Carnival Q3 2024 Earnings Report

Carnival EPS Results

• Actual EPS: $1.27
• Consensus EPS: $1.17
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $0.86

Carnival Revenue Results

• Actual Revenue: $7.90 billion
• Expected Revenue: $7.82 billion
• Beat/Miss: Beat by +$76.91 million
• YoY Revenue Growth: +15.20%

Carnival Announcement Details

• Quarter: Q3 2024
• Date: 9/30/2024
• Time: Before Market Opens
• Conference Call Date: Monday, September 30, 2024
• Conference Call Time: 10:00AM ET

Carnival (NYSE:CCL) (NYSE: CCL) is a global cruise operator that provides leisure travel services through a portfolio of passenger cruise brands. The company’s core business is operating cruise ships that offer multi-night voyages and associated vacation services, including onboard accommodations, dining, entertainment, spa and wellness offerings, casinos, youth programs, and organized shore excursions. Carnival markets cruise vacations to a broad range of consumers, from value-focused travelers to premium and luxury segments, through differentiated brand positioning and onboard experiences.

Its operating structure comprises multiple well-known cruise brands that target distinct geographic and demographic markets. These brands include mainstream and premium lines that serve North American, European, Australian and Asian itineraries, with ship deployments tailored by season and route demand. In addition to core cruise operations, Carnival’s services encompass itinerary planning, packaged shore excursions, specialized onboard programming, and guest loyalty initiatives designed to encourage repeat business.

Carnival’s origins trace back to the early 1970s when the original Carnival Cruise Line was founded and later expanded through organic growth and acquisitions. A notable milestone in its corporate history was the combination of Carnival with other cruise interests to create a dual-listed global company, which broadened its international footprint and brand portfolio. Today the company operates across major cruise markets worldwide and manages a diverse fleet that serves short and long-duration itineraries to a variety of destinations.

Leadership has included members of the Arison family historically involved in the company’s direction, and executive management responsible for day-to-day operations and strategic planning. Carnival positions itself as one of the leading global cruise operators, focused on delivering holiday experiences across a range of prices and styles while responding to regulatory, safety and operational demands inherent to the cruise industry.

Carnival Q3 2024 Earnings Call Transcript

Key Takeaways

• Q3 2024 record results: Revenues reached almost $8 billion (up $1 billion YoY), adjusted EBITDA hit $2.8 billion (up $600 million and $160 million above guidance), and net income grew over 60% with double-digit ROIC for the quarter.
• Upgraded full-year guidance: 2024 EBITDA is now expected at $6 billion (>$400 million above original guidance), full-year ROIC at 10.5% (50 bps above initial forecast), driven by higher yields and lower adjusted cruise costs.
• Strong forward bookings: With ~99% of 2024 ticket revenue booked, 2025 occupancy and pricing are at historic highs (nearly half of 2025 sold at higher prices), and early 2026 bookings have already set records.
• Strategic fleet and destination investments: Upcoming North American debut of Sun Princess and Star Princess, plus new private destinations—Celebration Key (July 2025) and Half Moon Caye pier (mid-2026)—aim to boost revenue and guest experience.
• Balance sheet deleveraging: $7.3 billion of debt prepaid since 2023, revolver capacity at $3 billion, and expected net debt/EBITDA leverage improving by 2 turns to approach 4.5×, on track for investment-grade metrics.

Presentation

[Operator]

As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Beth Roberts, Senior Vice President, Investor Relations. Thank you. You may begin.

[Beth Roberts, SVP of Investor Relations at Carnival Corporation & plc]

Thank you. Good morning, and welcome to our third quarter 2024 earnings conference call. I'm joined today by our CEO, Josh Weinstein, our Chief Financial Officer, David Bernstein, and our Chair, Micky Arison. Before we begin, please note that some of our remarks on this call will be forward-looking. Therefore, I will refer you to the forward-looking statement in today's press release. All references to ticket prices, net per diems, net yields, and adjusted cruise costs without fuel will be in constant currency unless otherwise stated. References to per diems and yields will be on a net basis. Our comments may also reference cruise costs without fuel, EBITDA, net income, free cash flow, and ROIC, all of which will be on an adjusted basis unless otherwise stated. All these references are non-GAAP financial measures defined in our earnings press release.

[Beth Roberts, SVP of Investor Relations at Carnival Corporation & plc]

A reconciliation to the most directly comparable U.S. GAAP financial measures and other associated disclosures are also contained in our earnings press release and in our investor presentation. Please visit our corporate website, where our earnings press release and investor presentation can be found. With that, I'd like to turn the call over to Josh.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thanks, Beth. Before I begin, I'd like to express my support and heartfelt sympathy for all those impacted by Hurricane Helene this past week. Our thoughts and prayers are with you. With that, I'll turn to our prepared remarks. As September comes to an end and we close out the year, I am happy to report that we are delivering well in excess of 2024 expectations. We've also built an even stronger base of business for 2025, and we're off to an unprecedented start to 2026. Our third quarter, by all accounts, was phenomenal, breaking multiple records and outperforming on every measure. Revenues hit an all-time high of almost $8 billion, $1 billion more than last year's record level. Record EBITDA exceeded $2.8 billion, up $600 million over last year and $160 million over guidance.

[Josh Weinstein, CEO at Carnival Corporation & plc]

We delivered over 60% more net income than the year prior, achieving double-digit ROIC as of the end of our third quarter. These improvements were driven by high margin, same-ship yield growth across all major brands, not driven by capacity growth. It resulted in EBITDA and operating income on a unit basis of 20% and 26%, respectively, to levels we've not seen in the last 15 years. Strong demand enabled us to increase our full-year yield guidance for the third time this year. Consistent with our historical emphasis on efficiency, we also improved our cost guidance, which enabled us to drive more revenue to the bottom line.

[Josh Weinstein, CEO at Carnival Corporation & plc]

With around 99% of our 2024 ticket revenue already on the books, we're poised to deliver record EBITDA of $6 billion, almost $600 million above our prior peak and $400 million above the original guidance we set in December. ROIC is expected to end the year at 10.5%, 1.5% points better than our original December guidance and almost double last year's ending point. Looking forward, the momentum continues as we actively manage the demand curve. At this point in time, 2025 is at historical highs on both occupancy and price. All core deployments are at higher prices than the prior year. Every brand in our portfolio is well-booked at higher prices in 2025, demonstrating the ongoing benefit of our demand generation efforts throughout our optimized portfolio.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Our base loading strategy is continuing to work well, allowing us to take price thanks to having pulled ahead on occupancy. In fact, in the last three months, our 2025 booked position's price advantage versus last year has actually widened for the full year and for each quarter individually. And with nearly half of 2025 already booked, we feel confident in maintaining our trajectory. While early days, the benefit of our enhanced commercial performance is carrying nicely into 2026, as we just achieved record booking volumes in the last three months for sailing that far out. This incredibly strong booked position for 2024, 2025, and 2026 drove record third quarter customer deposits towards $7 billion, and that's along with continued growth in pre-cruise purchases of onboard revenue.

