Lindblad Expeditions Holdings Inc.

Hello and welcome to today's Limblad Expeditions Holding Incorporated 2022 second quarter results. My name is Bailey and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Craig Fellenstein, Chief Financial Officer of Limblad Expeditions. Craig, please go ahead.

Thank you, Bailey. Good morning, everyone, and thank you for joining us for Linblad's 2022 second quarter earnings call. With me on the call today is Dolph Burley, Linblad's chief executive officer. Dolph will begin with some opening comments, and then I will follow with some details on our financial results and liquidity before we open the call for Q&A. You can find our latest earnings release 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 any 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 out of the way, let me turn the call over to Del.

Thanks, Craig. Good morning, everyone, and thank you all for joining us today. In today's call, I look forward to sharing our progress in ramping the company back to full operations, giving you a picture of how we are navigating short-term challenges in our business environment, Updating you on the progress we are making across the company in several business functions and with our land companies, and articulating why we are quite optimistic about the future for Lindblad Expeditions. Without question, the biggest highlight from this past quarter was operating all 10 of our ships on itineraries across the globe. With the return of the National Geographic Orion to service in French Polynesia, Q2 marked the first quarter where every one of our ships carried guests since the pandemic struck in March of 2020. I want to thank the many talented leaders on our ships and across our offices who worked hard to bring all the ships back to voyaging in this last quarter. In addition to the Orion, our other blue water ships, the National Geographic Explorer, Endurance, and Resolution, all followed up their successful Antarctic seasons with robust voyages across the Arctic and Europe. At the same time, our U.S. flagged ships, the National Geographic Venture, Quest, Seabird, and Sea Lion, which spent the winter primarily in Central America and Baja, California, made their way north and returned to exploring the Pacific Northwest and Alaska. Lastly, our Galapagos ships, the Endeavour 2 and Islander, continued to ramp occupancies as more and more guests returned to travel. Particularly gratifying are the stories of guests whose spirits are nourished and elevated from their interaction with the natural beauty of the remote places we visit, the abundant wildlife whose habitats we are striving to help protect, and the indigenous peoples and cultures with whom we partner in communities across the world. It is worth noting that we have released a full schedule of offerings with over 100 itineraries across all seven continents for 2023 and beyond. This set of offerings puts on full display the capability of the company, and we believe will be compelling for both our longtime loyal guests as well as the many new guests we are attracting with the omnichannel marketing approach we have been honing, and which I will describe further in a few minutes. I would characterize Q2 as a quarter where we saw, on balance, improvements in the reduction of impact that COVID has been having on our business. The removal of the airline requirement for a negative COVID test for those passengers returning from foreign countries and the lifting of the mask mandate for the airlines sent a strong signal about the safety of travel to consumers and removed a stress point for travelers. While both of these developments will certainly help drive bookings over the long term, We did see a rise in COVID cases at times among our guests and crew, albeit predominantly with mild symptoms. When cases do arise, our crew is well trained to handle those circumstances, and we diligently follow appropriate protocols. The safety of our crew and guests remains paramount for us as we return to providing our signature high quality, authentic, and immersive experiences. We will continue to evaluate and amend our protocols as necessary. While nearly all of the geographies in which we traditionally operate have reopened, there are currently two exceptions. The first we discussed last quarter, and that is the voyages impacted by the Russia-Ukraine conflict. There were eight voyages that had to be rerouted, impacting over 500 booked guests. While creating some short-term headwinds, the good news is as of this point, we have successfully rebooked 72% of those guests on other voyages between 2022 and 2023. The other closed destination is Japan, which resulted in the need to reschedule five itineraries on the National Geographic Resolution. As a result of ongoing cruise ship restrictions there, we are limiting the use of the resolution in the third quarter and instead will be repositioning her earlier down to Antarctica so she can enjoy a longer season in one of our most successful geographies. There were nearly 300 guests impacted by the change in itineraries And thus far, we have retained close to 70% of them between 2022 and 2023. The high guest retention rates we have maintained while shifting itineraries speaks to the flexibility of our operations and the desire of our loyal guests to explore. Despite the short-term impact of these itinerary changes, we are well positioned to continue our momentum moving forward. From a booking trend perspective, we continue to see strength in the latter half of 2022 and into 2023, with bookings for 2023 26% higher than at this same time in 2019 for 2020 prior to the pandemic. As we look to further drive bookings for both the short and long term, we have been refining our approach to what we call our sales funnel, and there are a few important changes I want to mention. After substantial investment in our digital marketing capability over the last year, we have coupled our paid and earned digital marketing strategies with our traditional mail and email campaigns to create what I would describe as a balanced omnichannel marketing approach. As you may recall from previous earnings calls, our company is investing in an overhaul of our booking system, website, and CRM capabilities and this work continues to progress with a transition to the new Seaware booking platform anticipated by the end of the year. We are finding that our digital efforts are particularly effective in attracting new guests to the company. We're also excited on the marketing front to welcome Noah Brodsky as our new Chief Commercial Officer. Noah brings deep experience in the travel industry, having served in leadership positions at Travel & Leisure, Wyndham Hotel Group, and Starwood Hotels and Resorts. Noah is a known innovator with great passion for creating remarkable guest experiences, and he will be responsible for all revenue-generating activity in the company, including sales, marketing, and partnership functions. We're excited to have him as part of our leadership team to help us realize the full potential of our platform. Another exciting operational development is the upgrade work we have been undertaking on the Islander 2, We're nearly finished and look forward to her launch in late August when she will begin hosting guests in the Galapagos. This all-sweet ship has been revamped with a focus on providing the ultimate expedition experience, and we are very excited for guests to enjoy all that she has to offer in one of the world's most remarkable destinations. In the midst of our operational progress and marketing momentum, there are some ongoing challenges we continue to manage against in the macro environment. As we have previously discussed, fuel costs have continued to increase dramatically with pricing up over 110% from 2019 levels. Additionally, managing global supply chain channels has increased shipping costs and driven costs up for certain goods, which we are minimizing by working closely with suppliers and sourcing even more locally when advantageous. Lastly, recruiting and retaining crew predominantly on our U.S. flagships has been more challenging than usual given marketing dynamics, but we have been able to ensure that we have the numbers and quality of crew which are so fundamental to our operations and the Lindblad guest experience. Turning to our land-based business, another bright spot in Q2, the combination of natural habitat, off the beaten path, dew vine cycling and adventures, and classic journeys delivered positive EBITDA for the quarter as travelers embraced the opportunity to return to exploring U.S. national parks, biking through Italy and France, and walking tours across Europe. As I have shared in the past, the strategy as we develop these companies is to provide our guests across the full complement of Lindblad companies with a compelling one-stop shop for their adventure travel needs. We are excited about what these companies will do individually with the support of the shared services that we are creating in the broader company and also excited about the future potential we believe can be unlocked through cross-marketing between our family of companies. With momentum across all facets of our company, we are quite optimistic about the future. The world is almost fully reopened and guests are ready to travel again. Our offerings are on trend for guests who are prioritizing adventure and meaningful experiences in their lives, and this provides some tailwind in our business. While the challenges are not over, we are experiencing them as less severe today than in the recent past, and our team has become adept at handling them. The passion on this team for our guest experience and the leadership role we play in the movement to sustain the natural ecosystems and indigenous people's cultures in the places we visit are the foundations upon which all of the rest of our work is built. Our entire team is excited to welcome a growing number of guests back to exploration as our momentum builds. And now, I'd like to turn the call over to Craig.