Lindblad Expeditions Holdings Inc.

Hello and welcome to today's Lindblad Expeditions Holdings Incorporated third quarter 2022 financial results call. My name is Bailey and I'll 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 Fallenstein, Chief Financial Officer. So please go ahead when you're ready.

Thank you, Bailey. Good morning, everyone, and thank you for joining us for Lindblad's 2022 Third Quarter Earnings Call. With me on the call today is Dolph Burley, Lindblad'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 SAC 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 Dolph.

Thanks, Craig. Good morning, and thank you all for joining us on the call today. The third quarter was an extremely rewarding one for Lindblad Expeditions on multiple fronts, highlighted by strong financial results, diligent operational execution, and further progress across a variety of strategic initiatives. The entire team has been extremely focused on continuing to deliver amazing guest experiences, attracting a broader audience of guests across our platform, returning the company to profitability, building the combination of talent, systems, and operating capabilities which will support future growth, and ensuring the acquisitions we made last year are performing well. I'm excited about all that we accomplished and grateful for the efforts by our team and our partners across the globe who have gone above and beyond to make this progress happen. On our Q2 earnings call, we foreshadowed that we anticipated returning to profitability on the EBITDA front in Q3. Not only did we do just that, but the $18.6 million in EBITDA Lindblad generated exceeded the expectations we had for Q3 only a few months earlier. Craig will be sharing greater details on the factors behind this performance But in broad strokes, they included higher occupancy levels driven by strong summer seasons across Alaska, the Galapagos, and the Arctic, significant demand across our land-based businesses, focusing of our marketing approach across the company, and efforts of our entire team to maintain efficiencies while delivering extraordinary guest experiences. One of the operational highlights from this past quarter was the sighting of perhaps the largest number of narwhals we have ever encountered in our 50-plus year heritage up in the Northwest Passage. This sighting delighted our guests and was made possible by the advanced ice capabilities of our newest ships, the National Geographic Endurance and the National Geographic Resolution, who made their inaugural voyages into this beautiful part of our planet. Experiences such as these are a reminder to our guests and our team of how exhilarating and how memorable voyages with Lindblad Expeditions continue to be. As we executed operationally this past quarter, we were also able to capitalize on certain changes in marketplace dynamics. Chief among these were an evolution in the restrictions around COVID, which certainly raised the comfort and confidence levels towards travel on the part of our guests. The relaxation of COVID testing, quarantine rules, and mask mandates in most of the countries where we operate, including most notably the lifting of the requirements to test before returning to the U.S., removed significant concerns for travelers. At the same time, over the course of the quarter, in close consultation with medical experts, we also made adjustments to our company policies and protocols fleet-wide. We have now removed all pre-departure testing across our fleet are only testing guests as necessary during each voyage and the requirement to wear masks has been lifted. The safety of our crew and guests remains a top priority and we will continue to evaluate and amend our protocols as necessary. Overall, the combination of relaxed protocols, broader immunization levels and a reduction in the severity of the most recent COVID variants have created a positive shift in the psyche of our guests. A manifestation of this shift is the tremendous zeal we are noting on the part of our guests to return to voyaging. There is great enthusiasm for seeing the world's natural wonders, learning from our naturalists and guides, and sharing this experience with traveling companions. We are not only seeing this excitement on board our fleet every day, but we are also seeing this enthusiasm with regards to demand for future travel. Part of this is certainly pent-up demand that built up over the last two and a half years But prior to the pandemic, there was a growing population of travelers who were interested to experience adventure travel, and that trend appears to be picking back up again. We are not only seeing strong bookings from our loyal returning guests, but also from a whole new cohort of first-timers who are looking for immersive and authentic travel experiences. During the third quarter, we saw a 71% increase in gross bookings for in-year travel, and a 31% increase in bookings for next year travel compared to Q3 2019. Overall, we remain very well positioned for the year ahead with bookings for 2023 23% ahead of where bookings were for 2020 at the same point in 2019 prior to the pandemic. There are a variety of steps we are taking to further accelerate our marketing and booking