Norwegian Cruise Line Holdings Ltd.

Good morning and welcome to the Norwegian Cruise Line Holdings Business Update and fourth quarter full year 2021 earnings conference call. My name is Maria and I'll be the operator today. 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 touchtone telephone. As a reminder to all participants that this conference call is being recorded. I would now like to turn the conference over to your host, Mark Kempa. Mr. Kempa, please proceed.

Thank you, Maria, and good morning, everyone. Thank you for joining Frank and I for our fourth quarter and full year 2021 earnings and business update call. Frank will begin the call with opening commentary, after which I 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 nclhltd.com forward slash investors. 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 begin, I would like to cover a few items. Our press release with the fourth quarter and full year 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 the cautionary statement 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, Mark, and good morning, everyone. And thank you for joining us today. And as always, I hope that all of you, as well as your loved ones, remain healthy and safe. Before going into my main commentary, I'd like to address the recent geopolitical issue which escalated last night. The tense situation in Ukraine is regrettable and our hopes are that the conflict ends quickly with minimal impact to the safety and welfare of those in the region. We are following the situation carefully as it impacts our voyages in the area. We have no vessels in the region until late May and we will be updating guests on our plans and about affected itineraries as needed. We have quite a bit to share with you today, ranging from our resumption of operations to the impact of the Omicron surge to recent developments with the CDC. We'll also cover the booking and pricing landscape in our plan for the return to service of the balance of our fleet. So let's get started. You know, it seems like just yesterday that we launched our great cruise comeback in late July of 21, after 500 days of no cruise operations. In the five months that follows through the end of 2021, we safely carried over 230,000 happy guests around the globe, everywhere from Europe to Alaska and points in between, delivering the unique and upscale vacation experiences that only our three award-winning brands can provide. This is evidenced by our brands having achieved the highest customer satisfaction scores in our history. and a reflection of the deep commitment from our crew members who are as energized as ever to be back in the high seas serving our guests. In addition, onboard spend by guests during the quarter continued to exceed all expectations and reached all-time highs. And we delivered these unparalleled vacation experiences in the safest manner possible, with protocols that are unmatched by any other area of the hospitality sector. I'll repeat once again that our number one priority is and always will be the health and safety of our guests, crew, and the communities we serve. And that commitment has never been more evident than in the months since our return to service. With over 230,000 guests sailing on our vessels in 2021, our COVID positivity rate was minuscule and certainly a fraction of what has been the case in the population at large. Our science-backed protocols, centered on vaccination and pre-boarding testing, provide a safe vacation experience that is not duplicated anywhere in the world. Today, and because of the rapid decrease in prevalence and in severity, the perspective and view of the pandemic is rapidly changing across the globe. municipalities, cities, states, countries, schools, institutions of all kinds, and private businesses alike are all moderating protocols as the public health environment improves. In the past, protocols were usually pared back slowly and only when cases had receded. But we have seen many instances, Denmark and Iceland being one of the best and most recent examples, where protocols and restrictions have been moderated despite high or even increasing caseloads. This latest normal now takes into account the diminished severity of the virus and balances the extent of necessary protocols with the need to resume daily life. The confidence for society to take these actions is mainly due to the availability and widespread uptake of vaccines, new therapeutics, and broad immunity. And an NCL cruise ship is one of the few places in the world where you can be assured that at least 95% of the people around you are fully vaccinated. And we're pleased to report that the rapidly improving public health environment has allowed us also to follow the easing of COVID-related protocols occurring in broader society. You can see in our return to service plan on slide four, a new phase, returning to normal, that reflects those changes and advances. Our brands recently announced that effective March 1 masking for guests across our fleet will be optional, while taking into account local guidelines, if any. Also beginning March 1, and in conjunction with the new CDC guidelines, which I'll discuss in a moment, the Norwegian brand will begin allowing all guests under the age of 12 to sail on its ships fleet-wide. These two steps greatly expand the addressable market for our largest and most family-oriented brand by allowing families to travel together regardless of age and without the mandate of wearing a mask. This announcement was scheduled to provide plenty of time and opportunity for families to plan their summer vacations with us. And all this comes at a time when last week we had the lowest number of positive pre-embarkation cases per 1,000 guests by far since launching service last July during the Delta surge. Recently, we were happy to see significant regulatory progress being made as we received clarification from the CDC on updated protocols for sailing originating from U.S. ports. Back in January, our three brands were the first in the industry to opt into the CDC's voluntary COVID-19 program for cruise ships operating in US waters. When our brands first opted in, the program had not yet been finalized. However, last week, as protocols for the program were confirmed, our brands reaffirmed the commitment made in March and mid-January of opting into the program. demonstrating once again our industry-leading and unwavering dedication to health and safety with protocols that appropriately reflect the public health environment. The program our brands have opted into calls for at least 95% of vaccine-eligible guests and crew be vaccinated. Given the differences in demographics of our brands, vaccination requirements will differ somewhat with Norwegian requiring guests aged 12 and over to be fully vaccinated while Ocean and Regent will continue to require all passengers be fully vaccinated. Regardless, we will continue to require that 100% of crew across our fleet be fully vaccinated and are working towards having all crew members boosted by April 1st. The new updated protocols also allow for mask wearing to be optional, as is the case with more and more societal