What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-01-27 compared with 2024-01-26 · 194 added, 207 removed, 145 unchanged (73% of the section changed)

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2024 Executive Overview

We consistently set records and achieved other significant milestones during this past year, including:

• Full year revenues hit an all-time high of $21.6 billion.

• For the first time since the resumption of guest cruise operations, net income was positive during the third quarter, generating $1.07 billion.

• We entered 2024 with our best booked position on record, for both price and occupancy.

• Total customer deposits for each quarter throughout 2023 consistently surpassed the previous quarterly records.

• We reduced our debt balance by $4.6 billion from its peak in the first quarter of 2023 and ended the year with $5.4 billion of liquidity.

The strengthening demand environment across all our brands contributed to our revenue growth as we drove improvements in ticket prices while closing the double-digit occupancy gap from the start of the year and reaching historical occupancy levels for the second half of 2023.

We believe our advertising investments and other demand generation efforts during the past 18 months have successfully elevated awareness and consideration for our brands, leading to record booking levels and revenue results.

In addition, these efforts enabled us to attract more new-to cruise and more new-to brand guests compared to 2019.

We are building momentum in closing the value gap to land-based alternatives, capturing over 3.5 million new-to cruise guests in 2023 and remain well-positioned to take share from land-based alternatives.

We continue to take actions to further stimulate demand and maintain our momentum through 2024 and beyond.

We are focused on ongoing improvements across the commercial space as we further rollout advancements to our yield management tools and lead generation techniques, continue to invest in sales and sales support, and build on already strong relationships with our trade partners.

This is complemented by our strategy to pull forward the sale of onboard items through bundled product offerings and pre-cruise sales.

We are also not losing sight of our expense base, as we have worked to mitigate the impacts of a high inflation environment by leveraging our scale through cost optimization initiatives.

We have made investments that we expect to increase our cost efficiencies in the future, including successfully installing SpaceX's Starlink, next generation internet across our fleet, which is expected to drive more than a 20% reduction in cost per megabit in 2024.

In addition, we expect it will increase our bandwidth pipeline, resulting in both improved guest experience and higher onboard revenues.

We also launched Maritime Asset Strategy Transformation (“MAST”), a centralized system developed to optimize equipment and machinery management across our brands and our fleet.

During 2023, we continued to work aggressively to reduce our environmental footprint and fuel consumption.

Our deep commitment resulted in industry-leading fuel efficiency and a more than 10% reduction in absolute GHG emissions compared to our peak year of 2011, despite capacity growth of 30% over the same period.

We also exceeded our shore power capability goal and our fleet now has twice as many ships ready to plug into shore power as there are ports currently able to provide it.

As a result of our fleet optimization efforts, our fleet is now one year younger than prior to pausing our guest cruise operations four years ago.

During 2023 alone we benefited from the introduction of three fantastic new ships including Carnival Celebration and Arvia, leveraging the scale of our popular and exceptionally efficient series of excel-class ships, and Seabourn Pursuit , our second luxury expedition ship.

In addition, Carnival Cruise Line welcomed Carnival Venezia, which was transferred from Costa, becoming the first ship as part of Carnival’s Fun Italian Style™ platform.

We will continue to optimize our brand portfolio by transferring Costa Firenze to Carnival Cruise Line in 2024.

We also made meaningful progress in other strategic asset projects.

We began construction on Celebration Key in Grand Bahama, which will be the largest and closest exclusive destination in our portfolio.

While not expected to open until summer 2025, we have begun generating consumer awareness and excitement around this fantastic upcoming destination.

We also started the process for a significant upsize in guest traffic at Half Moon Cay, our exclusive and beautiful pristine island destination in The Bahamas, with the creation of a pier-side berth that can accommodate our largest vessels.

In addition, we commenced work with our Grand Bahama Shipyard partners on the construction of two floating docks, one of which will have the largest lifting capacity in the world.

Together, these strategic investments are expected to significantly benefit us by helping to reduce travel time, further reducing our fuel consumption and preserving ship revenue days.

Our significantly improved 2023 cash from operations enabled us to notably reduce the substantial debt balance incurred during the pause of guest cruise operations.

In 2023, we made sizeable debt prepayments and ended the year with over $5 billion of liquidity.

Looking forward, we expect to continue to strategically refinance and prepay debt, leveraging our improving operating cash flow and the return of substantially all of the remaining credit card reserves during the first quarter of 2024.

In addition, with nearly two-thirds of 2024 on the books already, we are well positioned to achieve another year of record revenues.

This, combined with excess liquidity, is expected to enable us to continue actively managing down debt and reducing interest expense, leaving us on our path back to achieving investment grade credit ratings and higher return on invested capital.

