Q1 2023 Lindblad Expeditions Holdings Inc Earnings Call
Speaker 1: The here here.
Speaker 2: Good morning, all good afternoon. Oh, welcome to the Lynn Glad Expeditions, first quarters financial results call. My name is Adam and I'll be your recruits of today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one your telephone keypads into the queue. I will now hand the call over to Chief Financial Officer Craig Philanstein to begin to Craig. Please go ahead when you are ready.
Speaker 3: Thank you, Adam. Good morning, everyone, and thank you for joining us for Lindblad's 2023 First Quarter earnings call. With me on the call today is Dalperly Lindblad's Chief Executive Officer. Dalper will begin with some opening comments, and then I will follow with some details on our financial results, balance sheet, and current 2023 expectations.
Speaker 3: before we open the call for Q&A. You can find our latest earnings release in the investor relations section of our website.
Speaker 3: 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.
Speaker 3: The company cannot guarantee the accuracy of any forecast or estimates and we undertake no obligation to update any such forward-looking statements.
Speaker 3: If you would like more information on the risks involved in forward-looking statements, please see the company's FCC 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.
Speaker 3: And with that out of the way, let me turn the call over to DELF.
Speaker 4: Thanks Craig. Good morning everyone and thanks for joining us today. Not long ago I wrote our annual report letter to shareholders and described 2022 as a year of resurgence for our company. It was a year with many highlights, returning to full operations on all our ships.
Speaker 4: The first full year and brilliant performance had both poles of our new blue waterships, the National Geographic Endurance and the National Geographic Resolution. In the Galapagos, the extremely positive reception of our guests to the islander 2 and the securing of 20 more years of Coupos to operate there. And the record-setting financial performance of our land companies.
Speaker 4: were all reasons for celebration.
Speaker 4: Most importantly, we experienced a change in guest focus with COVID becoming less and less of a topic. This desire to once again explore the world's most amazing geographies returned and bookings started to meaningfully increase.
Speaker 4: This backdrop is one which created momentum into our first quarter performance. And I'm pleased to say that Q1 2023 results represent all time highs for Lindblad expeditions in both revenue and EBITDA.
Speaker 4: Craig will give some additional color on our financial results in a few minutes, but our first quarter performance demonstrates the earnings power inherent in the increased capacity of our fleet as well as the fast growing land companies. I for one, and I'm extremely grateful to the hardworking and dedicated team of people who fought steadfastedly over the last three years to ensure Lynn Blatt expeditions.
Speaker 4: emerged from the pandemic as a strong and vibrant company, and who are now working diligently to push it to new heights.
Speaker 4: First, as noted a moment ago, the world is opening up again to travel, and the confidence among guests continues to grow as they consider travel on expeditionships to remote places. Second, our modern marketing machine is starting to yield powerful results, and I want to tell you a bit more about that now. Prior to the pandemic, the company had been predominantly utilizing a historically successful marketing approach, which centered around brochures, letters from our founder and now board co-chair, Sven Olaf-Linblad, targeted emails, and smaller direct mail pieces, which focused on specific geographies and itineraries.
Speaker 4: Over the last two years, we have invested heavily in transitioning to an omni-channel marketing approach that evolves our past practices and adds meaningful digital marketing components.
Speaker 4: Today, we are developing an ever-growing capacity to source guests through search engine optimization and SEM. We are active on social media platforms. We also have a growing set of capabilities around the analytics, which allow us to gauge the effectiveness of our various digital marketing efforts, and also to understand the relative performance of all these different approaches and channels.
Speaker 4: from a customer acquisition cost standpoint.
Speaker 4: At this time, our bookings for 2023 are 45% higher than pre-pandemic bookings in 2019 for the year 2020. I am also happy to report that cancellations, which had more than doubled as a percentage of book revenue late last year, are settling down significantly. While still higher than in 2019, they have dropped due to a number of factors. First, the threat of COVID meaningfully impacting a voyage continues to diminish and indeed the incidence of COVID on a shift is increasingly rare. Secondly, we have now reinstituted a more industry norm cancellation policy.
Speaker 4: During the pandemic, we had reduced penalties for canceling a trip even on short notice to very low levels, recognizing that our valued guests wanted and needed flexibility to do due to illnesses and the quarantine requirements that nearly all countries had imposed for anyone who tested positive for COVID. We expect cancellations to continue to drop as a percentage of book revenue and are encouraged by the current trends. A big step forward in our marketing and sales efforts occurred earlier this week with the launch of our new Seeware reservations and booking platform. The Seeware platform is one which will allow guests and eventually travel advisor partners to book.
