Lindblad Expeditions Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The company operates expedition cruises and land-based travel through its Lindblad and Land Experiences segments. Results are unaudited; management notes that seasonality and other factors mean quarterly results may not indicate full-year performance. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Tour revenue | $153.6 million | $143.4 million | Up 7% |
| Operating income | $7.9 million | $12.5 million | Down 37% |
| Operating margin | 5.1% | 8.7% | Down 3.6 percentage points |
| Net income (loss) | $(4.2) million | $0.8 million | Declined $5.0 million |
| Net loss available to stockholders | $(5.1) million | $(0.4) million | Loss widened |
| Basic and diluted loss per share | $(0.10) | $(0.01) | Loss widened |
| Adjusted EBITDA, non-GAAP | $21.6 million | $27.2 million | Down 21% |
| Cash provided by operating activities | $43.9 million | $2.1 million | Up $41.8 million |
Revenue growth was led by Land Experiences, up 27% to $35.3 million, while Lindblad revenue rose 2% to $118.3 million. Lindblad operating income fell to $7.8 million from $12.1 million; Land Experiences operating income was $0.1 million versus $0.3 million. Consolidated operating expenses rose 11%, faster than revenue. Cost of tours increased 10%, general and administrative expense 23%, and selling and marketing expense 10%. The filing does not present a consolidated gross profit or gross margin figure.
Lindblad occupancy declined to 76% from 81%; available guest nights increased to 85,954 from 83,184, and guests carried rose to 7,508 from 7,354. Net yield per available guest night increased to $1,219 from $1,205. Adjusted net cruise cost per available guest night increased to $981 from $891.
Liquidity, cash flow and debt
- At March 31, 2024, cash and cash equivalents were $177.7 million and restricted cash was $46.5 million. Restricted cash includes $32.0 million in Federal Maritime Commission and other escrow and $12.8 million in credit-card processor reserves.
- Operating cash flow was $43.9 million, primarily reflecting a $38.6 million increase in unearned passenger revenues as guests paid for future travel. Investing activities used $6.5 million, principally for vessel and digital-transformation capital expenditures. Financing activities used $0.6 million.
- Debt principal was $635.1 million, with $622.7 million recorded as long-term debt net of financing costs and current portion. The company had no borrowings under its $45 million revolving credit facility. Notes include $360 million of 6.75% notes due 2027 and $275 million of 9.00% notes due 2028. Net interest expense was $11.6 million, up from $10.5 million.
- Working capital deficit was $71.0 million, compared with $74.7 million at year-end 2023, largely reflecting $290.8 million of unearned passenger revenues. Management said cash on hand and expected operating cash inflows should cover operations, debt service and necessary capital expenditures for at least the next 12 months.
- The company reported compliance with debt covenants at quarter-end. Its debt fair value estimate was $644.2 million; this is an estimate, not the balance-sheet carrying amount.
Material changes and notable items
- Management attributed weaker operating results despite higher revenue to increased tour costs, including fuel and land costs; personnel, technology and credit-card costs; and higher National Geographic royalties. Interest expense also increased, primarily following the May 2023 9.00% notes issuance.
- A new National Geographic brand license agreement took effect January 1, 2024. National Geographic no longer earns commissions on bookings through its former sales channel; the company now pays royalties under the co-selling and co-marketing arrangement. Higher royalties contributed to increased selling and marketing expense.
- Operating cash flow improved substantially year over year, but management attributed the increase primarily to advance receipts for future trips, which remain unearned until travel occurs.
- Preferred stock dividends are cumulative at 6% and continued to be paid in kind during 2024. The quarter’s $1.1 million dividend increased the amount attributable to preferred holders; outstanding preferred shares and accumulated dividends could convert into approximately 8.1 million common shares.
- In April 2024, after quarter-end, the company increased its Natural Habitat ownership to 90.1% for $15.2 million and DuVine ownership to 75% for $1.5 million. It also announced a planned acquisition of Wineland-Thomson Adventures for approximately $30 million, expected to be funded with at least $24 million in cash and up to $6 million in stock, subject to Tanzanian regulatory review and approval.
Outlook, risks and contingencies
Management reported 2024 bookings 4% ahead of bookings for 2024 at the same point in 2023, and more than 20% ahead excluding 2023 carryover bookings. No specific revenue, earnings or cash-flow guidance was provided in the filing. The company cautions that travel demand and operations can be affected by economic conditions, inflation, interest and fuel costs, geopolitical conflict and civil unrest, weather, vessel maintenance or disruption, labor costs, regulation, competition, and acquisition integration. It also identifies substantial indebtedness and covenant compliance, and maintaining relationships with National Geographic and WWF, among its risks.
The company has $26.2 million of future minimum vessel charter payments disclosed through 2025. It is involved in ordinary-course legal and regulatory matters and says it maintains protection and indemnity insurance expected to cover damages. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether booking strength converts into completed trips and recognized revenue, given the seasonal business and sizable advance-booking liabilities.
- Whether occupancy stabilizes and Lindblad cost growth, including fuel, labor, marketing royalties and overhead, moderates enough to improve operating margins.
- How cash generation compares with debt interest and principal needs, capital expenditures, and planned acquisition and ownership-purchase spending.
- The terms, funding and regulatory status of the Wineland-Thomson acquisition, and the financial impact of increasing ownership in Natural Habitat and DuVine.
- The potential dilution and future cash obligations associated with cumulative preferred dividends, conversion rights and the preferred stock repurchase provisions.