Good morning, everyone, and welcome to our first quarter 2018 earnings conference call. I'm Arnold Donald, President and CEO of Carnival Corporation & plc. Today, I'm joined by our Chairman, Micky Arison; and David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations, here with me in Miami. Thank you all for joining us this morning. Before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release. We are happy to report that our company is off to another strong start to the year, achieving record earnings on record revenues in our first quarter. Adjusted earnings of $0.52 per share were 36% higher than last year and $0.13 higher than the midpoint of our guidance, which was all due to strong operational execution by our team members worldwide to exceed our guest expectations and by our travel agent partners who support us around the globe. Our strong first quarter results, combined with favorable net movements in fuel and currency of $0.10 per share, enabled us to increase the midpoint of our previous full year guidance range by $0.15. It was reinforcing to see constant currency revenue yield growth this quarter of roughly 4%. Now that's on top of 4% improvement achieved in the first quarter last year. We continue to drive revenue yield growth by increasing demand in excess of our measured capacity growth through our ongoing guest experience and public relations efforts. These efforts produced another very strong wave season and that's on top of last year's record levels on both price and volume. That said, our booking trends are affected by items that make some clarification necessary when comparing to the prior year. We have been changing our distribution methods in China to move from a high concentration of full ship charters last year to an increased number of group sales this year. This change result in a much closer end booking curve, which affects comparisons to the prior year, but we believe it reduces risk and optimizes yields. In fact, our first quarter, we had positive yields in China and that's on top of 20% industry-wide capacity increases and a comparison to a quarter last year that was pre-Korea impact. So absent the shift in China from full ship charters to more group sales, our global cumulative advanced bookings are ahead at higher prices for the remainder of 2018. Our booking trends demonstrate our business fundamentals are strong and we are sustaining momentum as we continue to generate demand for cruise. Of course, we're working hard and had many efforts on the way already this year to increase demand and expand the market for cruising. Here in the U.S., our Ocean Originals travel series continue to attract record viewership, remaining the most popular travel shows on TV. Our newest series, 'La Gran Sorpresa' on Univision, which provides programming in Spanish featuring an Hispanic community, performed above expectations. In its first 6 episodes, the hour-long prime time Sunday night program reached nearly 7 million viewers. Now that's a nice complement to our existing lineup featuring "The Voyager with Josh Garcia" on NBC, which recently achieved its highest-rated episode ever, drawing an audience of nearly 2.5 million viewers; while "Ocean Treks with Jeff Corwin" on ABC consistently attracts 2 million viewers each week; and "Vacation Creation" with Tommy Davidson and Andrea Feczko, also on ABC, reached an audience of more than 1 million each week. In our second season, our major network viewership has increased 25% year-over-year and in just 2 short years has reached a cumulative audience of over 300 million viewers. This past wave season, we also launched multiple new marketing programs around the globe, which have been generating buzz for our brands. Here in North America, our highly successful Olympics campaign featuring Carnival Cruise Line, Holland America and Princess achieved nearly 400 million media impressions. Of course, you may have heard we appointed a new CFO, Chief Fun Officer that is, Shaquille O'Neal joins Carnival Cruise Lines inspiring others to choose fun. The Shaq campaign generated 2.7 billion impressions so far. In the U.K., our P&O brand launched its fourth marketing campaign with well-known British comedic actor, Rob Brydon, which generated 200 million views during the important wave season; while in Italy, France and Spain, Costa launched its third marketing campaign featuring Shakira on TV and social media, reaching 3.2 billion views with 13 million viewers on Facebook alone. We also furthered our guest experience efforts during the quarter. Progress continued on our OCEAN experience platform. Regal Princess is about to begin her European itineraries and will continue her ramp up with OCEAN abroad and we are now introducing our OCEAN platform on Caribbean Princess as she begins her summer Caribbean season sailing out of Port Everglades. On February 26, a new precedent was set, where we achieved a bandwidth of 2.25 gigabytes per second on Regal Princess, which represents 40x the connectivity capability of a typical ship and 400% of the maximum capability ever reported in the cruise industry. In fact, this was recognized as the most bandwidth capacity ever delivered to any mobile platform. MedallionNet is our on-ship connectivity for our OCEAN platform. It is a major breakthrough for guest connectivity experience at sea and is an outcome of our OCEAN experience platform. There were a number of other technology-driven milestones achieved this quarter in keeping with our ongoing efforts to further enhance the guest experience. Carnival Cruise Line completed the fleet-wide rollout of its new application, Hub App, which is among the highest-rated apps for cruise. Hub App achieved so many downloads, it actually trended and has crossed 3 million downloads and counting given its consistently high take-up rate onboard. More importantly, Hub App facilitates onboard revenue purchases like shore excursions and communications. This, combined with Carnival Cruise Line's newly launched CRM technology which enabled targeted marketing for onboard purchases, has driven a notable uptick in onboard revenues across multiple categories for the brand. Similarly, this past quarter, Costa rolled out its app, MyCosta, for its first ship, Costa Diadema, enabling our European guests to book shore excursions, dining and chat with others onboard. MyCosta will be rolled out fleet-wide by the end of 2018. And at AIDA in Germany, we recently completed the fleet-wide rollout of seamless check-in, enabling an embarkation process of just 30 seconds per guest and driving Net Promoter Scores even higher. AIDA will complete the rollout of its onboard app, MyAIDA, this coming quarter with additional functionality to be rolled out throughout 2018. These innovations are not only driving guest satisfaction scores higher, they are leading to a measurable increase in onboard spending for the organization overall. As you know, we also have a nice tailwind in ticket prices over the next few years with the rollout of our new state-of-the-art revenue management system, YODA, which is progressing as planned. As previously indicated, the revenue management system will be deployed across 6 of our brands to approximately 90% of those brands' inventory in the next few months to further facilitate yield uplift. We also remain on track to deliver $80 million of cost savings in 2018 as we continue efforts to leverage our industry-leading scale for containing costs. With $6 billion of cash from operations expected in 2018, we remain committed to distributing cash to shareholders as evidenced by recent share repurchases exceeding $250 million year-to-date, bringing the total to over $3.4 billion in just 2.5 years, as well as our growing dividend of $1.3 billion per annum. All told, the strong execution in the quarter, the fundamental strength in demand captured during wave season, combined with many achievements realized already this year to continue the momentum, all bolster our conviction in delivering double-digit return on invested capital in 2018 and beyond. Going forward, we remain focused on creating demand in excess of measured capacity growth and returning cash to shareholders. With that, I'll turn the call over to David.

