Carnival Corp and Carnival PLC Q4 2024 Earnings Call Transcript

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

Question: Matthew Boss - JPMorgan - Analyst : And congrats on another great quarter. So Josh, could you elaborate on the foundation that you've laid over the last two years, which you think has positioned you in the company to capitalize on the current demand that you're seeing? And with '25 shaping up to be another banner year, could you speak to initiatives across the organization to take share, optimize yields and drive onboard spending in '25 and beyond?

Question: Matthew Boss - JPMorgan - Analyst : I can tell. I can tell. And then, David, maybe just quick, if you could just break down net cruise cost ex fuel components in that 3.7% for this year? But I think more so, help us to think about maybe a reasonable spread between yields and cruise costs multiyear, if there's maybe a back of the envelope rule of thumb multiyear?

Question: Ben Chaiken - Mizuho Securities - Analyst : Celebration Key looks pretty exciting, opening up later this summer. Where do you think you are in the customer awareness of this product? Do you think it's well understood, appreciated by customers? Or is it still -- or is that marketing like an awareness still ramping? And then I have one follow-up.

Question: Ben Chaiken - Mizuho Securities - Analyst : Got it. Understood. And then in the release and call, transcript, you referenced an enhanced destination strategy. Can we open this up a little bit? Does this refer to Celebration Key? Or is this a little bit of a teaser to an additional opportunities to pride guests with differentiated Carnival owned operated destinations? I know you mentioned the peer Half Moon Cay, I believe. Just trying to understand the magnitude and direction of the strategy. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 20, 2024 / 3:00PM, CCL.N - Q4 2024 Carnival Corp and Carnival PLC Earnings Call

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : So Josh or David, if we think about the yield guidance for 2025, just based on the fact that you're two-thirds booked already for next year, it seems like you have strong pricing momentum across pretty much all your geographies. I know you'll hate that I say this, but it seems like the 4% or approximately 4% yield guidance to us might end up being conservative when we have this same call a year from now. So I guess the question is, can you give us a little color around the makeup of that yield forecast? And maybe does it seems like you could be taking a conservative view around whether it's onboard trends, whether it's the close-in pricing opportunity. And if I ask that question another way, I mean, if we think about the -- your initial yield guidance last year, which I think was 8.5% and it ended up closer to about 11%. What did you guys underestimate for 2024?

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. That's good color. And then, Josh, if we look at slide 17, about SEA Change. You noted your EBITDA per ALBD is going to be hopefully achieved in 2025. But if we look at your ROIC targets, we look at the -- even the carbon reduction target, I mean it's almost like you're going to hit those -- potentially hit those as well next year. So I guess the question is, do you -- I know you're going to hit this, but do you start to think about laying out another set of long-range financial targets at some point? To us, it seems like those SEA Change targets really were important pillars and gave the investment community something to really rally behind. So just trying to get a little bit more color as to how you're thinking about the long-term opportunities here?

Question: Steve Wieczynski - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. Got you. And real quick housekeeping one. David, is there anything we should think about in terms of cadence of costs? Obviously, we've got the first quarter NCC guide, but anything else through the rest of the year we should think about?

Question: Robin Farley - UBS Equities - Analyst : Obviously, fantastic guidance here and better than expected. I did want to ask about two things just to get a feel for whether these things are in your guidance or how much they're in your guidance and whether this would be additional upside? First is Celebration Key, you mentioned, obviously, you expected to be very successful and a driver, but you're not really able to see at this point what it would add really to ticket price or onboard spend. So I'm just wondering if you could help us understand really how little you may have in your yield guidance today for Celebration Key? I know in your cruise cost guidance, it's at 50 basis points. How much is it in your yield guidance at the moment?

Question: Robin Farley - UBS Equities - Analyst : Okay. Great. And then also in your EPS guidance, I think that you have $3 billion in debt that's callable next year. I hope I'm getting this number right, but -- and I assume that you're not factoring in the lower interest cost from some of that very expensive debt. If that were redone at maybe what some other things this year have been done at, could that be $0.20 or $0.25 of upside in annual interest expense savings. Is that the ballpark to think about potential upside?

