NYSE:RCL Royal Caribbean Cruises Q1 2023 Earnings Report $211.49 +3.99 (+1.92%) As of 03:59 PM Eastern Earnings HistoryForecast Royal Caribbean Cruises EPS ResultsActual EPS-$0.23Consensus EPS -$0.71Beat/MissBeat by +$0.48One Year Ago EPS-$4.57Royal Caribbean Cruises Revenue ResultsActual Revenue$2.89 billionExpected Revenue$2.82 billionBeat/MissBeat by +$61.75 millionYoY Revenue Growth+172.40%Royal Caribbean Cruises Announcement DetailsQuarterQ1 2023Date5/4/2023TimeBefore Market OpensConference Call DateThursday, May 4, 2023Conference Call Time10:00AM ETUpcoming EarningsRoyal Caribbean Cruises' Q1 2025 earnings is scheduled for Tuesday, April 29, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Royal Caribbean Cruises Q1 2023 Earnings Call TranscriptProvided by QuartrMay 4, 2023 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group First Quarter 2023 Earnings and Business Update Conference Call. I would now like to turn the conference over to Mr. Michael McCarthy, Vice President, Investor Relations. Operator00:00:20Please go ahead, sir. Speaker 100:00:22Good morning, everyone, and thank you for joining us today for our Q1 2023 Business Update Conference 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 Royal Caribbean International. 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 and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Speaker 100:00:57Please 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 and a reconciliation of all non GAAP items can be found on our website and in our earnings release available at www.rclinvestor.com. Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our Q1 and an update on our latest actions and on the current booking environment. Speaker 100:01:37We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason. Speaker 200:01:43Thank you, Michael, and good morning, everyone. I'm thrilled to be here this morning to share our incredible first quarter results and the strong trajectory of our business. When we turn the page from 2022 into 2023, with the full strength of our operating platform deployed and numerous tailwinds related to the consumer's desire to travel and experience the world, we believe this would be a great year. We expect it to finally return to yield growth in the Q1 and accelerate even more through the rest of the year. Well, As you saw in the press release this morning, what transpired over the past 4 months was much better than we had anticipated. Speaker 200:02:23Our brands are stronger than ever and our yield in Q1 blew away previous records. Before getting into the detail, I want to thank the entire Royal Caribbean Group team, 100,000 plus strong for another outstanding quarter. Their dedication and commitment allow us to deliver the very best vacation experiences responsibly, while generating strong financial results. As highlighted on Slide 4, it has been a tremendous Q1 that set us well on the path to a year that is significantly better than we expected just a few months back. We knew that demand for our business was strong, but what has transpired was a record breaking extended wave season that translated into robust bookings and meaningfully better prices. Speaker 200:03:12In the Q1, we delivered a record 1,900,000 memorable vacations, achieved 102% load factor at higher pricing than 2019 and earned exceptional guest satisfaction scores. Yields grew 5.8% compared to record 2019 levels and were significantly above our guidance. Strong demand for Caribbean itineraries translated into higher load factors at better than expected pricing for both ticket and onboard. Our yields are now exceeding record highs and we expect this trend to continue for the rest of the year and beyond. This is particularly significant because while we thought the Q1 would be a transition period, we always expected the rest of the year to be strong. Speaker 200:04:00The fact that demand for the coming 9 months is so much stronger than our already robust expectations says a lot about the strength of the consumer and the strength of our brands. Adjusted EBITDA and adjusted EPS in the Q1 were both considerably higher than our guidance and we generated $1,300,000,000 of operating cash flow. Strong revenues, our continued focus on Increasing margins and favorable timing of operating expenses contributed to the better than expected earnings performance. The acceleration of demand coupled with our team's incredible execution is also translating into higher revenue and earnings expectations for the full year. As you can see on Page 5, we are more than doubling our full year yield growth expectations to 6.75 to 7.75 on increased expectations for ticket and onboard revenues. Speaker 200:04:55We are also increasing earnings per share expectations by 40% to $4.40 to $4.80 as we continue to focus on expanding margins as revenue accelerates. Now I'll provide some insight into the robust demand environment and our incredible wave season. Bookings outpaced 2019 levels by a very wide margin throughout the entire Q1 and into April. Pricing was also significantly higher as our commercial apparatus across all channels has been driving quality demand into our vacation ecosystem. The strong wave season resulted in an acceleration of our book position in relation to prior years. Speaker 200:05:37The booking window is now completely back to normal, demonstrating consumers' desire to continue to plan their vacation travel with us well in advance. While demand has been strong across all products and markets, we continue to see exceptional strength from the North American consumer. This strength in combination with the incredible perfect day at CocoCay has resulted in record yields for our Caribbean sailings. In addition, European bookings are nicely outpacing 2019 levels with peak summer sailings trending particularly well in recent weeks. The robust demand we see for our products is a result of our superior brands, hardware, enhanced destination offerings, a nimble and global sourcing model and strong execution by our teams. Speaker 200:06:23As you heard me say on prior earnings calls, we continue to see Financially healthy and engaged consumers who are eager to vacation and build memories with us. Our customer sentiment remains strong and is bolstered by strong labor markets, high wages and excess savings. Secular tailwinds continue to benefit us as consumers continue to shift preferences and spend from goods to experiences, resulting in a strong entertainment and travel spend. This trend continued in the Q1 where spend on experience was 24% higher than 2019 and doubled the spend on goods. Further, our research shows that consumers plan to continue prioritizing leisure travel over other spend. Speaker 200:07:10Our addressable market is plentiful and continues to be meaningfully larger than it was in 2019. Our product appeals to a broad range of vacationers who are seeking everything from a short getaway to perfect day to a luxury world cruise. Cruising remains an exceptional value proposition. I would actually say it's too attractive of a value proposition, which is allowing us to outperform broader leisure travel as we seek to close the gap to land based vacations and drive better revenue and happy customers. Cruise search is up 15% versus 2019, significantly outpacing the growth in general vacation search and contributing to the doubling of visitors to our website when compared to 2019. Speaker 200:07:58Our vacations are popular among a broad range of consumers, which allows us to attract more and more new customers into our ecosystem. In the Q1, the percentage of guests who were either new to brand or new to cruise surpassed 2019 levels by a wide margin. The improvements we have made in our commercial capabilities have allowed us to capture quality demand and expand our share of guest wallet. In the Q1, about 2 thirds of our guests booked some of their onboard activities in advance of their crews. The comparable figure in 2019 was 48%. Speaker 200:08:37So you can see we have used our time well to upgrade our systems. Every dollar a guest spends pre cruise translates into approximately $0.70 of incremental spend once on board. While we have made a significant leap in our commercial capabilities, we are still in the early innings of our journey and will continue to add features and capabilities to our app and commercial engines. Looking to the rest of 2023, we expect to deliver amazing vacation experiences to over 8,000,000 guests at record yields as we deploy our best in class fleet across the best global itineraries. We expect to return to historical load factors in late spring and continue to benefit from a strong pricing environment. Speaker 200:09:22We expect to deliver record yields that are 6.75 to 7.75 higher than 2019 with every one of our brands generating positive direct profit this year. Our strong yield growth outlook is driven by the performance of new hardware, a strong pricing environment, especially for Caribbean itineraries and continued growth from onboard revenue areas. New hardware has been a great differentiator for us and we are benefiting from the 8 ships that joined our fleet since 2019. This year, each of our wholly owned brands will welcome a new vessel. These ships are sure to continue elevating vacation experiences for our guests and will continue to further drive a competitive advantage and deliver very attractive financial returns. Speaker 200:10:08Since all 3 of these ships will be delivered in the second half of this year. They will be a key yield driver next year. Silversea will welcome Silver Nova this summer, the first of the new evolution class. Celebrity Cruises will welcome the 4th and the award winning Edge series and Royal Caribbean International will take delivery of the game changing Icon of the Seas. Let me spend a minute talking about Icon of the Seas and the excitement she is generating with our customers. Speaker 200:10:39With Icon, we set out to create the ultimate vacation for thrill seekers, the chill enthusiasts and everyone in between without compromise. She is getting exceptional demand with bookings well surpassing previous records. Despite being on sale for only 5 months, Icon is significantly more booked for her inaugural season at materially higher rates than any other Royal Caribbean ship launch. ICON will join the fleet later this year and will debut in the Caribbean in January 2024 with itineraries that include Perfect Day at CocoCay and its new expansion, Hideaway Beach. Moving to costs, our team have been working hard for several years to reshape our cost structure with the goal of enhancing margins. Speaker 200:11:24Our cost outlook for the year reflects our commitment to enhancing profitability while focusing on delivering the best vacation experiences. We continue to expect the business to deliver record yields and adjusted EBITDA in 2023. Our proven formula for success remains unchanged. Moderate capacity growth, moderate yield growth, though I wouldn't define this year's growth as moderate, and strong cost controls will lead to enhanced margins, profitability and superior financial performance. We just published our 15th annual sustainability report, providing an in-depth update on our strategy and performance of delivering the best vacation experiences responsibly. Speaker 200:12:06In this report, we outlined our progress towards reducing our carbon intensity by double digits by 2025 versus 2019. We expect to deliver on significant milestones of our decarbonization pathway this year, including the introduction of advanced technologies on our new ships such as LNG, fuel cells and a first of its kind onboard Waste to Energy System. To wrap up, the business continues to accelerate and we are uniquely positioned to grow earnings and cash flow in 2023 on our way to achieving our trifecta goals. The strength of our brands and operating model continues to grow. We are committed to delivering the best vacation experiences responsibly, and I couldn't be more excited about what's ahead for the Royal Caribbean Group. Speaker 200:12:53With that, I will turn it to Naftali. Naft? Speaker 300:12:58Thank you, Jason, and good morning, everyone. Let me begin by discussing our results for the Q1. As you can see on Slide 4, we reported an adjusted net loss of approximately $59,000,000 or $0.23 per share. These results were significantly above our expectations and the high end of our guidance range. Total revenue was $2,900,000,000 adjusted EBITDA was $642,000,000 and operating cash flow was 1,300,000,000 again significantly above our expectations. Speaker 300:13:30We finished the Q1 with a load factor of over 102% at net yields that were up 5.8 percent for the quarter or 4.40 basis points higher than the midpoint of our guidance. Better than anticipated, close in demand for Caribbean sailings, an improving pricing environment and continued strength in onboard revenue were the main drivers for these exceptional results. Higher load factors drove 2 thirds of the yield outperformance and higher pricing drove the remainder. Net cruise costs excluding fuel per APCD increased 5.8% in and currency compared to the Q1 of 2019. Net cruise costs for the Q1 included $2.87 per APCD were 240 basis points impact of structural costs. Speaker 300:14:21Operating costs also benefited from approximately 160 basis points of favorable timing compared to guidance. 