Good morning and happy holidays, everyone. Welcome to our business update conference call. I am Arnold Donald, President and CEO of Carnival Corporation & PLC and today, I'm joined telephonically by our Chairman, Micky Arison; as well as by David Bernstein, our Chief Financial Officer; and by Beth Roberts, Senior Vice President, Investor Relations. Thank you all for joining us this morning. Now 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. What a difference a year make, we are clearly on our way back to full cruise operations with 50 ships now serving guests as we end the fiscal year. And that's up from just one ship, one short year ago. We've already returned over 65,000 crew members to our ships and since resuming operations, over 1.2 million guests and counting have sailed with us. Now we've achieved that while delivering an exceptional guest experience, with historically high Net Promoter Scores. These are strong accomplishments, especially in light of the uncertainty we faced just one year ago, when vaccines were not yet available and effective protocols to mitigate the spread of the virus were still evolving. Today, our team members and the vast majority of guests have received vaccines and many have received boosters. We have assessed the effective protocols for COVID-19 and its variant, enabling occupancy to progress toward historical lows. In fact, occupancies at our Carnival Cruise Line brand, which currently operates itineraries that are most similar to its normally published itineraries, are now approaching 90%, and that's after the impact of the variants on near-term booking. Again, Carnival Cruise Line continues to outperform with both occupancy and pricing strength. Even at this early stage, as a…

Thank you, Arnold. I'll start today with some color on our positive cash from operations followed by a review of guest cruise operations, along with a summary of our fourth quarter cash flows. Then I'll provide an update on booking trends and finish up with some insights into our financial position. Turning to cash from operations, I am so happy to report that our cash from operations turned positive in the month of November ahead of our previous indication driven by increases in customer deposits and other working capital changes. We all know that booking trends are a leading indicator of the health of our business. With solid fourth quarter booking trends leading the way, driving customer deposits higher, positive EBITDA is clearly within our site. Over the next few months, we expect ship level cash contributions to grow as more ships return to service and as we build on our occupancy percentages. However, cash from operations and EBITDA over the next few months will be impacted by restart-related spending and dry dock expenses, as 28 ships, almost 1/3 of our fleet, will be in dry dock during the first half of fiscal 2022. Given all these factors combined, we expect both monthly cash from operations and monthly EBITDA to consistently turn positive during the second quarter of fiscal 2022. So 2022 will be a tale of two halves. While we expect a net loss for the first half of 2022, it makes me feel so good to say we expect the profit for the second half of 2022. Now let's look at guest cruise operations. During the fourth quarter, we successfully restarted 22 ships. During the month of December, we will restart an additional seven ships, so we will be celebrating on New Year's Eve with over 2/3 of…

Thank you, David. Operator, please open the call for questions.

Our first question comes from Steve Wieczynski with Stifel. Please proceed.

So I just want to be clear about the near-term booking pressure due to Omicron. Is it fair to say that the booking pressure is really just around bookings for the first half of 2022? And what I'm trying to get at is we want to be sure that, that booking weakness hasn't started to impact further out bookings. And I know it's hard to understand which way Omicron might go. But would you expect a similar path that you witnessed around Delta, meaning bookings slowed and then rebounded very quickly as that fizzled out and got out of the media?

I think we have the experience I shared in the opening remarks about the Delta variant. We recovered in November completely from that. We'll have to see how this plays out. I think the great news is it appears to date from scientists around the world and medical experts that while this particular variant is highly infectious. It seems to have less damaging effects on people that contract it, especially those who are vaccinated and we encourage everyone to be vaccinated, everybody to get their boosters. We have very effective protocols, and so again, I think our actual performance, and we had these protocols in place, as you will recall, even before there were vaccines, we had effective protocols with sailings in Europe. So, we're amongst the safest form of socializing and travel that there are. And so to your question on the bookings, at this point, we have not seen any major impact on the second half '22, '23 bookings, it's hard for us to even quantify any impact, although we're kind of a reflection of overall consumer behavior globally. So, we sure, we've had some impact. We do see some a little spike in near-term cruise cancellations, but the booking patterns are strong. And we have not, at this point, seen anything and based on limited experience of the Delta variant and how this one seems to be playing out here at this time, not anticipating any. I hope that answered your question.

Yes. That's great color. Appreciate that. And then second question is probably for David. But David, you guys have refinanced over, I think you said the number is $9 billion so far, and I'm wondering how much more you think is available to refinance over the next 6 to 12 months? And maybe help us understand that you talked about interest costs for '22 being around about $1.5 billion, and what that number might actually look like by the time we get to next year? And I'm not trying to get more -- I'm not here trying to get more detailed guidance at you guys, I'm just trying to understand the magnitude of how much more you really could go from here?

