Lindblad Expeditions Holdings, Inc. Q3 FY2025 Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindblad Expeditions Third Quarter Earnings Call. I would now like to turn the conference over to Rick Goldberg, CFO. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us for Lindblad's Third Quarter 2025 Earnings Call. With me on today's call is Natalya Leahy, our Chief Executive Officer. Natalya will begin with some opening comments, and I'll follow with details on our Q3 financial results and updated expectations for the full year before we open the call for Q&A. As always, you can find our latest earnings release in the Investor Relations section of our website. But before we get to all of that, I'd like to 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. 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. With that out of the way, I'll turn the call over to Natalya.

Thank you, Rick, and welcome, everyone, to our third quarter earnings call. I want to start a bit differently today. Our guests are at the center of everything we do, and I want to share a remarkable highlight from this quarter. We achieved our highest guests Net Promoter Scores ever, both for quarter 3 and year-to-date since we began measuring them. That milestone made me pause and reflect on where we came from on the history and legacy that make us who we are today and differentiate us and set us up for success going forward. In January 1966, Lars-Eric Lindblad led the very first non-scientific expedition to Antarctica, followed a year later by the first citizen voyage to the Galapagos. These were the expeditions that started it all, the beginning of expedition travel and in many ways, the birth of ecotourism, now one of the fastest-growing segments in global travel. That legacy still defines us in our industry; experience and expertise truly matter and those take decades to build. It's this foundation built over nearly 60 years of pioneering exploration that continues to drive the exceptional guest experiences and results we are seeing today. Talking about results, we are pleased to report another quarter of very strong performance with revenue and adjusted EBITDA both exceeding expectations. Consolidated revenues increased 16.6% with our Lindblad and Land Segments growing 13.4% and 21.1%, respectively. Within our Lindblad segment, occupancy reached 88%, 6 points higher than last year on a 5% increase in capacity in the quarter, resulting in a record level of available guest nights for any quarter in our company's history. Net yields increased 9% to $1,314, the highest third-quarter yields in the company's history. We were particularly pleased to see our core Alaska trade perform exceptionally well, achieving almost 16% yield growth. This result demonstrates that travelers truly appreciate the unique, intimate, and highly differentiated experiences we provide, thanks to our unparalleled expedition expertise. We will continue to look for opportunities to increase capacity to meet demand in popular destinations like Alaska. From a profitability perspective, we produced the highest level of adjusted EBITDA in company history with adjusted EBITDA increasing 25% to $57.3 million and margins expanding 160 basis points to 23.8%. These results are proof that our commercial strategy to drive occupancy and maximize revenue is working and gives us strong confidence that we are on our way to achieve historical occupancy levels in 2026 and beyond. Looking ahead, our net booking costs remain strong for 2026 in both segments and are significantly ahead of the prior year. We've seen a very encouraging uptick in 2027 bookings as well as we just launched our 2027 deployment. Supporting our optimism, marketing conditions in the luxury travel segment remain highly favorable. According to a recent McKinsey study, demand for luxury tourism is expected to grow faster than any other travel segment with a projected 10% CAGR through 2028. These industry tailwinds reinforce our confidence in our positioning for sustained growth. Focusing on our three strategic pillars continues to be essential in our path forward: number one, maximizing revenue generation through occupancy, pricing, and deployment optimization; number two, optimizing financial performance through cost innovation and fixed asset optimization; and number three, exploring and capitalizing on accretive growth opportunities, including growing our portfolio. Let me begin with our first pillar, which focuses on maximizing revenue generation. Our Disney relationship continues to introduce the National Geographic Lindblad brand to new audiences and expanded distribution channels. In partnership with National Geographic, we successfully relaunched our youth travel program called Explorers in Training, targeting core family-friendly destinations. This program combined with other marketing initiatives to drive multigenerational travel has generated encouraging early results, with travelers 18 years and younger increasing 24% this summer versus the prior summer. Our efforts will drive occupancy and yield optimization in family-friendly destinations such as the Galapagos, Alaska, and Iceland. Our Disney Vacation Club activation continues gaining momentum as DVC members can now redeem points for National Geographic Lindblad expedition cruises. Our expedition team had an opportunity to sail with and present our brand to guests of the 4,000 passenger Disney Dream, generating not only media and bookings for members but also significant interest and