Good morning. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Cruises Limited First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to introduce Chief Financial Officer, Mr. Jason Liberty. Mr. Liberty, the floor is yours.

Thank you, operator. Good morning and thank you for joining us today for our first quarter earnings call. Joining me here in Miami are Richard Fain, our Chairman and Chief Executive Officer; Michael Bayley, President and CEO of Royal Caribbean International; and Carola Mengolini, our Vice President of Investor Relations. During this call, we will be referring to a few slides, which have been posted on our investor website www.rclinvestor.com. Before we get started, I'd like to refer you to our notice about forward-looking statements, which is on our first slide. During this call, we will be making comments that are forward-looking. These statements do not guarantee future performance and do involve risks and uncertainties. Examples are described in our SEC filings and other disclosures. Please note that we do not undertake to update the information in our filings as circumstances change. Also, we will be discussing certain non-GAAP financial metrics, which are adjusted as defined and a reconciliation of all non-GAAP financial items can be found on our website. Unless we state otherwise, all metrics are on a constant currency-adjusted basis. Richard will begin by providing a strategic review of the business. I will follow with a recap of our first quarter results, provide an update on the booking environment, and then provide an update on our full year and second quarter guidance for 2019. We will then open-up the call for your questions. Richard?

Thank you, Jason and good morning everybody. It's been a great first quarter and we're on our way to another great year. So I look forward to chatting about it a little bit. As we stated in our press release, this quarter we were able to beat our earnings guidance essentially due to higher revenues and our revenues for the full year are also looking better than what we expected with higher pricing in every quarter. I have to stress that we're both delighted and a little bit surprised with this very nice outlook as our initial guidance was already very strong. We think that this is a result of several elements, our superior new buildings, strategic revenue management decisions, our global footprint, very well-positioned brands and an enhanced destination offering. Now, while our revenue outlook has only gotten better, our earnings forecast was negatively impacted by some things outside our control namely currency, fuel and an incident that occurred at the beginning of April at the Grand Bahama Shipyard. The accident impacted the year's operation and therefore affected directly and indirectly the ships that were scheduled to be drydock there. Luckily, there were no serious injuries but we did have to cancel three sailings on Oasis of the Seas in order to have her repaired. This is a very unusual event and not only have we never experienced anything like it, I've never heard of anybody else ever experiencing it either. Now as it pertains to our improved business outlook, I should first highlight the new buildings that our guests will be able to enjoy this year. First, we continue to enjoy delicious yields on our new ships from last year Celebrity Edge and Symphony of the Seas. We continue to find that our guest appreciate the innovation and…

Thank you, Richard. Before getting into the results, I'd like to discuss the impact of the unfortunate incident in the Grand Bahama Shipyard on our key metrics. As we stated in the release this morning, the early April incident resulted in several canceled sailings, and higher repair costs that will impact our full year earnings by approximately $0.25 per share. While the cruise cancellations negatively impacted our absolute revenue for the year, these shorter season sailings were essentially neutral to our overall yields. As you can see on slide 2, in an improvement in our business outlook has offset all the $0.25 impact from FX and fuel and even most of the $0.25 negative impact from the Grand Bahama incident. This improved outlook is a result of our strong top line results in the first quarter and an increase in the revenue performance for the balance of the year. I will now walk you through our results for the first quarter of 2019. These results are summarized on slide 3. For the quarter, we generated adjusted net income of $1.31 per share, which is approximately $0.21 higher than our guidance and approximately 20% higher than same time last year. Net revenue yields were up 9.3% for the quarter, which is approximately 150 basis points higher than the midpoint of our previous guidance. The main drivers of the positive variance were continued strength and onboard revenue and better-than-anticipated close-in demand. As I have mentioned over the past couple of quarters, guests spend for onboard activities has continued to shift towards areas that involved experiences over buying things and this quarter was no different. Shore excursion and various types of packages were key contributors to the quarterly beat. In addition to the onboard revenue strength, our results also benefited from better-than-expected pricing…

Thank you. [Operator Instructions] Our first question comes from Steve Wieczynski from Stifel. Your line is open.

