10-Q 1 lindb20220930b_10q.htm FORM 10-Q lindb20220930b_10q.htm
0001512499 LINDBLAD EXPEDITIONS HOLDINGS, INC. false --12-31 Q3 2022 - - 165,000 165,000 62,000 62,000 80,000 80,000 0.0001 0.0001 1,000,000 1,000,000 62,000 62,000 80,000 80,000 0.0001 0.0001 200,000,000 200,000,000 53,132,670 50,800,786 53,065,365 50,755,546 10 5 2 1.4 7.4 0.8 0.8 1.5 9.5 0 0.4 1.0 Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged and recognized in gain (loss) on foreign currency. For the three months ended September 30, 2022, recognized as income in interest expense, net. For the nine months ended September 30, 2022, $1.3 million was recognized as income in interest expense, net, and $0.6 million was reclassified from other comprehensive income (loss) to interest expense, net. For the three and nine months ended September 30, 2021, recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity. Recorded in prepaid expenses and other current assets. For the three and nine months ended September 30, 2021, $0.9 million and $1.0 million, respectively, were recognized as losses on foreign currency in the condensed consolidated statements of income, and $2.4 million and $2.0 million losses, respectively, were recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity. 00015124992022-01-012022-09-30 xbrli:shares 00015124992022-10-31 thunderdome:item iso4217:USD 00015124992022-09-30 00015124992021-12-31 0001512499lind:SeriesARedeemableConvertiblePreferredStockMember2022-09-30 0001512499lind:SeriesARedeemableConvertiblePreferredStockMember2021-12-31 iso4217:USDxbrli:shares 00015124992022-07-012022-09-30 00015124992021-07-012021-09-30 00015124992021-01-012021-09-30 0001512499us-gaap:CommonStockMember2022-06-30 0001512499us-gaap:AdditionalPaidInCapitalMember2022-06-30 0001512499us-gaap:RetainedEarningsMember2022-06-30 0001512499us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-30 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

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

 

LINDBLAD EXPEDITIONS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

27-4749725

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

96 Morton Street, 9th Floor, New York, New York, 10014

(Address of principal executive offices) (Zip Code)

 

(212) 261-9000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

     

Common Stock, par value $0.0001 per share

 

LIND

 

The NASDAQ Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☒ No

 

As of October 31, 2022, 53,141,196 shares of common stock, par value $0.0001 per share, were outstanding.

 

 

 

LINDBLAD EXPEDITIONS HOLDINGS, INC.

 

 

Quarterly Report On Form 10-Q

For The Quarter Ended September 30, 2022

 

Table of Contents

 

   

Page(s)

     

PART I. FINANCIAL INFORMATION 

 
     

ITEM 1.

Financial Statements (Unaudited)

 
 

Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021 

1

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)

2

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)

3

 

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)

4

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

6

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

7

     

ITEM 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

20

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

34

ITEM 4.

Controls and Procedures

34
     

PART II. OTHER INFORMATION

 
     

ITEM 1.

Legal Proceedings

34

ITEM 1A.

Risk Factors

34

ITEM 2.

Unregistered Sale of Equity Securities and Use of Proceeds

35

ITEM 3.

Defaults Upon Senior Securities

35

ITEM 4.

Mine Safety Disclosures

35

ITEM 5.

Other Information

35

ITEM 6.

Exhibits

36
     

SIGNATURES 

37

 

 

PART 1.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

 
 

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

  

September 30, 2022

  

December 31, 2021

 
   (unaudited)     

ASSETS

        

Current Assets:

        

Cash and cash equivalents

 $116,446  $150,753 

Restricted cash

  29,524   21,940 

Marine operating supplies

  9,608   8,275 

Inventories

  2,140   2,278 

Prepaid expenses and other current assets

  45,252   27,094 

Total current assets

  202,970   210,340 
         

Property and equipment, net

  540,385   542,418 

Goodwill

  42,017   42,017 

Intangibles, net

  11,671   13,235 

Deferred tax asset

  6,849   7,609 

Right-to-use lease assets

  3,439   4,402 

Other long-term assets

  4,199   7,470 

Total assets

 $811,530  $827,491 
         

LIABILITIES

        

Current Liabilities:

        

Unearned passenger revenues

 $247,005  $212,598 

Accounts payable and accrued expenses

  56,774   49,252 

Lease liabilities - current

  1,524   1,553 

Long-term debt - current

  24,086   26,061 

Total current liabilities

  329,389   289,464 
         

Long-term debt, less current portion

  534,677   518,658 

Lease liabilities

  2,212   3,178 

Other long-term liabilities

  359   247 

Total liabilities

  866,637   811,547 
         

Commitments and contingencies

  -   - 

Series A redeemable convertible preferred stock, 165,000 shares authorized; 62,000 and 80,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

  68,090   83,901 

Redeemable noncontrolling interests

  31,583   10,626 
   99,673   94,527 
         

STOCKHOLDERS’ DEFICIT

        

Preferred stock, $0.0001 par value, 1,000,000 shares authorized; 62,000 and 80,000 Series A shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

  -   - 

Common stock, $0.0001 par value, 200,000,000 shares authorized; 53,132,670 and 50,800,786 issued, 53,065,365 and 50,755,546 outstanding as of September 30, 2022 and December 31, 2021, respectively

  5   5 

Additional paid-in capital

  82,432   58,485 

Accumulated deficit

  (237,217)  (136,439)

Accumulated other comprehensive loss

  -   (634)

Total stockholders' deficit

  (154,780)  (78,583)

Total liabilities, mezzanine equity and stockholders' deficit

 $811,530  $827,491 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(unaudited)

 

   

For the three months ended September 30,

   

For the nine months ended September 30,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Tour revenues

  $ 144,783     $ 64,507     $ 303,540     $ 81,555  
                                 

Operating expenses:

                               

Cost of tours

    87,576       45,600       208,023       73,270  

General and administrative

    24,535       17,023       68,882       46,123  

Selling and marketing

    16,025       10,213       41,193       17,680  

Depreciation and amortization

    10,839       9,323       33,193       25,785  

Total operating expenses

    138,975       82,159       351,291       162,858  
                                 

Operating income (loss)

    5,808       (17,652 )     (47,751 )     (81,303 )
                                 

Other (expense) income:

                               

Interest expense, net

    (8,369 )     (6,063 )     (26,500 )     (17,436 )

Loss on foreign currency

    (872 )     (1,434 )     (1,417 )     (1,165 )

Other (expense) income

    (333 )     4,357       84       4,362  

Total other expense

    (9,574 )     (3,140 )     (27,833 )     (14,239 )
                                 

Loss before income taxes

    (3,766 )     (20,792 )     (75,584 )     (95,542 )

Income tax expense (benefit)

    1,732       2,507       619       (2,648 )
                                 

Net loss

    (5,498 )     (23,299 )     (76,203 )     (92,894 )

Net income (loss) attributable to noncontrolling interest

    3,228       1,039       3,000       (17 )

Net loss attributable to Lindblad Expeditions Holdings, Inc.

