Royal Caribbean Group (RCL) — Q3 2025 Earnings Call Transcript

Good morning, everyone, and thank you for joining us today for our third quarter 2025 earnings call. Joining me here in Miami are Jason Liberty, our President and Chief Executive Officer; Naftali Holtz, our Chief Financial Officer; and Michael Bayley, President and CEO of the Royal Caribbean brand. Before we get started, I would 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 to 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 investor website and in our earnings release. 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, and Naftali will follow with a recap of our third quarter, the current booking environment, and our outlook for the remainder of 2025. We will then open the call for your questions. With that, I'm pleased to turn the call over to Jason.

Thank you, Blake, and good morning, everyone. I am pleased to discuss our third quarter results, updated outlook, and the many exciting initiatives fueling our momentum at the Royal Caribbean Group. This has been another great quarter for us. We continue to see strong momentum across our business powered by accelerated demand, growing loyalty, and all-time high guest satisfaction. Our commercial flywheel combining innovative ships, distinctive destinations, and world-class brands continues to drive sustained growth in guest trust and our ability to deliver the best vacation experiences responsibly. Before getting to the results for the third quarter, I want to highlight how we are continuing to build a stronger, more leading, and resilient vacation company for the long term. We are focused on building a vacation platform that continues to lead the leisure market through innovative ships, a growing portfolio of exclusive destinations, technology and AI that enhance every step of the guest journey. Together, these high-return investments strengthen guest loyalty and attract new travelers, positioning us to win more share of the fast-growing $2 trillion vacation market. Earlier today, we announced the Royal Beach Club, Santorini, further expanding our portfolio of exclusive destinations, extending our brand's reach beyond the ship and meaningfully enhancing the guest experience. This reflects our vision to redefine how the world vacations. And together with the Royal Beach Club Paradise Island, Perfect Day Mexico, and others, we expect to increase our exclusive land-based destination portfolio from 2 to 8 by 2028. These initiatives reflect thoughtful, sustained investment behind our commercial flywheel and reinforce the strength of our vacation platform. Cruising and leisure travel continue to outperform the broader travel industry, and we are exceptionally well-positioned to capture that momentum. With a powerful pipeline of strategic initiatives, a strong balance sheet, and a disciplined approach to growth, we have both the resources and conviction to continue making game-changing investments that delight our customers, strengthen our competitive advantage, and drive long-term shareholder value. I want to thank the entire Royal Caribbean Group team for their passion, dedication, and commitment that enable us to deliver the best vacation experiences responsibly and to drive exceptional financial results. Turning to our results and outlook. Third quarter results exceeded our expectations, driven primarily by strong close-in demand for our vacation offerings and lower costs. In the third quarter, our capacity increased 3% and we delivered nearly 2.5 million incredible vacations, a 7% increase year-over-year at high guest satisfaction scores. Net yields grew 2.4%, driven by strong demand across all key itineraries. We delivered adjusted earnings per share of $5.75 for the third quarter, which was 11% higher than last year. Naftali will elaborate more on Q3 results in a few minutes. Moving to our outlook for the remainder of the year. Our capacity in the fourth quarter is up 10% year-over-year, and we expect to grow yields 2.2% to 2.7% on top of a 7% yield increase in the same quarter last year. Our fourth-quarter outlook has been trivially impacted due to adverse weather and the unplanned extension of the temporary closure of Labadee, one of our exclusive destinations. Despite these marginal headwinds, we are expecting our total revenue to be up approximately 13% year-over-year in the fourth quarter. Full year net yield is expected to grow in the range of 3.5% to 4%, that's 25 basis points better than our initial expectations in January, which highlights the continued strong demand for our brands and the amazing vacations they deliver. Our yield growth this year is on top of several years of double-digit growth resulting in an industry-leading 31% yield growth compared to 2019. This highlights the remarkable transformation of our business and the enduring strength of our leading brands. Full year adjusted earnings per share is now expected to be in the range of $15.58 to $15.63, a 32% year-over-year growth. We are also on track to deliver nearly $6 billion of operating cash flow this year, a significant step change in our performance. We are a growth company, and our proven formula of moderate capacity growth, moderate yield growth, and strong cost discipline is driving significant earnings growth, continued margin expansion, and robust cash flow generation. We remain on track to achieve our Perfecta targets by 2027, a 20% compound annual growth rate in adjusted earnings per share and return on invested capital in the high teens. As we've always said, Perfecta is an important milestone on our growth journey, but our ambitions go well beyond. The combination of our game-changing ships on order, our growing exclusive destination portfolio, advancing our commercial technology platforms that are fueled by AI, and disciplined capital management is setting up the post-Perfecta era for another step change in the guest experience and financial performance. Now I'll provide some more insight into what we're seeing in the demand environment. Consumers continue to prioritize experiences and make room in their budgets for meaningful vacations. Our independent research, combined with millions of daily customer interactions continues to show positive sentiment towards travel and leisure and