Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) Q4 2023 Earnings Call Transcript
Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) Q4 2023 Earnings Call Transcript February 28, 2024
Lindblad Expeditions Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.53 EPS, expectations were $-0.3. Lindblad Expeditions Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, everyone, and welcome to the Lindblad Expeditions Fourth Quarter and Full Year Financial Results. My name is Bruno, and I'll be operating your call today. [Operator Instructions] I will now hand over to your host and Chief Financial Officer, Craig Felenstein. Please go ahead.
Craig Felenstein: Thank you, Bruno. Good morning, everyone, and thank you for joining us for Lindblad's 2023 fourth quarter and year-end earnings Callc With me on the call today is Sven Lindblad, Lindblad's Founder and Chief Executive Officer. Sven will begin with some opening comments, and then I will follow with some details on our 2023 financial results and current expectations for 2024 before we open the call for Q&A. You can find our latest earnings release in the Investor Relations section of our website. Before we get started, let me remind everyone that the company's comments today may include forward-looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations.
The company cannot guarantee the accuracy of forecasts or estimates, and we undertake no obligation to update any such forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. And with that, let me turn the call over to Sven.
Sven-Olof Lindblad: Thanks, Craig, and good morning, and thank you all for joining us today. When I returned to CEO of Lindblad Expeditions in June of 2023, I laid out for you a variety of priorities that I believe would usher in a new era for our enterprise. With eight months now in the rearview mirror, I would like to take a few minutes to discuss the progress we have made in each of these areas while providing some color on what drove our success this past year and why we are excited about the growth opportunity we have in the months and years ahead. First and foremost, the new era starts with putting the pandemic definitively behind us. The record financial results we delivered in 2023, including 35% revenue growth and adjusted EBITDA of over $71 million, a pretty good indication that we are well on our way to achieving that outcome.
Craig will go through our financial results in a moment, but we took nearly 30,000 guests more than ever before to the remarkable destinations we have been visiting for decades. And most importantly, the guest feedback has been nothing short of extraordinary. All the drivers of our business were up this year, led by a 33% increase in guest nights, as we began to fully utilize our expanded fleet. As we increase capacity, we also saw meaningful growth in net yield, up 12% to $1,097 per guests night and occupancy taking up to 77% from 75% a year ago. I know there is a tendency to focus on occupancy, but in isolation, it is a misleading metric, especially in our business. Understandably, at the big cruise lines, there is a commitment to 100% occupancy even if the last percentages represent very low or perhaps even no yield.
The reason is obvious, the onboard spend is meaningful in the casino, shops, spas, bars, land excursions, etc. So even if you add guests for free, you would be better off. In our case, there is minimal onboard spending. So that approach has absolutely no value. Also, we are extremely committed to maintaining price integrity, given long-term ramifications as there is no benefit in adding occupancy if yield decreases proportionately. So price integrity is a key metric and essential to preserve even if occupancies move ahead a bit slower in the short term. The second catalyst of our new era is capitalizing on the massive growth of interest in expedition travel. The poll to connect authentically with nature and culture is growing by the day, and there's no other company in this segment with our track record or with our commitment to providing authentic and immersive itineraries.
This past November, we further solidified our ability to take advantage of this growth with the extension and expansion of our 20 year old partnership with National Geographic, one of the world's most respected and beloved brands. This new agreement, which runs through 2040 will enable us to grow our brand on an international scale and reach more citizen explorers than ever before. Beyond enhancing our shared expertise and the onboard experience for our guests, it will increase the earnings potential of the company by opening larger addressable markets through new worldwide audiences. In short, it will further solidify our position as the leader in expedition cruise and experiential adventure in travel, a segment we have been leading for more than 50 years.
It also brings with it the power of Disney, the world's largest media and entertainment conglomerate. They have so many different capabilities to promote and activate the market. And in past months, our team, along with their marketing and sales teams have been deep in the strategy and tactical plans on a regular basis meeting monthly to plan specific initiatives to drive business. By year's end, we will be able to report with far more accuracy the detail about how the anticipated significant National Geographic and Disney effect, about the National Geographic and Disney effect, but harnessing that collective power is extremely exciting at a time with a poll to connect authentically with nature and culture is growing by the day. I firmly believe that this will result in meaningful accelerated growth in terms of occupancy, yield protection and expansion of the fleet for years to come.
Third, in this new era is building our technology to support innovative ways to drive the business. In many ways, 2023 was a year of transition on this front as we launched our new reservation system in May, the final building block in our digital stack transformation, which also included a new CRM, a new connect management system, a new digital asset management system and a new customer data platform. Not surprisingly, the rollout of the reservation system was complex with numerous challenges that had to be solved. It was certainly a distraction for various parts of our organization, but we kept our focus on our guests and have put most of those challenges behind us. We still have ways to go before we finally exploit the possibilities that these systems provide, but we are already seeing record bookings coming through our website.