    (8,726 )     (24,338 )     (79,203 )     (92,877 )

Series A redeemable convertible preferred stock dividend

    1,036       1,340       3,618       3,962  
                                 

Net loss available to stockholders

  $ (9,762 )   $ (25,678 )   $ (82,821 )   $ (96,839 )
                                 

Weighted average shares outstanding

                               

Basic

    53,045,329       50,110,188       51,665,912       50,013,191  

Diluted

    53,045,329       50,110,188       51,665,912       50,013,191  
                                 

Undistributed loss per share available to stockholders:

                               

Basic

  $ (0.18 )   $ (0.50 )   $ (1.60 )   $ (1.87 )

Diluted

  $ (0.18 )   $ (0.50 )   $ (1.60 )   $ (1.87 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(unaudited)

 

   

For the three months ended September 30,

   

For the nine months ended September 30,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Net loss

  $ (5,498 )   $ (23,299 )   $ (76,203 )   $ (92,894 )

Other comprehensive income:

                               

Cash flow hedges:

                               

Net unrealized income

    -       (2,333 )     -       (1,789 )

Reclassification adjustment, net of tax

    -       2,535       634       2,650  

Total other comprehensive income

    -       202       634       861  

Total comprehensive loss

    (5,498 )     (23,097 )     (75,569 )     (92,033 )

Less: comprehensive income (loss) attributive to non-controlling interest

    3,228       1,039       3,000       (17 )

Comprehensive loss attributable to stockholders

  $ (8,726 )   $ (24,136 )   $ (78,569 )   $ (92,016 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders Deficit

(In thousands, except share data)

(unaudited)

 

   

Common Stock

   

Additional Paid-In

   

Accumulated

   

Accumulated Other Comprehensive

   

Total Stockholders'

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Deficit

 

Balance as of June 30, 2022

    53,064,077     $ 5     $ 80,812     $ (218,695 )   $ -     $ (137,878 )

Stock-based compensation

    -       -       1,632       -       -       1,632  

Net activity related to equity compensation plans

    68,593       -       (12 )     -       -       (12 )

Redeemable noncontrolling interest

    -       -       -       (8,760 )     -       (8,760 )

Series A preferred stock dividend

    -       -       -       (1,036 )     -       (1,036 )

Net loss attributable to Lindblad Expeditions Holdings, Inc

    -       -       -       (8,726 )     -       (8,726 )

Balance as of September 30, 2022

    53,132,670     $ 5     $ 82,432     $ (237,217 )   $ -     $ (154,780 )
                                                 
    Common Stock     Additional Paid-In     Accumulated     Accumulated Other Comprehensive     Total Stockholders'  
    Shares     Amount     Capital     Deficit     Loss     Deficit  

Balance as of December 31, 2021

    50,800,786     $ 5     $ 58,485     $ (136,439 )   $ (634 )   $ (78,583 )

Stock-based compensation

    -       -       5,283       -       -       5,283  

Net activity related to equity compensation plans

    222,323       -       (766 )     -       -       (766 )

Issuance of stock for conversion of preferred stock

    2,109,561       -       19,430       -       -       19,430  

Other comprehensive income, net

    -       -       -       -       634       634  

Redeemable noncontrolling interest

    -       -       -       (17,957 )     -       (17,957 )

Series A preferred stock dividend

    -       -       -       (3,618 )     -       (3,618 )

Net loss attributable to Lindblad Expeditions Holdings, Inc.

    -       -       -       (79,203 )     -       (79,203 )

Balance as of September 30, 2022

    53,132,670     $ 5     $ 82,432     $ (237,217 )   $ -     $ (154,780 )

 

 

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders (Deficit) Equity (continued)

(In thousands, except share data)

(unaudited)

 

 

   

Common Stock

   

Additional Paid-In

   

Accumulated

   

Accumulated Other

   

Total Stockholders'

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Comprehensive Loss

   

Equity (Deficit)

 

Balance as of June 30, 2021

    50,139,831     $ 5     $ 50,777     $ (82,733 )   $ (943 )   $ (32,894 )

Stock-based compensation

    -       -       1,406       -       -       1,406  

Net activity related to equity compensation plans

    51,816       -       (37 )     -       -       (37 )

Other comprehensive income, net

    -       -       -       -       202       202  

Series A preferred shares dividend

            -               (1,340 )     -       (1,340 )

Net loss attributable to Lindblad Expeditions Holdings, Inc.

    -       -       -       (24,338 )     -       (24,338 )

Balance as of September 30, 2021

    50,191,647     $ 5     $ 52,146     $ (108,411 )   $ (741 )   $ (57,001 )
                                                 
    Common Stock     Additional Paid-In     Accumulated     Accumulated Other     Total Stockholders'  
    Shares     Amount     Capital     Deficit     Comprehensive Loss     Equity (Deficit)  

Balance as of December 31, 2020

    49,905,512     $ 5     $ 48,127     $ (11,572 )     (1,602 )   $ 34,958  

Stock-based compensation

    -       -       4,012       -       -       4,012  

Net activity related to equity compensation plans

    203,833       -       (1,763 )     -       -       (1,763 )

Issuance of stock for acquisition

    82,302       -       1,770       -       -       1,770  

Other comprehensive income, net

    -       -       -       -       861       861  

Series A preferred shares dividend

    -       -             (3,962 )     -       (3,962 )

Net loss attributable to Lindblad Expeditions Holdings, Inc.

    -       -       -       (92,877 )     -       (92,877 )

Balance as of September 30, 2021

    50,191,647     $ 5     $ 52,146     $ (108,411 )   $ (741 )   $ (57,001 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

   

For the nine months ended September 30,

 
   

2022

   

2021

 

Cash Flows From Operating Activities

               

Net loss

  $ (76,203 )   $ (92,894 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    33,193       25,785  

Amortization of deferred financing costs and other, net

    1,988       2,364  

Right-of-use lease asset

    626       4  

Stock-based compensation

    5,283       4,146  

Deferred income taxes

    759       (2,648 )

Change in fair value of contingent acquisition consideration

    111       -  

Loss on foreign currency

    1,417       1,165  

Write-off of unamortized issuance costs related to debt refinancing

    9,004       -  

Changes in operating assets and liabilities

               

Marine operating supplies and inventories

    (1,195 )     (375 )

Prepaid expenses and other current assets

    (19,575 )     (8,902 )

Unearned passenger revenues

    34,407       62,922  

Other long-term assets

    3,242       658  

Other long-term liabilities

    844       4,857  

Accounts payable and accrued expenses

    7,526       24,438  

Operating lease liabilities

    (658 )     -  

Net cash provided by operating activities

    769       21,520  
                 

Cash Flows From Investing Activities

               