Thank you, Arnold. Before I begin, please note all of my references to revenue, ticket prices and cost metrics will be in constant currency unless otherwise stated. I'll start today with an explanation of our change in reporting segments, then I'll provide a summary of our 2018 first quarter results, followed by an update on current booking trends for 2018 and finish up with some additional color on our 2018 March guidance. This quarter, we changed our operating segments to align with our new internal reporting. We still have 4 reportable segments and this change does not affect our consolidated results. We simply realigned 2 of our reporting segments. Our North America Cruise segment is now North America and Australia or more commonly known as our NAA segment. And our Europe, Australia and Asia cruise segment is now just Europe and Asia or more commonly known as our EA segment. While 7 of our 9 cruise brands have ships deployed in Australia, substantially all of our capacity in Australia is from our North American brands and P&O Cruises Australia. As a result, we realigned our internal reporting to consolidate substantially all of the Australian deployment into one cruise segment. In order to provide comparative historical information, this morning, shortly after our earnings release was distributed, we issued an 8-K with re-casted financial information for the segments for the last 3 years. Now let's turn to our financial results. As Arnold indicated, our adjusted EPS for the first quarter was $0.52. This was $0.13 above the midpoint of our December guidance. The improvement was driven by 3 things: $0.06 was from increased net ticket yields which benefited from stronger pricing on closed-in bookings on both sides of the Atlantic; $0.02 was from improved onboard and other yields which continue to benefit from a variety of ongoing efforts as Arnold highlighted in his comments; and $0.05 was from lower net cruise costs, excluding fuel, simply due to the seasonalization of costs between the quarters. Now let's look at our first quarter operating results versus the prior year. Our capacity increased 2.2%. The NAA brands were up 1.4%, while the EA brands were up 3.5%. Our total net revenue yields were up 3.9%. Now let's break apart the 2 components of net revenue yield. Net ticket yields were up 4%. This increase was driven by our NAA brands' deployment in the Caribbean and Australia as well as our EA brands' deployment in Europe and various other programs, including World Cruises. Net onboard and other yields increased 3.9%, with increases on both sides of the Atlantic. In summary, our first quarter adjusted EPS is $0.14 higher than last year with strong 3.9% revenue yield improvement worth $0.17 being slightly offset by 1% higher net cruise costs, excluding fuel, costing $0.03. Turning to 2018 booking trends. This year's wave season was strong and that's on top of the record wave season we had last year. Booking volumes for all future periods have been running ahead of last year at higher prices. At this point in time, cumulative bookings for the remaining 3 quarters of 2018 are in line with the prior year at higher prices. Now let's drill down into the cumulative booking position. First, for our NAA brand. The Caribbean program is slightly behind the prior year on occupancy at lower prices. This is driven by the Eastern Caribbean itineraries and San Juan. The Western Caribbean itineraries are ahead of the prior year on occupancy at slightly higher prices. For the Eastern Caribbean and San Juan itineraries, we expect to optimize our revenue yields by holding price and being patient. While the current perception of these regions are still somewhat impacted from last year's hurricanes, our guests are having a great time and coming home very happy, so it's just a matter of time before we are successful in getting the word out and improving things even further. The seasonal European program is well ahead of the prior year on occupancy at significantly higher prices. Alaska is ahead of the prior year on occupancy, albeit at lower prices. However, as I indicated on the last conference call, Alaska yields are impacted by mix. In the end, we expect individual ticket pricing in Alaska to exceed last year's record levels. Second, for our EA brands. For their European deployment, occupancy is ahead at nicely higher prices. Finally, I want to provide you with some color on our 2018 March guidance. As Arnold said, our first quarter results, combined with the favorable net impact of fuel prices and currency, enabled us to raise our full year earnings guidance. The increase was driven by 3 things compared to our December guidance. First, we benefit by $0.07 from the favorable impact of currency. Second, we benefit by $0.03 from the change in fuel prices, including the impact of fuel derivatives. And third, we flow-through $0.05 of the first quarter benefit from higher revenues. Putting all of these factors together, our adjusted EPS for 2018 is $4.20 to $4.40 versus $3.82 for 2017. And now I'll turn the call back over to Arnold.