We are achieving higher conversion rates across all parts of the funnel and we are delivering stronger guest service metrics at our contact center. A fourth pillar in this new era is reconnecting with our community in creative ways and creating the most modern marketing and sales platform to propel growth. The new agreement with National Geographic and our upgraded technology platform will certainly be a big part of that moving forward, but we are already reaching new audiences. With an expanded sales team and upgraded digital lead generation capabilities, we have been focusing on driving first-timer bookings through elevated search campaigns to capture and convert more prospects than ever before. Growing first timers is critical and that repeat behavior is significant, and they become the key community to propel growth.
A new era also means bring R&D back to the forefront in terms of new geographies, new experiences in parts of the world we have been visiting for years and integrating the ways we immerse our guests in these remarkable destinations. For 2024, we have developed a variety of new itineraries specifically designed to attract new guests. Most are shorter duration in order to get people into the system for the first time. Examples of a multi-month commitment in Iceland this summer and our recently launched collaboration with Food & Wine magazine, preparing 14 trips along the Columbia and Snake Rivers in Washington and Oregon with programming elements, wine selections and specials of guest selected by the editorial staff of Food & Wine. One of our biggest initiatives -- the biggest initiative, new initiative is a fly-in component for one of our Antarctica ships, creating itineraries that avoid crossing the Drake passage on some voyages and just one way on others.
It also allows for people with more limited time to visit Antarctica. These offerings have literally flown off the shelves and are allowing us to connect with new travelers who wouldn't have been -- who wouldn't have considered this kind of expedition before. The last component of the new era, I mentioned, was maximizing our diverse portfolio of land businesses while looking for additional expansion opportunities either through new capacity or further diversification of land offerings. The investments we have made thus far in broadening the land portfolio has proven widely successful, laying the vision of expertise and entrepreneurial spirit of the founders with the operating and marketing power of Lindblad has grown our land portfolio from EBITDA of just over $3 million when we first acquired Natural Habitat to nearly $23 million in 2023, including nearly 30% growth year-on-year.
This has not only created significant value for our guests and shareholders but also is a great calling card as we strategically look to find additional companies to join our family. So as you can see, the new era has clearly begun for Lindblad Expeditions and we are excited to further accelerate that new era in 2024. We start the year with a strong foundation of future bookings with the Lindblad segment pacing 2% ahead of where we were at the same point in 2023, despite having significantly less carryover business from cancellations during COVID. Excluding these carryover bookings, we would be 21% ahead of a year ago. There are a couple of headwinds to point out for the upcoming year. Due to the gang violence that erupted in Ecuador, on January 10, we canceled two voyages out of precaution in the first quarter, and there was some booking instability.
Fortunately, Ecuador's young, energetic President seems to have quelled the violence. And for all practical purposes, the country has largely stabilized. We certainly are feeling no disruption of activity and bookings are returning to a more normal pattern. Another potential headwind in Q2 is the possible rerouting of water warships around the tip of Africa to avoid the Red Sea due to the recent attacks from Yemen. We did not operate with guests in the Red Sea. But if we reroute the transit, there would likely be a couple of voyages impacted. While these isolated events are certainly frustrating, we have come to expect a certain amount of external disruption, and these short-term headwinds tail in comparison to the broader opportunity. As to the -- to expedition travel more broadly and incorporating adventure travel, this still represents one of, if not the largest growth segment in the travel industry.
I get why nature and particularly the concern over its long-term future is fueling interest. And while there is much more competition than ever, I believe that a very strong brand will inevitably be elevated by expanding interest. So I'm really excited about the next years as we, together with our partners with National Geographic and Disney, build and grow our business, expand our ideas, our relevance in supporting necessary strategies that help protect environments, communities and history. So many thanks for your time. And now I will turn it back to Craig.
Craig Felenstein: Thanks, Sven. As Sven highlighted, Lindblad delivered record revenue and EBITDA in 2023 as we further ramped operations with broader deployment of our expanded fleet and additional departures across our platform of land-based businesses. As we have discussed previously, the earnings potential of the company has increased considerably over the last several years with the addition of over 40% more ship capacity and three industry-leading land operators. And the record results we delivered in 2023 demonstrates the opportunity we have across our diverse portfolio of experiential offerings. Before we look ahead, let me take a few minutes to discuss our performance from this past year as we focused on further ramping ship operations, fueling the growth of our differentiated land portfolio and solidifying our overall infrastructure, technological footprint and marketing and sales capabilities to allow us to maximize the earnings potential in the years ahead.
Total company revenue for the full year 2023 of $570 million increased $148 million or 35% versus 2022, as we continue to ramp operations with strong growth across both our Lindblad and Land Experiences segments. At the Lindblad segment, revenue of $397 million increased $119 million or 43% year-on-year, primarily due to a 33% increase in available guest nights from broader utilization of the fleet. Additionally, net yield increased 12% to $1,097 per available guest night due to higher pricing and occupancy expansion to 77%, despite the significant increase in available guest nights year-over-year. As we further ramp occupancy towards historical levels, you can see both the revenue opportunity and the operating leverage inherent in our marine platform as we attract more and more guests while maintaining strong pricing discipline across the expanded fleet.