Sure. So Steve, if you look at our capital structure, the biggest piece that high interest rate debt are the 2L notes that we did in 2020 and those have high 9s or low 10s in terms of interest expense. So there is an opportunity there to do refinancing of those notes. And we'll look for the right time to consider doing that during 2022. And that could on that few billion dollars that's outstanding that could lower interest expense even further. But we did give the forecast is -- with the guidance at $1.5 billion, and depending on the timing of any refinancing and the exact interest rate on what we refinance, there should be a considerable amount of savings going forward. And of course, keep in mind that as Arnold indicated, we do expect that we believe we have the opportunity for higher EBITDA in 2023 as compared to 2019 and that should begin to drive debt down in 2023, our overall debt levels and correspondingly drive interest expense down. So it's a little premature to give guidance, but we do expect lower interest expense in 2023.

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

So on your commentary that pricing for second half of '22 has gone up over the last quarter and realizing, of course, that Q1 is still challenged, can you give us some color? Is there a firming point sometime during Q2, where you see that sort of the near-term impact sort of stopping and things being firm? Is it from sort of May forward? Or is there such a firming point? Or is it even earlier than may have potentially, where you're seeing that the bookings and pricing moving up that you are seeing in the second half, but where you can kind of see that point in Q2 where it's firming?

Okay. Dave, you want to take the first shot and...

Yes, sure. No problem. So listen, a lot of the reason we're focused on the back half of the year, and we've talked about the comparisons in the back half and also the first half of 2023, is because you're talking about apples and apples comparisons relatively speaking, because the whole fleet is in operation, the itineraries that we're running are looking are similar to the itineraries that we ran in 2019. So it's an apples-to-apples comparison, and you can see what the booking trends -- the pricing trends look like. If you look at the first half of 2022, remember, this is apples and oranges. In 2019, we had World Cruises, we had long exotic voyages. Our whole fleet was in operation. That's not true for the first half of 2022. So on an apples-to-apples basis, the comparison doesn't look nearly as good as when you get down to the detailed itinerary level. And at the detailed level, we're very pleased with pricing. I mean, just to give you some comparisons, I mean, look at the fourth quarter, our total cruise revenue yield per PCD was up 4%. And so overall, we're very, very pleased with the pricing that we're seeing for the whole year, it's just it's an apples and oranges for the first half.

Okay. Understood. And then just for my other question, your commentary about expenses is very helpful, thinking about there are some non-recurring hire things in 2022, and you said most of those won't recur in '23. And I realize the way too early for you to sort of give an expense guidance number in 2023. But is it reasonable to think that the improvement in efficiencies from having sold those 19 ships, that the expense per unit savings from that would more than offset the inflation piece, which the inflation piece may be recurring, but whereas all the other sort of restart and the pause status, all of those expenses. Once those are gone, is it reasonable to think that your -- that the savings from the less efficient ships being gone would more than offset any inflation?

Robin, thanks for the question and happy holidays to you. Obviously, we can't forecast what inflation is going to be and all that, and I know you understand that. But what we can tell you is that exiting the ships and the other efficiencies that we are managing to, as I said in my opening comments, put us in a fundamentally lower cost basis. And we'll have to see what happens with inflation and so on. But clearly, whatever revenue we're able to generate and prices look strong now, more of it will fall to the bottom line because of that. But I wouldn't want to try to predict inflation or anything, but we know we're coming out leaner and more efficient, and we'll be better positioned, and we're expecting to be in a position to deliver more EBITDA in '23 than we did in '19.

Our next question comes from Jaime Katz with Morningstar. Please proceed.

First, I would like hear a little bit about the timing of marketing spend over the course of the next year. My guess is that it might be more front-end loaded, given the uncertainty around the first half? And then if you have any comments on the supply chain and what you guys are seeing from a procurement perspective, it would be very interesting to hear that, given all of the publicity around such issues in the news.

