Earnings call transcript: Norwegian Cruise Line Q2 2025 sees stock surge despite earnings miss

Norwegian Cruise Line Holdings ($11.63B market cap) reported its second quarter 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue compared to forecasts. Despite this, the company’s stock surged by 11.79% in premarket trading, indicating strong investor confidence. The cruise operator’s EPS came in at $0.51, just shy of the $0.52 forecast, while revenue reached $2.52 billion, below the expected $2.56 billion. Trading at a P/E ratio of 13.5, the market’s positive reaction appears driven by the company’s record financial performance and strategic initiatives for future growth. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with additional insights available in the comprehensive Pro Research Report.

Key Takeaways

• Norwegian Cruise Line’s stock rose 11.79% in premarket trading despite missing EPS and revenue forecasts.
• The company reported record Q2 2025 results with strong adjusted EBITDA and net yield growth.
• Strategic initiatives include new ship deliveries and attractions, signaling future expansion.
• Foreign exchange losses impacted EPS by $0.08.
• The cruise industry is experiencing booking momentum amid a favorable macroeconomic environment.

Company Performance

Norwegian Cruise Line Holdings delivered a record performance in Q2 2025, with significant growth in net yield and adjusted EBITDA. The company highlighted a 3.1% increase in net yield and a trailing twelve-month margin improvement, while maintaining revenue growth of 5.57%. These results underscore the company’s ability to navigate challenges and capitalize on the recovering travel sector, despite operating with a significant debt burden (Debt/Equity ratio of 10.45). The cruise industry, representing about 2% of the vacation market, is seeing limited capacity growth, which Norwegian aims to leverage through strategic investments. InvestingPro subscribers can access 8 additional key financial metrics and expert insights about NCLH’s debt management strategy.

Financial Highlights

• Revenue: $2.52 billion, slightly below the forecast of $2.56 billion.
• Earnings per share: $0.51, impacted by $0.08 in foreign exchange losses.
• Adjusted EBITDA: $694 million, $24 million above guidance.
• Net yield growth: 3.1%, surpassing guidance by 60 basis points.

Earnings vs. Forecast

Norwegian Cruise Line’s actual EPS of $0.51 fell short of the forecasted $0.52, marking a 1.92% negative surprise. Revenue also missed expectations, coming in at $2.52 billion versus the $2.56 billion forecast, a 1.56% shortfall. Despite these misses, the market’s response was positive, likely due to the company’s robust operational performance and strategic outlook.

Market Reaction

The company’s stock experienced a notable 11.79% increase in premarket trading, reaching $26.16. This surge suggests that investors are optimistic about Norwegian’s future prospects, buoyed by its strong operational results and strategic initiatives. With a beta of 2.14, the stock shows higher volatility than the market average, and has demonstrated strong returns over both one-month and three-month periods according to InvestingPro data. The stock is approaching its 52-week high of $29.29, reflecting growing investor confidence. Discover more market insights and timing tools with InvestingPro’s advanced stock analysis features.

Outlook & Guidance

Norwegian Cruise Line reaffirmed its full-year 2025 adjusted EBITDA guidance of $2.72 billion and expects an adjusted EPS of $2.05. The company is targeting low to mid-single-digit yield growth in 2026 and aims to maintain cost growth below inflation. Strategic initiatives include the opening of a new water park and the delivery of additional ships, positioning the company for sustained growth.

Executive Commentary

CEO Harry Sommer emphasized the company’s focus on creating exceptional experiences, stating, "Our goal is to create the greatest island experience in The Caribbean." He also highlighted the company’s commitment to maintaining price integrity, saying, "We are not going to sacrifice price for occupancy." These statements underline Norwegian’s strategic priorities and market positioning.

Risks and Challenges

• Foreign exchange fluctuations could continue to impact earnings.
• Achieving cost savings targets amid inflationary pressures may be challenging.
• Competition within the cruise industry remains intense, requiring constant innovation.
• Economic uncertainties could affect consumer spending on travel.
• Regulatory changes in key markets could impact operations.

Q&A

During the earnings call, analysts inquired about European deployment adjustments for 2026 and the company’s focus on profitability and margin expansion. Norwegian highlighted improved booking momentum from May to July and expressed confidence in attracting new-to-cruise travelers. The discussions underscored the company’s strategic focus on expanding its market presence and enhancing profitability.

Full transcript - Norwegian Cruise Line Holdings Ltd (NCLH) Q2 2025:

Operator: Good morning, and welcome to the Norwegian Cruise Line Holdings Second Quarter twenty twenty five Earnings Conference Call. My name is Maria, and I will be your operator. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions for the session will follow at that time. As a reminder to all participants, this conference call is being recorded.

I would now like to turn the conference over to your host, Sara Inman. Ms. Inman, please proceed.

Sara Inman, Investor Relations, Norwegian Cruise Line Holdings: Thank you, and good morning, everyone. Thanks for joining us for our second quarter twenty twenty five 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 webcasted on the company’s Investor Relations website. We will also make reference to a slide presentation during the call, which can also be found on our website.

Both the conference call and the presentation will be available for replay for thirty days following today’s call. Before we begin, I would like to cover a few items. Our press release with second quarter twenty twenty five results was issued this morning and is available on our Investor Relations website. This call includes forward looking statements and 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 yield and and adjusted net crude cost 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 Summer. Harry?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Well, thank you, Sarah, and good morning, everyone, and welcome to our second quarter twenty twenty five earnings call. I am pleased to report another record quarter where we met or exceeded guidance across all metrics, allowing us to reiterate our full year guidance on the back of solid customer demand that resulted in record bookings over the last three months. These results reflect the continued strength of our brands and the disciplined execution of our strategy. While we are encouraged by our performance during the 2025, our focus remains firmly on delivering long term value through our Charting the Course strategy. This includes our commitment to balancing return on investment with return on experience, ensuring that we deliver exceptional vacations while driving strong financial results and strengthening our balance sheet.

