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Viking Holdings Ltd
NYSE:VIK
Viking Holdings Ltd
NYSE:VIK
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Earnings Call Transcript
Earnings Call Recording
Other Earnings Calls
Good morning. My name is Paul, and I will be your conference operator today. At this time, I would like to welcome everyone to Viking's Fourth Quarter and Full Year 2024 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions] thank you. I would now like to turn the program to your host for today's conference, Vice President of Investor Relations, Carola Mengolini.
Good morning, everyone, and welcome to Viking's Fourth Quarter and Full Year 2024 Earnings Conference Call. I am joined by Tor Hagen, Chairman and Chief Executive Officer; and Leah Talactac. President and Chief Financial Officer. Also available during the Q&A session is Linh Banh, Executive Vice President of Finance.
Before we get started, please note our cautionary statement regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release as well as in our filings with the SEC. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-IFRS financial metrics, which are reconciled and described in our press release posted on our Investor Relations website at irviking.com.
Tor and Leah will provide a strategic overview of the company, a recap of our fourth quarter and full year results and an update of the current booking environment. We will then open the call for your questions. To supplement today's call, we have prepared an earnings presentation that is also available on our Investor Relations website. With that, I'm pleased to turn the call over to Tor.
Thank you, Carola. Good morning, everyone, and thank you for joining us today. In the previous earnings calls, we have shared that Viking us certain unique points of differentiation, which have been behind our success. You can see these on Slide 3.
Our 2024 performance was quite remarkable, and I believe that reflects what makes us different. The focus on our core guest demographics, the power of our One Viking brand the value of our well-defined product and efficiency and appeal of our fleet. While it is not in the Viking Spirit to be boastful, I do think that we have much to be proud of and I will highlight a few metrics of this great year.
As you can see on Slide 4, our results were driven by a 6.3% growth in capacity and a very healthy demand from our customers, which was reflected in a net yield increase of 7.4%. This led to a 14% year-over-year increase in our adjusted gross margin to more than $3.5 billion. This strong top line results coupled with our disciplined approach to expenses and focus on operational efficiency enabled us to achieve an adjusted EBITDA of $1.3 billion, up 23.7% from the year before. We also managed our balance sheet well, ending the year with a 40.8% return on invested capital and a net leverage of 2.4x. We also finished the year with record guest satisfaction scores and great operational metrics.
On Slide 5, we are highlighting a repeat guest rate of 53% and our direct bookings being north of 50% and our leading market share position, 52% for Rivers and 24% for our Ocean segment. We take great pride in these results as it demonstrates our ability to grow our capacity, while we at the same time, improve margins and continue to deliver an exceptional product.
Moreover, during 2024 we also accomplished other important milestones. If we look at the next Slide #6. On May 1, we became a publicly traded company on the New York Stock Exchange. This was a historic moment which are considered a natural step to solidify our position as a leader in the travel industry. To cap this achievement, we received the 2024 North America IPO of the Year Award from the International Financing Review magazine. Overall, I believe that our successful IPO is a testament to the strength of our business model and our great execution. The IPO award was the latest in a series of accolades we received during 2024. We were also ranked #1 by Conde Nast Traveler across rivers, oceans and expeditions for the second consecutive year, and we will recognize as the world best by travel and leisure.
Our commitment to providing a great customer experience continues to be recognized year after year which is a rare feat for a travel company. We are generally proud of these achievements. In 2024, we also celebrated a historical return to China, offering our English-speaking guests a tender is along the Chinese Coast. We really enjoy welcoming people to this phenomenal part of the world. And we also made some scientific discoveries this year. One of the most noteworthy occurred in Antarctica. Our team on the Viking of [indiscernible] discovered a new colony of penguins not previously known to science. This I daresay make us real explorers. With that, I will turn to Leah to discuss our financials. But before I do, I want to congratulate on the appointment as President. Leah, thank you very much for your dedication to like me over the past 20 years and your leadership as we embark on this next chapter.
Thank you, Tor. Good morning, everyone. We are pleased to have reported a very strong fourth quarter and with this, great full year results. These are on Slide 8. On a consolidated basis and for the fourth quarter, total revenue increased 20.5% year-over-year to almost $1.4 billion. This was mainly driven by higher capacity and higher revenue per PCD. Adjusted gross margin increased 19.5% year-over-year to almost $870 million, resulting in a net yield of $507 an 7.4% higher than the fourth quarter of 2023.
