Good morning and welcome to the Norwegian Cruise Line Holdings Fourth Quarter and Full Year 2015 Earnings Conference Call. My name is Abigail, and I will be your operator. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions for the session will follow at that time. As a reminder to all participants, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Andrea DeMarco, Head of Investor Relations. Ms. DeMarco, please proceed.

Thank you, Abigail. Good morning, everyone, and thank you for joining us for our fourth quarter and full year 2015 earnings call. I'm joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings, and Wendy Beck, Executive Vice President and Chief Financial Officer. Frank will begin the call with opening commentary, after which Wendy will follow with commentary on the results for the quarter and full year 2015, as well as provide guidance for 2016 before turning the call back to Frank for closing words. We will then open up the call for your questions. As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at www.nclhltdinvestor.com, and will be available for replay for 30 days following today's call. Before we discuss our results, I would like to cover a few items. Our press release with fourth quarter and full year 2015 results was issued this morning and is available on our Investor Relations website. I would also like to review information about forward-looking statements and the use of non-GAAP information as a part of this call. The company's comments today may include statements about expectations for the future. Those expectations are subject to known and unknown risks, uncertainties and other factors that may cause the company's actual results and performance in future periods to be materially different from any future results or performance suggested by these expectations. The company cannot guarantee the accuracy of any forecast or estimates, and we undertake no obligation to update any forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, some of our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in the company's earnings release. With that, I'd like to turn the call over to Frank Del Rio. Frank?

Thank you, Andrea. And good morning, everyone. I'd like to start off by pointing out the song you've been listening to is the new Pitbull hit song, Freedom, which has been rocketing up the charts. As I'm sure you know, Pitbull is the godfather of our newest ship, Norwegian Escape, and the song plays an important role in Norwegian's new Feel Free global ad campaign. I'll talk more about the campaign a little later in the call, but first I'd like to discuss our robust financial results for 2015, talk a little bit about the initiatives we are implementing to keep the strong momentum from 2015 going into 2016 and beyond and give some color on the current business environment as we see it. I'll then hand over the call to Wendy to review 2015 results in more detail and to highlight our 2016 guidance. This past year, we dedicated a great deal of our time formulating, implementing and aligning the go-to-market strategies of Norwegian Cruise Line, Oceania and Regent, by focusing on a targeted set of initiatives aimed at driving demand. These initiatives resonated incredibly well and included our market-to-fill approach to pricing, which directs our target market and our past guests to focus on the deal aspect and value proposition of a cruise vacation rather than just on low price. Let me start by reiterating that the company came into 2016 in the best book position in our history. We had more revenue on our books and were better loaded coming into Wave season than ever before and we're better booked in each quarter and for the full year and at higher prices than at any time in our history. We attribute the strong base of booking to our successful go-to-market strategies which have put us in a…

Thanks, Frank. I am extremely pleased to report strong results for both the fourth quarter and full year 2015, which as Frank mentioned earlier marks the first full year of operations of the Combined Norwegian and Prestige organizations under one umbrella. I'll begin with a discussion of these results followed by an update on booking trends and then we'll close with our outlook for 2016. Unless otherwise noted, my commentary compares 2015 and 2014 per Capacity Day metrics on a Constant Currency Combined Company basis, which compares 2015 results for Norwegian against the combined 2014 financial results of Norwegian and Prestige. I'll begin with commentary on our fourth quarter results, where adjusted earnings per share increased 42% over prior year to $0.51 exceeding the top end of our guidance range. The fleet was primarily driven by higher net yields as the result of higher pricing as well as a benefit from lower fuel prices partially offset by the timing of our repair and maintenance costs. Adjusted Net Yield outperformed our expectations increasing 7.4% and exceeding our guidance of up approximately 5.5%, primarily as a result of strong pricing from same fleet operations as well as a partial quarter benefit from the addition of Norwegian Escape to the fleet. This comes on the heels of strong yield performance in the third quarter where net yields improved 4.7% on solely same fleet operations. On a Constant Currency and as reported basis, Adjusted Net Yield increased 16.9% and 15.2% respectively as a result of the acquisition of Prestige and stronger pricing. Now moving on to costs, Adjusted Net Cruise Costs Excluding Fuel per Capacity Day increased 5.9% or 4.8% on a Combined Company as reported basis, primarily as the result of two scheduled dry-docks in the period compared to no dry-docks in the…