leads. This represents the beginning of a significant opportunity to introduce expedition cruising to DVC's most loyal and engaged member base. We continue to see strong momentum from earmarked Disney travel advisers with bookings increasing 42% year-to-date. We are seeing higher adoption from this distribution channel as we educate and market our brand to these highly productive advisers, representing a large opportunity to deepen our penetration. Regarding our sales initiatives, in August, we fully rolled out onboard dedicated expedition sales specialists. For the quarter, our onboard sales program performed exceptionally well, with bookings as a percentage of total more than tripling year-over-year as our expedition experts effectively introduced guests to new destinations, converting them into repeat customers at the height of their excitement. This program not only drives higher repeat rates but also expands booking windows, which is so important for pricing optimization. Similarly, our recently expanded outbound sales program is gaining significant traction, with year-to-date sales increasing approximately 80% versus the prior year. We believe we're still in the early stages of optimizing this high potential distribution channel. In our Land segment, we delivered strong quarter 3 performance with our portfolio of premium adventure destinations continuing to exceed guest expectations. We appointed a dedicated sales leader to capitalize on cross-selling opportunities between our Land segment and expedition cruise offerings, creating additional revenue synergies across our platform. Moving to our second pillar, which focuses on optimizing financial performance through cost innovation. We continue to build cost innovation capabilities throughout the organization. This ongoing initiative helps us well on our way to meeting our cost efficiency targets this year while kicking off the next round of cost innovation projects. Among our accomplishments this quarter, we renegotiated corporate leases and port agreements, generating hundreds of thousands in cost savings. We also recently hired a Senior Vice President of Supply Chain and Procurement, who brings years of world-class experience across multiple industries, including cruise operations. Additionally, we successfully refinanced our debt, extending maturities and lowering our interest rate by approximately 75 basis points, a very meaningful achievement that strengthens our balance sheet flexibility and enables us to continue investing strategically across both our Lindblad and Land Experience segments. Rick will share more details on this in his section. Our third pillar focuses on accretive growth opportunities. The sustained strength in demand for our product presents compelling opportunities to strategically expand our capacity, including through new builds and charter partnerships. To that end, we continue to strategically expand our charter offerings. Our inaugural European river cruising program exceeded expectations, prompting us to increase the number of voyages for 2027. We've added spring and summer departures, as well as new in-demand Christmas market and holiday sailing offerings. In fact, we just announced our 2027 river collections this morning, including European, Egypt, India, and Vietnam itineraries. Charters provide a very efficient, capital-light approach to enter high demand markets for the right season. We are also actively evaluating accretive acquisitions, both with Lindblad and Land segments. As always, I want to briefly highlight our why because while these three strategic pillars drive our operational excellence and growth, our success is equally rooted in our unwavering commitment to our purpose of responsible exploration. During the quarter, we held our Arctic Visiting Scientist program in collaboration with National Geographic Society. Our ships hosted 10 projects, 6 of which were led by National Geographic explorers and funded by the Lindblad Expeditions-National Geographic Fund. Participating scientists surveyed glaciers to study the stability and structure, monitor changes in sea temperature, and collected seawater to understand how small microbes survive in dynamic and extreme environments. Guests traveled alongside the scientists and learned about their work in real time, exemplifying how our collaborative impact programs with National Geographic Society differentiate us in the marketplace. Turning to guidance. Given the strength of our performance, we are raising full year guidance for net yields, revenue, and EBITDA. Rick will take you through the specifics of our outlook in his remarks. These results reinforce our confidence that we are executing successfully on our strategic plan and are well positioned to capitalize on the significant opportunities ahead. In closing, I want to express my sincere appreciation to our crew, our field experts, the incredible founders of our land companies, and the entire team who worked tirelessly to deliver extraordinary guest experiences at the highest standards. This unwavering commitment to excellence is reflected in our results and is built into our DNA. As we look ahead, we remain committed to building on this momentum, continuing to invest in our people and operations, and delivering the transformative travel experiences that set Lindblad apart in the marketplace. Thank you for your continued confidence. We look forward to updating you on our progress in quarters ahead. And now I'm turning the call over to Rick for his remarks.

