James Hardiman

James Hardiman inquired about the shift in United Parks & Resorts' 2026 financial performance language from 'record revenues and EBITDA' to 'strong financial performance,' seeking clarification on whether this indicates increased conservatism or uncertainty. He also asked for a post-mortem on 2025 cost performance against targets and the gross-to-net impact of 2026's $50 million gross cost savings, particularly concerning labor.

Answer

CEO Marc Swanson clarified that the company is not providing guidance but is excited about the 2026 lineup and expects business growth, hoping for improved macro trends and weather. On costs, Mr. Swanson acknowledged suboptimal management in 2025 and highlighted new discipline and initiatives for 2026. Interim CFO Jim Forrester detailed headwinds like minimum wage increases (Florida, San Diego), property tax, insurance, and marketing spend, outlining plans to aggressively anticipate and address these to flatten or decrease year-over-year cost growth.

James Hardiman asked for clarification on United Parks & Resorts' 2026 outlook, specifically the phrase 'strong financial performance' compared to previous years' 'record revenues and EBITDA' guidance. He also sought a post-mortem on 2025 cost performance against targets and details on the $50 million gross cost savings for 2026, including expected wage headwinds.

Answer

CEO Marc Swanson clarified that the company is not providing specific guidance but is excited about 2026's lineup and expects business growth. He acknowledged less than optimal cost management in 2025, emphasizing new discipline and initiatives for 2026. Interim CFO and Treasurer Jim Forrester detailed headwinds like minimum wage increases (Florida, San Diego), property taxes, and insurance, outlining plans to proactively address these costs and reduce them on a net basis.

James Hardiman followed up on the impact of Epic Universe's opening, asking specifically about admissions per capita trends in Orlando and whether the company had become more promotional there. He also requested quantification of the impacts from weather, calendar shifts, and increased marketing.

Answer

CEO Marc Swanson declined to provide park-specific per capita data but noted that revenue at SeaWorld Orlando was positive for the quarter. He attributed the broader pressure on admissions per capita to necessary promotional activity in response to significant weather headwinds across the company. Swanson also clarified that the benefit from the Easter holiday shift was almost entirely offset by the negative impact of poor weather during the quarter.

James Hardiman from Citigroup Inc. requested a reconciliation for the decline in EBITDA and cash from operations despite relatively flat revenue. He also sought clarification on whether recent commentary about real estate monetization signaled new opportunities beyond hotel partnerships.

Answer

CEO Marc Swanson explained the EBITDA decline was due to cost pressures, primarily in labor, but emphasized that overall costs were well-managed. Regarding real estate, Swanson clarified that while there's nothing specific to announce, the company and its board are actively exploring various ways to monetize its valuable land holdings, not limited to just hotel development.

On behalf of James Hardiman, Sean Wagner asked for clarification on April's revenue performance, specifically if in-park per capita spending trends were similar to Q1. He also inquired about any other significant calendar-related comparisons or operating day shifts to consider for the remainder of the year.

Answer

CEO Marc Swanson confirmed that in-park per capita spending was positive in April and that they had not seen a pullback in guest spending. CFO James Mikolaichik added that while there are minor quarterly trades, the full-year operating day count is expected to be relatively flat, noting they expect to regain days lost to significant hurricane closures in late 2023.

James Hardiman of Citi asked for a postmortem on 2025 performance, seeking to categorize issues into cyclical pressures, weather impacts, unforced errors, and potential secular changes in consumer behavior, particularly given the CEO's view of the industry as resilient and growing. He also inquired about the philosophy behind cost savings and how to balance it with guest experience, and requested an update on previously outlined cost synergies for 2026.

Answer

CEO John Reilly explained that while not dwelling on the past, lessons from 2025 are being used to correct missteps, particularly regarding product localization and consumer confusion over pass benefits. He emphasized that the issues are not consumer-driven but execution-related, and highlighted opportunities for margin improvement. Reilly also noted the foundational work completed in park infrastructure and tech stack. CFO Brian Witherow confirmed that 100% of original gross cost synergies from the merger were delivered by end of 2025, and outlined ongoing efforts for further efficiencies, standardization, and labor productivity improvements in 2026 without providing a specific number. Reilly stressed that cost savings must protect the guest experience, citing examples of high-ROI operational improvements from employee suggestions.

James Hardiman of Citi inquired about a postmortem of Six Flags' 2025 performance, seeking to categorize issues into cyclical pressures, weather impacts, unforced errors, and potential secular shifts in consumer behavior. He also asked about the company's philosophy on cost savings, balancing efficiency with guest experience, and requested an update on previously outlined cost synergies for 2026.

Answer

President and CEO John Reilly explained that 2025 issues stemmed from product localization missteps, consumer confusion over pass benefits, and the need for margin improvement, not a fundamental consumer problem. He highlighted foundational work completed in parks and tech stack. CFO Brian Witherow confirmed 100% of original merger cost synergies were delivered by end of 2025 and that further efficiencies are expected in 2026 through productivity improvements and standardization, without specific new targets. John Reilly emphasized protecting the guest experience as a "red line" for cost initiatives, citing examples of high-ROI operational improvements.

James Hardiman of Citi analyzed the revised guidance, asking for a breakdown of the EBITDA reduction between Q2 performance and second-half expectations, particularly the impact of lost season pass revenue. He also questioned the timing and effectiveness of the pulled-forward advertising spend and its effect on operating expenses.

Answer

CFO Brian Witherow attributed the guidance cut primarily to lower-than-expected attendance volume, driven by a significant shortfall in the active pass base from weather disruptions in May and June. Regarding costs, he explained the decision to pull forward advertising was made before the worst weather hit. He noted cost savings were always planned to be back-half loaded, where the largest opportunities exist with the least disruption to the guest experience.

James Hardiman inquired about the strategic framework for portfolio optimization and monetizing smaller parks. He also requested an update on the $80 million revenue synergy target, its timing, the performance of the all-park pass, and how much is included in the 2025 guidance.

Answer

CEO Richard Zimmerman explained that portfolio optimization aims to reduce complexity and focus on core assets, citing the marketing of undeveloped land as an example. CFO Brian Witherow noted that revenue synergy realization is about a year behind due to system integration needs but emphasized the attendance growth opportunity is much larger. He stated that only a modest contribution from the new all-park pass is included in the 2025 guidance.

James Hardiman asked management to address the market narrative about being surprised by the investment needs at legacy Six Flags parks and questioned the 2025 margin profile, including how to model the path to the $800 million free cash flow target.

Answer

CEO Richard Zimmerman countered the narrative, stating the business is resilient and consumer demand is strong, as shown by a 20% attendance increase in October. CFO Brian Witherow added that margin improvement is a key focus, driven by attendance leverage and operational efficiencies like better labor management. He declined to provide specific EBITDA guidance but reiterated the components of the free cash flow calculation, including elevated near-term CapEx.

James Hardiman asked for more color on Mattel's December performance in the U.S., particularly regarding retail and wholesale dynamics, inventory levels, and whether the 2026 guidance includes any 'cleanup' from 2025's sharp retail turns.

