Royal Caribbean Cruises Stock

Good morning. My name is Morgan and I'll be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group Second Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to introduce Mr. Blake Vanier, Vice President of Investor Relations. Mr. Vanier, the floor is yours.

Good morning, everyone, and thank you for joining us today for our second quarter 2026 earnings call. Joining me here in Miami are Jason Liberty, our Chairman and Chief Executive Officer; Naftali Holtz, our Executive Vice President and Chief Financial Officer; and Michael Bayley, President and CEO of the Royal Caribbean brand.

Before we get started, I'd like to note that we will be making forward-looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors. We do not undertake to update any forward-looking statements as circumstances change.

Also, we will be discussing certain non-GAAP financial measures, which are adjusted as defined, and a reconciliation of all non-GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency adjusted basis.

Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our second quarter the current booking environment and our outlook for 2026. We will then open the call for your questions.

With that, I'm pleased to turn the call over to Jason.

Thank you, Blake, and good morning, everyone. This morning, we reported second quarter results that exceeded our expectations, along with an increase in our full year guidance that reflects the continued strength in demand for our leading vacation brands.

Revenue in the second quarter grew 6% year-over-year. Earnings were 8% higher than guidance, and we returned over $600 million of capital to investors through dividends and share repurchases. Our flywheel is accelerating. Demand for our vacation experiences continue to strengthen, driven by a healthy experience-seeking consumer and exceptional execution from the team which is delivering Net Promoter Scores averaging the low to mid-70s. We see continued commercial momentum as guests are booking in greater numbers, supported by our industry-leading technology and loyalty platforms.

From my perch, it is clear that the differentiated offering across our leading brands are driving strong demand, enabling higher pricing, increasing retenant amongst our most valuable guests and encouraging greater onboard and vacation spending. The further connectivity between our brands through loyalty, data and technology, combined with new destination experiences like Celebrity River are fueling our vision of transitioning the vacation of a lifetime to a lifetime of vacations. Since our April earnings call, the ongoing conflict in the Middle East has modestly weighed on bookings for some of our deployment in the near term, which primarily impact the third quarter.

Although booking trends improved after the initial disruption, the conflict has persisted longer than anticipated, influencing consumer destination preferences and resulting in more modest yield growth for Europe sailings this summer. As a result, we are reaffirming our yield guidance for the year of 1.75% to 2.25% as we grow our capacity 6.6% to deliver approximately double-digit improvement, an absolute revenue and double-digit improvement in earnings per share for 2026.

Given the interest in Mahahual, Mexico, one of our many destination projects, let me provide an update before discussing the results. Mexico has been a key destination partner since our inception and has played an important role in helping us fulfill our mission of delivering the best vacation experiences responsibly. Our commitment to Mexico and the destinations we visit is stronger than ever. This includes the great community of Mahahual, where we continue to maintain a constructive dialogue with community leaders and public officials as we work to develop a tourism destination that will create long-term opportunities for the region, for Mexico and for our guests.

Recent public comments by the Mexican administration acknowledges the community's support for development. The government is continuing to engage with community stakeholders to better understand their perspectives, a process that will take some time and is expected to affect our previously planned time line. We remain heavily engaged with key stakeholders to create sustainable tourism that includes lasting environmental, economic and social benefits for the region, including investments in critical infrastructure to protect the local environment. We will provide additional updates on this project as appropriate.

With that, let me dive into the second quarter results and updated outlook for the year. In the second quarter, we delivered 2.4 million incredible vacations at industry-leading guest satisfaction scores. Capacity increased 5% year-over-year and total revenue grew 6%. Net yields were up 1.2%, which was 100 basis points higher than our guidance, driven by a better than expected close in demand, including strong onward revenue, primarily for Caribbean products. Costs also came in favorably primarily due to timing, and we also benefited from better-than-expected performance from joint ventures and balance sheet management. As a result, adjusted earnings per share were $0.33 higher than our guidance. These results reflect continued appeal of our vacation experiences, diversified portfolio and disciplined execution. Naftali will elaborate on our results and outlook in a few minutes.

Turning to the demand environment. As I noted before, we continue to see engaged consumers who prioritize travel and experiences. Travel remains the #1 leisure category where consumers intend to spend more, and they are increasingly seeking vacations as a way to relax on line and escape. The ongoing geopolitical situation has affected near-term travel plans for some consumers, primarily preferring closer destinations over international trips through the cost of air travel. Consumers tell us that they are looking closer in due to flexibility and ease, which is reflected in the strong close-in booking volumes we have been seeing. Our book position is in line with prior years at record pricing for both 2026 and 2027.

In addition, onboard spending and pre-cruise purchases continue to exceed prior years. These trends are supported by our digital channels and our growing ability to connect guests with the experiences most relevant to them at the right point in their vacation journey. The response to Legend of the Seas and to the Royal Beach Club and Paradise Island and Santorini has been excellent. These new experiences showcase how expanding our fleet and destinations offer even more reasons for guests to vacation with us. Consumers are becoming more deliberate about their spending, yet they still prioritize quality leisure time, which aligns with our differentiated portfolio and the compelling combination of experiences, choices and value we offer.

Now let me provide an updated outlook for 2026. We expect net yield growth of 1.75% to 2.25% for the full year. while the prolonged conflict in the Middle East has modestly impacted Mediterranean sailings, which are heavily weighted to Q3, we continue to expect full year yield growth across our key products, including the Caribbean. We also remain committed to expanding margins by continuously identifying efficiencies through prioritizing spend and leveraging technology and AI without compromising the quality of the guest experience. We expect another year of strong earnings growth and cash flow generation. Full year adjusted earnings per share is expected to grow 14% and be in the range of $17.73 to $17.87. Our scale, industry-leading margin profile and strong cash flow generation allow us to continue to invest in our future and return capital to shareholders.

Let me now turn to the progress we are making against the long-term strategic initiatives and how we are bringing our connected vacation platform to life. Across our portfolio, we are strengthening engagement with our guests across the vacation journey, creating more opportunities to serve them across brands, destinations and vacations. Royal ONE is our new co-branded card that allows guests to earn and redeem rewards across our brands. Since its launch in April, it has been exceeding expectations, driven by higher sign-ups and cardholder spend. We are seeing Royal One cardholders spend more on our vacation experiences than non-cardholders and they are twice as likely to sell multiple times. We are seeing similar momentum from Points Choice and status match which has generated over 0.5 million new loyalty enrollments. These loyalty enhancements give guests greater freedom to engage with us across our brands without sacrificing the recognition they have earned. That flexibility is contributing to sustained growth in cross-branded bookings and bringing us closer to our goal of serving guests across the lifetime of vacations.

Technology is helping us make those relationships more relevant at every interaction. More than 90% of our guests now use our app, where monthly active users have increased fivefold since 2019, and more than half of our onboard revenue was purchased before embarkation. That engagement provides a richer understanding of what our guests value and allow us to deliver more personalized recommendations while making the vacation easier to plan and enjoy. These capabilities enable a more personalized itinerary across dining, entertainment and destination experiences. Real-time recommendations that connect guests with the next experience they are most likely to enjoy and a digital vacation passport that brings together preferences, loyalty recognition and rewards across all 3 brands.

We are also expanding the experiences that bring guests into the ecosystem. The debut of Legend of the Seas brought the Icon class to Europe for the first time. Equally important, we continue to invest in the ships our guests already know and love through Royal Caribbean's ongoing amplification program. Celebrity Cruises Solstice series revitalization and continued investments to elevate the luxury experience across the Silversea fleet. These enhancements strengthen the guest experience, improved return on existing assets, and create even more reason for guests to vacation with us more often. Our ships are platforms for experiences that cannot easily be replicated elsewhere. Taken together, our brands, ships, destinations, loyalty programs and digital capabilities are increasingly operating as a connected system. Each interaction gives us the opportunity to better understand the guest so that we can improve their experience. This creates a strong reason to vacation with us again, supporting greater frequency higher lifetime value and attractive returns. In fact, this year, we have seen repeat guest mix increase year-over-year even as we continue to grow our platform and attract guests who are new to cruise and new to brand.

Finally, supporting communities has always been a core part of our strategy. This quarter, we published our annual Community Impact report, highlighting our positive impact in over 85 communities worldwide and reaching over 3 million individuals through investment and partnership. Mahahual exemplifies our commitment. As part of our ongoing investment in the community, we're planning a new community center that will offer a modern accessible gathering space for all residents. Such initiatives create lasting value for local residents and support the region's long-term growth and vitality. In summary, demand for our brands remains strong, and we expect another year of double-digit earnings growth. We continue to cater greater share of the growing vacation market while investing in our future and returning significant capital to shareholders. While it's still early in our booking and planning cycle, we are encouraged by the elevated booking activity and year-over-year pricing improvements we are seeing for 2027. We fully remain committed to delivering the best vacation experiences responsibly, resulting in record-breaking Net Promoter Score. All of this, combined with strong cost and capital discipline, further bolsters our expectations on delivering Perfecta next year.

And with that, I will turn the call over to Naftali. Naftali?

Thank you, Jason, and good morning, everyone. I will start by reviewing second quarter results. Adjusted earnings per share were $4.21, $0.33 higher than the midpoint of our guidance and driven by higher revenue, lower costs and favorability below the line, including joint ventures. We delivered 6% more vacations and achieved a net yield growth of 1.2% compared to last year. The continued expansion of yields and capacity resulted in a total revenue growth of 6% for the quarter. Yields for the quarter were 100 basis points above our guidance, driven by stronger and accelerated closing demand compared to our expectations in April, particularly in the Caribbean. We have seen consumers choosing to book closer to the vacation time, mainly driven by flexibility and ease.

Net cruise cost per APCD excluding fuel, were up 3.9% year-over-year about 90 basis points better than expected, driven by the timing of the costs shifting to the second half of the year. Adjusted EBITDA was $1.8 billion. EBITDA margin was 38%, and operating cash flow was $1.9 billion. As Jason mentioned, our book position is strong and in line with prior years at record prices for 2026. While still very early, booking trends for 2027 are encouraging and pacing ahead of historical levels, including for itineraries where demand was impacted by geopolitical events this year. consumers' desire for memorable experiences with our leading brands drive strong demand for our vacation experiences. Our capacity is growing 6.6% this year with the Caribbean representing the same deployment mix compared to last year, while Europe is slightly down.

We plan deployment to optimize margin and operating income and the mix this year creates slight headwinds to yields, especially in the third quarter. The Caribbean represents 57% of our capacity this year and 44% in the third quarter. Our competitive position in the region is strong, supported by our industry-leading ships, destinations and experiences. This allows us to deliver incredible vacations and record Net Promoter Scores and grow yields even with elevated industry capacity in the region. Europe will account for 14% of capacity for the year and 28% of capacity in the third quarter. Europe demand is strong. We did, however, experience a modest and near-term impact on 2026 bookings since the last earnings call, primarily due to the prolonged geopolitical activity that is driving our reduced yield outlook for the remainder of the year. Lastly, Alaska is expected to account for 5% of total capacity and 13% in the third quarter.

Now let me talk about our guidance for 2026. Net yields are expected to grow 1.75% to 2.25%. Together, with capacity growth of 6.6%, total revenue is expected to grow 9% and as we continue to grow both yields and capacity. As I mentioned, our yield guidance compared to April is impacted by prolonged region-specific global events affecting select itineraries. For the full year, net cruise costs, excluding fuel, are expected to be approximately flat, consistent with our prior guidance, reflecting ongoing efficiency improvements and prudent cost management without impacting the guest experience. As I mentioned on the last call, the first half's cost growth is expected to be higher than the second half, driven by timing of dry docks and other year-over-year comparisons. We expect fuel expense to be $1.3 billion for the year, and our consumption for the remainder of 2026 is 58% hedged at significantly below market rates.

Additionally, when prices subsided in June, we opportunistically had more for 2027. Based on current fuel prices, currency exchange rate and interest expense, we expect adjusted earnings per share between $17.73 and $17.87. While our operating assumptions remain largely unchanged, we've benefited from an improved outlook from our joint ventures and expenses below the line. More importantly, our confidence in the business remains high supported by strong demand, a healthy book position, disciplined cost management and continued execution against our strategic priorities. We expect continued cash flow growth, enabling us to increase margins invest in strategic initiatives, maintain solid investment-grade balance sheet metrics and returning capital to shareholders.

Now let me discuss our third quarter guidance. In the third quarter, capacity is expected to be up 8.5% year-over-year, and net yields are expected to be roughly flat. As I mentioned earlier, deployment mix changes and global events have created yield headwinds in the third quarter. Looking ahead, we anticipate yield growth during the fourth quarter to reaccelerate. This growth is expected to be driven by a more favorable year-over-year comparison, deployment mix, the timing of dry dock scheduling compared to last year. While this provides a 2-point benefit to fourth quarter yields, there is a similar headwind to yields in the third quarter. Net cruise costs, excluding fuel, are expected to decrease in the range of 1.1% to 1.6% in constant currency. Taking all this into account, we expect adjusted earnings per share for the quarter to be between $6.26 and $6.36, a double-digit year-over-year growth.

Turning to our balance sheet. We ended the quarter with $6.9 billion in liquidity and leverage below 3x, consistent with our goal of solid investment-grade metrics. In July, we increased through the accordion feature, the revolving credit facility capacity by $250 million to a total capacity of $6.6 billion. We maintained strong access to diverse capital funding that support our robust liquidity and growth aspirations as well as shareholder returns. During the second quarter, we paid $404 million of dividends and repurchased 0.8 million shares. We have $805 million remaining under our current share repurchase program authorization. In closing, we remain committed and focused on our mission to deliver diversification experiences responsibly as we work to deliver another year of strong results.

With that, I will ask our operator to open the call for a question-and-answer session.

[Operator Instructions] Your first question comes from Matthew Boss with JPMorgan.

Congrats on a nice quarter. So Jason, could you speak to the continued strength in onboard spending? I know historically, this has been a key leading cater for the health of your consumer. And can you elaborate on 2027 booking and pricing trends across regions?

Sure. Thanks for the question, Matt. I hope all is well. I think on the onboard side, I think there's a combination of things. One, as you pointed out, we're seeing about 180,000 people on any given day spend. And so seeing elevated spend while they're on the ship is obviously a good sign, more good indicator of the health of the consumer or at least our guests that sale with us. each and every day. I think also what's very beneficial, and we commented is our ability to help our guests identify what they want to do on the ship prior to them getting on. So our investments in the technology and then the data to help curate well ahead of time, allows our guests to book what they want to do and also to basically get the first day of their crews back. So they're not spending their time trying to identify what there is to do. The combination of those things has resulted in a very strong trend of onboard revenue continuing to rise.

I would also comment that when we look at where our guests have spent on an elevated basis, you've seen an increase in in beverage as an example, and shore excursion. So seeking those experiences were higher than we had anticipated or we had seen in previous periods. On obviously, first to start off, we're in July, so it's early. But we have seen very strong demand for 2027. So as we said there at historical, which are very high volumes -- I'm sorry, booking volumes are in a great place. And of course, we're trying to optimize our yield, not trying to just be better than historical levels just to be better than historical levels. So we feel very good about our book position, and that's all at higher rates. And that's across the portfolio of products that we offer. So we feel good about 2027, which is also why we reaffirmed our view on reaching Perfecta by the end of next year.

Your next question comes from Steve Wieczynski with Stifel.

And thanks for all the color so far. So Jason, I want to ask about the Caribbean. From our seat, it's pretty clear. I think we could say that a few of your peers have accelerated promotions in that market. And as we think about whether that is -- whether we think about the fourth quarter and the next year, wondering if you've seen any impact from the uptick in promotions and if that has started to impact your ability to take price in that market? And if you haven't seen an impact from those promotions, would it be fair to assume that without the European headwinds you guys have encountered this year, you would have been able to raise your yield guidance for the year?

Sure. Thanks for the question, Steve. I'll start with the latter part. That's absolutely correct. I mean Europe was off to an incredible start at the beginning of the year. And obviously, the results of geopolitical activity in the region and the impact on fuel et cetera, did curtail to a degree the demand for Europe. Now that's not to say that European yields are down. Our European yields are still very good for this year, but they are less than what we had expected to. And so to the point we would have raised the back half of the year, if not for those activities. .

I think on the Caribbean side, I know this has been one of the main stories or concerns for the year. I think all -- whether it's cruise competitors or vacation competitors, we're all dealing with a different set of cards. But I think the reality for the Caribbean is while we have -- we've increased our Caribbean capacity for 2026. What we have seen is that demand for differentiated assets which we bring to the table with our ships and with our destinations. You combine that with what we've been able to do across loyalty and other technology-related things has resulted in us getting more reps out of our customers at our higher-margin guests. And so I think we're -- that allows us maybe to be a little bit less insulated from what our competitors are doing. But for us, we're in a very good position for the Caribbean for the balance of the year, and we continue to see strong demand only into next year.

Steve, it's Michael. I just got to add on the Caribbean that, of course, we opened the Royal Beach Club earlier in the year, and that's our #1 top rated experience in the Bahamas to date in Nassau and it is incredibly popular. It's really a great product, is a new product that we've introduced. You combine that with Perfect Day. We are just shy of 4 million guests going to Perfect Day in 2026 with do Icon class ships and the third one coming in the fourth quarter back from Europe with the Oasis class on the short product itineraries. I mean, we really -- to Jason's point, we have a phenomenal brand Royal Caribbean and with the sister brands, and we've got these unbelievable products that really do set Royal Caribbean apart from our competition.

