What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-09-30 compared with 2024-06-27 · 101 added, 89 removed, 221 unchanged (46% of the section changed)

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Three Months Ended

May 31, Six Months Ended

August 31, Nine Months Ended

2024 2023 2024 2023

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ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.

(c) For the three months ended May 31, 2024 compared to the three months ended May 31, 2023, we had a 5.4% capacity increase in ALBDs comprised of a 11% capacity increase in our NAA segment and a 3.6% capacity decrease in our Europe segment.

(c) For the three months ended August 31, 2024 compared to the three months ended August 31, 2023, we had a 6.2% capacity increase in ALBDs comprised of a 10% capacity increase in our NAA segment and a 0.7% capacity decrease in our Europe segment.

Our NAA segment’s capacity increase was caused by the following:

• Carnival Cruise Line 4,090-passenger capacity ship that was transferred from Costa Cruises and entered into service in May 2023

• Seabourn 260-passenger capacity ship that entered into service in July 2023

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Our Europe segment’s capacity decrease was caused by the following:

• Costa Cruises 4,090-passenger capacity ship that was transferred to Carnival Cruise Line in March 2023

• AIDA Cruises 1,270-passenger capacity ship removed from service in November 2023

• Costa Cruises 4,240-passenger capacity ship that was transferred to Carnival Cruise Line in February 2024

• The Red Sea rerouting as certain ships repositioned without guests

The decrease in our Europe segment’s capacity was partially offset by the following:

• The return to service of two ships as part of the completion of our return to guest cruise operations

• Cunard 2,960-passenger capacity ship that entered into service in May 2024

For the six months ended May 31, 2024 compared to the six months ended May 31, 2023, we had a 4.8% capacity increase in ALBDs comprised of a 7.1% capacity increase in our NAA segment and a 1.2% capacity increase in our Europe segment.

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• Costa Cruises 4,240-passenger capacity ship that was transferred to Carnival Cruise Line in April 2024

The decrease in our Europe segment’s capacity was partially offset by a Cunard 2,960-passenger capacity ship that entered into service in May 2024.

For the nine months ended August 31, 2024 compared to the nine months ended August 31, 2023, we had a 5.3% capacity increase in ALBDs comprised of a 8.2% capacity increase in our NAA segment and a 0.5% capacity increase in our Europe segment.

Our NAA segment’s capacity increase was caused by the following:

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• Carnival Cruise Line 5,360-passenger capacity ship that entered into service in December 2023

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• Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024

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The increase in our Europe segment’s capacity was partially offset by the following:

• Costa Cruises 4,090-passenger capacity ship that was transferred to Carnival Cruise Line in March 2023

• Costa Cruises 4,090-passenger capacity ship transferred to Carnival Cruise Line in March 2023

• AIDA Cruises 1,270-passenger capacity ship removed from service in November 2023

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Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.

Three Months Ended May 31, 2024 (“2024”) Compared to Three Months Ended May 31, 2023 (“2023”)

Three Months Ended August 31, 2024 (“2024”) Compared to Three Months Ended August 31, 2023 (“2023”)

Passenger ticket revenues made up 66% of our 2024 total revenues.

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• $114 million - 2.9 percentage point increase in occupancy

These increases were partially offset by decreases of $45 million in air transportation revenue and other passenger revenue.

The remaining 34% of 2024 total revenues was comprised of onboard and other revenues, which increased by $349 million, or 15%, to $2.7 billion in 2024 from $2.3 billion in 2023.

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• $164 million - 6.2% capacity increase in ALBDs

• $70 million - 5.6 percentage point increase in occupancy

• $95 million - higher onboard spending by our guests

• $43 million - 2.9 percentage point increase in occupancy

• $23 million - increase in other revenues primarily due to pre-and post-cruise land package revenues

Passenger ticket revenues made up 65% of our NAA segment’s 2024 total revenues.

Passenger ticket revenues increased by $480 million, or 16%, to $3.4 billion in 2024 from $3.0 billion in 2023.

This increase was driven by:

This increase was caused by:

• $310 million - 10% capacity increase in ALBDs

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The remaining 38% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $200 million, or 15%, to $1.5 billion in 2024 compared to $1.3 billion in 2023.

These increases were partially offset by decreases of $53 million in air transportation revenue and other passenger revenue.

The remaining 35% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $275 million, or 17%, to $1.9 billion in 2024 from $1.6 billion in 2023.

