WEBVTT - Norwegian Cruise Line President/Harry Sommer Talks Q1 Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Norwegian Cruise lunch stares

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<v Speaker 1>are struggling today, but that is despite record bookings in

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<v Speaker 1>the first quarter. Investor expectations are sky high following that

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<v Speaker 1>strong report. We're going to bring in Norwegian Cruise Line

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<v Speaker 1>CEO Harry Summer to talk about what's going on in

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<v Speaker 1>his business. Harry, you know, if you look at what

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<v Speaker 1>you've given the street, you've hiped your guidance here and

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<v Speaker 1>you're still not seeing investors react to the extent that

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<v Speaker 1>you would think if you were saying things are going

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<v Speaker 1>to be better in the future. How do you meet

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<v Speaker 1>investor expectations at this point?

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<v Speaker 2>You know? Well, first off, thank you for having me

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<v Speaker 2>on this show today. We are really thrilled with our

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<v Speaker 2>performance in Q one. We saw a revenue of twenty percent,

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<v Speaker 2>yields up sixteen percent, great demand both in ticket revenue

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<v Speaker 2>and onboard revenue, and we doubled our IVIDA from last year.

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<v Speaker 2>So these are all great indicators of the performance that

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<v Speaker 2>the company did in Q one. I think anything that

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<v Speaker 2>happened with the stock today perhaps just a small time reaction,

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<v Speaker 2>but we are super focused on the long term. We

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<v Speaker 2>raised our EPs guidance for the year. We raised our

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<v Speaker 2>yield guidance for the year. We are super happy with

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<v Speaker 2>the Cruise Guest and the cruz Guest and.

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<v Speaker 1>NCLH speak through now what the competition looks like at

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<v Speaker 1>this point for cruise goers When you look at your

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<v Speaker 1>customer base, are you finding that more people are coming

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<v Speaker 1>in that are new either to the cruise industry or

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<v Speaker 1>new to Norwegian? What do the numbers say?

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<v Speaker 2>Sure, we so to answer the first your question. First,

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<v Speaker 2>our competitive set is really hotel chains. You know, if

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<v Speaker 2>you think about the North American market for vacations, cruises

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<v Speaker 2>makes up barely two percent of it. So I know

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<v Speaker 2>you had the quote from my friend Jason on the

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<v Speaker 2>top of the show, He's not really our competitor, our

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<v Speaker 2>competitor or the Hilton, Marriott's, Piot's ihds of the world,

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<v Speaker 2>because that's really where the guest has choice. And we

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<v Speaker 2>believe that cruising represents both in edible value compared to

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<v Speaker 2>hotels and also a much better guest experience. Our ships

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<v Speaker 2>are always well maintained, they give a consistent product. We

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<v Speaker 2>go to fantastic places around the world, both close to

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<v Speaker 2>home and far away, and we really see guests continuing

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<v Speaker 2>to favor cruising as vacation, so new to cruises up

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<v Speaker 2>a few points, new To and cl is up a

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<v Speaker 2>few points. We're definitely seeing record interest in a cruise location.

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<v Speaker 1>It's interesting because it's not just this idea of Royal

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<v Speaker 1>Caribbean and you guys versus the hotel chains as you've

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<v Speaker 1>been saying. Actually today is an interesting day. There's another

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<v Speaker 1>cruise operator going public as well in one of the

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<v Speaker 1>biggest IPOs of the year. How do you see more

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<v Speaker 1>entrance into this space, particularly when it comes to dollars

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<v Speaker 1>from public investors.

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<v Speaker 2>You know, I think VIK has done a great job

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<v Speaker 2>over there at their last few decades, and both the

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<v Speaker 2>river cruise space and the ocean cruise space, and I

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<v Speaker 2>think anything that elevates the cruise experience is good for

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<v Speaker 2>the industry. I think at the end of the day,

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<v Speaker 2>the cruising industry is healthiest what it has good participants

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<v Speaker 2>with great product and great guests experiences on board. Certainly

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<v Speaker 2>biking delivers that. Of course NCLH does as well, and

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<v Speaker 2>we very much look forward to these new entrants continuing

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<v Speaker 2>to build demand for the industry in public from a

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<v Speaker 2>financial investment community, I think any good financial performer in

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<v Speaker 2>the industry raises the perception, if you will, of cruising

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<v Speaker 2>in the financial markets. So we're thrilled from that perspective

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<v Speaker 2>as well.

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<v Speaker 1>It's interesting because when we look at your numbers versus

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<v Speaker 1>the estimates compiled by Bloomberg, a lot of beats there

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<v Speaker 1>or as we've been talking about Harry passengers carried, and

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<v Speaker 1>even on operating capacity as well, But the revenue is

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<v Speaker 1>where things felt slightly short of expectations. What do you

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<v Speaker 1>think was the biggest contributor there?

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<v Speaker 2>You know, really I emphasize what you said. We beat

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<v Speaker 2>on pretty much every key metric you know, net revenue, margins,

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<v Speaker 2>ibita aps across the board, so we were very pleased

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<v Speaker 2>with our performance. We beat both guidance and consensus.

