want to emphasize is that we are focused on what we can control. Delivering the best vacation experiences for our guests optimizing revenue, managing costs, and executing on our long term strategies. Over the past several years, we have taken decisive steps to strengthen our balance sheet and we continue to do so. We are in a very strong financial position investment grade balance sheet, strong cash flow generation, robust liquidity and minimal near term maturities. And we remain focused on maintaining financial flexibility. Are confident in our growth strategy and the incredible opportunity ahead of us continuing to win a greater share of the growing $2,000,000,000,000 vacation market as we further progress from delivering the vacation of a lifetime into a lifetime of vacations. We also continue to invest in the future of our fleet our private destination portfolio and the guest experience. We do this all with the best talent and I wanna thank the entire Royal Caribbean Group team for their passion, dedication, and commitment to delivering the best vacation experiences responsibly and for driving strong financial results.

Now moving to our results and outlook. We are very pleased with our first quarter results, exceeded our expectations. Yields grew 5.6% and we saw better than expected close in bookings across all itineraries. Adjusted earnings per share of $2.71 in the first quarter was $0.23 higher than our guidance. Better revenue and favorable timing of expenses contributed to the better than expected earnings performance. Nathalie will elaborate more on the first quarter results shortly. Now I'll provide some insight into the demand environment and wave season. During the first quarter, bookings outpaced last year across all products resulting in the best wave season in the company's history. In the month of April, bookings for 2025 are outpacing last year with close in bookings trending particularly well. Our book position is in line with prior years at higher APDs. Onboard spending and pre cruise purchases continue to exceed prior years driven by increased participation in onboard activities and experiences at higher prices. All commercial channels are generating quality demand with strength in our direct to consumer channels. As always, we continue to possess a nimble and flexible sourcing model both geographically and demographically, with the ability to source quality demand all over the globe.

We continue to be thrilled by the reception of our spectacular new ships the enthusiasm for Star of the Seas, our second Icon class ship and Celebrity XL, the latest addition to the Edge class lineup. Have exceeded expectations driving strong pricing and load factors. As we look at our current and potential consumers, we remain encouraged. While broader consumer spending moderated, vacation spend continued to grow as consumer sentiment around leisure vacations remained positive. Our customers continued to be engaged and excited about vacations. In research fielded in April, seven out of 10 consumers told us that they intend to spend the same or more on leisure travel over the next twelve months. With spend on travel continuing to outpace major material purchases. And for nine out of 10 consumers surveyed, value for money is crucial when making vacation plans. And this is where we continue to excel. Furthermore, when financial concerns impact lifestyle or spending, travel is not the first place consumers indicate they will pull back.

Cruisers are more financially secure more likely to protect their travel budgets. During times of uncertainty. We are very well positioned to deliver great vacations from multiple close to home, millions of people in The US. Offering them extraordinary value through a range of itinerary options from three to ten days from Florida Texas, California, the Northeast, and the Northwest. Our vacation experiences remain an attractive value proposition and leading guest satisfaction compared to other vacation alternatives. Consumers recognize that our brands offer superior value for money versus alternative options. That value is made up of our unique ability to give guests the opportunity to visit a variety of destinations in one trip the convenience of having everything in one place plus our high quality onboard amenities and services and pricing that includes meals, accommodations, and entertainment. Now let me provide an update on our outlook for 2025. Let me note that our guidance ranges are expanded compared to those we would typically provide and are based on current demand trends, while also considering the complexity of the macro environment based on what we know today. Capacity is expected to grow 5.5% in 2025 driven by the introduction of Star of the Seas and Celebrity XL, as well as the full year benefit of Icon, Utopia and Silver Ray.

Yield growth is expected to be in the range of 2.6% to 4.6% supported by the incredible appeal of our new ships performance across our existing fleet and the continued success of our private destinations. Full year adjusted earnings per share guidance is now expected to grow approximately 28% and be in the range of $14.55 to $15.55 We are benefiting from better than expected first quarter performance and favorable foreign exchange and fuel rates. While we remain cognizant of macroeconomic uncertainties, recent booking trends disciplined cost management and a strong balance sheet positions us well, to deliver another year of strong earnings growth and cash generation. [indiscernible] Our proven formula of moderate capacity growth moderate yield growth and strong cost control continues to drive superior financial performance. And we remain focused on executing our perfecto performance program targeting a 20% compound annual growth rate in adjusted earnings per share through 2027, and return of invested capital in the high teens. We are relentlessly focused on delivering and innovating the best vacation experiences on the planet. And a key differentiator for us is our powerful commercial flywheel where each guest experience fuels deeper loyalty and more engagement which enables us to give guests the vacation experiences they want so they keep coming back.

It starts with our exceptional portfolio brands each a category leader designed to cater to the diverse needs of our global guest base. We amplify that strength with industry leading ships exclusive private destinations and continuous innovation that elevates every aspect of the guest journey. Over the next three years, we will introduce seven game changing new ships including Star of the Seas and Celebrity XL, in 2025. We'll launch Celebrity River in 2027 and expand from two to seven exclusive destinations. We deepen customer relationships through data, personalization and a frictionless experience that makes planning and enjoying a vacation seamless. Our unified loyalty programs connect all our brands under one ecosystem encouraging repeat travel and unlocking more opportunities to engage across ocean and river cruising along with our exclusive destinations. The ecosystem is working. Members of our loyalty programs accounted for nearly 40% of our bookings last year, with cross brand bookings increasing. Loyalty members are more likely to book direct and spend 25% more per trip than nonmembers. On the digital front, bookings our app have doubled so far this year and loyalty members are more likely to book in the app than non loyalty members. Over the last ten years, we've improved the rate at which guests rebook within three months by 1.7 times.

And increased Net Promoter Score by 15 points. These results have translated into 50 plus percent net yield growth over that time period. And we're just getting started. Looking ahead, we are incredibly energized by the momentum we're building. These ambitious initiatives reinforce our flywheel, and strengthening our ecosystem. As we turn the vacation of a lifetime into a lifetime of vacations. I am incredibly proud of the teams at the Royal Caribbean Group for their passion, and relentless focus on delivering great vacation experiences for our guests. We are executing from a position of strength and I remain optimistic about our ability to capitalize on the many opportunities that lie ahead. And with that, I will turn the call over to Naftali.

Naft?

Thank you, Jason, and good morning, everyone. I will start by reviewing first quarter results. Which were above our expectations. Adjusted earnings per share were $2.71 9% higher than the midpoint of our guidance. We had a great first quarter that was driven by better than expected pricing on closed end demand and $08 per share of favorable timing of expenses. We finished the quarter with a net yield increase of 5.6%. In constant currency compared to the first quarter of twenty twenty four sixty basis points above the midpoint of our initial guidance in late January. Most of our yield growth was driven by strength in ticket pricing versus twenty four. Net cruise costs excluding fuel increased 0.1% in constant currency, 175 basis points lower than our initial guidance driven entirely by timing of expenses that will roll into the second quarter and some of the rest of the year. Adjusted EBITDA margin was 35%, three sixty basis points better than last year. And operating cash flow was $1,600,000,000 As Jason mentioned, had a record weight season and our booked load factor is in line with prior year's and at higher APDs. Bookings in the month of April continued at a higher pace than last year, including strength in close end demand and cancellation levels remain normal.

The Caribbean represents 57% of our deployment this year and 49% of capacity in the second quarter. In 2025, we offer Caribbean sailings from nine U. S. Home ports, Miami, Fort Lauderdale, Tampa, Port Canaveral, Galveston, Baltimore, Cape Liberty, San Juan and New Orleans. And a variety of sailing lengths our leading hardware and destinations strengthen our competitive position in this market. With the introduction of Start of the Seas, in late August, Celebrity XL in November and the opening of Royal Beach Club Paradise Island by the end of this year. Europe will account for 15% of capacity for the year and 20% of capacity in the second quarter. Alaska is expected to account for 6% of total capacity and 9% in the second quarter. We have also some of the best hardware in the region with Celebrity Edge two Quantum class ships and SilverNova. Now let me talk about our guidance for 2025. Our proven formula for success moderate capacity growth, moderate yield growth and strong cost discipline is expected to drive significant earnings growth and higher cash flow generation this year. Moving to revenue guidance. We are increasing our guidance for the year compared to our prior one in January.

We did extend our typical guidance ranges to account for broader external factors and the complexity of the current macroeconomic environment. For the full year, we expect yield growth of 2.6% to 4.6%. As a reminder, first quarter yield growth disproportionately benefited from both the timing of drydocks and new hardware. A full quarter of ICON in addition to Utopia and Silver Ray. The cadence of yield growth throughout the year as expected is driven by the introduction of Star of the Seas and Celebrity XL in the third and fourth quarters. [indiscernible] The impact of the timing of new ship deliveries on yield growth in the second half of this year is a headwind of approximately 140 basis points. Full year net cruise costs excluding fuel are expected to be negative 0.1% to up 0.9%. 10 basis points lower than our prior guidance as we remain focused on efficiency enhancing margins maximizing cash flow. We manage our costs more on a yearly basis, the cadence of our cost growth varies throughout the year. This is driven by timing of dry docks, ship deliveries and the ramp up of costs related to our acquisition of the customized port and other destinations.

