Release Date: June 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Carnival Corp (CCL, Financial) reported record revenues, operating income, customer deposits, and booking levels, exceeding guidance on every measure.
- Yields increased over 12% in Q2, surpassing March guidance by over 1.5 points.
- European brands experienced extraordinary yield improvement, up over 20%, while North America saw a healthy 7% increase.
- Record second quarter adjusted EBITDA, approximately $150 million more than guidance, despite higher fuel prices.
- Customer deposits reached over $8 billion, shattering last year's record by $1.1 billion.
Negative Points
- Higher fuel prices impacted operational costs, although mitigated by other operational improvements.
- The company is still working towards achieving its long-term SEA Change targets, indicating room for improvement.
- The sunsetting of the P&O Cruises Australia brand involves some one-time costs and minimal CapEx investment.
- Despite significant progress, Carnival Corp (CCL) is still not at investment-grade credit ratings, though it is on the path.
- Increased drydock days in 2025 for the AIDA evolution program will result in higher costs.
Q & A Highlights
Q: Josh, could you elaborate on the global momentum that you're seeing, notably any call-outs in Europe? And how does the booked position for 2025 translate to the forward progression of pricing power and the promotional backdrop versus historical periods?
A: Our global momentum is strong across North American and European brands. The booking curve is higher than ever in North America and the highest in 15 years in Europe. For 2025, we are ahead in bookings and pricing, allowing us to optimize longer-term periods.
Q: Could you elaborate more about where you're seeing strength in 2025 bookings? Is the strong demand across the board or are there certain brands or itineraries showing more strength?
A: The strength is global, across brands and deployments. The teams are doing an excellent job in getting the message out and attracting interest. Additionally, portfolio modifications and the introduction of Celebration Key will help in 2025, along with flat capacity growth providing pricing power.
Q: What kind of return on invested capital do you target for Celebration Key?
A: We expect mid to high-teens ROIC for Celebration Key, similar to a newbuild investment. The benefit will be across dozens of ships over time, not just one.
Q: Given the strong early demand for next year bookings, could you be in a position to bring the dividend back to the story?
A: Our priority is to generate free cash flow, pay down debt, and strengthen the balance sheet. While we look forward to discussing dividends in the future, it is premature at this point.
Q: Can you provide more specifics around the cost savings seen in the quarter?
A: The majority of the favorability was due to timing between quarters. However, we are seeing opportunities in sourcing and other efficiencies. There are hundreds of cost-saving items contributing to the full-year savings.
Q: How do you manage the tension between harvesting cost savings and reinvesting in demand creation?
A: We aim to be the cost leader while reinvesting in the business. This includes marketing, onboard experiences, and bandwidth. Our focus is on driving revenue and maintaining cost leadership.
Q: Can you comment on the potential impact of Greek Islands limiting the number of ships that might call next year?
A: We have a great relationship with Greece and its local communities. We work with them to ensure sustainable operations. This is a small part of our overall mix and should not be disruptive.
Q: Can you talk about the changing demographics of your customers, particularly the engagement of younger demographics?
A: Engagement is evolving with digital trends. Our brands cater to various age groups, from millennials to boomers. We are happy with our mix and aim to attract a broad range of customers.
Q: What keeps you up at night given the strong environment?
A: We are confident in managing controllable factors. We focus on performing well and adapting to challenges. Our mobility provides flexibility to navigate uncertainties.
Q: Can you elaborate on the revenue management strategy for 2025, particularly the optimal booking curve length?
A: Optimization does not mean elongation. Our goal is to generate as much revenue as possible by the time the ship sails. This involves detailed management of bookings, pricing, and other variables.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
