Lindblad Expeditions Holdings, Inc 10-Q for FY2021 Q3
Lindblad Expeditions Holdings, Inc. (LIND)
About this 10-Q
Lindblad Expeditions Holdings, Inc filed this 10-Q on November 2, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $64.51M
- up 6230.4% from $1.02M a year earlier
- Net loss
- $24.34M
- compared with a net loss of $27.38M a year earlier
- Diluted EPS
- -$0.50
- compared with -$0.56 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission file number
LINDBLAD EXPEDITIONS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | ☒ |
| Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company | | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of October 25, 2021,
LINDBLAD EXPEDITIONS HOLDINGS, INC.
Quarterly Report On Form 10-Q
For The Quarter Ended September 30, 2021
Table of Contents
| Page(s) |
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| PART I. FINANCIAL INFORMATION |
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| ITEM 1. |
Financial Statements (Unaudited) |
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| Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 |
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| Notes to the Condensed Consolidated Financial Statements (Unaudited) |
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| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| ITEM 3. |
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| ITEM 4. |
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| PART II. OTHER INFORMATION |
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| ITEM 1. |
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| ITEM 1A. |
38 | |
| ITEM 2. |
38 | |
| ITEM 3. |
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| ITEM 4. |
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| ITEM 5. |
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| ITEM 6. |
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| PART 1. |
FINANCIAL INFORMATION |
| ITEM 1. |
FINANCIAL STATEMENTS |
LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
| As of September 30, 2021 | As of December 31, 2020 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Marine operating supplies | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangibles, net | ||||||||
| Deferred tax asset | ||||||||
| Right-to-use lease assets | ||||||||
| Other long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Unearned passenger revenues | $ | $ | ||||||
| Accounts payable and accrued expenses | ||||||||
| Lease liabilities - current | ||||||||
| Long-term debt - current | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, less current portion | ||||||||
| Lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Series A redeemable convertible preferred stock, shares authorized; shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Redeemable noncontrolling interest | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, par value, shares authorized; Series A shares issued and outstanding as of September 30, 2021 and December 31, 2020 | ||||||||
| Common stock, par value, shares authorized; and issued, and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders' (deficit) / equity | ( | ) | ||||||
| Total liabilities, mezzanine equity and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Tour revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of tours | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) gain on foreign currency | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ( | ) | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss attributable to Lindblad Expeditions Holdings, Inc. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Series A redeemable convertible preferred stock dividend | ||||||||||||||||
| Net loss available to stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Undistributed loss per share available to stockholders: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(unaudited)
| For the three months ended September 30, |
For the nine months ended September 30, |
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| 2021 |
2020 |
2021 |
2020 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive income (loss): |
||||||||||||||||
| Cash flow hedges: |
||||||||||||||||
| Net unrealized (loss) gain |
( |
) | ( |
) | ( |
) | ||||||||||
| Reclassification adjustment, net of tax |
||||||||||||||||
| Total other comprehensive income (loss) |
( |
) | ||||||||||||||
| Total comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Less: comprehensive income (loss) attributive to non-controlling interest |
( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive loss attributable to stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(unaudited)
| Common Stock | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of stock for equity compensation plans, net | ( | ) | ( | ) | ||||||||||||||||||||
| Other comprehensive income, net | - | |||||||||||||||||||||||
| Series A preferred stock dividend | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss attributable to Lindblad Expeditions Holdings, Inc | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of stock for equity compensation plans, net | ( | ) | ( | ) | ||||||||||||||||||||
| Issuance of stock for acquisition | ||||||||||||||||||||||||
| Other comprehensive income, net | - | |||||||||||||||||||||||
| Series A preferred stock dividend | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss attributable to Lindblad Expeditions Holdings, Inc. | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (continued)
(In thousands, except share data)
(unaudited)
| Common Stock | Additional Paid-In | Retained | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance as of June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of stock for equity compensation plans, net | ( | ) | ( | ) | ||||||||||||||||||||
| Other comprehensive income, net | - | |||||||||||||||||||||||
| Redeemable noncontrolling interest | - | |||||||||||||||||||||||
| Series A preferred shares dividend | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss attributable to Lindblad Expeditions Holdings, Inc. | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common Stock | Additional Paid-In | Retained | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance as of January 1, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of stock for equity compensation plans, net | ( | ) | ( | ) | ||||||||||||||||||||
| Repurchase of shares and warrants | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Other comprehensive loss, net | - | ( | ) | ( | ) | |||||||||||||||||||
| Redeemable noncontrolling interest | - | |||||||||||||||||||||||
| Series A preferred shares dividend | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss attributable to Lindblad Expeditions Holdings, Inc. | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| For the nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of National Geographic fee | ||||||||
| Amortization of deferred financing costs and other, net | ||||||||
| Amortization of right-to-use lease assets | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Loss on foreign currency | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Marine operating supplies and inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Unearned passenger revenues | ( | ) | ||||||
| Other long-term assets | ||||||||
| Other long-term liabilities | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Acquisition (net of cash acquired) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from long-term debt | ||||||||
| Repayments of long-term debt | ( | ) | ( | ) | ||||
| Payment of deferred financing costs | ( | ) | ( | ) | ||||
| Repurchase under stock-based compensation plans and related tax impacts | ( | ) | ( | ) | ||||
| Proceeds from Series A preferred stock issuance | ||||||||
| Repurchase of warrants and common stock | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Non-cash preferred share dividend | $ | $ | ||||||
| Shares issued for acquisition | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Lindblad Expeditions Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 — BUSINESS AND BASIS OF PRESENTATION
Business
Lindblad Expeditions Holdings, Inc. and its consolidated subsidiaries’ (the “Company” or “Lindblad”) mission is offering life-changing adventures around the world and pioneering innovative ways to allow its guests to connect with exotic and remote places. The Company currently operates a fleet of owned expedition ships and seasonal charter vessels under the Lindblad brand, operates land-based eco-conscious expeditions and active nature focused tours under the Natural Habitat, Inc. (“Natural Habitat”) and Off the Beaten Path, LLC (“Off the Beaten Path”) brands and operates luxury cycling and adventure tours under the DuVine Cycling + Adventure Company (“DuVine”) brand.
The Company operates the following reportable business segments:
Lindblad Segment. The Lindblad segment consists primarily of ship-based expeditions aboard customized, nimble and intimately-scaled vessels that are able to venture where larger cruise ships cannot, thereby allowing Lindblad to offer up-close experiences in the planet’s wild and remote places and capitals of culture. Many of these expeditions involve travel to remote places with limited infrastructure and ports, such as Antarctica and the Arctic, or places that are best accessed by a ship, such as the Galápagos, Alaska and Baja’s Sea of Cortez and foster active engagement by guests. Each expedition ship is designed to be comfortable and inviting, while being fully equipped with state-of-the-art tools for in-depth exploration. The Company has an alliance with National Geographic Partners (“National Geographic”), which provides for National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers and film crews, to join many of the Company’s expeditions.
Land Experiences Segment. The Land Experiences segment includes our three primarily land-based brands, Natural Habitat, DuVine and Off the Beaten Path.
| ● | Natural Habitat offers over 100 different expedition itineraries in more than 45 countries spanning all seven continents. The expeditions focus on small groups led by award-winning naturalists to achieve close-up wildlife and nature experiences. Examples of expeditions offered include safaris in Botswana, grizzly bear adventures in Alaska, polar bear tours in Canada and small-group Galápagos tours. Many of the expeditions feature access to private wildlife reserves, remote corners of national parks and distinctive lodges and camps for the best wildlife viewing. Natural Habitat has partnered with World Wildlife Fund (“WWF”) to offer conservation travel, which is sustainable travel that contributes to the protection of nature and wildlife. | |
| ● | DuVine offers luxury cycling and adventure tours around the world, providing immersive cultural and culinary experiences through thoughtfully designed itineraries led by expert local guides. Offerings primarily include tours throughout Europe, the United States and South America. Examples of DuVine's tours include cycling and culinary tours throughout the Bordeaux and Burgundy wine making regions, Tuscan truffle, porcini and chestnut harvest regions, Napa and Sonoma wine making regions and lakes and volcanos throughout Patagonia. DuVine's trips include top-quality gear and support and are tailored to riders of all abilities with an emphasis on exceptional food and wine experiences, along with boutique accommodations. | |
| ● | Off the Beaten Path offers active small-group and private custom journeys around the world with a long-standing focus on offering unique adventures and experiences throughout the U.S. National Parks. In addition to other U.S.-based adventures such as ranch vacations and fly-fishing expeditions, Off the Beaten Path's small group product offerings include international expeditions across Europe, Africa, Australia, Central and South America and the South Pacific. Examples of international expeditions include hiking through the Dolomites, enjoying a family adventure in Patagonia’s Lake District and experiencing the culture, architecture and village life of Morocco. All Off the Beaten Path expeditions are defined by a focus on outdoor activity, including wildlife viewing, hiking, rafting, snorkeling, kayaking and snowshoeing, and comprehensive pre-trip materials paired with experienced, friendly guides. | |
The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “LIND”.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding unaudited interim financial information and include the accounts and transactions of the Company. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for the periods presented. Operating results for the periods presented are not necessarily indicative of the results of operations to be expected for the full year due to seasonality and other factors. Certain information and footnote disclosures normally included in the consolidated financial statements in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC for interim reporting. All intercompany balances and transactions have been eliminated in these unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto for the year ended December 31, 2020 contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2021 (the “2020 Annual Report”).
There have been no significant changes to the Company’s accounting policies from those disclosed in the 2020 Annual Report.
Return to Fleet Operations
The Company resumed ship operations in June 2021 and as of November 2, 2021 had of its ten vessels providing expeditions to guests. During June 2021, the Company launched three ships in Alaska and another in the Galapagos, and during the third quarter the Company resumed operations on the majority of its remaining vessels with additional ships operating in Alaska, the Galapagos, Iceland and the Pacific Northwest. The Company continues to work with local authorities on plans to operate in additional geographies, such as Antarctica, during the remainder of the year and early 2022. As the COVID-19 virus effects travel restrictions in various locations around the world, the Company also continues to work with its guests to reschedule travel plans and refund payments or issue future travel certificates, as applicable, for those expeditions and trips that the Company is not able to operate.