This has been a truly remarkable year, and we have come a long way in an incredibly short amount of time.

We delivered unforgettable happiness to over 12 million guests this year and look forward to continuing to provide our guests with extraordinary cruise vacations in 2024, while honoring the integrity of every ocean we sail, place we visit and life we touch.

We had a strong year, setting records and achieving milestones, including:

• Full year revenues hit an all-time high of $25 billion, over 15 percent higher than the prior year

• Seven consecutive quarters of record revenues

• Record full year operating income of $3.6 billion, over 80 percent higher than the prior year

• All-time high cash from operations of almost $6 billion

• Higher ticket prices for 2024 versus 2023 for all of our major cruise lines and onboard spending levels that accelerated sequentially each quarter throughout the year

• Record booking trends and record year-end customer deposits, indicating a continuation of the strong momentum we’ve been experiencing for the last two years

We remain laser focused on further reducing interest expense and rebuilding our investment-grade balance sheet.

During 2024, we made debt prepayments of over $3 billion, bringing our total prepayments to over $7 billion since the beginning of 2023.

Additionally, we have reduced our debt balance by over $8 billion from the peak in January 2023, ending the year with $27.5 billion of debt.

We are delivering long-term value for our shareholders through improved operational execution across our cruise lines.

We ended 2024 with adjusted return on invested capital (“ROIC”) comfortably above our cost of capital.

We welcomed three new ships during 2024:

Carnival Jubilee , the third of five Excel class vessels for Carnival Cruise Line;

Sun Princess , Princess Cruises’ next generation flagship which was just awarded Conde Nast Traveler’s 2024 Mega Ship of the year in the U.S.;

and Queen Anne , Cunard’s first new ship in 14 years.

We have also been focusing on each of our cruise lines’ unique target markets, launching new marketing campaigns across all our brands.

In 2024, both new-to-cruise and repeat guests were each up double-digit percentages and we continue to attract new cruise guests as we work to increase awareness and consideration for cruise travel globally.

We continue to advance our enhanced destination strategy to provide guests with yet another reason to take a cruise vacation with us.

Celebration Key, our new exclusive cruise port destination on Grand Bahama Island, is scheduled to open in the summer of 2025, with an additional pier opening in the fall of 2026.

Its five portals built for fun will further expand our experience offerings with an abundance of features and amenities for our guests.

Celebration Key will be our largest and closest destination in our portfolio, saving fuel costs and reducing greenhouse gas emissions.

In addition, we recently announced plans to enhance Half Moon Cay, our highly rated and award-winning exclusive Bahamian destination.

The enhancements will lean further into this destination’s natural beauty and pristine appeal, reinforcing its new name – RelaxAway, Half Moon Cay.

Featuring a newly constructed pier that is expected to be ready in the summer of 2026, the destination will allow two ships to dock, including Carnival Cruise Line’s largest ships that will be able to visit for the first time.

We believe developing and promoting these unique assets will help us cast the net wider and capture even more new-to-cruise demand.

During 2024, we also continued making progress towards our sustainability goals.

We reduced our greenhouse gas emission intensity by approximately 17.5 percent compared to 2019, on track to achieve our targeted reduction of 20 percent by the end of 2026, a goal that was previously pulled forward by four years.

We have also lowered our absolute greenhouse gas emissions by almost 10 percent since 2019, despite capacity growth of over nine percent over the same period.

We are grateful for the efforts of our hard working and dedicated team who delivered a step change improvement in 2024 and set us up very well for 2025 and beyond, while consistently delivering unforgettable happiness to over 13 and a half million people in 2024, by providing them with extraordinary cruise vacations while honoring the integrity of every ocean we sail, place we visit and life we touch.

New Accounting Pronouncements

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A discussion of our critical accounting estimates, the underlying judgments and uncertainties used to make them and the likelihood that materially different estimates would be reported under different conditions or using different assumptions is as follows:

Liquidity and Other Uncertainties

We make several critical accounting estimates with respect to our liquidity.

As part of our liquidity management, we rely on estimates of our future liquidity, which includes numerous assumptions that are subject to various risks and uncertainties.

The principal assumptions used to estimate our future liquidity consist of:

• Expected increases in revenue in 2024 as compared to 2023

• Expected prepayment of debt

• Continued stabilization of inflationary pressures on costs compared to 2023

• Fuel prices at or around November 2023 year-end prices

In addition, we make certain assumptions about new ship deliveries, improvements on existing ships as well as other capital expenditures, removals of existing ships, and consider the future export credit financings that are associated with the new ship deliveries.

We have a substantial debt balance incurred during the pause in guest cruise operations and require a significant amount of liquidity or cash provided by operating activities to service our debt.