continued growth in spending. Roughly 3/4 of consumers intend to spend the same or more on vacations over the next 12 months, a level that has remained consistent for several quarters. While the broader consumer environment has normalized from the exceptional strength over the past 2 years, demand for experiences and leisure travel remains intact. Cruising offers superior value for money versus alternative options driven by the high-quality onboard amenities and services, pricing, inclusive of meals and entertainment and the opportunity to visit a variety of destinations with the convenience of having everything in one place. Earlier this year, we announced our plans to launch a new vacation experience, Celebrity River. The introduction of Celebrity River has received an extraordinary response with all initially available deployment selling out almost immediately. The majority of booked guests are Royal Caribbean Group loyalty members without prior river cruise experiences, highlighting a powerful opportunity to attract new guests to this segment and deepen engagement by creating new vacation occasions with our existing ecosystem. In fact, the majority of guests shared their primary motivation for booking a Celebrity River vacation was the opportunity to experience a new celebrity product, driven by the trust and affinity they have for the celebrity brand. Guests are also motivated by our new River ship design and features with most of them expecting superior staterooms, ship amenities, and outdoor spaces, all hallmarks of the brand. These early booking patterns are a powerful validation of our strategy to expand the Royal Caribbean Group vacation ecosystem, creating new ways for guests to experience the world with us while deepening the connection to our family of brands. We continue to be encouraged by the demand environment. Since the last earnings call, bookings are up on both new and like-for-like hardware with particular acceleration for close-in families. Booked load factors for 2026 remain well within historic ranges at record rates, with booked APD growth at the high end of historical ranges. As always, we remain focused on optimizing our pricing and yield growth. Our spectacular new ships continue to generate strong quality demand. The start of the season is exceeding our expectations, and Celebrity Xcel is shaping up to be the best performing new ship in the brand's history. The last 3 years saw unprecedented yield growth, and although that creates a high bar for comparables, our proven formula for success of moderate capacity growth, moderate yield growth and strong cost control is expected to continue to drive top line growth, margin expansion, and substantial cash flow. While still very early in the planning process, we anticipate earnings in 2026 to have a $17 handle on it. At the Royal Caribbean Group, we've always believed that clarity and conviction are competitive advantages. Our mission is clear: to deliver the best vacations responsibly, and our objective is just as ambitious: to capture a greater share of the growing $2 trillion global vacation market by turning a vacation of a lifetime into a lifetime of vacations. We don't just talk about that ambition. We built a robust multiyear plan that shows exactly how we intend to get there through bold high-return investments that strengthen our brands, elevate the guest experience, and create long-term value for our shareholders. That includes our expansion into River, the ongoing expansion of our private destination portfolio, the transformational development of Perfect Day in Mexico, and, of course, a steady stream of game-changing ships. This quarter, we announced a long-term agreement with Meyer Turku securing shipbuilding slots through the next decade to continue both companies' tradition of innovation. The agreement confirmed an order for Icon 5 for delivery in 2028, added an option for a seventh icon-class ship, and positions us for a new game-changing class beyond Icon, making the next stage at Royal Caribbean Group's history as we continue to redefine the future of vacations. In a world where digital experiences also define customer expectations, we're working to set the standard. We continue to enhance our digital capabilities to engage customers, remove friction from the guest experience, and drive incremental revenue. When we first introduced our app in 2017, the goal was simple: to give guests back the first day of their vacation by eliminating the need to wait in line for onboard reservations. Since then, the app together with our e-commerce engines has evolved into a cornerstone for our e-commerce strategy, transforming from a utility into a powerful platform that drives revenue, improves operational efficiencies, and deepens guest engagement. In the third quarter, e-commerce visits and conversion rates both increased double digits versus last year, marking a very strong improvement for these channels. In addition, a record share of onboard revenue was booked pre-cruise, with nearly 90% of those purchases being made through our digital channels. And we continue to redefine loyalty in a way that deepens engagement and provides guests with greater flexibility in how they earn points and status. Building on the success of the status match, I'm excited to announce Points Choice, the next evolution in how guests earn and apply loyalty points across our family of brands. Beginning in early 2026, guests will be able to apply loyalty points to the Royal Caribbean Group brand they prefer, regardless of which brand they are sailing with. This initiative further strengthens the overall value of our loyalty proposition, deepening engagement across our portfolio and reinforcing our commitment to putting the guests at the center of our orbit. As our ecosystem expands, it creates a virtuous cycle of demand, value, and advocacy—one that drives both short-term performance and enduring growth. It's a model that compounds over time, and we're just at the beginning of what it can become. I am incredibly proud of our teams at the Royal Caribbean Group for their dedication and exceptional execution. The opportunity is significant, and we're well-positioned to lead the next era of leisure travel. With that, I will turn it over to Naftali.

