Good morning, and welcome to our business update conference call. I'm Arnold Donald, President and CEO of Carnival Corporation & plc. Today, I'm joined telephonically by our Chairman, Micky Arison; our Chief Financial Officer, David Bernstein; and Beth Roberts, Senior Vice President, Investor Relations. We'd like to 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. Prior to getting into the details of the update, I just first want to say my heart goes out to all those affected by the invasion of Ukraine. I know thousands of members of our Carnival family are directly impacted and have loved ones in the area. We, along with the rest of the world, are praying for a peaceful resolution. Now concerning our business. We're well on our way back to full cruise operations with 3/4 of our capacity having resumed guest operations and a plan to return the balance of the fleet for the summer season. And while the conversation around COVID-19 is greatly reduced, we still have to and are successfully actively managing. Our enhanced protocols have helped us become among the safest forms of socializing and travel with far lower incident rates than on land. In fact, we have carried more than 2 million since resuming guest operations. Our guests are enjoying great vacations, and we are enjoying historically high guest satisfaction scores. Of course, we have not lost sight of our highest responsibility and, therefore, our top priority, which is always compliance, environmental protection and the health, safety and well-being of everyone: our guests; the people and the communities we touch and serve; and of course, our Carnival family, our…

Thank you, Arnold. I'll start today with a review of guest cruise operations, along with a summary of our first quarter cash flows. Then I'll provide an update on booking trends and finish up with adjusted EBITDA and net income expectations. Turning to guest cruise operations. During the first quarter 2022, we restarted 10 additional ships, resulting in 60% of our fleet capacity in guest cruise operations for the whole of the first quarter. This was a substantial increase from 47% during the fourth quarter 2021. As of today, 75% of our fleet capacity has resumed guest cruise operations. Agility to continuously adapt to the ever-changing landscape has been one of our greatest strengths during the pandemic. In the first quarter, we continued to demonstrate this scale as we adjusted restart dates to optimize our guest cruise operations. And we now expect each brand's full fleet to be back in guest cruise operations for its respective summer season where we historically generate the largest share of our operating income. I am happy to report that just last week, we announced plans for our Australia restart, commencing at the end of May after the government advised that cruising would be permitted beginning in April. For the first quarter, occupancy was 54% across the ships in service. We never expected to achieve our historical 100-plus percent occupancies for the first quarter since many of these sailings were confirmed just a number of months before departure, which resulted in less than the normal booking lead time. However, we had anticipated first quarter occupancy would exceed the 58% achieved in the fourth quarter of 2021. We started the quarter with over 55% cabin occupancy booked for the first quarter and expected to improve upon that during the quarter. However, during the first quarter 2022,…

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

And we'll proceed with our first question on the line from Robin Farley with UBS.

Great. I have one revenue and one expense question. For expenses, you talked about it being up 20 -- this is the nonfuel expense, up 25% in Q1 and sort of up low double digits for the year. So if that's kind of up 11% or 12% for the year, it sounds like it would be close to flat with 2019 by the end of this year. So I wanted to make sure we're thinking about those numbers right. And your comments included the idea that with the ship sales we’ll have a 5% reduction in operating expense ex fuel in 2023 versus '19. So I know you're not sort of giving full guidance for '23. But is that the way to think about nonfuel expense being kind of flat by the end of this year and then kind of down 5% next year? That's the expense question. And then on the revenue side, obviously, lots of positive news about the incremental volume build. I wonder if you could comment a little bit more specifically on sort of European itineraries versus the rest, which just to think about how price may be holding up outside of Europe, and then also how the incremental European cruises -- you might have a lot at high prices from kind of the last 12 months that have been shifted there for the summer, but maybe how that incremental European demand is looking in terms of price impact.

