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Q1 2021 Earnings Call
Apr 29, 2021, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by, and welcome to the Lindblad Expeditions' first-quarter earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions]. I would now like to hand the conference over to your speaker today, Craig Felenstein.

Thank you, you may begin.

Craig Felenstein -- Chief Financial Officer

Thank you, April. Good morning, everyone, and thank you for joining us for Lindblad's 2021 first-quarter earnings call. With me on the call today is Sven Lindblad, our founder and chief executive officer. Sven will begin with some opening comments, and then I will follow with some details on our financial results and liquidity before we open the call for Q&A.

You can find our latest earnings release in the investor relations section of our website. Before we get started, let me remind everyone that the company's comments today may include forward-looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations. The company cannot guarantee the accuracy of any forecast or estimates, and we undertake no obligation to update any such forward-looking statements.

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If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. And with that out of the way, let me turn the call over to Sven.

Sven Lindblad -- Founder and Chief Executive Officer

Thanks, Craig, and good morning, everyone, and thanks for joining us today. This morning started with some pretty interesting news that New York may be fully opening on July 1, which certainly gave me a smile and I'm sure many people on this phone call. Responsibly opening on July 1, that would be a huge victory that we've been waiting a long time for. As you all know, these past 12 months have been inordinately hard for our industry and for so many people who depend on tourism for their livelihoods, but now it's clear that there is significant positive momentum.

And that momentum is due in large part to vaccinations. The acceleration of distribution in the U.S. has been a monumental achievement. And just a few days ago, the European Union stated that U.S.

citizens who are vaccinated would be allowed to travel to EU countries. The details, of course, will take some time to emerge, but this is a huge and welcome step. At the end of March, when we announced our reactivation plans, we also announced that we would require all adults, all adults to be vaccinated. That was premised on a number of factors, but most importantly, it was based on our commitment to keeping our guests, our crew and the people we visit safe.

It was also overwhelmingly what our surveyed guests indicated that they wanted in order to return to travel. We couldn't be more excited to begin sailing again during the first week in June with two ships in Alaska and one in the Galapagos Islands, and our excitement has been matched by our guests. The demand has been so strong, particularly in Alaska, that we will likely be activating two more ships later in June. The 5th ship, the National Geographic Orion, may also be activated in Alaska if we can secure permission to effect clearance in a Russian port, as incorporating a foreign port is unfortunately necessary for a non-U.S.

ship in order to comply with the Jones Act. I think this reflects on the value of flexibility, which our size ships allow for. Soon, we will also reactivate sailings in parts of Europe, beginning with Iceland and hopefully, Greenland shortly thereafter. These are both geographies we know extremely well and areas that are in high demand from our audience.

By year's end, we anticipate being more or less fully operational again, and we will return to explore the world's amazing geographies with a robust cash position and with two new complementary travel companies that we acquired recently. These two additions are the latest pieces of our growth strategy, which includes offering a broad and deep platform for adventure and experiential travel opportunities. DuVine Cycling and Adventure is a very high end global adventure travel company, exploring the world by bike, and they are poised to grow rapidly with biking exploding. Particularly with the production, the greater production and the use of e-bikes, which significantly broadens the demographics of potential participants in bicycle touring.

You cannot buy a bike at the moment, partly, certainly not an e-bike, the demand is so significant. Our other acquisition, Off the Beaten Path, also operates globally, but primarily focuses on high-touch exclusive experiences in North American National parks. OBP was growing rapidly prior to COVID, and given the focus on U.S. travel to remote locations right now, they are seeing record sales coming out of the pandemic.

Both these companies are already extremely well-run by entrepreneurial owners and have tremendous potential for growth, particularly when integrated into our marketing platform, that is rapidly evolving with the goal of becoming a digital powerhouse. Over the past 50 years, Lindblad Expeditions has had hundreds of thousands of explorers discover the world's most extraordinary destinations while educating our guests about local cultures in the ever-changing environment. Through the expert specialist, guides and our expedition ships, we're the gold standard in experiential travel by which others are measured. That commitment to excellence in everything we do on behalf of our guests is also reflected in our commitment to provide a best-in-class experience before, during and after the guest journey via our digital transformation efforts.

