Norwegian Cruise Line Holdings Ltd (NCLH) — Q3 2025 Transcript

Thank you, Sherry, and good morning, everyone. Thanks for joining us for our third quarter 2025 earnings call. I'm joined today by Harry Sommer, 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 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 third quarter 2025 results was issued this morning and is also available on our IR 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 net yields and adjusted net cruise costs excluding fuel per capacity day are on a constant currency basis and comparisons are to the same period in 2024. With that, I'd like to turn the call over to our CEO, Harry Sommer. Harry?

Well, thank you, Sarah, and good morning, everyone. Welcome to our third quarter 2025 earnings call. I'll begin my remarks today with a discussion of the third quarter results and recent booking pace, and we'll then get into some recent highlights on our three brands and strategy. I'll then provide some brief comments on how 2026 is shaping up before handing the call over to Mark, who will provide a deeper dive into our financial performance and outlook. So to dive right in, I am pleased to report another record quarter with results that met or exceeded guidance across all metrics. As a result, we are reiterating our full year adjusted EBITDA guidance and raising our guidance for adjusted EPS. Our performance this quarter was driven by solid customer demand which drove load factors higher, reflecting the continued strength of our brands and the execution of our charting the course strategy. As previously stated, we remain committed to balancing return on investment with return on experience, delivering exceptional vacations, driving sustainable financial performance and strengthening our balance sheet. Now delving a bit more into the details of our third quarter results shown on Slide 4, we achieved another quarter of strong performance and solid execution across the business. We met or exceeded guidance we provided in July and delivered the highest quarterly revenue in our company's history. Load Factor finished ahead of expectations at 106.4% driven by stronger-than-anticipated demand from families, particularly at the NCL brand, resulting in net yield growth of 1.5%. Costs were essentially flat year-over-year, which resulted in adjusted EBITDA of approximately $1 billion, a milestone achieved for the first time in company history. As a result, our trailing 12-month adjusted operational EBITDA margin reached 36.7%, an improvement of 220 basis points from last year and another meaningful step towards achieving our charting the course margin target. Finally, adjusted EPS came in at $1.20, exceeding guidance by $0.06. Turning now to recent demand. Bookings in the third quarter marked the strongest third quarter bookings in company history with bookings up over 20% from last year. With this trend continuing into October, all collectively driven by strong demand, not only for short Caribbean sailings this winter, but also for our luxury brands. These results not only underscore the strength of today's demand but also provide a solid foundation for growth in the quarters ahead. Of course, there are other highlights in this eventful quarter that I would like to share. First, on the financial side, which Mark will cover in more detail, we completed a multifaceted capital market transaction that, among other benefits, reduced our share outstanding on a fully diluted basis by more than $38 million or over 7%, materially improving our adjusted EPS. On the guest experience side, we introduced several enhancements, including our new tri-branded loyalty recognition program, which I'll discuss later, and the launch of an enhanced website for the NCL brand. The new site is already delivering results with faster performance, better guest experience and higher conversion rates, resulting in increased bookings. We have also made it easier for guests to personalize their vacation with more targeted pre-cruise offerings. For example, we are now promoting high-value onboard products such as Vibe Beach Club passes, drinks and dining packages, streaming WiFi, spa treatments and short excursions through personalized e-mails and push notifications. Pre-cruise sales are at all-time high levels, which drives higher onboard revenue and higher guest satisfaction and repeat rates. On the sustainability front, we recently announced a landmark agreement with Spain's Repsol for supplying renewable marine fuels at the Port of Barcelona. This 8-year agreement starts this upcoming European season and is a first-of-a-kind partnership in the industry, underscoring our sustainable commitment. This agreement is a great example of cross-industry collaboration that could unlock meaningful progress and secure long-term access to renewable marine fuel in Europe. Now I'd like to take a few minutes to discuss the high-level strategies we're executing across our three brands, which are summarized on Slide 5. These strategies are designed to ensure we continue delivering exceptional experiences for our guests while advancing our charting the course targets and creating long-term value for our shareholders. At Norwegian Cruise Line, our focus is enhancing the family appeal and experience. At Oceania Cruises, we're working to firmly position the brand within the luxury sector. And at Regent Seven Seas Cruises, we're focused on maintaining its well-earned reputation as the pinnacle of ultra-luxury cruising. Moving to Slide 6. I'll dive into the strategic evolution underway at Norwegian Cruise Line. This is a transformation that has been underway for several months and is now accelerating with sharpened focus under the brand's new leadership including a new Chief Commercial Officer and a new Chief Marketing Officer with a robust search for a world-class leader to head the NCL brand well underway. As part of this evolution, the brand is executing a focused 3-part commercial strategy to drive yields and profitability higher over the next year and into the future. First, we're focusing more on families as a core demographic. We're building brand familiarity through our short Caribbean sailings, which give more guests, particularly families, a chance to experience our amazing product. That exposure helps build loyalty and creates a pipeline of repeat guests for the future. Over time, this will increasingly support one of our key priorities, boosting Load Factors. We are working diligently to attract more families to the brand to experience everything Norwegian has to offer, both onboard and other destinations, particularly our upgraded private island Great Stirrup Cay and through enhanced onboard offering geared towards families. Second, we're strengthening our brand positioning and marketing. To reach the broader family market, NCL is developing a refreshed brand campaign designed to elevate awareness and strengthen emotional connection, which we should launch in early 2026. Alongside that, we're optimizing our marketing mix and spend to ensure we're getting the best possible return on every marketing dollar, creating efficiencies throughout 2026. Lastly, we're elevating the guest experience. We are pleased to reiterate that our previously announced enhancements at Great Stirrup Cay are all on track to open around the holidays, including the new multi-ship pier, welcome center, tram system, an expansive 28,000 square-foot heated pool, the size of an entire cruise ship with a swim-up bar, kids' splash zones, shore club, new dining and beverage outlet and dozens of new cabanas. The upcoming summer '26 launch of the Great Tides Water Park will mark another milestone moment for the brand, spanning nearly 6 acres, the water park will feature 19 thrilling water