This increase was caused by:

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• $21 million - 1.5 percentage point increase in occupancy

• $21 million - increase in other revenues primarily due to pre-and post-cruise land package revenues

Europe Segment

Passenger ticket revenues made up 78% of our Europe segment’s 2024 total revenues.

Passenger ticket revenues increased by $190 million, or 17%, to $1.3 billion in 2024 compared to $1.1 billion in 2023.

This increase was driven by:

• $133 million - 11 percentage point increase in occupancy

Passenger ticket revenues increased by $221 million, or 14%, to $1.8 billion in 2024 from $1.6 billion in 2023.

This increase was caused by:

• $148 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

These increases were partially offset by a 3.6% capacity decrease in ALBDs, representing $40 million.

• $75 million - 5.0 percentage point increase in occupancy

The remaining 22% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $50 million, or 11%, to $515 million in 2024 from $465 million in 2023.

This increase was caused by an 11 percentage point increase in occupancy.

Costs and Expenses

Operating costs and expenses increased by $340 million, or 10%, to $3.8 billion in 2024 from $3.5 billion in 2023.

This increase was caused by:

• $29 million - higher onboard spending by our guests

• $22 million - 5.0 percentage point increase in occupancy

Costs and Expenses

Operating expenses increased by $383 million, or 9.8%, to $4.3 billion in 2024 from $3.9 billion in 2023.

This increase was driven by:

• $270 million - 6.2% capacity increase in ALBDs

• $81 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests

• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023

• $37 million - 5.6 percentage point increase in occupancy

• $48 million - higher onboard and other cost of sales driven by higher onboard revenues

These increases were partially offset by:

• $32 million - lower repair and maintenance expenses (including dry-dock expenses)

• $30 million - decrease in various other costs

Operating costs and expenses increased by $299 million, or 13%, to $2.6 billion in 2024 from $2.3 billion in 2023.

This increase was driven by:

These increases were partially offset by a $23 million change in pension valuation.

Selling and administrative expenses increased by $50 million, or 7.0%, to $763 million in 2024 from $713 million in 2023.

Depreciation and amortization expenses increased by $55 million, or 9.3%, to $651 million in 2024 from $596 million in 2023.

Operating expenses increased by $339 million, or 13%, to $3.0 billion in 2024 from $2.7 billion in 2023.

This increase was caused by:

• $278 million - 10% capacity increase in ALBDs

• $44 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests

• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023

These increases were partially offset by:

• $24 million - lower repair and maintenance expenses (including dry-dock expenses)

• $21 million - decrease in various other costs

• $31 million - higher onboard and other cost of sales driven by higher onboard revenues

Selling and administrative expenses increased by $35 million, or 8.3%, to $455 million in 2024 from $420 million in 2023.

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Depreciation and amortization expenses increased by $47 million, or 12%, to $424 million in 2024 from $377 million in 2023.

This increase was driven by a 10% capacity increase in ALBDs, representing $39 million.

Europe Segment

Operating costs and expenses were $1.1 billion in 2024 and 2023.

The changes in operating costs and expenses for the Europe segment were not material.

Operating Income (Loss)

Our consolidated operating income (loss) increased by $440 million to $560 million in 2024 from $120 million in 2023.

Our NAA segment’s operating income (loss) increased by $260 million to $525 million in 2024 from $265 million in 2023, and our Europe segment’s operating income (loss) increased by $195 million to $168 million in 2024 from $(27) million in 2023.

Operating expenses increased by $42 million or 3.7%, to $1.2 billion in 2024 from $1.1 billion 2023.

This increase was driven by:

• $36 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests.

• $17 million - higher onboard and other cost of sales driven by higher onboard revenues

These increases were partially offset by a $23 million change in pension valuation.

Selling and administrative expenses increased by $24 million, or 12%, to $223 million in 2024 from $199 million in 2023.

This increase was driven by higher compensation expense, increased investment in advertising and higher information technology expense.

Depreciation and amortization expenses increased by $4 million, or 2.6%, to $173 million in 2024 from $168 million in 2023.

Operating Income

Our consolidated operating income increased by $554 million to $2.2 billion in 2024 from $1.6 billion in 2023.

Our NAA segment’s operating income increased by $335 million to $1.4 billion in 2024 from $1.1 billion in 2023, and our Europe segment’s operating income increased by $201 million to $770 million in 2024 from $569 million in 2023.

These changes were primarily due to the reasons discussed above.

