Lindblad Expeditions Holdings, Inc. — Q2 2020 Form 10-Q
Business context and reporting period. Unaudited results for the quarter and six months ended June 30, 2020. Lindblad operates expedition cruises and Natural Habitat nature-focused land tours. COVID-19 travel restrictions led the company to suspend or reschedule most departures from March 16 through September 30, 2020.
Key financial metrics
Amounts are in millions of dollars, except per-share data. Q2 means the three months ended June 30; H1 means the six months ended June 30.
| Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 |
|---|---|---|---|---|
| Tour revenue | (0.3) | 76.7 | 81.0 | 166.3 |
| Operating income (loss) | (34.7) | 4.1 | (32.5) | 18.5 |
| Net income (loss) | (39.9) | 0.9 | (42.4) | 15.9 |
| Net income (loss) available to common stockholders | (39.7) | 1.0 | (41.6) | 15.7 |
| Basic and diluted EPS | (0.80) | 0.02 | (0.84) | 0.34 basic; 0.32 diluted |
| Adjusted EBITDA, non-GAAP | (25.5) | 12.5 | (14.9) | 34.5 |
Q2 reported revenue was slightly negative; management describes the period as having effectively no tour revenue following voyage rescheduling. A meaningful revenue margin comparison is not available for that quarter.
- H1 cash flow: Operating cash used was $36.8 million, versus $37.2 million provided in H1 2019. Investing cash used was $152.0 million, primarily for the National Geographic Endurance and installments on the Resolution. Financing provided $181.8 million, chiefly from new borrowings.
- Liquidity at June 30: Cash and cash equivalents were $80.9 million; restricted cash was $21.3 million. Working capital deficit was $36.7 million. Unearned passenger revenue was $120.8 million.
- Debt: Principal debt was $412.3 million ($401.3 million carrying value after financing costs), up from $230.0 million principal at year-end 2019. The company reported no material debt maturities until 2023 and compliance with covenants then in effect.
- Balance sheet: Total assets were $672.3 million, total liabilities $578.3 million, and stockholders’ equity $84.0 million at June 30, 2020.
Material changes and management commentary
- H1 tour revenue fell 51% year over year. Lindblad revenue declined 51% and Natural Habitat revenue declined 55%, primarily due to cancelled, disrupted, and rescheduled trips. Q2 revenue fell to effectively zero.
- Cost reductions partly offset lost revenue: H1 cost of tours declined 28%, general and administrative expense 16%, and selling and marketing expense 39%. Depreciation and amortization rose 23%, mainly following delivery of the National Geographic Endurance in March.
- Interest expense increased with additional borrowing. Foreign-currency losses were $7.3 million in H1, including a $5.3 million loss associated with maturity of a hedge for the Resolution installment.
- The company estimates cash usage of $10–15 million per month while vessels are not operating, excluding future guest payments and refunds. It believes liquidity should cover obligations for 12 months from August 10, 2020, assuming reduced 2020 operations and a ramp-up through 2021; it cannot reliably estimate the pandemic’s broader effects.
- As of July 28, 2020, Lindblad bookings for 2020 travel were 62% below the comparable prior-year booking position. 2021 advance bookings were 6% ahead of the comparable booking position for 2020 and 35% ahead of the comparable position for 2019. The company reported more than $30 million of new future-travel bookings since March 1; most affected guests had chosen travel credits rather than refunds.
- Cost and cash-preservation actions included laying up ships, furloughs and payroll reductions, reduced marketing and maintenance capital spending, and suspension of share repurchases. Management reduced expected annual maintenance capex by over $10 million, more than 50% of originally planned levels.
- In June, export-credit amendments deferred about $9 million of scheduled amortization through March 2021 and suspended a leverage covenant through June 2021. On August 7, the term-loan and revolving facilities’ leverage covenant was waived through June 2021; the term-loan rate increased 125 basis points, payable in kind at maturity, a 75-basis-point LIBOR floor was added, and certain covenants became more restrictive.
- The company is considering additional public or private debt or equity financing. The timing and availability are uncertain. It rescheduled or rebooked all voyages scheduled through September 30, 2020. Management reported no goodwill or long-lived asset impairment from its June 30 reviews.
Important facts for investors to verify
- Unrestricted cash, refund requests, travel-credit redemptions, and the resulting actual monthly cash burn.
- Whether and when voyages resume, and whether 2021 bookings convert into completed travel and cash receipts.
- Availability and terms of any additional financing, compliance with amended debt covenants, and the impact of higher borrowing costs.
- Remaining payments and funding for the National Geographic Resolution, scheduled for delivery in Q4 2021.