Adventure travel company Lindblad Expeditions (LIND -0.55%) has recently benefited from surging vacation demand. After sinking to an all-time low of $3.01 at the onset of the pandemic, its stock has since recovered more than 200% and now trades in the $9 area.
However, in the past month, Lindblad stock fell 22% as investors digested the company's second-quarter performance. Let's take a closer look at this consumer discretionary stock and why I think this recent drop has created a buy-the-dip opportunity for long-term investors.
Substantial year-over-year revenue growth
Highlighting the favorable demand environment during the company's late July earnings call, CEO Sven Lindblad affirmed, "The pull to connect authentically with nature and culture is growing by the day."
Partnered with National Geographic, Lindblad Expeditions offers sea-based voyages through its self-titled cruise brand, transporting guests to remote locations all over the world. Through subsidiaries Natural Habitat, Off the Beaten Path, DuVine Cycling + Adventure, and Classic Journeys, the company also provides land-based voyages to venturesome destinations including Africa, South America, and Antarctica.
Q2 revenue reached $125 million, a 37% increase over prior-year results. Year over year, Lindblad's land experience category grew by 39%, benefiting from new itineraries and more guests. Its cruise business grew 36% thanks to better fleet utilization and higher prices.
The company still operates at a loss
Although things look encouraging from a revenue standpoint, total operating expenses rose by $23 million or 21% for Lindblad during the second quarter. Each quarter, Lindblad chips closer and closer to profitable waters, but ultimately the company took a net loss of $8.5 million last quarter. But compared to last year's second-quarter net loss of $19 million, last quarter's net loss doesn't appear quite as ominous.
As Lindblad ramped up its fleet utilization and offered new land adventures last quarter, its cost of tours endured a 24% increase. Other expense categories like marketing, depreciation and amortization, and administrative costs all experienced hikes last quarter.
Looking ahead
While occupancy continues to climb in 2023, it hasn't yet reached Lindblad's historical benchmark of 90%. According to Sven Lindblad, one headwind that's impacted recent bookings is "large-scale discounting" among Lindblad's competitors. He referred to it as "a practice that has absolutely no chance of success in the long run" and reaffirmed his company's commitment to maintaining historically high yields.
Having already booked 100% of projected ticket sales for the year, Lindblad anticipates full-year tour revenue of between $550 million and $575 million, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between $70 million and $80 million.
According to CFO Craig Felenstein, cancellations have slowed from the first half of the year as travelers gain confidence in the post-pandemic era. Sven Lindblad underscored that with each additional percentage point of occupancy, his company should yield an additional $4 million to $5 million in EBITDA. The New York City-based vacation purveyor remains focused on recapturing its historical occupancy.
Why I think Lindblad is a buy
Felenstein stated in Lindblad's last earnings call that "while there will be quarterly fluctuations, we are well-positioned for sustained growth." He explained how his team intends to "take full advantage of the expanded earnings potential of the company" amid ceaseless demand for immersive travel experiences.
And given the recent dip in stock price from roughly $12 to $9 a share, there's no time like the present to initiate a position. Long term, I think the company will thrive as long as travel demand keeps up, and operational success will ultimately be reflected in the stock price. Shareholders and prospective investors should watch Lindblad's upcoming earnings reports closely for increasing occupancy and continued booking strength.
