Q1 2021 Lindblad Expeditions Holdings Inc Earnings Call
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Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Lindblad expeditions first quarter earnings Conference call. At this time, all participants are in a listen only.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.
Require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Craig Feldman steam. Thank you you may begin.
Thank you April good morning, everyone and thank you for joining us for Lindblad is 2021 first quarter earnings call with me on the call today than Lindblad, our founder and Chief Executive Officer spend 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.
The Investor Relations section of our website before.
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.
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.
Thanks, Craig and good morning, everyone. Thanks for joining us today.
This morning, starting with some pretty interesting news.
The New York, maybe fully opening on July one, which certainly gave me a smile on I'm sure many people on.
On this phone call responsibly opening on July one so that would be a huge victory.
Net.
We've been waiting a long time for as you all know these.
These past 12 months have been an ordinarily hard for our industry.
For so many people that 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.
And just a few days ago, the European Union state of the U S citizens, who are vaccinated would soon 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 of the adults to the 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 with our survey of guests indicated they wanted in order to return to travel.
We couldnt be more excited to begin selling again during the first week in June with two ships in Alaska, one of the Galapagos Islands, and our excitement has been masked by our guests. The demand has been so strong, particularly on Alaska that we will likely be activating two more ships later in June the fifth ship the national Geographic Orion.
<unk> may also be activated in Alaska, if we can if we can secure permission to affect clearance and of Russian court as incorporating of foreign port is unfortunately necessary for a non U S shift in order to comply with the Jones Act.
I think this reflects on the value of flexibility, which are sized ships of outflow.
Soon we will also reactivate selling some parts of Europe, beginning with the 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 years end, we anticipate being more or less fully operational again, and we will return to explore the worlds amazing geographies with a robust cash position and with two new complementary travel companies that we acquired recently these two additions of the latest pieces of our growth strategy, which includes offering a broad and deep.
Platform for adventure and experiential travel opportunities.
The volume cycling an adventure is of very high end global adventure travel company exploring the world by bike.
And they are poised to grow rapidly with Viking exploding.
Particularly with the production the greater production of the use of E bikes, which.
Significantly broadens the demographics of potential participants in bicycle tour.
You cannot buy a bike at the moment, partly certainly not in the heat pipe of 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-19 and given the focus on U S travel to remote locations right now they are seeing record sales coming out of the pandemic.
Both of these companies are already extremely well run by entrepreneurial owners and have tremendous potential for growth, particularly with 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 of the world's most extraordinary destinations while educating our guests about local cultures and the ever changing environment through.
Through the expert lengths of our specialist guides in our expedition ships, where the gold standard in experiential travel by which others are measured that.
Of that commitment to excellence in everything we do on behalf of our guests is also reflected on our commitment to provide the best in class experience before during and after the guest journey via via our digital transformation efforts.
By creating engaging informative content personalized information and rich media about traveling on our destinations will 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 insight and 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 creator.
While creating greater operating efficiency.
Further we will be able to easily integrate other expeditions and services that we offer from our recent acquisitions and natural habitat to travelers as they are on <unk>.
Diverse and their desires and interest in the.
The unique experiences we provide.
With this commitment to of 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 announcements this past quarter of aside from a resumption of operation was the 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.
Question I have been asked most often since we announced this change is one of my stepping down.
The 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 or wisely on to greater effect.
I have a deep understanding of this business, it's components and its opportunities.
More and more of as CEO I felt that there was often not enough time to focus on long term potential as of May 10, So that is about to change.
Our new CEO.
<unk> is an ideal candidate to succeed me as leader of the special organization the.
Ralph was most recently president and CEO of top calls and I've gotten to know on wells through the search and selection process.
Deeply understands the importance of delivering unmatched guest experiences and creating communities, while keeping customer service of the front and center of all activities. He also understands the essential role of technology and growing businesses and the importance of building World class teams I view doses of true partner and I will continue.
Will it be available to him as needed as an advisor and the thought partner.
Personally aside from helping onboard Gulf I'm going to focus on growth opportunities, new geographies and the strengthening of our social activities.