capabilities. And let me touch upon three. First, We are at a stage in our digital transformation where we can see real traction with our omnichannel marketing approach. Refinement in our search engine marketing, a focusing of our messaging on the differentiators behind the Lindblad brand, and a blending in of our traditionally very successful print and email marketing approaches has us reaching a wider audience of qualified guests. Second, we have invested in additional sales and marketing leadership under our new Chief Commercial Officer, Noah Brodsky, by adding experienced talent in both the global head of sales and also brand and communication roles. Third, in our guest contact center, we have added highly experienced leadership and increased the number of guest-facing frontline experts. This has greatly improved our response times in that critical function, enabled us to amplify the impact of our messaging around these life-changing trips for our guests, and greatly reduced any friction guests have in booking their voyages. While optimism is the prevailing sentiment, it is important to know that there are still challenges we are addressing in this business environment. Despite the strong results in Q3, the financial performance would have been even better had it not been for the impact of the Russia-Ukraine conflict on eight voyages, including our Northeast Passage itineraries, and the cancellation of five Japan voyages on the National Geographic resolution. The good news is the majority of the guests that were impacted have rescheduled for future voyages, and we don't foresee any restrictions on currently scheduled geographies moving ahead. Another item that impacted the quarter along with parts of 2023 is an increase in guest cancellations. While gross bookings continue to far exceed cancellations every week, we are seeing cancellations run higher than pre-pandemic levels, with most often noted reasons related to the logistics and cost of air travel and some lingering COVID concerns. The majority of these cancellations are not looking for refunds, but are pushing their voyages to later dates, which speaks to the robust and sustainable demand for expedition travel. We also continue to manage through higher fuel costs and supply chain headwinds. Fuel costs, while still high, have begun to abate a bit, and we are minimizing the supply chain impact by working closely with suppliers and sourcing even more locally when advantageous. Let me now turn to the latest additions to the company, starting with the newest ship in our fleet, the National Geographic Islander 2. This all-suite ship launched in the Galapagos during August, and the initial response has been nothing short of outstanding. The 48-passenger ship has been personally renovated to deliver our signature immersive experience in this amazing geography. She features diverse exploration tools and amenities, along with indoor, outdoor dining options, and comfortable and stylish public places to view the incredible wildlife and landscape under the watchful eye of our highly experienced staff and crew, many of whom have been with the company for many years. We're also seeing strong momentum across our expanded platform of land companies, As many of you know, last year we broadened and deepened our platform of adventure and experiential travel opportunities with the acquisitions of cycling company, DuVine Cycling and Adventure, Off the Beaten Path, which focuses primarily on the U.S. national parks, and Classic Journeys, a leader in walking tours across the world. Following the blueprint we used to drive the growth of natural habitat, our intention is to build these companies aggressively leveraging the cross-selling opportunities and the scale and support that resides in our larger company. That growth has already started as all of these companies, including Natural Habitat, have been able to capitalize on the significant demand coming out of the pandemic. They are ideally situated to attract travelers who want to get out and explore, given their focus on unique experiences with small groups of travelers in remote locations. We have already significantly surpassed the contributions from our land business back in 2019, and we have just begun to scratch the surface of what these combined entities can do together. By way of summary, we are very optimistic about the future for Lindblad Expeditions. Although challenging and at times painful, the pandemic months were a time when we focused on building the capability of the company from a marketing systems and operational standpoint. A number of these investments have been technical, such as our investment in a new website and our marketing technology stack, but just as importantly, we have invested in building the leadership capabilities in the company. While there is still some uncertainty ahead, we know we are well prepared and highly practiced in our ability to keep guests and our crew safe and deliver remarkable guest experiences. We're energized by the momentum we are generating across all facets of the company, and we're excited by the opportunity to build upon this success to drive additional earnings growth in the months and years ahead. And now, I will turn the call over to Craig.