[Josh Weinstein, CEO at Carnival Corporation & plc]

It's also gratifying to note that onboard spending levels were not only up strong again this quarter. Our year-over-year improvement in onboard per diems actually accelerated from the prior quarter. In essence, all demand indicators are continuing to move in the right direction, and we have so much more in the pipeline to sustain this momentum, including the North American premiere of the highly successful Sun Princess in just a few weeks. This will be followed by the introduction of her sister ship, Star Princess, the second next-generation Princess ship coming online in a year. We also continue to invest in the existing fleet with major modernization programs like AIDA Evolution, expected to deliver additional revenue uplift over the coming years. As you know, we're not just going to be buoyed by our ship. I can't wait for the introduction of our game-changing Bahamian destination, Celebration Key.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Its five portals, built for fun, will open in July 2025, but it really ramps up in 2026, when Celebration Key serves as a premium call for 19 Carnival Cruise Line ships, and rest assured, we're already planning for our phase two landside development to fully leverage the use of the four berths we're building. In 2026, there's also the midyear introduction of a two-berth pier at Half Moon Cay, our naturally beautiful and pristine beach, consistently rated among the top private islands in the Caribbean. These two destinations will be available to even our largest ships, further reducing fuel costs and our environmental footprint at the same time. Stay tuned, as we'll be sharing more exciting reveals about Half Moon Cay in the next few months. We're also stepping up our marketing efforts in the fourth quarter, which David will touch on.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Our elevated marketing investment has been working as we continue to drive demand well in excess of our capacity growth, with year-to-date web visits up over 40% versus 2019, paid search up more than 60%, and natural search up over 70%. Our brands are iterating on their creative marketing and constantly finding ways to attract more attention to the amazing product and execution we already deliver on board, and it is continuing to pay off as we chip away at the unwarranted price disparity to land-based vacations. All of these activities, along with strong support from our travel agent partners, have allowed us to once again take share from land-based peers as we attract even more new-to-cruise guests. In fact, both new-to-cruise and repeat guests were up double-digit % over last year. Now, turning to our balance sheet.

[Josh Weinstein, CEO at Carnival Corporation & plc]

We expect to continue on our path toward investment grade and have a clear line of sight for further debt paydown, having recently finalized our order book through 2028. We have just three ships spread over the next four years. That's one ship delivery in 2025, none in 2026, and one ship in each of 2027 and 2028. This limited order book should also position us well to continue to create demand in excess of capacity growth. Our continued focus on high-margin, same-ship yield growth should deliver improving EBITDA off of this year's record levels. Of course, strong and growing free cash flow and further debt reduction provide a consistent formula for ongoing improvement in our leverage metrics and a continuation in the trajectory we have experienced already this year, resulting in a two-turn improvement in debt to EBITDA in just nine months.

[Josh Weinstein, CEO at Carnival Corporation & plc]

We have certainly come a long way in a relatively short amount of time. In just two years, we've already more than doubled our revenue and are going from negative EBITDA to an expected all-time high of $6 billion this year. This remarkable achievement is all thanks to our global team. They continue to outperform as we progress through 2024, and they are also setting us up for a successful 2025. It is their continued execution that has put us firmly on the path to achieving our SEA Change targets. And just as important, they once again powered our ability to deliver unforgettable happiness to nearly 4 million guests this past quarter by providing them with extraordinary cruise vacations while honoring the integrity of every ocean we sail, place we visit, and life we touch. With that, I'll turn the call over to David.

[David Bernstein, CFO at Carnival Corporation & plc]

Thank you, Josh. I'll start today with a summary of our 2024 third quarter results. Next, I will provide the highlights of our fourth quarter September guidance, some color on our improved full-year guidance, along with a few other things to consider for 2025. Then I'll finish up with an update on our refinancing and deleveraging efforts. Let's turn to the summary of our third quarter results. Net income exceeded June guidance by $170 million as we outperformed once again. The outperformance was essentially driven by two things. First, favorability and revenue were $40 million, as yields came in up 8.7% compared to the prior year. This was seven-tenths of a point better than June guidance, driven by close-in strength in ticket prices, as well as onboard and other spending.

[David Bernstein, CFO at Carnival Corporation & plc]

Second, cruise costs without fuel for available lower berth day, or ALBD, improved slightly compared to the prior year and were nearly 5 percentage points better than June guidance, which was worth over $125 million. The third quarter benefited from cost-saving opportunities, accelerated easing of inflationary pressures, benefits from one-time items, and the timing of expenses between the quarters. Most of the third quarter cruise cost benefits will flow through as an improvement to our full-year September guidance... per diems for the third quarter improving at least 6% versus the prior year, driven by higher ticket prices and improved onboard spending on both sides of the Atlantic. At the same time, our European brands, on their path back to higher occupancy levels, saw solid growth in occupancy of 5 percentage points as compared to the third quarter of 2023.

[David Bernstein, CFO at Carnival Corporation & plc]

For the third quarter, we reported record-setting operating results, with strong demand delivering record revenues, record yields, record per diems, and record operating income. Now, two things to highlight about our fourth quarter September guidance. The positive trends we saw in the third quarter are expected to continue in the fourth. Yield guidance growth for the fourth quarter is set at 5% over the prior year. The difference between the yield guidance for the fourth quarter and the third quarter yield improvement of 8.7% is the result of a tougher prior year comparison, as fourth quarter 2023 per diems were up over 10% versus just 5% for the third quarter of 2023. Having said that, it is great to see that we anticipate continued strong yield growth in the fourth quarter and that it is driven primarily by price.

[David Bernstein, CFO at Carnival Corporation & plc]

Cruise costs without fuel per available lower berth day for the fourth quarter are expected to be up 8%, like first quarter of 2024, which was up 7.3%. Both quarters are impacted by higher dry-dock days and higher advertising expense as planned, and we did have about $25 million of anticipated third quarter costs shipped to the fourth quarter. As I have said many times, relative to cruise costs per ALBD, judge us on the full year and not the quarters, as we often see certain cost items like dry-dock expense, advertising, and other items have different seasonalizations between the quarters from year to year.

[David Bernstein, CFO at Carnival Corporation & plc]

2024 is a great example of this, where cruise costs without fuel per ALBD were up 7.3% in the first quarter, essentially flat in the second quarter, improved slightly in the third quarter, and are expected to be up approximately 8% in the fourth quarter. Turning to our improved full-year September guidance. Net income for September guidance is set at $1.76 billion, a $210 million improvement over our June guidance. This improvement was driven by 3 things. 1st, an improvement in yields to 10.4% by flowing through the $40 million revenue benefit from the third quarter.

