Carnival (US:CCL)2024-09-30 18:01Financial Data and Key Metrics - Revenue hit an all-time high of almost $8 billion, up $1 billion from last year's record levels [6] - Record EBITDA exceeded $2.8 billion, up $600 million over last year and $160 million over guidance [6] - Net income increased by over 60% compared to the prior year, achieving double-digit ROIC [6] - Full-year EBITDA guidance raised to $6 billion, $600 million above the prior peak and $400 million above original guidance [7] - ROIC expected to end the year at 10.5%, 1.5 points better than original guidance and almost double last year's ending point [7] - Customer deposits reached a record $7 billion in Q3, driven by strong bookings for 2024, 2025, and 2026 [9] Business Line Performance - High-margin same-ship yield growth across all major brands, not driven by capacity growth [6] - Onboard spending levels increased, with year-over-year improvement in onboard per diems accelerating [9] - All core deployments for 2025 are at higher prices than the prior year, with every brand well booked at higher pricing [8] - Nearly half of 2025 is already booked, with a widening price advantage compared to last year [8] - Record booking volumes for 2026 achieved in the last three months [9] Market Performance - European brands saw outsized growth in occupancy, up 5 percentage points compared to Q3 2023 [16] - Strong demand in both North America and Europe, with higher occupancy and pricing across all regions [24] - Web visits up over 40% versus 2019, paid search up more than 60%, and natural search up over 70% [12] - New-to-cruise and repeat guests both increased by double-digit percentages over last year [12] Strategic Direction and Industry Competition - Focus on high-margin same-ship yield growth and operational efficiency [6][13] - Introduction of new ships like Sun Princess and Star Princess, along with modernization programs like AIDA evolution [9][10] - Development of new destinations like Celebration Key and Half Moon Cay, expected to reduce fuel costs and environmental footprint [10][11] - Marketing efforts increased in Q4, with a focus on driving demand well in excess of capacity growth [11][12] - Limited new ship orders through 2028, with only three ships scheduled for delivery over the next four years [13] Management Commentary on Operating Environment and Future Outlook - Strong demand and pricing trends expected to continue into 2025 and 2026 [8][9] - Focus on debt reduction and achieving investment-grade metrics, with a clear path to further debt paydown [13][22] - Expectation of substantial free cash flow driven by operational execution and low newbuild order book [22] - Management expressed confidence in maintaining momentum and achieving SEA Change targets [14][55] Other Important Information - Hurricane Helene had an insignificant financial impact on the company, with costs in the millions [81] - The company is not pursuing the Chinese market at this time, focusing instead on other regions like Japan and Taiwan [77] - The company is well-positioned to handle potential disruptions, such as conflicts in the Middle East, due to its mobile fleet and strong source markets [48] Q&A Session Summary Question: Momentum into 2025 and 2026 - The company is seeing broad-based strength across all regions, with higher occupancy and pricing for 2025 [24] - The booking curve has been pulled forward, allowing the company to take price [24] Question: Capital Priorities and Debt Reduction - The company's top priority is debt reduction, with a goal of achieving investment-grade metrics by the end of 2026 [26] Question: Fourth Quarter Yield Guidance - No significant change in yield guidance for Q4, with strong demand expected to continue [29] Question: Booking Window and Demand for Celebration Key - The company is managing the booking curve to maximize revenue, with some brands pulling back to avoid leaving money on the table [31] - Celebration Key is expected to provide a premium in 2026, with 19 ships scheduled to visit the destination [31] Question: Start of 2025 and Expense Shifts - The company is off to a better start for 2025 compared to 2024, with higher occupancy and pricing [37] - Some one-time cost savings, including pension credits, contributed to the improved cost guidance [38] Question: Cost Savings and Margin Opportunities - Cost savings were driven by hundreds of small items across the board, including crew travel savings, port savings, and sourcing savings [40] Question: Streamlining the Portfolio - The company is open to further streamlining the portfolio but feels good about its current position heading into 2025 [42] Question: Cost Inflation and Dry-Dock Impact - Inflation remains a factor, but the company is working on cost-saving opportunities to offset it [45] - Dry-dock days are expected to increase by 17% in 2025, impacting year-over-year cost comparisons [21] Question: Middle East Conflict Impact - The company's business is not contingent on the Middle East, as it is not a major source market [48] Question: Dry-Dock Schedule and Half Moon Cay Development - Detailed dry-dock schedules for 2025 are available upon request [51] - Half Moon Cay will focus on enhancing its natural beauty, with no plans for a water park [52] Question: SEA Change Progress and Land-Based Leisure Demand - The company is ahead of schedule on SEA Change targets, with strong performance in yields and costs [55] - The company sees a remarkable value proposition compared to land-based alternatives, driving demand [58] Question: New-to-Cruise and Younger Demographics - New-to-cruise guests increased by 17% year-over-year, driven by better advertising and trade efforts [112] - The company is attracting younger demographics, with Carnival Cruise Line's average guest age at 41 [65] Question: Celebration Key Halo Effect - Celebration Key is already seeing a premium in bookings, with strong demand expected to increase once the destination opens [67] Question: Consumer Behavior and Trade-Down Dynamics - The company is not seeing any trade-down dynamics, with demand broad-based across all brands [73] Question: Chinese Consumer and Asia Pacific Market - The company is not pursuing the Chinese market at this time, focusing on other regions like Japan and Taiwan [77] Question: Occupancy and Yield Opportunities - There is still room for occupancy improvement, but the focus remains on driving price [84] Question: Fuel Costs and Shore Power - Fuel costs are not impacted by shore power, as it is included in port expenses [86] Question: Sister Ship Orders and Debt Tranches - The company has no plans to order additional ships before 2029, focusing on debt reduction instead [88] - Debt reduction efforts are focused on high-cost debt and managing maturity towers [91] Question: Competitor Encroachment in Galveston - The company is not concerned about competitor encroachment, as it represents a small part of the overall cruise market [94] Question: Fourth Quarter Yield and Demand Hiccups - The company expects strong demand to continue in Q4, with no significant changes to yield guidance [96] Question: Investor Day and Key Topics - The upcoming investor day will focus on progress on SEA Change, Celebration Key, and cost-saving opportunities [100] Question: Demand Drivers and Advertising Spend - The company is not relying on pent-up demand, with strong demand driven by better commercial execution [105] - Advertising spend is focused on both short-term and long-term bookings, with no immediate plans to reduce it [109] Question: New-to-Cruise Acceleration - New-to-cruise growth was driven by better advertising, trade efforts, and strong performance in Alaska [113]