Carnival Corporation (CCL) Q1 2023 Earnings Call Transcript

For the period ending February 28, 2023

March 27, 2023 10:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Josh Weinstein

Good morning. This is Josh Weinstein. Welcome to our First Quarter 2023 Business Update Conference Call. I'm joined today by our Chair, Micky Arison; our Chief Financial Officer, David Bernstein; and our Senior Vice President of Investor Relations, Beth Roberts.

Before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release.

Consistent with our last business update, we remain on an upward trajectory as we further closed the gap to 2019. We are still experiencing a record wave season, which started early, gained strength and has extended later into the year. We expect these favorable trends to continue based on the traction we're making to our ongoing effort to drive demand globally.

In the first quarter, we outperformed our guidance on all measures: Revenue, costs, adjusted EBITDA and earnings, while overcoming over $30 million in headwinds from fuel price and currency since our prior guidance. Thanks to the dedicated efforts of our 160,000 amazing team members around the world. We had sequential improvement in our occupancy gap to 2019 from 19 points in Q4 to 13 points in Q1 on increasing capacity, which is now above 2019 levels. We anticipate being just 7 points or less away from 2019 occupancies in the second quarter, well on our way to historical occupancies this summer.

Equally important, we also drove ticket prices higher and continue to throttle back on our opaque channel while also maintaining outsized onboard revenue growth where we have not lost sight on the cost side of the business. We are working hard to mitigate four years of inflation while still reinvesting in advertising and sales support to build future demand. We did update our cost guidance primarily to reflect decisions taken during the quarter that have increased our costs but will produce greater EBITDA and adjusted free cash flow, which David will elaborate on. We remain nimble and continue to aggressively seek opportunities to accelerate our path back to strong profitability.

For the year, we're expecting adjusted EBITDA of $4 billion at the midpoint. The gap to 2019's record $5.5 billion of adjusted EBITDA is being driven primarily by two items. First is our 2023 occupancy gap to 2019, which we expect to be behind us as we cycle through this year. As we discussed on the last call, this results primarily from longer-duration exotic voyages early in the year that we did not feel given the disparate COVID protocols to land-based alternatives were in place during most of the booking window for these voyages, as well as close-in deployment changes and the slightly delayed but improving European recovery trajectory. Second is a drag due to fuel prices and currency changes compared to 2019. In actuality, the strength of our demand generation resulting in elevated per diems and our fleet optimization efforts has helped us to mitigate four years of significant cost inflation which, of course, will continue to work to offset even further.