These have been an exceptionally active and exciting last few months that included several high impact announcements and significant milestones that will shape the future of our company for years to come. I’ll walk through each of these in more detail shortly, but highlights include the successful delivery of Oceana Cruises’ Allura, the brand’s eighth vessel the confirmation of two additional next generation Sonata class ships for Oceana Cruises, bringing their future order book to four ships and earlier this week, the announcement of the new Great Tides Waterpark at Great Stirrup Cay, marking our latest initiative to unlock the full value of the greatest island in The Caribbean. I’ll wrap up my remarks by focusing on top line drivers and an update on our return algorithm. I’ll then hand the call over to Mark, who will provide a deeper dive into our financial performance and outlook. Let me begin with our second quarter performance reflected on Slide four, which includes record results and continued momentum across all metrics.

We met or exceeded all guidance we provided at the April in our last earnings call and achieved record Q2 revenue. Most notably, net yield outperformed our expectations, growing 3.1% as a result of strong closing demand and onboard spend. This combined with the benefit from the timing of certain costs drove adjusted EBITDA to $694,000,000 $24,000,000 above guidance. As a result, our trailing twelve month margin now stands at 36.3%, representing a year over year improvement of more than 300 basis points, bringing us meaningfully closer to our Charting the Course margin target. Lastly, adjusted EBITDA for the quarter came in at $0.51 in line with guidance despite an $08 headwind from the impact of foreign exchange rates primarily related to our advanced ticket sales balance.

Moving to slide five, let’s take a look at one of the most exciting recent announcements for Norwegian Cruise Line brand, the long awaited bold next phase of development at Great Stirrup Cay. Earlier this week, we unveiled plans for Great Tides, a massive six acre water park opening in the 2026 with 170 foot tower and 19 water slides, an 800 foot dynamic river, cliff jumps and a dedicated 9,000 square feet kids splash zone. Great Tides Waterpark will redefine the experience in our private island and make Great Surf K the greatest private island in The Caribbean. This marks a major milestone in the evolution of Great Surf K, which along with our previously announced amenities reflects our strategy to deliver experiences that resonate with families and multiple generation of travelers. From kids and teens to parents and grandparents, we are indeed enhancing the destination with more of something for everyone.

To build excitement around the Great Tides Waterpark, we launched Escape to the Great Life, a consumer campaign featuring immersive pop ups in New York City and Miami. If you’re in New York, stop by 104 Grand Street today for a preview of what’s coming. The campaign kicks off a refreshed look and feel for Great Surf K that coincides with the island’s many enhancements. The Great Tides Waterpark is just one part of a broader transformation. By year end, the Norwegian brand will have debuted a new pier, a new welcome center, a new 28,000 square foot pool area with multiple swim up bars, cabanas and a kid’s flash zone.

Following in the 2026 is the opening of Horizon Park, Hammock Bay and the adults only beach area, the Vibe Shore Club, alongside additional amenities in our award winning Silver Cove. These new additions will drive incremental onboard revenue while enhancing the guest experience, the classic balance of return on investment with return on experience, which we’ve discussed so often, which will lead to higher guest satisfaction rates and stronger returns at what is already one of our highest rated destinations. In 2026, we expect to welcome approximately 1,000,000 guests to the island, nearly a third of our total guests. And in 2027, we expect that number to increase 20% to approximately 1,200,000 guests, cumulatively coming from nine different home ports across 21 of our vessels. Ultimately, what we’re doing at Great Stroke K is a clear example of our strategy in action, helping our guests vacation better and experience more.

As the original private island experience, we’re now reimagining it for the next generation of cruisers, and I can’t wait for everyone to discover and experience the greatest destination in The Caribbean. Moving to slide six. I’m also incredibly proud to share that earlier this month, we were in Italy to celebrate the delivery of Oceana Allura, the eighth ship in Oceana’s award winning fleet and the second in the Allura class. Built at the Fincantieri Shipyard in Genoa, Oceana Allure is a stunning embodiment of our vision for the future of luxury cruising, where immersive destinations, elevated design, outstanding service and culinary excellence converge. The shift is not only Oceana’s most luxurious to date, it’s also a clear signal of our continued investment in the luxury segment.

With Oceana Allura, we’ve made thoughtful ROI centric improvements to the Vista Blueprint, including enhancements to the stateroom mix. We replaced Solo Cabins with Penthouse Suites and Concierge Verandas staterooms, both of which deliver yield premiums and align with guest demand. We’ve also brought back the guest favorite French restaurant Joc created inspired by the world famous Jacques Pepin and expanded red ginger with new Nikkei inspired menu, further elevating the culinary experience. Allura sets a new benchmark for design, service and guest satisfaction, and the initial guest feedback has been outstanding. But we’re not stopping here.

At the delivery ceremony, we confirmed an order for two additional Sonata class ships for a total of four next generation ships for the brand, further reinforcing our confidence in the long term demand for luxury cruising, which is clearly reflected on slide seven. Additionally, this quarter, under Jason Montague’s renewed leadership, we launched sales for Seven Seas Prestige, our newest ultra luxury vessel. The ship’s debut marked a record breaking booking day for a newbuild launch, underscoring the strength of the luxury sector. Notably, the SkyView Region Suite priced at $25,000 per night, sold out on nearly all of our first season of sailings on opening day, representing the strongest opening day performance for a top tier product in the brand’s history. Following the successful delivery of Oceana Laura and the confirmation of two new Sonata class ships, we now have 13 ships on order across the three brands through 02/1936, implying a 4% capacity CAGR.

Each of these three brands is on a well defined growth trajectory. Norwegian has seven ships on order, Oceana has four ships on order and Regent has two ships on order. This measured expansion strategy ensures we’re investing in the unique strength and market position of each brand. Historically, this kind of measured capacity growth has led to outsized returns and we are confident it will continue to do so. Moving to slide eight, I want to revisit a framework many of you saw at our Investor Day, one that outlines the multiple drivers of pricing and net yields.

We’ve been making steady progress across each of these areas. While some of the benefits will take time to materialize, we wanted to provide a clear update on how these initiatives are advancing to date. Slide nine demonstrates how momentum is building. Let’s start with newbuilds and our fleet. As we bring new ships online, we’re also improving the cabin mix across the existing fleet.