Thank you so much, Natalya. This was an outstanding quarter with strong top line growth as we continue to drive occupancy back to historical levels and solid bottom line performance as we advance our cost innovation initiatives to improve margins. Total company revenues for Q3 2025 were $240 million, an increase of $34 million or 16.6% versus Q3 2024. Lindblad segment revenues were $138 million, an increase of $16 million or 13.4% compared to the prior year. Occupancy increased 6 percentage points from 82% to 88% despite a 5% increase in available guest nights, and net yield per available guest night increased 9% to $1,314, the highest third quarter yield in company history. Land Experience segment revenues were $103 million, an increase of $18 million or 21.1% compared to Q3 2024, driven by a 12% increase in guests and an 8% increase in revenue per guest. Turning now to the cost side of the business. Operating expenses before stock-based compensation, transaction-related expenses, depreciation, and amortization, interest, and taxes increased $22.7 million or 14% versus Q3 2024. Specifically, cost of tours increased $14.6 million or 13%, driven by operating additional voyages and trips. Fuel costs were 4.5% of Lindblad segment revenue, which was flat to Q3 2024. Sales and marketing costs increased $5.1 million or 20%, primarily due to higher royalties and commission expense and investments in demand generation efforts. We expect marketing expenses to remain elevated in Q4, reflecting investments in initiatives designed to drive growth into 2026 and 2027. General and administrative costs, excluding stock-based compensation and transaction-related expenses, increased $1.7 million or 7% versus a year ago, driven by higher personnel costs, partially offset by $1.8 million of employee retention tax credits realized in Q3 2025. Adjusted EBITDA for the quarter was $57.3 million, the highest quarterly result in our history and an increase of $11.5 million or 25% versus the prior year. This was driven by a $6.5 million and a $4.9 million increase in the Lindblad and Land Experience segments, respectively, with both segments growing EBITDA by 25% year-over-year. This includes the impact of $1.8 million of employee retention tax credits realized in Q3 2025, which brings the year-to-date impact of this program to $5.3 million. We also continued to deliver margin improvement this quarter, driven by greater leveraging of our fixed cost infrastructure and our cost innovation initiatives with adjusted EBITDA margins expanding 160 basis points year-over-year to 23.8%. Net income available to stockholders for the third quarter was roughly breakeven or $0.00 per diluted share, reflecting $23.5 million in debt refinancing expenses. Turning to the balance sheet, we ended the quarter with total cash of $290.1 million, an increase of $74 million versus the end of 2024. The increase reflects $97.1 million in cash from operations due primarily to the strong results of the business and increased bookings for future travel. We used $54.1 million of cash for investing activities, which includes the acquisition and refurbishment of 2 Galapagos vessels. Year-to-date, we've generated $60.4 million in free cash flow. During the quarter, we completed a comprehensive refinancing of our debt, a significant milestone that strengthens our balance sheet and enhances our financial flexibility to support strategic growth initiatives. As part of the refinancing, we issued $675 million of new senior secured notes to replace our 2027 and 2028 notes. This transaction simplifies our capital structure, extended our maturities and lowered our cost of debt. The new notes were priced at 7%, approximately 75 basis points lower than our prior blended rate, reflecting strong investor confidence in our business. In conjunction, we upsized and extended our revolving credit facility to $60 million with a new 5-year term, further improving our liquidity position. We've now delivered 10 consecutive quarters of deleveraging, driven by continued EBITDA growth and our net leverage stands at 3.1x. Reflecting this progress, S&P Global recently upgraded our corporate credit rating, citing Lindblad's strong operating performance and healthy forward book position. With a stronger balance sheet and ample liquidity, we're well positioned to aggressively pursue accretive growth opportunities, including fleet expansion through charters, acquisitions, or new builds and adding to our portfolio of world-class land-based experiences. Turning to our full year outlook, I'm pleased to share updated guidance for 2025. Our demand generation efforts continue to drive strong booking momentum across 2025 and 2026 as well as for our recently launched 2027 itineraries. As a result, we now expect net yield per available guest night to increase 12.5% to 14% year-over-year, up from our prior range of 9% to 11%. In line with this performance, we are raising our full year revenue guidance to a range of $745 million to $760 million, up from prior guidance of $725 million to $750 million. We are also raising our full year EBITDA guidance to a range of $119 million to $123 million, up from our previous range of $108 million to $115 million. This increase reflects the continued strength of our business and our disciplined execution against our three strategic pillars. In closing, Natalya and I have now been on board for 10 months, and we couldn't be more encouraged by the progress our teams have made in such a short time. We remain confident in our ability to deliver sustained growth and long-term value for our shareholders. With that, we would now be happy to take your questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Steve Wieczynski with Stifel.