Answer

Paul Ruh (CFO, Mattel) clarified that December U.S. gross billings grew less than anticipated, leading to a more promotional environment. He noted that POS was positive across all regions for Q4 and the full year (up 3%). Retailers adopted a just-in-time approach in 2025, with December POS finishing lower than expected and conservative inventory management. Mattel took actions to manage its own inventory and support retailers, positioning them well for 2026. James Hardiman also questioned if the 2026 operating income/EPS guidance, which is significantly below expectations, and the directional 2027 guidance imply a broader downward revision beyond 2026. Ynon Kreiz (Chairman and CEO, Mattel) stated that the 2027 double-digit profitability growth is directional, and the 2026 investments are expected to be highly accretive, accelerating top and bottom-line growth in 2027 and beyond, not merely returning to previous levels. He reiterated confidence in achieving a 50% gross margin in 2026 and improving financials thereafter, emphasizing that investments are for accelerated growth, aligning with the capital allocation priority for organic growth.

James Hardiman sought clarification on Mattel's December 2025 U.S. performance, specifically regarding retail and wholesale inventory levels, and whether the 2026 guidance includes any 'cleanup' from year-end dynamics. He also expressed concern that the 2026 operating income and EPS guidance, even with 2027's projected double-digit growth, might not return to prior 2025 expectations, suggesting a potential downgrade.

Answer

Mattel's CFO, Paul Ruh, attributed the December U.S. performance to lower-than-anticipated growth and a more promotional environment, leading to actions to manage inventory and support retail partners, positioning Mattel well for 2026. Mattel's Chairman and CEO, Ynon Kreiz, clarified that the 2027 double-digit profitability growth is directional, and the 2026 investments are designed to accelerate future growth and profitability beyond just returning to prior levels, emphasizing a return to 50% gross margin in 2026.

James Hardiman of Citigroup Inc. asked about the magnitude of recent price increases, the potential for market share gains, and requested a bridge from the initial to the current full-year guidance.

Answer

CFO Paul Ruh stated that pricing actions were minimal and necessary, while CEO Ynon Kreiz noted Mattel is competitively well-positioned due to its supply chain flexibility. Ruh clarified the guidance change was driven primarily by widening the top-line growth range to 1-3% (from 2-3%) to reflect consumer uncertainty, which then flows through to EPS.

James Hardiman asked for an early outlook on cost inflation for 2025 and other margin factors. He also inquired if wholesale shipments would track retail sales one-to-one in Q4, and how that compares to the prior year's destocking.

Answer

CFO Anthony DiSilvestro stated it was too early to comment on 2025 but noted the year-to-date deflation benefit has been shrinking each quarter and is expected to flip to slight inflation in Q4. Regarding inventory, he suggested there is potential for a slight tailwind from wholesale outpacing retail in Q4 compared to the prior year, as inventory was slightly elevated coming into 2024.

James Hardiman sought to understand how the projected 4%-8% wholesale growth translates to a modest operating loss for HDMC, considering factors like tariffs, deleverage from production vs. wholesale, and the potential impact of under-shipping Touring models on ASP and mix.

Answer

CFO Jonathan Root explained that several factors contribute to the near-flat operating income for HDMC in 2026. These include a full year of tariff exposure (a $25 million headwind), deleverage challenges from balancing wholesale and production, and associated supply chain impacts. He noted that the 1:1 retail-to-wholesale relationship provides an offsetting positive, along with non-motorcycle implications for Parts & Accessories and General Merchandise.

James Hardiman sought clarification on how Harley-Davidson bridges its projected 4%-8% wholesale growth to a modest operating loss for the HDMC segment in 2026, considering factors like tariffs, deleverage, and the impact on ASP/mix from under-shipping touring models.

Answer

Jonathan Root, Chief Financial and Commercial Officer, explained that bridging HDMC's operating income for 2026 involves several factors: a $25 million headwind from full-year tariff exposure, deleverage challenges due to balancing wholesale and production, and associated supply chain impacts. He noted that a broadly one-to-one retail and wholesale relationship provides an offsetting positive, along with non-motorcycle implications from Parts & Accessories and General Merchandise. He concluded that the midpoint comparison for operating income is effectively flat, but sets up an improved performance for future years.

Questioned the strategy of aligning wholesale shipments with retail sales given the retail weakness and asked about the risk of needing further inventory destocking in 2025.

Answer

Management defended the strategy, stating they are focused on reducing dealer inventory to levels similar to the start of the year. They believe this is the right level, partly because the quality of the inventory is higher with the new Touring platform, which reduces the risk of an overhang for 2025.

James Hardiman asked for a bridge explaining how 4%-8% wholesale growth in 2026 still leads to a modest operating loss for HDMC, considering factors like tariffs, deleverage from production versus wholesale, and the impact on ASP/mix from undershipping Touring models.

Answer

Jonathan Root, CFO, detailed the factors impacting HDMC operating income: a $25 million year-over-year headwind from full-year tariff exposure, a deleverage challenge from balancing wholesale and production, and associated supply chain impacts. He noted that the one-to-one retail/wholesale relationship provides an offsetting positive, and there are non-motorcycle implications. Overall, operating income is expected to be flat year-over-year at the midpoint, setting the stage for improved future performance.

James Hardiman asked for a bridge explaining how an anticipated 4%-8% wholesale growth in 2026 still leads to a modest operating loss for HDMC, considering factors like tariffs, production deleverage, and the impact of undershipping Touring models on ASP and mix.

Answer

CFO Jonathan Root explained that the near-flat HDMC operating income for 2026, despite wholesale growth, is due to several factors: a full year of tariff exposure adding a $25 million headwind, deleverage challenges from balancing wholesale and production, and associated supply chain impacts. He noted that the one-to-one retail-to-wholesale relationship provides an offsetting positive, and there are non-motorcycle implications from P&A and A&L.

James Hardiman of Citi asked for clarification on the positive second-half retail outlook and questioned how the company could make its new, sub-$6,000 small displacement motorcycle profitable, a goal that has historically been elusive.

Answer

CEO Jochen Zeitz reaffirmed the positive H2 retail outlook for North America. Regarding the new motorcycle, he called it a 'significant unlock' for the company, stating that both it and a forthcoming iconic cruiser will be profitable. He attributed this success to a long development cycle since 2021 and key learnings, but did not provide specifics on the cost structure.

James Hardiman of Citi sought clarification on the positive retail outlook for the second half and asked for more detail on the new small displacement bike, particularly how it can be profitable where previous attempts have failed.

Answer

CEO Jochen Zeitz confirmed the positive H2 retail sales outlook for North America, citing improving trends and easier comps. Regarding the new bike, he stated it has been in development since 2021 and is engineered to be profitable, representing a significant unlock for the company, but he declined to share specific details on the engineering or cost structure.

James Hardiman of Citi sought clarification on the positive second-half retail outlook and asked how the company plans to make its new small displacement motorcycle profitable, a feat that has been elusive in the past.

Answer

Chairman, President & CEO, Jochen Zeitz, confirmed the positive H2 retail outlook for North America, citing improving trends and easier comps. Regarding the new bike, he called it a 'significant unlock' for the company, stating that after years of development since 2021, the company is confident it can achieve profitability in this segment for the first time, though he did not provide specific details on the strategy.

James Hardiman requested detailed color on the various sources of the projected tariff impact, particularly from the EU and China, and asked about the risk of anti-American sentiment affecting sales. He also questioned whether the withdrawal of guidance was driven more by tariff uncertainty or underlying demand weakness.