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

Ship Accounting

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We review estimated useful lives and residual values for reasonableness whenever events or circumstances significantly change.

Since the pause of our guest cruise operations, we have disposed of ships for amounts significantly below their book values.

Management has estimated that this trend will normalize in the coming years.

The IMO recently adopted its 2023 Strategy on Reduction of GHG Emissions from Ships that would require international shipping to reduce total GHG emissions on a well-to-wake basis to net zero by or around 2050.

In addition, the framework introduces checkpoints in 2030 and 2040 that seek reductions in the total GHG emissions from international shipping by at least 20% and 70%, respectively, compared to 2008.

The EU has also proposed several regulations that will likely impact the cost of fossil fuels and has recently adopted the inclusion of maritime shipping in the EU’s Emission Trading System.

We have established Climate Action Goals, which include a GHG intensity reduction goal of 20% by 2030 from the 2019 baseline and pursuing net zero emissions by 2050 .

During the pause of our guest cruise operations, we disposed of ships for amounts significantly below their book values.

Management estimates that this trend will continue to normalize in the coming years.

The IMO’s 2023 Strategy on Reduction of GHG Emissions from Ships (“IMO Strategy”) strives to peak GHG emissions from international shipping as soon as possible and to reach net zero GHG emissions on a well-to-wake basis by or around 2050.

The IMO Strategy includes checkpoints in 2030 and 2040 that seek reductions in the absolute GHG emissions from international shipping by at least 20% and 70%, respectively, compared to 2008.

It also includes a target of a 40% reduction in CO 2 emissions intensity by 2030 compared to 2008.

The EU has also proposed several regulations that will likely impact the cost of fossil fuels and has recently adopted the inclusion of maritime shipping in the EU’s Emissions Trading System.

We have established Climate Action Goals, which include a GHG intensity reduction goal of 20% by 2030 from the 2019 baseline and we are pursuing our aspiration of net zero emissions by 2050 .

Given a 30-year estimated useful life for our ships, our most recently delivered vessels’ lives will extend beyond this 2050 date.

Fossil fuels are currently the only viable option for our industry and it is not clear when alternative fuels or other technologies will be commercially viable.

To provide a path to net zero emissions, alternative low GHG emission fuels will be necessary for the maritime industry;

however, there are significant supply challenges that must be resolved before viability is reached.

We are closely monitoring technology developments and partnering with key organizations on research and development to support our sustainability goals and aspirations.

We are closely monitoring technology developments and partnering with organizations on research and development to support our sustainability goals and aspirations.

Our fleet’s engines are capable of being modified for use with certain alternative fuels and we have completed tests on the use of marine biofuel blends on certain ships in our fleet.

In addition, and in support of our Climate Action Goals, we invest in technologies, including the use of LNG powered cruise ships, the installation of Advanced Air Quality Systems on board our ships to aid in the reduction of sulfur emissions, the use of shore power, enabling ships to use shoreside electric power where available while in port and various other efficiency related upgrades intended to reduce our emissions.

It is uncertain how recently adopted, proposed and possible future regulatory changes related to the environment and climate change and our pursuit of net zero emissions by 2050, may impact our ships’ useful lives and residual values and the impact is dependent on future regulatory actions and technological advances.

It is uncertain how proposed and possible future regulatory changes related to the environment and climate change and our aspiration of net zero emissions by 2050, may impact our ships’ useful lives and residual values and the impact is dependent on future regulatory actions and technological advances.

As of November 30, 2024, management concluded that there were no changes in our ship useful lives and residual value estimates.

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Valuation of Ships

Impairment reviews of our ships require us to make significant estimates.

We review our ships for impairment whenever events or changes in circumstances indicate that the carrying value of a ship may not be recoverable.

When an impairment review is appropriate, such as an expected sale of a ship before the end of its useful life, impairment reviews of our ships require us to make significant estimates.

We evaluate ship asset impairments at the individual ship level which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

We review our ships for impairment whenever events or circumstances indicate that the carrying value of a ship may not be recoverable.

If estimated future cash flows are less than the carrying value of a ship, an impairment charge is recognized to the extent its carrying value exceeds its estimated fair value.

Where estimated future cash flows are used to estimate the recoverable value of a ship, the cash flows include estimated regulatory costs, including those related to proposed regulations, which are likely to impact costs and capital expenditures, including those expected to meet our 2030 Climate Action Goals.

The estimation of a ship’s fair value includes numerous assumptions that are subject to various risks and uncertainties.

The principal assumption used in determining the fair value of these ships was the estimated sales proceeds.

The principal assumption used in determining the fair value of our ships tested for impairment in 2022 was the estimated sales proceeds.