Similar to our ship operations, our land portfolio is also delivering strong growth, driven by additional departures and guests across each of our four unique businesses. Land Experiences revenue of $172 million increased $29 million or 20% versus a year ago, led by Natural Habitat's polar bear and Africa trips, DuVine's cycling tours across Europe, Classic Journeys walking tours in Italy and Morocco and Off the Beaten Path trips to the U.S. National Parks. The strong revenue growth across both segments generated significant operating leverage in 2023, with total company adjusted EBITDA of $71 million, an increase of $83 million versus a year ago, driven by a $78 million increase at the Lindblad segment and a $5 million or 29% increase at the Land Experiences segment.
Looking a little closer at the cost side of the business, operating expenses before depreciation and amortization, interest and taxes increased $65 million or 15% versus 2022, led by a $39 million or 14% increase in cost of tours versus a year ago, primarily related to operating additional ship and land-based itineraries. Fuel costs decreased year-on-year as increased usage from operating additional trips was more than offset by lower pricing versus a year ago. Fuel was 5% of revenue in 2023 as compared to 7% of revenue in 2022. Sales and marketing costs increased $10 million or 17% versus a year ago, primarily due to higher commissions and royalties related to the increase in revenue and from increased search and direct mail marketing to drive future bookings.
And G&A spending increased $15 million or 17% excluding stock-based compensation and onetime items versus a year ago, primarily due to higher personnel costs as we ramp operations and increase credit card commissions related to final payments for upcoming itineraries and higher deposits on new reservations for future travel. Total company net loss available to stockholders of $50 million or $0.94 per diluted share improved $66 million versus the net loss available to common stockholders of $116 million or $2.23 per diluted share reported a year ago. The improvement reflects the significant ramp in operations, partially offset by $8 million of additional interest expense net associated with the higher rates and increased borrowings mostly related to our debt refinancing in May of 2023 and a $7 million increase in stock-based compensation primarily related to the increase in value of Natural Habitat.
Looking quickly at the fourth quarter of 2023, revenue increased 6% compared to the same period in 2022, due in large part to broader utilization of the fleet and additional land trip operations. Available guest nights at the Lindblad segment increased 18% due in large part to an additional transit voyage from Southeast Asia to French Polynesia on the resolution as well as from the timing of dry docks. As I highlighted on the last call, while taking guests on our transit voyages generates additional revenue on voyages that would normally be non-revenue generating, they do have a negative impact on occupancy and yields, which was evident in the Q4 metrics. The decrease in occupancy versus a year ago was predominantly due to the additional transit nights for sale as well as from increased cancellations on our Egypt itineraries due to the Israeli-Hamas war.
Adjusted EBITDA in the fourth quarter of $4 million increased $7 million from the fourth quarter a year ago, as the majority of the revenue growth in the quarter fell to the bottom line with operating expenses before depreciation and amortization, stock-based comp, interest and taxes up only 1% versus the fourth quarter a year ago. Turning to the balance sheet. We ended the year with $187 million in cash and short-term securities, an increase of $58 million versus the end of 2022, primarily driven by the net proceeds of $67 million from the debt refinancing back in May of 2023, which was offset by free cash flow use of about $4.5 million. Free cash flow for the year included $25 million in cash from operations, led by the improved operating performance, which was partially offset by interest payments of $44 million.
Please note that cash from operations was also negatively impacted by the use of future travel credits, which made up approximately 8% of ticket revenues in the current year. Cash from operations was more than offset by CapEx of $30 million, mostly from routine vessel maintenance as well as from investments in our digital initiatives. Looking ahead, we are excited by the sustained operating momentum across our expanded platform, and we anticipate significant growth in 2024, driven by higher occupancies and increased net yields across our fleet as well as additional travelers across our growing land businesses. The Lindblad segment is in a strong booking position for the upcoming year and the booking momentum has only accelerated with booking since the start of December for travel in 2024 up over 50% versus the same period a year ago for 2023.
Additionally, we have already booked over 87% of our full year projected ticket revenues for the year. Given the strong booking trends we are generating, we expect total company tour revenue in 2024 between $610 million and $630 million and adjusted EBITDA between $88 million and $98 million. Please note that these projections reflect the increased royalty rate associated with the expansion and extension of our National Geographic relationship as well as the impact of the voyage cancellations that Sven mentioned earlier. In addition to the robust P&L growth in 2024, we also anticipate strong free cash flow generation, excluding any growth CapEx. Maintenance CapEx is expected to be approximately $25 million to $30 million in the current year, which includes vessel maintenance as well as some additional investments in our digital initiatives.
We do anticipate buying part of the minority interest in our land companies during the first quarter, and we will continue to explore additional growth opportunities in the year ahead, including further diversifying our product portfolio or opportunistically expanding our fleet to capitalize on the continued growth in the demand for experiential travel. Thanks for your time this morning. And now Sven and I would be happy to answer any questions you may have.
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