LINDBLAD EXPEDITIONS : MANAGEMENT’S DISCUSSION AND (form 10-Q)
ANALYSIS OF THE
RESULTS OF
OPERATIONS AND
FINANCIAL
CONDITION
The following discussion and analysis addresses material changes in the
financial condition and results of operations of the Company for the periods
presented. This discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and related notes included
in this Quarterly Report on Form 10-Q (“Form 10-Q”), as well as the audited
consolidated financial statements and related notes included in the Company’s
Annual Report on Form 10-K filed with the
(“SEC”) on
Cautionary Note Regarding Forward-Looking Statements
Any statements in this Form 10-Q about our expectations, beliefs, plans,
objectives, prospects, financial condition, assumptions or future events or
performance are not historical facts and are “forward-looking statements” as
that term is defined under the federal securities laws. These statements are
often, but not always, made through the use of words or phrases such as
“believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expects,”
“estimates,” “projects,” “positioned,” “strategy,” “outlook” and similar words.
You should read the statements that contain these types of words carefully. Such
forward-looking statements are subject to a number of risks, uncertainties and
other factors that could cause actual results to differ materially from what is
expressed or implied in such forward-looking statements. There may be events in
the future that we are not able to predict accurately or over which we have no
control. Potential risks and uncertainties include, but are not limited to:
? suspended operations and disruptions to our business and operations
related to the novel corona virus COVID-19;
? the impacts of the novel coronavirus COVID-19 on our financial condition,
liquidity, results of operations, cash flows, employees, plans and growth;
? the impacts of the novel coronavirus COVID-19 on future travel and the
cruise and airline industries in general;
? unscheduled disruptions in our business due to travel restrictions,
weather events, mechanical failures, pandemics or other events;
? changes adversely affecting the business in which we are engaged;
? management of our growth and our ability to execute on our planned growth;
? our business strategy and plans;
? our ability to maintain our relationship with National Geographic ;
? compliance with new and existing laws and regulations, including
environmental regulations and travel advisories and restrictions;
? compliance with the financial and/or operating covenants in our debt
arrangements;
? adverse publicity regarding the cruise industry in general;
? loss of business due to competition;
? the result of future financing efforts;
? delays and costs overruns with respect to the construction and delivery of
newly constructed vessels;
? those risks discussed herein and in Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2020 , as filed with
the SEC on March 12, 2021 (the "2020 Annual Report").
We urge you not to place undue reliance on these forward-looking statements,
which speak only as of the date of this Form 10-Q. We do not undertake any
obligation to release publicly any revisions to such forward-looking statements
to reflect events or uncertainties after the date hereof or to reflect the
occurrence of unanticipated events.
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Unless the context otherwise requires, in this Form 10-Q, “Company,” “Lindblad,”
“we,” “us,” “our,” and “ours” refer to
its subsidiaries.
Business Overview
We provide expedition cruising, land-based adventure travel and cycling touring
experiences, using itineraries that feature up-close encounters with wildlife,
nature, history and culture, and promote guest empowerment, human connections
and interactivity. Our mission is offering life-changing adventures around the
world and pioneering innovative ways to allow our guests to connect with exotic
and remote places.
We currently operate a fleet of nine owned expedition ships and have contracted
for a new polar ice class vessel, the National Geographic Resolution, scheduled
to be delivered in the fourth quarter of 2021, and operate five seasonal charter
vessels under the
voyages include destinations such as
interest in exploration, research, technology and conservation. This
relationship includes a co-selling, co-marketing and branding arrangement with
vessels carry the
expeditions through its internal travel division. We collaborate with
Geographic
Geographic
naturalists, field researchers and film crews, join our expeditions. Guests have
the ability to interface with these experts through lectures, excursions, dining
and other experiences throughout their voyage. We deploy chartered vessels for
various seasonal offerings and continually seek to optimize our charter fleet to
balance our inventory with demand and maximized yields. We use our charter
inventory as a mechanism to both increase travel options of our existing and
prospective guests and also to test demand for certain areas and seasons to
understand the potential for longer term deployments and additional vessel
needs.
We operate land-based nature adventure travel expeditions around the globe, with
unique itineraries designed to offer intimate encounters with nature and the
planet’s wild destinations and the animals and people who live there.
and discovery that transform lives with eco-conscious expeditions and
nature-focused, small-group tours that include polar bear tours in Churchill,
safaris. Natural Habitat has partnered with
conservation travel, which is sustainable travel that contributes to the
protection of nature and wildlife.
adventures and unforgettable travel experiences, connecting with local character
and culture on small, intimate group cycling tours around the world with cycling
experts as guides, immersion in local cuisine, accommodations and history.
