Lindblad Expeditions Holdings, Inc. — FY2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. This is an annual filing, not a standalone fourth-quarter report; unaudited quarterly results are also summarized below. Amounts are in U.S. dollars unless stated otherwise.
Business context
Lindblad operates expedition cruises and adventure travel, including the Natural Habitat land-based travel business. At year-end it operated eight owned ships and five seasonal charter vessels. The National Geographic relationship supports co-marketing, sales and expedition programming; Natural Habitat has a conservation-travel partnership with WWF.
Financial and operating metrics
| Metric | FY2018 | FY2017 |
|---|---|---|
| Tour revenue | $309.7 million | $266.5 million |
| Gross profit | $156.0 million; 50.4% margin | $131.0 million; 49.1% margin |
| Operating income | $25.3 million; 8.2% margin | $10.7 million; 4.0% margin |
| Net income (loss) | $11.6 million; diluted EPS $0.24 | $(7.5) million; diluted EPS $(0.19) |
| Adjusted EBITDA | $54.8 million | $43.5 million |
| Cash from operating activities | $56.4 million | $52.9 million |
| Cash used in investing activities | $54.3 million | $80.5 million |
| Cash and cash equivalents at year-end | $113.4 million | $96.4 million |
| Long-term debt principal, including current portion | $201.5 million | $173.2 million |
| Working capital | $(9.3) million | $(12.7) million |
Capital expenditures were $54.3 million in 2018. Operating cash flow less reported capital expenditures was approximately $2.0 million; this is a simple calculation, not a company-defined free-cash-flow measure. The company reported $8.8 million of restricted cash and marketable securities at year-end. The carrying value of debt, net of deferred financing costs, was $190.1 million.
Lindblad-segment occupancy rose to 91% from 87%; net yield increased to $1,044 from $985. Natural Habitat revenue was $63.4 million, up 28%, and operating income was $5.5 million, up 60%. Company-reported Adjusted EBITDA is a non-GAAP measure and may not be comparable with other companies’ measures.
Material changes versus prior periods
- Revenue grew 16% year over year. Lindblad revenue rose 14%, reflecting added vessel capacity, higher yields and stronger occupancy; Natural Habitat revenue rose 28%, driven by additional departures and pricing.
- Operating income increased to $25.3 million from $10.7 million. The prior year was affected by six cancelled, highly booked voyages; 2018 also benefited from lower stock-based compensation and executive severance costs.
- Net income improved from a loss in 2017. The 2017 result included a $10.0 million income-tax expense, largely associated with U.S. tax reform; 2018 income-tax expense was $0.6 million.
- Operating cash flow increased by $3.5 million. Investing cash use fell as capital spending on new vessels was lower than in 2017. Financing cash flow included refinancing proceeds and repayments.
- Debt principal increased by $28.4 million from year-end 2017. In March 2018 the company refinanced into a $200 million secured term facility and retained a $45 million revolving facility, with no revolver borrowings at year-end.
- The National Geographic Venture entered service in the fourth quarter. The company had paid $59.2 million for that vessel and $53.6 million for the National Geographic Quest.
Fourth-quarter detail: 2018 tour revenue was $70.6 million versus $63.2 million in Q4 2017. Net loss was $4.6 million versus $15.0 million; diluted loss per share was $0.10 versus $0.36.
Outlook, risks, contingencies and unusual items
- No numerical full-year 2019 revenue, earnings or cash-flow guidance is provided in the supplied filing text. As of February 26, 2019, 87% of expected 2019 Lindblad-segment guest ticket revenue had been booked.
- The company targeted delivery of the National Geographic Endurance in January 2020. In February 2019, it contracted for a second polar ice-class vessel, targeted for September 2021, at a stated price of NOK 1,291.0 million, subject to contract adjustments. Its reported year-end purchase obligation for fleet expansion was $108.0 million; the second-vessel contract was entered after year-end.
- Management said cash, debt facilities and expected operating cash flows should fund operations, debt service and planned capital expenditures, while cautioning that future operating cash flows are not assured. The company reported compliance with debt covenants at December 31, 2018. The term loan interest rate was 6.02% at year-end; interest-rate caps covered $100 million of exposure.
- Key risks include travel-demand shocks, severe weather and climate impacts, vessel incidents or repair delays, newbuild cost or delivery problems, fuel and other cost inflation, foreign-exchange and variable-rate debt exposure, regulatory changes, and dependence on National Geographic and access permits for destinations such as the Galápagos. Galápagos operating rights were stated to be up for renewal in July 2024.
- Unusual or relevant items include a $2.2 million foreign-currency loss in 2018, $1.0 million of debt-refinancing costs, and $0.6 million of tax benefit related to state treatment of the mandatory repatriation tax. The company repurchased $0.1 million of common stock and $0.8 million of warrants during 2018.
- The company reported no litigation expected to have a material adverse effect. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Progress, final cost, financing and delivery timing for both polar-vessel projects, including NOK exchange-rate exposure and payment schedules.
- Whether advance bookings convert to completed travel at expected prices, and whether occupancy and net-yield gains persist as capacity expands.
- Liquidity and covenant headroom after planned vessel spending, including the extent to which cash balances include funds needed for operations or are restricted.
- The ongoing value and terms of the National Geographic relationship, which generated approximately 26% of 2018 guest ticket revenue through its sales channel, and the WWF license supporting Natural Habitat.
- Details of the 2018 tax provision and the remaining uncertainty around tax attributes, as well as the effects of adopting lease accounting in 2019.