Question: James Hardiman - Citi - Analyst : So I wanted to ask maybe a big picture question. Obviously, not a whole lot of capacity being added here. And so so much of this growth story is organic, obviously. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 20, 2024 / 3:00PM, CCL.N - Q4 2024 Carnival Corp and Carnival PLC Earnings Call And so I guess my first question is, how much of that organic turnaround do you think is a function of factors taking place in the industry versus, I don't know, self-help, right? You listed obviously, a whole bunch of things that you're doing brand by brand. I'm ultimately trying to figure out the sustainability of this organic growth that we're seeing right now?

Question: James Hardiman - Citi - Analyst : Got it. And then I guess along those same lines, although, I guess, in a lot of ways, I'm asking some previous questions in a different way. But you finished '24 with per diems up north of 5%. The guidance for the year, I guess, yield guidance is 42. There's some occupancy in there and then first quarter is 4.6. So we're going 5-plus to 4.6 to something lower. I guess from our perspective, right, Celebration Key, which comes on in the back half should should actually help with some acceleration. I guess, is there anything quantifiable that we should be thinking about that would weigh on per diems as we work our way through the year, maybe an itinerary geographical mix issue? Or is this just -- you get some version of this question every quarter, right? Is this just conservatism the further out you look?

Question: Patrick Scholes - Truist Securities - Analyst : Can you hear me?

Question: Patrick Scholes - Truist Securities - Analyst : Great. I'd like to ask a little bit about Mexico for my first question. Some news out there lately regarding additional passenger charges on that. Is you -- Josh, do you think it's a done deal? Or is there any chance that, that may not go through at this point? And then specifically for your folks for your ships, what percentage of your itineraries do make a stop at a port in Mexico? That's my first question.

Question: Patrick Scholes - Truist Securities - Analyst : Okay. Certainly, a -- the fluid situation. And then a follow-up question is on the year-over-year growth rate in your passenger ticket revenues versus

Question: Patrick Scholes - Truist Securities - Analyst : Okay. I was talking about a (inaudible). We'll talk about that after the call. But anything (inaudible). REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 20, 2024 / 3:00PM, CCL.N - Q4 2024 Carnival Corp and Carnival PLC Earnings Call

Question: David Katz - Jefferies - Analyst : Covered a lot already. I wanted to get a sense for the cost side of the equation, right? And the variability within there, right? The degree to which and what would have to happen for you to turn out a little bit better. on the cost increases that you may have built into your guidance? And then I have a quick follow-up.

Question: David Katz - Jefferies - Analyst : Well said. I wanted to follow up just on the leverage side of things. When I look back historically, at where the company has operated? Obviously, making good progress today, but should we be thinking about the two times or better as a long-term aspirational target? Is that still achievable?

Question: Jaime Katz - Morningstar Research Services LLC - Analyst : First, I'm hoping that you guys can talk a little bit about wave season. I guess I'm trying to understand how to think about balancing filling the rest of 2025 with pulling forward more demand from 2026? And whether or not one is a better strategy than the other without giving too much competitive information away, is there a way to, I guess, bundle even less than you are bundling now? And maybe promote less in order to optimize pricing?

Question: Jaime Katz - Morningstar Research Services LLC - Analyst : And then the other question I have is a little bit of a longer-term strategic question, right? We know what the costs are affiliated with Celebration Key this summer. But I suspect this isn't a one-and-done project. So is there some non-new-build CapEx we should be thinking of like level that will be in these in these brand-building projects longer term that might be higher than it was in the past?

Question: Brandt Montour - Barclays Estimates - Analyst : Congratulations on the results today. So the first question is on the booking curve, Josh, and I don't know if this is an easy one to answer. But when you try and take forecasting out of it and you just focus in on booking curve today versus the way -- versus how you're booking your bookings looked at the same time last year. Does the pricing look any less robust than this time last year, perhaps tougher comps or anything else that you would highlight?

Question: Brandt Montour - Barclays Estimates - Analyst : Okay. Great. And then just a quick housekeeping. The Red Sea had a something like a $130 million impact last year. How much of that effectively do you get back in '25? And how should we think about the timing of it in the cases and where it would show up in the comps? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 20, 2024 / 3:00PM, CCL.N - Q4 2024 Carnival Corp and Carnival PLC Earnings Call

Question: Brandt Montour - Barclays Estimates - Analyst : Okay. So lower yields offsetting no disruption this year?