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Operator
Good Morning. Welcome to Norwegian Cruise Line holdings third quarter 2025 earnings conference call. My name is Sherry and I will be your operator at this time. All participants are in the listen only mode. Later, we will conduct a question and answer session and instructions for the session will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone phone. As a reminder, all participants, this conference is being recorded. I would now like to turn the conference over to your host, Sarah Emin. Ms. Emin, please proceed.
Sarah Inmon (Head of Investor Relations)
Thank you Sherry and good morning everyone. Thanks for joining us for our third quarter 2025 earnings call. I’m joined today by Harry Sommer, President and CEO of Norwegian Cruise Line holdings and Mark Kempa, Executive Vice President and Chief Financial Officer. As a reminder, this conference call is being simultaneously webcast on the company’s investor relations website. We will be referring to a slide presentation during the call which can also be found on our website. Both the conference call and presentation will be available for replay for 30 days following today’s call. Before we begin, I would like to cover a few items. Our Press release with third quarter 2025 results was issued this morning and is also available on our IR website. This call includes forward looking statements that involve risks and uncertainties that could cause our actual results to differ. Material from such statements. These statements should be considered in conjunction with the cautionary statement contained in our earnings release. Our comments may also reference non Generally Accepted Accounting Principles (GAAP) financial measures. A reconciliation to the most directly comparable Generally Accepted Accounting Principles (GAAP) financial measure and other associated disclosures are contained in our earnings release and presentation. Unless otherwise noted, all references to 2025 net yield and adjusted net cruise costs, excluding fuel per capacity day are on a constant currency basis and comparisons are to the same period in 2024. With that, I’d like to turn the call over to our CEO Harry Summer.
Harry Sommer (Chief Executive Officer)
Harry well, thank you Sarah and good morning everyone. Welcome to our third quarter 2025 earnings call. I’ll begin my remarks today with a discussion of the third quarter results and recent booking pace and we’ll then get into some recent highlights on our three brands and strategy. I’ll then provide some brief Comments on how 2026 is shaping up before handing the call over to Mark who will provide a deeper dive into our financial performance and outlook. So, to dive right in, I am pleased to report another record quarter with results that met or exceeded guidance across all metrics. As a result, we are reiterating our full year adjusted EBITDA guidance and raising our guidance for adjusted eps. Our performance this quarter was driven by solid customer demand which drove load factors higher, reflecting the continued streng of our brands and the execution of our charting the course strategy. As previously stated, we remain committed to balancing return on investment with return on experience, delivering exceptional vacations, driving sustainable financial performance and strengthening our balance sheet. Now delving a bit more into the details of our third quarter results shown on slide 4, we achieved another quarter of strong performance and solid execution across the business. We met or exceeded guidance we provided in July and delivered the highest quarterly revenue in our company’s history. Load factor finished ahead of expectations at 106.4%, driven by stronger than anticipated demand from families, particularly at the NCO brand, resulting in net Yield growth of 1.5%. Costs were essentially flat year over year which resulted in adjusted ebitda of approximately $1 billion, a milestone achieved for the first time in company history. As a result, our trailing twelve month adjusted operational EBITDA margin reached 36.7%, an improvement of 220 basis points from last year and another meaningful step towards achieving our charting the course margin target. Finally, adjusted eps came in at $1.20, exceeded guidance by $0.06. Turning now to recent demand, bookings in the third quarter marked the strongest third quarter bookings in company with bookings up over 20% from last year with this trend continuing into October, all collectively driven by strong demand not only for our short Caribbean sailings this winter, but also for our luxury brands. These results not only underscored the strength of today’s demand, but also provide a solid foundation for growth in the quarters ahead. Of course, there are other highlights in this eventful quarter that I would like to share. First, on the financial side, which Mark will cover in more detail, we completed a multifaceted capital market transaction that, among other benefits, reduced our share outstanding on a fully diluted basis by more than 38 million or over 7%, materially improving our adjusted ETS. On the guest experience side, we introduced several enhancements including our new TRI branded loyalty and recognition program which I’ll discuss later, and the launch of an enhanced website for the NCL brand. The new site is already delivering results with faster performance, better guest experience and higher conversion rates resulting in increased bookings. We have also made it easier for guests to personalize their vacation with more targeted pre cruise offerings. For example, we are now promoting high value onboard products such as Vibe Beach Club passes, drinks and dining packages, streaming Wi-Fi, spa treatments and shore excursions through personalized emails and push notifications. Pre cruise sales are at a whole time high levels which drives higher onboard revenue and higher guest satisfaction and repeat rates. On the sustainability front, we recently announced a landmark agreement with Spain’s Repsol for supplying renewable marine fuels at the Port of Barcelona. This eight year agreement starts this upcoming European