Yes. The last point I'll just add a little bit more into it because I think it's important because I think we're quite deliberate about these things is that when you're delivering, especially in the Caribbean Net Promoter Scores that are in mid-70s, which is unicorn territory. We are incredibly intentional, obviously, about the vacation experience that we're delivering. But while obviously, our costs have been very strong. Our cost management has been very strong. We have continued to lean in and invest in the product and the vacation experience. And that is resulting in establishing incredible trust with our guests, which also fuels the repeat rate and experiences our customers value them, but they also want to ensure that they're going to get what they expect. And I think we're seeing that through the Net Promoter Score, which is an indicator of not just they had a great time, but also a great advocacy and they're sharing that with their friends and family, which is driving very strong demand.

Your next question comes from Lizzie Dove with Goldman Sachs.

I just wanted to put kind of a finer point on Matt's question on 2027. With 4Q what you've applied at a strong exit rate, you've got 2 years of comps. Caribbean next year, I think, should be benign. I think Carnival is pulling maybe mid-single-digit capacity out of the system versus maybe the some of the long hail of what we've seen with the Middle East this year. And so I guess, all of that -- those puts and takes, how do you think about whether this is setting up to be potentially an above Algo, yes.

Well, I don't know, Lizzie, if I would say the comps are easy. I mean we've had substantial yield growth over the past several years. Obviously, we are doing things, whether it's on the product, the experience we're adding great hardware as we've added Legend. We're bringing new destinations online. We're bringing River online. So there's a lot of, I think, great tailwinds going into going into 2027. I think it's too early, obviously, to think through exactly what the yield handle will be for next year. But we continue to believe that we drive tremendous shareholder value with moderate yield growth of strong cost control and being very discerning about how we invest our capital and how we return capital to shareholders. But there are a lot of tailwinds, but it's -- we don't plan for perfection.

Your next question comes from Robin Farley with UBS.

Just wanted to get a little bit of color around the 2027 commentary. Just -- so the 2 things looking to clarify. You talked about pacing being up, which sounds like a little bit more of an incremental comment. So I'm wondering if load factor like on the books. Is that and maybe the strategy is not to have it up at this point, but just kind of wondering where low it is compared to this time last year? And then also, price on the books for '27 the release sort of talked about record or didn't necessarily imply that price on the books is up for '27 at the moment. But I think something in Jason's opening remarks meant. So if you could just clarify also whether record for 2027 means year-over-year compared to the second last year?

Yes. So Robin, it's Naftali. We feel very good about how it's pacing. It is early, like Jason said, it is July. But we booked very well and at higher prices. So we feel pretty good about next year.

Yes. And Robin, I think the comment on the load factor standpoint, which is at an elevated level on a comparable basis as well. But it's more or less in line where we have been booked on a load factor basis. Now as Naftali said, that's at -- when we used to term record pricing, which means higher pricing than we saw in the previous period. So that's all very positive news.

But I think the -- one of the points I just want to stress again, when we think about load factor or book position is we have built very sophisticated AI-driven models that help us each and every day or really every second of every day, manage about $20 million in growing price points to optimize our yield. And so we're focused on obviously driven as much revenue as we possibly can. But where we are today, we're at an elevated level slightly, but we're not looking to be -- we're happy with being a couple of points below, a couple of points above as these tools have found themselves to be incredibly predictable and successful helping us generate higher revenue.

Your next question comes from Brandt Montour with Barclays.

Great. So recognizing that the Mexico time line is a bidding question. The question is, does that affect your target of Western, Eastern Caribbean sort of 50-50 split in '28, '29 time range? And if that is -- if that does have to be changed or what is your capability of sort of managing anchor does there need to be any sort of change to that split?

Yes. Brandt, I think, first off, I think the answer is we'll see if there will be any impact to that. I think we're as I said in my commentary, we're not really in a place to comment on the status of that development. But what -- I mean what I would say is we are generating very strong demand out of home ports like Galveston and Tampa and South Florida for cruising in the Western Caribbean that we believe we'll be able to deliver that with a set of different vacation experience and destination experiences that we think will be highlighted by Mahahual and Cozumel, et cetera. So I think that there might be some changes in deployment on the margin. That's not our expectation today, but there might be. But we're not worried about the ability to generate growing yields off of that capacity. .

Your next question comes from James Hardiman with Citigroup.

So maybe just walk us through the last few months and what you've seen with respect to demand. Obviously, as of your last call, it seemed like the geopolitical headwinds had begun to dissipate. But then one of your competitors talked about a step back in May and then some improvement in June. Curious if you guys would generally agree with those shape of events and sort of what, if anything you could tell us about July. I think more than anything, people are just sort of looking for the exit rate or the most recent data point at some barometer of where this is all headed.

Well, I think the commentary that was made by -- I believe it was Carnival that you're referring to. I think that's generally what we saw as well. Like when we came into our call, we had seen a great rebound in the month of April from some of the geopolitical noise that was happening before that. And then a few weeks after the call, you saw some -- and again, I want to just stress, we're talking about things that are highly on the margin, like -- these are small little changes that can have some small change to our revenue and booking environment. So we saw a little bit of that in May. But we saw really -- most of June and certainly in July, a very strong demand environment. We're seeing strong volumes and we're seeing, as we've commented on the pricing here for 2026 and into 2027. So there's some geopolitical noise that's out there. There's always some ebbs and flows that happen in the booking activity. But across our products, we see strong demand from our consumers.

Your next question comes from Sharon Zackfia with William Blair.

I seem to recall you were working on a project to kind of enhance onboard spending with the app while passengers are on board with some sort of rollout next year. I don't recall if that's still the time line and maybe if you can refresh our memory on kind of how to make the spending more frictionless once on board and a digital mechanism?

Yes. Well, we are -- I mean, we're very fortunate that we sit on a mountain range of high-quality data, and we have millions and millions of interactions with our guests. So we're getting better and better identifying what our guests are looking to do and then personalizing that. And so some of that as it relates to inside the app, you'll start to see in early next year. And these tools get smarter and smarter. Again, we're doing this in a way that is really to help enhance the guest experience. We're not -- and so it's important that we have the tools tuned in to be able to learn and also to curate or put in front of them what is relevant to them.

Maybe to add one thing. Of course, we're focused on across the term. So this is one case that these other pieces that we're working on, we want to simplify the way we explore I understand the options that we offer in making sure that [indiscernible] journey is scrip.

Your next question comes from Conor Cunningham with Melius Research.

There's been a lot of questions around the '27 bridge, but I was actually hoping to maybe get a little bit more near term. Just the implied fourth quarter obviously steps up from 3Q and I know there's a lot of moving parts. So I was just hoping that you could kind of give the puts and takes around what you're assuming there. I know you're not explicitly guiding to it. But just from a demand standpoint, comp standpoint product, anything that could be helpful in driving confidence in that ex-rate given it's so important to the 2027 bridge?

Sure. So let me give you a couple of the pieces. And of course, we're not guiding to it, but as we say every quarter, and it's hard to compare quarter-over-quarter versus last year, there's so many moving pieces, right? So one, you have the timing of new ships, deployment changes, dry dock days, capacity, the changes and mixes between Caribbean and Europe. So all of those are impacting quarter-over-quarter. And this year, it's obviously between deferred and the fourth quarter, it's an opposite impact. So I mentioned in my prepared remarks, around 200 basis points headwind to the third quarter and the same similar, I guess, tailwind to the fourth quarter is how I would describe it.

Your next question comes from David Katz with Jefferies.

If we are seeing this the right way our math is right, it appears that average itinerary length is getting just a little bit shorter. And I wanted to just get your perspective on the degree to which that's intentional or strategic in some way and how we should think about the locations of that.

Yes. Well, we've -- obviously, there's been investments on our destinations where our guests are seeking to visit places like Perfect Day, the Royal Beach Club, et cetera. And that allows us to offer a more elevated short product. And so the question is why are we doing that? We're doing this because the consumer, especially keep in mind, half of our guests are millennials younger now, their profile for a vacation today as they start -- as their kids start to get older, et cetera, where they start going in and getting married and moving towards that direction, in their current state, they like to take shorter vacations, though [indiscernible] more frequently. But they tend to spend the same amount of money that they would spend on a short vacation as they went on a long vacation. And so we have developed and curated a series of products, especially in the short cribbing space. That's a little bit shorter than the 7 -- the normal 7 night. And that's generating very high demand it's not always are we doing -- are we delivering a product that they're looking for, but it's also from the onboard side. It's a product that they're great we get away or get -- just general getaways that we're getting. And that's why you're seeing the investments further investments in more of these Royal Beach clubs, we're putting better assets there. And that's all reeling in higher frequency and new to cruise, which is feeding the future.

And David, just to add, this is Michael. On our short product, which we've been growing year-over-year and which is proving to be very successful to all of the points that Jason raised, we've never walked away from the Classic 7 night itinerary, which is unbelievably popular. So when you think about icon class and then also the new icon class Legend in the Mediterranean coming back into the Caribbean. We've got a huge lineup of products in the classical 7 night, particularly in the Caribbean, which is unbelievably popular for the family. So I think we've seen great success with short product, but we also continue to see great success with the new ships coming online and going straight into the Classic 7-night Caribbean.

And just the last thing. If you kind of look at our deployment mix, it's short this year versus last year on a mix basis is not significantly higher than just the capacity growth. So we do have that growth, but then on other products as well.

Your next question comes from Vince Ciepiel with Cleveland Research.

Great. Thanks for all the color and bookings and unpacking the geopolitical impact. Do you acknowledge that they had some impact here on '26 yield? At this point, 2027 sounds like it's in a really great spot. You noted very strong demand in June and July. Despite a recent uptick with everything going on in the street recently. So just kind of curious, like do you think cruise bookers are becoming desensitized to the situation. It's kind of becoming old news? Or is it just more of a mix thing where you're booking more Caribbean right now. Just would be curious your take on why you think the recent trend has been so much stronger?

Well, I think there's a series of things going on. I mean, it's -- first off, I think when we think kind of further out, these geopolitical events have had little to no impact on guests that are thinking 6 months down the road. They could impact more on what they're trying to do with 3 to 6 months. There might be a little bit hesitant longer term within 12 months when they're looking at airfare, right, because their fares typically published within about a 12-month period of time. But that stuff is typically just noise. And I think we have seen time and time again now that our business is incredibly resilient. Our consumer is resilient. When things are happening around the world, I don't -- I think the term desensitize because I don't -- I don't think people are looking to be desensitized or ignore what's happening.

But I think that as things get resolved or moved into a different place, or maybe it becomes a little bit more of a new normal. They're then back-end focused on what is critically important to them and building memories and experiences with their friends and family are at the very highest of their priority list. And I think that's why we see a very resilient consumer across all of our brands, which are all different segments, obviously, that are out there. It might change a little bit about this year, I might I might said, go to this location versus that location. But again, this stuff is very much on the margin. There's a very high demand for Europe, very high demand for the Caribbean and Alaska on our brands. And I think as long as we're delivering on what we -- what our guests expect us to be doing, they're willing to trust certification with us, which you see in the bookings on a volume and on a rate basis as we look at the build for 2027.

Your next question comes from Trey Bowers with Wells Fargo.

I actually wanted to pivot next kind of a bigger picture question. When one of your big competitors and River talks about that business, they talk about how important it is to drive the ocean business. And as you guys get closer to launching in Europe, just curious, longer term, how you think the introduction of Celebrity River might impact the long-term pricing dynamics of the celebrity Ocean brand.

Sure. Well, first, I think when we think about River for Celebrity, obviously, we have high, high ambitions there. We have this incredible database or a set of customers that trust their vacation experience with us and have been seeking an elevated experience on River. And especially for our celebrity customers, we're effectively miniaturizing an edge class ship and putting it on River and that look and feel of the shipping experience is what they're looking for. And now when you go deeper and elevate that on land, where our guests -- our goal is for our guests to be able to walk away with a story on these different locations. That drives a lot of just organic demand for us. And with that, we're seeing pricing that is higher than what we see in the competitive set for River.

Now over time, we expect that our -- that all this will be great tailwinds to our yields for our Celebrity brand and for our other brands again, as we get more and more reps in our ecosystem and this -- and our goal of this lifetime of vacations. And we're seeing that -- and I think it's in the early stages, we're seeing that today, right? We're seeing more repeat those repeat guests spend 20% to 25% more. And now for us to be able to offer them more -- another vacation experience that is typically not a substitute. It's an additional vacation we feel very encouraged by that level of demand that we're seeing.

We also see a lot of interest from the Royal Caribbean gas for Celebrity River, which is really great news. I mean it's been very positive response to this new product.

Your next question comes from Jamie Rollo with Morgan Stanley.

Could you please talk a little bit about where you are on maximizing per DMs rather than pricing to fill? And should we expect load factor to soften a little [indiscernible] 3 given the slowdown you noted? And also might we expect booked load factors to soften over the next 6, 12 months, if we continue to see this demand shift to later booking.

Sure. Well, I think first on the pricing side, Jamie, we every day price integrity is very top of mind for us. And we're in a generally an unfortunate position where our guests appreciate the vacation experience offering and they -- and they're willing to consider moderate price increases that we have been putting out there. There are times like we have talked about geopolitically that there are things that are -- that could be in play that we might not take the sample of load factor while maintaining price integrity. But for the most part, when we look at -- on our book load factor basis, and we've seen this very much over the past, call it, 2 to 4 weeks or 3 to 4 weeks is we see really high demand going out. So our load factor position, we're managing that, to its optimal level, putting us in a position to be able to raise prices into the future.

Your next question comes from Xian Siew with BNP Paribas.

You talked about strength in close-in bookings in the quarter. And I was just wondering is there anything you could point to in terms of what you're doing to help drive the close-in demand? I know you mentioned [indiscernible] just waiting closer to, but anything you're doing in particular to try and stay in front of that consumer. And then in terms of close-in bookings, is there anything we should think about in terms of maybe repeat guests versus new to cruise or is it kind of a similar mix as overall?

Yes. Well, I'll just start off on the latter. I mean, there's definitely been an increase in the repeat crew. So we're getting more reps of our guests. And I think that helps in short and long term. demand for our business. One of the commented in our remarks, because obviously, we're talking with our guests all the time. We have seen -- I mean, really, for the past 3 or 4 years, close-in demand coming in higher than we had expected it to as we have made it a lot easier to book closer than in the past. And our guests appreciate flexibility and optionality. And the flexibility is important because they're -- maybe they haven't decided whether they're going to go away in 2 weeks or 6 weeks or whatever it might be. And the ability for them to capture that from time to time because they're also dealing with very limited inventory is something that we continue to see elevate. So we like -- I mean -- and also the closing demand, if you followed our business 10 years ago and before, we would typically have to discount for close-in demand. And today, for closing demand, we're able to increase our pricing. So we're happy to harvest that.

That concludes our Q&A session. I will now turn the conference back over to Naftali Holtz, EVP, COO, for any closing remarks.

Thank you all for your participation and interest. Blake will be available for any follow-ups. Wish you all a great day.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.

Good morning. At this time, I would like to welcome everyone to the Royal Caribbean Group First Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Mr. Blake Vanier, Vice President, Investor Relations. The floor is yours.

Good morning, everyone, and thank you for joining us today for our first quarter 2026 earnings call. Joining me here in Miami are Jason Liberty, our Chairman and Chief Executive Officer; Naftali Holtz, our Chief Financial Officer; and Michael Bayley, President and CEO of the Royal Caribbean brand.

Before we get started, I would like to note that we will be making forward-looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors, we do not undertake to update any forward-looking statements as circumstances change.

Also, we will be discussing certain non-GAAP financial measures, which are adjusted as defined, and a reconciliation of all non-GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency adjusted basis.

Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our first quarter, the current booking environment and our outlook for 2026. We will then open the call for your questions.

With that, I'm pleased to turn the call over to Jason.

Thank you, Blake, and good morning, everyone. This morning, we reported first quarter results that exceeded our expectations, along with a record WAVE season that reinforced the continued strength in demand for our leading vacation brands. Revenue grew 11% year-over-year, earnings were 11% higher than guidance, and we returned $1.1 billion of capital through dividends and share buybacks.

Our performance reflects consistently strong execution by our teams and the compelling value proposition and differentiated experiences, our brands offer consumers who continue to prioritize experiences. The consumer backdrop remains healthy, and demand for our vacation experiences continue to be strong. Across our portfolio, we see consistent engagement from guests, strong booking volumes and onboard spending that remains well above prior years.

Before diving into the first quarter results, I want to briefly touch on recent geopolitical developments, starting with the Middle East. From an operational standpoint, two of our TUI Cruise ships sailing in the Middle East region were directly impacted by the conflict and therefore, had to temporarily pause operations. Both ships have since safely repositioned out of the area and are heading to the Mediterranean where they will welcome guests beginning in the middle of May.

The most notable financial impact from the Middle East conflict has been on fuel costs. While we are approximately 60% hedged for 2026, fuel prices at current spot levels are expected to increase costs by roughly $0.62 per share this year. In addition to fuel, we saw a short-term moderation in demand trends for 2026 for high-yielding Mediterranean sailings, which modestly impacted our outlook for the upcoming summer season. The softer booking trends lasted for a few weeks, but we have now turned a corner and are experiencing improved demand for the limited inventory we have remaining for Q2 and Q3 sailings.

Lastly, we experienced some disruption in demand for select West Coast of Mexico itineraries, driven by travel disruption concerns during the quarter. Demand trends for other products remain largely consistent with our expectations.

