Norwegian Cruise Line Holdings Ltd.

Good morning, and welcome to the Norwegian Cruise Line Holdings first quarter 2021 earnings conference call. My name is Josh, 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, then zero on your touchstone 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 DeMarco, Senior Vice President of Investor Relations, Corporate Communications, and ESG. Ms. DeMarco, please proceed.

Thank you, Josh, and good morning, everyone. Thank you for joining us for our first quarter 2021 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 our financials 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 reference to a slide presentation during this call, which may also be found on our investor relations website. Both the conference call and the presentation will be available for replay for 30 days following today's call. Before we discuss our results, I would like to cover a few items. Our press release with first quarter 2021 results was issued this morning 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 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 contained in our earnings release and presentation. And with that, I'd like to turn the call over to Frank Del Rio.

Thank you, Andrea, and good morning, everyone. As always, I hope that all of you joining us today, as well as your loved ones, remain healthy and safe. Today we will focus our commentary on the progress we have made thus far towards the resumption of cruising, the overall strength of the booking and pricing environment, and our efforts to bolster our liquidity and maximize financial flexibility as we methodically return our fleet to operation. Over a year since the suspension of voyages worldwide, our team at Norwegian is exhilarated that the time has finally come to where we shift our focus to what I like to call our great cruise comeback, even if the comeback starts from international ports. As you can see on slide four, our return to service plan is centered around three key phases. We developed our multi-layered sail-safe health and safety strategy, including mandatory vaccinations for all guests and crew at its cornerstone, which I will touch on in more detail later in the call. Second, last month we announced our initial voyage resumption plan with a two-pronged approach to restarting cruises from both within and outside of U.S. waters starting this summer. All three of our brands have now announced initial voyages embarking from both new and normally scheduled international ports, and we remain engaged in active dialogue with the CDC regarding a potential resumption of cruising from U.S. ports. Lastly is the phase relaunch of the remainder of our fleet, the timing of which will depend on several factors such as the global public health environment, port openings, travel restrictions, and the all-important CDC. Slide 5 further details our two-prong voyage resumption plan. Outside of the U.S., our long-awaited return to cruising will begin in July, first with three Norwegian cruise line vessels sailing from Athens and throughout the Greek Isles and new Caribbean home ports in Jamaica and the Dominican Republic. Oceana cruises will start in late August with voyages from Copenhagen, and Regent Seven Seas Cruises will resume from Southampton, England, beginning in September, with Seven Seas Splendor, our newest and most luxurious vessel, resuming her inaugural season. The response to our international voyage resumption has been overwhelming, and even sailings from our new Caribbean home ports are performing better than expected, despite the extremely condensed booking window. I can't thank our loyal guests, value travel partners, and all of our stakeholders enough for their patience and support over the past year as we prepare for our return to cruising. As for our work to restart voyages in the U.S., on April 5th, we submitted a comprehensive ironclad proposal to the CDC requesting authorization to resume cruising this summer with the robust and healthy safety strategy I just described and which includes 100% vaccination of all guests and crew. We and the rest of the cruise industry have since continued dialogue with the CDC. And just last week, the CDC issued additional clarification for its previously outlined technical guidance, which alleviated some of the pain points in the original safe 2A guidance. Even more importantly, we were pleased to see the CDC incorporate vaccines, our most powerful tool against COVID-19, into its guidance. creating two different pathways for the resumption of cruising from US ports. One for vaccinated voyages with a vaccination threshold of 95% for guests and 98% for crew, and one for non-vaccinated voyages that fall below this threshold. The vaccinated path, which is consistent with but falls short of our plan for 100% vaccination of guests and crew, has fewer hurdles to clear before return to cruising including the removal of the requirement for simulated voyages prior to revenue sailings and the relaxing of certain burdensome and costly testing requirements. In addition, yesterday, the CDC issued technical guidance for Phase 2B and 3, which covers simulated voyages and restricted voyages and the application process for a conditional sailing certificate. The guidance includes an operations manual for simulated and restricted voyages for which we need more clarity on whether the numerous and onerous requirements would apply to vaccinated voyages as well, or only to those that are not. Our team is working through the new guidance, but at first glance, however, it appears the path forward is a bit rockier and a bit steeper than originally expected. As time goes by, and given how long it takes to stand up a ship from cold layup, the urgent need for an acceptable and definitive agreement with the CDC is imperative, as a potential midsummer restart from U.S. ports could be in jeopardy. However, the CDC's recent willingness to engage with the industry in constructive dialogue has shown that they are committed to working with us to find an acceptable path forward, and we are certainly in a better place today than we were just 30 days ago. The progress we have made so far has been possible in part due to the incredible grassroots efforts undertaken across the cruise ecosystem to encourage elected officials to help resume cruising in the U.S., which supports thousands of jobs, families, and small businesses throughout the country. Through CLIA's Ready, Set, Sail platform and our own Safe to Sail advocacy campaign, we were able to send over 150,000 messages to elected officials throughout the United States. Thank you to all of you who have called, emailed, or tweeted your officials in support of the cruise industry. The wind is at our back, and now is the time to keep the positive momentum going with our advocacy efforts. So I encourage you to continue reaching out to your elected officials by texting CRUISE to 52886 and have your voices heard. Turning to slide six, we unveiled our robust and multilayered sales safe health and safety program, which includes mandatory vaccinations for all guests and crew as its cornerstone. We believe that vaccinations, combined with the dozens of science-backed preventive protocols, including universal COVID-19 testing that were developed by the Healthy Sail Panel, will provide one of, if not the safest vacation option available anywhere on land or at sea. Our protocols extend well beyond those of the already successfully reopened travel and hospitality sectors, including hotels, resorts, casinos, theme parks, restaurants, movie theaters, arenas, and airlines. SailSafe was developed in conjunction with our expert advisors, including the Healthy Sail Panel and our newly announced SailSafe Global Health and Wellness Council, chaired by former FDA Commissioner Dr. Scott Godley. The council, which is comprised of six public health and scientific experts featured on slide seven, will complement the work of the Healthy Sail Panel and provide Norwegian Cruise Line holdings with specific expert advice on the implementation and continuous improvement of our SailSafe program. Shifting to our booking trends, which you can see on slide eight, we continue to see the strongest demand we have ever experienced for future cruise vacations across all three of our brands, despite continued reductions of demand-generating marketing investments, the absence of a full complement of our all-important travel agent partners, and a virtual lockdown from many of our international source markets. Perhaps the best indicator of this pent-up demand is our booking volumes, which during what is probably the most unorthodox wave season in our industry's history accelerated considerably with bookings net of cancellations more than doubling versus the prior quarter. As I touched on at our last call, this demand coupled with the opening of Voyagers for sale further in advance continues to result in a significant expansion of the booking curve with the first quarter's curve nearly doubling versus the same time last year. Pent-up demand is particularly evident for 2022 voyages. For the first half of 2022, our load factor is meaningfully ahead of 2019, with pricing higher when excluding the dilutive impact of future cruise credits. Keep in mind that 2019 was a record year, which makes the strong booking trends we are experiencing even more impressive. In addition, approximately 70% of our booked position is comprised of new cash bookings with the remainders comprised of future cruise certificates. By the time summer 2021 comes around and the industry begins to resume operations, more than 50 million would-be cruises will have been left ashore. So the pent-up demand is real and it's deep. And you can see that in our growing advance ticket sales, which increased approximately $200 million in a gross basis in the quarter, or up approximately 40% versus the prior quarter's build. We believe we have reached an inflection point, as this is the highest gross bill since the beginning of the pandemic. And as we get closer to our resumption of cruising and begin phasing in the rest of our fleet, we expect this momentum to continue to accelerate sequentially. Another exciting milestone reaching the quarter was the naming of Vista, the first of two new 1,200-guest Allura-class ships for the Oceania Cruises brand, and the first new build for the line in over a decade, which you can see on slide nine. The upscale vessel, the seventh for the line, will set sail in early 2023, followed by a sister ship in 2025. Like her sister vessels, Vista will deliver the finest cuisine at sea and will introduce several unique firsts for the brand in the realm of dining and guest experience. More reveals of Vista's venues and experiences will begin later this month, in the lead up to the launch of sales for her inaugural voyages in September of 2021. I'll be back later to provide an update on our ESG efforts as well as provide closing remarks, but now I'd like to turn the call over to Mark for a financial update. Mark.

