Release Date: September 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Carnival PLC (CUK, Financial) reported record revenue of almost $8 billion for Q3 2024, surpassing last year's record by $1 billion.
- Record EBITDA of $2.8 billion, up $600 million from the previous year and $160 million above guidance.
- Net income increased by over 60% compared to the previous year, achieving double-digit ROIC.
- Strong demand enabled an increase in full-year yield guidance for the third time in 2024.
- Record customer deposits of nearly $7 billion, driven by strong bookings for 2024, 2025, and 2026.
Negative Points
- Cruise costs without fuel per available lower berth day (ALBD) are expected to rise by 8% in Q4 2024.
- Higher dry dock days and advertising expenses are anticipated to impact Q4 2024 costs.
- Operating expenses for the new Bahamian destination, Celebration Key, will impact year-over-year cost comparisons by about 0.5 points in 2025.
- An increase of 17% in dry dock days for 2025 will impact cost comparisons by about 0.75 points.
- Debt reduction remains a priority, with a focus on managing high-cost debt and refinancing, indicating ongoing financial pressure.
Q & A Highlights
Q: Josh, on the continued momentum, could you elaborate on the stronger base of business for 2025 and the record start to 2026 that you cited? Maybe touch on volume and pricing trends across regions, specifically in Europe?
A: Sure. The strength is broad-based. The book position is higher for both North America and our European brands, consistent across the quarters. Our brands have been doing a great job of pulling forward the booking curve, allowing us to take price. We're about two-thirds booked for the next 12 months, putting us in an enviable place.
Q: On the balance sheet, could you speak to capital priorities given the free cash flow generation and recent changes?
A: Our priority is debt reduction with the goal of becoming investment grade. We expect to achieve investment-grade metrics as part of our SEA Change program by the end of 2026. We have plenty of time to consider other alternatives beyond that.
Q: Regarding the fourth quarter yield guidance, it looks a bit lower than the implied guidance from June. Is there any softness or weakening in pricing during the fourth quarter?
A: Actually, there was no change from June guidance for the fourth quarter on the yield side. We always said the fourth quarter would be challenging due to a strong comparison from the previous year. We feel good about the 5% yield growth we are projecting.
Q: On the '25 and '26 bookings, you're already 50% booked for next year. Has the booking window expanded too much, potentially leaving money on the table if demand stays strong?
A: The goal is to maximize revenue by the time we sail. Almost all of our brands are higher year-over-year in bookings. We are actively managing the booking curve to ensure we are not leaving price on the table. Celebration Key is expected to drive a premium, especially in 2026.
Q: Given the record levels of bookings for 2025 and 2026, is it fair to say you're off to a better start for 2025 than a typical year?
A: Yes, we are starting off better for 2025 than we did for 2024, which is shaping up to be a record year. We are higher in both occupancy and price.
Q: Can you talk about some of the cost savings and margin opportunities you're finding? Is it better leveraging a leaner fleet or actively pulling costs out of the business?
A: It's not about pulling costs out of the business. We are seeing hundreds of small savings across many brands, including crew travel savings, port savings, and sourcing savings. Better leveraging our scale across all brands has contributed to about half of the $100 million cost savings for the full year.
Q: On the potential impact of the Middle East conflict on your business, how do you expect it to affect your operations next year?
A: Our business isn't contingent on the Middle East. It's not a major source market for us, and we are not going to the region. Unless the conflict escalates significantly, our ships are mobile, and we are focused on strong source markets.
Q: Can you provide more granularity on dry dock increases for next year for modeling purposes?
A: I don't have detailed quarterly information handy, but Beth can provide that to you.
Q: Is there any update on the Chinese consumer or Asia Pacific in general? How is it trending?
A: China was not very meaningful for us pre-pandemic. We are not pursuing it at this time. However, other regions like Japan and Taiwan are doing well, and people continue to enjoy cruising with us.
Q: Occupancy is still not fully caught up relative to fiscal 2019. Isn't that already a yield opportunity?
A: Yes, there is an opportunity to push occupancy a bit higher, but it won't be the biggest driver of revenue improvement going forward. The focus will be on driving price.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