Cycling tours include in
redwoods to pedaling through farmland on a
the world-class vineyards of
dining, cycling through exotic
the roads of ancient cities and trek the Atlas desert by camel, to bamboo
forests and Buddhist temples or pedaling past tea plantations in
Off the
led by local, experienced guides, with distinct focus on wildlife, hiking
national parks and culture, to change people’s lives through exceptional travel.
Off the Beaten Path is known for providing distinctive insider national park
experiences in the
unique trips across
place.
The Company operates two segments including the Lindblad segment, which consists
of the operations of our Lindblad brand, and the Land Experiences segment,
consisting of our Natural Habitat, DuVine and Off the Beaten Path brands.
2021 Highlights
We resumed ship operations in
nine vessels providing expeditions to guests. During
three ships in
we resumed operations on the majority of our remaining vessels with additional
ships launching in
During
things, extend the deferral of scheduled amortization payments of the first
export credit facility through
million
covenant through
credit facilities by 50 basis points and annualize EBITDA used in its covenant
calculation through
quarterly over three years starting in
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During
other things, extend the waiver of its total net leverage ratio covenant through
excluding the Main Street Loan, and the Revolving Facility by 50 basis points,
such additional interest to be paid in cash. Certain other covenants under the
amended credit agreement continue to be more restrictive during the extended
covenant waiver period.
During the first quarter of 2021, we completed the acquisitions of Off the
Beaten Path, a land-based travel operator specializing in authentic national
park experiences, and DuVine, an international luxury cycling and adventure
company focused on exceptional food and wine experiences.
Return to Fleet Operations and COVID-19 Business Update
We resumed ship operations in
our nine vessels providing expeditions to guests. During
three ships in
we resumed operations on the majority of our remaining vessels with additional
ships launching in
work with local authorities on plans to operate in additional geographies during
the second half of the year. As the COVID-19 virus effects travel restrictions
in various locations around the world, we also continue to work with our guests
to reschedule travel plans and refund payments, as applicable, for those
expeditions and trips that we are not able to operate due to local restrictions.
We believe there are a variety of strategic advantages that enable us to deploy
our ships safely and quickly, while mitigating the risk of COVID-19 as travel
restrictions are lifted. The most notable is the size of our owned and operated
vessels which range from 48 to 148 passengers, allowing for a highly controlled
environment that includes stringent cleaning protocols. The small nature of our
ships also allows us to efficiently and effectively test our guests and crew
prior to boarding. All ship crew and staff members have been fully vaccinated.
Additionally, the majority of expeditions take place in remote locations where
human interactions are limited, so there is less opportunity for external
influence.
While our ships were not in operations, the majority of the fleet was being
maintained with minimally required crew on-board to ensure they complied with
all necessary regulations and could be fully put back into service quickly as
needed. Ahead of launching each ship, crew levels were increased as necessary to
prepare each vessel for operations as well as for crew training and
vaccinations. Our offices primarily remain closed, and most employees are
working remotely to maintain general business operations, to provide assistance
to existing and potential guests and to maintain information technology systems.
We continue to adhere to the comprehensive plan we implemented in
mitigate the impact of COVID-19 and preserve and enhance our liquidity
position. Prior to resuming operations, this plan employed a variety of cost
reduction and cash preservation measures including significantly reducing ship
and land-based expedition costs such as capital expenditures, crew payroll, land
costs, fuel and food, and meaningfully reducing general and administrative
expenses through reduced payroll and the elimination of all non-essential
travel, office expenses and discretionary spending. We also accessed available
capital under existing debt facilities and through the issuance of preferred
stock. With the majority of operations resuming, operating costs are ramping
back up, but given the continued uncertainty around COVID-19 and given that
guest counts have not yet returned to traditional levels, we continue to
minimize expenditures as appropriate.
Bookings Trends
We have experienced a substantial negative impact from the COVID-19 virus
including elevated cancellations and softness in near-term demand. Despite the
COVID-19 impact, we still have substantial advanced reservations for future
travel. Bookings for the full year 2022 are 36% ahead of the bookings for 2021
as of the same date a year ago and 37% ahead of the bookings for 2020 as of the
same date two years ago. We continue to see new bookings for future travel
including over
significant deposits and final payments for future travel.
For 2021 voyages that have been cancelled or rescheduled, we are offering future
travel credits or full refunds to our fully paid guests. As of
the majority of guests have opted for future travel credits.