The Company believes there are a variety of strategic advantages that enable it to deploy its ships safely and quickly, while mitigating the risk of COVID-19 as travel restrictions are lifted. The most notable is the size of its 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 the Company’s ships also allows it to efficiently and effectively test its guests and crew prior to boarding. Additionally, all guests age 12 and older, crew and staff are required to be fully vaccinated and the majority of expeditions take place in remote locations where human interactions are limited, so there is less opportunity for external influence.
While the Company’s 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. The Company’s 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.
The Company continues to adhere to the comprehensive plan it implemented in March 2020 to mitigate the impact of COVID-19 and preserve and enhance its 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. The Company 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, the Company continues to minimize expenditures as appropriate.
Balance Sheet and Liquidity
As of September 30, 2021, the Company had $
As of September 30, 2021, the Company had a total debt position of $
During September 2021, the Company drew down $
During June 2021, the Company amended its export credit agreements to, among other things, extend the deferral of scheduled amortization payments of the first export credit facility through December 2021 in the aggregate amount of $
During April 2021, the Company amended its term loan and revolving credit facilities to, among other things, extend the waiver of its total net leverage ratio covenant through March 31, 2022, annualize EBITDA used in its covenant calculation through December 31, 2022 and increase the interest rate spreads of the term loan, excluding the Main Street Loan, and the revolving credit facility by an additional
Given the dynamic and unpredictable nature of the COVID-19 pandemic, the Company cannot reasonably estimate the potential impacts the pandemic will have on its financial condition, results of operations, cash flows, plans and growth for the foreseeable future. It is unknown when full travel restrictions and various remaining border closures will be lifted and what the demand for expedition travel will be once restrictions are no longer in place. Based on the actions taken to date by the Company, its planned and anticipated actions and its current forecast, the Company believes that it can meet its obligations for the next 12 months from November 2, 2021, the date of this Quarterly Report on Form 10-Q.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. The amendments of this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this ASU as required, and it has not had, nor is it expected to have, a material impact to the Company’s financial statements.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance of this ASU is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by reference rate reform. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional, is only available in certain situations, and is only available for companies to apply until December 31, 2022. The Company is currently reviewing its agreements impacted by the reference rate reform and does not expect this ASU to have a material impact to the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt–Debt with conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The amendments in this ASU address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. The amendments reduce the number of accounting models for convertible debt instruments and convertible preferred stock, and address convertible instruments with conversion features, as well as other items. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. The Company will adopt this ASU as required and does not expect it to have a material impact to the Company’s financial statements.
NOTE 2 — EARNINGS PER SHARE
Earnings per Common Share
Earnings (loss) per common share is computed using the two-class method related to its Series A Redeemable Convertible Preferred Stock, par value of $
conversion of the Preferred Stock. Diluted earnings per share is computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the dilutive incremental common shares associated with restricted stock awards and shares issuable upon the exercise of stock options, using the treasury stock method, and the potential common shares that could be issued from conversion of the Preferred Stock, using the if-converted method. When a net loss occurs, potential common shares have an anti-dilutive effect on earnings per share and such shares are excluded from the diluted earnings per share calculation.
For the three and nine months ended September 30, 2021 and 2020, the Company incurred a net loss from operations, therefore basic and diluted net loss per share are the same for the periods. For the three and nine months ended September 30, 2021, approximately
For the three and nine months ended September 30, 2021 and 2020, the Company calculated earnings (loss) per share as follows:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
| Net loss attributable to Lindblad Expeditions Holdings, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Series A redeemable convertible preferred stock dividend | ||||||||||||||||
| Undistributed loss available to stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding: | ||||||||||||||||
| Total weighted average shares outstanding, basic | ||||||||||||||||
| Total weighted average shares outstanding, diluted | ||||||||||||||||
| Undistributed loss per share available to stockholders: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
NOTE 3 — REVENUES
Customer Deposits and Contract Liabilities
The Company’s guests remit deposits in advance of tour embarkation. Guest deposits consist of guest ticket revenues as well as revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions and air transportation to and from the ships. Guest deposits represent unearned revenues and are reported as unearned passenger revenues in the condensed consolidated balance sheets when received and are subsequently recognized as tour revenue over the duration of the trip. Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606) defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. The Company does not consider guest deposits to be a contract liability until the guest no longer has the right, resulting from the passage of time, to cancel their reservation and receive a full refund. In conjunction with the suspension or rescheduling of expeditions, the Company provided guests an option of either a refund or future travel certificates, which in some instances exceeded the original cash deposit. The Company has recorded liabilities up to the amount of cash deposits and additional value of any future travel certificates are being recognized as a discount when applied to future expeditions. The change in contract liabilities within unearned passenger revenues presented in our condensed consolidated balance sheets are as follows:
| Contract Liabilities | ||||
| (In thousands) | ||||
| Balance as of January 1, 2021 | $ | |||
| Recognized in tour revenues during the period | ( | ) | ||
| Additional contract liabilities in period | ||||
| Balance as of September 30, 2021 | $ | |||
The following table disaggregates our tour revenues by the sales channel it was derived from:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Guest ticket revenue: | (unaudited) | (unaudited) | ||||||||||||||
| Direct | % | NA | % | % | ||||||||||||
| National Geographic | % | NA | % | % | ||||||||||||
| Agencies | % | NA | % | % | ||||||||||||
| Affinity | % | NA | % | % | ||||||||||||
| Guest ticket revenue | % | NA | % | % | ||||||||||||
| Other tour revenue | % | NA | % | % | ||||||||||||
| Tour revenues | % | NA | % | % | ||||||||||||
NOTE 4 — FINANCIAL STATEMENT DETAILS
The following is a reconciliation of cash, cash equivalents and restricted cash to the statement of cash flows:
| For the nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| (In thousands) | (unaudited) | (unaudited) | ||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash as presented in the statement of cash flows | $ | $ | ||||||
Restricted cash consists of the following:
| As of September 30, 2021 | As of December 31, 2020 | |||||||
| (In thousands) | (unaudited) | |||||||
| Federal Maritime Commission escrow | $ | $ | ||||||
| Credit card processor reserves | ||||||||
| Certificates of deposit and other restricted securities | ||||||||
| Total restricted cash | $ | $ | ||||||
The Company’s prepaid expenses and other current assets consist of the following:
| As of September 30, 2021 | As of December 31, 2020 | |||||||
| (In thousands) | (unaudited) | |||||||
| Prepaid tour expenses | $ | $ | ||||||
| Prepaid marketing, commissions and other expenses | ||||||||
| Prepaid client insurance | ||||||||
| Prepaid air expense | ||||||||
| Prepaid port agent fees | ||||||||
| Prepaid corporate insurance | ||||||||
| Prepaid income taxes | ||||||||
| Total prepaid expenses | $ | $ | ||||||
The Company’s accounts payable and accrued expenses consist of the following:
| As of September 30, 2021 | As of December 31, 2020 | |||||||
| (unaudited) | ||||||||
| (In thousands) | ||||||||
| CERTS Grant | $ | $ | ||||||
| Accrued other expense | ||||||||
| Accounts payable | ||||||||
| Bonus compensation liability | ||||||||
| Employee liability | ||||||||
| Refunds and commissions payable | ||||||||
| Travel certificate liability | ||||||||
| Royalty payable | ||||||||
| Accrued travel insurance expense | ||||||||
| Income tax liabilities | ||||||||
| Foreign currency forward contract liability | ||||||||
| Total accounts payable and accrued expenses | $ | $ | ||||||
During August 2021, the Company received a $
Loan Receivable
The Company’s loan receivable is recorded at amortized cost within other long-term assets. The Company reviewed its loan receivable for credit losses in connection with the preparation of its condensed consolidated financial statements for the period ended September 30, 2021. In evaluating the allowance for loan losses, the Company considered factors such as historical loss experience, the type and amount of loan, adverse situations that may affect the borrower’s ability to repay and prevailing economic conditions. Based on these credit loss estimation and experience factors, the Company realized
| For the nine months ended September 30, 2021 | ||||
| (In thousands) | (unaudited) | |||
| Balance as of January 1, 2021 | $ | |||
| Adjustment for ship building expense | ( | ) | ||
| Legal invoices deferred | ||||
| Accrued interest | ||||
| Amortization of deferred costs | ( | ) | ||
| Balance as of September 30, 2021 | $ | |||
NOTE 5 — LONG-TERM DEBT
| As of | As of | |||||||||||||||||||||||
| (In thousands) | Principal | Deferred Financing Costs, net | Balance | Principal | Deferred Financing Costs, net | Balance | ||||||||||||||||||
| Credit Facility | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| 1st Senior Secured Credit Agreement | ( | ) | ( | ) | ||||||||||||||||||||
| 2nd Senior Secured Credit Agreement | ( | ) | ( | ) | ||||||||||||||||||||
| Revolving Facility | ( | ) | ( | ) | ||||||||||||||||||||
| Note payable | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total long-term debt | ( | ) | ( | ) | ||||||||||||||||||||
| Less current portion | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Total long-term debt, non-current | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
For the three and nine months ended September 30, 2021, deferred financing costs charged to interest expense were $
Credit Facility
In March 2018, the Company entered into the Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) providing for a $
In August 2020, the Company amended the Amended Credit Agreement to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the Term Facility was increased
In December 2020, the Company amended the Amended Credit Agreement to provide for the borrowing of a new tranche of incremental term loans under the Amended Credit Agreement in an amount of $
During April 2021, the Company further amended its Amended Credit Agreement to, among other things, extend the waiver of its total net leverage ratio covenant through March 2022, annualize EBITDA used in its covenant calculation through December 31, 2022 and increase the interest rate spreads of the Term Facility, excluding the Main Street Loan, and the Revolving Facility by
The Term Facility, as amended, bears interest at an adjusted Intercontinental Exchange (“ICE”) Benchmark administration LIBOR with a minimum of
Senior Secured Credit Agreement
In January 2018, the Company entered into a senior secured credit agreement (the “First Export Credit Agreement”) with Citibank, N.A., London Branch and Eksportkreditt Norge AS, to make available to the Company a loan in an aggregate principal amount not to exceed $
Geographic Endurance and borrowed $
In April 2019, the Company entered into a senior secured credit agreement (the “Second Export Credit Agreement”) with Citibank, N.A., London Branch and Eksportkreditt Norge AS, to make available to the Company, at the Company's option and subject to certain conditions, a loan in an aggregate principal amount not to exceed $
Notes Payable
In connection with the Natural Habitat acquisition in May 2016, Natural Habitat issued a $
Covenants
The Company’s Amended Credit Agreement, First Export Credit Agreement and Second Export Credit Agreement contain financial and restrictive covenants that include among others, net leverage ratios, limits on additional indebtedness and limits on certain investments. As of September 30, 2021, the net leverage ratio covenant of the Company’s Amended Credit Agreement, First Export Credit Agreement and Second Export Credit Agreement have been waived through March 2022. The Company was in compliance with its covenants in effect as of September 30, 2021.
