Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) Q3 2019 Earnings Conference Call October 30, 2019 8:30 AM ET Company Participants Craig Felenstein - Chief Financial Officer Sven Lindblad - Founder and Chief Executive Officer Conference Call Participants Steve Wieczynski - Stifel Fred Wightman - Citi Greg Pendy - Sidoti George Kelly - Imperial Capital Operator Good morning, and welcome to the Lindblad Expeditions Inc. Reports Third Quarter 2019 Financial Results Conference Call and Webcast. All participant ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2019, including the Balance Sheets, Statements of Income, Comprehensive Income, Stockholders' Equity, and Cash Flows, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial details such as revenue, debt, and commitments Condensed Consolidated Balance Sheet Highlights (As of September 30, 2019) | Account | Sep 30, 2019 (in thousands) | Dec 31, 2018 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$529,613** | **$473,409** | | Total current assets | $143,563 | $150,183 | | Property and equipment, net | $345,280 | $285,979 | | **Total Liabilities** | **$394,257** | **$350,863** | | Unearned passenger revenues | $124,605 | $123,489 | | Long-term debt, less current portion | $216,117 | $188,089 | | **Total Stockholders' Equity** | **$128,020** | **$116,044** | Condensed Consolidated Statements of Income Highlights | Metric (in thousands) | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | **Tour Revenues** | **$100,983** | **$87,242** | **$267,294** | **$239,125** | | Operating Income | $15,659 | $10,281 | $34,145 | $28,860 | | Net Income | $2,726 | $5,346 | $18,656 | $16,105 | | Net (Loss) Income per Share (Diluted) | $(0.01) | $0.11 | $0.31 | $0.35 | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30) | Cash Flow Activity (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,550 | $39,258 | | Net cash used in investing activities | $(76,720) | $(45,510) | | Net cash provided by financing activities | $25,149 | $17,026 | | **Net (decrease) increase in cash** | **$(10,021)** | **$10,781** | [Notes to the Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail the company's business structure, accounting policies, and financial instrument activities, including segment operations, lease accounting adoption, debt facilities for fleet expansion, and derivative risk management - The company operates two reportable business segments: Lindblad, focusing on ship-based expeditions, and Natural Habitat, which offers land-based adventure travel[25](index=25&type=chunk)[26](index=26&type=chunk) - The company adopted the new lease accounting standard (ASU 2016-02) on January 1, 2019, resulting in the recognition of operating lease liabilities of **$6.2 million** and related right-to-use lease assets[31](index=31&type=chunk) - On July 17, 2019, the company completed a warrant exchange offer, converting all outstanding warrants into common stock, which resulted in the issuance of over **3.8 million shares** and a non-cash deemed dividend of approximately **$2.7 million**[62](index=62&type=chunk)[63](index=63&type=chunk) - The company has significant commitments for fleet expansion, including the construction of the National Geographic Endurance (delivery Q1 2020, price **$134.6 million**) and the National Geographic Resolution (delivery Q4 2021, price **$153.5 million**)[77](index=77&type=chunk)[78](index=78&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a 16% increase in tour revenues for Q3 2019, driven by the addition of the National Geographic Venture, and detailing liquidity, capital resources, and significant funding activities [Business Overview and 2019 Highlights](index=26&type=section&id=Business%20Overview%20and%202019%20Highlights) The company provides expedition cruising and land-based adventure travel, operating a fleet of eight owned ships with two new polar vessels under construction, and completed a warrant exchange offer in 2019 - The company operates a fleet of **eight owned expedition ships** and **five seasonal charter vessels**, with two new polar ice-class vessels, the National Geographic Endurance and National Geographic Resolution, scheduled for delivery in Q1 2020 and Q4 2021, respectively[24](index=24&type=chunk)[92](index=92&type=chunk) - In February 2019, the company contracted to build the National Geographic Resolution for approximately **$153.5 million** and in April 2019, entered into a senior secured credit agreement to finance up to **80% of its purchase price**[94](index=94&type=chunk)[95](index=95&type=chunk) - In July 2019, the company completed a warrant exchange and consent solicitation, converting all outstanding warrants into common stock and recording a non-cash deemed dividend of **$2.7 million**[96](index=96&type=chunk) [Results of Operations - Consolidated](index=30&type=section&id=Results%20of%20Operations%20-%20Consolidated) Consolidated tour revenues increased 16% in Q3 2019 and 12% in the first nine months of 2019, primarily due to the addition of the National Geographic Venture, though Q3 net income decreased due to foreign currency loss and