Norwegian Cruise Line Holdings Ltd.

Good morning, and welcome to Norwegian Cruise Line Holdings' fourth quarter and full year 2025 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 conference call is being recorded. I would now like to turn the conference over to your host, Sarah Inman. Ms. Simmons, please proceed.

Good morning, everyone. Thank you for joining us for our fourth quarter and full year 2025 earnings call. I'm joined today by John Chidsey, President and CEO of Norwegian Cruise Line Holdings, and Mark Kempa, Executive Vice President and Chief Financial Officer. As a reminder, this conference call is being simultaneously webcast on the company's investor relations website. We will be referring to a slide presentation during this call, which can also be found on our website. Both the conference call and presentation will be available for replay for 30 days following today's event. Before we begin, I would like to cover a few items. Our press release with fourth quarter and full year 2025 results was issued this morning and is also available on our 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. Unless otherwise noted, all references to 2025 and 2026 net yield and adjusted debt cruise costs excluding fuel for capacity day are on a constant currency basis, and comparisons are into the same period in the prior year. With that, I'd like to turn the call over to our CEO, John Chisley. John?

Thank you, Sarah, and good morning, everyone. It's my pleasure to be here with you today, and I'd like to thank my Norwegian Cruise Line Holdings colleagues for their warm welcome and Mark for his partnership. There are many reasons that I agreed to join the board last February and now become CEO. This is a special company. It founded the modern cruise industry. We have iconic brands, an extremely loyal guest base, and a dedicated team. At the same time, NCLH has clearly not been performing to its full potential. Over the past two weeks since becoming CEO, I have been moving quickly to immerse myself in all aspects of our business and culture. I've begun a deep review of operations, spending time with our leadership, and beginning to engage across the organization to better understand where we are performing well and where we are not. As someone who has built a career at consumer-focused companies, I share the team's passion for delivering an unbeatable guest experience. I've seen our company at moments of real strength, as well as through some of its most challenging periods, including the pandemic. I've experienced firsthand the resilience of this company and its people. I bring deep familiarity with the cruise industry from my prior years on the NCLH Board of Directors. We span transportation, hospitality, entertainment, construction, logistics, revenue management, touring, and more. We do this while managing various distribution channels and regulatory frameworks around the world. Our industry relies on guests booking their voyages months, sometimes even years in advance. I've also successfully led a number of yield driven asset intensive businesses through periods of transformation and performance improvement. Those experiences have reinforced a simple lesson. Sustainable improvement comes from disciplined execution operational rigor and a clear focus on the fundamentals. This is the approach I intend to bring to NCLH. We are operating a capital-intensive business with a balance sheet that is overly levered and a cost structure that must continue to be streamlined. Indeed, we have some challenges that need to be addressed immediately and others that will take more time. We also have strengths to leverage. My takeaway after these first two weeks We have to create a burning platform sense of urgency, balanced against optimism and excitement for the opportunities ahead of us. Let me be clear. Our strategy is sound. Our execution and coordination have not been. And a culture of accountability is essential and necessary going forward. The good news is that we have the assets, we have the brands, and we now have the right focus. Job one is fixing execution and driving accountability and urgency. This comes from optimizing the organization and eliminating bureaucracy. There were clear failures in the basics of developing coordinated plans and a clear operating cadence around key enterprise-wide initiatives. The culture was very siloed with the lack of a one team mentality, which fed into this lack of cohesion. And I found that while there was work being done, the alignment and focus was not where it needed to be. Job two is improving efficiency and return on invested capital, ensuring that our capital allocation decisions are grounded in measurable returns. The company invested heavily in our ships, and as a result, our product is strong. However, we underinvested in technology, revenue management capabilities, and customer-facing systems. Correcting this imbalance is one of our top priorities. And job three is unlocking operational upside in revenue management, itinerary optimization, and monetization of our private destinations. There is important work ahead to return our company to sustained growth and value creations. It is the combination of my turnaround experience and tenure leading consumer-focused companies and industry understanding that provides me with the confidence that we can deliver for our shareholders, guests, and team members. What will make this possible is our leadership team. As of the past few months, we have put in place essentially an all-new leadership team in most of our critical functions with a skill set and experience level that is well-suited for the work ahead. Now, this group needs to bond, and we need to create a culture of accountability and empowerment. The pieces are definitely here and I'm already encouraged by the team's excitement and commitment to this turnaround. Some actions are already underway and you will see further announcements over coming quarters as we streamline and reorganize the business to better execute. To that end, I'm working closely with our brand and executive leadership teams to take a fresh look at how we can improve day-to-day execution and drive more consistent results. Mark Kozlowskis was named President of Norwegian Cruise Lines in December, bringing more than three decades of experience across sales, operations, and innovation in the global travel industry. Mark has a strong track record of driving commercial performance and enhancing the guest experience, and his leadership will be instrumental at the brand level. I'm also working closely with Jason Montague, our Chief Luxury Officer, as he continues to lead Regent Seven Seas Cruises and Oceana Cruises. Together, we are focused on ensuring that each of our brands continues to deliver distinctive, high-quality experiences that resonate with our guests. Our executive leadership team brings together experienced company and industry veterans alongside new seasoned leaders from outside the industry, particularly in areas like technology and strategy. At the Norwegian brand, we recently onboarded a seasoned industry veteran to lead that brand's revenue management function, along with a chief marketing officer that is honing our brand messaging and the way we engage with our guests. Going forward, our decisions will be driven with a focus on revenue management, which will work with and direct sales and marketing to better align our resources. This is just one example of our teams coming together across the company around a common goal of improving performance. My priorities are straightforward. Improve execution, strengthen financial discipline, reduce leverage, and focus the organization on the areas that will drive sustainable value creation over time. Once we complete our review and finalize our operating plan, progress will require patience, discipline, and consistent execution. I look forward to sharing more detail on these priorities as we progress. With that, I'll turn it over to Mark to walk through our fourth quarter results and our outlook for 2026. Mark?