Speaker 4: Selecticabin and Access Any Special Offers Online. I'm quite excited about the fact that it will also allow guests who are on a voyage with us to book a future trip in real time. We have found historically that guests who love seeing whales in Alaska express interest in seeing the whales in Baja.
Speaker 4: The same is true for our polar explorers who once they have experienced one of the poles on a linblad ship have a great desire to travel to the other pole in the same fashion.
Speaker 4: Seaware will also allow us to implement modern dynamic pricing practices, enhancing our ability to reach higher levels of revenue yield on voyages across the globe.
Speaker 4: Just as importantly, we're building connectivity between the CWARE platform and our marketing technology and CRM stack. This will give us better and faster access to customer data and enable us to be more effective in our guest generation and customer service efforts.
Speaker 4: The SeaWare implementation is a major milestone in these digital transformation efforts and enables a leap forward towards a more powerful future.
Speaker 4: Back in 2002, our founder, Sven, pulled a group of leaders together within the company and established Lindblad Expeditions guiding principles. Our first guiding principle is ensure that everything we do must add value to the guest experience.
Speaker 4: I'm really grateful to our team for the guest feedback we are seeing across our fleet, both new and old, with regards to the quality of expedition content, food and beverage, and the onboard hotel and amenities aspects of these expeditions.
Speaker 4: The other thing that is improving as each month goes by is the reliability of the network of partners which we enjoy, including airlines and the many land and port operations partners that we have built relationships with over decades of working together. They are returning to more normal operations which has a great impact on the enjoyment of our guests traveling the world with us.
Speaker 4: Delivering amazing experiences for our guests remains our primary focus. And as we do so, we are equally committed to pushing booking levels higher and higher to once again achieve the occupancy levels that we had attained prior to the pandemic. At this particular time, we have seen the best performance.
Speaker 4: in the geographies which are the historical strongholds for the company. The Antarctic season which just finished was extremely strong. Our newest ships demonstrated their polar class 5 capabilities in the ice and enabled voyages to areas that were previously unreachable. The abundance of wildlife and remarkable scenery.
Speaker 4: observed further south than ever before in the Amuncens Sea created unforgettable experiences for our guests.
Speaker 4: We also continue to generate booking strength in the Galapagos while experiencing some of the highest guest feedback scores in our history there. Our Alaska season, which begins in May, is showing strong guest demand across all four of our US flag vessels, and we're expecting another strong season in the Arctic when the polar ships move further north for the Arctic summer.
Speaker 4: As we continue to ramp occupancy levels, we are focused on fine-tuning marketing for some of our more esoteric or shoulder-season itineraries, including where the ships are in transition between the poles or repositioning before and after very popular destinations such as Baja.
Speaker 4: I mentioned the performance of our land companies earlier, but their progress deserves more detailed description. As you may recall, our strategy is to develop a best-in-class platform company which can provide adventure travel options across multiple types of experiences and with different thematic focuses for our guests.
Speaker 4: Famously, Sven Lindblad describes our guests as omnivorous in their desire to experience the world broadly from a travel and expedition standpoint. Q1 is a seasonally quiet quarter for all of our land companies, but they delivered positive earnings and are poised for another year of record results.
Key drivers behind their performance include the quality of their offerings and strong consumer demand for premium experiential travel. They are also benefiting from the sharing of best practices and greater infrastructure and marketing support resident in our larger organization.
As I near the end of my comments, I feel it is important to mention our continued focus related to environmental sustainability and our mission to educate guests about what they can do to support the health of our planet. In addition to our now long-time commitment to being carbon neutral and having zero single-use plastics in our system, we continue to push forward on many other efforts. We sponsored the 2023 Planet Forward Story Fest, relaunched our support for the Kampong-Tralok Green School in Cambodia, and launched the Visiting Scientist Program for the 2022 and 2023 Antarctic and Southern Ocean season.
The scientists on board our ship will study snow algae, DNA in the oceans waters, and believed in oil reality.
A personal highlight for me was welcoming 50 elementary middle school and high school teachers in to our 2023 class of Lynn Vlad National Geographic Society Grozner Teaching Fellows who will take expeditions with us and then translate their experiences to future generations in their classrooms across America.
As we look forward, I want to share my belief that the future will be bright for our segment of this industry and for Lindblad Expeditions individually. The rise in environmental consciousness and the consumer trends indicating that people are desiring experiences rather than being more focused on material goods provide secular tailwinds for our business.