[David Bernstein, CFO at Carnival Corporation & plc]

2nd, a one-point improvement in cruise costs per ALBD to approximately 3.5% from flowing through $100 million of the $125 million cost benefit from the third quarter, with $25 million reseasonalized to the fourth quarter, as I previously mentioned. And 3rd, a benefit from fuel price and currency worth $70 million. The strong 10.4% improvement in 2024 yields is a result of an increase in all the component parts: higher ticket prices, higher onboard spending, and higher occupancy at historical levels, with all three components improving on both sides of the Atlantic. Now, a few things for you to consider for 2025. We are forecasting a capacity increase of just 0.7% compared to 2024.

[David Bernstein, CFO at Carnival Corporation & plc]

We are well positioned to drive 2025 pricing higher, with less inventory remaining to sell than the same time last year. We are also looking forward to the introduction of our game-changing Bahamian destination, Celebration Key, in July twenty twenty-five. We anticipate that Celebration Key will be a smash hit with our guests and provide an excellent return on our investment. However, we do expect that the operating expenses for the destination will impact our overall year-over-year cost comparisons by about half a point. In 2025, we are expecting 688 dry-dock days, an increase of 17% versus 2024, which will also impact our overall year-over-year cost comparison by about three-quarters of a point. I will finish up with a summary of our refinancing and deleveraging efforts.

[David Bernstein, CFO at Carnival Corporation & plc]

With record third quarter EBITDA of $2.8 billion, our efforts to proactively manage our debt profile continue. Since June, we prepaid another $625 million of debt, bringing our total prepayments to $7.3 billion since the beginning of 2023. Additionally, we successfully upsized the borrowing capacity on our revolving credit facility by nearly $500 million, bringing the total undrawn commitment to $3 billion, back to its 2019 level. Furthermore, we will continue to look for more opportunistic refinancings over time. Our leverage metrics will continue to improve in 2024 as our EBITDA continues to grow and our debt levels improve.

[David Bernstein, CFO at Carnival Corporation & plc]

Using our September guidance EBITDA of $6 billion, we expect better than a two-turn improvement in net debt to EBITDA leverage compared to year-end 2023, approaching 4.5 times and positioning us two-thirds of the way down the path to investment-grade metrics. Looking forward, we expect substantial free cash flow, driven by our ongoing focus on operational execution and among the lowest new build order book in decades, to deliver continued improvements in our leverage metrics and our balance sheet, moving us further down the road to rebuilding our financial fortress while continuing the process of transferring value from debt holders back to shareholders. Now, operator, let's open up the call for questions.

[Operator]

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In order to allow for as many questions as possible, we ask that you each keep to one question and one follow-up. Thank you. Our 1st question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question.

[Matthew Boss, Equity Research Analyst at JPMorgan]

Great, thanks, and congrats on another really nice quarter.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thanks, Matt.

[Matthew Boss, Equity Research Analyst at JPMorgan]

So Josh, on the continued momentum, maybe could you elaborate on the stronger base of business for 2025 and the record start to 2026 that you cited? Maybe if you could touch on volume and pricing trends that you're currently seeing across regions and maybe specifically in Europe?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Sure. So, probably broad-based is the best way to talk about the strength in what we're seeing on 2025. The book position is higher for both North America and our European brands, and that's consistent across the quarters as well. So we're positioned very well. Our brands have been doing a great job of pulling forward the booking curve, and now we get to take price, which is the goal. So it is very encouraging. You know, we're about two-thirds booked when you look at next twelve months. So, we're in a pretty enviable place. Matt, did you have a follow-up?

[Matthew Boss, Equity Research Analyst at JPMorgan]

Yeah, thanks, so maybe just a follow-up would be on the balance sheet, if you could speak to capital priorities from here, just given the free cash flow generation and some of the changes that you've made.

[David Bernstein, CFO at Carnival Corporation & plc]

So, you know, basically, you know, our priority one, two, and three is debt reduction. You know, where you have the goal of becoming investment-grade, and we do expect to see both the reduction in our debt levels as well as the improvement in our EBITDA, achieve investment-grade metrics as part of our SEA Change program towards the end of 2026. And, so we've got plenty of time to think about other alternatives, beyond that.

[Matthew Boss, Equity Research Analyst at JPMorgan]

Great. Congrats again. Best of luck.

[David Bernstein, CFO at Carnival Corporation & plc]

Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Steve Wieczynski with Stifel. Please proceed with your question.

[Steve Wieczynski, Managing Director at Stifel]

Yeah, hey, guys, good morning, and congratulations on the strong quarter and the outlook. So Josh or David, this might be some of a short-sighted question. And David, you touched on this a little bit in your prepared remarks, but if we kind of think about the fourth quarter yield guidance, it looks to us like it might be a little bit lower versus the implied guidance for the fourth quarter back in June that you gave back in June.

[Steve Wieczynski, Managing Director at Stifel]

So just, you know, just wondering if there's anything from a, you know, whether it's a pricing perspective or any geography or brand, you know, that it is showing any. I don't want to use the word softness, but I guess I have to use that word, you know, or weakening in pricing during the fourth quarter, or, you know, are you guys just taking a more conservative view around onboard spending over the next, you know, the next couple of months?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Hey, Steve, this is Josh. Actually, I'm not sure of your math, but there was really no change from where we were in June guidance when it comes to the fourth quarter on the yield side. And, you know, we always said, when we came out with our guidance, frankly, in December, we were challenged a lot, particularly on the fourth quarter, and people didn't think we'd be able to actually reach, you know, breakeven year over year because the fourth quarter of 2023 was so strong. So now we're talking about 5%, and we feel good about that.

[Steve Wieczynski, Managing Director at Stifel]

Okay, gotcha. And then, Josh, want to ask about the 2025 and 2026 bookings. And you talked about how you're already 50% booked for next year, and in a pretty good position, it seems like, already for 2026. So just, you know, wondering if you think about your booking window, you know, has it expanded too much? You know, or saying that differently, are you nearing a point where you might start leaving money on the table if demand kind of stays status quo from here?

[Steve Wieczynski, Managing Director at Stifel]

Then, you know, following up on that question, just, you know, just wondering if you've seen demand accelerate for, you know, for bookings maybe, you know, more in late 2025 and 2026 that are gonna be touching Celebration Key.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Sure. So, it's a great point on the booking curve. You know, the goal is not an ever-increasing booking curve, it's to maximize the revenue that we're gonna generate by the time we sail. I would say this is a brand-by-brand, itinerary-by-itinerary, you know, build-up. And I would say that almost all of our brands are pretty much higher year over year. There's one that's not, and that's an active decision to pull back because we want to make sure, we're not leaving price on the table, exactly to your point.