We determined the fair value of these ships based on their respective estimated selling values, for those ships expected to be disposed of, or estimated discounted future cash flows and comparable market transactions.

Refer to our consolidated financial statements for additional discussion of our property and equipment policy and ship impairment reviews.

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Given the inherent uncertainty related to the eventual outcome of these matters and potential insurance recoveries, it is possible that all or some of these matters may be resolved for amounts materially different from any provisions or disclosures that we may have made.

In addition, as new information becomes available, we may need to reassess the amount of asset or liability that needs to be accrued related to our contingencies.

In addition, as new information becomes available, we may need to reassess amounts accrued related to our contingencies.

All such changes in our estimates could materially impact our results of operations and financial position.

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Known Trends and Uncertainties

• We believe the volatility in the cost of fuel and increases in other related costs are reasonably likely to continue to impact our profitability in both the short and long-term.

• We believe inflation and interest rates are reasonably likely to continue to impact our profitability.

• We believe a global minimum tax could affect us in 2026, with the potential for a one-year deferral.

Prior to any mitigating actions, we believe the annual impact could be approximately $200 million.

We continue to evaluate the impact of these rules and are currently evaluating a variety of mitigating actions to minimize the impact.

The application of the rules continues to evolve, and its outcome may alter our tax obligations in certain countries in which we operate.

• We believe the volatility in the cost of fuel is reasonably likely to continue to impact our profitability in both the short and long-term.

• We believe the increasing global focus on climate change, including the reduction of GHG emissions and new and evolving regulatory requirements, is reasonably likely to have a material negative impact on our future financial results.

We became subject to the EU Emission Trading Scheme (“ETS”) on January 1, 2024, which includes a three-year phase-in period.

We estimate the impact in 2024 to be approximately $51 million based on a European Union Allowance cost of $75 per metric ton of emissions.

Refer to XIX.

We became subject to the EU Emissions Trading System (“ETS”) on January 1, 2024, which includes a three-year phase-in period.

Refer to XVIII.

Governmental Regulations.

• We believe that the instability in the Red Sea region currently impacting shipping could have an impact on our results of operations.

Results of Operations

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• Sales of passenger cruise tickets and, in some cases, the sale of air and other transportation to and from airports near our ships’ home ports and cancellation fees.

We also collect fees, taxes and other charges from our guests.

The cruise ticket price typically includes the following:

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This generally includes the following:

• Beverage sales

• Internet and communication services

• Casino gaming

• Full service spas

• Shore excursions

• Specialty restaurants

• Retail sales

• Photo sales

• Laundry and dry cleaning services

• Beverage sales • Internet and communication services

• Casino gaming • Full service spas

• Shore excursions • Specialty restaurants

• Retail sales • Art sales

• Photo sales • Laundry and dry cleaning services

These goods and services are provided either directly by us or by independent concessionaires, from which we receive either a percentage of their revenues or a fee.

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Substantially all costs associated with our shoreside personnel are included in selling and administrative expenses

• Fuel costs, which include fuel delivery costs

• Fuel costs, which include fuel delivery costs and European Union Allowance costs

• Food costs, which include both our guest and crew food costs

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100.5 91.4 54.6

Available Lower Berth Days (“ALBDs”) (in millions) (b)

91.3 72.5 14.6

Occupancy percentage (c)

Available Lower Berth Days (“ALBDs”) (in millions) (b) (c)

95.6 91.3 72.5

Occupancy percentage (d) 105 % 100 % 75 %

Passengers carried (in millions)

13.5 12.5 7.7

Fuel consumption in metric tons (in millions)

Fuel consumption in metric tons per thousand ALBDs 32.1 36.1 (d)

Fuel cost per metric ton consumed $ 701 $ 830 $ 515

Fuel consumption in metric tons per thousand ALBDs 30.9 32.1 36.1

Fuel cost per metric ton consumed (excluding European Union Allowance) $ 665 $ 701 $ 830

Currencies (USD to 1)

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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) Occupancy, in accordance with cruise industry practice, is calculated using a numerator of PCDs and a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers.

(c) In 2024 compared to 2023, we had a 4.7% capacity increase in ALBDs comprised of a 7.9% capacity increase in our NAA segment and a 0.5% 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 transferred from Costa Cruises and entered into service in May 2023

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

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

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

• Carnival Cruise Line 4,130-passenger capacity ship that transferred from Costa Cruises and entered into service in April 2024

The increase in our NAA segment’s capacity was partially offset by a Seabourn 460-passenger capacity ship that was removed from service in September 2024.

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

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

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

• Costa Cruises 4,240-passenger capacity ship that transferred to Carnival Cruise Line and was removed from Costa Cruises’ fleet 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

• P&O Cruises (UK) 5,280-passenger capacity ship that entered into service in December 2022

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

(d) Occupancy, in accordance with cruise industry practice, is calculated using a numerator of PCDs and a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers.