Thank you, David. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Steve Wieczynski with Stifel.

So I guess the question is around your yield outlook for the remainder of 2018. And you basically maintained that at 2.5%. I guess, given the healthy beat in the first quarter and what seemed to be very strong second quarter guidance, what held you guys back -- or what's holding you guys back from maybe raising that at this point? I know you guys have typically not done that after the first quarter, but I think as we kind of look out through the rest of 2018, given your commentary, it seems like if we kind of stay in the same environment, there should be upside to that yield outlook. Am I thinking about that the right way?

Good morning, Steve. Yes. So as David pointed out, the $0.13 beat in quarter 1, $0.05, was just the timing of expenses between the quarters. The $0.05 was the revenue improvement in the first quarter, which we passed through to the year, and then the balance in the -- for us is kind of just rounding. So we always give you our best guidance. We simply rolled up the guidance around it to the nearest $0.05. In terms of the environment, we're always anticipating that there -- it's a volatile world. There are things that can go on. We maintain our balance -- our guidance around yield for the balance of the year and so that's how it came up.

Yes. Steve, the $0.05 we wrote through is 0.25 point. It takes $0.20 to increase our yield guidance by 1 full point. So 0.25 point is just rounding. I mean, in fact, our yield guidance did go up, but it's still rounded to the same 2.5, but embedded was an increase.

Okay. Got you. And then, second question, I guess, would be going to the Caribbean. And David, in your comments, you talked about how the Eastern Caribbean is a little bit softer, while the Western Caribbean is -- it seems like it's pretty strong. And I guess there seem to be this panic right now kind of out there in the investment community that the summer Caribbean pricing is deteriorating. And I guess can you guys give us some additional color on what you talked about, David, in terms of what you're seeing there? And are there any competitors out there right now that are somewhat overly promotional and maybe how you guys are countering that?

Well, I'll start first and I'll let David add on. Globally, we're ahead on price and occupancy and, in fact, as David mentioned in the Western Caribbean, we're actually ahead on price and occupancy even with double-digit capacity increase. There was concern last year around the Caribbean and, again, we had strong yield improvement with double-digit capacity increases in the third quarter last year, but Eastern Caribbean is heavily influenced by San Juan and we're very confident that it's related to some hurricane malaise hangover. We're being patient and our guests, as David mentioned, are having a tremendous experience. In fact, I would tell anybody that's waiting to see better pricing before they book, they're probably just going to miss out. The guests are having a great experience and we're on the job of making sure people know that and understand that. David?

Yes. This is just one of many -- over time, each year, we seem to face an issue. One year, it's Turkey. Another year, it's [indiscernible]. There's always something, but these are small issues in the grand scheme of a global company. And despite the hurricane hangover that we're experiencing a little bit in the Eastern Caribbean, the overall business is doing great. And as Arnold said, the Western Caribbean, which is seeing double-digit capacity increases in the back of the year -- half of the year, we are seeing higher prices and we are ahead on occupancy. So we're very confident that the Caribbean will do very well and that's on top of a record year in the Caribbean last year. So we feel very good about the overall state of the business.

Yes. The Caribbean is strong.

That's perfect. And real quick, can I get a housekeeping question with Beth? Can I -- can we grab your updated 2Q through 4Q capacity increase expectations?

Yes. Give me -- why...

Why don't we go on to the next question? When Beth gets the quarterly numbers, she'll give them.

Our next question comes from the line of Greg Badishkanian with Citi.

So first question, just in the fourth quarter, you mentioned that bookings for the full year 2018 were ahead of the prior year at higher prices. So with cumulative bookings now in line for 2018, pricing is much higher. Could you talk about why that works out? It sounds like the environment has been very healthy in terms of bookings since January. Is it -- is there some sort of mix issue? Or what's leading to the -- to that change?

So you're comparing 2 different periods. First of all, at the end of the year, what we were talking about was the full year 2018. Now we're talking about the balance of 2018 on a cumulative basis. But if you actually included 2019, we would be ahead at higher prices overall. So we were just trying to give the cumulative booked position as it related to 2017. The other thing that you also have to keep in mind is the goal isn't about being ahead. The goal is about optimizing revenue yield. So we're constantly taking action to do that. And I think I've said this before. If the booking curve keeps moving ahead, then at some point, we'll be sold out for the rest of the year and you guys would be -- would say to us, "Guys, you sold too quickly and you didn't optimize revenue yields." So we're making those decisions every day and we feel very good about our position at the moment.

Quarterly...

And -- yes, go ahead.

Go ahead, Greg. I'll finish when you're done.

Okay. All right. Yes. Just the closed-in bookings, a little bit more color. I mean, it was just a lot stronger in terms of the net yield. And when you think about what drove that, if you could just give us a little bit more detail on why you think it -- it did so much better from a net yield perspective?

Are you talking about the first quarter?

Yes. Yes.

Yes. I mean, listen, we always give you our best guess. I mean, we saw some strength in the Caribbean. We saw some strength in Australia. There were a number of markets where we did better than we had anticipated and onboard, too. I mean, it was both ticket and onboard, we're up. So it was across the board in every category. Sometimes you'll have a few things go one way and a few things go the other way and they may net out. In this particular case, just about everything went in a favorable direction for us.