Purchases of property and equipment

    (29,566 )     (89,114 )

Acquisition (net of cash acquired)

    -       (7,177 )

Net cash used in investing activities

    (29,566 )     (96,291 )
                 

Cash Flows From Financing Activities

               

Proceeds from long-term debt

    360,000       61,720  

Repayments of long-term debt

    (346,301 )     (1,530 )

Payment of deferred financing costs

    (10,859 )     (3,135 )

Repurchase under stock-based compensation plans and related tax impacts

    (766 )     (1,763 )

Net cash provided by financing activities

    2,074       55,292  

Net decrease in cash, cash equivalents and restricted cash

    (26,723 )     (19,479 )

Cash, cash equivalents and restricted cash at beginning of period

    172,693       204,515  
                 

Cash, cash equivalents and restricted cash at end of period

  $ 145,970     $ 185,036  
                 

Supplemental disclosures of cash flow information:

               

Cash paid during the period:

               

Interest

  $ 22,159     $ 13,300  

Income taxes

    226       54  

Non-cash investing and financing activities:

               

Non-cash preferred stock dividend

  $ 3,618     $ 3,962  

Value of shares issued for acquisition

    -       1,770  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

Lindblad Expeditions Holdings, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Unaudited)

 

 

NOTE 1BUSINESS AND BASIS OF PRESENTATION

 

Business

 

Lindblad Expeditions Holdings, Inc.’s and its consolidated subsidiaries’ (the “Company” or “Lindblad”) mission is offering life-changing adventures around the world and pioneering innovative ways to allow its guests to connect with exotic and remote places. The Company currently operates a fleet of ten owned expedition ships and five seasonal charter vessels under the Lindblad brand, operates land-based, eco-conscious expeditions and active nature focused tours under the Natural Habitat, Inc. (“Natural Habitat”) and Off the Beaten Path, LLC (“Off the Beaten Path”) brands, designs handcrafted walking tours under the Classic Journeys, LLC (“Classic Journeys”) brand and operates luxury cycling and adventure tours under the DuVine Cycling + Adventure Company (“DuVine”) brand.

 

The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “LIND”.

 

The Company operates the following two reportable business segments:

 

Lindblad Segment. The Lindblad segment primarily provides ship-based expeditions aboard customized, nimble and intimately-scaled vessels that are able to venture where larger cruise ships cannot, thus allowing Lindblad to offer up-close experiences in the planet’s wild and remote places and capitals of culture. Each expedition ship is fully equipped with state-of-the-art tools for in-depth exploration, and the majority of expeditions involve travel to remote places with limited infrastructure and ports, such as Antarctica and the Arctic, or places that are best accessed by a ship, such as the Galápagos Islands, Alaska, Baja California’s Sea of Cortez and Panama, and foster active engagement by guests. The Company has an alliance with National Geographic Partners, LLC (“National Geographic”), which provides for lecturers and National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers and film crews, to join many of the Company’s expeditions.

 

Land Experiences Segment. The Land Experiences segment includes our four primarily land-based brands, Natural Habitat, DuVine, Off the Beaten Path and Classic Journeys.

 

 

Natural Habitat specializes in conservation-oriented adventures, providing life-enhancing forays into the natural world that feature wild habitats and the animals and people who live there. Natural Habitat’s travel adventures provide unparalleled access to the planet's most extraordinary wildlife, landscapes and cultures. Natural Habitat’s unique itineraries include access to private wildlife reserves, remote corners of national parks and distinctive, secluded, and remote lodges and camps situated where wildlife viewing is best, such as polar bear tours in Churchill, Canada, Alaskan grizzly bear adventures, small-group Galápagos Islands tours and African safaris. Natural Habitat has partnered with World Wildlife Fund (“WWF”) to offer conservation travel, which is sustainable travel that contributes to the protection of nature and wildlife.

   
 

DuVine specializes in luxury cycling and adventure tours around the world, providing immersive cultural and culinary experiences through thoughtfully designed itineraries led by expert local guides. Offerings primarily include tours throughout Europe, the United States and South America. Examples of DuVine’s tours include cycling and culinary tours throughout the Bordeaux and Burgundy wine making regions, Tuscan truffle, porcini and chestnut harvest regions, Napa and Sonoma wine making regions and lakes and volcanos throughout Patagonia. DuVine’s trips include top-quality gear and support and are tailored to riders of all abilities with an emphasis on exceptional food and wine experiences, along with boutique accommodations.

   
 

Off the Beaten Path provides active small-group and private custom journeys around the world with a long-standing focus on offering unique adventures and experiences throughout United States (“U.S.”) National Parks. In addition to other U.S.-based adventures such as ranch vacations and fly-fishing expeditions, Off the Beaten Path’s small-group product offerings include international expeditions across Europe, Africa, Australia, Central and South America and the South Pacific, such as hiking through the Dolomites, family adventures in Patagonia’s Lake District and experiencing the culture of Morocco. All Off the Beaten Path expeditions are defined by a focus on outdoor activity led by experienced, friendly guides.

   
 

Classic Journeys offers highly curated active small-group and private custom journeys centered around cinematic walks focused on engaging experiences that immerse guests into the history and culture of the places they are exploring and the people who live there, led by expert local guides in over 50 countries around the world. Classic Journeys’ tours are highlighted by luxury boutique accommodations and handcrafted itineraries curated through years of local connections such as experiencing Tuscan farmhouse kitchens, exploring Minoan ruins in Crete, or eating and dancing around a Berber encampment campfire.

 

7

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding unaudited interim financial information and include the accounts and transactions of the Company. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for the periods presented. Operating results for the periods presented are not necessarily indicative of the results of operations to be expected for the full year due to seasonality and other factors. Certain information and footnote disclosures normally included in the consolidated financial statements in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC for interim reporting. All intercompany balances and transactions have been eliminated in these unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto for the year ended December 31, 2021 contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022 (the “2021 Annual Report”).

 

There have been no significant changes to the Company’s accounting policies from those disclosed in the 2021 Annual Report.

 

Ramp of Fleet Operations 

 

The Company resumed operation in June 2021 and, since then, has continually ramped its operations, providing immersive expeditions in 2022 across all ten of its owned vessels. During the third quarter of 2022, operations included trips to Alaska, the Arctic, the Pacific Northwest, British Columbia, Canada's Northwest Passage, the Galápagos Islands, Greenland, Iceland, Norway and South America. Travel restrictions related to COVID-19 have diminished dramatically, and the Company will resume operations in additional geographies in the remainder of 2022 and throughout 2023. Where travel restrictions remain, which primarily includes a limited number of itineraries impacted by the Russia-Ukraine conflict, the Company is adjusting itineraries where possible, and working with guests to reschedule travel plans and refund payments or issue future travel certificates, as applicable. Previously, due to the spread of the COVID-19 virus and the effects of travel restrictions around the world, the Company had suspended or rescheduled the majority of its expeditions departing between March 16, 2020 through May 31, 2021.

