Viking Holdings Ltd (VIK) Q2 2026 Earnings Report, Transcript and Summary

Good morning. My name is Matthew, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Viking's Second Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the program to your host for today's conference, Vice President of Investor Relations, Carola Mengolini.

Good morning, everyone, and welcome to Viking's Second Quarter 2026 Earnings Conference Call. I am joined by Leah Talactac, President and Chief Executive Officer; and Linh Banh, Chief Financial Officer. Also available during the Q&A session is Tor Hagen, Executive Chairman. Before we get started, please note our cautionary statement regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release as well as in our filings with the SEC. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-IFRS financial metrics, which are reconciled and described in our press release posted on our Investor Relations website at ir.viking.com. Leah and Linh will provide a strategic overview of the company, a recap of our second quarter results and an update of the current booking environment. We will then open the call for your questions. To supplement today's call, we have prepared an earnings presentation that is available on our Investor Relations website. With that, I'm pleased to turn the call over to Leah.

Thank you, Carola. Good morning, everyone, and thank you for joining us. We are very pleased to have delivered another quarter of strong year-over-year performance. As we reported this morning, during the second quarter, revenue increased 16.5%, driving an 18.2% growth in adjusted EBITDA. These results reflect the continued strong demand for our destination-focused travel experiences and the great execution of our teams across the organization. On Slide 3, you can see that demand for Viking is strong. From an advanced booking perspective, our 2026 season is effectively sold out with 96% of the capacity for our core products already booked. Looking further ahead, our focus is on continuing to build our book position for 2027. As of August 9, 53% of the capacity for our core products for 2027 was booked, and this includes a 15% year-over-year increase in capacity. Overall, we are very encouraged by the early booking trends for 2027. As you can tell from these trends, the visibility provided by our advanced bookings gives us confidence in the demand for our product, allows us to manage pricing dynamically and supports our thoughtful approach to capacity growth. As you can see on Slide 4 and since our last earnings call, we have continued to expand our fleet, adding 4 new river vessels and 1 ocean ship, consistent with our long-term growth strategy. During 2026, we expect to take delivery of 12 ships in total, 10 for River and 2 for Ocean. As we grow the Viking fleet, we remain committed to the characteristics that make our ships unique and support the distinctive earnings profile of our business. First, we operate one of the youngest fleets in the industry, which contributes to lower maintenance costs, greater operational reliability and long earnings power. Second, our ships have been thoughtfully designed to maximize operational efficiency while providing the consistent and great experience that our guests expect. And third, within each of our product categories, our ships are designed to be almost identical and indistinguishable to our guests. Guests choose Viking because of the destinations and itineraries we offer, not because of a particular ship. As a result, when ships are deployed on similar itineraries, they are generally able to achieve comparable yields regardless of when they entered service. We believe this is a significant competitive advantage and an important driver of the long-term returns generated by our fleet. Moreover, our almost identical ships also create significant operational advantages. Because our ships are built to common specifications, we benefit from efficiencies across sales and marketing, operations, deployment, purchasing and shipbuilding. This approach simplifies everything from crew training and maintenance to inventory management and fleet deployment. Taken together, we believe that these advantages reinforce the strength of our business model and the distinctive earnings power of the Viking fleet. Now while a thoughtful fleet expansion remains the engine of our growth, we are also focused on further enhancing the experiences we offer our guests. Moving to Slide 5. You can see that we continue to increase our offering of land extensions and optional shore excursions, providing guests with more opportunities to explore the destinations they visit before, during and after their voyage. One example is our new St. Moritz, Lombardy & Alpine Train extension, which takes guests through the Swiss Alps aboard the Bernina Express. This 4-night fully guided trip can be added before or after the cruise. And we have also expanded our shore excursion portfolio with experiences such as a Zeppelin flight over Cologne, which offers breathtaking aerial views of the city's most iconic landmarks. Additions such as these reinforce our commitment to providing meaningful and memorable ways for our guests to explore the world. We believe that they are an important differentiator for Viking. As our fleet continues to grow, so does the range of experiences available to our guests. Now before turning the call over to Linh to discuss our financials, I would like to address the low water levels currently affecting some rivers in Europe. As we have discussed in the past, river cruising is inherently dependent on natural conditions, and no 2 seasons are alike. This year, portions of several European rivers, particularly the Danube and the Rhine, have experienced historically low water levels, creating operational challenges across the industry. Generally, Viking's purpose-built river fleet, deployment flexibility and well-established ship swap capabilities are significant competitive advantages that enable us to minimize disruptions as much as possible. That said, the historically low water levels this year, combined with conditions that have deteriorated week by week, have impacted guests on some of our itineraries this season. Delivering a great guest experience is one of our highest priorities, and our teams are working tirelessly to ensure that any necessary adjustments are handled as smoothly as possible. With our guests at the center of every decision we make, we are also enhancing our communication protocols to ensure they understand what to expect on disrupted itineraries. We are doing this through more proactive outreach and more frequent operational updates. We are also issuing future cruise vouchers to certain affected guests. While we believe this is the right approach from both a guest satisfaction and loyalty perspective, these vouchers will have a financial impact extending beyond 2026 and into 2027 and 2028 as they are redeemed. We believe this investment reinforces the trust that our guests place in Viking and supports the long-term loyalty that has been fundamental to Viking's success. Our focus remains on taking care of our guests, operating our European River fleet through these challenges and continuing to deliver the exceptional experiences for which Viking is known. With that, I'll turn it over to Linh to discuss our financials.