Thank you, Jason, and good morning, everyone. I will start by reviewing third quarter results. Net yields grew 2.4% in constant currency compared to the third quarter of last year, 15 basis points above the midpoint of our guidance. The yield outperformance was driven by the stronger-than-expected close-in demand. Yields grew across all key products and were mainly driven by existing hardware given the timing of new ship deliveries. During the quarter, a record share of onboard revenue was booked pre-cruise, and nearly 90% of those purchases were completed through our digital channels, with the app emerging as the fastest-growing driver of engagement and conversion across those platforms. NCC, excluding fuel, increased 4.3% in constant currency, 195 basis points lower than our guidance as we continue to find ways to better deliver the best vacations without compromising the guest experience. Adjusted gross EBITDA margin was 44.6%, 60 basis points better than last year. And operating cash flow was $1.5 billion. Adjusted earnings per share were $5.75, 11% higher than last year and 3% higher than the midpoint of our guidance. Earnings outperformance was driven by the strong close-in demand and lower costs. As Jason mentioned, demand for our portfolio brands and industry-leading experiences continues to be very strong. Book load factors remain within historical ranges, at record rates for both 2025 and 2026. Capacity is expected to grow 5.5% for the full year and 10% in the fourth quarter. As expected, capacity growth in the fourth quarter is driven by new ships, Star of The Seas and Celebrity Xcel, as well as additional APCDs due to lower dry dock days compared to 2024. The Caribbean represents 57% of our deployment this year and 63% of capacity in the fourth quarter, a region where we hold a strong position and are advancing a series of strategic initiatives to reinforce that. These include industry-leading hardware, shorter and longer attractive itineraries, the upcoming Royal Beach Club Paradise Island and Perfect Day Mexico. Our Caribbean capacity is up 6% for the year and 10% in the fourth quarter. And even with capacity growth in the region, we see continued yield growth with Caribbean yields in the fourth quarter expected to be up 37% compared to the fourth quarter of 2019. Europe will account for 15% of capacity for the year and 9% in the fourth quarter and in a strong booked position as the European season wraps up. Asia Pacific is expected to account for 11% of capacity for the year and 13% for the fourth quarter. Now let me talk about our updated guidance for 2025. Our proven formula for success—moderate capacity growth, moderate yield growth, and strong cost discipline—is expected to drive significant earnings growth and higher cash flow generation. We continue to expect net yield growth of 3.5% to 4% for the full year, driven by gains in load factor and APD across new and like-for-like hardware. Full year net cruise costs, excluding fuel, are expected to decline approximately 0.1%, 40 basis points better than our prior guidance as we remain focused on better execution through leveraging our scale and utilizing technology and AI, all while ensuring strong customer satisfaction and enhanced product offering and vacation experiences. We anticipate a fuel expense of $1.14 billion for the year, and we are 68% hedged below market rates. Based on current fuel prices, currency exchange rates, and interest rates, we expect adjusted earnings per share between $15.58 and $15.63. The $0.12 increase compared to our prior guidance is driven by Q3 outperformance, $0.02 of better Q4 performance, offsetting a $0.05 impact from recent adverse weather events and the unplanned extension of the closure of Labadee. We also expect 18% growth in adjusted EBITDA to just above $7 billion and 290 basis points growth in adjusted EBITDA margin. This positions us to accelerate our cash flow generation, which allows us to continue investing in our strategic initiatives, maintaining investment-grade balance sheet metrics and expanding capital return to shareholders. Now let me comment on fourth quarter guidance. In the fourth quarter, we expect capacity to be up 10% year-over-year with net yield growth of 2.2% to 2.7%. As noted on the last earnings call, the timing of Celebrity Xcel's delivery and fewer dry dock days versus last year will unfavorably impact fourth quarter net yield growth by about 90 basis points. Net cruise costs, excluding fuel, I expect a decline between 6.6% and 6.1% during the fourth quarter. Taking all this into account, we expect adjusted earnings per share for the quarter to be $2.74 to $2.79. Now I will share insights for 2026, which is shaping up to be another very exciting year for us with multiple strategic initiatives that are already well underway. 