Answer

CEO Jochen Zeitz explained that the largest tariff impact stems from China sourcing, despite it being a small portion of total spend, due to the 145% duty. He expressed cautious optimism about a favorable trade deal with Europe. CFO Jonathan Root added that the tariff situation is extremely fluid, contributing to the guidance withdrawal. Regarding demand, Jochen Zeitz noted that sequential improvement was seen from February through April in North America and that anti-American sentiment has not been a significant issue.

James Hardiman from Citigroup Inc. requested a detailed breakdown of the tariff impacts from China, Mexico, and the EU, and asked about the risk of anti-American sentiment. He also questioned how much of the guidance withdrawal was due to tariffs versus underlying consumer demand trends, specifically asking about April sales.

Answer

CEO Jochen Zeitz explained that the largest tariff impact comes from China sourcing (estimated $75M-$100M of the total $130M-$175M impact) due to 145% duties, despite China sourcing being less than 6% of total spend. He expressed cautious optimism about a favorable EU trade deal and noted no significant anti-American sentiment impacting sales. Zeitz also revealed that North American retail saw sequential improvement from February through April. CFO Jonathan Root added that the situation remains fluid, which is why the guidance was withdrawn.

James Hardiman of Citi requested a detailed bridge for the 2025 operating margin guidance, questioning how margins are expected to increase when revenue is guided flat-to-down and factors like foreign exchange and product mix are expected to be unfavorable.

Answer

CFO Jonathan Root provided a margin walk from the 2024 result of 6.7%. He noted that while volume is relatively flat and both FX and mix (due to more Softails) present headwinds, these will be offset by favorable pricing and lower operating expenses. The OpEx favorability is driven by the full-year benefit of headcount reductions and other productivity savings, contributing to the guided 7% to 8% operating margin.

James Hardiman of Citi requested a detailed bridge for the 2025 operating margin guidance, seeking to understand how margins are expected to increase while revenue is projected to be flat to down, especially if OpEx tracks sales.

Answer

Chief Financial Officer Jonathan Root provided a margin walk from the 2024 result of 6.7%. He outlined key drivers for the guided 7% to 8% range, including: slightly favorable pricing, negative impacts from foreign exchange and product mix (due to more Softails), reduced manufacturing unfavorability compared to 2024, and favorability from lower operating expenses.

James Hardiman from Citi asked for a detailed bridge to the 2025 operating margin guidance, seeking to understand how margin is expected to increase when revenue is projected to be flat to down and OpEx is expected to track revenue.

Answer

CFO Jonathan Root outlined the margin bridge from the 6.7% achieved in 2024. He noted that while volume is relatively flat and both FX and mix (due to more Softails) are slight negatives, the company expects favorability from pricing actions. Additionally, he highlighted expected favorability from lower OpEx, driven by headcount reductions, which contributes to the guided 7% to 8% operating margin range for 2025.

James Hardiman of Citigroup Inc. questioned the strategy of aligning wholesale shipments with retail sales (implying flat inventory) given the retail weakness, and asked about the confidence level in avoiding further destocking in 2025.

Answer

CFO Jonathan Root reiterated the focus on reducing dealer inventory, aiming for a 20% reduction from Q3 levels to end 2024 at similar levels to the start of the year. CEO Jochen Zeitz added that they feel confident this is the right approach, as the significant adjustments made this year will position them correctly for 2025.

James Hardiman of Citigroup questioned the strategy of aligning wholesale shipments with retail sales given the market weakness, and asked about the company's confidence in avoiding further destocking in 2025.

Answer

CFO Jonathan Root stated the plan is to reduce dealer inventory by another 20% from Q3 levels, bringing it to a similar level as the start of 2024. He stressed the importance of prioritizing inventory for core categories like Touring and CVO to protect market share gains. CEO Jochen Zeitz added that management is confident this is the correct inventory level and represents a significant adjustment for the year.

James Hardiman from Citigroup Inc. questioned the strategy of aligning wholesale shipments with retail sales given the current retail weakness and asked about the confidence in avoiding further destocking in 2025.

Answer

CFO Jonathan Root confirmed the focus on reducing dealer inventory, noting a 13% Q3 reduction from Q2 and a target for another 20% cut in Q4 to end the year at levels similar to the start of 2024. CEO Jochen Zeitz added that they are confident this is the appropriate level of adjustment for the year.

James Hardiman sought clarification on the Consumer Products (CP) guidance for low single-digit revenues and 6%-8% operating profit, inquiring about point-of-sale assumptions, potential tailwinds from inventory levels, and the impact of retail ordering patterns.

Answer

CFO Gina Goetter stated that retail inventory ended 2025 down high single digits, not expecting a significant positive or negative impact in 2026. She highlighted a stronger entertainment slate, including four Disney movie releases, as a major tailwind for CP. The segment's revenue phasing for 2026 is expected to be balanced, with Q1 down due to licensing comps and Q2 up strongly due to a favorable tariff-related comp from 2025.

James Hardiman asked about the unexpected expansion of Wizards of the Coast's operating margin by 420 basis points in 2025, questioning if this was a permanent benefit despite expectations for contraction in 2026 due to video game investments. He also sought clarification on the Consumer Products segment's 2026 guidance, specifically regarding point-of-sale assumptions, inventory levels, and the potential for retail ordering patterns to become a tailwind after 2025's tariff-related shifts.

Answer

CFO Gina Goetter explained that Wizards' segment margins typically range in the high 30s% to low 40s%. The 2025 expansion was driven by mix, leverage, and cost productivity, but 2026 will see some give-back due to increased royalty expenses and pre-launch costs for 2027 video games. For Consumer Products, Gina Goetter stated that retail inventory ended 2025 down high single digits, which is a 'right resting spot' and not expected to be a significant tailwind or headwind. She highlighted a stronger entertainment slate as a key tailwind for 2026, with balanced growth expected throughout the year, noting specific quarterly comps.

James Hardiman of Citigroup Inc. sought to reconcile the significant Q2 earnings beat with the more modest full-year guidance raise, asking for details on the offsetting weakness in the Consumer Products (CP) segment and the nature of its Q2 performance.

Answer

CFO & COO Gina Goetter explained the CP guide reflects the Q2 revenue shortfall being treated as a permanent loss, deleverage impacts, and retailers pushing back holiday resets. CEO Chris Cocks described a 'tale of two categories,' with bullishness on games but 'cautious optimism' for toys due to tariff uncertainty and potential stockouts of hot items. Goetter clarified the Q2 CP issue was primarily a timing shift from direct import to domestic fulfillment.

James Hardiman of Citigroup Inc. questioned the cautious nature of the guidance, asking if it fully incorporates a worst-case scenario (145% tariff, GFC-level declines), and inquired about the risk from tariffs on the rest of the world.

Answer

CFO & COO Gina Goetter confirmed the guidance embeds the 145% China tariff and a retail sales decline scenario similar to 2008-2009. CEO Chris Cocks stated their base outlook assumes a 10% reciprocal tariff for the rest of the world and that any increase would be a headwind. Goetter emphasized that the company is making 'no regret moves' on supply chain diversification regardless of the tariff outcome.

James Hardiman requested a more specific EBITDA target for 2027 within the 'Playing to Win' outlook. He also asked for a bridge to the 2025 margin expansion guidance, questioning the offsets to the significant net cost savings.