Thank you, Frank. My remarks today will focus on the continued execution of our COVID-19 financial action plan and our plan to return to cruising later this summer. I am pleased to say that we are beginning to see light at the end of the tunnel. with the significant progress we have made in recent months on our return to cruising. Despite this positive momentum, we have not lost sight that the pandemic is not yet over, and we remain focused on maintaining our cost discipline and pulling all levers available to conserve cash and maximize financial flexibility in what is an improving but still uncertain environment. As I have said before, our team is focused on what we can control and we continue to adapt our strategy as needed as the pandemic evolves. Slide 10 illustrates the three focus areas of our action plan and the additional proactive measures taken since the beginning of the first quarter. First, we continue to tightly control operating expenses and capital expenditures through a number of initiatives, including the significant reduction or outright deferral of near-term demand-generating marketing expenses and non-essential capital expenditures. As an example, our non-new-build capital expenditures continue to be less than half our pre-pandemic expectations for 2021. In addition, we finalized 50 million euro of incremental deferrals of new-build related shipyard payments since our last earnings call, resulting in a total deferral of 270 million euro through the end of the second quarter 2022. Second, we have made significant progress on improving our debt maturity profile to provide additional near-term financial flexibility. In March, we repaid the Pride of America and Norwegian Jewel facilities, which were set to mature in 2022, leaving no significant debt maturities until 2024. We also worked with our lenders to amend certain credit agreements to free up approximately $2 billion of additional debt capacity most of which is on an unsecured basis. While we believe our liquidity position today is strong, this incremental debt capacity meaningfully improves our financial flexibility and gives us additional optionality should the need arise. And the final focus area of our action plan is securing additional capital. We successfully tapped the market, which resulted in approximately $1 billion of incremental liquidity in the quarter. Slide 11 illustrates the two highly successful capital market transactions executed in March. First, we issued $1.1 billion of senior unsecured notes consisting of a $575 million tack-on to the December unsecured notes offering and $525 million of new unsecured notes due 2028. These transactions generated approximately $650 million of incremental liquidity in after repaying the Norwegian Jewel and Pride of America facilities, both of which were to mature in 2022. Second, we went to the market with a strategic, multifaceted offering to proactively manage our balance sheet. We raised approximately $1.6 billion of proceeds, net of underwriting fees, through a public common equity offering of approximately 53 million shares at $30 per share. We then used approximately one billion of the net proceeds to fully repay the L. Catterton exchangeable notes due 2026. This opportunistic transaction had several strategic benefits. First, it enhanced our balance sheet by effectively converting debt to equity with the prepayment of debt at par. Second, the early redemption of the L. Catterton notes enabled us to repurchase a significantly lower number of shares than what would have been required if the notes were held to maturity. Third, we unlocked value and added approximately $530 million of incremental liquidity with limited additional dilution of shareholders, as the vast majority of the shares were already reserved for the Elk Catterton notes. And lastly, we reduced our future interest expense burden. To date, we've accessed the capital market seven times over a 12-month period, with several multi-instrument transactions. As a result, since the onset of the pandemic, we've raised more than $7.5 billion, including the drawdown of the $875 million revolver early last year. This incredible feat would not have been possible without the hard work, support, and partnership of countless individuals, including our team at Norwegian, our lenders, the shipyards, investors, bankers, and many, many more. Turning to our illustrative liquidity profile on slide 12, total liquidity as of March 31st was approximately 3.4 billion, which is net of the portion of customer deposit refunds that are included in accounts payable as of quarter end. We have also estimated approximately 100 million for anticipated health and safety investments. These factors combined result in a net liquidity on a pro forma basis of approximately 3.3 billion, enabling us to continue to navigate through this fluid environment and execute on our return-to-service plan. As for cash burn, our team continues to be laser-focused on cost containment and cash conservation. For the first quarter, our average monthly cash burn was in line with prior guidance at approximately $190 million or approximately $170 million per month, excluding non-recurring debt modification costs. We paid approximately $50 million of one-time cost in the quarter as a result of debt deferrals and covenant waivers and suspensions, which, when combined with the new bill payment extensions, have resulted in approximately $1 billion of additional liquidity through first quarter of 2022. As for the second quarter, we expect the average cash burn to be approximately $190 million per month as we prepare for our resumption of cruising beginning in July. Restart expenses are primarily related to repositioning, provisioning and staffing of vessels, implementing new health and safety protocols, and a measured ramp-up of demand-generating marketing investments. We will continue to be disciplined and take a thoughtful approach to reintroducing costs with our voyage resumptions in order to conserve cash while at the same time balancing the need to drive new cash bookings. Slide 21 details additional guidance we have provided for certain metrics, including depreciation and amortization, interest expense, and new build-related capital expenditures. Turning to slide 13, we ended the first quarter with approximately $3.5 billion of cash and cash equivalents. Our cash balance in the first quarter increased, driven by approximately $1.2 billion of net proceeds from capital raises, This was partially offset by approximately $570 million of operating cash burn, including operating expenses, SG&A interest, and CapEx, customer cash refunds for canceled voyages of approximately $100 million, collateral obligations of approximately $250 million, and a net working capital and other outflow of approximately $50 million, which includes health and safety investments. Before handing the call back to Frank, I want to reiterate that as we continue to navigate through this crisis and prepare to execute on our voyage resumption plans, we have not taken our focus off the future. Our medium and long-term financial recovery plan, which is provided on slide 14, is focused on three critical components. First, rebuilding and gradually returning to pre-COVID margin levels while continuing to identify opportunities to further drive margin expansion. Second, maximize our cash generation. And third, focus on optimizing our balance sheet and charting a path to delever. With that, I'll hand the call back over to Frank for closing commentary.