Overall, our diversified portfolio and disciplined operating model position us well to manage through these dynamics, while remaining focused on delivering exceptional vacation experiences accelerating growth and executing our long-term strategy with conviction. We expect to drive another year of double-digit revenue and earnings growth, supported by a strong book position fortified balance sheet and robust cash flow generation. I want to thank our crew members and shoreside teams around the world. Their passion, focus and commitment to our guests are the foundation of our success and continue to set our company apart.

Now turning to the results. We experienced another record WAVE season, highlighting the continued strong demand environment for our leading and trusted brands. Our book position is strong and remains within optimal prior year ranges at record prices. During the quarter, we delivered over 2.5 million unforgettable vacations at industry-leading guest satisfaction scores. Revenue grew 11% year-over-year and net yields grew 2%.

Costs came in very favorably, and we saw better-than-expected performance from our joint ventures. As a result, adjusted earnings per share was $0.37 higher than our guidance. These results reflect the continued appeal of our vacation experiences, diversified portfolio and disciplined execution. Naftali will elaborate on Q1 results shortly.

We closely monitor consumer behavior through millions of daily interactions on our commercial platform and with 170,000-plus guests on our ships every day. What we see is a consistently engaged consumer who prioritizes vacations and seeks quality, variety and value, which is exactly what we deliver. Based on our most recent research, our consumers remain very healthy, supported by excess cash, strong employment trends and a continued preference for consuming experiences over purchasing things. Travel remains a top priority, ranking as the #1 leisure category, where consumers intend to spend more. 31% of consumers say traveling more is a top priority for the next year, breaking behind only physical health and finances. Our vacation offer compelling value, flexibility and choice relative to alternatives. This continues to be reflected in the level of interest and engagement we see across our brands and the continued strength in onboard spending.

Now let me provide an updated outlook for 2026. Revenue is expected to grow roughly double digits year-over-year, and net yield is expected to grow 1.5% to 2.5%. We continue to expect yield growth across our key products, including the Caribbean. As we enter the year, we saw strong demand for Europe, which are high-yielding itineraries, and that strength was embedded in the outlook we provided in January. Due to the geopolitical events affecting itineraries in the Mediterranean and the West Coast of Mexico, we've adjusted our full year net yield expectations. Our overall outlook for the itineraries remains largely aligned with our January guidance. We also remain committed to enhancing margins through rigorous cost discipline, continuously identifying efficiencies across operations, by prioritizing spend and utilizing technology and AI without compromising the quality of the guest experience.

We are expecting another year of strong earnings growth and cash flow generation. Full year adjusted earnings per share is expected to grow double digits and be in the range of $17.10 to $17.50. This includes $0.74 per share from fuel headwinds, as well as lower income from joint ventures. We are also on track on our Perfecta performance program, targeting a 20% compound annual growth rate in adjusted earnings per share through 2027 and a ROIC in the high teens. Our large-scale leading margin profile and strong cash flow generation allow us to continue advancing strategic investments into our future while enhancing growth with capital return through competitive dividends and opportunistic share repurchases. Our vacation ecosystem integrates the best brands and ships unique destination experiences, and technology platforms wrapped around a loyalty program that connects it all.

I want to spend a moment on how technology and AI are shaping the way we operate and how guests experience our vacations. Disruptive technology and AI have been embedded in our business for years, particularly in the area that require complex real-time decision-making at scale. As these technologies advance rapidly, we are continually discovering new ways to accelerate their integration throughout our ecosystem, making it easier for us to deliver amazing experiences and for guests to keep vacationing with us.

Across our digital booking channels, guest engagement has undergone a fundamental shift since 2019. Digital penetration of bookings has more than doubled over that period with most of that growth coming through our app. Monthly active users for the app are 5x higher than 2019 levels, with adoption over 90%, confirming mobile as a way guests increasingly plan and manage their vacation. Today, more than half of onboard revenue is booked before guests ever step on board with the vast majority of those purchases made digitally. Guests are engaging earlier, planning more intentionally, and personalizing their vacations in ways that were simply not possible a few years ago.

Our focus is on a unified intelligence layer that delivers seamless, relevant experiences and supports meaningful enhancements throughout the vacation journey from dreaming and booking to onboard experiences and service to post-cruise engagement. What differentiates us in this space is not access to tools, but the combination of a deep understanding of our guests, a fully integrated digital ecosystem the ability to deploy these capabilities across a multi-day end-to-end vacation experience and the commitment to excellence and innovation.

Our ships are floating cities where we design and operate every guest touch point across numerous activities for a prolonged vacation period. That level of integration creates conditions where disruptive technology and AI enhance our moat in ways that are very difficult to replicate. We are deploying these capabilities in a disciplined manner, measuring performance, reacting to guest feedback and then scaling what works. We are in the early innings. And as we develop the capabilities further, it reinforces a flywheel that compounds over time.

We also continue to make meaningful progress in other strategic initiatives. Our loyalty program is designed to better recognize and reward our guests, driving higher engagement, increased frequency and repeat travel. Since launching initiatives to drive cross-brand awareness in 2023, including our industry-first status match program in 2024, which allows guests to enjoy equivalent status across our brands, cross-brand bookings have increased significantly reinforcing the strength of our connected ecosystem.

We recently launched our new Royal ONE co-branded credit cards, which further expand and strengthen our loyalty ecosystem, building our recent enhancements like Points Choice and Status Match. The Royal ONE, credit card is the most powerful way for our guests to earn rewards across our brands, allowing them to accumulate points faster and to redeem those points seamlessly across our ecosystem. Since 2019, cardholder accounts more than doubled, and as we continue to enhance the value proposition and deepen integration across brands, we believe there's an opportunity to double it again.

We also recently announced orders for Icon VI and Icon VII, reflecting the success of the Icon platform and our confidence in its ability to consistently deliver industry-leading guest experiences and returns. We continue to innovate the Icon series to maintain high satisfaction scores and superior economics.

Following the launch of Royal Beach Club Paradise Island last year, we recently opened the Royal Beach Club Santorini. Demand for the Beach Club has been very strong. developed with local stakeholders, it's the centerpiece of our ultimate Santorini Day, offering guests an elevated way to experience the island. We are also advancing the Royal Beach Club in Cozumel, now expected to open in early 2028. And are actively progressing Perfect Day Mexico and Costa Maya expected to open in late 2027 and ramp up in early 2028. Together, these initiatives are differentiating our experiences and are nicely accretive to yield growth.

Finally, the upcoming delivery of Legend of the Seas, our third Icon class ship, is another exciting opportunity for us. Consumer receptivity is remarkable, it is in a very strong book position with prices higher than those that we saw for Icon and Star.

In summary, demand for our brands continues to be very strong, and we expect another year of double-digit revenue and earnings growth. We are executing decisively key initiatives as we look to win a greater share of the large and growing vacation market.

With that, I will turn it over to Naftali. Naf?

Thank you, Jason, and good morning, everyone. I will start by reviewing first quarter results. Adjusted earnings per share were $3.60, $0.37 higher than the midpoint of our guidance and 33% higher compared to last year. The outperformance was driven by better-than-expected revenue, lower costs and better performance from our joint ventures.

In the first quarter, we delivered 12% more vacations than last year. Notably, we observed an increase in number of young guests, mainly Millennials and younger demographics as well as an increase in repeat guests compared to the previous year. We finished the quarter with net yield growth of 2%, which was above the high end of our guidance range. Yield performance was supported by all key itineraries and improvements in gross margin.

Net cruise costs, excluding fuel, performed better than expected, driven primarily by continued cost discipline as we find more efficient ways to deliver the vacation experience without compromising the product.

Adjusted EBITDA was approximately $1.7 billion, representing an EBITDA margin of 38%, an increase of more than 300 basis points year-over-year. Operating cash was $1.8 billion, an increase of 13%.

As Jason mentioned, we had a record WAVE season, and our booked load factor is within historical ranges and at record APDs, reflecting strong demand for our vacation experiences and a healthy consumer. The Caribbean represents 57% of our deployment this year, and 50% of capacity in the second quarter. Caribbean yields are expected to be positive for the year even with elevated industry capacity reflecting the continued strength of demand and the differentiation of our product.

Our competitive position in the region is further supported by our industry-leading hardware and destinations including the introduction of Legend of the Seas into the Caribbean in November following its redeployment from Europe as well as the continued benefit from the new Royal Beach Club at Paradise Island.

Europe will account for 14% of capacity for the year and 18% of capacity in the second quarter. Bookings for the high-yielding Mediterranean itineraries, which began the year on an exceptionally strong trajectory moderated following recent geopolitical developments late in the first quarter, partially driven by increased air travel cost, airline capacity reductions and flight disruptions. These factors mainly affect the second and third quarters, when these high-yielding itineraries represent a larger share of deployment. In recent weeks, bookings from Mediterranean itineraries have been rebounding.

Bookings for West Coast of Mexico itineraries, which represent 5% of capacity also moderated during the quarter, reflecting geopolitical-related considerations specific to that region. Lastly, Alaska is expected to account for 5% of total capacity and 9% in the second quarter.

Now let me talk about our guidance for 2026. Our proven formula for success, moderate capacity growth, moderate yield growth and strong cost discipline is expected to drive significant earnings growth and higher cash flow generation this year. Capacity is expected to grow 6.7% for the year, with first and third quarters growing at a higher rate than the second and the fourth. Net yield is expected to grow 1.5% to 2.5%. Our yield guidance compared to January is influenced by region-specific geopolitical developments affecting the Mediterranean and West Coast of Mexico, which are mostly pronounced for the second and third quarters. Otherwise, expectations for the rest of the portfolio remained similar to January.

As Jason noted, we continue to see very engaged consumer, which supports strong quality demand for both ticket and onboard. Furthermore, we have been investing in enhancing our commercial capabilities to remove friction and enable guests to book the best experiences for the vacation needs. As a result, we continue to see over 70% penetration in our pre-cruise booking engines with over 5 items purchased per booking and a year-over-year increase in spend per night.

For the full year, net cruise costs, excluding fuel, are expected to be approximately flat, or 50 basis points better than our prior guidance, reflecting ongoing efficiency improvements and prudent cost management without impacting the guest experience. While we manage our costs more on an annual basis, the cadence of our cost growth varies throughout the year. As I mentioned on our last call, the first half cost growth is expected to be higher than second half, driven mainly by timing of dry docks and other year-over-year comparison factors. The most notable impact from recent geopolitical events is on our fuel costs. We expect fuel expense to be $1.35 billion for the year, and our forward consumption for the remainder of 2026 is 59% hedged at significantly below market rates. Our guidance is based on spot rates as we always do. However, fuel expense would be approximately 4% lower if rates were based on the forward curve.

Based on current fuel prices, currency exchange rate and interest expense, we expect adjusted earnings per share between $17.10 and $17.50. Our earnings guidance includes a $0.62 headwind from fuel rates for the remaining of the year, as well as a $0.12 headwind from lower expected earnings contribution from TUI Cruises. We expect to continue to increase cash flow generation, allowing us to grow margins, continue investing in our strategic initiatives maintaining solid investment-grade balance sheet metrics and expanding capital return to shareholders.

Now I will discuss our second quarter guidance. In the second quarter, capacity will be up 4.9% year-over-year. Net yields are expected to be up approximately 0.2% in constant currency. Year-over-year comparison elements, including increased dry dock days and impact from geopolitical events contribute almost 200 basis point headwind to yields in the quarter. We also expect a similar impact from these factors on third quarter yields.

Net cruise costs, excluding fuel, are expected to be up in the range of 4.6% to 5.1% in constant currency. This quarter has almost 400 basis points of cost headwinds related to additional dry dock days and year-over-year comparisons as well as increased costs mostly related to crew travel resulting from air travel disruptions and reduce capacity. Taking all this into account, we expect adjusted earnings per share for the quarter to be $3.83 to $3.93. Earnings are impacted by almost $1 from the items I just mentioned for the quarter, including lower earnings contribution from TUI Cruises.

Turning to our balance sheet. We ended the quarter with $6.9 billion in liquidity and leverage below 3x consisted with our goal of solid investment-grade metrics. During the quarter, we accessed the capital markets through a $2.5 billion investment grade bond offering. The transaction was well received and was significantly oversubscribed, reflecting continued strong institutional demand and confidence in our credit. Net proceeds were used to refinance existing indebtedness, including near-term maturities.

Also during the quarter, we repurchased 2.9 million shares for a total of $836 million. This reflects our strong financial position and commitment to capital allocation priorities will be continue to invest in growth while also returning capital to shareholders. We have $1 billion remaining under our current program authorization.

In closing, we remain committed and focused on our mission to deliver the best vacation experiences responsibly as we work to deliver another year of strong results.

With that, I will ask our operator to open the call for a question-and-answer session.

[Operator Instructions] Your first question comes from Steve Wieczynski with Stifel.

So Jason, as we think about the rest of the year, we obviously have your second quarter yield guidance, and I have to assume based on Naf's comments that your third quarter yields are going to look somewhat similar to your second quarter given the exposure you have to Europe. So then if that's true, that would imply your fourth quarter yields are going to be growing, let's call it, somewhere in that mid-single-digit range to kind of get you into that 2% midpoint.

So wondering what gives you the confidence the fourth quarter could grow that much. And I guess then that actually to me would imply that without the European headwinds you guys encountered -- you guys would have actually been able to raise your full year yield guidance. Am I kind of thinking about that all the right way?

Yes, Steve. Well, first, thanks for the question and hello to everybody. But I think that's exactly the way to think about it. So the year is a little bit of a smiley face in terms of yield, and that's really impacted, as we said, by our commentary on the Mediterranean, and to a lesser extent, the deployment to the West Coast of Mexico. If you kind of like just kind of zoom out in the beginning of the year, demand from North Americans to go to Europe was really kind of off the charts, which is very much taken into our guidance. And so when the activities started to occur in the Middle East, you saw some level of moderation in demand for the Mediterranean.

And when you think about it through the course of the year, we're obviously more pronounced with those itineraries in Q2 and Q3 and very little in Q4. And so as it points to all of our products are doing very well. By the way, Europe is doing well. It's just that it's less than what we had anticipated, while the other ones are doing well. And so when you look at what our book position in Q4, which, of course, has less on the Med product, but is in a very strong book position at very strong rates. You look at the comps with Legend and we have an easier comp in Q4. That's why we feel very good about the fourth quarter of this year.

By the way, we feel good about Q2 and Q3. It's just that we did see that moderation, and we have -- and fortunately, that has now turned the corner over the past several weeks, but we have just less inventory to sell to be able to take that price.

Your next question comes from Matthew Boss with JPMorgan.

So Jason, maybe if we take a step back, so despite geopolitical developments and the elevated industry capacity in the Caribbean, your yield guide at the high end this year stands at 2.5% constant currency. So maybe could you speak to the drivers of durable growth multiyear, which seem intact here regardless of the macro and just how you see the company set up today relative to pre-pandemic?

Sure. Well, first, I just want to just touch on the capacity in the Caribbean. That has been, I think, much more of an outside looking in observation or concern than it actually has been for our company. The reality of it is we own the Caribbean, especially the Royal brand owns the Caribbean. We have the best assets in the world in the Caribbean. And of course, we have a Perfect Day, and now we have the Royal Beach Club. And all those islands also attract an elevated amount of demand and people's willingness to pay more to have those elevated experiences.

And so I think when we look at our business, our brands are positioned in, we think, the perfect segments for them. They are the leaders in those segments. They're supported by these great ships, and they are supported by these destinations which we continue to add on to. So I think we're positioned very well, and I think that our expectation is we'll continue to generate high-quality demand. And one of those points on high-quality demand, which I commented in my script, is we're getting more and more repeat customers inside of our ecosystem. So at this point, about 40% of our customers are coming from our current customer base. And historically, that was 1/3, 1/3, 1/3. And so I think that's a reflection of all the things that we're doing around loyalty, all the investments we've made on AI and other technology that helps curate and engage with our guests are highly effective.

And of course, the tools that we have around pricing, et cetera, allows us to kind of meet our guests where they're looking to go and also what they're willing to pay. And that is creating more and more reps and more and more high-quality demand for us. And I think we say this all the time, the leisure marketplace is $2.1 trillion, $2.2 trillion. This industry is a very small [ sliver ], but this industry today as a core vacation experience. It's core to people's vacation considerations. It's no longer kind of a -- well then we consider cruise, cruise is very mainstream. And I think that's why you're seeing a lot of durability in demand for cruise. And you couple that with the reality that we still trade at about a 15% plus discount to land-based vacation also kind of helps inflate us around some of this noise.

Your next question comes from Brandt Montour with Barclays.

Great. I just wanted to circle back on the third quarter and the Med. And just maybe if you could put a little bit of a finer point on it. How much do you have left to book at this point in the year, how much damage do you think was done over the last few weeks? What are you sort of baking into your forward guidance in terms of how the conflict plays out and how bookings play out from here?

Yes. Well, Brandt, what I would first start off is, I don't think I would describe we had a record wave period. So I wouldn't describe it as damage. I would probably describe it as the booking trends that we saw for the Mediterranean in the early parts of WAVE and when we gave guidance and even to the point where we -- of course, we put all that into the 10-K, all of our knowledge was just at levels that we had not seen before. And it moderated as we got out of the month of February, with the activity happening in the Middle East, driven by really two things. One of it was people's concern about vacation disruption. But more importantly is cost of air went up by almost -- more than 40%. It's now moderated down to like 15%. And so it was getting to a point where cost of a flight was more than the cruise.

