Lindblad Expeditions Holdings Inc.

Hello, everyone, and welcome to the Limbled Expedition Holdings 2022 Fourth Quarter and Full Year Financial Results. My name is Bruno, and I will be operating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. I will now hand over to your host, Craig Fallenstein, Chief Financial Officer. Please go ahead.

Thank you, Bruno. Good morning, everyone, and thank you for joining us for Lindblad's 2022 fourth quarter year-end 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, liquidity, and 2023 expectations 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 forecast or estimates, and we undertake no obligation to update any such forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, our comments may reference non-GAAP financial measures. a reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. And with that out of the way, let me turn the call over to Delph.

Thanks, Craig. Good morning, and thank you all for joining us today. In this call, I will recap various highlights from 2022 and also share thoughts on the very positive outlook we have for the business in the months and years ahead. For those of you who have been following our journey, you know that our growth strategy includes both organic growth in our existing fleet and land companies and also strategic acquisitions that are value accretive out of the gate and provide an array of travel options for our adventurous guests. Adding to our platform of premium travel companies focused on creating life-changing guest experiences has been a powerful means of building shareholder value. As a team, we continue to be energized by this dual-pronged strategy and are pushing forward in each of these areas. But before providing you with more detail, I do want to thank all of the people at Lindblad Expeditions, Natural Habitat, Divine Cycling and Adventure, Off the Beaten Path, and Classic Journeys for their tremendous hard work last year. Without their efforts, our company could not have emerged from the pandemic so successfully and would not be so well poised for the future. 2022 is a year that will be remembered as being the year of resurgence. While our full fleet was sailing by the end of 2021 and all of our land companies, including the three acquired during 2021, had restarted operations, it was in 2022 that we started getting more traction. Last year, guests became more comfortable with foreign travel, countries significantly loosened COVID quarantine requirements, and our vendors and partners across the globe eventually returned to a state closer to that of pre-pandemic operations. Craig will provide more detail, but we made significant progress this past year financially, including a $52 million improvement in EBITDA versus 2021. And while the full year EBITDA stood at a loss as we ramped operations, momentum built over the course of the year, and we were EBITDA positive in the second half of 2022. In the Lindblad segment of the business, it was an exciting year regarding the fleet. 2022 represented the first full year of operation for the two new polar ice class ships, the National Geographic Endurance and the National Geographic Resolution. These sister ships, which together represent an approximately 40% increase in guest capacity versus where we were in 2019, performed extremely well in the early and late part of the years in Antarctica, and during the summer months, in the Arctic. Their patented expo hotel technology and polar class 5 ice rating in combination with premium accommodations and dining make these ships extremely effective and comfortable in the most remote places on Earth. In keeping with our philosophy of focusing on smaller purpose-built ships, these two ships with capacities of 126 passengers are able to provide more access to remote locations and a higher number of shore landings per voyage than larger ships can provide. At both poles, we were able to explore areas that we had never visited before with unforgettable wildlife, land and seascapes featuring prominently in our guest experiences. Notably, we were able to go farther south in the Amundsen Sea off Antarctica than ever before and also explore the Northwest Passage weeks earlier than at any time in our history. and Ross Seals were only two of the typically hard to find magnificent polar species that these new ships were able to take our guests to observe based on the ship's remarkable capabilities in polar ice. In addition to the polar ships, this past August we also welcomed the National Geographic Islander 2 into our fleet. Replacing the Islander in the Galapagos, she features more spacious accommodations, indoor-outdoor dining, and amenities such as a science hub, fitness studio, and sauna. She is a beautiful ship that is earning extremely positive guest reviews in her first months of expeditions. Purchase and refurbishment of this ship is a great example of how we can be opportunistic in the acquisition arena given the deep relationships that we have forged for decades in the ship community and with partner shipyards. This past year we also solidified our operating rights in the Galapagos Islands with the extension of our existing cupos, or guest permits, for an additional 20-year period. Our relationships with the Ecuadorian government and the many partners we have on the mainland, as well as in the islands themselves, represent the work of many people in our company over 40-plus years. A further highlight of 2022 was the strength of our land companies. As you may recall, starting with the acquisition of Natural Habitat in 2016 and more recently with the purchase of Off the Beaten Path, divine cycling and classic journeys over the last two years, we've been building a platform company centered around best-in-class adventure travel companies. We're happy to announce that as a group, the land companies generated nearly $18 million in EBITDA in 2022, more than double what Natural Habitat alone delivered in 2019. These companies are riding a strong wave of guests who are returning to travel in these different segments, and they've done a good job building the team and infrastructure to handle this growth. We have just begun to