By creating engaging informative content, personal information and rich media about travel and our destinations, we'll generate greater awareness, interest and demand for our unique products and experiences, while growing time spent with our brand. Our business will be fueled by the insider data we'll be able to generate as a result of this transformation, which will have a positive impact on everything we do, from content to operations, resulting in a richer and deeper understanding of needs while creating greater operating efficiency. Further, we'll be able to easily integrate other expeditions and services that we offer from our recent acquisitions and Natural Habitat to travelers as they are endeavor-ous in their desires and interest in the unique experiences we provide. With this commitment to a best-in-class digital experience, Lindblad will not only transform, but will lead the way from our roots as the innovator in the category of equal adventure travel while pushing the envelope to provide the best experience pre, during and post every expedition, allowing us to go further in every aspect of our business.

As we strengthen our market reach, we will continue to look to further broaden our platform of companies while continuing to expand our core business of expedition ships, either through new builds or acquisitions of existing vessels. The other announcement this past quarter, aside from our resumption of operation was that next month, I will be moving from my CEO position to co-chair of the board. This was envisioned about a year prior to the pandemic but, of course, slowed as a consequence. A question I've been asked most often since we announced this change is why am I stepping down? Reality is that's not really how I look at it.

I feel I'm stepping into a role where I can use my abilities better, more wisely and to greater effect. I have a deep understanding of this business, its components and its opportunities. More and more, as CEO, I felt that there was often not enough time to focus on long-term potential. Well, as of May 10, that is about to change.

Our new CEO, Dolf Berle, is an ideal candidate to succeed me as leader of this special organization. Dolf was most recently president and CEO of Topgolf, and I've gotten to know him well through the search and selection process. He deeply understands the importance of delivering unmatched guest experiences and creating communities while keeping customer service at the front and center of all activities. He also understands the role of technology and growing businesses and the importance of building world-class teams.

I view Dolf as a true partner, and I will continually be available to him, as needed, as an advisor and a thought partner. Personally, aside from helping onboard Dolf, I'm going to focus on growth opportunities, new geographies and the strengthening of our social activities. As I have said, probably each time we have reported, I believe so strongly that the combination of good smart business combined with a strong integrated approach to conservation, science, education, exploration, diversity and inclusion is the essence of the very successful enterprise. It always has been, but I feel even more important now as consumers care more and more about how a company relates to society more broadly as part of its relevance.

It has been a tremendous honor to found and serve as the CEO of Lindblad Expeditions since 1979, and I'm proud of all that we've accomplished over the last 42 years. We've built a business based on the respect and understanding of geography and connecting hundreds of thousands of guests worldwide with nature, culture and an opportunity to explore our world. In summary, it's been a long year, one with little to be happy about, optimistic about. That has now changed.

Getting back to doing what we do is the greatest form of optimism and we are on track to do that in just over a month. I couldn't be happier. We are well prepared to start-up again. We have excellent financial reserves, a couple of new companies under our umbrella and a marketing machine that is vastly strengthened for growth.

And we have the added horsepower of a new capable and enthusiastic CEO to lead the way in our next phase together with a talented and tenured team and an engaged Board that has proven to be such an extraordinary asset in this most challenging year. Before I finish, I do want to thank all of you, our investors, who have recognized the long-term value of Lindblad Expeditions over the past year and maintained your enthusiasm for continued involvement. We should all be excited and optimistic about the years ahead where expedition and experiential travel become more and more meaningful to a traveling public itching to get out there and explore. Many thanks for your time today.

And now let me turn the call back over to Craig.