1st quarter results are a testament to the continued robust demand environment, attractive value proposition of our cruise vacations and strong commitment by our teams to deliver the best vacation experiences responsibly. Turning to the booking environment. Bookings have consistently been higher than the same time in 2019, with the gap widening as Wave extended further into the year than ever before. The booking strength has been particularly evident on Caribbean sailings, where our Superior Hardware and Perfect Day at CocoCay continue to be winning combination. Speaker 300:15:07More than half of our Caribbean sailings Visit Perfect Day at CocoCay, which is Royal Caribbean International's highest rated destination in the Caribbean. Since Perfect Day opened midway through the Q2 of 2019, these itineraries are driving outsized yield and pricing growth. While the Caribbean has seen booking strength, performance of our European itineraries is also aligned with our initial expectations. European itineraries account for 17% of full year capacity, peaking at 35% in the 3rd quarter. Bookings for our European sailings have been nicely outpacing 2019 levels with peak summer trending particularly well in recent weeks. Speaker 300:15:52Several of our newest ships including Celebrity Beyond, Odyssey of the Seas and Silver Dawn are sailing in Europe this summer and are attracting quality demand and rates. Now let me review our 2023 outlook. If you turn to Slide 8, you will see our updated guidance for the full year 2023. We expect net yield growth of 6.75 percent to 7.75 percent for the full year. This represents an approximately 400 basis point increase from the midpoint of our prior guidance. Speaker 300:16:27About a third of the increase is due to strong Q1 results with the remainder due to better business outlook for the rest of the year. The underlying yield improvement is driven by the performance of new hardware, strong demand for our core products, particularly Caribbean itineraries and continued strong growth from onboard revenue areas. While yield growth is expected to ramp up for the rest of the year, there is some variability at the quarter level. Yield growth is likely to be the highest in Q2, where we lapped the opening of Perfect Day at CocoCay and benefit from our Caribbean deployment mix. As you can see from our guidance, yields for the back half of the full year are expected to be up by more than 6%. Speaker 300:17:14From a cost perspective, net cruise costs excluding fuel are expected to be up 5.5% to 6.5% for the full year as compared to 2019. Our cost outlook reflects our culture of continuous improvement and innovation, and we are benefiting from all the actions we have taken over the last several years to support enhanced margins. Net cruise costs also include 2 10 basis points of structural costs that we did not have in 2019. Those include, for example, costs related to the full year operations of Perfect Day at CocoCay and our new Galveston terminal. We continue to actively manage persistent inflation across categories, including food and beverage, airfare and short side human capital. Speaker 300:18:02Our teams continue to find ways to manage through inflation while maintaining exceptional guest experience and increasing profitability. Fuel expense is expected to be approximately $1,100,000,000 for the year and we are 54% hedged for the remaining of the year. Looking ahead, fuel consumption is 25% hedged for 2024 and 5% hedged for 2025. Based on the current business outlook, along with current fuel pricing, currency exchange rates and interest rates, we expect record adjusted EBITDA and adjusted earnings per share of $4.40 to $4.80 Now turning to Slide 9, I'll provide some color on 2nd quarter capacity and guidance. We plan to operate about 11,700,000 APCDs during the 2nd quarter. Speaker 300:18:54Net yields are expected to be up 10.1% to 10.6% compared to 2019. Exceptional strength in Caribbean itineraries combined with our amazing private island destination Perfect Day at CocoCay is driving the increase in yields. Net cruise costs, excluding fuel, are expected to be up approximately 8.9% as we continue to focus on margin expansion while revenue accelerates. 2nd quarter operating costs carry approximately 4.30 basis points of incremental expenses the way on NCCX when compared to 2019, of which half are structural and half are timing from the Q1. So in summary, based on current currency exchange rates, fuel rates and interest rates, we expect adjusted earnings per share of $1.50 to $1.60 for the 2nd quarter. Speaker 300:19:50Turning to our balance sheet. We ended the quarter with $3,900,000,000 in liquidity. Our liquidity remains very strong, and we are focused on expanding our margins to further enhance EBITDA and free cash flow. During the Q1, we repaid $286,000,000 of debt maturities as well as $2,400,000,000 of Revolver Advances. In February, we issued $700,000,000 of senior guaranteed notes at 7.25 percent coupon to refinance 2023 2024 debt maturities. Speaker 300:20:24Our access to capital remains strong, and our execution and performance to resonate with our investors and financial partners. We will proactively and methodically continue to improve the balance sheet through debt pay downs and opportunistic refinancings. Our remaining scheduled maturities for 2023 are $1,800,000,000 made up predominantly of ECA debt amortization, which we expect to pay down with cash on hand and operating cash flow. As the business continues to accelerate and generate strong and growing cash flows, we are committed to a disciplined capital allocation and to return to an investment grade balance sheet profile in line with our trifecta goals. In closing, Our business continues to accelerate and we expect to grow yields and margin so we can achieve record adjusted EBITDA in 2023. Speaker 300:21:16We remain committed and focused on executing on our strategy and delivering on our mission while achieving our Trifecta goals. With that, I will ask our operator to open the call for a question and answer session. Operator00:21:31Thank you, sir. We'll go first to Steven Wieczynski, Stifel. Speaker 400:21:41Yes. Hey, guys. Good morning. So first off, congratulations on a strong quarter. Jason, in the release, you mentioned that for 2023, you're expecting 2023 EBITDA to significantly exceed 2019 levels, which is a change in wording relative to Where you were back in February. Speaker 400:22:01And look, I understand I'm probably nitpicking here a little bit. But just want to understand maybe how we should think about EBITDA trajectory now for the year and the progression you guys are on now to get north of $5,000,000,000 in EBITDA by 2025 according to your trifecta program? Speaker 300:22:21Hey, Steve. Good morning. It's Naftali. So as you can see, we are very pleased with the results. And as we think about EBITDA and how this translates to the progression throughout the year, You can see that we are increasing yields and we expect the EBITDA growth to be higher than our yield growth. Speaker 300:22:42And that's because A lot of the revenues is dropping to the bottom line because we are very much focused on cost and enhancing margins. So if we look at what we kind of look at the guidance that we provided, we're going we expect to be an eyelash away from our previous EBITDA per APCD record in 2019. And a lot of the things that we're doing and a lot of the strategies that we're employing should benefit to us as we continue to execute towards our trifecta goal. Speaker 200:23:14Yes. And I think I'd just add on to it, Steve, as we think about it on the trifecta side, obviously, this year, the performance of this year is better than we It's much better than we had expected. And I think the commentary we talked around about Icon, obviously, we have Nova coming online, which is a high yielding, ship. We have Ascent coming online, which is high yielding. We have Hideaway coming online. Speaker 200:23:41And of course, the commentary that we've been talking about that we've seen acceleration in price and volumes is also what we're seeing for like for like For 2024, though it's early. And for us to get to the marks for trifecta, we really just need moderate yield growth And good cause control, which we you continue to show. And so that's kind of very much on our path. And as Naf mentioned, it's great to see That really almost every penny of the outperformance on revenue is dropping right down to the bottom line, which would be dropping right down to EBITDA. Speaker 400:24:21That's great color. Thanks guys. And then second question, as we think about the back half of the year, Obviously, we can back into your yield guidance. But if we kind of break down those yields a little bit, are you assuming your Customer from an onboard has obviously been extremely, extremely healthy. And are you assuming that your customer kind of stays in the same ballpark That they are now, do you have them slowing a little bit in terms of spend levels? Speaker 400:24:47And then second part of this question, which is a little bit different, but we get a lot Questions from investors about demand and demand into 2024 and can the demand levels that are there right now persist into next year? Or is 23 benefiting from Just still kind of reopening in COVID bookings and stuff like that. So hopefully all that makes sense. Speaker 200:25:14Yes, sure. Well, I think obviously, we don't have a crystal ball. What we know is what we see happening Basically every minute of every day. We're taking tens and tens of thousands of bookings a day. We've got 160,000, 170,000 people spending on our ships. Speaker 200:25:31And so we have a very good idea of the customer in terms of what's happening today. We also obviously do a lot of surveying of our customers in terms of What they're looking to do in the future, and it's obviously clear to us that they are very focused on gathering experiences and creating memories with their friends and family. So the other point I'll just add is and this is more on the pre cruise side And what they're booking on the ship for the future, that number continues to rise, which also just shows their appetite to spend more and more on non ticket related spend. So I think for us, when we think about the back half of this year, Our expectation is that we're going to continue to see what we're seeing. However, the mix changes a little bit. Speaker 200:26:20In Q3, we have a little bit more Europe. We have a little bit less Caribbean. And of course, you've heard our commentary on the Caribbean, is exceptionally strong, which is really what's driving the overall outperformance, while Europe is now Very much coming in as we expected for the year. So I think that probably talks a little bit about how we think about the back half of next year. Now again, going to demand level for 2024, What we have again is what we're seeing day in and day out. Speaker 200:26:53And at this point in the year, the customer now and of course, we begin to Position ourselves and orient ourselves to 2024 more and more, I'm showing the majority of the bookings we're now taking are focused on 2024. And we see very similar strength and acceleration from what we've been seeing close in as well as what we've been seeing for the bookings for 2023. Speaker 400:27:21That's great color. Thanks guys. Appreciate it and congratulations. Speaker 500:27:24Steve, I just have to add one comment because it's I have to talk about Icon of the Seas. I think If you think about 2024 and the comments we made earlier about Icon, Icon is literally the best performing new product launch we've ever had in the history of our business and we're delighted with volume and rate and that really is a full 24 products. So You can see if you wanted to use Icon as a proxy, I know it's a brand new product and it's stunning, but it's really driving a huge amount of demand and great rate. Speaker 200:27:59That probably won't be the first time you hear about Icon from Michael. Just to Speaker 400:28:05Thanks guys. Speaker 200:28:06Thanks Steve. Operator00:28:08Your next question comes from Brandt Montour, Barclays. Speaker 600:28:13Hey, good morning, everybody. Obviously, exceptional quarter. Congratulations. A question about load factors. I know you guys are going to hit historical load here in the spring. Speaker 600:28:24But curious looking past that, What the new normal for load looks like given maybe you have some regional mix shift, which could affect it, but more so you have obviously A lot of new capacity that's different and has more onboard and more space. So any comments about what the new normal looks like for you guys for load. Speaker 200:28:50So on an expectation standpoint, I mean, just mathematically, Our load factor, our normalized load factor will begin to rise, and that's really leading With Icon coming on, which will have a higher load factor profile. Now we're also taking on Nova, which has a lower load factor Then, the Royal Caribbean brand and the Celebrity brand, and we're also taking on a scent, which has lower load factors than Royal. But with Icon coming on next year, Utopia coming on next year, You would expect our load factors to be up a point or 2 when we look into 2024 and beyond. Speaker 600:29:29That's super helpful. And then my second question is just on China. Back in 2019, if I recall, you guys had something like mid single digits of your global demand coming from China traveling outside of China. And I know there's Outbound international flight constraints limiting China outbound travel, but you're probably engaged with your database over there. I'm just curious what you're seeing from them now that they're starting to travel again and if it's even showing up sort of on the radar in terms of what's booked for this for later this year? Speaker 500:30:05Yes. Hi, it's Michael. Yes, outbound has always been a