So Natalya or Rick, you provided some insight on the bookings for 2026, and I believe you mentioned that bookings for 2027 are already in progress. I don't recall your specific descriptions, but it seems they are significantly better than this time last year. Could you elaborate on those booking trends and perhaps indicate where the demand currently stands, particularly for your key itineraries next year? Additionally, could you share more details about the increase in bookings from your Disney travel partners, as that seems quite important?

Steve. Well, thank you. Great question as usual. So we are not giving '26 guidance yet. It's coming next time, but I will give you a little bit more commentary. So as I mentioned, our booking costs in '26 in both segments are quite significant and we are actually seeing some recent uptakes which are encouraging. On the Lindblad segment, we are working with all the commercial initiatives. As you know, we just implemented them throughout this year. So they have a lot of run rate to deliver results. We are working towards delivering historical occupancy levels, which are around 90%, and we are, I would say, well on track for that, which will definitely result in yield growth combined with managing pricing. As of our Disney relationships, we are just starting to see the fruits of all the initiatives that we're implementing there. So we are seeing some results that are coming this year, and I certainly expect more to come in forward years.

Got it. My second question also relates to 2026, and I understand if you can't answer it directly, but I'll try to frame it in a way that might elicit some response. Given your current bookings and as we look ahead to yields and pricing for next year, you're coming off a growth year of 12% to 14% in yields as mentioned by Rick. Could you provide some insights on how pricing and yields might shape up for next year, considering this growth? What could we potentially expect?

Yes, we are experiencing significant yield growth this year, primarily due to increased occupancy and maintaining our pricing strategy. While we expect yield growth to stabilize as our occupancy continues to rise, it may not reach the double-digit increases we've observed this year. I hope this provides some reassurance. We will keep our pricing integrity intact as we work on increasing occupancy.

I have a follow-up question regarding maintaining price integrity as we head into next year. Natalya, should we view this more as an effort to avoid discounting next year, or do you believe you have the ability to raise prices in both the Lindblad and Land-based segments? Considering what you have been booking, can you discuss how pricing for next year compares to this year?

We will be providing guidance for 2026 during our next earnings call. We are clearly seeing an increase in demand. We have been enhancing our capacities through charter additions and new ships introduced this year. We are actively seeking to expand our capacity, whether by adding more charters, constructing new ships, or acquiring vessels. This is in response to the demand, particularly for popular destinations like Alaska, where we experienced a significant waitlist this year and achieved remarkable pricing power. Our cruise in Antarctica has been performing exceptionally well, often selling out immediately upon deployment, and we continue to implement price increases there. The Galapagos is also thriving, with four ships operating there, which has led to a 40% increase in capacity this quarter compared to last quarter, and we are maintaining this momentum. We serve over 100 destinations, each with varying levels of demand. Overall, we are witnessing outstanding demand for our product.

Yes. And if I can just add a couple of quick things. I mean, we're also continuing to build out our revenue management function, which is going to be critical to building out our price growth over time on the expedition cruise side. And then our Land Experiences segment experienced an 8% increase in revenue per guest here in Q3. And so we feel really good about our continued ability to take price in that segment as well.