As I've said, probably each time, we have reported I believe so strongly that the combination of good smart business combined with the strong integrated approach the conservation Science education exploration diversity and inclusion is the essence of the sustainably successful enterprise.
It always has been but I feel even more important now as consumers care more and more about how our company relates to the society.
Society more broadly as part of its relevance.
It has been a tremendous honor.
To begin to found and serve as the CEO of the lindblad expeditions since.
Since 1979, and I am proud of all of that we've accomplished over the last 42 years, we've built the 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 couldnt be happier, we are well prepared to start up again, we have excellent.
Financial reserves, a couple of new companies under our umbrella and on marketing machine that is vastly strengthen for growth and we have the added horsepower of new capable of enthusiastic CEO to lead the way on our next phase together with a talented and tenured team and an engaged board that has proven to be such an extraordinary asset and this most.
During the 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 will become more and more meaningful to the traveling public itching to get out there and explore.
Many thanks for your time today and now let me turn the call back to Craig. Thanks.
Thanks, Vince before I jump in let me once again, thank our dedicated crew across the world as well as our diligent office personnel for the resiliency over the past year and for their commitment and 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 the comprehensive plan, we put in place back in the March of 2020 to further fortify our liquidity position and ensure we emerge from the COVID-19 pandemic has 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 originate in the United States. This is the $26 million increase in total cash over where we ended.
Q1 2020.
So as we begin to sell of 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 do volume 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 remains safely laid up with the minimally required crew and we continue to minimize ship in land based expedition operating and capital costs.
Did spend a little over $1 million on maintenance Capex of this past quarter down $3 million from a year ago, primarily due the drydocks for the quest and venture as we prepare to resume selling 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 administration.
Administrative spending through employee furloughs workload reductions and elimination of all non essential travel office expenses and discretionary spending we.
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 demand 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 reschedule voyages.
Turning to current booking trends demand for travel continues to accelerate and we're really well situated for a return to ship operations bookings.
Bookings for 2022 are currently 39% ahead of where we were for 2021 at the same time of year ago, and 32% ahead of 2020 at the same 0.2 years ago. The strong year on year trends include guests on canceled voyages that have opted to reschedule, but they only make up about 20% of our overall bookings for 2022.
Yes.
The robust new bookings, we are seeing from both returning guests as well as new audiences as we begin to resume marketing in earnest focusing on the digital targeting and social opportunities as well as increased outreach through trade advertising and travel advisors. There is no question that there are of significant pent up demand to get out and explore the worlds of 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 towards resuming operations, our cash usage today is still estimated to be approximately 10 to 15 million monthly on average, including all ship in office operating expenses necessary capital expenditures and expected interest and principal payments, but excluding any new guest payments for future travel and refunds of previous.
The U S payments of.
Of course, as we implement plans to resume operations. This monthly operating cash usage will increase as we hire crew returned shift of service market upcoming expeditions spend on our digital transformation projects and reinstate frontloaded part time of its staff as needed at.
At the same time, we do anticipate a continued ramp and cash inflows from final payments for upcoming of wages 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 of principal outstanding an increase of $116 million from the end of Q1 a year ago.
This primarily reflects the incremental $85 million main street loans during the fourth quarter of 2020, as well as $35 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 payments on the vessel and our final borrow 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 corner. The 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 it is still it still will take some time to return to full <unk>.
<unk>, 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 of your time this morning, and I'll spend on I would be happy to answer any questions you may have.
Good Day reminder, if he would like to add.
Ask a question. Please press Star then the number one on your telephone keypad again that is star then the number one.
Your first question comes from Steve with the.
<unk> with Stifel.
Hey, guys good morning.
So it's been the first of all congratulations I guess thats congratulations.
Okay.
So so want to understand.
How youre thinking about layering in additional ships at this point.
You mentioned that spend on your prepared remarks of it sounds like you might already be ready to launch.
Some additional shifts at this point I, just wanted to dig into that a little bit more and understand how you guys go about making those decisions that would assume that at this point. That's that's all demand based is that the right way to think about it.
