Harry Sommer
President and Chief Executive Officer at Norwegian Cruise Line
Well, thank you Sarah, and good morning, everyone. Thank you for joining us today for our third quarter 2024 earnings call and Happy Halloween.
I'm extremely pleased with our results as Norwegian Cruise Line Holdings continues to make steady and meaningful progress driving and leveraging the strong demand environment, while delivering exceptional vacation experiences all while effectively controlling our costs thanks to the dedicated efforts of our shipboard and shoreside teams.
I am delighted to say for the third straight quarter we have achieved results that surpassed our guidance across all key metrics which has led to an increase in our full year guidance for a fourth time this year. These results demonstrate how our strategic direction is yielding positive results now and positioning us well for the future progressing steadily towards our 2026 financial and sustainability targets. As you recall from our Investor Day earlier this year we unveiled our Charting the Course strategy with the vision to have our guests vacation better and experience more and which focused on what I refer to as the four p's people, product, growth platform, and performance. I would like to take the opportunity today to share our progress on several fronts of this strategy.
I'll begin my remarks by highlighting our performance pillar through both our strong third quarter results and providing an update of our full year outlook. Next, I'll discuss recent developments in our exciting new build program part of our growth platform as well as new initiatives on all three of our award-winning brands part of our product pillar.
I will also comment on the strong demand we are seeing and how our onboard offerings and service quality continue to drive improved guest satisfaction, while maintaining disciplined cost management, the balancing of return of investment, and return on experience that is one of the core tenets of our strategy. And last but not least, I'll cover some of the key advancements in our sustainability efforts which underpins each pillar of our strategy. I'll then turn the call over to Mark, who will provide more detailed commentary on our results and updated guidance.
First, I am pleased to report that our strong momentum for the first half of the year a combination of the continued focus and execution by our teams on our strategic initiative and successful cost efforts coupled with sustained robust demand has continued into the third quarter resulting in exceptional performance. As illustrated on the Slide four we not only met but exceeded our guidance across all key metrics for a third straight quarter. We achieved the highest quarterly gross revenue and adjusted EBITDA in our company's history and the highest trailing 12-month adjusted operational EBITDA margin since returning to regular operations improving almost 10 full percentage of points from the third quarter of last year.
Our adjusted EPS increased 31% to $0.99 well ahead of our guidance of $0.92 despite a $0.06 negative impact from foreign exchange rates and our higher adjusted EBITDA drove net leverage to end the quarter at 5.58x an approximate one- and three-quarter turn improvement over just the last nine months from year-end 2023.
Slide five lays out the effect of our strong third quarter guidance third quarter results on our full year guidance. While Mark will provide more detailed commentary shortly, I would like to highlight a few key points on our full year numbers.
We are projecting net yield to increase 9.4% this year marking 120 basis point improvement from our previous guidance as we carry forward strength from the third quarter and raise our fourth quarter guidance. This impressive growth is expected to be a record for the company since going public in 2013 and is truly exceptional.
Our adjusted operational EBITDA margin is expected to improve to 35.3%, 4.6 percentage points over 2023 and a significant step towards our goal of approximately 39% in 2026 driven by strong top-line growth and our flat adjusted net cruise cost excluding fuel and dry dock during the year. We expect our adjusted ROIC to close the year in the double digits, an improvement from 8% in 2023 demonstrating we are well on our path to 12% by 2026. And lastly, we expect our net leverage to further decrease to approximately 5.4x by year-end a major step towards achieving our 2026 target of mid 4x. Each of these year-end metrics demonstrates that we are on track to achieve our 2026 charting the course targets and reinforces our confidence in our strategic direction and ability to execute.
Turning to slide six which I know you are familiar with I want to once again highlight how our long-term growth platform pillar is set to deliver measured capacity growth and optimize our fleet to drive strong financial returns. Historically measured capacity growth has driven outsized revenue and adjusted EBITDA growth, and we expect this trend to continue with the additions of new vessels to our fleet. I'll provide more details on these exciting developments as we turn to slide seven.
At Norwegian, we recently unveiled what in 2026 will be the 21st ship in our fleet, Norwegian Luna. This exciting addition will launch a variety of fun and fun voyages sailing round-trip from Miami starting in April 2026. As a sister ship to Norwegian Aqua, Luna boasts exciting enhancements over previous Prima class ships including a 10% increase in capacity, luxurious new three-bedroom duplex haven suites, a groundbreaking hybrid roller coaster water slide that will debut next year on Norwegian Aqua, new activities and games for our guests, and a new revitalized service at the Mandara Spa and Salon and Pulse Fitness Centers.
Speaking of Norwegian Aqua, we're making excellent progress towards your launch in early 2025. Earlier this month I visited the Fincantieri shipyard in Italy and witnessed firsthand the impressive final touches being applied to the vessel. I'm incredibly excited for our guests to experience this next generation Prima class ship.
At Oceania Cruises, we remain committed to delivering the finest cuisine at sea with new experiences on every new build. In this case, I'm sorry, in the case of the brand's upcoming Allura, we are introducing the Creperie for which Oceania's newly appointed executive culinary directors and resident master chefs of France, Alice Coretti and Eric Burrell, have crafted over 20 exquisite recipes. I'm eagerly anticipating our food loving guests reaction to this new exciting culinary experience when Allura debuts next year, and of course I'll be first in line.