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

(d) Fuel consumption in metric tons per thousand ALBDs for 2021 is not meaningful.

2024 Compared to 2023

The discussion below compares the results of operations for the year ended November 30, 2024 to the year ended November 30, 2023.

You should read this discussion in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report.

This discussion should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report.

For a comparison of the Company’s results of operations for the year ended November 30, 2023 to the year ended November 30, 2022, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended November 30, 2023, which was filed with the U.S.

Securities and Exchange Commission on January 26, 2024.

Results of Operations

Years Ended November 30,

(in millions) 2023 2022 Change

Passenger ticket $ 14,067 $ 7,022 $ 7,045

Onboard and other 7,526 5,147 2,380

21,593 12,168 9,425

Operating Expenses

Commissions, transportation and other 2,761 1,630 1,131

Onboard and other 2,375 1,528 847

Payroll and related 2,373 2,181 192

Fuel 2,047 2,157 (110)

Food 1,335 863 472

Ship and other impairments — 440 (440)

Other operating 3,426 2,958 467

Cruise and tour operating expenses 14,317 11,757 2,560

Selling and administrative 2,950 2,515 435

Depreciation and amortization 2,370 2,275 95

19,637 16,547 3,090

Operating Income (Loss) 1,956 (4,379) 6,335

Nonoperating Income (Expense)

Interest income 233 74 159

Interest expense, net of capitalized interest (2,066) (1,609) (457)

Gains (losses) on debt extinguishment, net (111) (1) (110)

Other income (expense), net (75) (165) 90

(2,018) (1,701) (317)

Income (Loss) Before Income Taxes $ (62) $ (6,080) $ 6,018

Years Ended November 30,

(in millions) 2023 2022 Change

Passenger ticket $ 9,122 $ 4,692 $ 4,430

Onboard and other 5,466 3,589 1,877

14,588 8,281 6,307

Operating Expenses 9,587 7,526 2,061

Selling and administrative 1,753 1,517 236

Depreciation and amortization 1,495 1,408 88

12,836 10,451 2,385

Operating Income (Loss) $ 1,752 $ (2,170) $ 3,922

Years Ended November 30,

(in millions) 2023 2022 Change

Passenger ticket $ 5,004 $ 2,660 $ 2,344

Onboard and other 1,531 872 659

6,535 3,531 3,003

Operating Expenses 4,398 3,925 474

Selling and administrative 876 745 131

Depreciation and amortization 668 692 (24)

5,942 5,361 581

Operating Income (Loss) $ 593 $ (1,830) $ 2,423

During the pause in our guest cruise operations, we incurred substantial debt and require a significant amount of cash to service our debt.

Our ability to generate cash will be affected by general macroeconomic, financial, geopolitical, competitive, regulatory and other factors beyond our control.

The full extent of these impacts is uncertain and may be amplified by our substantial debt balance.

Cruise passenger ticket revenues made up 65% of our total revenues in 2023 while onboard and other revenues made up 35%.

Revenues for the year ended November 30, 2023 increased by $9.4 billion to $21.6 billion from $12.2 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

ALBDs increased to 91.3 million in 2023 as compared to 72.5 million in 2022.

Occupancy for 2023 was 100%, compared to 75% in 2022.

Cruise passenger ticket revenues made up 63% of our NAA segment’s total revenues in 2023 while onboard and other cruise revenues made up 37%.

NAA segment revenues for 2023 increased by $6.3 billion to $14.6 billion from $8.3 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

ALBDs increased to 56.4 million in 2023 as compared to 44.3 million in 2022.

Occupancy for 2023 was 103% compared to 82% in 2022.

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

Passenger ticket revenues increased by $2.4 billion, or 17%, to $16.5 billion in 2024 from $14.1 billion in 2023.

This increase was caused by:

• $988 million - higher ticket prices driven by continued strength in demand

• $705 million - 5.1 percentage point increase in occupancy

• $691 million - 4.7% capacity increase in ALBDs

• $86 million - net favorable foreign currency translational impact

These increases were partially offset by a decrease of $60 million in other passenger revenue.

The remaining 34% of 2024 total revenues was comprised of onboard and other revenues, which increased by $1.0 billion, or 14%, to $8.6 billion in 2024 from $7.5 billion in 2023.

This increase was driven by:

• $422 million - 4.7% capacity increase in ALBDs

• $286 million - 5.1 percentage point increase in occupancy

• $264 million - higher onboard spending by our guests

Passenger ticket revenues made up 63% of our NAA segment’s 2024 total revenues.