Thank you, John, and good morning, everyone. I'll begin with our fourth quarter results on slide five, which were ahead of or in line with our expectations. Net yields in the fourth quarter grew 3.8% while adjusted net cruise cost ex-fuel of $158 was below guidance, increasing only 0.2%, driven by strong cost controls, which ultimately drove adjusted EBITDA of $564 million, exceeding our guidance. Adjusted net income for the quarter was $130 million, adjusted EPS of $0.28, which excludes an approximately 95 million or 20 cent write-off related to certain information technology assets included in depreciation and amortization expense. Now moving to our full year 25 results on slide six. Starting with our top line performance, net yields rose 2.4% compared to the prior year as expected. We continue to have a disciplined cost management approach and our adjusted net cruise costs ex-fuel per capacity day rose only 0.7%, slightly better than our guidance and well below inflation. Overall, we made important strides in 2025. Our adjusted EBITDA increased 11% to 2.73 billion. Our adjusted operational EBITDA margin improved 160 basis points to 37.1%, and our adjusted EPS increased 19% to $2.11. Moving to slide seven, I'll touch on a few operational highlights since our last earnings call. At the Norwegian brand, under the leadership of our new chief marketing officer, we launched a refreshed brand platform reintroducing our iconic 1990s tagline, it's different out here, and anchoring the brand and the values that have always set Norwegian apart, freedom and flexibility. Norwegian also opened bookings for Norwegian Aura, the largest of our prima class ships, with her first voyages setting sail in 2027. At Oceana, We continue to sharpen the brand's positioning in the luxury space, announcing an adults-only policy fleet-wide. This shift is already yielding results. The sales of Oceana Sonata delivered a record-breaking opening day, with bookings surpassing the launch of Oceana Allura by 45%. Strength in our luxury portfolio was also evident at Region 7C's where January bookings were up 20% year over year with robust demand across the destination portfolio. In addition, we recently announced new ship orders across all three brands, one for Norwegian Cruise Line, one Sonata-class ship for Oceana Cruises, and one Prestige-class ship for Region. We now have 17 ships on order through 2037 securing coveted shipyard building slots, and locking in our long-term growth plan. Importantly, given the timing of the deliveries for these new ship orders, they require only modest initial capital outlays, and we do not expect them to have a material impact on our near-term leverage. Turning to Great Stirrup Cay on slide 8, We are very encouraged by the early results following the opening of the pier, a new expansive pool, and enhanced guest amenities on the island. Initial guest feedback has been incredibly positive with strong guest satisfaction scores across the board. The early feedback reinforces our confidence that our investments are improving the guest experience and will drive strong returns. Importantly, we remain on track to open the Great Tides Water Park later this summer, which will further elevate the island's offering and strengthen demand as we move into 2027. Great Stirrup Cay is a central pillar of our Caribbean strategy. We remain highly confident in the long-term opportunity in the region, which delivers strong financial returns, attracts a broad and growing guest base, provides a stable operating environment and allows us to target more new to crews and premium family guests. While our Caribbean strategy required a shift in deployment to the region, in hindsight, it is clear that this shift, which resulted in a 40% capacity increase in Q1, was executed without the necessary enterprise-wide coordination as John referenced. In addition, The capacity increase was premature as the supporting infrastructure and commercial initiatives around Great Stirrup Cay were not yet ready to support and accommodate the additional capacity. While phase one of the enhancements opened at the tail end of 2025, we increased capacity into the region ahead of the full build out at Great Stirrup Cay, which includes the Great Tides Water Park. Importantly, we did not sufficiently align revenue management, sales, marketing, itinerary planning, and on-island monetization strategies to support that deployment shift. The individual components were moving forward, but they were not integrated under a single cohesive operating plan designed to absorb the capacity at the right yield. As a result, the headwinds we are experiencing in the first quarter are more pronounced than we anticipated last quarter, which I will address in more detail shortly. As we stepped back and evaluated our 2026 deployment, it became clear that our commercial strategy, including our sales, marketing, pricing strategy, and revenue management tools, were not aligned with our deployment. As a result, certain itineraries did not receive coordinated commercial support required to maximize performance and yields, which is weighing on our expected performance for the full year. We entered 2026 slightly behind our ideal booking curve in certain itineraries, creating near-term pressure on pricing and yield, which is evident in our guidance. Moving forward, We expect that creating tight integration between deployment planning and commercial execution will ensure itineraries are fully supported by a cohesive plan around revenue management, pricing and