Okay. For the quarterly capacity, the first quarter closed up 2.2; the second quarter will be up 1.5; third quarter, 1.7; fourth quarter, up 2.6; for a total of 2% on the year.

Our next question comes from the line of David Beckel with Bernstein Research.

Just had a follow-up on the Eastern Caribbean comments. You mentioned that San Juan is sort of the hub of perceived weakness or maybe the hurricane overhang. Are you also seeing weakness in Eastern Caribbean itineraries that don't directly touch on Puerto Rico? Or is Puerto Rico so pervasive that it pretty much touches everything?

That was a -- there's a general -- now, you've got to put all this in context, right, because we had a really strong year last year. And so this is all on top of that and we're also trying to optimize revenue and yield as David mentioned. But generally speaking, San Juan is much more of a drag than the rest of the Eastern Caribbean in terms of where we are, but overall, I have to emphasize to you that things are strong and we feel really good about it. So it is a little bit of a hurricane malaise overhang. We had most of the first part of '18 booked already, although we did account last year for -- in the fourth quarter of last year when we had the call, we accounted for a little bit of impact from hurricane on future bookings. But the first part was pretty much booked, so we're starting to experience some of that now. But frankly, we're doing really well. We see a lot of strength there. The guests are having a great time. And there is a lot of media noise around San Juan in particular as people continue to focus on the infrastructure overall in Puerto Rico, which I think is a bit of a overhang for us.

And the only reason we really called San Juan out individually was because we do have -- San Juan is [indiscernible] for us. And also, it is a source market for that home port and that did have the -- hurricane did have an impact on that source market, albeit small, but it did have an impact.

But our revenue management's signed. We're well positioned to finish strong overall in the Caribbean and in the Eastern Caribbean.

Just to mention, the booking volumes during wave period has been strong. The issue dates back to the multi-week period when the hurricane occurred itself and the recovery period in the back half of last year. As Arnold indicated, we were [ far aloft ] for the first quarter when that occurred and that's why we're seeing the experience in the later part of the year.

Great. That's helpful. And as a follow-up question, I want to ask a little bit about Ocean Medallion, the platform, the technology behind that. It seems like things are taking a little bit longer than you would have thought for the Princess rollout, but it sounds like you're also well along on apps for other brands. Are these apps based on some of the learnings from the Ocean Medallion? Or are they in any way connected? Or are they completely separate?

No. They would be separate, but they're all around the same principle, which is to enhance the guest experience. Ocean Medallion is a holistic change. It's not an app, right? It changes every system on the ship. It redefines the roles of the crew, et cetera. We have on Regal, it's installed. Caribbean Princess is coming next. We have 8 ships in total now in the Princess fleet that are Ocean-ready. But we're doing a slow ramp-up on purpose. We want to make this -- it's a holistic change. We want to make sure that the platform is stable, that we repeat it a lot and we scale so we can discover whatever issues there might be. And we're having a lot of fun watching guests' reactions as we slowly introduce it. We're not under any pressure or rush. We're not fixing a problem that existed before. Our guests are very happy with the Princess experience. And this is all guest-centric stuff. So we've had some tremendous gains from it already in terms of the experience with MedallionNet as I articulated in the opening comments. So we feel very good about it. We are going to ramp it up slowly. We're excited to get it on another ship and give guests the experience and have the Regal continue its ramp-up as she goes over for our European itineraries. So that's where we are on that. The other apps -- we have 9 brands. They're all innovative. We've got a number of different things, different demands around the world. Each brand has a different psychographic segment it's catering to. And so a lot of the apps in the tube are all on the same principle, how do we enhance the guest experience so we consistently exceed our guest expectations? And it's becoming a positive tailwind. We've got nice lift in -- overall from a number of these things in areas like communications and other onboard areas as we do more targeted marketing, et cetera, which is driven by some of the capability that technologies give the crew.

Our next question comes from the line of Felicia Hendrix with Barclays.

So -- we'll just keep drilling down on the Caribbean, but you guys have made it pretty clear that it seems like just San Juan and the homeported ships there that's been main issue. So just wondering, if you could help us understand, you said it was a small, but exactly how much of your deployment is -- are these homeported San Juan ships? And perhaps, can you quantify how much of a headwind San Juan is to your yield outlook?

Okay. Well, I can't quantify that, the headwind. But San Juan is just one Carnival ship that's homeported there, but the whole Eastern Caribbean -- like, I was looking at the back half of the year, the Eastern -- the whole Caribbean was 28% and I think the Eastern Caribbean represented 11% of the company's capacity for the back half.

I'd say Eastern and San Juan is 16%. It's where we are versus 13% for Western Caribbean.

Okay. So I guess I'm just trying to figure out what the Eastern Caribbean would have looked like without this San Juan issue.

The way I look...

That's an awful lot of detail...

Yes. It would have been better, but other than that, it's really hard to say what the impact is. Remember, it's 1 out of 100 ships and it's 1 2,000-passenger ship. It's very tiny.