Thank you, Mark. And before we wrap up our prepared remarks, I'd like to provide an update on our global sustainability program, Sail and Sustain, which is reflected on slide 15. Despite the current public health challenges we face, our commitment to drive a positive impact on society is and the environment through the advancement of our ESG strategy remains at the core of our everyday operations. Throughout the crisis, we have remained committed to supporting our local communities and the destinations we visit. Earlier this week, we announced that we are providing a $10 million cash support to six Alaskan port communities to help families and small businesses with basic relief programs in the localities severely impacted by the ongoing cruise suspensions. My heart breaks for Alaska and its wonderful people as we face a potential second year of zero, or at best, limited cruise operations during the all-important summer tourism season, which would bring yet another blow to Alaska's hard-hit tourism economy. We are doing everything in our power to resume cruising in the U.S. as soon as possible, so we can provide additional much-needed relief to this important region. In addition, we also joined the Shop Local Alaska program, which is a joint initiative between Buy Alaska and Voyage.com to encourage the support of severely impacted small businesses in Alaska. This virtual platform allows consumers to live around the globe to browse and purchase a wide range of items from virtual Alaska shops. In our local Miami community, we provided $100,000 worth of Visa gift cards to the cruise members of the International Longshoremen's Association Local 1416, who saw over 60% of their business wiped out nearly overnight with the suspension of cruise voyages. We were proud to support this pillar of the local community, which has been providing longshore labor to Port Miami for over 85 years and holds the historic position as the oldest black union in Florida. As part of our ongoing humanitarian efforts and in the spirit of giving back, we also provided more than $2 million of in-kind humanitarian relief to to support various community organizations worldwide throughout 2020 and 2021. This support was directed to a variety of efforts, including local food banks, disaster relief, and COVID-19 recovery efforts. In addition, and in celebration of Teacher Appreciation Week on Monday, we relaunched our Giving Joy contest, which provides educators with 100 free cruises and a chance to win up to 25,000 cash awards for their schools. Throughout this unprecedented period, countless teachers have worked tirelessly to give their all to their students, and we believe now more than ever, they deserve our recognition and gratitude. On the environmental front, we are honored to receive the prestigious 2021 ACG Build America Merit Award for environmental enhancement for our newly constructed double-ship pier at Ward Cove in Ketchikan, Alaska. Through this project, we were able to transform Ward Cove, a Superfund site, into a sustainable, environmentally friendly, and entertaining site for the local community and cruise visitors alike. Going forward, we continue to be focused on enhancing our ESG disclosures to provide additional transparency. And I look forward to sharing additional details with you as we continue on our ESG journey. Turning to slide 16, I'd like to leave you with a few final key takeaways. First, we are putting health and safety at the forefront of our return-to-service plan, as demonstrated by our science-backed, sales-safe health and safety program, which includes 100% vaccination of all guests and crew, in addition to comprehensive protocols. We will continue to work with our expert advisors to evolve these protocols over time with the latest science and technology developments. We are focused on our great cruise comeback with our phase-void resumption plans both within and outside of U.S. ports. At the same time, we are keeping our longer-term strategic and financial priorities in focus as we execute on our recovery plans. And lastly, we continue to experience strong future demand for cruising across all three of our award-winning brands with very positive booking and pricing trends for 2022 and beyond. Overall, I am more hopeful today than when I spoke with you last. I can't thank enough our dedicated and passionate team members around the globe for all their hard work and perseverance, which has brought us to this critical point and which will propel us forward. We still have a long road to full recovery ahead of us, but we are optimistic and encouraged by the progress we have recently made to a resumption of cruising as well as the continued robust demand we are seeing from our loyal guests. We can't wait to get back to what we do best, providing guests with incredible experiences and lifetime memories, and our shareholders with industry-leading financial metrics and year-over-year improved financial results. And with that, Josh, please let's open the call for questions.