Thank you, Leah, and good morning, everyone. I will start by reviewing our very strong second quarter results. On a consolidated basis, total revenue for the quarter increased 16.5% year-over-year to $2.2 billion. The year-over-year increase was mainly driven by increased capacity and higher revenue per PCD. During the second quarter of 2026, capacity PCDs increased 10.9% compared to the same period in 2025. This year-over-year growth was mainly driven by the expansion of our fleet, which included the addition of 7 River vessels and 2 Ocean ships. The growth also reflects additional capacity of the Viking Yi Dun, an Ocean ship dedicated to our guests from Asia. It is now sailing in Europe, and we are pleased to be expanding our European itinerary offerings to this important and growing customer base. Adjusted gross margin increased 16.3% year-over-year to $1.4 billion, resulting in a net yield of $645, 6.2% higher than the second quarter of 2025. Vessel expenses, excluding fuel per capacity PCD, increased 2.7% this quarter compared to the same period last year. Regarding SG&A, expenses were slightly lower as a percentage of adjusted gross margin when compared to the same time last year. As we have mentioned in the past, our priority is to invest in our teams as well as in sales and marketing to support future growth and drive demand generation. Adjusted EBITDA for the second quarter was $748 million, 18.2% higher than the same period last year. This significant year-over-year increase was mainly driven by higher capacity and higher net yields in both the Ocean and River segments. As we have shared before, capacity growth, coupled with net yield growth, translates into strong EBITDA improvement and margin expansion. Net income was $588 million, an improvement of $148 million when compared to the same period in 2025. Adjusted net income attributable to Viking Holdings Limited was $587 million, 33.8% higher than the same period in 2025. Adjusted EPS was $1.31 for the second quarter, 33% higher than the same period in 2025. Before moving to our reportable segments, which are on Slide 8, I would like to highlight that for the first half of the year, our consolidated adjusted gross margin increased 16.5% year-over-year to over $2.1 billion, and our adjusted EBITDA was $853 million, 20.9% higher than in the same period last year. It is important to note that the prolonged low water conditions we are experiencing across some of our European rivers are not yet reflected in our financial results. As conditions evolve, we will see some impact in the periods ahead, although it is too early to determine the extent. Now I will briefly discuss our 2 reportable segments, River and Ocean. Unless noted, I will be referring to the year-to-date metrics for 6 months ended June 30, 2026. For the River segment, capacity PCDs increased 3.2% year-over-year, and occupancy for the period was 94.8%. Adjusted gross margin grew 11.3% year-over-year, and net yield was $660, up 8.8% year-over-year, driven by strong demand across all regions and favorable itinerary mix. For Ocean, capacity PCDs increased 11.4% year-over-year, mainly due to the addition of the Viking Vesta in July of 2025. Occupancy for the period was 95.4%. Adjusted gross margin increased 20.3% year-over-year to $1.1 billion, while net yield increased 7.7% to $593. Similar to River, the year-over-year increase was driven by strong demand and favorable itinerary mix. Now moving to the balance sheet. On Slide 9, you can see that as of June 30, 2026, we had total cash and cash equivalents of $4 billion, and we also have an undrawn revolver facility of $1 billion. Our net debt was $2.4 billion, and our net leverage was 1.2x. As of June 30, 2026, deferred revenue was $5 billion. Also on Slide 9, we show our bond maturity outlook. As you can see, maturities are in 2028 and beyond. With this, I'd like to confirm our debt amortization for 2026 and 2027. As of June 30, 2026, the scheduled principal payments for the remainder of 2026 were $117 million and $234 million for the full year 2027. From a committed capital expenditure perspective and for the full year 2026, the total committed ship CapEx is about $1.9 billion, or $650 million net of financing. And for the full year 2027, the total expected committed ship CapEx is about $1.0 billion, or $260 million net of financing. We will now dive into the booking curves, which are all as of August 9, 2026. On Slide 11, we show our consolidated metrics for our core products. As you can see, we are in very good shape for both the 2026 and the 2027 seasons. The 2026 season already has 96% of the capacity PCDs booked. Advanced bookings equal $6.4 billion, which is 13% higher than the 2025 season at the same point in time, while capacity is increasing by 7%. And for 2027, we are already 53% booked with capacity increasing by 15% year-over-year. We have $4.7 billion of advanced bookings, which are 21% higher than the 2026 season at the same point of time in 2025. I will now talk about the advanced bookings curves for the segments. On the next slide, you will see our curves for Ocean cruises. This is Slide 12. I will start with the yellow line, which shows the bookings for 2026. Overall, we have sold 96% of our capacity PCDs for the year and have $2.9 billion of advanced bookings, which is 17% higher than last year at this point in time. Capacity is increasing by 9%, and rates have remained strong as we finish selling the year. If you look at the gray line, you will see the booking trend for the 2027 season, which is in very good shape, too. As of August 9, we had sold about 62% of the 2027 capacity for Ocean, which is quite notable since the capacity is increasing by 18% year-over-year. Advanced bookings are 29% higher than last year, with rates equal to $877 compared to $781 for the 2026 season at the same point in time. Now we move to Slide 13, you will see the curves for the River segment. I will start with the advanced bookings for 2026, which is the yellow line. As you can see, we are having a very good year with 96% of the 2026 capacity already sold. We have over $3 billion in advanced bookings, which is 11% higher than last year at this point in time. Similarly to Ocean, we have continued to book our remaining inventory at very attractive rates. Capacity for the River segment is growing approximately 6% during 2026. Now looking at the gray line, these are the advanced bookings for the 2027 season. As you can see, we have sold about $1.8 billion in advanced bookings, which is 11% higher than the 2026 season at the same point in time. Our operating capacity for River is up 13% year-over-year, and we are already 42% booked. These are good trends for 2027 with relatively high rates equal to $1,029 compared to $942 in 2026. Keep in mind that the River operation is seasonal as our core European product starts in March. Given this, the booking curve builds through the year. So recapping, demand for our product is strong, and we are very pleased with how the booking curves are developing. Now Leah will add some color to our order book and capacity.