Yes. I think the most important part, Felicia, is that we're doing really well in the Caribbean and we're coming off a record year. We are doing, overall, very well. We are very confident about where we're sitting, even with the Eastern Caribbean, but on balance in the Caribbean overall. And occasionally, you're going to have an area or a few itineraries -- I mean, that happens every year, as David already mentioned, somewhere in the world and those are just things we normally manage through, but the underlying fundamental is very strong. And it's clear. In this case, it's not at all capacity-driven. It's other issues and we have successfully increased yields. Last year, [indiscernible] capacity increased in the Caribbean and we're doing it again this year.

And with the perception issue, like, on a scale from 1 to 10, I'm sure it's improved because we keep getting further and further away. I mean, it -- where would you say we are?

It's really hard to say exactly where we are. It continues to improve every day. We've got the Caribbean -- it's open program going. It's industry-wide. And overall, this is just an ongoing change that hopefully, like everything else, is temporary.

Okay, so batting 1,000 with those, so I'm going to move on to something else. You guys had talked about, briefly before 2019, and we've all heard about the elongated booking curve. So I was just wondering, when you think about 2019, what are your booking -- how do your booking volumes for '19 compare, say like to this time last year for 2018, both in terms of booking and pricing?

Yes, we, we've had -- the first half of 2019, we are ahead at higher prices, and so we're very encouraged by the overall future booking trends. But keep in mind, it is very early.

Yes, okay. And then, that's just housekeeping -- if you could just give us your interest expense and D&A guidance for the second quarter and for the full year, that would be great.

Sure. Second quarter, interest expense is $50 million, roughly $190 million to $200 million for the year. D&A is $515 million for the 2Q, 260 -- sorry, $2.60 billion to $2.70 billion for the year.

Our next question comes from the line of Robin Farley with UBS.

I know you addressed earlier the idea that you -- your guidance actually does have a yields guidance raise in there, but it was only 0.25 point and kind of rounded, to be unchanged. I actually calculate slightly more than that, but maybe you're rounding conservatively, and that's fine. But I guess, I just -- you've -- you've talked a little about the East -- the San Juan cruises. I mean, is it fair to say that you could meet or exceed your yield guidance even if pricing didn't grow in San Juan year-over-year, I mean, given that you have strength in markets like European itineraries and Alaskan itineraries, that have a much higher average price point that growth there would more than offset? In other words -- and so, on a combined basis, you could still meet or exceed your existing guidance just from what you have on the books today elsewhere, is that a reasonable...

Yes, we always work hard to beat our guidance. And absolutely on -- even within the Caribbean, we can, we've got a ways to go here, and so we can perform -- outperform there, even more than we already are. But certainly, with everything else in the world, we are ahead overall, globally, so.

And keep in mind, when we put our guidance together, we always provide for the unknown and that, of course, is included in the remainder of the year.

Okay, great. So it's a. . .

We have another hurricane season coming, so maybe it'll be quiet, maybe it won't, but we always have to factor in -- that things can go upside down.

Okay, great. No, that's helpful. And then just -- you've talked about -- you're ahead in volume and price at record levels and that maybe that optimizing means that you actually don't want to continue to sort of always be ahead, right, that that's not the end goal. So just interesting that you mentioned for 2019 that you're ahead overall. And yet your volume, your booking volumes have still been up year-over-year on top of last year's record wave season. I guess, when would we see the point where you're putting more into price? And so we would see a period where maybe your volumes are not higher year-over-year? Like what, is that something that you think we'll see in 2018 or maybe more when you get to next year booking for the year ahead?

We don't know. We got a lot of itineraries, a lot of brands and a lot of world markets, and things change every year, right? So I wouldn't try to predict when we would see that. What I will tell you this year, as I said on the opening of the call, if you exclude China, overall, we are ahead on both. And the China mix shift between full ship charters and group sales is the only reason why we're not reporting overall, being ahead on both. So that's for this year. And we're ahead, as David mentions really early, as he said for '19. But so far, we're ahead on both, for the first half of '19 as well. But we're not giving guidance on '19 yet, obviously. But -- so things are strong. Our job is to just create the demand in excess of the measured capacity growth to make certain our brands are consistently exceeding guest expectations. We -- our markets everywhere in the world that are underpenetrated, everywhere in the world, including here in North America, still including in the Caribbean. And so we have great fundamentals as long as we continue to drive demand, debunk the myths about cruising, and make it easier for people to book a cruise and then make sure, certain they have a fantastic time once they're on board. We're going to continue to do well.

And we're always chasing that optimal place. And the reason we don't know is, the world around us continues to change, and so we'll continue to adapt to that and chase the optimal.

And practically speaking, what -- we'll never truly get to the optimal. I mean, it's always a moving target and what is optimal patterns this year wouldn't necessarily be the same one for the next year, so we'll always be chasing it. But as long as we're continuously getting better, then we're moving in the right direction.

Our next question comes from the line of Harry Curtis with Nomura Instinet.

My question is related to the incremental capacity growth globally coming next year. And I think you've done a pretty good job getting in front of that with your perception and marketing spend. To what degree do you think you can go back to markets you used to cruise to either in the Eastern Med or the Holy Land, that might absorb some of -- some of that incremental capacity coming next year?