But that kind of settled out. And of course, we did have to address that demand. But where we sit there today, we're at the end of April. There's very little inventory left to sell for the quarter, and there's still very little inventory to sell for the third quarter. But of course, we are continuing to actively manage this environment. And if we see things continue to accelerate, that could be a positive light for this quarter and Q3.

Your next question comes from James Hardiman with Citi.

So I wanted to sort of zoom in on the idea that we're turning the corner. Obviously, the weeks following the initial geopolitical disruption were probably the worst. But maybe some indication of where we stand today in terms of the booking trajectory versus where we were in February before a lot of this started, I don't know, if we're fully back or we're just heading in that direction.

And then as we think about sort of the 2Q and 3Q, we're saying that's most pronounced. I'm just curious if that's because those are what's next or whether consumers are comfortable booking beyond the third quarter and into 2027, assuming that this disruption will go away, or will sort of worry about that when we get to that point in time.

Yes, sure. So James, just to -- so we're clear on tenses, we are not turning the corner. We have turned the corner. Now I don't know what -- there's always statements that can be made and that can change the hearts and minds of the consumer, but the moderation that we saw has turned. It's just that we have limited inventory that's in place. We do not see this at all showing up next year in people's booking behaviors. And of course, we have guests that are starting to book next year clearly. And we're talking about a specific product. And so our commentary around the Caribbean and other products, you should hear is very good. And you should hear that bookings for Europe are very good. They are just a little bit less than we had anticipated when we started the year based off of a high-quality demand and really strong pricing.

And James, just one other thing on -- we used the word moderation because that's what we saw. We didn't see dip and then it's a return. It wasn't a very strong trajectory. And even following that, we saw that there is enough potential to even accelerate. And so there was a moderation at any time where the bookings were still good.

Your next question comes from Lizzie Dove with Goldman Sachs.

I was wondering if you could maybe give us a refresh on Perfect Day Mexico. You mentioned opening late 2027 ramping '28. Could you maybe share some more details on the cadence of that ramp? And then just bigger picture, your latest thinking around the long-term structural yield growth opportunity there in the Western Caribbean market and particularly around the Galveston, Texas penetration opportunity?

Lizzie, I'll talk a little bit about construction and cadence. Obviously, we are incredibly excited with Perfect Day Mexico. We have a lot of support for the project from the government in Mexico. And the project is proceeding. We obviously have announced, I think we said that we'll be having a soft opening in Q4 '27, as we move into '28, we'll fully opening the whole experience, which is, in many ways, very similar to often how we open up big traction or big events or new ships, for example.

So project is generally on track and its impact in terms of the region, particularly out of Galveston and particularly as it relates to the Texas and the regional market is, is we believe, incredibly significant. We literally will have the biggest, best, most attractive destination experience for that whole Gulf region. And if you look at the opportunity that exists in Texas, it's a market which is much larger than Florida and its penetration rate is much lower than Florida. So we're expecting to -- I guess I'm going to use this word. We're expecting to own the Texas market as it relates to cruising into the Caribbean and Perfect Day Mexico, combined with Royal Beach Club and Costa Maya will be the centerpiece of that combined with, of course, our Icon class ships.

So the combination of the hardware, the brand and the destination, we believe, is going to be a massive accelerator for overall financial performance for the business. So we're very excited about that. The project is really exciting. I mean I think what we've got planned is epic in its nature. It's really going to be a stunning experience. So we're very much looking forward to bringing that alive over the coming couple of years. We did have some issues. I think it was reported. There were a little blips in the radar as it relates to environmental issues that have now been resolved, and all of that is now behind us. So we're continuing on track.

Yes. Lizzie, the last point, I just want to add on it because we are super excited about it. But I always think it's an important point to make the pictures and the videos you've seen of it, that is what it's going to look like. So we will very much live up, hopefully, maybe even exceed all the incredible marketing around it. So we're very excited. And as Michael said, it's owning the Texas market. It's also increasing a catchment area for the drivable market, and it's also going to unlock, we think, more potential in the West, you really kind of west of the Mississippi as the cost to get to Houston and so forth is less than other parts of the country. So we're super excited about it. And it's not that far away.

Your next question comes from Robin Farley with UBS.

I had a question on yields, but also just a quick follow-up. Michael's comment may have just answered it, but it sounded like Mexico, there had been a little bit of a pause in construction because of that environmental stuff. So I just want to clarify if Michael's comment means that construction has resumed in Mexico there?

Yes.

Yes, great. And then the other question was just sort of thinking about next year and if it's the 200 basis points impact in Q2, Q3, it sounds like the entire 100 basis point change is maybe a mid-single-digit sort of shift in where you had expected European yields to come in this year. Is it fair to assume that you would kind of fully expect that to come back in 2027 when we're kind of thinking ahead to the impact this year being kind of not necessarily coming out of next year? Just help us size that.

Yes. The comment about the European one is, there are other things that were already known around some of the structural aspects of it, right? So there was just more because of the geopolitical. But the bottom line is that you're right, this is for this year. We don't see those issues for next year. And we see also the bookings, as Jason mentioned, are strong for next year. We don't see the consumers being the impact of that. It's really a near term for right now for Q2 and Q3.

Your next question comes from Xian Siew with BNP Paribas.

You talked about the co-branded credit card and several changes to the loyalty program and also how repeat guests are kind of stepped up. I'm kind of wondering what do you think is kind of the implications of that in terms of how they could impact net yield growth, maybe repeat guests are booking further ahead, maybe they spend more on onboard, kind of any learnings on how higher repeat penetration could be a benefit and where...

Yes. Sure. Thanks, Xian, for the question. Yes. So first off, I think we should -- when we look at our repeat guests, one, they tend to sell on us more often. That's not a surprise. But they also tend to spend about 25% more than new-to-cruise or first to brand. The new-to-cruise index is a little bit higher when you get because of the short product, and that has introduced very high-yielding new-to-cruise consumers for us. But effectively, what we are trying to do and kind of go to the saying that we've said is to go from a vacation of a lifetime to a lifetime of vacations. And so we're trying. That's the reason why we're getting into River is we effectively want to use this platform of ours that our guests love and our guests trust to keep them inside of our ecosystem.

And so when you look at things, whether it's the point's choice or whether it's the ability for our guests to sail on any of our brands and get recognized and get their points associated with that or now having a co-branded card that now covers all 3 of our brands. It's effectively things to continue to incentivize and recognize our guests to stay inside that. And then we look for what are making sure we have the experiences that they're looking for and that we're elevating the experiences and we're bringing new experiences like River online so that they continue to travel with us in that unlocks great lifetime value of the customer. It makes us more efficient because it helps leverage our ultimately our platform.

At the same time, we also need to make sure we have the tools so that we're going to market, and we're connecting with them in the way that they want to, and that's why we have significantly evolved our digital capabilities, our guests are able to see where they are in their loyalty journey. Our guests are able to engage with us at any point in their dreaming or their vacation journey. And all these things kind of come together to have this kind of commercial apparatus and ecosystem to ultimately get more and more of our guests wrapping inside of our ecosystem.

And maybe just to add one more thing. If you kind of put everything that Jason just said together, it's really for us looking at the customer lifetime value, right? And so in addition for them having more frequency with us, shortened duration between the cruises, higher spend, lower acquisition cost is also another way to do it. And we believe we will also be able to serve them better because we know them better and we make sure that we tailor the vacation they need with all the tools we have. So it's kind of part together of the customer lifetime value.

Your next question comes from Kevin Kopelman with TD Cowen.

Great. I had a question on North American customers and higher airfares. Can you talk at all? Have you seen any consumer behavior change at all kind of reacting to the higher airfares in North America for your North America itineraries? And how do you see consumers' ability to kind of -- as well as those air fare increases as they're getting to ports as the year goes on?

Kevin, we've seen a slight impact, obviously, because when the airfares go up, it does have an impact. The great thing is, is we've got a phenomenal global infrastructure. So for example, if you look at the European product in itineraries, when airfares goes up or it spikes and as Jason mentioned, it kind of spiked up and then it started to fall back down again. Then what we see is we see an increase in European customers booking, if there's a slight decrease in U.S. North American customers, which is -- which really does moderate itself out as the situation calms down.

So I think that the benefit of our infrastructure, our global infrastructure from a sales and marketing perspective and brand presence has been really quite effective and always has been in these times when we see fluctuating air costs.

And just -- I think, one thing I just want to add is the North American consumer, as we see it and as we commented in our remarks, is very strong. And at least for our customers in terms of where their balance sheets are, where their level of employment is their balance sheets, et cetera, and their propensity to vacation and their propensity to cruise to us, is really, I mean, at the highest levels that we have seen in the past.

What can create outside of the comments we made about U.S. consumers, maybe you're getting a little bit concerns seeing about flight cost to Europe, which have now settled down. What was actually probably impacting them more domestically was just friction in the travel experience, right? And so it was the long lines to the airports and so forth. People will go through, well, can I just drive there or maybe wait until this kind of settles down, which can sometimes impact some of the close-in business. Fortunately, as you can see in our first quarter results, while we saw some of that, but we also saw the consumer breakthrough on that, and we saw a little bit more of our drivable markets kind of lift up.

Your next question comes from Andrew Didora with Bank of America.

Just two quick questions on costs. So I guess for Naftali, I guess, one, how do you think of rolling in new hedges in this high fuel environment? And then second, just on unit costs, you continue to do a really nice job here. I guess my question is at what level of capacity growth would we start to see maybe more inflationary type NCCx fuel growth in, say, I don't know, 2% to 3% range. Just curious of your thoughts on there.

Yes. So first on fuel, where, as I mentioned, we did see higher fuel, fuel costs, obviously, not surprising. And the way we manage our hedging program, and we are hedged 60% for the year. We're hedged a little bit less than 50% already add pre-conflict prices for next year and 25% roughly for '28. So we continue to methodically add hedges and make sure that we manage volatility through the course of a longer period of time. So we'll continue to observe. We feel very good with where we are, and we'll continue to absorb that and add where it makes sense. So that's on the fuel side.

On the cost side, we subscribe to our formula. So we say our formula is moderate capacity growth, market yield growth, strong cost control. And so we subscribe to that formula, and we want to maintain a spread between our yield growth and our cost growth. And our focus is to make sure the first that we deliver the best vacation experiences. So we are very a nice about making sure that we don't touch the guest experience and actually enhancing that. And with that also comes yield growth, et cetera. So we're doing that.

And then at the same time, we always find ways to do things better. And technology today helps us a lot. And so either it could be through supply chain as an example or other areas that we can just achieve more with these tools. And so we're utilizing those tools and that obviously comes to the benefit of the cost. So that's kind of how we manage the business.

Yes. And Andrew, one other point I just want to make is that, I mean, at least talking for the Royal Caribbean Group, our business is growing in perpetuity. So we're adding 1 ship or 2 every single year for the foreseeable future. And so I think the combination of the technology that Naf talked about which is pervasive and the opportunities are always existing. But it's also just our responsibility to embrace as our business scales. And when we have that capacity growth coming in, there's always going to be a little bit of some headwinds on it when you're introducing new destinations as an example, but because there's no APCDs associated with it. But for the most part, we look at that as -- our group's challenge themselves on how do we scale our groups as capacity grows.

Your next question comes from Sharon Zackfia with William Blair.

I guess I wanted to follow up on costs. Are you making any itinerary changes given higher fuel either currently or looking out to '27, '28? And then obviously, net cruise costs are coming in a bit lower. Is there anything you've pulled back on this year in terms of initiatives or spend that we should think of as deferring to '27? Or is this just harvesting some of those efficiencies that you just referred to?

Yes. So let me be very clear. When we talk about guest experience, our itineraries are the key part of it. And so the answer is absolutely not. We have great ship experiences. We have amazing destinations, and we want to maintain that quality of the experience. So the answer is we have not modified anything because of higher fuel costs. We always do, right? I mean this is not new, but we always try to find other ways to investments into energy efficiency, just better utilization of technology of how we use fuel, but that's not impacting the guest experience.

And your second question was about [ deferment ] and the answer is no as well. as I said, all the things that we're doing is we're finding better ways in a sustained way because then that's not really improving costs. This is just deferring. So we're finding sustained ways to operate the business more efficiently while again, ensuring that the guest experience remains intact.

Your next question comes from Vince Ciepiel with Cleveland Research.

Just wanted to dig a little bit more into yield outlook for the year. Could you maybe comment on how you think new hardware, and you have Star, Xcel contribution, Paradise Island, RBC Santorini, like a lot of exciting new products out there, how they might be contributing to the yield growth overall versus the like-for-like impact? And then also on a regional basis, I think you had mentioned or used the term that Europe was doing well, I think, was the quote. Is it fair to assume that Europe yields will grow this year? Or kind of what does the guide assume?

Yes. So I just want to help on the Europe question again. Europe is going to do very well this year. It is just less well than we had anticipated it was going to do a few months ago. And when answering like what's driving yield, the answer is it's all of it. Whether it's like-for-like, whether it's having more of a year of Star, Legend is coming on. It's the ramping up because we're still very much -- we ramp up these destinations very thoughtfully to make sure that the guest experience is at the very highest level.

And so the answer is all of it is going well. And there is again, the onetime realities of the med doing a little bit less well than we had anticipated, but still great. There is the realities that the West Coast of Mexico had some hiccups, we generally think that is also a onetime situation, which provides for great tailwinds into 2027..

That concludes our Q&A session. I will now turn the conference back over to Naftali Holtz, CFO, for closing remarks.

We thank you all for your participation and interest in the company. Blake will be available for any follow-ups. We wish you all a great day.

This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.

Good morning. My name is Morgan and I'll be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group Fourth quarter and Full Year 2025 Earnings Call. [Operator Instructions] I would like to introduce Mr. Blake Vanier, Vice President of Investor Relations. Mr. Vanier, the floor is yours.

Good morning, everyone, and thank you for joining us today for our fourth quarter 2025 earnings call. Joining me here in Miami are Jason Liberty, our Chairman and Chief Executive Officer; Naftali Holtz, our Chief Financial Officer; and Michael Bayley, President and CEO of the Royal Caribbean brand.

Before we get started, I'd like to note that we will be making forward-looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors. We do not undertake to update any forward-looking statements as circumstances change.

Also, we will be discussing certain non-GAAP financial measures, which are adjusted as defined, and a reconciliation of all non-GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency-adjusted basis. Jason will begin the call by providing a strategic overview and update on the business. Naftali will follow with a recap of our fourth quarter, the current booking environment and our outlook for 2026. We will then open the call for your questions.

With that, I'm pleased to turn the call over to Jason.

Thank you, Blake, and good morning, everyone. I'm very pleased to share our fourth quarter and full year 2025 results, our outlook for 2026 and our exciting strategic investments that will continue to shape and accelerate Royal Caribbean Group's future success. 2025 was an outstanding year, defined by strong demand for our brands and vacation experiences, disciplined execution of our strategies, strong balance sheet management and robust financial performance.

We delivered a record 9.4 million memorable vacations at a very high customer satisfaction score, achieved nearly $18 billion of total revenue and 33% earnings growth, all while expanding our margins, increasing return on invested capital and reducing leverage. We generated nearly $6.5 billion of operating cash flow and returned $2 billion to shareholders through dividends and share buybacks. Meanwhile, our scale, profitability and consistent execution enable continued investments in the differentiated experiences and innovations that delight guests and fuel the next chapter of long-term growth. I want to thank our team members worldwide for their passion and unwavering dedication to providing outstanding vacation experiences every day. Their efforts made our guest vacations memorable and contributed to a successful year for our shareholders.

As a global vacation leader, we continue to broaden our vacation ecosystem across ocean, river and land with unique experiences, giving guests more ways to experience the world with our family of brands. Today, we are announcing a further expansion of Celebrity River Cruises with a commitment for 10 additional ships. This will expand Celebrity's River Cruise fleet to 20 vessels by 2031. The expansion will make Celebrity River Cruises one of the largest European River cruise operators, offering more itineraries and destinations than ever before. We are also announcing the launch of the Royal Caribbean brand's new Discovery class ships that will redefine how Royal's guests experience the world. The agreement with the shipyard includes 2 firm order ships, and options for 4 additional ships. And we recently shared the next evolution of our loyalty program with Points Choice, which gives consumers the freedom to earn points on any of our 3 vacation brands and apply them where they matter most, regardless of the ship they're sailing. The expansion of our ocean and River fleets, loyalty enhancements and our growing exclusive destination portfolio strengthens the integrated ecosystem we are building. These investments broaden our appeal to new guests while deepening the connection with those who already vacation with us, supported by technology and AI that make the experience more seamless and more personal. This approach expands the way guests can vacation with our family of brands and reinforces our vacation of a lifetime strategy.

Now turning to our results. I am very proud of what we have accomplished in 2025. Flawless execution of our incredible teams propelled our strong performance in 2025, elevating demand across our brands and driving durable margin expansion. This resulted in a 33% year-over-year increase in adjusted earnings per share and ROIC in high teens. We also invested in key strategic priorities while strengthening the balance sheet and returning capital to shareholders. The year ended on a great note. Fourth quarter net yields grew 2.5% and adjusted EPS was $2.80, higher than our guidance. We also generated strong profitability and margin expansion as we continue to execute on both commercial and cost priorities. With this strong performance, we are on track to achieve our perfected financial targets in 2027. As we said before, Perfecta is an important milestone on our growth journey, but our ambitions go well beyond it. 2025 was another year of remarkable milestones on our journey to expand the way our guests can experience our brands on a ship and shore. We welcomed World Caribbean Star of the Seas, took delivery of Celebrity Excel, launched Celebrity River Cruises and finally, in late December, opened the Royal Beach Club Paradise Island. Our joint venture with TUI Cruises also added to this momentum with the delivery of Mein Schiff relax, the first vessel in its new class and the largest ship in its fleet.

