Carnival Corp Ltd. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . 2024 Executive Overview 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 Refer to our consolidated financial statements for further information on Accounting Pronouncements . Critical Accounting Estimates Our critical accounting estimates are those we believe require our most significant judgments about the effect of matters that are inherently uncertain. 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: 37 Ship Accounting We make several critical accounting estimates with respect to our ship accounting including ship improvement costs, estimated useful lives and residual values. We account for ship improvement costs, including replacements of certain significant components and parts, by capitalizing those costs that we believe add value to our ships and have a useful life greater than one year and depreciating those improvements over their estimated remaining useful life. The costs of repairs and maintenance, including those incurred when a ship is taken out-of-service for scheduled maintenance, and minor improvement costs and expenses, are charged to expense as incurred. If we change our assumptions in making our determinations as to whether improvements to a ship add value, the amounts we expense each year as repair and maintenance expense could increase, which would be partially offset by a decrease in depreciation expense, resulting from a reduction in capitalized costs. In addition, the specifically identified or estimated cost and accumulated depreciation of previously capitalized ship components are written-off upon retirement, which may result in a loss on disposal that is also included in other operating expenses. We do not have cost segregation studies performed to specifically componentize our ships. In addition, since we do not separately componentize our ships, we do not identify and track depreciation of original ship components. Therefore, we typically have to estimate the net book value of components that are retired, based primarily upon their replacement cost, their age and their original estimated useful lives. Given the large size and complexity of our ships, ship accounting estimates require considerable judgment and are inherently uncertain. In order to compute our ships’ depreciation expense, we apply judgment to determine their useful lives as well as their residual values. We have estimated our ships’ useful lives at 30 years and residual values at 15% of our original ship cost. Our ships’ useful life and residual value estimates take into consideration the estimated weighted-average useful lives of the ships’ major component systems, such as hull, superstructure, main electric, engines and cabins. We also take into consideration the impact of technological changes, historical useful lives of similarly-built ships, long-term cruise and vacation market conditions and regulatory changes, including those related to the environment and climate change. We determine the residual value of our ships based on our long-term estimates of their resale value at the end of their useful lives to us but before the end of their physical and economic lives to others, historical resale values of our and other cruise ships as well as our expectations of the long-term viability of the secondary cruise ship market. We review estimated useful lives and residual values for reasonableness whenever events or circumstances significantly change. 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. 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 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 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. If materially different conditions existed, or if we materially changed our assumptions of ship useful lives and residual values, then our depreciation expense, loss on retirement of ship components and net book value of our ships would be materially different. Our 2024 ship depreciation expense would have increased by approximately: • $51 million assuming we had reduced our estimated 30-year ship useful life estimate by one year at the time we took delivery or acquired each of our ships 38 • $260 million assuming we had estimated our ships to have no residual value We believe that the estimates we made for ship accounting purposes are reasonable and our methods are consistently applied in all material respects and result in depreciation expense that is based on a rational and systematic method to equitably allocate the costs of our ships to the periods during which we use them. Valuation of Ships 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. 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. 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 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. 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. Refer to our consolidated financial statements for additional discussion of our property and equipment policy and ship impairment reviews. We believe that we have made reasonable estimates. Contingencies We periodically assess the potential liabilities related to any lawsuits or claims brought against us, as well as for other known unasserted claims, including environmental, legal, regulatory and guest and crew matters. While it is typically very difficult to determine the timing and ultimate outcome of these matters, we use our best judgment to determine the appropriate amounts to record in our consolidated financial statements. We accrue a liability and establish a reserve when we believe a loss is probable and the amount of the loss can be reasonably estimated. In assessing probable losses, we make estimates of the amount of probable insurance recoveries, if any, which are recorded as assets where appropriate. Such accruals and reserves are typically based on developments to date, management’s estimates of the outcomes of these matters, our experience in contesting, litigating and settling other similar matters, historical claims experience, actuarially determined estimates of liabilities and any related insurance coverage. 