NOTE 6 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative Instruments and Hedging Activities
The Company’s derivative assets and liabilities consist principally of foreign exchange forward contracts and interest rate caps and are carried at fair value based on significant observable inputs (Level 2 inputs). Derivatives entered into by the Company are typically executed over-the-counter and are valued using internal valuation techniques, as quoted market prices are not readily available. The valuation technique and inputs depend on the type of derivative and the nature of the underlying exposure. The Company principally uses discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, currency exchange rates, interest rate yield curves and counterparty credit risks.
Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with certain of its non-U.S.-dollar denominated receivables and payables. The Company primarily hedges a portion of its current-year currency exposure to the Canadian and New Zealand dollars, the Brazilian Real, the South African Rand, the Euro and the British pound sterling. The fluctuations in the value of these forward contracts largely offset the impact of changes in the value of the underlying risk they economically hedge.
Interest Rate Risk. The Company uses interest rate caps, designated as cash flow hedges, to manage the risk related to its floating rate corporate debt.
The Company records the effective portion of changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized. Any changes in fair values of hedges that are determined to be ineffective are immediately reclassified from accumulated other comprehensive income (loss) into earnings.
The Company held the following derivative instruments with absolute notional values as of September 30, 2021:
| (In thousands) | Absolute Notional Value | |||
| Interest rate caps | $ | |||
| Foreign exchange contracts | ||||
Estimated fair values (Level 2) of derivative instruments were as follows:
| As of September 30, 2021 | As of December 31, 2020 | |||||||||||||||
| (unaudited) | ||||||||||||||||
| (In thousands) | Fair Value, Asset Derivatives | Fair Value, Liability Derivatives | Fair Value, Asset Derivatives | Fair Value, Liability Derivatives | ||||||||||||
| Derivative instruments designated as cash flow hedging instruments: | ||||||||||||||||
| Foreign exchange forward (a) | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Derivative instruments not designated as cash flow hedging instruments: | ||||||||||||||||
| Foreign exchange forward (b) | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| (a) | Recorded in accounts payable and accrued expenses. | |
| (b) | Recorded in prepaid expenses and other current assets. |
Changes in the fair value of the Company’s hedging instruments are recorded in accumulated other comprehensive income, pursuant to the guidelines of cash flow hedge accounting as outlined in ASC 815. The effects of derivatives recognized in the Company’s condensed consolidated financial statements were as follows:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Derivative instruments designated as cash flow hedging instruments: | ||||||||||||||||
| Foreign exchange forward (a) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Interest rate cap (b) | ( | ) | ( | ) | ||||||||||||
| Derivative instruments not designated as cash flow hedging instruments: | ||||||||||||||||
| Foreign exchange forward (c) | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| (a) | For the three and nine months ended September 30, 2021, $ |
| (b) | Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity. | |
| (c) | Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged. During the three and nine months ended September 30, 2021, a gain of $ |
Fair Value Measurements
The carrying amounts of cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair value given that the terms of the agreements were comparable to the market as of September 30, 2021. As of September 30, 2021 and December 31, 2020, the Company had no other significant liabilities that were measured at fair value on a recurring basis.
NOTE 7 — STOCKHOLDERS’ EQUITY
Stock and Warrant Repurchase Plan
The Company’s Board of Directors approved a stock and warrant repurchase plan (“Repurchase Plan”) in November 2015 and increased the repurchase plan to $
Preferred Stock
On August 31, 2020, the Company issued and sold
NOTE 8 — STOCK BASED COMPENSATION
The Company is authorized to issue up to
As of September 30, 2021 and December 31, 2020, options to purchase an aggregate of
The Company recorded stock-based compensation expense of $
2021 Long-Term Incentive Compensation
During the nine months ended September 30, 2021, the Company granted
During the nine months ended September 30, 2021, the Company awarded
As a new grant under his compensation agreement, the Company granted to Mr. Berle, the Company’s new Chief Executive Officer,
Natural Habitat Contingent Arrangement
In connection with the acquisition of Natural Habitat, Mr. Bressler, the founder of Natural Habitat, has an equity incentive opportunity to earn an award of options based on the future financial performance of Natural Habitat, where if the Final Year Equity Value of Natural Habitat, as defined in Mr. Bressler's amended employment agreement, exceeds $
Other
Mr. Lawrence, President of Off the Beaten Path, was issued
NOTE 9 — RELATED PARTY TRANSACTIONS
In May 2016, in connection with the Company's acquisition of Natural Habitat, Natural Habitat issued an unsecured promissory note, amended May 2020, to Mr. Bressler, the founder of Natural Habitat. See Note 5 — Long-term Debt for more information.
NOTE 10 — INCOME TAXES
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The measurement of net deferred tax assets is reduced by the amount of any tax benefit that, based on available evidence, is not expected to be realized, and a corresponding valuation allowance is established. The determination of the required valuation allowance against net deferred tax assets was made without taking into account the deferred tax liabilities created from the book and tax differences on indefinite-lived assets.
The Company accounts for income taxes using the asset and liability method, under which it recognizes deferred income taxes for the tax consequences attributable to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, as well as for tax loss carryforwards and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The Company recognizes the effect on deferred taxes of a change in tax rates
in income in the period that includes the enactment date. The Company provides a valuation allowance against deferred tax assets if, based upon the weight of available evidence, the Company does not believe it is “more-likely-than-not” that some or all of the deferred tax assets will be realized. The Company will continue to evaluate the deferred tax asset valuation allowance balances in all of our foreign and U.S. companies to determine the appropriate level of valuation allowances.
The Company is subject to income taxes in both the U.S. and the non-U.S. jurisdictions in which it operates. The Company regularly assesses the potential outcome of current and future examinations in each of the taxing jurisdictions when determining the adequacy of the provision for income taxes. The Company has only recorded financial statement benefits for tax positions which it believes reflect the “more-likely-than-not” criteria of FASB’s authoritative guidance on accounting for uncertainty in income taxes, and it has established income tax reserves in accordance with this guidance where necessary. Once a financial statement benefit for a tax position is recorded or a tax reserve is established, the Company adjusts it only when there is more information available or when an event occurs necessitating a change. While the Company believes that the amount of the recorded financial statement benefits and tax reserves reflect the more-likely-than-not criteria, it is possible that the ultimate outcome of current or future examinations may result in a reduction to the tax benefits previously recorded on its condensed consolidated financial statements or may exceed the current income tax reserves in amounts that could be material. As of September 30, 2021, and December 31, 2020, the Company had a liability for unrecognized tax benefits of $
The Company is subject to tax audits in all jurisdictions for which it files tax returns. Tax audits by their very nature are often complex and can require several years to complete. Currently, there are no U.S. federal, state or foreign jurisdiction tax audits pending. The Company’s corporate U.S. federal and state tax returns for the current year and three prior years remain subject to examination by tax authorities and the Company’s foreign tax returns for the current year and four prior years remain subject to examination by tax authorities.
NOTE 11 — ACQUISITIONS
To further expand the Company’s land-based experiential travel offerings and increase its addressable market, on February 1, 2021, the Company acquired, through its Natural Habitat subsidiary,
The acquisitions had an aggregate purchase price of $
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (In thousands) | (unaudited) | (unaudited) | ||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Net loss available to stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
In addition to the businesses acquired above, during September 2021, the Company acquired the Crystal Esprit yacht for $
NOTE 12 — COMMITMENTS AND CONTINGENCIES
Redeemable Non-Controlling Interest
Mr. Bressler, founder of Natural Habitat, retains a
Mr. Lawrence, through a combination of his original minority interest and the profit interest units he received, retains a
Mr. Levine, founder of DuVine, retains a
Since the redemption of the noncontrolling interests are not solely in the Company’s control, the Company is required to record the redeemable noncontrolling interest outside of stockholders’ equity but after its total liabilities. In addition, if it is probable that the instrument will become redeemable, as such solely due to the passage of time, the redeemable noncontrollable interest should be adjusted to the redemption value via one of two measurement methods. The Company elected the income classification-excess adjustment and accretion methods for recognizing changes in the redemption value of the put options. Under this methodology, a calculation of the present value of the redemption value is compared to the carrying value of the redeemable noncontrolling interest and the carrying value of the redeemable noncontrolling interest is adjusted to the redemption value’s present value. Any adjustments to the carrying value of the redeemable noncontrolling interest, up to the fair value of the noncontrolling interest, are classified to retained earnings. Adjustments in excess of the fair value of the noncontrolling interest, are treated as a decrease to net income available to common stockholders.
The fair value of the put options were determined using a discounted cash flow model. The redemption values were adjusted to their present value using the Company’s weighted average cost of capital.