Answer

CFO and COO Gina Goetter hinted that 2027 EBITDA would be closer to the high end of the analyst's estimated range. For the 2025 margin bridge, she explained that volume and mix provide a one-point benefit, supply chain impacts (including tariffs offset by productivity) are net neutral, and the remaining accretion comes from savings in managed operating expenses.

Speaking for James Hardiman, Sean Rooney asked about Hasbro's expectations for the holiday season, retailer sentiment, and key brands. He also inquired about future cost-saving opportunities and their expected split between COGS and OpEx.

Answer

CEO Chris Cocks stated the toy industry is expected to be down modestly and highlighted Play-Doh, Beyblade X, TRANSFORMERS, and the board game portfolio as key holiday drivers. CFO Gina Goetter characterized retailer sentiment as unchanged and supportive. Regarding cost savings, she noted the split would likely be 50-50 between supply chain and managed expenses next year, with 'design to value' savings beginning to contribute.

James Hardiman asked about Brunswick's specific retail performance in Q4 2025, the basis for confidence in a flat-to-up U.S. retail boat market for 2026, and the outlook for global boat pipeline reductions in 2026, contrasting Brunswick's inventory levels with broader industry concerns.

Answer

Chairman and CEO David Foulkes stated that Q4 retail units were flat, with continued strength in premium and core brands and some recovery in value products. He cited tailwinds for 2026 including recent interest rate cuts, strong equity markets, and early double-digit retail growth in January. CFO Ryan Gwillim clarified that Brunswick aims for wholesale to match retail in 2026, with minimal further pipeline reductions, and emphasized that Brunswick's inventory is fresh and lean, particularly for Sea Ray and Boston Whaler.

James Hardiman inquired about Brunswick's fourth-quarter 2025 retail performance, the basis for confidence in a flat to slightly up retail market for 2026, and the early January 2026 retail trends. He also asked about the company's inventory levels, specifically global pipelines for 2026, and how Brunswick's inventory position compares to broader industry concerns. Finally, he questioned if industry-wide high inventory levels would impact Brunswick's propulsion and P&A segments.

Answer

Chairman and CEO David Foulkes and CFO Ryan Gwillim reported flat retail units for Brunswick in the second half of 2025, with strength in premium/core brands and recovery in value products. They cited tailwinds for 2026 including 75 basis points of rate cuts in late 2025 (with more expected), retail financing rates dropping to 7.5%, strong equity markets, and double-digit retail growth in January 2026. Regarding inventory, Ryan Gwillim stated global boat pipelines were reduced by 2,200 units in 2025, with expectations for flat to a minor reduction in 2026, aiming for wholesale to match retail. He clarified that Brunswick's inventory with major distributors is fresh and lean, not contributing to broader industry inventory concerns. David Foulkes added that solid ordering and a strong Q1 production fill rate indicate no headwind for propulsion and P&A from industry inventory levels.

James Hardiman asked about Brunswick's retail performance and outlook for 2026, specifically inquiring about the current run rate relative to the flat to slightly up expectation for 2026 and the building blocks to achieve that positive inflection. He also followed up on industry flattening trends and inventory levels.

Answer

CEO David Foulkes explained that after early Q2 shocks, recovery and stabilization began in late Q2, with Q3 being flat year-over-year, driven by premium and core product lines outperforming value. He noted that strength continued into October and, with improving interest rates, momentum should continue into next season, leading to a flat to slightly up 2026. CFO Ryan Gwillim added that Brunswick's performance might outperform the industry by a point or two in certain places due to share gains. Regarding inventory, Ryan Gwillim stated that Brunswick's inventory is historically low, around 18,000 global units and below 12,000 in the U.S., with good freshness. David Foulkes added that outboard engine pipelines are in extremely good shape.

James Hardiman of Citigroup questioned why full-year guidance remained unchanged despite a significant reduction in the estimated tariff impact, suggesting a weaker underlying business outlook. He also asked for clarification on the earnings phasing between Q3 and Q4, noting the easy comparison from the prior year's Q3 inventory reduction.

Answer

CFO Ryan Gwillim explained that the initial guidance already anticipated some tariff mitigation, so the net change was less dramatic than it appeared. He acknowledged a slightly softer market but denied a major downgrade to the core business outlook. CEO David Foulkes added that while July retail trends are positive, the company remains cautious until the trend is more sustained. Regarding phasing, Gwillim noted that while Q3 has an easy comp, the year-over-year production increase will be even greater in Q4.

James Hardiman asked for the gross tariff number before mitigation, questioned the drivers of the weak Q2 guidance, and sought to understand if second-half tailwinds would outweigh tariff headwinds.

Answer

Ryan Gwillim (executive) stated that providing a gross tariff number is difficult due to accounting complexities but confirmed significant mitigation is underway. He attributed the Q2 outlook to the accounting for full-year tariffs and conservatism on sales volume. David Foulkes (executive) and Gwillim both affirmed that for the second half, the benefits from more efficient operations and easier year-over-year production comparisons should outweigh the negative tariff impact.

James Hardiman asked what had changed in the last three months to lower the midpoint of the 2025 earnings outlook and questioned the wholesale versus retail shipment cadence and year-end inventory targets.

Answer

CEO David Foulkes identified a significant negative shift in foreign exchange (FX) rates as the primary reason for the revised outlook. CFO Ryan Gwillim confirmed plans to undership retail in H1 2025, with a flip in H2. Foulkes added that the goal is to end 2025 with weeks-on-hand inventory lower than year-end 2024, targeting a normalized level around 35 weeks.

James Hardiman inquired about inventory levels, asking if the Q4 guidance cut implies lower year-end inventory than previously expected, and questioned if the 2025 earnings view has been lowered following the 2024 guidance reduction.

Answer

CFO Ryan Gwillim confirmed that the company will continue to reduce pipeline inventory, with the Q4 adjustment reflecting cautious ordering from channel partners, not a change in inventory strategy. CEO David Foulkes added that the ultimate driver is retail demand, and with pipelines already very low, he believes the setup for 2025 EPS growth remains constructive as long as retail sales hold steady.

James Hardiman asked for a breakdown of organic versus inorganic business contributions to yield growth, specifically the impact of new ships and the Royal Beach Club, and the performance of the organic business in the Caribbean, particularly older tonnage.

Answer

Jason Liberty, Chairman and CEO, explained that about half of the yield growth for the year will come from new hardware and the other half from like-for-like growth, including the Caribbean. Michael Bayley, President and CEO of Royal Caribbean International, highlighted the Royal Beach Club's success, becoming the top-rated experience in Nassau within four weeks, with demand ramping up. Naftali Holtz, CFO, added that profitability is growing on both new and existing ships through efficiency and scale.

James Hardiman asked for a breakdown of yield growth between organic and inorganic factors, specifically considering new Icon Class ships, Celebrity ships, and the Royal Beach Club, and how the organic business, particularly in the Caribbean, is performing.

Answer

Chairman and CEO Jason Liberty explained that about half of the yield growth comes from new hardware, with the other half from like-for-like growth, including the Caribbean. President and CEO of Royal Caribbean International Michael Bayley noted the Royal Beach Club's strong guest satisfaction and ramping demand. CFO Naftali Holtz added that profitability is growing from new ships, efficiency, and scale.