2026 capacity is expected to be up 6%, as we introduce Legend of the Seas in Europe this summer as well as benefit from a full year of Star and Xcel. Capacity growth is higher in the first and third quarter due to the timing of new ship deliveries and dry docks. In 2026, we expect to have more dry dock days compared to this year, partially due to longer dry docks for several planned modernization projects of our existing ships. Caribbean capacity will represent about 57% of our deployment in 2026. For Caribbean products, we have continued to add shorter itineraries, building on our success in the last several years, enhanced by the opening of the Beach Club in Nassau this year. European itineraries will account for 14% of our capacity. Alaska and West Coast will account for about 10% and Asia Pacific will also account for 10%. As Jason mentioned, booked load factors remain within historical ranges at record rates for 2026. Bookings for 2026 have come in at APDs that are nicely higher than the prior year, resulting in 2026 booked APD growth at the high end of historical ranges. Now moving to costs. We remain committed to driving margin expansion supported by strong cost performance, even as we advanced major initiatives throughout 2026, including the opening of the Beach Club in Nassau and the build-out of Perfect Day Mexico. Even with these strategic initiatives, we expect anemic cost growth next year. We continue to focus on improving fuel efficiency and are also hedging our rate exposure. Next year, we expect EU ETS to increase from 70% this year to 100% weighing on our energy efficiency gains. Moving below the line. Keep in mind that announced dividends and already completed share repurchases were funded through a combination of strong operating cash flow and incremental borrowings while maintaining our commitment to keep leverage below 3x. Additionally, we expect the global minimum tax policy updates beginning January 1, 2026, to impact us by an incremental couple of hundred basis points. Taking all this into account, we expect adjusted EPS to have a $17 handle, and we will provide more details during our fourth quarter earnings call. Turning to our balance sheet. We ended the quarter with $6.8 billion in liquidity and its adjusted leverage that was below 3x on an LTM basis. We're in a very strong financial position, which allows us to fund our growth ambitions while also returning capital to shareholders. During the third quarter, we issued $1.5 billion of investment-grade unsecured notes at 5% and 3.8% coupon. Proceeds were used to opportunistically finance the delivery of Celebrity Xcel at a lower cost than the existing committed ECA financing as well as refinance other debt. This was an opportunistic issuance where we utilized our strong investment-grade balance sheet to access the capital markets to finance a new ship delivery. We intend to continue to evaluate these types of transactions compared to existing committed ECA arrangements to lower the cost of capital and gain tenure. We have very limited maturities left for this year, all related to ship amortization payments that we plan to repay with cash flow. In connection with the debt offering, Fitch upgraded our clear rating to BBB and S&P updated our outlook from stable to positive. We are very pleased with the recognition of the rating agencies of the strength of our balance sheet and our strong financial performance. In September, we received a cash dividend of $258 million from our joint venture to Cruises, and we expect it to continue to pay a regular cash dividend given its strong financial performance and balance sheet. Also during the quarter, we repurchased approximately 1.3 million shares. And as of September 30, we have $345 million still available under the current authorization. In September, the Board of Directors authorized a 30% increase to the quarterly dividend to $1 per common share. We remain focused on both growing the company through strategic investments as well as returning capital to shareholders. Since July 2024, we returned $1.6 billion of capital to shareholders through dividends and share repurchases, and we intend to utilize our strong financial position to return capital going forward. In closing, we remain committed and focused on our mission to deliver the best vacation experiences responsibly as we wrap up another strong year and look ahead to an exciting 2026. With that, I will ask our operator to open the call for a question-and-answer session.