The following is a rollforward of redeemable non-controlling interest:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Net income (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| Acquired businesses' noncontrolling interest | ( | ) | ||||||||||||||
| Fair value adjustment of put option | ( | ) | ( | ) | ||||||||||||
| Balance September 30, | $ | $ | $ | $ | ||||||||||||
Royalty Agreement – National Geographic
The Company is party to an alliance and license agreement with National Geographic, which allows the Company to use the National Geographic name and logo. In return for these rights, the Company is charged a royalty fee. The royalty fee is included
within selling and marketing expense on the accompanying condensed consolidated statements of operations. The amount is calculated based upon a percentage of certain ticket revenues less travel agent commission, including the revenues received from cancellation fees and any revenues received from the sale of pre- and post-expedition extensions. Royalty expense for the three and nine months ended September 30, 2021 was $
The royalty balance payable to National Geographic as of September 30, 2021 and December 31, 2020 was $
Royalty Agreement – World Wildlife Fund
Natural Habitat has a license agreement with WWF, which allows it to use the WWF name and logo. In return for these rights, Natural Habitat is charged a royalty fee and a fee based on annual gross sales. The fees are included within selling and marketing expense on the accompanying condensed consolidated statements of operations. This royalty fee expense was $
Charter Commitments
From time to time, the Company enters into agreements to charter vessels onto which it holds its tours and expeditions. Future minimum payments on its charter agreements as of September 30, 2021 are as follows:
| For the years ended December 31, | Amount | |||
| (In thousands) | ||||
| 2021 (three months) | $ | |||
| 2022 | ||||
| 2023 | ||||
| Total | $ | |||
Legal Proceedings
From time to time, the Company is party to litigation and regulatory matters and claims. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability will be incurred and the amount or range of the loss can be reasonably estimated. The results of complex proceedings and reviews are difficult to predict and the Company’s view of these matters may change in the future as events related thereto unfold. An unfavorable outcome to any legal or regulatory matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations.
NOTE 13 — SEGMENT INFORMATION
The Company is primarily a specialty cruise and experiential travel operator with operations in
The Company evaluates the performance of its business segments based largely on tour revenues and operating income, without allocating other income and expenses, net, income taxes and interest expense, net. For the three and nine months ended September 30, 2021 and 2020, operating results for the Company’s reportable segments were as follows:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | % | 2021 | 2020 | Change | % | |||||||||||||||||||||||||
| (In thousands) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||||||
| Tour revenues: | ||||||||||||||||||||||||||||||||
| Lindblad | $ | $ | $ | NM | $ | $ | $ | ( | ) | ( | )% | |||||||||||||||||||||
| Land Experiences | NM | % | ||||||||||||||||||||||||||||||
| Total tour revenues | $ | $ | $ | NM | $ | $ | $ | ( | ) | % | ||||||||||||||||||||||
| Operating (loss) income: | ||||||||||||||||||||||||||||||||
| Lindblad | $ | ( | ) | $ | ( | ) | $ | % | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | )% | |||||||||||||
| Land Experiences | ( | ) | NM | ( | ) | ( | ) | % | ||||||||||||||||||||||||
| Total operating loss | $ | ( | ) | $ | ( | ) | $ | % | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | )% | |||||||||||||
Depreciation and amortization are included in segment operating income as shown below:
| For the three months ended | For the nine months ended | |||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | % | 2021 | 2020 | Change | % | |||||||||||||||||||||||||
| (In thousands) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||||||
| Depreciation and amortization: | ||||||||||||||||||||||||||||||||
| Lindblad | $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||||
| Land Experiences | ( | ) | ( | )% | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total depreciation and amortization | $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||||
The following table presents our total assets, intangibles, net and goodwill by segment:
| (In thousands) | As of September 30, 2021 | As of December 31, 2020 | ||||||
| Total Assets: | (unaudited) | |||||||
| Lindblad | $ | $ | ||||||
| Land Experiences | ||||||||
| Total assets | $ | $ | ||||||
| Intangibles, net: | ||||||||
| Lindblad | $ | $ | ||||||
| Land Experiences | ||||||||
| Total intangibles, net | $ | $ | ||||||
| Goodwill: | ||||||||
| Lindblad | $ | $ | ||||||
| Land Experiences | ||||||||
| Total goodwill | $ | $ | ||||||
For the three and nine months ended September 30, 2021 there was $
NOTE 14 — SUBSEQUENT EVENTS
On October 8, 2021, the Company received $
On October 14, 2021, to further expand its land-based experiential travel offerings, the Company acquired
| MANAGEMENT’S DISCUSSION AND 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 Securities and Exchange Commission (“SEC”) on March 12, 2021.
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, cancelling or rescheduling of voyages and other potential disruptions to our business and operations related to the novel coronavirus 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, including our ability to successfully integrate acquisitions; |
|
| ● |
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.
Unless the context otherwise requires, in this Form 10-Q, “Company,” “Lindblad,” “we,” “us,” “our,” and “ours” refer to Lindblad Expeditions Holdings, Inc., and 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 ten owned expedition ships, having taken possession of our new polar ice class vessel, the National Geographic Resolution, in September 2021, and operate five seasonal charter vessels under the Lindblad Expeditions Holdings, Inc. (“Lindblad”) brand. Additionally, during September 2021, we purchased the Crystal Esprit yacht and expect to begin operating it in 2022. Our voyages include destinations such as the Arctic, Antarctic, the Galápagos, Alaska and Baja's Sea of Cortez. We have a longstanding relationship with the National Geographic Society dating back to 2004, which is based on a shared interest in exploration, research, technology and conservation. This relationship includes a co-selling, co-marketing and branding arrangement with National Geographic Partners, LLC (“National Geographic”), whereby our owned vessels carry the National Geographic name and National Geographic sells our expeditions through its internal travel division. We collaborate with National Geographic on voyage planning to enhance the guest experience by having National Geographic experts, including photographers, writers, marine biologists, 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.
Natural Habitat, Inc. (“Natural Habitat”) creates opportunities for adventure and discovery that transform lives with eco-conscious expeditions and nature-focused, small-group tours that include polar bear tours in Churchill, Canada, Alaskan grizzly bear adventures, small-group Galápagos tours and African safaris. Natural Habitat has partnered with World Wildlife Fund (“WWF”) to offer conservation travel, which is sustainable travel that contributes to the protection of nature and wildlife.
DuVine Cycling + Adventure Company (“DuVine”) provides international cycling 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. International cycling tours include the exotic Costa Rican rainforests, the rocky coasts of Ireland, deep in the vineyards of Spain, or high in the Swiss Alps. Cycling adventures in the United States vary from cycling beneath the California redwoods to pedaling through Vermont farmland, wine tastings in the world-class vineyards of Napa and Sonoma or farm-to-table renaissance dining.
Off the Beaten Path, LLC (“Off the Beaten Path”) provides small group travel, 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 Rocky Mountains, Desert Southwest, and Alaska, and includes unique trips across Europe, Africa, Australia, Central and South America and the South Pacific, for connecting the heart of the traveler with the soul of the place.
We operate 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 June 2021 and as of November 2, 2021 had eight of our ten vessels providing expeditions to guests. During June 2021, we launched three ships in Alaska and another in the Galapagos and during the third quarter the Company resumed operations on the majority of its remaining vessels with additional ships operating in Alaska, the Galapagos, Iceland and the Pacific Northwest.
During September 2021, we drew down $46.2 million under the second export credit agreement in conjunction with our final payment upon delivery of the National Geographic Resolution. In April 2021 we drew down $15.5 million under the second export credit agreement in conjunction with our fourth installment payment for the vessel.
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.
During September 2021, we acquired the Crystal Esprit yacht for $13.3 million. We expect to modify the vessel to a capacity of 48 guest, along with other changes, and replace the National Geographic Islander in the Galapagos.
Return to Fleet Operations and COVID-19 Business Update
We resumed ship operations in June 2021 and, as of November 2, 2021, had eight of our ten operating vessels providing expeditions to guests. During June 2021, we launched three ships in Alaska and another in the Galapagos, and during the third quarter, we resumed operations on the majority of our remaining vessels with additional ships operating in Alaska, the Galapagos, Iceland and the Pacific Northwest. We continue to work with local authorities on plans to operate in additional geographies during remainder of the year and in early 2022. 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 or issue future travel certificates, 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. Additionally, all guests age 12 and older, crew and staff are required to be fully vaccinated and 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 March 2020 to 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 continue to see significant new bookings across the fleet and have substantial advanced reservations for future travel. Bookings for the full year 2022 are 51% ahead of the bookings for 2021 as of the same date a year ago and 25% ahead of the bookings for 2020 as of the same date two years ago.
For voyages that were cancelled or rescheduled, we offered guests future travel credits or full refunds and the majority of guests opted for future travel credits.
Balance Sheet and Liquidity
As of September 30, 2021, we had $155.6 million in unrestricted cash and $29.5 million in restricted cash primarily related to deposits on future travel originating from U.S. ports and credit card reserves. During August 2021, we received a $21.0 million grant under the Coronavirus Economic Relief for Transportation Services (“CERTS”) Act, which provided grants to eligible motorcoach, school bus, passenger vessel and pilotage companies that have experienced annual revenue losses of 25 percent or more as result of COVID-19. The priority use of grant funds must be for payroll costs, though grants may also be used for permitted operating expenses and the repayment of debt accrued to maintain payroll.
As of September 30, 2021, we had a total debt position of $561.8 million and were in compliance with all of our debt covenants currently in effect.
In conjunction with the continuing economic risk of the COVID-19 pandemic, during 2021 we have taken a variety of steps to strengthen our balance sheet and increase liquidity including:
During June 2021, 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 December 2021 in the aggregate amount of $15.7 million, extend the effective suspension of the total net leverage ratio covenant through March 2022, increase the interest rate for the export credit facilities by 50 basis points and annualize EBITDA used in the covenant calculation through December 31, 2022. The deferred principal payments will amortize quarterly over three years starting in March 2022. Certain other covenants continue to be more restrictive during the extended covenant waiver period.
During April 2021, we further amended our term loan and revolving credit agreement to, among other things, extend the waiver of its total net leverage ratio covenant through March 31, 2022, annualized EBITDA used in our covenant calculation through December 31, 2022 and increase the interest rate spreads of the Term Facility, excluding the 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.
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. 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.