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Interest expense, net of capitalized interest, decreased by $87 million, or 17%, to $431 million in 2024 from $518 million in 2023.

The decrease was substantially all due to a decrease in total debt and lower interest rates.

Six Months Ended May 31, 2024 (“2024”) Compared to Six Months Ended May 31, 2023 (“2023”)

The decrease was caused by a decrease in total debt and lower average interest rates.

Debt extinguishment and modification costs decreased by $68 million, or 84%, to $13 million in 2024 from $81 million in 2023 as a result of debt transactions occurring during the respective periods.

Nine Months Ended August 31, 2024 (“2024”) Compared to Nine Months Ended August 31, 2023 (“2023”)

Passenger ticket revenues made up 66% of our 2024 total revenues.

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This increase was caused by:

• $525 million - 8.2 percentage point increase in occupancy

• $810 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

• $666 million - 6.4 percentage point increase in occupancy

• $586 million - 5.3% capacity increase in ALBDs

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This increase was driven by:

• $218 million - 8.2 percentage point increase in occupancy

• $343 million - 5.3% capacity increase in ALBDs

• $267 million - 6.4 percentage point increase in occupancy

• $161 million - higher onboard spending by our guests

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Passenger ticket revenues made up 64% of our NAA segment’s 2024 total revenues.

Passenger ticket revenues increased by $804 million, or 20%, to $4.7 billion in 2024 from $3.9 billion in 2023.

Passenger ticket revenues increased by $1.3 billion, or 19%, to $8.2 billion in 2024 from $6.9 billion in 2023.

This increase was caused by:

• $378 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

• $567 million - 8.2% capacity increase in ALBDs

• $566 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

• $223 million - 3.4 percentage point increase in occupancy

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The remaining 37% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $320 million, or 13%, to $2.8 billion in 2024 compared to $2.5 billion in 2023.

This increase was caused by:

The remaining 36% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $595 million, or 15%, to $4.7 billion in 2024 from $4.1 billion in 2023.

This increase was driven by:

• $338 million - 8.2% capacity increase in ALBDs

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Passenger ticket revenues made up 77% of our Europe segment’s 2024 total revenues.

Passenger ticket revenues increased by $563 million, or 27%, to $2.7 billion in 2024 compared to $2.1 billion in 2023.

Passenger ticket revenues increased by $784 million, or 21%, to $4.5 billion in 2024 from $3.7 billion in 2023.

This increase was driven by:

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• $40 million - net favorable foreign currency translational impact

• $24 million - 1.2% capacity increase in ALBDs

The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $144 million, or 22%, to $799 million in 2024 from $655 million in 2023.

The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $194 million, or 17%, to $1.3 billion in 2024 from $1.1 billion in 2023.

This increase was driven by:

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Costs and Expenses

Operating costs and expenses increased by $735 million, or 11%, to $7.5 billion in 2024 from $6.8 billion in 2023.

Operating expenses increased by $1.1 billion, or 10%, to $11.8 billion in 2024 from $10.7 billion in 2023.

This increase was caused by:

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• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023

• $33 million - higher port expenses

• $29 million - net unfavorable foreign currency translational impact

These increases were partially offset by $47 million of lower fuel price and consumption.

These increases were partially offset by:

• $32 million - lower fuel price and consumption

• $23 million - change in pension valuation

Selling and administrative expenses increased by $205 million, or 9.5%, to $2.4 billion in 2024 from $2.2 billion in 2023.

This increase was caused by an increase in advertising costs and administrative expenses, which includes an increase in compensation costs.

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Operating costs and expenses increased by $512 million, or 11%, to $5.0 billion in 2024 from $4.5 billion in 2023.

Depreciation and amortization expenses increased by $123 million, or 7.0%, to $1.9 billion in 2024 from $1.8 billion in 2023.

Operating expenses increased by $851 million, or 12%, to $8.0 billion in 2024 from $7.1 billion in 2023.

This increase was caused by:

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• $77 million - higher onboard and other cost of sales driven by higher onboard revenues

• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023

• $43 million - 3.4 percentage point increase in occupancy

• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023

• $30 million - higher repair and maintenance expenses (including dry-dock expenses)

These increases were partially offset by $39 million of lower fuel price and consumption.

Selling and administrative expenses increased by $91 million, or 10%, to $966 million in 2024 from $875 million in 2023.

This increase was caused by an increase in advertising costs and administrative expenses, which includes an increase in compensation costs.