slides, a dynamic river, a huge kids splash zone, a 10- and 15-foot tall cliff jump and an innovative jet karts attraction. It will be the perfect family-friendly addition to our already exceptional island amenities, which includes Silver Cove, an exclusive retreat offering magnificent villas and a beach club. And that's just the additions at Great Stirrup Cay. We're also looking ahead to enhancements across other destinations in our portfolio. In addition, we are expanding our kids and family programming with improved activities and entertainment, ensuring engaging experiences for guests of all ages. At the core of this approach is our ambition to be the brand of choice in the contemporary space for both seasoned travelers and premium families while maximizing profitability. Future travel intent, current bookings, guest satisfaction scores, and future onboard cruise sales are all at or near record levels, clear signs that our strategy is working. We continue to actively balance between load factor and price with the goal of optimizing net yield, margins, and most importantly, profitability. Now turning to Slide 7. This strategy is already leading to tangible results. Our increased Caribbean presence, additional short sailings, which capitalize on demand for closer to home family vacations and continued investment in our private island destinations are already driving higher Load Factors. The fourth quarter marks the first period where we're truly seeing the shift in strategy come to fruition. In Q4 of this year, we will have the highest mix of short sailings since 2019, reflecting our deliberate move to rebalance Norwegian's deployment towards closer to home itineraries. This approach expands our reach, appealing to a broader mix of guests, particularly premium families and unit cruise travelers, while allowing us to better leverage our private island investments. In Q4, short sailings capacity is increasing over 80% versus prior year. And our Caribbean deployment is moving to over 50% of our total capacity. As a result, we now expect Load Factors to improve over 100 basis points year-over-year to nearly 102%. Now I know many of you will probably ask why our fourth quarter yield guidance has changed from our prior implied guidance to growth of 3.5% to 4%. So let me get ahead of that question. As mentioned earlier, we are very focused on Load Factor and increasing brand visibility through our Caribbean product. It has been quite some time since we've had this level of short sailings in our deployment and demand has exceeded our expectations. In the fourth quarter, our Caribbean short sailings are performing quite well, particularly among our targeted family demographic, driving Load Factors higher than we had forecasted. On our Caribbean sailings, we are seeing more families, which means more children in each cabin. We expect core pricing for the first and seconds to be well up. The addition of children as third and fourth in the cabin, however, will naturally dilute blended pricing. The end result remains strong yield growth and strong margin expansion. This is an intentional planned trade-off to drive margins and profitability higher in both the short- and long-term. These early results from our increased short sailing Caribbean deployment are encouraging and reinforce our confidence in the strategy. Now looking ahead, we expect this dynamic to accelerate in the first quarter of 2026 with Load Factor projected to be 200 to 300 basis points higher year-over-year, driven by a meaningful 40% increase in short sailings. Additionally, this will coincide with the soft opening of Great Stirrup Cay's new amenities around the holidays, while the more meaningful enhancements will be coming when Great Tides Water Park opens later in summer 2026. When we return next winter, we'll have the full benefit of the new amenities at Great Stirrup Cay and the word of mouth from thousands and thousands of satisfied guests, which will further strengthen performance. Moving on to Slide 8. We're confident this positive momentum will continue throughout 2026 with Load Factors building on 2025 levels and returning to, if not exceeding, 2024 levels, reaching at least 105%. This is sustained progress driven by this new deployment strategy. Now I've spoken a bit about the Norwegian brand, and now I want to turn to our luxury portfolio, Oceania Cruises and Regent Seven Seas Cruises on Slide 9. The opportunity we're seeing in luxury cruising has never been stronger. Global luxury spending continues to expand with experiences ranking as the fastest-growing segment in 2024. Both Oceania and Regent are perfectly positioned to capture this demand. Oceania delivers luxury by choice, offering guests elevated personalized experiences with exceptional culinary offerings, while Regent is the pinnacle of the ultra-luxury all-inclusive luxury segment. To fully capitalize on this opportunity, we brought back Jason Montague earlier this year to lead both brands and drive the next phase of growth. Turning to Slide 10, you can see the tangible progress already underway. The first thing Jason did was optimize the organization, ensuring we have the right leadership structure and the right people in the right roles to support long-term growth. Next, he's been deeply engaged in our fleet management program, including our pipeline of three luxury ships, overseeing the design and launch of Oceania Allura and Regent Seven Seas Prestige, both of which will set new standards for design, experience, and efficiency. He has also been very focused on elevating our existing fleet, and Seven Seas Mariner is the latest example of that commitment. The ship entered dry dock just yesterday, where we're undertaking a full transformation, refreshing suites, reimagining public spaces and introducing an enhanced pool grill featuring a new wood-fired pizzeria concept for relaxed alfresco dining. Seven Seas Voyager will be undergoing a similar revitalization when she enters dry dock next year. Coupled with our three new vessels and the upcoming Prestige delivering in 2026, we truly will have the world's most luxurious fleet. Finally, Jason has been laser-focused on enhancing brand positioning and marketing across both brands, ensuring that Oceania is fully recognized in the luxury space, while Regent maintains its place as the pinnacle of ultra-luxury cruising. We know we have two extraordinary luxury products. Now it's about telling these brand stories more powerfully and consistently in the market. I want to take a moment to recognize Jason and the entire luxury team, they're doing an outstanding job executing on this strategy, elevating both Regent and Oceania and positioning our luxury portfolio as a key growth driver for 2026 and beyond. Finally, moving to our loyalty program on Slide 11. I'm thrilled to share how we're taking guest recognition to the next level. We recently launched our new loyalty status honoring program, allowing members of Latitudes Rewards, Oceania Club, and the Seven Seas Society to have their tier status honored across all three of our award-winning brands. Our guests will now be able to enjoy the loyalty perks they've earned, no matter which of our brands they choose to sail. It's a major step forward that makes it easier than ever to explore the world within our NCLH family. This change will also encourage our top guests to try our other brands. It's really about deepening our connection with our most loyal guests, rewarding their commitments and giving them even more ways to vacation better and experience more. And while it's early, the preliminary results of this program have well exceeded our expectations, proving again the power of our brands. And with that, I'll be happy to turn the call over to Mark.