Thank you, Wendy. With the integration of Norwegian and Prestige well behind us, our team can now focus 100% on executing on our long-term strategy and developing complementary initiatives to drive further growth in our business. A case in point is the Feel Free global campaign launched last month with the Norwegian brand. It brings a straightforward message that translates well in all markets around the world and bolsters Norwegian's attribute of freedom and flexibility. At the same time, we are delivering on our disciplined newbuild program with the addition of Sirena to the Oceania Cruises fleet and the already legendary Seven Seas Explorer to the Regent fleet. Lastly, Norwegian's three brands continue to work together to align strategies and home processes by showing best practices ranging from the best way to deploy digital marketing initiatives to producing world-class entertainment across our fleet, to developing preliminary programs that are best-in-class. Both Wendy and I wish we had more time to discuss just how much activity is going on at Norwegian in our drive to at least $5 adjusted earnings per share in 2017 and 14% return on invested capital in 2018, but we want to leave time for your questions. So, operator, I'll ask you to now please open up the call for Q&A.

Thank you, Mr. Del Rio. Our first question comes from the line of Harry Curtis with Nomura. Your line is open.

Hi, good morning. Frank, can you talk about one of the concerns over the past six weeks about China that there's just simply too much supply coming and not enough demand or infrastructure to fill that capacity?

I've heard those comments. I'm probably not the best expert to articulate what may be happening on the ground today because, as you know, we don't get there until another 18 months from now. But I got to tell you, Harry, that everything that I've seen, everything that my team on the ground sees, the discussions we're having with the big-charter travel agents, operators, it reinforces our belief that overall there is no better place to deploy a new vessel, like we are deploying in 2017, than in China.

Can you talk a little bit more about diversifying the sourcing away from the charters and your perception of how the travel agent system is building and kind of the financial incentives for the reasons why that system should build pretty quickly?

Well, I think it's at this stage more of a wish and a hope by the operator that it evolves into a more diversified multi-channel way of doing business than the singular charter. But I got to tell you, from our perspective, entering the market as we are for the first time, I think it works to Norwegian's advantage to have a very concentrated group of travel agents that are mainly responsible for the ultimate distribution of the product. Perhaps years from now when we have four or five vessels, I will probably think differently. But entering this market pretty much as a start-up in China, I kind of favor the existing very one-sided model because it allows me to focus all my attention on a known group of distributors as opposed to trying to introduce a brand in a populace of over a billion people. So for guys like me, it may not be the worst thing in the world.

Very good. And then I just had a quick question on costs. There was some talk after the Prestige merger of some cost savings, really long-tail cost savings such as contract renewals. Can you give us a sense of where those are at this point? How much savings is still possible based on further synergies?

We mentioned probably six months ago that the formal synergy program was over. We've, I believe, done an excellent job in identifying those major contracts. Contracts have long-life in some cases. They're not all up for renewal in 2015 or in 2016, and we continue to believe that as more of these contracts come up for renewal that the combined volume that we bring to a particular vendor, a particular contract will be helpful in renegotiating new terms at a lower cost.

And I would just add to that, Harry, that I think in the beginning, what you might be alluding to is taking out maybe the hotel operations contractor on Prestige, and we have decided to keep that in place. But instead, what we've done is we've really pulled our buying power and we're working very well together not just on the Prestige side, but also logistics for the entire fleet.

Very good and nice results. Thanks.

Thanks, Harry.

Thank you. Our next question comes from the line of Felicia Hendrix with Barclays. Your line is open.

Hi, good morning. Thank you and thanks for all the great color you provided on the call. Wendy, I believe you said that for the first quarter, just in reference to the dry-dock and some other items, that yields would have been 75 basis points to 100 basis points higher. For the full year, I believe you still have some higher dry-docks than you had last year. So for the full year, what would that yield impact be?

So all of the other dry-docks throughout the year, if you look at dry-docks this year versus last year, they pretty much roll over each other. So the largest impact is when you pull out the Pride of America in Q1, Felicia, partly because it's a 24-day dry-dock, partly because it's also the highest yielding ship on Norwegian. So, on a full year basis, if you pulled that out, it's probably about 10 basis points to 15 basis points.

Okay. Thanks. And then just while we're talking about the full year, in the past you guys have said that the company could generate net yield growth of 2% to 3% in an organic year and 3% to 4% in the year when there's a new ship. So if three ships coming in this year, is it fair to say that these three new ships account for 100 basis points of yield to the forecast? Because it sounds like the legacy fleet and everything that you've done is performing well also.

