Carnival Corp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew Boss - J.P. Morgan Securities LLC - Analyst : Great. Thanks and congrats on a really nice quarter.

Question: Matthew Boss - J.P. Morgan Securities LLC - Analyst : So Josh, maybe could you elaborate on the global momentum that you're seeing notably any call-outs in Europe? And then just given the booked position for 2025, which you cited is higher than '24 a year ago, how does that translate to the forward progression of pricing power and just the promotional backdrop maybe versus historical periods in your view?

Question: Matthew Boss - J.P. Morgan Securities LLC - Analyst : It's great color. Best of luck.

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : Hey, guys. Good morning. So Josh, look I know it's still early on, but your commentary around 2025 bookings is really encouraging at this point. To add onto the last question there, I mean, could you elaborate a little bit more about where you're seeing that strength in 2025? Is the strong demand pretty much across the board? Or are there certain brands or itineraries that are showing more strength versus others?

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : And then --. Sorry, David. Go ahead.

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. Thank for that David. And second question, a bigger picture question around capital allocation. So based on how strong early demand is for next year bookings, it just doesn't seem like there's any slowdown at this point taking place. So I guess the question is, if we look out a year from now and bookings continue to look solid, your SEA Change targets are essentially in sight and you're even closer to an investment grade rating, I mean, is it fair to think that you guys could be in a position to bring the dividend back to this story? I mean, just think it's another important milestone and something that investors are becoming more focused on? Thanks.

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. Thanks, guys. Appreciate it.

Question: Patrick Scholes - Truist Securities - Analyst : Hi. Good morning. I have some questions on return on invested capital. First one, and then I'll have a follow up question. What kind of ballpark return on invested capital do you target for Celebration Key? I wonder if you could give us some color on that. Thank you.

Question: Patrick Scholes - Truist Securities - Analyst : Okay. Follow-up question, certainly with a new public, new -- existing company going public in the luxury river space. They're doing 30% ROIC. Now granted it's bit of a niche, would you ever rule out your folks getting in that line of business? I certainly could envision seaborne river cruises being quite popular and a good crossover for your existing customers. Just some thoughts around that. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 25, 2024 / 2:00PM, CCL.N - Q2 2024 Carnival Corp Earnings Call

Question: Patrick Scholes - Truist Securities - Analyst : Okay, Josh, I appreciate it. Thank you.

Question: Ben Chaiken - Mizuho Securities USA - Analyst : Hey. Good morning. You're two-thirds of the way to your 2026 targets with two years remaining. As you think about the remaining bridge to your targets and the toggle between costs and yields. Do you feel tied to a specific yield requirement or threshold or is there enough opportunity in the cost side to generate the operating leverage necessary to reach your goals? And then related, costs were better in the quarter, can you maybe provide a little more greater specifics around what you're seeing or where you're getting more operating leverage than expected? And then I have one quick follow-up. Thanks.

Question: Ben Chaiken - Mizuho Securities USA - Analyst : Got it. And then, Josh, in the quarter you announced that P&O Australia will sunset into Carnival. You still have a number of brands across geographies and customer preferences. Do you feel there are other areas of the portfolio you can streamline and realign? Thanks.

Question: Ben Chaiken - Mizuho Securities USA - Analyst : Got it. Thank you.

Question: Robin Farley - UBS Securities LLC - Analyst : Great. Thanks. The commentary has been very helpful. Thanks in addressing a lot of the concerns out there, especially I think showing -- that slide, you have showing the momentum in Q4 pricing in particular. So thanks for giving that additional clarity. Just one question. There have been some headlines out there about some of the Greek Islands limiting the number of ships that might call next year. It's not even clear whether that's official or just something that is being considered. Can you just put some context around that? Whether that would just be changing a itinerary to go somewhere on a Tuesday rather than a Wednesday, right, as opposed to not being able to go there at all? In other words, is there anything we think about that's been different itinerary changes in the last year or so that so looking ahead to next year, is that anything that we should be thinking about? Thanks.

Question: Robin Farley - UBS Securities LLC - Analyst : Okay, great. Thanks. And just one follow-up. I think, last week you might have given the different percentage growth for new-to-brand versus

Question: Robin Farley - UBS Securities LLC - Analyst : Great. Thank you.

Question: James Hardiman - Citi Investment Research - Analyst : Hey, good morning. Thanks for taking my question. So just point of clarification, you talked about the same ship yields being up double digits. Can you help us with how much of that is pricing? Obviously you're getting some occupancy benefit there? And then sort Of I guess a bigger picture question there is you've had mid-single digit per diem growth for eight quarters. you don't think it's pent-up demand, it sounds like you made that point a couple of times, Josh. When and why do you think that ultimately decelerates? Thanks.

Question: James Hardiman - Citi Investment Research - Analyst : Got it. And then sort of as a follow-up of all along the same lines, right, as we think about Europe, versus NAA per diems. Obviously, Europe had a big occupancy tailwind in the last couple of quarters, and it seems like that is now dissipating. You've guided per diems to be up, I think about mid-single digit range -- for each of the next few quarters. Any way we could sort of slice the Europe versus North America as we think about per diem? Are they pretty similar as we move forward? Or is one stronger than the other? Thanks.

Question: James Hardiman - Citi Investment Research - Analyst : Got it. Much appreciated.