Robin, I'll have David comment a little bit on both. But directionally, on the cost question, as he articulated, we had a lot of capacity out in dry dock, et cetera. So we're doing stuff over a smaller number of birds in terms of looking at the cost increases. And we had lots of onetime costs and so on. So we're not giving guidance for next year. But as we indicated, as you look through the second half of the year and see how the cost increases will be softer, we're pointing in the right direction. And we've done a lot of things going forward, including with the change in the fleet with a significant part of our capacity 25% being new ships, which are inherently more efficient. But also all the active management things we've done with the existing fleet, the pre-existing fleet, exiting less efficient ships and so on and then shoreside as well. We're doing a number of things to offset inflation and to just make ourselves a better company from a cost infrastructure standpoint. So David, I'll let you comment on the cost and we can get back to the revenue. David, go ahead.

Yes. So directionally, Robin, your math is correct, I mean, overall speaking. To get back to a low double digit for the year, you do have to sort of get directionally towards that flattish area by the end of the year. But let's -- I'll remind you of one thing that I've said many times before. Costs do vary by quarter because of a variety of things, dry dock, advertising, et cetera. So as Arnold said, we're not giving guidance for 2023. And overall, he mentioned all of the, I guess, tailwinds that help us achieve improved operating costs and adjusted cruise costs for 2023. I will also mention that we have 8% more capacity, so we get leverage versus 2019. We also get some shoreside SG&A leverage. But I will remind you, it is 4 years of inflation that is the headwind. So that is a challenge. And so we will do everything we can to properly manage the cost for 2023. But it is a little bit premature for us to give guidance at this point.

Thanks, David. Do you want to start on the revenue, David? And I can wrap up. Go ahead.

Yes. So on the revenue side, what's interesting, when you look at all of the different itineraries, we had mentioned the uptick in recent booking volumes. And we're actually seeing that uptick across all the different itineraries, whether it be in the Caribbean, in the Med and also even parts of Northern Europe. The exception, of course, is we did have, as Arnold said in his notes, I guess, 4.6% of our capacity for the remainder of the year. That's actually 3.8% for the whole year, touched on, went to St. Petersburg. And we did, I guess, change -- we moved 2 ships. And we changed the attractive itineraries for the remaining ships that are in the Baltic to go to other ports. So we have seen the bookings for those ships impacted. But remember, it's early days, and we just made the changes to those itineraries. So we've got to get the message out. But for all of the rest of the itineraries, across the board, whether they be in the Med, East, West Med, Caribbean and other parts of the world, we are seeing good solid booking trends at good solid pricing. We mentioned that our revenue management teams are holding pricing. And we are seeing good volume. I will point out that for the second -- bookings for the second quarter, we've even seen volumes that exceeded the 2019 levels, which I guess is not surprising from the perspective that, we have more inventory to sell for the second quarter than we did for 2019. But it's great that the demand is there and we are seeing the volume. And as Arnold indicated in his notes, in the month of March, we are seeing occupancies approach 70%. And we even had I think he said 40 voyages where occupancy exceeded 100% or expect to exceed 100%. So I think we are well positioned around the globe. And we'll also work very hard to get those remaining itineraries booking again now that we readjusted them with other attractive ports.

That's great. I think that commentary addresses so much of what investors have been concerned about. And then just to clarify, did I mishear when -- I thought I heard you say 5% reduction in operating expense ex fuel by 2023 versus '19. Was that 5%?

Yes. So Arnold had indicated that 5% was in ship operating expenses. And that's on an apples-to-apples basis, putting everything else aside as a result of the fleet optimization, just looking at a comparison to 2019. Of course, there's changes in itinerary, there's also -- which impact that. There's inflation which impacts that. There's other cost savings that we're working hard. That was just the fleet optimization portion. And that was obviously a great tailwind to help us reduce costs as we go into 2023.

We'll proceed our next question on the line from Steve Wieczynski from Stifel.

So I want to ask about onboard revenues. And I think there's a fear now that consumers might start pulling back on spending given -- whether it's higher fuel prices or other economic headwinds that might be out there. So given you guys have realtime data in terms of onboard spend, have you guys seen anything over the last couple of weeks that would make you believe the consumer might be starting to slow down once they come onboard? And I guess is there -- have you seen any difference in spending patterns across your different geographies?