Selling and administrative expenses increased by $126 million, or 10%, to $1.4 billion in 2024 from $1.3 billion in 2023.

This increase was driven by higher compensation expense, increased investment in advertising and higher information technology expense.

Depreciation and amortization expenses increased by $122 million, or 11%, to $1.2 billion in 2024 from $1.1 billion in 2023.

This increase was caused by:

• $92 million - 8.2% capacity increase in ALBDs

• $31 million - fleet enhancements and investments in shoreside assets

Europe Segment

Operating costs and expenses increased by $207 million, or 10%, to $2.4 billion in 2024 from $2.2 billion in 2023.

Operating expenses increased by $249 million, or 7.5%, to $3.6 billion in 2024 from $3.3 billion in 2023.

This increase was caused by:

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• $86 million - 11 percentage point increase in occupancy

• $33 million - net unfavorable foreign currency translational impact

• $49 million - higher onboard and other cost of sales driven by higher onboard revenues

• $25 million - 1.2% capacity increase in ALBDs

• $32 million - net unfavorable foreign currency translational impact

These increases were partially offset by:

• $29 million - lower various other costs

• $23 million - lower repair and maintenance expenses (including dry-dock expenses)

Operating Income (Loss)

Our consolidated operating income (loss) increased by $887 million to $836 million in 2024 from $(52) million in 2023.

Our NAA segment’s operating income (loss) increased by $446 million to $797 million in 2024 from $351 million in 2023, and our Europe segment’s operating income (loss) increased by $481 million to $288 million in 2024 from $(193) million in 2023.

• $23 million - change in pension valuation

Selling and administrative expenses increased by $52 million, or 8.3%, to $687 million in 2024 from $634 million in 2023.

Depreciation and amortization expenses decreased by $5 million, or 1.1%, to $501 million in 2024 from $506 million in 2023.

Operating Income

Our consolidated operating income increased by $1.4 billion to $3.0 billion in 2024 from $1.6 billion in 2023.

Our NAA segment’s operating income increased by $781 million to $2.2 billion in 2024 from $1.5 billion in 2023, and our Europe segment’s operating income increased by $682 million to $1.1 billion in 2024 from $0.4 billion in 2023.

These changes were primarily due to the reasons discussed above.

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Interest expense, net of capitalized interest, decreased by $248 million, or 16%, to $1.4 billion in 2024 from $1.6 billion in 2023.

The decrease was substantially all due to a decrease in total debt.

Debt extinguishment and modification costs increased by $35 million, or 112%, to $66 million in 2024 from $31 million in 2023 as a result of debt transactions occurring during the respective periods.

The decrease was substantially all due to a decrease in total debt and lower average interest rates.

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Debt extinguishment and modification costs decreased by $33 million, or 30%, to $78 million in 2024 from $112 million in 2023 as a result of debt transactions occurring during the respective periods.

Liquidity, Financial Condition and Capital Resources

As of May 31, 2024, we had $4.6 billion of liquidity including $1.6 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024, at which point it will be replaced by the $2.5 billion New Revolving Facility available through August 2027.

As of August 31, 2024, we had $4.5 billion of liquidity including $1.5 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility.

We will continue to pursue various opportunities to repay portions of our existing indebtedness and refinance future debt maturities to extend maturity dates and reduce interest expense.

Refer to Note 3 - “Debt” of the consolidated financial statements and Funding Sources below for additional details.

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We had a working capital deficit of $9.6 billion as of May 31, 2024 compared to a working capital deficit of $6.2 billion as of November 30, 2023.

The increase in working capital deficit was substantially all due to an increase in customer deposits, a decrease in cash and cash equivalents and a decrease in prepaid expenses and other.

We had a working capital deficit of $8.6 billion as of August 31, 2024 compared to a working capital deficit of $6.2 billion as of November 30, 2023.

The increase in working capital deficit was caused by an increase in customer deposits, an increase in accrued liabilities and other, a decrease in cash and cash equivalents and a decrease in prepaid expenses and other.

We operate with a substantial working capital deficit.

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The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, make long-term investments or any other use of cash.

Included within our working capital are $7.9 billion and $6.1 billion of customer deposits as of May 31, 2024 and November 30, 2023, respectively.

Included within our working capital are $6.4 billion and $6.1 billion of customer deposits as of August 31, 2024 and November 30, 2023, respectively.

We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations.