 

The Company believes there are a variety of strategic advantages that enabled it to deploy its ships safely and quickly as travel restrictions were lifted. Most notably, the size of its owned and operated vessels, which range from 48 to 148 passengers, allows for a highly controlled environment that includes stringent cleaning protocols. The small nature of the Company’s ships also allowed it to efficiently and effectively test its guests and crew prior to boarding, or as otherwise needed. Additionally, the majority of expeditions take place in remote locations where human interactions are limited, so there is less opportunity for external influence.

 

 

Balance Sheet and Liquidity

 

As of September 30, 2022, the Company had $116.4 million in unrestricted cash and $29.5 million in restricted cash primarily related to deposits on future travel originating from U.S. ports and credit card reserves.

 

As of September 30, 2022, the Company had a total debt position of $572.4 million and was in compliance with all of its debt covenants in effect. The Company believes that it will be in compliance with all applicable covenants over the next 12 months. 

 

During May 2022, the Company further amended its senior secured export credit agreements to extend the waiver of its net leverage coverage ratio from March 2022 through December 31, 2022.

 

On February 4, 2022, the Company issued $360.0 million of 6.75% senior secured notes, maturing 2027, and entered into a new $45.0 million revolving credit facility. Proceeds from the senior secured note issuance were used primarily to pay the outstanding borrowings under the Company's prior credit agreement, including the term facility, Main Street Loan and the revolving credit facility. 

 

 

 

NOTE 2EARNINGS PER SHARE

 

Earnings per Common Share

 

Earnings (loss) per common share is computed using the two-class method related to its Series A Redeemable Convertible Preferred Stock, par value of $0.0001 (“Preferred Stock”). Under the two-class method, undistributed earnings available to stockholders for the period are allocated on a pro rata basis to the common stockholders and to the holders of the Preferred Stock based on the weighted average number of common shares outstanding and number of shares that could be issued upon conversion of the Preferred Stock.

 

Diluted earnings per share is computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the dilutive incremental common shares associated with restricted stock awards and shares issuable upon the exercise of stock options, using the treasury stock method, and the potential common shares that could be issued from conversion of the Preferred Stock, using the if-converted method. When a net loss occurs, potential common shares have an anti-dilutive effect on earnings per share and such shares are excluded from the diluted earnings per share calculation.

 

For the three and nine months ended September 30, 2022 and 2021, the Company incurred net losses from operations, therefore basic and diluted net loss per share are the same for each period. For the three and nine months ended September 30, 2022, approximately 0.8 million restricted shares, 1.4 million shares issuable upon exercise of options and 7.4 million common shares issuable upon the conversion of the Preferred Stock were excluded from dilutive potential common shares for the periods as they were anti-dilutive. For the three and nine months ended September 30, 2021, 0.8 million restricted shares, 1.5 million shares issuable upon exercise of options and 9.5 million common shares issuable upon conversion of the Preferred Stock were excluded from dilutive potential common shares for the periods as they were anti-dilutive. 

 

Loss per share was calculated as follows:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 
  

(unaudited)

  

(unaudited)

 

(In thousands, except share and per share data)

                

Net loss attributable to Lindblad Expeditions Holdings, Inc.

 $(8,726) $(24,338) $(79,203) $(92,877)

Series A redeemable convertible preferred stock dividend

  1,036   1,340   3,618   3,962 

Undistributed loss available to stockholders

 $(9,762) $(25,678) $(82,821) $(96,839)
                 

Weighted average shares outstanding:

                

Total weighted average shares outstanding, basic

  53,045,329   50,110,188   51,665,912   50,013,191 

Total weighted average shares outstanding, diluted

  53,045,329   50,110,188   51,665,912   50,013,191 
                 

Undistributed loss per share available to stockholders:

                

Basic

 $(0.18) $(0.50) $(1.60) $(1.87)

Diluted

 $(0.18) $(0.50) $(1.60) $(1.87)

 

 

NOTE 3REVENUES

 

Customer Deposits and Contract Liabilities

 

The Company’s guests remit deposits in advance of tour embarkation. Guest deposits consist of guest ticket revenues as well as revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions, and air transportation to and from the ships. Guest deposits represent unearned revenues and are reported as unearned passenger revenues in the condensed consolidated balance sheets when received and are subsequently recognized as tour revenue over the duration of the trip. Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606) defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. The Company does not consider guest deposits to be a contract liability until the guest no longer has the right, resulting from the passage of time, to cancel their reservation and receive a full refund. In conjunction with the suspension or rescheduling of expeditions, the Company provided guests an option of either a refund or future travel certificates, which in some instances exceeded the original cash deposit. The Company has recorded liabilities up to the amount of cash deposits. The additional value of any future travel certificates is being recognized as a discount when applied to future expeditions. The change in contract liabilities within unearned passenger revenues presented in our condensed consolidated balance sheets are as follows:

9

 

  

Contract Liabilities

 

(In thousands)

  (unaudited) 

Balance as of December 31, 2021

 $147,783 

Recognized in tour revenues during the period

  (295,824)

Additional contract liabilities in period

  296,296 

Balance as of September 30, 2022

 $148,255 

 

The following table disaggregates our tour revenues by the sales channel it was derived from:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

Guest ticket revenue:

 

(unaudited)

  

(unaudited)

 

Direct

  56%  60%  51%  60%

National Geographic

  12%  13%  15%  12%

Agencies

  19%  17%  19%  17%

Affinity

  4%  7%  5%  6%

Guest ticket revenue

  91%  97%  90%  95%

Other tour revenue

  9%  3%  10%  5%

Tour revenues

  100%  100%  100%  100%

 

 

NOTE 4FINANCIAL STATEMENT DETAILS

 

The following is a reconciliation of cash, cash equivalents and restricted cash to the statement of cash flows:

 

  

For the nine months ended September 30,

 
  

2022

  

2021

 

(In thousands)

 

(unaudited)

 

Cash and cash equivalents

 $116,446  $155,562 

Restricted cash

  29,524   29,474 

Total cash, cash equivalents and restricted cash as presented in the statement of cash flows

 $145,970  $185,036 

 

Restricted cash consists of the following:

 

  

As of September 30, 2022

  

As of December 31, 2021

 

(In thousands)

 

(unaudited)

     

Credit card processor reserves

 $21,000  $10,536 

Federal Maritime Commission and other escrow

  7,084   9,814 

Certificates of deposit and other restricted securities

  1,440   1,590 

Total restricted cash

 $29,524  $21,940 

 

Amounts within prepaid expenses and other current assets in excess of 5% of current assets as of September 30, 2022 were prepaid tour expenses of $20.7 million and prepaid marketing, commission and other expenses of $12.9 million, and as of December 31, 2021, were prepaid tour expenses of $10.3 million. 