Thank you, Linh. As we reported this morning and since our last earnings call, we took delivery of 4 River vessels and 1 Ocean ship and exercised our options for 2 additional Ocean ships scheduled for delivery in 2032. We are very pleased with our performance year-to-date, and our ongoing fleet expansion underscores confidence in the business, the resilience of demand and the long-term growth opportunity before us. We look forward to updating you on our progress in the quarters to come. With that, operator, we are ready to open the line for questions.

[Operator Instructions] Your first question is coming from Steve Wieczynski from Stifel.

[Technical Difficulty].

Steve, your line is not coming through clearly. Are you able to repeat your question? And once again, Steve, your line is not coming through very clearly. Are you able to repeat your question, please? Your next question is coming from Xian Siew from BNP Paribas.

Maybe on the low water levels, are you seeing kind of any near-term indicators that suggest consumers might be kind of avoiding river cruising at all? Just given the low water levels, are you seeing any near-term impact on demand? And then maybe longer term, how do you think about how low water levels might impact guest experience and brand loyalty? I know in the past instances of -- I think it was in 2022, low water levels in the Rhine, guest ratings were similar for itineraries with ship swaps and to those without, and maybe it's a little bit more difficult this year, but anything you could kind of share in terms of brand loyalty over time and guest satisfaction?

Thanks for the question. So for nearly 30 years, Viking has successfully operated on Europe's rivers through a wide range of water conditions. So river levels, they naturally fluctuate from year-to-year. Some seasons, we experienced high water. Other seasons, we experienced low water. So that's really the reason why our river fleet was designed with these realities in mind. And we have, over the course of 30 years, have really worked on our operational expertise that allows us to minimize disruptions through proven solutions, including ship swaps when necessary, so that our guests can continue to enjoy the itineraries that we offer. This year was exceptionally low water. We understand that it was not ideal conditions. But nevertheless, we continue to operate without any cancellations. I think our booking curves for the River segment speak for themselves. We have not seen any particular impact in terms of booking cadence, but I'll let Linh expand on that.