Thank you, Harry, and good morning, everyone. Let me start with our third quarter results highlighted on Slide 12. We delivered another strong quarter, exceeding or meeting guidance across all metrics. Occupancy came in at 106.4%, nearly 100 basis points above guidance, driven by strong family demand across all itineraries. Net yields grew 1.5%, in line with guidance, fueled by strong pricing growth of over 3%. On the cost side, adjusted net cruise cost excluding fuel was down 0.1 point, coming in slightly better than expected as our cost control efforts continue to bear fruit. As a result of better-than-expected fuel consumption, adjusted EBITDA for the quarter was $1.019 billion, above our guidance of $1.015 billion. Adjusted net income came in at $596 million. Adjusted EPS came in $0.06 ahead of guidance at $1.20. Overall, this was a solid quarter, consistent with our expectations. Moving on to fourth quarter and full year guidance on Slide 13. We expect occupancy to be approximately 101.9% in the quarter, roughly 100 basis points above the prior year and our previous implied guidance. As Harry mentioned, we are very focused on Load Factor and brand visibility at the Norwegian brand, and we are encouraged by the progress we have made this quarter as family demand surpassed our initial expectations driving occupancy higher. I want to reiterate that we continue to balance Load Factor and price recognizing the natural give and take between the two. As we attract more families, we are seeing more third and fourth guests in a cabin. And naturally, those guests come in at a lower price point which has a modest impact on overall pricing. As a result of this dynamic in the fourth quarter, we expect net yield to grow approximately 3.5% to 4% reflecting our deliberate decision to welcome more families while taking a slight trade-off on price, which remains healthy at nearly 3% growth. As a result, full year net yield growth expectations have been adjusted slightly to 2.4% to 2.5% for the year. Turning to cost in the fourth quarter. Adjusted net cruise cost excluding fuel is expected to be essentially flat, up only 50 basis points year-over-year. This is slightly higher than our prior implied guidance for the quarter, primarily due to the timing of certain expenses. As a result, for the full year, we now expect cost to increase 75 basis points, well below inflation. This is the second year in a row we have been able to achieve this strong cost control, all while achieving record guest satisfaction scores and repeat rates. We expect fourth quarter adjusted EBITDA to be approximately $555 million and adjusted EPS to be $0.27. As a result, we are reiterating our full year adjusted EBITDA guidance at $2.72 billion and increasing our full year adjusted EPS guidance to $2.10, which represents almost a 19% increase year-over-year. Moving on to Slide 14. I want to take a moment to highlight the strong progress we've made on our cost savings program. Back at our Investor Day in May 2024, we set a bold goal to achieve more than $300 million in savings and we remain fully on track to deliver on that commitment. In 2024, we realized over $100 million in savings, and we're on pace for another $100 million plus in 2025 which has allowed us to limit net cruise cost growth to only about 3/4 of 1%. We are carrying this culture of cost discipline into 2026 and we have full line of sight to achieving at least another $100 million in savings next year, keeping our unit cost growth well below the rate of inflation while continuing to deliver an exceptional guest experience. These cost savings have been a major driver of our continued margin expansion, as you can see on Slide 15. Our adjusted operational EBITDA margin has increased by roughly 600 basis points since year-end 2023, and we remain on track to reach approximately 37% by the end of this year. Looking ahead to 2026, we expect this positive momentum to continue supported by our proven algorithm of low- to mid-single-digit yield growth and sub-inflationary cost growth. The strategic initiatives Harry outlined earlier are central to this plan, from bringing more families to the Norwegian brand and increasing Load Factor, to refreshing our brand and marketing and the launching of new amenities at Great Stirrup Cay this year around the holidays and the new water park next year. At the same time, our luxury brands continue to benefit from strong demand trends and their truly best-in-class offerings. Oceania is building momentum as we position it squarely in the luxury space, and Regent remains the clear leader in ultra-luxury cruising, delivering an unmatched product and service experience. I'm confident that all of these efforts driving both the top and bottom line will enable us to further expand margins and achieve our approximately 39% target next year. Turning to Slide 16. You can see our debt maturity profile, which has been extended and strengthened following our recent capital markets activity. In September, we successfully completed a series of strategic transactions that significantly enhanced our financial flexibility. We refinanced the majority of our 2027 exchangeable notes extending our maturity profile, and reduced our shares outstanding on a fully diluted basis by approximately 38 million shares, all while remaining essentially net leverage neutral. In addition, we refinanced approximately $2 billion of debt, including the replacement of about $1.8 billion of secured debt to unsecured. As a result, we have now fully eliminated all secured notes from our capital structure. These actions underscore our continued focus on optimizing our balance sheet, improving collateral utilization and positioning the company for sustainable long-term growth. Turning to net leverage, I want to emphasize that reducing leverage remains our top financial priority. In the third quarter, net leverage increased slightly from the second quarter to 5.4x from 5.3x. This modest increase reflects the delivery of Oceania Allura where we took on the associated debt but have not yet annualized the EBITDA contribution from the ship. We now expect to end the year at approximately 5.3x. Excluding the impact of non-cash foreign exchange revaluation on our euro-denominated debt related to Norwegian Aqua and Allura, our leverage would end the year at approximately 5.2x. In a year when we've taken delivery of two new vessels, maintaining flat leverage is a notable accomplishment and positions us well to achieve our 2026 target of reaching the mid-4x range. In closing, our solid performance so far this year and the ongoing benefits from our cost initiatives reflect meaningful progress on our top financial priorities: deleveraging, expanding margins, and strengthening the balance sheet. I'll hand the call back over to Harry to close out.