Thank you, Mr. Del Rio. If you have any question at this time, please press the star, then the one key on your touchtone telephone. In order to get as many people through the queue, please limit your time to one question. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Steven Grambling with Goldman Sachs. You may proceed with your question.

Thanks. Good morning. I guess a quick clarification on pricing. If we look at the individual ship brands, what are you seeing in pricing, both including and excluding FCCs?

Hi, Steve. Good morning. They're up, and they're up sequentially. We raised prices at the beginning of the second quarter, and I'm just amazed at how much pricing power we actually have. given the difficulties that we all know about and the relatively low marketing spend that we have put out in the last quarter and a half or so. And so when you hear about inflation, inflation means prices go up. And it's good to see that we, too, are seeing the positive side of inflation, which is pricing power. So we're very pleased with that.

And I guess as a follow up, since you mentioned the inflation, there's obviously been a lot of talk of labor shortages in the hospitality industry. But of course, you have a bit of a different labor model. So I'm curious, as you start prepping for resuming sailing, what are you seeing on the labor front and how should you or how should investors generally be thinking through the puts and takes between inflation versus the efficiency actions on your overall cost structure?

Yeah, you know, we were just talking about it before the call. Over 95% of our crew are non-American nationals, so we're not seeing any kind of pressure on the labor side. The biggest issue on labor for us, getting the crew back on the ships, is the various travel restrictions that still exist around the world. Visas, consulates and embassies are slow in issuing visas. The situation in India now, we all know about And then, of course, we've committed to 100% vaccination of crew. So putting the crew together with a vaccine, these are all challenges that... that may impact our ability to stand up shifts in the future, but we don't really believe that it will. With vaccines coming on, the surplus of vaccines now coming on pretty strong around, at least around the U.S., we feel that we'll be able to stand up the vessels on a pretty good clip.

