Norwegian Cruise Line Holdings Ltd.

Good morning and welcome to the Norwegian Cruise Line Holdings Second Quarter Earnings Conference Call. My name is Samantha and I will be your operator. At this time, all participants are in 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, this conference call is being recorded. I would now like to turn the conference over to your host, Sarah Inmon, VP of Investor Relations. Ms. Inmon, please proceed.

Thank you and good morning, everyone. Thanks for joining us for our second quarter 2026 earnings call. I'm joined today by John Chidsey, 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 the 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 call. Before we begin, I would like to cover a few items. Our press release with second quarter 2026 results were issued this morning and is also available on our investor relations site. 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 a 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 net cruise costs excluding fuel per capacity day are on a constant currency basis. and comparisons are to the same period in the prior year. With that, I'd like to turn the call over to John.

Thanks Sarah and thanks everyone for joining the call. I'm joined today by Mark as we discuss our second quarter results. At a high level, we delivered solid second quarter results. Top line grew 5% driven by increased capacity days while we lowered unit costs 0.5% leading to profitability ahead of guidance. At the same time, the team made substantial progress during the quarter to advance our turnaround priorities. I'm going to talk with you today about actions underway and why I am confident in our pathway to revenue recovery, which combined with our cost control capabilities, will drive meaningful growth and profitability and improve shareholder returns. Successful turnarounds are never linear and take time to demonstrate tangible performance improvements, which translates into financial success. Rest assured, our teams are moving with urgency and enhanced accountability across internal functions to continue executing on the initiatives we have underway and are building on our strong foundation. As you can see on slide 4, during my first months as CEO, we have moved swiftly. We have made leadership changes across the brands, adding new revenue management and marketing leadership at NCL, and building key commercial capabilities. all while remaining focused on improving our booking curves and delivering on critical initiatives such as Great Tides Waterpark on Great Stirrup Cay on time. At the same time, we have not let up on cost discipline and organizational efficiency. Mark will provide more detail later in the call, but during the quarter we identified an additional $100 million of annualized savings and cash benefits. Combined with the $125 million of annualized run rate savings we announced last quarter, This brings the actions announced over the past two quarters to approximately $225 million of annualized savings and cash benefits. Importantly, we are actioning these initiatives as demand for cruise and the long-term fundamentals for the industry remain strong, as consumers are prioritizing travel and experiences. We have strong brands, attractive assets, and a product that continues to resonate with guests. but those advantages only matter if we execute with greater discipline and translate them into better financial performance. Turning to slide five, our approach and priorities are consistent with what we outlined last quarter. Build the team, culture, and capabilities required to execute. Sharpen brand positioning and marketing effectiveness. Rebuild demand and improve our book position and optimize pricing and yield through that strengthened demand base. This is the path to enhance our fundamental business model and operations to position NCLH for success. Among the top of our priorities list has been ensuring we have the right leaders, talent, and operating discipline in place to guide NCLH forward. This is foundational because the opportunity in front of us is not about strategy, as we have discussed previously. It is about changing how we operate. We recognize the need to work with a true one-team mindset across functions internally. During the quarter we made meaningful progress by welcoming our new Chief People Officer, Heather Jacobs. Heather brings more than 25 years of global people and cultural leadership experience across travel and hospitality. We strengthened commercial leadership at the Norwegian brand with the appointment of Lee Appelbaum as Chief Marketing Officer. Lee brings more than 25 years of experience building and transforming global consumer brands, including Patron, Bacardi, and Wheels Up. Additionally, we have continued to build out the teams in other critical areas, including in-sale revenue management, digital commerce, casino, and itinerary planning. These appointments build on the leadership updates we have made over the past year across other key functions such as technology and strategy. in addition to changes made at the brand level. In total, half of my direct reports are new in the role over the last year and we have substantially rebuilt and strengthened the Norwegian brand leadership team. Having this experienced team in place is essential to implementing meaningful operational changes. With the team now in place, our next step is to build our operating rhythm and culture and translate that collective experience into better execution and ultimately better results. I'll now turn to our plans to sharpen our brand positioning, particularly with respect to NCL's marketing engine. As seen on slide six, the starting point is important. We believe we have the right product and the right target consumer. We see that in our guest satisfaction scores, repeat rates and cruise next sales, which reinforces that the product and service experience continue to resonate once guests are on board. We have also identified and sized our priority consumer, premium families and seasoned travelers, which represents over 35 million consumers. Additionally, we already have work underway to develop a clearer understanding of what motivates them and determine how best to reach them. In parallel, we are inventorying our products and services to define what truly differentiates NCL and mapping those strengths against the needs of our target guest. The work thus far gives us confidence in the fit between the in-sale offering and our target consumer. We provide a flexible premium vacation experience with something for every member of the family while still creating shared moments together. The Gap has been connecting the right