That includes modifications like the one I mentioned earlier on Allura, replacing solo cabins with higher yielding pentest and concierge suites as well as increasing the number of balcony cabins on the legacy fleet. Deployment optimization is another key focus. We’ve been analyzing our itinerary mix and cruise duration at more granular levels to strike the right balance between guest demand and profitability. This includes increased front and sun deployment, shorter cruise lengths and of course the benefits of the enhancements at Great Stroke K. With new deployments, ships and experiences coming online, we are investing in the systems that will also help drive our top line.

We’ve been developing a new revenue management system, the first phase of which is on track to be completed by the 2025, and we expect some benefits from this system as early as late twenty twenty six with an even bigger benefit in 2027. Marketing and brand positioning are equally important. Oceana Cruises is focused on positioning itself firmly within the luxury space with new branding coming in the near future that better communicates the brand’s extraordinary value proposition. And as I mentioned earlier, this week Norwegian introduced a refreshed look and feel for Great Serve K to align with the transformational enhancements underway. To support these efforts, I’m thrilled to welcome Kieran Smith as the new Chief Marketing Officer at Norwegian Cruise Line.

Her expertise and deep experience in vaunted consumer brands will bring fresh perspective and will elevate our marketing efforts, amplify brand reach and fuel top of funnel demand. Finally, onboard spend remains a critical driver of revenue and we’re focused on improving the guest journey to support it. We’ve made significant strides in this area already and I’m excited to share that Daniel Henry has joined NCLH last week as our new Chief Digital and Transfer and Technology Officer. His experience in travel and hospitality at American Airlines and McDonald’s will help us advance everything from websites and apps to back end systems, enhancing the guest experience and driving onboard revenue. Now I know many of you are looking ahead to what this means for 2026 and are charting the course targets, which I’m pleased to report we are very much on track to achieve.

Consistent with our algorithm that we shared at Investor Day, we continue to expect net yield growth in the low to mid single digit range. As I mentioned earlier, the opening of the Great Tides Waterpark next summer is expected to be a positive demand driver and with its summer launch, we expect to see a full benefit starting in 2026 and throughout 2027. Our outlook includes a 25 basis point benefit in 2026 and a cumulative 1% uplift in 2027. Of course, top line growth is only one part of the equation. As you can see on slide 10, we’ve also made significant progress on the cost side of the business.

In 2024, our costs were essentially flat and we’re guiding to flat again this year for the full year 2025 and flat in both Q3 and Q4. By year end, we expect to deliver over $200,000,000 in savings and we have high confidence in delivering our $300,000,000 plus savings target through 2026. But I want to be clear, the cost savings come off initiatives focused on better purchasing, economies of scale and more efficiencies, all with an eye to always be improving the guest experience. As an example, our efforts have proven so successful that we’ve been able to invest a portion of our savings generated to upgrade significant portions of our culinary offering across the fleet to further elevate our already outstanding product. We now are offering higher quality food throughout all 34 vessels in our fleet.

Of course, our performance over the past two years gives us confidence to continue in 2026 and beyond. We remain fully committed to sub inflationary unit growth in 2026, while continuing to further improve the guest experience. We are committed to continued record guest satisfaction scores, record repeat rates and record future onboard cruise sales. Driving top line growth and maintaining sub inflationary cost growth are what support our 2026 financial targets, which you’ll see on slide 11. With strong performance in the 2025 and reaffirmed guidance for the full year, I remain confident in achieving the goals we laid out just over a year ago.

We launched our 2026 targets a year and a half ago and our execution on our strategy is driving meaningful financial improvement, which you can see on slide 12. We expect to expand margins by six thirty basis points by the end of this year compared to 2023. During that same period, capacity is growing over 8% or about 4% a year and adjusted EPS is projected to almost triple. All of this is contributing to our top financial priority deleveraging. We expect to end the year with net leverage around 5.2 times, down a full 2.1 turns from 2023.

That’s a significant step forward and a clear signal that our strategy is producing results. Now before I turn it over to Mark, I want to take a moment to highlight the release of our 2024 Sail and Sustained report on slide 13. I encourage you to take a look as it showcases the meaningful progress we’ve made on our sustainability priorities. One thing that really stands out is our fuel efficiency with new and enhanced technology and equipment going live fleet wide on a constant basis. At the same time, almost 60% of our fleet is equipped with shore power and almost half our fleet has been tested with biodiesel blends.

This is a clear reflection of our commitment to operating more sustainability while driving long term value for our business and stakeholders. None of our sustainability, financial or operational achievements would be possible without the dedication of our incredible team across the globe. I’m proud to share that Forbes has recognized Norwegian Cruise Line Holdings as one of America’s best large employers for 2025. This honor is a testament to the hard work and passion of our shoresight and shipboard team members who make everything so possible and I’m so proud of. With that, I turn the call to Mark to give more thoughts on our financial performance.

Mark? Thank you, Harry, and good morning, everyone. Let me start with our second quarter results on Slide 14. We delivered record results coming in at or ahead of guidance across all metrics. Occupancy was slightly above guidance at 103.9%.

Net yields grew 3.1%, 60 basis points better than our guidance on strong pricing growth of 5.1%. The beat on net yield was largely driven by strong close end bookings and pricing across all deployments as well as strong onboard spend. On the cost side, adjusted net cruise cost ex fuel was flat at $163 coming in better than expected. The beat was primarily due to the timing of certain expenses that are now expected to be incurred later in the year. As a result, adjusted EBITDA for the quarter was $694,000,000 higher than our guidance of $670,000,000 Adjusted net income came in at $257,000,000 net of $37,000,000 of foreign currency losses related to the revaluation of our advanced ticket sales.

Adjusted EPS was in line with guidance at $0.51 net of an $08 impact from foreign exchange losses. Excluding this, our earnings per share would have been meaningfully higher than guidance this quarter. Moving on to third quarter and full year guidance on Slide 15. We expect occupancy to be approximately 105.5%, which is about 2.5 points below the prior year. As we noted last quarter, this is primarily driven by some softness in bookings that we experienced in early April related to our long haul European sailings.