Okay. Sure. On the marketing spend, first of all, again, we're very pleased with the results we've been able to enjoy, especially with the Carnival brand, where the itineraries are more comparable to what they normally would be, pre-COVID, without any advertising or very limited. So as we get ready for wave, we are launching campaigns across the brands in anticipation of wave, still less spend than we had, say, in previous years pre-COVID but a significant ramp-up from where we are. And we're being very diligent as part of the efficiencies we talked about and looking at how to effect that spend for the greatest impact. So, we've gotten more efficient in the spend, we believe, as well. So we are starting to ramp up. But again, the full fleet won't be sailing until sometime in the spring or whatever, obviously, we're looking for bookings now in the second half of '22 and beyond, so a lot of spendings with that. But we'll ramp up and judge as we go what seems to make the most sense and what's really going to drive guest behavior. In terms of the supply chain and sourcing question, we're global. We source from all over the world. There's lots of dynamics everywhere. We've had single challenges, issue challenges at times with provisions or procuring, particularly services in a particular area. But overall, we are able to sail in a great way for the guests, where the guests are having a great time in a way that is compliant and very much in the best interest of public health. And so, we've been able to manage through. Any other color you want to add, David, on either point?

No, I think you hit the points well. I just did want to add one point. I was on mute. I apologize when Robin asked the question about the cost. I just wanted to point out to everybody that by the time we get to 2023, remember, there's four years of inflation there between '23 and 2019. So just keep that in mind in addition to the other comments that Arnold made about costs for 2023.

Our next question comes from Patrick Scholes with Truist Securities. Please proceed.

Great. I wonder if you can just help me clarify sort of apples-to-apples on your commentary on bookings. And you said advanced bookings for the second half of '22 and the first half of '23 are now at the higher end of historical ranges. Previously, of course, you had just talked about the second half of next year. When you're talking about the advanced bookings for second half of '22 and the first half of '23, is that a combined '22 and '23 together? Or is that for both periods separately? I'm just trying to apples-to-apples to what you said, just the single period last time. Does that make sense?

Go ahead, David. Go ahead.

Yes. So when we -- well, the reason we labeled the period separately is because we looked at each individually and each one was at the higher end of the historical range individually.

Okay. And then -- okay. So we're going to look individually, I want to be clear here, apples-to-apples, you had said previously, back half of next year was at a new historical high, meaning historical high, but now it's at the higher end. Would that -- is it fair to assume that it's not -- those bookings for the second half of next year are not quite as high as you had said last quarter? Am I interpreting that correctly?

Yes. You were interpreting that correctly. But by the way, nobody really wants to be breaking new records on the advanced booking curve, because if you want to properly -- the goal is to maximize the pricing and maximize the revenue when the ship sails. So historically, if you're in that great a book position, it's time to raise price, slow down the booking curve. You don't need to be that far ahead. If I told you that we were sold out for the back half of 2022, at this moment in time, you'd tell me we didn't manage it properly. We left money on the table. So it's not shocking that we pulled back a little bit, and we raised price, and you saw a slowdown in the booking trends.

Fair enough. I appreciate the color on that.

Our next question comes from Ben Chaiken with Crédit Suisse. Please proceed.

Another apples-to-apples question. Does this -- forgive me, does this -- when you guys give the forward commentary on pricing, does this adjust for the 19 ships removed? Or is it just a gross bookings versus gross bookings previously? If that didn't make sense, I can try to do it offline. Meaning does that capture the mix shift, I guess, or not?

Yes. So essentially, we're just looking at the fleet in 2019 that existed in all of the bookings. And so we don't subtract out ships that left the fleet. We're not doing consistently. We're doing today's fleet versus the fleet we had for 2019 sailings. So yes, there is some benefit to -- as Arnold said, the newer ships will get a better price point, better mix of cabins and other things. And so that is benefiting the price over time, and they're also more cost efficient, and they generate significantly more EBITDA as well. So you're seeing all of that flow through in the booking trends and ultimately, flow through to the cash flow and P&L.

The other thing, another variable there, another variable are itineraries and so we don't adjust itineraries either. And certain itineraries are more higher yielding than others and so on and so forth. But those are normal variances that happen year-to-year.

Got you. That totally makes sense. And then I guess just one other. You guys mentioned several times, bundled packages. I guess, are you seeing -- I know we're kind of early in the return to cruise, but are you seeing passengers have an additional wallet on onboard as well? Like are there incremental opportunities to spend?

Absolutely, we're seeing higher spending levels on board. There's no question about that. In some cases, bundling is contributing to that. We've always done -- each brand is different. And over time, there's always been some bundling. There seems to be even more of it currently than there has been in the past. And it appears that when you have these bundled packages that overall, you end up getting a greater yield because there's additional spend. But right now, there's also, I'm sure, just this pent-up demand where people are anxious to go out and experience things and have a good time and that's also showing up on board revenues right now, which are very strong.

Next question comes from Assia Georgieva with Infinity Research. Please proceed.

