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    CCL
    Earnings call· Feb 2025(Q1 FY25)

    Carnival Corp Ltd. CCL

    Mar 21, 2025 Source

    Executive summary

    Carnival Q1 FY25 — Record Revenue & EBITDA, Raised Full-Year Guidance

    Carnival delivered a strong Q1 FY25, setting multiple financial records and significantly outperforming guidance, driven by robust demand and effective cost management. The company raised its full-year earnings outlook, affirming strong yield expectations for the remainder of the year and demonstrating resilience amidst global volatility. Strategic investments in destinations and fleet enhancements are underway, while the company continues to prioritize debt reduction and aims for investment-grade leverage metrics by 2026.

    Highlights

    5

    • Achieved Q1 high watermarks for revenue, EBITDA, EBITDA per ALBD, operating income, and customer deposits.

    • Net income exceeded guidance by over $170 million, driven by strong demand and better-than-expected unit costs.

    • Robust 7.3% yield increase in Q1, smashing guidance and building on last year's 17% improvement.

    • Full-year earnings guidance raised by $185 million, reflecting Q1 outperformance and $100 million in interest expense savings.

    • Booking volumes for 2026 sailings and beyond reached an all-time high in Q1, with 80% of 2025 on the books at higher prices.

    Concerns

    2

    • Heightened macroeconomic and geopolitical volatility noted as a backdrop, requiring continued vigilance.

    • Unplanned dry docks in 2025 partially offset permanent cost savings, impacting ALBDs and cruise cost per ALBD.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year 2025 Net Income
    approximately $2.5 billion
    high materiality
    High
    Full-year 2025 Yield Growth
    4.7%
    high materiality
    High
    Full-year 2025 Interest Expense
    Lowered by $100 million
    medium materiality
    High
    Full-year 2025 EBITDA
    $6.7 billion
    high materiality
    High
    2026 SEA Change ROIC Target
    12%
    high materiality
    High
    2026 SEA Change EBITDA per ALBD Target
    more than 50% higher than 2 years ago
    high materiality
    High
    Debt Reduction
    nearly $5 billion
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    European Brands
    European brands continue to outperform year-over-year on both price and occupancy, driving overall yield improvement.
    Price: outperformingOccupancy: outperforming
    		—outperforming——
    North America Brands
    North America brands are performing well, though European brands are outperforming them in terms of year-over-year growth.
    		—performing well——

    Operational metrics

    24
    Q1 Net Income outperformance vs. guidance
    $170 millionbetter than guidance
    Q1 FY25

    Outperformance driven by strong demand and better-than-expected unit costs.

    Q1 EBITDA
    $1.2 billionapproaching 40% year-over-year increase
    Q1 FY25

    Reached a Q1 high watermark.

    Q1 Operating Income
    near doublingyear-over-year
    Q1 FY25

    Resulted from strong revenue and cost performance.

    Q1 Operating Margins
    improved over 400 basis pointsyear-over-year
    Q1 FY25

    Now surpassing 2019 levels.

    Q1 EBITDA Margins
    improved over 400 basis pointsyear-over-year
    Q1 FY25

    Now surpassing 2019 levels.

    Q1 Cruise Costs without Fuel per ALBD
    up 1%compared to prior year
    Q1 FY25

    2.4 points better than December guidance, mainly due to timing of expenses between quarters.

    Q1 Interest Expense Favorability
    $13 million
    Q1 FY25

    Driven by refinancing efforts during the quarter.

    Full-year 2025 Incremental Bottom Line Improvement
    $600 millionmore than 30% improvement from 2024
    FY25

    Expected from yield growth outpacing unit cost growth on flat capacity.

    Greenhouse Gas Target Reduction
    over 19%compared to 2019
    FY26

    Closing in on the 2026 target.

    Customer Deposits
    up over $300 millionversus prior year
    Q1 FY25

    Driven by improved ticket prices and increased pre-cruise onboard sales.

    Full-year 2025 Cruise Costs Excluding Fuel per ALBD
    3.8%
    FY25

    Reflects spreading lower absolute cruise costs over revised ALBDs due to unplanned dry docks.

    Debt Refinanced in Q1
    $5.5 billion20% of total debt
    Q1 FY25

    Included highest coupon debt instruments.

    Annualized Interest Expense Savings from Refinancing
    $145 million
    annualized

    Achieved through Q1 refinancing efforts.

    Average Cash Interest Rate
    4.6%down significantly
    current

    Reduced through opportunistic refinancing.

    Secured and Senior Priority Guaranteed Debt Reduction
    $4 billion
    LTM

    More reductions expected.

    Debt Maturities Remainder 2025
    $1.1 billion
    remainder of FY25

    Well managed near-term maturity towers.

    Debt Maturities Full Year 2026
    $2.7 billion
    FY26

    Well managed near-term maturity towers.

    Q1 Debt Reduction
    $0.5 billion
    Q1 FY25

    Part of ongoing deleveraging efforts.

    Total Debt
    $27 billion
    end of Q1 FY25

    Reduced by $0.5 billion in Q1.

    Debt Reduction from January 2023 Peak
    over $8 billion
    end of FY24

    Significant progress in deleveraging.

    Q1 Onboard Spending Growth
    10%year-over-year
    Q1 FY25

    Acceleration from Q4 FY24 growth trends, broad-based across categories.

    New-to-Cruise Growth Rate
    significantly multiple times higherthan capacity growth rate
    Q1 FY25

    Indicates successful marketing and value proposition.

    New Builds on Order
    3
    next 4 years

    Supports ability to reach investment-grade leverage metrics.

    Caribbean Footprint Guest Count
    6.5 millioncould be upwards of 11 million
    2024

    Expected growth driven by destination investments like Celebration Key.