marketing from day one. We are embarking on a disciplined business review to ensure full alignment across our deployment, marketing, pricing, and look forward to sharing more with you on this process in the coming quarters. As John mentioned earlier, we are moving with a sense of urgency to overcome these challenges. However, given the booking lead times, the benefits will phase in over time. We are confident that these steps will position us for stronger, more sustainable performance over the long term. This leads me to our 2026 guidance on slide 10. Let's start with net yields. As a result of the headwinds I discussed earlier, we expect net yield growth in the first quarter to decline approximately 1.6% as higher occupancy was more than offset by pricing pressure. Looking to the balance of the year, we expect net yields to stabilize and modestly improve growing at approximately 0.6%, bringing our full year net yields to approximately flat. However, we do not expect this gradual improvement to be symmetrical across all three quarters. At our Norwegian brand, we are experiencing pricing headwinds in select markets as a result of certain execution missteps, including sailings in the Caribbean and Bahamas and itineraries out of our new home port of Philadelphia. In Europe, the tailwinds we had expected to occur in Q3 are not as strong as previously anticipated, given the aforementioned execution missteps. Outside of these markets, we note that heightened competitive activity in Alaska has also pressured yields due to elevated industry capacity levels. That said, We remain focused on improving our commercial strategy and expect these headwinds to fade as we better align our strategy with deployment. We recognize that this level of top-line performance falls short of our expectations and our long-term objectives. As I mentioned earlier, we are undertaking a disciplined business review to fully assess the drivers of this underperformance and to ensure we realign deployment, pricing, and marketing to restore sustainable net yield growth. Turning to costs, our discipline on the expense side remains firmly intact, and this marks the third consecutive year of strong cost control. In the first quarter, we expect adjusted net cruise costs, ex-fuel, to decrease approximately 0.8%. Looking to the remaining nine months of the year, we expect unit cost to grow approximately 1.4%, bringing full year unit cost growth to approximately 0.9%, well below inflation. Our cost savings program represents a structural change in culture. We are building the muscle to continuously identify efficiencies, remove waste, and improve processes. That work will continue throughout 2026 and beyond as we remain focused on driving sustainable margin expansion. As a result, we expect first quarter adjusted operational EBITDA margin to improve to approximately 29.1% compared to 28.4% in the first quarter of 2025 and adjusted EBITDA of $515 million. For the full year, we expect margins to remain essentially flat year over year at approximately 37%, while adjusted EBITDA increases approximately 8% to $2.95 billion. Adjusted EPS is expected to be approximately $0.16 in the first quarter, and for the full year, we expect adjusted EPS to increase approximately 13% to $2.38. Sea leveraging remains a top financial priority, and for the full year 2026, we expect net leverage to remain approximately flat at 5.2 times. Keep in mind, this reflects the delivery of Norwegian Luna in March and Seven Seas Prestige in December, which temporarily increases reported leverage by approximately a quarter turn as the associated EBITDA contribution phases in. While we continue to grow capacity at a healthy pace, we are focused on driving stronger top line performance and margin expansion to support further net leverage reduction over time. As these new ships ramp and contribute meaningful to EBITDA, we expect net leverage to resume its downward trajectory. At the holding company level, at the brand level, and within revenue management, we are taking an appropriately disciplined approach to guidance. Rebuilding credibility with the market starts with setting clear, realistic expectations and delivering on them consistently. We are acting with urgency to strengthen the business, but we are also realistic that meaningful improvement requires deliberate execution over time. Our focus is on building a stronger, more durable foundation and restoring performance in a way that is sustainable and credible. Before I turn the call back over to John, I want to take a moment to highlight the progress we've made on our cost savings initiatives over the past several years on slide 11. We expect 2026 to mark another year of subinflationary adjusted net cruise cost ex-fuel growth. That would represent nearly three consecutive years of essentially flat unit cost growth while we deliver on our 300 million plus savings target. These results are the product of a disciplined work of our transformation office, which has methodically reviewed cost structures across the business, identifying efficiencies and removing waste all without compromising the guest experience. While much of the early focus was on shipboard efficiencies, we are now expanding and accelerating the program to drive further operating leverage by optimizing SG&A. Importantly, this is not a one-time program. We have embedded cost discipline into our culture, and we intend to continue driving efficiencies and margin expansion well beyond 2026. With that, I'll turn it back to John for closing remarks.