Well, thank you, Mark. Now looking at Slide 18, I'd like to once again highlight the significant progress we're making towards our key charting the course financial targets. By year-end 2025, we expect adjusted operational EBITDA margin to expand by more than 600 basis points versus 2023. Adjusted EPS to grow nearly threefold, net leverage to decline by 2 full turns and adjusted ROIC to continue its upward trajectory. I'm incredibly proud of what we've accomplished so far in 2025. Looking ahead, 2026 is shaping up to be another outstanding year with capacity set to grow approximately 7% as the Regent Luna and Seven Seas Prestige join the fleet, we expect to see continued strength across all three brands. At Norwegian, we anticipate even more families sailing with us further lifting Load Factor and driving margin expansion. Our strong capacity growth, combined with low- to mid-single-digit yield gains and sub-inflationary cost growth is expected to drive meaningful margin expansion and continued deleveraging in 2026. I'm confident in our trajectory and excited about the last months of 2025 and the year ahead will bring as we continue charting our course to our sustainable, long-term value creation. With that, I'll hand the call back to Sherry to begin the question-and-answer session.

So heard loud and clear '26 high-level targets are reiterated here. But guys, with a little bit of pressure from mix in the fourth quarter, based on the shift to families as well as it looks like incremental confidence in the occupancy lift for next year, can you give us some sort of additional insights into how that mix shift would affect yields for next year, all else equal?