So Jason, you mentioned that '26 EPS is going to start with the $17 handle, and it seems pretty clear that '26 bookings, demand pricing all look pretty solid at this point. So look, I fully understand you guys aren't prepared to give detailed guidance for next year. But as we think about '26, I would assume your company tagline very much remains in place here, meaning, look, we know capacity growth offset at 6%. Moderate yield growth, I would assume is kind of in that low- to mid-single-digit range and that the disciplined cost control probably means low single-digit growth or in your terms, anemic, even with some of your structural costs you'll be taking on next year. So from a high-level perspective, is that kind of the right way to think about '26?

Yes, that’s a good way to summarize it. First, it’s important to note that we are still early in our planning process. I previously mentioned that just because we have a $17 handle doesn’t automatically mean $17.01. If we consider moderate yield growth along with solid cost control, which I would describe as anemic, it leads us to expect significant earnings per share growth and improvements in return on invested capital. However, there may be some noise in our projections related to below-the-line items, particularly in fuel costs, which have risen due to compliance factors. Additionally, as we navigate global minimum tax changes, we are anticipating a slight increase in taxes as well, which could contribute to any disconnect in our analysis. I also want to emphasize that we are heavily investing in technology and expanding to new destinations, increasing from 2 to 8, which will incur depreciation and other costs. Furthermore, we are committed to returning capital to our shareholders, as evidenced by our dividend increase to $1 and our ongoing share buyback program. Our balance sheet remains very strong, and we are strategically repurchasing shares while maintaining our investment-grade rating. Overall, we are optimistic about our position; the rates we are booking provide us with significant opportunities for next year, aiming for a 6% growth in capacity while enhancing our offerings, such as the Royal Beach Club in Nassau. Lastly, we continue to see strong consumer interest in our brands, ships, and destinations, which is reflected in our Net Promoter Score. Despite some challenges in the fourth quarter, including three storms that affected certain land experiences, this does not diminish the overall strength we are experiencing.

I also wanted to think a little bit about your 2026 comments. To clarify, when you talk about the anemic net cruise cost growth, is that sort of anemic before, because that would sound like sub-2%. And is that before we think about the impact of the new destinations you're opening? In other words, would that be in addition? Was that anemic referring to sort of like-for-like, and then there would be more than that? And then a similar clarification on the bookings side of things for 2026, it sounds like your price on the books is up year-over-year and maybe booked load is down year-over-year. And I assume that's intentional. Maybe you could just kind of give us some color around that.

Robin, let me discuss the cost expectations for next year. Over the past few years, we've launched and planned to launch a new private destination each year. Next year, we will open the Paradise Island Beach Club in Nassau, along with several other initiatives. Our approach to managing costs follows a consistent formula: moderate capacity growth, moderate yield growth, and strong cost control. We anticipate a 6% growth in capacity next year. Taking all these factors into account, my comments reflect the overall situation. We acknowledge the challenges we face, but we are also implementing numerous strategies to enhance our operations, improve the guest experience more efficiently through technology, and utilize AI for better efficiency. Therefore, my comments pertain to the total cost growth expected for next year.

Yes. So—and just to put a point on it, Robin, is that the anemic comment includes the structural costs. So it's not just like-for-like. It includes the Royal Beach Club in the Bahamas as well as we leverage AI and we leverage the scale of our business. On the comment—on your question on the bookings side of things, I think there's a few things to keep into consideration. One, we've obviously leveraged our incredible ships and leveraged our private destinations while also considering what different segments that consumers are looking for. We have more short product coming online next year, and those guests book closer in. And so that's a little bit of probably what I would say is the year-over-year comparable on the load factor standpoint, this really is what influences that. We actually think we're in an optimal booking position. We're at rates that are, I mean, higher than we probably thought that they would be at, which I think is a really great thing as we see really strong demand and people are dreaming more and more on their vacation experiences. And we're also seeing that translate to onboard spend. And so we're thoughtfully meeting our guests with the experiences, and they're willing to pay for that.

So Jason, maybe could you just elaborate on the progression of global demand that you saw over the course of the third quarter? Any change in momentum at all that you've seen in October? And maybe to your comment before, just drivers that you see supporting '26 bookings at the high end of historical ranges. And maybe just if you're seeing anything different from new customer acquisition.