That's helpful. Thanks. I'll yield to the floor, but best of luck getting back out there.

Thanks, Dave. Thank you. Our next question comes from with JP Morgan. You may proceed with your question.

Hey, good morning, everyone. Thanks for taking my questions. Frank, I was hoping you could opine a little further on the CDC's announcement yesterday and wondering if you thought that the spirit of the update from them was aligned with the CDC's own goal of getting, you know, you guys sailing back in July, and then specific to your comment, Which parts of the CSO, which I know may not apply to you in the end, did you think were more rocky or steeper than expected?

Look, I think everybody has the same goal of getting the industry back in operation. The CDC themselves have stated that cruising or any activity cannot be zero risk. They've acknowledged that vaccines is the game changer. That's why society is racing towards vaccinations as fast as possible, which is why we proposed to the CDC back on April 5th an ironclad, multi-pronged approach to the situation, which is everyone on board has to be vaccinated. So I have to tell you that I am disappointed at first read. I'm going to give the CDC an opportunity to expand and clarify. We have a call with them this afternoon on some of the requirements. For example, as we read pronouncements, even though everyone on board would be vaccinated, in between bites of your meal and in between sips of your beverage, you have to put on your mask, take off your mask. So nobody should order soup because your mask might get sloppy. So that to me is just preposterous. It's not in the spirit of where the country is heading, where President Biden wants to open the country, 70% of American adults will be vaccinated by the beginning of the third quarter. So we hope that we're reading it wrong. We hope that there will be clarifications. Quite frankly, we're hoping that some of these more onerous requirements in Phase 2B only apply to cruises or ships or brands or companies that are not going to vaccinate 95% of passengers and 98% of crew as mandated by the CDC. We hope that if you do get to 95, 98 or even better, the 100, 100 that Norwegian is proposing, that there won't be a need for such impractical, you know, onerous, burdensome requirements. So we'll see what happens over the next few days as we engage with them, reengage with them on these particular phases. But certainly on first read, we were disappointed.

That's really helpful. Thanks for that. And then a follow-up, maybe an impossible hypothetical, but if everything went well from here on out with the CDC in the very near term, like you get those positive revisions, you're looking for in the July, looks like, you know, the July is going to happen. Best case scenario, and again, you found this out, let's say tomorrow, best case scenario, how many additional shifts do you think you could launch for July in the U.S.?

None. I mean, the July U.S. launch, at least for our company, you know, It's just not possible. It was possible back in early April when we proposed to the CDC 100% vaccination. We've always said it takes about 90 days to stand up a vessel. So from April 5th when we submitted our proposal, 90 days would have been early July, and that was possible. But today we're in early May, so now we're looking past that. But, look, there's more to it than just what the CDC says. There is only so much capacity to be able to stand up vessels. Standing up a vessel after a 15, 18-month cold layup is not an overnight exercise. It takes a while. And making it more complicated is the travel restrictions for crew, the vaccination mandates that we are imposing for crew. So we are focused on standing up our first five vessels that we've announced, first six vessels that we've announced for Norwegian Ocean and region outside the U.S. As you know, we, the industry, we, our company, regularly operate vessels outside the U.S., especially in the summer season where Europe is the big draw. And so, you know, July, August, September is summer season. and the best and highest use for our vessels is to operate in Europe, and that's what we're doing. In a couple of occasions, we are standing up vessels in the Caribbean. Because the CDC up to now has not given us a pathway, we'll see how things progress over time. But remember, it is a seasonal industry, and outside of Alaska, which is in doubt not only because of the CDC but because of the Canadian situation, outside of Alaska, the world's cruise fleets are typically outside of the U.S. in the summertime. We're cruising elsewhere. We're cruising primarily in the Mediterranean, in northern Europe, et cetera. So seasonality plays a big role, as will the final CDC regulations will play a big role.

And, Brant, as we've always said, we're not in a race. We want to do this properly. We want to instill confidence in our passengers, our guests, all of our constituents. So we want to do it in a methodical manner, and it's important that we just start the momentum going. That's the key.

Got it. Thanks for that, guys, and good luck.

Thank you. Our next question comes from Steve was in ski with people. You may proceed with your question.

Hey guys. Good morning. Um, so, so Frank, I guess I'm a little bit confused here. I mean, you know, you guys have already indicated that all, all your guests and all your crew are, you know, we're going to have to be vaccinated. So, you know, am I not reading this right from the CDC yesterday that, you know, you would be able to skip the simulated cruises and be able to start North American cruising sooner rather than later. And, you know, if you did go down the path of participating in the simulated cruises for certain ships that don't meet those vaccine mandates, do you believe that 60-day wait period would still be in place or would that get accelerated?