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 amounts accrued related to our contingencies. All such changes in our estimates could materially impact our results of operations and financial position. Refer to our consolidated financial statements for additional discussion of contingencies. Known Trends and Uncertainties • 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 Emissions Trading System (“ETS”) on January 1, 2024, which includes a three-year phase-in period. Refer to XVIII. Governmental Regulations. 39 Results of Operations We have historically earned substantially all of our cruise revenues from the following: • 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. The cruise ticket price typically includes the following: • Accommodations • Most meals, including snacks at numerous venues • Access to amenities such as swimming pools, water slides, water parks, whirlpools, a health club and sun decks • Child care and supervised youth programs • Entertainment, such as theatrical and comedy shows, live music and nightclubs • Visits to multiple destinations • Sales of onboard goods and services not included in the cruise ticket price. This generally includes the following: • 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. Concession revenues do not have direct expenses because the costs and services incurred for concession revenues are borne by our concessionaires. In 2024, we earned 34% of our cruise revenues from onboard and other revenue goods and services. We earn our tour and other revenues from our hotel and transportation operations and other revenues. We incur cruise operating expenses for the following: • The costs of passenger cruise bookings, which include travel agent commissions, cost of air and other transportation, port fees, taxes, and charges that directly vary with guest head counts and credit and debit card fees • Onboard and other cruise costs, which include the costs of beverage sales, costs of shore excursions, costs of retail sales, internet and communication costs, credit and debit card fees, other onboard costs, costs of cruise vacation protection programs and pre- and post-cruise land packages • Payroll and related costs, which include the costs of officers and crew in bridge, engineering and hotel operations. Substantially all costs associated with our shoreside personnel are included in selling and administrative expenses • Fuel costs, which include fuel delivery costs and European Union Allowance costs • Food costs, which include both our guest and crew food costs • Other ship operating expenses, which include port costs that do not vary with guest head counts; repairs and maintenance, including minor improvements and dry-dock expenses; hotel costs; entertainment; gains and losses on ship sales; ship impairments; freight and logistics; insurance premiums and all other ship operating expenses We incur tour and other costs and expenses for our hotel and transportation operations and other expenses. 40 Statistical Information Years Ended November 30, 2024 2023 2022 Passenger Cruise Days (“PCDs”) (in millions) (a) 100.5 91.4 54.6 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) 2.9 2.9 2.6 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) AUD $ 0.66 $ 0.66 $ 0.70 CAD $ 0.73 $ 0.74 $ 0.77 EUR $ 1.09 $ 1.08 $ 1.06 GBP $ 1.28 $ 1.24 $ 1.25 Notes to Statistical Information (a) PCD represents the number of cruise passengers on a voyage multiplied by the number of revenue-producing ship operating days for that voyage. (b) ALBD is a standard measure of passenger capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. 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) 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 41 (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. 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. 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. Revenues Consolidated 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 NAA Segment 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 42 Europe Segment 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 Consolidated 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. 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 43 • $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, 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, 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 44 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 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. This deficit is mainly attributable to the fact that, under our business model, substantially all of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts generally remain a current liability on our balance sheet until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our borrowings and other cash from operations. 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 $6.4 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 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. Sources and Uses of Cash Operating Activities 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 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 $3.3 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: • Repayments of $200 million of short-term borrowings • Repayments of $5.9 billion of long-term debt and refinancing of $1.8 billion of long-term debt to extend maturities • Issuances of $3.0 billion of long-term debt • Debt issuance costs of $131 million • Debt extinguishment costs of $79 million • 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 45 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. Material Cash Requirements Payments Due by (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 Newbuild capital expenditures (b) 893 423 1,302 1,263 1,502 3,182 8,565 Total $ 3,862 $ 4,414 $ 7,318 $ 10,797 $ 6,208 $ 9,677 $ 42,277 (a) Includes principal as well as estimated interest payments and does not include the impact of any future possible refinancings. Excludes undrawn export credits. (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 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. 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 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) 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.