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Operating Activities

Our business provided $3.8 billion of net cash flows from operating activities during the six months ended May 31, 2024, an increase of $2.3 billion, compared to $1.5 billion provided for the same period in 2023.

This was caused by an increase in cash provided by the release of substantially all credit card reserves (included in the change in prepaid expenses and other assets), a decrease in the net loss compared to the same period in 2023 and other working capital changes.

Our business provided $5.0 billion of net cash flows from operating activities during the nine months ended August 31, 2024, an increase of $1.7 billion, compared to $3.4 billion provided for the same period in 2023.

This was caused by an increase in cash provided by the release of $0.8 billion in credit card reserve funds (included in the change in prepaid expenses and other assets) and our net income position of $1.6 billion in 2024 compared to our net loss position of $26 million for the same period in 2023, partially offset by a decrease in other working capital changes.

Investing Activities

During the six months ended May 31, 2024, net cash used in investing activities was $3.4 billion.

During the nine months ended August 31, 2024, net cash used in investing activities was $4.0 billion.

This was caused by capital expenditures of $4.0 billion primarily attributable to the delivery of a 5,360 and a 4,310-passenger capacity NAA segment ships and one 2,960-passenger capacity Europe segment ship.

During the six months ended May 31, 2023, net cash used in investing activities was $1.5 billion.

During the nine months ended August 31, 2023, net cash used in investing activities was $2.3 billion.

This was driven by:

• Capital expenditures of $1.8 billion primarily attributable to the delivery of one 5,280-passenger capacity Europe segment ship

• Proceeds from sales of one 2,700-passenger capacity Europe segment ship, one 1,270-passenger capacity Europe segment ship and one 460-passenger capacity NAA segment ship totaling $255 million

• Capital expenditures of $2.6 billion primarily attributable to the delivery of one 5,280-passenger capacity Europe segment ship and one 260-passenger capacity NAA segment ship

• Proceeds from sales of ships of $260 million relating to one 2,700-passenger capacity Europe segment ship, one 1,270-passenger capacity Europe segment ship and one 460-passenger capacity NAA segment ship

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Financing Activities

During the six months ended May 31, 2024, net cash used in financing activities of $1.2 billion was caused by:

During the nine months ended August 31, 2024, net cash used in financing activities of $2.0 billion was driven by:

• Repayments of $4.8 billion of long-term debt

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• Issuances of $3.0 billion of long-term debt

During the six months ended May 31, 2023, net cash used in financing activities of $1.6 billion was driven by:

• Repayments of $0.2 billion of short-term borrowings

During the nine months ended August 31, 2023, net cash used in financing activities of $4.2 billion was driven by:

• Repayments of $200 million of short-term borrowings

• Repayments of $6.8 billion of long-term debt

• Debt issuance costs of $116 million

• Debt extinguishment costs of $67 million

• Issuances of $3.0 billion of long-term debt

• Payments of $94 million related to debt issuance costs

• Purchases of $20 million of Carnival plc ordinary shares and issuances of $22 million of Carnival Corporation common stock under our Stock Swap Program

• Proceeds from issuance of $22 million of Carnival Corporation common stock and purchases of $20 million of Carnival plc ordinary shares under our Stock Swap Program

Funding Sources

As of May 31, 2024, we had $4.6 billion of liquidity including $1.6 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024, at which point it will be replaced by the New Revolving Facility available through August 2027.

As of August 31, 2024, we had $4.5 billion of liquidity including $1.5 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility.

Refer to Note 3 - “Debt” of the consolidated financial statements for additional discussion.

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We plan to use existing liquidity and future cash flows from operations to fund our cash requirements including capital expenditures not funded by our export credit facilities.

We seek to manage our credit risk exposures, including counterparty

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nonperformance associated with our cash and cash equivalents, and future financing facilities by conducting business with well-established financial institutions, and export credit agencies and diversifying our counterparties.

We seek to manage our credit risk exposures, including counterparty nonperformance associated with our cash and cash equivalents, and future financing facilities by conducting business with well-established financial institutions, and export credit agencies and diversifying our counterparties.

(in billions)

Future export credit facilities at May 31, 2024

Future export credit facilities at August 31, 2024

$ — $ 0.8 $ — $ 1.3 $ 1.3

Our export credit facilities contain various financial covenants as described in Note 3 - “Debt”.

At May 31, 2024 , we were in compliance with the applicable covenants under our debt agreements.

At August 31, 2024 , we were in compliance with the applicable covenants under our debt agreements.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis