Norwegian Cruise Line Holdings Ltd. (NCLH) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Exceeded Expectations: The second quarter surpassed expectations with results exceeding guidance on all key metrics, leading to an increase in full-year guidance for the third time this year.
• Robust Demand and Strong Pricing: Witnessed robust demand with strong pricing and booking volumes, leading to record-breaking advance ticket sales.
• Financial Performance: Adjusted EBITDA grew 14%, and adjusted EPS was up 33%. Net leverage decreased by one and a half turns six months early.
• Fleet and Destination Enhancements: Updates on new ships and enhancements to destinations like Bermuda and Great Stirrup Cay, and new home ports in Jacksonville, Florida, and Philadelphia.
• Sustainability Progress: Achieved 2024 target for shore power technology ahead of schedule and expanded tests for biodiesel blend, showcasing commitment to sustainability.

Pessimistic Highlights

• Middle East Itinerary Cancellations: About 3% of capacity was affected by cancellations in the Middle East, resulting in a very short resale cycle. However, the robust demand environment helped offset this setback.

Company Outlook

• Raised Full-Year Guidance: Due to strong performance, the company raised its full-year revenue and earnings guidance, expecting to end the year with an adjusted operational EBITDA margin of 34.5% and an adjusted EPS of $1.53.
• 2025 and Beyond: The company is on track to achieve double-digit adjusted ROIC by year-end and is optimistic about its long-term growth platform, including the delivery of new ships and expansion into new destinations.

Q & A Highlights

• Q: Booking trends for 2025 and the impact of itinerary changes on yield. (Steven Wieczynski, Stifel)

  A: Seeing strength across all itineraries for 2025 with robust pricing. The optimal book position has slightly advanced due to better analytics and revenue management tools. (Mark Kempa)

• Q: Incremental investments in Great Stirrup Cay and the impact on costs. (Benjamin Chaiken, Mizuho Securities)

  A: Investments will be measured and disciplined, with no significant ramp-up in CapEx expected in the near term. Local communities are leading investments in new home ports like Jacksonville. (Mark Kempa)

• Q: Cost outlook for 2025 and the impact of new destinations on costs. (Conor Cunningham, Melius Research)

  A: No material headwinds expected from core costs or new destinations like Jacksonville and Philadelphia. The focus remains on sub-inflationary unit cost growth. (Mark Kempa)

• Q: The impact of new hardware and itinerary changes on yield for 2025. (Vincent Ciepiel, Cleveland Research Company)

  A: New ships and itinerary changes are not expected to have a material impact on yield for 2025. The focus is on organic growth through marketing and revenue management. (Harry Sommer)

• Q: The difference between gross and net yield and the outlook for transportation and airfare costs. (Lizzie Dove, Goldman Sachs)

  A: The benefit seen in the commission, transportation, and other line was due to better air purchasing, which is expected to continue improving. (Harry Sommer)

• Q: Year-end net leverage target and balance sheet considerations. (Daniel Politzer, Wells Fargo)

  A: Significant improvements in net leverage are expected by year-end, aligning with the 2026 target of mid-fours. (Mark Kempa)