Second, and third quarter cost growth is expected to be higher than the first and the fourth quarter. With the third quarter being most impacted by two eighty basis points from these headwinds. We anticipate a fuel expense of $1,140,000,000 for the year and we are 59% hedged. At below market rates. We are benefiting from the current low fuel rates and have capitalized on this opportunity by executing hedges for the upcoming years at very favorable rates. Based on current fuel prices, currency exchange rates and interest expense, we expect adjusted earnings per share between $14.55 and $15.55 The $0.55 increase compared to our prior guidance is driven by a €0.37 benefit from FX and fuel rates for the remaining of the year a €05 benefit from a lower share count due to share repurchases with the remainder attributed to the outperformance in the first quarter. We also expect 15% growth in adjusted EBITDA and two ten basis points growth in gross EBITDA margin. This positions us to accelerate our cash flow generation which allows us to continue investing in our strategic initiatives maintaining investment grade balance sheet metrics and expanding capital return to shareholders. Now let me comment on second quarter guidance.

In the second quarter, we expect capacity will be up 6% year over year and a net yield growth of 4.3% to 4.8%. Roughly half of the yield increase is driven by new hardware, and the rest is driven by higher rates and load factors on like for like hardware. Net cruise costs, excluding fuel, are expected to be up 3.7% to 4.2%. This includes higher dry dock days in the first half of the year compared to last year, and 140 basis points impact from first quarter cost timing shift. Taking all this into account, we expect adjusted earnings per share for the quarter to be 4 point to $4.1 Turning to our balance sheet. We ended the quarter with a strong $4,500,000,000 in liquidity, We're in a very strong financial position and we'll continue to further strengthen the balance sheet. During the quarter, S and P Global Ratings upgraded our credit rating to investment grade. Reflecting the strength of our financial position consistent performance and disciplined capital allocation strategy. We are very pleased with this acknowledgment of the strong trajectory of the business and our commitment to strengthening the balance sheet. Also during the quarter, we exchanged €213,000,000 of our outstanding convertible notes for cash and stock.

This transaction reduced our fully diluted share count by 1,000,000 shares. We have €110,000,000 left outstanding that we plan to settle at maturity. During the quarter, we also repurchased 1,000,000 shares under our 1,000,000,000 share repurchase program. As of March 31, we have $759,000,000 available for repurchases under the current authorization. We will continue to opportunistically buy back shares while ensuring a strong balance sheet. We have very limited maturities left this year all related to shift amortization payments that we plan to repay with cash flow. We also expect to further reduce leverage to below three times the end of twenty twenty five. In closing, we remain committed and focused on our mission to deliver the best vacation experiences responsibly as we work to deliver another year of solid returns. With that, I will ask our operator to open the call for a question and answer session.

Our first question comes from the line of Matthew Boss with JPMorgan. Please go ahead.

Thanks and congrats on a nice quarter.

Thank you. So Jason, could you speak to drivers of the better than planned performance in the first quarter maybe elaborate on business in April? And just walk through the company specific initiatives and continued investments that you have that you think could insulate results and win multiyear market share?

Sure, Matt. Hope hope you're doing well. So I think just starting off in the first quarter, you know, we we have seen, you know, this kind of continuous trend that you know, in inside of a quarter, we we see kind of an uplift in demand. As as we get very close in And not only do we see an uplift in demand, we're also able to raise our pricing during that period of time. And there are also high quality customers that are also spending well on the ship. So the driver in the q one is really just really strong close in demand that we've seen, and you've heard us talk about in in April and then in the second quarter, yeah, we're we're seeing that continuous trend. Interesting thing about the trend is of course, our revenue management tools take those things into account. And then try to predict in the next quarter that it's going to be at a certain level. And and it and it keeps elevating, which I know is probably counterintuitive to some of the reporting around consumer confidence and so forth that's out there. I think the reason for that is several factors.

One of which is, you know, we're obviously incredibly focused on our flywheel. How to you know, you know, how do we get our guests to be more to come with us more frequently So the investments we've made in loyalty, the rep the investments we've made even in our app and online, so that it makes it easier and easier whether it's through us or through our travel partners to do business with us. Gets easier and easier. And and then, you know, we're we're getting more and more reps out of those investments, you know, that we're making. Think behind that is also and we've seen this for a while. It's just a flight to quality. When you're delivering an exceptional vacation experience with net promoter scores that are above 70, You get very strong advocacy and you get customers that that that you wanna continue to, to sell with you. And and I think that's why we're seeing again, another we saw an outperform quarter in q one And while I also think we're bucking some of the the trends that are very intuitive when you look at consumer confidence and so forth. The combination, I think, of what we're delivering combined with the value gap to land based vacation, which as you you know, everyone on this call has heard me over time, it's frustrating to have that gap.

