“As one of Norwegian’s largest investors, Elliott recognizes the substantial value of the company’s high-quality assets and brands at a time of exceptional growth for the cruise industry. However, Norwegian’s disappointing outlook for 2026 falls meaningfully short of the company’s potential. Commentary on today’s earnings call reinforced a troubling pattern of execution lapses and strategic missteps across the business that have been years in the making,” warned the firm.

Elliott Management noted that persistent shortcomings at Norwegian Cruise Line (NCLH) underscore the urgent need for comprehensive board refreshment to restore accountability, strengthen oversight, and rebuild investor confidence. Elliott is committed to ensuring that Norwegian Cruise Line (NCLH) has the independent, experienced, and fully engaged board required to return the company to industry-leading performance.

Shares of Norwegian Cruise Line Holdings (NCLH) fell 10.6% during Monday’s trading session.

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Management View

• John Chidsey, newly appointed President, CEO & Director, opened by stating, “NCLH has clearly not been performing to its full potential.” He emphasized a rapid, organization-wide review to identify underperformance and outlined a new approach focused on “disciplined execution, operational rigor and a clear focus on the fundamentals.” Chidsey identified three immediate priorities: fixing execution and driving accountability, improving efficiency and return on invested capital, and unlocking operational upside in revenue management and itinerary optimization. He highlighted, “Our strategy is sound, our execution and coordination have not been, and a culture of accountability is essential and necessary going forward.”

• Chidsey confirmed an “all-new leadership team in most of our critical functions” and a commitment to streamlining and reorganizing the business, including the appointment of Marc Kazlauskas as President of Norwegian Cruise Lines and a new Chief Marketing Officer and revenue management leader. He also noted ongoing integration efforts across brands and functions.

• Mark Kempa, Executive VP & CFO, stated, “Net yields in the fourth quarter grew 3.8%, while adjusted net cruise cost ex fuel of $158 was below guidance, increasing only 0.2%, driven by strong cost controls, which ultimately drove adjusted EBITDA of $564 million, exceeding our guidance.” Kempa also noted a $95 million or $0.20 write-off related to certain information technology assets.

• Kempa highlighted the launch of a refreshed Norwegian brand platform, Oceania’s move to an adults-only policy, and record-breaking bookings for new ship sales. He announced new ship orders across all three brands, securing 17 ships on order through 2037.

Outlook

• For 2026, the company expects net yield growth in the first quarter to decline approximately 1.6%, with net yields for the full year projected as “approximately flat.” Kempa projected full year adjusted EBITDA to increase approximately 8% to $2.95 billion and adjusted EPS to increase approximately 13% to $2.38. Adjusted EPS for Q1 2026 is expected to be approximately $0.16.

• Adjusted net cruise cost ex fuel is forecast to decrease approximately 0.8% in Q1 2026, with full year unit cost growth at approximately 0.9%, “well below inflation.”

• Management acknowledged that the “2026 outlook is below the long-term aspirations we previously communicated.”

Financial Results

• Kempa reported adjusted net income for Q4 2025 at $130 million and adjusted EPS of $0.28, excluding the IT asset write-off. Full year 2025 net yields rose 2.4%, adjusted net cruise cost ex fuel per capacity day rose 0.7%, and adjusted EBITDA increased 11% to $2.73 billion. The adjusted operational EBITDA margin improved 160 basis points to 37.1%, and adjusted EPS increased 19% to $2.11.

• The company remains on track to deliver its $300 million-plus cost savings target, with “nearly 3 consecutive years of essentially flat unit cost growth.”

• Net leverage for 2026 is expected to remain approximately flat at 5.2x, temporarily impacted by new ship deliveries.

Q&A

• Steven Wieczynski, Stifel: Asked how the company will address Caribbean deployment missteps and about guidance implying a negative yield cost spread. Chidsey responded, “I think we got a little ahead of ourselves. Again, there wasn’t a great cohesive plan… There’s just a lot of short-term misfires.” Kempa added, “The strategy around Caribbean is sound… we’ve seen some changes over the last few months of our various leadership.”

• Benjamin Chaiken, Mizuho: Inquired about European itinerary execution and organizational inefficiency. Kempa explained a shift to fewer long-duration voyages and noted “commercial misalignment in terms of our deployment and commercial strategy.” Chidsey described a “very siloed” culture lacking urgency and accountability, with “definite opportunities on the shore side to optimize the company.”

• Conor Cunningham, Melius Research: Asked about the timeline for the ongoing review and engagement with Elliott. Chidsey said he expects to have priorities “pretty buttoned up” in the next couple of quarters and confirmed recent shareholder outreach, including with Elliott.

• Matthew Boss, JPMorgan: Questioned immediate actions to improve bookings and cost growth outlook. Kempa said the focus is on load factor, noting a planned increase of over 200 basis points and ongoing investment in technology and revenue management systems.

• Brandt Montour, Barclays: Asked about scale disadvantage and how long a turnaround may take. Chidsey replied, “I do not think we’re at a disadvantage at scale,” expecting cost improvements sooner and revenue gains to be more visible in ’27 and ’28.

• Additional analyst questions addressed competitive positioning, luxury brand margins, board renewal, and asset sales. Chidsey affirmed all three brands are considered core and emphasized executing the current strategy before evaluating divestitures.

Sentiment Analysis

• Analysts’ tone was slightly negative, pressing management on execution missteps, yield guidance reductions, and cultural inefficiencies. Questions focused on Caribbean deployment, organizational structure, and recovery timelines.

• Management’s tone was realistic and occasionally defensive, acknowledging “missteps,” “lack of cohesion,” and “self-inflicted wounds.” Chidsey repeatedly highlighted urgency, discipline, and accountability as new priorities. Phrases like “as I said before,” and “I can’t give you an exact date” reflected caution and a focus on managing expectations.