[Josh Weinstein, CEO at Carnival Corporation & plc]

So despite the fact that overall we're in a record position, we are looking at that, you know, obviously with a lot more clinical eye and making sure we're doing the right thing to optimize that revenue. When it comes to Celebration Key, you know, clearly there's a premium, and it's gonna benefit us. In particular, it's a 2026 ongoing story when we get to ramp up to about, you know, 20 ships, which is gonna be pretty fantastic. And the fact that we're doing all of this, that we've been able to talk about with 2024 and even into the first half of 2025, it's got nothing to do with Celebration Key.

[Josh Weinstein, CEO at Carnival Corporation & plc]

This is just based on the natural demand and all the commercial activities that we're doing and delivering on board, and that's supporting real strong revenue increases.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Gotcha. Thanks for that, Josh. Really appreciate it. Congrats, guys.

[Operator]

Thank you. Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.

[Robin Farley, Managing Director at UBS]

Great. Thank you. I know it's too early to give guidance for 2025, but-

[Josh Weinstein, CEO at Carnival Corporation & plc]

You're gonna ask anyway, but you're gonna ask anyway.

[Robin Farley, Managing Director at UBS]

Let me just ask it this way, which I think is harmless. You know, given everything you're saying about the booked position for 2025 and even 2026 being at record levels, is it fair to say that you're off to a better start for 2025 than a typical year? Hopefully, that's an innocent way to ask it. I also did just want to clarify on the expense. David, I heard when you mentioned the $25 million of expense that was sort of you know, borrowed from, you know, that will show up in Q4. That kind of shifted that $25 million.

[Robin Farley, Managing Director at UBS]

But was there a separate amount, and I apologize if I missed this, that was a one-time cost savings this year, that we should think about coming back in 2025? I just wanted to catch what that amount was and even what it was for, if you would share that. Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Okay. So, I'll actually very directly answer your question. So we are starting off even better for 2025 than we did for 2024, which is shaping up to be a record year. We are higher in occupancy, and we're higher in price, and the brands are doing a great job of really trying to optimize that booking curve and revenue generation. So that's not guidance, but it's a point in time, and that's where we are.

[Robin Farley, Managing Director at UBS]

Okay, great.

[David Bernstein, CFO at Carnival Corporation & plc]

As far as the second question is concerned, yeah, there were a couple of reasons why we reduced costs by the full points of the year. One included some one-time benefits. Wasn't huge, probably about $20 million of the $100 million, related to some pension credits and a few other little things, for the year.

[Robin Farley, Managing Director at UBS]

Okay, great. Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thanks, Robin.

[Operator]

Thank you. Our next question comes from the line of Ben Chaiken with Mizuho Securities. Please proceed with your question.

[Ben Chaiken, Managing Director and Senior Equity Analyst at Mizuho Securities]

Hey, good morning. On the cost side, EBITDA flow-through has been, you know, stronger than expected. It was almost 60%. You know, costs have been better generally for the majority of the year. Can you talk about some of the cost saves, margin opportunities you're finding? Is this simply better leveraging a fleet that is now leaner, subsequent to some of the asset sales over the past few years, or is it costs that you're actively pulling out of the business or, or both? Thanks.

[David Bernstein, CFO at Carnival Corporation & plc]

No, it's not costs that we're pulling out of the business. I mean, what we're seeing is hundreds of small items across the board, across many brands. Things like crew travel savings, other port savings opportunities, as well as a lot of sourcing savings, cost innovation, better leveraging our scale across all the brands. And that probably represented about half of the $100 million cost savings that we rolled through for the full year.

[Ben Chaiken, Managing Director and Senior Equity Analyst at Mizuho Securities]

Got it. That's helpful. And then I guess for Josh, higher level, you folded P&O Australia into the Carnival brand this year. I know it was somewhat smaller scale, but do you think there's other opportunities to streamline the portfolio in a similar way going forward? Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

You know, I'd never say never take things off the table. I think this is one of those decisions that just made a lot of sense and something that we felt pretty passionately about executing quickly. We'll continue to review our portfolio brand by brand, ship by ship, but right now we feel real good about how we're entering 2025.

[Ben Chaiken, Managing Director and Senior Equity Analyst at Mizuho Securities]

Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thank you.

[Operator]

Thank you. Our next question comes from the line of James Hardiman with Citi. Please proceed with your question.

[James Hardiman, Director at Citi]

Hey, good morning. Wanted to dig into some of the cost commentary you gave us, David. So, 3.5% growth for this year, that seems like it's getting better, obviously with some cost saves and maybe better inflation. I think you called out about a half a point next year for Celebration Key and another 75 basis points from dry-docks. I guess, are there any call outs on the other side of that equation? I don't think our starting point should be, you know, in that 5% range if we were to just take the 3.5% this year and add those two call-outs.

[James Hardiman, Director at Citi]

Maybe talk us through sort of what the base level of inflation is as we think about 2025 and any other sort of positive factors that will help offset some of the negative ones for next year?

[David Bernstein, CFO at Carnival Corporation & plc]

If you know exactly what inflation is gonna be over the next 15 months, let me know, but we're still trying to figure that out. There is some level of inflation that continues in our business. We'll include that within our guidance when we provide in December. Plus, we continue to work on cost-saving opportunities. You know, as I said in the June call, even though we have the best you know, cost metrics in the business. We still believe there are opportunities in our business to further leverage our scale and to work through those opportunities as we did in the second and the third quarter, and we'll continue to do so. And we'll include some of that in our guidance, which will offset some of inflation. So but, stay tuned.

[David Bernstein, CFO at Carnival Corporation & plc]

The two things that I gave in my prepared remarks were, you know, relative to the dry-docks and the cost of Celebration Key, are pretty well fixed at this point, and so I wanted to highlight those in the prepared remarks.

[James Hardiman, Director at Citi]

Got it, and then, you know, obviously, sounds like everything's going pretty well from a demand perspective. Maybe speak to, you know, one of the questions that we keep getting is the potential for the widening conflict in the Middle East to negatively impact your business. I mean, to some degree, it would seem to help that much of that region was already vacated in 2024. I guess, the hope was that would be a 2025 tailwind. That now seems off the table, but just maybe speak to how, if at all, you expect that region to impact your business next year.

[Josh Weinstein, CEO at Carnival Corporation & plc]

So, you know, we weren't banking on it getting better, and, you know, hope to God that it doesn't get worse. You know, thoughts are with, you know, everybody in the Middle East region and hoping for peace. But it, our business isn't really contingent on it. It's not a major source market for us, and we're not going to the region. Unless it were to escalate to something significantly wider than the Middle East, you know, our ships are mobile, and we're in source markets that are phenomenal for us, with lots of potential.