Question: Brandt Montour - Barclays Capital Inc. - Analyst : Hey. Good morning, everybody. Thanks for taking my question and congratulations on the quarter. Josh, I was hoping maybe you could elaborate a little bit on the revenue management strategy for '25. I know you have already. My question is more on the booking curve length, the optimal booking curve length. Your head again on next year's booking curve. But is there a certain point where you feel like you don't want to go any further than that and it's not necessarily optimal. How do you think about that?

Question: Brandt Montour - Barclays Capital Inc. - Analyst : That's super helpful. My follow-up is on three brands, Costa, Princess, and Holland America. Those are three that we've been watching you guys talk about in your sort of improvement improving ROIC across those three brands. I know that you've been focused on them. How would you describe this success or -- versus your own benchmarks on those three brands improvement. And are any three of them outperforming the others at this point along those guidelines?

Question: Brandt Montour - Barclays Capital Inc. - Analyst : Excellent. Thanks so much.

Question: Conor Cunningham - Melius Research - Analyst : Hi everyone. Thank you. Just on, I think you said 10% new-to-cruise. I was curious if you could talk a little bit about just the changing demographics of your customers in general. How much is the younger demographic engaging with the product, our product? Is there anything that they're doing different than prior generations? Thank you.

Question: Conor Cunningham - Melius Research - Analyst : Okay. Appreciate it. On the P&O Australia brand being sunsetting, just as you consolidate that into Carnival, is there any impact on the [P&O] or any investment needed -- like during that transition time. Just curious like as it goes away, is there potentially cost headwind associated with that? Thank you.

Question: Conor Cunningham - Melius Research - Analyst : Thank you.

Question: Assia Georgieva - Infinity Research - Analyst : Good morning, guys. Excellent quarter. Really happy for what you have accomplished. I had two quick questions. The first one is more on the external or competitive environment. David and Beth, as you guys know, we do this really extensive pricing surveys which are quantitative, and we follow about 95% of the private and public company. So we are seeing some discounting out of one of your competitors into Q4 and possibly into Q1 2025? And also seeing sort of encroaching on your territory by another brand that may be a private one. Would you, Josh, David, Beth be willing to comment as to how these external pressures may carry a potential risk towards the winter season?

Question: Assia Georgieva - Infinity Research - Analyst : Thank you, Josh. And a quick follow-up question. You described both ticket price and occupancy being tailwinds in Q2. And I think again, with Europe being somewhat slower on the uptake in 2023, should we expect a continued benefit from higher occupancies and especially out of the European source passenger in Q3 or do we believe that going into Q4, Q1, and possibly next year, that benefit will start to subside a little bit just because of the catch-up that's been going.

Question: Assia Georgieva - Infinity Research - Analyst : And Josh, that makes total sense, especially on the occupancy guidance. I understand and appreciate it. So good luck. We're expecting great things in September.

Question: Jamie Katz - Morningstar, Inc. - Analyst : Hi guys. Good morning. I have a quick question. Given that the environment has been so strong for you guys, what keeps you up at night? Is it regulatory risk? Is there some ESG risk? Is it nothing right now. Just curious to hear sort of the other side of the track. Thanks.

Question: Jamie Katz - Morningstar, Inc. - Analyst : That's all I got. Thanks.

Question: Dan Politzer - Wells Fargo Securities, LLC - Analyst : Hey, good morning, everyone. Thanks for taking my question. First one on Celebration Key. Josh, you mentioned you're ramping up their 18 ships calling on port there in 2026. Can you maybe talk about the uplift that you're expecting, whether it's in the form of ticket prices, on-board spend, I know you mentioned fuel. And then to what extent is this built into those SEA Change targets which you're already tracking well ahead of at this point? Thanks.

Question: Dan Politzer - Wells Fargo Securities, LLC - Analyst : Got it. And then just for my follow-up, in terms of costs for next year, I know acknowledging it's still very early, but as you think about that marketing and advertising component, on the one hand, you don't have a ton of capacity growth. But with Celebration Key starting to the opening in the back end of the year, how should we kind of think about that line item relative to 2024?

Question: Dan Politzer - Wells Fargo Securities, LLC - Analyst : Got it. And then just very one last very quick clarification. David, I know you mentioned returning to IG metrics. I just want to make sure that there's no change in your goal of getting back to IG, an investment-grade credit rating?

Question: Dan Politzer - Wells Fargo Securities, LLC - Analyst : Got it. Thanks so much.

Question: David Katz - Jefferies LLC - Analyst : Morning, everyone. Thanks for taking my question. I wanted to follow on to that. Well, number one, congrats on the quarter. I wanted to just follow on the last question with respect to the balance sheet. And look, I think we probably all progress through a period we're expecting maybe rate cut. Nonetheless, you're making some very good progress with respect to that balance sheet. Can you help us maybe shed a little light beyond just the obvious easy math around what a rate cut could or would do for you in progressing that balance sheet?

Question: David Katz - Jefferies LLC - Analyst : Appreciate that. And if I may follow up quickly, just going back, Josh, to one of the things you talked about. It's a bit more specific. Performance marketing, which was, I believe, a relatively new initiative. Could you give us an update on where that is, how it's done? What's next, et cetera, please?

Question: David Katz - Jefferies LLC - Analyst : Okay. Thank you.

Question: Sharon Zackfia - William Blair. & Company, L.L.C. - Analyst : Hi, good morning. I'm convinced you go in alphabetical order on these calls.

Question: Sharon Zackfia - William Blair. & Company, L.L.C. - Analyst : Okay. Thank you.