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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: All right, another stock we're watching today is Norwegian Cruise Lines.

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Speaker 3: It is in the red here.

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Speaker 2: We can see with the rest of the market Norwegian

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Speaker 2: is falling. But it did put out an earnings report

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Speaker 2: signaling strong cruise demand despite missing profit outlook expectations. Norwegian

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Speaker 2: was one of a few cruise stocks that sank earlier

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Speaker 2: this month as well, following comments from Commerce Commerce Secretary

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Speaker 2: Howard Lutnik about a potential tax crackdown on ships that

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Speaker 2: sail under foreign flags. Joining us now is the CEO

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Speaker 2: Harry Summer Norwegian Cruise Lines. Harry, you know, came out

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Speaker 2: with some numbers that looked on the one hand good

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Speaker 2: but missed maybe outlook expectations. Why do you run us

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Speaker 2: through the reasons for that first?

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Speaker 1: So thanks for having a sum this morning. Appreciate it.

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Speaker 1: So you know, we're really happy with our twenty twenty

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Speaker 1: four earning scorecard. We had ten percent yield increases to

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Speaker 1: record numbers. It's a record percent increase, our record total yield.

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Speaker 1: We had record EBITDA. We kept cost growth down to

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Speaker 1: one percent, so like a nine hundred basis point spread

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Speaker 1: between revenue growth and cost growth is fantastic. We had

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Speaker 1: we something like crippled our net income from twenty three

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Speaker 1: to twenty four, we reduced our leverage by two turns,

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Speaker 1: increased our return on invested capital by three turns. So

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Speaker 1: overall we were really really excited about our twenty four papers,

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Speaker 1: so to speak, because in twenty five it's.

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Speaker 3: Going to be a little bit different, you know that.

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Speaker 1: The but we think it returns back to a normal

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Speaker 1: cadence where like in the back three and a half

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Speaker 1: percent yield growth on a half on a or three

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Speaker 1: percent yield growth on a half point growth in costs,

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Speaker 1: so about a three hundred basis point spread there.

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Speaker 3: As we're really excited.

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Speaker 1: Q One is a couple of technical issues that are

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Speaker 1: dragging it down, related to a few of our big

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Speaker 1: ships going to for some long dry docks, but abps

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Speaker 1: to that, we're really happy about the future as well.

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Speaker 3: Well.

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Speaker 4: In addition to booking and the momentum that you're seeing

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Speaker 4: in bookings, I also want to talk about how much

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Speaker 4: people are actually spending when they're on board. Of course,

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Speaker 4: that's a big way how cruises such as yourself make money.

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Speaker 4: And with this fear that we're seeing over inflation, the

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Speaker 4: concerns that are building about the consumer. Do you anticipate

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Speaker 4: that people riding aboard your cruises are going to pull

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Speaker 4: back on their spending once they're actually on the ship.

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Speaker 3: No, no, we don't see that.

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Speaker 1: You know, the onboard spend, which we track, as you

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Speaker 1: might imagine, on a weekly basis, was strong both for

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Speaker 1: Q four and our reported numbers, and continues to be

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Speaker 1: strong throughout January and now February as well.

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Speaker 3: That's the months almost over.

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Speaker 1: We're very very pleased, you know, I think within the

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Speaker 1: core demographic that we're getting, which is primarily you know,

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Speaker 1: upper middle class and upper class guests for our two

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Speaker 1: luxury brands, Oceanic cruises and reaching seven seat cruises, they

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Speaker 1: seem to be doing well despite the modest inflationary environment

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Speaker 1: we're seeing today, So we are not seeing any cracks

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Speaker 1: in on board spend.

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Speaker 2: I wonder if you factor in any additional tax bills

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Speaker 2: you might receive from the Trump administration. As we noted

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Speaker 2: in the intro, Howard Lutnick was I guess unhappy that

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Speaker 2: a lot of cruise liners and oil tankers are sailing

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Speaker 2: around with you know, low tax Caribbean flags on the back.

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Speaker 2: Most of your fleet is out of the Bahamas. What

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Speaker 2: do you say about that or what would you do

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Speaker 2: about it? Could you imagine putting more American flags on

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Speaker 2: your boats?

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Speaker 3: So you know, I'll start up.

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Speaker 1: I say it's a bit of a misnomer that the

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Speaker 1: cruise industry doesn't pay tax you know, as an industry.

