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Speaker 1: Let's get to it, because we were delighted to have

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Speaker 1: with us to share some insight on the company's business.

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Speaker 1: The president's CEO and chief Climate Officer of Carnival, he's

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Speaker 1: Josh Weinstein and he joins us on Zoom in New

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Speaker 1: York City. Josh, it's so great to have you here

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Speaker 1: with Matt and myself on Bloomberg Business Week. First of all,

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Speaker 1: if I may, how do you see the broader macro

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Speaker 1: outlook on a day when we're spending a lot of

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Speaker 1: time talking about Russia and concerns about instability there. How

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Speaker 1: do you see it and how do you kind of

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Speaker 1: factor it in as you run what is a global business?

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Speaker 2: Well, thank you first of all for having me. It's

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Speaker 2: a pleasure to be with you. You know, I got

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Speaker 2: to be honest with you. Over the last call it

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Speaker 2: nine months, ten months, our trajectory has only been in

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Speaker 2: one direction, and that has been up. And that is

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Speaker 2: despite you know, a good amount of geopolitical uncertainty and discord.

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Speaker 2: And that's you know, we're a global company and so

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Speaker 2: that's part of our global trade and we adapt and

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Speaker 2: we evolve and we move on. I'd say, in the

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Speaker 2: last three months it's been pretty fascinating.

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Speaker 3: We usually have our.

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Speaker 2: Peak demand in bookings in the first quarter, and our

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Speaker 2: first quarter is December, January, February of the year, and

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Speaker 2: in fact, we did have a record first quarter in bookings,

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Speaker 2: highest bookings in the company's history.

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Speaker 3: We thought that was great, and then we got to

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Speaker 3: our second quarter and we shattered it.

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Speaker 2: And so the demand that we see is carrying on

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Speaker 2: in the first three weeks of our third quarter.

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Speaker 3: For the month of June, it hasn't stopped.

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Speaker 2: And so despite the fact that there is geopolitical uncertainty,

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Speaker 2: that that is something that our consumers, our guests are

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Speaker 2: taking in stride. And at the end of the day,

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Speaker 2: they've got a desire to travel, they've got a desire

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Speaker 2: for new experiences, and they have a lot of pent

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Speaker 2: up demand for experience, as you know, and that plays

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Speaker 2: very well into our business.

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Speaker 1: Josh. It feels like though investors maybe think it's as

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Speaker 1: good as it gets, considering the bounce back that we've

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Speaker 1: seen in your share price this year, you know how

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Speaker 1: it goes as someone who's been at Carnival for a

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Speaker 1: while now and looked at it from very several different angles.

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Speaker 1: But we still have the stockdown from about eighty percent

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Speaker 1: from a high back in January of twenty eighteen. Is

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Speaker 1: it as good as it gets? Do you think in

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Speaker 1: terms of bookings and visibility right now?

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Speaker 3: Oh? Not at all, you know. So the short answer

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Speaker 3: is no.

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Speaker 2: It As a matter of fact, even though we're all

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Speaker 2: the way back in our booking curve for our North

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Speaker 2: American brands, we're still only about ninety percent back for

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Speaker 2: our European brands, and so their trajectory is the same thing,

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Speaker 2: going in the right direction, but they've got a ways

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Speaker 2: to run. But to show you the strength of our

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Speaker 2: portfolio of world class brands, our European brands, in the

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Speaker 2: second quarter, they actually as compared to twenty nineteen, not

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Speaker 2: only do they have double digit increased percentages in the

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Speaker 2: volumes booked for the rest of this year, for the

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Speaker 2: second half of the year it was on double digit

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Speaker 2: price increases. And so first quarter seven and a half

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Speaker 2: points up in I think second quarter of this year

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Speaker 2: seven and a half percent percent up in pricing with

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Speaker 2: that demand on a forward looking basis, as win in

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Speaker 2: our back, we're very well booked for the rest of

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Speaker 2: this year into the first half of next year.

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Speaker 3: So with all due respect to you know, to the market.

