Royal Caribbean Cruises .(RCL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company increased its full-year yield guidance to over 11% and earnings by more than 70% due to better-than-expected third-quarter results and an improved outlook for the fourth quarter [8][14] - Adjusted earnings per share for the third quarter reached $5.20, exceeding guidance by$ 0.25 per share [31] - Adjusted EBITDA was $2.1 billion, representing a 24% year-over-year growth, with an adjusted EBITDA margin of 44%, which is 240 basis points higher than last year [32] Business Line Data and Key Metrics Changes - Net yields increased by 7.9% year-over-year, driven by stronger average passenger daily rates (APDs) across all key itineraries, particularly in Alaska and Europe [32] - Net cruise costs, excluding fuel, increased by 4% in constant currency, with favorable timing of expenses offsetting the negative impact of stock compensation [32] Market Data and Key Metrics Changes - The company reported strong demand for its experiences, with bookings outpacing 2024 levels during the third quarter and into October [15] - The addressable market for cruises is growing, with a significant increase in new customers, particularly from younger demographics [21] Company Strategy and Development Direction - The company aims to capture a greater share of the$ 1.9 trillion vacation market through moderate capacity growth, moderate yield growth, and strong cost control [11] - The introduction of new private destinations, such as Perfect Day Mexico and Royal Beach Club, is expected to enhance customer experiences and drive demand [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strong demand for cruise experiences, supported by favorable macroeconomic conditions such as wage growth and low unemployment [18] - The company anticipates earnings in 2025 to start with a $14 handle, driven by moderate yield growth and effective cost management [43] Other Important Information - The company achieved a fully unsecured capital structure, allowing for further growth ambitions and capital allocation [44][45] - The company is diversifying its fuel sources and has made significant progress in sustainability initiatives, including a double-digit reduction in carbon intensity compared to 2019 [29][30] Q&A Session Summary Question: Can you discuss pricing and cumulative comparisons to 2019? - Management indicated that fourth-quarter pricing is up about 25% compared to 2019, with strong demand and customer willingness to pay more driving this growth [48][49] Question: What are the capital investment expectations for Perfect Day Mexico? - The company acquired the port for$ 292 million and is focused on ensuring significant returns associated with private destinations while enhancing guest experiences [53][54] Question: What are the pillars for achieving the $14 earnings target in 2025? - Management emphasized the importance of moderate yield growth, effective cost management, and benefits from a stronger balance sheet in achieving this target [56][57] Question: How do you view bookings trends and marketing strategies? - Management noted that elevated demand patterns are driving bookings, and they plan to continue investing in marketing to sustain this demand [72] Question: What impact do you expect from the hurricane on yields? - Management stated that there has been minimal impact from the hurricane on fourth-quarter yields, and they do not foresee any carry-through effects into 2025 [74] Question: Can you elaborate on the Gulf Coast market opportunity? - Management highlighted that Texas has a similar cruise market size to Florida but with half the penetration, presenting a significant growth opportunity [76][78]