higher interest expense Consolidated Results of Operations (in thousands) | Metric | Q3 2019 | Q3 2018 | % Change | 9 Months 2019 | 9 Months 2018 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Tour Revenues | $100,983 | $87,242 | 16% | $267,294 | $239,125 | 12% | | Operating Income | $15,659 | $10,281 | 52% | $34,145 | $28,860 | 18% | | Net Income | $2,726 | $5,346 | (49%) | $18,656 | $16,105 | 16% | - The increase in tour revenues for both the three and nine-month periods was primarily driven by the Lindblad segment, reflecting a significant increase in Available Guest Nights from the addition of the National Geographic Venture in late 2018[118](index=118&type=chunk)[119](index=119&type=chunk) - The decrease in Q3 2019 net income was primarily due to a **$2.3 million loss on foreign currency translation** and a **$0.8 million increase in interest expense** related to new vessel financing[133](index=133&type=chunk) [Results of Operations - Segments](index=32&type=section&id=Results%20of%20Operations%20-%20Segments) The Lindblad segment saw a 19% revenue increase in Q3 2019, driven by a 14% rise in Available Guest Nights, while the Natural Habitat segment's revenue grew 7% due to more departures and higher pricing, with both segments reporting significant operating income growth Segment Tour Revenues and Operating Income (Q3 2019 vs Q3 2018, in thousands) | Segment | Tour Revenues | % Change | Operating Income | % Change | | :--- | :--- | :--- | :--- | :--- | | Lindblad | $76,581 | 19% | $12,570 | 53% | | Natural Habitat | $24,402 | 7% | $3,089 | 49% | - Lindblad segment's Q3 performance was driven by a **14% increase in Available Guest Nights**, a **7% increase in Net Yield to $1,054**, and an occupancy increase to **94% from 92% YoY**[135](index=135&type=chunk)[137](index=137&type=chunk) - Natural Habitat segment's Q3 revenue growth was due to additional departures, increased travelers, and itinerary changes leading to higher average pricing[141](index=141&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by operating cash flow, existing debt facilities, and advance passenger receipts, with net cash from operations at $41.6 million for the first nine months of 2019, primarily used for new vessel construction - Net cash from operating activities increased by **$2.3 million to $41.6 million** in the first nine months of 2019 compared to 2018, due to improved operating results and higher bookings[149](index=149&type=chunk) - The company has significant funding needs for its two new polar vessels, the National Geographic Endurance and Resolution, which will be funded by cash on hand, dedicated Export Credit Agreements, its revolving facility, and operating cash flows[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) - As of September 30, 2019, the company had a working capital deficit of **$17.3 million** and cash and cash equivalents of **$104.1 million**, with the stock repurchase plan having a remaining balance of **$12.1 million**[157](index=157&type=chunk)[158](index=158&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are related to foreign currency exchange rates, particularly with the Norwegian Kroner for ship construction, and interest rates on variable-rate debt, which are partially hedged with derivatives - The company is exposed to foreign currency risk, particularly with the Norwegian Kroner (NOK) for its new ship construction, where a hypothetical **10% weakening of the NOK** would result in an approximately **$7.7 million loss** recorded in other comprehensive income[167](index=167&type=chunk) - The company is exposed to interest rate risk on its variable-rate debt, where a hypothetical **1.0% change in the one-month LIBOR** would impact annual interest expense by approximately **$1.0 million**, partially mitigated by **$100.0 million in interest rate cap agreements**[168](index=168&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of September 30, 2019, concluding their effectiveness with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2019, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[169](index=169&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[171](index=171&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=41&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in various claims and legal actions arising in the ordinary course of business and maintains protection and indemnity insurance expected to cover any potential damages - The Company is involved in various claims and legal actions from time to time in the ordinary course of business and has insurance expected to cover damages[172](index=172&type=chunk) [Risk Factors](index=41&type=section&id=ITEM%201A.%20Risk%20Factors) This section states that there are no material changes to the risk factors previously disclosed, referring readers to the 'Risk Factors' section in the company's 2018 Annual Report on Form 10-K for a comprehensive discussion of risks - The company refers to the 'Risk Factors' section of its 2018 Annual Report filed on February 28, 2019, for a discussion of the most important risks and uncertainties affecting the business[174](index=174&type=chunk) [Unregistered Sale of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202.