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Speaker 2: You know, any one day you're gonna have ups, you're

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Speaker 2: gonna have downs.

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Speaker 3: As you said, we've we've been.

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Speaker 2: On a pretty big tear, about a one hundred percent

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Speaker 2: or so since the start of the year. Our job

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Speaker 2: is to focus on the business, focus on that demand generation,

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Speaker 2: and continue to drive our business forward.

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Speaker 4: Josh Matt Miller here with Carol. What needs to happen

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Speaker 4: to bring the stock back to pre pandemic levels or

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Speaker 4: why hasn't it come back? Is it just that you

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Speaker 4: took on a lot of debt that you have a

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Speaker 4: lot of investment to do. I mean you're trading in

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Speaker 4: the teams right now, and before the pandemic hit, you

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Speaker 4: were trading more like fifty sixty seventy dollars a share.

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Speaker 3: Yeah.

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Speaker 2: Well, you know, our profile is definitely been impacted by

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Speaker 2: what happened in twenty twenty and what we had to

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Speaker 2: do to get through it. Frankly, you know, we were

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Speaker 2: a company that entered in with probably about you know,

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Speaker 2: the market cap and the debt.

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Speaker 3: If you added it together.

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Speaker 2: It's probably not too dissimilar to exactly where we are

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Speaker 2: now if you add it together.

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Speaker 3: It's just that our debt, which used to be.

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Speaker 2: About thirteen billion dollars is thirty three billion dollars and

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Speaker 2: hence the value of the of the equity is down

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Speaker 2: and it's our job over the next you know, several

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Speaker 2: years to effectively transfer that back by generating free cash flow.

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Speaker 2: We have a good amount of headroom to do to

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Speaker 2: take that and delever and pay down debt. We have

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Speaker 2: the lowest order book of new builds in frankly my history.

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Speaker 2: I've been here for twenty one years. And when I

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Speaker 2: started back in November of two thousand and seven as

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Speaker 2: the treasurer as one of the stops along my path

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Speaker 2: here at Carnival Corporation, we had twenty four ships on order,

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Speaker 2: and so our ability to generate a lot of cash

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Speaker 2: and we will continue to do that and use it

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Speaker 2: to delever is quite strong, to tell you the truth. Now,

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Speaker 2: as far as you know, what are the other factors involved?

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Speaker 2: For us, it's about getting back to not only full capacity,

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Speaker 2: full occupancy, but really leveraging our brands. Our brands are phenomenal,

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Speaker 2: I mean they are world class. We have Carnival Cruise

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Speaker 2: Line as America's cruise line. Ada in Germany created modern

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Speaker 2: day cruising. They own Germany Piano Cruises in the UK

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Speaker 2: they are synonymous with cruising.

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Speaker 3: They have a Union Jack as their livery. We own

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Speaker 3: those markets.

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Speaker 2: They are very good markets for us, and they're rebounding

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Speaker 2: and so the As far as I'm concerned, there's only

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Speaker 2: one way that we're going, and it's up.

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Speaker 4: Can I just ask about your debt? You have a

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Speaker 4: weighted average fixed coupon of six point nine to four percent,

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Speaker 4: which is not bad considering where we are right now,

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Speaker 4: and we're I guess, and about two.

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Speaker 1: Point nine billion maturing in twenty twenty.

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Speaker 4: Four, which is where it would be, which is much

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Speaker 4: lower than it would be if you had to refinance. Now,

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Speaker 4: is my point right? You guys got in on this

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Speaker 4: early and filled your coffers first. Do you think that

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Speaker 4: puts you at an advantage relative to your competitors.

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Speaker 3: I think we're in good shape.

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Speaker 2: You know, we've we've basically gotten to a point where

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Speaker 2: we ended the quarter at about seven point two billion

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Speaker 2: seven point three billion of liquidity, and we've already started

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Speaker 2: to de lever. As far as we're concerned, we can

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Speaker 2: always be opportunistic, we can refinance, we can look at

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Speaker 2: what's available, but we as far as we see the future,

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Speaker 2: we have no need to go out to the markets

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Speaker 2: at this point. We can delever with the liquidity buffer

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Speaker 2: that we have and starting to generate again all of

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Speaker 2: that cash flow.