Balance Sheet and Liquidity
As of
originating from
we had a total debt position of
of our debt covenants.
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Since the beginning of the COVID-19 pandemic, we have taken a variety of steps
to strengthen our balance sheet and increase liquidity including:
In
million
and fourth installment payments on the National Geographic Resolution.
In
date of the principal payments to be due in three equal installments, with the
first payment due on
the final payment due on
In
amortization payments from
net leverage ratio covenant from
we further amended our export credit facilities to, among other things, extend
the deferral of scheduled amortization payments of the first export credit
facility through
the effective suspension of the total net leverage ratio covenant through
2022
points and annualize EBITDA used in the covenant calculation through
31, 2022
years starting in
restrictive during the extended covenant waiver period.
In
waive the application of the total net leverage ratio covenant through
2021
been increased by 125 basis points, to be paid-in-kind at maturity, a LIBOR
floor of 75 basis points has been added to the term loan facility and certain
covenants were amended to be more restrictive. During
amended our term loan and revolving credit agreement to, among other things,
extend the waiver of its total net leverage ratio covenant through
2022
2022
Main Street Loan, and the Revolving Facility by 50 basis points, such additional
interest to be paid in cash. Certain other covenants continue to be more
restrictive during the extended covenant waiver period.
In
placement issuance of Redeemable Convertible Series A Preferred Stock that
carries a 6% annual dividend, which is payable in kind for two years and,
thereafter, in cash or in-kind at our option. The preferred stock is convertible
into shares of Lindblad common stock at a conversion price of
representing a premium of 23% to Lindblad’s 30-day trading volume weighted
average price on the date of issuance.
In
borrowed an incremental
through the Main Street Expanded Loan Facility program established by the
of Governors
interest rate of LIBOR plus 3.0%, without any LIBOR floor, and matures
2025
As we continue to ramp up operations, our monthly cash usage will increase as we
incur costs in operating expeditions, preparing additional ships for return to
service, spending to market and advertise upcoming expeditions and trips and
instating remaining furloughed and part-time office staff as needed. We also
anticipate a significant increase in guest payments as we receive final payments
for upcoming expeditions as well as deposits for new reservations for future
travel. However, there can be no assurance that cash flows from operations will
be available to fund future obligations or that we will not experience delays or
cancellations with respect to the resumption of our operations.
Given the dynamic nature of the COVID-19 pandemic, we cannot reasonably estimate
the potential impacts the pandemic will have on our financial condition, results
of operations, cash flows, plans and growth for the foreseeable future. It is
unknown when travel restrictions and various border closures will be lifted and
what the demand for expedition travel will be once restrictions are no longer in
place. Based on our actions taken to date, our planned and anticipated actions
and our current forecast, we believe that we can meet our obligations for the
next 12 months from
10-Q.
The discussion and analysis of our results of operations and financial condition
are organized as follows:
? a description of certain line items and operational and financial metrics
we utilize to assist us in managing our business;
? results and a comparable discussion of our consolidated and segment
results of operations for the three and six months ended June 30, 2021 and
2020;
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? a discussion of our liquidity and capital resources, including future
capital and contractual commitments and potential funding sources; and
? a review of our critical accounting policies.
Financial Presentation
Description of Certain Line Items
Tour revenues
Tour revenues consist of the following:
? Guest ticket revenues recognized from the sale of guest tickets; and
? Other tour revenues from the sale of pre- or post-expedition excursions,
hotel accommodations, air transportation to and from the ships and
excursions, goods and services rendered onboard that are not included in
guest ticket prices, trip insurance, and cancellation fees.
Cost of tours
Cost of tours includes the following:
? Direct costs associated with revenues, including cost of pre- or
post-expedition excursions, hotel accommodations, and land-based
expeditions, air and other transportation expenses, and cost of goods and
services rendered onboard;
? Payroll costs and related expenses for shipboard and expedition personnel;
? Food costs for guests and crew, including complimentary food and beverage
amenities for guests;
? Fuel costs and related costs of delivery, storage and safe disposal of
waste; and
? Other tour expenses, such as land costs, port costs, repairs and
maintenance, equipment expense, drydock, ship insurance, and charter hire
costs.
Selling and marketing
Selling and marketing expenses include commissions, royalties and a broad range
of advertising and promotional expenses.
General and administrative
General and administrative expenses include the cost of shoreside vessel
support, reservations and other administrative functions, including salaries and
related benefits, credit card commissions, professional fees and rent.