The discussion and analysis of our results of operations and financial condition are organized as follows:
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a description of certain line items and operational and financial metrics we utilize to assist us in managing our business; |
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results and a comparable discussion of our consolidated and segment results of operations for the three and nine months ended September 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 |
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a review of our critical accounting policies. |
Financial Presentation
Description of Certain Line Items
Tour revenues
Tour revenues consist of the following:
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Guest ticket revenues recognized from the sale of guest tickets; and |
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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:
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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; |
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Payroll costs and related expenses for shipboard and expedition personnel; |
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Food costs for guests and crew, including complimentary food and beverage amenities for guests; |
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Fuel costs and related costs of delivery, storage and safe disposal of waste; and |
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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.
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 National Geographic fee 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 Net Cruise Cost represents Net Cruise Cost adjusted for Non-GAAP other supplemental adjustments which include certain non-operating items such as stock-based compensation, the National Geographic fee amortization, and 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).
Net Cruise Cost represents Gross Cruise Cost excluding commissions and certain other direct costs of guest ticket revenues and other tour revenues.
Net Cruise Cost Excluding Fuel represents Net Cruise Cost excluding fuel costs.
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 U.S. dollar is the functional currency in our foreign operations and 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 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.
Results of Operations - Consolidated
| For the three months ended September 30, |
For the nine months ended September 30, |
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| (In thousands) |
2021 |
2020 |
Change |
% | 2021 |
2020 |
Change |
% | ||||||||||||||||||||||||
| Tour revenues |
$ | 64,507 | $ | 1,019 | $ | 63,488 | NM | $ | 81,555 | $ | 81,991 | $ | (436 | ) | (1 | )% | ||||||||||||||||
| Cost of tours |
45,600 | 8,075 | 37,525 | 465 | % | 73,270 | 62,988 | 10,282 | 16 | % | ||||||||||||||||||||||
| General and administrative |
17,023 | 9,145 | 7,878 | 86 | % | 46,123 | 36,170 | 9,953 | 28 | % | ||||||||||||||||||||||
| Selling and marketing |
10,213 | 2,128 | 8,085 | 380 | % | 17,680 | 18,413 | (733 | ) | (4 | )% | |||||||||||||||||||||
| Depreciation and amortization |
9,323 | 8,485 | 838 | 10 | % | 25,785 | 23,728 | 2,057 | 9 | % | ||||||||||||||||||||||
| Operating loss |
$ | (17,652 | ) | $ | (26,814 | ) | $ | 9,162 | 34 | % | $ | (81,303 | ) | $ | (59,308 | ) | $ | (21,995 | ) | (37 | )% | |||||||||||
| Net loss |
$ | (23,299 | ) | $ | (27,535 | ) | $ | 4,236 | 15 | % | $ | (92,894 | ) | $ | (69,929 | ) | $ | (22,965 | ) | (33 | )% | |||||||||||
| Undistributed loss per share available to stockholders: |
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| Basic |
$ | (0.50 | ) | $ | (0.56 | ) | $ | 0.06 | $ | (1.87 | ) | $ | (1.40 | ) | $ | (0.47 | ) | |||||||||||||||
| Diluted |
$ | (0.50 | ) | $ | (0.56 | ) | $ | 0.06 | $ | (1.87 | ) | $ | (1.40 | ) | $ | (0.47 | ) | |||||||||||||||
Comparison of the Three and Nine Months Ended September 30, 2021 to Three and Nine Months Ended September 30, 2020 - Consolidated
Tour Revenues
Tour revenues for the three months ended September 30, 2021 increased $63.5 million, to $64.5 million, compared to $1.0 million for the three months ended September 30, 2020. The Lindblad segment tour revenues increased by $33.1 million and the Land Experiences segment increased $30.4 million, primarily as a result of restarting expeditions and trips. The Land Experiences segment also includes the results of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
Tour revenues for the nine months ended September 30, 2021 decreased $0.4 million to $81.6 million, compared to $82.0 million for the nine months ended September 30, 2020. The Lindblad segment tour revenues decreased by $29.3 million, primarily as a result of cancelled, disrupted and rescheduled expeditions due to COVID-19. At the Land Experiences segment, tour revenues increased $28.8 million over the prior year period, primarily due to operating additional trips and from the inclusion of the results of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
Cost of Tours
Total cost of tours for the three months ended September 30, 2021 increased $37.5 million, to $45.6 million compared to $8.1 million for the three months ended September 30, 2020. At the Lindblad segment, cost of tours increased $18.3 million, due to the restart of expeditions. At the Land Experiences segment, cost of tours increased $19.2 million, due to operating additional trips during the third quarter of 2021 and the inclusion of the results of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
Total cost of tours for the nine months ended September 30, 2021 increased $10.3 million, or 16%, to $73.3 million, compared to $63.0 million for the nine months ended September 30, 2020. At the Lindblad segment, cost of tours decreased $6.9 million, primarily related to cancelled, disrupted and rescheduled expeditions due to COVID-19. At the Land Experiences segment, cost of tours increased $17.2 million, primarily due to operating additional trips and the inclusion of the results of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
General and Administrative
General and administrative expenses for the three months ended September 30, 2021 increased $7.9 million, or 86%, to $17.0 million compared to $9.1 million for the three months ended September 30, 2020. At the Lindblad segment, general and administrative expenses increased $4.5 million from the prior year period primarily due to higher personnel costs associated with restarting operations, increased stock-based compensation expense and higher credit card commissions due to the strong booking environment. At the Land Experiences segment, general and administrative expenses increased $3.4 million, primarily due to increased personnel costs related to operating additional trips, higher credit card commissions due to the strong booking environment and the inclusion of the results of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
General and administrative expenses for the nine months ended September 30, 2021 increased $9.9 million, or 28%, to $46.1 million compared to $36.2 million for the nine months ended September 30, 2020. At the Lindblad segment, general and administrative expenses increased $4.7 million from the prior year period primarily due higher personnel costs associated with restarting operations, increased stock-based compensation expense and increased credit card commissions due to a strong booking environment. At the Land Experiences segment, general and administrative expenses increased $5.2 million, primarily due to increased personnel costs related to operating additional trips, higher credit card commissions due to a strong booking environment and the impact of the acquisitions of Off the Beaten Path and DuVine, which were completed during the first quarter of 2021.
Selling and Marketing
Selling and marketing expenses for the three months ended September 30, 2021 increased $8.1 million to $10.2 million, compared to $2.1 million for the three months ended September 30, 2020. At the Lindblad segment, selling and marketing expenses increased $6.7 million primarily due to higher commissions and increased advertising spend. At the Land Experiences segment, selling and marketing expenses increased $1.4 million, primarily due to increased marketing spend and higher commissions associated with the ramp up in operations and the inclusion of the results of Off the Beaten Path and DuVine which were acquired during the first quarter of 2021.
Selling and marketing expenses for the nine months ended September 30, 2021 decreased $0.7 million, or 4%, to $17.7 million, compared to $18.4 million for the nine months ended September 30, 2020. At the Lindblad segment, selling and
marketing expenses decreased $3.2 million, primarily due to lower commission expenses due to the cancellation, disruption and rescheduling of expeditions due to COVID-19 partially offset by increased marketing spend related to the ramp up in operations. At the Land Experiences segment, selling and marketing expenses increased $2.5 million, primarily due to increased marketing spend and higher commissions associated with the ramp up in operations and the inclusion of the results of Off the Beaten Path and DuVine which were acquired during the first quarter of 2021.
Depreciation and Amortization
Depreciation and amortization expenses for the three months ended September 30, 2021 increased $0.8 million, or 10%, to $9.3 million, compared to $8.5 million for the three months ended September 30, 2020, primarily due to information technology assets placed into service, accelerated depreciation for the National Geographic Islander and the amortization of acquired intangibles.
Depreciation and amortization expenses for the nine months ended September 30, 2021 increased $2.1 million, or 9%, to $25.8 million, compared to $23.7 million for the nine months ended September 30, 2020, primarily due to a full nine months of depreciation of the National Geographic Endurance which was added to the fleet in March 2020.
Other Income (Expense)
Other expenses for the three months ended September 30, 2021, decreased $0.5 million to $3.1 million from $3.6 million for the three months ended September 30, 2020, primarily due to the following:
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A $1.4 million loss in foreign currency translation in 2021, compared to a gain of $1.0 million in 2020 which was due primarily to $2.5 million loss on the maturity of a foreign currency hedge related to the final payment for the National Geographic Resolution upon its delivery in September 2021. |
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A $1.5 million increase in interest expense, net to $6.1 million in 2021, primarily due to increased borrowings under our term loan facility as part of the Main Street Lending Program, and the additional drawdowns under our export credit agreements related to the National Geographic Resolution, as well as higher rates on our debt facilities. |
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Recognition of $4.4 million in other income related to expenses covered under the CERTS grant received in September 2021. |
Other expenses, for the nine months ended September 30, 2021, decreased $4.1 million to $14.2 million from $18.3 million for the nine months ended September 30, 2020, primarily due to the following:
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A $1.2 million loss in foreign currency translation in 2021, compared to a $6.3 million loss in foreign currency translation in 2020 primarily due to lower losses on the maturity of foreign currency hedges related to installment payments for the National Geographic Resolution in 2021 as compared with 2020. | |
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A $5.7 million increase in interest expense, net to $17.4 million in 2021, primarily due to increased borrowings under our term loan facility as part of the Main Street Lending Program, the higher rates on our debt facilities and the additional drawdowns under our export credit agreements related to our new builds, the National Geographic Endurance and the National Geographic Resolution. |
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Recognition of $4.4 million in other income related to expenses covered under the CERTS grant received in September 2021. | |
Results of Operations – Segments
Selected information for our reportable segments is below. 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.