But in times like this, and we've seen this in other markets when when there's economic concerns, that value gap is actually a pretty good, buffer for for us to live in our vacation experiences and our guests willing to to pay for those experiences and for us to meet meet our our financial expectations. I I also think when we think about the the longer term opportunity and the investments we're making, Obviously, our destination portfolio has been exceptionally successful We're gonna basically be adding destination or two over the next several years. That's gonna drive tremendous value for our shareholders. So there it's a great margin. Business for us, and it also enhances the guest experience We have a lot of great ships coming online that are, you know, are are very, very well received as a very focused and designed to who the customer of today and the customer of tomorrow is. We've got a lot of investments on the technology side. So, obviously, our yield management program is has a tremendous amount of AI inside of it, and that gets smarter and smarter. We're installing a new travel platform that will be centered around the customer instead of being centered around a cabin And then we have a lot of, you know, other, I would say, modernization activities and so forth that are taking some of the great learnings from the newer ships and rolling them back on to some of our legacy fleet.

So, yeah, we're really excited. You know, I you know, we all appreciate that there is some noise in the environment but we are seeing you know, I I think all things considered very strong consumer trends for our business.

That's really great color. And then maybe Naftali, if you could just walk through the areas of this year's guidance where you embedded expanded assumption ranges tied to the current macro backdrop? And just multiyear, any change in thinking to your outlined 20% earnings growth CAGR based on anything that you've seen date?

Yeah. Hi, Matt. So really, if you look historically, at this time of the year, we actually narrowed the range So we started roughly around 50 sorry 100 basis points on yield in the beginning of the year and this point we're around 50. So we kept it at 100. So that's really where the difference is. Obviously, is something that we feel we can control. Very well. So that hasn't changed. And obviously, the earnings we've expanded that range.

Obviously, just announced Perfecta just a couple of weeks ago. And so we feel very good about as Jason said about the long term opportunity to continue to win share for a very, very large and exciting $2,000,000,000,000 vacation market. We continue to invest on our strategies. We believe our strategies work. So we feel that we are also in a great financial position to continue to capitalize on that opportunity.

Next question comes from the line of Vince Chaikin with Mizuho. Please go ahead.

Hey, good morning. Thanks for taking my questions. Have NASA opening in December. Naftali, I think in the last call, you said this is greatest weekend in the history of Cruise. Any updated thoughts on the pricing of that day pass? Thanks.

Hey, Ben, it's Michael. Yeah, the greatest weekend in the world is, of course, Utopia of the Seas. Sailing out of Port Canaveral to Perfect Day and soon to be the Royal Beach Club. So we are absolutely delighted with the performance of that product. It has been outstanding. So very pleased with that. And it truly is the greatest weekend in the world. The beach club pricing strategy, we have a big event that we're hosting in New York City in a couple of weeks, and we'll be talking about the destination portfolio and, sharing some of the images and concepts that will be coming alive in the coming years. And particularly, we'll be talking about the Royal Beach Club in Nassau. And we'll be talking during that presentation about how we're thinking about pricing. We're very as Jason mentioned, on NAF we're super excited about this portfolio that we've got coming online over the next few years. And first one out of the gates of course is the Royal Beach Club National.

Understood. I appreciate that. And one maybe clarification. Why are the new ships a headwind in 3Q and 4Q think you mentioned 140 basis points into HT yield. I guess simplistically, would have thought the ships are a positive. Is this just basically like test cruises ramping up APCDs without the associated full revenue ramp? So Yeah. Let me just clarify. So it's really about timing of when these ships enter into service. And we broadly say second sorry third quarter but really that there is timing into it. So if you think about Utopia, it entered pretty early in July. Star is actually entering towards very late in August And so you have both lower APCDs as well as less of impact from the load factors ramping up. That's really the headwind that is mostly on Q3. Now Q3 also on an absolute dollar is the highest in the second half. So it weighs a little bit more on the second half of the year. Understood. Thank you very much. Sure.

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

Guys. Good morning. So Jason, if we go back to revised guidance for the rest of the year, I guess I would say I'm probably a little surprised you guys didn't take a more conservative view around, onboard spending and or close in pricing. And I know you mentioned the feedback that you've gotten from and your data from your customer base does remain positive. But clearly, onboarding close in can change very quickly. So I guess my question is, you know, if there was going to be some pressure from your customer base, do you think the the low end of your guidance is now set low enough that even if there was going to be some pressure, would capture that. And look, I know that's kind of a tough question because we have no clue how bad spending levels would have to be before it goes outside that range. But I want to get your kind of feedback there or or take on that.

Yeah. But look, I think there's obviously there's there's a lot of companies that are doing different things. With you know, there's a heightened level of uncertainty that's out there. You know, when we're guiding, Steve, you know, the best that we can do is look at how we're trading each and every day, and also how our customers are spending where we see resistance and where we don't see resistance. In in what we're doing. I you know, I I think that when we look at at at at how we've guided for the balance of the year, obviously, we needed to update for q one. We needed to update for for FX and fuel.