Again, we -- it's tough to predict those things. It's easy to say at some point, it's almost certain that we will be cruising back with a large -- some of our itineraries in places that previously were very high-yielding itineraries, and that includes the Black Sea, as well as what you're referencing now. But when that's going to happen exactly, the world is a strange and mysterious place, and we'll have to see. But we're prepared to take guests where they want to go, which is usually, they only want to go places that is safe to go and it's comfortable to go. But we'll take guests where they want to go, as long we're allowed to do that. But to predict when that would happen, the reality is there's always going to be -- there has always been, can't say what always will be. There have always been pockets where you -- it was great, then you couldn't go, then you went back and that's just [indiscernible]. Notwithstanding that, we are underpenetrated in every market in the world, not just us, but the industry is. Just keep in mind, we only represent -- all the cabins represent up to 2% of the hotel rooms. And the vast majority of travelers are not cruising every year by a long shot, meaning they have never cruised. So we have great opportunity. For us, our planning, as you know, we are very comfortable with our capacity growth in the coming years. We've been consistent with our execution around measured capacity growth. And we're spreading that growth over a number of brands, an increasing number of geographic regions, and we're very careful where and when we add capacity. We're going to strive to drive yield increases at rates that we recently achieved, or even higher. In the end that may or may not happen, but we do have a bit of a cushion in the future, and future is of capacity itself is the driver for earnings growth and for cost containment. So we can achieve similar earnings growth rates at lower rates of increases in yields, but of course, we're going to strive for even greater earnings growth by driving both the occupancy and the yields.

And specifically, have you been inching back into any of the markets where you had a higher presence, 3 or 4 years ago? Or are you preparing to?

In terms of inching back, no, the brands plan our itineraries 2 years out, in some cases, even more. And so again as we read the tea leaves, we will go where guests want to go. I'm cautiously optimistic, some of those high-yield itineraries will be coming back in the next 3 to 5 years. Of course, there's markets like Cuba. And Cuba is still small, relatively, but it is expanding now. We were the first, as you know, very proud and happy about that. But the industry is going there and we're expanding our itineraries in Cuba. And that's a growth area. And then, of course, over the near term, there is still China.

And just shifting gears for my last question. Going to capital returns, it would appear that given your capital commitments for new ships, in combination with your dividend, that most of your free cash is spoken for. But to the extent that your EBITDA goes up, do you -- and you've got an underlevered balance sheet, do you use your balance sheet or the capacity that you have to repurchase stock more aggressively?

Again, we'll continue to repurchase. We have an authorization from the board now, and we'll continue to repurchase shares on an opportunistic basis as we have in the past. We continue to grow our dividend, as you know. Our debt/equity ratio is very strong. There's no reason for us to make it a lot stronger. So yes, we can look at leveraging up while maintaining a very healthy debt/equity ratio to look for ways to return cash to shareholders even through increasing dividends and or -- through share repurchase.

So and -- we take our March guidance. If we don't buy back shares for the rest of the year, we'd wind up with a debt-to-EBITDA ratio of less than 2x. So we will see an increasing absolute level of debt as we repurchase shares throughout the year and maintain at least the 2x ratio. I mean, it's a target. It's not an exact number. We'll never be at exactly 2x. Our overall goal is to be somewhere between 2x and 2.5x, and to maintain the current leverage that we have from that perspective.

Our next question comes from the line of James Hardiman with Wedbush Securities.

So I wanted to clarify a couple of points, it's probably going to be nitpicking here a bit, but I guess that's what we do. So the first quarter yield beat was about $0.08 between ticket and onboard, and you're flowing through $0.05 to the rest of the year. Is that just conservatism, or are you actually bringing down something during the balance of the year? And I guess -- maybe related question, I mean, as we talk about the Eastern Caribbean, I think the point that Beth made is it seems like the majority of the weakness there was -- stems from the immediate aftermath of the hurricanes. Is that actually any worse than you thought it would be 3 months ago, or is it just similarly challenged?

Yes, so when we looked at our guidance, we got our forecast, we rolled it up. In our mind, nothing changed in the remaining part of the year, from what we were thinking in December. So in the end, the difference between -- it's $0.03. I mean, $0.03 is 0.15% of our overall yield guidance. And so I was just not that good to call it that close. And so we rolled it up. We gave you our best guess, and that's where we're at. Then like I said, we raised the guidance by 0.25 point then rolled the $0.05 through. It was as simple as that.

Yes. And concerning the second part of your question -- was it worse than we anticipated or anything like that? Absolutely not. Again, I don't even want to leave a color on the Eastern Caribbean like it's bad. It's really not. I mean. We had great growth last year. We are still booking, and so on and so forth, and we'll see it through to the end. But it's a strong market on top of a record year. And the Western Caribbean is even stronger, and so the Caribbean overall is very strong. The guests are having a fantastic time. We got a couple of little pockets that we have to address, in terms of perceptions and stuff, but we're doing that, and I wouldn't want you guys walking away from this call thinking there's weakness in the Caribbean, because that's just not true.

Okay, I thought so, but I figured it was worth asking. And then in terms of China -- I wanted to revisit the change in distribution. Help me understand that a little bit better -- it sounds like it's just a timing thing, is that right? Close-in versus further out bookings, and I guess, is the point there that you're just diversifying your distribution, I mean generally, I would think, further out bookings are a good thing but is the idea that you're looking for diversification there? And then, maybe just speak to the health of the Chinese market exclusive of some of these changes in distribution methods?