| For the three months ended September 30, |
For the nine months ended September 30, |
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| (In thousands) |
2021 |
2020 |
Change |
% | 2021 |
2020 |
Change |
% | ||||||||||||||||||||||||
| Tour revenues: |
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| Lindblad |
$ | 33,100 | $ | 16 | $ | 33,084 | NM | $ | 40,264 | $ | 69,533 | $ | (29,269 | ) | (42 | )% | ||||||||||||||||
| Land Experiences |
31,407 | 1,003 | 30,404 | NM | 41,291 | 12,458 | 28,833 | 231 | % | |||||||||||||||||||||||
| Total tour revenues |
$ | 64,507 | $ | 1,019 | $ | 63,488 | NM | $ | 81,555 | $ | 81,991 | $ | (436 | ) | (1 | )% | ||||||||||||||||
| Operating (loss) income: |
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| Lindblad |
$ | (22,282 | ) | $ | (24,835 | ) | $ | 2,553 | 10 | % | $ | (80,617 | ) | $ | (54,287 | ) | $ | (26,330 | ) | (49 | )% | |||||||||||
| Land Experiences |
4,630 | (1,979 | ) | 6,609 | NM | (686 | ) | (5,021 | ) | 4,335 | 86 | % | ||||||||||||||||||||
| Total operating loss |
$ | (17,652 | ) | $ | (26,814 | ) | $ | 9,162 | 34 | % | $ | (81,303 | ) | $ | (59,308 | ) | $ | (21,995 | ) | (37 | )% | |||||||||||
| Adjusted EBITDA: |
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| Lindblad |
$ | (11,596 | ) | $ | (16,088 | ) | $ | 4,492 | 28 | % | $ | (51,382 | ) | $ | (29,001 | ) | $ | (22,381 | ) | (77 | )% | |||||||||||
| Land Experiences |
5,001 | (1,382 | ) | 6,383 | NM | 1,017 | (3,368 | ) | 4,385 | NM | ||||||||||||||||||||||
| Total adjusted EBITDA |
$ | (6,595 | ) | $ | (17,470 | ) | $ | 10,875 | 62 | % | $ | (50,365 | ) | $ | (32,369 | ) | $ | (17,996 | ) | (56 | )% | |||||||||||
Results of Operations – Lindblad Segment
The following table sets forth our Available Guest Nights, Guest Nights Sold, Occupancy, Maximum Guests, Number of Guests and Voyages for the three and nine months ended September 30, 2021 and 2020:
| For the three months ended September 30, |
For the nine months ended September 30, |
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| 2021 |
2020 |
2021 |
2020 |
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| Available Guest Nights |
35,251 | - | 41,474 | 51,624 | ||||||||||||
| Guest Nights Sold |
28,829 | - | 33,749 | 46,050 | ||||||||||||
| Occupancy |
82 | % | - | 81 | % | 89 | % | |||||||||
| Maximum Guests |
5,493 | - | 6,514 | 6,512 | ||||||||||||
| Number of Guests |
4,418 | - | 5,236 | 5,564 | ||||||||||||
| Voyages |
75 | - | 89 | 85 | ||||||||||||
The following table shows the calculations of Gross Yield and Net Yield for the three and nine months ended September 30, 2021 and 2020. Gross Yield is calculated by dividing Tour Revenues by Available Guest Nights and Net Yield is calculated by dividing Net Revenue by Available Guest Nights:
| Calculation of Gross Yield per Available Guest Night and Net Yield per Available Guest Night |
For the three months ended September 30, |
For the nine months ended September 30, |
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| (In thousands, except for Available Guest Nights, Gross and Net Yield per Available Guest Night) |
2021 |
2020 |
2021 |
2020 |
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| Guest ticket revenues |
$ | 32,325 | $ | - | $ | 38,087 | $ | 60,351 | ||||||||
| Other tour revenue |
775 | 16 | 2,177 | 9,182 | ||||||||||||
| Tour Revenues |
33,100 | 16 | 40,264 | 69,533 | ||||||||||||
| Less: Commissions |
(2,705 | ) | (818 | ) | (3,248 | ) | (8,080 | ) | ||||||||
| Less: Other tour expenses |
(1,545 | ) | (308 | ) | (2,611 | ) | (7,021 | ) | ||||||||
| Net Yield |
$ | 28,850 | $ | (1,110 | ) | $ | 34,405 | $ | 54,432 | |||||||
| Available Guest Nights |
35,251 | - | 41,474 | 51,624 | ||||||||||||
| Gross Yield per Available Guest Night |
$ | 939 | NM | $ | 971 | $ | 1,347 | |||||||||
| Net Yield per Available Guest Night |
818 | NM | 830 | 1,054 | ||||||||||||
The following table reconciles operating income to our Net Yield Guest Metric for the Lindblad Segment:
| For the three months ended |
For the nine months ended |
|||||||||||||||
| (In thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Operating loss |
$ | (22,282 | ) | $ | (24,835 | ) | $ | (80,617 | ) | $ | (54,287 | ) | ||||
| Cost of tours |
25,842 | 7,534 | 48,282 | 55,237 | ||||||||||||
| General and administrative |
12,230 | 7,751 | 34,322 | 29,646 | ||||||||||||
| Selling and marketing |
8,382 | 1,678 | 13,659 | 16,862 | ||||||||||||
| Depreciation and amortization |
8,928 | 7,888 | 24,618 | 22,075 | ||||||||||||
| Less: Commissions |
(2,705 | ) | (818 | ) | (3,248 | ) | (8,080 | ) | ||||||||
| Less: Other tour expenses |
(1,545 | ) | (308 | ) | (2,611 | ) | (7,021 | ) | ||||||||
| Net Yield |
$ | 28,850 | $ | (1,110 | ) | $ | 34,405 | $ | 54,432 | |||||||
The following table shows the calculations of Gross Cruise Cost and Net Cruise Costs for the three and nine months ended September 30, 2021 and 2020:
| Calculation of Gross Cruise Cost and Net Cruise Cost |
For the three months ended September 30, |
For the nine months ended September 30, |
||||||||||||||
| (In thousands, except for Available Guest Nights, Gross and Net Cruise Cost per Avail. Guest Night) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Cost of tours |
$ | 25,842 | $ | 7,534 | $ | 48,282 | $ | 55,237 | ||||||||
| Plus: Selling and marketing |
8,382 | 1,678 | 13,659 | 16,862 | ||||||||||||
| Plus: General and administrative |
12,230 | 7,751 | 34,322 | 29,646 | ||||||||||||
| Gross Cruise Cost |
46,454 | 16,963 | 96,263 | 101,745 | ||||||||||||
| Less: Commissions |
(2,705 | ) | (818 | ) | (3,248 | ) | (8,080 | ) | ||||||||
| Less: Other tour expenses |
(1,545 | ) | (308 | ) | (2,611 | ) | (7,021 | ) | ||||||||
| Net Cruise Cost |
42,204 | 15,837 | 90,404 | 86,644 | ||||||||||||
| Less: Fuel Expense |
(2,357 | ) | (1,026 | ) | (3,880 | ) | (4,350 | ) | ||||||||
| Net Cruise Cost Excluding Fuel |
39,847 | 14,811 | 86,524 | 82,294 | ||||||||||||
| Non-GAAP Adjustments: |
||||||||||||||||
| Stock-based compensation |
(1,406 | ) | (310 | ) | (4,012 | ) | (1,911 | ) | ||||||||
| National Geographic fee amortization |
- | - | - | (727 | ) | |||||||||||
| Other |
(328 | ) | (549 | ) | (1,007 | ) | (573 | ) | ||||||||
| Adjusted Net Cruise Cost Excluding Fuel |
$ | 38,113 | $ | 13,952 | $ | 81,505 | $ | 79,083 | ||||||||
| Adjusted Net Cruise Cost |
$ | 40,470 | $ | 14,978 | $ | 85,385 | $ | 83,433 | ||||||||
| Available Guest Nights |
35,251 | - | 41,474 | 51,624 | ||||||||||||
| Gross Cruise Cost per Available Guest Night |
$ | 1,318 | NM | $ | 2,321 | $ | 1,971 | |||||||||
| Net Cruise Cost per Available Guest Night |
1,197 | NM | 2,180 | 1,678 | ||||||||||||
| Net Cruise Cost Excluding Fuel per Available Guest Night |
1,130 | NM | 2,086 | 1,594 | ||||||||||||
| Adjusted Net Cruise Cost Excluding Fuel per Available Guest Night |
1,081 | NM | 1,965 | 1,532 | ||||||||||||
| Adjusted Net Cruise Cost per Available Guest Night |
1,148 | NM | 2,059 | 1,616 | ||||||||||||
Comparison of Three and Nine Months Ended September 30, 2021 to Three and Nine Months Ended September 30, 2020 at the Lindblad Segment
Tour Revenues
Tour revenues for the three months ended September 30, 2021 increased $33.1 million to $33.1 million. The increase was a result of restarting expeditions during 2021 compared with cancelling, disrupting and rescheduling all expeditions due to COVID-19 in the third quarter of 2020.
Tour revenues for the nine months ended September 30, 2021 decreased $29.3 million to $40.3 million, compared to $69.5 million for the nine months ended September 30, 2020. The decrease was primarily driven by additional cancelled, disrupted and rescheduled expeditions due to COVID-19 during 2021.
Operating Loss
Operating loss decreased $2.6 million to a loss of $22.3 million for the three months ended September 30, 2021 compared to an operating loss of $24.8 million for the three months ended September 30, 2020. The decrease was a result of restarting expeditions during 2021 compared with cancelling, disrupting and rescheduling all expeditions due to COVID-19 during the third quarter of 2020.
Operating loss increased $26.3 million to a loss of $80.6 million for the nine months ended September 30, 2021, compared to a loss of $54.3 million for the nine months ended September 30, 2020. The increase was primarily driven by lower revenue from cancelled, disrupted and rescheduled voyages due to COVID-19.
Results of Operations – Land Experiences Segment
Comparison of Three and Nine Months Ended September 30, 2021 to Three and Nine Months Ended September 30, 2020
Tour Revenues
Tour revenues for the three months ended September 30, 2021 increased $30.4 million to $31.4 million compared to $1.0 million for the three months ended September 30, 2020, primarily as a result of operating additional trips during the third quarter 2021 and the inclusion of the results of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
Tour revenues for the nine months ended September 30, 2021 increased $28.8 million to $41.3 million compared to $12.5 million for the nine months ended September 30, 2020, due primarily to operating additional trips beginning the second quarter of 2021, the cancelled, disrupted and rescheduled expeditions due to COVID-19 during 2020, and by the inclusion of the operations of Off the Beaten Path and DuVine, which were acquired during the first quarter of 2021.