Vessel expenses excluding fuel per capacity PCD increased 0.4% this quarter compared to the same time last year. I will note that this quarter, capacity increased 10.9% compared to last year, which brought down some fixed costs when calculated on a dollar per capacity PCD basis. Adjusted EBITDA for the fourth quarter totaled $306 million, improving $87 million or 39.7% higher than the fourth quarter of 2023.
Net income for the fourth quarter of 2024 was $104 million compared to a loss of $594 million for the same period in 2023. The net income for the fourth quarter of 2024 and includes a loss of $96 million from the revaluation of warrants issued by the company due to stock price appreciation. In comparison, the fourth quarter of 2023 and includes a loss of $602 million from the impact of the Series C preferred shares and an additional $37 million loss due to the revaluation of warrants. These warrants were fully exercised in the fourth quarter. And as a result, the fourth quarter of 2024 is the final quarter that this will be impacted by the warrant valuation.
Adjusted net income attributable to Viking Holdings Limited for the fourth quarter of 2024 was $200 million, and adjusted EPS was $0.45. Adjusted EPS for full year 2024 was $1.86. Now I will briefly discuss our two reportable segments, River and Ocean. These are on Slide 9.
Unless noted, I will be referring to metrics for the full year ended December 31. For the River segment, our capacity PCDs increased 3.7% year-over-year. This was primarily due to the operation of ships delivered in 2023 for the entire 2024 season. ships delivered in 2024 for part of the 2024 season and the addition of winter sailings in Europe. Adjusted gross margin grew 15.8% year-over-year to $1.6 billion, and net yield was $533, up 11.7% year-over-year, driven by strong demand for our European itineraries. Occupancy was 95.4% for the year.
For Ocean, capacity PCDs increased 6.2% year-over-year driven by the delivery of the Viking Saturn in April of 2023 and the additions of the Viking Yi Dun and the Viking [ Vella ] in September and December of 2024. Occupancy for the period was 93.9%. Adjusted gross margin increased 12.1% year-over-year to $1.5 billion and net yield was $522 up 5% compared to the previous year. Now let's move to the balance sheet.
On Slide 10, you can see that as of December 31, 2024, and we had total cash and cash equivalents of $2.5 billion and an undrawn revolver of $375 million. Our net debt was $3.2 billion, and we finished the year with a net leverage ratio of 2.4x. We are very pleased to share that since our last call, Moody's upgraded the corporate rating of Viking Cruises Limited to our rating of BA3 from B1, aligned with S&Ps and reflecting the continuous improvement in the company's credit metrics. As of December 31, deferred revenue was $4.1 billion.
Also on Slide 10, you can see our current bond maturity outlook, which has not changed since we last reported, with one bond maturity due in May 2025 and all other maturities in 2027 and beyond. With this, I'd like to confirm our debt amortization for 2025. As of December 31, 2024, the scheduled principal payments were $490 million. From a committed capital expenditure perspective for the full year 2025, the total expected committed ship CapEx is about $870 million or $450 million net of financing. The main drivers of the increase in total committed ship CapEx are the new River ship building contracts for long ships to be delivered in 2027 and 2028. With that, I'll turn it back to Tor to review our business outlook, including our booking curves.
Thanks, Leah. If we move to Slide 12, you will see that 2025 is shaping up a very great year. Also, demand for our core products remain strong. As of February 23, we were already 88% booked for the year with $5.3 billion of advanced bookings. These are 26% higher than the 2024 season at the same point of time. As you can see, the figures look very good. Notably, during 2025, we will grow our core capacity by 12%, with the delivery of 10 river ships and one ocean ship. As you will see, we are committed to our leadership position in River and the delivery of 10 ships across multiple regions in 1 year speaks to that. Moreover, this past month, we also signed options for an additional eight river vessels, but Leah will get into these details later.
As our capacity grows, I find it relevant to talk about our crew and our fleet. First, I will note that we have a fantastic grew which has earned us more awards than any other travel company in the rivers or oceans. Most importantly, our crew is a significant reason that we receive high satisfaction ratings for my guess. And as you can tell, we believe that our crew is essential to our success. On the rivers, we also have a strong advantage in owning or otherwise controlling a great number of documentations. We also believe that our extended in-house operations are a critical advantage in our ability to deliver a great product. And lastly, we believe that the unique design of our ships small and almost identical set us apart and serve as an important value driver.
