Lindblad Expeditions Holdings, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited; dollar amounts below are in millions unless stated otherwise.
Business context and reporting period
Lindblad operates expedition cruises and land-based adventure travel through its Lindblad and Land Experiences segments. Ship operations resumed in June 2021. By November 2, eight of ten owned vessels were operating; the company also operates seasonal charter vessels. It took delivery of the National Geographic Resolution in September and acquired the Crystal Esprit yacht during the quarter.
Financial performance and liquidity
- Revenue: Q3 tour revenue was $64.5, versus $1.0 in Q3 2020, when operations were substantially disrupted. Nine-month revenue was $81.6, down 1% from $82.0. Q3 segment revenue was $33.1 for Lindblad and $31.4 for Land Experiences.
- Profitability: Q3 operating loss was $17.7, compared with $26.8; net loss was $23.3, compared with $27.5. Nine-month operating loss widened to $81.3 from $59.3, and net loss widened to $92.9 from $69.9. Loss per share was $0.50 for Q3 and $1.87 for nine months, versus $0.56 and $1.40, respectively, in 2020. The filing does not present a consolidated gross margin figure.
- Non-GAAP measure: Adjusted EBITDA was negative $6.6 for Q3 versus negative $17.5; for nine months it was negative $50.4 versus negative $32.4. The company cautions that this measure is not GAAP and may not be comparable across companies.
- Cash flow: Nine-month operating cash flow was positive $21.5, versus negative $71.7 in 2020, primarily reflecting guest deposits and final payments for future trips and a $21.0 CERTS grant. Investing cash outflow was $96.3, including $89.1 of property and equipment purchases and $7.2 for acquisitions. Financing cash inflow was $55.3. Cash, cash equivalents and restricted cash decreased $19.5 to $185.0.
- Liquidity: September 30 unrestricted cash was $155.6 and restricted cash was $29.5. Current assets were $220.1 and current liabilities $259.6, a $39.5 working-capital deficit, largely reflecting $189.6 of unearned passenger revenue. Cash and cash equivalents were $187.5 at December 31, 2020.
- Debt and equity: Debt principal totaled $561.8, including $20.3 current; the balance-sheet debt carrying amount, net of deferred financing costs, was $547.1. The company reported compliance with covenants in effect. Series A preferred stock had a 6% cumulative dividend, paid in kind for its first two years, and was convertible into approximately 9.5 million common shares as of quarter-end.
Material changes versus the prior comparable period
- Q3 revenue and operations rebounded as voyages and land trips restarted. Lindblad reported Q3 occupancy of 82%; nine-month occupancy was 81%, compared with 89% in 2020. Lindblad nine-month revenue fell 42% to $40.3, while Land Experiences revenue rose to $41.3, including newly acquired businesses.
- Despite the revenue rebound, nine-month operating loss increased, principally because Lindblad revenue remained depressed by COVID-related cancellations, disruptions and rescheduling, while operating costs rose with the restart and acquisitions.
- Q3 general and administrative expense rose 86% to $17.0 and selling and marketing expense rose to $10.2, reflecting restarted operations, personnel, commissions and advertising. Nine-month general and administrative expense rose 28% to $46.1; selling and marketing expense declined 4% to $17.7.
- Debt principal increased from $496.5 at December 31, 2020, primarily as the company drew $61.7 under the second export credit agreement for the National Geographic Resolution. During 2021, debt amendments extended leverage-covenant waivers through March 2022 and increased certain interest-rate spreads.
Outlook, commentary and risks
- Management reported that 2022 bookings were 51% ahead of bookings for 2021 at the comparable date one year earlier, and 25% ahead of 2020 at the comparable date two years earlier. These are booking comparisons, not revenue guidance.
- The company said it could meet obligations for the 12 months from November 2, 2021, based on actions taken and its current forecast, assuming operations ramp as expected. It also said the pandemic’s future financial and demand impacts cannot be reasonably estimated; operating costs were rising as ships returned to service, and cash flows or the operating restart were not assured.
- Travel restrictions, border closures, cancellations, demand recovery, operational disruptions, weather, vessel issues, acquisition integration, debt covenants and floating interest rates remain risks. A hypothetical 100-basis-point increase in LIBOR would raise annual interest expense by approximately $4.3, based on quarter-end variable-rate debt.
- The company received $21.0 under the CERTS Act in August and recognized $4.4 in other income for permitted costs through September 30. It received a further $6.0 on October 8; unused grant funds must be returned if not appropriately used within one year.
- In Q1, Lindblad acquired 90.1% of Off the Beaten Path and 70% of DuVine for aggregate consideration of $10.6. On October 14, it acquired 80.1% of Classic Journeys for $12.8 cash. Legal proceedings were described as ordinary-course matters; no specific loss amount was provided. Management said controls were effective at September 30 and that remediation addressed a prior-year material weakness.
Important facts for investors to verify
- Whether vessel operations and travel demand continue to recover, and how cancellations, refunds and future travel certificates affect cash receipts and revenue recognition.
- Whether operating cash generation can support the working-capital deficit, debt service, vessel spending and planned growth without additional financing.
- Debt-amendment terms, covenant-waiver expiration, deferred principal repayment schedule, interest-rate exposure and preferred-stock dividend and conversion effects.
- Whether acquired businesses meet expectations and how remaining noncontrolling-interest put/call arrangements may affect future cash needs.
- Permitted use and remaining balance of CERTS grant funds, and whether any material legal or regulatory contingency develops.