Haven't seen any particular slowdown or anything like that in terms of onboard spend, it's been very strong, has continued to be healthy around the world, has been up everywhere. So don't see major distinctions from one geography to the next. As we get to full occupancy and we carry more kids in the summer, that kind of thing, you can see the the kind of per diems maybe will change a little bit. But overall, the spending is significantly up and has continued to be so far.

Okay. Got you. And then second question would be around the liquidity position. It looks like you burned around $700 a month in the first quarter. And I guess with some disruptions around Omicron and now the war and fuel, just maybe wondering at what level of liquidity you would start to get, I don't know if I'd use the word, uneasy. And I guess a better way to ask that question might be, do you see anything on the horizon that would make you believe that you might need to increase your liquidity base moving forward?

We've had good liquidity through this period. We will obviously continue to monitor. But as we move ahead and get more of our ships sailing and are able to generate obviously more revenue and more customer deposits, et cetera. At this stage, we feel we're in good shape on liquidity and see that going forward. If something changes, of course, obviously, we'll report at that time. But right now, we feel good about our liquidity position. David? Go ahead, David.

Can I just -- first of all, the one thing on the onboard revenue, the only thing I want to add that Arnold didn't mention is we have been raising price onboard. There's been -- there is strong demand. And obviously, with the environment being what it is, there's been an opportunity to raise price, and we've been capturing that opportunity. And as far as the liquidity, I guess, the 2 things that we continue to think about, in addition to what Arnold mentioned, is we think about refinancing our 2L notes, which are still out there. And of course, we have $3 billion of maturities in 2023 that we think about what is the optimal time to refinance that. But other than that, I just want to add those concepts as we think through those in the ensuing months and quarters ahead.

We'll get to our next question on the line from the line of James Hardiman with Citi.

A couple of my questions on the pricing front. So you guys spoke to revenue per passenger cruise day being up 7.5%. I think that number for the November quarter was plus 4%, which is obviously encouraging, right? I think the concern was that pricing benefited from the fact that these cruise ships weren't full in that the last, whatever, 20% to 30% of the rooms would come in at a discount. And so we couldn't really take that pricing strength to the bank. But this is a sample of 2, obviously. That pricing actually accelerated as the ships got more full from 4Q to 1Q. So maybe speak to how we should contextualize these pricing numbers. Is there any reason to think that those will come in a bit as we get the last, call it, 30% of occupancy? Or is there the opportunity for that to continue to accelerate?

We're certainly -- thanks for your question, first of all. We're certainly going to continue to work hard to make certain the prices hold and accelerate. And we'll have to see in the end where we're managing yield. And so we want to optimize occupancy and price. Right now, there's lots of demand. We obviously will be ramping up our advertising and promotional efforts as time goes on. We have increased already, but still well below where we were in 2019. We've gotten smarter and more efficient in how we do that. And so we want to create more demand and keep it going. But as you've heard from what we reported so far, pricing is strong, and we've been able to maintain price. David, I don't know if you want to add any more color.

Yes. The only thing I wanted to add to what Arnold said is, James, you really need to think about it a little bit differently because you're sort of saying, well, when the last 30% comes in, it does -- the last 30% isn't going to come in at the last second. Remember that for the last few quarters, the booking window has been much shorter. And so when we think about the future, we said we don't expect to get to historical occupancy levels until 2023, but we do expect to see an improving level of occupancy every quarter as we go forward. And one of the reasons is because for 2023, looking out today, we've got a much fuller booking curve. We'll manage pricing the way Arnold described, along that booking curve, and we'll get to our historical occupancy levels. And we're being very careful in the short term where the booking curve is shorter to manage that appropriately. We're driving demand, as Arnold mentioned, with the advertising. Although advertising these days seems to be -- the mix of advertising has changed tremendously and will continue to evolve. So think of it in terms of booking curve. And with the longer booking curve towards next year, we can get to those occupancy levels because there's a lot of demand out there. People want to cruise. We have a great product. We're still a good value compared to land-based alternatives, although we're trying to make it a bit less of a value as we move forward and to raise price as Arnold indicated.