[James Hardiman, Director at Citi]

Got it. Thanks, guys.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

[Patrick Scholes, Managing Director at Truist Securities]

Hey, good morning, everyone.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Hey, Patrick.

[Patrick Scholes, Managing Director at Truist Securities]

Good morning. My first question, you talked about dry-docks increasing next year. Can you give us a little more possible granularity on dry-dock increases or decreases for perhaps some quarters, by quarter for next year, for modeling purposes? Thank you.

[David Bernstein, CFO at Carnival Corporation & plc]

So, I don't have all that detail handy, Patrick, but if you call Beth, I'm sure she can provide that to you.

[Patrick Scholes, Managing Director at Truist Securities]

Okay. Beth, we will call you. Thank you. And then second, I see there's some news out about a new cruise pier at Half Moon Cay. Do you have any longer-term plans above and beyond just a pier for Half Moon Cay, such as water parks and the like down the road?

[Josh Weinstein, CEO at Carnival Corporation & plc]

So, well, I'll give you a yes and a no. So, do we have more plans? Absolutely. Do we want a water park? Absolutely not.

[Patrick Scholes, Managing Director at Truist Securities]

Okay.

[Josh Weinstein, CEO at Carnival Corporation & plc]

The difference between Half Moon Cay and what we're building at Celebration Key is Celebration Key is really that five portals of fun, and looking to be that entertainment center. What we have at Half Moon Cay is one of the most naturally beautiful white sand beach, crescent-shaped islands in the Caribbean, and that's a true private destination and something that we want to enhance. We will be talking about that more over the coming months. I won't steal Christine's thunder, but good things coming that are gonna make that and a pretty amazing destination in and of itself for a completely different reason.

[Patrick Scholes, Managing Director at Truist Securities]

Great! Sounds great. Thank you. All set.

[Operator]

Thank you. Our next question comes from the line of Brandt Montour with Barclays. Please proceed with your question.

[Brandt Montour, Director at Barclays]

Good morning, everybody. Thanks for taking my questions. So just starting off, you know, we haven't really touched on SEA Change and your three-year targets there. We kind of got a little bit of an update in the release. You know, I guess the question is, Josh, with this new 2024 full year guidance, obviously, we can calculate, you know, the progress you're making, and we can look at that number and sort of imply some KPIs, yields, costs to get to those targets.

[Brandt Montour, Director at Barclays]

It's implying a pretty narrow spread between those two and would give us the sense that, you know, if we harken back to your, you know, what you gave us in the Investor Day, what you were thinking for per diems that were sustainable and costs that were sustainable, you know, we would think you could do better. So, I guess if you could just. I know that that was a long-winded way of asking the same question that you've already gotten twice, but if you could just give us a sense for how you think about the business in the current operating environment, given all the positive commentary you've said today, vis-a-vis those longer-term targets.

[Josh Weinstein, CEO at Carnival Corporation & plc]

I think the teams around the world are doing a phenomenal job. You know, if you think about it, you know, in December, we were saying up 8.5% on yields, up 4.5% on cost, which gets us to 9% ROIC. Now we're saying up almost 10.5% on yields, only up 3.5% on cost. It gets us to 10.5% on ROIC. Clearly, we're outperforming the expectations. It gets us about 75% of the way there for two of the metrics, the EBITDA per ALBD and the ROIC, after one year, with two years remaining. You know, and carbon is progressing as expected.

[Josh Weinstein, CEO at Carnival Corporation & plc]

We're about 50% there after one year. So you know, the teams, you know, the teams aren't doing all those things to make targets. They're doing those things to make their guests happy and provide, you know, great business results, and the outcome is gonna be hitting those targets. You know, do I wanna hit them early? Yes. Do I wanna get farther than that? Absolutely. But, you know, we'll take that in stride, and, you know, we'll probably talk more when we get to December guidance, and you can put that in context of where we'll end in 2025 and then take it from there.

[Brandt Montour, Director at Barclays]

Okay, thanks for that. And then, just to follow up, maybe Josh, if you could address the broader, land-based, you know, leisure demand environment. You know, what we're seeing elsewhere is not what Cruise is seeing. We, you know, we kind of see sort of steady, slow, somewhat softer, normalization. You know, we don't get any of that from you in your commentary today. I guess, you know, we understand why it's happening, but if the rest of the world is, you know, narrowing a little bit toward, you know, and narrowing your, let's say, your gap from the top, do you see any of that affecting your consumers' behavior and willingness to spend and sort of pricing sensitivity?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, we are still a remarkable value to land-based alternatives. And maybe land-based is softening because, you know, we're doing better. Who knows? You have to ask them that. I can't tell you, their business. But, you know, we have a tremendous value. We are doing a better job of getting our word out, better marketing, more eyes on the industry, more eyes on us. You know, our new-to-cruise this past quarter was up about 17% year over year. That's not by accident. That's because our brands are really focused on driving that demand profile. So, you know, I don't have a crystal ball, and I can't tell you what the world's going to look like, you know, a year from now, two years from now.

[Josh Weinstein, CEO at Carnival Corporation & plc]

But I can tell you, if we keep focusing on commercial execution and doing the right things and doing them better, then there's a long runway. Because the one thing that's never been a question is, can we execute on board and deliver a great experience? And that's always been the case. It's just a matter of how we convince people to come with us who have never, and I think we're doing a good job on that.

[Brandt Montour, Director at Barclays]

Great. Congrats on the quarter.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thank you. And I guess I'd be remiss if I didn't shout out the travel agents because all they do is amplify our voice in a tremendous way. And so that success that we're seeing in building that demand profile is really, you know, hand in hand with their success, and we appreciate their efforts.

[Operator]

Thank you. Our next question comes from the line of Connor Cunningham with Melius Research. Please proceed with your question.

[Conor Cunningham, Director at Melius Research]

Everyone, thank you. Maybe sticking with that, the comments on new-to-cruise. Can you, when you look at your 2025 bookings, are you seeing new-to-cruise and new to brand accelerate? And if you could just touch on just the younger demographic. I think I asked you that last quarter, but it just, it seems like a pretty big mega trend for you, over the long term. Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Sorry, I just got distracted. As far as what the demand profile is for the future bookings, we don't really talk about that in advance, but we're happy to talk about it when we get to our results, and we can talk about what the breakdown is for the profile of the folks who sailed. Suffice it to say, everything I'm saying is not ending in 2024 with respect to our efforts to keep optimizing and keep getting better at execution, keep driving that demand profile, and catching that net as widely as we can. You know, we have almost no capacity growth, so all of that increased demand is just going to result in who wants to pay the most to get on our ships, and that's what we're driving for.

[David Bernstein, CFO at Carnival Corporation & plc]

And as far as the age profile.