Speaking for James Hardiman, Sean Wagner asked about the role of occupancy in the 2025 guidance and the future opportunity from new Icon class ships. He also asked for the specific occupancy assumption for 2025 and the outlook for the equity income line.

Answer

CFO Naftali Holtz noted a significant opportunity to increase occupancy on both new and existing ships, which contributes to maximizing overall yield. He declined to provide a specific occupancy target for 2025 but said it is trending consistently. He also stated that the equity income line is expected to be consistent throughout the year with no specific factors to call out.

James Hardiman of Citigroup sought details on the new River Cruise venture, asking about the delivery schedule for the 10 ships and the target demographic. He also questioned the significant increase in 2025 CapEx to $5 billion and how to model this spending in future years.

Answer

CEO Jason Liberty stated the initial 10-ship river order will deliver two ships in 2027 and four per year thereafter, emphasizing it is 'not a hobby.' CFO Naftali Holtz addressed CapEx, attributing the $5 billion to new ship deliveries (Star of the Seas, Celebrity Xcel) and major investments in private destinations like the Costa Maya port and the Nassau Beach Club, all supported by growing cash flow.

James Hardiman asked what has fundamentally changed to drive the company's significantly improved return profile and where returns might settle long-term. He also questioned the strategic, non-financial considerations for investing in land-based destinations to extend competitive advantages.

Answer

CEO Jason Liberty attributed the higher returns to long-term investments in brand leadership, innovative ships, destination experiences like Perfect Day, and technology. He stated the ultimate strategic goal is to keep customers within the Royal Caribbean 'ecosystem' by delivering a 'lifetime of vacations.' This involves creating more experiences—through building, buying, or partnering—to increase engagement and loyalty with their customer base.

James Hardiman sought to confirm the key components bridging Polaris's 2025 to 2026 Adjusted EPS, particularly the contributions from wholesale volume, Indian Motorcycle separation, cost savings, commodities, and tariffs. He also questioned the $90 million incremental tariff impact for 2026, noting it seemed higher than previous estimates, and asked about the potential effects of Mexico's tariffs on China.

Answer

CEO Mike Speetzen and CFO Bob Mack confirmed the bridge includes the $400 million+ wholesale volume benefit with a 40% flow-through, $0.75-$0.80 from Indian, and that the remaining gap is primarily due to tariffs and commodities, alongside a modest increase in OpEx for IT and engineering. Speetzen highlighted the significant $200 million+ total tariff load (nearly $3 EPS impact) and Polaris's aggressive strategy to reduce China-based spend to under 5% by 2027, aiming for long-term localization benefits. Mack clarified the incremental tariff impact was slightly lower at $90 million (ex-Indian), but a new $20 million commodities inflation added pressure, bringing total tariffs ex-Indian to $215 million. Both executives stated Mexico's tariffs on China had not impacted Polaris and were not expected to.

James Hardiman asked for clarification on the components of the 2026 EPS bridge, including wholesale, Indian, cost savings, commodities, and tariffs. He specifically inquired if the $90 million tariff number had changed and the anticipated impact of Mexico's tariffs on China.

Answer

Michael Speetzen (CEO, Polaris Inc.) and Bob Mack (CFO, Polaris Inc.) confirmed the bridge components, highlighting tariffs and commodities as key offsets. Mack clarified the $90 million incremental tariff impact is slightly lower than previously thought, but a new $20 million commodities inflation is present, bringing total tariffs ex-Indian to $215 million. Speetzen discussed ongoing lobbying efforts against tariffs and an aggressive plan to reduce China-based spend to less than 5% by 2027, aiming for localization benefits. Mack stated they do not believe Mexico's tariffs on China will significantly impact Polaris.

James Hardiman questioned the status of the original $1.10 EPS guidance (ex-tariffs) and how the incentive compensation headwind might swing back as a tailwind, impacting current and future year earnings.

Answer

CEO Mike Speetzen explained that the original guidance and the tariff impact cannot be viewed independently, as high tariffs would likely slow consumer spending further, making the original forecast moot. He emphasized the focus is on navigating the current situation. Regarding incentive compensation, Speetzen stated that the majority is profit sharing for employees. While it's a Board discussion, his desire is not to negatively impact that compensation for employees dealing with factors outside their control.

James Hardiman of Citigroup Inc. asked for details on ORV dealer inventory levels, including days-on-hand, and questioned if the inventory reduction was complete. He also inquired about the company's debt covenants in light of the lean financial outlook.

Answer

CEO Mike Speetzen confirmed ORV dealer inventory was around 100 days of supply and that while the bulk of the reduction is complete, further adjustments are needed in the recreational sub-segment, snow, and marine. CFO Bob Mack assured that debt covenants were proactively renegotiated in Q4 2024, providing sufficient headroom for 2025, and that the company is prioritizing debt paydown.

James Hardiman asked why Q3 retail was considered worse than expected when the decline was less severe than in Q2. He also sought more detail on inventory progress versus 2019 and questioned the 'flat EPS' starting point for 2025, given that a stable retail environment should imply shipment growth.

Answer

CEO Mike Speetzen explained the negative surprise was driven by the depth of competitor promotions on noncurrent inventory and a progressive weakening of the consumer backdrop after July. He reiterated high confidence in hitting year-end inventory targets, with units substantially below 2019 levels and DSO just over 100 days. He clarified his 'flat EPS' comment for 2025 assumes shipments could also be flat, reflecting a cautious view that retail may remain challenged next year.

James Hardiman asked if the delta between Q1 2026's 2.4% normalized yield and the full year's 3% was primarily due to the outsized Caribbean mix in Q1, and if the company feels better about the Caribbean dynamic later in the year. He also questioned if the global capacity shift from Europe to the Caribbean in 2026 represents a net benefit for Carnival given its relative exposure to Europe.

Answer

President and CEO Josh Weinstein confirmed that Q1 has different yield comparisons and is impacted by spring 2025 volatility, but overall, they feel good about the business. He expressed a positive view on competitors clearing out of Europe, stating that Carnival's European strategy with P&O Cruises, AIDA, and Costa is very effective, and they also see strength in North American brands' European programs.

James Hardiman sought clarification on forward booking commentary, noting a potential discrepancy between Q2 statements of 'in line' load factors and the current press release mentioning 'acceleration' in bookings since May, yet still being 'in line.' He then asked for a deeper explanation of how programs like AIDA Evolutions, Carnival's new marketing, and Caribbean destination enhancements are translating into strong organic growth and industry-leading yields, and what other low-hanging fruit exists for future pricing improvements.

Answer

CFO David Bernstein suggested the Q2 commentary on load factors likely pertained to 2025, while current remarks focus on 2026. CEO Josh Weinstein elaborated that while AIDA Evolutions is currently small, its success provides a template for future ship refurbishments across brands, which will contribute to yields. He emphasized that broad-based improvements across most brands, driven by enhanced commercial execution, investments in advertising, revenue management systems, and talent, are fueling the strong performance. Mr. Weinstein expressed that the pace of execution improvement has exceeded expectations, with significant opportunities still ahead.

James Hardiman from Citi asked for clarification on forward booking commentary, specifically if the reported acceleration in bookings year-over-year since May meant Carnival was now "ahead" on bookings for 2026, or still "in line" as previously indicated. He also asked how programs like AIDA Evolutions, Carnival's new marketing, and Caribbean destination enhancements are translating into pricing, and about future "low-hanging fruit" for pricing improvement.