relatively small percentage of our China business. I think we're now more encouraged by all of the signals that we've had for our reopening in China in 2024. And we still got some work to do, but we've now started to rebuild our sales Organization in China and we expect hopefully by late spring, early summer to be back operating out of China. Speaker 200:30:3224, 24, it's pretty up. Speaker 600:30:37And then sorry, that's in terms of That's in terms of actual capacity in China? The question was more about China outbound to other areas. Speaker 500:30:45Right. Yes. That's correct. That's in actual capacity operating out China in 'twenty four. As it relates to outbound, outbound started to return, but it's obviously coming now from a smaller base. Speaker 200:30:58Great. Speaker 600:30:58Thanks so much. Speaker 300:31:00Thanks, Brian. Operator00:31:02Next, we'll hear from Robin Farley, UBS. Speaker 700:31:06Great. Thanks. With that yield guidance increase, I don't even have a question on demand because that was kind of a mic drop with that increase. I actually have a question kind of just looking at related to balance sheet issues. Another cruise line has talked about getting ECA funding for a significant amount of money that's not related directly to a ship order, but for Owners Extras. Speaker 700:31:33And I'm just wondering, is there potentially opportunity because obviously those would be at sort of 1% 2% interest rates. Is there opportunity for Royal? I know you guys aren't doing any big change orders that we know of at the moment, but is there an opportunity for you to get some ECA funding for things not directly related to a ship delivery? Speaker 300:31:52Yes. Hi, Robin. It's Naftali. These days have been fantastic partners to us. We're obviously very committed to our newbuild program and they provide us very attractive financing. Speaker 300:32:05There's always puts and takes, but we don't expect any material changes from our financing arrangements at this point. Speaker 200:32:12Yes. The only point I would just add, Robin, what you're describing is not a new concept. We've actually probably been doing that for about a decade. So if we have change orders or we have orders extras, that the same concept of the eightytwenty, 20 percent down, 80% financed is how those ships have been financed, whether it is for the contract price or other elements that we're adding on to the ship? Speaker 700:32:41I guess it was really more I was thinking that it's the first time we've seen sort of like incremental ECA funding that wasn't tied to ships ordered before the pandemic, which and again, it's tied to a very big change order, so not your situation. And then just one other quick clarification on the expense side of things. When you look at your expenses for the full year, Obviously, some of you mentioned structural because you have a full year of CocoCay and Galveston. But you said some of it's transitional. And I don't know if I heard you say, I'm just wondering what amount because obviously some of the structural that will be recurring next year, but some of the transition costs would as they fall away create an expense decline next year. Speaker 700:33:24So I just I don't know if you can quantify how many basis points your full year increase is one time? Thanks. Speaker 300:33:31So it's predominantly structural. Some of the two examples, as you mentioned, are there. And obviously, they will be now in our base as we go forward. As we get to our full or historical load factors, those transitional costs are very minimal And we are expecting them to go away. So it's predominantly the structural costs. Speaker 700:33:55But I mean for the transition cost, is there is it 100 basis points or 200 basis points of the full year expense this year that in theory Speaker 300:34:04will be Yes, it's roughly it's even less than 100 basis points and with Some of the COVID protocols that we had a little bit in Q1 and some of our crew movements that we need to finish up, but that's Generally, the ballpark. Speaker 200:34:25Yes. In reality, on the cost side, If you take out the transition that enough just talked about and you take out the structural, our costs for the year were basically up around 3%. So just to kind of give you the sense of the level of all the actions we took over through COVID To get our cost structure and operating model aligned has effectively absorbed a Tremendous amount of inflation. So our costs in the essence are really just up 2% to 3%. Speaker 700:34:58And would you say that inflation is sort of now moderating if we think about 2024 that like the rate of increase in 2024? Or is that 3%, something that you would expect to recur? Speaker 200:35:09No, I mean, it's definitely moderating. I mean, it's all but it's still Still a pain and it's still coming at you in different ways. But we have I mean our teams are really exceptional And trying their very best to combat it and come up with great solutions. Sometimes it's around How do we get goods from point A to point B? And in some cases, how do we just leverage more of our buy across our brands? Speaker 200:35:37But it is painful. Speaker 300:35:39Yes. The word I would say is just persistent, right, which we it's not unique to us. You see it everywhere. It's Definitely moderating. I think the other thing just to point out that our focus is also what you saw in the Q1, which is as our revenue accelerates, how do we Keep the costs down and really try to get that revenue all the way to the bottom line. Speaker 700:36:03Great. Thank you very much. Thanks. Thanks, Robin. Operator00:36:07We'll go next to Vincent Stiefel, Cleveland Research Company. Speaker 600:36:13Great, thanks. I wanted to dig a little bit more into pricing. Obviously, with the net yield guidance, it looks like Net per diems for this year to be up high singles, maybe even approaching 10% versus 19%. I'm curious kind of how you might break out or talk directionally about how much of that's like for like versus new hardware versus CocoCay lift and then maybe just zeroing in on the like for like, your ability to continue to move that up in years ahead When you consider the value gap versus land? Speaker 300:36:50Yes. So First, you're right. If you kind of look at the pricing, it is an eyelash away from double digits. We do have some structural costs, especially on the back end of the year. We eliminated some of the lag reporting lag for Silversea. Speaker 300:37:08If you take that out, we're per double digits. So we're very pleased with that. And it comes from different things. Yes, we have 8 new ships that we did not have in 2019, that's a great yield driver and price driver. We have a lot of these ships going to CocoCay that continues to attract yield premiums, we have the onboard strength that we are that we continue to execute on. Speaker 300:37:36So all of these Are driving the pricing increase and the pricing strength. And we also see like for like pricing increase as well. So It's a demand environment. It's all these actions that we have taken that we think are going to continue to benefit us beyond 2023. Speaker 200:37:55Yes. I just want to add what's also just very encouraging when you see it, which is effectively a double digit price increase for us, That also does not include I mean or the negative side of this is we don't have China obviously here in 2023, Which had a substantial APD differential to the average. We also sold Azamara, which was a higher yielding versus the average. And so to be at a double digit price increase and which has been accelerating, I think really just shows the strength of leisure, The strength of Cruise and the strength for our brands. Speaker 600:38:35Great. And then a little bit longer term question. Your 1Q margin looks like it was basically back in line with pre COVID levels if you ex out fuel and the guide suggests that that builds further as you move through 2023. So I think that's really reflective of Gains in the core operations of the business. And in light of that, curious how you're feeling about the ROIC target long term, I think you said teens, which feels like a pretty broad range. Speaker 600:39:09But in light of the progress you're making in 2023 on the margin front, is how you're feeling about longer term ROIC? Speaker 200:39:18Yes. Well, I think First off, we are based off of this latest guide, we are now in double digits on an ROIC basis. And so our focus here is to have a business model that during good times and bad times stays within the teens on an ROIC basis. The focus on margin and also the capital discipline that you're seeing us employ each and every day, We think very much gets us there with moderate yield growth and good cost control. So we feel very good about our trifecta goals. Speaker 200:39:55We've talked about that as that's really us just getting to base camp, which is kind of pre COVID levels scaled up for the additional capacity on our business. And really, if you just think about 2023 in itself, if it wasn't for the crisis actions we had to take, we will be well north of our 2019 earnings and well north of our 2019 ROIC. So that's how I think we think about The business and the organic growth we have with the ships coming online and the activities we have on the destination side is really well positioning us. Speaker 300:40:32Great. Thanks. Operator00:40:36Next, we'll go to Benjamin on Credit Suisse. Speaker 800:40:41Hey, how's it going? Speaker 900:40:42Hey. Just one for me. On CocoCay, are Speaker 800:40:46you still seeing the same Pricing premiums to those itineraries as you did to the rest of the portfolio as you did in 2019? And I ask that in the context of there just being much more capacity at the island today than a few years ago? And then part 2, I think, Tidaway Beach is a 4Q opening. Any color on demand or pricing there? Thanks. Speaker 500:41:06Hi, Benjamin. Yes, I mean, I think we're truly delighted with Perfect Day. And I think the comments earlier we spoke about The volume that we're attracting to Perfect Day, this year will take around 2,500,000 of our guests to Perfect Day And the pricing premiums continue to be really robust and the spend on the island continues to be really robust as well. So we've seen As we've increased the volume, we've seen no decline in the power of the pricing and in fact it continues to accelerate. With Hideaway Beach, that will accommodate approximately 2,500 more guests. Speaker 500:41:47So today, we're I think in March, we had close to 250,000 guests in Perfect Day. And on average now, we're having around 11,000 guests a day in CocoCay. With Hideaway, we can add another 2,500, 3000 guests. And that's really for Designed to be open in time for Icon of the Seas and of course Icon will visit at the end of January and Icon will be going to Perfect Day every single week. We've also got Utopia coming online in June. Speaker 500:42:20We haven't announced the deployment, but Utopia will also be going to Perfect day. And the demand is just very strong. I mean, we've seen there's a lot of demand for that particular product and any of our ships that have Perfect day on their itinerary, demanded and there's strong pricing premium that we Speaker 200:42:39see there. Yes. Ben, just one point on On Hideaway, for modeling purposes, just keep in mind that it's coming online at the very end of this year, But its ramp up of operations and so forth, as Michael said, is kind of in line when ICON comes on, online, which will be towards the end of So just as you're thinking about yielding costs, just keep that in mind. Speaker 300:43:05That's helpful. Thank you. Speaker 500:43:07Also, Benjamin, just to add a quick comment, not on Perfect Day, but we did receive the kind of the green light approval from the Bahamian government to proceed through the environmental and permitting and planning process now in the Bahamas. So Our intention is to have the Royal Beach Club open in towards the end of the spring summer of 2025 And that new addition to the portfolio is also going to really produce an incredible Experience for certainly for the short product and the short product is doing exceptionally well at the moment. We continue to increase our short product and put Really great ships into that market. So the combination of Perfect Day on one day and the Beach Club on the second day really is a winning combination. Speaker 800:44:01And forgive me, is the expectations around the Royal Beach Club, is Speaker 300:44:04that a similar size To the hideaway or large smaller or larger just from the capacity? Speaker 500:44:10Actually from a capacity perspective, it's very similar to hideaway. Remember hideaway is part of The Perfect Day experience. So the Perfect Day experience capacity will be around 13,000 a day, but the Beach Club's capacity will be around 2,500 to $27.50 a day. Speaker 200:44:29Thanks. Thanks, Ben. Operator00:44:32Your next question comes from Connor Cunningham, Melius Research. Speaker 1000:44:37Hi, everyone. Thank you for the time. Just on the $5,300,000,000 in And customer deposits that you have. I was curious if you could parse out what percentage of the bookings are people that are new to Cruise versus historical levels? It just seems like You're gaining a lot of momentum there. Speaker 1000:44:52Just curious on where that sits today. Thanks. Speaker 300:44:55Yes. So as we I think Jason said this In his prepared remarks, this quarter and it's been consistent in the last several quarters, the combination of new to our brands And new to our crews significantly exceeded 2019 levels. So we're very pleased with seeing this quality demands and our brands attracting New