But we did not update for the back half. And and so typically, what you would see is you know, when we see trends that we saw in the first quarter, will start to think about how that's gonna impact the balance of the year. So I think we've to take a little bit more of a conservative position that's informed by how we see our guest training with us each and every day. And then we've tried to extend that range to think about how we look at a maybe a softer side and and maybe a more optimistic side you know, to, you know, to help kind of invest understand how we see the range of it. As you mentioned, you know, there is uncertainty and so things could change, obviously. But I think we we feel I mean, we're, you know, we're you know, over I think we're 86% booked for the year. So I think we have pretty good visibility. We see really no impact no change in cancellation rates.

We see no real change in how how how our consumers are are acting outside of that. They're they are a little bit more short term focused and we've seen that in the elevation of bookings for the second quarter. Okay. Got you. That's good color, Jason. And then second question, one of the questions we get a lot from investors is around discounting and what we would call kind of promotional work in order to drive, you know, drive demand. So, you know, as we think about bookings and and maybe not much for this year, but as we think about into 2026 and beyond, can you maybe help us think about how you would attack using lowering pricing versus other tools in order to stimulate demand if there was going to be a slowdown in bookings? And then Jason, I'm not sure you mentioned this in your prepared remarks, but can you give us some color around what you're seeing so far for 2026 and maybe how you're booked for next year versus what you would call your optimal booked position?

Sure. So first and foremost, you know, we are very religious about price integrity. Know, we've we've been through different cycles before, and and and ensuring that we have a high level of price integrity, we think, is is very important. And and I think the combination of all all the tools that we have in place, having that kinda global yield management platform and being able to source from different parts of the world and different parts of The US, you know, on on a dime. I think, you know, positions us us us really, really well. But I I would say, Steve, that what what we generally view is that we have a pretty good holster of of different promotional tools and so forth that we use and we engage all the time on the marketplace. But, you know, I think we would lead with price integrity and we would we would obviously wanna focus on making sure that whatever we're we're putting into the marketplace does not have something that we we believe will impact the integrity of our brands. Or or how we're managing revenue, into the future. I did comment on 2026, you know, that So so one, you know, the the booking window is about a week shorter.

But that's really being driven by close in demand. And our book position for 2026, I said at this point, is in line with same time last year on a volume standpoint. And of course, obviously, we have and that's on a percent. So we, you know, obviously, we have more capacity next year and at higher prices.

Okay. Got you. Thanks guys. Appreciate it.

Thanks, Steve.

Our next question comes from the line of Lizzie Dove with Goldman Sachs. Please go ahead. Hi, Thanks for taking the question. Congrats on a good set of earnings.

Just curious in terms of the inventory you still have to fill for 4Q and for 2026, has there been any difference in terms of like the type of bookings without that's like Europe versus U. S. Itineraries or different brands strengthen contemporary versus premium, short duration, drive to, anything like that, that you would call out that's kind of different than usual trends?

There's there's really nothing specific, Lindsay, that I would I would call out what we're seeing by market. Obviously, some of the things that you you read out there about things a little bit softer for markets like Canada, Yeah. That's that's that's there, but it's very, very us, it's very material to our business. But when we look at whether it's sourcing from whether it's North America, Europe, or Asia, for the products that they source to we feel very good in terms of of their of their booking activity.

And I think, you know, I we we've also been studying. Obviously, we have brands that are in in different segments And so we're looking at is there any behavioral change in the family Is there any behavioral change in the luxury market? Because there are different consumers, you know, they have different balance sheets. And they do tend to act and behave differently. But from what we can see so far, you know, and because so far, meaning, you know, as of as of an hour ago, you know, they, you know, they continue to be focused on their vacation experiences, making sure that they planned and they're getting the vacation experience that they're that that they want. I think there's just a general recognition that there's there is there is this value gap and, you know, potentially, there, you know, there trading more for a more known all inclusive experience, which is why I think we're we're seeing trends that are more favorable than what we might see with other travel peers.

Got it. That makes sense. And then, I guess, just thinking about the makeup of the yield outlook for this year. Obviously, you've been getting such great premiums on the new ships. It's been a big driver. I'm curious, any color you can share of like the contribution of new ship premiums versus like for like pricing, whether you distill a bit of private island, maybe lesser this year, but in that, but just is like for like pricing still up year on year? And just any way to kind of think about the relative contribution of each of those kind of blocks, I suppose?

Yes. So hey, Lizzie. So I said that in the first quarter it was roughly half and half between like for like and new hardware pretty consistent throughout the year except for the third quarter as I mentioned because of the timing of the new ship start of the seas. That obviously is a little bit less so and And mostly like for like. So it's pretty consistent in excluding that piece in the third quarter.

Got it. Thank you. [indiscernible] Our next question comes from the line of Brandt Montour with Barclays. Please go ahead.

Good morning, everybody. Thanks for taking my question. Just a follow-up on near term demand commentary. You guys see a lot of data from your loyalty program now that your loyalty program 40% of your business. You see you can track customers and where they're going in the system. Are you seeing anyone trade down between ships, between brands, just looking for more value within the system?