    Industry KPIs

    4
    MetricValueDetails
    Comparable sales comps7.3%%
    Booked position booking windowall-time high
    Gross bookings value room nightsall-time high
    Net unit growth development pipelineflat%

    Orderbook & backlog

    4
    Booking volumes for 2026 sailings and beyondall-time highQ1 FY25
    2025 Booked Positionover 80%end of Q1 FY25

    at higher prices

    Represents the portion of the year on the books.

    Booking Curvefarthest out on recordend of Q1 FY25
    Booking Position for current and next 3 quartersabove the top end of all rangesQ1 FY25

    Historically, ranges were 50-70% for current quarter, 30-50% for next.

    Product announcements

    4
    ProductTypeDetails
    Celebration Keymilestone
    RelaxAway (Half Moon Cay)expansion
    Denali Lodge Expansion and Renovationexpansion
    AIDA Evolution Programupdate

    Deals & partnerships

    2
    P&O Cruises AustraliaSunsetting of the brand and folding its two remaining ships into Carnival Cruise Line.

    Completed this month, consolidating operations under Carnival Cruise Line.

    Unidentified BuyerSale of Seabourn Sojourn.cash offer

    While not actively looking to sell, the offer was in the best interest of shareholders, leaving Seabourn with a modern fleet.

    Risks & headwinds

    2
    Heightened macroeconomic and geopolitical volatilityOngoing

    Not quantified, but acknowledged as a backdrop since December guidance.

    Mitigation: Team is nimble and agile, honed characteristics over the first half of the decade to manage through challenges. Portfolio approach with strong brands in deep, underpenetrated markets provides resilience.

    Unplanned dry docks2025

    Partially offset permanent cost savings.

    Mitigation: Offset by lower depreciation expense from vessel sale; permanent savings still flow through to full year.

    What to watch in Q2 FY25

    5

    Full-year Yield Guidance

    next quarter
    Current4.7% (affirmed for Q2-Q4)
    TargetPotential upside if strong close-in demand and onboard spending continue

    Why it matters

    Yield performance is a key driver of profitability and reflects pricing power and demand strength.

    Look, I mean, the strength of Q1 was pretty fantastic, and that was driven by both the close-in demand on the ticket and just tremendous onboard spending. We're talking about 10% growth year-over-year for the first quarter, which is actually an acceleration of onboard spend trends versus year-over-year growth from the fourth quarter. And frankly, the onboard spend that we've seen in the first couple of weeks of March hasn't slowed down.

    Q&A highlights

    6

    Can you provide more color on consumer demand trends since Q4, especially given macro concerns? Also, clarify the Q1 beat flow-through to full-year guidance, specifically regarding ALBD impact from dry docks.

    Wave season was a success with record bookings for future years and strong pricing for the remainder of 2025. The Q1 beat flow-through was primarily from yield outperformance and interest expense savings. Cost favorability in Q1 was mostly timing, with some permanent savings offset by lower ALBDs due to unplanned dry docks.

    “wave was a success, right? I mean we set a record for bookings for further out years. We came into wave at historic occupancy and price. We use that to our advantage. We took price, and we're well set up for the rest of the year.”

    asked by Benjamin Chaiken · answered by Josh Weinstein

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Full-Year Outlook

    Carnival delivered a fantastic first quarter, achieving record revenue, EBITDA, EBITDA per ALBD, operating income, and customer deposits. Net income surpassed guidance by over $170 million, driven by a robust 7.3% yield increase and better-than-expected unit costs. For the full year, the company raised its earnings guidance by $185 million, increasing yield expectations to 4.7% and reducing interest expense guidance by $100 million due to refinancing efforts.

    02

    Strategic Marketing and Destination Development

    New marketing campaigns across major brands during wave season, including Costa at Sanremo Music Festival and Carnival Cruise Line at the Oscars and Super Bowl, generated significant impressions and cut-through. Celebration Key, Carnival's marquee port, is on track for a July opening, with all five portals expected to be operational by Q4. RelaxAway (Half Moon Cay) is scheduled for a H2 2026 opening, and the Denali Lodge in Alaska is undergoing expansion and renovation to enhance land-sea packages.

    03

    Fleet Optimization and Modernization

    The company continued optimizing its portfolio by sunsetting P&O Cruises Australia, integrating its two ships into Carnival Cruise Line. The Seabourn fleet was consolidated with the sale of Seabourn Sojourn, leaving Seabourn with a modern fleet of three ultra-luxury ocean vessels and two expedition ships, averaging just over 7 years old. The AIDA Evolution program began with AIDADIVA's 7-week dry dock, adding new features and improving fuel efficiency, with AIDALUNA, AIDABELLA, and AIDAmar to follow.

    04

    Financial Fortress and Deleveraging Efforts

    Carnival is making significant strides in rebuilding its financial fortress, closing in on investment-grade leverage metrics. During Q1, $5.5 billion of debt was refinanced, resulting in $145 million in annualized interest expense savings and reducing the average cash interest rate to 4.6%. The company reduced debt by $0.5 billion in Q1, ending with $27 billion total debt, and expects to reduce debt by nearly $5 billion from year-end 2024 through 2026, supported by strong cash flow and limited new builds.

    05

    Consumer Demand and Value Proposition

    Despite macroeconomic and geopolitical volatility🌐, demand remains strong, with booking volumes for 2026 sailings reaching an all-time high in Q1. The company exited wave season with over 80% of 2025 on the books at higher prices and a record-long booking curve. Management emphasized cruising's value proposition compared to land-based alternatives, attracting new-to-cruise guests at a rate significantly higher than capacity growth, and catering to diverse consumer segments across its brand portfolio.

    AI-generated summary of the company’s earnings call. Not investment advice.