Morning, Steve. We're going to have one rule and one rule only. And that is, at least at the beginning, 100% of our guests and our crew will be vaccinated. We're not going to pick and choose that this ship is less safe than another ship. It's one rule only. covers everyone, whether you're sailing in Europe, sailing out of the Caribbean, or sailing out of the US. So I really haven't paid too much attention to the latest simulated voyages because we don't plan on participating in that program. We're going to be fully vaccinated, and therefore, we won't have to. So I just don't know the answer to your question in terms of timing.

Okay, gotcha. And let me ask this a little bit differently then. So you obviously have been in front of the CDC, and you've had conversations with the CDC, and I'm sure you've asked this question to them, but how can they differentiate between you guys and Let's take, for example, the airline industry. So if I'm going in an airline, I don't have to be vaccinated. There's no social distancing requirements. If I go on a cruise line on one of your ships, everybody is going to be vaccinated. What is their answer to that question in terms of how they're differentiating there?

Steve, you just threw a piece of red meat at me. Listen, they just won't answer it. We're perplexed. We're flabbergasted. We're outraged. airplanes, casinos, just about every venue. And when we talk about that we're willing to vaccinate every single person aboard the cruise ship, there isn't another venue on earth, not a school, not a factory, not your office building, apartment building, much less an entertainment venue like a casino, hotel, or resort that can make that claim. We will have, we will be the safest place on Earth, by definition. On top of that vaccination mandate, we're going to implement the 74 Healthy Sail Panel recommendations. That one-two punch is unbeatable. No one on Earth has it. Yet, the CDC continues to treat us differently. We dare say unfairly. And look, it's not like the CDC has done a great job of controlling the virus around the country. We rank number one in the world for the most infections, the most hospitalizations, I think the most deaths, yet they pick on the cruise industry to an extreme that is just unbelievable, unexplainable, and frustrates us to no end. We're hopeful that the discussions that we've been having lately with them, these two times a week calls, will result in continued improvement. We saw improvement when they announced last Wednesday night clarifications to their original Phase 2a. We're certainly going to let them know this afternoon that what they published for Phase 2B and 3 is unacceptable in many areas, and that we're, again, hopeful at this point. I can't say more than hopeful that clarifications will come soon to alleviate the pain points that we've identified.

And if I could ask one more quick one, probably for Mark, but Mark, whether you start North American cruising July, August, September, whatever time frame, obviously you're going to have some operations around Europe and other parts of the Caribbean in the near term. I guess the question, Mark, is your current liquidity position, do you feel that it's pretty adequate at this point, meaning you feel comfortable enough with where you sit today?

Hi, Steve. Look, we have a very solid liquidity position today, almost $3.5 billion at the end of the quarter, so We feel like we have a great foundation going forward. We still have a sufficient amount of tools in our toolbox should we need it. But the key really is we have to stay ahead of our needs. But the key is that they're still relatively uncertain. There's a lot of uncertainty out there. So we have to watch that. While we're certainly encouraged with the recent momentum and the discussions that have taken place and with the restart, that certainly bodes well for us and the So we just need to see that continued momentum going forward. But we do have tools should we need it, but we feel we're in a very strong position as we sit here today.

Okay, great. Thanks, guys. Best of luck.

Thank you. Our next question comes from Patrick Scholes with Truist Securities. You may proceed with your question.

Hi. Good morning, everyone. You've

Frankie had talked about with having complete vaccinations to start with out of the U.S. overcoming a hurdle with the CDC. However, you have Florida prohibiting customers and patrons of businesses providing any documentation regarding certifying a COVID-19 vaccine. How do you plan to deal with that Florida law in this situation? Thank you.

That's an issue, Patrick. We've had discussions with the governor's office. Those continue. But it is a classic state versus federal government issue. Legally, lawyers believe that federal law applies and not state law, but I'm not a lawyer, and we hope that this doesn't become a legal football or a political football. But at the end of the day, cruise ships have motors, propellers, and rudders, and God forbid we can't operate in the state of Florida for whatever reason, and there are other states that we do operate from. and we can operate from the Caribbean for ships that otherwise would have gone to Florida. We certainly hope it doesn't come to that. Everyone wants to operate out of Florida. It's a very lucrative market. It's a close-drive market. But it is an issue. Can't ignore it. And we hope that everyone is pushing in the same direction, which is we want to resume cruising in a safe manner, especially at the beginning. You know, things might be different six months from now or a year from now. But today, with the pandemic still being front and center in everybody's mind, and we're just getting out of the worst part of it just, you know, weeks ago. I think everyone should be wanting to start cruising in the safest possible manner, and that's exactly what the Norwegian Cruise Line Holdings Plan does, 100% vaccination of both crew and passengers. For the life of me, I don't understand 98% and not 100%. So you have a big ship, you have 1,800 crew members on board, and you're going to vaccinate 1,764 of them but not 36%. I mean, what a loophole to allow potential COVID to be introduced. In the crew area, 100%, 100%, at least at the beginning, I believe, should be the model. And if the CDC wants to go in a different direction, the rest of the industry wants to go in, great. We want to go 100%. We want clearance for 100%. And as of today, which is a little over a month since we submitted our proposal to the CDC, we've not yet heard back from them. And that is very disappointing.