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Speaker 3: We do have export credits as well, so for.

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Speaker 2: The new bills that we do have on order, we've

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Speaker 2: got about three billion dollars of very competitively priced export

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Speaker 2: credit facilities ready and waiting for us if we choose

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Speaker 2: to use them between now and two years from now, in.

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Speaker 3: The middle of twenty twenty five, when our last ship

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Speaker 3: is ordered.

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Speaker 2: So we're in a very strong position when it comes

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Speaker 2: to our ability to manage our debt down and manage

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Speaker 2: our interest expense down over time.

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Speaker 4: You know.

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Speaker 2: Matter of fact, one of the one of the drivers

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Speaker 2: that we had for being able to add two hundred

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Speaker 2: and seventy five million dollars to the bottom line in

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Speaker 2: our guidance change from March to June was in fact

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Speaker 2: interest expends savings from starting that process of delevering.

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Speaker 3: So we're very we're very pleased with that. With that trajectory, Well,

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Speaker 3: talk to.

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Speaker 1: Us about you know, Matt and I are going back

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Speaker 1: and forth. We're looking at different functions here, So tell

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Speaker 1: us we want to make sure we have this right.

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Speaker 1: Is it two point nine billion? Is that correct? Maturing

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Speaker 1: in twenty twenty four, I was looking at some of

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Speaker 1: our research.

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Speaker 2: You know what, I don't want to give you the

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Speaker 2: wrong number in a live program. That's fair to get back.

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Speaker 3: To you, and we'll make sure we get it squared

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Speaker 3: away for you. Well.

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Speaker 1: And the other thing is is you talked about, you know,

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Speaker 1: operating good cash flow, and forgive me, we just want

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Speaker 1: to make sure we're we're hitting it right too. You

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Speaker 1: know the amount that the ships are not inexpensive. You

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Speaker 1: guys have did a lot of replacement during the pandemic

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Speaker 1: and getting rid of some of the older ships and

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Speaker 1: so on. But I do wonder, Josh, can you I

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Speaker 1: don't know, what's the capex that you're looking for that

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Speaker 1: you can continue to spend which is really important, you know,

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Speaker 1: certainly to your business. And can you do it with

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Speaker 1: the debt load the current debtload?

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Speaker 3: Yeah? I think the short answer is yes, I think

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Speaker 3: we can.

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Speaker 2: You know, and as far as we have new build

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Speaker 2: capex and we have non new build capecks. Our new

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Speaker 2: build order pipeline, as I said, is the smallest we

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Speaker 2: have had in anyone's memory, and so we are very

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Speaker 2: well placed to be able to manage that type of

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Speaker 2: CAPEX spend.

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Speaker 3: And as I mentioned, it does come.

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Speaker 2: With export credits packaged with it should we choose to

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Speaker 2: use them. As export credits are rolling off, because we're

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Speaker 2: paying them down every year in the normal course. On

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Speaker 2: top of that new build capex we've got, we've got

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Speaker 2: maintenance cappex, we've got you know, making sure our ships

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Speaker 2: are in good condition. That you know, we're forecasting it's

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Speaker 2: going to be you know, give or take about one

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Speaker 2: point five billion for this year in twenty twenty three,

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Speaker 2: and about one point seven billion on an annual basis

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Speaker 2: thereafter for the foreseeable future.

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Speaker 3: That profile, that entire CAPEX profile.

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Speaker 2: Is significantly less than what we were living with and

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Speaker 2: how we were operating pre pause. And so that's why

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Speaker 2: we're so bullish that the amount of cash flow that

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Speaker 2: will be able to generate and then utilized a d

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Speaker 2: lever is not insignificant. You know, we're basically planning between

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Speaker 2: twenty four, twenty five and twenty six something in the

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Speaker 2: magnitude of about five billion of cash from operations, where

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Speaker 2: if you net out all these, with the capex, with

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Speaker 2: the debt, export credits coming in, export credits getting paid off,

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Speaker 2: we anticipate over over eight billion dollars will be available

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Speaker 2: for us to be able to de lever.