Craig Felenstein -- Chief Financial Officer

Thanks, Sven. Before I jump in, let me once again thank our dedicated crew across the world as well as our diligent office personnel for their resiliency over the past year and for their commitment in preparing us to return to operations while preserving capital whenever possible. It has been over a year since we paused our operations, and we continue to execute on a comprehensive plan we put in place back in March of 2020 to further fortify our liquidity position and ensure we emerge from the COVID pandemic as the same strong and vibrant company we were prior to the cessation of operations. The targeted capital raises and cash preservation measures implemented over the past year allowed us to end Q1 2021 with $164 million in unrestricted cash and $22 million in restricted cash related primarily to deposits on voyages that originated in the United States.

This is a $26 million increase in total cash over where we ended Q1 2020. So as we begin to sail this June, we have ample liquidity to begin ramping up our operations. At the same time, the investments we have made over the past year to expand our fleet capacity and diversify our product offerings will allow us to build upon the momentum we had prior to the virus and capitalize on the growing demand for authentic adventure travel. With the addition of the National Geographic Endurance, which was delivered last March and the anticipated delivery of her sister ship, the National Geographic Resolution, later this year, we will have increased our fleet capacity by over 35% from 2019 levels once we are fully operational.

And with the recent acquisitions of leading travel operators, DuVine and Off the Beaten Path, we have further broadened our growth opportunity with two high-quality brands that will benefit from our marketing platform, expertise and resources while expanding our addressable markets and offering more options to our guests. Turning to our current operations. During the first quarter, all of our ships remain safely laid up with the minimally required crew, and we continue to minimize ship- and land-based expedition operating and capital costs. We did spend a little over $1 million on maintenance capex this past quarter, down $3 million from a year ago, primarily due to dry docks for the Quest and Venture as we prepare to resume sailing, and an additional $2 million on build costs related to the Resolution.

On the advertising and marketing front, during the first quarter, we continued to limit our spend, focusing primarily on digital opportunities and paid media that was generating appropriate returns with regards to future bookings. And we continue to minimize general and administrative spending through employee furloughs, workload reductions and elimination of all nonessential travel, office expenses and discretionary spending. We did begin bringing back employees, as necessary, to implement our restart plans, and that is expected to continue to ramp as we move closer to resuming operations. Looking at the P&L, the measures taken during the first quarter enabled us to reduce total operating expenses before depreciation and amortization, interest and taxes by nearly 70% versus the same quarter a year ago.

On the cash front, we lowered our net cash spend this quarter to $18 million, which included approximately $18 million spent on operating costs, $7 million net spent on the acquisitions of DuVine and Off the Beaten Path, $5 million spent in principal and interest payments and $4 million spent in capex. The cash usage was significantly offset by the positive net cash flow from guests as payments for future travel far exceeded guest refunds on rescheduled voyages. Turning to current booking trends. Demand for travel continues to accelerate, and we are really well situated for a return to ship operations.

Bookings for 2022 are currently 39% ahead of where we were for 2021 at the same time a year ago and 32% ahead of 2020 at the same point two years ago. The strong year-on-year trends include guests that canceled voyages that have opted to reschedule, but they only make up about 20% of our overall bookings for 2022. The robust new bookings we are seeing is from both returning guests, as well as new audiences as we begin to resume marketing in earnest, focusing on digital targeting and social opportunities, as well as increased outreach through trade advertising and travel advisors. There is no question that there is significant pent-up demand to get out and explore the world's amazing geographies.

And as more destinations open to travel, we expect to secure additional bookings for both 2021, as well as 2022 and beyond. As we work toward resuming operations, our cash usage today is still estimated to be approximately $10 million to $15 million monthly on average, including all ship and office operating expenses, necessary capital expenditures and expected interest and principal payments, but excluding any new guest payments for future travel and refunds of previously made guest payments. Of course, as we implement plans to resume operations, this monthly operating cash usage will increase as we hire crew, return ships to service, market upcoming expeditions, spend on our digital transformation projects and reinstate furloughed and part-time office staff as needed. At the same time, we do anticipate a continued ramp in cash inflows from final payments for upcoming voyages as well as growing deposits related to new reservations for future travel.

