Lindblad Expeditions Holdings, Inc. — Q1 2020 10-Q
Reporting period: Three months ended March 31, 2020; filed May 5, 2020. The company operates expedition cruises under Lindblad and land-based nature tours through Natural Habitat. Results were sharply affected by COVID-19-related cancellations and disruptions.
Financial results
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Tour revenue | $81.2 million | $89.7 million | Down 9% |
| Operating income | $2.3 million | $14.4 million | Down 84% |
| Operating margin | 2.8% | 16.0% | Down 13.2 percentage points |
| Net income (loss) | $(2.5) million | $15.1 million | Decline of $17.6 million |
| Net loss per share, basic and diluted | $(0.04) | Basic $0.32; diluted $0.31 | — |
| Adjusted EBITDA (non-GAAP) | $10.6 million | $22.0 million | Down 52% |
| Cash provided by operating activities | $15.4 million | $15.3 million | Approximately unchanged |
| Cash used in investing activities | $116.7 million | $35.1 million | Higher vessel spending |
At March 31, cash and cash equivalents were $137.0 million, with a further $22.8 million of restricted cash. Total debt principal was $382.2 million; the balance sheet reports debt net of financing costs of $370.7 million, including $11.8 million current. Working capital deficit was $7.7 million, compared with $36.3 million at December 31, 2019. The company reported compliance with debt covenants.
Performance and material changes
- Lindblad segment revenue fell 9% to $69.5 million and operating income fell 84% to $2.2 million. Occupancy was 89% versus 91%; available guest nights declined 12%. Net yield rose 3% to $1,130.
- Natural Habitat revenue fell 14% to $11.7 million; operating income declined to $0.1 million from $0.7 million.
- Lower revenue and added costs from cancelled, disrupted and rescheduled trips pressured results. Lindblad also incurred costs ahead of the National Geographic Endurance launch and higher drydock and personnel expenses.
- Cost of tours increased 8% to $42.2 million, while general and administrative expense increased 7% to $17.2 million. Selling and marketing expense decreased 8% to $12.9 million.
- Other expense rose to $6.6 million, including a $3.4 million foreign-currency loss, versus a $0.7 million gain in Q1 2019. A $13.4 million unrealized cash-flow hedge loss reduced other comprehensive income.
Liquidity, outlook and risks
- The company suspended or rescheduled most departures from March 16 through June 30, 2020; subsequent updates noted May voyages were rescheduled and most June voyages were being cancelled or rescheduled. Ships were laid up with minimum required crew. No COVID-19 cases had been reported aboard the fleet, and all guests had disembarked safely.
- Management estimated cash use of approximately $10–15 million per month while vessels were not operating, including operating costs, necessary capital expenditures and debt service. This estimate excludes guest payments for future travel and requested refunds.
- Management stated it believed it could meet obligations for the 12 months from May 5, 2020, based on actions taken, anticipated actions and its forecast. It also said the impact and duration of the disruption could not be reasonably estimated. This is not a revenue or earnings forecast.
- Liquidity actions included cost reductions, maintenance capital spending cuts of more than $10 million (over 50% below originally planned levels), reduced payroll and discretionary spending, curtailed marketing, deferred bonuses and suspension of share repurchases. The company drew $45.0 million on its revolver and $107.7 million under the Endurance export credit agreement during the quarter.
- After quarter-end, the company drew $30.6 million under the second export credit agreement for the National Geographic Resolution build. It received and returned a $6.6 million SBA loan. Resolution was scheduled for delivery in Q4 2021; remaining construction payments and possible cost adjustments are commitments.
- Bookings had been up 25% at February-end for 2020 versus the prior-year comparable date, with 86% of original projected guest ticket revenue sold. Subsequently, 2020 Lindblad bookings were 27% below the comparable prior-year level. Second-half 2020 advance bookings were 8% higher year over year; the company reported more than $15 million of new bookings since March 1 for travel in 2020–2022. Most affected guests had elected future travel credits as of April 24.
- Key uncertainties include reopening and travel restrictions, future demand and refund requests, health protocols, ability to obtain additional financing, debt service and covenant requirements, variable interest rates, foreign exchange exposure, and vessel construction obligations. Management reported no goodwill or long-lived asset impairment at March 31 despite performing impairment analyses.
Important facts to verify
- Subsequent cash use, refund requests and guest-credit redemptions against the stated monthly burn estimate.
- Actual timing and extent of expedition resumptions, cancellations and booking recovery.
- Available liquidity, financing access, debt maturities and covenant compliance, including any debt-payment holiday.
- Funding needs and delivery costs for the National Geographic Resolution and related foreign-exchange exposure.
- Underlying operating performance alongside non-GAAP Adjusted EBITDA and the effect of hedge valuations and currency movements.