people to our ecosystem. And at the same time, we also focus on making sure that they stay there, right, then increase repeat rates. This is all in line with our strategies. Speaker 300:45:28So some of the benefit you see in the Q1 in these customer deposits is just more people booking with us, NUTOR Brands and NUTOR Cruise. Speaker 1000:45:39Okay. That's helpful. And then just I was I was hoping if you could unpack a little bit just on this close end pricing momentum that you saw in the quarter. What did you assume originally and then how first, how it played out? And just How you're thinking about that trend through the remainder of the year? Speaker 1000:45:54I realize load factors are stepping up. So there's probably less to fill, but just curious on how you're thinking about that going forward. Thank you. Speaker 200:46:03Yes. Well, I think, first what I would say is, It was an incredible surprise at the differential between our wave expectations close in versus the realities of what occurred. There was a substantial difference versus 2019 levels, which were already at a record high. And so we built another 3 or 4 load factor points. As you pointed out, Connor, we are Our expectations for the balance of the year was to be at normal load factors. Speaker 200:46:39So those book positions were higher, so there is less inventory. But certainly there is the opportunity and of course we've recognized a lot of that opportunity in terms of the expectation that those volumes continue and at higher rates. I think the thing that was of a great, I wouldn't say surprise, but delight to us was While the volumes were building at those large volumes, we were also able to continue to raise pricing during that period of time, which is not always what you see As you times in which you're looking to fill certain volume gaps. Speaker 300:47:17Yes. And just as I think I said it in my prepared remarks, 2 thirds of our yield outperformance in the quarter were just load factors. We built 200 basis points more and the remaining It was just higher pricing both on ticket and exceptional strength on onboard revenue. Speaker 1000:47:36Okay. Appreciate the time. Thank you. Operator00:47:41Matthew Boss from JPMorgan is up next. Speaker 1100:47:44Great. Thanks and congrats on a really nice print. Speaker 200:47:48Thanks, Matt. Speaker 1100:47:49Maybe to follow-up on demand. As we think about the drivers and the magnitude of the top line upside relative to where we stood 3 months back. I guess maybe if you could help to maybe rank order the upside? And then Could you elaborate on your most recent momentum that you cited in bookings that you've seen? And finally, maybe just relative to the trifecta plan that you laid out in November 2022, what's your confidence today or just how best to think about puts and takes to consider relative to when you initially laid this out? Speaker 200:48:27Okay. Well, I'll take a stab at it and Hello for my teammates here to add in. I think first just starting off on Trifecta. We feel very good about our Trifecta program. Obviously, the results of what we're talking about today in terms of the acceleration, the higher pricing, Our continued ability to manage our costs is all very encouraging, as we kind of think through what 2025 is going to look at Or look like, there's obviously there's always headwinds that you're dealing with, but we do really believe that by us just Continuing to moderately grow our yields and managing our costs and managing our capital allocation, we see kind of clear skies towards those goals. Speaker 200:49:15There's obviously things in which when we think about negative carry, we think about and how to manage that and get that down to the levels to get our earnings power back from there. That's also kind of top of mind for us. As it relates to on the demand side, just to be I think Which we kind of laid out in our remarks, there are several things. First is, the Caribbean has been exceptionally strong, Especially ships that are touching a perfect day, we saw a huge strength from onboard spend has been very, very strong. It's not one area of onboard, it's really across the board. Speaker 200:49:50So that's really that's been very encouraging. Our North American products have all been booking well, Alaska, Northeast and so forth. And for Europe, I think we were a little bit concerned going into the year. But because of our global and nimble sourcing model, we really have seen a surge in European bookings And we feel very good on how Europe is going to play out this year, but not to the level that we saw in the Caribbean. And so that's just broader combination is what's driving acceleration in demand, acceleration in pricing And while we doubled our yield and increased our earnings by 40%. Speaker 300:50:33Yes. Just to add, it's Naftali. I think First on the latest points around the demand. I think if you kind of zoom out a little bit, we did talk about and we've been talking about the value proposition Of crews being very attractive and you see that played out. So our goal is to close the gap and we do that with The ships that we have, the experiences we deliver, Perfect Day at CocoCay, some of the itineraries we design. Speaker 300:51:00But those are things that if you, the consumer, are obviously, it's very attractive. On the trifecta, I just want to make one comment, Which is, as we were designing it, we weren't designing it for a perfect environment, right? So as Jason said, there's puts and takes, there's headwinds, tailwinds. And as we were designing those coordinates, we're confident we can get there. Speaker 500:51:27And Matthew, just to add, when I just using Royal Caribbean International as a proxy for the company, When I think about 2024 and 2025, we've got Icon of the Seas coming online. We've got Utopia of the Seas. We've got Hideaway Beach Jim Perfect Day coming online in late this year. We've got expectations that China will be up and operating in 2020 4, and we've got the Beach Club coming online in 2025. So just from the Royal Brands perspective, we've got an incredible lineup of really new and exciting products, And we've seen that these products really do ignite the market and generate significant demand. Speaker 500:52:08So we feel pretty optimistic about the future. Speaker 1100:52:14It's great color. Congrats again and best of luck. Speaker 200:52:16Thanks, Matt. Appreciate it. Operator00:52:20Next up, we'll hear from Daniel Pulitzer, Wells Fargo. Speaker 900:52:24Hey, good morning, everyone, and congrats on the quarter. Just a quick one for me. The Caribbean itineraries, I mean, it sounds like pricing is tracking pricing and demand is tracking well above your expectations. And you've talked about this shift to short term product. Do you could you see a prolonged shift there? Speaker 900:52:40And how do you think about Your capacity allocation over the next kind of year or 2 as it relates to Europe and some of the more premium itineraries relative to kind of the lift you're probably getting now from CocoCay? Speaker 200:52:53I think we feel pretty good about the balance of our deployment. We have been I think we have shown that having Great assets like Perfect Day, putting great assets in the short product, which connect very well to millennials and Gen X and so forth that are looking for more volume vacation experiences, and they do that over shorter periods of time. And so that really kind of zones in to that clientele. But I think when we look and of course, our deployment will shift a little bit in our expectations as we look forward as we expect China to come online and Asia Pac to kind of light back up here in 2024 2025. But Caribbean is going to continue to be where the majority of our capacity is. Speaker 200:53:39And I think our broader portfolio of deployment will More or less look like it does this year with a little bit more indexing into short and probably a little bit more indexing into China. Speaker 900:53:51Got it. Thanks. And just for my follow-up, I wanted a little bit more color on China, and maybe that cruise customer, if you can maybe put a little bit more color around what's looked like Historically, in terms of mix of pre board spend versus onboard, the EBITDA relative to the rest of your portfolio per The yields kind of any additional color as we think about the reopening and take that into account given the strong and robust demand from the travel and leisure customer there? Speaker 500:54:20So Dan, pre pandemic, we built a significant business For cruise in the China market, I think Roll was the number one cruise brand in China by volume And we had a few of our ships that were operating there. And in fact, before the pandemic, we had Wonder of the Seas originally planned to deploy into the China market, which of course subsequently changed. Our expectation is that this market will return to how it was pre pandemic. The value of a Chinese customer is very high. When you look at the net revenue from a Chinese consumer, It's typically around the same level as an American and slightly higher. Speaker 500:55:05So we see that returning. The spend changes somewhat in terms of onboard spend. They skew differently in different areas, but overall the aggregate of their spend Is very high. So we believe that that market will return and we're hoping in 2024 we'll see that. Speaker 900:55:24Got it. Thanks so much. Operator00:55:28Your next question comes from Fred Wightman, Wolfe Research. Speaker 1200:55:33Hey, guys. Good morning. I was hoping you could just talk a bit more about if you think about the really strong demand you're seeing for the Caribbean and sort of in line European demand, what is Driving sort of that divergence? Is it just that CocoCay is that attractive? Are you hearing pushback on European airfare? Speaker 1200:55:48Like where is the biggest difference? Speaker 200:55:52Well, I think in the earlier part of the year, we were a little bit concerned about the airlift for Europe, But that has kind of normalized, at least for our guests. And also don't forget, we source As well in Europe for our European product and that just goes back to our business model of having this kind of global nimble sourcing model. So I think that's how we kind of think about that. As it relates to the Caribbean, I think it's a combination of things and as Naf pointed out, There's still a significant value gap between land based vacation and cruise. I think we've closed Some of that gap this year, which is encouraging. Speaker 200:56:36And we saw pre pandemic that ships that touched Perfect Day, as an example, had really kind of closed the gap to land based, especially Orlando and Vegas. And what we're doing is what we're seeing is that that is starting to kind of get back to 2019 levels of the gap still exist As those businesses got stronger during the period. And so I don't think it's one thing, but I think the value gap, I think that The demand to spend time with people's friends and family and gather experiences and buy less stuff, all these secular and demographic trends are just huge tailwinds for the demand environment. Operator00:57:18Makes sense. And then on Speaker 1200:57:19the expense side, You guys called out some benefits from expense timing in the quarter. I think that was sized at 180 basis points. Is that all showing up in the 2Q guide? Does Some of that get punted into 3Q and 4Q. How should we think about that? Speaker 300:57:34Yes. It's I mean, majority of it, almost all of it is in should be expected in Q2. Speaker 900:57:41Perfect. Thank you. Operator00:57:44And we'll go to Paul Golding, Macquarie Capital. Speaker 1300:57:48Thanks so much and congrats on the quarter. Just one for me, a longer term question here. I know you're still building load factor, but as you think about Q1 of the strength and close in bookings. Does this change the way you think about Wave and how you manage the booking curve and inventory as you go into the next Wave cycle, the Booking cycle and just in the context of what we had through the pandemic, which was a bit protracted booking curve? Thanks so much. Speaker 200:58:14Yes. We actually through the COVID period had kind of shifted How we go to market with our inventory. We used to kind of put everything out there and all the suites would be sold basically right off the bat And then you would kind of work your way down to the inside cabins. Well, now we hold back inventory and we release it based off of our What I think are much more sophisticated revenue management models that we have today. And so all of that takes into account the The demand environment we're seeing and that's why I think sometimes when we get into conversations around what percent booked are you, how does it relate to this period versus that period, What we're really focused on is optimizing yield. Speaker 200:58:56And so there might be periods where quarter over quarter or year over year, we want to be In a stronger book position or lesser than what we were booked in a previous period Because what we're focused on is maximizing yield, which sometimes comes with us having more inventory to sell. Speaker 1300:59:18Appreciate the context. Thanks. Okay. Speaker 300:59:22Well, we thank everyone. Speaker 200:59:24Yes. Speaker 700:59:25Go ahead, Nick. Thank you. Speaker 300:59:27We thank everyone for their participation and interest in the company. Michael McCarthy will be available for any follow-up. So we wish you all a great day. Thank you. Operator00:59:39Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation. You may nowRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallRoyal Caribbean Cruises Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Royal Caribbean Cruises Earnings HeadlinesMajor cruise line cancels all trips to Caribbean destination out of an ‘abundance of caution’April 24 at 2:20 AM | nj.comGoldman Sachs Sticks to Its Buy Rating for Royal Caribbean (RCL)April 24 at 2:20 AM | markets.businessinsider.