That said, we saw demand improve as the quarter progressed, and our disciplined approach to pricing allowed us to maintain solid pricing growth in the period. As Harry mentioned, we saw record bookings over the past few months, and our ATS balance reached an all time high of $4,000,000,000 As a result, net yield is expected to grow approximately 1.5% in the quarter, driven by very healthy pricing growth of 4%. Keep in mind, this is coming off prior year net yield growth of 8.7% in the 2024. Turning to costs. Adjusted net cruise cost ex fuel is expected to be essentially flat in the quarter.

I am extremely proud of our team members across the entire organization who’ve been the driving force in executing against our cost savings program for over a year now. And it is encouraging and a true testament to our overall execution as we continue to harvest savings and efficiencies and to see those results reflected in our guidance while still delivering an exceptional guest experience. We expect third quarter adjusted EBITDA to be just over $1,000,000,000 and adjusted EPS to be 1.14 an approximate 11% increase year over year. Moving to our full year outlook. We expect occupancy to average 103% as a result of our deployment mix in the year.

As for net yield, we are reiterating full year guidance and expect net yields to grow 2.5%. This implies strong pricing performance with growth of approximately 4.4% with both metrics coming off record performance in 2024. On the cost side, we are also reiterating the midpoint of our prior guidance and expect our full year adjusted net cruise cost ex fuel to be essentially flat at 60 basis points of growth. As a result, we are maintaining our full year 2025 adjusted EBITDA guidance at $2,720,000,000 Our full year adjusted EPS guidance is also unchanged at 2.05 net of FX headwinds of $08 This represents an approximate 16% growth in earnings per share year over year. I want to take a moment to highlight the significant progress we have made on margin expansion since 2023, as shown on Slide 16.

Nearly two years ago, we established a transformation office with the mandate to take a disciplined, methodical approach to identifying waste and inefficiencies across the business, and that work is clearly paying off. We remain very focused on both return on investment and return on experience. With record overall guest satisfaction scores, including in the key areas such as food and beverage, entertainment and service and combined with record repeat rates and onboard future sales across all three brands, we have clear evidence that our cost improvement actions are not coming at the expense of the guest experience. As of June, our trailing twelve month margins reached 36.3%, a more than five sixty basis point improvement from the 2023. This is being driven by a combination of strong top line performance growth and a more efficient and lean cost structure.

Looking ahead, we expect our 2025 margin to reach approximately 37%, and I am confident that with continued top line growth and sub inflationary unit cost growth, we are on track to achieve our 39% margin target by the 2026. Turning to Slide 17. I’ll walk through our balance sheet and debt maturity profile. At quarter end, we expanded our revolving credit facility by almost 50% from $1,700,000,000 to nearly $2,500,000,000 further strengthening our liquidity profile and enhancing our financial flexibility. This is another testament to the strength and confidence our lenders and stakeholders see not only in our current performance, but more importantly, in our future growth trajectory.

Looking ahead to 2026, we have approximately $1,000,000,000 in scheduled maturities, reflecting a balanced and manageable maturity profile. On a housekeeping note, one important change in our debt profile that should be noted for your models is that with the delivery of Norwegian Aqua, our total euro denominated debt on the balance sheet is approximately €1,300,000,000 In addition, our euro debt increased in July with the delivery of Oceania Lura by approximately €570,000,000 As a reminder, our euro debt is subject to mark to market remeasurement, which may result in noncash gains or losses below the line due to FX movements. For purposes of adjusted net income and adjusted EPS, we are excluding the impact of this remeasurement. Turning to net leverage on Slide 18. I want to reaffirm that reducing leverage remains our top financial priority.

In the second quarter, we reduced net leverage to 5.3 times, down from 5.7 times in the first quarter. We expect a slight uptick in the third quarter, reflecting the debt associated with the delivery of Oceania Allura in July. At year end, we expect our net leverage to be approximately 5.2 times, which is over two turns lower than 2023. This modest revision from our prior guidance is solely due to the fluctuation in our euro debt and does not reflect any change in our underlying fundamentals or earnings expectations. In fact, one important but often overlooked element of our current earnings profile is that when adjusting for the annualization of expected EBITDA contributions from our twenty twenty five newbuild deliveries, year end net leverage would be at approximately 4.9 times.

This represents a meaningful step forward as we continue to improve our balance sheet and financial profile. With the solid progress we have made, we remain firmly on track to reach our twenty twenty six goal of net leverage in the mid-4x range. Wrapping up, our strong execution in the first half of the year, combined with the momentum of our cost reduction program, has enabled us to make meaningful progress on our top financial priorities: deleveraging the business, expanding our margin profile and the resulting strengthening of our balance sheet. With that, I’ll hand the call over back to Harry. Well, thank you again, Mark.

Looking at Slide 19, I want to take a moment to once again highlight the significant progress we’re making against 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 approximately 3x, net leverage to decline by 2.1 turns and adjusted ROIC to continue its upward trajectory. While these results and the momentum we’re carrying into 2026, we remain firmly on track to achieve our long term targets. More than ever, I’m confident that our strategy is working and our execution is delivering. There’s real excitement across the organization from the new ships that entered service in the first half of the year to the meaningful progress we’re making towards creating the greatest private island experience in The Caribbean.

I’m looking forward to what the 2025 and the years ahead will bring as we continue charting our course to sustainable long term value creation. And with that, we will now move to the question and answer portion of the call and I will hand the line back to our operator. Thank you all.

Operator: Thank you. We will now be conducting a question and answer session. Ask that analysts limit themselves to one question and a follow-up so that others may also have the opportunity to do so. Our first question comes from Steve Wieczynski with Stifel. Proceed with your question.

Steve Wieczynski, Analyst, Stifel: Yes. Hey, guys. Good morning. So Harry or Mark, first of congratulations on the quarter. So I want to understand maybe your comments about the increase in demand over the last couple of months across all three brands.