You've got to take them one at a time. Certainly, Escape is proving to be as good as her billing and consistent with what we've said in the past about new vessels entering the Norwegian fleet. Sirena on the Oceania brand is performing on par with the other three sister vessels that are identical to Sirena. So not really accretive, but just more of the good high yields that those kind of vessels produce. And Explorer is doing very well, although she's only going to contribute to about 5.5 months worth of business. But to give you an idea, she is in the Mediterranean in the third quarter or early fourth quarter. And in spite of the challenges that we see in the Mediterranean, she is booked at yields roughly 50% higher than a sister Regent vessel is generating in the Mediterranean during the same time. So clearly, that is a huge driver. But remember that that vessel is only a 750-passenger vessel. So, on a weighted average basis, even though she books as well as I mentioning to her the overall impact on the annual yield growth is minimal.

And I would just add that that kind of helps counterbalance the Norwegian Escape, where obviously Norwegian ships are at a lower yield than the Oceania and the Regent ships. But again, Felicia, if you take 3% to 4% is the number that we've always guided to in a year that we bring in ships, that's a midpoint of 3.5%, we're guiding to 4% on a Constant Currency basis, which I think really points to the fact that we have really been growing the organic fleet.

Thank you for that color. And then just last thing, little housekeeping. When you guys talk about 2017, your outlook for earnings to exceed $5, I was just curious, are you assuming stock buybacks in it?

No, we are not. So the guidance for 2016 does not assume buybacks. In the original $5 plan, however, there was just under $800 million of free cash flow that we showed at that time to pay down debt, but not specifically buybacks.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Robin Farley with UBS. Your line is open.

Great. Thanks. Two questions. One is I wonder if you could talk a little bit about expense drivers in Q4 came in I guess a little bit higher than guidance, which would have been something other than the dry-docks that you would have had in the plan, I guess. And similarly, for 2016, when we sort of quantify what the dry-dock increase is and the China expense, there may be some there expenses that are up, and I know the whole Norwegian Edge program, most of that's going to be showing up in CapEx. So maybe you could just give a little color on what the other expense drivers are.

Sure. So on Q4, there were some partly repairs and maintenance, some timing items and additional investments. Clearly you've seen the benefit as we've made investments, primarily into the Norwegian brand in 2015 and what it's done to drive demand and yields. On the 2016 side of costs, there are a number of puts and takes there, but clearly we are investing in China, we called that out, that's $15 million for 2016 for the cost of investing and the ship comes in in mid-2017 where we'll then get the benefit. There is about $20 million on the additional dry-docks, there is a little bit more interest in some FX, and then we also have a tailwind on the fuel side.

And maybe some other non-fuel operating expense items in there because, if I backed out China and the dry-docks, it seems like expense would still be up excluding fuel on the operating side?

Yeah, somewhat. But overall I would say that we're doing everything we can to keep – if you take out China and the additional dry-dock expense, we would actually be sub-1% in our growth in net cruise cost, Robin. So we're doing everything we can to manage down those costs. And you are correct, by the way, on The Norwegian Edge program. There has been a little bit of misunderstanding there as to how we get to those numbers. But keep in mind that we have always been out there saying post the acquisition that we have about $175 million in what we would call maintenance CapEx for the combined fleets. So The Norwegian Edge and the Regent program, those span two years so you've got $175 million times two. We also have been opportunistic to lock in FX hedges on our new-builds. So there's a few puts and takes, but overall our CapEx guidance has not changed because we're managing through that.

Okay. That's great. Thank you. And then just lastly, can you give a little more color around the Hawaiian land-based operation that you bought and just what that will do to revenue and expenses? Is that accretive at the bottom line and that kind of thing?

Sure. So it's about $32 million a year in revenue and about $5 million per year to the bottom line, so pretty immaterial. And it actually is dilutive to our yields as we bring in additional capacity. So what we've tried to do there is just make sure that we excluded assuming that the sale will go through and it'll be out some time in 2016 and give you all the color to get your models right by quarter.

Great. Thank you.

Thank you. Our next question comes from the line of Steven Wieczynski with Stifel. Your line is open.

Hey. Good morning, guys. So, Frank, I guess going back to the 2017 guidance of $5, it now sounds like you're a little bit more favorable going north of $5. And you said that didn't contemplate any entry into China. So I guess the question is, does that now contemplate China? Is it better fundamentals? Is it lower fuel? I'm just trying to get at why is that a little bit better versus $5 right now.