That's really helpful. And then along those same lines, everybody wants to compare sort of your pricing strength to your competitors as we look versus 2019. Are there any sort of major differences you would call out that make those comparisons not really apples-to-apples? Obviously, you have, I guess, a, more of a global consumer base, right? And I don't know if there are any major differences between sort of the U.S. customers and sort of worldwide. And then the other piece is just maybe a bit more of a mass market customer. And so how do we think about the potential for growth out of those contingents?

First of all, your understandings are right. It is apples and oranges. There are a number of differences, not the least of which is we're on different fiscal quarters and so even the month long . You have timing, then you also -- obviously, in addition to that, is cabin mix. It's itinerary mix, as you mentioned, composition of the European itineraries. And right now, you have big itinerary changes because a lot of our lucrative itineraries, which would be similar for some of the others perhaps too, but we may have more of it in terms of world cruises and more exotic cruises and so on and so forth. But anyway, all those things are different. When we try our best to kind of normalize all that, which is extremely difficult to do and try to match up month-by-month, when we've done that, we see that we're doing as well of, and in some cases, better than the others. In the recent times, one has done better on price. But at the same time, they've not done as well in occupancy. And so in the end, we don't see a big performance difference on that when we try to match up. But it is apples and oranges. David, I don't know if you wanted to add anything else.

I'll add some clarity to that. So remember, one of our competitors had a lot less occupancy than us during their fourth quarter period, which probably leads to more balconies, cabins and at a higher price as part of the overall mix. And also some of our competitors, one of them was not carrying any kids because of the vaccine requirements and kids are at a lower price. So as a result of that too, that affects the overall position. Arnold mentioned the itinerary differences. But what we did do is we lined up the months, October, November and December. And we can do that internally for ourselves compared to our competition. And so if we try to also balance. Remember, occupancy, there's 2 sides to the equation, there's price and occupancy. And the best way to balance that out is to look at the gross revenue per ALBD as opposed to the gross revenue per PCD. Because I will tell you, if all I did was sell one penthouse suite on one ship and didn't sell anything else, my per PCD would be incredibly high. But when you balance it all out, the revenue per ALBD reduction because, of course, the occupancy was down in all 3 companies, we're the same, within 2 percentage points. So the reduction in revenue per ALBD was at 2 percentage points difference between all 3 companies. And so I think we are, as Arnold said, we're doing better in some. And we're well positioned and looking forward to, as I said, 2023 and providing 14 million memorable vacation experiences to people around the globe.

Our next question is from the line of Assia Georgieva with Infinity Research.

It's mind-boggling how many refinancings you guys did. So David, a question to you. How should we model interest expense going forward? I think you probably have hit the lowest-lying fruit at this point. Do you expect that there could be further significant savings on interest expense into the back half of the year and possibly 2023?

Yes. So in terms of interest expense, we did give a forecast in the business update, which was $1.5 billion. And it was the same interest expense forecast we gave back in December. So that is our forecast for the full year 2022. We do have the opportunity, as I mentioned before, to refinance the 2L notes at some point in the future. And we'll carefully look at that opportunity, and that might provide some interest savings over time. But on the flip side, we're all watching the Fed and there is the possibility for rates to move up. So at this point, it is a little premature to forecast 2023. If you know exactly what the Fed is going to do and all, let me know. But it is difficult. But it's going to be in that neighborhood, plus or minus, as you think it through in 2023.

The Fed hasn't called me today. So I don't know what the latest thinking is. Can I ask a couple of -- one question, revenue and itinerary related. It's great news that Australia is opening up. And obviously, that will be more helpful during the winter season 2022, 2023. Given that Spirit will be permanently based in the U.S., are you thinking of adding another Carnival ship so that you have a little bit more scale as opposed to just one ship? And do you think that China is an opportunity that might come online within the current fiscal year?

