Norwegian Cruise Line Holdings Ltd.

Good morning, and welcome to the Norwegian Cruise Line Holdings Business Update and First Quarter 2022 Earnings Conference Call. My name is Rob, and I'll be your operator. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session, and instructions for the session will follow at that time. If anyone should require operator assistance during the conference, please press star zero on your touchtone telephone. As a reminder to all participants, this call is being recorded. I would now like to turn the conference over to your host, Jessica John, Vice President of Investor Relations, ESG, and Corporate Communications. Ms. John, please proceed.

Thank you, Rob, and good morning, everyone. Thank you for joining us for our first quarter 2022 Earnings and Business Update call. I'm joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings, and Mark Kempa, 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.nclhltd.com slash investors. We will also make reference to a slide presentation during this call, which may also be found on our investor relations websites. Both the conference call and 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 first quarter 2022 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, Jessica, and good morning, everyone, and thank you for joining us today. In the last few days, our company marked a significant milestone, if not the most significant milestone thus far in our great cruise comeback. This past Saturday, Norwegian Spirit welcomed guests for the first time since her fleet-wide pause in operations back in March of 2020. And in doing so, she became the final ship in our 28-ship fleet to return to service, making Norwegian Cruise Line Holdings the first major cruise operator to have all its ships operating again. The last two years, and certainly the last few months, have been challenging, to say the least. But with each new challenge that arose to further complicate an already colossal undertaking, The team at Norwegian stepped up to the plate time and again to demonstrate our extraordinary resilience, dedication, and passion. So I want to thank each and every team member across our organization, from shipboard to shoreside, for all their efforts to reach this point and our great crew's comeback and position our company to thrive in the years to come. Even more impressive was our team's ability to drive some of the highest guest satisfaction scores ever, ticket revenue, and onboard spend in our history. And this trend has persisted even as we ramp up occupancy, carrying more guests across all brands, all itineraries, and in all cabin classes. We have reached this milestone with a clear, consistent, and focused strategy throughout our relaunch, ensuring that we do not prioritize short-term gains at the expense of jeopardizing our long-term brand equity and industry-leading pricing in the process. First, we have prioritized the health, safety, and well-being of our guests, crew, and the communities we visit above all else, doing everything possible to create a safe and healthy experience for all stakeholders. Since launching our great cruise comeback, we have carried over 500,000 guests, and we continue to experience significantly lower COVID incidence rates aboard our ships as compared to the population at large, indicating that our health and safety protocols are indeed working as designed. Second, and throughout the pandemic, we provided steadfast support both to our guests and travel partners, focusing on doing the right thing and demonstrating our willingness to go to great lengths to support them. And I don't think this commitment has gone unnoticed. I firmly believe that as we exit the pandemic, our three brands will be in better standing than ever before with these key partners, the travel public at large, and with our key past guests. And lastly, we have stood firm on our go-to-market strategy of marketing to fill and maintaining price integrity by emphasizing value over price. You have heard me say time and time again that we will not sacrifice our industry-leading pricing to temporarily bolster our load factors, and I continue to stand behind that philosophy. Pricing will be the primary driver to net yield growth. As we exit the pandemic and return to a normalized booking performance, this outperformance will be key. And given that consistent net yield growth is the single most important factor in maximizing high quality and sustainable profitability, this is an area where we will not compromise our efforts. So while our first quarter load factors were somewhat tempered, our net per diem growth over first quarter of 2019 record pricing was, as shown on slide five, significant. A trade-off and an outcome that is much more meaningful for the company's long-term success. Now, you don't have to take my word for it. Our pre-pandemic track record of stellar net yield outperforming year after year speaks for itself. As you can see on slide six, in 2019, Our net yields were better than our peers by somewhere between 20% to 40%. This historical outperformance, coupled with the strong pricing we are experiencing for all future periods, are evidence that our strategy is a superior one and the best way to protect our brand's equity while driving long-term shareholder value. Taking a step back to survey the broader landscape, today we find ourselves in a much more favorable public health regulatory and demand environment than when we last spoke a little over two months ago. We have witnessed a continued relaxation of COVID-related protocols across the globe, from air travel to concerts and other indoor activities, and this time around, the cruise industry is an active participant. First, we are pleased that in late March, the CDC entirely removed its travel health notices for cruise, representing a significant step towards leveling the playing field between cruise and our land-based counterparts. In addition, the CDC continues to modify elements of its voluntary framework for cruise, relaxing certain requirements, the most recent of which includes reducing required vaccination thresholds from 95% to 90%, which further opens up the important family market to cruising. Second, as I mentioned earlier, we have seen an acceleration in the reopening of society to pre-pandemic normalcy, which bodes well for the travel and leisure sector overall. More ports around the world have opened to cruise, and we have seen travel restrictions relaxed in many areas. And while there are still regions where discussions to reopen to cruise are ongoing, particularly certain countries in Asia, the good news is that we do not have ships sailing in those regions until fourth quarter, giving us additional time to monitor the situation, plan for various outcomes, and be ready to adapt as needed. And lastly, we are seeing an explosive showing by consumers, particularly American consumers. Consumer spend is strong. snapping back and even exceeding where we left off in 2019. Gone are the days when the family budget was going to antibacterial wipes, hand sanitizer, delivery apps, stationary bikes, and streaming services. Consumers today are