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. 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Email Address About Royal Caribbean CruisesRoyal Caribbean Cruises (NYSE:RCL) operates as a cruise company worldwide. The company operates cruises under the Royal Caribbean International, Celebrity Cruises, and Silversea Cruises brands, which comprise a range of itineraries. As of February 21, 2024, it operated 65 ships. 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There are 14 speakers on the call. Operator00:00:00Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group First Quarter 2023 Earnings and Business Update Conference Call. I would now like to turn the conference over to Mr. Michael McCarthy, Vice President, Investor Relations. Operator00:00:20Please go ahead, sir. Speaker 100:00:22Good morning, everyone, and thank you for joining us today for our Q1 2023 Business Update Conference 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 Royal Caribbean International. 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 and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Speaker 100:00:57Please 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 and a reconciliation of all non GAAP items can be found on our website and in our earnings release available at www.rclinvestor.com. Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our Q1 and an update on our latest actions and on the current booking environment. Speaker 100:01:37We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason. Speaker 200:01:43Thank you, Michael, and good morning, everyone. I'm thrilled to be here this morning to share our incredible first quarter results and the strong trajectory of our business. When we turn the page from 2022 into 2023, with the full strength of our operating platform deployed and numerous tailwinds related to the consumer's desire to travel and experience the world, we believe this would be a great year. We expect it to finally return to yield growth in the Q1 and accelerate even more through the rest of the year. Well, As you saw in the press release this morning, what transpired over the past 4 months was much better than we had anticipated. Speaker 200:02:23Our brands are stronger than ever and our yield in Q1 blew away previous records. Before getting into the detail, I want to thank the entire Royal Caribbean Group team, 100,000 plus strong for another outstanding quarter. Their dedication and commitment allow us to deliver the very best vacation experiences responsibly, while generating strong financial results. As highlighted on Slide 4, it has been a tremendous Q1 that set us well on the path to a year that is significantly better than we expected just a few months back. We knew that demand for our business was strong, but what has transpired was a record breaking extended wave season that translated into robust bookings and meaningfully better prices. Speaker 200:03:12In the Q1, we delivered a record 1,900,000 memorable vacations, achieved 102% load factor at higher pricing than 2019 and earned exceptional guest satisfaction scores. Yields grew 5.8% compared to record 2019 levels and were significantly above our guidance. Strong demand for Caribbean itineraries translated into higher load factors at better than expected pricing for both ticket and onboard. Our yields are now exceeding record highs and we expect this trend to continue for the rest of the year and beyond. This is particularly significant because while we thought the Q1 would be a transition period, we always expected the rest of the year to be strong. Speaker 200:04:00The fact that demand for the coming 9 months is so much stronger than our already robust expectations says a lot about the strength of the consumer and the strength of our brands. Adjusted EBITDA and adjusted EPS in the Q1 were both considerably higher than our guidance and we generated $1,300,000,000 of operating cash flow. Strong revenues, our continued focus on Increasing margins and favorable timing of operating expenses contributed to the better than expected earnings performance. The acceleration of demand coupled with our team's incredible execution is also translating into higher revenue and earnings expectations for the full year. As you can see on Page 5, we are more than doubling our full year yield growth expectations to 6.75 to 7.75 on increased expectations for ticket and onboard revenues. Speaker 200:04:55We are also increasing earnings per share expectations by 40% to $4.40 to $4.80 as we continue to focus on expanding margins as revenue accelerates. Now I'll provide some insight into the robust demand environment and our incredible wave season. Bookings outpaced 2019 levels by a very wide margin throughout the entire Q1 and into April. Pricing was also significantly higher as our commercial apparatus across all channels has been driving quality demand into our vacation ecosystem. The strong wave season resulted in an acceleration of our book position in relation to prior years. Speaker 200:05:37The booking window is now completely back to normal, demonstrating consumers' desire to continue to plan their vacation travel with us well in advance. While demand has been strong across all products and markets, we continue to see exceptional strength from the North American consumer. This strength in combination with the incredible perfect day at CocoCay has resulted in record yields for our Caribbean sailings. In addition, European bookings are nicely outpacing 2019 levels with peak summer sailings trending particularly well in recent weeks. The robust demand we see for our products is a result of our superior brands, hardware, enhanced destination offerings, a nimble and global sourcing model and strong execution by our teams. Speaker 200:06:23As you heard me say on prior earnings calls, we continue to see Financially healthy and engaged consumers who are eager to vacation and build memories with us. Our customer sentiment remains strong and is bolstered by strong labor markets, high wages and excess savings. Secular tailwinds continue to benefit us as consumers continue to shift preferences and spend from goods to experiences, resulting in a strong entertainment and travel spend. This trend continued in the Q1 where spend on experience was 24% higher than 2019 and doubled the spend on goods. Further, our research shows that consumers plan to continue prioritizing leisure travel over other spend. Speaker 200:07:10Our addressable market is plentiful and continues to be meaningfully larger than it was in 2019. Our product appeals to a broad range of vacationers who are seeking everything from a short getaway to perfect day to a luxury world cruise. Cruising remains an exceptional value proposition. I would actually say it's too attractive of a value proposition, which is allowing us to outperform broader leisure travel as we seek to close the gap to land based vacations and drive better revenue and happy customers. Cruise search is up 15% versus 2019, significantly outpacing the growth in general vacation search and contributing to the doubling of visitors to our website when compared to 2019. Speaker 200:07:58Our vacations are popular among a broad range of consumers, which allows us to attract more and more new customers into our ecosystem. In the Q1, the percentage of guests who were either new to brand or new to cruise surpassed 2019 levels by a wide margin. The improvements we have made in our commercial capabilities have allowed us to capture quality demand and expand our share of guest wallet. In the Q1, about 2 thirds of our guests booked some of their onboard activities in advance of their crews. The comparable figure in 2019 was 48%. Speaker 200:08:37So you can see we have used our time well to upgrade our systems. Every dollar a guest spends pre cruise translates into approximately $0.70 of incremental spend once on board. While we have made a significant leap in our commercial capabilities, we are still in the early innings of our journey and will continue to add features and capabilities to our app and commercial engines. Looking to the rest of 2023, we expect to deliver amazing vacation experiences to over 8,000,000 guests at record yields as we deploy our best in class fleet across the best global itineraries. We expect to return to historical load factors in late spring and continue to benefit from a strong pricing environment. Speaker 200:09:22We expect to deliver record yields that are 6.75 to 7.75 higher than 2019 with every one of our brands generating positive direct profit this year. Our strong yield growth outlook is driven by the performance of new hardware, a strong pricing environment, especially for Caribbean itineraries and continued growth from onboard revenue areas. New hardware has been a great differentiator for us and we are benefiting from the 8 ships that joined our fleet since 2019. This year, each of our wholly owned brands will welcome a new vessel. These ships are sure to continue elevating vacation experiences for our guests and will continue to further drive a competitive advantage and deliver very attractive financial returns. Speaker 200:10:08Since all 3 of these ships will be delivered in the second half of this year. They will be a key yield driver next year. Silversea will welcome Silver Nova this summer, the first of the new evolution class. Celebrity Cruises will welcome the 4th and the award winning Edge series and Royal Caribbean International will take delivery of the game changing Icon of the Seas. Let me spend a minute talking about Icon of the Seas and the excitement she is generating with our customers. Speaker 200:10:39With Icon, we set out to create the ultimate vacation for thrill seekers, the chill enthusiasts and everyone in between without compromise. She is getting exceptional demand with bookings well surpassing previous records. Despite being on sale for only 5 months, Icon is significantly more booked for her inaugural season at materially higher rates than any other Royal Caribbean ship launch. ICON will join the fleet later this year and will debut in the Caribbean in January 2024 with itineraries that include Perfect Day at CocoCay and its new expansion, Hideaway Beach. Moving to costs, our team have been working hard for several years to reshape our cost structure with the goal of enhancing margins. Speaker 200:11:24Our cost outlook for the year reflects our commitment to enhancing profitability while focusing on delivering the best vacation experiences. We continue to expect the business to deliver record yields and adjusted EBITDA in 2023. Our proven formula for success remains unchanged. Moderate capacity growth, moderate yield growth, though I wouldn't define this year's growth as moderate, and strong cost controls will lead to enhanced margins, profitability and superior financial performance. We just published our 15th annual sustainability report, providing an in-depth update on our strategy and performance of delivering the best vacation experiences responsibly. Speaker 200:12:06In this report, we outlined our progress towards reducing our carbon intensity by double digits by 2025 versus 2019. We expect to deliver on significant milestones of our decarbonization pathway this year, including the introduction of advanced technologies on our new ships such as LNG, fuel cells and a first of its kind onboard Waste to Energy System. To wrap up, the business continues to accelerate and we are uniquely positioned to grow earnings and cash flow in 2023 on our way to achieving our trifecta goals. The strength of our brands and operating model continues to grow. We are committed to delivering the best vacation experiences responsibly, and I couldn't be more excited about what's ahead for the Royal Caribbean Group. Speaker 200:12:53With that, I will turn it to Naftali. Naft? Speaker 300:12:58Thank you, Jason, and good morning, everyone. Let me begin by discussing our results for the Q1. As you can see on Slide 4, we reported an adjusted net loss of approximately $59,000,000 or $0.23 per share. These results were significantly above our expectations and the high end of our guidance range. Total revenue was $2,900,000,000 adjusted EBITDA was $642,000,000 and operating cash flow was 1,300,000,000 again significantly above our expectations. Speaker 300:13:30We finished the Q1 with a load factor of over 102% at net yields that were up 5.8 percent for the quarter or 4.40 basis points higher than the midpoint of our guidance. Better than anticipated, close in demand for Caribbean sailings, an improving pricing environment and continued strength in onboard revenue were the main drivers for these exceptional results. Higher load factors drove 2 thirds of the yield outperformance and higher pricing drove the remainder. Net cruise costs excluding fuel per APCD increased 5.8% in and currency compared to the Q1 of 2019. Net cruise costs for the Q1 included $2.87 per APCD were 240 basis points impact of structural costs. Speaker 300:14:21Operating costs also benefited from approximately 160 basis points of favorable timing compared to guidance. 