You guys obviously had some issues here with your longer European itineraries for this year. So I guess my question is maybe what have you guys done for 2026 in terms of changing the European deployments, whether that’s in terms of length or asset classes that are going to be sailing over there? And then look, I fully understand it’s still early on. But maybe what has been the response so far to those changes? And then also if you could help us think about maybe what pricing looks like right now for 2026 relative to 2025?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Good morning, Steve. Thank you for the nice comments. And it seems like four questions embedded in your question, so I’m going to try to remember them all and come back to you. On the technical side, which is what we’re doing different in 2026, we moved especially on the Norwegian brand, but even on our luxury brands of Ocean and Regent to slightly shorter itineraries in Europe for next year. We’ve also reduced the deployment in Europe for next year.

This year in Q2 and Q3, I think we had about 3144% respectively of our entire fleet in Europe in 25%. Next year, Q2 and Q3 goes down to 2638%. So that’s it’s not a significant decrease, but it’s a modest decrease coupled with shorter itineraries, we believe better reflects what the consumer demand environment is like. In terms of what’s the response to the change, I’ll reiterate what we said in the prepared remarks that we are in the optimal book position for next year, not just in total, but specifically for Europe. So we’re very happy.

I think this year there was as we talked about in the last earnings call a bit of an idiosyncratic issue that perhaps we didn’t have the optimum Q3 European itineraries. But there was a further headwind with the challenges that are well documented of what happened with consumer confidence in April. I’m pleased to say that even with our less than 100% optimal itineraries for 2025, once May came along, we saw a strong rebounded I should say and strong consumer demand even for Europe for Q3 which is what allowed us to overachieve on the implied guidance for Q3. Guess we didn’t really give guidance for Q3 but do better than we had initially expected when we gave out guidance for the back half of the year. And Steve, thing on the itinerary changes or the response to the changes, it’s important to note that our itineraries we put on sale two to three years ago.

So the fact that we’re redeploying our vessels in 2026, this was a decision that was made two to three years ago as part of our overall strategy change. It was not in response to softness we saw this year. I think we’ve had some questions on that, so wanted to clarify it. Yes. It’s an interesting point.

Not to spend too much time on our very first question, but the summer twenty twenty six itineraries launched in 2024, just to give you a feel for what our planning cycle was at least at that time.

Steve Wieczynski, Analyst, Stifel: Sure. Okay. And second question, Mark, this will be much more concise. As we start to think more about 2026, can you help us maybe think about some of the puts and takes for next year both on the yield and the cost side? Just want to make sure we’re thinking about things the right way and aren’t missing any of these potential puts and takes as 26 comes a little bit more into focus at this point.

Thanks, Mark.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Well, hi Steve. I appreciate your second take at us trying to give us some 2026 guidance. But look, think when we step back and we look at 2026, I think the first thing obviously is we should expect to see some tailwind from our Q3 dip that we did see this year in 2025. Beyond that, again, all of our itineraries were well planned in advance. I think us getting back into the more fun and sun will over time help us get back to historical load factors.

I wouldn’t expect to see that overnight, but I think that’s something obviously on the horizon. And then that combined I think with the excitement and the halo effect that we’ll start to see around our great Stirrup Cay announcement, I think will drive positive momentum. So we look forward again, we’re focused on driving low to mid single digit yield growth. And when there’s opportunity, of course, we’re always looking to outperform that.

Steve Wieczynski, Analyst, Stifel: Got you. Thanks guys. Appreciate it.

Operator: Our next question comes from Lizzie Dove with Goldman Sachs Asset Management. Please proceed with your question.

Lizzie Dove, Analyst, Goldman Sachs Asset Management: Hi, there. Thanks for taking the question. Congrats on a great quarter and guidance. I guess just to ask Steve’s question in a little bit of a different way about 2026. You’ve got this really strong Q4 exit rate, a lot of headwinds this year for reasons that you flagged.

How are you thinking about then as you get into 2026 to set up, especially potential ROI yield benefit from Great Stirrup Cay? And as you’re moving more into Fun and Son, I think maybe 12 percentage points higher for Bermuda and Caribbean. That’s where the growth is, but it is generally a little bit lower on a dollar basis. Like how to think of those puts and takes?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Maybe I’ll this is Harry. And Lizzie, good morning. Always nice to hear from you. Maybe I’ll take the second question and I’ll send over to Mark for the first half of your question. I think you are right that Caribbean in total is not necessarily higher or Bermuda for that fact is certainly not necessarily higher yielding than Europe.

But I just want to give you guys some insights into how we decide on our deployment plan for the year. We don’t necessarily look to optimize yield. We look to optimize profitability, right? So if you think about Korea versus Europe, maybe yields are in the same range, maybe on an absolute ticket basis even a little slightly lower, but the profitability is should be improved and you’ll see that in our spread between revenue and cost for next year. But that’s not, of course, the only thing that we look at.

We want to balance near term profitability against long term brand health. So we want to operate itineraries that have the highest possible guest satisfaction scores and repeat rates. And we think this new deployment in The Caribbean and Bermuda will help to optimize for that number. And lastly, operational feasibility. And certainly, Caribbean and Bermuda itineraries rate very high in that metric as well.

So when you put those three things together, we get to what we believe is the optimum mix for both short term profitability and long term return, which is the focus that we always have as a team. And Lizzie, guess going back to the first point of your question, yes, our 4Q exit rate, yes, it is a good setup. We are implied guidance, think, is around 4% and change on both pricing and yield. So that certainly sets us up well going into the year. More importantly, as we said in our prepared remarks, we remain in our optimal booked position for 2026.

And that’s really what we focus on. As we think again, as I said earlier, as we see start to see some of the halo effects, start to see some of the excitement, we will continue to focus on price. As I said before, we will continue to build occupancy over time. So I think sitting here, we feel we’re in a good setup for 2026 and we’re going to continue to work hard.

Lizzie Dove, Analyst, Goldman Sachs Asset Management: Great. That’s helpful. And then shifting gears just onto the cost side. You’ve been doing such a great job there. I see on slide 10 it says sub inflation.