 

As of September 30, 2022 and December 31, 2021, no individual amounts within accounts payable and accrued expenses were in excess of 5% of current liabilities.

 

10

 

In 2021, the Company received a $27.0 million grant under the Coronavirus Economic Relief for Transportation Services (“CERTS”) Act, which provided grants to eligible motorcoach, school bus, passenger vessel, and pilotage companies that have experienced annual revenue losses of 25 percent or more as result of COVID-19. The priority use of grant funds was required to be for payroll costs, though grants could be used for operating expenses and the repayment of debt accrued to maintain payroll. The Company had accounted for the grant as a current liability on its balance sheet, as any amounts not appropriately used within one year of the grant date would have to be returned to the U.S. Treasury. As expenses for the grant were incurred, the corresponding amounts were recognized in other income on the income statement. During the three months ended March 31, 2022, the Company recognized the remaining $11.6 million of the CERTS grant in other income for permitted payroll costs and ship operating expenses and, as of September 30, 2022, has no further liability recorded for the grant.

 

Loan Receivable

 

The Company’s loan receivable is recorded at amortized cost within other current assets. The Company reviewed its loan receivable for credit losses in connection with the preparation of its condensed consolidated financial statements for the period ended September 30, 2022. In evaluating the allowance for loan losses, the Company considered factors such as historical loss experience, the type and amount of loan, adverse situations that  may affect the borrower’s ability to repay and prevailing economic conditions. Based on these credit loss estimation and experience factors, the Company realized no allowance for loan loss for the nine months ended September 30, 2022. The following is a rollforward of the loan receivable balance:

 

  

Loan Receivable

 

(In thousands)

 

(unaudited)

 

Balance as of December 31, 2021

 $3,964 

Accrued interest

  108 

Amortization of deferred costs

  (28)

Balance as of September 30, 2022

 $4,044 

 

 

NOTE 5LONG-TERM DEBT

 

  

As of September 30, 2022

  

As of December 31, 2021

 
   (unaudited)             

(In thousands)

 

Principal

  

Deferred Financing Costs, net

  

Balance

  

Principal

  

Deferred Financing Costs, net

  

Balance

 

6.75% Notes

 $360,000   (9,501) $350,499  $-  $-  $- 

First Export Credit Agreement

  98,019   (1,896)  96,123   107,695   (2,090)  105,605 

Second Export Credit Agreement

  112,603   (2,273)  110,330   120,281   (2,473)  117,808 

Note payable

  842   -   842   842   -   842 

Other

  969   -   969   1,034   -   1,034 

Credit Facility

  -   -   -   284,170   (9,050)  275,120 

Revolving Facility

  -   -   -   44,500   (190)  44,310 

Total long-term debt

  572,433   (13,670)  558,763   558,522   (13,803)  544,719 

Less current portion

  (24,086)  -   (24,086)  (26,061)  -   (26,061)

Total long-term debt, non-current

 $548,347  $(13,670) $534,677  $532,461  $(13,803) $518,658 

 

For the three and nine months ended September 30, 2022, deferred financing costs charged to interest expense was $0.7 million and $2.1 million, respectively. For the three and nine months ended September 30, 2021, deferred financing costs charged to interest expense was $0.8 million and $2.3 million, respectively. During the three months ended March 31, 2022, $9.0 million of deferred financing costs related to the repayment of the Company’s prior credit agreement, including the term facility, Main Street Loan and revolving credit facility were written-off to other expense.

 

11

 

6.75% Notes

 

On February 4, 2022, the Company issued $360.0 million aggregate principal amount of 6.75% senior secured notes due 2027 (the “Notes”) in a private offering. The Notes bear interest at a rate of 6.75% per year, accruing from February 4, 2022, and interest on the Notes is payable semiannually in arrears on February 15 and August 15 of each year. The Notes will mature on February 15, 2027, subject to earlier repurchase or redemption. The Company used the net proceeds from the offering to prepay in full all outstanding borrowings under its prior credit agreement, including the term facility, Main Street Loan, and revolving credit facility, to pay any related premiums and to terminate in full its prior credit agreement and the commitments thereunder. The Notes are senior secured obligations of the Company and are guaranteed on a senior secured basis by the Company and certain of the Company’s subsidiaries (collectively, the “Guarantors”) and secured by first-priority pari passu liens, subject to permitted liens and certain exceptions, on substantially all the assets of the Company and the Guarantors. The Notes may be redeemed by the Company, at set redemption prices and premiums, plus accrued and unpaid interest, if any. 

 

The Notes contain covenants that, among other things, restrict the Company’s ability, and the ability of the Company’s restricted subsidiaries, to incur certain additional indebtedness and make certain dividend payments, distributions, investments and other restricted payments. These covenants are subject to a number of important exceptions and qualifications set forth in the Notes. 

 

New Revolving Credit Facility 

 

On February 4, 2022, the Company entered into a new senior secured revolving credit facility (the “New Revolving Credit Facility”), which provides for an aggregate principal amount of commitments of $45.0 million, maturing February 2027, including a letter of credit sub-facility in an aggregate principal amount of up to $5.0 million. The obligations under the New Revolving Credit Facility are guaranteed by the Company and the Guarantors and are secured by first-priority pari passu liens, subject to permitted liens and certain exceptions, on substantially all the assets of the Company and the Guarantors. Borrowings under the New Revolving Credit Facility, if any, will bear interest at a rate per annum equal to, at the Company’s option, an adjusted Secured Overnight Financing Rate (“SOFR”) rate plus a spread or a base rate plus a spread.

 

The New Revolving Credit Facility contains customary affirmative and negative covenants, as well as financial covenants and event of default provisions.

 

Senior Secured Credit Agreements

 

In January 2018, the Company entered into a senior secured credit agreement (the “First Export Credit Agreement”) making available to the Company a loan in an aggregate principal amount not to exceed $107.7 million for the purpose of providing financing for up to 80% of the purchase price of the Company’s new ice class vessel, the National Geographic Endurance, delivered in March 2020. In September 2021, the Company amended its First Export Credit Agreement to, among other things, waive the net leverage coverage ratio through March 2022 and annualize EBITDA used in its covenant calculation through December 31, 2022. During May 2022, the Company further amended its First Export Credit Agreement to extend the waiver of its net leverage coverage ratio from March 2022 through December 31, 2022. Certain other covenants continue to be more restrictive during the extended covenant waiver period. The First Export Credit Agreement, as amended, bears interest at a variable interest rate equal to three-month LIBOR plus a margin of 3.50% per annum, for an aggregated rate of 6.75% over the borrowing period covering September 30, 2022. 