Within the industry, Lindblad Expeditions has the deepest and widest history related to expedition travel, including the many firsts our company recorded, such as being the first company to take tourists to places such as Antarctica and the Galapagos. We are building on that great tradition by continuing to advance the technologies and depth of expertise within our ranks.
as we take advantage of the strong and growing demand for high quality experiential travel.
providing additional financial flexibility as we continue to ramp the business and explore additional growth opportunities that can further amplify the growth trajectory of the company. I'll discuss our balance sheet in a moment, but before I do, let's take a quick look at our financial performance from this past quarter. First quarter, total company revenue of $143 million increased $76 million or 111% versus the first quarter a year ago, as we continue to ramp operations and with 54 million or 60% higher than 2019, do in large part to our expanded fleet and additional land-focused offerings. At the Lindblad segment,
Revenue of $115 million increased $65 million, or 130%, versus the first quarter a year ago, and $39 million, or 52%, versus 2019.
The year-on-year growth was driven by a 71% expansion in available guest nights for broader utilization of the fleet and by increased occupancy of 81% versus 66% in the first quarter a year ago.
The higher occupancy combined with increased pricing across the fleet drove net yields to $1,205 per night, an increase of 63% from the first quarter of 2022. While occupancy is not yet back to traditional levels, you can see the revenue opportunity we have across the expanded fleet as we...
Land Experiences segment for the first quarter of 2023 of 28 million increased 59% versus the first quarter of 2022 and was more than double the first quarter of 2019.
The strong revenue performance across both segments generated significant operating leverage, with total company adjusted EBITDA of 27 million in the first quarter. An increase of 48 million versus the first quarter a year ago, and growth of 23% compared with the first quarter of 2019.
The year-on-year growth was driven by a $47 million increase at the Lindblad segment led by broader utilization of the fleet and strong demand in Antarctica, the Galapagos, Baja and Costa Rica, while the land experience segment in a traditionally slow season increased by $1 million due predominantly to the growth in natural habitat from northern light to
2022 led by a 24% increase in cost of tours.
primarily related to the rampant ship utilization, which included higher fuel and crew costs, as well as expenses related to operating additional land-based trips.
Fuel costs increased 40% due to the rampant ship operations, but was only 6% of revenue, as compared to 9% of revenue in the first quarter of 2022, reflecting the increased revenue overall offset by slightly higher pricing. Sales and marketing costs increased 68% versus a year ago. Primarily due to higher commissions and royalties.
related to the increase in revenues and from increased search and direct mail marketing to drive future bookings.
The quarter also included some additional costs associated with our digital initiatives, most notably associated with our new reservation system, which as Dalton mentioned, launched earlier this week.
G&A expense during the quarter increased 26% versus a year ago, excluding stock-based compensation and one-time items, primarily due to higher personnel costs as we ramp operations and increased credit card commissions related to final payments for upcoming itineraries and higher deposits on new reservations for future travel. All company net loss available to stock.
an additional interest expense of $1.8 million net associated with higher rates on our export credit agreements and increased borrowings related to our debt refinancing in February 2022.
Turning to the balance sheet, we ended the quarter with $121 million in cash and short-term investments, a $9 million decline from the end of 2022, as positive operating cash of $2 million was more than offset primarily by capex of $6 million, which included maintenance capex and spending on our digital initiatives.
as well as by principal payments on our ECA facilities of $6 million. Following the quarter, we further solidified our balance sheet by refinancing our export credit agreements with notes that mature in 2028. The 9% fixed rate notes replaced variable rate debt that had an interest rate of approximately 8.5% in the first quarter.
and also eliminates principal payments of over $20 million annually. We also increased our cash position by nearly $70 million, providing further flexibility as we ramp operations and additional capital as we explore additional strategic initiatives to expand our long-term growth opportunities.
Turning to the full year 2023, we remain excited by the sustained operating momentum across our portfolio and continue to anticipate significant growth as we ramp operations and capitalize on our expanded platform.
The Linwad segment has already booked well over 90% of its full year projected ticket revenues for the year, and we continue to expect total company tour revenue in 2023 between 550 and 575 million and adjusted EBITDA between 70 and 80 million.
These projections reflect the impact of elevated cancellations on occupancy in the first half of the year, but as anticipated, we have started to see a slowdown in cancellation rates with regards to bookings for the back half of the year and the incident in 2024. Please note that quarterly results will reflect the seasonality of our business.
with the second and fourth quarters impacted by less available guest nights due to the heavy dry dock and transit time across our fleet, more shoulder season inventory, the impact of launching our new reservation platform and seasonality for our land businesses.