It looks like the bar chart is basically flat. As you think about looking to the extra $100,000,000 that you’re targeting next year, just curious where the key opportunities of the different cost buckets are and how to think about that? Thanks.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: I’m just going to make one technical comment before I pass this one over to Mark. Please don’t take out your ruler and measure the exact number of pixels that one bar is above the other. With that, turn it to Mark. Lizzie, look, we’ve been very focused on this and I think this is something we’ve been communicating quarter after quarter. We continue to deliver strong on our waste removal, gaining efficiency on our cost side.

Yes, for the last two years, we have essentially been flat on a year over year basis. Our commitment has been that we commit to delivering sub inflationary unit cost. And if we can do better than that, then that is certainly a bonus and we are going to work our tails off to do that. Look, in terms of categories, I will say the same thing. It’s across the board.

We are taking a disciplined approach, methodical approach to this with our transformation office. And most importantly, as we’ve continued to say, we are doing all of this and we are protecting the guest experience, protecting the brand. As we’ve said, our repeat rates are up. All of our guest satisfactions rates scores continue to be up. So that is the purpose of doing this in a methodical way and we’re going to maintain that.

Finally on that, we’ve always said this was an initial three year program, but it doesn’t stop there. We will continue to focus and we will continue to harness this muscle over time. I want to reiterate the point that Mark made because I think there was some misunderstanding maybe in the last one or two earnings call that in some way shape or form we were in some way diminishing the guest product. It is the furthest thing from the truth. I want to be as clear and articulate and this is possible.

We look at every single expense. If we believe it will even modestly decline the guest experience, we just simply won’t do it. We are focused on purchasing, efficiency, economies of scale, the other things that Mark mentioned across the entirety of the P and L. But I get the guest satisfaction scores every Friday afternoon of the week’s cruise and we meticulously ensure that there’s nothing we do certainly on an intended basis, but even on an unintended basis that impacts that score. And we are looking to constantly improve record numbers.

We’re not going to end there. We want record numbers again next year for guest satisfaction scores, for guest return rates, for future onboard sales. For us those metrics are just as important as the ultimate quarterly earnings because that is what sets us up for a successful future.

Lizzie Dove, Analyst, Goldman Sachs Asset Management: Thank you.

Operator: Our next question comes from Connor Cunningham with Melius Research. Please proceed with your question.

Connor Cunningham, Analyst, Melius Research: Hi, everyone. Thank you. Congratulations as well. Nice stuff all around. Maybe we could just stick with deployments for a second because I don’t in the past, you guys don’t talk a lot about the close in booking opportunity, but as you move to like shorter term duration, more Caribbean, more Sun and Fun, can you just talk about the close in opportunity in terms of just from a revenue management perspective, like how that fits within the calculus kind of longer term for you guys?

Thank you.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: We I’m not quite sure how to address that question. It is clearly true that a booking curve for a three or four day cruise is far different from a seven or nine day cruise. We have sophisticated revenue management algorithms. I think we discussed in our prepared remarks the fact that we’re coming out with a new generation revenue management system solely where clearly we’re focused on the difference in booking patterns. I think part of what you’re seeing now in record bookings is the fact that we are having more and stronger close in sales.

But I want to be clear, we’re also having very good sales for 2026 as well. So it doesn’t come at the expense of getting ’26 in the correct and optimized book position. And Conor, maybe what you were really trying to get at is, we’re not we are sticking to our optimal booking curve. Obviously, that takes into account all of our deployments, whether it’s a longer itinerary or a shorter itinerary. We are not over indexing on leaving capacity or inventory waiting for that last minute strong demand.

Obviously, we’re optimizing, we’re managing to our booking curve. To the extent close in demand remains strong, we will take that into account. But it’s more important that we maintain on our overall booking curve.

Connor Cunningham, Analyst, Melius Research: Okay. That’s helpful. And then maybe we could I mean, I think that we could all we would all agree that you’re under earning in 2025. You had a lot going on in the first quarter and then third quarter and all that stuff. And so I’m just trying I think a question that I’ve been getting is just more around the earnings power of the company.

As we start to think about ’26, maybe you could talk about what was potentially left on the table that had you not had the redeployments that occurred in the first quarter and then the headwind in the third quarter, like what the numbers would have looked like for the year? Because again, I think we’re just trying to all trying to understand the underlying power that you guys have established here. Thank you.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Conor, look, so I think when we look at where our expectations are for 2025, our implied our earnings guidance is about 16% EPS growth. And I think what I’ll comment on is if we didn’t have the FX headwinds, that would have been about 20% plus on an earnings per share. Look, we have said one years point ago, we’ve stated our targets for 2026. We maintain sitting here today that we’re confident in hitting those targets, And that includes the EPS in the $2.45 $2.5 range as well as our margin performance and deleverage, and we’re maintaining that. And I think sitting here at this point trying to give up puts and takes for 2025, I think every year has some puts and takes.

But we certainly feel confident in the business and more importantly confident in our strategy going forward.

Connor Cunningham, Analyst, Melius Research: Okay. Good luck. Thank you.

Operator: Our next question comes from Matthew Boss with JPMorgan. Please proceed with your question.

Matthew Boss, Analyst, JPMorgan: Thanks and congrats on a really nice quarter. Thank So Harry, on the demand rebound that you cited, any change in momentum here in July with bookings or pricing trends? And on the combination of the structural increase in fund and some itineraries and then the recently announced investments, could you speak to early indications of demand for Great Stirrup Cay and maybe the opportunity on the premium yield side?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Thank you, Matthew, for the kind words on the quarter. So to address the two parts of that question, listen, we talked about May through July being a record period. July certainly did not decelerate. July will be a record July in the history of the company as an individual month. So I’ll give you a little bit more insight than maybe Sarah or Mark wanted me to.

Past that specific to GSE been forty eight hours. So this is truly the early innings. First couple of days we saw a material increase in our website visits, our leads, which is a thing that we measure. People actually becoming a little bit more involved with us in conversations have doubled in these last two days. Two days, I’m not extrapolating to infinity, but certainly those are positive signs.