season and is a first of a kind partnership in the industry. Underscoring our sale and sustained commitment. This agreement is a great example of cross industry collaboration that could unlock meaningful progress and secure long term access to renewable marine fuel in Europe. Now I’d like to take a few minutes to discuss the high level strategies we’re executing across our three brands which are summarized on Slide 5. These strategies are designed to ensure we continue delivering exceptional experiences for our guests while advancing our charting the course targets and creating long term value for our shareholders. At Norwegian Cruise Line, our focus is enhancing the family appeal and experience. At Oceana Cruises we’re working to firmly position the brand within the luxury sector and at Region Seven Seas Cruises we’re focused on maintaining its well earned reputation as the pinnacle of ultra luxury cruising. Moving to slide six, I’ll dive into the strategic evolution underway at Norwegian Cruise Line. This is a transformation that has been underway for several months and is now accelerating with sharpened focus under the brand’s new leadership including a new Chief Commercial Officer and a new Chief Marketing Officer. With a robust search for a world class leader to head the NCL brand well underway as part of this evolution, the brand is executing a focused three part commercial strategy to drive yields and profitability higher over the next year and into the future. First, we’re focusing more on families as a core demographic. We’re building brand familiarity through our Shore Caribbean Sailings which give more guests, particularly families, a chance to experience our amazing product. That exposure helps build loyalty and creates a pipeline of repeat guests for the future. Over time this will increasingly support one of our key priorities boosting load factors. We are working diligently to attract more families to the brand to experience everything Norwegian has to offer both on board and at our destinations, particularly our upgraded private island Great Stirrup Cay and through enhanced onboard offering geared towards families. Second, we’re strengthening our brand positioning and marketing to reach the broader family market. NCL is developing a refreshed brand campaign designed to elevate awareness and strengthen emotional connection which we should launch in early 2026. Alongside that, we’re optimizing our marketing mix and spend to ensure we’re getting the best possible return on every marketing dollar, creating efficiencies throughout 2026. Lastly, we’re elevating the guest experience. We are pleased to reiterate that our previously announced enhancement to Great Serve K are all on track to open around the holidays including the new multi ship pier, welcome center, tram system, an expansive 28,000 square foot heated pool the size of an entire cruise ship with a swim up bar, Kids Splash Zones 5 Shore Club, New dining and beverage outlet and dozens of new Cabanas. The upcoming Summer 26 launch of the Great Tides Water park will mark another milestone moment for the brand. Spanning nearly six acres, the water park will feature 19 thrilling water slides, a dynamic river, a huge kid splash zone, a 10 and 15 foot tall cliff jump and an innovative jet carts attraction. It will be the perfect family friendly addition to our already exceptional island amenities which include Silver Cove, an exclusive retreat offering magnificent villas and a beach club. And that’s just the additions at Great Stirrup Cay. We’re also looking ahead to enhancements across other destinations in our portfolio. In addition, we are expanding our kids and family programming with improved activities and entertainment, ensuring engaging experiences for guests of all ages. At the core of this approach is our ambition to be the brand of choice in the contemporary space for both seasoned travelers and premium families while maximizing profitability. Future travel intents, current bookings, guest satisfaction scores and future onboard crude sales are all at or near record levels, clear signs that our strategy is working. We continue to actively balance between load factor and price with the goal of optimizing net yield margins and most importantly, profitability. Now turning to slide 7, this strategy is already leading to tangible results. Our increased Caribbean presence, additional short sailings which capitalize on demand for closer to home family vacations and continued investment in our private island destinations are already driving higher load factors. The fourth quarter marks the first period where we’re truly seeing the shift in strategy come to fruition. In Q4 of this year, we will have the highest mix of short sailings since 2019, reflecting our deliberate move to rebalance Norwegian’s deployment towards closer to home itineraries. This approach expands our reach appealing to a broader mix of guests, particularly premium families and new to cruise travelers, while allowing us to better leverage our private Island Investments. In Q4, short selling capacity is increasing over 80% versus prior year and our Caribbean deployment is moving to over 50% of our total capacity. As a result, we now expect load factors to improve over 100 basis points year over year to nearly 102%. Now I know many of you will probably ask why our fourth quarter yield guidance has changed from our prior implied guide to growth of 3.5% to 4% so let me get ahead of that question. As mentioned earlier, we are very focused on load factor and increasing brand visibility through our Caribbean product. It has been quite some time since we’ve had this level of short sailings in our deployment and demand has exceeded our expectations in the fourth quarter. Our Caribbean short sailings are performing quite well, particularly among our targeted family demographic, driving load factors higher than we had forecasted on our Caribbean ceilings. We are seeing more families, which means more children in each cabin. We expect core pricing for the first and seconds to be well up. The addition of childs as third and fourth in the cabin, however, will naturally dilute