Lindblad Expeditions Holdings, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unless otherwise noted, financial amounts below are in millions of dollars. Lindblad operates expedition cruises and land-based travel through its Lindblad and Land Experiences segments.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Tour revenue | $144.8 | $64.5 | $303.5 | $81.6 |
| Operating income (loss) | $5.8 | $(17.7) | $(47.8) | $(81.3) |
| Net loss | $(5.5) | $(23.3) | $(76.2) | $(92.9) |
| Net loss available to stockholders | $(9.8) | $(25.7) | $(82.8) | $(96.8) |
| Loss per share, basic and diluted | $(0.18) | $(0.50) | $(1.60) | $(1.87) |
| Adjusted EBITDA (non-GAAP) | $18.6 | $(6.6) | $(8.8) | $(50.4) |
Q3 operating margin was approximately 4.0%, compared with negative 27.4% a year earlier. The nine-month operating margin was negative 15.7%, versus negative 99.7%. Interest expense, net was $8.4 million in Q3 and $26.5 million year to date, up from $6.1 million and $17.4 million, respectively.
Q3 revenue rose 124%, primarily as operations and trips ramped up and pricing increased; the 2022 Land Experiences results also include Classic Journeys, acquired in Q4 2021. Nine-month revenue rose 272%, with comparisons also affected by the prior-year timing of acquisitions and the limited 2021 operating period. Q3 Lindblad segment revenue was $83.7 million and Land Experiences revenue was $61.0 million. The segments generated operating losses of $7.1 million and operating income of $13.0 million, respectively.
Lindblad’s Q3 occupancy was 81%, compared with 82% in Q3 2021; available guest nights increased to 71,000 from 35,000. Net yield per available guest night increased to $1,014 from $818. These operating metrics are company-reported measures.
Cash flow, debt and liquidity
- At September 30, 2022, cash and cash equivalents were $116.4 million and restricted cash was $29.5 million. Total debt principal was $572.4 million; balance-sheet debt, net of financing costs and including current maturities, was $558.8 million.
- Working capital deficit was $126.4 million, versus $79.1 million at December 31, 2021. Current liabilities included $247.0 million of unearned passenger revenue, reflecting advance customer payments.
- For the first nine months, operating cash flow was $0.8 million, investing cash flow was $(29.6) million, and financing cash flow was $2.1 million. Cash, cash equivalents and restricted cash decreased by $26.7 million.
- In February 2022, the company issued $360 million of 6.75% senior secured notes due 2027 and entered a new $45 million revolving facility, which was undrawn as of the filing. Proceeds primarily refinanced prior borrowings. Export credit facilities had variable rates of 6.75% and 7.07% at September 30.
- The company reported compliance with covenants then in effect and expected to remain compliant over the next 12 months. Net leverage ratio waivers on export credit agreements ran through December 31, 2022; an October 11 amendment provided for annualized EBITDA calculations in the covenant for specified periods from March through September 2023.
Outlook, commentary and risks
- Management said travel restrictions related to COVID-19 had diminished and operations had resumed across all ten owned ships. It expected to resume operations in additional geographies during the rest of 2022 and 2023. It reported 2023 bookings 23% ahead of bookings for full-year 2020 at the comparable point in 2019; the filing does not provide a clear corresponding revenue or earnings forecast.
- Management expected increased guest payments as final trip balances and new deposits were collected, while also anticipating higher cash use from operating costs, fuel, inflation, and marketing. It said cash on hand and expected operating inflows should fund operations, debt service and necessary capital spending if the operational ramp proceeds as expected, but cautioned that cash flows were not assured.
- Russia-Ukraine-related restrictions affected a limited number of itineraries; the company said it was adjusting routes where possible and working with guests on rescheduling, refunds or future travel certificates. Other risks cited include travel disruption, adverse economic conditions, fuel costs, weather, labor, competition, acquisition integration and debt covenant compliance.
- Unusual and financing-related items included recognition of the remaining $11.6 million CERTS grant in Q1 2022 other income and a $9.0 million write-off of deferred financing costs related to refinancing. The grant liability was fully extinguished by September 30.
- Series A preferred stock carries a 6% cumulative dividend and ranks senior to common stock. Holders could convert the 62,000 preferred shares outstanding, plus accrued dividends, into approximately 7.4 million common shares at September 30. Preferred dividends reduced the loss available to common stockholders.
Important facts for investors to verify
- Whether bookings convert into completed trips and operating cash flow, given the working capital deficit and reliance on advance passenger receipts.
- Progress toward sustained profitability and the impact of higher interest, fuel, labor and marketing costs.
- Debt terms, covenant waivers and amendments, available revolver capacity, and compliance after the waiver periods.
- Potential common-stock dilution from preferred conversion, equity awards and other outstanding instruments.
- Current itinerary disruption, cancellation and refund exposure, including impacts from geopolitical events and travel restrictions.