We also continue to invest in technology and innovation that makes our vacations easier to discover, easier to plan and more personalized while making our business smarter and more efficient. Over the past year, we further embedded disruptive technologies like AI across all commercial and operational areas. I'll bid more detail on our tech investments later in the call. 2025 demonstrated the power of our model and the strength of our platform and it sets us up well for 2026 and future years. Our momentum continues into 2026. The wave is off to a record start. We experienced the best 7 booking weeks in the company's history since the last earnings call. As a result, we are already about 2/3 booked for the year, with book load factors well within historical ranges at record rates. This sets us up to optimize pricing and yield growth as we continue to build the book of business for the balance of the year. All commercial channels are delivering quality demand with direct-to-consumer performing particularly well. Last year, we added hundreds of new digital capabilities as consumers' preference for digital engagement continues to grow.

Our increasingly connected ecosystem aims to make vacations planning straightforward and seamless. Travel Partners are also delivering meaningful more bookings than last year and at higher rates. Our spectacular new ships continue to generate strong, high-quality demand, Star of the Seas and Celebrity Excel are exceeding expectations and Legend of the Seas, our first icon class ship debut in Europe later this year, is experiencing very strong booking trends. Our latest research shows that our consumers feel financially secure and continue to prioritize experiences with 40% planning to increase leisure travel spending in the next year. The cruise value proposition continues to resonate due to quality amenities, value and convenience.

Looking ahead for 2026, our proven formula will continue to generate strong financial results. Moderate capacity growth, although 2026 will be a bit higher at mid-single digits, moderate yield growth and strong cost control. Combination of those 3 things create meaningful margin expansion, increased cash flow and drives a stronger balance sheet. That's the model we planned for and it's the model we're executing today while also funding future growth and expanding capital return to shareholders. Revenue is expected to increase double-digit year-over-year resulting in full year net yield growth in the range of 1.5% to 3.5%. We expect positive yield growth for our key products, including the Caribbean, as our investments continue to differentiate us and strengthen our leadership position even in a period of elevated capacity growth in the region.

Full year adjusted earnings per share is expected to be in the range of $17.70 to $18.10, a 14% year-over-year increase. We also expect to deliver over $7 billion of operating cash flow this year, and we continue to prioritize strategic investments into our future, while enhancing capital returns to shareholders through competitive dividends and opportunistic share repurchase programs. At Royal Caribbean Group, our strategy is centered on creating a lifetime of vacations for our guests by continually strengthening the ecosystem that makes those experience as possible. We are extending our competitive moat through differentiated experiences, world-class brands, exclusive destinations and industry-leading loyalty program, and technological investments that remove friction and make every interaction more personalized. Together, these elements reinforce our Lat Am vacation ecosystem, attracting new guests driving more frequency and long-term loyalty that translates into sustainable growth and shareholder value.

A cornerstone of that strategy is our exclusive destination portfolio. We're especially excited about Royal Beach Club Paradise Island, which opened in December and is off to an incredible start. Guests response has been exceptionally positive reinforcing our confidence in the role these experiences play as we continue to expand our destination platform. Innovation on the ship side remains a key differentiator. New ships do more than add capacity, they expand the experience, broaden the guest base and raise guest satisfaction, all while driving and enabling better financial results.

And today's announcement of the new discovery class of ships on our Royal Caribbean brand is the next step in our innovation road map designed to continue to raise the bar for our guest experience and to extend our leadership in the vacation space. We'll share more details as we go, but it will follow our disciplined approach, investing in product leadership and high return growth that compounds over time. As I shared at the beginning of the call, we are expanding our River business with the commitment for 10 additional ships that will expand the Celebrity River Cruise fleet to 20 vessels by 2031. We see river cruising as an exciting growth opportunity that adds an incremental vacation choice and expands the moments and occasions guests can experience with us, all while deepening loyalty across our family of brands.

Finally, AI and disruptive technology are becoming a foundational advantage for us, representing a core capability that improves the guest experience, strengthens our commercial engine and helps us run the business more intelligently. Our digital channels are increasing the gateway to long-term guest value, highlighted by a 25% year-over-year increase in active users on the app in the fourth quarter. E-commerce traffic was up 10% year-over-year in 2025 with conversions improving throughout the year. As it relates to disruptive technology, including AI and Gen AI, we're scaling in 2 complementary ways. First, we're investing in enterprise programs that deliver better guest satisfaction and experience while improving revenue and margin, helping us to fundamentally change how we run the business. And second, we're infusing these technologies across the organization through smaller practical use cases that create momentum, productivity and confidence at the individual and team level.

We are improving our ability to curate and personalize what guests see while increasing precruise engagement because the vacation is better when it's easier to plan and easier to personalize. The goal is to reduce friction, improve the experience and present relevant options that add value to the guests. We are also using AI to improve efficiency and execution from supply chain forecasting to energy management and marine operations. These are the types of capabilities that build durable operating leverage over time and reinforce our focus on margin expansion and returns.

Disruptive technology is not just a tool, it's a capability that we have been building for more than 5 years. It helps us deliver a better experience, run a smarter operation and strengthen the ecosystem we're building for long-term growth. In closing, 2025 was an exceptional year, and we entered 2026 from a position of strength, a differentiated vacation platform, a strong balance sheet and a disciplined approach to growth and returns.

And with that, I will turn it over to Naftali. Naf?

Thank you, Jason, and good morning, everyone. I will start by reviewing fourth quarter results. Net yields grew 2.5% in constant currency, 5 basis points above the midpoint of our guidance. Yields grew across all key products on 10% capacity growth and were driven by both new and existing hardware. Total revenue growth in the fourth quarter was 13%. Net cruise costs, excluding fuel, decreased 6.3% in constant currency, in line with our guidance as we remain focused on identifying sustainable efficiencies in our operations while further enhancing our vacation offerings.

Adjusted earnings per share were $2.80. Earnings outperformance compared to guidance was driven by favorable revenue and better performance across our joint ventures. The fourth quarter capped an incredible year for us as strong demand for our vacation experiences coupled with strong execution by our teams resulted in happy guests and robust financial results. Guest satisfaction continues to outpace industry standards and remains exceptionally strong, will be consistently achieve significant improvements in financial performance. For the full year, total revenue grew 8.8%. Adjusted EBITDA grew by 17.6% to just over $7 billion and adjusted EPS grew 33% to $15.64. At the same time, we generated $6.4 billion of operating cash flow, achieved an investment-grade balance sheet, and returned $2 billion of capital to shareholders, all while investing more than $5 billion in our future.

Since 2019, we have transformed the Royal Caribbean Group into a stronger, more profitable and more resilient vacation platform, solidifying our strong financial foundation. Total guests increased 45% since 2019 with millennials and younger nearly doubling. At the same time, we saw strong growth from both new and repeat guests. Total revenue has increased by 64% and adjusted EBITDA has surged 94% since 2019. Net income more than doubled and operating cash flow grew 75% and supporting continued growth and long-term shareholder return.

Moving to our 2026 outlook. I will start with capacity and deployment for the year. With the introduction of Legend and the annualized impact of Star and Excel, capacity is expected to be up 6.7% year-over-year on the higher end of our moderate capacity growth. While the amount of dry docks is modestly higher than 2025, the cadence and its impact on the quarterly capacity is different. We have less capacity in dry dock in the first quarter and more in the second quarter. It is also worth noting that on average, we have more premium hardware in dry dock this year when compared to last year, hurting yield comparisons, and this is most pronounced in the second quarter. We expect APCDs to grow 8.5% in the first and third quarters and 5% in the second and fourth quarter.

As Jason mentioned, the year is off to a very strong start. Book load factors remain within historical ranges at record rates with approximately 2/3 of 2026 inventory having already been booked at higher rates. Our deployment mix is consistent with last year. The Caribbean represents 57% of our capacity, grew 8% compared to last year, with the full year impact of Star of the Seas and Celebrity Excel. Revenue yields have grown 35% since 2019, and we expect continued yield growth in 2026 even as capacity in the region is increasing. The Caribbean continues to be the most desired cruise destination by consumers and the best way to experience the Caribbean is with the Royal Caribbean Group. The combination of leading brands, the best hardware and exclusive destinations results in the region outperforming in both NPS and profitability.

We continue to differentiate in the Caribbean market. We have the best hardware in the market with 6 Oasis class ships and 3 icon class ships. Over 70% of guests on these itineraries sailing on the Royal Caribbean brand will visit a private destination this year, and that percentage will increase to 90% in 2028 with the opening of the Beach Club in Cozumel and Perfect Day Mexico. Europe will account for 15% of capacity and is growing 5% versus last year, including Legend of the Seas debuting in Europe this summer. European sailings continue to perform very well on both rate and volume with strong demand from both American and European consumers. It is worth noting that while European capacity, which is high yielding, is up for the year. It is down the first half of the year, driven by a decrease in the second quarter due to dry dock timing. Alaska is expected to account for 5% of total capacity and is up 3% versus last year. We have some of the best hardware in the region, including Celebrity Edge, 2 quantum class ships and Silver Moon.

Turning to our 2026 guidance. We expect yield growth of 1.5% to 3.5% from both new and like-for-like hardware with a projected capacity increase of 6.7%, revenue for 2026 is expected to achieve a double-digit growth rate. Our leading vacation platform anchored by attractive value proposition and supported by strategic investments enabled us to grow both capacity and rate setting us apart within the vacation market. We do expect net yield growth to be higher in the second half of the year compared to the first half, given the impact of dry dock timing the ramp-up of Royal Beach Club Paradise Island, timing of new ship deliveries and deployment mix changes. Full year net cruise costs, excluding fuel, are expected to be flat to up 1%. We following a 10 basis points decrease in 2025. There are also about 200 basis points of cost headwinds, mainly related to our private destinations portfolio ramp-up to come without APCD increase.

The cadence of our call growth varies throughout the year with first half cost growth expected to be higher than second half, driven mainly by timing of dry docks and year-over-year quarterly comps compared to 2025. We anticipate full year fuel expense of approximately $1.17 billion with 60% of our projected fuel consumption hedged. Approximately 10% of our fuel consumption is expected to be from LNG and biofuel blends compared to 8% in 2025. Fuel efficiency continues to improve, with fuel consumption per APCD reducing by approximately 4% compared to 2025, driven by new hardware and deployment optimization. As a reminder, the scope of the European Union Emissions Trading System, or EU ETS, will extend in 2026 to cover 100% of emissions associated with our European itineraries, up from 70% in 2025. Based on current fuel prices, currency exchange rates and interest expense, we expect adjusted earnings per share between $17.70 and $18.10, a 14% year-over-year growth at the midpoint. This also represents a 23% CAGR over the first 2 years of Perfecta, which sets us up well to achieve our targets by 2027.

We expect adjusted EBITDA to be a little shy of $8 billion, a 13% year-over-year growth an adjusted EBITDA margin that is just over 40%. Strong growth and improved profitability enabled us to enhance cash flow, invest in key initiatives, maintain investment-grade metrics, and increase capital returns to shareholders. We expect to invest $5 billion of capital into our key strategic growth initiatives as well as ensuring our assets are well maintained. We are set to deliver Legend of the Seas in the second quarter with committed financing in place. Non-ship capital is expected to be $1.8 billion with a significant portion related to our private destination portfolio. Santorini Beach Club, the Cozumel Beach Club and Perfect Day in Mexico as well as our fleet modernization program that ensures we keep elevating the guest experience and enhancing financial performance.

Now I will discuss our first quarter guidance. In the first quarter, capacity will be up 8.5% year-over-year. More than 70% of our capacity will be in the Caribbean, 16% in Asia Pacific, and the remaining capacity is spread across several other itineraries. Net yields are expected to be up 1% to 1.5% in constant currency. This includes an impact of 30 basis points from recent itinerary modifications in China and approximately 50 basis points of yield headwinds due to deployment shifts. Net cruise costs, excluding fuel, are expected to be up in the range of 0.9% to 1.4% in constant currency. Taking all this into account, we expect adjusted earnings per share for the quarter to be $3.18 to $3.28.

Turning to our balance sheet. We ended the quarter with $7.2 billion in liquidity and leverage well below 3x, consistent with our goal of solid investment-grade metrics. With the strong expected cash flow generation, we will continue to manage maturities, find opportunities to reduce cost of capital, and opportunistically buy back shares. In closing, we remain committed and focused on our mission to deliver the best vacation experiences responsibly as we work to deliver a not a year of great results.

With that, I will ask our operator to open the call for a question-and-answer session.

[Operator Instructions] Your first question comes from Matthew Boss with JPMorgan.

And congrats on another really nice quarter. So Jason, maybe to kick off, could you elaborate on the further acceleration and momentum into 2026 that you cited? And just larger picture, how do you see your portfolio differentiated today relative to that $2 trillion total vacation market with the opportunity to capture additional market share from here?

Well, thanks, Matt. I hope you're doing well. One, I think that, obviously, our business is growing. Our -- our capacity is growing 6.7% this year. And one of the things that we just see coming into this year, and we saw this even during the Black Friday and Cyber sale activities that we've seen an acceleration in demand, which, of course, more than matches the capacity that we have when we have coming on. So we continue to see a very strong consumer who is really attracted to our incredible brands and the experiences that they're delivering. We're also seeing additional tailwind, and you can see that in our -- just in terms of on the loyalty side, we're seeing an increase in the percentage of our guests that are loyalists. So our loyalty programs and now with that coming with Point Choice, we're seeing more and high-quality demand for our guests. And of course, with loyalty, you're able to personalize more and put a very effective package in front of them in terms of what they're looking to achieve with their friends and family that their ceiling with.

As we look at the business, and you've heard me say this in the past, we really do look at that $2 trillion plus. I mean it's growing now, it's even over $2 trillion leisure space for us to grab more share of. And when you get into why are we so focused obviously, there are many reasons to do that -- to close that gap and focus less on our cruise competitors is that we think that we're able to increase our margins by putting a product in place that is really attracted to our guests. And so what you're seeing us do commercially, first is we're making sure that we are personalizing, putting things in front of our guests that they're attracted to and taking friction out of how they book their activities each and every day.

On the product standpoint, we listen very closely to what our guests are looking for. And so you're seeing us on the new ships that we deliver. You're seeing it on the modernization activities we're doing and also the changes we're making on the ship to how do we close the gap to what our guests are looking to, not just for a cruise vacation but for a broader vacation experience. And then on the destination side, you're seeing us you invest in enhancing the guest experience. And when you look at, for example, I think Santorini is a great example of this, we're not looking to take guests out of the key cities of Santorini. What we're looking to do is help them maximize their day and spend time in our private destination in the Royal Beach Club that will be there as well as in the key cities in Santorini. So all of this is really focused on how do we enhance the experience and when we find when we're doing that, we're building more trust, and we're also enhancing the overall guest experience, and we see that just through the change in the Net Promoter Score.

Then when you get into the ecosystem, we think about what are our guests doing when they're not with us. And so when we grab share of that $2 trillion marketplace as you expand your offering. And so that's one of the things that we -- historically, we would expand our offering by add more destinations. Here, we see that when our guests are not with us or some of our guests when they're not with us, they're taking an additional vacation on a river. And that's why we feel so passionate about getting deeper and deeper into that. that business. And what we see is we're closing gaps to Orlando. We're closing gaps to Vegas. We're closing gaps to other vacation on inclusive experiences, which get higher APDs than us, probably so at least 15% higher on APDs. And so we're trying to close that gap. We think we deliver a higher value proposition than what happens on land. And that collectively, you tie that together with great loyalty, personalization is resulting in I think what you see is outperformance.

Just to add one more thing to what Jason said. So all these things that we're doing, as you can see this year, we're growing both capacity and yield. And as we look at it, we feel that this is a differentiation within the vacation marketplace. And that leads really to winning more share from the consumer in that $2 trillion market. So we feel very passionate that we'll continue to innovate. And that's -- so we continue to innovate and add more experiences like River, and that sets us very well to continue to win that share from that $2 trillion, which is obviously a very big market. .

Your next question comes from Steve Wieczynski with Stifel.

And congrats on a strong 2025. So they want me to ask one question, I'm going to do that, but it's going to be 2 different parts. So I'm going to -- so Jason, obviously, there's a lot of concern in the market about Caribbean capacity and what that means in terms of taking price action, especially on the close-in side of things. So if you could, could you walk us through maybe what you're seeing today in the Caribbean, maybe more so, whether it's by brand, whether it's by itinerary, whether it's bispecific product. And I guess what I'm trying to understand is what is doing well in the Caribbean? What might be lagging? And then I would assume that you guys are probably taking a conservative approach to what close-in pricing is going to look like in the Caribbean, given the industry capacity increases. And then second part of my question would be, Jason, if you think about your 2026 yield guidance, 2.5% at the midpoint. Just wondering if that 2.5% fits with your company tagline, meaning you guys talked about moderate yield growth, and I'm just wondering, 2.5% fits that profile or is this a year where yield growth might be more hampered given what's happening in the Caribbean? That's it.

Okay. Well, thanks, Steve.

Sorry.