Matthew Boss, Analyst, JPMorgan: And then Mark, maybe could you expand on the drivers of the raised occupancy growth outlook for this year? And how best to think about the opportunity moving forward as we think about load factors, prioritizing deployment mix to The Caribbean and also lapping up against some of the disruption that we saw this year?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Yes. Good morning, Matt. Look, as I’ve said before, certainly, we would expect to see some load factor improvements by the one off anomalies that we saw in the third quarter of this year. But more importantly, I think, again, over time, as we continue to pivot our deployment to the Fun and Sun itineraries, we would naturally expect to get more higher load factors on those related itineraries. Again, I want to stress that that doesn’t happen overnight, but we certainly think it’s a near to mid term opportunity that we can capitalize on.

And then when you combine that again with our new opportunity in The Caribbean and The Bahamas with our new Island experience that we’ve just announced, again, I think that will continue to drive load factors. One important thing to note is that the water park we just announced two days ago, it will come online in 2026. And why that’s important is, yes, there’s a lot of excitement, there’s a lot of halo around it, but until consumers get on the island and start to experience it, that’s when we really expect to see that drive going forward. So we do have a little bit of time in between now and then. But as Harry said, two days doesn’t make a trend, but very, very encouraging.

And we’re going to we’re excited to see the opportunity in front of us around that.

Matthew Boss, Analyst, JPMorgan: Great color. Best of luck.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Thank you.

Operator: Our next question comes from Brent Mantor with Barclays. Please proceed with your question.

Brent Mantor, Analyst, Barclays: Good morning, everybody. Thanks for taking my question. So I wanted to circle back on the commentary on bookings momentum that you saw in the recent months. Can you kind of take us back to March, April and talk about maybe some of the things, the tactical tools that you pulled out potentially promotional tools or sort of revenue management tools and what how aggressive that you feel like you might have gotten in retrospect or not aggressive and if this sort of reacceleration kind of came more organically and if you’ve been able to call any of those activities and maybe help us understand how the strategy evolved?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: So listen, Brandon, it’s never a single thing that drives the change that we saw from a choppy April to a record May through July. But I’d say the primary driver was the improvement in macroeconomic environment. I mean, don’t want to take away from the hard work that everyone did, but I’d say that’s driver number one. I will also say that I’m incredibly proud of the work that David on the NCL brand and Jason on the O’Shannon region brand are doing on redefining the brand to make it more relevant for consumers. Perhaps in the past our focus had been a little bit more on what we would call lower funnel marketing efforts, things like direct mail, e mail, digital ads and things like that.

We are now shifting our focus to be more brand oriented and top of the funnel in order to drive more real demand and love for the brand that isn’t necessarily as focused on price. So I’d say number one, improving macroeconomic environment number two, a shift to making the brands more compelling in the consumer environment. Of course, the benefits we’re seeing with record guest satisfaction scores, the fact that guests on the ship today are having excellent experiences resonates when they come home and talk to their friends and family. Yes, we change promotions from time to time, but I wouldn’t say we did anything unusual in the May to July that you don’t necessarily see in the normal course of business.

Brent Mantor, Analyst, Barclays: That’s helpful. Thanks for that, Harry. And then congratulations on the Phase two for GSE, they announced it two days ago. Can you maybe just talk about the competitive positioning for the island versus your friends and competitors about a mile away? Maybe just help us understand what might be differentiated.

Obviously, you’re going for more families. Perhaps you need more families to get to those sort of longer term occupancy goals that you talked about just a minute ago, Mark. But just help us think of understand the sort of positioning versus CocoCay.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: So I’ll just start out by saying I’m not here to comment on our competitors’ strategy or their amenities. You can certainly speak to them about it. I will focus my comments on us. Our goal is to create the greatest island experience in The Caribbean by building out a series of amenities that our customer base, our demographics will love. We think this combination of peer, huge pool, kids splash area, these relaxation areas, the Hammock Bay, the Horizon Park, the adults only beach area, Vibe Shore Club, then of course, this massive water park, dynamic river, grotto bar, cliff side jumps, things like that.

And second, Splash Zone for kids and even this new Jet Kart race thing, which is going to be an innovative and new thing to the industry, I think you put those things all together, and I think we unquestionably have the greatest private island in The Caribbean, which is our goal. We are focused on our demographic. We think our demographic will find this combination of beautiful relaxing areas plus active areas plus family areas plus adult areas. Our footprint on the island is massive. So we can have all of those things on it.

We believe our demographic will find it compelling. Early indications is they do.

Brent Mantor, Analyst, Barclays: Great. Thanks everyone.

Operator: Our next question comes from Robin Farley with UBS. Please proceed with your question.

Robin Farley, Analyst, UBS: Thank you. Just wanted to see if you could give us some color to kind of help Square. You mentioned the acceleration since your last guidance and it seems like that might have meant that the top end of your guidance range would have been more reachable or maybe even upside to that, but at least kind of the top end being more reachable if things were improving since you last gave that. So if you could give a little color around kind of why bring down the top end of the range? And I don’t know if there’s any color about sort of price versus volume, like with the acceleration in volume and not price or the other way around or just sort of how to think about taking down the top end?

Thank you.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Hi, good morning, Robin. It’s interesting. I actually look at it in a different way. I actually look at it that we brought the bottom end of our range up. But I guess one could also say that position it the way you did.

So look, our guidance is based off what we know today and what we have visibility on. As we’ve said, we’ve seen an acceleration in demand. But keep in mind, I think when we go back to April, May, we did imply that we saw a bit of a low and I think we classified it as choppy bookings. So number one, catching up from that, I think gives us more confidence. But as always, our guidance is based off the best visibility we have today.

And the biggest variable at this stage typically becomes the onboard revenue component. So, we feel good where we are and that’s our best look today.

Robin Farley, Analyst, UBS: Okay. Thanks. And then I don’t know if there’s anything in the price versus volume sort of on the forward. And just my follow-up was going to be on this is a really quick one on the CapEx because you announced this water park, which is seems like a major investment. Your CapEx didn’t change and maybe the answer is as simple as you knew it was in your CapEx budget even though it hadn’t been announced maybe if that’s But if there’s anything else that changed in your CapEx plans?

