Good morning, and welcome to the Norwegian Cruise Line Holdings Third Quarter 2016 Earnings Conference Call. My name is Amanda, and I will be your operator. I would now like to turn today's conference over to your host, Ms. Andrea DeMarco, Vice President of Investor Relations and Corporate Communications. Ms. DeMarco, please proceed.

Thank you, Amanda. Good morning, everyone, and thank you for joining us for our third quarter 2016 earnings call. I am joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings; and Wendy Beck, Executive Vice President and Chief Financial Officer. Frank will begin the call with opening commentary, after which Wendy will follow to discuss results for the quarter, as well as provide guidance for the fourth quarter and full year 2016 before turning the call back to Frank for closing words. We will then open the call for your questions. As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at www.nclhltdinvestor.com and will be available for replay for 30 days following today's call. Before we discuss our results, I would like to cover a few items. Our press release with third quarter 2016 results was issued this morning and is available on our Investor Relations website. I would also like to review information about forward-looking statements and the use of non-GAAP information as a part of this call. The company's comments today may include statements about expectations for the future. Those expectations are subject to known and unknown risks, uncertainties and other factors that may cause the company's actual results and performance in future periods to be materially different from any future results or performance suggested by these expectations. The company cannot guarantee the accuracy of any forecast or estimates, and we undertake no obligation to update any forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, some of our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. With that, I'd like to turn the call over to Frank Del Rio. Frank?

Thank you, Andrea, and good morning, everyone. Thank you for joining us on this post-election Wednesday. Please allow me to take you back some 50 years to 1966. Lyndon B Johnson was President, and the United States and the Soviet Union were in the thick of the Cold War. Star Trek premiered on CBS, and Caesar's Palace had just opened on the Las Vegas strip. The Department of Transportation was founded, and an actor named Ronald Reagan became the unlikely Governor of California. A little spooky this morning, but that's what happened. It was a year that shaped our country in terms of politics and pop culture. It was also a time when Americans were fully reaping the benefits of the post-war boom, and one of their main aspirations was to see the world. This same year, a small ship made its maiden voyage from the port of Miami to the Bahamas. These weekly-scheduled voyages ushered in a sea change in the way Americans and later the world would view holidays at sea. The MS Sunward carried just 550 passengers, pioneers, really, in a new type of vacation, one where you pack once, embark and disembark the ship in the same city, and in between, experience a world very different from your own. Compared to today's cruise industry, the accommodations were spartan, the service was barely passable, and the food was better known for its quantity rather than its quality. Yet the unique experiences afforded by this new approach to vacations kept guests coming back for more. Norwegian Cruise Line, back then known as Norwegian Caribbean Line, was the company that offered this unique new vacation experience, and throughout its first 50 years, it has never stopped innovating. Most of you on this call know many of Norwegian's innovations and…

Thank you, Frank. Unless otherwise noted, my commentary compares to 2016 and 2015 per capacity day metrics on a constant-currency basis and includes the results of our land-based operations in Hawaii, which were excluded from our third quarter guidance. I'll begin with commentary on our third quarter results followed by color on booking trends and an update on fourth-quarter and full-year 2016 guidance, finishing with an early look at 2017. Adjusted earnings per share increased 20% to $1.62, coming in at the top end of our guidance range of $1.57 to $1.62. Adjusted Net Yield growth increased 3.4%, or 2.8% on an as reported basis mainly due to higher pricing versus prior year. Looking at cost, Adjusted Net Cruise Costs Excluding Fuel per Capacity Day increased 1.7% on both a constant currency and as reported basis mainly due to an increase in marketing expenses. Turning to fuel, our fuel expense per metric ton net of hedges decreased 11.5% to $500 from $565 in the prior year. When combined with the $2.5 million realized loss recorded in other expense related to a portion of our fuel hedge portfolio which was deemed ineffective, our all-in fuel expense came in slightly higher than guidance. Taking a look below the line, interest expense net increased to $60.7 million compared to $49.8 million in the prior year, mainly due to an increase in average debt balances outstanding primarily associated with the delivery of Norwegian Escape and Seven Seas Explorer as well as higher interest rates due to an increase in LIBOR rates. Other expense was $5.3 million compared to $1.7 million in the prior year. The increase was primarily related to unrealized and realized losses on fuel swap derivatives and foreign exchange derivative hedge contracts as well as foreign currency transaction losses. Turning to markets…