I think there are more than 2 questions in that in that. But I think, first off, just talking about the Caribbean and certainly my colleagues here can chime in as well. Of course, we read what everybody also is putting out there in terms of points of view on the Caribbean. I think first, what I think we need to point out is I think when you have the best ships and you have the best destinations and you have brands that have incredible loyalty and trust with their guests, that equates to, which is what we're seeing is very similar demand trends for the Caribbean as we're seeing in other parts of the world.

Now there is a significant level of demand for Europe, which is great, but it's also not a place where we have over half of our capacity. But you're seeing very good trends in the Caribbean across all 3 brands. So if you want to get into -- we're concerned about K-shape or too much supply, we're seeing it whether it's on the Royal Caribbean brand or Celebrity Silversea, we're seeing high demand wanting to go to the Caribbean. And so as Naf commented, we're not only seeing good volume, but our pricing is higher in the Caribbean than it was last year. And I know that may not feed into what maybe some groups want to hear, but that is a reality that we continue to see strong demand for the Caribbean. And we continue to see strong demand for our broader organization.

And that leads us, when we think about 2026, yes, I mean, the there were a few things that we do not expect, for example, with some of the redeployments we've had in around China. And that also resulted a little bit more of our deployment in locations that are a little bit lower yielding, doesn't mean they're less margin or less profit. They just may not have the same price point as something else. And that's why we're seeing strong earnings growth coming out of all of this. But when you think about a company that our capacity is growing 6.7% this year. Our total revenue was up double digits. I think it's up almost 88% versus '19 total revenue. And so we're growing our business. We're going to continue to grow our business moderately. And the yield, I mean, typically, you think about moderate yield growth somewhere between 2% to 4%. We're in that 2% to 4%. And probably be a little bit better if it wasn't for China. But besides that, we're seeing people who are willing to pay more money than they did last year. they're willing to spend more money on the ships than they did last year. We're getting the volumes that are more what our capacity increases. And we're benefiting from a lot of the investments that we've made around AI and loyalty and so forth. The last comment I just want to make about -- the comment I just made about that our total revenue is growing double digits in 2026. The Caribbean total revenue is growing by double digits in 2026.

Your next question comes from James Hardiman with Citi.

I actually just wanted to continue down that same line of thinking. Maybe if you could help us think about your business sort of organic versus inorganic. Obviously, you've got another icon class shift coming on. You've got some calendar benefits from last year's icon celebrity ships. And then you've got the Royal Club coming on. I don't think you're going to get any benefit from the second one in Cozumel but at least that first one. And so when I just think about the inorganic stuff, it sort of feels like you could get made north of 2% on that alone. So how should I think about the organic business? And then maybe specifically, the organic business in Caribbean, just given the idea that seems to be if there's going to be more capacity coming to the Caribbean, those older ships, the older tonnage probably is taking on the brunt of that -- the competitive environment that you're seeing from one of your peers?

Okay. Well, thanks, James, for the question. And I think, first, as we look at our yield profile for this year, about half of it is going to come from new hardware. By the way, as we add new hardware into our environment, just because the denominator is bigger, it has less of effect on our yield improvement. So half of it's going to come from new hardware or new -- and the other half is coming from like-for-like. I'll have Michael talk for a second here in a minute on the Royal Beach Club. But historically, if you look at when we launched Perfect Day, we started very slow and the buildup of that business. And we do that very intently to make sure that we have mastered the experience and Michael and his team are masters at doing that before we kind of ramp up to more significant levels.

But when you think about our business, that's typically the tailwinds that we see. And we see like-for-like yield growth, by the way, that also includes the Caribbean. And you're also seeing the benefits of the new hardware as it comes on. Sometimes in quarters, it's a little bit -- when some of the new ships are coming in, some of the deployment changes, especially even when the new ships come in, like a ship might have been in on a Saturday, now it goes out on a Friday. That can sometimes play a little bit of a mix in that.

James, it's Michael. Just to comment on Jason's commentary regarding the Royal Beach Club and the opening. We typically start all of these new products slowly, we have capacity restraints when we open up, just to make sure that we've got the product absolutely perfect, and that's exactly what we've done with the Royal Beach Club. The great news is that within 4 weeks, the Royal Beach Club has already become the #1 top rated experience in Nassau for our cruise guests and it's already outperformed all other products that are available in the market. That's exactly where we want to be so. We're pushing it now to get to exactly the same level of satisfaction as Perfect Day. Our latest results showing about 0.81% behind Perfect Day for a satisfaction delivery, which means that the NPS is really stunning. So we're moving towards that goal of making sure that we've got the perfect product and the demand now is really starting to ramp up. And we feel like we're going to have a huge success with the product.

Just want to think about the yields and the like-for-like. Obviously, the yield is just one part of the equation. We also look at the profitability of the ships. So if you kind of look at the way we are expecting margins to grow this year and of course, earnings. There is also the ability to not only benefit from new ships, efficiency and sale and just better margins. But we also make -- even if we make those deployment changes, we find ways to also run them more efficiently and deliver the guest experience in a better way. So the profitability is also growing on both, not just the yield. .

Your next question comes from Lizzie Dove with Goldman Sachs.

Congrats a great year. I guess thinking more, you gave a lot of great color in terms of the cadence for the year and the fact is like on the dry dock side of things in deployment, islands, et cetera. Could you maybe share a little more in terms of how you're thinking about that net yield cadence for the year, I guess, in terms of the ramp of what's factored into your guidance? And I suppose specifically for 2Q, given you kind of called that out on the dry dock side.

Yes. We're not -- I'm not going to comment specifically about Q2 more about the first half and the second half. But I said in the prepared remarks, there are really a couple of things that are driving that cadence. One is dry dock timing. So we do have more dry docks than last year. And I talked about them being more in the second quarter versus the first quarter. And, of course, towards the end of the year. One thing that is a little unique in this year is that we have also larger ships going into modernization or dry docks so those come obviously with higher yield. So the year-over-year comparison is different. And then we have also more silver sea ships significantly in the last year. And so those are, of course, also highly online. So this is more about how the comps work and year-over-year cadence. The second one is the ramp-up of the Royal Beach Club. Michael talked about. We want to get the experience right. We're doing great, and we'll just make it better. And so there's a little bit of impact that. And then some of the deployment and mixes and the time of new ships that we have every year. And so that's really the main impact of the cadence throughout the year.

Your next question comes from Robin Farley with UBS Financial.

I wanted to ask about the new ship order discovery class. There's not a ton of detail, but the industry chatter is that it's going to be much smaller than the Icon, Oasis, a lot of other ships you've done. And so I wonder if you could talk a little bit about -- I assume that means you can put them in higher-yielding destinations or just kind of what's the trade-off between maybe those ships not being as much capacity growth versus pricing. And then I'm just going to squeeze in a part to, I won't make it but just on net cruise costs, just this is like a year or 2 here of just incredibly low net cruise cost. Is this due to just the timing of 2 years in a row of dry dock days, something related? Or is this actually like a sustainable rate of net cruise cost growth that we would think about longer term?

Robin, it's Michael. I'll talk a little bit about Discovery. Actually, I'm really not going to talk about discovery. We've been working on Discovery for the last couple of years and from the business perspective, we are really excited with the innovation, creativity the kind of product that we've now created with Discovery. It really is going to be a game changer. Just as Icon was introduced and kind of changed the game. Discovery is going to do exactly the same thing. We are really looking forward to sharing more details about Discovery with the marketplace. But we're not planning on saying much about it today or in the next couple of months. We have a promotional campaign that will be ready to go soon. And we'll be very excited to visit multiple cities and start talking about discovery. I can tell you that it really is going to be a game changer. The -- many of the assumptions that are currently out there in social media, et cetera, in terms of size, capacity, et cetera, et cetera, are probably fair to say, inaccurate. So we're looking forward to introducing it. It's going to be a big deal, and we'll make sure that you get an invitation.

Okay. And Robin, I'll cover the cost. So I think for -- you know our formula, and we do subscribe to it, and that's the way we run the business. And so we want to always have that spread between yield growth and cost growth. And we believe that, that's the right way to do that. And so that's going to follow our formula, right? And this year, it follows that formula. I think the first thing to really -- this is really important, we're very proud of how our teams not only growing the commercial aspects of it and revenue, but how they are also delivering the experience and the cost that management will do that. And what's very, very important to us is we are not compromising on the product because for us, it's really important that we continue to deliver the verification experiences, and Jason talked a lot about how that will carry us and allow us to grow sustainably into the future and win share. .

The other thing that is the 2 other things that are kind of helping us in terms of how we manage costs. First, our capacity growth this year is 6.7%. And so you should expect from us and we expect from ourselves that we can leverage the scale of this business. We're now going to be $8 billion company that as we continue to grow the capacity, right, there comes some economies of scale on the cost side as well. That's one. And the second one is that we're finding more and more ways, and Jason talked about it in his prepared remarks, about how do we more sustainably and smartly the business, utilizing all the disruptive technology that's out there, including AI and Gen AI. And we talked a little bit about how we're doing that on large commercial activities, but it's really infused in everything that we do day to day, and the teams are really working through that and utilizing it and find better ways to run the business.

Yes. And I just want to -- just to add on the AI side because I think a lot of times, it's attributed to people like you're going to have less people. I think we look at AI as really allowing us to do more higher purpose activities to enhance the experience for our guests. And our business, especially because of the scale of our business, you just -- you can think about supply chain, you think about how our ships get from point A to point B, you think about how we yield manage or just being able to get people to start kind of further up the chain in their -- and the activities that they do, that yields not only get a better experience for our guests, a better experience for our employees, but also then provides the cost opportunities for us. And so we see it as a huge commercial enhancer. It's a significant guest experience enhancer. We see it as really tooling our employees to make their experience better and for them to provide higher value. And it's less about what I think sometimes we think that there's just like less people. What we actually see it as more as a lot of new things that we can be doing that's going to drive higher margins into our business.

Your next question comes from Brandt Montour with Barclays.

Great. So we spend a lot of time on the supply situation in the Caribbean. My question is more about how maybe industry participants away from you have reacted to that. Does it feel -- I mean, Jason, you've been watching this industry for a long time. Does it feel like a little bit more or less rational than maybe what this type of environment would have been generated in the past. And sitting here halfway through wave with industry volumes so far, seemingly pretty strong across the board. Are we at a point now where maybe things can improve or sort of still wait and see?

Well, it's only been 20 years. So -- but I've seen a lot of Michael Fisher has seen a lot over the 20 years in terms of all the different kind of promotional activities. For sure, this industry is so much more rational, so much more about price integrity. And there's always promotions in the market. And -- but those promotions in the market are, we would say, very similar to what we saw last year or 2 years ago and similar to what we saw in 2017, '18, '19, et cetera. Now there's a -- there's -- if you go back probably a decade ago, you saw some irrational activity. But I think overall, we would say that it's rational -- there's a lot of price integrity. Our travel partners are doing such an exceptional job in generating high-quality demand as well as our other channels as we're, for sure, a channel of choice. And -- and so I think collectively, from what I can see, there's a lot of rational activities. And that, by the way, also expands into really have a look at our true competitive set which includes land-based vacations. And when we -- and I think somewhat the cruise saw this is a little bit insulated because of the price gap to land based, but we're certainly chasing to see how we can go back and close that.

Your next question comes from Conor Cunningham with Melius Research.

Just maybe a comment around the close in bookings strength. I was just hoping you could talk about your skewed itineraries that are moving more towards 3 to 4 days versus 7 plus. It's not in the context of like you having less visibility. It's more in the idea of close-in demand has the opportunity to move yields a lot more. So just can you talk a little bit about that and how -- I think it was 20% in 2025. So if could just maybe correct that number, but also give your thought process for around 2 and beyond.

Yes. Well, first Conor, I think that coming in -- obviously, over the past, call it, 3 or 4 years, we certainly have made it a priority to bring more short product to the market. And that is to really match how guests or certain segments you want to go out on vacation. They want more vacation experiences. They want them more often. They want them shorter duration. That's not everybody, but there are certain segments that want that great weekend get away. And so we've certainly added that into this. But we haven't -- we're now kind of in a more mature state with those short products. But as you pointed out, it is closer in business. But the reason why I want to combine those 2 thoughts about it is closer in business, and we've kind of -- we've reached kind of a good level of scale. Not that there's not more growth. It's just that it's not going from single digits into something that's more material into our business.

The reason those thoughts are important to bring together is that our yield management models, right, do catch up. right? I mean they are AI based, they do learn. And so when we think about close in, and you can see this in the fourth quarter, we did see better demand, but it's not -- it doesn't necessarily mean that, that better demand is going to result in what we saw in previous quarters with close-in booking. I think we have a pretty good handle now on closing demand, how we market it, how we price it, how it comes in and our yield management and our forecasting is informed by all of that. I think the other point I want to say on the short product side that I think Michael and Laura have really -- on the celebrity side have done an exceptional job is they have really elevated the experience. Our guests walk away with having the versification weekend, certainly of the year. And of course, we want it to be at the lifetime, but certainly over the year. And I think that when you're delivering that experience, you're building that trust, it's an incredible feeder for our broader part of our business, especially new to cruise because now they're hooked on the vacation experience. And that's also yielding more reps we're getting out of our guests, and that's resulting in achieving that goal of delivering a lifetime of vacations.

And Conor, just to add to Jason's comments, I mean, for Royal, we've got -- now we've got 2 Oasis-class ships, 1 out of Port Canaveral, 1 out of Miami, moving twice a week, carrying around 12,000 people per ship per week, so that's 24,000 a week going to Perfect Day in CocoCay and now, of course, with the Royal Beach Club and they're also going to the Royal Beach Club. So when you think about the proposition in the marketplace to the customer, the fact that you can get on these incredible ships, just tactful of activities and entertainment features, multiple restaurants, then wake up in the morning and take the kids to perfect a cook okay and then have a great show in the evening and the next day, get to the Royal Beach Club and be back in work on Monday morning. It's really a fantastic proposition. And we've seen the demand for those products really accelerating. And of course, the kind of the margins that we generate on those products are really quite significant.

The other comment is the simplicity of booking, the ease of being able to get on board these ships. It's become increasingly easier. And then with all of the investments that we've made over time, in the pre-cruise planning and the ability to start communicating with our guests about opportunities to book and buy products before they come on board. All of that is really combined to make this a very seamless, easy product to buy, and that's exactly what we're seeing. And so in many ways, it does encourage people to wait a little longer before they book because they know how simple it is, and they also know what a great time they're going to have.

Your next question comes from David Katz with Jefferies.

Congrats. Can you just talk about what information or inputs you have with respect to River that are driving the increased commitment there? And the degree to which you believe you can induce trial of your current customer base versus taking share from existing river cruise companies, an update there would be great.

Sure. Well, obviously, we were very excited about River. Of course, when we announced River, and we announced the first 10 ships. Also at the same time, I said this was not going to be a hobby. And so we are -- this is another, I think, a point of evidence that this is not a hobby for us. And we feel -- well, obviously, we've done a lot of research before you've been announcing this or getting into this about the trust that we've built with our customers, how loyal affects them and that really -- their desire for an elevated river experience. And so we felt very strongly just based off -- we have 9.5 million guests. This year, we'll have over 10 million guests sailing with us. We have a massive database of loyalists that our ability to generate high-quality demand is, I think, very strong. That really availed itself when we began to tease it and build waiting lists and so forth that you immediately saw specifically from our loyalty guests, not just with the celebrity brand, but across our 3 brands, a strong desire to take a vacation on river with us. And of course, that we see that every day in terms of the demand from -- we hear from the trade and from our customers for any open spot that they can possibly get. So we feel very good about it. And I think we always just need to remember these are not 20 -- 7,500 passenger ships. These are sub-200 passenger ships, and we're very excited. And we think Europe is just one area of the world where our guests want to go on river.

And just 2 other things to add as we were opening for sale, obviously, the demand actually exceeded our expectations. So that gave us a lot of confidence also as well. And that's both on the volume, but also on the the price? And then one other maybe data point that really was encouraging to us because this is what we thought that's going to happen is that roughly 80% of the people that are booked or actually existing customers, but they've never experienced river cruise before. And so they're very excited because they trust the celebrity brand to actually experience another differentiation with the celebrity brand. And so that tells you that we can have an opportunity not only to attract other river cruises but also expand the market.

This concludes the Q&A period. I'd like to turn the call back to Naftali Holtz, CFO, for any concluding remarks.

We thank you all for your participation and interest in the company. Blake will be available for any follow-ups. We wish you all a great day.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to introduce Blake Vanier, Vice President of Investor Relations. Mr. Vanier, the floor is yours.

Good morning, everyone, and thank you for joining us today for our third quarter 2025 earnings call. Joining me here in Miami Jason Liberty, our President and Chief Executive Officer; Naftali Holtz, our Chief Financial Officer; and Michael Bayley, President and CEO of the Royal Caribbean brand.

Before we get started, I would like to note that we will be making forward-looking statements during this call. These statements are based on management's current expectations and are subject to risks and uncertainties. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release issued this morning as well as our filings with the SEC for a description of these factors. We do not undertake to update any forward-looking statements as circumstances change. Also, we will be discussing certain non-GAAP financial measures which are adjusted as defined, and a reconciliation of all non-GAAP items can be found on our investor website and in our earnings release. Unless we state otherwise, all metrics are on a constant currency-adjusted basis.

Jason will begin the call by providing a strategic overview and update on the business, and Naftali will follow with a recap of our third quarter, the current booking environment and our outlook for the remainder of 2025. We will then open the call for your questions.

With that, I'm pleased to turn the call over to Jason.