Answer

CFO David Bernstein clarified that previous "in line" commentary referred to 2025, while current commentary is for 2026. CEO Josh Weinstein explained that AIDA Evolutions, while small in immediate impact, provides a template for future ship refurbishments across brands, driving significant returns. He attributed broad-based yield improvements to enhanced commercial execution, investments in advertising, revenue management systems, and personnel, noting that the pace of execution improvement has exceeded expectations with more opportunities ahead.

James Hardiman from Citi sought clarification on forward booking commentary regarding load factors versus booking acceleration, and asked for insights into how brand-level initiatives like AIDA Evolutions and Caribbean destination development are translating into pricing power and future pricing opportunities.

Answer

CFO David Bernstein clarified that prior commentary on load factors likely pertained to 2025, while current remarks focus on 2026. CEO Josh Weinstein explained that programs like AIDA Evolutions, while small individually, contribute to overall yield improvement. He highlighted investments in advertising, revenue management systems, and personnel as key drivers of enhanced commercial execution and continued pricing growth across brands.

James Hardiman sought to connect the booking lull in April to the 2026 book position moving from 'ahead' to 'in line,' asking if the company maintained pricing discipline during the slowdown. He also asked about the potential for itinerary changes due to the Middle East conflict.

Answer

CEO Josh Weinstein affirmed the strategy of not panicking or making reactive pricing decisions during periods of volatility, given their long booking curve. Regarding the Middle East, he stated that any potential impact is limited to a couple of ships based out of Dubai late in the year and into 2026. He reassured that the company already avoids the Red Sea and has no significant exposure to the immediate conflict area through the end of 2026, with guest and crew safety being paramount.

James Hardiman sought to connect the booking lull in April to the 2026 book position moving from "ahead" to "in line," asking if the company held firm on pricing during the slowdown. He also asked if any meaningful itinerary changes are anticipated due to the current Middle East conflict.

Answer

CEO Josh Weinstein generally agreed with the assessment, stating that the company doesn't need to panic or make reactive pricing decisions during periods of volatility, as the teams are focused on managing the yield curve for the long term. Regarding the Middle East, he noted that only a couple of ships based out of Dubai at the end of the year would be potentially impacted and that mitigation plans are in place, with no other significant exposure in the region through 2026.

James Hardiman of Citigroup asked about any forward-looking consumer sentiment indicators beyond bookings, such as payment behavior. He also inquired about the long-term ROIC opportunity beyond the 12% target and the potential timing for new long-term goals.

Answer

CEO Josh Weinstein reported no unusual signals from other indicators like cancellations. He stated that the 12% ROIC target is not an endpoint and that mid-teens is a realistic goal, driven by commercial execution and investments like Celebration Key. He anticipates discussing new long-term targets in early 2026, after the current ones are achieved.

James Hardiman asked about the sustainability of organic growth, seeking to distinguish between industry-wide tailwinds and company-specific initiatives. He also questioned the apparent deceleration in per diem growth implied by the 2025 guidance.

Answer

CEO Josh Weinstein acknowledged industry strength but emphasized significant self-help, pointing to nearly 10% same-ship yield growth and closing the historical performance gap with peers. He attributed this to improved execution and the large value proposition versus land-based vacations. Regarding per diem trends, he reiterated that the guidance reflects current information ahead of the critical wave booking season.

James Hardiman sought more detail on the 2025 cost outlook, asking about the underlying inflation assumptions and potential offsets beyond the disclosed impacts from Celebration Key and dry docks. He also asked about the potential business impact from the widening conflict in the Middle East.

Answer

CFO David Bernstein noted that while it's difficult to predict inflation, the company continues to work on cost-saving opportunities to provide an offset, with more detailed guidance to come in December. CEO Josh Weinstein addressed the geopolitical question, stating the Middle East is not a major source market and the company is not sailing in the region. He added that unless the conflict escalates significantly, the impact is minimal as their ships are mobile.

James Hardiman asked about the relative acceleration in 2026 advanced bookings, specifically why river bookings showed a greater acceleration (4% to 6% to 8%) compared to ocean, and if this indicates stronger demand in the river segment. He also questioned Viking's strategy regarding a new competitor entering the river space, particularly leveraging its 113 coveted docking locations as a competitive moat and potential defensive plays.

Answer

Tor Hagen, Chairman and CEO, explained that ocean booking efforts are influenced by the new building program, aiming to be further ahead. He noted that river prices are 8% higher year-over-year, indicating no weakness. Leah Talactac, President and CFO, added that ocean is a year-round product while river has a shorter season, influencing booking patterns. Tor emphasized Viking's strategy of playing offense, leveraging its unique ship design (higher guest capacity at similar operating costs) and fundamental cost-efficiency. Leah highlighted Viking's extensive itineraries across 21 rivers and market dominance.

James Hardiman asked about the relative acceleration in 2026 advanced bookings between ocean (consistent) and river (accelerating), questioning if it indicates stronger demand in river or other influencing factors. He also sought Viking's thoughts on a new river competitor and the strategic importance of its 113 coveted docking locations.

Answer

Tor Hagen, Chairman and CEO, and Leah Talactac, President and CFO, explained that ocean booking efforts are influenced by new building programs, aiming for a stronger lead. River bookings show 8% higher prices year-over-year, with smaller capacity expansion. Tor emphasized Viking's 'offense' strategy, leveraging its unique docking sites and efficient river ship design (190 guests vs. competitors' 160-170), which provides a significant cost advantage. Leah added the breadth of Viking's itineraries across 21 rivers.

James Hardiman from Citigroup Inc. inquired if the faster capacity growth in the Ocean segment puts downward pressure on its pricing. He also asked about the impact of booking mix on the 4% advanced booking per PCD growth for 2026 and whether the capacity expansion in Egypt could be a pricing tailwind in 2027.

Answer

Torstein Hagen, Founder, Chairman & CEO, asserted that Ocean growth is a result of an outstanding product, not a drag on pricing, highlighting strong demand from guests seeking a "quiet serene experience." He noted that new, high-demand destinations like Egypt and India are small components and don't significantly impact the overall average but demonstrate the brand's strength in launching new products. He emphasized the brand's core promise of "no children, no casinos, no nickel and diming" as a key differentiator.

James Hardiman followed up on the 2026 pricing curve, asking for the strategic rationale behind a potential acceleration in pricing from this point forward. He also asked if Viking is seeing any hesitation from American consumers traveling to Europe.

Answer

EVP of Finance Linh Banh highlighted strong booking momentum in April and May and the advanced state of their 2026 bookings (37% sold) as evidence of consumer and brand strength. She emphasized that their sticky bookings provide significant revenue visibility. Regarding travel to Europe, Banh stated they are seeing no issues; on the contrary, with approximately 70% of itineraries in Europe, their strong booking curves indicate robust demand.

James Hardiman followed up on 2026 pricing, asking for the strategic rationale behind a potential acceleration in pricing from this point forward, especially in a 'dicier' economy. He also asked if Viking was seeing any hesitation from American consumers traveling to Europe.

