Norwegian Cruise Line Holdings Ltd.

Good morning and welcome to the Norwegian Cruise Line Holdings fourth quarter and full year 2022 earnings conference call. My name is John 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 touch tone telephone. And as a reminder to all participants, this conference 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. Thank you, Ms. John. Please proceed.

Thank you, John, and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2022 earnings and business update call. I'm joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings, Mark Kempe, Executive Vice President and Chief Financial Officer, and Harry Sommer, President and Chief Executive Officer of Norwegian Cruise Line. 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 websites. 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 website. 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 fourth quarter and full year 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 Dalrio.

Thank you, Jessica, and good morning, everyone, and thank you for joining us today. 2022 was a year like no other in our company's 56-year history as we successfully concluded our great cruise comeback with the last vessel in our fleet reentering service midway through the year. Our team continually pushed forward through this challenging transition year, achieving several significant milestones on our road to recovery and preparing for the next chapter of our storied brands. With our full fleet back to the high seas, we significantly ramped up occupancy levels, carrying nearly 1.7 million guests, welcomed our newest ship, Norwegian Prima, to our world-class fleet, reached several critical financial inflection points, maintained our industry-leading pricing, and perhaps more telling, ended the year in a record book position for 2023 and at record prices. These accomplishments are even more impressive when considering they were achieved against the backdrop of lingering COVID-19 impacts, as well as ongoing macroeconomic and geopolitical uncertainty. I want to take the opportunity to once again thank our entire team, both shoreside and shipboard, for their hard work, dedication, and tenacity, which has propelled us forward as we strive to be the vacation of choice for everyone around the world. I'm incredibly proud, honored, and inspired to work alongside each and every one of you. And I also want to express our sincere thanks to our loyal guests, valued travel partners, lenders, shipyards, investors, and all of our stakeholders for their continued support and partnership. Shifting our attention to what is certainly a bright future for our company, let's turn to slide six, which outlines our current positioning and the key catalysts we have on the horizon. First, we are encouraged to see that our target consumer, which tends to skew more upmarket than the broader cruise industry, continues to be financially healthy and resilient and is prioritizing consumption of experiences over the purchase of physical goods. We've talked previously about the two high-level indicators we carefully monitor to evaluate the willingness of consumers to spend on cruise travel, the first being the length of the booking curve, which is a forward-looking indicator, and the second one being onboard revenue, a real-time indicator of a consumer's actual spending, both of which continue to hold strong with no signs of fading. In fact, the booking window in the fourth quarter was well elongated compared to the same quarter in 2019. Onboard revenue also continues to be a bright spot with gross onboard revenue per passenger cruise day in the quarter increasing approximately 25% higher than the comparable 2019 period. The bottom line is our target consumer continues to be willing to spend on travel and experiences now and in the future. This gives us confidence that not only is the incredible value proposition for cruising resonating with consumers, but the unique and compelling offerings of our three brands are also appealing to their respective markets. Second, we are taking actions across our business to align with our strategic priorities and strengthen the foundation for sustained profitable growth. This includes a broad and ongoing initiative we began in the fourth quarter to improve operating efficiencies and the right size our cost base so that we can rebuild and enhance our margins. You may ask, why start this initiative now? Well, the past few years have been unlike anything we could have imagined. First, we were focused on taking the necessary measures to withstand a prolonged and unprecedented period of disruption by minimizing cash burn, raising capital, enhancing our health and safety programs to adapt to a rapidly evolving public health environment, and advocating for the industry to restart cruise operations. We then shifted our focus to relaunching our operations while providing our discerning guests the same unparalleled vacation experience they expect from our leading brands. We also took this unique opportunity to raise the bar on pricing for the long term. Now that our phased occupancy ramp is nearly complete and our loyal guests know that cruising in our brands is back and even better than before, we are squarely focused on how to maximize profitability as we embark on a period of transformational growth Every aspect of our business is being evaluated through the lens of how we can realize our full value potential for all stakeholders. We are exploring further opportunities, first and foremost to reduce our cost profile and to maximize revenue generation. You've likely seen some of the actions we've already taken to improve our cost structure, including normalization of marketing spend, corporate overhead reductions, itinerary optimization, supply chain initiatives, and thoughtful rationalization of product delivery. We will continue to leave no stone unturned as we identify and evaluate incremental opportunities. And of course, we will not lose sight of our guests, the very heart of our business, and we will continue to prioritize delivering an exceptional guest experience and superior service levels. The last catalyst I want to touch on is our industry-leading new build pipeline. This year, for the first time in our history, we are gearing up to deliver one new build for each of our brands, as shown on slide seven, adding over 5,000 additional births to our fleet, including an over 20% increase in our upscale births. On a capacity-day basis, this will result in approximately 19% growth in 2023 compared to 2019. As you can see on slide eight, we have made some modifications to our new build pipeline primarily related to the last two shifts in the Prima class. These shifts have been lengthened in part to accommodate the future use of alternative fuels. We now expect gross tonnage for the third and fourth Prima class to be approximately 10% larger and the fifth and sixth Prima class shifts to be approximately 20% larger than Norwegian Prima and Viva. As a result, delivery days have shifted a bit, and we now expect one larger Prima Class shift to be delivered each year from 2025 through 2028. We remain confident in our ability to profitably absorb this capacity with continued consumer demand for travel, our expansion into the many unserved and underserved markets around the world that our brands have not yet tapped into, and in the broader industry's vast underpenetration particularly when compared to land-based vacation alternatives. Shifting our discussion now to our booking, demand, and pricing trends, as you can see on the slide down in the fourth quarter, our load factor reached 87% in line with guidance. This is approximately 20% below the comparable 2019 quarter, yet demonstrates another sequential improvement in closing the occupancy gap versus 2019. This ramp is continuing through the first quarter of 2023, as we have already achieved 100% occupancy in the quarter, leading to a return to historical levels beginning in the second quarter of 2023 and beyond. In terms of pricing, slide 10 illustrates another strong result in the pricing front, with our net per diem growth in the fourth quarter of 2022 up approximately 14% on an as-reported basis and up 15%, in constant currency over 2019. Turning to slide 11, at year end, our cumulative book position for 2023 was within our optimal range of approximately 60 to 65%. We continue to believe this is our sweet spot as it strikes the delicate balance of encouraging guests to book early while also optimizing pricing. Full year 23 book position is now ahead of 2019's record performance and at higher prices. Since we last spoke in November, we have been pleased to see positive booking momentum continue, including a very strong wave season that likely started two months earlier than usual. In fact, November was a record-breaking month for Norwegian Cruise Line as it celebrated a record day, record week, and record month of sales boosted by its Black Friday and Cyber Monday holiday push. Subsequently, in January, a strong start to traditional wave led the line to setting another record booking month. Our region brand also experienced a similar positive reception to its 2023 wave offer launch, which resulted in a record launch day with net booking volume nearly four times last year's wave launch and 2019 pre-pandemic levels. Our current cumulative book position and the strong demand dynamics that we continue to experience across our brands gives us further confidence that we can achieve our 2023 guidance, which Mark will discuss shortly in more detail. I'll be back with closing comments a little later, but for now, I'll turn the call over to Mark for his commentary on our financial position and outlook.