I have a couple of questions. Arnold, you mentioned in the prepared remarks that the Carnival brand is already at 90% occupancy, which is fantastic news. Given that we have the restart date for all the ships at this point, they're pretty much fixed. So, we can be hopeful that there might be upside from higher occupancy levels? Should we think that the Princess might be the next brand that is getting to levels somewhat closer to the Carnival brand and possibly, Costa? Is that a fair way to look at it? Can I get my hopes up for occupancy?

Yes. Thanks for the question. I think, first of all, we've had a number of ships on the Carnival brand on a 100% occupancy and the trend there is very good. But again, those itineraries are most comparable to the itineraries that existed, pre-COVID. And so, you have very some itinerary, some going on in just great execution by the Carnival team. In terms of which brand is next, that's pretty complicated. As we bring ships back, we don't bring them back right away anywhere near 100% occupancy. And so you have to look at the proportion of ships returning to service and when they return to service. And then you have to look at the itineraries. We also have different protocols around the world. We have a number of European sailings that still have social distancing or physical distancing requirements and that caps the occupancy in the 60% to 80% range, depending on itinerary in the ship and so on. So there are a lot of variables here, and we just have to see what the situation is around the speed of ramp-up and what the required protocols are and which itineraries we're going to be able to bring the ships back into. With the plans we have, we can kind of predict, but this is a very dynamic situation and has been. Our team has been really able to adapt to it and execute well. Overall, the trend is positive and the brands will get to where they need to be, given their particular circumstances, but the trajectory overall trajectory despite the fits and the stops and the speed bumps and pot holes and so on and so forth and detours, the overall trajectory is positive.

You gave me such a great segue into my second question because you mentioned itineraries probably three or four times. And I understand that Australia and New Zealand has basically been closed for the winter season. Coral Princess couldn't do her long voyage this summer, I think, partly because of Australia and New Zealand being such an uncertain vacation point at this point. And then referencing again, itineraries and the new LNG ships coming in, Costa Diadema had to replace Costa Smeralda in South America, because we don't have enough access to or reliable access to LNG facilities. Would you -- given that you're the only cruise company, a large cruise company that is operating LNG ships, would you have to participate in building out the infrastructure at places such as Brazil, for example?

Yes. I think we have a strong partnership with Royal Dutch Shell in terms of LNG infrastructure access, et cetera. And then obviously, we go beyond that relationship to secure what we need. But if -- when we built the first ship, when we started building it, there was no infrastructure. And so we made a commitment early because of our commitment on the environmental front. And now, we're very excited to have the six ships with another five coming. So again, you may have to adjust in the moment here or there or whatever. But overall, we see a clear line of sight on the infrastructure to support good yielding itineraries that are exciting for our guests with our LNG-powered ships. And then if absolutely necessary, the ships can use alternative fuel source, obviously, but our intention and purposes because we built them as LNG-powered ships to use LNG.

So would you need to participate further -- I'm sorry.

Go ahead, your follow-up. Do we have to participate and help fund or something the establishment of the infrastructure? We don't anticipate having to put capital in ourselves to help establish the infrastructure. We don't. We think there are plenty of players in that part of the business to do that. Timing may be a little off here or there, but we don't see a need at this point for us to commit our capital to building LNG infrastructure in ports.

Okay. Great. And I'm really glad you've made such a commitment to a cleaner environment. So I appreciate that. A great holiday season from me as well.

Thank you. Thank you. Same to you.

Our next question comes from Paul Golding with Macquarie Capital. Please proceed.

So I had a quick question on just structural evolution of the marketplace. David, I think you had mentioned earlier about the mix shift increasing a bit sequentially towards higher-end state room mix. And I'm wondering if that's something beyond the current order book you're looking to do more long term because you see higher propensity? The spend, should we expect as far as thinking once we're in a clear yield environment, should we expect just continued increase in higher-end state room mix? And then I have a follow-up on inflation.

Sure. So I think what Arnold in his prepared remarks talked about, I think it was 5 percentage points higher, 5 or 6 percentage points higher balcony cabins and so the mix of balconies that in our fleet in the future is higher than the mix historically. A lot of that has to do with the way in which we built ships and the designer ships. We've been able to get effectively more balcony cabins on each and every ship, which will hopefully we believe will drive yields and satisfaction levels of our guests. I don't think you're going to see for the ships we have on order through 2025, it's all well set. We're beginning to start thinking about future new builds and we'll analyze that based off of customer trends and desires. And we'll work those into the plans and you can be sure we'll be thinking about that and making sure that we optimize our return on invested capital over time as a result of what we do.