If we now move to Slide 13, you will see the main areas where this approach provides benefits. From a marketing and sales perspective, all ships within each product are almost identical. This simplifies the sales and marketing process as guests choose a tenders rather than specific chips or considering their age. This strategy also allows us to generate higher and more consistent yields across the entire fleet regardless of ship age. Regarding deployment and operations, our long booking window allows us to position our fleet strategically to meet guest demand. Since our ships are almost identical, we can optimize revenue and net yield by allocating a number of demand is highest. Our fleet design also streamlines operation and board. For example, crew can move across ships with minimal retraining, and maintenance and repairs are more efficient. Additionally, from a nautical perspective, the River long ship design and reduce disruptions due to lower high water since ships can be swapped an mineral gas impact. And lastly, we also gained efficiencies in shipbuilding. By designing almost identical ships, we can streamline the shipbuilding process. Also, our ship construction time line has accelerated due to a reduced design phase.
Now another benefit of our fleet is its age. As shown on Slides 14 and 15, we are one of the youngest fleets in the industry, which offer significant advantage. To start, it allows for more efficient operations, including technological advances that result in lower fuel consumption. A young fleet also requires lower maintenance, which allows us to direct most of our capital expenditures to fleet expansion and the launch of new product offerings. This ultimately means that more of our capital is invested in initiatives designed to grow our revenue and cash flows. And a young fleet also has state-of-the-art efficient design which results in no wasted space or extra wait on board while maximizing the comfort for gas. You can see this in the case of the River long ships. As example, the Square bow allows more usable space. The same is the case with three full decks in the front, which enable us to accommodate more guests and therefore, improve the profitability of the ships.
Most of the vessel feature only two decks in front. This means that Viking can deliver a superior product to our guests while generating more revenue. In the case of our ocean ships, they were designed with a focus on our core demographic and their interests. To this end, use space typically needed for casinos and children's entertainment to accommodate state rooms and a broader range of onboarding managers to improve the onboarding experience. This layout allows us to operate with optimal gas-to-crude ratio while maintaining our high level of service. As you will see, all these are very relevant attributes that further enhance our margins and profitability. Now I will stress that while the ships are efficient and beautiful. It is a staff that sets us apart. Let us now review the booking curves, which are all as of February 23, 2025.
On the next slide, you will see our curves for Ocean Cruises, that is Slide 16. The blue line shows the bookings for 2025. Overall, we have sold $2.4 billion of advanced bookings which is 30% higher than last year at this point in time. Our operating capacity is up 18% year-over-year, and we have already sold about 87% of that capacity. I will also note that we are very pleased with the 2025 rates, we drive $744 per day compared to $681 last year.
Now if we move to Slide 17, you will see the curves for the river prices. I will start with advanced bookings for 2025, which is again blue line. As you can see, we have sold almost $2.6 billion in advanced bookings, which is 24% higher than last year. Keep in mind that our operating capacity for river is up 7% year-over-year. Overall, from a demand perspective, we're having a great year with 89% of the 2025 capacity already result at rates of $839 compared to $797 in 2024.
In summary, this a very good trend for 2025. I will highlight that depending on the market conditions we might not want to be booked too far out as we look to optimize pricing. If you look at the 2025 curve, some can argue that they're a little bit to see. This is more of an art than a science when manufacturers at play. We might want to slow patient if we think that it will benefit the overall revenue. It's important to analyze the curves with these things in mind. Our focus at this time is on 2025, specifically selling the remaining capacity and resuming our main river season in Europe. We will not be sharing information on future season yet. However, note that both the 2026 and 2027 seasons are open for sale. Leah will add some color to our order book and capacity.
Thank you, Tor. Moving to Slide 18. Since our last earnings release, we have a few relevant updates. This past December, we took delivery of the beautiful Viking Vella, an ocean ship that is operating in Europe. We also exercised our options and entered into shipbuilding contract for eight River long ships, which are scheduled for delivery in 2027 and 2028 for each year. Additionally, we entered into option agreements for eight additional River vessels to be delivered in 2029 and 2030. And we announced that we would build two additional River vessels to operate in Egypt scheduled to be delivered in 2027.