Answer

EVP of Finance Linh Banh pointed to the strong booking momentum in April and May and the highly advanced booking curve (37% sold for 2026) as evidence of their brand and consumer strength. Regarding travel to Europe, she stated that with approximately 70% of itineraries there and 2025 nearly sold out, Viking is seeing the opposite of hesitation, observing strong consumer demand.

James Hardiman questioned Winnebago's industry shipment assumptions for calendar years 2025 and 2026, seeking clarity on expected retail performance and the extent of industry-level inventory reduction. He also asked about the company's inventory turn rate and how it aligns with broader industry trends and RVIA forecasts.

Answer

President and CEO Michael Happe acknowledged that 2025 saw more destocking than initially anticipated and that 2026 assumptions do not build in significant dealer inventory increases, aiming for a one-to-one wholesale-to-retail ratio in many categories. He stated that the company is striving for two inventory turns across all businesses and anticipates industry retail and wholesale RV shipments to be around 330,000 units for calendar year 2026. Happe also noted that retail in the remaining months of calendar 2025 could be down slightly.

James Hardiman of Citi asked about inventory management, questioning if the company's goal of two turns is achievable this year and if this discipline puts them at a disadvantage against peers shipping more aggressively. He also asked for the retail assumption behind the wholesale forecast and the price increase needed to offset the potential tariff impact.

Answer

CEO Michael Happe stated that two turns is a long-term goal aligned with dealer health, acknowledging it may sacrifice short-term share but is the right long-term strategy. CFO Bryan Hughes clarified the retail assumption is close to wholesale, implying a slight destock, and quantified the unmitigated tariff risk as roughly $30-40 million in costs that would need to be offset.

James Hardiman asked for details within the fiscal 2025 guidance, including inventory turns, ASPs, and market share. He also questioned the company's commitment to the Marine segment following a significant write-down on Chris-Craft and asked about potential interest in a competitor's divested marine assets.

Answer

SVP and CFO Bryan Hughes projected modest ASP increases for Motorhomes but headwinds for Towables and Marine, with continued destocking in Motorized. President and CEO Michael Happe affirmed a strong commitment to the Marine business, framing the Chris-Craft impairment as a cyclical issue and highlighting Barletta's strength. He declined to comment on specific M&A but reiterated the goal to grow the non-RV business.

James Hardiman of Citi asked about the industry dynamic between current and non-current models, particularly in ORV, and how BRP's retail performance might evolve in the second half. He also sought early thoughts on fiscal 2026, including the impact of inventory normalization and the potential tariff headwind.

Answer

CEO José Boisjoli noted that while many OEMs are becoming more cautious with shipments, BRP is well-positioned with low inventory and new products, expecting to gain market share in H2. He anticipates the H2 industry trend will be similar to Q2. CFO Sébastien Martel added that for fiscal 2026, the tariff headwind could be around $120-$130 million on a run-rate basis before mitigation efforts, which the company will actively work to reduce.

James Hardiman asked for details on retail trends throughout the quarter, particularly in April and May, and questioned whether BRP's more favorable tariff position creates a competitive advantage.

Answer

CEO Jose Boisjoli noted that underlying retail trends have not significantly changed, with premium vehicles continuing to outperform entry-level models. He stated that while BRP's tariff situation is manageable, he believes all OEMs will eventually find ways to mitigate tariff impacts. He identified the primary risk as the uncertainty tariffs create for consumer confidence, which is causing some customers to delay purchases.

James Hardiman asked for a quantification of the inventory reduction's impact on earnings to better understand fiscal 2026 potential. He also questioned why expected interest rate cuts are not leading to a more optimistic outlook for the first half of next year.

Answer

CFO Sebastien Martel referenced a prior comment that the inventory correction represented a $3 to $4 per share impact, which could be a tailwind in a normalized year. Regarding interest rates, he explained that while cuts would help, BRP faces a headwind from expiring interest rate caps. He also expressed uncertainty that rate cuts alone would be enough to offset broader consumer macroeconomic concerns.

James Hardiman of Citigroup Inc. questioned the company's underlying earnings power following a significant guidance reduction, asking how the new forecast reconciles with previous commentary about a normalized earnings potential of around $11.50 per share. He also inquired about the strategic "goodwill" in supporting dealers at the expense of BRP's own profitability and whether this support is expected to yield tangible future benefits.

Answer

CEO Jose Boisjoli explained that the guidance change was driven by higher-than-expected snowmobile inventory, softer Marine trends, and a softer U.S. market, which prompted a more cautious dealer reaction than anticipated. He reiterated that supporting dealers is a core, long-term strategy. CFO Sebastien Martel quantified the headwinds, noting that the snow season, the Marine business drag ($1.50/share), and the one-time inventory reduction represent a $3 to $4 EPS impact that should normalize in the future, reaffirming the business's higher underlying earnings potential.

James Hardiman from Citi asked for an update on the company's key guideposts for units, price, and margin, and how the internal outlook for full-year EBITDA has shifted. He also requested early thoughts on fiscal 2026, noting Camping World's optimism contrasts with others in the industry.

Answer

Chairman & CEO Marcus Lemonis stated that new unit growth projections have been raised, used unit goals remain consistent, and the gross margin target is now above 30%. He maintained the long-term SG&A improvement goal of 600-700 basis points but noted near-term ASP pressure makes 350-400 bps more likely for the year. For 2026, Lemonis expressed confidence in continued growth in both new and used segments through higher productivity from fewer locations, stating, "We don't really give a shit about everybody else."

James Hardiman of Citigroup Inc. asked for an update on the company's key performance guideposts for units, price, and margin, and how the internal outlook for full-year EBITDA has shifted. He also requested early thoughts on fiscal year 2026.

Answer

Chairman & CEO Marcus Lemonis confirmed that new unit projections have been raised and the gross margin goal is to remain above 30%. He reiterated the long-term SG&A improvement target of 600-700 basis points, noting its achievement depends on ASPs recovering. For 2026, Lemonis stated, "We're not expecting '26 to be anything but up for us," driven by continued new and used business growth, fewer rooftops, and a tighter expense structure, irrespective of the broader industry.

James Hardiman asked for color on the sales cadence after a strong January and moderate February, the current consumer interest rate environment, the impact of Q4 insurance claims on SG&A, and the confidence level in the used RV opportunity.

Answer

CEO Marcus Lemonis attributed February's moderation to weather, which created pent-up demand and a strong sales backlog for March. He stated that consumer finance rates are roughly 50-100 basis points lower than a year ago. Executive Matt Wagner quantified the Q4 insurance claim impact on SG&A at approximately $6 million, which is expected to normalize. Lemonis expressed high confidence in the used RV strategy for 2025, noting that record procurement in January and February is central to their plan to drive "outsized increases in our EBITDA" and improve the company's leverage ratio.

James Hardiman questioned the sensitivity of the 2025 outlook to broader industry performance, asking about potential upside or downside scenarios. He also asked for an update on the M&A trajectory and store count, given the recent net decline in dealerships.

Answer

CEO Marcus Lemonis described the 2025 outlook as conservative and 'idiosyncratic,' based on internal drivers like the used business recovery and not dependent on major macro improvements. Regarding M&A, Lemonis, Matt Wagner, and Lindsey Christen explained that while they are disciplined in closing underperforming stores, they see a highly opportunistic environment and expect to meet or exceed their historical target of 12-15 acquisitions in 2025.