Good morning, Brandt, this is Mark. So first and foremost, our job is to maximize yield margins and, of course, earnings growth. And I think that we've been telegraphing consistent with our strategy, we aim to grow yields next year in the low- to mid-single digits. But going back to in line with our strategy, we've been clear that we continue to expand the Norwegian brand into the family segment. As we do that, that obviously brings higher Load Factors, which we have clearly seen both in the third and more importantly, into the fourth quarter, we will see a significant benefit from that in the first quarter of about a 200 to 300 basis point improvement year-over-year. With that, families and children often bring slightly lower pricing in the overall mix. But importantly, our core customer, that first and second customer, we are seeing meaningful growth in pricing. So we expect to continue to grow yields in that low- to mid-single-digit algorithm. And again, this is in line with our strategy, and we're executing as planned.

Thank you for the valuable insight. I have a second question regarding the bookings. Harry, you mentioned that bookings increased by 20%. Could you clarify whether that statistic refers to the quarter or the month? I believe it's for the quarter. Regardless, I don't think that figure was adjusted for capacity growth, but it's still impressive. How does this align with the statement in the release about being within the optimal range? I would expect this to indicate movement toward the upper end of that range, especially since the mix is shifting more toward the Caribbean, which typically has shorter booking windows. Therefore, under normal circumstances, I would anticipate a decrease in longer lead time bookings, which could be a concern for us. So, could you help clarify these points and what might be driving this acceleration in bookings?

Sure, Brandt. There's a lot to cover, and I'll do my best to address as much as I can remember. First, bookings increased by 20%, which applies to the entire quarter rather than just a specific month. Additionally, this increase extended into October. Both the third quarter and the month of October saw this growth, and I want to highlight that it was widespread across all three brands—NCL, Oceania, and Regent all experienced this increase. While Oceania and Regent don't have a significant presence in the Caribbean, their growth is not related to that region but rather reflects the progress being made in consumer demand. Specifically for NCL, there are some unique advantages regarding bookings. You mentioned capacity, and there is also a trend towards shorter cruises, which means we need more bookings. Overall, we are observing a stronger consumer appetite in this third quarter compared to the same period last year.

I appreciate what you've said about the kind of dilution from families totally get that. But at the same time, there has been a lot of focus on the Caribbean and whether there is kind of more of a promotional environment there with so much kind of competition, everybody kind of moving the ships there. So curious what you're seeing and whether that has kind of impacted you at all or you expect it to going forward?

So Lizzie thanks for the question. We're not really seeing anything unusual in the promotional landscape, at least within the competitive set that we play in. What we're seeing this year is normal from both a price and promotional perspective, which is one of the reasons that it will allow us to have this 3.5% to 4% yield increase in Q4 that we've discussed. So no, nothing unusual.

Okay. Got it. And then, I guess, thinking about longer term, your Caribbean capacity is growing, what is the kind of strategy to kind of absorb that capacity in Caribbean? I know you've got the GSC development, but I'm curious if you feel like there's a need to kind of push marketing or how we should think about costs from those kind of private island investments? Just anything like we should consider as we move to 2026.

I believe it begins with consumer demand. Our aim is to establish both a brand framework and targeted marketing strategies that resonate with the demographics likely to be interested in the Caribbean. We've previously discussed the changes in our branding and marketing communications, so I won't repeat that here. With the recent additions of a new Chief Marketing Officer and a Chief Commercial Officer, we are certainly making headway in these areas. The expansion of GSC will definitely contribute to this effort. I want to point out that approximately one-third of our guests in the coming year on the NCL brand will visit GSC, making it our most frequented destination globally. Thus, our investments there are crucial. I also want to highlight that everything we plan to launch over the holiday period, just a month away, is on schedule. I visited the island recently, and it looks fantastic. I want to remind everyone that our footprint at GSC exceeds that of many competitors, and we intend to make good use of it. The upcoming addition of a water park in the summer of next year should be another significant milestone and a game changer regarding demand. Ultimately, we believe that with the brand, the marketing efforts, and the influx of guests enjoying the initial amenities available during the holiday season, we can expect positive word of mouth. Regarding your second question about marketing, we have increased our marketing spending this year. I want to assure analysts that our flat costs year-over-year did not result from cutting marketing expenses. In fact, we've raised our marketing spending significantly more than the 75 basis points increase in our overall cost structure, and we've achieved savings through efficiencies elsewhere to support this. We plan to keep investing in marketing, as it's essential for driving consumer demand. We believe our current marketing expenditure aligns well with our revenue goals for next year, and we will maintain these spending levels moving into next year while exercising strong cost control throughout our financials. This strategy will allow us to continue the impressive margin expansion of 600 basis points we've achieved over the past year, with an additional 200 basis points planned for next year, all while managing increased marketing expenses.

Okay, Mark, you'll probably hit this question. But if we think about next year, you basically just said you expect to grow yields kind of in that low- to mid-single-digit range. And if I look at Slide 14 and I get my handy dandy ruler out to kind of gauge where costs are projected based on that bar chart. They look like they're going to be higher, but not anything crazy. So if we put all that together, it seems like there would be maybe a good bit of upside to your charting the course EPS targets, I'd say, especially now also including your recent capital market transaction. So I'm not sure what you can say or not say about that, but any comments there would be super helpful.