Well, first of all, we're delighted to see that the Australian government is not extending the ban on cruises beyond the April 17 date. And we've already announced, as you are aware, P&O Australia is going to start selling late May in Australia. And so we're happy to be bringing joy for cruise vacations to Australians again and giving people who want to cruise in Australia an opportunity to do so. So we're excited about that. China, we'll have to see how things pan out there. Right now, it's still not practical. And as we've always said with China, when we're able to do it profitably, we'll do it. And when we can't, we won't. And so we continue to work with the authorities there and other places that are still not yet quite open to eventually get it open for cruise in a way that makes sense for everyone. So that's that. The Fed hasn't called me today either, by the way. But I would say -- overall, things are really looking good. I mean we're -- 75% of the ships are now sailing. Whether we'll put another ship into Australia for the Carnival brand, that's the decision to be made over time. But almost certainly, given the demand in Australia historically for the various brands, it would not be illogical to think at some point once things are up and going again, Carnival would have an even greater presence. So but at this point, we don't have any specific plans. Right now, we'll see how things pan out.

Yes. David, I'm sorry.

The only thing I just wanted to remind everybody is that remember, Carnival Cruise Lines moved out 6 ships so -- during the pause in guest cruise operations. And so as a result of that, as Arnold said, we'll relook at it. But everything needs to be reexamined to make sure we optimize the cash flow and profitability of Carnival Cruise Lines.

And by the way --

We have some time before their season, right? So there's still a few months to go?

Yes. And Carnival is doing so well. I mean it's lead the way period, in terms of occupancy, has been strong yields. We've had unbelievable bookings the past few weeks, wave level bookings in the Carnival brand in the last few weeks here and is super positive for the brand and a good, hopefully, leading indicator for the overall industry.

It does seem that wave season is being extended. And I imagine it's not just the pause or the slowdown because of Omicron, but also because people have been cooped up for 2 years. And it might be taking a little bit longer to make those decisions given uncertainty, COVID or geopolitical. So hopefully, we'll continue to see a great booking volume stream over the next weeks.

Absolutely. Yes, there's no question, consumer confidence, uncertainty driven by all the various dynamics, COVID, the invasion in Ukraine and all that. But clearly, there's momentum.

We got our next question on the line from the line of Stuart Gordon with Berenberg.

Yes. Just a couple of points I'd be interested. And the first one is on the dry dock days. Could you just give some color on sort of the number of days that you're expecting in the first half of '22 versus '19, perhaps also a full year if you have it? And then how that should shape up for '23. I'm assuming you're putting through a lot of dry dock days that will therefore not be required next year. And just the second is on the Omicron impact. What was the damaged occupancy from cancellations due to Omicron, if you could give us some flavor on that?

Yes. I'll take the second part and let David tell you about the dry dock days. In terms of Omicron, as we said in the opening comments, it clearly had an effect on consumer confidence, and it caused disruption. People either were testing positive, so they couldn't cruise or they weren't able to get timely tests. And then there was just the overall impact on society and uncertainty and uneasiness that Omicron created. It's tough to quantify it and isolate it to say this was all Omicron and this was something else. But the bottom line is it had an impact, it had an impact on wave and which is why we feel -- partly why we feel now we have an extended wave season and are seeing that rebound now. But we did get through it. We got through it just as we got through Delta. And now, there's lots of momentum and things are clearly pointed in the right direction. So go ahead, David, on the dry dock days.

Yes. So the dry dock days, in the first quarter, we have 273 days versus 141 in 2019. In the second quarter, there's 399 days versus 184 days in 2019. For the full year, this year, right now, the plan is 802 dry dock days. We have some additional dry docks in the fourth quarter. I only have at the moment the first half of 2023. By the way, most many of the dry docks are usually either the first half or the fourth quarter. But the first half is down to, in '23, 272 days. There'll probably be some more in the fourth quarter. But you can see the number of dry dock days will be significantly less. 802 is an unusually large number. I don't think we've ever exceeded. I think something in the range of 550 was probably the largest number we ever had. But as I mentioned in my notes, we're bringing back the ships. We're optimizing it. The ships are not in service. And we want to make sure the ships look great when the guests get back onboard. And of course, we are cleaning the hull. Because I will tell you, you get those hulls clean, and it is incredibly much more efficient from a fuel perspective. So we are optimizing the situation. I don't have the full year 2019 at my fingertips. I do apologize. But perhaps Beth can get back to you on that one.