Thanks, Leah. I mean, I think I concur with what Leah said. If you look at our '27 curves as of August 9, we are already over 40% booked for Rivers, and that is a great position to be in. So based on that, we don't believe low water is impacting our bookings, and we're pleased with how the curve is tracking.

Maybe could I add a point? It's Tor here. I'm in Europe. I'm in Oslo as a matter of fact. And my daughter, Karine, was on board of Mira here in Oslo, and guests there have been -- 100 guests there have been on river cruises -- on the combined river cruise down the Rhine and then on to the Mira. And of course, we all are a little bit concerned how our guest reactions. As you know, we try to go a bit overboard to treat our guests well. She said that the people she spoke to said that they were very pleased with the way Viking handled the whole situation. And of course, we have the benefit that we can do the ship swaps and all that. So of course, it's not ideal, but I think we've been able to handle it very well. We were a little bit slow initially, but I think we have handled it very well.

Your next question is coming from Matthew Boss from JPMorgan.

Congrats on another nice quarter. So Leah, with your '27 advanced bookings per PCD up 10%, more or less unchanged relative to a quarter ago, can you touch on recent pricing trends across River relative to Cruise? Or just any constraints to delivering at least the mid-single-digit historical yields in 2027 despite the impact that you cited from vouchers? And Linh, on expenses, any transitory impact to expect in costs, excluding fuel for this year? Or just any constraints to your ability to manage costs below yields for this year and next year as we think about the impact from the water levels?

Matt, so I think our booking curves show that our rates are actually pretty good. And also the pacing is also good, with 40% of the River capacity and more than 60% of Ocean capacity for 2027 already being booked as of this point in time. We don't see an impact on demand and in what the bookings that are coming in. Based on recent events, we've seen our guests kind of prove to be resilient and are continuing to book 2027 and future seasons. Linh, do you want to add additional color?

Sure. Thanks, Leah. So for 2027, as Leah noted, our net yields are quite nice, about 10% higher compared to the same point in time prior season. And so I think this goes to the same, our curve reflects some favorable product mix, and so we see that 10%. I think our goal remains mid-single-digit yield growth for 2027. As it relates to expenses, as you know, we don't guide, but the first half has shown where expenses have been. Cadence of expenses may differ from one period to the next. It's not always like-for-like. So we wouldn't say we should extrapolate, but our goal is always, obviously, to be prudent and diligent with cost management. We noted earlier that there may be some impact from low water. We will possibly see that in the third quarter and then also from the voucher issuances. So as vouchers are issued and utilized for future periods, those future periods will reflect the voucher value.

Your next question is coming from Robin Farley from UBS.

If you could help us quantify a little bit the vouchers issued. It's interesting that you're saying you've done that even though you haven't had any cancellations. Just thinking about, assuming if all those vouchers were to be used in '27, kind of what the total impact would be? I would assume it's relatively small across the base of your fleet, but if you could help us quantify the value that you've issued. And then also on that 10% increase, in '27 booked revenue per day, you mentioned the favorable product mix in there. Is it fair to assume there's also some benefit that that's a gross revenue number, that airfares are maybe higher in '27 versus '26? And any color you could give us on how the cruise ticket price itself is trending if you didn't have that higher airfare in there, just even in whatever way you can help us quantify that?

Robin, this is Leah. So yes, we did proactively issue future cruise vouchers. As Tor mentioned earlier during the call, we want to be -- we want to make sure that the guests feel that we understand that the -- nobody wants a disrupted cruise. We understand that this was not what they had hoped for when they first initially booked. And so really, that future cruise voucher generates the goodwill and in the hopes that they will return for future seasons so that they can experience the experience that Viking is known for. Based on conditions, they continue to evolve week-to-week. So at this stage, our focus is on the direct impact to our third quarter. So as of mid-August, more than 50% of the River capacity cruise days were affected with about 10% to 12% ultimately canceling. So we have proactively started to issue vouchers for these guests to acknowledge that we understand what's going on. We understand that this is not what they had purchased. And hopefully, to Linh's point, these vouchers would encourage them to really come back to Viking and experience the -- what we are known for -- the experiences that we're known for. And with that, I'll turn it over to Linh for -- you had some cost questions about airfare.