blended pricing. The end result remains strong yield growth and strong margin expansion. This is an intentional planned trade off to drive margins and profitability higher in both the short and long term. These early results from our increased short sailing creative deployment are encouraging and reinforce our confidence in the strategy now. Looking ahead, we expect this dynamic to accelerate in the first quarter of 2026 with load factor projected to be 200 to 300 basis points higher year over year driven by a meaningful 40% increase in short sailings. Additionally, this will coincide with the soft opening of Great Stirrup Cay’s new amenities around the holidays, while the more meaningful enhancements will be coming when Great Tides Water park opens later in summer 2026. When we return next winter, we’ll have the full benefit of the new amenities at Great Stirrup Cay and word of mouth from thousands and thousands of satisfied guests which will further strengthen performance. Moving on to Slide 8, we’re confident this positive momentum will continue throughout 2026 with load factors building on 2025 levels and returning to, if not exceeding 2024 levels, reaching at least 105%. This is sustained progress driven by this new deployment strategy. Now I’ve spoken a bit about the Norwegian brand and now I want to turn to our luxury portfolio, oceana Cruises and Region 7 Sea Cruises on slide 9. The opportunity we’re seeing in luxury cruising has never been stronger. Global luxury spending continues to expand with experiences ranking as the fastest growing segment in 2024. Both Oceana and Regent are perfectly positioned to capture this demand. Oceana delivers luxury by choice, offering guests elevated personalized experiences with exceptional culinary offerings, while Region is the pinnacle of the ultra luxury all inclusive luxury segment. To fully capitalize on this opportunity, we brought back Jason Montague earlier this year to lead both brands and drive the next phase of growth. Turning to slide 10, you can see the tangible progress already underway. The first thing Jason did was optimize the organization, ensuring we had the right leadership structure and the right people in the right roles. Support long term growth. Next. He’s been deeply engaged in our fleet management program, including our pipeline of six luxury ships, overseeing the design and launch of Ocean Allura and Region Seven Seas Prestige, both of which will set new standards for design experience and efficiency. He has also been very focused on elevating our existing fleet and Seven Seas Mariner is the latest example of that commitment. The ship entered dry dock just yesterday where we’re undertaking a full transformation. Refreshing suites, reimagining public spaces and introducing an enhanced pool grill featuring a new wood fired pizzeria concept for relaxed al fresco dining. Seven Seas Voyager will be undergoing a similar revitalization when she enters dry dock next year. Coupled with our three new vessels and the upcoming prestige delivery in 2026, we truly will have the world’s most luxurious fleet. Finally, Jason has been laser focused on enhancing brand positioning and marketing across both brands, ensuring that Oceana is fully recognized in the luxury space, while Regen maintains its place as the pinnacle of ultra luxury cruising. We know we had two extraordinary luxury products. Now it’s about telling these brand stories more powerfully and consistently in the market. I want to take a moment to recognize Jason and the entire luxury team. They’re doing an outstanding job executing on this strategy, elevating both Region and Oceania and positioning our luxury portfolio as a key growth driver for 2026 and beyond. Finally moving to our loyalty program in slide 11. I’m thrilled to share how we’re taking guest recognition to the next level. We recently launched our new Loyalty Status Honoring program, allowing members of Latitude Rewards, Oceana Club and the Seven Seas Society to have their tier status honored across all three of our award winning brands. Our guests will now be able to enjoy the loyalty perks they’ve earned no matter which of our brands they choose to sell. It’s a major step forward that makes it easier than ever to explore the world within our NCLH family. This change will also encourage our top guests to try our other brands. It’s really about deepening our connection with our most loyal guests, rewarding their commitment and giving them even more ways to vacation better and experience more. And while it’s early, the preliminary results of this program have well exceeded our expectations, proving again the power of our brands. And with that, I’d be happy to turn the call over to Mark.
Mark Kempa (Chief Financial Officer)
Thank you Harry and good morning everyone. Let me start with our third quarter results highlighted on Slide 12. We delivered another strong quarter, exceeding or Meeting guidance across all metrics, occupancy came in at 106.4%, nearly 100 basis points above guidance driven by strong family demand across all itineraries, net yields grew 1.5% in line with guidance fueled by strong pricing growth of over 3%. On the cost side, adjusted net cruise cost ex fuel was down a tenth of a point, coming in slightly better than expected as our cost control efforts continue to bear fruit. As a result of better than expected fuel consumption, adjusted EBITDA for the quarter was 1,000,019 above our guidance of 1,015, adjusted net income came in at 596 million. Adjusted EPS came in $0.06 ahead of guidance at $1.20. Overall, this was a solid quarter consistent with our expectations. Moving on to fourth quarter and full year guidance on Slide 13, we expect occupancy to be approximately 101.9% in the quarter, roughly 100 basis points above the prior year and our previous implied guidance. As Harry mentioned, we are very focused on load factor and brand visibility at the Norwegian brand and we are encouraged by the progress we have made this quarter as family demand surpassed our initial expectations, driving occupancy higher. I want to reiterate that we continue to balance load factor and price, recognizing the ...