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Speaker 3: And that's on top of it, you know, a couple

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Speaker 3: a couple billion we're doing this year, Josh.

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Speaker 1: One thing I want to ask you, and you mentioned

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Speaker 1: this too, that you know, among the different hats that

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Speaker 1: you've worn at Carnival, and you've been there, I think

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Speaker 1: almost twenty years. I think I'm right if I'm looking

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Speaker 1: at it, twenty one one is treasure and so you

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Speaker 1: you understand the importance of the financial side of Having

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Speaker 1: said that, I am also curious when you, you know,

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Speaker 1: look at what really moves the bottom line. You know,

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Speaker 1: when people come on board, Yep, it's the tickets, but

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Speaker 1: it's also excursions and other things. Are they upping the

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Speaker 1: spend ahead of time that gives you even greater visibility

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Speaker 1: and that's where you make a lot of money.

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Speaker 3: Oh, it absolutely is. You know.

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Speaker 2: We we've made a concerted effort over you know, since

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Speaker 2: since getting back in our restart to really augment the

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Speaker 2: onboard spend profile.

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Speaker 3: And we can do that through several mechanisms. You know.

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Speaker 2: One of them is the fact is the inflationary environment.

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Speaker 2: If you think about twenty nineteen to twenty twenty three,

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Speaker 2: people are used to paying more when they go into

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Speaker 2: their local restaurant, their local bar, local entertainment, and so

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Speaker 2: we have adjusted our pricing accordingly for this for similar experiences,

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Speaker 2: and that's taken just just fine with the consumer.

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Speaker 3: We're not being out of the ordinary.

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Speaker 2: As a matter of fact, our service levels are so

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Speaker 2: much better than what you can find on land based alternatives.

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Speaker 2: It's a great value. On top of that, we're finding

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Speaker 2: different ways to pull forward that spend, as you are

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Speaker 2: referring to, and we can do that by bundled ticket

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Speaker 2: prices with onboard packages. We can sell people specific packages,

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Speaker 2: whether that's beverage or spa.

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Speaker 1: Packages, and they're buying it, and they're buying it ahead

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Speaker 1: of time.

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Speaker 3: Oh they are, they are.

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Speaker 2: It's you know, we've made about a step change for us,

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Speaker 2: but a remarkable opportunity to do more. I want to

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Speaker 2: say that it's about sixty percent increase per person per day,

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Speaker 2: the amount of our onboard spend that's being purchased before

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Speaker 2: you get on the ship. Now that's great, but it

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Speaker 2: is still a minority of our overall onboard spend revenue.

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Speaker 2: So we've got a tremendous opportunity to keep that momentum

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Speaker 2: going by finding different ways to get people to want

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Speaker 2: to put down money for those experiences in advance.

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Speaker 1: All right, don't kill me, Josh. But thirty seconds left here,

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Speaker 1: do you guys think about recession? Are you factoring the

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Speaker 1: possibility of a recession? Just quickly?

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Speaker 3: Yeah? We do, you know, we do. That's part of

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Speaker 3: our job. The great thing about our business and our

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Speaker 3: company is number one, we are well booked.

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Speaker 2: We're about at any one time about fifty percent book

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Speaker 2: for the next twelve months, and obviously that's much more

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Speaker 2: weighted in the first half. On top of that, we

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Speaker 2: are an outrageous value when you compare us to land

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Speaker 2: anywhere from twenty five to fifty percent, and that bodes

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Speaker 2: very well when people are thinking about how do I

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Speaker 2: maintain combination?

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Speaker 1: Forgive me, I got to run because the computer is

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Speaker 1: going to take me out. Josh, come back soon. Josh Weinstein,

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Speaker 1: President and CEO and chief Climate Officer at Carnival Corporation

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Speaker 1: on Zoom in New York City,