Viking Holdings Ltd (VIK) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call indicates strong revenue growth, with a 24.9% increase YoY, and a significant portion of future capacity already booked. The introduction of a hydrogen-powered ship and strategic expansion into new markets like Egypt and India are positive catalysts. Despite some expense upticks, the management's confidence in maintaining mid-single-digit growth and high-quality product offerings suggests a positive outlook. The lack of clear guidance on yield growth and capital returns is a slight concern, but overall, the company's strong market position and innovative strategies are likely to drive a positive stock price movement.

Key Financial Performance

Net Yield Increased 8% year-over-year in Q2 2025, driven by disciplined execution and strong demand for cruises.

Revenue Increased 18.5% year-over-year to $1.9 billion in Q2 2025, mainly due to increased capacity, higher occupancy, and higher revenue per PCD.

Capacity Increased 8.8% year-over-year in Q2 2025, attributed to the delivery of new river and ocean vessels.

Adjusted Gross Margin Increased 19.2% year-over-year to $1.2 billion in Q2 2025, supported by higher yields and capacity growth.

Vessel Expenses (excluding fuel per capacity PCD) Increased 8.2% year-over-year in Q2 2025, driven by changes in itinerary mix and higher port charges.

Adjusted EBITDA Increased 28.5% year-over-year to $633 million in Q2 2025, driven by higher capacity, occupancy, and net yields.

Net Income Increased by $280 million year-over-year to $439 million in Q2 2025, with improvements attributed to higher capacity, occupancy, and yield growth.

Adjusted Net Income Increased 25.8% year-over-year to $439 million in Q2 2025, impacted by currency fluctuations and hedging strategies.

Adjusted EPS Reported at $0.99 for Q2 2025, reflecting strong financial performance.

River Segment Capacity PCDs Increased 7.5% year-over-year for the first half of 2025, driven by new ship additions.

River Segment Net Yield Increased 6.9% year-over-year for the first half of 2025, supported by strong demand for European itineraries.

Ocean Segment Capacity PCDs Increased 11.2% year-over-year for the first half of 2025, due to new ship additions.

Ocean Segment Net Yield Increased 12% year-over-year for the first half of 2025, driven by favorable deployment mix and reduced World Cruise operations.

Total Cash and Cash Equivalents Reported at $2.6 billion as of June 30, 2025, reflecting strong liquidity.

Net Debt Reported at $3.2 billion as of June 30, 2025, with a net leverage of 2.1x.

Deferred Revenue Reported at $4.4 billion as of June 30, 2025, indicating strong advanced bookings.

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Operating Highlights

New Ship Additions: The Viking Vesta joined the ocean fleet in June 2025, operating in the Mediterranean. Additionally, the Viking Amun was added to the Nile fleet.

New Itineraries: Announced first voyages in India starting in 2027, with early response showing sold-out itineraries.

Global Presence Expansion: Expanded river fleet to 85 vessels globally, with operations on rivers like the Rhine, Nile, Danube, and Mekong. Added priority access to 110 docking locations.

New Market Entry: Introduced itineraries in India, marking a new market entry for Viking.

Fleet Efficiency: Ocean fleet consists of 12 small, modern ships with uniform design for operational efficiency. River fleet expanded with selective growth in high-demand regions.

Cost Optimization: Implemented itinerary planning and cost structure optimization to manage vessel expenses and enhance yields.

Capacity Growth: Capacity increased by 8.8% in Q2 2025, with 96% of 2025 capacity already booked and strong bookings for 2026.

Shareholder Base Diversification: Completed a secondary offering of 30.5 million shares at $44.20 per share, increasing institutional float and diversifying ownership.

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Risk or Challenges

Currency Fluctuations: The company faces risks from currency fluctuations, particularly with euro-denominated loans. Although hedging strategies are in place, there is still exposure to unrealized currency fluctuations.

Cost Increases: Vessel expenses, excluding fuel, increased by 8.2% year-over-year due to changes in itinerary mix and higher port charges. This could impact profitability if not managed effectively.

Debt and Leverage: The company has a net debt of $3.2 billion and a net leverage of 2.1x. While manageable, this level of debt could pose risks if market conditions deteriorate or if revenue growth slows.

Supply Chain Delays: The delivery of two river vessels has been delayed from 2025 to 2026, which could impact capacity growth and revenue projections.