spending to catch up on over two years of missed experiences. One example of this that we see every day is hotel ADRs and airline fares, which are at or near record levels. And now with our full fleet back up and running and our industry's overwhelming advantage in its value proposition over land-based options, we, along with the entire cruise industry, are well positioned to capitalize on this pent-up demand. While the public health environment improved over the course of the quarter, the start of the Russia-Ukraine conflict did cause additional disruptions across the world and to our business, as you can see on slide 7. First and foremost, we continue to hope for a peaceful resolution which minimizes further impact for those in the region. Our motto is family first, and as such, we have focused on assisting our impacted shipboard and shoreside team members as best we can. We have activated our crew relief fund and are providing logistical, communication, and mental health support to affected team members. In addition, we also provided a sizable donation to save the Children's Ukraine Crisis Relief Fund and invited partners, including guests, travel partners, and team members to contribute as well. Prior to the conflict, approximately 10% of our annual capacity across our three brands was scheduled to sail in the Baltic region, with approximately 5% calling on St. Petersburg, Russia. We subsequently canceled or modified approximately 60 sailings, which included all calls to ports in Russia for 2022. And in a move that demonstrates one of the unique strengths of our industry, we quickly redeployed three ships scheduled to operate in the region to sail alternate itineraries. Oceana's Marina, Region 7C's Mariner, will remain in Europe, sailing British Isles and Northern European itineraries, respectively. Meanwhile, Norwegian Getaway was redeployed to Port Canaveral to take advantage of pent-up, close-in domestic demand, which, despite the condensed booking window, has already meaningfully exceeded our occupancy expectations. And in a pre-emptive measure, our three brands will pause all calls to Russia from their 2023 and 2024 itineraries. While this is not an ideal scenario, we are once again demonstrating our ability to pivot as needed in response to exogenous events. Now, turning to slide eight, we shift today's discussions to our broader booking and demand trends. Overall, we continue to experience sequentially improving underlying demand and robust pricing for all future periods. The Omicron surge in December and January did indeed impact net booking momentum, with the vast majority of cancellations concentrated for close-in sailings. The tide began to turn in mid-January when net booking volumes began to show week-over-week improvement. As booking regained momentum, we experienced another temporary setback with the emergence of the Russian-Ukraine conflict. This impact was also short-lived and was mainly concentrated to the Baltic region with some leakage to surrounding Mediterranean saline, with cancellations returning to pre-conflict levels by the end of the first quarter. Overall net booking volumes have continued to improve sequentially, returning to and recently surpassing pre-Omicron levels and currently at levels approaching the pace needed to consistently sail at historical pre-pandemic load factors. As a result of the impacts from Omicron and the Russia-Ukraine conflict, Second half 2022 book position is now below an extraordinarily strong 2019. As we look further out in the year, the picture improves sequentially, with book position in the fourth quarter remaining in line with 2019. More importantly, cumulative full year 2023 book position is ahead of 2019 and ahead of pre-pandemic 2020 at a comparable point in the booking curve. On the all-important pricing front, as mentioned earlier, our go-to market strategy of marketing to fill versus discounting to fill and emphasizing value over price is paying off in droves, with pricing meaningfully higher for all future periods when compared to the comparable pre-pandemic periods. This holds true even when including the dilutive impact of future cruise credits in 2022, which, as a reminder, will no longer be a headwind in 2023, as FCCs must be applied to salings through year-end 2022. As the booking environment improves, we will continue our strategic marketing efforts in order to further stoke demand to obtain quality, high-price, and high-value bookings. With each month that goes by, our recovery trajectory becomes a little clearer. 2022 is no doubt a transition year, but as I look towards 2023, I'm excited by the full potential the future holds. We are still operating in an uncertain environment, and if we've learned anything, it's that a return to normalcy will certainly not happen overnight and possibly not without additional bumps in the road. But with each passing day, I'm increasingly confident that we are reaching the milestones needed to propel us forward in this recovery. We are doing everything in our control to position us for sustained long-term success, and we are laying the foundation needed to set the company up for an extremely strong year in 2023 and beyond. From where we sit today, and without another black swan event derailing our plans, there is a reasonable and clear path to reach record net yields and record adjusted EBITDA levels in 2023. Boosted by the introduction of four new ships across our three brands over the next 18 months, a goal our entire team is focused on achieving. As just mentioned, a key component to this future success will be our industry-leading growth profile, with nine new ships coming online across our three brands through 2027. The first of these ships, Norwegian Prima, will join our fleet in just a few short months, as you can see on slide nine. After her record sales debut in May of 2021, her booking volumes continue to be stellar and her pricing significantly outpacing our past new ship launches. In March, we announced that pop icon Katy Perry will serve as the godmother to Prima and will be the headline entertainer at her Christian ceremony in Reykjavik, Iceland. This announcement garnered significant media coverage, further building on the excitement surrounding Prima and allowing us to reach a new-to-cruise audience. As we look to next year, 2023 will be the first year that each of our brands will be welcoming new capacity, the additions of Norwegian Viva, Oceana Cruises Vista, and Region 7C's Grandeur to our fleet. These new hardware introductions are a meaningful driver not only in net yield growth and overall profitability, but also in attracting new guests to our brands and reigniting loyal past guests to enjoy new and elevated experiences. They also have historically had a significant halo effect in the rest of our fleet. Needless to say, I'm ready and eager to begin welcoming these additional premium capacity to our fleet, which we expect will be meaningful contributors to our top and bottom line financial results. I'll be back with closing comments a little later, but for now, I'll turn the call over to Mark Kempa for his commentary on our financial positions. Mark?