So first, I love all questions from you. Second, yes, when you get your ruler out on that chart, I want to reiterate through the broader constituency that our target, as we've been maintaining, is to deliver sub-inflationary or better unit cost growth. And we've been very successful at doing that now for two years in a row. And we certainly maintain and have a clear line of sight on that for 2026. Look, I think when it comes to the charting the course targets as you've heard today, we are reiterating our confidence in hitting those targets. We are executing on our strategy. Of course, it's early in the year. We do have a lot more Caribbean sailings. So bookings are naturally a little bit closer in. But everything we're seeing today indicates that we're well on our way. So we have confidence on our path. We have confidence in executing our strategy, and that's what we're maintaining. And we'll continue to deliver on that path.

Okay, I understand. For my second question, regarding the fourth quarter yield guidance, Harry and Mark, you noted the yield challenges from the addition of the third and fourth and the increased Load Factors. Did you also consider any effects from factors such as the recent weather changes in the fourth quarter or the government shutdown? I'm trying to determine what the like-for-like yield would look like, without factoring in the Load Factor increase.

It's hard to sort of break things down into their components. So I'll start out by saying that we believe a 3.5% to 4% yield growth on a year-over-year basis is strong, and we're very happy with it. If you're asking whether there were modest impacts by the government shutdown, hard not to believe that, that's a modest headwind to the business. I wouldn't necessarily say the weather was a big deal. It was actually a relatively modest hurricane season as these go; we only had an impact on a handful of Bermuda cruises and one or two now to Jamaica, none of which had to be canceled, just re-routed. But maybe on the government shut down a little bit. But the macro environment continues to be strong, the economy continues to grow, unemployment rates continue to be low. The things that we measure, cruise intent, future cruise sales onboard the ship are all at or near record levels. So we're pleased. And of course, the proof is in the pudding, I've gone out not just for Q3, but for the actual month of October, the month that just ended, that bookings were up over 20% year-over-year across all three brands. We think that's a pretty good setup, but we'll continue to move forward.

I think we lost Robin. Sorry.

So Harry, maybe a 2-part question. If you could elaborate on the progression of booking trends that you saw through the third quarter and into October. And then if you parse through the mix impact that you cited in the Caribbean, could you speak to underlying pricing trends across itineraries that you're seeing across both family and luxury?

Well, I don't think there's been a material change. If you're asking whether we saw an acceleration July, August, September, October, they were all four of them were good months. I wouldn't necessarily say that one of them stood up or that things have decelerated in any way, maybe a modest acceleration coming into October, but nothing that material. All four months were very good months for us. And on the pricing side, I'd make a similar comment. There's nothing that stands out, if you will. I think across the board, we've seen strength. I just want to echo Mark's comments on pricing; you just have to think about NCL a little bit different. We're seeing good pricing increases on the first and second in the cabin as we increase third and fourth; that naturally is a modest headwind to overall average price but still a benefit to yield margin and profitability. So I just want to emphasize that point. But across the board, nothing that stands out one way or another, we're seeing good strength everywhere.

And then maybe, Mark, as a follow-up, could you help break down the drivers of Load Factors in 2026 that you're expecting to exceed 2024. What you're embedding for the Caribbean relative to the opportunity you see year-over-year in Europe?

Look, thanks, Matt. I think it's a couple of things. Obviously, when we look at '26, we've clearly stated today that we expect to be at least 105% or better. That's clearly being driven by the increased family dynamic, which we have been very clear that we continue to go after. So I think you'll see some significant tailwinds in the first quarter, where we called out at least a 200 to 300 basis point improvement. And then I think as we transition into the latter part of the year, when GSC launch comes online fully, you're going to start to see that accelerate in the latter part of Q3 and Q4 of next year. That, combined with, I think, some further opportunity in Q3, all should contribute to a healthy increase in Load Factor year-over-year. We've said, we've committed we want to get back to historical Load Factors better. We're doing that not only organically but by expanding our segment into premium families, and we're starting to see evidence of that.

I want to provide a bit more detail because while the Caribbean is certainly a key focus for Q4 and Q1, there are other factors that will help us throughout the year. For the NCL brand, we have transitioned from longer European itineraries to shorter ones, mainly seven-night trips in the Mediterranean, which should attract a larger family market, aligning with our brand strategy. We are also working to reduce the number of single cabins across all three brands, not just NCL but also Oceania and Regent. I believe that 2026 will be a year where we see the entire booking curve cycle was completed under favorable conditions. We are looking for modest improvements in every aspect of the business. So, while the Caribbean is certainly a significant focus for Q4 and Q1, it is not the only initiative we are pursuing to enhance our occupancy Load Factor for next year.