Operating Income (Loss)
Operating income increased $6.6 million to $4.6 million for the three months ended September 30, 2021, compared to an operating loss of $2.0 million for the three months ended September 30, 2020. The higher operating income was primarily a result of operating additional trips during the third quarter of 2021. The third quarter of 2021 also included the results of Off the Beaten Path and DuVine which were acquired during the first quarter of 2021.
Operating loss for the nine months ended September 30, 2021 decreased $4.3 million to a loss of $0.7 million compared to a loss of $5.0 million for the nine months ended September 30, 2020. The decrease was primarily a result of operating additional trips and from the inclusion of the results of Off the Beaten Path and DuVine which were acquired during the first quarter of 2021.
Adjusted EBITDA – Consolidated
The following table outlines the reconciliation of net loss to consolidated Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020. 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.
| Consolidated |
For the three months ended September 30, |
For the nine months ended September 30, |
||||||||||||||
| (In thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Net loss |
$ | (23,299 | ) | $ | (27,535 | ) | $ | (92,894 | ) | $ | (69,929 | ) | ||||
| Interest expense, net |
6,063 | 4,529 | 17,436 | 11,763 | ||||||||||||
| Income tax expense (benefit) |
2,507 | (2,893 | ) | (2,648 | ) | (7,664 | ) | |||||||||
| Depreciation and amortization |
9,323 | 8,485 | 25,785 | 23,728 | ||||||||||||
| Loss (gain) on foreign currency |
1,434 | (989 | ) | 1,165 | 6,334 | |||||||||||
| Other (income) expense |
(4,357 | ) | 74 | (4,362 | ) | 188 | ||||||||||
| Stock-based compensation |
1,406 | 310 | 4,146 | 1,911 | ||||||||||||
| National Geographic fee amortization |
- | - | - | 727 | ||||||||||||
| Other |
328 | 549 | 1,007 | 573 | ||||||||||||
| Adjusted EBITDA |
$ | (6,595 | ) | $ | (17,470 | ) | $ | (50,365 | ) | $ | (32,369 | ) | ||||
The following tables outline the reconciliation for each reportable segment from operating income to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020.
| Lindblad Segment |
For the three months ended September 30, |
For the nine months ended September 30, |
||||||||||||||
| (In thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Operating loss |
$ | (22,282 | ) | $ | (24,835 | ) | $ | (80,617 | ) | $ | (54,287 | ) | ||||
| Depreciation and amortization |
8,928 | 7,888 | 24,618 | 22,075 | ||||||||||||
| Stock-based compensation |
1,406 | 310 | 4,012 | 1,911 | ||||||||||||
| National Geographic fee amortization |
- | - | - | 727 | ||||||||||||
| Other |
352 | 549 | 605 | 573 | ||||||||||||
| Adjusted EBITDA |
$ | (11,596 | ) | $ | (16,088 | ) | $ | (51,382 | ) | $ | (29,001 | ) | ||||
| Land Experiences Segment |
For the three months ended September 30, |
For the nine months ended September 30, |
||||||||||||||
| (In thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Operating income (loss) |
$ | 4,630 | $ | (1,979 | ) | $ | (686 | ) | $ | (5,021 | ) | |||||
| Depreciation and amortization |
395 | 597 | 1,167 | 1,653 | ||||||||||||
| Stock-based compensation |
- | - | 134 | - | ||||||||||||
| Other |
(24 | ) | - | 402 | - | |||||||||||
| Adjusted EBITDA |
$ | 5,001 | $ | (1,382 | ) | $ | 1,017 | $ | (3,368 | ) | ||||||
Liquidity and Capital Resources
The COVID-19 pandemic has had a material negative impact on our operations and financial results and while we have substantially resumed operations, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of the COVID-19 pandemic 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 completely lifted and what the demand for expedition travel will be once these restrictions are no longer in place.
During August 2021, we received a $21.0 million grant under the CERTS Act, which provided grants to eligible motorcoach, school bus, passenger vessel, and pilotage companies, see the notes to the condensed consolidated financial statements for more information.
As of September 30, 2021, we had approximately $561.8 million in long-term debt obligations, including the current portion of long-term debt. We believe that our cash on hand and expected future operating cash inflows will be sufficient to fund operations, debt service requirements and necessary capital expenditures, assuming that our operations continue to ramp up as we currently expect.
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, and spending to market and advertise upcoming expeditions and trips. 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.
Sources and Uses of Cash for the Nine Months Ended September 30, 2021 and 2020
Net cash provided by operating activities was $21.5 million in 2021 compared to net cash used in operating activities of $71.7 million in 2020. The $93.3 million increase is primarily due to cash received from guests for final payments and deposits on upcoming expeditions and trips, partially offset by costs of operations. The current period also included $21.0 million received for the CERTS grant.
Net cash used in investing activities was $96.3 million in 2021 compared to $152.8 million in 2020. The $56.5 million decrease was primarily due to payments for the completion of the National Geographic Endurance during the first quarter 2020, partially offset during 2021 by costs associated with building the National Geographic Resolution, the purchase of the Crystal Esprit and the net cash used for the acquisitions of Off the Beaten Path and DuVine.
Net cash provided by financing activities was $55.3 million in 2021 compared to $261.4 million in 2020. The $206.2 million decrease is primarily due to the borrowing $107.7 million under the senior secured credit agreement for the final contracted payment of the National Geographic Endurance, a $45.0 million drawdown of our revolving credit facility, the $85.0 million generated from the issuance of Preferred Stock and the borrowing of $30.6 million under the senior secured credit agreement for an installment payment on the National Geographic Resolution during 2020, partially offset by the borrowing of $61.7 million under the senior secured credit agreement for remaining payments on the National Geographic Resolution.
Funding Sources
Debt Facilities
Credit Facility
Our Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), provides a $200.0 million senior secured first lien term loan facility (the “Term Facility”), maturing March 2025, and a $45.0 million senior secured revolving credit facility (the “Revolving Facility”), which includes a $5.0 million letter of credit sub-facility. In March 2020, we drew $45.0 million on our Revolving Facility, which matures in March 2023.
The Amended Credit Agreement was amended in August 2020 to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the Term Facility was increased 125 basis points, to be paid-in-kind at maturity, a LIBOR minimum of 0.75% was added to the Term Facility and certain covenants were amended to be more restrictive.
In December 2020, we amended the Amended Credit Agreement to provide for the borrowing of a new tranche of incremental term loans under the Amended Credit Agreement in an amount of $85.0 million, maturing December 2025, made under the Main Street Expanded Loan Facility (the “Main Street Loan”). Interest on the Main Street Loan shall be paid-in-kind for the first year and the principal shall amortize at a rate of 15% in each of the third and fourth years, with the remaining amounts to be paid at maturity.
During April 2021, we further amended our Amended Credit Agreement that, among other things, extends the waiver of the total net leverage ratio covenant through March 31, 2022, annualized EBITDA used in the covenant calculation through December 31, 2022 and increases the interest rate spreads of the Term Facility, excluding the Main Street Loan, and the Revolving Facility by 50 basis points. Certain other covenants under the Amended Credit Agreement continue to be more restrictive during the extended covenant waiver period.
The Term Facility (excluding the Main Street Loan), as amended, as of September 30, 2021, bears interest at an adjusted Intercontinental Exchange (“ICE”) Benchmark administration LIBOR, with a minimum of 0.75%, plus a spread of 5.25%, for an aggregated rate of 6.00% as of September 30, 2021, and the Revolving Facility bears interest at an adjusted ICE Benchmark administration LIBOR plus a spread of 3.50%, for an aggregated rate of 3.58% as of September 30, 2021. The Main Street Loan bears interest at a rate per annum of an adjusted ICE Benchmark administration LIBOR for an interest period of 3-months plus 3.00%, for an aggregated rate of 3.13% as of September 30, 2021.
In 2018, we entered into interest rate cap agreements to hedge our exposure to interest rate movements and manage our interest rate expense related to the Term Facility.
Senior Secured Credit Agreements
Our first senior secured credit agreement (the “First Export Credit Agreement”) made available a loan in an aggregate principal amount not to exceed $107.7 million for the purpose of providing financing for up to 80% of the purchase price of our new polar ice class vessel, the National Geographic Endurance. During March 2020, we borrowed the $107.7 million under the First Export Credit Agreement for the final contracted payment of the National Geographic Endurance.
Our second senior secured credit agreement (the “Second Export Credit Agreement”) made available to us a loan in an aggregate principal amount not to exceed $122.8 million for the purpose of providing pre- and post-delivery financing for up to 80% of the purchase price of the National Geographic Resolution, which was delivered during September 2021. As of September 30, 2021, we borrowed the $122.8 million available under the Second Export Credit Agreement, drawing approximately $30.5 million in 2019, $30.6 million in 2020 and $61.7 million in 2021.
In June 2020, we amended our export credit agreements to defer scheduled amortization payments from June 2020 to March 2021 and suspend the total net leverage ratio covenant through June 2021. During June 2021, we further amended our export credit agreements to, among other things, extend the deferral of scheduled amortization payments of the First Export Credit Agreement through December 2021 in the aggregate amount of $15.7 million, extend the waiver of the total leverage ratio covenant
through March 31, 2022, increase interest rate spreads of the export credit agreements by 50 basis points and annualize EBITDA used in the covenant calculation through December 31, 2022. The deferred principal payments will amortize quarterly over three years starting March 2022. Certain other covenants continue to be more restrictive during the extended covenant waiver period. We were in compliance with our covenants in effect as of September 30, 2021.
The First Export Credit Agreement, as amended, bears interest at a floating interest rate equal to three-month LIBOR plus a spread of 3.50% per annum, or 3.62% over the borrowing period covering September 30, 2021. The Second Export Credit Agreement, as amended, bears a variable interest rate equal to three-month LIBOR plus a spread of 3.50% per annum, or 3.63% over the borrowing period covering September 30, 2021.