Economic and Market Conditions: The company’s performance is tied to consumer demand for travel, which could be adversely affected by economic downturns or geopolitical instability.

Regulatory Risks: Operating in multiple regions exposes the company to varying regulatory requirements, which could lead to compliance costs or operational disruptions.

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Guidance & Outlook

2025 Booking Status: 96% of the 2025 capacity for core products is already booked, with advanced bookings totaling $5.6 billion, a 21% increase compared to the same point in 2024. Capacity is increasing by 12%.

2026 Booking Status: 55% of the 2026 capacity for core products is already booked, with advanced bookings totaling $3.9 billion, a 13% increase compared to the same point in 2025. Capacity is increasing by 9%.

Ocean Cruises 2025: 95% of the 2025 capacity is booked, with $2.5 billion in advanced bookings, a 29% increase compared to the same point in 2024. Capacity is increasing by 18%.

Ocean Cruises 2026: 64% of the 2026 capacity is booked, with $2.5 billion in advanced bookings, a 19% increase compared to the same point in 2025. Rates are higher at $780 compared to $752 for 2025.

River Cruises 2025: 97% of the 2025 capacity is booked, with $2.7 billion in advanced bookings, a 16% increase compared to the same point in 2024. Capacity is expected to grow by 6%.

River Cruises 2026: Advanced bookings for 2026 total $1.6 billion, a 5% increase compared to the same point in 2025. Rates are higher at $940 compared to $887 for 2025. Capacity is expected to grow by 9%.

New Ship Deliveries: Two river vessels previously scheduled for delivery in late 2025 are now expected in early 2026. Two ocean ships, Viking Mira and Viking Libra, are scheduled for delivery in 2026. Two river vessels for India are planned for delivery in 2027 and 2028.

Capital Expenditures: Expected committed ship CapEx for 2025 is $990 million ($560 million net of financing). For 2026, it is $1.2 billion ($70 million net of financing).

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you walk us through the last couple of months in terms of booking progress for 2026, especially considering the slowdown in bookings earlier this year?

A:Leah Talactac stated that they have seen strong demand from consumers, with an outstanding June and July, and continued booking strength into August. They are 55% sold for 2026, and consumer behavior remains consistent with past trends.

Q:Is the uptick in marketing spend broad-based, or are you targeting specific itineraries or cabin classes?

A:Leah Talactac explained that they use marketing as the first lever to address softening demand, rather than pricing. For example, during softer demand around Liberation Day, they increased marketing efforts to stimulate demand without discounting.

Q:How does the strong start to 2026 bookings at over 50% sold allow you to optimize pricing on capacity for 2026?

A:Torstein Hagen mentioned that they aim to balance good returns with providing value for money to guests. While they might have pushed prices slightly higher in hindsight, they are satisfied with the current pricing.

Q:Can you provide perspective on the 4% advanced bookings per PCB growth to date and whether mid-single-digit yield growth for 2026 is achievable?

A:Leah Talactac stated that while they do not provide guidance, mid-single-digit price growth is their goal. They are averaging $800 to $900 per day, which is a 4% increase on top of the 7% achieved in 2025. This pricing, combined with capacity increases, is expected to drive revenue and EBITDA growth.

Q:Is the 4% growth in booked revenue per crew day for 2026 expected to increase, or will it remain at this level?

A:Leah Talactac clarified that they have consistently targeted mid-single-digit growth and did not provide guidance suggesting an increase. Linh Banh reiterated that they feel confident in achieving their mid-single-digit goal given current market conditions.

Q:Can you provide clarity on the higher expense uptick and whether it is a new base or due to nonrecurring factors?

A:Leah Talactac explained that quarterly variances occur due to factors like timing of repairs, ship deliveries, and itinerary mix. For the first half of 2025, operating expenses (excluding fuel) were up 3.9%, while capacity increased 11% and yields were up 7.6%. She emphasized that they manage expenses prudently on an annual basis.

Q:Why did River pricing accelerate while Ocean pricing decelerated modestly for 2026?

A:Leah Talactac noted that year-over-year price changes depend on what is sold and that river and ocean booking curves develop differently due to seasonality. Despite these differences, they are achieving $800 to $900 per day across all products.