Thank you, Blake, and good morning, everyone. I am pleased to discuss our third quarter results, updated outlook and the many exciting initiatives fueling our momentum at the Royal Caribbean Group. This has been another great quarter for us. We continue to see strong momentum across our business, powered by accelerated demand, growing loyalty and all-time high guest satisfaction. Our commercial flywheel combining innovative ships distinctive destinations and world-class brands continues to drive sustained growth in guest trust and our ability to deliver the best vacation experiences responsibly.

Before getting to the results for the third quarter, I want to highlight how we are continuing to build a stronger, further leading and more resilient vacation company for the long term. We are focused on building a vacation platform that continues to lead the leisure market through innovative ships, a growing portfolio of exclusive destinations, technology and AI that enhance every step of the guest journey. Together, these high-return investments, strengthen guest loyalty and attract new travelers positioning us to win more share of the fast-growing $2 trillion vacation market.

Earlier today, we announced the Royal Beach Club, Santorini, further expanding our portfolio of exclusive destinations, extending our brands reach beyond the ship and meaningfully enhancing the guest experience. This reflects our vision to redefine how the world vacations. And together with the Royal Beach Club Paradise Island, Perfecta Mexico and others, we expect to increase our exclusive land-based destination portfolio from 2 to 8 by 2028. These initiatives reflect a thoughtful, sustained investment behind our commercial flywheel and reinforce the strength of our vacation platform.

Cruising and leisure travel continue to outperform the broader travel industry, and we are exceptionally well positioned to capture that momentum. With a powerful pipeline of strategic initiatives, a strong balance sheet and a disciplined approach to growth. We have both the resources and conviction to continue making game-changing investments that delight our customers strengthen our competitive advantage and drive long-term shareholder value. I want to thank the entire Royal Caribbean Group team for their passion, dedication and commitment that enable us to deliver the best vacation experiences responsibly and to drive exceptional financial results.

Turning to our results and outlook. Third quarter results exceeded our expectations, driven primarily by strong close-in demand for vacation offerings and lower costs. In the third quarter, our capacity increased 3% and we delivered nearly 2.5 million incredible vacations, a 7% increase year-over-year at high guest satisfaction scores. Net yields grew 2.4%, driven by strong demand across all key itineraries. We delivered adjusted earnings per share of $5.75 for the third quarter, which was 11% higher than last year. Naftali will elaborate more on Q3 results in a few minutes.

Moving to our outlook for the remainder of the year. Our capacity in the fourth quarter is up 10% year-over-year, and we expect to grow yields 2.2% to 2.7% on top of a 7% yield increase in the same quarter last year. Our fourth quarter outlook has been trivially impacted due to adverse weather and unplanned extension of the temporary closure of Labadi, 1 of our exclusive destinations. Despite these marginal headwinds we are expecting our total revenue to be up approximately 13% year-over-year in the fourth quarter. Full year net yield is expected to grow in the range of 3.5% to 4%, that's 25 basis points better than our initial expectations in January, which highlights the continued strong demand for our brands and the amazing vacations they deliver.

Our yield growth this year is on top of several years of double-digit growth resulting in an industry-leading 31% yield growth compared to 2019. This highlights the remarkable transformation of our business and the enduring strength of our leading brands. Full year adjusted earnings per share is now expected to be in the range of $15.58 to $15.63, a 32% year-over-year growth. We are also on track to deliver nearly $6 billion of operating cash flow this year, a significant step change in our performance. We are a growth company and our proven formula of moderate capacity growth, moderate yield growth and strong cost discipline is driving significant earnings growth, continued margin expansion and robust cash flow generation.

We remain on track to achieve our Perfecta targets by 2027, a 20% compound annual growth rate and adjusted earnings per share and return on invested capital in the high teens. As we've always said, Perfecta is an important milestone on our growth journey, but our ambitions go well beyond. The combination of our game-changing ships on order, our growing exclusive destination portfolio advancing our commercial technology platforms that are fueled by AI and disciplined capital management is setting up the post perfect era for another step change in the guest experience and financial performance.

Now I'll provide some more insight into what we're seeing in the demand environment. Consumers continue to prioritize experiences and make room in their budgets for meaningful vacations. Our independent research, combined with millions of daily customer interactions continues to show positive sentiment towards travel and leisure and continued growth in spend. Roughly 3/4 of consumers intend to spend the same or more on vacations over the next 12 months, a level that has remained consistent for several quarters. While the broader consumer environment has normalized from the exceptional strength over the past 2 years, demand for experiences and leisure travel remains intact.

Cruising offers superior value for money versus alternative options driven by the high-quality onboard amenities and services, pricing, inclusive of meals and entertainment and the opportunity to visit a variety of destinations with the convenience of having everything in one place. Earlier this year, we announced our plans to launch a new vacation experience, Celebrity River. The introduction of Celebrity River has received an extraordinary response with all initially available deployment selling out almost immediately. The majority of book guests are Royal Caribbean Group loyalty members without prior river cruise experiences, highlighting a powerful opportunity to attract new guests to this segment and deepen engagement by creating new vacation occasions with our existing ecosystem.

In fact, the majority of guests shared their primary motivation for booking a Celebrity River vacation was the opportunity to experience a new celebrity product, driven by the trust and affinity they have for the celebrity brand. Guests are also motivated by our new rivership design and features with most of them expecting superior state rooms, ship amenities and outdoor spaces, all hallmarks of the brand. These early booking patterns are a powerful validation of our strategy to expand the Royal Caribbean Group vacatio ecosystem, creating new ways for guests to experience the world with us while deepening the connection to our family of brands. We continue to be encouraged by the demand environment.

Since the last earnings call, bookings are up on both new and like-for-like hardware with particular acceleration for close-in families. Booked load factors for 2026 remained well within historic ranges at record rates, with booked APD growth at the high end of historical ranges. As always, we remain focused on optimizing our pricing and yield growth. Our spectacular new ships continue to generate strong quality demand. Star of the season is exceeding our expectations and Celebrity Xcel is shaping up to be the best performing new ship in the brand's history. The last 3 years saw unprecedented yield growth, and although that creates a high bar for comparables, our proven formula for success of moderate capacity growth, moderate yield growth and strong cost control is expected to continue to drive top line growth margin expansion and substantial cash flow.

While still very early in the planning process, we anticipate earnings in 2026 to have a $17 handle on it. At the Royal Caribbean Group, we've always believed that clarity and conviction are competitive advantages. Our mission is clear to deliver the best vacations responsibly and our objective is just as ambitious to capture a greater share of the growing $2 trillion global vacation market by turning a vacation of a lifetime into a lifetime of vacations. We don't just talk about that ambition. We built a robust multiyear plan that shows exactly how we intend to get there through bold high-return investments that strengthen our brands, elevate the guest experience and create long-term value for our shareholders. That includes our expansion into River, the ongoing expansion of our private destination portfolio, the transformational development of Perfect Day in Mexico and, of course, a steady stream of game-changing ships.

This quarter, we announced a long-term agreement with Meyer Turku securing shipbuilding slots through the next decade to continue both companies' tradition of innovation. The agreement confirmed an order for Icon 5 for delivery in 2028, added an option for a seventh icon class ship and positions us for a new game-changing class beyond ICON making the next stage at Royal Caribbean Group's history as we continue to redefine the future of vacations.

In a world where digital experiences also define customer expectations, we're working to set the standard. We continue to enhance our digital capabilities to engage customers, remove friction from the guest experience and drive incremental revenue. When we first introduced our app in 2017, the goal is simple. Give guests back the first day of their vacation by eliminating the need to wait in line for onboard reservations. Since then, the app together with our e-commerce engines, has evolved into a cornerstone for our e-commerce strategy, transforming from a utility into a powerful platform that drives revenue, improves operational efficiencies and deepened guest engagement.

In the third quarter, e-commerce visits and conversion rates both increased double digits versus last year, marking a very strong improvement for these channels. In addition, a record share of onboard revenue was booked pre-crews with nearly 90% of those purchases being made through our digital channels. And we continue to redefine loyalty in a way that deepens engagement and provides guests with greater flexibility in how they earn points and status. Building on the success of status match I'm excited to announce Points Choice, the next evolution and how guests earn and apply loyalty points across our family of brands.

Beginning in early 2026, Guests will be able to apply loyalty points to the Royal Caribbean Group brand they prefer, regardless of which brand they are sailing with. This initiative further strengthens the overall value of our loyalty proposition deepening engagement across our portfolio and reinforcing our commitment to putting the guests at the center of our orbit. As our ecosystem expands, it creates a virtuous cycle of demand, value and advocacy one that drives both short-term performance and enduring growth. It's a model that compounds over time, and we're just at the beginning of what it can become. I am incredibly proud of our teams at the Royal Caribbean Group for their dedication and exceptional execution. The opportunity is significant, and we're well positioned to lead the next era of leisure travel.

With that, I will turn it over to Naftali. Naf?

Thank you, Jason, and good morning, everyone. I will start by reviewing third quarter results. Net yields grew 2.4% in constant currency compared to the third quarter last year, 15 basis points above the midpoint of our guidance. The yield outperformance was driven by the stronger-than-expected close-in demand. Yields grew across all key products and were mainly driven by existing hardware given the timing of new ship deliveries. .

During the quarter, a record share of onboard revenue was booked pre-cruise and nearly 90% of those purchases were completed through our digital channels, with the app emerging as the fastest-growing driver of engagement and conversion across those platforms. NCC, excluding fuel, increased 4.3% in constant currency 195 basis points lower than our guidance as we continue to find ways to better deliver the best vacations without compromising the guest experience.

Adjusted gross EBITDA margin was 44.6% and 60 basis points better than last year. And operating cash flow was $1.5 billion. Adjusted earnings per share were $5.75 and 11% higher than last year and 3% higher than the midpoint of our guidance. Earnings our performance was driven by the strong closing demand and lower costs.

As Jason mentioned, demand for our portfolio brands and industry-leading experiences continues to be very strong. Book load factors remain within historical ranges, at record rates for both 2025 and 2026. Capacity is expected to grow 5.5% for the full year and 10% in the fourth quarter. As expected, capacity growth in the fourth quarter is driven by new ships, start-up [indiscernible] and Celebrity Xcel as well as additional APCDs due to lower dry dock days compared to 2024. The Caribbean represents 57% of our deployment this year and 63% of capacity in the fourth quarter, a region where we hold a strong position and are advancing a series of strategic initiatives to reinforce that. These include industry-leading hardware, shorter and longer attractive itineraries, the upcoming Royal Beach Club Paradise Island and Perfect Day Mexico.

Our Caribbean capacity is up 6% for the year and 10% in the fourth quarter. And even with capacity growth in the region, we see continued yield growth with Caribbean yields in the fourth quarter expected to be up compared to the fourth quarter of 2019. Europe will account for 15% of capacity for the year and 9% in the fourth quarter and in a strong booked position as European season wraps up. Asia Pacific is expected to account for 11% of capacity for the year and 13% for the fourth quarter.

Now let me talk about our updated guidance for 2025. Our proven formula for success, moderate capacity growth, moderate yield growth and strong cost discipline is expected to significant earnings growth and higher cash flow generation. We continue to expect net yield growth of 3.5% to 4% for the full year driven by gains in load factor and APD across new and lifelike hardware. Full year net gross excluding fuel, expected to decline approximately 0.1%, 40 basis points better than our prior guidance as we remain focused on better execution through leveraging our scale and utilizing technology and AI, all while ensuring strong customer satisfaction and enhanced product offering and vacation experiences.

We anticipate a fuel expense of $1.14 billion for the year, and we are 68% hedged below market rates. Based on current fuel prices, currency exchange rates and interest rates, we expect adjusted earnings per share between $15.58 and $15.63 and -- the $0.12 increase compared to our prior guidance is driven by Q3 outperformance, $0.02 of better Q4 performance, offsetting a $0.05 impact from recent adverse weather events and the unplanned extension of the closure of Labadie. We also expect 18% growth in adjusted EBITDA to just above $7 billion and 290 basis points growth in adjusted EBITDA margin. This positions us to accelerate our cash flow generation, which allows us to continue investing in our strategic initiatives, maintaining investment-grade balance sheet metrics and expanding capital return to shareholders.

Now let me comment on fourth quarter guidance. In the fourth quarter, we expect capacity will be up 10% year-over-year with net yield growth of 2.2% to 2.7%. As noted on the last earnings call, the timing of celebrity of excels delivery and fewer dry dock days versus last year will unfavorably impact fourth quarter net yield growth by about 90 basis points. Net cruise costs, excluding fuel, I expect a decline between 6.6% and 6.1% during the fourth quarter. Taking all this into account, we expect adjusted earnings per share for the quarter to be $2.74 to $2.79.

Now I will share insights for 2026 which is shaping up to be another very exciting year for us with multiple strategic initiatives that are already well underway. 2026 capacity is expected to be up 6% and as we introduce Legend of the Seas in Europe this summer as well as benefit from a full year of STAR and Xcel. Capacity growth is higher in the first and third quarter due to the timing of new ship deliveries and dry docks. In 2026, we expect to have more dry dock days compared to this year partially due to longer dry docks for several planned modernization projects of our existing ships. Caribbean capacity will represent about 57% of our deployment in 2026. For Caribbean products, we have continued to add shorter itineraries, building on our success in the last several years, enhanced by the opening of the beach flood in [indiscernible] this year. European itineraries will account for 14% of our capacity. Alaska and West Coast will account for about 10% and Asia Pacific will also account for 10%.

As Jason mentioned, book load factors remain within historical ranges at record rates for 2026. Bookings for 2026 have come in at APDs that are nicely higher than prior year resulting in 2026 booked APD growth at the high end of historical ranges.

Now moving to costs. We remain committed to driving margin expansion supported by strong cost performance even as we advanced major initiatives throughout 2026, including the opening of the Beach Club in Nassau and the build-out of Perfect Day Mexico. Even with these strategic initiatives, the weigh on the NCCX metric, while being significantly accretive to margins, we expect anemic cost growth next year. We continue to focus on improving fuel efficiency and are also hedging our rate exposure. Next year, we expect EU ETS to increase from 70% this year to 100% weighing on our energy efficiency gains.

Moving belong the line. Keep in mind that announced dividends and already completed share repurchases were funded through a combination of strong operating cash flow and incremental borrowings, while maintaining our commitment to keep leverage below 3x. Additionally, we expect the global minimum tax policy updates beginning January 1, 2026, to impact us by an incremental -- 100 basis points. Taking all this into account, we expect adjusted EPS to have a $17 handle, and we will provide more details during our fourth quarter earnings call.

Turning to our balance sheet. We ended the quarter with $6.8 billion in liquidity and its adjusted leverage that was below 3x on an LTM basis. We're in a very strong financial position, which allows us to fund our growth ambitions while also returning capital to shareholders. During the third quarter, we issued $1.5 billion of investment-grade unsecured notes at 5 and [ 38 ] coupon. Proceeds were used to opportunistically finance the delivery of Celebrity Xcel at a lower cost than the existing committed ECA financing as well as refinance other debt. This was an opportunistic issuance where we utilize our strong investment-grade balance sheet to access the capital markets to finance a new ship delivery. We intend to continue to evaluate these types of transactions compared to existing committed ECA arrangements to lower cost of capital and gain tenure.

We have very limited maturities left for this year, all related to ship amortization payments that we plan to repay with cash flow. In connection with the debt offering, Fitch upgraded our clear rating to BBB and S&P update our outlook from stable to positive. We are very pleased with the recognition of the rating agencies of the strength of our balance sheet and our strong financial performance.

In September, we received a cash dividend of $258 million from our joint venture to Cruises, and we expect it to continue to pay a regular cash dividend given its strong financial performance and balance sheet. Also during the quarter, we repurchased approximately 1.3 million shares. And as of September 30, we have $345 million still available under the current authorization. In September, the Board of Directors authorized a 30% increase to the quarterly dividend to $1 per common share. We remain focused on both growing the company through strategic investments as well as returning capital to shareholders. Since July 2024, we returned $1.6 billion of capital to shareholders through dividends and share repurchases, and we intend to utilize our strong financial position to return capital going forward.

In closing, we remain committed and focused on our mission to deliver the investigation experiences responsibly as we wrap up another strong year and look ahead to an exciting 2026.

With that, I will ask our operator to open the call for a question-and-answer session.

[Operator Instructions] Our first question will come from the line of Steve Wieczynski with Stifel.

So Jason, you mentioned that '26 EPS is going to start with the '17 handle, and it seems pretty clear that '26 bookings, demand pricing all look pretty solid at this point. So look, I fully understand you guys aren't prepared to give detailed guidance for next year. But as we think about '26 I would assume your company tagline very much remains in place here, meaning, look, we know capacity growth offset at 6%. Moderate yield growth, I would assume is kind of in that low to mid-single-digit range and that the disciplined cost control probably means low single-digit growth or in your terms, anemic, even with some of your structural costs you'll be taking on next year. So from a high-level perspective, is that kind of the right way to think about '26 .

Steve. Yes, I think that is a good high-level way of saying it. I think first, to start off with, it is early in our planning process. And actually, I even said -- I said it earlier to you on CNBC [indiscernible] does not mean 1701. If you take moderate yield growth, you take good cost control or not use the term anemic, which I think is probably a better description of how we think about costs for next year as we are significantly leveraging our scale and leveraging technology and so forth to get more and more efficient each and every day that leads you to sizable earnings per share growth, ROIC growth, et cetera. I think where there's probably a little bit of noise is below the line and probably in fuel. And so there are there are an increase in our fuel costs that have a compliance component to it.