Looking at our debt obligations, we ended the first quarter with $498 million in principal outstanding, an increase of $116 million from the end of Q1 a year ago. This primarily reflects the incremental $85 million Main Street loan during the fourth quarter of 2020, as well as $30.5 million in borrowings under our export credit agreement during April 2020 for the third installment payment on the National Geographic Resolution. Following the quarter, in April of 2021, we drew down an additional $15.5 million for the fourth installment payment on the vessel and our final borrower related to the Resolution of $47 million will be drawn upon delivery, which is still anticipated to be during the fourth quarter of this year. With regards to our leverage covenants, the company has continued to work with its lenders and following the quarter, it further amended its existing term and revolver loans to suspend leverage ratio covenants through March 31, 2022.

With the resumption of marine operations set to become a reality in just over a month, the steps we have taken over the past year to increase our liquidity runway, enhance our existing operations and expand our product platform will enable us to emerge from the pandemic as a strong and vibrant company. And while, still, it will take some time to return to full operations, we are absolutely ready to capitalize on those geographies that are available today, and at the same time, well positioned to take advantage of the growing demand for experiential travel over the long term, which will enable us to build additional shareholder value in the years to come. Thank you very much for your time this morning. And now Sven and I would be happy to answer any questions you may have.

Questions & Answers:


[Operator instructions] And your first question comes from Steve Wieczynski with Stifel.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Good morning. So Sven, first of all, congratulations. I guess, it's congratulations. So I want to understand how you're thinking about layering in additional ships at this point.

You mentioned, Sven, in your prepared remarks that it sounds like you might already be ready to launch some additional shifts at this point. I just want to dig in that a little bit more and understand how you guys go about making those decisions, I would assume that, at this point, that's all demand-based. Is that the right way to think about it?

Sven Lindblad -- Founder and Chief Executive Officer

Yes. Well, it's based on two factors. One is identifying geography that you think our audience is interested in and, secondly, really understanding the demand curve and the timing of those things. So it's a really rigorous process because, obviously, it's a big commitment to build a ship or ships, and you want to make sure that there's a confluence between geography and demand.

Craig Felenstein -- Chief Financial Officer

Steve, just to be clear, are you referring to launching new ships ultimately, several years now, or you're talking about launching new ships this year?

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

No, no. What I meant was later this year. So obviously, you have the three ready to go in early June. And I guess, maybe I misunderstood you, but it sounds like you're ready to actually start to think about putting additional ships back in the water sometime later this summer?

Sven Lindblad -- Founder and Chief Executive Officer

I see. Yes. Sorry, I think I misunderstood your question. My apologies.

So as we've always said, there are three things that are necessary in order to relaunch a ship in a particular area. One is it's obviously a medical solution and we have that. We're requiring everybody to be vaccinated, and that's a very clear path. And then the second one is the challenge at the moment in certain areas, which is, are you allowed to come into that area or not.

And there still are some restrictions. I'll give you an interesting example, the Columbia River in the United States. Washington state has a particular perspective. Oregon, which is the other side of the river, has another perspective.

County-by-county. Now all these things are changing really, really rapidly. The acceleration of openings is really at a much higher pace. And the minute places are open, we've got sort of plans in place.

A lot of these voyages, we have guests booked, lots of them. We just cannot officially go there yet, right? So for example, Norway, we have lots of people booked on our voyages that involve Norway, but Norway is not yet open. We have lots of people interested and booked in Iceland. Iceland is open.

Greenland is not yet open, and it's an important place for us, but we anticipate that it's highly likely that we'll be able to operate Greenland later this summer. So it's all a series of processes that have to happen in order to pull the trigger finally on reactivating a ship.

