Norwegian Cruise Line Holdings Ltd. (NCLH) Earnings

Management highlights

### Leadership and Organizational Changes - Half of the CEO's direct reports are new to their roles over the past year, with the Norwegian (NCL) brand leadership team substantially rebuilt - Added new key leaders: Chief People Officer Heather Jacobs (25+ years of global travel/hospitality leadership experience) and NCL Chief Marketing Officer Lee Appelbaum (25+ years of global consumer brand transformation experience) - Expanded teams in critical commercial functions: in-sale revenue management, digital commerce, casino, and itinerary planning ### Cost Discipline and Savings - Identified an additional $100 million of annualized savings and cash benefits this quarter, building on the $125 million of annualized run-rate savings announced last quarter, bringing total savings announced in the past two quarters to $225 million - Total cumulative savings identified from 2024 through 2026 now exceeds $500 million; the vast majority of the new $100 million in savings relates to capital expenditure reductions, with the remainder from salary and benefit efficiencies - All cost savings are from back-office and behind-the-scenes efficiencies, with no cuts to guest-facing product offerings, and some operational changes even enhance the guest experience ### NCL Brand Strategy and Product Improvements - Shifted revenue management to a base-loading methodology, which sets more competitive pricing earlier in the booking curve to build demand sooner, maintain price integrity closer to sailing, and reduce exposure to late-cycle demand volatility and discounting. This shift is already implemented for select 2027 and open 2028 sailings, and all new 2028+ NCL inventory will use this methodology from launch - Refreshing brand positioning targeting priority consumers: premium families and seasoned travelers, a group of over 35 million consumers. Interim marketing creative that directly targets this segment will launch in the coming weeks - Completed the Great Tides Waterpark development at Great Stirrup Cay, NCL's private island, with a preview period starting next week and official grand opening on September 4. The 6-acre waterpark complements existing experiences, increases guest throughput, and expands paid experience revenue opportunities, aligning the island offering with the needs of premium family guests ### Luxury Portfolio Optimization - Oceania Cruises: Reconfiguring Oceania Nautica to Oceania Aurelia to create a more intimate, suite-focused ship aligned with the brand's luxury positioning. Announced a binding agreement to sell Oceania Serena with a leaseback arrangement through Spring 2028, simplifying the fleet to better support luxury positioning and long-term returns - Regent Seven Seas Cruises: Reimagining and expanding entry-level suites on Seven Seas Explorer class ships, creating the largest entry-level suites in the luxury cruise industry while improving space ratios and guest-to-crew ratios to strengthen the brand's ultra-luxury positioning ### Fleet and Capital Strategy - Five ships are expected to exit the fleet over the next three years as part of ongoing portfolio optimization - Capacity growth will moderate significantly after 2027, reaching a 2.5% CAGR from 2026 to 2029. Gross new build and capital expenditure will decline by nearly $1 billion annually starting in 2028, improving free cash flow generation to support deleveraging - No significant debt maturities until 2030, providing financial flexibility; reducing net leverage remains a top priority

Guidance

- **2026 Full Year**: Full-year 2026 net yield is now expected to decline approximately 5%, hitting the low end of the prior guidance range. Adjusted net cruise cost excluding fuel is now expected to decline 25 basis points year-over-year, revised from a prior expectation of flat growth, marking the third consecutive year of unit cost growth of 1% or less. Adjusted EBITDA is now expected to be approximately $2.5 billion, with adjusted EPS of approximately $1.50. - **2026 Third Quarter**: Net yield is expected to decline approximately 8.9%, with a load factor of 104%. Demand pressure is most pronounced on European sailings, which represent 39% of third quarter deployment, as two-thirds of guests on these sailings are from North America, where elevated airfares and macro conditions have hurt demand. - **2026 Fourth Quarter**: Net yield is expected to decline approximately 6.5%, with a load factor of 99%. - **2027**: The first half of 2027 is expected to see continued demand challenges, with the most pressure concentrated in the first quarter, and net yields expected to remain negative for the first half. Sequential improvement is expected throughout 2027, with material yield growth and performance improvement expected in the second half of 2027 as changes to marketing, demand generation, and revenue management take full effect on the booking curve. 2027 is expected to be a transitional year, with 2028 projected as the first normalized year for the turnaround, when margin expansion is expected to accelerate toward the low 30% range.

Segment performance

Aggregate second quarter 2026 results: adjusted EBITDA of $666 million, which exceeded guidance by $34 million. Net yield decreased 2.6% (100 basis points above initial expectations), and adjusted net cruise cost excluding fuel was $163, a 50 basis point year-over-year decline that met cost targets. Adjusted net income was $222 million, with adjusted EPS of $0.48, which was $0.10 above guidance. No separate segment-level absolute or percentage revenue contribution figures were provided for the company's three brands (NCL, Oceania Cruises, Regent Seven Seas Cruises) in this call.

Risks & headwinds

- Current booking volumes are below optimal levels for the next 12 months, driven by historical underinvestment in top-of-funnel marketing and poor demand generation, which is expected to pressure near-term yields through the first half of 2027 - European sailings face ongoing demand pressure from elevated North American airfares, broader macroeconomic conditions, and geopolitical uncertainty related to ongoing regional conflict, which has slightly shortened booking window lengths on the margin - It takes time to retrain consumers and travel agents to adjust to the new base-loading revenue management strategy, as guests have become accustomed to waiting for late-cycle close-in discounts from NCL - Itinerary adjustments (such as reducing less popular open-jaw itineraries) require port slot availability that is not immediately available, so improvements to itinerary design will only be implemented gradually over multiple years - The company now expects to end 2026 with net leverage above 6x, so meaningful deleveraging will require improved top-line performance and moderated capital expenditure - All operational and marketing changes are early in implementation, and full financial benefits will take multiple quarters to materialize, with no impact on 2026 results due to limited runway for changes to affect already planned sailings

Analyst Q&A

• Q: What is the 2027 net yield outlook, when can green shoots be expected? /

  A: Management expects company-specific execution issues to weigh more heavily on the first half of 2027, particularly the first quarter, with first half yields remaining negative. Yield growth is expected to accelerate in the second half of 2027 as the benefits of current operational changes materialize, with sequential improvement already visible quarter-over-quarter in early trends.

• Q: Is 2028 the first normalized year after the turnaround, and can margins return to the low 30% range? Also, what explains lower Q4 load factors? /

  A: Management confirms that with the new leadership team only fully in place for a few weeks, 2027 will be a transitory year, and 2028 is expected to be the first normalized year. Lower Q4 load factors are primarily a result of historical underperformance in demand generation, not a conscious choice to prioritize price over occupancy. Management expects margin expansion to accelerate toward the low 30% range by 2028, driven by cost efficiencies and an improved demand flywheel.

• Q: How will consumers and travel agents react to the new base-loading revenue management strategy, after years of expecting close-in discounts? /

  A: Management notes that retraining the market will take some time, but the strategy aligns NCL with broader industry standard practices, so it is the right long-term move. The company does not expect this adjustment to take multiple years, and has plans in place to expedite consumer and agent adoption of the new pricing model.

• Q: Is the NCL product uncompetitive versus industry peers, and will cost cuts hurt product quality? /

  A: Management states that NCL's product (ships, crew, private destination experiences) is fully competitive with industry peers, and customer satisfaction and repeat visit rates remain strong when consumers do book. All cost cuts to date are behind-the-scenes back-office efficiencies that do not impact the guest product, and the company will continue this approach for future savings. The core issue holding NCL back is poor top-of-funnel marketing, not an uncompetitive product.