Sure. So I'll just start off maybe first on the new customer acquisition side. First, all the things that our brands are doing and what we're doing on an enterprise basis to really kind of build out further our commercial flywheel is really working. So even like the announcement today about Points Choice and making sure that our guests when they choose to sail in any of our brands that they're getting the points that they want on their primary brand that they have loyalty status in. We continue to evolve things like that. Our technology, our AI tools are getting smarter and smarter so that we're able to curate what is relevant to that consumer. And that's drawing in more new to cruise, really seeing an elevated amount of increase first to brand. So seeing people shift from other cruise lines to our brands, we've seen an elevated amount of that. And then our loyalty program and what we've been doing to add to that is we're just getting more and more reps from that consumer. And so we're really happy about that. When you think about just what we see broadly, really, each of the markets that we're doing business in or that we're sourcing our guests from is doing quite well. We saw a little bit of a pullback from the North here in Canada in the early kind of mid-part of the year, but we've now seen that normalize. Demand from Europe this summer was really strong, and their focus now on booking into 2026 is actually stronger. And the reason for that, when we talk to those guests and our travel partners, is that we didn't have a lot of inventory left in the summer of 2025 for the European consumers that typically book a little bit later. So they're getting a little bit ahead of that curve, and that's really encouraging. But we continue to see the U.S. consumer really across all segments, whether that's our family segment to our ultra-luxury segment. We want you to stay with us, and so those demand patterns have been quite strong. What I will say is that as these tools develop, our forecasting is getting better. And so our ability to predict what's going to happen in a quarter and then close-in is getting better as this kind of marriage between AI and our historical forecasting capabilities is getting closer and closer in terms of its predictability. And so I would not, in any way, take that because we hit the high end of our range in Q3, that's — we don't guide with the hope of coming out with some incredible beat. We guide because that's our best thinking at a point in time. It's a 50-50 forecast. And that's how we try to manage the business. We've just, I think, all collectively been in an environment where what we would see in the forward-looking picture was greater than what we saw in the previous picture. And we're seeing that, but now we're able to predict it better.

I just wanted to ask about the Caribbean. There's been a lot of talk about whether there's oversupply in the region as people move more capacity there. You gave that great start about 4Q, and it doesn't sound like you're seeing it, but curious what you're seeing there, whether there is oversupply and how you think about the setup for 2026 specifically?

Yes. Well, I mean, it's—I think it's well known. It's been known for some time that there is an increase in supply in the Caribbean. Of course, Caribbean has been working incredibly well for us. And so I'm not surprised that there's been a supply increase there. But it's a very manageable increase in supply. So we've seen it—it's been a little bit more promotional in the Caribbean activities. But for us, I think, because of our differentiated assets with our ships and our destinations and our ability to kind of keep our guests inside of our ecosystem, and we're seeing a draw from other ecosystems coming to our ecosystem that we're able to not only manage that demand, but we're able to see our guests pay up to experience our delivery.

Great. So if you look at your guidance for the fourth quarter net yields and you add back the 90 basis points or so from the comparison issues that you laid out? And then maybe add something for the storms, you kind of get to, I don't know, maybe something like mid-3s exiting the year. I just want to know if that's the way you would sort of cleanse the fourth quarter in terms of how yield growth is exiting the year to the lens of the fact that there's not much new hardware helping out there. And so maybe this is what we could look at as a like-for-like exit in the year. But let me know if there are other puts or takes, as we think about building our models for '26.

Yes. I mean, obviously, we're not providing guidance for '26, but we are going to subscribe to the formula, as we just talked about. But in terms of how you exit the fourth quarter, your math is directionally correct. So we did quantify the more the less dry docks as well as the new hardware. And so when you take kind of a more normalized new hardware and like-for-like, you're definitely in the ZIP code.

As we look ahead to 2026, I believe investors are eager to consider the various factors at play, especially since there are quite a few positive aspects. For instance, the negative shipping timing that impacted 2025 is turning into a positive factor for us. While weather isn't a significant number, theoretically, it could also help in 2026. My challenge lies in reaching any figure lower than $18 unless I assume that yields are not lower than they were this year as we forecast growth. Could you clarify if some of these positive factors might be countered by a generally weaker consumer environment? It doesn't seem like that is the case, and we're just trying to make sense of these elements.

