Lindblad Expeditions Holdings, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing also provides unaudited fourth-quarter results. Lindblad operates expedition cruises and nature-adventure tours through its Lindblad and Natural Habitat segments.
Financial performance
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Tour revenue | $343.1 million | $309.7 million | +11% |
| Operating income | $33.2 million | $25.3 million | +31% |
| Operating margin | 9.7% | 8.2% | +1.5 percentage points |
| Net income | $18.7 million | $11.6 million | +62% |
| Diluted EPS | $0.28 | $0.24 | +$0.04 |
| Adjusted EBITDA | $66.6 million | $54.8 million | +21% |
| Operating cash flow | $62.6 million | $56.4 million | +$6.2 million |
| Capital expenditures | $96.0 million | $54.3 million | +$41.7 million |
Revenue growth reflected additional Lindblad capacity from the National Geographic Venture and growth in Natural Habitat departures and pricing. Operating income improved in both segments. Higher marketing and tour costs and depreciation partly offset revenue gains. Operating cash flow was below capital spending in 2019, with much of the investment relating to two new polar vessels.
Lindblad segment occupancy was 91%, unchanged from 2018; net yield rose to $1,051 from $1,044. Natural Habitat revenue increased 11% to $70.7 million and operating income rose 26% to $7.0 million.
Fourth-quarter results
Q4 2019 tour revenue was $75.8 million, compared with $70.6 million in Q4 2018. Net income was $0.1 million versus a $4.6 million loss; diluted EPS was a loss of $0.03 versus a loss of $0.10. The filing attributes seasonality partly to tour timing and ship maintenance schedules.
Liquidity, debt and commitments
- Cash and cash equivalents were $101.6 million at year-end, down from $113.4 million; restricted cash was $7.7 million.
- Working capital deficit widened to $36.3 million from $9.3 million, largely reflecting advance passenger receipts recorded as unearned revenue.
- Debt principal totaled $230.0 million, versus $201.5 million a year earlier; balance-sheet debt net of deferred financing costs was $218.1 million. The company had no borrowings under its $45 million revolving facility at year-end.
- The main term facility carried a 5.01% rate at year-end. The company reported compliance with debt covenants. A 1-percentage-point change in LIBOR was estimated to change annual interest expense by about $1.0 million on unhedged variable-rate debt.
- Contractual obligations totaled $531.8 million, including $200.9 million of fleet-expansion purchase obligations, $230.0 million of debt principal and $70.1 million of related interest.
- Management said cash, credit facilities and expected operating cash flows should cover operations, debt service and newbuild spending, while cautioning that future cash flows are not assured.
Material changes, outlook and risks
- The company exchanged or converted all outstanding warrants in July 2019, issuing approximately 3.9 million common shares. It recorded a $2.7 million non-cash deemed dividend, reducing income available to common stockholders.
- Capital spending supported the National Geographic Endurance, scheduled for delivery in Q1 2020, and National Geographic Resolution, scheduled for Q4 2021. The Resolution financing agreement permits borrowing up to $122.8 million; about $30.5 million had been drawn by year-end.
- As of February 18, 2020, 86% of expected 2020 Lindblad guest ticket revenue had been booked. The filing gives no formal full-year revenue or earnings guidance.
- Key risks include travel-demand shocks—including contagious disease and COVID-19, expressly identified in the filing—weather and itinerary disruption, vessel repairs or newbuild delays and overruns, rising competition and operating costs, variable interest rates, currency movements, and dependence on the National Geographic relationship. Galápagos operating licenses are due for renewal in July 2024.
- The 2019 foreign-exchange hedges for the Resolution construction payments generated a $5.1 million loss in other comprehensive income; the filing estimated a 10% NOK strengthening would generate a $9.8 million OCI gain and a 10% weakening an $8.0 million OCI loss.
- Management and the independent auditor reported effective internal control over financial reporting. The financial-statement audit opinion was unqualified. No litigation was identified as expected to have a material adverse effect.
Important facts for investors to verify
- Delivery timing, final costs, financing and expected returns for both new vessels.
- Whether advance bookings convert to completed voyages and cash receipts, particularly given the travel-demand risks disclosed in the filing.
- Liquidity and covenant headroom as capital commitments, debt service and the working-capital deficit evolve.
- Whether 2019 operating improvement persists after accounting for added capacity, higher marketing costs and non-GAAP adjustments in Adjusted EBITDA.
- The warrant exchange’s dilution and the distinction between consolidated net income of $18.7 million and $13.7 million available to common stockholders after the deemed dividend.