Based on our committed order book, we expect a 5.3% increase in total births for our fleet available for operations from December 31, 2024 to 2030. This calculation excludes the six River vessels in Russia and Ukraine. As it relates to 2025 capacity, we expect the sins of the Viking Vesta will be delivered in mid-2025. Regarding these 10 River vessels, we expect the delivery to be evenly split with five [indiscernible] first half and the remaining five in the second half of the year. Of these 10 ships, seven will sale in Europe, two in Egypt and one in Vietnam. Similarly to past seasons, more than 70% of the capacity from our core products will be in Europe, with the rest split across Australia, Asia, Egypt, North America, South America and the poles. As you can tell, Viking is experiencing exciting growth, and we are delighted to share our progress. While we continue to deliver strong financial results, our commitment remains unwavering. We prioritize our guests, treat all Viking employees like family, embrace a contrarian approach and always strive to do what is right for the environment. With this, I conclude our prepared remarks, and I'll now turn it back to the operator to take questions.
Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions]. And the first question today is coming from Steven Wieczynski Stifel.
So Tor, whoever wants to take this, I mean, Tor, you kind of talked about how you might be booked a little ahead of where you might want to be just based on the booking curves and potentially leaving some -- I guess, leaving some price on the table. Just wondering though, why you haven't added 2026 into your booking curve charts yet? And then maybe give a little bit more color on how '26 bookings are looking and if they would be in a normal range if they were on those charts right now?
Steve, thanks for the question. So this earnings call really, we wanted to focus on the 2024 performance and then also close out the 2025 season from a booking perspective. And then, of course, we still have to operate 2025 we did come out and say that January was a really strong booking month for us, and that includes both '25 and '26 seasons. It's still a little early, but we are pleased to say that 2026 is ahead of 2025 at the same point in time. But again, our focus remains on finishing selling the '25 season and then operating the year in the same Viking standard that our guests expect. So we anticipate we will be able to give a more fulsome update for '26 in the next call. But we kind of wanted to give an update on how '25 is shaping up and also share that 2024 was a great year for Viking?
Okay. And then second question, obviously, there's been some news out there in the marketplace about Royal Caribbean and their celebrity brands entering -- starting to move into the river market or market. So I guess the question is going to be, how would you guys respond to new competition. And maybe a better way to ask that is, what kind of keeps you guys in a unique position to fend off new competition moving into this space?
It's always interesting to see more attention to the space where we have been operating so long. So we wish people welcome. I think our -- we are in a very strong position as we are, as you know. We already have a 52% market share. We will take other people a little while to have a substantial dent in that, and we have a large order book. We have great customer satisfaction. And it's a bit different to operate small ships from big ships. It takes a special talent, which I think we have as a company. So I think we'll continue doing what we're doing. As you know, we have a pretty big order book, too. So I think we'll have 108 derivatives by 2028. So 10 more or less from somebody else. It is certainly something which will not make an impact on us.
I think the important thing is when you come to the Rivers, we have a couple of advantages. We're very proud of the design of our ships, as I'm sure, will Royal Caribbean be because they are good designers of ships, and they have seen how others do it well. But I think we have a couple of other things. We have a wide portfolio of liver destinations. So people have a menu to choose from when they want to go on the River Cruise with the Viking that's a hard one to beat I'd say. And we have a great direct marketing power. So I think we'll continue our business to always look to what others are doing, but we'll continue business and shouldn't be overly worried about anything.
The next question will be from Matthew Boss from JPMorgan.
Congrats on a nice quarter. So maybe could you elaborate on current demand trends by region across both River and Ocean or any signs of pause whatsoever that you're seeing in today's backdrop with demand trends as you look at forward indicators today?
Matt. I hope you're doing well. Thank you for the question. I think given where we are with the curves, we're 88% sold for 2025, we had a really good Q4 as well as a very good wave. So as of right now, I think we feel so about our '25 season. were up on capacity or up in yields and we're 88% sold. So from where we're sitting today, we're in a good spot.
And then maybe, Leah, could you elaborate on your total revenue approach. If we think about 12% capacity, 7% pricing for '25. Just how you look to optimize yields relative to the double-digit capacity multiyear.