 

In April 2019, the Company entered into a senior secured credit agreement (the “Second Export Credit Agreement”), to make available to the Company and subject to certain conditions, a loan in an aggregate principal amount not to exceed $122.8 million for the purpose of providing pre- and post-delivery financing for up to 80% of the purchase price of the Company’s new expedition ice-class cruise vessel, the National Geographic Resolution, delivered in September 2021, and borrowed $122.8 million under the Second Export Credit Agreement. In September 2021, the Company amended its Second Export Credit Agreement to, among other things, waive the net leverage coverage ratio through March 2022 and annualize EBITDA used in its covenant calculation through December 31, 2022. During May 2022, the Company further amended its Second Export Credit Agreement to extend the waiver of its net leverage coverage ratio from March 2022 through December 31, 2022. Certain other covenants continue to be more restrictive during the extended covenant waiver period. The Second Export Credit Agreement, as amended, bears a variable interest rate equal to three-month LIBOR plus a margin of 3.50% per annum, for an aggregated rate of 7.07% over the borrowing period covering September 30, 2022.

 

Notes Payable

 

In connection with the Natural Habitat acquisition in May 2016, Natural Habitat issued a $2.5 million unsecured promissory note, amended in May 2020, to Benjamin L. Bressler, the founder of Natural Habitat, with an outstanding principal amount of $0.8 million as of  September 30, 2022. The promissory note accrues interest at a rate of 1.44% annually, with interest payable every six months and the remaining principal payment due on December 22, 2022. 

 

12

 

Other

 

The Company’s Off the Beaten Path subsidiary has a loan maturing September 2023 for the purchase of guest transportation vehicles. The loan’s original principal was $0.3 million, is collateralized by the vehicles and bears an interest rate of 4.77% annually.

 

The Company’s Off the Beaten Path subsidiary has a $0.8 million loan under the Main Street Expanded Loan Facility, originated on December 11, 2020. For the first 12 months, interest was not payable and accrued to the principal balance, thereafter, monthly interest payments are required. The outstanding balance will amortize at a rate of 15% on both December 2023 and December 2024, with the remaining balance due December 2025. The loan bears a variable interest rate equal to one-month LIBOR plus a spread of 3.00%, or 6.14% as of September 30, 2022. This loan may be voluntarily prepaid at any time and from time to time, without premium or penalty, other than customary “breakage costs” and fees for LIBOR-based loans.

 

The Company’s DuVine subsidiary has a EUR 0.1 million State Assistance Loan related to the financial consequences of the COVID-19 pandemic, for the purpose of employment preservation. This loan matures August 2025, with monthly payments, and bears an interest rate of 0.53% annually. 

 

Covenants

 

The Company’s Notes, New Revolving Credit Facility, First Export Credit Agreement and Second Export Credit Agreement contain financial and restrictive covenants that include among others, net leverage ratios, limits on additional indebtedness and limits on certain investments. The net leverage ratio covenant of the Company’s First Export Credit Agreement and Second Export Credit Agreement have been waived through December 31, 2022. On October 11, 2022, the Company amended the covenants of its Senior Secured Credit Agreements to use an annualized EBITDA calculation in its net leverage ratio covenant for the periods from March 31, 2023 through September 30, 2023. The Company was in compliance with its covenants in effect as of September 30, 2022 and believes that it will be in compliance for the next 12 months.

 

 

NOTE 6FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

Derivative Instruments and Hedging Activities

 

The Company’s derivative assets and liabilities consist principally of foreign exchange forward contracts and interest rate caps and are carried at fair value based on significant observable inputs (Level 2 inputs). Derivatives entered into by the Company are typically executed over-the-counter and are valued using internal valuation techniques, as quoted market prices are not readily available. The valuation technique and inputs depend on the type of derivative and the nature of the underlying exposure. The Company principally uses discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, currency exchange rates, interest rate yield curves and counterparty credit risks.

 

Currency Risk. The Company uses currency exchange forward contracts to manage its exposure to changes in currency exchange rates associated with certain of its non-U.S. dollar denominated receivables and payables. The Company primarily economically hedges a portion of its current-year currency exposure to the Canadian and New Zealand dollars, the Brazilian Real, the South African Rand, the Euro and the British pound sterling. The fluctuations in the value of these forward contracts largely offset the impact of changes in the value of the underlying risk they economically hedge.

 

Interest Rate Risk. The Company previously used interest rate caps to manage the risk related to its previously existing variable rate corporate debt.

 

The Company recorded the effective portion of changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassified these amounts into earnings in the period during which the hedged transaction was recognized. Any changes in fair values of hedges that are determined to be ineffective are immediately reclassified from accumulated other comprehensive income (loss) into earnings. The Company reclassified $0.6 million from other comprehensive income (loss) to earnings for the period ended March 31, 2022 due to the termination of a cash flow hedge relationship between the Company’s interest rate caps and the Company’s underlying corporate variable rate debt, which was repaid during February 2022. 

 

The Company held the following derivative instruments with absolute notional values as of September 30, 2022:

 

(In thousands)

 

Absolute Notional Value

 

Interest rate caps

 $100,000 

Foreign exchange contracts

  13,872 

 

13

 

Estimated fair values (Level 2) of derivative instruments were as follows:

 

  

As of September 30, 2022

  

As of December 31, 2021

 
  

(unaudited)

         

(In thousands)

 

Fair Value, Asset Derivatives

  

Fair Value, Liability Derivatives

  

Fair Value, Asset Derivatives

  

Fair Value, Liability Derivatives

 

Derivative instruments designated as cash flow hedging instruments:

                

Interest rate cap (a)

 $-  $-  $9  $- 

Total

 $-  $-  $9  $- 

Derivative instruments not designated as cash flow hedging instruments:

                

Interest rate cap (a)

 $1,392  $-  $-  $- 

Foreign exchange forward (a)

  -   753   664   - 

Total

 $1,392  $753  $664  $- 
 

(a)

Recorded in prepaid expenses and other current assets.

 

Changes in the fair value of the Company’s hedging instruments are recorded in accumulated other comprehensive income. The effects of derivatives recognized in the Company’s condensed consolidated financial statements were as follows:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 
  (unaudited)  (unaudited) 

Derivative instruments designated as cash flow hedging instruments:

                

Interest rate cap (a)

 $-  $(93) $-  $(256)

Foreign exchange forward (b)

  -   (109)  -   (605)
                 

Derivative instruments not designated as cash flow hedging instruments:

                

Interest rate cap (a)

  1,046   -   749   - 

Foreign exchange forward (c)

  (872)  268   (1,417)  188 

Total

 $174  $66  $(668) $(673)
 

(a) 

For the three months ended September 30, 2022, recognized as income in interest expense, net. For the nine months ended September 30, 2022, $1.3 million was recognized as income in interest expense, net, and $0.6 million was reclassified from other comprehensive income (loss) to interest expense, net. For the three and nine months ended  September 30, 2021, recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity. 