Maybe to just follow up on that a little bit more. So I understand that the customer dynamic kind of lingers into the first half of 2026. But it seems like the mix headwind becomes a tailwind when Great Stirrup Cay comes online, like the Water Park comes online. So one, is that even right? And then two, can you just talk about the ramp around Great Stirrup Cay as all the new investments start to come online in general?

Yes, Conor, you are absolutely correct. As we enter the second half of the year and fully integrate Great Stirrup Cay, we believe it will provide a significant boost. In our last earnings call, we mentioned that we expect GSC to contribute at least a 25-point increase to next year's yield, and approximately one point in 2027. Although we will be directing about a third of our overall customers through the island next year, by the time the water park opens, around two-thirds of that base will have already visited. Therefore, we may not realize the full advantage in 2026, but we anticipate a notable increase in the latter half of the year. With the new amenities at Great Stirrup Cay, we have observed a significant rise in consumer interest, resulting in more website bookings and increased travel intentions, which is part of the reason for the 20% increase in bookings. This is generating excitement. We consider what's happening in late December as an initial soft opening, and we are introducing impressive amenities, including one of the largest pools, comparable in size to an entire cruise ship. We are generating buzz and gaining momentum, and as Harry mentioned, as we receive more word of mouth towards the end of this year and into early next year, we expect to see continued strength and growth from this initiative.

I have a question about the cost aspects of the mix dynamics. It seems that as occupancy increases, you experience economies of scale, which makes sense to me. But are you observing the cost offsets you anticipated? Ultimately, your overall approach focuses on the difference between unit costs and net yield. So, are you seeing the cost offsets as yields face some modest headwinds from the mix dynamics?

Yes, Conor. I think it's across the board. We continue to see margin expansion. We've expanded margin this year by more than 150 basis points or 200 points of 600 basis points in 2023. That's in part to almost everything we're doing. It's not only the mix, the better and more efficient, closer to home itineraries. But more importantly, it's also the muscle and the scale that we continue to get that we've been demonstrating over the last two years. So I think when you put all that together, we continue to flex that muscle. We continue to improve. And of course, in part to some of that is the mix, but that's starting to come into play now. When you look at the last 18 to 24 months, that has not been a mix issue. That just means we've simply been better at delivering a better unit cost overall system-wide. So we certainly are seeing the fruits of that. We're bearing fruit, and we expect to continue to see that into 2026 and beyond.

And I just want to emphasize, not cost at the extensive product; our guest satisfaction scores and our future onboard bookings continue at record levels that it is super critical to get that message across.

Maybe the first question has three parts. First, could you remind us about the '26 costs being sub-inflation? What specific opportunities do you see for next year? During the Investor Day, you shared a few critical examples; can you provide anything for next year? Second, is having higher Caribbean exposure beneficial for costs? How should we approach that? Lastly, what should we consider regarding the impact of occupancy, given that it should be around 200 to 250 basis points of growth? Is there a general rule of thumb for translating occupancy into net cruise costs?

All right. I will try to address all three points. First, regarding the details for 2026 and the larger opportunities. We have been clear that in this business, there isn't a quick fix to identify significant cost savings. It requires a thoughtful and methodical approach to every aspect, from development to product delivery. We are concentrating on many small improvements, and over time, this will lead to greater efficiencies overall. We're attentive to everything, and we're proceeding in a disciplined manner. About Caribbean capacity as a potential cost benefit, absolutely, operating closer to home allows us to deliver our product more effectively and at a lower unit cost. However, this is just a part of the overall picture. As for occupancy, when we consider increasing occupancy from third and fourth guests, typically children or teenagers, there is minimal additional cost involved, which contributes to higher revenue. Even looking at our third quarter, where occupancy increased by 1 point, and in the fourth quarter, where it also increased by 1 point, we're not seeing substantial changes in our cost structure due to this. Thus, as we continue to attract more third and fourth guests, we will further enhance our overall unit cost.

Okay, got it. That's very helpful. And then just for '26, a quick one. Obviously, capacity growth is higher in '26 than '25. Is there anything abnormal on the D&A side specific to the island investments we should consider?

No, I believe that when examining depreciation and amortization, whether viewed as a gross or net percentage of revenue, it will remain quite stable. We have been transparent about the fact that our investments in Great Stirrup Cay have generally been modest. Our most significant investment is the pier, which cost approximately $150 million, and I anticipate that it will be depreciated over a period of at least 30 to 40 years, although I do not have the precise figure. Therefore, I don't expect any increase in depreciation and amortization due to the investments on the island. I would also like to point out that we have a 7% capacity growth planned for next year with the addition of two new ships, Luna in March and April, and Prestige in late December of 2026.