Thanks, Leah. So as it relates to 2027 and net yields, our curves show advanced bookings per PCD, which is revenue that we generate from our guests that have booked thus far. So it is favorable product mix. We price to demand is the reality, keeping in mind that we want to ensure that our pricing is -- we have good pricing for our guests to ensure that they come back. What we would point to is net yields if you want to look at airfare. So net yields will reflect costs. And as many of us know, airfare is something that most companies are seeing pressure with. That being said, our goal remains mid-single-digit yield growth year-over-year. That remains the same for '26 and the same for 2027.

Your next question is coming from Trey Bowers from Wells Fargo.

I just want to confirm, when we look at the booking curves, is there any impact of that from the issued vouchers? Or is that a totally clean number? And then I guess, as well, kind of unrelated, the sales and marketing spend was really solid this quarter. It was down year-over-year. If you guys could just talk about any efficiencies you're seeing in kind of your marketing spend and where you see that heading over time?

Sure. So the second quarter results do not include any impact for the low water. The low water really started in mid-July. The future cruise voucher is a credit that can be applied toward new future bookings, and they're used towards the cruise fare. So they're effectively providing a discount on the price of the future cruise. These can be applied for cruises later in '26 and into '27 and '28 and future years.

Your next question is coming from James Hardiman from Citi.

I wanted to circle back to sort of the discussion about mix and ultimately how that seems to benefit your advanced bookings per PCD number. We spent a lot of time on the last call sort of talking about that outsized 11% number and how it wasn't likely to stay where it is. Maybe speak to sort of how much of that mix being sort of released, so to speak, is responsible for going from the 11% to the 10%. And how much, as we think about what's left to be booked, should impact that number or how much that 10% is likely to stay closer to where it is? And maybe as part of that, we did see River, in particular, decelerate a couple of points versus the last advanced booking per PCD number. I think it went from about 12% to closer to 9%, whereas Ocean was pretty consistent. What's the narrative there? Is that really just about mix? Or did River, in fact, sort of slow more so than Ocean? Just help us understand those pieces.

Sure. So we did speak about this in the last quarter call, which is that we do have a product mix benefit here for the year-to-date curves for 2027. So as we sell more, for example, Egypt, Vietnam, that does heavily weight the price so that year-over-year, it looks much stronger. I think as we continue to sell our bread and butter, which is Europe, as most of you are aware, the average price will start to come to more a reasonable or natural number. And our goal remains mid-single-digit yields for both Rivers and Oceans. As it relates to Oceans, the price year-over-year for 2027 did stay around that 12% range. And while there may be upside, I think we need to let the booking season develop before we extrapolate trends. As we noted, mid-single digit is our goal for net yields, which includes costs such as transportation and air, and we still do have a good chunk of inventory left to sell. And so overall, I mean, the current strength is driven by higher pricing and itinerary mix, but our goal remains mid-single-digit yield growth.

Your next question is coming from Lizzie Dove from Goldman Sachs.

You talked a bit more about the offering of more land extensions, shore extensions and things like that. Could you maybe share how you're thinking about that longer term and whether from an acquisition perspective, that's something that might kind of fit into the overall portfolio? And especially within the context of, I think you still got about $4 billion of cash, how you think about the relative priorities of capital returns or just -- yes, capital allocation over time?

Lizzie, so yes, so we have been quite clear from the start that our focus is really about the destination and the experiences. So our teams have -- with that top of mind, when we think about our future itinerary planning as well as what offerings we have available for either optional shore excursions or pre and post excursions when they are in Europe. Having said that, I think, this one, I'll invite Tor into the call because he actually was quite keen on the Zeppelin that we announced. I think he went on it a couple of times. So Tor, do you kind of want to just give a little bit of color on that and also on how we see extensions and other experiences kind of enhancing our core products?

Your next question is coming from Conor Cunningham from Melius Research.

I didn't know if Tor wanted to respond there or not.

Yes. Tor, I think you might be on mute. Do you want to respond on the experiences? Anyway, so I'll look for Tor to unmute but -- well, hang on 1 second. Let me just finish the second portion. So on the capital allocation question, so we do have a healthy cash balance of $4 billion. Our priority, as you can see from our order book, is really to reinvest the cash in the business to generate strong returns. This -- we do have a framework in which we look at all acquisitions. So first, it has to be scalable. So it has to be able to move -- when we think about acquisitions, it's like you have to compare it to our organic growth. So it has to be able to generate the same, if not more returns, than our ships. So it has to be scalable, it has to be margin accretive and then, of course, complementary to the brand and fits within the brand ethos. So sorry to interrupt, but go ahead with your question.