 (b) 

For the three and nine months ended  September 30, 2021, $0.9 million and $1.0 million, respectively, were recognized as losses on foreign currency in the condensed consolidated statements of income, and $2.4 million and $2.0 million losses, respectively, were recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.

 

(c)

Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged and recognized in gain (loss) on foreign currency.

 

In connection with the acquisition of Classic Journeys, the purchase agreement includes a contingent consideration earnout, see Note 11—Acquisitions, which is required to be recorded at fair value at each period. The possible contingent acquisition consideration earnout is either zero or $0.6 million, depending on the achievement of certain average annual net profits targets for the years ended December 31, 2022 and 2023 by the acquired operation. As of September 30, 2022, the contingent liability had a value of $0.3 million using a Level 3 valuation method, which was recorded in other long-term liabilities. 

 

The carrying amounts of cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to the short-term nature of these instruments. The Company estimates the approximate fair value of its long-term debt to be $495.3 million as of September 30, 2022, based on the terms of the agreements and comparable market data as of September 30, 2022. As of September 30, 2022 and December 31, 2021, the Company had no other significant liabilities that were measured at fair value on a recurring basis.

 

 

 

NOTE 7STOCKHOLDERS EQUITY

 

Stock Repurchase Plan

 

The Company’s Board of Directors approved a stock and warrant repurchase plan (“Repurchase Plan”) in November 2015 and increased the repurchase plan to $35.0 million in November 2016. The Repurchase Plan authorizes the Company to purchase, from time to time, the Company’s outstanding common stock and previously outstanding warrants. Any shares purchased will be retired. The Repurchase Plan has no time deadline and will continue until otherwise modified or terminated at the sole discretion of the Company’s Board of Directors. These repurchases exclude shares repurchased to settle statutory employee tax withholding related to the exercise of stock options and vesting of stock awards. The Company has cumulatively repurchased 875,218 shares of common stock for $8.3 million and 6,011,926 warrants for $14.7 million, since plan inception. The remaining balance for the Repurchase Plan was $12.0 million as of September 30, 2022. The Repurchase Plan is suspended due to restrictions related to the Main Street Expanded Loan Facility program that continue for one year upon repayment. The Company repaid the Main Street Expanded Loan Facility in February 2022. 

 

Preferred Stock

 

In August 2020, the Company issued and sold 85,000 shares of Preferred Stock for $1,000 per share for gross proceeds of $85.0 million. The Preferred Stock has senior and preferential ranking to the Company’s common stock. The Preferred Stock is entitled to cumulative dividends of 6.00% per annum, and for the first two years the dividends were paid-in-kind. After the second anniversary of the issuance date, the dividends may be paid-in-kind or be paid in cash at the Company’s option. At any time after the third anniversary of the issuance, the Company  may, at its option, convert all, but not less than all, of the Preferred Stock into common stock if the closing price of shares of common stock is at least 150% of the conversion price for 20 out of 30 consecutive trading days. The Preferred Stock is convertible at any time, at the holder’s election, into a number of shares of common stock of the Company equal to the quotient obtained by dividing the then-current accrued value by the conversion price of $9.50. The Preferred Stock deferred issuance costs were approximately $2.1 million as of September 30, 2022, recorded as reduction to preferred stock on balance sheet. During the year ended December 31, 2021, 5,000 shares of Preferred Stock and related accumulated dividends were converted by the holder into 566,364 shares of the Company’s common stock. During the nine months ended September 30, 2022, 18,000 shares of Preferred Stock and related accumulated dividends were converted by the holder into 2,109,561 shares of the Company’s common stock. The Company recorded accrued dividends for Preferred Stock of $1.0 million and $3.6 million for the three and nine months ended September 30, 2022, respectively, and $1.3 million and $4.0 million for the three and nine months ended September 30, 2021, respectively. As of September 30, 2022, the 62,000 shares of Preferred Stock outstanding and accumulated dividends could be converted at the option of the holders into approximately 7.4 million shares of the Company’s common stock.

 

 

NOTE 8STOCK BASED COMPENSATION

 

The Company is authorized to issue up to 4.7 million shares of common stock under the 2021 Long-Term Incentive Plan (“the Plan”) which was approved by shareholders in September 2021. As of September 30, 2022, approximately 3.6 million shares were available to be granted under the Plan.

 

As of September 30, 2022 and December 31, 2021, options to purchase an aggregate of 1.4 million and 1.5 million shares of the Company’s common stock, respectively, with a weighted average exercise price of $15.10 and $10.30, respectively, were outstanding. As of September 30, 2022, 388,000 options were exercisable.

 

The Company recorded stock-based compensation expense of $1.6 million and $5.3 million, during the three and nine months ended September 30, 2022, respectively, and $1.4 million and $4.1 million during the three and nine months ended September 30, 2021, respectively.

 

2022 Long-Term Incentive Compensation

 

During the nine months ended September 30, 2022, the Company granted 342,602 restricted stock units ("RSUs") with a weighted average grant price of $13.27. The RSUs will primarily vest equally over three years on the anniversary of the grant date, subject to the recipient’s continued employment or service with the Company on the applicable vesting date. The number of shares were determined based upon the closing price of our common stock on the date of the award.

 

During the nine months ended September 30, 2022, the Company awarded 56,209 market performance share units (“MSUs”) with a weighted average grant price of $15.08. The MSUs are market-based equity incentive awards based on a performance-multiplier of change in the stock price of the Company’s common stock between the grant date and March 31, 2025. The number of shares that will eventually be earned and vest may be more or less than the number of MSUs that are awarded, depending on the Company's common stock price, at a level ranging from 0% to 150%. The number of MSUs earned shall be determined and shall vest on March 31, 2025, subject to the recipient’s continued employment or service with the Company on the vesting date.

 

15

 

Natural Habitat Contingent Arrangement

 

In connection with the acquisition of Natural Habitat, Mr. Bressler, the founder of Natural Habitat, has an equity incentive opportunity to earn an award of options based on the future financial performance of Natural Habitat, where if the Final Year Equity Value of Natural Habitat, as defined in Mr. Bressler's amended employment agreement, exceeds $25.0 million, effective as of December 31, 2023, Mr. Bressler will be granted options with a fair value equal to 10.1% of such excess, subject to certain conditions. 

 

 

NOTE 9RELATED PARTY TRANSACTIONS

 

In May 2016, in connection with the Company's acquisition of Natural Habitat, Natural Habitat issued an unsecured promissory note, amended May 2020, to Mr. Bressler, the founder of Natural Habitat. See Note 5—Long-term Debt for more information.

 

 

NOTE 10INCOME TAXES

 

As of September 30, 2022 and December 31, 2021, the Company had no unrecognized tax benefits recorded. The Company's effective tax rate for the three and nine months ended September 30, 2022 was an expense of 46.0% and 0.8%, respectively, versus an expense of 12.1% and a benefit of 2.8% for the three and nine months ended September 30, 2021, respectively.