Passenger ticket revenues increased by $1.5 billion, or 16%, to $10.6 billion in 2024 from $9.1 billion in 2023.

This increase was caused by:

• $717 million - 7.9% capacity increase in ALBDs

• $609 million - higher ticket prices driven by continued strength in demand

• $241 million - 2.7 percentage point increase in occupancy

These increases were partially offset by a decrease of $64 million in other passenger revenue.

The remaining 37% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $753 million, or 14%, to $6.2 billion in 2024 from $5.5 billion in 2023.

This increase was caused by:

• $430 million - 7.9% capacity increase in ALBDs

• $191 million - higher onboard spending by our guests

• $145 million - 2.7 percentage point increase in occupancy

Europe Segment

Cruise passenger ticket revenues made up 77% of our Europe segment’s total revenues in 2023 while onboard and other cruise revenues made up 23%.

Europe segment revenues for 2023 increased by $3.0 billion to $6.5 billion from $3.5 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

ALBDs increased to 34.9 million in 2023 as compared to 28.2 million in 2022.

Occupancy for 2023 was 95% compared to 65% in 2022.

Operating Expenses

Operating expenses increased by $2.6 billion to $14.3 billion in 2023 from $11.8 billion in 2022.

These increases were driven by our resumption of guest cruise operations, an increase of ships in service and considerably higher occupancy levels.

Fuel costs decreased by $0.1 billion to $2.0 billion in 2023 from $2.2 billion in 2022.

$0.4 billion of this decrease was caused by lower fuel prices and changes in fuel mix of $129 per metric ton consumed in 2023 compared to 2022, partially offset by higher fuel consumption due to the resumption of guest cruise operations.

We did not recognize ship and other impairment charges in 2023 compared to $440 million recognized in 2022.

Selling and administrative expenses increased by $0.4 billion to $2.9 billion in 2023 from $2.5 billion in 2022.

This increase was

caused by increases in advertising costs and administrative expenses incurred as part of our resumption of guest cruise operations, which includes an increase in incentive compensation reflecting expected improvements in the company’s current and long-term performance.

The drivers in changes in costs and expenses for our NAA and Europe segments are the same as those described for our consolidated results.

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

Passenger ticket revenues increased by $945 million, or 19%, to $5.9 billion in 2024 from $5.0 billion in 2023.

This increase was driven by:

• $463 million - 8.8 percentage point increase in occupancy

• $379 million - higher ticket prices driven by continued strength in demand

• $87 million - net favorable foreign currency translational impact

These increases were partially offset by a 0.5% capacity decrease in ALBDs, representing $26 million.

The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $231 million, or 15%, to $1.8 billion in 2024 from $1.5 billion in 2023.

This increase was driven by:

• $142 million - 8.8 percentage point increase in occupancy

• $72 million - higher onboard spending by our guests

Costs and Expenses

Operating expenses increased by $1.3 billion, or 9.2%, to $15.6 billion in 2024 from $14.3 billion in 2023.

This increase was caused by:

• $731 million - 4.7% capacity increase in ALBDs

• $333 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests

• $144 million - higher onboard and other cost of sales driven by higher onboard revenues

• $139 million - 5.1 percentage point increase in occupancy

• $63 million - higher repair and maintenance expenses (including dry-dock expenses)

• $59 million - net unfavorable foreign currency translational impact

• $47 million - decreases in gains on ship sales realized in 2024 compared to 2023

• $36 million - higher port expenses

These increases were partially offset by:

• $89 million - lower fuel consumption per ALBD

• $58 million - lower fuel prices

• $23 million - change in pension valuation

Selling and administrative expenses increased by $302 million, or 10%, to $3.3 billion in 2024 from $2.9 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 $187 million, or 7.9%, to $2.6 billion in 2024 from $2.4 billion in 2023.

This increase was driven by capacity increases, fleet enhancements and investments in shoreside assets for our NAA segment.

Operating expenses increased by $968 million, or 10%, to $10.6 billion in 2024 from $9.6 billion in 2023.

This increase was caused by:

• $753 million - 7.9% capacity increase in ALBDs

• $160 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests

• $81 million - higher onboard and other cost of sales driven by higher onboard revenues

• $76 million - higher repair and maintenance expenses (including dry-dock expenses)

• $46 million - 2.7 percentage point increase in occupancy

These increases were partially offset by:

• $86 million - lower fuel consumption per ALBD

• $50 million - lower fuel prices

Selling and administrative expenses increased by $199 million, or 11%, to $2.0 billion in 2024 from $1.8 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 $168 million, or 11%, to $1.7 billion in 2024 from $1.5 billion in 2023.