• Compared to the previous quarter, management sentiment shifted from confidence and record-setting results to a more measured, turnaround-focused approach. Analysts moved from questions about growth upside to concerns about execution and guidance credibility.

Quarter-over-Quarter Comparison

• Guidance for net yield growth shifted from “low- to mid-single-digit” growth for 2026 in Q3 to “approximately flat” in Q4, with Q1 2026 yields expected to decline 1.6%.

• Management transitioned from emphasizing “record bookings,” “record earnings,” and “margin expansion” to addressing “execution missteps,” “siloed culture,” and a “business review.”

• Analyst focus moved from capitalizing on demand momentum and margin expansion to scrutinizing organizational structure, strategic misalignment, and the pace of the turnaround.

• The tone of both management and analysts became more cautious, with explicit acknowledgment of challenges and a longer runway for recovery.

Risks and Concerns

• Management identified “a balance sheet that is overly levered” and a need to “streamline” the cost structure.

• Execution missteps in Caribbean and European deployments resulted in capacity and pricing pressures.

• Market risks include heightened competitive activity in Alaska, premature capacity increases, and underinvestment in technology and revenue management.

• Geopolitical risks in the Middle East were noted, with Chidsey stating, “At this time, we are not operating in the affected areas, and there are no impacts to our scheduled itineraries.”

• Fuel cost volatility is partially mitigated with 51% hedged for 2026.

Final Takeaway

Norwegian Cruise Line Holdings enters 2026 with a new CEO, a substantially refreshed leadership team, and a clear mandate to improve execution and accountability. The company projects adjusted EPS of $2.38 for the year, with cost discipline and operational reviews underway to address recent performance shortfalls. While yield growth is expected to be flat and near-term headwinds persist, management asserts that foundational changes are being made to position the company for sustainable value creation, with further updates on progress anticipated in the coming quarters.

Read the full Earnings Call Transcript

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Revenue was up 6% year over year to $2.2B

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Eminence Capital is a global asset management firm focused on bottom up, fundamental

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In a letter to the Board, Elliott Management argued that “the case for change at Norwegian is as compelling as any we have ever seen,” describing the situation as “one of the clearest value-creation opportunities in the public markets.”

To orchestrate this turnaround in the company’s fortunes, Elliott has taken a 10% stake in the company, making it one of Norwegian’s (NCLH) largest shareholders and a key collaborator to drive the changes necessary to “unlock the company’s full potential.”

To that end, Elliott submitted its “Norwegian Now” thesis, detailing the case for change and outlining the actions required to rebuild the company.

Elliott contends that meaningful reform at Norwegian (NCLH) starts with a broad reconstitution of the board, adding members whose travel industry experience complements the company’s strategic needs.

Once a new board is in place, Norwegian (NCLH) should seek leadership that can implement a business plan to address the company’s bloated costs that were misaligned with competitors, ship deployment decisions that have created an unnecessary yield headwind, and the company’s “high tolerance for value destruction.”

“Norwegian’s CEO appointment reflects a profound failure of Board oversight: the company had no credible succession plan, no executive bench, conducted no comprehensive search, and ultimately installed a leader with no executive experience in the cruise industry,” Elliott said in their letter regarding the recent appointment of John Chidsey as CEO.

As the third-largest cruise operator (behind Carnival and Royal Caribbean), Norwegian (NCLH) has failed to translate a modern, well-maintained fleet and ownership of one of the largest private island destinations into outperformance of its rivals. Instead, the company has been undermined by burdensome debt, poor cost management, inconsistent strategy, and pursued strategies that were not only misaligned with customer preferences but with industry trends as well.

Fortunately for investors, Elliott believes these missteps are easily corrected and represent a potential for “strong return on invested capital and significant revenue growth opportunities.”

“Norwegian benefits from a rare combination of secular tailwinds, high-quality assets, and untapped opportunity. Realizing this potential, however, requires meaningful change. We urge the Board to engage with Elliott to implement the changes necessary to strengthen this important Company. Norwegian’s shareholders have waited long enough.”

Elliott’s stake and plan for correction is lifting Norwegian Cruise Line Holdings (NCLH) shares by as much as 6% on Tuesday, giving a modest lift to competitors Royal Caribbean (RCL), Carnival Corporation (CCL), and Viking Holdings.

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These S&P 500 (SP500) (IVV) (VOO) stocks have the most net relative weight by hedge funds.

1. Incyte Corporation (INCY) 32.26

2. Centene Corporation (CNC) 19.37

3. Invesco Ltd. (IVZ) 17.94

4. News Corporation Class A (NWSA) 15.61

5. VeriSign, Inc. (VRSN) 15.23

6. Mohawk Industries, Inc. (MHK) 14.94

7. Match Group, Inc. (MTCH) 13.52

8. PG&E Corporation (PCG) 12.63

9. Solventum Corporation (SOLV) 12.28

10. Sandisk Corp (SNDK) 12.18

11. Southwest Airlines Co. (LUV) 12.04

12. Lamb Weston Holdings, Inc. (LW) 11.77

13. J.B. Hunt Transport Services, Inc. (JBHT) 11.27

14. GoDaddy, Inc. Class A (GDDY) 11.02

15. United Airlines Holdings, Inc. (UAL) 10.67

16. Expedia Group, Inc. (EXPE) 10.05

17. Tapestry, Inc. (TPR) 9.99

18. Ralph Lauren Corporation Class A (RL) 9.76

19. Henry Schein, Inc. (HSIC) 9.67

20. Norwegian Cruise Line Holdings Ltd. (NCLH) 9.22

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