 

 

NOTE 11ACQUISITIONS

 

To further expand the Company’s land-based experiential travel offerings and increase its addressable market, the Company completed three acquisitions during 2021. On February 1, 2021, the Company acquired 80.1% of the outstanding common stock of Off the Beaten Path, a land-based travel operator specializing in authentic national park experiences, on  March 3, 2021, the Company acquired 70% of the outstanding common stock of DuVine, an international luxury cycling and adventure company focused on exceptional food and wine experiences, and on October 13, 2021, the Company acquired 80.1% of Classic Journeys, a leading luxury walking tour company. 

 

The acquisitions had an aggregate purchase price of $23.6 million, including $1.8 million in Company stock and $0.2 million in deferred contingent consideration. The deferred contingent consideration has an earnout potential between zero and $0.6 million. The acquisitions were accounted for under purchase accounting and are included in the Company's consolidated financial statements since the date of the acquisitions. The Company preliminarily recorded $10.4 million in intangible assets related to tradenames and customer lists and $19.9 million in goodwill related to these acquisitions. The amount recorded for the intangible assets and goodwill is subject to possible adjustment when the valuation of Classic Journeys is finalized. 

 

 

NOTE 12COMMITMENTS AND CONTINGENCIES

 

Redeemable Non-Controlling Interest

 

The Company has controlling interests in its Natural Habitat, Off the Beaten Path, DuVine and Classic Journeys consolidated subsidiaries. The noncontrolling interests are subject to put/call agreements. The put options enable the minority holders, but do not obligate them, to sell the remaining interests to the Company. The Company has call options which enable it, but does not obligate it, to acquire the remaining interests in the subsidiaries, subject to certain dates, expirations and similar redemption value purchase measurements as the put options.

 

16

 

Since the redemption of the noncontrolling interests are not solely in the Company’s control, the Company is required to record the redeemable noncontrolling interest outside of stockholders’ equity but after its total liabilities. In addition, if it is probable that the instrument will become redeemable, as such solely due to the passage of time, the redeemable noncontrollable interest should be adjusted to the redemption value via one of two measurement methods. The Company elected the income classification-excess adjustment and accretion methods for recognizing changes in the redemption value of the put options. Under this methodology, a calculation of the present value of the redemption value is compared to the carrying value of the redeemable noncontrolling interest and the carrying value of the redeemable noncontrolling interest is adjusted to the redemption value’s present value. Any adjustments to the carrying value of the redeemable noncontrolling interest, up to the redemption value of the noncontrolling interest, are classified to retained earnings. Adjustments in excess of the redemption value of the noncontrolling interest, are treated as a decrease to net income available to common stockholders.

 

The redemption value of the put options were determined using a discounted cash flow model. The redemption values were adjusted to their present value using the Company’s weighted average cost of capital. 

 

The following is a rollforward of redeemable non-controlling interest:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 
  

(unaudited)

  

(unaudited)

 

Beginning balance

 $19,595  $10,036  $10,626  $7,494 

Net income (loss) attributable to noncontrolling interest

  3,228   1,039   3,000   (17)

Redemption value adjustment of put option

  8,760   -   17,957   - 

Acquired businesses' noncontrolling interest

  -   (941)  -   2,657 

Ending balance

 $31,583  $10,134  $31,583  $10,134 

 

Royalty Agreement National Geographic

 

The Company is party to an alliance and license agreement with National Geographic, which allows the Company to use the National Geographic name and logo. In return for these rights, the Company is charged a royalty fee. The royalty fee is included within selling and marketing expense on the accompanying condensed consolidated statements of operations. The fee is calculated based upon a percentage of certain ticket revenues less travel agent commission, including the revenues received from cancellation fees and any revenues received from the sale of pre- and post-expedition extensions. Royalty expense for the three and nine months ended September 30, 2022 was $1.9 million and $4.5 million, respectively, and was $0.7 million and $0.9 million for the three and nine months ended September 30, 2021, respectively.

 

The royalty balance payable to National Geographic as of September 30, 2022 and December 31, 2021 was $1.8 million and $0.9 million, respectively, and are included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.

 

Royalty Agreement World Wildlife Fund

 

Natural Habitat has a license agreement with WWF, which allows it to use the WWF name and logo. In return for these rights, Natural Habitat is charged a royalty fee and a fee based on annual gross sales. The fees are included within selling and marketing expense on the accompanying condensed consolidated statements of operations. This royalty fee expense was $0.4 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2021, respectively.

 

Charter Commitments

 

From time to time, the Company enters into agreements to charter vessels onto which it holds its tours and expeditions. Future minimum payments on its charter agreements as of September 30, 2022 are as follows:

 

For the years ended December 31,

 

Amount

 

(In thousands)

 (unaudited) 

2022 (three months)

 $3,130 

2023

  12,188 

Total

 $15,318 

 

17

 
 

NOTE 13SEGMENT INFORMATION

 

The Company is primarily a specialty cruise and experiential travel operator with operations in two reportable segments, Lindblad and Land Experiences. The Company evaluates the performance of the business based largely on the results of its operating segments. The chief operating decision maker and management review operating results monthly, and base operating decisions on the total results at a consolidated level, as well as at a segment level. The reports provided to the Board of Directors are at a consolidated level and contain information regarding the separate results of both segments.

 

The Company evaluates the performance of its business segments based largely on tour revenues and operating income, without allocating other income and expenses, net, income taxes and interest expense, net. Operating results for the Company’s reportable segments were as follows:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 
  

2022

  

2021

  

Change

  % 

2022

  

2021

  

Change

  %

(In thousands)

 

(unaudited)

          

(unaudited)

         

Tour revenues:

                                

Lindblad

 $83,741  $33,100  $50,641   153% $198,063  $40,264  $157,799   392%

Land Experiences

  61,042   31,407   29,635   94%  105,477   41,291   64,186   155%

Total tour revenues

 $144,783  $64,507  $80,276   124% $303,540  $81,555  $221,985   272%

Operating income (loss):

                                

Lindblad

 $(7,142) $(22,282) $15,140   68% $(60,380) $(80,617) $20,237   25%

Land Experiences

  12,950   4,630   8,320   180%  12,629   (686)  13,315   NM 

Total operating income (loss)

 $5,808  $(17,652) $23,460   133% $(47,751) $(81,303) $33,552   41%

 

Depreciation and amortization are included in segment operating income as shown below:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 
  

2022

  

2021

  

Change

  % 

2022

  

2021

  

Change

  %

(In thousands)

 

(unaudited)

          

(unaudited)

         

Depreciation and amortization:

                                

Lindblad

 $10,090  $8,928  $1,162   13% $31,087  $24,618  $6,469   26%

Land Experiences

  749   395   354   90%  2,106   1,167   939   80%