1st quarter results are a testament to the continued robust demand environment, attractive value proposition of our cruise vacations and strong commitment by our teams to deliver the best vacation experiences responsibly. Turning to the booking environment. Bookings have consistently been higher than the same time in 2019, with the gap widening as Wave extended further into the year than ever before. The booking strength has been particularly evident on Caribbean sailings, where our Superior Hardware and Perfect Day at CocoCay continue to be winning combination. Speaker 300:15:07More than half of our Caribbean sailings Visit Perfect Day at CocoCay, which is Royal Caribbean International's highest rated destination in the Caribbean. Since Perfect Day opened midway through the Q2 of 2019, these itineraries are driving outsized yield and pricing growth. While the Caribbean has seen booking strength, performance of our European itineraries is also aligned with our initial expectations. European itineraries account for 17% of full year capacity, peaking at 35% in the 3rd quarter. Bookings for our European sailings have been nicely outpacing 2019 levels with peak summer trending particularly well in recent weeks. Speaker 300:15:52Several of our newest ships including Celebrity Beyond, Odyssey of the Seas and Silver Dawn are sailing in Europe this summer and are attracting quality demand and rates. Now let me review our 2023 outlook. If you turn to Slide 8, you will see our updated guidance for the full year 2023. We expect net yield growth of 6.75 percent to 7.75 percent for the full year. This represents an approximately 400 basis point increase from the midpoint of our prior guidance. Speaker 300:16:27About a third of the increase is due to strong Q1 results with the remainder due to better business outlook for the rest of the year. The underlying yield improvement is driven by the performance of new hardware, strong demand for our core products, particularly Caribbean itineraries and continued strong growth from onboard revenue areas. While yield growth is expected to ramp up for the rest of the year, there is some variability at the quarter level. Yield growth is likely to be the highest in Q2, where we lapped the opening of Perfect Day at CocoCay and benefit from our Caribbean deployment mix. As you can see from our guidance, yields for the back half of the full year are expected to be up by more than 6%. Speaker 300:17:14From a cost perspective, net cruise costs excluding fuel are expected to be up 5.5% to 6.5% for the full year as compared to 2019. Our cost outlook reflects our culture of continuous improvement and innovation, and we are benefiting from all the actions we have taken over the last several years to support enhanced margins. Net cruise costs also include 2 10 basis points of structural costs that we did not have in 2019. Those include, for example, costs related to the full year operations of Perfect Day at CocoCay and our new Galveston terminal. We continue to actively manage persistent inflation across categories, including food and beverage, airfare and short side human capital. Speaker 300:18:02Our teams continue to find ways to manage through inflation while maintaining exceptional guest experience and increasing profitability. Fuel expense is expected to be approximately $1,100,000,000 for the year and we are 54% hedged for the remaining of the year. Looking ahead, fuel consumption is 25% hedged for 2024 and 5% hedged for 2025. Based on the current business outlook, along with current fuel pricing, currency exchange rates and interest rates, we expect record adjusted EBITDA and adjusted earnings per share of $4.40 to $4.80 Now turning to Slide 9, I'll provide some color on 2nd quarter capacity and guidance. We plan to operate about 11,700,000 APCDs during the 2nd quarter. Speaker 300:18:54Net yields are expected to be up 10.1% to 10.6% compared to 2019. Exceptional strength in Caribbean itineraries combined with our amazing private island destination Perfect Day at CocoCay is driving the increase in yields. Net cruise costs, excluding fuel, are expected to be up approximately 8.9% as we continue to focus on margin expansion while revenue accelerates. 2nd quarter operating costs carry approximately 4.30 basis points of incremental expenses the way on NCCX when compared to 2019, of which half are structural and half are timing from the Q1. So in summary, based on current currency exchange rates, fuel rates and interest rates, we expect adjusted earnings per share of $1.50 to $1.60 for the 2nd quarter. Speaker 300:19:50Turning to our balance sheet. We ended the quarter with $3,900,000,000 in liquidity. Our liquidity remains very strong, and we are focused on expanding our margins to further enhance EBITDA and free cash flow. During the Q1, we repaid $286,000,000 of debt maturities as well as $2,400,000,000 of Revolver Advances. In February, we issued $700,000,000 of senior guaranteed notes at 7.25 percent coupon to refinance 2023 2024 debt maturities. Speaker 300:20:24Our access to capital remains strong, and our execution and performance to resonate with our investors and financial partners. We will proactively and methodically continue to improve the balance sheet through debt pay downs and opportunistic refinancings. Our remaining scheduled maturities for 2023 are $1,800,000,000 made up predominantly of ECA debt amortization, which we expect to pay down with cash on hand and operating cash flow. As the business continues to accelerate and generate strong and growing cash flows, we are committed to a disciplined capital allocation and to return to an investment grade balance sheet profile in line with our trifecta goals. In closing, Our business continues to accelerate and we expect to grow yields and margin so we can achieve record adjusted EBITDA in 2023. Speaker 300:21:16We remain committed and focused on executing on our strategy and delivering on our mission while achieving our Trifecta goals. With that, I will ask our operator to open the call for a question and answer session. Operator00:21:31Thank you, sir. We'll go first to Steven Wieczynski, Stifel. Speaker 400:21:41Yes. Hey, guys. Good morning. So first off, congratulations on a strong quarter. Jason, in the release, you mentioned that for 2023, you're expecting 2023 EBITDA to significantly exceed 2019 levels, which is a change in wording relative to Where you were back in February. Speaker 400:22:01And look, I understand I'm probably nitpicking here a little bit. But just want to understand maybe how we should think about EBITDA trajectory now for the year and the progression you guys are on now to get north of $5,000,000,000 in EBITDA by 2025 according to your trifecta program? Speaker 300:22:21Hey, Steve. Good morning. It's Naftali. So as you can see, we are very pleased with the results. And as we think about EBITDA and how this translates to the progression throughout the year, You can see that we are increasing yields and we expect the EBITDA growth to be higher than our yield growth. Speaker 300:22:42And that's because A lot of the revenues is dropping to the bottom line because we are very much focused on cost and enhancing margins. So if we look at what we kind of look at the guidance that we provided, we're going we expect to be an eyelash away from our previous EBITDA per APCD record in 2019. And a lot of the things that we're doing and a lot of the strategies that we're employing should benefit to us as we continue to execute towards our trifecta goal. Speaker 200:23:14Yes. And I think I'd just add on to it, Steve, as we think about it on the trifecta side, obviously, this year, the performance of this year is better than we It's much better than we had expected. And I think the commentary we talked around about Icon, obviously, we have Nova coming online, which is a high yielding, ship. We have Ascent coming online, which is high yielding. We have Hideaway coming online. Speaker 200:23:41And of course, the commentary that we've been talking about that we've seen acceleration in price and volumes is also what we're seeing for like for like For 2024, though it's early. And for us to get to the marks for trifecta, we really just need moderate yield growth And good cause control, which we you continue to show. And so that's kind of very much on our path. And as Naf mentioned, it's great to see That really almost every penny of the outperformance on revenue is dropping right down to the bottom line, which would be dropping right down to EBITDA. Speaker 400:24:21That's great color. Thanks guys. And then second question, as we think about the back half of the year, Obviously, we can back into your yield guidance. But if we kind of break down those yields a little bit, are you assuming your Customer from an onboard has obviously been extremely, extremely healthy. And are you assuming that your customer kind of stays in the same ballpark That they are now, do you have them slowing a little bit in terms of spend levels? Speaker 400:24:47And then second part of this question, which is a little bit different, but we get a lot Questions from investors about demand and demand into 2024 and can the demand levels that are there right now persist into next year? Or is 23 benefiting from Just still kind of reopening in COVID bookings and stuff like that. So hopefully all that makes sense. Speaker 200:25:14Yes, sure. Well, I think obviously, we don't have a crystal ball. What we know is what we see happening Basically every minute of every day. We're taking tens and tens of thousands of bookings a day. We've got 160,000, 170,000 people spending on our ships. Speaker 200:25:31And so we have a very good idea of the customer in terms of what's happening today. We also obviously do a lot of surveying of our customers in terms of What they're looking to do in the future, and it's obviously clear to us that they are very focused on gathering experiences and creating memories with their friends and family. So the other point I'll just add is and this is more on the pre cruise side And what they're booking on the ship for the future, that number continues to rise, which also just shows their appetite to spend more and more on non ticket related spend. So I think for us, when we think about the back half of this year, Our expectation is that we're going to continue to see what we're seeing. However, the mix changes a little bit. Speaker 200:26:20In Q3, we have a little bit more Europe. We have a little bit less Caribbean. And of course, you've heard our commentary on the Caribbean, is exceptionally strong, which is really what's driving the overall outperformance, while Europe is now Very much coming in as we expected for the year. So I think that probably talks a little bit about how we think about the back half of next year. Now again, going to demand level for 2024, What we have again is what we're seeing day in and day out. Speaker 200:26:53And at this point in the year, the customer now and of course, we begin to Position ourselves and orient ourselves to 2024 more and more, I'm showing the majority of the bookings we're now taking are focused on 2024. And we see very similar strength and acceleration from what we've been seeing close in as well as what we've been seeing for the bookings for 2023. Speaker 400:27:21That's great color. Thanks guys. Appreciate it and congratulations. Speaker 500:27:24Steve, I just have to add one comment because it's I have to talk about Icon of the Seas. I think If you think about 2024 and the comments we made earlier about Icon, Icon is literally the best performing new product launch we've ever had in the history of our business and we're delighted with volume and rate and that really is a full 24 products. So You can see if you wanted to use Icon as a proxy, I know it's a brand new product and it's stunning, but it's really driving a huge amount of demand and great rate. Speaker 200:27:59That probably won't be the first time you hear about Icon from Michael. Just to Speaker 400:28:05Thanks guys. Speaker 200:28:06Thanks Steve. Operator00:28:08Your next question comes from Brandt Montour, Barclays. Speaker 600:28:13Hey, good morning, everybody. Obviously, exceptional quarter. Congratulations. A question about load factors. I know you guys are going to hit historical load here in the spring. Speaker 600:28:24But curious looking past that, What the new normal for load looks like given maybe you have some regional mix shift, which could affect it, but more so you have obviously A lot of new capacity that's different and has more onboard and more space. So any comments about what the new normal looks like for you guys for load. Speaker 200:28:50So on an expectation standpoint, I mean, just mathematically, Our load factor, our normalized load factor will begin to rise, and that's really leading With Icon coming on, which will have a higher load factor profile. Now we're also taking on Nova, which has a lower load factor Then, the Royal Caribbean brand and the Celebrity brand, and we're also taking on a scent, which has lower load factors than Royal. But with Icon coming on next year, Utopia coming on next year, You would expect our load factors to be up a point or 2 when we look into 2024 and beyond. Speaker 600:29:29That's super helpful. And then my second question is just on China. Back in 2019, if I recall, you guys had something like mid single digits of your global demand coming from China traveling outside of China. And I know there's Outbound international flight constraints limiting China outbound travel, but you're probably engaged with your database over there. I'm just curious what you're seeing from them now that they're starting to travel again and if it's even showing up sort of on the radar in terms of what's booked for this for later this year? Speaker 500:30:05Yes. Hi, it's Michael. Yes, outbound has always been a relatively small percentage of our China business. I think we're now more encouraged by all of the signals that we've had for our reopening in China in 2024. And we still got some work to do, but we've now started to rebuild our sales Organization in China and we expect hopefully by late spring, early summer to be back operating out of China. Speaker 200:30:3224, 24, it's pretty up. Speaker 600:30:37And then sorry, that's in terms of That's in terms of actual capacity in China? The question was more about China outbound to other areas. Speaker 500:30:45Right. Yes. That's correct. That's in actual capacity operating out China in 'twenty four. As it relates to outbound, outbound started to return, but it's obviously coming now from a smaller base. Speaker 200:30:58Great. Speaker 600:30:58Thanks so much. Speaker 300:31:00Thanks, Brian. Operator00:31:02Next, we'll hear from Robin Farley, UBS. Speaker 700:31:06Great. Thanks. With that yield guidance increase, I don't even have a question on demand because that was kind of a mic drop with that increase. I actually have a question kind of just looking at related to balance sheet issues. Another cruise line has talked about getting ECA funding for a significant amount of money that's not related directly to a ship order, but for Owners Extras. Speaker 700:31:33And I'm just wondering, is there potentially opportunity because obviously those would be at sort of 1% 2% interest rates. Is there opportunity for Royal? I know you guys aren't doing any big change orders that we know of at the moment, but is there an opportunity for you to get some ECA funding for things not directly related to a ship delivery? Speaker 300:31:52Yes. Hi, Robin. It's Naftali. These days have been fantastic partners to us. We're obviously very committed to our newbuild program and they provide us very attractive financing. Speaker 300:32:05There's always puts and takes, but we don't expect any material changes from our financing arrangements at this point. Speaker 200:32:12Yes. The only point I would just add, Robin, what you're describing is not a new concept. We've actually probably been doing that for about a decade. So if we have change orders or we have orders extras, that the same concept of the eightytwenty, 20 percent down, 80% financed is how those ships have been financed, whether it is for the contract price or other elements that we're adding on to the ship? Speaker 700:32:41I guess it was really more I was thinking that it's the first time we've seen sort of like incremental ECA funding that wasn't tied to ships ordered before the pandemic, which and again, it's tied to a very big change order, so not your situation. And then just one other quick clarification on the expense side of things. When you look at your expenses for the full year, Obviously, some of you mentioned structural because you have a full year of CocoCay and Galveston. But you said some of it's transitional. And I don't know if I heard you say, I'm just wondering what amount because obviously some of the structural that will be recurring next year, but some of the transition costs would as they fall away create an expense decline next year. Speaker 700:33:24So I just I don't know if you can quantify how many basis points your full year increase is one time? Thanks. Speaker 300:33:31So it's predominantly structural. Some of the two examples, as you mentioned, are there. And obviously, they will be now in our base as we go forward. As we get to our full or historical load factors, those transitional costs are very minimal And we are expecting them to go away. So it's predominantly the structural costs. Speaker 700:33:55But I mean for the transition cost, is there is it 100 basis points or 200 basis points of the full year expense this year that in theory Speaker 300:34:04will be Yes, it's roughly it's even less than 100 basis points and with Some of the COVID protocols that we had a little bit in Q1 and some of our crew movements that we need to finish up, but that's Generally, the ballpark. Speaker 200:34:25Yes. In reality, on the cost side, If you take out the transition that enough just talked about and you take out the structural, our costs for the year were basically up around 3%. So just to kind of give you the sense of the level of all the actions we took over through COVID To get our cost structure and operating model aligned has effectively absorbed a Tremendous amount of inflation. So our costs in the essence are really just up 2% to 3%. Speaker 700:34:58And would you say that inflation is sort of now moderating if we think about 2024 that like the rate of increase in 2024? Or is that 3%, something that you would expect to recur? Speaker 200:35:09No, I mean, it's definitely moderating. I mean, it's all but it's still Still a pain and it's still coming at you in different ways. But we have I mean our teams are really exceptional And trying their very best to combat it and come up with great solutions. Sometimes it's around How do we get goods from point A to point B? And in some cases, how do we just leverage more of our buy across our brands? Speaker 200:35:37But it is painful. Speaker 300:35:39Yes. The word I would say is just persistent, right, which we it's not unique to us. You see it everywhere. It's Definitely moderating. I think the other thing just to point out that our focus is also what you saw in the Q1, which is as our revenue accelerates, how do we Keep the costs down and really try to get that revenue all the way to the bottom line. Speaker 700:36:03Great. Thank you very much. Thanks. Thanks, Robin. Operator00:36:07We'll go next to Vincent Stiefel, Cleveland Research Company. Speaker 600:36:13Great, thanks. I wanted to dig a little bit more into pricing. Obviously, with the net yield guidance, it looks like Net per diems for this year to be up high singles, maybe even approaching 10% versus 19%. I'm curious kind of how you might break out or talk directionally about how much of that's like for like versus new hardware versus CocoCay lift and then maybe just zeroing in on the like for like, your ability to continue to move that up in years ahead When you consider the value gap versus land? Speaker 300:36:50Yes. So First, you're right. If you kind of look at the pricing, it is an eyelash away from double digits. We do have some structural costs, especially on the back end of the year. We eliminated some of the lag reporting lag for Silversea. Speaker 300:37:08If you take that out, we're per double digits. So we're very pleased with that. And it comes from different things. Yes, we have 8 new ships that we did not have in 2019, that's a great yield driver and price driver. We have a lot of these ships going to CocoCay that continues to attract yield premiums, we have the onboard strength that we are that we continue to execute on. Speaker 300:37:36So all of these Are driving the pricing increase and the pricing strength. And we also see like for like pricing increase as well. So It's a demand environment. It's all these actions that we have taken that we think are going to continue to benefit us beyond 2023. Speaker 200:37:55Yes. I just want to add what's also just very encouraging when you see it, which is effectively a double digit price increase for us, That also does not include I mean or the negative side of this is we don't have China obviously here in 2023, Which had a substantial APD differential to the average. We also sold Azamara, which was a higher yielding versus the average. And so to be at a double digit price increase and which has been accelerating, I think really just shows the strength of leisure, The strength of Cruise and the strength for our brands. Speaker 600:38:35Great. And then a little bit longer term question. Your 1Q margin looks like it was basically back in line with pre COVID levels if you ex out fuel and the guide suggests that that builds further as you move through 2023. So I think that's really reflective of Gains in the core operations of the business. And in light of that, curious how you're feeling about the ROIC target long term, I think you said teens, which feels like a pretty broad range. Speaker 600:39:09But in light of the progress you're making in 2023 on the margin front, is how you're feeling about longer term ROIC? Speaker 200:39:18Yes. Well, I think First off, we are based off of this latest guide, we are now in double digits on an ROIC basis. And so our focus here is to have a business model that during good times and bad times stays within the teens on an ROIC basis. The focus on margin and also the capital discipline that you're seeing us employ each and every day, We think very much gets us there with moderate yield growth and good cost control. So we feel very good about our trifecta goals. Speaker 200:39:55We've talked about that as that's really us just getting to base camp, which is kind of pre COVID levels scaled up for the additional capacity on our business. And really, if you just think about 2023 in itself, if it wasn't for the crisis actions we had to take, we will be well north of our 2019 earnings and well north of our 2019 ROIC. So that's how I think we think about The business and the organic growth we have with the ships coming online and the activities we have on the destination side is really well positioning us. Speaker 300:40:32Great. Thanks. Operator00:40:36Next, we'll go to Benjamin on Credit Suisse. Speaker 800:40:41Hey, how's it going? Speaker 900:40:42Hey. Just one for me. On CocoCay, are Speaker 800:40:46you still seeing the same Pricing premiums to those itineraries as you did to the rest of the portfolio as you did in 2019? And I ask that in the context of there just being much more capacity at the island today than a few years ago? And then part 2, I think, Tidaway Beach is a 4Q opening. Any color on demand or pricing there? Thanks. Speaker 500:41:06Hi, Benjamin. Yes, I mean, I think we're truly delighted with Perfect Day. And I think the comments earlier we spoke about The volume that we're attracting to Perfect Day, this year will take around 2,500,000 of our guests to Perfect Day And the pricing premiums continue to be really robust and the spend on the island continues to be really robust as well. So we've seen As we've increased the volume, we've seen no decline in the power of the pricing and in fact it continues to accelerate. With Hideaway Beach, that will accommodate approximately 2,500 more guests. Speaker 500:41:47So today, we're I think in March, we had close to 250,000 guests in Perfect Day. And on average now, we're having around 11,000 guests a day in CocoCay. With Hideaway, we can add another 2,500, 3000 guests. And that's really for Designed to be open in time for Icon of the Seas and of course Icon will visit at the end of January and Icon will be going to Perfect Day every single week. We've also got Utopia coming online in June. Speaker 500:42:20We haven't announced the deployment, but Utopia will also be going to Perfect day. And the demand is just very strong. I mean, we've seen there's a lot of demand for that particular product and any of our ships that have Perfect day on their itinerary, demanded and there's strong pricing premium that we Speaker 200:42:39see there. Yes. Ben, just one point on On Hideaway, for modeling purposes, just keep in mind that it's coming online at the very end of this year, But its ramp up of operations and so forth, as Michael said, is kind of in line when ICON comes on, online, which will be towards the end of So just as you're thinking about yielding costs, just keep that in mind. Speaker 300:43:05That's helpful. Thank you. Speaker 500:43:07Also, Benjamin, just to add a quick comment, not on Perfect Day, but we did receive the kind of the green light approval from the Bahamian government to proceed through the environmental and permitting and planning process now in the Bahamas. So Our intention is to have the Royal Beach Club open in towards the end of the spring summer of 2025 And that new addition to the portfolio is also going to really produce an incredible Experience for certainly for the short product and the short product is doing exceptionally well at the moment. We continue to increase our short product and put Really great ships into that market. So the combination of Perfect Day on one day and the Beach Club on the second day really is a winning combination. Speaker 800:44:01And forgive me, is the expectations around the Royal Beach Club, is Speaker 300:44:04that a similar size To the hideaway or large smaller or larger just from the capacity? Speaker 500:44:10Actually from a capacity perspective, it's very similar to hideaway. Remember hideaway is part of The Perfect Day experience. So the Perfect Day experience capacity will be around 13,000 a day, but the Beach Club's capacity will be around 2,500 to $27.50 a day. Speaker 200:44:29Thanks. Thanks, Ben. Operator00:44:32Your next question comes from Connor Cunningham, Melius Research. Speaker 1000:44:37Hi, everyone. Thank you for the time. Just on the $5,300,000,000 in And customer deposits that you have. I was curious if you could parse out what percentage of the bookings are people that are new to Cruise versus historical levels? It just seems like You're gaining a lot of momentum there. Speaker 1000:44:52Just curious on where that sits today. Thanks. Speaker 300:44:55Yes. So as we I think Jason said this In his prepared remarks, this quarter and it's been consistent in the last several quarters, the combination of new to our brands And new to our crews significantly exceeded 2019 levels. So we're very pleased