This increase was caused by:

• $117 million - 7.9% capacity increase in ALBDs

• $51 million - fleet enhancements and investments in shoreside assets

Europe Segment

Operating expenses increased by $336 million, or 7.6%, to $4.7 billion in 2024 from $4.4 billion in 2023.

This increase was caused by:

• $174 million - higher commissions, transportation costs, and other expenses driven by an increase in the number of guests

• $92 million - 8.8 percentage point increase in occupancy

• $63 million - higher onboard and other cost of sales driven by higher onboard revenues

• $62 million - net unfavorable foreign currency translational impact

• $47 million - nonrecurrence of gains on sale of three Europe segment ships in 2023

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

Selling and administrative expenses increased by $85 million, or 9.7%, to $961 million in 2024 from $876 million in 2023.

Depreciation and amortization expenses increased by $8 million, or 1.2%, to $676 million in 2024 from $668 million in 2023.

Operating Income

Our consolidated operating income increased by $1.6 billion to $3.6 billion in 2024 from $2.0 billion in 2023.

Our NAA segment’s operating income increased by $879 million to $2.6 billion in 2024 from $1.8 billion in 2023, and our Europe segment’s operating income increased by $747 million to $1.3 billion in 2024 from $593 million in 2023.

These changes were primarily due to the reasons discussed above.

Nonoperating Income (Expense)

Interest expense, net of capitalized interest, increased by $0.5 billion to $2.1 billion in 2023 from $1.6 billion in 2022.

The increase was caused by a higher average interest rate in 2023 compared to 2022, partially offset by a decrease in total debt.

Debt extinguishment and modification costs were $111 million in 2023 as a result of debt transactions during the year compared to $1 million in 2022.

Interest expense, net of capitalized interest, decreased by $311 million, or 15%, to $1.8 billion in 2024 from $2.1 billion in 2023.

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

Debt extinguishment and modification costs decreased by $32 million, or 28%, to $79 million in 2024 from $111 million in 2023 as a result of debt transactions occurring during the respective periods.

Other income (expense), net increased by $157 million to $83 million in 2024 from ($75) million in 2023.

The increase primarily relates to a non-recurring favorable result related to litigation.

Liquidity, Financial Condition and Capital Resources

As of November 30, 2023, we had $5.4 billion of liquidity including $2.4 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024.

In February 2023, Carnival Holdings II entered into the $2.1 billion New Revolving Facility, which may be utilized beginning in August 2024, at which date it will replace our Revolving Facility.

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

As of November 30, 2024, we had $4.2 billion of liquidity including $1.2 billion of cash and cash equivalents and $2.9 billion of borrowings available under our multi-currency revolving credit facility (“Revolving Facility”).

In addition, we had $7.8 billion of undrawn export credit facilities to fund ship deliveries planned through 2033.

W e 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 5 - “Debt” of the consolidated financial statements and Funding Sources below for additional details.

We had a working capital deficit of $8.2 billion as of November 30, 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 a decrease in cash and cash equivalents and restricted cash and an increase in customer deposits, partially offset by an increase in prepaid expenses and a decrease in short-term borrowings and the current portion of long-term debt.

The increase in working capital deficit was caused by increases in customer deposits and accrued liabilities and other and decreases in the current portion of long-term debt, cash and cash equivalents and 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 $6.1 billion and $4.9 billion of customer deposits as of November 30, 2023 and 2022, respectively.

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

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

Certain of these agreements allow the credit card processors to request, under certain circumstances, that we provide a reserve fund in cash.

Certain of these agreements allow the credit card processors to request, under certain circumstances, that we provide a capped reserve fund in cash.

As of November 30, 2024, we were not required to maintain any reserve funds.

In addition, we have a relatively low level of accounts receivable and limited investment in inventories.

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Operating Activities

Our business provided $4.3 billion of net cash flows from operating activities during 2023, an increase of $6.0 billion, compared to $1.7 billion used in 2022.

This was caused by a decrease in the net loss compared to the same period in 2022 and other working capital changes.

Our business provided $5.9 billion of net cash flows from operating activities during 2024, an increase of $1.6 billion, compared to $4.3 billion provided in 2023.

This was caused by cash provided by the release of $0.8 billion credit card reserve funds (included in the change in prepaid expenses and other assets) and our net income position of $1.9 billion in 2024 compared to our net loss position of $74 million in 2023, partially offset by a decrease in other working capital changes.

Investing Activities

During 2024, net cash used in investing activities was $4.5 billion.

This was driven by:

• Capital expenditures of $1.9 billion for our ongoing new shipbuilding program

• Capital expenditures of $1.4 billion for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sales of ships and other of $340 million

This was caused by:

• Capital expenditures of $4.6 billion primarily attributable to the delivery of two NAA segment ships, one Europe segment ship and developments in our port destinations and exclusive islands

• Proceeds of $58 million primarily from the sale of an NAA segment ship

During 2023, net cash used in investing activities was $2.8 billion.