I'll just be crisp about it. No. Brent. They are, they're they're they're continuing to behave how they normally behave. We've even been watching, you know, are they even, you know, as they're it's not just about the booking in itself. It's also the journey they go through when they're researching and so forth. Are they looking for alternatives that are that are less, and we're not seeing that either occurring at this point.

Okay. Thanks for that, Jason. And then another question, sort sort of recession scenario type of question. But your load factors are in line with prior years for this year, for next year. One of your larger peers is running their booked position ahead of prior years. And so the question is if you go into a slower bookings environment, would you be willing to how much would you be willing to flex your load factors in order to protect price? And if that's something that you'd even need to do or if there's other levers you could pull?

Well, I don't I don't think I mean, you know, it's tough to deal with hypotheticals. I I think that, you know, we're obviously focused on optimizing our revenue and, you know, but at the same time, maintaining price integrity. So I don't have any answer on how much load factor we we would give up. I think what we're what we've been trying to do is actually increase our load factor. We've been outfitting our legacy ships with more capabilities to take on more load factor. Our new ships are able to take on more load factor. And so we're trying to maximize that. And it's not about load factor to get more people in. It's actually to to bring more value to the vacation experience for our our our guests, especially our families and multigenerational Instead of having to buy two cabins, they're able to maybe get their family members into one cabin because we've been able to increase the load factor inside that cabin. Of course, you know, because of the demand that we have and the flywheel that we have, the loyalty system we have, you know, we're able to kinda, you know, you know, maintain that momentum and get more and more reps out of our loyalty guests.

And so that's that's you know, I I don't really know what the hypothetical answer to it is, but I would I lean into that. We do look to obviously maximize our load factor, but also not not at the sacrifice of price integrity.

Got it. Makes sense. Thanks, everyone.

Our next question comes from the line of Vince C. Peel with Leland Research. Please go ahead.

Thanks. Maybe as a follow-up to Brandt's You know, it sounds like your April bookings were were quite strong. There has been some reports out there of a little choppier [indiscernible] So just be curious, you know, what what you see out in the marketplace. You have new leadership across all three major cruise lines, going through what potentially might be some choppy waters. Jury is still out. But up to this point in time, how do you think the industry has been navigating through the last thirty, sixty days from a pricing perspective?

Yeah.

Well, I you know, I'm about three and a half years into this this. I don't know how how new I I I if you can call me Young, that would be great as well. I I mean, first of I you're also dealing, I think, with a set of of industry leaders that while they might you know, be relative if three and a half years is new, then, you know, I guess the other ones might be a little bit newer. But we've been in this industry for for a long time, and I continue to see, I think, pretty rational behavior Everyone generally leading with price integrity. And I think that's you know, it's it's it's tough to get a read on it because I think there's been a lot of high quality demand that that the industry is is continuing know, to see. And I think it goes back to what we keep pressing on is, is that it it this isn't about share right, or I think volume in the cruise industry. This is about you know, where you know, how small cruise is to the broader travel and leisure industry. And and the focus and I think we're all collectively focused though I can't speak for the others is how do we close that gap to land based vacation.

And and how do we get that extra rep from land onto our ships. And I think that's that's that's kind of what the the the vision and the focus is Most about stealing share from, you know, from each other on on on the cruise industry side. And I think that's that combined with the value gap I think, is is is is why you're seeing a difference in behavior. I just wanna comment on the on what you referred to on on the choppiness. I mean, you know, everybody gets their sources from from from different places. But I think you should take our commentary around April to describe what we're seeing. And that may be, you know, seen differently by different channels as well. But but I just wanted to make that point.

Yeah. That that's really helpful clarification. And then maybe for Naf, just, around capital allocation. And recently announced the share repurchase plan. Just thoughts as you balance what you're seeing on the macro front with returning capital versus shoring up the balance sheet are you thinking about that? And any change to the CapEx plans in light of what you're seeing out there?

Yeah. So first, I'll start by saying that we feel very good about financially and this balance sheet and where we are. We have made as you know a lot of effort over the last couple of years to make sure that we get to place where the balance sheet is strong. Investment grade now rated. We have a very strong liquidity. We're generating very healthy cash flows. And so we feel pretty good about where we are. And so as we look at the opportunity, we feel that there's so much opportunity to kind of win the share of the $2,000,000,000,000 market and we do want to continue to invest. We are very confident with our strategies and we have a very well articulated and defined capital investment over the next couple of years and obviously it's articulated in Perfecta. So that we will continue to do. And I think the balance sheet is is very good to support that.