with seeing this quality demands and our brands attracting New people to our ecosystem. And at the same time, we also focus on making sure that they stay there, right, then increase repeat rates. This is all in line with our strategies. Speaker 300:45:28So some of the benefit you see in the Q1 in these customer deposits is just more people booking with us, NUTOR Brands and NUTOR Cruise. Speaker 1000:45:39Okay. That's helpful. And then just I was I was hoping if you could unpack a little bit just on this close end pricing momentum that you saw in the quarter. What did you assume originally and then how first, how it played out? And just How you're thinking about that trend through the remainder of the year? Speaker 1000:45:54I realize load factors are stepping up. So there's probably less to fill, but just curious on how you're thinking about that going forward. Thank you. Speaker 200:46:03Yes. Well, I think, first what I would say is, It was an incredible surprise at the differential between our wave expectations close in versus the realities of what occurred. There was a substantial difference versus 2019 levels, which were already at a record high. And so we built another 3 or 4 load factor points. As you pointed out, Connor, we are Our expectations for the balance of the year was to be at normal load factors. Speaker 200:46:39So those book positions were higher, so there is less inventory. But certainly there is the opportunity and of course we've recognized a lot of that opportunity in terms of the expectation that those volumes continue and at higher rates. I think the thing that was of a great, I wouldn't say surprise, but delight to us was While the volumes were building at those large volumes, we were also able to continue to raise pricing during that period of time, which is not always what you see As you times in which you're looking to fill certain volume gaps. Speaker 300:47:17Yes. And just as I think I said it in my prepared remarks, 2 thirds of our yield outperformance in the quarter were just load factors. We built 200 basis points more and the remaining It was just higher pricing both on ticket and exceptional strength on onboard revenue. Speaker 1000:47:36Okay. Appreciate the time. Thank you. Operator00:47:41Matthew Boss from JPMorgan is up next. Speaker 1100:47:44Great. Thanks and congrats on a really nice print. Speaker 200:47:48Thanks, Matt. Speaker 1100:47:49Maybe to follow-up on demand. As we think about the drivers and the magnitude of the top line upside relative to where we stood 3 months back. I guess maybe if you could help to maybe rank order the upside? And then Could you elaborate on your most recent momentum that you cited in bookings that you've seen? And finally, maybe just relative to the trifecta plan that you laid out in November 2022, what's your confidence today or just how best to think about puts and takes to consider relative to when you initially laid this out? Speaker 200:48:27Okay. Well, I'll take a stab at it and Hello for my teammates here to add in. I think first just starting off on Trifecta. We feel very good about our Trifecta program. Obviously, the results of what we're talking about today in terms of the acceleration, the higher pricing, Our continued ability to manage our costs is all very encouraging, as we kind of think through what 2025 is going to look at Or look like, there's obviously there's always headwinds that you're dealing with, but we do really believe that by us just Continuing to moderately grow our yields and managing our costs and managing our capital allocation, we see kind of clear skies towards those goals. Speaker 200:49:15There's obviously things in which when we think about negative carry, we think about and how to manage that and get that down to the levels to get our earnings power back from there. That's also kind of top of mind for us. As it relates to on the demand side, just to be I think Which we kind of laid out in our remarks, there are several things. First is, the Caribbean has been exceptionally strong, Especially ships that are touching a perfect day, we saw a huge strength from onboard spend has been very, very strong. It's not one area of onboard, it's really across the board. Speaker 200:49:50So that's really that's been very encouraging. Our North American products have all been booking well, Alaska, Northeast and so forth. And for Europe, I think we were a little bit concerned going into the year. But because of our global and nimble sourcing model, we really have seen a surge in European bookings And we feel very good on how Europe is going to play out this year, but not to the level that we saw in the Caribbean. And so that's just broader combination is what's driving acceleration in demand, acceleration in pricing And while we doubled our yield and increased our earnings by 40%. Speaker 300:50:33Yes. Just to add, it's Naftali. I think First on the latest points around the demand. I think if you kind of zoom out a little bit, we did talk about and we've been talking about the value proposition Of crews being very attractive and you see that played out. So our goal is to close the gap and we do that with The ships that we have, the experiences we deliver, Perfect Day at CocoCay, some of the itineraries we design. Speaker 300:51:00But those are things that if you, the consumer, are obviously, it's very attractive. On the trifecta, I just want to make one comment, Which is, as we were designing it, we weren't designing it for a perfect environment, right? So as Jason said, there's puts and takes, there's headwinds, tailwinds. And as we were designing those coordinates, we're confident we can get there. Speaker 500:51:27And Matthew, just to add, when I just using Royal Caribbean International as a proxy for the company, When I think about 2024 and 2025, we've got Icon of the Seas coming online. We've got Utopia of the Seas. We've got Hideaway Beach Jim Perfect Day coming online in late this year. We've got expectations that China will be up and operating in 2020 4, and we've got the Beach Club coming online in 2025. So just from the Royal Brands perspective, we've got an incredible lineup of really new and exciting products, And we've seen that these products really do ignite the market and generate significant demand. Speaker 500:52:08So we feel pretty optimistic about the future. Speaker 1100:52:14It's great color. Congrats again and best of luck. Speaker 200:52:16Thanks, Matt. Appreciate it. Operator00:52:20Next up, we'll hear from Daniel Pulitzer, Wells Fargo. Speaker 900:52:24Hey, good morning, everyone, and congrats on the quarter. Just a quick one for me. The Caribbean itineraries, I mean, it sounds like pricing is tracking pricing and demand is tracking well above your expectations. And you've talked about this shift to short term product. Do you could you see a prolonged shift there? Speaker 900:52:40And how do you think about Your capacity allocation over the next kind of year or 2 as it relates to Europe and some of the more premium itineraries relative to kind of the lift you're probably getting now from CocoCay? Speaker 200:52:53I think we feel pretty good about the balance of our deployment. We have been I think we have shown that having Great assets like Perfect Day, putting great assets in the short product, which connect very well to millennials and Gen X and so forth that are looking for more volume vacation experiences, and they do that over shorter periods of time. And so that really kind of zones in to that clientele. But I think when we look and of course, our deployment will shift a little bit in our expectations as we look forward as we expect China to come online and Asia Pac to kind of light back up here in 2024 2025. But Caribbean is going to continue to be where the majority of our capacity is. Speaker 200:53:39And I think our broader portfolio of deployment will More or less look like it does this year with a little bit more indexing into short and probably a little bit more indexing into China. Speaker 900:53:51Got it. Thanks. And just for my follow-up, I wanted a little bit more color on China, and maybe that cruise customer, if you can maybe put a little bit more color around what's looked like Historically, in terms of mix of pre board spend versus onboard, the EBITDA relative to the rest of your portfolio per The yields kind of any additional color as we think about the reopening and take that into account given the strong and robust demand from the travel and leisure customer there? Speaker 500:54:20So Dan, pre pandemic, we built a significant business For cruise in the China market, I think Roll was the number one cruise brand in China by volume And we had a few of our ships that were operating there. And in fact, before the pandemic, we had Wonder of the Seas originally planned to deploy into the China market, which of course subsequently changed. Our expectation is that this market will return to how it was pre pandemic. The value of a Chinese customer is very high. When you look at the net revenue from a Chinese consumer, It's typically around the same level as an American and slightly higher. Speaker 500:55:05So we see that returning. The spend changes somewhat in terms of onboard spend. They skew differently in different areas, but overall the aggregate of their spend Is very high. So we believe that that market will return and we're hoping in 2024 we'll see that. Speaker 900:55:24Got it. Thanks so much. Operator00:55:28Your next question comes from Fred Wightman, Wolfe Research. Speaker 1200:55:33Hey, guys. Good morning. I was hoping you could just talk a bit more about if you think about the really strong demand you're seeing for the Caribbean and sort of in line European demand, what is Driving sort of that divergence? Is it just that CocoCay is that attractive? Are you hearing pushback on European airfare? Speaker 1200:55:48Like where is the biggest difference? Speaker 200:55:52Well, I think in the earlier part of the year, we were a little bit concerned about the airlift for Europe, But that has kind of normalized, at least for our guests. And also don't forget, we source As well in Europe for our European product and that just goes back to our business model of having this kind of global nimble sourcing model. So I think that's how we kind of think about that. As it relates to the Caribbean, I think it's a combination of things and as Naf pointed out, There's still a significant value gap between land based vacation and cruise. I think we've closed Some of that gap this year, which is encouraging. Speaker 200:56:36And we saw pre pandemic that ships that touched Perfect Day, as an example, had really kind of closed the gap to land based, especially Orlando and Vegas. And what we're doing is what we're seeing is that that is starting to kind of get back to 2019 levels of the gap still exist As those businesses got stronger during the period. And so I don't think it's one thing, but I think the value gap, I think that The demand to spend time with people's friends and family and gather experiences and buy less stuff, all these secular and demographic trends are just huge tailwinds for the demand environment. Operator00:57:18Makes sense. And then on Speaker 1200:57:19the expense side, You guys called out some benefits from expense timing in the quarter. I think that was sized at 180 basis points. Is that all showing up in the 2Q guide? Does Some of that get punted into 3Q and 4Q. How should we think about that? Speaker 300:57:34Yes. It's I mean, majority of it, almost all of it is in should be expected in Q2. Speaker 900:57:41Perfect. Thank you. Operator00:57:44And we'll go to Paul Golding, Macquarie Capital. Speaker 1300:57:48Thanks so much and congrats on the quarter. Just one for me, a longer term question here. I know you're still building load factor, but as you think about Q1 of the strength and close in bookings. Does this change the way you think about Wave and how you manage the booking curve and inventory as you go into the next Wave cycle, the Booking cycle and just in the context of what we had through the pandemic, which was a bit protracted booking curve? Thanks so much. Speaker 200:58:14Yes. We actually through the COVID period had kind of shifted How we go to market with our inventory. We used to kind of put everything out there and all the suites would be sold basically right off the bat And then you would kind of work your way down to the inside cabins. Well, now we hold back inventory and we release it based off of our What I think are much more sophisticated revenue management models that we have today. And so all of that takes into account the The demand environment we're seeing and that's why I think sometimes when we get into conversations around what percent booked are you, how does it relate to this period versus that period, What we're really focused on is optimizing yield. Speaker 200:58:56And so there might be periods where quarter over quarter or year over year, we want to be In a stronger book position or lesser than what we were booked in a previous period Because what we're focused on is maximizing yield, which sometimes comes with us having more inventory to sell. Speaker 1300:59:18Appreciate the context. Thanks. Okay. Speaker 300:59:22Well, we thank everyone. Speaker 200:59:24Yes. Speaker 700:59:25Go ahead, Nick. Thank you. Speaker 300:59:27We thank everyone for their participation and interest in the company. Michael McCarthy will be available for any follow-up. So we wish you all a great day. Thank you. Operator00:59:39Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation. You may nowRead morePowered by