Sure. China, as you know, is a B2B market, much more than a true consumer market. And so the full ship charters, the way it's going to work if you want to imagine it is, January full ship charter would get booked at 100%, even though the cruise wouldn't happen until June. Now when they book that full ship charter with us, there may have been no guests booked at all. And so you're recording 100% in January for a June sailing. With group sales -- so you're busting that up now, with group sales, you may have 10% of people that have actually booked, okay? So you could be actually ahead on bookings. But instead of recording 100%, you're only recording 10% at that point in time, because the rest is going to come when the group sales are actually activated. And so that's the dynamic that causes the shift. In terms of why do that, we're doing 2 things. We're expanding distribution. And in doing so, we're also, as part of that, trying to go more to the group sales. We think overall it gives us greater clarity, it lowers the risk, the concentration of risk. And that full ship charter may have booked at 100%, but then later in the year, they may have come back and said, "Hey, we were only able to book it full because we had to drop the price which was different than the price we agreed to you with, we'd like a credit, can you help us out?" So on and so forth, so. Even though you recorded it, then there's claims and credits on the back end. So with the group sales and the distribution across more distributors, we're cautiously optimistic, that will be reduced, and will end up in better shape. And so far, for the first quarter -- keep in mind, as I said, the first quarter this year compared to last year's first quarter in China, that was pre-Korea impact last year, and capacity is actually up significantly in the first quarter this year in China versus last year's first quarter, and we've done well. So we're cautiously optimistic. China, is still China, we're going to let it play out. But again, we're well prepared with our guidance to handle whatever we need to handle.

And just so I understand, when you say you've done well, is that sort of, done well despite all the challenges, so down less than you maybe anticipated, or actually up in China?

Right. In his comments, he indicated that we were up in China in the first quarter, so.

Yes, we're up.

Okay. I didn't know if that was a comment for last year, talking about the cruise [indiscernible].

No, it that was not.

That's for this quarter, yes.

Our next question comes from the line of Assia Georgieva with Infinity Research.

I thought I was going to be the only one to ask a China question, because usually I'm the only one that doesn't ask a China question. But James here beat me to it. So given that one of your competitors has unwound their JV, how does that affect you?

Frankly, not at all. I think -- I'm not fully up to speed or understand that the JV was unwound, that can be for a lot of different reasons. There's demand for ships all over right now, the world. But anyway, having said that, it doesn't affect us at all. I think it's just -- China is such an embryonic market. We have such a small relative amount of capacity against the latent pent-up demand that's there. And what's most important, is getting on a distribution system to connect with that demand. And then long term, we remain very optimistic. We're very excited about the progress we made with our joint venture with CSSC, the shipbuilding entity. And we feel good about the performance of Majestic Princess, our first purpose-built ship for China in our Princess brand, and the ongoing performance of the Costa Group, which was of course, the first international brand to be in China.

Yes. Arnold, thank you for that. And switching gears a little bit. In Alaska, again, we're having a competitor with a ship built specifically for that market, because you mentioned Majestic Princess for China and Norwegian Bliss for Alaska. Does that affect Princess in Holland America?

Not at all. I think -- I'm sorry, it's just the concept of a ship purposely built for Alaska. We have a lot of ships that are purposely built for Alaska and many other places, but in any event, no. Alaska's a very strong market, we're enjoying continued success there. Obviously, we're far and away the largest -- especially with all the land properties we have in Alaska as well, which also adds to our ability to drive yield in our businesses. And so -- but there are always people coming and going and it doesn't really affect us.

No, I understand, and I appreciate your chuckle, in terms of purpose build, but it is a new build. It's a new ship, which we haven't seen in Alaska.

Yes, yes. Good ship. Well, it won't be sailing year-round in Alaska, that's for sure.

Well, that would be difficult to do.

Our next question comes from the line of Jared Shojaian with Wolfe Research.

Can you just tell me, did you guys get any benefit from the new RM system in the first quarter? And have you baked any improvement in 2Q or the full year in your guidance from the RM system?

Yes, YODA, our revenue management system, has been a -- definitely a boon to us. As I've mentioned, several times in previous calls, one of the biggest advantages, just -- of all of our revenue science folks to work together, because when you have that, different perspectives and that much talent, and you get them to work together, they ideate and generate things that they would never do on their own. And so the whole process of developing that too -- has been beneficial, and then the tool itself has been, and as I said -- there will be 6 brands that will have about 90% of our inventory going through it, that, some of that inventory of course is for 2019, so you won't see all the benefit in 2018. But it's definitely been a lift, has added discipline, has added creativity and has added yield.

Can you tell us how much of the 3.9% growth in the first quarter was because of the RM system?

I'm sure our revenue science folks would love to give you a number, but the reality is, there are so many variables, there is no way to do that. It's clear that the cumulative effect of everything we've done has contributed to the positive result. There's no question, I could give you lots of anecdotal examples of where we had specific yield lift from actions driven by YODA and the teams. But to quantify it proportionately, is a task that they like to try to do but there's way too many variables.

Got it, okay. And just to confirm, to clarify on China, when you say yields were up in the first quarter, are you saying, constant currency yields were up? Or is that a function of just the RMB being a lot stronger year-over-year?

No. Constant currency yields are up for the first quarter.

Okay. So maybe -- if yields are up in the first quarter, I guess, we're going to see supply drop off pretty considerably, you're going to start to lap the Korea impact. Is there any reason why China yield shouldn't start to materially improve from the first quarter?