So, yes, it did not include China. The $5 was introduced about a year ago. So lots of moving parts any time you are predicting what's going to happen two years down the road. But everything that we see today, we have greater confidence than ever that the $5 earnings per share at a minimal will be reached. We think China will be accretive. We think that, if fuel remains at the levels it is today, it will be accretive. not on a dollar-for-dollar basis because don't forget our unfavorable hedges. But nevertheless, we've also netted higher synergies than was contemplated when we put out the $5 back in February/March of last year. But then, of course, the biggest driver of all is the confidence that we're seeing in the advance booking. To be up 30% on higher pricing is very comforting. And we have yet to see the full effect of all the itinerary changes that we've announced because some don't take effect until late 2016 and early 2017 and some don't take effect until mid-2017, which also were not included. We believe that the move of Getaway alone to Scandinavia could have an impact of just under $0.10 a share. So we see a lot of good reasons why that $5 is coming into focus very nicely.

Okay. And then the second question would be in terms of this year. How are you guys viewing onboard spend? And have you seen any weakness in onboard spend in the last two months, three months?

We had a very, very strong Q4 in onboard spend leading up to the holidays. We saw a little dip at the beginning of the year, and it's typical. I think it's a little bit of the hangover from New Year. But over the last three weeks or so, we've seen it pick up back to where we expected it to be. So there's no headline there, at least not yet.

Okay. And then last question real quick. Have you guys bought back any stock in the first quarter?

We will continue to be opportunistic and we will be buying back shares most likely in Q1.

Okay. Thanks, guys. Appreciate it.

Thank you. Our next question comes from the line of Greg Badishkanian with Citigroup. Your line is open.

Great. Thanks. Just on Europe, when you mention that the recent geopolitical events as well as currency could have an impact of about $0.10, I'm just wondering the breakout between currency versus the geopolitical issues impacting itineraries (46:34)?

Yeah, good question. So it's about half and half. $0.05 of that would be related to the impact of Turkey and $0.05 would be on the FX.

Perfect. And are you noticing any differences between North American-sourced passengers going to the Med versus European-sourced passengers going on Med as well as European itineraries? Is there any difference in behavior and demand?

Greg, we see that the North American passenger up to now – we think it will change throughout the spring and summer, but up to now we see the North American passenger being a little more hesitant to book an Eastern Mediterranean itinerary than if you are a European-sourced guest. And that's very consistent with what we've seen in prior events similar to what we're facing now.

Makes sense. And then finally, just the Caribbean, it's strong, it's very strong and that's pretty consistent within the industry. What's the key driver for that continued strength?

Well, there is I think various reasons. One, people want to go on vacation, they want to cruise. So if a person is perhaps hesitant to go to the Eastern Mediterranean, they'll go to the Caribbean instead. So weakness in one theater of deployment will be offset by strength in the other. I also think that in the case of Norwegian, we've got our best hardware there. People want to try the Escape; people want to try the Getaway and Breakaway. And I think that our marketing is resonating, it's upbeat. It's just consistent with the overall fun nature of the Caribbean, and there has not been any reason not to go to the Caribbean. So it's always going to be the largest deployment theater for the cruise industry and it's been consistently in the mid 40s-% of capacity, and I think to some degree the demand has sort of filled up to that capacity over the years.

Thank you.

Thank you. Our next question comes from the line of Kevin Milota with JPMorgan. Your line is open.

Hey. Good morning, everyone. Two questions here. One, hopefully, you could give us the capacity increases. You gave us the first quarter and full year, but maybe second quarter, third quarter and fourth quarter capacity increases? And also talk through the cadence of net yields, can you give us some expectations on where you see net yields, how they're flowing through the year given the new ship introductions in the second quarter and the third quarter? Thank you very much.

Great. Hi. So the capacity growth for Q2 is approximately 11%, Q3 15%, and Q4 11%. And then on the cadence for yields, it will be the highest in Q3. I've likened it to a bell curve in the past and it's still similar to bell curve and then Q2 would be the next highest, Q1 would be the third highest and then Q4 would be the lowest, but that's because we're rolling over such high numbers in Q4 2015.

Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Tim Conder with Wells Fargo Securities. Your line is open.

Thank you. First of all, again, Frank and team, congrats on the great execution.

Thank you.

And also, all the color, to echo some previous comments on that. Most of my questions have been answered. But a couple clarifications, Wendy, the $20 million in incremental dry-docks that we're going to see in 2016, should we assume – I know you've got some accelerated dry-docks in the first half of 2017, but on an annual basis, should we assume that that should go more back to normal i.e. that $20 million go away in 2017 is the first question. And then, Frank, on China, just to clarify, the $5 plus in EPS that you're commenting on earlier. You said the incremental shift is not included but does that include the 2015 of incremental expense that you called out?

No. It did not. So, China was just not contemplated when the original $5 forecast was disclosed.

Okay.

And then, Tim, regarding the dry-dock, so it's a dry-dock versus a dry-dock 2016 versus 2017. Maybe slightly less in cost in 2017 due to the Pride of America dry-dock.