Yes. So I'll take this one. I think we've said it in the past, and we still firmly believe that in a year with double-digit capacity growth, mid-single-digit yield growth is really great. And that's what we've seen for the past few years. So I think for 2024, just -- it reflects what we've been able to do. We increased capacity by 6% in 2024, while increasing yield by 7%. And as you note, for 2025 to date, our capacity growth for our core product is 12%, and we're at 7% yield increases or advanced bookings per PCD right now.
So I think we stick to that. We do feel that double-digit capacity growth with mid-single-digit yield growth is good for the company, especially with the strong order book we have.
The next question will be from Robin Farley from UBS.
Just wanted to clarify, in your comments a moment ago, you mentioned that '26 is ahead of 2025. And I wonder if you could clarify if that is price or volume or both? That I had was referring to? And then also, you just referenced the idea that mid-single-digit growth is what you would be aiming for with double-digit capacity growth. And based on your historic curves to get to mid-single-digit yield growth for 2026, you would probably want to be at sort of 10%, maybe a little higher in terms of that booked revenue per cruise for '26 at this far in advance, just based on -- I say that based on your yield curve for '24 and '25. Would you say that where you are booked right now for 2026 is consistent with a pricing position that could get you to mid-single digit for '26 based on what you've seen? And would appreciate any color on this, given so much uncertainty in the market, I think it would be really helpful for investors to kind of have that sense of how '26 is shaping up. .
Sure. Robin, this is Leah. So we do want to stay focused on 2025 season and making sure that we close out the year. But given the commentary that we've given about 2026, so we don't give guidance. We're not ready to discuss 2026 until the first quarter earnings call. But I can say that it's both rate and also volume. But again, with our capacity increases, we feel that we have been able to achieve mid-single digits in the past, and we see no reason to think differently at this time.
Okay. Great. That is helpful. And maybe just as a follow-up. Going back to the idea of sort of new entrants in the market. It's certainly -- I don't think investors are concerned that other new entrants would have anywhere near your market share in terms of capacity. But just thinking about demand. Are there any things you would point to as barriers to entry in terms of docking rights at certain key cities on your itineraries or things like that, that might be difficult for new entrants to get sort of any color around that might be helpful.
We have -- from the guest go a bit very obsessed, not only about our customers, but also about getting docking rights. So it sort of stems back from the time when we bought the KD company. And there, there's a lot of docking rights on the Rhine and on the elbow, Which we got -- so that is very important for us. So we have -- I think we have some 72 premier docking rights along the rivers. Of course there are some that are particularly unique. For example, we work for 7 years to get the write outside the Eiffel Tower in Paris, where we have a long-term contract for that. and also in Egypt right outside the Karnak temple, exclusive for us. So I think these are very valuable things as you rightly pointed out as potential barriers entry. We are also strong on the [ Danube ] Budapest wherever a joint venture with the Hungarian government. So we have very strong positions on doing rates. That's important.
The next question will be from Andrew Didora from Bank of America. .
Question for Tor. Obviously, some of the earlier questions you spoke to this, but of uncertainty in the macro this morning, airlines are lowering guidance because of it. look, I know you have a much different customer. But just curious, like in this type of macro environment, do you manage your booking curves differently? Just curious if we should be -- when you start talking about 2026 should there be any impact on maybe kind of your future booking curves as a result of this uncertainty and how you manage that?
Well, I think we are delighted so far ahead for 2025 so that we can sort of get that dealt with. It also gives us time. These are uncertain times. It also gives us time to take any action that would be needed for 2026. We are in any position that we have a strong database or a big database. So you can say we -- the contract to people who depend on travel agents to generate demand. We also have trials agents that we can generate demand ourselves, not out of thin air, but out of the database we have. And I think that's very, very valuable. That may cost us a little bit more marketing, but at least we have that ability and we have a strong financial position. So I think we will deal with it. As you know, I've been in this industry for a couple of years. And I've seen bad times come and bad times go. And I think it's important to be a bit of a contrarian and one should not despair too much when bad things happen. Most things pass after all. So I think as long as we are analytical about it, I'm prepared to invest even if we see a slump that will be fine.
