Business context and reporting period
Lindblad Expeditions Holdings, Inc. filed this Form 10-K for the fiscal year ended December 31, 2021. It operates expedition cruises and land-based adventure travel through its Lindblad, Natural Habitat, DuVine, Off the Beaten Path and Classic Journeys brands. Ship operations resumed in June 2021 after pandemic-related suspensions; as of January 31, 2022, nine of ten available vessels were operating.
Financial performance and liquidity
| Metric | 2021 | 2020 | 2019 |
|---|---|---|---|
| Tour revenue | $147.1 million | $82.4 million | $343.1 million |
| Operating income (loss) | ($110.8 million) | ($88.4 million) | $33.2 million |
| Net income (loss) | ($119.2 million) | ($100.1 million) | $18.7 million |
| Adjusted EBITDA, non-GAAP | ($64.0 million) | ($52.2 million) | $66.6 million |
| Cash from (used in) operating activities | $32.5 million | ($92.3 million) | $62.6 million |
- Revenue rose 79% from 2020 as operations restarted and newly acquired land-tour businesses were included, but remained 57% below 2019.
- Land Experiences revenue was $64.3 million, including the 2021 acquisitions; Lindblad segment revenue was $82.8 million. Consolidated operating expenses exceeded revenue, resulting in a substantial operating loss.
- Lindblad cruise occupancy was 81% in 2021, versus 89% in 2020 and 91% in 2019. Net yield per available guest night was $879, versus $1,048 and $1,051, respectively. Management cautions that pandemic effects distort comparisons.
- At year-end, unrestricted cash was $150.8 million, restricted cash was $21.9 million, and debt principal was approximately $558.5 million. Working capital was negative $79.1 million, principally reflecting $212.6 million of unearned passenger revenue.
- Investing activities used $114.7 million, including $96.7 million of property and equipment purchases and $18.0 million of net acquisition spending. Financing activities provided $50.4 million. The filing does not provide a clear consolidated gross-margin figure.
Material changes and unusual items
- In 2021 the company acquired Off the Beaten Path, DuVine and Classic Journeys for aggregate stated consideration of $23.6 million. The acquisitions contributed $17.9 million of revenue and were immaterial to net income, according to the filing. Preliminary purchase accounting included $19.9 million of goodwill and $10.4 million of intangible assets.
- The National Geographic Resolution entered the fleet in September 2021. The company also acquired the Crystal Esprit yacht for $13.3 million; after renovation as the National Geographic Islander II, it was expected to replace the Islander in the Galápagos in 2022.
- The company received $27.0 million under the CERTS program and recognized $15.4 million as other income for permitted costs in 2021; unrecognized grant amounts remained subject to use restrictions and possible repayment.
- Preferred stock dividends were $5.3 million in 2021. At year-end, the remaining preferred shares were convertible into approximately 9.1 million common shares, creating potential dilution.
Outlook, management commentary and risks
Management reported substantial advance reservations: second-half 2022 bookings were nearly 20% ahead of the comparable 2020 booking position two years earlier, and 2023 bookings were 54% ahead of the comparable 2021 position. These are booking comparisons, not a revenue or earnings forecast. The company said cash use would rise as voyages and marketing activity ramped up, and cautioned that pandemic-related demand, restrictions, cancellations and operating conditions remained uncertain.
After year-end, on February 4, 2022, the company issued $360.0 million of 6.75% senior secured notes due 2027, used proceeds primarily to repay its prior term and revolving facilities, and entered a new undrawn $45.0 million revolving facility due 2027. At December 31, 2021, the company reported compliance with covenants then in effect; leverage covenant waivers on existing facilities had been extended through March 2022. The company said available cash and expected operating inflows should fund operations and obligations assuming operations proceeded as expected, but gave no assurance.
- Key exposures include renewed COVID-19 disruption, weak travel demand, health and safety costs, weather and climate effects, ship repair or modification delays, fuel and labor cost inflation, and competition or excess expedition capacity.
- Other material risks include debt service and covenant compliance, access to refinancing, integration of acquisitions, potential goodwill impairment, and dependence on the National Geographic alliance, whose agreements run through 2025.
- Galápagos operations depend on permits and regulatory compliance; access restrictions could affect itineraries. The company also faces potential dilution and preferred-stock redemption obligations, and its common stock is subject to U.S.-citizenship ownership restrictions tied to coastwise shipping laws.
- Management and the auditor reported effective internal control over financial reporting; the auditor issued an unqualified opinion on the financial statements. No litigation expected by management to have a material adverse effect was disclosed.
Important facts for investors to verify
- Whether bookings convert into completed travel and cash receipts, and how occupancy, yields, refunds and future travel certificates trend as operations normalize.
- Post-refinancing debt balances, cash burn, interest expense, covenant headroom and ability to meet scheduled principal and interest payments.
- Acquisition performance, final purchase-price allocations, contingent consideration and the potential cost of buying out minority interests.
- Potential preferred-stock conversion or redemption, including dilution relative to common shares outstanding.
- Continuity of the National Geographic relationship and continued permits and operating rights in the Galápagos.