I wanted to explore the yield setup for next year in more detail. There has been a lot of insightful commentary so far. First, I assume you have nearly half of next year booked, particularly a significant portion of the first half. Can you describe the core trend line you are seeing in like-for-like comparisons? Additionally, there are some variables to consider. You mentioned that the GSC should be accretive, which is promising. However, I would like to clarify a couple of points. Regarding the new hardware, would you characterize it as accretive, dilutive, or somewhat neutral? Lastly, concerning the shift to the Caribbean, there has been helpful commentary about occupancy potentially benefiting, although there might be a slight dilutive impact on per diem. Ultimately, does the shift to the Caribbean serve as a tailwind, a headwind, or is it neutral to yield in 2026, based on your current assessment?

Good morning, and thanks for joining us today. You're correct that we're about half booked for next year, which aligns with where we typically are at this stage in the cycle. In terms of core trends, our algorithm indicates that with this level of measured capacity growth, we can anticipate low- to mid-single-digit yield growth. Our current booking position suggests that this is achievable, and we are committed to reaching our core targets. Regarding the impact of new hardware, we observed a modest positive effect with Aqua this year and expect similar results with Luna next year for the NCL fleet. However, it's worth noting that it's just one ship out of 34, so the overall impact at the NCLH level will be limited. On the Oceania and Regent side, we have new ships arriving, with Oceania's Allura this year and a new ship for Regent at the end of next year, which will also provide a slight boost. Overall, while new ships contribute positively, they remain just one part of the bigger picture. When discussing the Caribbean, we see it more as a margin booster rather than just a yield improvement. We believe Caribbean cruises are strong in terms of yield, but the crucial aspect is that they deliver higher margins compared to some of the exotic itineraries in regions like Africa, South America, and Asia that these ships have substituted, particularly the shorter 3- and 4-day cruises.

It's a really helpful overview there. And then maybe one final one. Just as you shift more Caribbean in the business, probably looks a little bit closer in, I would imagine. And when you watch that trend line in close-in bookings over the last 60, 90 days. How would you characterize it?

So yes, these Caribbean cruises both in general and certainly the 3- and 4-day cruises do book closer in. And I think that was one of the factors why we've seen record bookings in Q3 in October, clearly not the only factor, but one of the factors. I'd say the bookings have been nothing short of incredible. I mean, the demand we're seeing for close-in up until a week of sailing even has been unprecedented from at least the recent history. So we're very, very pleased with the strength of the consumer and their ability to book across the entire length of the booking curve, including up to the day before cruise.

Two questions. One, can you give us an update on the progress of finding a new Brand President? And then secondly, can you talk a little bit about the changes in selling strategy with the Oceania brand, specifically recent unbundlings.

Thank you, Patrick. Regarding the search for a new Brand President, we are conducting a thorough search and are pleased with the high caliber of talent we have attracted. We're currently deep into the process, but there are no announcements today or in the next week or two. I hope we can have someone onboard soon. Our priority is to attract a world-class leader who can continue to evolve our brand promise, especially as we've been developing it over the past few quarters. In addition to our new Chief Marketing Officer, new Chief Commercial Officer, and new Head of Technology, we have fantastic internal and external candidates working to enhance NCL in the future. As for the promotional strategy for Oceania, while it has been discussed widely, it is actually a modest change. We’ve implemented various promotions over the past year and gathered valuable data on what customers appreciate and are willing to pay for. This recent promotion aligns with our ongoing efforts, optimizing the experience for our guests while maximizing yields and margins. I am very pleased with the booking levels and consistency we are witnessing on Oceania, as well as the Regent brand, which has shown impressive weekly bookings and revenue. This is encouraging news overall.

Maybe Harry is thinking about these brand changes a bit more strategically. When you consider the timeline for repositioning these brands, particularly for Norwegian, how long do you think it will take to change the brand familiarity with families? How long until you achieve your targeted run rate?

So I think with Regent, we're already there because the brand changes there were relatively minor. I'd say with Oceania, we're probably about two-thirds along the journey with the evolution of the Oceania brand to luxury. We're focusing not just on food but also on destination service experiences that our guests truly value. I think it still has a slightly longer runway. I mentioned in my prepared remarks that we're going to be launching some new brand campaigns in the first quarter that will certainly help us along. Clearly, the shift to families and the focus on GSC is already coming forward, as evidenced by our Q4 occupancy in '26. So it's already beginning to take hold. My guess is that by the middle of next year, we will have reached...

Andrew, our top priority is reducing leverage, and we are actively seeking ways to achieve this. Margin expansion is the primary factor driving this effort, leading to significant free cash flow, which we anticipate will increase over the next 24 months. As we consider our capital structure, particularly regarding remaining debt, we remain opportunistic and will continue to pursue strategic trades that enhance our overall structure and ratings.

All right. So with that, I want to thank everyone for today's earnings call. For those of you listening, for those of you who have participated, particularly pleased with our record earnings, our record revenue, our record EBITDA, our record future book position, in terms of new bookings, and all the other wonderful tailwinds that the brand is undertaking. We look forward to sharing the journey ahead with all of you. Thank you all very much. Have a great day.