Yes. So thanks, James, for the question. I think, first, to start off, is that the consumer or our guests is strong. They have great jobs, they have great bank account balances. And they have a strong desire to vacation and build experiences and memories with their friends and family. But we're also not immune to what's generally happening in the environment. And so it's what the consumer is willing—their willingness to pay, and they are willing to pay up. They may not be willing to pay like last year, double digits up for the year before, I think it was 13% or 14% up, but they're willing to pay more. And so I think in your math of yield growth, we expect moderate yield growth for next year. I would describe like this year was a moderate yield growth type of year, which we had foreshadowed for a very long period of time. I would say, second, as we said, our—we expect our costs to grow on a per APCD basis at an anemic level. So we want to have a healthy margin between our yields and our costs, and that's going to drive more margin to our business, more returns, more cash flow to our shareholders, and gives us the confidence to continue to invest in our business. I think where—when you're probably trying to reconcile your numbers, I mean, you can certainly—Blake and team can help you do more of it. I think it's—more of it is below the line, where I think that there's an opportunity to provide some clarity here. And again, I just want to stress, I did not say our earnings for next year are going to be $17. I said that they're going to have a $17 handle on there. Just to clarify, again, so I think we feel very good about the business for next year. And it’s—whether we look at our book position or what we're hearing from our guests, we're going to continue to generate very strong demand and deliver these incredible vacation experiences.

I have a question on River. You mentioned, Jason, sold out your '27 itineraries in a few hours. I think you have 10 ships in the first order. How are you thinking about allocating capital to this opportunity in the context of what appears to be accretive ROI? Like are there balance sheet limitations? Is there ship construction limitations? Or was it just getting comfortable with the opportunity?

Sure. Thanks for the question, Ben. First, it didn't sell out in a few hours; it sold out in a few minutes. So to our Head of our Celebrity brand, I told you so. The good news is we're going to have more. Yes, that's right. Yes. So we—our initial order was 10. We—obviously, we have options for much more than all of that. First and foremost, what you want to do is you want to make sure that you get the product right. And so our launch of it and you had the opportunity to see what the ship is going to look like, the amenities that it's going to offer—it will deliver on the true DNA of the Royal Caribbean Group, right? It will be a step change, and it will change the expectations of what our guests are looking for. As I also said when we announced this, this is not a hobby. We do expect to be a substantial vacation player in the River business, and so we will continue to grow that. I mean our limitations, I think more is just squaring up that we got the experience on what we want it to be. And then this is an area where we have an opportunity to accelerate into here, and we have confidence in doing that.

Maybe just going back to comment and moving to shorter-duration itineraries and as a result banking on closing yields. I think that a lot of the questions have just been obviously around the yield performance in the next year. But it seems to that mix dynamic is really what's kind of changing your approach to the 2026. So I guess maybe my question is, if close-in demand were to stay here, would that suggest that like the ultimate—like that you would see significant upside to your underlying earnings upside in 2026? Is that a fair assumption?

Yes. So one, I wouldn't say that we are—you're banking on close-in demand. I would probably describe it as each product that we offer to our guests and their different segments, and different brands, and different destinations has a different booking pattern to it. That's very natural. And I think a weekend getaway is not typically what's on somebody's mind 18 months in advance. And so as we have more of those opportunities that we're able to deliver because of the assets that we have, that is what's driving a change in that behavior. But the behavior in our other products actually looks very similar to what we have typically seen for 7-night Caribbean or 7-night in Europe, et cetera. And so those patterns are there. They're strong and they're accelerating. And so I think that's what you want to see is that for each of the product and those different tracks that things are moving at a rate that's going to optimize your total revenue performance. And so that's how we think about it. Now certainly, we have seen in the past, and we do not count on this, is that you close in on all these products accelerate, and we end up beating our expectations. But we do, of course, try to bake in our forecast. These are the patterns that—the patterns we saw last quarter, the patterns we saw a year ago try to inform how we expect the track to occur. And it's—and that's how our yield management works, that's how our tools work and trying to predict and to lay out what we should be offering in the market. So I think, again, we feel very good about the booking environment. We feel good about our book position. I would read into our commentary is we are optimizing our revenue—as when we look back in time, we see more often than not that we've left some money on the table, and that's—it's our job to maximize revenue.

I wanted to talk through the composition of your revenue as you ramp up more of the owned destination. So I know with CocoCay, you also saw a ticket lift in addition to the onboard spend that you get on the island. Is that a similar dynamic with the Royal Beach Clubs, or as the Royal Beach Clubs come on, do we start to see the composition of yield shift a little bit more to onboard spend and how that lead versus ticket?