Andrew, I just want to point out, as we've said in the past, our bookings are pretty sticky. So this really shows the strength of the booking curves that Viking has, which is, as Tor mentioned, we have time to react. So with 88% being sold for 2025, looking sticky. It really gives us runway and time to close out the rest of the year and then focus on 2026. So the fact that we're talking about 26 sitting here in March of 2025. It's a little bit unbelievable, but such as the way things are, but it's the time factor. And as Tor says, things are cyclical. And again, with our customer demographic being high end, well off, they are quite resilient compared to the average consumer? .
Understood. And just as my follow-up, I guess, Tor, obviously, you've done a good job diversifying kind of your river business a bit moving into Egypt. I know China last year. When we think about over the next 12, 3 to 5 years, if you were to prioritize other geographies for growth, how would you write them going forward?
Yes. Obviously, our main source market is English-speaking world, and there are many places they can go to. I think what we have in our portfolio is pretty much our bread and better business. But we have seen, as we've opened up Egypt that has become very attractive to our guests same with [indiscernible] and Cambodia, there are interesting places for our curious guest. And we hopefully will go to other similar places. But we have another area that we have been focusing on, and that is China, as we have. We don't make a big splash about it. But, it's obviously a huge market, and we have our operation there where we don't -- again, we do it differently from other people. So we have -- this year, we have four river vessels in Europe dedicated to the Chinese source market. And these four river vessels have Chinese staff, Chinese food the captains and the nautical people are good Germans or Swiss or whatever they are. So they know the way up and down delivers. But this is -- this has taken a little bit of time, but this can, of course, become a potentially significant source of business. And again, it's a philosophy that we have, which is different from most others. And that is if you go on a Viking ship of the ones we normally go on is English only onboard if you go on the Chinese-speaking ships, it's Mandarin only onboard and largely Chinese food, they come to places to experience the history and culture around the river, and then they want to come home and be in comfort on our ships. And that is probably more of an opportunity than anything else we have. It's not easy because we are, again, marketing direct to the Chinese consumer, which is quite gutsy, but that is our belief.
The next question will be from James Hardiman from Citigroup. .
This is Sean Wagner on for James. Just taking a look at your advanced booking curves. Is it safe to assume a similar flattening to the 2025 curve as we've seen in the past couple of years? Or is there any reason to believe that it will, I don't know, flatten quicker or slower than it has in the past?
Sean, I think what you're seeing in the curve from this point for generally is the fact that we're 88% sold. So we have some remaining inventory. And as you can imagine, it's mainly the fourth quarter, which are lower-yielding order. And so the flattening isn't necessarily flattening. It's really we're finishing off the season, which is what we anticipate doing in the coming months.
Great. I guess at the end of the year, can you remind us what there's some sort of -- what's behind the -- how it kind of ticks down at the end of the year?
I mean I think the way our consumers are, we generally felt very well in advance. That's that is our one of our big advantages. So one the year starts ending. You have a couple of cancellations, which you see a little bit of a tick down, but it's not significant. And as you can see from our 2024 numbers, we had a very great year, one of our best yet, with high-yielding, high adjusted EBITDA margin and a great adjusted EBITDA of $1.3 billion. So I think the focus should be how well we've done.
Yes, of course. And I guess to that point and to previous questions, acknowledging that you guys are sold so far out in advance and you're much more insulated than other, call it, travel companies, and you spoke to a strong January, are you seeing any weakening in trends as late acknowledging that even if you were seeing weakening trends, you're able to kind of pivot and you're dealing with much further out bookings, but are you seeing any sort of weakening in those trends?
So following a record book revenue book month in January, we are seeing that February is a little bit slower. This is probably a reflection of the uncertainties in the world. Again, this advantage we have of the booking curves being far out is that we have the time to not -- I wouldn't say catch up, but we have time to monitor the booking curves and then also start our marketing machine, which is what we use to generate demand. So all in all, I think we are fairly. We sit here feeling fairly positive about 2025. We're optimistic about 2026. And we're feeling good about how 2024 ended.
Okay. And one more quick one. How should we think about CapEx this year and next year? What are you I guess, planning to do with excess cash?
So similar to prior quarters, we are -- we have a very strong order book. So our capital allocation priorities are really to make sure that we have the ability to support that strong order book. And we believe that a big cash reserve provides a strong financial safety net. That provides stability and flexibility. We've talked a little bit about the uncertainties that the market is feeling right now. And so this big cash reserve, I think, bolsters our plans for the future. And then our top priorities is to reinvest cash in the business to generate strong returns. So we are ready for an acquisition if the right opportunity presents itself, but you can see from our strong order book that we are focused on organic growth.