[Conor Cunningham, Director at Melius Research]

Okay

[David Bernstein, CFO at Carnival Corporation & plc]

... is concerned, I think we touched on this last quarter. I mean, if you look back at all of our brands over the last 10, 12 years or so, the average age for most of the brands really hasn't changed. Now, of course, the repeat guests, who sailed a decade ago are 10 years older, but the average age of our guests. So, we are attracting a lot of new, young people. And some of our brands, like Carnival Cruise Line, has an average age of, like, 41 years old. So you know, that's a brand. Obviously, millennials these days are, I think it's 43 or 44 years old or younger. And that does represent over half the population in the United States.

[David Bernstein, CFO at Carnival Corporation & plc]

You know, Carnival's got over half of its guests who are millennials because the average age is 41 or younger.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, but I would say, and I think I said this on either the last call or the call before, we love boomers, right? And we love Gen X. We love... I mean, it is. If you think about our portfolio approach, you know, we have brands like Holland America, like Cunard, where that is where they're trying to push that demand profile because it's folks with a very good income, a very good retirement base, and a lot of time to take cruises that can go 14-nights, 21-nights world cruises. So we love the fact that we're pushing harder into that millennial generation, and we're getting that interest and that demand profile, but we don't want that to the exclusion of really leaning into the other generations for what we have to offer.

[Conor Cunningham, Director at Melius Research]

Helpful. On Celebration Key, I know you've gotten a lot of questions on that. Just, you know, it is opening, you know, in mid of next year. You know, is it creating the halo effect that you would have expected? Like, are people asking for it, or maybe they're asking a little bit different. I think you mentioned 19 ships are going to touch there. Like, are those ones selling out quicker than you would have expected, like, reverse relative to history in general? Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Unfortunately, because every Carnival ship is going, there's no, you know, there's no test case, but season.

[Conor Cunningham, Director at Melius Research]

Yeah.

[Josh Weinstein, CEO at Carnival Corporation & plc]

So yes, we are seeing a premium for it. We are seeing people that are seeking it out. And the good thing is, it hasn't even opened yet. So, you know, we think the rubber is really going to hit the road once we can deliver the experience and really show people what it can do.

[Conor Cunningham, Director at Melius Research]

Appreciate it. Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thank you.

[Operator]

Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

[David Katz, Managing Director at Jefferies]

Hi, morning, everyone. Thanks for taking my question.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah.

[David Katz, Managing Director at Jefferies]

Hi, I... I appreciate all the details so far. And, you know, it's interesting when we look across our coverage, you know, there are some smaller pockets of weakness that, you know, consumers have started to demonstrate here and there. And, you know, this is a broadly based, you know, positive quarter, and I just wanted to double-click on the issue of, you know, are there, you know, any, you know, small pockets, any, you know, any areas of consumer behavior that we should just keep an eye on as we go forward that are, you know, again, embedded in what appears to be a pretty broad-based, you know, strong quarter and outlook?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, no, I appreciate the question. I guess I'm happy that I just have to say no. You know, what we're seeing is, in fact, broad-based. We're seeing that demand for all the brands pretty much across the portfolio, but we're seeing it in the booking trends that we've talked about. The onboard spending. You know, the onboard spending levels are, we're 7% up year over year. Just off the top of my head, am I off by a point? Yeah, something like that.

[David Bernstein, CFO at Carnival Corporation & plc]

More than the second quarter. [crosstalk]

[Josh Weinstein, CEO at Carnival Corporation & plc]

We're up 6.7% year over year, which is an acceleration versus the increase that we saw second quarter versus the prior year. So all the things that you look at, is that demand profile changing, or is the state of the consumer changing? I can't speak to macroeconomics because there's a lot going on in the world, but at least with what we have to offer, people are happy to pay and to participate, and we think that's a great thing. And we think that goes back to all the things that we've been talking about for the last two years, about where we want to focus and make sure that we are doing a better and better job as time goes on.

[David Katz, Managing Director at Jefferies]

Perfect. And if I can, just as my follow-up, are you able to observe or record, you know, any trade-down dynamics where, you know, part of the demand, you know, you're seeing is, you know, a consumer who's, you know, traded out of something else and into a cruise vacation?

[Josh Weinstein, CEO at Carnival Corporation & plc]

No, nothing that we've seen that says that. I mean, I think, I think it's the opposite. It's we're doing a better job of convincing them that this is something they want to do, not because they're trading down from something, but that they want to experience what we have to offer.

[David Katz, Managing Director at Jefferies]

Okay. I apologize for the, you know, the questions. My ratings-

[Josh Weinstein, CEO at Carnival Corporation & plc]

No, no, I think they're good questions.

[David Katz, Managing Director at Jefferies]

Okay.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Very fair.

[David Katz, Managing Director at Jefferies]

Congrats on the quarter. Yep.

[Operator]

Thank you. Our next question comes from the line of Jamie Katz with Morningstar. Please proceed with your question.

[Jaime Katz, Senior Equity Analyst at Morningstar]

Hi, good morning. I'm curious if you have any update on, I guess, the Chinese consumer. Is it trending as you would like, or Asia Pacific in general? Just because the data that's been coming out of the region has been a little bit lumpy, and it was obviously something that was pretty meaningful prior to the pandemic. Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, you know, hi, Jamie. It wasn't very meaningful for us prior to the pandemic. In the grand scheme of things, it was a few percentage points of our capacity that was really dedicated to China. We have, as I've been pretty open about, I'm ecstatic that it's reopened to international cruising. I want it to be very successful for our competitors, but it's not something that we're pursuing at this time and have not. With respect to the region overall, when it comes to Japan, Taiwan, and other regions, that's going well. You know, people liked cruising with us before, and they continue to enjoy it now.

[Jaime Katz, Senior Equity Analyst at Morningstar]

Yeah, I was just curious if there was any movement with them, you know, with outbound travel more so than anything else.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah.

[Jaime Katz, Senior Equity Analyst at Morningstar]

As far as occupancy in the European brands, is there a little bit of room left in that for upside, or has the gap sort of closed on that?

[Josh Weinstein, CEO at Carnival Corporation & plc]

I mean, overall, we're back to historical norms, which is a range, it's not a number. And I'd say all of our brands, to varying degrees, have the ability to, you know, maybe drift a little higher here and there. It's not gonna be a big driver of our, you know, improvement as we look forward. It's really gonna be from driving price, which is where we're focused. But there's always an opportunity to make some tweaks and find some more occupancy.

[Jaime Katz, Senior Equity Analyst at Morningstar]

I don't think you guys had mentioned anything on any hurricane impact, but any insight to that, the cost of that disruption, if you have it, would be helpful. Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah. I mean, ours is insignificant compared to the impact that it's having on the region, which, you know, first and foremost, we should take a second to just think about. But putting that aside, you know, it's a few million dollars for us. It's not anything of significance.

