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Carnival Q1 earnings: ‘We’re back,’ CEO says

Carnival CEO Josh Weinstein joins Yahoo Finance Live’s Brian Sozzi at the Milken Institute’s 26th annual Global Conference in Beverly Hills, CA, to discuss the state of the cruise industry, cruise travel demand, pricing, debt levels, macroeconomic headwinds, and the outlook for the cruise industry.

Video transcript

JULIE HYMAN: After several years of battling the rocky waters of the COVID-19 pandemic, the cruise industry now finding itself burdened with debt. But with traveling restrictions fading into the horizon and bookings picking up as cruisers return, what's next for cruise lines? Yahoo Finance's Executive Editor Brian Sozzi spoke with Carnival CEO Josh Weinstein at the Milken Institute Global Conference.

JOSH WEINSTEIN: We're back. You know, we-- as of last month, when we reported on our first quarter, we had record numbers, right? We just got through the wave period, which is the highest booking period in the industry. We literally had the most bookings in the history of our company in that three-month period. And that was both our North American brands and our European brands, which took a little longer to get back into that flow. So frankly speaking, between that and our first quarter results where we beat on every single line item, things are trajectory-- in the right trajectory.

BRIAN SOZZI: Where are the bookings in relation to pre-pandemic levels?

JOSH WEINSTEIN: So our book position is basically, if you look back at the last 15 years, it's one of our highest we've ever been in. So by the time we looked at the rest of the year at the end of the quarter, we were already 70% booked for the rest of the year. So we are very well-positioned for the continued momentum and continued improvement.

BRIAN SOZZI: How does pricing look?

JOSH WEINSTEIN: Pricing has been pretty good. You know, what we saw since we've been through our restart is, you got two aspects of the pricing. You got how much are people spending for tickets and how much are they spending on board. The onboard spending has been record levels. And we are talking about 20% higher than before the pandemic. And the good news is, over the last five quarters, while that's been maintaining at a nice, steady pace, the ticket pricing is inching back up, back up, back up every single quarter. So the trajectory is really-- again, I couldn't be prouder of the team and the things that we're doing.

BRIAN SOZZI: I've heard a lot at this conference about an economic slowdown. I'm catching a different vibe from you. How do you square that?

JOSH WEINSTEIN: You know, it's actually-- I don't think it's particularly Carnival Corporation. Travel and leisure has not slowed down. So, you know, what we see is a consumer base that is demanding experience, demanding travel. I mean, we got to remember, people have been pent up. You know, that demand has been latent, waiting.

And yeah, it's true it's been a year and a half since the pandemic has run its course. But I'll tell you the truth, people had time. They had time to think about, what are the things I really want to do? And they're expressing it now. And so between the future bookings and the real-time impact of onboard spending, we just see no slowdown.

BRIAN SOZZI: Is there still that cohort that is afraid to get back on a ship?

JOSH WEINSTEIN: They're probably is. I mean, here's the thing about us and the thing about cruising. We're tiny, right? In the overall vacation market, we are, no matter how you want to cut it, less than 3%. There is a huge market of potential consumers out there in all of our main markets-- the United States, the UK, Germany, Italy, Australia.

What we need to do is amplify our voice and get more people who have never cruised before to consider us, and that's happening. Our level of first-time cruisers is almost back to where it was pre-pandemic. Despite the concept that people might have been afraid, people understand value. They understand when their friends and family get off of a cruise and go home and rave about how amazing that experience was, it resonates with people. And they bring their friends and family next time.

BRIAN SOZZI: Do you still hear that old saw that cruises are just for old people? I'm guessing you don't believe in that.

JOSH WEINSTEIN: I don't. I don't. You know, as a father of three kids who are now 18, 16, and 13, I can tell you we've been cruising every year since our 18-year-old was one. And that is so far from the truth. I mean, there is truly something for everyone. And if you've never been, I can understand the myths.

But the fact is, in today's world, there's not one main dining room with an early seating or a late seating as your option. There's actually 15 restaurants. You book like you're on land. There's 15 bars. There's waterslides and roller coasters and ice cream parlors and rock walls and ice rinks. I mean, you name it. The cruise industry is radically different than where it was in the past. And we've got the demand to show that it's working.

BRIAN SOZZI: Any line of sight into Carnival going back to China?

JOSH WEINSTEIN: You know, I mean, the good thing about our assets is they're mobile. And so China has been shut down for international cruising for three years now. So we've done what we needed to do to move our assets where the guests are going to be and where they're going to want to sail. If and when China opens up for international cruising, it will be fantastic for the industry, and we'll look at it. Because our ships are mobile, we can go back. As of yet, there's nothing on the horizon I've seen. But we're patient.

BRIAN SOZZI: You've touched a lot of different areas inside of Carnival. One of the cool areas I think that you touched is the numbers. You know a lot of the numbers. You've been at the company for a long time. There's a lot of issue-- or there's a lot of focus on our platform by retail investors-- they understand Carnival. They understand what you do. But there's been concerns about your debt levels. When are you going to bring them down? And what is an acceptable level of debt?

JOSH WEINSTEIN: Well, I am a former treasurer. And so getting back a fortress balance sheet is incredibly important to us. We peaked at $35 billion of debt. I was very, very happy to say on our last earnings call two very important things. Number one, we have no intention of issuing anymore equity. And number two, we are starting to pay down the debt.

BRIAN SOZZI: I just want-- no more stock. Because I know that it's been talked about. No issuance? No issuance.

JOSH WEINSTEIN: I mean, ultimately, it's always a board decision. But we have zero plans to do that. We've got the trajectory. We are generating cash. We are a cash generation business. And when you look at our CapEx profile over the next few years, it's our lowest ship order book in decades. When I first became treasurer in 2007, we had 24 ships on order. We now have four ships on order and a very small expedition ship, and that's it. And what that means is, we take that cash and we pay down the debt, and we get back on the road to investment grade credit metrics, which is what we're shooting for.

BRIAN SOZZI: How long do you think that will take?

JOSH WEINSTEIN: Oh, it's years, it's not months. But we've got-- we've got plans in place. We've got demand generation that's going to support that cash generation and expedite it.

BRAD SMITH: And that was Yahoo Finance Executive Editor Brian Sozzi with Carnival CEO Josh Weinstein.