The next question will be from Brandt Montour from Barclays.
So maybe for Tor, you guys have answered the question about near-term bookings in a number of different ways. So I don't want to re-ask that. But Tor, you've seen this business through a long period of time and the highs and the lows. And your customer is predominantly American wealthy and older. I imagine you would say that market uncertainty, these folks all have portfolios and asset prices going down is probably the #1 factor that would maybe creep into bookings or cause hesitation to book. But is there a factor also that you've seen maybe in past cycles where waves of anti-American or the perception of anti-American sentiment could creep into the broader media cycle and cause Americans to not want to book abroad. Is that a factor you worry about at all?
My colleagues sit in the U.S., and I now sit in Europe. So I don't have a lot of anti-American sentiment here. But of course, it is a thing one should think about in this day and age. But I think our guests tend to be educated, highly educated curious people. So I think it takes a little bit more than a few bad statements from somebody to scale them off quite frankly. And we see, for example, now our popular [indiscernible] in Vietnam. It's history, that's, of course, long run back in history. But I think our guests are curious, they will undoubtedly be somewhat impacted by declines in portfolios. We shouldn't -- so the impact will not be null, but I think they're not starving and they're not having jobs that they're losing. So I don't -- I think they are much less impacted than most other travel companies, customers. But we should -- of course, we should be aware of it.
Okay. A follow-up question on the River competitive market dynamics that we had discussed earlier in the call. away from capacity growth from Royal Caribbean in river and the market share discussion. More on the product side, you guys have created an advantage by using the same design, right, and creating the distinctive product that customers know and love. Does that -- is there a concern to that advantage if Royal Caribbean is maybe the first competitor that would come in with a large balance sheet with an innovative culture and that could actually start iterating around a product if that could create a buzz in and of itself. Is that something that you would then have to potentially pivot in your own long-term design plans.
River ship has to be less than 11 meters in 30 or 40 wide meters and a bit tall and 135 meters long. So the ability to innovate is limited. We have done a few things because we have found that for a while, one did not have full balconies on ships. So we found a way by having asymmetric to design ownership that's a patented design pattern we have that we can have full balconies and at the same time suites on the other side. So I think there, we have been innovative. There is very -- not so much innovation can be done. We have also been able to get our ships being full three deck ships become a bit technical, but we have a slide that I think slides I think it says, which shows how we are different from existing operators because we have been able to get three full decks, and we said about doesn't have to be pointed it will be square. So we have done that. So we managed to put 190 guests of similar size cabins onto the same footprint where others get up to 164 maybe let's 156 only. So we have been very innovative ourselves. But Royal Caribbean has not been innovative -- but I think we have what we have. And I'd say one thing is, of course, we shouldn't be too obsessed only with technology, but it's really the thing that matters is where do we take our guests with short cushions dividend for them. And also what is the quality of our staff. And we all like to think we have the best staff around, but we have very, very good staff and I think Leah made the point that we treat our staff like family. We are a public company, but the family on top has a lot to say, but the style in which we treat each other. And I believe that most people or most staff ownerships field, they are part of a family. And I think that helps bring it onward to the guests. That comments we hear time and time again. but we'll follow Royal Caribbean, but it's not so easy to go from a few to money. We have done it. But -- we will watch them. Maybe we will learn some data.
Next question will be from Meredith Jensen from HSBC.
If you look to capture more and more of the wallet share from your very loyal customers and you enhance the land-based options and build out those, what kind of products or offering for your customers or travel agents or on the wish list, like what sort of things do you continually think we may do that. That might be something that our core customers would like to do to expand on land and excursions and other things like that.
I think the first thing we have done is, of course, we had our -- we developed our expedition ships. So 2 years ago, I went myself on the Cruise to Antarctica, which was a phenomenal experience. In September, I plan to go the other way and go to Greenland or what we call as red, white and blue land, but go to Greenland and then into the Northwest passage. These type of things have turned out to be very, very interesting for paces. I think an important part of what we're doing is that we would like to be in charge of the product delivery to the extent possible. So it's limited what other things we can offer. But of course, when you look at the map and where we are, we can offer a vacation or next semi exploration anywhere in the world really. So I think we're likely to remain on cells, wherever we are. We could see that bigger enter so far is, but it's not so trivial because we also like to have some scale so we can make some money on that and not only to have an interest in product. But there, Egypt has been exceptional for us and the ships we have designed for there are very good, and that's very interesting. So it's likely to be a yield-based company for many years ago. .