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Speaker 1: You know, our Trade Association puts out some statistics. I

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Speaker 1: think as an industry we played close to two and

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Speaker 1: a half billion dollars in taxes on an annual basis

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Speaker 1: to various US jurisdictions.

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Speaker 3: We just pay them in different forms.

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Speaker 1: It's not an income tax, their ports taxes, but essentially

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Speaker 1: it gets to the same thing gets the treasury of

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Speaker 1: local and state and some federal taxes as well. So

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Speaker 1: that's a pretty robust tax bill. Now, of course, you know,

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Speaker 1: the administration may choose to pursue additional taxes on the

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Speaker 1: industry to a relatively complicated situation as our ships aren't

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Speaker 1: based in the United States for long periods of time,

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Speaker 1: So a little bit difficult to ascertain exactly what our

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Speaker 1: tax bill would be depending on how they may want

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Speaker 1: to modify the tax code.

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Speaker 3: But I will say, you.

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Speaker 1: Know, we're generally pleased with some of the other actions

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Speaker 1: of the administration. You know, this pursuit of peace in

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Speaker 1: the Middle East and between Russia and Ukraine, which hopefully

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Speaker 1: comes to tuition over the next few months, would be

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Speaker 1: a major tailwind to us. You know, we have one

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Speaker 1: of our highest yielding itineraries. You know, back in the

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Speaker 1: day seventeen eighteen to nineteen where cruises that visited Russia,

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Speaker 1: most specifically Saint Petersburg with about a third of our

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Speaker 1: fleet based in Northern Europe across our three brands summer

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Speaker 1: and to the extent that Russia opened up this could

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Speaker 1: be a significant tailwind to us in order to start

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Speaker 1: visiting Saint Petersburg. It was one of our most lucrative

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Speaker 1: and more importantly, highest rateed ports from a guest experience perspective.

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Speaker 4: That's really interesting, Harry, to hear you say that. I

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Speaker 4: know that your results last year were hurt in particular

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Speaker 4: by the conflict in Israel and specifically in the Red Sea.

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Speaker 4: So talk to us a little bit more about the

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Speaker 4: potential opportunity that you could see though in Russia, because

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Speaker 4: I mean, at least listening to your preliminary comments now,

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Speaker 4: it seems like you're saying that is a big opportunity.

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Speaker 1: Yes, I mean, this industry drives in peaceful environments. As

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Speaker 1: you may imagine, guests don't want to take vacations in

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Speaker 1: areas of conflict. And I don't mean to state the obvious,

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Speaker 1: but I think it's important to note and if we

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Speaker 1: can get some relative calm in the situation, especially in Russia,

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Speaker 1: like I said, with eleven of our ships about a

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Speaker 1: third of our fleet based up there, we can certainly

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Speaker 1: make some You know, it starts with the guest experience.

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Speaker 1: If we can provide guests with an even better experience

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Speaker 1: than they get today, we can generate additional.

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Speaker 3: Red and you therefore a profit.

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Speaker 1: The Middle East is a little bit more complicated because

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Speaker 1: there's a little bit more of a long lee time,

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Speaker 1: there's slightly more exotic cruises that.

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Speaker 3: Go to that part of the world.

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Speaker 1: But assuming things continue to calm down in that region,

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Speaker 1: we think there could be a tail wind for our

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Speaker 1: twenty twenty seven results.

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Speaker 3: So I think both.

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Speaker 1: Those areas are key, and we're again very pleased with

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Speaker 1: the work that the administration is doing in those areas.

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Speaker 4: So I know it's early, and you know you're thinking

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Speaker 4: about this as maybe a twenty twenty seven story. But

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Speaker 4: is there any range of numbers that you could could

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Speaker 4: put to that opportunity.

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Speaker 1: You know, it's really hard to tell. You know, it

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Speaker 1: depends when it happens, how far in advance. But you know,

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Speaker 1: with eleven ships in that Northern Europe region, you know,

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Speaker 1: even a ten or twenty dollars per DM impact on

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Speaker 1: those cruises could be significant. But I because that was

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Speaker 1: a type of impact we got back in seventeen to

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Speaker 1: nineteen on a positive basis, so it could be meaningful

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Speaker 1: to the bottom line.

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Speaker 4: All right, Harry, really appreciate you taking the time to

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Speaker 4: speak with us today after what I'm sure is a

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Speaker 4: very busy morning. Are thanks to Harry Summer of Norwegian

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Speaker 4: Cruise Lines