Thank you, Wendy. Next week the cruise industry's newest port of call, Harvest Caye, will open for guests sailing Western Caribbean voyages. Located off the southern coast of Belize, this tropical destination is unique in the industry offering visitors the option of experiencing a 5-star resort-style beach getaway or exciting eco-friendly excursions on the mainland. The responsible environmentally sensitive development of this island has been a priority for Norwegian since day one. Its privileged location near the world's second largest barrier reef meant that an even higher level of care and planning was necessary to complete the final product. And what a product it is, this unique and unparalleled eco-oriented destination immerses guests in the flora, fauna and culture of Belize through its nature center, extensive green areas, and shops run by local Belizean artisans. We look forward to her debut next week as the premier destination in the Western Caribbean. And from the warm waters of Southern Belize we turn our attention to the Pacific Northwest, where Norwegian recently revealed plans for its upcoming 2018 new build, the Norwegian Bliss. As the pioneer of cruising to Alaska from Seattle, it was only fitting that Norwegian returned to the Emerald City to debut its first ship to enter service directly into an Alaska deployment. Details regarding the ship's features will be revealed over the coming months but one recent partnership we are happy to announce is with Wyland, the world-renowned wildlife artist who Norwegian commissioned to design the hall art for Norwegian Bliss. His design, "Cruising with the Whales", depicts the majesty and diversity of the waters of Alaska and the Pacific Northwest. The importance of protecting Alaska's delicate ecosystem is paramount, which is why Norwegian Bliss will not only be our first ship to debut in Alaska, it will…

Thank you, Mr. Del Rio. Our first question comes from Felicia Hendrix from Barclays. Your line is open.

Hi, good morning. Thanks for taking my question. My first question has a few parts. First part is clarification because, Frank, at the end of your initial prepared remarks, you said that excluding the fluctuations and factors you can't control like FX and fuel, EPS guidance is up double digits but the way it was written in the release and then how Wendy described it, it sounded like it was not excluding. So, I just wanted to get some understanding on how to look at that 2017 outlook.

Look, we don't want to go a whole lot into 2017 expectations. That's what Q1 is all about. What we're saying is, since we last spoke, two items, FX and fuel have gone against us. And if those trends continue, those are headwinds to our previously stated 2017 expectation. So we just want to alert you that those items are real. They've occurred; they are occurring; they are beyond our control.

But they're included in hitting double-digits.

Correct.

Okay. EPS guidance is up double digits, including the effect of fuel and FX.

Correct.

Okay. And then, Wendy, can you help us understand kind of what the incremental fuel FX headwind is since the last time you gave us color on 2017?

Yes. So, for 2017, it looks like it's somewhere in the range presently of $0.10 to $0.15.

Okay. And that's $0.10 to $0.15 incremental from August?

That's correct.

Okay. And also on your last call you said that yield growth would be moderate. Has that changed?

Yield growth, we're not going to give you guidance, but yes, it will be moderate, and it would also be positive.

Okay. Those are my questions. Thank you very much.

The next question is from Robin Farley with UBS. Your line is open.

Great, thank you. I want to clarify also in the 2017 outlook and the release you talked about occupancy sort of commensurate with prices slightly lower for the full-year 2017, but I think, Frank, in your comments, it sounded like you said excluding the Joy, which is going to China, that was the case commensurate with lower price excluding Joy. So I just want to clarify whether that's the case in both situations, and how Joy would change that 2017 outlook?

Hi, Robin. Yes, the statements excluded Joy. As you know, the charter model in China is very different than what we are accustomed to here. So, in all the numbers that we have provided you, the effects of Joy are excluded. We are continuing to be very bullish on China. Everything that we've seen thus far continues to confirm our expectations that China will be accretive, that China's pricing as we see by the charter contracts we have under our belt thus far are consistent with our prior statement of expecting pricing up some 20% over the Norwegian fleet average. And in terms of 2017, yeah, loads right now are flat to slightly higher than they were this time last year. But it's very important to understand, and Wendy mentioned that in her prepared remarks, if you recall the series of events that really hurt the business last year, particularly in the Med, began just about now a year ago – November 13, if my memory serves right. And, so especially, when it has to do with pricing, the pricing that we have on the books today a year ago and how we ended were very different. Remember, a year ago today, we still believed that we were aiming for a much higher 2017 earnings per share that the Med primarily caused us to ultimately take down. So you have to understand that when you're looking at the business today versus a year ago, you have to take into consideration those series of events that damaged the business going forward. So not until we have an opportunity to lap this period are they really comparable. It's not so much on load, because load is load. It's more on pricing. So we're very pleased where we stand on load, especially for the first half of the year. We're okay with where we stand for load for the full-year. Our first half pricing is very strong. It's where the second half, which is primarily driven by heavy concentration of Mediterranean cruising, where this year-over-year comparison has got to be carefully analyzed, because you're comparing two very different periods.