Yes, guys. Good morning. So first I want to dig into the first quarter yield beat a little bit more. And I guess the question is you beat the midpoint of your yield guidance by around 150 basis points, which is, I mean, ridiculously strong. And that's after you already had a good one month under your belt when you gave that guidance. So can you help me understand a little bit more how the last two months of the first quarter performed so well? Was that more onboard related? Or was that more close-in related? Or was it a combination of both of those? And then maybe also if you could elaborate a little more around those onboard experimental experiential products you called out in the release as well. That would be helpful. Thanks.

Sure. Well, thanks Steve. So on the first quarter beat, yes, you were right. We were about a month in when we gave guidance. Really it is a combination of very strong on-board trends and better close-in demand, specifically in the Caribbean and then China outperformed our expectations for the quarter. On the onboard side, which has been exceptionally strong we saw an over index of spend on shore excursion our packages like beverage packaging, internet package and again more focused on the experiential stuff versus seeing more spend occur within the retail shops.

Hey, Steve, this is Michael. I just wanted to add as well that I think as time passes, we're becoming a lot more sophisticated with our ability to pre-cruise market products, services and experiences. And I really feel like we're making good progress. The other element of course is that we're seeing a lot of demand for the products and the activities and experiences that we've got on Perfect Day. So we're kind of excited about what we see there. And I think I heard that you actually were there a couple of weeks ago.

Yes, I was. It was great. And so my second question was going to be directed towards you Michael. And it was going to be a question on CocoCay. So I guess, what I want to ask here is, how do you potentially -- or how do you combat the potential overcrowding possibility on that island. And I guess, what I'm getting at is with a new peer now there could be days where you could see 9,000, 10,000 passengers on that island. And I guess, how do you make sure the customer experience won't be impacted? Or another way of saying it is, do you think there is a passenger level that would create a negative passenger experience?

Yes. I mean, obviously, we've given this experience the name Perfect Day. And we've designed Perfect Day to deliver what we think will generally be a perfect day for our customers. And we -- from what we've seen so far with between 4,000 and 6,000 people on the island, we've got a huge amount of space available. So we've engineered designed for peak and the peak was way up close to 10,000. We obviously now we'll operate it with bigger ships coming to Perfect Day, and we'll see how we go. I think we're kind of feeling pretty optimistic about the potential for three ship calls versus two ship calls that could take us up to 12,000 a day. And remember, it's a fairly large island and we've only developed about a third of it.

Okay. Got you. And then real quick Jason on the cost side of things for Perfect Day, Silversea and Miami, Cruise Terminal those went up by about 50 basis points in your guidance. Just wondering which one of those three is kind of driving that increase? Or is it pretty much across all three of them?

Yes. Some of it's just rounding Steve, but yes some of that's also just further, I mean, investments in Silversea would be really the driver of that and that's more on the product side.

Okay, great. Thanks guys. Appreciate it.

Sure.

Thank you. Our next question comes from Jared Shojaian from Wolfe Research. Your line is open.

Hey, good morning, everyone. Thanks for taking question. I want to ask about the $0.25 from the Oasis ship. I would think that you get that back next year, but you also didn't really raise your capacity guidance for next year by the equivalent amount. And I'm also not really sure how the accounting works on the free credits that you offered. If that impacts this year or if that could spill into next year as well so can you just talk about that a little bit?

Yes, sure. So as it relates to the $0.25 most of that – well, all of that $0.25 will take place in 2019. There is some leak over for future cruise certificates into 2020 that will also impact next year. But the way that we, I mean, this is generally most of this will be something that we will we able to recover in the future. There's -- there are some things as it relates to the yard that could potentially impact us into 2020. But for the most part this revenue loss is EPC loss were -- will be things that we'll lose this year, but gain back next year.

Okay. Thank you. And Jason, I want to dig a little bit on the Silversea synergies. When you first announced the deal you were talking about $50 million of synergies. Can you confirm that those are $50 million of operating synergies exclusive of the debt refinancing? And then maybe specifically I think in last call you talked about how some of the synergies are already in your cost guidance. If you could just break out of the $50 million how much is currently embedded into your guidance for this year?