James Hardiman asked about the drivers behind the consumer demand drop-off in April and the subsequent improvement in July, as well as the outlook for Q4 and any initial thoughts on fiscal 2026.

Answer

CFO Mike McLamb attributed the April pause to a confluence of tariff headlines, global tensions, and tax law uncertainty, noting these factors have since eased, contributing to a better July. CEO Brett McGill added that April was a 'cliff' effect, whereas July's start was more stable. For Q4, McLamb expects continued challenges but noted positive same-store sales are possible, though not factored into guidance. For fiscal 2026, they see a favorable setup for margin improvement if inventory normalizes, but the macro outlook remains uncertain.

James Hardiman asked for a breakdown of the 11% same-store sales growth between unit volume and average selling price (ASP), and questioned the sharp deceleration from strong Q2 growth to an expected decline in April.

Answer

Michael McLamb, an executive, clarified that unit volumes were down mid-single digits in the quarter, meaning the 11% growth was driven by a significant ASP increase due to a premium product mix shift, partly from delayed Florida sales. He cautioned that the April slowdown reflects a tough comparison to the prior year and broad consumer uncertainty caused by tariffs, and that a similar ASP lift should not be expected.

James Hardiman from Citi sought a clean, apples-to-apples view of inventory unit growth and asked about the expected cadence of same-store sales for the rest of the year to achieve the 'flattish' full-year target, especially given the January improvement.

Answer

Executive Michael McLamb stated there were no anomalies in the year-over-year inventory comparison; levels were simply higher than planned due to lighter sales. He reiterated the target for full-year inventory orders to be around or slightly below the prior year. Regarding sales cadence, Executive Bill McGill credited technology and improved consumer sentiment for the January uptick. McLamb added that the path to flattish full-year comps is supported by easier comparisons in the back half of the year, particularly in the September quarter.

James Hardiman inquired about the quantifiable impact of Hurricane Helene on Q4 results, the assumptions for hurricane impacts in the fiscal 2025 guidance, the trajectory of customer borrowing rates, and the unit versus price breakdown for Q4 same-store sales.

Answer

CFO Michael McLamb quantified Hurricane Helene's impact as approximately $30 million on revenue and over $6 million on the bottom line for Q4. He advised caution in modeling Q1 2025 due to the storms' disruption in Florida, which constitutes about 25% of the company's business. McLamb noted that retail financing rates are down about 100 basis points year-over-year and that Q4 unit volume declined only slightly, outperforming the broader industry's ~20% drop. CEO Bill McGill added that the hurricane timing created a tough start for Q1.

James Hardiman sought clarification on the guidance assumption that booking 'choppiness' stabilizes, asking if the current booking run-rate is sufficient to meet targets or if further improvement is needed. He also asked what the recent trends imply for the 2026 outlook, specifically if a dynamic of higher price and lower occupancy should be expected.

Answer

CEO Harry Sommer clarified that while he wouldn't extrapolate from one strong week, the current booking pace and pricing are sufficient to hit the full-year guidance. Regarding 2026, CFO Mark Kempa stated it's too early to draw detailed conclusions from a few weeks of data but reaffirmed strong confidence in achieving the 'Charting the Course' targets for 2026, noting the booked position is well ahead of historical averages.

James Hardiman of Citi followed up on occupancy, asking about the expected rate in 2026 and beyond. He also requested a bridge from the 2025 guidance to the 2026 "Charting the Course" targets, noting the implied acceleration in earnings growth.

Answer

President and CEO Harry Sommer indicated that a "mild tailwind" on occupancy in 2026 is a reasonable expectation due to deployment shifts, but declined to provide specific figures. To bridge to the 2026 targets, he highlighted that the 2025 EPS growth is 29% on an FX-adjusted basis, making the 2026 growth bar less steep. He reiterated that the company's algorithm of moderate capacity growth, single-digit yield growth, and low cost growth will enable them to achieve their targets.

James Hardiman asked for clarification on per diem pricing trends, questioning the acceleration in Q3 and implied deceleration in Q4, and inquired about the sustainability of the wide spread between yield and cost growth relative to the 2026 targets.

Answer

CFO Mark Kempa explained that Q4 pricing guidance of around 5% is strong considering a tough 14% comp from the prior year and headwinds from Middle East redeployments. CEO Harry Sommer added that while the 2024 yield/cost spread is exceptional, the primary focus remains on achieving the absolute 2026 financial targets for margin, EPS, leverage, and ROIC, with the strong 2024 performance increasing their confidence.

James Hardiman, on for Saree Boroditsky, asked for more detail on the flat organic sales growth outlook, seeking a breakdown by end market and product type (consumables, equipment, automation), and inquired about the cautiousness of industrial OEM customers.

Answer

CFO Gabe Bruno provided a detailed end-market outlook, anticipating continued pressure in Heavy Industries and Construction, with Energy expected to be positive for the full year. CEO Steven Hedlund addressed OEM cautiousness, citing significant uncertainty around potential trade tariffs as a primary factor, emphasizing the need for organizational agility.

James Hardiman of Citigroup sought to confirm the calculations for the three-year targets, estimating approximately $6.7 billion in 2026 adjusted EBITDA and a 3.5x leverage ratio. He also asked for the expected trajectory of the cash balance and net debt through 2026.

Answer

CEO Josh Weinstein confirmed the EBITDA and leverage math was accurate. CFO David Bernstein added that the cash balance is expected to decline over time toward the pre-pause target of $2.0-$2.5 billion as the company rebuilds its financial position, though a precise year-by-year forecast is complex. He noted that total liquidity would decrease as debt is paid down.

James Hardiman from Citi asked for clarification on like-for-like per diems to understand underlying pricing power separate from mix impacts from cabin types. He also questioned the cost trajectory, noting the increase from Q1 to Q2 and seeking clarity on the exit rate for 2023 and expectations for 2024.

Answer

CEO Josh Weinstein confirmed that like-for-like pricing is up and emphasized the cruise industry's strong value proposition compared to land-based vacations. CFO David Bernstein added that Q4 yields are expected to be up versus 2019, indicating higher pricing once mix issues resolve. On costs, Bernstein attributed the Q2 increase to higher occupancy and dry dock timing, advising to focus on full-year guidance as a more reasonable run rate.

James Hardiman of Citi asked about the strategy of using opaque booking channels for discounting and the company's confidence in recovering pricing power. He also questioned if the 'tripledemic' of seasonal viruses was having any observable impact on booking trends.

Answer

CEO Josh Weinstein defended the use of opaque channels as a tool to optimize total bottom-line revenue, not just ticket price, and affirmed their ability to pull back on them as conditions improve. He stated that they see no material business impact from seasonal viruses, as consumer behavior regarding travel is returning to normal.

James Hardiman inquired about the impact of the recent booking surge on pricing, seeking to reconcile the Q3 per diem decline with the strong pricing outlook for 2023. He also asked for an open-ended perspective on Carnival-specific versus industry-wide challenges and opportunities.

Answer

CEO Josh Weinstein noted that 2023 pricing is higher now than earlier in the year, driven by relaxed protocols and increased advertising. CFO David Bernstein added that the Q3 per diem was impacted by a delayed ramp-up in ad spend. On challenges, Weinstein stated the entire cruise industry is undervalued versus land-based vacations and highlighted Carnival's specific opportunities to improve its commercial operations.