Okay. And then back to the question on share repo and debt reduction. Again, you commented on what was and was not contemplated related to the $5 plus target there. Has anything changed, as you see it now, related to your plans on debt pay down and in your thought process there?

Well, I think as we talked to all of our investors, we've got a weighted average cost of debt of roughly 3.9%. It's hard to choose to pay down debt at those kind of rates. We have been out there, as you've seen, being opportunistic and also participating with secondary offerings. So, I think that's where our focus is at this time, especially with the rates where our stock is.

Okay. Okay. That's what we thought. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Vince Ciepiel with Cleveland Research. Your line is open.

Great. A couple on the business. The first, you've mentioned a nice increase in the outside sales force in the past. Could you help us understand what payback you're seeing now that you've had a few quarters to digest that and specifically California and Canada, how has that business changed for you over the last 6 months to 12 months?

Yeah. I'm glad you asked. We made a big deal at about this time last year. And through the fourth quarter, our California business was up 20% and Canada was up 19%. So, we thought that was a very good ROI, especially to get to those levels ramped up as quickly. And so I expected that trend to continue through 2016 with the new ship introductions, et cetera.

Great. Thanks. And then the 30% increase for the first half of 2017, I think it was you mentioned as being indicative of consumer confidence. How much of that 30% increase do you think is an industry-wide thing or a lengthening of the booking curve versus maybe some things you're doing specifically within the business and a payback from new ad campaign or other changes you've made?

Yeah. I don't know. Those aren't the kind of things that I discuss with competitors. But my sense is that a high tide raises all boats, as they say. And if we're doing well into the future, my instinct is that others are as well. We're not doing anything particularly different for 2017 departures that we're not doing for 2016. It seems to resonate well in the market place. As I said earlier, the only difference between 2016 and 2017 are some itinerary changes that we discussed earlier that we think are going to be accretive to yields and therefore to earnings. But I think it just shows a fundamental strong demand by consumers for cruise vacation. We all know what's the pundits have been saying about the overall economy and the threat of recession, et cetera, et cetera, but I've always believed that the cruise industry because of our elongated booking curve is a very strong indicator of future our economic activity and I hope that what we're seeing for 2017 carries on and it proves out (55:32) that the economy remains strong.

Great. Thanks.

Okay, Abigail, we have time for one more question please.

Our last question comes from the line of Jared Shojaian with Wolfe Research. Your line is open.

Hi. Good morning.

Good morning.

Good morning.

Frank, there seems to be some debate philosophically about how luxury brands performed during recession. You've got one camp that will say luxury is more cyclical because it deals with higher dollar pricing, and then the other camp will say luxury is less cyclical because you have higher net worth incomes.

Yeah.

So, I think based on comments you've made in the past, you lean towards the latter. But my question is what sort of data can you share just to compare Oceania and Regent versus some of the contemporary brands just historically over the last few recessions? Thanks.

If you go back to 2008, 2009 with the great recession, most cruise lines out there today have yet to reach their pre-recession yield. I think that's the best indicator of how resilient the brands are in case of a downturn and that's because most brands react by reducing pricing when natural demand dries up. The Oceania and Regent brands didn't do that, our go-to-market strategy is to not focus on discount but to focus on spending more marketing dollars to stimulate demand. As a result, Regent returned to its high watermark. I think, Regent never missed a year, every year was a record year in yields and Oceania missed it in 2009 and got back in 2010. So from Oceania and Regent's perspective, I will tell you that, the upscale brands are more resilient to the downturn. Even though Norwegian brand, on a standalone basis, got back to their pre-recession yields in 2011. And so I think a lot has to do with management and how they react to the situation and we're very pleased that we keep growing yields because we never had to climb that steep full back up from deep discounting.

Okay. Great. Thanks, that's helpful. And then, lastly, we know there's a lot of incremental luxury capacity coming on later this year, whether that's in Viking or Seabourn and even yourself. So can you just update us on what you're seeing on the yield side and in the luxury premium segment?

Yeah. I think that the bigger impact on yields in the upscale segment is not so much the capacity increase as you mentioned, but the geopolitical situation in the Eastern Med, the Med. That's the area where a lot of upscale inventory goes to in the second quarter and third quarters. And with that area having the negative impact, I think that's having a bigger impact on yield than whether one or two or three ships are entering the marketplace.

Okay, great. Thanks.

Okay. Well, thanks, everyone, for your time and support. As always, we will be available to answer your questions later today. Thanks again.

This concludes today's conference. You may now disconnect.