Okay. Sorry. So maybe just a point of clarification and then piggybacking just on the excursion stuff. But can you -- so occupancy in the second quarter for River decelerated year-over-year, and you're saying there was no impact. So if you could just talk about that. I think it may just be in the context of the supply growth. So that's one, maybe easy one. And then just on the excursion and shore product, can you just talk about what's actually resonating and where attach rates are today and where you see the opportunity for attach rates 5 years from now or so, something like that?

Your next question is coming from David Katz from Jefferies.

Sorry, I think I still need to answer the question.

Go ahead, Linh. Go ahead, yes.

Apologies for that. For the second quarter of 2026, as we can see from the numbers, we performed quite well in the second quarter for River occupancy. Occupancy was slightly lower than Q2 2025. There was some impact as it related to our Egypt cruises, but that itinerary sells very well for us, well priced and has done quite well and is doing quite well. As it relates to excursions, we've mentioned this in the past, I think it was slightly -- a little lower than 40% of our guests opt to take a pre or post land extension. And obviously, that helps from a margin perspective. But in addition to that, what we found is our guests that take a pre or post or optional shore excursions with us, they tend to rate their experience better. And so from that perspective, that's really what we want. We want our guests to have a great time. And by adding additional different experiences that our guests can opt to purchase, what we've seen is quality scores for those guests are actually higher. And apologies for some of this disconnect, but please go ahead with your question.

No, we're going to -- Leah, we're going to take the cadence back right now, okay? What I wanted to ask is within some perspective on the portion of bookings that are repeat customers. And the reason I asked the question is the degree to which these customers have been on multiple Viking cruises in the past and are having a challenged experience at this time. And it may be quite a bit easier to take given that they've been a repeat customer. So any qualitative sense around what the current book is of repeat customers that have been with you multiple times before would be helpful.

Sure. So as of last year, so as of 2025, I'm going off memory now, so Linh, correct me if I'm wrong, but I believe 52% of the guests who traveled with us in the 2025 season were repeat guests. So that's a number that we publish every year. And that number is quite important to us as well as new-to-brand, of course. As you grow the fleet, a healthy mix of making sure that you're addressing your addressable market as well as making sure that your guests repeat, like that mix is important to continue to grow the capacity. So when we think about our product offerings, what would allow guests to repeat? So it's new itineraries. So it's itinerary mixes, new destinations such as India, Egypt has proven very well for us in terms of repeat brand. And then also these excursions, some of our guests have already been on the itineraries, and they already have the included excursions. And so when we have optional excursions that they can augment in their cruise, then that gives them something new to experience even though the itinerary is the same. And I think a combination of that, when we think about the 520 unique destinations we go to, when we think about the 21 major rivers. We're in 7 continents. We're in all oceans. That really -- that portfolio breadth really allows guests to go with us wherever they want to go in the world, to travel with Viking wherever in the world they want to travel to. And that's also where we keep our focus on when we think about operationally, what other areas would it be difficult for an individual traveler to go to that our guests, 55, with lots of time -- they have the time, they have the opportunity and they have the means to travel. Where else can we reduce the travel friction so that they can essentially travel the world in comfort? So that's what we think about when we think about our destinations and our expanded product offerings.

Your next question is coming from Andrew Didora from Bank of America.

Maybe just going back to the European rivers again. A question for -- maybe for Linh. I guess when you look back historically at times like this, maybe 2022 or before that, what kind of impact did you see in future bookings? Just trying to frame your commentary about being -- we will be seeing an impact in '27 and '28. Just trying to get a sense of what that's looked like historically. And then is the impact that you -- I think that you said that 50% of cruises are impacted, is that of 3Q cruises? And just curious on how that compared to other times of low water levels. Is this the worst that you've seen? Just trying to put it all into perspective.

Andrew, so as of mid-August, more than 50% of our River capacity PCDs during the third quarter, so July. This really started in July and then into mid-August. So more than 50% of that has been impacted. And so for those impacted cruises, we have -- Leah mentioned, we want our guests to -- we understand where our guests are coming from. We understand that this is not the experience that they initially purchased. And so there were some disruptions to their cruise experience. So we are giving vouchers. And that voucher will impact the next booking that they choose to book. So whatever is available or open for sale, which is later in '26 and really mainly '27, '28. What we would say is this low water that's occurring right now is probably historically -- I would say, compared to other seasons, this is probably more low water than what we've seen in the past. And so we want to be proactive. We want to ensure our guests feel good, and we want to at least try to deliver the best experience we can with these conditions. And so there will be some impact to the third quarter of 2026 and some impact into future years. That being said, as you can see from our curves, pricing to date has been quite healthy. And with this in mind, we still will try to achieve our goal of mid-single-digit yield growth.

