Core Viewpoint - Royal Caribbean Cruises Ltd. (RCL) reported mixed second-quarter 2025 results, with adjusted earnings exceeding estimates while revenues fell short, leading to a 5.4% decline in stock price during pre-market trading [1][8]. Financial Performance - Adjusted earnings per share (EPS) for Q2 2025 were $4.38, surpassing the Zacks Consensus Estimate of $4.10, and up from $3.21 in the same quarter last year [2][8]. - Quarterly revenues reached $4,538 million, missing the consensus estimate of $4,550 million, but reflecting a year-over-year increase of 10.4% from $4.11 billion [2][8]. Revenue Breakdown - Passenger ticket revenues were $3.2 billion, an increase from $2.9 billion in the prior-year quarter, aligning with estimates [3]. - Onboard and other revenues rose to $1.34 billion from $1.22 billion year-over-year, also meeting estimates [3]. - Total cruise operating expenses were $2.28 billion, up 6.1% year-over-year, matching estimates [3]. Cost and Yield Analysis - Net yields increased by 5.2% on a constant currency basis and 5.3% on a reported basis compared to Q2 2024 [4]. - Net cruise costs, excluding fuel, per Available Passenger Cruise Day (APCD) rose by 2.5% on a reported basis and 2.1% at constant currency from the previous year [4]. Financial Position - As of June 30, 2025, cash and cash equivalents stood at $735 million, up from $388 million at the end of 2024 [5]. - Long-term debt decreased to $17.61 billion from $18.47 billion at the end of 2024, with the current portion of long-term debt also declining to $1.4 billion from $1.6 billion [5]. Booking Trends - Strong booking momentum is noted for 2025 and 2026, with load factors exceeding previous years and higher pricing levels [6]. - There has been an acceleration in bookings, particularly for close-in sailings, contributing to the second-quarter performance [6]. - Demand remains robust across all product categories, supported by strong digital and commercial channel performance [6]. Future Outlook - For Q3 2025, RCL anticipates depreciation and amortization expenses between $425-$435 million and net interest expenses of $235-$245 million, with adjusted EPS projected between $5.55-$5.65 [9]. - For the full year 2025, depreciation and amortization expenses are expected to be $1.70-$1.71 billion, with adjusted EPS anticipated between $15.41 and $15.55, an increase from previous expectations [11]. - Net yields are projected to rise by 3.5-4% year-over-year on both a reported and constant currency basis [11].

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.71 for the first quarter, which was $0.23 higher than guidance, driven by better revenue and favorable timing of expenses [10][21] - Yields grew by 5.6% in constant currency compared to the first quarter of 2024, exceeding initial guidance by 60 basis points [21] - Adjusted EBITDA margin was 35%, which is 360 basis points better than the previous year [22] Business Line Data and Key Metrics Changes - Bookings in the first quarter outpaced last year across all products, resulting in the best wave season in the company's history [10][11] - Onboard spending and pre-cruise purchases exceeded prior years, driven by increased participation in onboard activities and experiences at higher prices [11][12] - The Caribbean accounted for 57% of deployment this year and 49% of capacity in the second quarter [22] Market Data and Key Metrics Changes - The company expects capacity to grow by 5.5% in 2025, supported by the introduction of new ships [15] - Europe is projected to account for 15% of capacity for the year, while Alaska is expected to account for 6% [24] - The company reported that 7 out of 10 consumers intend to spend the same or more on leisure travel over the next twelve months [12] Company Strategy and Development Direction - The company is focused on delivering exceptional vacation experiences, optimizing revenue, managing costs, and executing long-term strategies [7][8] - The introduction of seven new ships over the next three years is expected to enhance customer experiences and drive growth [18] - The company aims for a 20% compound annual growth rate in adjusted earnings per share through 2027 [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged heightened uncertainty in the macro landscape but emphasized strong consumer demand for cruising experiences [6][7] - The company remains confident in its growth strategy and the opportunity to capture a larger share of the $2 trillion vacation market [7][15] - Recent booking trends and disciplined cost management position the company well for strong earnings growth despite macroeconomic uncertainties [15][28] Other Important Information - The company ended the quarter with $4.5 billion in liquidity and received an investment-grade credit rating upgrade from S&P Global Ratings [30][31] - The company repurchased 1 million shares under its $1 billion share repurchase program [31] Q&A Session Summary Question: Drivers of better than planned performance in Q1 - Management noted strong close-in demand and the ability to raise pricing during this period, alongside high-quality customers spending well on the ship [38][39] Question: Areas of guidance expansion due to macro backdrop - Management expanded guidance ranges to account for broader external factors while maintaining confidence in long-term growth strategies [46][48] Question: Pricing strategy for new ships and potential headwinds - New ships entering service later in the year may create a headwind due to lower average passenger cruise days initially [54][56] Question: Onboard spending and consumer behavior - Management indicated that consumer spending remains strong, with no significant trade-down behavior observed among loyalty program members [78][79] Question: Capital allocation and share repurchase strategy - The company is focused on maintaining a strong balance sheet while also returning capital to shareholders through dividends and share repurchases [92][94]