Thanks.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Let me just circle back to your comment about volume versus price and then I’ll let Mark talk about CapEx. Listen, the volume versus price, our price has been amazingly consistent throughout the four quarters of the year. I think if you look at our results for Q1, Q2, our guidance for Q3 and implied guidance for Q4, we’re basically delivering a 4%, 4.5% price increase year over year in all four quarters. So we’re happy with that consistency. It’s a fundamental principle of this company that we are not going to sacrifice price for occupancy, so we don’t, because we believe that sets us up once again for the best long term performance of the brand.

Other fundamental principles is we’re constantly improving the onboard product for our guests, this focus on cost, all the other things that we’ve talked about in this call that lead to our long term algorithm of low to mid single digit yield growth, sub inflationary growth, etcetera, etcetera. I think on that regard, we have performed well for this year and I’m happy with all four quarter performances. Turn it over to Mark for CapEx. Yes. Look, regarding CapEx, I think we’ve been pretty clear that yes, you are correct in the fact that our future CapEx outlook did not change.

I think that’s as a result of two things. Number one, we did this was in fact in our plans. Obviously, we had not announced it publicly, but we had this in overall CapEx guidance. But I think importantly, number two, we are not I think it’s important to understand that we are not investing hundreds and hundreds of millions of dollars into this experience. Yes, there is an investment, but we certainly think that we are getting a great return on it in the teens, in fact.

And I think as we look forward going into the future years, we will continue to look for other opportunities to monetize where it makes sense. I would be remiss if I didn’t shout out Patrick Dahlgren and his entire team for the incredible work that they’ve done, obviously working very closely with David and the brand to create an amazing experience for our guests at a reasonable cost of construction.

Robin Farley, Analyst, UBS: Great. Thank you very much.

Operator: Our next question comes from Ben Shakim with Mizuho. Please proceed with your question.

Ben Shakim, Analyst, Mizuho: Hey, good morning. Thanks for taking my questions. First one is just a clarification. So on ’26 for yields and costs, again, not looking for guide, we’ve already kind of you’ve already kind of touched on it. But just very simply, the moving variables, more fun and sun is a tailwind occupancy, but a price headwind is the net of that yield tailwind neutral or flat in ’26 and then on cost kind of similar question, higher occupancy obviously mechanically hurts net cruise cost, but then last quarter you talked about some real cost savings associated with fund and tons.

So just similar question, just maybe relative to normal algo, are the variables kind of a headwind, tailwind or neutral on both yields and cost? I Sorry.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Think you’re thinking about this directionally correct. We’re not here to give specific guidance for 2026 so we won’t. But I think when you think about the underlying factors, yes, I think you’ve laid them out for the most part right. Our key is to hit the algo. We’re committed to it for ’26, low to mid single digit yield growth, sub inflationary cost growth, measured capacity growth, difficult disciplined capital allocation, and the achievement of our charting the course targets.

All I can do at this point is reiterate, we believe in all those things. We think all of those principles will be alive and well in 2026. Yes. And to further that, we’re focused on profitability and in our eyes today profitability means margin expansion. So when you look at 2025, where our guidance is, we expect to have improved our margin by about almost 700 basis points versus 2023.

And as we look to 2026, that’s where we’re focused on margin expansion. And that comes both from the top end and from the top line as well as our cost, but it’s a combination. But it’s margin expansion, is what drives cash flows, which would drop which drives down our leverage. And then operator, I think we have time for one last question.

Operator: Okay. Our last question is from David Katz with Jefferies. Please proceed with your question.

Connor Cunningham, Analyst, Melius Research: All right. Made it in under the wire. Thank you for taking my question. Congratulations, I wanted to know okay. I am patient, if nothing else.

So look, I some of your peers and when we look at the industry, one of the things we’re very focused on is new to cruise and new to brand travelers. It’s not something that you, I see, formally quote, but would you be willing to give us any color on some of the strong bookings that you’ve laid out and how much of that is new to cruise and new to brand?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: It’s a good question, David. I’ll say that we haven’t necessarily seen on an itinerary adjusted basis much shifts here. Naturally in a three and four day cruise environment, you get slightly higher new to brand because new people to cruise are a little bit more likely to sort of do a taster if you will before committing to a longer cruise. And similarly in Europe, a seven night cruise would have slightly more new to brand than a nine night cruise. But if you adjust for itineraries, it’s a stable thing.

Keep in mind, in an ideal world, yes, do want more you do want new to cruise and new to brand to come in, but also in a world of record guest satisfaction scores, you get a record repeat rate, which sort of balances out on the other side. So I think net net, no strong trends that we’re seeing. We’re happy with where we are.

Connor Cunningham, Analyst, Melius Research: Okay. If I can just follow-up quickly. I think part of our thesis and part of the work that we’ve done suggests that there is a meaningful new to Cruise discovering the value proposition, right, and trading up in value. Is it fair to assume that somewhere in your numbers that there is a presence of that or are we overstating that?

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: So I appreciate the comment because we share your belief. We the way we look at this holistically, I forget the exact number, but something like 35,000,000 people a year cruise, disproportionately North Americans, we believe that reflects something like 2% of their overall vacation market locally and worldwide. So yes, and coupled with the fact that cruising actually is less expensive than the typical hotel and resort stay while providing what we believe to be a much more extensive product and a better product overall, you couple all things those things together. And yes, the thesis for this industry long term is that there is and I’m sorry, one other factor, the fact that there are only four shipyards in the world that are building ships, which limits the overall industry capacity growth to something like 45% a year as opposed to hotels which basically have unlimited growth potential especially with non disciplined players. You put all those things together and we share your thesis that long term this is an amazing industry to be in.

Whether that impacts us one quarter to the next sort of hard to see that, but certainly year to year we do see those trends.

Connor Cunningham, Analyst, Melius Research: Got it. Okay. Thank you very much. Appreciate it.

Harry Sommer, President and CEO, Norwegian Cruise Line Holdings: Okay. And with that, I once again want to thank everyone for joining us today. For those of you living in Manhattan, I once again encourage you to visit our GSE pop up down there in SoHo on 104 Grand Street. We’re handing out free mocktails, and you’ll get a little experience of what the future of Great Serve K is going to look like. Please join us, and thank you for today.

Bye, everyone.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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