[Jaime Katz, Senior Equity Analyst at Morningstar]

Excellent. Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah.

[Operator]

Thank you. Our next question comes from the line of Assia Georgieva with Infinity Research. Please proceed with your question.

[Assia Georgieva, CEO at Infinity Research]

Good morning, guys. Congratulations on a great quarter, and I'll just delve into the few quick questions that I have. Occupancy is still not fully caught up relative to fiscal 2019. Isn't that by itself already a yield opportunity?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, like I said, you know, we operate in a range for occupancy, and we are within our range, but there's certainly the opportunity to push that a little bit more. It's just not going to be the biggest driver of how we can improve the revenue picture going forward.

[Assia Georgieva, CEO at Infinity Research]

Maybe a quick question for David. Fuel costs seem to be a little bit, well, quite a bit higher relative to what we were estimating because we track for 180, IFO 380 and MGO. Could that possibly be related to shore power in the Baltics, you know, Denmark, Germany ports that are offering shore power, you know, Sweden, et cetera? Now, is that part of the play there?

[David Bernstein, CFO at Carnival Corporation & plc]

No, because some, you know, our shore power, when we buy it, is actually not included in the fuel expense. It's included in port expenses, 'cause we purchase it at, you know, at the port. So that would not have been an impact. So I'm not sure what you're looking at and what you're tracking, but, you know, Beth can give you some websites to look at, which maybe will improve your tracking overall.

[Assia Georgieva, CEO at Infinity Research]

That would be great. And Beth, I'm sorry, I'll bother you on this one. And basically, then my 2nd question, given the acceleration in EBITDA generation, and how far ahead you're with the SEA Change program, is it possible at this point to order a sister ship for a 2027, 2028 delivery, whether it's for a Princess brand or a Carnival brand?

[Josh Weinstein, CEO at Carnival Corporation & plc]

No, I mean, our order book is set through 2028. We feel very good about that. And as you know, we did order, you know, what we call Project Ace, which is that next generation for Carnival, but that doesn't start until 2029. So, you know, the focus of all that EBITDA generation is really, it's cash flow, and we're gonna use the headroom with the reduced capital expenditures to pay down debt.

[Assia Georgieva, CEO at Infinity Research]

So in, Josh, in terms of the debt tranches, we're going after the highest cost of debt, correct?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Well, as long as it's got a good NPV, if we want to pay it down. So there's a lot of factors that... Yeah, go ahead, David.

[David Bernstein, CFO at Carnival Corporation & plc]

I was gonna say, it's, it's really a combination of 3 things that we look at. One is the cost of the debt, and, you know, we do have two double-digit issuances out there. Both of them are callable in 2025, so that should help our overall, you know, when we... We'll look at refinancing those in the early part of next year. We also look at the maturity towers. We're well set through 2026 on maturity towers. They're very well managed. But the towers in 2027 and 2028, we'll be looking at refinancing some of that, as well as looking at secured versus unsecured debt. 'Cause our goal is to get to be completely unsecured, but we'll manage that over time as we move forward.

[Assia Georgieva, CEO at Infinity Research]

And David, that was basically my question, you know, highest cost versus secured towers.

[David Bernstein, CFO at Carnival Corporation & plc]

[Understood.]

[Assia Georgieva, CEO at Infinity Research]

So, it's a balancing act, I imagine.

[David Bernstein, CFO at Carnival Corporation & plc]

Correct.

[Assia Georgieva, CEO at Infinity Research]

All right. And, lastly, if I may ask, somebody is encroaching on your Galveston, Texas, port and building a terminal there. What do you think about that? They already have a presence in Miami and are doing Port Canaveral, et cetera, an unnamed competitor, who do not have to report to some ROIC or other metrics. How do you feel about sort of the, what I call the encroachment?

[Josh Weinstein, CEO at Carnival Corporation & plc]

I don't think about it as an encroachment. You know, we are 2% of the overall vacation market. And if it's the company I think you're talking about, it's a small part of the overall Cruise Market. Growing, but small. And so there's the demand profile, as long as we do our jobs, with our world-class portfolio brands, we'll be just fine. I gotta cut you off, though. You did three questions, and the operator only said one. Sorry.

[Operator]

Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Well done, though.

[Operator]

Our next question comes from the line of Dan Politzer with Wells Fargo. Please proceed with your question.

[Dan Politzer, Director at Wells Fargo]

Hey, good morning, everyone. Thanks for taking my questions. Josh, I do want to follow up on the fourth quarter yield comment. I know you mentioned there really wasn't much, if any, actually any change to your prior guide. But as we think about, you know, the third quarter came in better. David cited better closing demand and on board driving the beat. I mean, is there any reason that wouldn't be in the cards for the fourth quarter? Are there near-term demand hiccups or noise, whether it's the news cycle or election, that could be maybe driving additional conservatism?

[Josh Weinstein, CEO at Carnival Corporation & plc]

Look, we try to give you our best estimate of what's gonna happen. Do we always try to outperform? Absolutely. You know, that's the goal. There's nothing in particular about the fourth quarter other than what you said. I mean, right, the next month, a lot of attention is gonna be focused on something other than, you know, what's normal. It happens every four years, so we'll see what kind of impact that has. The business is still going strong, and we expect a lot of ourselves.

[David Bernstein, CFO at Carnival Corporation & plc]

Yeah. And also, keep in mind, with 99% of the ticket revenue for the year already on the books, there's not a lot left to sell.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah.

[Dan Politzer, Director at Wells Fargo]

Right. No, that makes sense. And this is for my follow-up. You know, in a couple of weeks, you're hosting some investors aboard Sun Princess. You know, any way to kind of think about maybe framework and maybe kind of the key topics we should focus on? It seems like there's a lot of progress on, you know, SEA Change, your Celebration Key, maybe some of these cost opportunities or savings from easing inflation. But what are kind of the key high-level focus points we should be thinking about? Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Oh, look, it's been about 15 months since we got together for the first time to talk about what our priorities were and announce SEA Change. I think it's a good opportunity for us to just kind of level set on where we are in everything, and the hope, you know, hopefully, as you see it, the way we see it, which is the progress that we're making across the board. We also get an opportunity to showcase the Princess brand, and specifically, the Sun Princess, which is just a true game changer for Princess, and I'd say for the premium market. She's a remarkable ship, and the team on board does a remarkable job.

[Josh Weinstein, CEO at Carnival Corporation & plc]

You'll also get an opportunity, not just to hear from me, but you'll be able to hear from the president of that brand and to actually meet the presidents of pretty much all of our brands who will be there with us. So good opportunity for you to get a little bit more, you know, educated and inundated by all things Carnival Corporation.