Yes.
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 the of those things so.
It's a really rigorous process because obviously, it's a it's a big commitment to build the ship or ships and you want to make sure that as of confluence between geography on demand.
Steve just to be clear are you referring to launching new ships.
Ultimately several years now you're talking about launching the new ships this year.
No what I meant was later this year. So obviously of the three ready to go in early June and I guess, maybe I misunderstood you, but it sounds like you are ready to actually start to think about putting additional ships back in the water sometime later this summer.
Yes.
I think I'm just trying to stage of question my apologies.
So we will be.
The.
As we've always said the three things that are necessary in order to relaunch of ship from a particular area of one is obviously of medical solution and we have that we're requiring everybody to be vaccinated and and Thats, a very clear path and then the second one is the challenge at the moment in certain areas, which is.
Are you allowed to are you allowed to come into that area or not and there still are some restriction. So 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 it on other prospective county by County now all of these things are changing really really wrong.
Happily.
The acceleration of openings is really at a much higher pace than the minute places are open we've got sort of plans in place a lot of these voyages. We have we have guests booked lots of them.
Just cannot officially go there yet right. So for example of Norway, we have lots of people booked on our voyages that involve Norway, Norway is not yet open.
We have lots of people.
Interested in booked in Iceland, Iceland is open Greenland is not yet open and it's an important place for us, but we anticipate that we will.
Highly likely that we'll be able to operating agreement later this summer. So we're just it's all it's all it's all of the series of processes that have to happen in order to pull the trigger finally on reactivating of ship.
The other thing that I'll add Steve is that the.
You talked about the allowed in the past, even while we are operating but.
Even more so now which is we have of immense amount of flexibility both given the size of the ships and kind of how we operate.
As a result, if there are geographies that arent opening and can pivot and pivot pretty quickly as loans theres 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 interestingly on unique ideas, we can pivot to so we do envision some openings later this year is just the.
A matter of figuring out what those are and when they are.
Okay got you thanks for that color and then I.
I guess this would be for you Craig if you look at the booking trends for 'twenty. Two I think if I read my notes of <unk> 39 of 32% higher versus 21 in 'twenty.
Obviously those are being.
I think they are being pushed up by the resolution and endurance.
I guess the question is there any way to think about what those what booking trends for 'twenty two would look like with without the new capacity just trying to get it from on a.
Our like for like basis, I know, if you guys can do that or you can't.
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 of same store sales. If we didn't have the resolution of the endurance of lot of these guests we'd like to travel on our other ships, whether it be the explorer of the Orion or some of our other destinations. So it's really not a fair apples to apples comparison to just stripped out those two ships.
The way we tend to look at these things is when you look at where we are from the percentage of the Max revenue that we can get in any given year, where do we sit today as of <unk>.
The Senate versus where we sat in prior years and what I can tell you is that as a percentage of Max revenue for 2022. We're further along today than we were last year for 2021 and the year. Prior for 2020. So in terms of percentages. We're definitely pacing ahead in terms of the overall bookings even when you strip those two voyages out.
Understood and if I can ask one more quick one of I guess the <unk>.
Pricing front I mean.
Everything that we see and everything it sounds like you guys are seeing in terms of pent up demand from your customer base looks 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 the strong pricing.
Sure.
Over the next couple of years and I just wanted to kind of get your thoughts in terms of the way you think about pricing power moving forward.
Yeah. So.
It's interesting I don't think we.
We have never felt it wise to sort of.
Well I'm, not I'm, not suggesting you're suggesting gouging, but what could be perceived as sort of gouging.
And.
We believe that our greatest opportunity is expansion of inventory rather than pushing prices to too hard.
Because at a certain point of view.
Could fall off a cliff or just puts you on a position where there is there could be too much focus on pricing our pricing is already of the highest in the industry.
I mean without question.
And so we're very cautious about that.
We don't want to be of hogs get slaughtered because of.
Of pushing that too fast too hard.
