Lindblad Expeditions Holdings, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Unless noted, financial figures are in millions of dollars. The company operates expedition cruises under Lindblad and land-based travel through Natural Habitat.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Tour revenue | $1.0 | $101.0 | $82.0 | $267.3 |
| Operating income (loss) | $(26.8) | $15.7 | $(59.3) | $34.1 |
| Net income (loss) | $(27.5) | $2.7 | $(69.9) | $18.7 |
| Adjusted EBITDA, non-GAAP | $(17.5) | $24.1 | $(32.4) | $58.7 |
| Basic loss per share | $(0.56) | $(0.01) | $(1.40) | Income per share: $0.32 |
- Q3 revenue fell 99% year over year as nearly all expeditions were cancelled or rescheduled amid COVID-19. Nine-month revenue declined 69%; both segments reported operating losses.
- Nine-month operating cash flow was $(71.7), versus $41.6 provided in 2019. Investing cash outflow was $152.8, mainly reflecting vessel spending; financing provided $261.4. Cash, cash equivalents and restricted cash increased $36.9 to $146.2.
- At September 30, unrestricted cash was $129.6 and restricted cash was $16.5. Working capital was $14.6, compared with a $36.3 working-capital deficit at year-end 2019.
- Debt principal was $412.2; the balance-sheet carrying amount, net of financing costs, was $399.7, including $8.5 current debt. Management reported no material debt maturities until 2023 and compliance with covenants then in effect.
- Total assets were $708.8 and total liabilities $558.2. Unearned passenger revenues were $120.5. Property and equipment, net, rose to $488.0 from $357.8 at year-end 2019.
Material changes and financing
- In August, Lindblad raised $85.0 gross through a private placement of Series A redeemable convertible preferred stock. It carries a 6% cumulative annual dividend, payable in kind for two years, and is convertible at $9.50 per common share. Holders may require redemption at the six-year anniversary; conversion could represent approximately 8.9 million common shares at September 30.
- The company drew $45.0 on its revolver, borrowed $107.7 under an export credit agreement for delivery of the National Geographic Endurance, and drew $30.6 under financing for the National Geographic Resolution, scheduled for delivery in Q4 2021.
- Debt amendments deferred about $9.0 of scheduled export-loan amortization through March 2021 and waived or suspended leverage-ratio covenants through June 2021. The term-loan rate increased 125 basis points, payable in kind at maturity; certain covenants became more restrictive.
- Property investment and the Endurance entering service contributed to higher depreciation and amortization, up 28% for the nine-month period. The company found no goodwill or long-lived-asset impairment at September 30.
Outlook, risks and unusual items
- Most expeditions departing March 16 through December 2020 were suspended or rescheduled, including the 2020–2021 Antarctica season. Ships were laid up with minimum required crews; management reduced payroll and other operating costs, marketing, and planned maintenance capital spending.
- Management estimated cash usage of approximately $10–15 million per month while vessels were not operating, excluding guest receipts and refund requests. It said liquidity should cover obligations for 12 months from October 29, 2020, based on its forecast, which assumed rescheduled operations during 2020 and a ramp-up through 2021. Management also said the pandemic’s effects could not be reasonably estimated and additional financing might be pursued.
- Bookings as of October 26, 2020: Lindblad 2020 bookings were 74% below the comparable prior-year point. Total 2021 bookings were 4% ahead of the comparable 2019 booking point but 12% below the comparable 2020 point; bookings for the final nine months of 2021 were 12% ahead of the comparable 2020 booking point. New future-travel bookings exceeded $44 million since March 1; most affected guests had chosen future-travel credits.
- Key uncertainties include the timing and safety of restarting operations, travel restrictions, demand recovery, customer refunds, cash burn, vessel delivery and construction costs, and availability and terms of further financing. Foreign-exchange losses were $6.3 for the first nine months, primarily associated with a Resolution-related hedge; interest expense rose to $11.8.
- The company returned a $6.6 SBA loan received in April. Its stock repurchase program remained suspended. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether operations restarted on the forecast schedule and whether monthly cash use and refund demands matched management’s estimates.
- How much of reported cash is unrestricted and available, and the status and use restrictions of the $16.5 million restricted-cash balance.
- Bookings, cancellations, future-travel-credit redemption, and cash deposits and final payments for 2021 and later travel.
- Compliance with amended debt covenants, future borrowing costs, and any additional financing or dilution from preferred-stock conversion or redemption.
- Progress, remaining funding needs, and delivery timing for the National Geographic Resolution.