We do acknowledge that also there is supplemental to the investment because we are focused on growth and we are a growth company. But we do appreciate that there is excess cash flow. So we've restarted the dividend. We've increased it three times. Since the summer of twenty twenty four. We feel we're in a very good spot right now offering competitive dividend and we'll continue to evaluate as things come by. And then the share repurchases are opportunistic. And so we did feel that this quarter we had an opportunity to recapture some shares. And we've done that and we'll continue to evaluate that opportunistically. And of course, it's important to know that we are very focused on the balance sheet. So we will not compromise the balance sheet for that. We feel in a very good position and we'll continue to value share repurchases. Helpful. Thanks.

Our next question comes from the line of Robin Farley with UBS. Please go ahead.

Great. Thank you. Just circling back to your comment that the month of April, you said bookings for 2025 are outpacing year over year. And just thinking about what that might imply about 2026 bookings. I know you said the load factor for '26 is in line with the same time last year, but is it fair to say it's still above sort of historic ranges, right? So even if maybe the focus of bookings from the consumer today is on the close in more than 2026. Is it fair to say they're still room for that load factor to to come down? In other words, if, you know, you can sort of wait out a little bit of uncertainty here as the consumer is waiting a little bit to be more aggressive with 2026?

Thanks.

Yeah, sure. So our commentary around April represents know, our future bookings. So I'll I'll I'll leave it there as it relates to whether it's '26 or '27, because we are booking some things for '27 at this point in time. And and I I think on the on the load factor or the or the booked position for 2026, Robin, the way that I would look at this is you know, are you you heard me say this in in the beginning of this year. I said it at the end of last year and also towards the end of of, of 2023 is the I think we always have some level of regret that we're too booked going into into the calendar year. And we and we leave revenue on the table. So I think we feel very good being booked in line with same time last year Our revenue management models say that's where where we should be booked. And, of course, we're we're booked at at higher rates. So I think I think we and and if low factors are a little bit lower, that's okay because it's it is substantially higher on a book position than if you were to look back and you know, the February, you know, '15 and, you know, know, you know, ten years ago, you know, the the book position is is is much higher, but but we we typically do have a level of regret we would have had an opportunity to to grab more revenue or optimize more revenue.

If we if we would've waited a little bit longer.

Great. No. It totally makes sense. Thank you. And then maybe just one quick quick follow-up. Just noticed that our capacity growth rate in 2020 is just like slightly lower growth rate than it was previously. Is that just sort of dry dock scheduling or like a ship delivery changing by a few weeks, something like that?

Yes, Robin. It's it's really rounding. So it's and this is exactly what you said. Some of the refinement of dry docks some of the specific entry points of the new hardware And it's not 100 basis points. It's much smaller. It's close to 30.

Basis points. Oh, okay. Great. Yeah. So it shows up as, a point in the release. So, no, that's really helpful. Thank you. Thanks.

Our next question comes from the line of Connor Cunningham with Melius Research. Please go ahead.

Hi, everyone. Thank you. You shared some great survey staff, I thought, at the beginning of the call. And and I think you mentioned that nine and ten people that you survey cite the relative value of of cruising in general. So I was curious, you know, we're early days in in the potential downturn here from a from an economic standpoint. Like, how has that moved up your consumers priority list versus, like, other secular opportunities that you see within the space. I'm just trying to understand how much more insulated your out could be relative to other forms of travel, that are out there citing, you know, more difficult, backdrop in general. Thank you. Yeah. Hey, Connor. Yeah. I mean I mean, your value is always an important consideration. It is it is at a higher level than what we have historically seen. But it's only moved up, you know, a a position or two on that list. You know, I think that one of the things that, you know, that we've we've been trying to close is that value gap to land based vacation and the appreciation of so much more you get out of out of a cruise experience than you do by land base.

And I think it it it it's but it does serve in times like like like this when there's maybe a greater level of uncertainty it it does help us, you know, navigate you you know, you know, some of, you know maybe some of those concerns that might be out there from the consumer. Because they know how much value they get out of it. They have a sense on the bookends on what it will cost them and their family or friends to be able to do it. And they and they know they're gonna get a great experience out of And I and I think those are the combination of, you know, them being able to build memories, and experiences with their friends and family, which are very high on that list. You know, visiting locations that they haven't been before is very high on that list. And value for money is very high on that list. And it's a little bit elevated versus what we've seen in the past.

Okay.

And and then maybe just going back to the to the cap allocation commentary. I'm I'm just trying to I know it's early days on the buyback. And you guys' conviction level continues to to basically every quarter, and you have a, you know, pretty know, robust outlook for the next couple of years. So why why wouldn't we be leaning in really hard on the buyback? And general? It just seems like there's a mismatch in what you're communicating at times to what the market is is doing. So just any thoughts there on why why we wouldn't lean in or or maybe you would. Thank you.