%20Unregistered%20Sale%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the quarter, and the company's stock and warrant repurchase plan had a remaining balance of $12.1 million as of September 30, 2019, with no shares repurchased in Q3 - There were no unregistered sales of equity securities in Q3 2019[175](index=175&type=chunk) - As of September 30, 2019, the company's stock and warrant repurchase plan had an available balance of **$12.1 million**, with no shares repurchased under the plan during the three months ended September 30, 2019[176](index=176&type=chunk) [Defaults Upon Senior Securities](index=43&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Mine Safety Disclosures](index=43&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=43&type=section&id=ITEM%205.%20Other%20Information) Not applicable [Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and XBRL data files - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL interactive data files as exhibits[181](index=181&type=chunk)

Financial Data and Key Metrics Changes - Total company revenue increased by 10% year-on-year, with the Lindblad segment growing by 9% and Natural Habitat by 18% [28] - Adjusted EBITDA rose by 9%, driven by an 11% increase in the Lindblad segment [28] - Net income available to common stockholders was $1 million or $0.02 per diluted share, compared to $0.1 million or $0.00 per diluted share in the same quarter last year [35] Business Line Data and Key Metrics Changes - The Lindblad segment generated revenue of $64.9 million, a 9% increase from $59.6 million in Q2 2018, attributed to a 6% increase in available guest nights and a 3% increase in net yield to $1,030 per night [29] - Natural Habitat segment revenues grew by 18% to $11.8 million, but adjusted EBITDA decreased to a loss of $0.8 million due to a 19% increase in operating expenses [34] Market Data and Key Metrics Changes - The US fleet expanded from 124 berths to 324 berths, achieving strong occupancy levels during the Alaska season [8] - The company reported a strong booking environment, with the Lindblad segment pacing 10% ahead of the same point last year [40] Company Strategy and Development Direction - The company is focused on expanding capacity while maintaining high occupancy levels and net yields, with plans to add the National Geographic Endurance to the fleet next year [11][27] - Investments in technology infrastructure, including a new CRM platform and reservation system, are aimed at improving guest engagement and operational efficiency [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth in the second half of the year, citing strong bookings and higher yields expected from existing vessels [45] - The company anticipates total tour revenue for 2019 to be between $350 million and $358 million, representing a 13% to 16% growth compared to 2018 [41] Other Important Information - The company became carbon neutral in 2019, offsetting its carbon footprint through investments in clean energy and reforestation [18][21] - The company raised between $1.5 million and $2 million annually to support conservation efforts globally [19] Q&A Session Summary Question: Confidence in EBITDA growth for the second half of the year - Management noted that the results year-to-date align with expectations, and the benefits from new inventory will be more pronounced in the latter half of the year [44][45] Question: Concerns about slight dip in occupancy - Management indicated that a 1% drop in occupancy is not significant and attributed it to the addition of inventory during the shoulder season [46][47] Question: Response to shorter itinerary cruises - Initial responses to new shorter itineraries have been positive, with sold-out programs in Galapagos, but repeat rates are still being assessed [50][51] Question: Trends from non-US sourced passengers - Currently, about 90% of guests are from the US, but there are plans to expand international marketing efforts in the future [53][54] Question: Timeline for new reservation system and dynamic pricing - The new reservation system is expected to be functional by late 2019 or early 2020, with dynamic pricing impacts anticipated in 2020 [57] Question: Contribution margin changes as ships mature - Typically, margins are lower in the first year due to marketing and staffing investments, but they are expected to optimize by the second or third year [62] Question: Major one-time costs affecting EBITDA guidance - Management identified increased marketing spend and new IT project expenses as significant one-time costs impacting EBITDA [66][67]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 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). ☒ Yes ☐ No For the quarterly period ended June 30, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI ...

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to ______________ Commission File Number 001-35898 96 Morton Street, 9th Floor, New York, New York 10014 LINDBLAD EXPEDITIONS HOLDINGS, INC. (Address of ...