Thank you, Mark. Before opening the call to questions, I want to underscore our focus going forward. Together with our board and executive leadership team, we are focused on improving execution, strengthening financial performance, and reducing leverage over time. While remaining firmly committed to delivering the exceptional vacation experiences our guests have come to expect across our three incredible brands. As I said before, we have the assets, we have the brands, we now have the focus. I recognize that our 2026 outlook is below the long-term aspirations we previously communicated. Closing that gap requires focus, rigor, and accountability. And that is exactly what we are bringing to this next phase. We look forward to keeping you apprised of our progress. Before we move to Q&A, I want to briefly address the current conflict in the Middle East. We are closely monitoring the situation in Iran and the broader region. The safety of our guests and crew is always our top priority. At this time, we are not operating in the affected areas, and there are no impacts to our scheduled itineraries. As it relates to fuel, the longer-term impact remains uncertain. However, we are currently approximately 51% hedged for 2026 and 27% hedged for 2027, which helps mitigate near-term volatility. We will continue to monitor developments closely and will adjust as necessary. With that, operator, please open the line for questions.

Thank you. This time we'll now be conducting a question and answer session. If you'd like to ask a question at this time, you may press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, for our first question. Our first question comes from the line of Steve Wisinski with Stiefel. Please proceed with your question.

Yeah, thanks, guys. Good morning. John, welcome in and congratulations on the CEO appointment. So I have two questions that I'm going to try to ask here in one. So, John, obviously, you've only been in your seat for a very short period of time, but you noted and Mark commented in his prepared remarks that there have been execution missteps with aligning your commercial strategy with your deployment. So, I guess my first question is about these Caribbean deployments and maybe how you address these capacity overhangs moving forward, or if you start to pivot away from decisions that previous management implemented in the Caribbean. And then second question is probably for you, Mark. But if we look at slide 10 and look at the implied guidance for 2Q through 4Q, you obviously have a negative yield cost spread. But from our seat, that seems somewhat conservative, even with your deployment headwinds. So, Mark, not sure what you would say about that, but any comments would be helpful, especially given the fact Caribbean capacity starts to ease after the first quarter. And maybe it's more about Alaska and Europe that you called out in your prepared remarks. But Any comments there would be super helpful. Thanks, guys.

Yeah, so in terms of your question about Caribbean deployments, clearly I think the Caribbean is the place to be. I think it really ties back to when I said it was a very siloed effort, organization, not a cohesive plan. So I think clearly, as we said in our remarks, our timing was off. I think we got a little ahead of ourselves. Again, there wasn't a great cohesive plan. Marketing was going in one direction. Top of the island was going in a different direction. So I think in the intermediate to long term, we were very confident about the Caribbean. Again, I just think this is where we've got to do a better job of running a very well-coordinated, well-executed plan, and I think we'll be fine. It was just a lot of short-term misfires, if that's kind of how I think I would describe it.

Yes, Steve, so the strategy around Caribbean is sound. We've said that our private island, Great Sturpey, is a central pillar of that. I think this squarely reflects the pretty dramatic shift in capacity toward the region without the right commercial apparatus working in sync as a cohesive unit across the board, hence why we've seen some changes over the last few months of our various leadership. So I think going forward as we correct those missteps and we align our strategies as one unit, I think we'll continue to see improved performance around that. I think, Steve, on your second portion there was a mouthful, but I think you were referencing the implied guidance Q2 to Q4 as well as maybe a negative spread there. You know, apart from the Caribbean and Bahamas where we've had a significant capacity increase I think when we reference some of the commercial missteps or execution, that is also affecting us in Europe. While Europe as a whole, the market is fine, we are not seeing the expected tailwinds that we expected to harvest over the summer as a result of some of our own missteps. So we are in the process of, again, working on that and correcting that. Apart from that, I think we are seeing softness in Alaska. I think Alaska has seen mid-single-digit increase in capacity across the industry, and I think that is putting pressure on the broader industry around that. So that is a little bit of a drag for us this year.

Okay. Thanks, guys. Appreciate it.

Our next question comes from the line of Ben Chaykin with Mizuho. Please proceed with your question.

