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Takeaway: While positive, the $35m increase in synergy target wasn't completely a surprise. It had been in mgmt's back pocket to mask higher costs.




  • 6.7% average increase in beverage prices
  • $1 in net yields translates into $15m in bottom line
  • Market-to-fill strategy:  172 days booked (154 days in Q1 2014).  39% more revenue on the books for 2016 vs 2015 at same time last year
  • Freechoice style promotion resulted in record-breaking Wave demand for Norwegian
  • Every quarter in 2015 higher load factor than 2014.  2016 load factor has doubled what it was in 2015 at same time (Norwegian brand only)
  • German/UK sales offices joined forces in Prestige acquisition
  • "Incremental Reinvestment efforts: crucial to ???? customers
  • Norwegian Escape:  booked better 10x than Getaway.
  • Oceania Siriena: record booking days
  • Lower interest expense:  lower than expected interest rates and better group pricing on credit facilities due to better leverage metrics
  • 1Q higher costs: receipt of technical parts and increased marketing expense
  • NCC:  $9.1m benefit on mark-to-mark contingency (contingent of $50m of Prestige shareholders) 
  • 1Q: $401 at the pump oil price (-39% YoY)
  • Norwegian Star drydock in April - repairs under warranty but lost revenue from canceled 15 day Panama sailing
  • 2015 NCC guidance: unchanged as $20m 'reinvestment' offset better cost synergies
  • Q2 2015 capacity:  29% in Caribbean, 27% in Europe, 12% Alaska, 4% Asia/Africa/Pacific/World Cruise
  • Final tally of synergies will be during Q2 conf call

Q & A

  • Why was net yield FY 2015 guidance not raised?  Combination of things: Star drydock, FX hit later
  • Sees prices/diem going higher in 2016
  • When Q2 integration efforts are done, they will do a China study group and expect to complete by end year.
  • "Incremental reinvestment costs ($20m in 2015, $40m in 2016)" - sales force/marketing efforts 
    • No benefits baked into 2015/2016 guidance
  • By 2017, EPS would hit $5 (had included $50m synergy target in 2016)
    • Now additional $25m net synergies boost 
    • Feel stronger today $5 is achievable
  • Revenue synergies:  2/3 synergies onboard yield, 1/3 ticket synergy.  More opportunities were in ticket.
  • 1Q 2015 synergies:  75% in ticket (more towards Norwegian).  25% in onboard synergies (skewed towards Prestige)
  • Deferred revenue of $21m:  $18-19m remaining for next few quarters.
  • Fuel guidance: MGO fuels costs go up in Q3 but will go back down in Q4
  • Market color:  Pretty steady across all regions.  A little weakness in exotic itineraries in Oceania (Africa/Asia). Alaska doing well. Escape doing well.
  • Increase in beverage prices:  have not seen a decrease in consumption
  • FX sensitivities: $0.003 euro, Canadian $0.003, Australia $0.002 
  • Feel there is more opportunities on synergies
  • $27m headcount reductions (10% of payroll) for 2016 ---pretty much done there in cutting costs
  • Will not eliminate close-in discounting. Applaud RCL for taking that step
  • In Q4 2015, could start to pay down some debt or share repurchase
  • Weighted cost of debt: 3.7%
  • Share repurchase has higher priority than issuing a dividend