Operational and Financial Metrics
We use a variety of operational and financial metrics, including non-GAAP
financial measures, such as Adjusted EBITDA, Net Yields, Occupancy and Net
Cruise Costs, to enable us to analyze our performance and financial condition.
We utilize these financial measures to manage our business on a day-to-day basis
and believe that they are the most relevant measures of performance. Some of
these measures are commonly used in the cruise and tourism industry to evaluate
performance. We believe these non-GAAP measures provide expanded insight to
assess revenue and cost performance, in addition to the standard GAAP-based
financial measures. There are no specific rules or regulations for determining
non-GAAP measures, and as such, they may not be comparable to measures used by
other companies within the industry.
The presentation of non-GAAP financial information should not be considered in
isolation or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. You should read this discussion
and analysis of our financial condition and results of operations together with
the condensed consolidated financial statements and the related notes thereto
also included within.
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Adjusted EBITDA is net income (loss) excluding depreciation and amortization,
net interest expense, other income (expense), income tax (expense) benefit,
(gain) loss on foreign currency, (gain) loss on transfer of assets,
reorganization costs, and other supplemental adjustments. Other supplemental
adjustments include certain non-operating items such as stock-based
compensation, executive severance costs, the
amortization, debt refinancing costs, acquisition-related expenses and other
non-recurring charges. We believe Adjusted EBITDA, when considered along with
other performance measures, is a useful measure as it reflects certain operating
drivers of the business, such as sales growth, operating costs, selling and
administrative expense, and other operating income and expense. We
believe Adjusted EBITDA helps provide a more complete understanding of the
underlying operating results and trends and an enhanced overall understanding of
our financial performance and prospects for the future. Adjusted EBITDA is not
intended to be a measure of liquidity or cash flows from operations or a measure
comparable to net income as it does not take into account certain requirements,
such as unearned passenger revenues, capital expenditures and related
depreciation, principal and interest payments, and tax payments. Our use of
Adjusted EBITDA may not be comparable to other companies within the industry.
The following metrics apply to our Lindblad segment:
Adjusted
supplemental adjustments which include certain non-operating items such as
stock-based compensation, the
acquisition-related expenses.
Available Guest Nights is a measurement of capacity and represents double
occupancy per cabin (except single occupancy for a single capacity cabin)
multiplied by the number of cruise days for the period. We also record the
number of guest nights available on our limited land programs in this
definition.
Gross Cruise Cost represents the sum of cost of tours plus, selling and
marketing expenses, and general and administrative expenses.
Gross Yield per Available Guest Night represents tour revenues less insurance
proceeds divided by Available Guest Nights.
Guest Nights Sold represents the number of guests carried for the period
multiplied by the number of nights sailed within the period.
Maximum Guests is a measure of capacity and represents the maximum number of
guests in a period and is based on double occupancy per cabin (except single
occupancy for a single capacity cabin).
other direct costs of guest ticket revenues and other tour revenues.
Net Cruise Cost Excluding Fuel represents
Net Yield represents tour revenues less insurance proceeds, commissions and
direct costs of other tour revenues.
Net Yield per Available Guest Night represents Net Yield divided by Available
Guest Nights.
Number of Guests represents the number of guests that travel with us in a
period.
Occupancy is calculated by dividing Guest Nights Sold by Available Guest Nights.
Voyages represent the number of ship expeditions completed during the period.
Foreign Currency Translation
The
re-measurement adjustments and gains or losses resulting from foreign currency
transactions are recorded as foreign exchange gains or losses in the condensed
consolidated statements of operations.
Seasonality
Traditionally, our Lindblad brand tour revenues from the sale of guest tickets
are mildly seasonal, historically larger in the first and third quarters. The
seasonality of our operating results fluctuates due to our vessels being taken
out of service for scheduled maintenance or drydocking, which is typically
during nonpeak demand periods, in the second and fourth quarters. Our drydock
schedules are subject to cost and timing differences from year to year due to
the availability of shipyards for certain work, drydock locations based on ship
itineraries, operating conditions experienced especially in the polar regions
and the applicable regulations
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of class societies in the maritime industry, which require more extensive
reviews periodically. Drydocking impacts operating results by reducing tour
revenues and increasing cost of tours. Natural Habitat, DuVine and Off the
Beaten Path are seasonal businesses, with the majority of Natural Habitat’s tour
revenue recorded in the third and fourth quarters from its summer season
departures and polar bear tours, while the majority of Off the Beaten Path and
DuVine’s revenues are recorded during the second and third quarters from their
summer season tours and cycling adventures.
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