[Dan Politzer, Director at Wells Fargo]

That's great. Thanks so much, and congrats on a nice quarter.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Thanks a lot, Ben.

[Operator]

Thank you. Our next question comes from the line of Chris Stathoulopoulos with SIG. Please proceed with your question.

[Chris Stathoulopoulos, Senior Equity Research Analyst at SIG]

Good morning. Thanks for taking my question. So Josh, I'm gonna ask the demand question here in a different way. As we think about global travel and tourism and think about different segments, if you will, within the ecosystem, so Lodging, Airlines, here in, you know, sort of a different dynamic here as we think about demand, certainly within Lodging, lower to middle-income consumers, some concerns around price sensitivity, little bit of a mixed bag in Airlines. In Cruise lines, this is unique here, with what feels like this sort of persistent demand and just kind of ongoing momentum, if you will. Now, I was wondering if you could rank order or think about the moving pieces as to the why. So there's the new-to-cruise piece, I would say perhaps the later reopening of certain markets, strong U.S. dollar discount to land-based trips, base loading. Just if you could help us provide some context as we think about the moving parts of demand here. There's still some debate around whether this is any pent-up demand here, which I think is just not the case, or what actually, you know, is this actual base load going forward? Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Well, I guess the most affirmative thing I'll say is I completely agree with you, it's not pent-up demand anymore. We've been sailing for over three years now, so I don't... I think that that has come and gone. You know, I, I'm not gonna answer your question by rank ordering, but I would say that, you know, when it comes to all of the industry, I think we're all doing a pretty good job at that demand generation and creation and getting awareness, getting people interested in cruising who maybe have never thought about it before.

[Josh Weinstein, CEO at Carnival Corporation & plc]

With respect to us, you know, there is a lot of activity going on at all of our brands to really just try to do better and better at blocking and tackling when it comes to the commercial operations, right? Generating, you know, new creative, generating more eyeballs in performance marketing, looking for and then, you know, being looked at by the right potential customer. Driving people to our trade partners, driving people to our websites, doing everything we can to just get the word out and get them interested, and I think that's part of, you know, what's driving us in a pretty significant way.

[Chris Stathoulopoulos, Senior Equity Research Analyst at SIG]

Okay, and then as my follow-up, David, so my math here, I have about a point and a quarter on the adjusted NCCs for next year, and we can come up with our own assumptions, as you said, on inflation. But as we think about the other moving pieces here, puts and takes, on the advertising side, I know, I think it said that it's expected to be elevated in 4Q. Is there a reason, or how should we think about next year? And do we need this level of advertising per ALBD to continue? Is it part of the base load book plan, or can we expect that to sort of get softer, if you will, as that initiative continues to take hold? Thanks.

[David Bernstein, CFO at Carnival Corporation & plc]

Yeah, so the advertising, as well as many other decisions, are things that we really need to talk about over the next month or two in the planning process, which we're in the midst of doing, and we'll give guidance in December relative to all of those items. It would be premature for us to be making a decision today, exactly what we wanna do, particularly for, you know, next summer or the back half of next year in advertising. So we'll give you more insight into that in three months.

[Josh Weinstein, CEO at Carnival Corporation & plc]

I just... I'll just add a couple of things. One is, you know, remember, we just talked about a record-setting 2026 booking period. So we're not just, you know, we're not just booking for the short term, we're booking for the long term, and advertising is a combination of, you know, getting people to consider things for the longer term and getting the ships filled as we need to in the shorter term. So the metric of just looking at it on an ALBD basis is useful for benchmarking, but it's not too scientific. It's really about how much bookings we wanna generate and how we think we need to spend to go get it. And I think we're doing a good job.

[Josh Weinstein, CEO at Carnival Corporation & plc]

And when you do look at us on a benchmark basis, even though we're higher than we were back in 2019, and I think a couple of percent higher year over year, we're still quite a bit lower than most, if not everyone. So we'll continue to be thoughtful about it and do what we think we need to do to drive the business. I think we got time for one more.

[Chris Stathoulopoulos, Senior Equity Research Analyst at SIG]

Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, thank you. I think we got time for one more, if there are any more, operator.

[Operator]

Thank you. Our final question comes from the line of Fred Wightman with Wolfe Research. Please proceed with your question.

[Fred Wightman, Director at Wolfe Research]

Hi, guys. Thanks for sneaking us in. I just wanted to come back to new-to-cruise. Josh, I think you said that was up 17% this quarter. Last quarter, that was up 10%, so it's a pretty big acceleration for a brand that's as big as you guys are. Can you touch on what drove that? Was there a reallocation of some of the ad spend? And maybe how you think strategically that could sort of increase that penetration stat from 2% to something larger as a percentage of total vacation spends. Thanks.

[Josh Weinstein, CEO at Carnival Corporation & plc]

Yeah, so there's no one thing that's gonna be the answer for driving new-to-cruise either. It is that same combination of better advertising, the trade doing a great job, better usability of our websites. You know, I'd say Alaska, in particular, for this past year, was off the charts, was absolutely phenomenal, and that tends to skew higher to new-to-cruise, because if you're gonna go see Alaska, which everybody should go do, the only way you can go see it is by a cruise ship to really appreciate it. And the only way you should do that is by one of our brands, because they do it amazingly, and we have more permits for Glacier Bay than anybody else, and we have the shore side footprint that nobody else has and can replicate.

[Josh Weinstein, CEO at Carnival Corporation & plc]

That has served us very, very well. I'd say it's, you know, the same things that you've heard me talk about in the past quarters, that hopefully I'll continue to talk about in the coming quarters to come, about just doing the basics better.

[Fred Wightman, Director at Wolfe Research]

Thank you.

[Josh Weinstein, CEO at Carnival Corporation & plc]

I appreciate it. Well, thank you, everybody, for joining us, and look forward to talking again in a few months for those of you that I don't see next week. Take care.

[Operator]

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Beth Roberts, SVP of Investor Relations
• David Bernstein, CFO
• Josh Weinstein, CEO

Analysts

• Matthew Boss, Equity Research Analyst at JPMorgan
• James Hardiman, Director at Citi
• Conor Cunningham, Director at Melius Research
• Ben Chaiken, Managing Director and Senior Equity Analyst at Mizuho Securities
• Robin Farley, Managing Director at UBS
• Jaime Katz, Senior Equity Analyst at Morningstar
• David Katz, Managing Director at Jefferies
• Brandt Montour, Director at Barclays
• Chris Stathoulopoulos, Senior Equity Research Analyst at SIG
• Assia Georgieva, CEO at Infinity Research
• Fred Wightman, Director at Wolfe Research
• Steve Wieczynski, Managing Director at Stifel
• Patrick Scholes, Managing Director at Truist Securities
• Dan Politzer, Director at Wells Fargo