Conversely, the third quarter will benefit from more complete fleet usage and peak seasons across our fleet and land companies.
Overall, while there will be quarterly choppiness, we are well positioned for strong results in 2023 and beyond. More and more guests are experiencing the thrill of exploration, and with an expanded fleet and a broader set of product offerings, we are well situated to capitalize on the growing demand for experiential travel.
deliver additional shareholder value in the months and years ahead. Thanks for your time this morning and now Dolph and I would be happy to answer any questions you may have.
As a reminder, if you'd like to ask a question today, please press star fuller by one on your telephone keypad now. From the parent's hospital question, please ensure your headset is fully plugged in and unmuted locally. That's star one to ask a question. And now our first question today comes from Steve, which is Steve from Steve from Steve Golanas Open. Please go ahead. Yeah, here you guys, good morning.
So Craig, can we do some simple math here? You know, you just posted a 27 million EBITDA first quarter and based on your unchanged guidance, you know, you're saying your business is going to do, let's say, let's call it 48 million at the midpoint, you know, for the last three quarters of a year.
you kind of talked about this towards the end of your prepared remarks, and I fully understand the seasonality of your business. But, you know, I guess I have I really have no idea how this business is only going to do 48 million of EBIT over the last three quarters of the years over the year. So you know, are you being super, super conservative here? Are you seeing something you know, we aren't seeing? Just just trying to square away
why that full year guidance wasn't touched yet at this point. Thanks. Sure. Thanks, Steve. So when you look at the guidance that we gave for the year, obviously, there was a fair amount of items that we knew heading into the year, including the fact that we expected Q1 to be very strong, and it was. So we knew we were going to start off the year on the right foot, which is certainly what happened. When you look at kind of the rest of the year, there are certain headwinds which are just relevant in the business.
on us in the early part of the quarter. And then as Dolph mentioned in his commentary, you certainly do have some of these more esoteric or shoulder season inventory voyages which are still ramping up. You know, the geographies that have bounced back quicker are the tried-and-true geographies that we have certainly been operating in for years.
Some of the more, I would say, nuanced itineraries are still ramping. And those are more prevalent in the second quarter and the fourth quarter. So that's kind of the primary driver between a lot of this. The other thing that's kind of happening on the cost side is while fuel costs have come down from where they were in the fourth quarter, they still haven't fully abated and we're still seeing the impact of higher costs.
But the last thing that I'll say with regards to guidance is where we end up for the full year still has a significant amount of variability to it associated with do bookings continue on the same trajectory that they're on today and what happens with cancellations. You know, Dov talked about cancellations coming down dramatically and they have.
but are still higher than they were in 2019, and probably close to two times higher, which is still ahead when they were facing. So with all those things combined, we felt leaving guidance where it is made the most sense at this time. Okay, thanks, Craig, for that. And then second question, in terms of cancellation rates, I guess, can you then help us think about...
maybe how you guys are thinking about load factors for the rest of the year. There's obviously going to be some seasonality with shoulder seasons and stuff like that. So just any help there around how you're thinking about occupancy for the last three quarters. And then also if we can get an update on just kind of what you're seeing from higher airfares and any pressure that you are seeing or is that...
However, we will not obviously get back to the levels we were at in 2019, and we're ramping towards that as we head out of this year into 2024. When you think about the quarterly cadence of our occupancies, certainly Q1 and Q3 will be the strongest occupancy quarters for the year, and you would expect Q2 and Q4 to be
to be the lowest occupancies of the year with Q2 probably facing the most headwinds out of all of the quotas for the upcoming year. So that's kind of how the cadence should play itself out in 2023.
I'll just comment briefly on the airfare comment. It's certainly the case that airfares are higher. They're dramatically higher for places like Australia and New Zealand. We're also seeing airfare to Europe being something that our guests are thinking about and I do think it has had some effect on bookings. We make quite an effort to to offset that with promotions of our own to reduce that as a negative factor, but I do think that
For the next few months at least, I do think that'll be a factor and we expect that it will improve by the end of the year. Okay, great. Thanks guys, appreciate it.
Thanks, Steve. The next question comes from Tyler Battery from Open Home. Tyler, your line is open. Please go ahead.
Good morning. This is Jonathan on for Tyler. Thanks for taking our questions and congrats on the quarter. First one for me. Can you talk a little bit about what you're seeing from the consumer, you know, giving the macro backdrop here and what happened over the last few months?