Your next question is coming from Richard Clarke from Bernstein.

I guess just quickly on the booking curve. Obviously, you cut it at the 9th of August. Would you expect that to look meaningfully different if you'd cut it today or yesterday? And as you're sort of planning going forward, are you happy to treat 2026 as a one-off year? Or are you going to sort of operationally change anything, shift capacity, shift in the Danube and Rhine destinations going to more land-based excursions possible to mitigate if these conditions do repeat more often?

So I'll address the operational. And I think, as I mentioned, river levels naturally fluctuate from year-to-year. So some seasons, there are high water. Some seasons, there are low water. And for the 30 years that we've operated in the rivers, we know this. And so our fleet is specifically designed to navigate through these seasonal variations of water flow. That's where having nearly identical ships actually makes for a better experience in times of whether it's high or low water because the ships are able to meet in the middle and then the guests can then ship swap on a normal variation in terms of water levels. Now this year has been particularly low. We've also seen this, I believe, in 2018 and 2022. We also did not cancel cruises during those times. This is just a part of operating in the rivers. We know that this happens. This is a reality of operating in the rivers. So because of that, our team has been really -- they have it down to a science of having a combination of operational flexibility, contingency planning and itinerary adjustments to minimize disruption for our guests.

And maybe, Leah, if I can add. I'm finally back online. Of course, we have seen this before. And I think as long as we inform our guests what they can expect, then I think that solves most of the problem. And of course, we are in a unique position, as Leah said, by having our identical ships so that we can hopefully get away with only one ship swap. So I think we're in a very, very unique position. I see no reason whatsoever for lowering ambitions in terms of what volume on the River should be. Because a matter of fact, if one is a little bit contrarian, maybe such a situation as now can create some opportunity to do things that otherwise would have been difficult because we are in a very strong financial position. So we might be able to be contrarians too, but that may be wishful thinking.

Your next question is coming from Stephen Grambling from Morgan Stanley.

Maybe two follow-ups. The first one is quick, which is just -- so that comment on the cancellations in 3Q, I think you said 10% to 12% cancellations. Was that on just the 50% impacted or of the total River? And then second on -- another follow-up on excursions and extensions. Just any sense for how the economics and operations of these extensions work as we try to think about incremental margins? And then just strategically, as we think about the opportunity to expand further that you mentioned, how do you balance that with staying true to the all-inclusive and no upsell associated with the brand?

Thanks for the question. So the clarifying point, the cancellation of 10% to 12% is on the affected 50% of River capacity PCDs. And when we think about the all-inclusive nature of our products, it's still all-inclusive. It is the guests' discretion whether or not they want to augment their cruises. But if they don't want to open their wallet again when they come on board, then they don't have to. So we believe that, that still is a balance between the all-inclusive nature, which it is with all of the amenities that we have and all of the included beer, wine, included excursions, but it's also a balance of making sure that guests are able to experience what they want to experience beyond what is included. And as Linh mentioned, when we do have these additional things that guests can choose from, it does increase the quality scores. So we also see that the guests also want to have a choice. And then I'll turn it over to Linh on your question about extensions.

Sure. So I mean, I think, as mentioned earlier, plus or minus 40% of our guests do opt to purchase a pre or post extension, and a good amount of our guests do add an optional shore excursion. So that's already reflected in our net yields that you see today. I think, over time, it will contribute, and we will continue to provide different options for our guests. But as you mentioned, we are all-inclusive. So this is up to the guests, whether or not they would like to opt in for more. We're constantly looking at whether it's our deployment, our itineraries and what it provides versus what we can also add incrementally. So overall, at the end of the day, what we want is our guests to have a great experience with Viking.

Your next question is coming from Meredith Jensen from HSBC.

I was hoping you might speak a little bit more about the other portion of revenues, which is obviously also performing very well. But maybe if you could sort of unpack some of the drivers there and including how the U.S. product, Mississippi and Ohio rivers are performing as well given everything going on in the world? It would be great to hear about that as well.

Meredith, hope you're well. So in our other segment is a mix of a few things. As you noted, it is the Mississippi, it is our Expedition product, and it is our China outbound efforts. So taking our Chinese-speaking guests to Europe. And so in the second quarter, we did bring on the Yi Dun, and the Yi Dun will start operating for our Chinese guests. And over the summer, we did take that ship to Europe. And so we are quite excited about that opportunity. So the growth there you see really is reflective of that. We have currently today 4 long ships operating in Europe for our Chinese-speaking guests, and now the Yi Dun for our Ocean-going itineraries. I don't know, Tor, if you would like to add anything on that effort.

