Norwegian Cruise Line Holdings Ltd.

Good morning, and welcome to the Norwegian Cruise Line Holdings Third Quarter 2020 Earnings Conference Call. My name is Crystal, and I will be your operator. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions for the session will follow at that time. If anyone should require assistance during the conference, please press star and then zero on your touch-tone telephone. As a reminder to all participants, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Andrea DiMarco, Senior Vice President of Investor Relations, Corporate Communications, and ESG. Ms. DiMarco, please proceed.

Thank you, Crystal, and good morning, everyone. Thank you for joining us for our third quarter 2020 earnings call. I'm joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings, and Mark Kempe, Executive Vice President and Chief Financial Officer. Frank will begin the call with opening commentary, after which Mark will follow to discuss results for the quarter before handing the call back to Frank for closing remarks. We will then open the call for your questions. As a reminder, this conference call is being simultaneously webcast on the company's investor relations website at www.nclhltdinvestor.com. We will also make references to a slide presentation during this call, which may also be found on our investor relations website. Both the conference call and presentation will be available for replay for 30 days following today's call. Before we discuss our results, I'd like to cover a few items. Our press release with third quarter 2020 results was issued last night and is available on our investor relations website. This call includes forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements. These statements should be considered in conjunction with the cautionary statements contained in our earnings release. Our comments may also reference non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation. With that, I'd like to turn the call over to Frank Del Rio. Frank?

Thank you, Andrea, and good morning. I hope that everyone joining us today, as well as your loved ones, are healthy and safe. Similar to our last earnings call, today we will provide a business update focusing more on the progress of our response to the COVID-19 global pandemic than on financial results. I'd like to begin by saying that we welcome the issuance of the CDC's framework for conditional sailing order. We view this as a positive step in the right direction on the path of our shared goal of resuming cruising in the United States in a safe and responsible manner. The return to cruising is a much-anticipated event for our loyal past guests, valued travel partners, our team members in the communities we visit around the globe, and in particular, by our home ports around the United States. These ports and the entire cruise ecosystem, which includes port employees, luggage handlers, stevedores, tour operators, taxi and rideshare drivers, coach operators, suppliers, airlines, hotels, and many other businesses and industries, have experienced significant economic hardship due to the ongoing suspension of cruising, and I am sure that they are anxiously awaiting the resumption of cruising as much as we are. While there continues to be a long road to full recovery ahead of us, with many uncertainties still to be overcome, the new CDC framework allows us to take the first definitive steps towards this recovery process. The new conditional order creates phases for the resumption of cruising, including first testing and additional safeguards for guests and crew, and building laboratory capacity and medical capabilities for future testing. Second, simulated trial sailings where we will test the overall effectiveness of our health and safety protocols in real-life situations. Third, evaluation and certification for vessels on a ship-by-ship basis versus by brand or operator to confirm they meet specific requirements. And fourth, a phased return of guests to revenue-generating voyages while mitigating the risks of COVID-19. The framework contains numerous rigorous hurdles that are without a doubt challenging for the cruise industry, but challenging they should be, given the current high prevalence of the virus around the world. But even so, we believe we are making continued sequential progress towards the resumption of cruise operations and a return to pre-COVID normalcy. There are points in the order that require further dialogue and clarification with the CDC, and we have not yet received all the technical guidelines for many aspects of the framework. Given the short timeframe since the order was issued, the complex logistics of the order, and the many salient points that must still be clarified, our team is working on analyzing and scoping the operational requirements of this order. Our shared goal in this process is to create and implement a series of protocols that are driven by science. We are appreciative and encouraged that the CDC has expressed a willingness to engage with us in meaningful dialogue. We will continue to collaborate with the CDC to further clarify outstanding questions and determine next steps, at which point we hope to be in a position to share additional details about our return to service plan with all of you. I want to be clear that despite this positive development, we are still very much in the midst of this public health crisis. As we sit here today, COVID-19 cases are surging in many areas of the world, particularly in Europe and in the United States, and we are seeing nations, states, cities, and communities