Any changes to the guest mix or signs of a shift down in terms of lower price rooms or itinerary changes or shorter durations? Sure, thanks Jonathan. So a couple things are happening with regards to the guest mix. Which I will say for the most part they remain pretty consistent with where they have been traditionally. We are seeing
some additional bookings in year for 2023 that are arguably in past years, or probably if you pushed after 2024, that booking window is shifting a little bit more in the short term and then actually more in the long term, so that bell curve has kind of changed a little bit, but that could be potentially short lived, but that's what we're seeing today. We are also continuing to see
more bookings from US guests and international guests, the mix is becoming a little more US focused, not too dramatically but a little shifting on that front. And then we've seen a significant amount of success with first-time guests. So the mix of first-time to repeat guests has shifted a little bit. That was always to be expected partially because of the additional inventory that we have across the fleet. So as you add more hardware you're going to ultimately need to get more new.
on the inorganic growth front. I'm curious if you've seen more opportunities coming to market, whether that's existing hardware or potential bolt on acquisitions, given some of that macro volatility we've seen. Yeah, thanks, Jonathan. We, in fact, are seeing, I think, an uptick in the overall marketplace as it relates to.
the potential acquisitions of some of the smaller companies, similar to what we've done in the past. And we're always on a lookout for ships that could be additive to our fleet. I think the world is opening up again, particularly with family businesses and the travel business that have weathered the storms of the pandemic and are thinking hard about whether they're going to pass their companies on to the next day.
Okay, great. I appreciate all the color, guys. That's all for me.
Thanks Jonathan. The next question comes from Alex Berman from Craighound Capital. Alex, your line is open. Please go ahead.
Hey guys, thanks for taking my question and congratulations on a really strong start to the year. I wanted to ask about the land experiences segment. What's been driving the strength there? I remember a few years ago there was maybe some hesitation to market the land offering to your crew.
if it's just been its own kind of natural recovery and demand for the land experiences. Sure, thanks Alex. Let me start out by saying one of the things that we were looking for when we acquired these companies was obviously we were looking for businesses that fit with the ethos and the mission of what Lindblad does. We were looking for businesses that ultimately had significant growth upside from where they were today.
But we were also interested in finding businesses that had really strong leaders that were running those businesses today. And I will say, both Dolph and I would point out that the folks who are running those businesses, whether it be Andy and Dina over at Dubai, whether it be Corey at Off the Beaten Path, whether it be
Edward and Susie at Classic Journeys and certainly Ben at Natural Habitat. They've done great job with these businesses and they set them up for success coming out of the pandemic because they were delivering such amazing experiences and such amazing geographies. We always knew that they had significant growth ahead of them and we also knew that we could add some significant fuel to that growth.
by providing some additional heft from the Lindblad company, providing some additional focus from the Lindblad company, and that's exactly what's happened coming out of the pandemic. So you're seeing really nice success from these businesses. I will say we have really just started to scratch the surface of what Lindblad can do for these businesses. A lot of the success that you're seeing today is success that was built into these businesses by these original founders and owners.
But as Dolph mentioned in his comments, by sharing best practices on the way things can operate, by making sure we're focused on the right products, by giving them the marketing capabilities that they need to attract new guests, all these things are really, what I would say, combining to create some really nice momentum at these businesses. And I'll just add that we're really seeing the benefit of the pent-up demand that occurred during the pandemic and as they come in.
which is...
true not only here in the US but also abroad and so that company is just riding riding that wave no pun intended extremely well so we're excited about it and then and Craig really said the right thing I think as related to marketing just the opportunity for these leaders to to share best practices in what they're seeing not only from a
sort of traditional marketing standpoint, but definitely with the enhanced kind of web marketing and search engine optimization that comes with being part of the Lindblad company, all of those things are contributing. So we're just really optimistic about each of those businesses going forward.
Okay, that's really helpful. Thank you both. Thanks, Alex. Nothing further in the queue, our President. But as a final reminder, that's Star followed by one on your telephone keypad to ask a question today. We have no further questions at this time, so I'll hand the call back to the management team for any concluding remarks.
Thanks, Adam, and thank you everybody for joining us this morning. We look forward to maintaining the dialogue. If you have additional questions, please give us a ring and we'll be happy to connect again. Thank you. Thank you.
Thanks Adam, and thank you everybody for joining us this morning. We look forward to maintaining the dialogue. If you have additional questions, please give us a ring and we'll be happy to connect again. Thank you. Thank you everyone.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.