Royal Caribbean Cruises Ltd.

Good morning, my name is Regina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Royal Caribbean Group second quarter 2023 and business update earnings call. All participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star one on your telephone keypad. I would now like to introduce Michael McCarthy, Vice President of Investor Relations. Mr. McCarthy, the floor is yours.

Good morning, everyone, and thank you for joining us today for our second quarter 2023 earnings call. Joining me are Jason Liberty, our Chief Executive Officer, Naftali Holtz, our Chief Financial Officer, and Michael Bailey, President and CEO of Royal Caribbean International. Before we get started, I'd like to note that we will be making forward-looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors. We do not undertake to update any forward-looking statements as circumstances change. Also, we will be discussing certain non-GAAP financial measures which are adjusted as defined and a reconciliation of all non-GAAP items can be found on our website and in our earnings release available at www.rcinvestor.com. Unless we state otherwise, all metrics are on a constant currency adjusted basis. Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our second quarter and an update on our latest actions and on the current booking environment. We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason.

Thank you, Michael, and good morning, everyone. I'm thrilled to share with you this morning our strong second quarter results and another step change in the trajectory of our business. You may recall that we doubled our revenue yield guidance and increased our earnings expectations by 40% in May on the heels of a record wave period that drove strong booking momentum for our brands. Well, as we shared in this morning's press release, it got even better since then. The combination of strong preference for our leading brands, numerous consumer tailwinds, and the attractive value proposition of cruise contributed to strong and accelerated demand for our vacation experiences. Our brands continue to excel, and we not only delivered another outstanding quarter that significantly exceeded expectations, but are also increasing our full-year earnings guidance by another 33%. I'm thrilled to share that we are now expecting double-digit yield growth for the full year and low teens growth rate for the remaining quarters. I want to thank the entire Royal Caribbean Group team for delivering another outstanding quarter. Their passion, dedication, and commitment allow us to deliver the very best vacation experiences responsibly while generating strong financial results. Last year, we laid out Trifecta, which set clear and ambitious targets. We have made tremendous progress towards those goals and now expect to achieve record EBITDA per APCD and record return on invested capital this year. We are well on our way to achieving trifecta as we continue to execute on our strategies. As highlighted on slide three, we delivered another outstanding quarter that exceeded expectations. The robust demand environment we reported back in May continued throughout the second quarter and translated into strong booking volumes at meaningfully higher prices. During the second quarter, we delivered a record 1.9 million memorable vacations at exceptional guest satisfaction scores. We achieved record yields that were 12.9% higher than 2019. Strong close-in demand, higher pricing, and continued strength of onboard spend drove the revenue outperformance. While the Caribbean remains a standout performer this year, we were particularly pleased with the strength and quality of closing demand for European itineraries. This acceleration of demand for Europe contributed to the better than expected yield performance for the quarter. Our continued focus on enhancing margins and our disciplined capital allocation resulted in more than 100% of the revenue outperformance flowing to the bottom line. We had record adjusted EBITDA and cash flow in the quarter and achieved significantly better than expected earnings. Booking volumes since our last earnings call have continued to accelerate, both for 2023 sailings and even more so for 2024, as the majority of the bookings we are currently taking are for next year's sailings. The North American consumer remains incredibly strong, and volumes from European consumers looking to book their summer vacations accelerated. The strength of our brands and quality of our vacation experiences, combined with the value proposition of Cruise, is translating into double-digit yield growth expectations versus 2019 for the year and low teens growth rate for the second half of 2023. Our load factors are now back to normal, so the incredible yield growth is driven by strengthened pricing and onboard spend for both new and like-for-like hardware. While it's still too early to provide any specific color for next year's outlook, clearly the very healthy demand environment we are seeing is quite encouraging. There has been a lot of talk about the state of the consumer, and I want to share what we are seeing from millions of daily interactions with our customers. Sentiment remains strong and is bolstered by strong labor markets, high wages, and excess savings. our customers remain engaged and eager to vacation and build memories with us as they continue to shift preferences towards experiences over goods. Over the last few months, experience spend was up 25% compared to 2019 and double that of spend on goods. Despite this increase, spend on experiences remains lower than the long-term trend line, implying a multi-year catch-up opportunity. Our vacation platform is appealing to a broad range of vacationers, and our addressable market continues to expand as we benefit from favorable demographics and wealth trends. In the second quarter, the percent of guests who were either new to brand or new to cruise surpassed 2019 levels by a wide margin, and we have seen post-cruise repeat booking rates nearly double 2019 levels. While we have made positive strides in narrowing the gap to land-based vacations over the last several months, cruising remains an exceptional value proposition, allowing us to outperform broader leisure travel as we seek to further close the gap to land-based vacations, drive better revenue, and welcome even more happy customers. Future cruise consideration is near all-time highs and a contributing factor to a doubling in website visits compared to 2019. In addition, our travel partners are now fully back up and running and delivering more bookings than they did in 2019. Our improved commercial capabilities have allowed us to capture this quality demand and expand our share of the guest wallet. In the second quarter, about two-thirds of our guests booked some of their onboard activities in advance of their cruise, translating into incremental spend once on board. While we have made a significant leap, we are still in the early endings of our journey. and we continue to add new features and capabilities to our app and commercial engines. One thing is clear. Our guests continue to spend more on their vacation experience, and our teams continue to deliver strong guest satisfaction and net promoter scores. The robust demand we see for our products is bolstered by our industry-leading brands, innovative hardware, enhanced destination offerings, nimble global sourcing model, and strong execution by our teams. New hardware has been a great differentiator for us, allowing us to drive quality demand and attract new customers into our vacation ecosystem. In 2023, we take delivery of three new ships that support our strategy and will deliver premium yield in 2024 and beyond. This month, Silversea welcomed Silvernova, the first of the new Evolution class. Later this year, Celebrity Cruises will welcome Celebrity Ascent. and Royal Caribbean International will take delivery of the game-changing Icon of the Seas late in Q4, with its revenue sailings beginning in the end of January. Looking ahead into 2024, Royal Caribbean International has recently revealed the ultimate weekend getaway, Utopia of the Seas, which will join our fleet mid-next year. Utopia will be the first Oasis-class ship that will be entirely focused on short cruises in the Caribbean, supporting our strategy of competing, with land-based vacation alternatives, and driving new-to-cruise customers into our vacation ecosystem as we seek to close the value gap. Demand and pricing for Utopia has far exceeded our expectations. Also, in 2024, Silversea will welcome the second in the Evolution class, Silver Ray, delivering the future of ultra-luxury cruising. Demand for Ray is very strong, and it is attracting the highest rates for the brand's classic fleet. We continue our efforts to deepen the relationship with the customer. We are further enhancing our commerce capabilities to optimize our distribution channels, build even more customer loyalty, and lower our acquisition costs. We continue to enhance our e-commerce and pre-cruise capabilities and are seeing increased guest repeat rates and spend, as well as further elevation in the overall guest experience. We will continue to excel in the core and drive business excellence in order to increase yields, and capture efficiencies across our platform. Our proven formula for success remains unchanged. Moderate capacity growth, moderate yield growth, and strong cost control will lead to enhanced margins, profitability, and superior financial performance. In conclusion, our business and our amazing team on and off the water are firing on all cylinders as we exceeded expectations in the second quarter and significantly increased our earnings and cash flow guidance for 2023. We are well on our way to achieving our trifecta goals. Our differentiated platform that includes the best brands, fleet, destination, people, and global sourcing platform is winning. And I'm very proud of our teams that go out every day to deliver the best vacations responsibly. And with that, I will turn it over to Naftali. Naf?