across the globe responding to the surge in different ways. As the seasons change, scientists are warning of a likely hard winter ahead. The good news is that our understanding of the virus and the advancements in testing, treatments, and therapeutics are leaps and bounds ahead of earlier this year, and I believe that as a society, we are much better equipped to respond this time around. In fact, and as you know, just yesterday, Pfizer and BioNTech announced that their trials demonstrated that their vaccine was more than 90% effective in preventing COVID-19 among trial participants. This is a significant milestone and likely the first of many breakthroughs to come on the vaccine front. And while we recognize the continued fluidity of the current global public health environment and expect additional headwinds to get in our way, our company and our industry has demonstrated resilience time and time again, and I believe this time will be no different. I am confident that our extraordinary team is well prepared to continue to adapt and innovate to overcome the challenges of this pandemic. I want to take this opportunity to thank all our team members around the globe. Their dedication, perseverance, patience, and hard work is what is propelling us through this once-in-a-lifetime crisis. I could not be prouder of how this team has risen to the occasion despite the significant personal and professional challenges they are all facing during this pandemic. As cruising gradually resumes in other areas of the world, we continue to be encouraged by the success our peers have experienced, and we congratulate them for leading the way and demonstrating that the cruise industry can indeed safely operate in a pandemic environment. We know it is impossible to fully eliminate all risks pertaining to COVID-19 anywhere in society, including on cruise ships. But with the appropriate science-backed protocols in place, and now with the prospects of an effective vaccine and therapeutic, we have witnessed relaunched cruise ships dramatically reduce control and manage this risk, and even successfully contain and mitigate COVID-19 cases on board. Turning to our company's recent events since our last earnings call, we have had another eventful quarter, as you can see on slide three. These key events include two additional extensions of our voyage suspension, resulting in a pause in operations through year-end 2020. This brings our temporary suspensions to a total of nine-plus months. The announcement of the Healthy Sail Panel's 74 recommendations, which will inform our specific health and safety strategy going forward, and discussions and collaborations with the CDC, which resulted in the issuance of the framework for conditional sail order replacing a no-sail order. As we continue to navigate through this crisis, we have made continued progress on many fronts, as you can see on slide four. We addressed significant operational challenges, including the repatriation of over 24,000 crew members to their homes around the globe and the transition of our vessels to minimum manning status. As we have previously stated, our goal during the vessel layoff period was to reach a minimum level of manning on each of our ships while complying with all the applicable regulations, minimizing our cash burn rate, and maintaining our vessels in class and ready to reenter service under short notice. Going forward, we plan to begin the process of a phase restaffing of our ships as we prepare for a gradual return to service. Next, we continue to execute on our financial action plan to position us to withstand this period of disruption Mark will provide an update on our progress and on the incremental actions we have taken to bolster liquidity later in the call, so I won't go into details now. We also continue to make significant progress on our roadmap to relaunch, which is illustrated on slide five, particularly in the first phase, the enhancement of health and safety protocols. The Healthy Sail panel, a group of 11 globally renowned scientific and medical experts, which we assembled in collaboration with Royal Caribbean Group, provided us with their recommendations to mitigate the risks of COVID-19 on cruise ships. As you can see on slide six... The Healthy Sail Panel, led by Dr. Scott Godley, former FDA Commissioner, and Governor Mike Leavitt, former Health and Human Services Secretary, provided 74 detailed recommendations across five key focus areas and concluded that cruising can be made safe in the current health environment with a robust set of science-backed protocols and procedures in place. Guided by expert advisors, including the Healthy Sail Panel, and further informed by successful sailings in Europe, CLIA and its member lines also committed to mandatory core elements for our health and safety strategies, including 100% COVID-19 testing of guests and crew, the wearing of face coverings, physical distancing requirements, highly controlled shore excursions, and much more. Our multi-layered approach to health and safety will have protocols that span the entire cruise journey, starting from the time guests book the cruise and continuing post-cruise disembarkation. There is no single solution to the current public health challenge, no silver bullet, but we believe the cumulative effect of testing coupled with dozens of other measures of protection at different phases of the cruise journey will significantly mitigate risk and allow us to provide one of the safest vacation alternatives anywhere. Furthermore, as society learns more about the virus and the effects