activities. All the industry has ever asked is to be treated the same as other areas of society. The CDC's new voluntary program is a positive step in that direction, which we expect will lead to further easing of protocols as the pandemic continues its retreat. In the meantime, we will continue to maintain best-in-class protocols centered on vaccinations and testing for the health and safety of all on board and to offer guests the safest vacation experience possible. The resumption of service across our fleet was not without its challenges. As difficult an endeavor as it was to pause and find safe haven for our entire fleet back in the spring of 2020, it is even a greater feat to smoothly bring back the fleet into operation and to deliver the world-class level of hospitality and service our brands are known for. I want to thank team members across our organization, from shipboard to shoreside, for the hard work, dedication, and passion they displayed in returning our fleet to service. I also want to thank our loyal past and new-to-brand guests for entrusting us with what for many has been their first taste of travel since the pandemic began two years ago. And a special and heartfelt thanks to the travel agency community who have weathered the pandemic like no other. We stuck together through the industry's toughest times and are now re-engaged to bring us all back stronger than ever. And finally, a thanks to our shareholders, lenders, shipyard partners, and the broader financial community for your support and confidence in our company, supporting our growth story and the opportunities that lie ahead. The story of the past quarter was obviously all about the Omicron wave. Unfortunately, Omicron did not pick the best of times to make its appearance. Just as we were experiencing a solid rebound in bookings during October and November after the Delta wave began to wane and buoyed by a very successful Black Friday and several Monday promotions, the impacts of Omicron began to appear in early December. First, a Norwegian vessel whose itineraries featured multiple calls to South African ports had its operations paused as Omicron quickly spread there and additional travel restrictions were imposed. Canceling targeted sailings on certain vessels operating in the Caribbean and South America during the quarter also became necessary, as in addition to travel restrictions, ports began implementing difficult, sometimes onerous requirements for docking. Concurrently, booking volumes slowed, and cancellation of existing bookings increased. While Emacron did impact our business in the near term, primarily for close-in sailings in the first and second quarters, It did provide the opportunity to once again demonstrate our resilience as a company and as an industry. Our ethos throughout the pandemic has emphasized being nimble and ready to adapt. Our management team has maneuvered through what no other industry has ever had to do and has done a remarkable job doing so. The silver lining to this pandemic is that it has brought our team even closer together and fortified the strong collaborative culture we already enjoyed through and that we truly believe is one of our competitive advantages. As we return to normalcy, that positive culture will only grow stronger. Now for some good news. The impact of Omicron are waning week by week. While the short term has been impacted, the following points illustrate the strong underlying consumer demand that gives us confidence about the trajectory of our business in the future. First, of the guest cancellations that occurred during December and the January period, the majority were for sailings in the first and second quarters of 2022, demonstrating sustained consumer confidence in sailings further out. Second, beginning in mid-January, net booking volumes began improving and continue to do so and accelerate sequentially week over week. Third, book position for each quarter in 2022, when compared to 2020-19, sequentially improved over the prior quarter. Fourth, despite the erosion in book position due to the Delta and Omicron surges, as of today, second half 2022 book position is in line with what was an extraordinarily strong 2019, while 2023, compared to pre-pandemic 2020, is an even better position, in fact, a record book position. Fifth, Again, as of today, pricing for 2022 and 2023 sailings remain higher for the full year versus 2019 and pre-pandemic 2020, respectively, even when including the diluted effects of future cruise credits. Our core go-to-market principle of marketing to fill versus discount to fill is performing like a champ. as we have not and will not chase short-term occupancy by sacrificing price, which only results in long-term and perhaps even permanent damage to brands' equity, as we have seen over the years in other situations. Sixth, despite sailing cancellations and slight changes in our return-to-service plans due to Omicron, all of our vessels are expected to sail by early May and in time for the peak summer seasons. And lastly, we are seeing our largest and most important distribution channels coming back to full strength. Every day we are seeing more and more business being booked by our travel partners in a shift which bodes well for the industry as the vibrant travel agent community is vital and amplifies the reach of our message to consumers which translates into more and better bookings. I want everyone to recall that in the past, our industry was accustomed to successfully managing through bumps in the road. Whenever there was a natural or geopolitical or some other black swan type event that impacted bookings, you could almost count like clockwork that after eight to 10 weeks of quiet, booking patterns would rebound. We've seen this pattern occur twice already during the pandemic. Once last spring after the initial variant seeded and vaccinations became prevalent, and most recently last fall, right after the Delta surge began to wane. With the public still a bit shell-shocked by the sudden emergence and equally dramatic decline of Omicron, what our business needs now is a few weeks of quiet, with no new variants or surges for confidence to return and momentum to take hold. Our experts in the Sales Safe Global Health and Wellness Council, headed by Dr. Scott Godley, believe we're at that point right now. So while Omicron did indeed have an immediate but short-term impact on our business, it was an impact that simply shifted expectations and the timing of our recovery by about three months. That shift in timing is coinciding with the shift in societal attitudes that I mentioned earlier from avoiding the virus at all costs to living with it. It's something we really didn't see after the Delta wave, but it's gaining more and more momentum post-Omicron. We are seeing more and more living of life, and we've once again begun hearing the term revenge travel being batted about. These shifts bode well for our company as vacationers look to once again explore the world, but to do so in a safe manner. I'll be back shortly with closing comments, but for now I'll turn the call over to Mark for his commentary on the progress of our financial action plan. Mark.