Yeah. Yeah. I so I think I think the main driver of it, think, just to just to to I think to be clear about it. Is that, you know, we're we're still saddled a little bit with some some of the covenant from during COVID. Because we lost a lot of, equity in the in the p you know, in in the in the balance sheet and the p and l. That's still being built up. And so there's still some net worth you know, covenants that we have to manage around. And so it's, you know, that that $1,000,000,000 announcement for the year is is based you know, meant to be kinda smoothed out, not because of the opportunity that might lay in front of us on the stock side, but some of it has to do with just the timing of that net worth calculation and and and the cushion that's on top of that. You know, you have to make sure that we that we don't you know, take on some type of an issue. That's really the driver on, like, why we would not have bought more as an example. And then we take advantage of opportunities like we did with the converts.

That not in his team did that allowed us to to to to to grab some more of those of those shares.

What I will tell you is, you know, you know, we you know, all all the all the dilution that we that we had to incur which again is a a fraction of of others, is very is very personal to us and and we're we're focused on how do we recapture it as soon as we can.

K. Appreciate the detail.

Thank you.

You got it.

Our next question comes from the line of James Hardiman with Citi. Please go ahead.

Hi, this is Sean Wagner on for James. The growth in occupancy is increasingly noteworthy. How should we be thinking about occupancy in context of the 2025 guide? And and, I guess, that opportunity going forward as you add the ICON class ship every year with with what we know about the load factors on those ships?

Yeah. So I think we've articulated in the past that you know, we we feel that there's a great opportunity for both for existing ships, right? So retrofitting some of the rooms with some higher ability to take bigger occupancy and capacity. Then also with the newer ships, they are accretive to our overall average load factor. And so we have Icons, we have Utopia. These are much higher than the average. So as we continue to add those shifts, that will inch up the load factor. And at the end of the day, we're trying to maximize yield, And that's a both load factor and price.

Okay. And for the 2025 guidance, what is your assumed occupancy for the year?

Yeah. We don't really kind of guide on occupancy. Just on yield, but it's consistent with kind of how we're trending here.

Okay. Fair enough. And I guess what are you assuming for your equity income line in the context of the full year guide? Do you you expect that growth to keep up with the EBIT growth? Or as far as variability going from here forward, do you expect that to flex up and down commensurate with your full year guidance?

Yeah. I think it's really consistent, throughout the year. So there's nothing specific to call out.

Okay.

Thank you very much.

Our final question comes from the line comes from the line of Shian Qiu with BNP Paribas.

Please go ahead.

Hi, guys. Thanks for the question.

On 1Q, you kind of beat the net yield guidance and then 2Q looks like a nice guidance as well on net yield. But the full year net yield guidance on constant currency may be up just a little bit. Just I'm just curious how you're thinking about 2H and if that's changed at all versus ninety days ago?

Yeah. No. It it you know, as you can see, we haven't really changed our yield guidance for the year. It was up slightly basically taking into account the outperformance in the first quarter. And so we made the comments around the first quarter where at this disproportionately benefited from timing of new hardware. If you remember last year ICON came in during the first quarter and was ramping its load factors. We did not have Utopia. So a lot of contribution from that timing in the first quarter. And then on the third quarter, I made these comments earlier that there's also a headwind this year from the timing of Star entering into service and just the year over year comp both from APCDs well as just the load factor ramp up. And so there's kind of that cadence throughout the year and there are the things that we're trying to point out of how they are trying to impact. But if you kind of normalize for that, it's pretty consistent throughout the year. And our formula is very clear, right? Moderate capacity growth moderate yield growth, strong cost control. That's our formula for success. That's how we're managing the business.

And so that's pretty consistent this year.

Great. Thanks. And then maybe just on another follow-up on the booking trends.

Any kind of differences between returning customers versus new customers? Are you seeing any differences there? You mentioned kind of strong loyalty, but yeah, any curious any other thoughts?

No. I I I think the only thing that we would we would the reason why we pointed out the point on the loyalty side is we're is we're we're getting more reps out of our loyalty customers. And some of that is also just cross branded. Opportunities that are that are being enabled by our loyalty program. But demand from new to cruise and first to brand is exceptionally high. We're just there's just a creation of greater competition for our inventory because of of the successful activities that are coming from our our loyalty program.

Great. Thanks, guys. Good luck.

And I'll now turn the conference back over to Naftali Holt, CFO for closing remarks.

Thank you. We thank everyone for your participation and interest in the company. Blake will be available for any follow ups.

We wish you all a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect. Icon of the Seas. It's the first of a whole new class of ships. Everyone in your crew will have the time of their life multiple times a day. You'll never forget the feeling of plunging down six record breaking slides at Thrill Island or finding the courage to conquer the crown's edge, a test of bravery like nothing you've ever dared, dangling high above the ocean. And dial up your downtime at the Surfside neighborhood where little cruisers can get drenched in fun at Splashaway Bay Aqua Park while adults can soak up the views from the water's edge pool.