of COVID-19, we, in collaboration with the CDC, will continuously evaluate, refine, and improve upon these protocols with our team of experts applying the best practices, science, and technology available. A concurrent step in our roadmap is to continually assess port availability and travel restrictions, which we believe will remain fluid as the virus prevalence ebbs and flows in different regions around the world. Our team is in constant communication with key destinations regarding the reopening of ports, and we are ready to adapt as needed. Certainly a conditional order in the news of an effective vaccine and this morning of a promising therapeutic for COVID-19 infections will also aid in the return to normal in these critical areas. A third step in our roadmap is to begin reactivating our sales and marketing machines. Once we receive further clarity around the conditional order, which will then allow us to finalize an initial voyage resumption plan, we will begin a disciplined process of ramping up our sales and marketing efforts, focusing on our go-to-market strategy of market to fill versus discount to fill to take advantage of our annual wave period. Lastly, we will initiate the gradual phase relaunch of our vessels in U.S. territorial waters. But before recommencing guest voyages, we will conduct trial sailings, which will be independently audited by a third party and overseen by the CDC. Trial sailings will allow us to train crew and check the effectiveness of our enhanced health and safety protocols, confirm their flawless implementation and execution, and comply with new CDC requirements, including the necessary clearance on a ship-by-ship basis, certifying that the ship has complied with and passed all regulatory mandates. The independent audit, which will be conducted by DMVGL, our classification society, will provide another layer of reassurance to all our key stakeholders that our health and safety program is working as designed. When we are ready to resume guest sailings in U.S. waters and have received all necessary approvals, we will take a gradual and methodical approach to returning vessels back to service. Initial voyages will likely operate shorter-duration itineraries of seven days or less at reduced guest capacity levels. Focusing on today's current business environment and what we are seeing in our booking trends on slide seven, we continue to be encouraged that despite our reduced investments in sales and marketing and other demand-generating activities and the overall lackluster travel environment, there continues to be strong demand for future cruise vacations. As expected, the load factor for the full year 2021 is now below historical ranges, primarily driven by weak first half of the year occupancies impacted by continued uncertainty around the timing of the resumption second half of 2021 and into 2022 continue to be in line with historical ranges. And as for pricing, full year 2021 is in line with pre-pandemic levels, despite the dilutive impact of the value-added future cruise credits we provided for canceled voyages. On a company-wide basis, approximately 50% of these future cruise certificates issued to date have already been redeemed. including nearly 50% for the Norwegian brand, nearly 60% on Oceana cruises, and approximately 75% on Region 7 Seas cruises. Consumer demand is evident across our entire suite of offerings, with no one sailing region, sailing length, brand, or source market materially outpacing others in terms of performance. A particular area of strength that you would expect is with our loyal past guests, who currently represent approximately 60% of all 2021 bookings. In fact, our luxury brands, Regent and Oceana, announced multiple booking records they have achieved in the past two months. First, Oceana had the most successful holiday promotion in its history. with its Labor Day upgrade sale. Even more impressive was the fact that nearly half of the reservations were from new-to-brand guests, and the vast majority of the reservations were cash bookings, with less than 5% of these reservations utilizing future cruise certificates from canceled voyages. For the region brand, the opening of the 2023 World Cruise shattered its previous World Cruise opening day booking record, doubling reservations versus last year's record levels. Regent also announced that the launch of its 2022-2023 voyage collection reservations on opening day surpassed Regent's previous all-time booking day record by nearly 40%, which was set back in April of 2018 with the launch of Seven Seas Splendor's inaugural season. While all destinations experienced high levels of interest, cruises in Africa, Asia, the Mediterranean, and Northern Europe, the Baltics in particular, were notably popular. And I must note that contrary to the perception that the more mature cruiser is reluctant to travel, these three examples demonstrate the opposite, that our older guests have a continued appetite for upscale luxury travel, even for long and exotic cruises, once the immediate impact of the pandemic subsides. As I have said previously, our market investment strategy will correspond with a gradual ramp-up of sailing. Our go-to-market strategy of market to fill as opposed to discount to fill has served us well in the past, is serving us well now, and I am confident it will continue to serve us well as we re-engage with guests and travel agent partners in earnest to resume cruise voyages. I'll be back later to provide closing comments, but now I'd like to turn the call over to Mark for a financial update. Mark, please.