Okay. Thank you for that detailed answer.

Thank you. Our next question comes from Robin Ford with DBS. You may proceed with your question.

Thank you. You know, like everyone else, I have questions about the restart and timing, but I know that there aren't all the answers. So I actually am going to ask a question. One of the slides talking about the recovery plan, it mentioned private island infrastructure and even ahead of maybe some deleveraging. So I'm just wondering if that is something related to the reopening plan that is you felt you needed, you know, given they may be initially limited to private islands and just kind of wanted to hear what that reference may be. Thanks.

Hi, Robin. It's Mark. So, look, that, you know, as we look at our path going forward and our plans, you know, medium, long term, certainly, obviously, delevering is a critical component of what we want to do. And we'll continuously be looking at that. When we talk about our islands and our infrastructure, we've been talking about this for a while, that we believe the private islands are a unique destination that we can continue to monetize in a positive economic way. That said, we are not targeting anything with our comeback where it would force us to have significant CapEx around that. We're simply keeping on our radar that as we recover and as we rebuild, Those are opportunities where we can invest and see a significant return on. So I wouldn't read too much into it, but, you know, as we go forward, we're going to balance all needs, whether it's delevering, trying to take out some debt, investing in the fleet, investing in our islands, you know, investments to become more efficient. That's all going to be in our playbook, and we'll balance the needs accordingly.

Okay, great. Thank you very much.

Thank you. Our next question comes from Jamie Katz with Morningstar. Let me proceed with your question.

Hi. Good morning. I don't think you guys have mentioned the demand that you've seen on the three ships that you put into the Caribbean and announced last month. So if there's any insight into how pent-up demand has played out for those itineraries, I'd love to hear it. And then I do think the sourcing of cruisers has been a little bit more geographically homogeneous for some of the other cruise lines and what they have currently announced in Europe. So are there any logistical difficulties we should be thinking about when you're sourcing across geographies or because of the vaccination requirement, is that not as much a problem? Thanks.

Yeah. Thank you, Jamie. Your first question is, All three of the initial sailings we announced for Norwegian, one vessel out of Athens for the Greek Isles, doing incredibly well. And to tie that with your second question, consistent with our prior history, a little over 80% of the people who are booked on those cruises out of Greece are American. So Americans are willing to get on an airplane and fly over there. The two sailings out of the Caribbean are doing better than expected. Remember that normally Caribbean sailings out of Miami, out of South Florida, this is the low season. So we have two ships where we normally have one. So on relative terms, they're not going to be the highest producing vessels in terms of yields. But given what we expected, they were doing better than expected, especially given the fact that we introduced them only about a month ago. And so the booking window is very, very compressed. But again, speaking to the pent-up demand, it's filling up quickly. And so I'm glad we did it. It certainly beat keeping the ship laid up. But we would have preferred to start those vessels in Alaska, start those vessels in Europe, but because of other reasons that you know of, we couldn't. And so the next best thing was to start new home ports. And we'll see what happens. You know, we're very encouraged, especially with the vessel out of the Dominican Republic. The DR has very good airlift to the U.S. I believe it's the number one destination for Americans to the Caribbean. And who knows, that vessel might prove to be so profitable there that it never returns back to U.S. waters, which would be, again, one of the economic casualties of this prolonged CDC-induced suspension.

Thank you.

Thank you. Our next question comes from Vince Satiello with Cleveland Research. You may proceed with your question.

Hi, thanks. Question on longer-term supply-demand dynamics. Pre-COVID, there was concern in the industry of elevated capacity additions, limiting pricing power. Based on what you're seeing today with scrapping or delaying of the scheduled arrivals, how much lower do you think industry capacity ends up shaking out over the next couple years? And What are you seeing early on right now for longer-dated sailings in 22 and 23, and how does that shape your view of industry pricing going forward?

