Lindblad Expeditions Holdings, Inc. — Q1 2018 10-Q
Reporting period: Three months ended March 31, 2018; comparisons are with Q1 2017. Lindblad operates expedition cruises and adventure travel through its Lindblad and Natural Habitat segments. Results are seasonal and may not indicate full-year performance.
Financial performance
Amounts below are in millions of dollars except per-share data and percentages.
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Tour revenue | $82.4 | $63.1 |
| Gross profit / gross margin | $46.5 / 56.5% | $30.5 / 48.4% |
| Operating income / operating margin | $14.4 / 17.4% | $1.4 / 2.2% |
| Net income | $10.9 | $0.6 |
| Net income available to common stockholders; diluted EPS | $10.8; $0.24 | $0.6; $0.01 |
| Adjusted EBITDA (non-GAAP) | $22.2 | $10.3 |
| Operating cash flow | $10.5 | $2.7 |
| Capital expenditures | $14.5 | $22.8 |
Revenue increased 31%; Lindblad revenue rose 32% to $70.5 million, and Natural Habitat revenue rose 20% to $12.0 million. Lindblad occupancy improved to 90.8% from 86.8%, and net yield rose to $1,127 from $1,008. Adjusted EBITDA excluding the estimated benefit of Q1 2017 voyage cancellations increased 33%, to $22.2 million from $16.7 million.
Liquidity, debt and cash flow
- Cash and cash equivalents were $97.3 million at March 31, 2018, versus $96.4 million at December 31, 2017. Restricted cash and marketable securities were $20.2 million, up from $7.1 million, principally reflecting higher Federal Maritime Commission escrow deposits.
- Working capital was positive $10.0 million, compared with a $12.7 million deficit at year-end. Unearned passenger revenues, largely advance guest receipts, were $111.3 million.
- Gross debt principal was approximately $202.5 million; reported debt carrying value, net of discount and deferred financing costs, was $190.0 million. The company refinanced in March with a $200 million secured term loan, maturing in 2025, and a $45 million revolving facility, with no revolver borrowings at quarter-end. The term loan rate was 5.95% at March 31.
- Cash flow from investing was negative $27.7 million, including $14.5 million of property and equipment purchases and $13.2 million transferred to restricted cash. Financing provided $18.0 million, including $200 million of new debt proceeds, offset mainly by repayment of $170.6 million of prior debt and $6.3 million of financing costs.
Material changes and notable items
- Q1 2017 included cancellations of four voyages due to a main-engine issue on the National Geographic Orion and two voyages for air-conditioning repairs on the National Geographic Sea Lion. The filing estimates these cancellations reduced 2017 revenue by $9.1 million and Adjusted EBITDA by $6.5 million. Excluding that revenue comparison, Q1 2018 revenue grew 14%.
- Growth also reflected the National Geographic Quest, added to the fleet in 2017, higher Lindblad pricing and demand, and additional Natural Habitat departures and pricing. The company operates seven owned expedition ships and five seasonal charter vessels.
- Interest expense rose to $2.7 million from $2.3 million, partly due to higher rates. Foreign currency results shifted to a $0.5 million loss from a $0.2 million gain. Debt refinancing costs included approximately $1.0 million expensed; $4.2 million of lender and third-party fees were capitalized.
- The company repurchased 568,446 warrants for $0.8 million and 9,030 shares for $0.1 million during the quarter. Approximately $12.1 million remained under the repurchase authorization at April 30, 2018.
Outlook, commitments and risks
No specific quarterly or full-year revenue or earnings guidance is provided in the supplied filing text. Management stated it believes cash, available credit facilities and expected operating cash flows will be sufficient for operations, debt service and planned capital needs, while cautioning that future operating cash flows are not assured.
- The National Geographic Venture, priced at $57.3 million, was scheduled for delivery in Q4 2018; $34.8 million had been paid by quarter-end. The National Geographic Endurance is priced at $134.6 million, targeted for delivery in January 2020 (potentially November 2019); an export credit facility of up to $107.7 million may finance part of its purchase price when delivered.
- Key risks cited include weather or mechanical disruptions, growth execution, competition, regulation and credit-agreement covenant compliance, vessel construction delays or cost overruns, and failure to meet revenue or Adjusted EBITDA projections. The company was in compliance with credit covenants at March 31.
- The company noted ordinary-course legal and regulatory matters and said it has protection and indemnity insurance expected to cover damages. No U.S. federal, state or foreign tax audits were pending; tax positions and provisional Tax Act accounting remain subject to review and possible adjustment.
- Revenue guidance should be considered in light of seasonality, advance passenger deposits, and capacity and operating costs associated with fleet expansion. Q1 2018 adoption of the revenue standard did not materially affect reported financial position or results.
Important facts for investors to verify
- Whether Q1 growth and improved yields and occupancy persist after accounting for the unusually weak 2017 comparison caused by voyage cancellations.
- Delivery timing, final cost and financing for the Venture and Endurance, and the resulting capital requirements and debt service.
- Liquidity available for general use: $20.2 million of restricted cash and securities is not freely available, and advance passenger receipts are recorded as unearned revenue until tours occur.
- Debt terms, floating-rate exposure, covenant headroom and the company’s ability to fund commitments and repurchases from operating cash flow.
- Adjusted EBITDA is a non-GAAP measure; review its reconciliation and exclusions alongside GAAP earnings and operating cash flow.