Okay. Great, that's helpful. And then just one other clarification on 2017 EPS. Should we be thinking about double-digit growth as being around 10%, and if that's the case, from the midpoint of the previous guidance, I thought 15% to 25%. It's about, call it, a $0.20 or $0.30 reduction in EPS outlook for next year. And Wendy, I know you said FX and fuel combined are kind of negative $0.10 to $0.15 of that. Would you say the other piece is more -- you've mentioned opening a number of international marketing offices. Is it more that, or is it more sort of cautiousness on the yield side that -- thinking about that change since the last call?

Yeah. I think you answered my question for me, or at least you tried. So let me clarify. Look, we still are very well positioned for 2017, like we were last time we spoke. In fact, if anything, we're better positioned in some ways. Certainly first half. We're not going to provide a whole lot more guidance on 2017. I don't even want to use the word guidance. It's more of an indication. It's next quarter when we provide more clear guidance, but 2017 will greatly depend on the Mediterranean. It is by far the highest yielding itineraries across the board today. Again, if you compare where we are on pricing for second half to where we were this time last year, it's a negative. But this time last year didn't sustain. Pricing eroded and eroded significantly because of all the events that occurred which resulted in what we're going to generate in terms of earnings per share this year, which, by the way, is a record for the company, but lower than what we expected. Look, double-digit is a broad statement, and I'm not necessarily walking away from our prior comment, but I just think at this juncture, still very early vis-à-vis 2017. We ought to leave it at that. I will point out as I mentioned in my prepared remarks that business from North American source consumers, especially for Mediterranean sailing for 2017, have been up significantly. Double-digits. Strong double-digits across all three brands in the last 8 weeks to 10 weeks. And we would expect that given that we have not had any major geopolitical events occur since mid-July. That healing process that we always talk about has finally taken hold, and business has begun to come back as we would expect. So if this trend continues, we will soon begin to lap prior year weakness, as the prior year began to take the effects of the geopolitical events that hopefully we won't have this year.

Great. Thank you very much.

Our next question is from Harry Curtis from Nomura. Please go ahead.

Hi. Good morning. I wanted to follow-up on the sequential pricing weakness in the third quarter this year and the fourth quarter in the Med to get a better sense in Europe of what the comp actually is. Can you give us – or what would be very helpful is if we could understand how weak the pricing was, how much did it fall in the third and fourth quarters in the Med this year?

That's a complicated question to answer, Harry, with any great detail. But, what I would point you to is at this time last year, the company still believed that we could deliver our original earnings per share growth, and in spite of tight cost controls, the reason we had to take our earnings guidance down for both 2016 and 2017 was because of the significant yield deterioration that we saw, primarily in Mediterranean sailing.

And we did say on the last call that Europe was anticipated to be – or that what we were seeing was down high-single digits. And that did prove out, Harry.

Okay. And then, Wendy, can you remind us what your fuel hedge, the pricing of your fuel hedge and the percentage for next year?

Yeah, so we are 79%. We gave a lot of color in the press release, Harry, but we're 79% on average. It's broke out between HFO, 81% at a price just under $60 per barrel. And then for MGO, we are 75% hedged on Brent, and it's about $41 a barrel. And I would also add regarding fuel, we have about a 90% correlation to our hedges to the price we actually pay at the pump. So that puts us about a fourth of our fuel bill in 2017 that's actually subject to market fluctuations.

Okay. And my last question, just has to go, is related to the supply growth. Just overall, do you think that the growth in your capacity, which has been stronger than your competitors, do you think it's just outstripping your ability or your marketing systems to fill that capacity growth?

No, I don't think so. Let's take ship by ship, Escape is performing very, very well in the Caribbean, for 2017, is performing extremely well. Especially in the second quarter and third quarters, when we have moved Getaway to Baltic, which is also performing extremely well compared to what her performance had been in the Caribbean. In terms of Explore, the Regent Explore, she had just a gangbuster record-setting year in 2016 in both loads and yields, setting brand records. And as we look at 2017, that vessel is also continuing the same trends that we saw in 2016. In fact, her pricing is up over 2016 even though she's going to be operating a full-year as opposed to in 2016, her inaugural season, where she came in midyear which is the high season. Sirena, the Oceania vessel that came in April of 2016, is probably the one that performed the least well, and that's primarily because the Oceania brand had five of her six ships in Europe, three of her six ships in the Mediterranean in 2016. So it's a little bit of bad luck that we put a vessel for the Oceania brand in the market that took the brunt of the geopolitical events. The good news going forward is that neither Oceania nor Regent have any new capacity coming online until 2020. At the Norwegian brand the new capacity in 2017 is going to China, and I gave you commentary in China. We're very pleased with how China is coming along. And so, Norwegian won't have any new capacity for the Western market until 2018 when Norwegian Bliss goes to Alaska.