Sharon, it's Michael. Yes, it's a good question. I mean Perfect Day was really a huge driver of ticket lift as well as onboard spend. I think with the Beach Clubs, it's a slightly different product. So it does kind of slip more into the short excursion onboard revenue frame. And so it's also a driver for itinerary as well because we're beginning to see that itineraries that include the Beach Club as well as Perfect Day seem to be driving even more demand than historically, which has been really strong. So I think we'll see that kind of combination of Beach Clubs really pushed through in onboard revenue and short excursions. And then the Perfect Day is typically a key driver of ticket.

Yes. And Sharon, I think just to add on to Michael's point, it's got to modulate a little bit, right? Because the Perfect Day model tends to bring a lot of premium on the ticket side. And so we still have—there's opportunity for us to grow more in CocoCay, but as Perfect Day Mexico comes online, that is probably a little bit more of a balance between ticket and onboard, when the Beach Clubs come online, it's more on the onboard side. So it will modulate a little bit here. And—but it's—the answer to all of it is it's great revenue. It's a great guest experience, great margins, great returns. And so it's a true kind of win-win opportunity for everybody.

Just wanted to clarify kind of the yield picture here in '25. The first half was up, I think, closer to 5%. Second half looks on track for 2.5% or maybe something a little bit north of that. Clearly, some moving pieces. How much of that decel is related to just tougher compares versus maybe less new hardware tailwind? Is new hardware still a tailwind for the second half on a year-over-year basis? Or has it kind of transitioned to a little bit of headwind? And then the last piece, obviously, is you've called out, I think, some port fees as well as dry dock, as well as Haiti, etc. So there's a number of like isolated headwinds, but just help us kind of bridge that step down, first half versus the second half if you could.

Yes. And thanks, Vince. So every quarter has something, right, because the ship delivery timing does impact those. These are large ships. And this year, we had 2 deliveries. I think the best way to look at it is you kind of look at it on a yearly basis, and that's—if you kind of look at it across the board, it's probably—if you normalize all these quarter-over-quarter things, some of it was a '24 easy comp or a harder comp. And some of it is just some of these events and timing of ship deliveries and how we ramp up. But if you look at it on a yearly basis, that's a great, I think, just a way to look at our business. And it also subscribes to our formula, which we've said all along, this is how we manage the business. This is how we subscribe to that, and then we drive to grow the business according to that formula, including the yield, the capacity, and the cost.

Actually, Naf, I just wanted to touch on the bond deal quickly to finance Celebrity Xcel. Obviously, not a usual way to finance a ship, but certainly makes sense given the rate differential. I guess my question is, are you pretty much indifferent in how you finance the ships right now as long as there is that rate benefit? And out of curiosity, are there any additional benefits of tapping the unsecured market as opposed to the ECA financing?

Yes. Great question. Thank you. And so, yes. For now, we're in a place where we have a very strong investment-grade balance sheet. We're benefiting from rates that are basically commensurate with our financial performance and our ratings. And so when we evaluate that, we look at it and we say, what does that make sense to finance with ECA? Obviously, they're great partners. We're very grateful to kind of the partnership we have. It's obviously very important during the construction period to have the financing and these ships will—they always have that committed financing in place also post-delivery, which is obviously very valuable. But when we come to the decision, when we take the ship, we have this alternative—and for this one, we negotiated this financing several years ago when credit rating was not as good as today. And so we—and our improvement in the capital markets was quite substantial. And so when we looked at that, it just made more sense and much lower cost of capital. The other thing is just to remind everybody is these ECAs also have amortization payments. So when you look at the average tenure, of the loan is roughly a little bit over 6 years. We're obviously now issuing 10-year piece of paper in the unsecured market. So it's not just that the cost is low; we also gain tenure with it. And obviously, the covenant package is a little bit different, too. So you have the benefit there. We're very happy with kind of how this went. We're going to continue to evaluate all the alternatives—it's very important to understand that all our ship financing—all our ship deliveries and orders will have committed financing going forward, and then we'll have that option to evaluate what's the best alternative for us when we take delivery.

Thank you. We thank you all for your participation and interest in the company. Blake will be available for any follow-ups. We wish you all a very good day.