Hey, thanks for taking my questions. Just to maybe follow up on Europe, so last year you kind of did these long-duration immersive strategies into Europe in 3Q, and you did that in the heels of April 2nd, which seems like an obvious formula for weakness. But as you were kind of suggesting in the previous comments, that you were not expecting 3Q this year to be a tailwind as a result of your own missteps. I guess I'm just – can we flush this out? Can we unpack that a little more? I believe Caribbean should be either your lowest or close to your lowest from a capacity mix standpoint. Yeah, so help us unpack how the missteps in the Caribbean impact that 3Q kind of year-over-year comparison versus last year.

Yeah, thank you, Ben. Look, you're absolutely right. We did have a shift in itinerary or deployment that was already preplanned for 2026. prior to any events last year in March, April. I think the issue around Europe is we, in fact, did decrease our longer deployment itineraries. In fact, you know, as a stat, I think we had about 160 voyages last year, which were 9 to 14 days. This year, those same voyages are down to the low 60. So, you know, we did, in fact, reduce it by 50 to 60%. Where we're seeing some pressure is on a good portion of those sailings. We do have quite a bit of open jaw itineraries. And as a result of that, we're seeing a little bit of pressure from our consumers around those open jaws. And that's something, again, that goes back to what I would call commercial misalignment in terms of our deployment and commercial strategy. So while we cannot correct that for 2026, It is something that we are focusing on in the future that we believe is very correctable. But, of course, we will not see the fruits of that until 2027 and beyond.

Okay. And then, John, in your prepared remarks, I believe you spoke about – these are a mix of my words and your words, but I believe you spoke about a culture of inefficiency and bureaucracy. Maybe you could expand on this. How did this manifest in results? Was this a cost? headwind or more of a strategy and capacity allocation related? And then what are you doing specifically to change this culture? Thanks.

Yeah, I think it was a little bit of both. I think, as I said, it was very siloed and not, I hate to keep using the word cohesive, but cohesive strategy and cohesive execution, which allowed a lot of these sort of missteps I find a culture that really has no sense, not no sense, but it needs a much greater sense of urgency and accountability. I think both of those were missing. And yes, they're clearly, as we said in our remarks, I think the company's done a great job ship side in terms of looking at costs, but I think we have definite opportunities on the shore side to optimize the company. And so what am I doing to get after it? Again, trying to create that culture of one, trying to create cohesive plans, trying to go after the cost. But I also think the other huge opportunity is revenue because It was so disjointed, underinvested, as I said, in technology, in revenue management, sales going in one direction, marketing in another, itinerary planning in another, lack of real focus on revenue management. I think pulling all that together, I actually think our biggest opportunity is revenue. And while you might not see that one immediately given the nature of our industry and people are already fairly well booked in 26th, But you should definitely start to see the fruits of that in 27. So I kind of look at it as a tale of two cities. I think both sides of the coin are opportunities for us. And the culture is what will drive both of those at the end of the day.

Thanks.

Our next question comes from the line of Connor Cunningham with Malleus Research. Please receive your questions.

Hi, everyone. Thank you. John, maybe we could just stick with you and maybe follow up to Ben's comments a little bit there. You mentioned that you're going through a full review process now. Just curious on when that will actually be, you know, understand a lot of its culture and more of a broader strategy as you kind of take the reins.

Well, as I said, I think our strategy is correct. I like, as Mark noted, we have as a company invested a lot in our ships. So I think our ships and our guest experience, you know, our sort of crew enthusiasm and crew dedication is, is good, whether it takes three months, four months, five months to really dig into where have we gotten a little bloated, where are we not efficient. Where should we be looking to invest short-term? I can't tell you exactly, but, I mean, it's not a one-year process by any stretch of the imagination to kind of pull together, you know, what do we want to do immediately, what do we want to do, but for certain reasons maybe we can't get after until 27, sort of racking and stacking those priorities. So, you know, I would say in the next couple quarters we should have that pretty buttoned up, but I don't know. I can't give you an exact date by any stretch. I've been here all of two weeks, so...

No, I realize that you've been there for a short period of time. Okay, so just as a follow-up maybe, have you guys actually been in contact with Elliott? And then when you look at their presentation, what would you actually agree with as you've kind of digested what they've said? The answer is yes.

We have been in touch with Elliott like we have with all of our shareholders. And we're actually headed out for like a two-week roadshow basically with our investors, which we're literally hitting the road this week and next week. So that was already set up. That's one of the first things I wanted to do when I stepped in is, you know, go talk to shareholders and get their, you know, perspective on what we've done well and clearly what we haven't done well. So that's all underway. And obviously, you know, hearing from Elliot is just like any other shareholder, meaning we're very interested in what they have to say and their thoughts on how we better drive long-term shareholder value. So that's what I would say.