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<v Speaker 3>YEA.

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<v Speaker 2>Revenue really talks to some of the items that we

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<v Speaker 2>make a small margin on, like air and I talked

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<v Speaker 2>about that in the coll this morning, that we sold

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<v Speaker 2>guests slightly fewer air tickets. Now, air tickets isn't a

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<v Speaker 2>high margin item for us, so actually selling slightly few

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<v Speaker 2>of them is better overall for the company. So it

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<v Speaker 2>impacted gross revenue, but it didn't impact net revenue. Our

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<v Speaker 2>net revenue exceeded guidance and exceeded consensus.

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<v Speaker 1>How sensitive is the consumer that you have to the

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<v Speaker 1>environment that we're living in, Harry, Even if you're kind

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<v Speaker 1>of excited about this kind of record bookings environment, do

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<v Speaker 1>you worry about consumer sentiment at this point is very fragile.

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<v Speaker 2>You know, we're not seeing any cracks and consumer sentiment

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<v Speaker 2>in our core demographics. You know, we really sell cruises

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<v Speaker 2>between our three brands and our Reegian Cruise Line, Oceanic

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<v Speaker 2>Cruises and Region seven seat cruises across all demographic fronts,

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<v Speaker 2>but mostly to higher net worth individuals, and sentiment within

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<v Speaker 2>the higher net worth individuals it continues to be really high.

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<v Speaker 2>Couple that with the huge gap invocation experience between us

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<v Speaker 2>and the alternative ications, plus a value gap that creases

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<v Speaker 2>our price less than hotels in spite having a better experience,

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<v Speaker 2>and we're really seeing demand continue to outperform our expectations

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<v Speaker 2>despite any cracks that we see in other parts of

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<v Speaker 2>the economy.

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<v Speaker 1>Harry, we thank you so very much for joining us

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<v Speaker 1>on a very busy earnings period for you. That is

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<v Speaker 1>Norwegian Cruise Line CEO, Harry Summer. Now it's another stock

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<v Speaker 1>moving Amazon it's cloud unit posted its strongest sales growth

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<v Speaker 1>in a year, a sign that the retailer's most profitable

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<v Speaker 1>unit is recovering from a slump in certain businesses. We're

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<v Speaker 1>going to break it down with John Arlcmann from BNN

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<v Speaker 1>Bloomberg joining us from Toronto and Encyclopedic. As we know

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<v Speaker 1>as ever about technology, John, you also spoke earlier, I believe,

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<v Speaker 1>to an Amazon executive as well. What are they saying

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<v Speaker 1>about their potential and the exciting stuff in cloud in AI?

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<v Speaker 3>Yeah, so much to talk about, Shanali and I guess

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<v Speaker 3>we'll start with the market reaction to these latest Amazon numbers.

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<v Speaker 3>You could make the argument if we hadn't seen the

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<v Speaker 3>success we saw from AWS, maybe there'd be a slightly

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<v Speaker 3>different narrative just because of the guidance from the second

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<v Speaker 3>quarter overall. But if you think about where we were

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<v Speaker 3>a year ago, just as contact Sanale, when a lot

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<v Speaker 3>of business customers were starting to be a little bit

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<v Speaker 3>uncertain about the economic spending environment, there were questions about

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<v Speaker 3>what that would mean for Amazon Web services, and yet

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<v Speaker 3>here we are with AI and full effect right now,

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<v Speaker 3>and that being reflected in these quarterly results. The numbers

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<v Speaker 3>that really stood out to me Shonali, the fact that

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<v Speaker 3>on the revenue side, AWS clearing twenty five billion dollars,

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<v Speaker 3>so an annual run right now of one hundred billion

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<v Speaker 3>dollars for this business. You're going to be hard pressed

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<v Speaker 3>to find any corporate software business outside of Microsoft to

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<v Speaker 3>that size and scale. And that's just one part of

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<v Speaker 3>the Amazon business. And then the profit story, the fact

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<v Speaker 3>that the operating margins are already north of thirty eight

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<v Speaker 3>percent Bloomberg Intelligence seeing that heading towards forty percent, but

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<v Speaker 3>during an earning season where companies in technology are continuing

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<v Speaker 3>to SPA and on AI. Maybe one of the lessons

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<v Speaker 3>from the Meta conference call when Mark Zuckerberg obviously committed

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<v Speaker 3>to some big numbers and that raised concerns on Wall Street.

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<v Speaker 3>By comparison Andy Jasse talking about the need to spend

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<v Speaker 3>but also the need to monetize quickly on that spending.

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<v Speaker 3>That seemed to resonate with the streets. So Amazon getting

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<v Speaker 3>a lot of check marks, it feels like from the

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<v Speaker 3>Wall Street community so far.

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<v Speaker 1>Johnny, thank you so much for your time. We had

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<v Speaker 1>to leave it there for now,