Q:What metrics need to be achieved to consider capital returns to shareholders?

A:Leah Talactac stated that they are committed to a balanced capital allocation framework and prioritize maintaining a large cash reserve for stability and flexibility. While dividends or share buybacks are options for the long term, they currently see better uses for cash, such as generating returns through investments.

Q:Are the trends of River pricing accelerating and Ocean pricing decelerating expected to continue?

A:Torstein Hagen stated that growth in the Ocean segment reflects the strong demand for their product and is not significantly impacted by capacity growth. He emphasized the high quality of their Ocean and River products and their ability to attract guests from other cruise lines.

Q:How does mix impact the 4% growth in 2026 advanced bookings per PCB, and what is the outlook for 2027?

A:Torstein Hagen mentioned that while new markets like Egypt and India are priced higher due to smaller vessel sizes, they are not large enough to significantly impact the overall average. He emphasized the strong demand for unique experiences and the high quality of their products.

Q:What gives you confidence in filling long-term capacity growth at the right price, especially with growing competition in River?

A:Torstein Hagen expressed confidence in their ability to fill capacity due to their strong market position, control of docking stations, and high-quality products. He downplayed the impact of competition, noting their dominance in the River market and the strong demand for their Ocean products.

Q:Is M&A a consideration for capital allocation, and what criteria would guide such decisions?

A:Leah Talactac stated that M&A is an option if the right opportunity arises. They evaluate acquisitions based on scalability, margin accretion, and alignment with the brand. She cited India as an example of a successful complementary expansion.

Q:What restrictions exist for other shipyards to build river ships, and how do you ensure your product remains relevant?

A:Torstein Hagen noted that while other shipyards can build river ships, Viking's experience, relationships, and cost efficiency give them a competitive edge. He emphasized their commitment to maintaining a consistent, high-quality product and avoiding unnecessary changes.

Q:Are new markets like Egypt and India dilutive to overall pricing, and how do you assess new markets?

A:Torstein Hagen explained that smaller vessels in new markets require higher pricing, and they ensure new products meet high standards. He emphasized their ability to identify and meet guest demand for unique experiences.

Q:What is the strategy for expanding the point of sale outside North America, including China?

A:Torstein Hagen highlighted their direct-to-consumer marketing approach in China, avoiding intermediaries. He noted progress in developing the Chinese market and the potential for significant growth.

Q:Review of Unclear Management Responses

A:Management avoided providing direct answers to questions about specific guidance for mid-single-digit yield growth and whether 2026 booked revenue per crew day would increase. They also did not provide clear details on the impact of mix on pricing or specific metrics for initiating capital returns to shareholders.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

VIK Transcript

Viking Holdings Ltd (VIK) Q3 2025 Earnings Call Transcript

Positive11-19

The earnings call summary and Q&A indicate strong demand, with advanced bookings increasing significantly and higher pricing for both ocean and river cruises. The company showcases confidence in its market position and strategic growth plans, including new ship deliveries and capacity expansion. Despite some unclear responses, the overall sentiment is positive, supported by strong booking trends and pricing power. The lack of guidance changes or negative financial results further supports a positive outlook.

Viking Holdings Ltd (VIK) Q2 2025 Earnings Call Transcript

Positive8-19

Viking Holdings Ltd (NYSE:VIK) Q1 2025 Earnings Call Transcript

Positive5-21

The earnings call highlights strong financial performance with a 24.9% revenue increase and improved adjusted EBITDA. The Q&A section reveals confidence in pricing strategies and demand stability. Despite a net loss, there is a significant improvement YoY. The lack of a share repurchase program is a minor negative, but overall, the company's growth plans and financial health suggest a positive outlook. The management's vague responses on macroeconomic impacts are a concern, but not enough to outweigh the positives.

Viking Holdings Ltd (VIK) Q1 2025 Earnings Call Transcript

Unknown5-20

While Viking reported strong financial metrics with increased revenue and EBITDA, the absence of a share repurchase program and concerns about debt management and future booking trends pose risks. The Q&A revealed no immediate pricing pressures but highlighted uncertainties in macroeconomic impacts and booking patterns. The lack of a shareholder return plan and net losses also temper positive sentiments. Overall, the mixed signals from financial performance and strategic planning suggest a neutral stock price movement in the short term.

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