We will continue to evaluate that Steve as we move forward. When you think about of our the drivers of our revenue is pretty simple right.
Occupancy you have the availability of guest nights of your of price and when you think about what's happened from 2016 through where we are today, obviously not operating today, but before we before the pandemic.
We were able to maintain pricing and we were able to maintain occupancy as we dramatically increase the available guest nights and when you think about where we're going to be in 2000.
22 post resolution, we're going to be 66% above in terms of our inventory, where we were in the back in 2016, it's a massive increase and if we can maintain the other two aspects of that which are the occupancy and pricing even at a relatively stable level, you're going to see some significant growth and then we will 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.
To put too much stress on the system and all aspects of.
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.
Okay. Thanks, guys, great color and best of luck this quarter in terms of resumption of cruising.
Thanks, Steve.
Your next question is from Alex Fuhrman with Craig Hallum capital.
Great. Thanks, very much for taking my question I was wondering if you could talk a little bit more about some of the recent acquisitions that you've made and kind of what youre seeing so far in terms of interest in those properties from some of your existing customers I don't know if thats anything.
The marketing at all but I'm sure some people of just being that that news.
And how do 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 youre operating.
Yeah, Great question. Thank you.
Well first of all of its only been a couple of months.
But we've had these companies.
In essence and.
And what we've done is we are really committed all of these companies that have off the beaten path to volume and ourselves.
Aggressive cross marketing efforts, because we know for effects that our audiences are diverse in terms of their interest and that's the whole thesis behind the acquiring these companies as you know.
I'll meet somebody who's in Antarctica, one year.
That will be on the Safari in Africa in the next year there'll be bicycling through Burgundy of the following year or whatever and they just have this diverse set of interests.
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 divine in OBP for example, the.
The inquiries have been.
Not only records, but.
Multiple of retrofits.
In terms of inquiries as a consequence of being exposed to.
Are obviously much larger audiences. So we believe the strategy makes a tremendous amount of sense, we're very eager to find additional companies that fit the strategy and the cross marketing component as well as taking advantage of circumstances. It makes it a huge amount of sense.
Great that's really helpful and then.
If you could also comment just about the impact over the past year.
Year on a half or so you've had a lot of canceled voyages in a lot of travel credits that had been issued two new customer can you give us the sense of how youre thinking about that both from a business standpoint, and then what we're going to see from a financial reporting standpoint, as those of 125% credit start to get used.
Curious.
The prior questions point of me it sounds like you've got just the huge surge of demand for a couple of years here and there is not going to be a lot of sensitivity to price or there may be opportunities for customers to use those credits on on some of your other properties like off the beaten path.
At day as they start to rebook planned over the next few years.
Okay.
Please remain on the line just one moment.
Okay.
Yes.
And just one moment, while we get the line reconnected.
Thank you.
Okay, Mr feelings day newer reconnected now.
April can you hear us.
I can I can hear reconnected now.
Hey.
The.
Alex East along.
We may of last Alex.
Sorry about that everybody will be disconnected never happened to me in the 20 plus years of doing this but hopefully you can hear US again. The question that was raised was raised about future travel credits and the impact of implication that it's going to have over the next several years.
As I mentioned earlier my comments right now the future travel credit applications. In 2021 of 2022 is really only about 21% of our future bookings. So we are of significant cash opportunities still in 2022 and beyond.
With regards to the bookings the majority of the bookings I.
I'd say close to 75% of them of the future sales credit bookings have already been made so a lot of that can 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 that we can take a year ago. They will burn off part of that credit, but then they will have an additional credit to utilize moving forward at what they can do with that credit is the income book of 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 theyre likely to travel again.
Sooner if they have the future travel credits so it should help of stimulate some additional business moving forward.
While at the same time of me a little bit of of cash overhang and in the next year on year and a half.
Hello.
Okay.
Again, if anyone would like to ask a question. Please press star then the number of wine.
And there are no further questions at this time.
Okay. 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. Thank you.
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Thank you for joining today's conference. This concludes the call you may now disconnect.