And then my second question. Rick, on the guidance, I think the updated EBITDA guidance still does imply a decline in Q4 EBITDA compared to last year's Q4, even with revenue up materially. I know on the last call you noted the expectation for some pressure in second-half EBITDA. We obviously didn't see that in Q3. So maybe help us bridge kind of what you expect in Q4, what may be causing the expectation for Q4 EBITDA pressure.

Yes. So I think there are 2 important dynamics happening in Q4. The first is a shift in the timing of our marketing spend in order to set the stage for wave season. And the second is an increase in the number of dry and wet docks in Q4. We had 6 happening in Q4 2025 versus only 2 in Q4 of 2024.

Got it. And just quick, should we assume that's a recurring schedule going forward? Or is that more of a '25 specific?

What I would say is the timing of dry and wet docks is variable every year based on our decisions around deployment as well as shipyard availability.

Congrats on strong results. So the increase in occupancy in guest nights, obviously, very impressive here. It's clear that all the changes you've made since joining and the expanded NatGeo Disney partnership are providing some nice tailwinds here. On the flip side, are you guys seeing any headwinds at this point from the macro environment? Obviously, your customers are typically higher net worth, so less sensitive to the macro. But just wondering if you're seeing sort of any offsetting headwinds to call out amid all the positive news otherwise.

Eric, we are always attentive to the geopolitical landscape and monitor it closely. Our guests tend to be more resilient to economic challenges, and we have observed that despite changes in the economy this year, demand has stayed relatively stable. We hope this trend continues. We consistently keep an eye on the macroeconomic conditions. The only challenge I would like to highlight is that, as Rick has mentioned multiple times, we anticipate an increase in royalties in 2026.

Yes, no, that's clear. And I think, I mean, if '26 is anything like what we've seen very early on from this expanded partnership, those royalties will be well worth it. Next question for me. So you mentioned the benefit from increasing the mix of charters for a few quarters now. You also stated, Rick, that you expect to aggressively pursue accretive growth opportunities, including Land Experiences. So just kind of a bit of a higher-level question here, but how do you view your current mix of revenues? And is there anything that you would like to sort of increase or decrease from a mix perspective as you look out over the next 5 years or so, whether that's different channels or charters or what have you?

So I'll start by saying we're very comfortable with the mix that we have today. We currently have 10 charter ships that will operate in 2026. These are a great way for us to deliver our product in unique destinations at attractive margins without capital intensity. There are natural limitations of expanding capacity through this channel as there are just a limited number of ships available to satisfy our guest experience criteria. However, along with new builds and acquisitions, this is an important tool in our toolbox as we think about growing capacity, and we're especially excited to launch a handful of innovative charter voyages this morning for our 2027 season, including on European Rivers, Egypt, India, and Vietnam.

Congrats on getting your bond refinancing done. And thinking of growth opportunities, I'm just wondering how you're thinking of financing alternatives and where you feel comfortable with leverage?

So I'd say we're very pleased with the results of our recent financing. And as we sit here with a strengthened balance sheet, we feel like that positions us well to aggressively pursue expansion opportunities, whether that's on the expedition cruise side, through charters, acquisitions, or new builds or expanding on our portfolio of world-class Land Experience companies.

I guess I'm wondering about thinking bite-size type of expansion opportunities like the last couple of ships you acquired? Or I think you mentioned possibly new builds. Which way are you leaning?

I think we are evaluating and considering various types of opportunities again. There are charter businesses, which are a great way to expand capacity in specific destinations, though there are some limitations to that. We are definitely looking at buying existing tonnage if we find something that provides a good return on investment and meets our brand criteria, and we are also evaluating new build opportunities. So I would say stay tuned, and you will hear more on that.

I would say we now have delivered 10 consecutive quarters of deleveraging, and we're confident in our ability to continue to delever as we drive EBITDA growth.

There are no more questions at this time. I would like to turn the call back over to Rick Goldberg for closing remarks.

Just want to thank everyone for your continued interest and support of Lindblad Expeditions. Have a great day. Bye now.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.