Equity
Preferred Stock
In August 2020, we issued and sold 85,000 shares of Series A Redeemable Convertible Preferred Stock, par value of $0.0001, (“Preferred Stock”) for $1,000 per share for gross proceeds of $85.0 million. The Preferred Stock has senior and preferential ranking to our common stock. The Preferred Stock is entitled to cumulative dividends of 6.00% per annum, and for the first two years, the dividends will be paid-in-kind. After the second anniversary of the issuance date, the dividends may be paid-in-kind or be paid in cash at our option. The Preferred Stock is convertible at any time, at the holder’s election, into a number of shares of our common stock equal to the quotient obtained by dividing the then-current accrued value by the conversion price of $9.50. At any time after the third anniversary of the issuance, we may, at our option, convert all, but not less than all, of the Preferred Stock into common stock if the closing price of shares of common stock is at least 150% of the conversion price for 20 out of 30 consecutive trading days. The number of shares of common stock received in such conversion shall be equal to the quotient obtained by dividing the then-current accrued value by the conversion price. At the six-year anniversary of the closing date, each investor has the right to request that we repurchase their Preferred Stock and any Preferred Stock not requested to be repurchased shall be converted into our common shares equal to the quotient obtained by dividing the then-current accrued value by the conversion price.
Funding Needs
We generally rely on a combination of cash flows provided by operations and the incurrence of additional debt to fund obligations. A vast majority of guest ticket receipts are collected in advance of the applicable expedition date. These advance passenger receipts remain a current liability until the expedition date and the cash generated from these advance receipts is used interchangeably with cash on hand from other cash from operations. The cash received as advanced receipts can be used to fund operating expenses for the applicable future expeditions or otherwise, pay down credit facilities, make long-term investments or any other use of cash. Traditionally, we run a working capital deficit due primarily to a large balance of unearned passenger revenues and as of September 30, 2021 we had a working capital deficit of $39.5 million. As of December 31, 2020 we had positive working capital of $73.4 million as a result of lower unearned passenger revenues while we were not operating and higher cash balances driven by the debt borrowings and a preferred share offering during the year. As of September 30, 2021 and December 31, 2020, we had $155.6 million and $187.5 million, respectively, in cash and cash equivalents, excluding restricted cash.
Our Board of Directors approved a stock and warrant repurchase plan (“Repurchase Plan”) in November 2015 and increased the repurchase plan to $35.0 million in November 2016. The Repurchase Plan authorizes us to purchase from time to time our outstanding common stock and our previously outstanding warrants. Any shares and warrants purchased will be retired. The Repurchase Plan has no time deadline and will continue until otherwise modified or terminated at the sole discretion of our Board of Directors. These repurchases exclude shares repurchased to settle statutory employee tax withholding related to the exercise of stock options and vesting of stock awards. During March 2020, the Repurchase Plan was suspended due to the uncertain impact of the COVID-19 pandemic and our borrowings through the Main Street Expanded Loan Facility program places restrictions on stock repurchases. We have cumulatively repurchased 875,218 shares of common stock for $8.3 million and 6,011,926 warrants for $14.7 million since plan inception. All repurchases were made using cash resources. The balance for the Repurchase Plan was $12.0 million as of September 30, 2021.
The additional borrowings under the Second Export Credit Agreement and amendments of the First Export Credit Agreement created material changes in our future obligations from those reported in our 2020 Annual Report. The changed or amended obligations as of September 30, 2021 are as follows:
| Payments due by period |
||||||||||||||||||||
| (In thousands) |
Total |
Current |
1-2 years |
3-4 years |
Thereafter |
|||||||||||||||
| Financing Activities: |
||||||||||||||||||||
| Export Credit Agreement (a) |
$ | 107,695 | $ | 6,450 | $ | 25,802 | $ | 39,320 | $ | 36,123 | ||||||||||
| Second Export Credit Agreement (b) |
122,840 | 7,678 | 20,474 | 20,474 | 74,214 | |||||||||||||||
| Total |
$ | 230,535 | $ | 14,128 | $ | 46,276 | $ | 59,794 | $ | 110,337 | ||||||||||
| (a) |
The June 2021 amendment to the First Export Credit Agreement deferred principal amortization payments through December 31, 2021, as described above. |
|
| (b) |
The balance and future obligations reflect the April 2021 and September 2021 additional borrowings of $15.5 million and $46.2 million, respectively, under the Second Export Credit Agreement for contracted installment payment on the National Geographic Resolution. |
Critical Accounting Policies
For a detailed discussion of the Critical Accounting Policies, please see our 2020 Annual Report.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There have been no material changes in our exposure to market risks from the information set forth in the “Quantitative and Qualitative Disclosures About Market Risk” sections contained in our 2020 Annual Report.
We are exposed to a market risk for interest rates related to our variable rate debt instruments. We assess our market risks based on changes in interest rates utilizing a sensitivity analysis that measures the potential impact on earnings and cash flows based on a hypothetical 100 basis point change in interest rates. For additional information regarding our long-term borrowings see Note 5 to our Condensed Consolidated Financial Statements included herein. As of September 30, 2021, we had interest rate cap agreements to hedge a portion of our exposure to interest rate movements of our variable rate debt and to manage our interest expense. The notional amount of outstanding debt associated with interest rate cap agreements as of September 30, 2021 was $100.0 million. Based on our September 30, 2021 outstanding variable rate debt balance, a hypothetical 100 basis point increase in LIBOR interest rates related to our variable interest rate debt instruments would impact our annual interest expense by approximately $4.3 million.
| CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting, as of September 30, 2021, using the criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation under the updated internal control framework in Internal Control-Integrated Framework (2013), management concluded that internal control over financial reporting was effective as of September 30, 2021.
Remediation Plan
Management had previously established a comprehensive set of controls and procedures over financial reporting. However, in several instances during the year ended December 31, 2020 we noted a lack of complete compliance with these controls and procedures, specifically related to the required documentation of certain review procedures performed. Management has taken additional steps to ensure consistent compliance with those controls and procedures, as well as to ensure appropriate documentation of reviews that have taken place. Measures we have taken to remediate the prior material weakness at December 31, 2020 include:
| ● |
Additional ongoing communications and training to employees across the entire organization regarding the importance of adhering to control procedures and maintaining proper documentation. |
|
| ● |
Enhanced communications and documentation regarding reviews of journal entries and balance sheet reconciliations in a timely manner. |
|
| ● |
Additional layers of examination to ensure appropriate review procedures over journal entries and balance sheet reconciliations have taken place and have been subsequently documented appropriately. |
|
| ● |
Exploring the ability to further leverage our information technology resources and general ledger system to enhance communication and documentation of review over journal entries and balance sheet reconciliations. |
We are committed to maintaining a strong internal control environment, and we believe the measures described above have strengthened our internal control over financial reporting and remediated the material weakness we have identified.
Changes in Internal Control over Financial Reporting
Except as described above under Remediation Plan, there was no change in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| PART 2. |
OTHER INFORMATION |
| LEGAL PROCEEDINGS |
The Company is involved in various claims, legal actions and regulatory proceedings arising from time to time in the ordinary course of business. We have protection and indemnity insurance that would be expected to cover any damages.
| RISK FACTORS |
We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The risks and uncertainties that we believe are most important for you to consider are discussed under the heading “Risk Factors” in the 2020 Annual Report.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Recent Sales by the Company of Unregistered Securities
There were no unregistered sales of equity securities during the quarter ended September 30, 2021.
Repurchases of Securities
Our Board of Directors approved a stock and warrant repurchase plan (“Repurchase Plan”) in November 2015 and increased the repurchase plan to $35.0 million in November 2016. The Repurchase Plan authorizes us to purchase from time to time our outstanding common stock and our previously outstanding warrants. Any shares and warrants purchased will be retired. The Repurchase Plan has no time deadline and will continue until otherwise modified or terminated at the sole discretion of our Board of Directors. These repurchases exclude shares repurchased to settle statutory employee tax withholding related to the exercise of stock options and vesting of stock awards. During March 2020, the Repurchase Plan was suspended due to the uncertain impact of the COVID-19 pandemic and our borrowings through the Main Street Expanded Loan Facility program places restrictions on stock repurchases. We have cumulatively repurchased 875,218 shares of common stock for $8.3 million and
6,011,926 warrants for $14.7 million, since plan inception. All repurchases were made using cash resources. The balance for the Repurchase Plan was $12.0 million as of September 30, 2021.
The following table represents information with respect to shares of common stock withheld from vesting's of stock-based compensation awards for employee income tax withholding for the periods indicated:
| Period |
Total number of shares purchased |
Average price paid per share |
Dollar value of shares purchased as part of publicly announced plans or programs |
Maximum dollar value of warrants and shares that may be purchased under approved plans or programs |
||||||||||||
| July 1 through July 31, 2021 |
189 | $ | 12.12 | $ | - | $ | 11,974,787 | |||||||||
| August 1 through August 31, 2021 |
554 | 14.69 | - | 11,974,787 | ||||||||||||
| September 1 through September 30, 2021 |
383 | 13.75 | - | 11,974,787 | ||||||||||||
| Total |
1,126 | $ | - | |||||||||||||
| DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| MINE SAFETY DISCLOSURES |
Not applicable.
| OTHER INFORMATION |
Not applicable.
| EXHIBITS |
| Number |
Description |
Included |
Form |
Filing Date |
||||
| Memorandum of Agreement between LEX Esprit Ltd. and Esprit Limited, dated August 20, 2021. |
8-K |
August 20, 2021 |
||||||
| Memorandum of Agreement Additional Clauses between LEX Esprit Ltd. and Esprit Limited, dated August 20, 2021. |
8-K |
August 20, 2021 |
||||||
| Herewith |
||||||||
| Herewith |
||||||||
| Herewith |
||||||||
| Herewith |
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| 101.INS |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
Herewith |
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| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
Herewith |
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| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
Herewith |
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| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
Herewith |
||||||
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
Herewith |
||||||
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
Herewith |
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| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 2, 2021.
| LINDBLAD EXPEDITIONS HOLDINGS, INC. |
||
| (Registrant) |
||
| By |
/s/ Dolf Berle |
|
| Dolf Berle |
||
| Chief Executive Officer |
||