It would say that -- I mean, your thought process is obviously solid. We would expect that, but again, China's China, so we'll just have to wait and see. What we've done is given you our best expectations in the guidance we've given, which is obviously an increase overall in guidance.

Our next question comes from the line of Tim Conder with Wells Fargo Securities.

I wanted to mainly circle back to the broader capacity question. And it seems like yourselves and your other 2 -- #2 and 3 players have been very disciplined in how you've applied many different disciplines to achieve the overall objectives here. How do you view, maybe another player who's growing capacity very rapidly over the next several years? And their applications of disciplines, given past history, and how do you view that going forward and thinking about managing the capacity and yields and everything?

Yes. I think the first comment I'd like to make is, a cruise is not a cruise, is not a cruise. I mean, the brands are all very differentiated, and they offer very distinct experiences. So we've learned, given the fact that there's large addressable markets everywhere that are seriously underpenetrated, that we have to focus on measured capacity growth. And we're totally focused on achieving double-digit return on invested capital in 2018 and sustaining that. And if, for some reason, we -- the demand isn't there, we are fully prepared to accelerate retirements and with our scale, that matters, as we're focused on growing earnings and not the number of ships. And so the fact other people do different things, or do whatever they're doing, obviously can impact us, but that's just part of a overall business condition we have to manage. The advantages we have is that the brands are highly differentiated, and if we're doing our job of creating the excess demand, then we should be able to continue to not only grow earnings through capacity addition, but also through yield improvement. And to the extent were falling short in any way, then we would manage our capacity, which is going to have way more impact on what we can do with yield and earnings, and so on, than what somebody else is doing.

No, no, very helpful. Along that line, have you seen any evidence of those trying to build their brands in markets move more aggressive here so far, year-to-date or not?

In terms of -- probably, you should talk to them, but you hear anecdotal stuff, but at the same time, you never know how much volume is tied into that. You also hear positive comments that some that we're discounting more severely in previous years are discounting less. So there's noise out there, but the reality is, where we see it, whether it's the Mediterranean, whether it's the Baltics, Alaska, the Caribbean -- we're seeing strength, and we feel good, and we continue to try to generate demand.

Our next question comes from the line of Angus Tweedie with Bank of America Merrill Lynch.

I just wanted to ask on [ IMA ] regulation, on exhaust gas cleaning systems. Could you give us an update, one, on your position in terms of the fleet. And then secondly, given the move we've seen in fuel oil in the last couple of weeks and the futures on that, has your approach to how you're implementing this technology changed at all?

Yes, hey, thank you. We've installed the exhaust gas cleaning systems on the majority of our ships. In addition, as you know, we've ordered 9 LNG ships. We think that these and other mitigating actions will allow us to be prepared for the pending requirements in the 2020 ECA, on the low sulfur regulations. So we feel we're well positioned. The investment's already included in our CapEx guidance, so we're covered there as well. In terms of future fuel prices and stuff, we continue to look. We've never hedged and won't. We've used the collars in the past. We still have them in place through '18, and we'll continue to revisit. But we always did them to protect against a sudden spike that could cause a cash crunch in the business, with ship orders and other things we have on the books. And right now, with our position being so strong in terms of our cash position, the cash we have and our debt ratio, that will factor into any decisions around whether we would do collars in the future or not.

The next question comes from the line of Tim Ramskill with Credit Suisse.

Just 2 for me, please. The first is, at the Q1 stage, also your guidance for Q1 was for sort of 1.5% to 2.5% on yield, and your guidance now for Q2 is, is that a little bit more positive? So just wondering, if you could sort of tell us what's changed sort of now versus 3 months ago, thinking about the sort of most approximate quarter that you're about to move into. And then, my second question was just sort of, on the yield, the new yield management system, obviously, you were asked about it a moment ago. Just some sense as to sort of how far through the full process of rollout you are, I guess, it learns from itself over time, my understanding is, you're going to roll out across the entirety of the business as well. So how much through the sort of benefits of that do you feel you are?

Okay. So let me go through the quarters. Each quarter, we give you our best guess. I mean, we've got 80% to 90% of the inventory booked, on the books. But keep in mind, there's also the onboard revenue, which is a little bit less predictable, because you don't have 80% to 90% of the onboard on the books. We're looking at the second quarter, we see what we have. And it -- and we give you our best guess. In addition, the prior year comparables are also very different. But we are in a -- as we said before, we're in a good, strong position, looking out for the second quarter and the remainder of the year. And we feel pretty good about the guidance we've given for the second quarter. As far as the revenue management system is concerned, I think Arnold commented in his notes that over the next couple of months, we're going to roll it out to 90-plus percent of the inventory for the 6 brands that it's going on, which represent, I think it's about 45% of our business overall. So we are seeing, as we said before, it's good improvement from the system. It's adding positively to our revenue -- to our yields. And we're very excited and expect it to continue to add to yields over the next few quarters and few years as well.

Okay. So would you be as bold as to sort of put a timeframe as to how far through that whole process you are?

Yes. We've got a long way to go, because even once we implement the system, we're going to continue to improve it, and we're going to continue to learn from it. So this will be a number of years, so we're still in the early innings, and we expect to see multiple year-over-year improvement.

Okay. Thank you, everyone. We really appreciate your interest and engagement. Hope you all have a fantastic day. Thank you.