Great. And one quick follow-up on Speaking about Viking being as much of a marketing company as it is a cruise company and how you're reaching out to the Chinese consumers as well as outside of North America and consumers for your English-speaking cruises. Are there -- as technology advances, and I know you've been ahead of the curve on these things, are there additional investments that we still look to, to help you better interact with these and potentially transact online directly as well as booked directly in the future.
Obviously, Obviously, the world has changed. And I think we should like to be ahead of the curve. So we are doing more things on the technology front. Technology, not in terms of what certain other cruise lines have done like robotic bartenders and the like that, that's nonsense. But in terms of what we can do on the marketing side, online booking, what they can do and how they interact on websites or whatever, we have lots of things underway. It's -- that's where, I think, big serious investments we've been made in the coming years. And it will be exciting to see what it looks like. It has changed a lot. For example, we had a call center, which was an our head office in Woodland Hills then [ Cameco ], and we managed to switch that over to being all alone overnight, quite frankly, because of the technology we had I can imagine if that have been the old taken weeks. So we are quite well equipped, I would say. But here, we will invest more.
And the final question today will be from Dan Politzer from Wells Fargo.
First, Tor, you take a lot of pride in being a contrarian historically. Can you talk maybe about the opportunities that you do see to lean in the year or how you do think about allocating capital? And as far as M&A, can you just remind us of how you think about that and how it could fit into your existing company?
Yes. So first of all, of course, it has allowed us to place orders for new buildings at a time when other people were afraid. That is as we came out of COVID. And of course, it allows us to get new building contracts far out. And at I shouldn't say reasonable, nothing is reasonable anymore, but at comparatively reasonable prices. So that's how we did that. There are some possible M&As. It's not entirely trivial because we take great pride in being one brand. And so things have to fit into the one brand category. We don't want to be a conglomerate of brands. We want to have clear focus on exactly who we are. And you're going to say the -- one of the things we are most proud of is probably our notice no children, no casinos, no nickel and diming, then we don't have an aisle, you can go to get fleeced.
It's good for the P&L don't get me wrong, but it's not good for the experience to when people go on to Viking experience, they know exactly what it will cost. So it's not entirely trivial. But I think if there are bad times now for a few months, then maybe there can be some opportunities that come along. So that's why it needs to have $2.5 billion in cash. And of course, if we look at that capacity, we also have some of that. So there are things we could do. and I'd rather invest money and developing the business than returning to shareholders of which I won't. I believe we can make better use of it in the company than I as a shareholder can do outside the company. So I think we will. It may sound a little bit rich to sit on $2.5 billion. but it can give opportunities to.
Right. No, that makes a lot of sense in the track record speaks for itself. And then just kind of for my follow-up. I think it was you who mentioned there was February took a step back. There were some uncertainties there. Is there any way you can kind of elaborate on that? And have you seen kind of trends change or maybe improve or even deteriorate into March? And I apologize for the short-term nature of the question, it just feels like everything is highly uncertain right now? So any additional detail or color would be helpful.
Yes, sure. So coming from a banner month in January, February does look like it slowed down a little bit. But at this point in time, we go back to the curves. We're 80% sold for 2025, 2026 is pacing on a consolidated basis. A bit better than 2025 at same point in time. So on the whole, I think we're comfortable with where we are. And at the end of the day, what we have is time. So we have time to close out 2025, as Linh mentioned, really, the remaining inventory is end of the year. And then we have time for 2026 bookings to develop. And then again, we're pointing back to our marketing capabilities and our ability to generate demand. So I think when we take a step back, we're fairly comfortable where we are from a booking perspective. And we're optimistic about 2025 and look forward to focusing on 2026 and reporting on that in the first quarter.
Thank you, and that does conclude today's Q&A session. I will now turn the conference back over to Tor Hagen, Viking's Chairman and CEO, for closing remarks.
Yes, I'd like to thank everyone for joining us on today's call and for your support and interest in Viking. That's probably what I should say, and I wish you a very nice day.
Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.