Great. And then on the cost side, as we think about your commentary on inflation, your thoughts on 2022 fuel cost, should we start thinking more about whether hedging is going to play a role here again for your team versus what was previously not a robust hedging program on your side in the fuel space?

We historically haven't hedged and at this point in time. If that changes, we'll let you know. But historically, we haven't had -- we have felt that over time that all takes care of itself, and we have some natural hedges with the portfolio we have and revenues and costs in different currencies around. Well, I know you're talking about fuel price hedging. But I'm just -- other than that, we really typically don't hedge.

And other than the LNG, nothing meaningful on mix shift between bunker and MGO and going into the operating here?

There's no question that over time, we'll see a lower ratio of MGO, given the fact we're bringing in LNG, and we have advanced air quality systems on the ships, et cetera. So the combination of LNG and extended use of advanced air quality systems, we should see a lowering of the requirements on MGO as we go forward. David, do you want to add any additional color?

No, I think that does it well. My blended fuel average for '22 reflected probably a 10-point drop in the NGL mix from '21 to '22.

Our next question comes from Vince Cipiel with Cleveland Research. Please proceed.

I wanted to follow up on occupancy. I think you mentioned that August was about 59%. So it looks like it was pretty stable throughout your fiscal 4Q. I definitely appreciate that it's a dynamic situation that you alluded to. But how are you thinking about that occupancy build throughout 2022? Do you anticipate it's more linear or more inflecting in the second half? Kind of what's built into the budget as it relates to your profitability assumptions?

So I'll start just with an overall comment that clearly, the occupancy trend is really positive. Now when you look at the comparison you just made, there are a lot of dynamics in that. For example, we brought on, as David mentioned, I think, in some of his comments, 22 ships or something. And obviously, when you bring the ships on they're not initially at full occupancy. That's on purpose as we bring them in. And so that averages down your occupancy. So what we're looking at overall for occupancy trends or where you have comparable itineraries and ships that have been sailing for a while, what's happening with the occupancy on those ships. And that's a very positive message. So you have a number of things weighting those occupancy numbers. David?

Yes. So the other thing, keep in mind that affected the fourth quarter, was the Delta variant in the month of August impacted bookings, many of which might have been for the fourth quarter. And as a result of that, we had hoped to have higher occupancy in the fourth quarter. But between the Delta variants and everything else and a few itinerary changes that we had, we were very pleased with the overall 59%. Looking forward, I will say it's very difficult to predict exactly by month or by quarter what the occupancy is going to be. We're in a good book position. And we're expecting overall the trend to be positive and to see increasing occupancies throughout 2022, but I think it'd be premature for us to give some sort of guidance.

Okay. Operator, we have time for one more question.

We have a question from Ryan Sundby with William Blair. Please proceed.

I have a question around operating procedures. It feels like proof of activation and net year touch results have been a really effective tool for the industry to lean on here. I guess given more breakthrough cases really around -- all live experiences in the past month or so, is that still an effective tool going forward? And when do you need to start considering acquiring a booster, which I think a market like France is now requiring?

Yes. Thanks for the question. I think overall, we continue to be informed by, again, the scientists around the world, medical experts. And of course, we continue to act in compliance with whatever the rules are in the destinations and home ports that we're operating. But the bottom line is that this is a dynamic situation in the markets where we are requiring vaccine, requiring testing everywhere. We require vaccines in most places. And we're encouraging boosters. Of course, our crew is vaccinated and over 10,000 of them have already received boosters and we'll be continuing with that. They are tested very frequently, the crew is. And those protocols have worked and have helped us be amongst the safest forms, as I mentioned before, of socializing and travel of any in the travel and leisure sector. So they have worked and they are continuing to work. So we'll see how it plays out. We'll follow the science, and obviously, we'll be in compliance. But right now, we are sailing with confidence. As you noted, there are going to be some cases. There's a far lower incidence of cases right now on cruise and at society at large, and we want to work to continue to ensure that that's the case. And when there are cases, the risk of propagation or spread of the virus has been very effectively controlled to date. And as long as that continues to be the case, we'll continue to sail with confidence. But we'll adjust and adapt to what we need to. I think the most important thing is where we have had cases. In most instances, they're either asymptomatic are minor symptoms. We have not had lots of cases where people have to be hospitalized or worse. And I think that's important, and that's also increasing trend in society at large. And hopefully, that trend will continue. Other question? Sorry, that was the last question?

That was the last question.

Okay. Look, everyone, thank you. I really appreciate your engagement. Please have a safe and joyful holiday and we look forward to talking to you guys at the next business update. So thank you very much.

Happy Holidays, everyone.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.