So that's nine questions in one. I'll try to remember them. Look, I think that the narrative of too much capacity coming online pre-pandemic had pretty much been debunked. all the cruise industries were taking on the new delivery, digesting that new capacity very nicely, and increasing pricing. And so we always – our comeback always was we only have 28 ships. There are many underserved markets that we simply don't have ships to operate in, and so we're eager to get our hands on our new vessels, all nine of them across the three brands. And what we're seeing now in the pandemic – is pricing is strong, demand is stronger than ever. I mean, to give you a nugget of data, the Oceana and Regent brands reached their 50% load factor for 2022 over 100 days earlier than they did for the record year of 2019. Nearly four months, they hit their 50% load factor mark earlier than ever before and at higher prices. So pricing power is there. In terms of capacity exits, I think from what I can see, and I don't know because different companies, you've got to ask the individual company, but from what I can see, the capacity exits have already occurred. You know, we have the youngest fleet in the industry, so we never considered any exits and still haven't. And the order book in the future hasn't changed, so they're coming with very, very few delays. And whatever is delayed is delayed by a few weeks, a month or so. So, look, the industry was healthy as heck before the pandemic. We're seeing during the pandemic how resilient it is, how much pent-up demand there is. We just need to get started. We just need to get all these ridiculous regulations, this overreach, eliminated. And listen, I'll tell you this. If we could operate, given what's on the books right now for 2022, if we can operate the itineraries that we're actually selling, 2022 could be a record year. That's how good things are. But the big risk is can we operate? Are we going to have to continue to cancel sailings because of this rolling, you know, conditional sail order which is, you know, very difficult to comply with? And it's not just the CDC. Let me try to be a little fair here. The rest of the world has got to open up as well. The CDC affects U.S. embarking, disembarking guests. But the rest of Europe has to open up. Asia has to open up. South America has to open up. Remember, this is a global industry. Cruise companies visit 500 ports around the world, and only a handful are open today. And so that's the risk. How quickly can the world return to normal, to opening up the ports, lifting the travel restrictions, et cetera? But from a pure market dynamic point of view, 2022 would be a record year.

That's really helpful. Thank you.

And Josh, we have time for one last question, please.

Thank you. Our last question comes from Ivan Byneseth with Tigers Financial. You may proceed with your question.

Thank you for taking my questions, and congratulations on fighting this good fight and almost getting there. Just kind of a couple quick questions. Do you think that the demand is even greater than you're experiencing because a lot of people may be hesitant to book, but once they know they can book and the rules are clear that you will see, maybe travel agents are saying, I have a bunch of people ready to book. once it's ready to go, and also which ones of your lines are seeing the strongest demand and the best pricing. And then one last thing. You know, a lot of the travel industry has started to embrace the concept that's been driven by a certain company that books houses as working from home doesn't have to be your home, and the work from anywhere can be anywhere, and maybe there's an opportunity to address people that want to work from anywhere, including a cruise ship from time to time would be a great place to work.

Yeah, I don't know. I think that's a little fatty. Remember, you work from home because you have this incredible – Fast Internet service, as you know, Internet service on a cruise ship in the middle of the ocean is not optimal. So I wouldn't get too carried away on that one, Ivan. Look, in terms of overall demand, we're hitting only on partial cylinders. The U.S. is by far the biggest driver of new demand. Even though we have, you know, 50,000 cases a day and all the restrictions that we still have to live with and the news cycle and everything else, Europe, for the most part, has not reopened in terms of robust marketing and travel agencies coming back. The U.K. is doing okay. Australia, New Zealand, which, as I think you know, has always been, you know, number three, number four, top source market for us, is completely closed down. So the fact that we're doing as well as we're doing with marketing spend that is in the neighborhood of 30% to 40% of what we normally spend, the news cycle, the travel restrictions, the unknown, right? We're just not sure what's going to be happening. There is no certainty. The international source markets, for the most part, being suboptimal, right? I mean, like I said in my prepared remarks, the pent-up demand is deep. Fifty million people, by the time summer rolls around, you know, 33 million people cruise a year. We will have been shut down 18 months. That's 50 million people that would have cruised that haven't cruised. And so I think we have a pent-up demand tail that we're going to be able to enjoy and over the next couple of years, certainly in 22 and into 23 and perhaps beyond. Because, look, it's sort of like the yin and the yang. You know, we've gone with no cruising, with zero. And these people want to cruise, and they're going to cruise in the future. And so we believe that sets up a beautiful dynamic for increased pricing, and we're taking advantage of it to be as well-booked as we are. And, again, I gave you a nugget that Ocean and Regent – hit their 50% load factor for 2022 over 100 days earlier than they ever had before, and their pricing is up. Even with the FCC dilution, it's just, you know, unbelievable. Just let me cruise, CDC, and we'll have incredible financial results. Just let us cruise.

And, Ivan, your comment on the demand getting better, I think you're spot on. You know, we are seeing that with data points. When we talk about our booking volumes that have doubled, we see our ATS continually growing. So as consumers get more certainty and more comfortable, I think, you know, there's good signs that that should continue and continue strong. So we're very hopeful around that.

Well, congratulations on managing this so well and really all on your own because, like other industries, you received so far no help. So hopefully we're getting there soon. So good luck.

Thank you, Ivan. All the best to you.

Before we go, I'd like to remind everyone that our Annual General Meeting is coming up on May 20th. This year we have a number of very important proposals on the ballot, including an increase in our authorized share capital. We are extremely appreciative of the support we've received from our shareholders during this extraordinary time, and we're asking for our shareholders' continued support. Please vote and support our board's recommendations for our annual general meeting proposals so that we have the flexibility to continue to respond to the unprecedented challenges of the pandemic. Thank you again, everyone, for your time and support, and as always, we'll be available to answer any of your questions. Have a great day and stay well.

Thank you. This concludes today's conference call. You may now disconnect.