Finally, Regent Seven Seas Cruises recently celebrated the steel cutting for its latest ultra luxury ship, Seven Seas Prestige. At 77,000 tons and accommodating only 850 guests, this vessel will offer our guests unrivaled space at sea with one of the highest guest to space ratios in the industry. The ship will introduce exciting innovations including a reimagined palatial region suite, a new set of duplex suites and other accommodation categories, fresh dining experiences and numerous other incredible offerings that will allow our guests to experience luxury transcended.
Moving to slide eight, we have enhanced our offering and partnership building on our bold aspiration for our guests to vacation better and experience more. Norwegian launched its new brand positioning, Experience More at Sea, which underscores NCL's commitment to provide guests with more variety, more to see, more to do, more to enjoy and more value through elevated offerings providing more of what they love while vacationing. The More at Sea offering is an evolution and expansion of the previous Free at Sea package now with an enhanced beverage package, additional nights at specialty dining venues and Starlink high-speed internet.
In addition to its new positioning, Norwegian also unveiled its latest partnership as the official cruise line of the National Hockey League. This milestone marks NCL's first partnership with the Professional Sports League and the NHL's first partnership with the cruise line. This multi-year partnership provides a fantastic platform for the brand to connect and engage with hockey fans everywhere and show them how they can experience More at Sea with NCL. Oceania, meanwhile, unveiled its new brand value promise and offering, Your World Included, which features an updated selection of always included amenities for our guests.
As part of the new brand promise, guests will now have a generous suite of amenities included in the fare including gourmet specialty restaurants, in-suite dining, prepaid gratuities, gourmet coffees and teas, laundry services and unlimited Starlink Wi-Fi, among others. These enhancements have helped drive increased demand and I'll now discuss our booking trends on slide nine.
Since our last quarterly update in July, the cruise consumer has continued to show strength. This resilience has allowed us to take advantage of the strong demand we experienced in the third quarter. Net yield grew 9% year-over-year and outperformed guidance by an amazing 260 basis points. This impressive performance was largely due to strength in pricing and demand across all geographies, but particularly in Alaska and Canon New England voyages.
We also saw strong onboard revenue across the board, particularly in shore excursions and communications, the latter boosted by Starlink, which is already live on 30 of the 32 ships in our fleet and will be rolled out to the entire fleet by year end. In another sign of consumer health and confidence, pre-booked onboard revenue continues to improve up mid-single digits from the previous year and nearly doubling from 2019 levels.
Looking ahead, we are at the upper end of our optimal range on a forward 12-month booked basis, and we continue to see strong demand for all brands and deployment with pricing and load for 2025 in line or above this year's levels for all four quarters and full year.
Turning to slide 10, we see the strength of our demand reflected in our advanced ticket sales, which increased 6% compared to the previous year, outpacing capacity growth. This achievement was driven by robust pricing, a dynamic deployment mix, increased pre-sale packages, and capacity growth.
Moving to slide 11, I will now dive into some of our advancements in sustainability, which underpins our strategy. We are committed to being responsible stewards of our environment while creating long-term value for all of our stakeholders and I'm proud to share some key highlights of our progress. This quarter, we received some significant recognition for our sustainability efforts. MSCI gave us a rating of A within the hotel and travel industry for the second year in a row.
This recognition reflects our ongoing efforts to integrate environmental, social, and governance factors into our business practices. It's a testament to our dedication to transparency and responsible business practices. Additionally, at the ESG shipping award this year, we were the top-ranked company in the ESG leadership category and the only cruise line to even make the list.
This accolade recognizes our outstanding achievements and innovative initiatives within the global maritime industry. It reinforces our position as a leader in sustainable cruising and motivates us to continue pushing boundaries in this area. Operationally, we also made significant strides in our alternative fuel initiatives. 41% of our fleet has now been tested with a biodiesel blend, surpassing our 2024 goal. This achievement underscores our commitment to reducing our carbon footprint and exploring innovative solutions for cleaner operations.
Finally, strengthening our communities is a key pillar of our global sale and sustain program, and we are committed to supporting organizations that benefit communities at large.
During the third quarter, Oceania successfully launched the Relay for Life at Sea program on Oceania's Insignia and Vista. This initiative focuses on the wellness of our guests and crew by raising awareness through an onboard walk and encouraging donations to the American Cancer Society. We're excited to roll out this program to the remainder of the Oceania fleet later this year, further amplifying its positive impact.
Additionally, in the wake of the destruction caused by both Hurricanes Milton and Helene, we contributed $80,000 to the American Red Cross to help those in affected communities. In addition to the $30,000 previously donated to the Red Cross to support Hurricane Helene relief efforts, we are matching up to $50,000 more in public donations towards Hurricane Milton relief efforts. These achievements demonstrate our fulsome and holistic approach to sustainability, encompassing environmental stewardship, social responsibility, and strong governance.
As we continue charting the course towards a more sustainable future, we remain committed to innovation, transparency, and creating positive change in the communities we touch.
With that, I'll hand the call over to Mark to go over financial results in more detail. Mark?