Yes, so I won't give a specific number. But the way we look at the $50 million which was really more on a cost perspective that would be synergies that we would be recognizing over a two to three year period of time. We are on a very strong track and to meet that potentially even a little bit earlier. So there is a good piece of it that is in the 2019 numbers, but the majority of it will start to come into next year and into 2021.

And the $50 million is excluding debt refinancing in the first quarter of next year?

Yes it is.

Okay. Thank you very much.

Thank you. And our next question comes from Felicia Hendrix from Barclays. Your line is open.

Hi. Thank you. Good morning. So this is probably directed to all of you, but maybe more specifically to Jason. You're all clearly bullish as reflected in your prepared remarks and commentary and the release. So when -- thinking about your increased guidance, is it coming more from ticket or onboard? And then Jason, I was also wondering if you could just comment on the sentence in the release where you kind of mentioned that the booked position and rate and volume are a product of a number of factors including market forces itineraries segmentation and revenue management decisions?

Okay. In terms of the mix of the outlook, it's probably in diff a little bit higher on the ticker side. But I mean the onboard is also a big driver of this. As we commented and Michael commented about our pre-cruise sales to our outlook into how people are planning to spend while they are on the ship is very good and we saw that take place in the first quarter. So it is a combination of both onboard and ticket. I mean the onboard is also a very big driver of this, as we commented and Michael commented about our pre-cruise sales to our outlook into how people are planning to spend while they are on the ship is very good and we saw that take place in the first quarter. So it is a combination of both onboard and ticket that we expect to drive the yield -- the 75 basis point uplift in our yield outlook for the 2019 period of time. The comment in the release is really just leveraging what we have been saying on our calls for some time to just kind of to keep in mind that yes, we're in a very strong demand environment and our ability to identify and harvest that demand with the tools and techniques that we have we feel very good about. But we have said that we -- there is this kind of constant internal debate about are we taking too much on too soon? And that's sometimes leaving money on the table. And I think that's really what that statement's about is that your booked position is not just a reflection of the demand it's also a reflection of your revenue management decisions to take those bookings at that point in time. And that was really more just kind of stressing that point again.

Okay. That's helpful. Thank you. And then just kind of bigger picture, I think, if you ask any of us the investment community two years ago, you know, no one probably would've been able to predict that demand would be as strong as it today I mean your like-for-like net yield growth is going to be now to 4% to 5.5% for this year -- well above your historical range. And you guys talked a bit about this in the prepared remarks and we know hardware is part of the driver there. But if you have to kind of call out the hardware versus your tech investments and other demand drivers kind of how much is that driving that high like-for-like net yield outlook? And where are we in terms of those investments being able to further drive yields? Are we kind of at -- like if you're looking at a scale from 1 to 10 are we kind of at the 2 to 3 range or are we at the kind of 7 to 8 range?

Felicia, it’s Richard. I'll take a stab at that and Michael and Jason can add in if they have others. It is hard. I'm not sure a couple of years ago we ourselves would have predicted a strong market as we're seeing today. I think we look at it as an entire experience and it's hard to say well the technology is really helping. At the risk of the offending Michael, the Perfect Day is making the change. And it's clear both are by the way and both have been very effective. And we've been pleased with the reaction to our new ships. So, Celebrity Edge has just been going gangbusters and Celebrity Flora which is coming out -- it's about to come out is going gangbusters as well. And the Island and the technology, the people, our ratings, and our ratings on our guest appreciation of our wonderful crew members is going up. And these things work together and I'm not sure I know how to separate them out. The other aspects of that is we all enjoy reaping the benefits of that and you're quite right, we do enjoy reaping the benefits of that. But these things take a long time in advance to orchestrate. And so we are incurring a lot of costs both capital costs and operating costs to put in place these things which then don't pay off for a while into the future. And I also will admit that it's a little frustrating to have to invest now and reap the rewards later. But this is a long-term industry. We think our success is very much related to our ability to focus on what's happening not this year, but what's happening down the road. So, I'm not sure I know how to separate those things, but I think we all worked together to accomplish the goal.

Yes and I just want to add one other thing. I think it's good to kind of break down a little bit of it. Of our core yield growth this year, about a third of it is the new hardware and a little bit over two-thirds of it is improvement in our like-for-like business. So, I think it's a combination of all the things that Richard talked about as well as just stronger demand or poor cruise perception of cruise continues to rise demographics are certainly following into the favor of cruise, a lot of multi-generational travel. And so -- yes, I think that the piece this year which is -- if you heard us in the past we would typically say half of our yield growth was coming from the new hardware and half was coming from just core like-for-like yield growth. This year we're seeing an elevated amount of yield growth on just a like-for-like.

And actually not to blabber your question, but it opens a lot of really important doors. The other thing that's happened is the cruise industry not just us, but the whole industry is doing a better job of addressing the growth in the public's demand for experiences over things. And so I think we have been also just fortunate that our industry is in the sweet spot of the direction that the public seems to be going in as well.

Thank you. That's helpful. And just a quick clarification when you guys kind of break out your like-for-like yield versus the other things like Silversea and the Terminal and Perfect Day. Specifically on Perfect Day when you're breaking that out beyond like-for-like, is that just coming -- is that just about the revenues that are coming from Perfect Day? Or are you including the increases in pricing that you might be seeing in -- on the ships that are touching Perfect Day?

Yes, it's really focused on the on-island revenue that's there. In terms of the yield growth it's -- that's something that's in the core yield number.

Okay, great. Perfect. Thank you so much.

Sure.

Thank you. Our next question comes from David Beckel from Bernstein. Your line is open.

Hey thanks for the question. I just want to dig a little bit deeper into the improvement in the rest of the year. First question is just trying to get at how much of that is Royal-specific and how much of that is a better environment? You called out onboard, it sounds like a lot of that is Royal-specific initiatives and higher ticket price some of which relates to Perfect Day. Are you also seeing higher ticket prices associated with an overall increase in demand for cruise? And as a secondary part of that question is the improvement in the year that you're seeing pretty uniform across all future periods?

Sure. So certainly Perfect Day and Royal are helping us in the yield outlook story here. But we're seeing broad very strong demand for cruise. If you look at Celebrity -- especially with Celebrity Edge, I mean yield growth associated with that or the overall demand for Edge has really been exceptional. So, I don't think it is a specific segment. I don't think it's a specific brand. I think we're seeing overall very strong demand for cruising in general. And yes that outlook at least for this year is a pretty consistent path in terms of yield growth. But I do think it's important just to put it in perspective I mean seeing some of the strength we've seen on our core yields this is not what we typically see in a year. So yes, I think we're yes as Richard commented, we are very delighted to see the global demand accelerating. But I always would kind of -- looking out into the future I would not expect this type of yield improvement year in year out.

Got it. That's helpful. And my second question is about Europe. Understanding that you can source guests from different markets, when you have been tapping the European markets, you said volumes were down. Is -- are you actually -- are you also taking price down in those markets? Or are you instead simply diverting demand to other markets? And in those other markets, is that putting a pressure on pricing when you have to rely a little bit more on other markets to replace that European demand?

Hi, David, it's Michael. I think the beauty of global infrastructure is we can switch on and off demand with relevant pricing relatively easy. We did expect some volatility and softness in the U.K. market this year. It's because of Brexit and we assumed there may be some volatility in Europe. But Europe's doing exactly what we needed to do this year and we're fortunate that the demand from the North American markets has been particularly strong. And we also have good demand for our European products from Asia Pacific as well. So it's a mix. I think that we are lucky that we do have this global structure and we go through careful planning in terms of the year before in trying to guestimate what's going to happen in each of these markets. And I think we've done a pretty good job this year in figuring out what's going to happen.

Great. Thanks so much. Appreciate it.

Thank you.

Thank you. Our next question comes from Harry Curtis from Instinet. Your line is open.

Good morning and thank you. Just a quick follow up on that. Could you just touch on European demand for European product particularly for TUI?

Yes so I'll comment specifically on TUI. I think as – obviously, we saw strength in the first quarter from our joint ventures and our largest joint venture is TUI. So hopefully that can provide you some kind of insight in terms of how TUI is trading. I think as Michael said, we expected there be some a bit softness as it relates to the U.K. It's not a volume. It's just more we're seeing better demand from other markets. And of course, when we see that, we're going to look to grab that demand and optimize our yields. And when you look at the other markets, northern markets in Europe are a little bit stronger than the southern markets. And yes, I know there's been some talk around Germany, but overall as it relates to TUI cruises which is really more where we are that business continues to perform very well.

And we're also picking up positive commentary on at least the very early stages of bookings for 2020. Can you give us some color on that please?

Yes it's definitely too early to start to comment on 2020. We're obviously seeing very strong demand trends that are accelerating our yield outlook for the -- for this year and we will comment on 2020 as we start to get to the back half of this year.

Okay. Well I'll try a different one than. It didn't look like you used any cash to repurchase stock, but you should generate some free cash flow this year. What you're thinking around that of these prices?

Okay. It's a different approach, but it's -- so as we've said for some time I mean our North Star here is looking at more investment grade credit metrics so it means maintaining between three and 3.5 times. We get closer to the lower end of those metrics as we get to the back half of this year. And as we've said for a long time that we very much believe in returning capital to our shareholders and improving shareholder returns. But as it relates to share repurchase, we do that opportunistically and we will certainly be looking at that in the back half of the year.

Okay. Its pretty good, thank you.

Thanks, Harry.

And thank you very much. Our next question comes from James Hardiman from Wedbush Securities. Your line is open.

Hey, good morning. Couple for me. So I apologize if you already answered this. I don't think you did, but the non-organic stuff, the CocoCay, the new Cruise Terminal Silversea, you're now saying that's a 400 basis point benefit to the yield guide. I think that was previously 350 basis points. Really impressive after just one quarter. I guess what drove that specifically between the three major initiatives there?

Yes, well the 400 is really just relating to the second quarter, which we have not provided any guidance for. We still expect about 350 basis points in our yield guide for the full year.

Okay. That's helpful. And then sort of following up on the Europe question. You’ve now had a few weeks at least since that deadline was delayed about six months, and we've heard some commentary that maybe that should help -- maybe just a slicing things little bit too thin for you. But can you speak to whether or not the demand in the UK, which you called out as being fairly weak earlier in the year, is that getting any better given that we've got at least a short-term for you?

Hi, James, it's Michael. I think we commented earlier that we expected some softness or some volatility in the UK market, and we kind of planned for that. Interestingly, what we have seen is fairly good demand for products outside of Europe. So we've seen an uptick out of the UK market for products in the Caribbean and for Asia-Pacific coming out of the UK market. And I think that's happening generally out of the UK market. But -- and for our ex-UK products, demand has continued to be pretty robust. It's the UK gas booking product in the Mediterranean that's probably the most, I would say, volatile. And I think that's based upon anxiety of how exactly the visa issue is going to be resolved. But it's all of course, as we all know, it's an incredibly uncertain. And I think that's what's creating that uncertainty with the customer in terms of booking those products. But the other products are doing quite well.

And then, lastly for me -- go ahead.

No, no James, I was just going to add to -- just keep in mind that if that decision was taken pretty late in the booking cycle for that consumer for the Med.

Okay. That's helpful. And then just the last market, I want to touch on Alaska. There's been a lot of hindering about what's going on there given higher capacity this year. Sounds like, it's going pretty well for you guys specifically, but maybe talk about the health of pricing in the Alaska market. Are the ships that have been there a while able to absorb sort of the increased capacity without taking too much of a hit on the pricing front?

James, it's Michael. I think we're kind of pleased with Alaska. I mean we -- I think as Jason mentioned earlier, we increased our capacity in the Alaska market by quite a lot this year. Ovation of the Seas is the largest newest ship to go into the Alaska market. Celebrity Edge is the second Celsius class ship. Our capacity was up in the high-double-digits. I think it was something like 24%, 25% increase in capacity. It's only about 5% of our total capacity for the whole business, and of course, it's the highest yielding geographical market that we have. So, we've added quite a lot of capacity. We're doing very well in the market, and we're pleased with our results there. I think maybe other brands and products are having a struggle, but we're feeling pretty good about where we are.

Okay. That’s helpful. Thanks, guys.

Thank you. Our next question comes from Jaime Katz from Morningstar. Your line is open.

I'm curious if you would like to comment on the expansion of the distribution channels in China that was mentioned. I'm curious mostly, how that's changed maybe over the last year, and how you sort of envision that changing in the year ahead to help sort of fortify the brand locally?

Hi, Jamie, it's Michael. We're feeling again pretty good about the journey that we're on with the distribution in China. I'm not going to comment specifically about percentage changes that we've achieved over the past couple of years. We decided, I think it was three years ago we set the course to change the model in terms of distribution, but also product and itinerary lanes. And we set ourselves internal targets to ensure that we were on the right track, and we've met or exceeded those targets each year for the past three years. And we feel like we're really in a good place in terms of where we want to go. Obviously the fact that we've brought -- we're bringing Spectrum of the Seas our newest and latest Quantum Ultra ship into the China market I think really supports the decisions that we've made previously. And Spectrums, it's a lot of anticipation and excitement in the China market for the arrival of Spectrum and the bookings are in a really good place.

Okay. And then, I know it's small, but there's this minority interest that's sort of flowing through now, and I'm curious what the right way to think about the cadence of that is going forward? Because we don't really have any frame of reference historically.

Yeah. Hi. I think you are talking about the non-controlling interests?

Right.

Yeah. So, it really just relates to the one-third interest that we don't have, because we consolidate Silversea. That flows through our P&L. It would be 100%, and then the non-controlling interest gets back down for the one-third. And so, it is going to be difficult to model, I can see externally this year. But it should be a relatively small amount in each quarter that impacts us as we built this overseas business up.

Perfect. Thank you.

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

Thank you, and congrats, first of all, for a good start of the year, gentleman. On 2020, Jason, I wanted to circle back to that. I know you said it's early and you give more color. But during your earlier comments about there's an ongoing debate as which it should be as to how much bookings you want to take on and the trade-off versus given that price. So can you say at this point for 2020 how you're booked and pricing trends relative to looking into 2019 at this point last year? Just any color there. And maybe flush through a little bit more, should we anticipate the booking curve to continue to expand as part of that debate or not?

Yeah. Well, another good attempt, Tim. I could say, but I won't. It is very early on. Obviously, we're in a very good booking environment. But I'm not going to comment or we're not going to comment on the book position for 2020. We're -- we've obviously seen very good trends into this year that would result on those raisings our yield guidance, but it is way too early to start to comment on the outlook or to give you even a book position that may or may not provide you the proper realities of what the future looks like.

Tim, I think we should maybe reemphasize. The comment that we made about booking wasn't anything to do with the world as we're seeing it today. It's a point that we've made before which is that we think that there may be too much focus on this statistics that we are ahead on bookings in both volume and price, because we actually drive some of that. And also if we just change the way our itineraries work. So, if we shifted in one year -- and I'm not saying we're doing that -- but if we have one year where we had much more shorter cruises we would expect to have less other books at a lower prices and conversely if we had a year where we had less -- more long-term bookings you would expect that statistic to go up. And so, I think our concern is that people may be putting too much emphasis on that. And I hate to put cold water on our ability to forecast, but a couple of years ago in one of our calls I actually made the point that I thought that we have reached a peak and that we probably wouldn't want to increase the amount of early bookings that we took and in fact, our revenue manager said no actually given the circumstances we've got to go even higher. So, my prediction there wasn't very, very accurate. So, I think we were -- we were really making a generic comment. And we really, I want to emphasize, are not trying to make any comment about 2020 or 2021.

Okay. Okay. No, no, helpful. And then on the higher cost guide, Jason, you said the majority of that was Oasis. Was that virtually all of it? Or are you maybe seeing some opportunities for the long-term and tweaking up some spending for other items?

Yeah. I mean, the vast majority of it was either Oasis relating to the APCDs or so on the repair cost. There are some other small related investments like in technology and so forth that we're making, but not large sums of money.

Okay. And then lastly just a clarification on the U.K., in particular. You mentioned that soft on a relative basis on the one hand, but I guess in an absolute basis, are U.K. yields up or down just to be direct with it?