That does it for me. Thank you.

Our next question is from Steve Wieczynski from Stifel. Your line is open. Steven Wieczynski - Stifel, Nicolaus & Co., Inc.: Good morning, guys. So Frank or Wendy, your third quarter yield guidance or constant yield guidance was 2.5% and it came to about 90 basis points higher than that. Can you help us understand what's the biggest delta of that change versus your guidance that you gave, given there was only 50 days left in the quarter the last time you guys reported. And I know the release says improved pricing, but can you give a little bit more color on that?

Sure. Good morning, Steve. It's primarily related to higher participation with our casino player program. So, that's a good thing. But it definitely we saw more participation than what we had anticipated at the time that we gave our guidance.

So it's part of onboard revenue. Steven Wieczynski - Stifel, Nicolaus & Co., Inc.: Okay, so it really wasn't anything on the price side of things. It was more onboard driven?

Well, yes. I mean, ultimately it's going into our net yields but that's the largest driver was in onboard revenue with casino. Steven Wieczynski - Stifel, Nicolaus & Co., Inc.: Okay, thanks. And then second question. I don't know if you'll answer this or not, but if you exclude Europe from your full-year 2017 commentary, is it fair to say the rest of your business would be up in both price and occupancy?

Yes, absolutely, Steve. Across-the-board Caribbean is performing very well. Hawaii, Bermuda, and when we say Europe, we have to be careful because the Baltic is performing very, very well. Continues to perform well, it performed well in 2016. So in a nutshell, 2017 depends on Mediterranean. And again, we're cautious about Mediterranean bookings, but the last 8 weeks, 10 weeks have been very strong compared to the same period last year. And, it's important the last 8 weeks to 10 weeks last year were record setting, and were before the series of geopolitical events occurred. So if I'm comparing just the last 8 weeks to 10 weeks, that gives me encouragement in an environment today that is post-geo events, versus the same period last year prior geo events and I'm up, that gives me encouragement that if it continues, the Mediterranean will be a positive contributor towards 2017's result as opposed to it being as negative as it was for 2016. Steven Wieczynski - Stifel, Nicolaus & Co., Inc.: Okay, got you. And last simple question for you, Frank. The Breakaway Plus Ship for 2019, any update in terms of where that ship might be deployed? I know you've talked before about China. I know you had to make that decision by the end of this year and we haven't heard anything yet at this point.

Yeah, we're still on track to make a decision at the end of this year and we'll give you an update at the next earnings call as to which way we're going. Steven Wieczynski - Stifel, Nicolaus & Co., Inc.: Okay, great. Thanks, guys.

Our next question is from Tim Conder from Wells Fargo Securities. Your line is open.

Thank you. Staying on the Med and Europe you operate, given that we sort of seeing a quiet window, incident window thankfully and hopefully it continues here, what are you seeing from the industry's perspective here? Would the industry be maybe saying, okay, the pricing is improving, or North American sources are improving here over the last 2.5 months? Let's get that on the books rather than pushing price more. How do you see that dynamic more so from an industry perspective or if you want to comment from Norwegian's perspective.

Well, at least my philosophy is first you make sure you have a good base of occupancy. We were much further behind in obtaining that occupancy for 2017 Mediterranean cruising especially for Q3 and beyond last time we spoke than we are today is the result of that strong performance I have been talking about for the last 8 weeks or 10 weeks. We have closed the gap. And if this continues for the next 8 weeks until yearend, where we had some softness last year as the effect of Paris and then San Bernardino started to take place, we have some year-over-year comps that we believe if the current environment continues, we'll be able to beat. So, look, I think that 2017 is a year of reconciliation for Mediterranean. I don't think it's going to be a record year. I think it'll be a much better year than 2016. We won't see the dilution of pricing throughout the booking cycle as we saw last year due to the successive events, each successive events caused more vacuum in the system and more pricing pressure. So, I see for example, that occupancy should be better this year than last year. If you recall our Q3 occupancy is a couple points below what we did in 2015. We believe that should reverse itself. And our expectations for pricing improvement are very much tempered for 2017. It's very much a show-me. I'm encouraged by what's happened in the last 8 weeks to 10 weeks, but 8 weeks to 10 weeks doesn't make an entire booking cycle. If it continues, we'll have better news to share with you at the next earnings call.

Okay. Okay. Thank you. And I guess that would lead in – then as a follow-up on some previous questions here to the definition of double-digits versus your prior 90 days ago, the 15% to 25%. Just any definition or range that you can give us on double digit? I mean, I guess, the inference here would be that clearly it's not the 15% to 25% it was.

Look we all know what double-digit means. I don't want to get cute with you. I don't want to suggest we're walking away from our prior indication. I just want to let you know that those two events occurred. Not events, but those two factors are now weighing against. Quite frankly if the FX turns positively and fuel prices drop, those factors which are negative today can turn positive. But, I think we ought to leave guidance once for the next call. We'll have 90 more days under our belt, have a much better view about 2017, certainly for first half, and a much better view for second half, which is the one, quite frankly, that is more of a question mark today. So, again, you shouldn't read a bear story into it. You shouldn't read a bull story into it. I think that we have performed relatively well this year against some difficult -- in a difficult environment. At the midpoint of our 2016 guidance, we'll deliver earnings per share of 18% plus. And we want to hopefully continue that trend into the future. But I just assume not give you any more details on 2017 than we already have.

Okay. Fair enough. And last question: Wendy, you cited on the interest expense a little bit in Q3 here the move in LIBOR. Granted the moves we're seeing today in the markets in general, who knows where that shakes out after a few weeks, year or month or so, but when we look at the 10-year today and I know that's different from LIBOR, but can you give us any sensitivity on your interest expense exposure for 2017 as it stands?

Yeah. So, first off, for Q3, that equated to about $2.3 million in interest expense, and it's about 47 bps year-over-year or potentially, say, $0.06 from a EPS standpoint for full-year.

All right. You said $0.06. I'm sorry Wendy?

$0.06 EPS impact...

All right. And...

About 50 basis points.

How should we think about it in sensitivity of LIBOR or however you want to determine for 2017? Just on an annual basis?

Hard to say. A 50 basis point change is about $0.06.

Okay.

Yeah.

Thank you.

Our next question is from Greg Badishkanian from Citi. Your line is open.

Great. Thanks. So just kind of thinking about Europe again asked a little bit differently. How much of the second half do you have remaining to book? Because if you're seeing better pricing, better bookings and I think the double-digit that was in reference to price? And you have easier comparisons beginning in mid-November, but then you said it should be a record year. I'm just trying to understand, how much can you move the needle as we get into next year?

You're talking about 2017, Greg?

2017, correct. Yes.

So there is a lot of inventory yet to book for second half of 2017. If you look at it on a year-over-year basis, we said that on a load basis, the second half is flattish to where we were this time last year with pricing down. And so the good news is I've been mentioning that over the last 8 weeks to 10 weeks, we have seen booking volume exceed that of the same 8 weeks to 10-week period last year, so that we have eaten into the gap that existed. We still have a gap, and if the last 8 weeks or 10 weeks repeat themselves, let's say, over the last 8 weeks of the year to the end of the year, we ought to end the year slightly ahead. But it all depends on whether we continue to realize the trends that we've seen over the last 8 weeks to 10 weeks, which have been strong versus last year, both in load and in pricing.

Right. Right, okay. Good. That's helpful. And then just on China. Can you give us a little more color as you talk to other, some of your big travel partners there, just how the market has been progressing over the last few months, just to give us a different perspective?

Yeah. I'm not hearing negative charter coming out of China. I think that some of the challenges that may have occurred in the last 24 months ago seemed to have waned a bit. I think part of it is, is that the capacity expansion into China in 2017 is somewhat tempered compared to prior years. For example into the Shanghai arena that we're going to be bringing our Norwegian Joy into. If you exclude Norwegian Joy as a participant, capacity in Shanghai is actually slightly down. And so, I'm seeing a pretty positive environment. I know that from our own business, we're very, very pleased with the pace of which our charter contracts are coming in in terms of volume, in terms of what percentage of our capacity is being filled. And I'm very, very pleased at the pricing. The pricing continues to be in line with our previous indication of which, if you recall, it was some 20% better than the Norwegian fleet average. So overall, I think that most competitors if not all competitors, seem to be less or more confident about China than perhaps they were this time last year where there was some question marks. So overall, it's good. We're excited about our growing traction and presence there.

Okay. All right, thank you.

Okay. Thanks everyone for your time and support. It's always a pleasure to speak to all of you. And as always, we will be available to answer your questions the rest of the day. Have a great day, everyone. Thank you.

This concludes today's conference call. You may now disconnect.