And then also, as we as we're managing global minimum tax, there is a slight increase in the taxes that we're anticipating to play. And that's probably where there's a little bit of a of a disconnect. The other thing I just want to add is we're also investing a lot in technology. We're investing a lot in these new destinations. We're going from 2 to 8. And so as we bring these things online, there's also depreciation and other things that could potentially come into play. Lastly, I would just add is we're also leveraging to return capital to our shareholders. And you saw that here with the raise in our dividend to $1. And I think you've also seen that is not talked about in our buyback of shares. And so we are -- our balance sheet is in an incredibly strong position, and we are opportunistically buying back shares, and we're doing that and taking advantage of being able to lever ourselves up to maintain a strong investment-grade position but maintaining that leverage point that we've said to maintain that rating.

So we feel really good about the book position, the rates that we're booking at provide us a lot of rate room and opportunity for next year as we are optimizing our yield profile while we're growing the business at 6% on a capacity basis and bringing on new incredible destination experiences with the Royal Beach Club here in Nassau. So there's a lot of really great and exciting things. And I would say just last 1 is that we continue to see a very strong consumer. Our guests are their thirst for our brands for the ships the destinations and the incredible experiences that our incredible crew are delivering is at the very highest level, and we see that in our Net Promoter Score. So we're super excited about the strength and there was a little bit of noise here in the fourth quarter. There were 3 storms that just one, even in Asia, there's a typhoon in Asia that impacted some of the land-based experience and some of the compensation we needed to give back. But that's not a reflection of the strength that we're seeing.

Our next question will come from the line of Robin Farley with UBS.

I also wanted to think a little bit about your 2026 comments. To clarify, when you talk about the anemic net cruise cost growth, is that sort of anemic before because that would sound like sub-2%. And is that before we think about the impact of the new destinations you're opening? In other words, would that be in addition? Was that anemic referring to sort of like-for-like and then there would be more than that? And then a similar clarification on the bookings side of things for 2026, it sounds like your price on the books is up year-over-year and maybe booked load is down year-over-year. And I assume that's intentional. Maybe you could just kind of give us some color around that.

Robin, let me talk about the cost expectations for next year. So in the last couple of years, we're opening and we have plans to open every year private destination, right? So next year is going to be the Paradise Island Beach Globe in Nassau. And we have a lot of other initiatives that we're doing. But at the end of the day, the way we manage our costs is we look at -- we were subscribed to our formula. We have the moderate capacity growth, made deal growth, strong cost control. We grow capacity next year by 6%. So with all this, we take this into account, and my comments are totally under total amount.

And of course, we have those headwinds. But on the other hand, we have a lot of things that we're doing. We are finding better ways, as I noted in my remarks, to manage the business, deliver the experience. in a more efficient way through technology, just efficiencies and AI. And so the way we manage it is all in a total. And so my comments are on the total cost growth for next year.

Yes. So -- and just to put a point on it, Robin, is that the anemic comment includes the structural costs. So it's not just like-for-like. It includes the Royal Beach Club in the Bahamas as well as we leverage AI and we leverage the scale of our business. On the comment -- on your question on the bookings side of things, I think there's a few things to keep into consideration. One, we've obviously leveraging our incredible ships and leveraging our private destinations while also considering what different segments that consumers are looking for, we have more short product coming online next year and those guests book closer in. And so that's a little bit of probably what I would say is the year-over-year comparable on the load factor standpoint, this really is what influences that. We actually think we're in an optimal book position. We're at rates that are, I think, higher than we probably thought that they would be at, which I think is a really great thing as we see really strong demand and people are dreaming more and more on their vacation experiences. And we're also seeing that translate to onboard spend. And so we're thoughtfully meeting our guests with the experiences and they're willing to pay for that. .

Our next question will come from the line of Matthew Boss with JPMorgan.

So Jason, maybe could you just elaborate on the progression of global demand that you saw over the course of the third quarter any change in momentum at all that you've seen in October? And maybe to your comment before, just drivers that you see supporting '26 bookings at the high end of historical ranges. And maybe just if you're seeing anything different from new customer acquisition.

Sure. So I'll just start off maybe first on the new customer acquisition side. First, our -- all the things that our brands are doing and what we're doing on an enterprise basis, to really kind of build out further our commercial flywheel is really working. So even like the announcement today about Points Choice and making sure that our guests when they choose to sell in any of our brands that they're getting the point that they want on their primary brand that they have loyalty status in.

We continue to evolve things like that. Our technology, our AI tools are getting smarter and smarter so that we're able to curate what is relevant to that consumer. And that's drawing in more new to cruise, really seeing an elevated amount of increase first to brand. So seeing people shift from other cruise lines to our brands, we've seen an elevated amount of that. And then our loyalty program and what we've been doing to add to that is we're just getting more and more reps from that consumer. And so we're really happy about that. When you think about just what we see broadly, really each of the markets that we're doing business in or that we're sourcing our guests from is doing quite well.

We saw a little bit of a pullback from the North here in Canada in the early kind of mid part of the year, but we've now seen that normalize Demand from Europe this summer was really strong, and their focus now on booking into 2026 is actually stronger. And the reason for that, when we talk to those guests and our trial partners, is that we didn't have a lot of inventory left in the summer of 2025 for the European consumers that typically book a little bit later. So they're getting a little bit ahead of that curve, and that's really encouraging. And then -- but we -- again, we continue to see the U.S. consumer really across all segments, whether that's our family segment to our ultra-luxury segment. we want to stay with us and so those demand patterns have been quite strong. What I will say is that as these tools develop our forecasting is getting better.

And so our ability to predict what's going to happen in a quarter and then close in is getting better as this kind of marriage between AI and our historical forecasting capabilities is getting closer and closer in terms of its predictability. And so I would not, in any way, take that because we hit the high end of our range in Q3, that's we don't guide with the hope of coming out with some incredible beat. We guide because that's our best thinking at a point in time. It's a 50-50 forecast. And that's how we try to manage the business. We've just, I think, all collectively been in an environment where what we would see in the forward-looking picture was greater than what we saw in the previous picture. And we're seeing that, but now we're able to predict it better.

Our next question will come from the line of Lizzie Dove with Goldman Sachs.

I just wanted to ask about the Caribbean. There's been a lot of talk about whether there's oversupply in the region as people move more capacity there. You gave that great start about 4Q and it doesn't sound like you're seeing it, but curious what you're seeing there, whether there is oversupply and how you think about the setup for 2026 specifically?

Yes. Well, I mean, it's -- I think it's well known. It's been known for some time that there is an increase in supply in the Caribbean, of course, Caribbean has been working incredibly well for us. And so not surprised that there's been a supply increase there. But it's a very manageable increase in surmise. So we've seen it -- it's been a little bit more -- a little bit more promotional in the Caribbean activities. But for us, I think, because of our differentiated assets with our ships and our destinations and our ability to kind of keep our guests inside of our ecosystem, and we're seeing a draw from other ecosystems coming to our ecosystem that we're able to not only manage that demand, but we're able to see our guests pay up to experience or delivery.

Our next question will come from the line of Brandt Montour with Barclays.

Great. Thanks everybody my question. So if you look at your guidance for the fourth quarter net yields and you add back the 90 basis points or so from the comparison issues that you laid out? And then maybe add something for the storms you kind of get to, I don't know, maybe something like mid-3s exiting the year. I just want to know if that's the way you would sort of cleanse the fourth quarter in terms of how yield growth is exiting the year to the lens of the fact that there's not much new hardware helping out there. And so maybe this is what we could look at as a like-for-like exit in the year. But let me know if there's other puts or takes, we think about building our models for '26.

Yes. I mean, obviously, we're not providing guiding for '26, but we are going to subscribe to the formulas, as we just talked about. But in terms of how you exit the fourth quarter, your math is directionally correct. So we did quantify the more -- the less dry docks as well as new hardware. And so when you take kind of a more normalized new hardware and like-for-like, you're definitely into ZIP code.

Our next question comes from the line of James Hardiman with Citi.

So maybe to that last point, as we sort of roll things forward into 2026, I think investors are very keen as we think about puts and takes that there's a lot of puts, right? You've got whereas in 2025, you had sort of negative ship timing. That was a headwind that now becomes a tailwind. Obviously, weather it's not a big number, but in theory, that becomes a tailwind as we think about 2026. I guess where I struggle a little bit is to get to anything less than 18 [indiscernible] if I don't assume that yields are, I don't know, less than they were this year as we think about growth. So maybe help us -- are there any takes as we think about the puts and takes specifically, are some of these tailwinds may be offset by a weaker consumer environment broadly, do really sound like it. We're just trying to sort of put some of these items.

Yes. So thanks, James, for the question. I think, first, to start off, is that the consumer for our guests is strong. They have great jobs, great balance sheet, bank accounts. And they have a strong desire to vacation and build experiences and memories with their friends and family. But there's -- we're also not immune to what's generally happening in the environment. And so it's what the consumer is willing -- their willingness to pay up, and they are willing to pay up. They may not be willing to pay like last year, double digits up for the year before, I think it was 13% or 14% up but they're willing to pay more. And so I think in your math of yield growth is we expect moderate yield growth for next year. .

I would describe like this year was a moderate yield growth type of year, which we had at foreshadowed for a very long period of time. I would say, second, as we said, is our -- we expect our costs to grow on a per APCD basis at an anemic level. So we want to have a healthy margin between our yields and our costs, and that's going to drive more margin to our business, more returns, more cash flow to our shareholders. and gives us the confidence to continue to invest in our business. I think where -- when you're probably trying to reconcile your numbers, I mean, you can certainly but your [indiscernible] to help you do more of it. I think it's -- more of it is below the line, where I think that there's an opportunity to provide some clarity here. And again, I just want to stress, I did not say our earnings for next year are going to be $17 I said that they're going to have a 17 handle on there. Just to clarify, again, so I think we feel very good about the business for next year. And it's -- whether we look at our book position or what we're hearing from our guests, we're going to continue to generate very strong demand and deliver these incredible vacation experiences.

Our next question will come from the line of Ben Chaiken with Mizuho.

I have a question on River. You mentioned Jason sold out your '27 itineraries in a few hours. I think you have 10 ships in the first order. How are you thinking about allocating capital to this opportunity in the context of what appears to be accretive ROI? Like are there balance sheet limitations? Is there ship construction limitations? Or was it just getting comfortable with the opportunity.

Sure. Thanks for the question, Ben. First, it didn't sell out in a few hours and sold out in a few minutes. So to our Head of our celebrity brand, I told you so. The good news is we're going to have more -- that's right. Yes, that's right. Yes. So we -- our initial order was 10%. We -- obviously, we have options for much more than all of that. First and foremost, what you want to do is you want to make sure that you get the product right. And so our launch of it and you had the opportunity to see what the ship is going to look like, the amenities that it's going to offer it will deliver on the true DNA of the Royal Caribbean Group, right? It will be a step change and it will change the expectations of what our guests are looking for.

As I also said when we announced this, this is not a hobby. We do expect to be a substantial vacation player in the River business, and so we will continue to grow that. I mean our limitations, I think more is just squaring up that we got the experience on what we want it to be. And then this is an area where we have an opportunity to accelerate into here, and we have confidence in doing that.

Our next question will come from the line of Conor Cunningham with Melius Research.

Maybe just going back to comment and moving to shorter-duration itineraries and as a result, banking on closing yields. I think that a lot of the questions have just been obviously around the yield performance in the next year. But it seems to that mix dynamic is really what's kind of changing your approach to the 2026. So I guess maybe my question is, if close-in demand were to stay here, would that suggest that like the ultimate -- like that you would see significant upside to your underlying earnings upside in 2026. Is that a fair assumption?

Yes. So one, I wouldn't say that we are banking on close in demand. I would probably describe it as each product that we offer to our guests and they're different segments and different brands and different destinations has a different booking pattern to it. That's very natural. And I think we can get away is not typically what's on somebody's mind 18 months in advance. And so as we have more of those opportunities that we're able to deliver because of the assets that we have, that is what's driving a change in that behavior. But the behavior in our other products actually looks very similar to what we -- what we have typically seen for 7 night Caribbean or 7 night in Europe, et cetera. And so those patterns are there. They're strong and they're accelerating. And so I think that's what you want to see is that for each of the product and those different tracks that things are moving at a rate that's going to optimize your total revenue performance.

And so that's how we think about it. Now certainly, we have seen in the past, and we do not count on this is that you close in on all these products accelerate and we end up beating our expectations. But we do, of course, try to bake in to our forecast. These are the patterns that -- the patterns we saw last quarter, the patterns we saw a year ago try to inform how we expect to track to occur. It's -- and that's how our yield management works, that's how our tools work and trying to predict and to lay out what we should be offering in the market. So I think, again, we feel very good about the booking environment. We feel good about our book position. I would read into our commentary is we are optimizing our revenue -- as when we look back in time, we see more often than not that we've left some money on the table, and that it's our job to maximize revenue.

Our next question will come from the line of Sharon Zackfia with William Blair.

I wanted to talk through kind of the composition of your revenue as you ramp up more of the own destination. So I know with CocoCay, you also saw a ticket lift in addition to the onboard spend that you get on the island. Is that a similar dynamic with the Royal Beach Club or as the Royal Beach clubs come on, do we start to see the the composition of yield shift a little bit more to onboard spend and how that lead versus ticket?

Sharon, it's Michael. Yes, it's a good question. I mean Perfect Day was -- really was a huge driver of ticket lift as well as onboard spend. I think with the Beach Club, it's a slightly different products. So it does kind of slip more into the short excursion onboard revenue frame. And so it's also a driver for itinerary as well because we're beginning to see that itineraries that include the Beach Club as well as Perfect Day seem to be driving even more demand than historically, which has been really strong. So I think we'll see that kind of combination of Beach Clubs really pushed through in onboard revenue and short excursions. And then the Perfect Day is typically a key driver of ticket.

Yes. And Sharon, I think just to add on to Michael's point, it's got to modulate a little bit, right? Because the Perfect Day model is -- tends to bring a lot of premium on the ticket side. And so we still have -- there's opportunity for us to grow more in CocoCay, but as Perfect Day Mexico comes online, that is probably a little bit more of a balance between ticket and onboard, when the beach clubs come online, it's more on the onboard side. So it will modulate a little bit here. And -- but it's -- the answer to all of it is it's great revenue. It's a great guest experience, great margins, great returns. And so it's a true kind of win-win opportunity for everybody. .

Our next question will come from the line of Vince Ciepiel with Cleveland Research.

Just wanted to clarify kind of the yield picture here in '25. The first half was up, I think, closer to 5%. Second half looks on track for 2.5% or maybe something a little bit north of that. Clearly some moving pieces. How much of that decel is related to just tougher compares versus maybe less new hardware tailwind? Is new hardware still a tailwind for the second half on a year-over-year basis? Or is it kind of transition to a little bit of headwind. And then the last piece, obviously, is you've called out, I think, some port fees as well as dry dock as well as Haiti, et cetera. So there's a number of like isolated headwinds, but just help us kind of bridge that step down first half versus the second half, if you could.

Yes. And thanks, Vince. So every quarter as something, right, because the ship delivery timing does impact those. These are large ships. And this year, we had 2 deliveries. I think the best way to look at it is you kind of look at it on a yearly basis, and that's -- if you kind of kind of look at it across the board, it's probably -- if you normalize all these quarter-over-quarter things, some of it was a '24, easy comp or a harder comp. And some of it is just some of these events and timing of ship deliveries and how we ramp up.

But if you look at it on a yearly basis, that's a great, I think, just a way to look at our business. And it also subscribes to our formula, which we've said all along, this is how we manage the business. This is how we subscribe to that and then we drive to grow the business according to that formula, including the yield, the capacity and the cost.

Our next question will come from the line of Andrew Didora with Bank of America.

Actually, Naf, I just wanted to touch on the bond deal quickly to finance the Celebrity Xcel. Obviously, not a usual way to finance a ship, but certainly makes sense given the rate differential. I guess my question -- are you pretty much indifferent in how you finance the ships right now as long as there is that rate benefit? And out of curiosity, are there any additional benefits of tapping the unsecured market as opposed to the ECA financing?

Yes. Great question. Thank you. And so, yes. For now, we're in a place where we have a very strong investment-grade balance sheet. We're benefiting from rates that are basically commensurate with our financial performance and our ratings. And so when we evaluate that we look at it and we say, what does that make sense to finance with -- the CA, obviously, they're great partners. We're very grateful to kind of the partnership we have. It's obviously very important during the construction period to have the financing and these ships will -- they always have that committed financing in place also post delivery, which is obviously very valuable. But when we come to the decision, when we take the ship, we have this alternative -- and for this one, we negotiated this financing several years ago when credit rating was not as good as today. And so we -- and our improvement in the capital markets was quite substantial. .

And so when we looked at that, it just made more sense and much lower cost of capital. The other thing is just to remind everybody is these ECAs also have amortization payments. So when you look at the average tenure, of the loan is roughly a little bit over 6 years. We're obviously now issuing 10-year piece of paper in the unsecured market. So it's not just that the cost is low, we also gain tenure with it. And obviously, the covenant package is a little bit different, too. So you have the benefit there. We're very happy with kind of how this went. We're going to continue to evaluate all the alternatives -- it's very important to understand that all our ship financing. All our ship deliveries and orders will have committed financing going forward, and then we'll have that option to evaluate what's the best alternative for us when we take delivery.

And that will conclude our question-and-answer session. I will turn the call back over to Naftali for closing comments.

Thank you. We thank you all for your participation and interest in the company. Blake will be available for any follow-ups. We wish you all a very good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.