And Connor, I think as John had said, I think there's a huge opportunity here as we focus on the revenue side. We brought in a top-notch commercial revenue officer who is an industry veteran who has significant experience in other areas of the industry of correcting this issue. And while that's going to take some time to harvest, we believe that, again, we're putting in the right structural components underneath that to really drive the top line as well.

Appreciate it. Thank you.

Our next question comes from the line of Matthew Boss with J.P. Morgan. We should see your two questions.

Great, thanks. So, John, as you enter 26, slightly below your optimal booking range, could you speak to actions, maybe more in the immediate term, to support improvement in booking trends and maybe specifically your mindset on preserving price relative to load factors?

I think, again, having been here two weeks, I'm going to defer to Mark on that one. I'm not that deep in the weeds yet, to be honest.

Yeah, Matt, great question. So, yeah, we are slightly behind the optimal booking curve, as we mentioned, and as a result, you know, when you look at our guidance, I think that's reflective of both the first quarter as well as the remaining three quarters. It is always a delicate balance between price and load, but I think when you step back and you think about our longer-term strategy of a central pillar around the Caribbean and getting more premium families on board, monetizing our island, we will be continuing to focus on load factor. And in fact, I think our load factor this year is increasing by over 200 basis points. So the balance is going to be finding that right price together with the right yield and load factor. And I think, again, as we align all of our commercial departments rowing in one direction, I think you're naturally going to see increases in both.

Great. And then maybe, Mark, to that point, could you elaborate on your cost growth outlook for this year? Meaning, I know this has been a strong area of focus in particular for you personally over the last couple of years, but any areas of incremental low-hanging fruit that you see to further rationalize the cost structure or maybe on the flip side, investments needed to drive yields multi-year in your view? Just what's the best way to think about the balance that we should consider here?

Yeah, I think, as John mentioned, one of the areas that we have not invested in enough is customer-facing systems technology and both marketing and revenue management technology. I think, as you guys all recall, we started investing in a new revenue management system last year. It has just started up and running over the last six to eight weeks, so that'll take some time. But I think, again, when you step back and you look at where our cost culture over the last two to three years has been, yes, we've made good progress. We've always said this is a $300 million-plus program, but a lot of that was focused on shipboard efficiencies. And now our eyes are squarely turning on the SG&A component using that same muscle. So while you dig down, there's never any – low-hanging fruit, but I think you're going to see us taking much more methodical, urgent actions around that side of the equation going forward to right-size that piece of the business.

Great color. Best of luck.

Our next question is from the line of Brant Montour with Barclays. Please receive your questions.

Good morning, everybody. Thanks for taking my questions. So John, I want to get your sense. I mean, you know, in your prepared remarks, you touched on technology and revenue management, customer-facing systems. Putting these together, do you think that there is a disadvantage at Norwegian of scale? And the reason I ask is, you know, you said that, you know, this would require patience. How long in your experience does it take to see these types of turnarounds start to come to fruition?

Yeah, I do not think we're at a disadvantage at scale. I think, again, you know, if we show the same discipline on the shore side, the SG&A side that we've done on the ship side, I think we can definitely, you know, see some improvements over the next, you know, 26 and 27 because cost, you know, you can go after faster than the revenue side given, again, how far out people book. But I think our investments in revenue management, as Mark said, and some of our guests facing technology, the island coming online, better monetization of that island. I think the revenue side, again, you're going to see more 27, 28. So they kind of go at slightly different paces just given how our industry sets up. But I think we're all – Mark might not say it's low-hanging fruit, but I would say there's lots of opportunities. So I'll quibble with him a little bit there. And, you know, that's our job to go after that and go get it and, again, focus on it as much as we did on the ship side costs.

Thanks for that. And then just a follow-up question. You know, it's been all of one and a half days since the geopolitical events unfolded in the Middle East, understanding that you don't have direct exposure there. But, you know, have you seen or do you expect to see near-term bookings pressure on on other international itineraries, namely Europe, from Americans, and have you baked anything for that into your guidance?

Yeah, good morning, Brent. So, you know, so far we're, what, a day or two into this, and, you know, I cannot say that we've seen anything noticeable around that. In terms of, you know, in terms of the guidance, you know, our guidance is our best view of how we see the world. But I certainly would not say we've baked anything in for the last two days of geopolitical issues. As I think John noted in his prepared remarks, obviously we could see a little bit of pressure on fuel. The good news is that we're over 50% hedged for the year, and the one thing that we can control is fuel consumption. And I think when you look at this year where we're heading, our implied forecast implies that we're going to be down about 3% in fuel consumption per capacity day. And that comes off of 2025 where we were down 6% per capacity day. So we're controlling what we can control. And, you know, hopefully we're hopeful that this unrest in the Middle East area settles soon.

Thanks, everyone.

Our next question is from the line of James Hardiman with Citi. Please proceed with your questions.

Hey, good morning. Thanks for taking my questions, and, John, welcome aboard and good luck. So we've talked a lot today about some of the missteps along the way, the misalignment, and I think investors very much appreciate sort of the ownership on that front. I maybe wanted to dig into if there might be other factors also at play here, namely sort of the cyclicality piece, right, the strength of the consumer broadly, and then, you know, maybe the competitive piece, right, your relative positioning within the industry. Obviously, you guys have some really impressive peers. And so just trying to dig in a little bit more, do you think the consumer is slowing? Do you think that – you know, you've lost any credibility with consumers as we think about, you know, fixing this going forward, just trying to make sure we understand all the pieces. Thanks.

Yeah, so I would start out by saying I'm going to let Mark get a little more granular. But I think the other thing, besides our missteps, I think the other thing investors really need to focus on is that You know, as we talked about, it really is a whole new team, which I was kind of lucky. I mean, a lot of people have been brought in, not just, you know, the head of Norwegian, but, you know, we have a new head of technology who came from two Fortune 500 companies and, you know, a new head of strategy and a new revenue management. I would say just even having been on the board, got back on the board about a year ago, the quality of the team is infinitely better, but the downside, which turns into an opportunity, is, you know, most of them have only been here three or four months. So, yes, we had missteps. But I think we have much higher caliber people in the key roles, so now we've just got to gel, as I said, and become one team, and I think they're equally excited about what we can accomplish. So I would say, you know, yes, missteps, but also you don't – in some of my previous turnarounds, you have to go in and kind of clear the field, spend three to four months going to find the right people to put in place. I think for the most part we have that here. I think in terms of what Mark is saying with the consumer, I think he can give you a little more color on that, so –

Yeah, James, good morning. Look, I think overall, you know, we're not seeing issues with the consumer. The consumer continues to be strong relative to cruise and relative to our space. I think what we're seeing in terms of our specific results throughout the areas are really as a result of some of the missteps that we've taken. You know, equally as important, our luxury brands continue to do very, very strong, and we're very happy with that. I think the big focus is really on our mass brand Norwegian aligning our commercial strategy and getting much, much sharper on our execution. So I would say, you know, from our standpoint, a good portion of this is probably self-inflicted wounds that we can correct, course correct over time.

Got it. That's really helpful, Culler. And then maybe staying with you, Mark, you've touched on a little bit of this, but as we think about the phasing of the year, I guess particularly on the top line, I think most of us were bracing for a pretty rough first quarter. As we think about that sort of 0.6% yield growth in the back of the year, obviously 2Q, you're still not going to have the benefit of great tides. So I'm assuming we should maybe still be modeling 2Q to be down in terms of yields before we get maybe some relief in the back half of the year. Also, really just trying to get an understanding as to what the exit rate looks like and how that might influence 2027. And then anything to call out in terms of cost phasing as well.

Thanks. Yeah, James. So, look, I think when you look at the balance of the year, as we've said, Q2 is, for the most part, pretty well sold. As we did mention, we are seeing some pressure in Europe as a result of our own missteps. Alaska is seeing pressure from the abroad industry. But I think when you start to look toward the fourth quarter and where we are, given that we will have our full island amenities as well as the water park, we'll have about a third of our passengers touching the island in the fourth quarter. I think that's where we're going to really start to see some of the turnaround starting to occur. So don't want to get too far ahead of our skis here. But we've got some work to do over the next couple quarters.

Got it. Thanks, guys.

The next questions are from the line of Vince Cipo with Cleveland Research. Please proceed with your questions.

Hi. Thanks for taking my question. Obviously, you know, the old target for low to mid-single-digit yield growth in 26 versus the flat today, there's been some degradation in the last, 90 plus days and just trying to understand kind of the shape and pace of it. Um, is it, you know, when you, when you look at your bookings, is it just things overall have been a little bit worse versus plan? Or when you look at it by month, has there been anything encouraging, discouraging, uh, that when you kind of look at the more recent trend line and bookings, how it has informed, um, kind of your perspective on the year? And when you think about kind of this starting negative and moving towards sounding like more positive yield growth in the fourth quarter, does that require an improvement in the bookings trajectory that you're seeing right now or just kind of assume more of the same?

Hi, Vince. Good morning. So, you know, look, I think, you know, when you think about bookings, it all starts with momentum. And, you know, as you start to see some changes in the momentum and you start to get slightly behind the booking curve, That has, as we all know, that has ramifications down the line over the next few quarters. The positive news is, again, we've made some organizational changes, more of which you're going to see, I think, over the course of the next few weeks. We're aligning our organization to ensure that they're operating as one cohesive unit, and we've got some good industry talent there. that are now running the key areas. So, yes, it's going to take some time, but it takes time to turn the ship, so to speak. But we are seeing some positive green shoots. It's just time is needed, and we've got a lot of opportunities on the horizon.