consumer with the strength of our offering through our messaging and media. We have the right product and are focused on the right consumer. Now we are focused on effectively reaching that audience through the most impactful channels. Great Stirrup Cay is a clear example of this, and you can see that Great Tides Waterpark is coming together on slide 7. Great Stirrup Cay has long been one of our highest rated destinations, but historically, the island did not fully deliver the breadth of the experience that premium families are looking for. While we had elevated experiences like Silver Cove and our private villas, We also had an opportunity to create more for families to enjoy together. We are addressing that opportunity with Great Tides Waterpark, which is preparing for a preview period beginning next week ahead of the official grand opening on September 4th. The nearly six-acre waterpark will feature 19 waterslides anchored by the 170-foot tidal tower. In over 800-foot high-energy river and the industry's first cliffside jumps, These attractions complement the recently opened Great Life Lagoon, a 1.4-acre pool area larger than two Olympic-sized pools combined, as well as existing experiences such as ziplining and Silver Cove. Combined with the pier, which is also expected to open shortly, the island experience will be more reliable, easier to access, and better aligned with what our target guest wants from a premium family vacation. Together, These investments should enhance the island's revenue potential by increasing guest throughput and expanding the range of paid experiences available to guests. I was on the island a few weeks ago, and what stood out to me is the breadth of the experience. Teens can enjoy the slides, cliff jumps, and wandering river at Great Tides Waterpark, while adults have places like Vibe Shore Club, Silver Cove, and our private villas where they can relax and enjoy the island in a more elevated way. It is exactly the kind of differentiated experience that allows NCL to create memorable vacations for guests across generations. Importantly, we are not waiting for the 2027 weigh season to act. We are already changing the way we communicate Great Stirrup Cay and the broader NCL value proposition. In the coming weeks, we will introduce interim creative that more directly speaks to premium families, highlights the breadth of the NCL experience, and includes a clear call to action. The goal is straightforward. Communicate more clearly why NCL is different, why that different matters to our target guest, why now is the right time to book. Improving our brand positioning and rebuilding demand are critical to returning to our optimal book position. We are also strengthening how we manage that demand through improvements to our team, tools and processes as you can see on slide eight. During the quarter, we began making changes to the way we sell cruises at NCL. As we evaluated our prior approach, it became clear that in certain areas we were holding price too high, too far out, which limited early demand generation and left us more exposed to close-end discounting. We are now moving toward a base-loading methodology which establishes more competitive pricing earlier in the booking curve to build demand sooner and support stronger close-end yields. This is not about discounting the product. It is about managing the full booking curve more effectively, building a healthier book position earlier, maintaining better price integrity as we move closer to sailing, and being more strategic about our promotional activity. As part of this shift, we have taken pricing initiatives on select sailings in 2027 and open 2028 sailings. The greatest opportunity is on sailings farther out in the booking window. particularly later in 2027 where we have more time to shape the curve. For new 2028 inventory and beyond, all NCL sailings will be managed using this methodology from the outset. Taking a step back, we are focused on managing inventory and price in a more disciplined way, maximizing yield over the full booking cycle and reducing our exposure to close-end demand volatility. particularly in periods of external disruption like the one we are navigating today. With many of these operating changes already in motion, we are moving swiftly to ensure the company is better positioned to capture the revenue opportunity we know exists across our brands. It is important to remember that we are still early in this process, however, and we expect the financial benefits of the actions we are taking today to build over time. I have spent significant time discussing the NCL brand, but I also want to address the work underway across our luxury portfolio, as shown on slide 9. The work here is focused on three areas, sharpening brand positioning, elevating the product and guest experience, and strengthening commercial performance over time. At Oceana Cruises, our focus is on aligning the fleet more closely with the brand's luxury positioning. That is why we are reimagining Oceana Nautica to Oceana Aurelia, creating a more intimate, sweet-forward ship designed for fewer guests with enhanced service levels. Today, we are also announcing that we have entered into a binding memorandum of agreement to sell Oceana Serena. The transaction includes a leaseback arrangement that will allow us to continue operating the vessel until the ship is transferred in Spring 2028. This is a deliberate portfolio action to move the Oceana fleet toward a product offering that better supports the brand's positioning and long-term return profile. It also represents another step toward improving Oceana's product market fit and simplifying the portfolio to more fully reflect the luxury experience our guests expect. At Regent, we are taking similar action to further strengthen the brand's position in the ultra luxury market. We are announcing a new suite category on the Seven Seas Explorer class ships, where we will reimagine and expand our entry level suites on these vessels. As a result, Regent will offer the largest entry level suites in the luxury cruise industry, while also improving two important luxury metrics, space ratios and guest or crew ratios. Taken together, these actions are about making the products match the positioning Creating clear differentiation for our guests and improving the financial performance of our luxury portfolio over time. We've learned a great deal over the two quarters and made meaningful progress executing against our strategic priorities. While the financial benefits will take time to build, we are confident that the actions we are taking will support stronger performance over time. With that, let me turn it over to Mark.