This was driven by:

• Capital expenditures of $3.9 billion for our ongoing new shipbuilding program

• Capital expenditures of $1.1 billion for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sales of ships and other of $70 million

• Purchases of short-term investments of $315 million

• Proceeds from maturity of short-term investments of $515 million

• Capital expenditures of $3.3 billion with the majority attributable to the delivery of one Europe segment ship and one NAA segment ship

• Proceeds from sales of three Europe segment ships, one NAA segment ship and other totaling $340 million

Financing Activities

During 2024, net cash used in financing activities of $2.6 billion was caused by:

• Repayments of $5.4 billion of long-term debt

• Debt issuance costs of $203 million

• Debt extinguishment costs of $41 million

• Issuances of $3.1 billion of long-term debt

During 2023, net cash used in financing activities of $5.1 billion was driven by:

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• 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

During 2022, net cash provided by financing activities of $3.6 billion was caused by:

• Net repayments of short-term borrowings of $2.6 billion

• Repayments of $2.1 billion of long-term debt

• Debt issuance costs of $153 million

• Issuances of $7.2 billion of long-term debt

• Net proceeds of $1.2 billion from the public offering of Carnival Corporation common stock

• Proceeds from issuance of $95 million of Carnival Corporation common stock and purchases of $87 million of Carnival plc ordinary shares under our Stock Swap Program

For the Company’s cash flow activities for the fiscal year ended November 30, 2021, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended November 30, 2022, which was filed with the U.S.

For our cash flow activities for the fiscal year ended November 30, 2022, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended November 30, 2023, which was filed with the U.S.

Securities and Exchange Commission on January 26, 2024.

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Payments Due by

(in millions) 2024 2025 2026 2027 2028 Total

(in millions) 2025 2026 2027 2028 2029 Thereafter Total

Debt (a) $ 2,969 $ 3,991 $ 6,016 $ 9,534 $ 4,706 $ 6,495 $ 33,712

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Excludes undrawn export credits.

(b) As of November 30, 2023, we have committed undrawn export credit facilities of $3.0 billion which fund a portion of our newbuild contractual commitments.

(b) As of November 30, 2024, we have undrawn export credit facilities of $7.8 billion which fund a portion of our newbuild contractual commitments.

Funding Sources

In February 2023, Carnival Holdings II entered into the $2.1 billion New Revolving Facility, which may be utilized beginning in August 2024, at which date it will replace our Revolving Facility.

Refer to Note 5 - “Debt” of the consolidated financial statements for additional discussion.

As of November 30, 2024, we had $4.2 billion of liquidity including $1.2 billion of cash and cash equivalents and $2.9 billion of borrowings available under our Revolving Facility.

In addition, we had $7.8 billion of undrawn export credit facilities to fund ship deliveries planned through 2033.

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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) 2024 2025

(in billions) 2025 2026 2027 2028 2029 Thereafter

Future export credit facilities at November 30, 2024

$ 0.7 $ — $ 1.2 $ 1.2 $ 1.6 $ 3.1

Our export credit facilities contain various financial covenants as described in Note 5 - “Debt.” At November 30, 2024, we were in compliance with the applicable covenants under our debt agreements.

Stock Swap Program

Our Stock Swap Program allows us to realize a net cash benefit when Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares.

Under the Stock Swap Program, we may elect to offer and sell shares of Carnival Corporation common stock at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of Carnival plc ordinary shares in the UK market.

Any sales of Carnival Corporation common stock and Carnival plc ordinary shares have been or will be registered under the Securities Act of 1933, as amended.

During 2023, under the Stock Swap Program, we sold 2.3 million shares of Carnival Corporation common stock and repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $2 million which were used for general corporate purposes.

In addition, during 2023 we sold 0.5 million shares of Carnival Corporation common stock at an average price per share of $9.83, resulting in net proceeds of $5 million.

During 2022, we sold 6.0 million shares of Carnival Corporation’s common stock and repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $8 million which were used for general corporate purposes.

In addition, during 2022 we sold 1.6 million shares of Carnival Corporation common stock at an average price per share of $19.27, resulting in net proceeds of $30 million.

During 2021, we sold $8.9 million shares of Carnival Corporation’s common stock and repurchased the same

amount of Carnival plc ordinary shares, resulting in net proceeds of $19 million.

In addition, during 2021 we sold 0.6 million shares of Carnival Corporation common stock at an average price per share of $21.32, resulting in net proceeds of $13 million.

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-K

Item 7. Management’s Discussion and Analysis