Yeah. We don't guide by market, but I -- or provide yield by market. But what I would say is that -- I think a better word is that it's -- the U.K. is softer than North America and then North America is stronger than -- our systems and tools and how we do things means, we're going to source more guests out of North America. As Michael said this is -- based off of what we had been seeing for sometime, we expect a less sourcing to take place out of the U.K. because of the strengths we saw in the other markets. But I wouldn't read into it too deeply that there is a major issue in the U.K. It's more of that we have seen stronger demand trends from other markets.

Helpful. Thank you very much, gentlemen.

Sure.

Thank you. Our next question comes from Stephen Grambling from Goldman Sachs. Your line is open.

Hey, thanks for taking the question. One of the big changes over the past few years seems to have been your ability to hold on to pricing premiums on new ships passed kind of year one to two. Is that all coming from existing customers? Or are you also able to continue to drive new-to-cruise the new customers on those ships relative to the years passed?

Hi, Stephen, this is Michael. I think we stated a few years ago one of our key areas of focus was on new-to-cruise in particularly in market like the United States we've been quite focused on growing our new-to-cruise segment. We have changed some of our strategy so everything that we've done with the short product where we took the Voyager class ships and put them through role amplified and then place them into the short product with Perfect Day CocoCay has really stimulated that new-to-cruise segment. So that's part of it. Our loyalty customers continue to grow. They like the brands and they enjoy what we provide. I think the new ships, we've been very focused on not only the continuation of kind of on innovation in bringing new products and services to our guests. But we've done a lot more analytics on, really trying to understand what's going to attract those customers and bring them back and also be able to maintain higher yields. A – Jason Liberty: Just to add to it as well, I'd keep in mind, these ships are having much richer mix of inventory than numerous ships. They also have many more onboard revenue venues. And I think it's also one of the things that's different about them maybe versus some of our ships or legacy ships is that, they source very well globally. So there's a lot of new-to-cruise, but a lot of that is not just coming from a single market, it's coming from many different markets. Q – Stephen Grambling: Maybe a quick follow up. On the existing customer base, would you attribute some of the ongoing strength in that customer base, not only to the new product that you have, but also it sounds like, I don't want to put…

Thank you. Our last question comes from Brandt Montour from JPMorgan. Your line is open. Q – Brandt Montour: Great, good morning, thanks, for taking my question. Just hoping for a little clarification on CocoCay. So the 350 basis points from the non-core which includes that is unchanged since last quarter, so just wondering if you could help us understand what's changed in the guidance at this point for CocoCay since then? And kind of given what you guys has said pre-cruise onboard sales continued to come in so well? A – Jason Liberty: Yes so as it relates to -- again the items that we had kind of called out of the Perfect Day and for the Miami and Silversea, on the Perfect Day side that is really relating to the onboard or really the onshore dollars. So in our 75 basis points increase in our yields or that we've provided that's really -- included in that is yield improvement that we have seen or salvation of yield improvement we have seen for the ships that are going to Perfect Day. But that's just a component of that. The pre-cruise sales we're seeing in general are accelerating and the different experiential things on the ships are also very much a part of that as well as the great demand we're seeing from our other brands and other markets around the world. Q – Brandt Montour: Okay. That's helpful. Thank you. And then on the fuel, just given fuel prices there are even more topical. You hedged more next year at this point than you were at this time last year, but that number is essentially unchanged this last quarter. So I just kind of, if you could give us an update on the strategy given what's happening to oil prices? A – Jason Liberty: Well we have a very consistent hedging program. We're typically 40% to 60% hedged 12 to 24 months out. So it's not a reflection of how we maybe feel in the moment about fuel prices. But one thing I would say about if you look at our fuel hedging into the future it is more -- it's indexed more towards MGO than it is to IFO and so I would give you those characteristics of the hedged profile going forward. Q – Brandt Montour: Got it, thanks a lot guys, great quarter.

Great. Okay thank you for your assistance Cheryl today. And we thank you all for your participation and interest in the company. Carola will be available for any follow-ups you might have and we wish you all a very good day.

Thank you very much ladies and gentleman for joining us today. This concludes our conference. You may now disconnect.