Lindblad Expeditions Holdings, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; unaudited. Amounts are U.S. dollars in millions unless noted.
Business context
Lindblad operates expedition ships and land-based adventure travel businesses through its Lindblad and Land Experiences segments. Results are seasonal; management cautions that interim results may not indicate full-year performance.
Key financial metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Tour revenue | $124.8 | $90.9 | $268.2 | $158.8 |
| Operating income (loss) | ($8.5) | ($19.3) | $4.0 | ($53.6) |
| Net loss | ($23.7) | ($28.6) | ($22.9) | ($70.7) |
| Net loss per share | ($0.48) | ($0.59) | ($0.49) | ($1.43) |
| Adjusted EBITDA (non-GAAP) | $6.2 | ($6.2) | $33.4 | ($27.4) |
- Revenue increased 37% in Q2 and 69% for the first half, primarily from additional trips and voyages and higher pricing. Operating margin was approximately negative 6.8% in Q2 versus negative 21.2%; for the first half it was 1.5% versus negative 33.7%.
- Q2 Lindblad segment revenue was $87.4 million and operating loss was $11.0 million; Land Experiences revenue was $37.4 million and operating income was $2.5 million. Lindblad occupancy was 74% in Q2 versus 75% a year earlier; first-half occupancy improved to 78% from 71%.
- For the six months, operating cash flow was $19.5 million versus $18.6 million. Investing activities provided $0.4 million, including proceeds from securities sales, compared with $23.6 million used in 2022. Financing activities provided $61.5 million.
- At June 30, cash and cash equivalents were $143.0 million and restricted cash was $54.5 million. Total current assets were $258.9 million and current liabilities $332.8 million; the company reported a $73.9 million working capital deficit, largely reflecting advance passenger receipts.
- Debt principal was $635.1 million; carrying value was $620.4 million after deferred financing costs. The company reported $360 million of 6.75% notes due 2027 and issued $275 million of 9.00% notes due 2028. Q2 net interest expense was $11.6 million versus $9.4 million.
Material changes and notable items
- Revenue growth reflected increased fleet utilization and trip departures as well as higher pricing. First-half Lindblad available guest nights rose 51%; net yield per available guest night increased 29% to $1,124.
- Operating expenses also rose: first-half cost of tours increased 24%, general and administrative expense 25%, and selling and marketing expense 42%. Management cited higher operating activity, personnel and commissions, and increased marketing to support future bookings.
- In May, the company issued $275 million of 9.00% notes, using proceeds primarily to repay prior Export Credit Agreements. The refinancing resulted in a $3.9 million write-off of deferred financing costs and other expenses; higher interest rates and borrowings also increased interest expense.
- Unearned passenger revenue increased to $272.9 million from $245.1 million at year-end 2022. Management said bookings for full-year 2023 were 43% ahead of bookings for 2019 at the same point in 2019.
- Management stated cash on hand and expected future operating cash inflows would be sufficient for operations, debt service, and necessary capital expenditures. The company was in compliance with debt covenants at June 30, 2023; it reported no longer having variable-rate debt exposure after repaying variable-rate instruments.
Outlook, risks and contingencies
- No specific full-year financial guidance is provided in the filing. Management highlights booking strength but notes results are seasonal and affected by drydock timing and operating schedules.
- Risks include inflation, fuel prices, higher interest rates, economic conditions and travel demand; disease outbreaks, geopolitical events, weather and operational disruptions; labor availability and costs; vessel maintenance costs; regulation; competition; and maintaining National Geographic and WWF relationships.
- The filing reports ordinary-course legal claims and proceedings, with protection and indemnity insurance expected to cover damages. No specific material loss estimate is stated.
- Natural Habitat renewed its WWF partnership through December 31, 2028. A significant workforce-related risk identified is potential adverse effects from changes in worker classification rules.
Important facts for investors to verify
- Whether booking momentum and advance passenger deposits convert into completed trips, revenue, and cash flow, particularly given seasonality.
- Debt-service capacity and the cost implications of the 9.00% notes, alongside the reported working capital deficit and restricted cash balances.
- Whether revenue growth and improved occupancy can sustain operating profitability as labor, commissions, marketing, fuel, and other operating costs rise.
- The assumptions underlying management’s liquidity assessment, including planned capital expenditures, vessel maintenance, and future operating cash inflows.
- The treatment and potential dilution from Series A preferred stock: 62,000 shares were outstanding, with accrued dividends, and holders could convert into approximately 7.7 million common shares.