And I think, Mark, as you noted on, I think, the last question, the luxury brands are performing very well. So I think, again, our missteps and our lack of cohesion is really with the Norwegian brand. But because that's the largest brand by far, that's where you're seeing it pull the overall NCLH down. So I'm actually encouraged by the fact that we're executing well with two out of three. I know our opportunity is really around the Norwegian brand, as well as all the other things. We talked about we can do better on revenue management across all three brands. We can take SG&A, optimize SG&A across all three. But specifically, I think our big opportunity on the revenue side is Norwegian.

Great. And maybe digging in a little bit more there, like when you step back and think about flat yield for the year, Caribbean's 40% of the mix, and it's probably safe to assume that's negative, but Based on some of your other commentary, it doesn't sound like Europe and Alaska are kind of like hitting it out of the park for you. So I don't know. I feel like going into this call, there was probably more concern that Caribbean would be even more negative than maybe what this overall guidance implies. So can you just talk about how you have managed price in the region, what you're seeing overall? And, you know, I think in years past, you've talked about how, you know, price matters a lot more and it takes a lot longer to go earn it back. So just how you're navigating the pricing side in the Caribbean through this reshuffling.

Yeah, hi. So, you know, as I said earlier, you know, it's always a delicate balance between price and load factor. And as we continue to build our presence in the Caribbean, we're going to continue to balance that. Obviously, we are seeing some pricing pressure as a result of our missteps, and we're working on correcting that. When you think about Europe, I thought it was clear earlier, Europe as a whole is not – we don't see issues with the market. We see issues with our execution in the market. And again, there's opportunities around the margin to fix that for 2026, but we certainly can fix that for 2027. It's just a matter of we're not seeing the expected tailwinds that we would have thought year over year on that that we had expected earlier. And Alaska, again, is a little bit of a soft spot. We are seeing some pressure there just from a broad industry standpoint. So, again, these are all things that we believe are fixable, and it's going to take time. But with the right alignment, the right leadership, I think we have a huge opportunity in front of us.

Thanks. Our next questions come from the line of Lizzie Duff with Goldman Sachs. Please receive your questions.

Hi, thanks for taking the question. John, as you're stepping into this new role as CEO and taking a bit of a fresh look at things, I'm curious, as you think about the portfolio long term, how are you defining what is strategically core versus maybe non-core within the brand portfolio? And I'll ask my second question at the same time, which is, obviously, Oceana and Regent have a different profile as Norwegian. yield, margins, et cetera, any way that you can help us think about those relative margins or return profile of those brands versus the Norwegian brand?

Yeah, so I think we absolutely, as I said, I like the strategy. I like the assets and the brands we have. I think the quickest and most predictable way to get back on the right track and deliver long-term shareholder value is, again, to execute, work on revenue management, You know, work on making sure we have an aligned, cohesive plan, going after where we need to optimize the business. So I'm actually very pleased with the portfolio we have. I just think there's lots of work to do around all three brands. And I couldn't begin to tell you about the margins on the three brands because I really haven't dug in that much. I don't really think we go into that kind of level of detail anyway. But I look at them all as core is my honest answer.

Thank you.

Thank you. Our last question comes from the line of Trey Bowers with Wells Fargo. Please proceed with your question.

Hey, guys. Thanks for the question. I guess just quickly getting back to the Elliott question from before, they've obviously proposed one named new board member and would like to have a few more. How open are you guys to some fresh set of eyes on the board? Yeah, I'll just stop there.

Yeah, I would say like any company, you would expect to say, you know, we're always looking at renewing our board. I think we've added three or four board members over the last couple years. So I think that's a constant process. The government committee goes over. So I would just say, you know, all kinds of people throw us suggestions, and we will definitely look at those as a board and go from there.

And I guess just following up on Lizzie's question, if someone was to approach you guys and were interested in one of the brands, would you explore that or you feel like everything's so devalued right now that that would not be an option?

Yeah, I think, again, I believe in these three brands. I think the best way to drive shareholder value is to go execute well, take out the excesses, and let this team coalesce because, again, it's pretty brand new. And to me, that's the best path to go down. Obviously, you always reevaluate things like any company over a longer time period, but I'm pretty confident in what our plan is here.

Thanks, guys.

So I think you said, operator, that was the last question. So just again, I want to thank you all for joining us today and for your continued engagement, and we look forward to updating you on our progress next quarter as we move down the road and put some plans together here. Thank you very much.

Thank you. This will conclude today's conference. May it disconnect your lines at this time. Thank you for your participation and have a wonderful day.