Sure. I've been spending a fair amount of time on our China outbound business, which, of course, we operate very differently from anybody else. We have the benefit that we can start with our Chinese -- our river ships in Europe, where we have all Chinese staff. And the same model as we did when we started Americans on the rivers, they then come and feel at home on the Chinese-speaking and Chinese food ships in Europe. And our ratings are very, very high. As it turned out, we took the Viking Yi Dun and now deploy that to -- in Europe, too. So we fly the Chinese across to here, and they now see Europe. I think, it's -- the reactions have been very positive. And I think that could be -- this ought to be a real opportunity for us in the medium term, I would say.

Your next question is coming from Alex Brignall from Rothschild & Company.

Maybe I'll try my luck and do a follow-on to the previous question and then one original one. So on China, also there was an opportunity for sort of domestic China business. Could you talk about any progress you've made on that, the opportunity? And then in terms of cruising domestic, also how the India itineraries have started, obviously, not for more domestic business, but how the demand for those is going, and how the booking curves are looking for those? And then just in terms of Q3, it's obviously very hard to model, but it feels like we can do a job on occupancy because we just take the 10% to 12% of the 50% of the proportion, which is River. But could you just help us to understand what happens with actual costs? Obviously, you've built an incredibly resilient business for ship swaps, but are there other costs that we should think about within just Q3 specifically outside of just the lower amount of people that will be on board if there's been cancellations?

Should I take the China follow-up first?

Sure.

Again, we did operate in China for Chinese -- or in Chinese waters for Chinese. But the unfortunate thing is that the people who operate there locally, I will not mention names, but it's a fiercely price competitive market. And they, to a large extent, have been selling the sort of American style product to Chinese customers through wholesalers, but the wholesalers are the price setters, and the cruise lines really have to take whatever is left over. Our strategy has been very different and following what we did in the U.S. But what we do in China, this may not be new to you, we market directly to the Chinese consumer. And that means that we own them and we can reset the price, and we're not subject to any of the shenanigans that tour operators implement. It means it takes us a bit longer time to get there. But if we get -- I'd say if -- when we get there, then I think it will be a much more profitable business than competing in local waters with the big U.S. guys or, for that matter, Chinese guys. So we'll be the European cruise line for Chinese tourists. I think that could be very, very interesting.

All right. And the other questions were India. So how is the India itinerary tracking? So we announced India for the first time in 2025 to start sailing in 2027. So we are pleased to report that for the 2027 and 2028 seasons, the India itinerary is completely sold out, so they're full.

Yes, this sounds like somebody trying to get into the River Cruise business, talking how quickly they sold out their stuff. So be careful...

It's par for the course for us, Tor, so no need for a press release on it.

Okay, I'm sorry.

And then 2029, while we haven't received any figures on that, 2029 is also selling quite well. And as far as the expenses for low water, the situation is ongoing. So we are -- it started in mid-July, it's now mid-August. So I'm happy to say, and Tor verified it, that it is raining in Europe. So we are optimistic that we will turn the corner. But having said that, it is a bit premature to provide any figures. So we will see some incremental expenses from transportation impacting adjusted gross margin and then some operational expenses impacting vessel expenses, but we'll have an update for that in Q3.

Thank you. I'll now turn the conference back over to Leah Talactac, Viking's President and CEO, for closing remarks.

Maybe, Leah, I could make a couple of comments before you close the books.

Sure.

Because if you look at our presentation, we see -- or your presentation rather, we see the phenomenal order book we have on Slide 14, I think it is. And I think it's -- when we talk about water levels and all that, it's sometimes counterintuitive to talk about the value of having such an order book. But I'm so sure that this order book will be very good for us. And as long as we make sure we spend enough on marketing, treat our guests well and we have very good contract prices with the yards, then I think this will be one of the main assets of Viking, if I may say so.

Yes. Thank you, Tor. That sums up our position. And again, these are historically low water levels, but this is something that we are experts at dealing with. It's something that we deal with from time to time, whether it's low or high water. And fortunately, our operations team is quite excellent at handling it. Having said that, thank you, everyone, for joining us today. We apologize for the various hiccups we've had throughout this call. We appreciate you bearing with us. And thank you, and we will speak to you next quarter. Thanks, and have a great day.

Thank you.