No, that was very helpful. Could I just circle back to the first question. I mean would it be fair to say that if we were to see another variant, each iteration of the variant, Delta to Omicron, you're a, recovering faster; but b, also seeing less of an impact because the human nature is we're getting more used to it? Would that be a fair observation at least?

I think we'll have to see what happens with the variants. But clearly, society is better prepared. There's better understanding of transmission, of epidemiology, of everything. More people are vaccinated. That's a biggie, of course. And people -- and fewer and fewer people are getting really sick from, whether it's Omicron or the B variant of Omicron or whatever. And so the focus is shifting more to where it should be, which is hospitalizations or worse -- long-term effects are worse. And as long as I think society doesn't see a huge ramp-up in that, from some variants, then you're absolutely right, people are learning how to live with it and live with it safely and comfortably. And of course, our protocols have been -- have served us very well. On the ships, we are far better than the equivalent incidents on land, partly because of the testing, the vaccinations, all the other protocols we have in place. And so we're amongst the safest forms of socialization there is, and we've learned a lot about how to manage. And so through Delta, through Omicron, through all those, we have had much lower incidents than what you would find on land and have gotten pretty adept at serving the best interest of public health and dealing with it. But overall, society is getting used to it. And as long as hospitalizations don't ramp-up or worse, then you would think the trend you're seeing today would continue.

And remember, test is much more available. That will be very helpful as well. Because in the first quarter, that was a big issue for us, on the testing side.

We'll get to our next question from…

This will probably be the last question. Okay. Thank you.

So we’ll take ou final question from the line from Fred Wightman with Wolfe Research.

I was hoping you could give a little bit more detail on the sailings where you are seeing occupancy over 100%. It sounds like that might be mostly concentrated in the Carnival brand. But are those largely South Florida departures? Are you seeing pretty broad-based strength in terms of where those are located or home porting, anything else to add would be great.

Definitely more North American oriented, not only the Carnival brand. I think the better characterization would be kind of traditional itineraries that people have been used to. And so in a number of cases, of course, we've had ultra-itineraries because destinations weren't available or they had protocols, et cetera, that made it difficult to take guests there and what have you. But overall, I think the most important aspect of that is you're talking a lot of sailings at 100%, which is showing that things is definitely coming back. And that we have the ability to sell at 100% with protocols and still serve the interest of public health with really good outcomes from a health and safety standpoint. So that's that, I would characterize it. There's still a lot of destinations elsewhere that have restrictions. There's additional protocols. The regulations -- we have 9 brands all over the world. There's all kinds of regulations and protocols not just in home markets, but in destination markets that we have to deal with. And all of that creates challenge. But it's becoming less, and we are moving towards full occupancies over time and having all of the ship sail.

Makes sense. And a housekeeping question. When you guys are making comments about forward earnings commentary for the back half of this year and then into '23, are you just assuming the current spot fuel price? Or are you looking at the forward curve there? I'm assuming of that?

Yes. So our commentary was very broad. I do assume that fuel will be better than the current spot price. But the commentary is pretty broad. And we're not giving specific guidance. So while fuel price matters to the bottom line, it's still -- depending on the price, it's -- there's a wide range where we're still within the guidance we gave of a profit and loss.

Thank you, all. Operator, thank you very much. But everyone, thank you. We appreciate your interest in us. We're very excited about welcoming people back onboard. Again, our heart goes out to all of those impacted by Ukraine invasion. But we're looking forward to piece there and brighter days ahead. Thank you.

Thank you very much. That does conclude the call for today. We thank you for your participation. Please disconnect your lines. Have a good day, everyone.