scratch the surface on the benefits of having these leading travel companies under one umbrella and anticipate sustained growth as we capture an even greater share of our guests' travel plans. As excited as we were by the resurgence in 2022, we are even more excited by the expectations we have for 2023 and beyond. As we look ahead, there are several reasons we're optimistic. From a financial standpoint, we expect that we will have a record year in 2023 in both revenue and EBITDA. Demand for high-quality experiential travel continues to grow, and we are well positioned to capture significant piece of that interest. In what is often called the wave season for bookings, typically in the January and February timeframe, we have experienced record inbound call and booking volumes. In January, we averaged over 50% higher net bookings volumes than in either 2022 or 2019. And bookings for 2023 are currently up 47% versus 2019 on the same date that year. The investments we made in 2022 to develop a more robust omnichannel marketing approach by adding significant digital marketing and CRM capabilities on top of our historic combination of email, brochures, and letters is paying off. We effectively doubled the organic link clicks to our website from social media channels, as well as on our on-platform media video views versus 2021. We're also now beginning to unlock the advanced analytics, which will make our marketing approach more effective and more cost-efficient. Looking forward, we expect to roll out our new reservations and booking system, CWARE, in Q2 of 2023. We greatly anticipate that what this upgraded technology will mean for our team and for our travel advisor partners. Ultimately, linking this system to Salesforce and a number of marketing analytics technologies will mean a new day in our CRM capabilities. These technical changes will occur over the course of 2023 and evolve and improve with every passing month thereafter. On a final note regarding my optimism for the future, we strengthened our team meaningfully in 2022. The majority of the new hires occurred in the revenue generation ranks of the organization. We hired our new chief commercial officer, Noah Brodsky, who has great expertise in performance marketing. We also added a senior vice president of sales, industry veteran John Delaney, who is focused on building our base of travel advisor relationships. At the same time, we made several additions to our technology and digital teams and added resources and expertise to our call center and pre-voyage guest service teams. It has been gratifying to see how our mission-driven culture has resonated with excellent candidates as we recruit for roles across multiple functions in the company. The challenges that came with the pandemic are subsiding, but there are just a lingering few that I want to mention as they are continuing to elevate our cancellations versus historical levels. We are finding that there are still a number of guests who are concerned about health risks related to travel, particularly to more remote places. There are also a few countries who still require quarantine measures if someone tests positive for COVID. We continue to see some headwinds with regard to airline travel in areas such as cost, availability, or reliability. The Northeast Passage, which has numerous stops in Russia, will not be viable anytime soon given the war with Ukraine. So we are now offering guests who had previously booked the Northeast Passage the option to sail the Northwest Passage as well as the Norwegian fjords and Svalbard. In recent weeks, unrest in Peru has caused us to temporarily halt trips to Machu Picchu and the Amazon, which has also impacted several of our Galapagos itineraries. As of today, the situation in Peru is improving, and we intend to soon return to normal operations, provided the unrest across the country does not return. As an overall statement, the challenges of the last few years have driven change inside the company which has made us stronger. We have become faster and more nimble in responding to external factors such as evolving international health policies and geopolitical events. We have also taken this time to revamp and upgrade core processes and systems within the company to handle a higher volume of business. A motivating factor in this work has been that guests are demonstrating an increased appetite for the natural world after more than two years of restricted travel. Their enthusiasm is evident not only during their trips and voyages, but also in their consumption of content. It is this combination of an upswing in guest interest and demand, coupled with our stronger product and company capabilities, that gives me great optimism for our future. I will close by updating you briefly on our ongoing work across the globe in an area that is central to our mission and purpose at Lindblad Expeditions. In 2023, we will continue to build on our environmental and conservation programs that have included our commitment to being 100% carbon neutral. We will also continue to be single-use plastic-free on our ships, as we have been since 2019, and we will maintain our commitment to using only sustainably sourced seafood. All food on our ships will continue to be locally sourced wherever possible. We will also continue supporting artisans in the communities we visit through our artisan fund and through our global gallery retail shops, which bring locally created art and other products to our guests. In the areas of science and education, we will continue to provide space on our ships for scientists to conduct field work, and we will continue to perform citizen science projects as well. Just this past week, The 2023 class of 50 elementary, middle school, and high school teachers who will travel with us as part of the Lindblad Expeditions National Geographic Grosvenor Teacher Fellowship Program were notified that they will be going on voyages across the world. These voyages will help them teach our next generation the importance of loving, studying, and conserving the most remote places on Earth and the wildlife that call those places home. I will turn the call over to Craig. Thanks, Dolph.