Craig Felenstein -- Chief Financial Officer

One of the things that I'll add, Steve, is that we've talked about this a lot in the past, even while we were operating, but even more so now, which is we have an immense amount of flexibility, both given the size of the ships and kind of how we operate. So as a result, if there are geographies that aren't opening, we can pivot and pivot quickly, as long as there is guest demand, to a different itinerary. And given the experience that the team has here in operating in these geographies for many, many years, we have some interesting unique ideas we can pivot to. So we do envision some openings later this year.

It's just a matter of figuring out what those are and when they are.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK. Got you. Thanks for the color and then I guess this will be for you, Craig. If you look at the booking trends for '22, I think if I read my notes right, 39% and 32% higher versus '21 and '20.

Obviously, those are being, at least, I think they are being pushed up by the Resolution and Endurance. And I guess the question is, what booking trends for '22 would look like without the new capacity? Just trying to get it on a like-for-like basis? I don't know if you guys can do that or you can't.

Craig Felenstein -- Chief Financial Officer

Let me give you a little color rather than giving you specifics, but I can get you close. It's always an interesting question because it's not like we have same-store sales. If we didn't have the Resolution or the Endurance, a lot of these guests would've likely travel on our other ships, whether it be the Explorer or the Orion or some of our other destinations. So it's really not a fair apples-to-apples comparison to just strip out those two ships.

But the way we tend to look at these things is when you look at where we are from a percentage of the max revenue that we can get in any given year, where we sit today as a percentage versus where we sat in prior years. And what I can tell you is that as a percentage of max revenue for 2022, we are further along today than we were last year for 2021 and the year prior for 2020. So in terms of percentages, we are definitely pacing ahead in terms of the overall bookings, even when you strip those two voyages out.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Understood. And if I can ask one more quick one. I guess, on the pricing front, I mean, everything that we see and everything sounds like you guys are seeing in terms of pent-up demand from your customer base looks, I mean, extremely, extremely strong in the out years, especially for a lot of the exotic itineraries. So I guess the question is going to come from a pricing standpoint.

And it seems like you guys should have some extreme strong pricing power over the next couple of years. And I just want to kind of get your thoughts in terms of the way you think about pricing power moving forward?

Sven Lindblad -- Founder and Chief Executive Officer

Yes. So it's interesting. We have never felt it wise to sort of -- well, I'm not suggesting you're suggesting gouging, but what could be perceived as sort of gouging. We believe that our greatest opportunity is expansion of inventory rather than pushing prices too, too hard.

Because at a certain point, you could fall off a cliff or just put you in a position where there could be too much focus on pricing. Our pricing is already the highest in the industry. I mean without question. And so we're very cautious about that.

We don't want to be a hog that gets slaughtered because of pushing that too fast, too hard.

Craig Felenstein -- Chief Financial Officer

And we'll continue to evaluate that, Steve, as we move forward. When you think about the drivers of our revenue, it's pretty simple, right? You have occupancy, you have the availability of Guest Nights and you have price. And when you think about what's happened from 2016 through where we are today, obviously, not operating today, but before the pandemic, we were able to maintain pricing and we were able to maintain occupancy as we dramatically increased the Available Guest Nights. And when you think about where we're going to be in 2022 post-Resolution, we're going to be 66% above in terms of our inventory where we were back in 2016.

It's a massive increase. If we can maintain the other two aspects of that, which are occupancy and pricing even at a relatively stable level, you're going to see some significant growth. And then we'll continue to push price in those geographies where we think it makes sense to do so. But it is something that we want to be cognizant of.

You don't want to put too much stress on the system in all aspects, both in terms of distribution, as well as price, but we'll evaluate pretty much on an itinerary by itinerary basis as we move forward.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK. Thanks guys. Great color and best of luck this quarter.

Craig Felenstein -- Chief Financial Officer

Thanks Steve.


Our next question is from Alex Fuhrman with Craig-Hallum Capital.

Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst

Great. Thank you very much for taking my question. I was wondering if you could talk a little bit more about some of the acquisitions that you've made? And kind of what you're seeing so far in terms of interest in those properties from some of your existing customers? I don't know if that's anything you've marketed at all, but I'm sure some people have just seen that news. And how you plan to market that just broader portfolio of offerings going forward? Is it just about finding good assets at good prices? Or could there be bigger opportunities to really integrate your offering?

Sven Lindblad -- Founder and Chief Executive Officer

Great question. Thank you. Well, first of all, it's only been a couple of months that we've had these companies in essence. And what we've done is we are really committed all these companies, that have Off the Beaten Path, DuVine and ourselves to aggressive cross-marketing efforts, right? Because we know for a fact that our audiences are diverse in terms of their interest.

And that's the whole thesis behind acquiring these companies is I'll meet somebody who's in Antarctica one year, you'll meet -- they'll be on a safari in Africa the next year, they'll be bicycling through Burgundy the following year, whatever, and they just have this diverse set of interest. And so constantly putting the opportunities in front of our collective audiences that is more than just our individual companies, to us, feels like a really, really smart strategy. Now we have started with a whole bunch of emails introducing these new companies to our audiences. And DuVine and OBP, for example, the inquiries not only records, but like multiple records in terms of inquiries as a consequence of being exposed to are obviously much larger audiences.

So we believe this strategy makes a tremendous amount of sense. We're very eager to find additional companies that fit this strategy and the cross-marketing component as well as taking advantage of certain synergies makes a huge amount of sense.

Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst

Great. That's really helpful. And then wondering if you could also comment just about the impact over the past one and a half years or so, you've had a lot of canceled voyages and a lot of travel credit that have been issued to customers. Can you give us a sense of how you're thinking about that, both from a business standpoint and then what we're going to see from a financial reporting standpoint as those 125% credit start to get used? And curious to the prior question's point, I mean, it sounds like you've got just a huge surge of demand for a couple of years here, and there's not going to be a lot of sensitivity to price or there may be opportunities for customers to use those credits on some of your other properties, like Off the Beaten Path, as they start to rebook plans over the next few years?


Please remain on the line. Just one moment. OK, Mr. Felenstein, you're reconnected now.

Sven Lindblad -- Founder and Chief Executive Officer

April, can you hear us?


I can. I can. You're reconnected now.

Sven Lindblad -- Founder and Chief Executive Officer

OK. Alex, you still on? We may have lost Alex. Sorry about that, everybody. We got disconnected.

It never happened to me in 20-plus years of doing this, but hopefully, you can hear us. So we had a question that was raised about future travel credits and the implications that it's going to have over the next several years. As I mentioned earlier in my comments, right now, the future travel credit implication is in 2021 and 2022 is really only about 21% of our future bookings. So we have a significant cash opportunity still in 2022 and beyond with regards to the bookings.

The majority of the bookings, I'd say, close to 75% of them of the future travel credit bookings have already been made. So a lot of that's going to be utilized over the next couple of years. The other facet of this, which is actually helpful for us when you look outward is if folks reschedule their voyages from Point A to Point B from the same voyage they were going to take a year ago, they will burn off part of that credit, but then they will have an additional credit to utilize moving forward. And what they can do with that credit is they can book an additional voyage.

And given the high repeat balances that we see among our guests in terms of frequency of travel, if they have a great experience, which we're confident they will, they're likely to travel again sooner if they have a future travel credit. So it should help us stimulate some additional business moving forward. While at the same time, be a little bit of a cash overhang in the next one year and one and a half years.


[Operator instructions] And there are no further questions at this time.

Craig Felenstein -- Chief Financial Officer

OK. Thank you, everybody, for joining us. We appreciate your time this morning. And if you have additional questions, please feel free to reach out, and we can connect over the next several days.

Thank you.

Sven Lindblad -- Founder and Chief Executive Officer

Thank you.


[Operator signoff]

Duration: 35 minutes

Call participants:

Craig Felenstein -- Chief Financial Officer

Sven Lindblad -- Founder and Chief Executive Officer

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst

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