Good day, and welcome to the Lindblad Expeditions, Inc. Reports First Quarter 2018 Financial Results Call and Webcast [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Felenstein. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for Lindblad's First Quarter 2018 Earnings Call. With me on the call today is Sven Lindblad, our Founder and Chief Executive Officer. Sven will begin with some opening comments and then I will follow with some details on our first quarter results before we open the call for Q&A. You can find our latest earnings release in the Investor Relations section of our Web site. 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 Sven.

Thank you, Craig, and thanks to all of you for joining us on the call today. Lindblad is off to a very strong start in 2018, and I'm pleased to have the opportunity to review the company's performance during the first quarter, while highlighting some of the key initiatives that will enable us to build on this momentum moving forward. The strong results we generated during Q1 highlights the opportunities we have, as we add capacity as well as invest in new businesses with significant untapped potential. Both the Lindblad segment and Natural Habitat delivered record breaking first quarters in terms of revenue and earnings, as more and more guests traveled with us to destinations across the globe. At the Lindblad segment, the increase was due, in large part, to the capacity added from launching the National Geographic Quest last July. Importantly, even as we have expanded our overall inventory, we have still maintained high-occupancy levels across our fleet, while also growing net yields, a reflection of the significant demand of our expeditions both new -- both from new and returning guests. We are also seeing increased demand from our land-based offerings at Natural Habitat. The number of guests traveling across Nat Hab's diverse product offerings continues to expand with strong growth in all key destinations. Nat Hab is also benefiting significantly from cross promotion across the Lindblad community, with a number of Lindblad guests traveling with Nat Hab up over 40% versus the first quarter a year ago. At the same time, Nat Hab's audience continues to embrace the offerings at Lindblad, with booked guests for 2018 already up over 50% versus all of '17. So the thesis of accelerated cross selling is certainly proving out in excess of our original expectations. The Natural Habitat acquisition has been a…

Thanks, Sven. As Sven discussed, the momentum we generated during the back half of 2017 has continued into the first quarter of 2018 as the strategic investments we have made and continue to make to expand our capacity are generating significant financial returns. As we add inventory, we have also been able to maintain high yields in occupancy levels, giving us further confidence in the long-term growth opportunities, given the growing demand for high quality, immersive and authentic expedition travel. Turning to the first quarter of 2018, on a reported basis, Lindblad delivered revenue growth of 31% versus the first quarter a year ago. And this revenue growth contributed to an $11.9 million increase in adjusted EBITDA to $22.2 million. These results do include the impact of several voyage cancellations in the first quarter a year ago, and excluding the impact of these cancellations, we estimate that revenue would have increased 14% and adjusted EBITDA would have increased 31 -- 33% year-on-year. The substantial increase versus the first quarter a year ago was driven by the Lindblad segment, which generated 32% revenue growth on a reported basis to $70.5 million, this $17 million increase was primarily due to a 26% rise in available guest nights, mostly from the launch of the National Geographic Quest in July 2017 as well as from the negative impact of the voyage cancellations on the first quarter a year ago. The revenue growth this past quarter also reflects a 12% increase in net yield to $1,127 per night to higher pricing across most of our itineraries, and growth in occupancy from 87% to 91% due to broad-based demand across the entire fleet. Excluding the impact of the voyage cancellations a year ago, we estimate that the Lindblad segment revenue growth would have been approximately 13%…

[Operator Instructions] The first question comes from Chris Woronka with Deutsche Bank.

It's Steve Pizzella on for Chris Woronka. Looking at the 1Q, real strong growth year-over-year even with adjusting for the voyage cancellations. Can you talk about how that came in versus internal expectations? And the decision to leave guidance unchanged, is that just some conservatism? Or are you facing some fuel headwinds? Can you comment on that?

Sure. So certainly, we had a very, very strong first quarter. If I was pooling it versus our expectations, it certainly came in a little bit ahead of where we were looking at. But the year certainly had a cadence to it that we always expected, and that was given where the dry docks were that the first and second quarters would be the strongest quarters of the year, followed by some of the onetime items in Q3 and Q4 that I mentioned. I think importantly, when you look at the trends, the operating trends of the business, they remain very, very strong, way past the first and second quarter, we're already looking at very strong growth into 2019. But there are some of these anomalies in each of these quarters with regards to available guest nights as well as launching the Venture at the end of the year, they're going to play into the full year. There's also some, I would say, relatively newer itineraries, which Sven can elaborate on in a second. Later in the year, we still have a little bit of uncertainty around them, and that includes the launch of our Egypt product; it includes where we end up in the South Pacific, certainly; and we have launched some shore of the Galápagos strip, which Sven can get into a second. So all of these things along with the price of fuel, certainly given where we are in the year, have resulted in us leading guidance where it is right now. But as the second and third quarter play themselves out, we'll certainly update the full year expectations as results dictate. Sven, you want to talk a little bit about the -- some of the itinerary changes?

Well, one of the things you do particularly when you're having such a good year, it's a great opportunity to test certain ideas, how one of the levers that we believe are very important is to begin offering programs or a certain number of programs that are shorter because there are certain constituencies that we have to -- just simply don't have the time. So for example, in the Galapagos, we're testing some shorter programs in the fourth quarter, just to see if that has any sort of resonance that we can build upon into the future. So in that it's still is an experiment, we're still keeping our eyes on it and it may not work 100% in the short term, although frankly, I believe it will, but we don't know that for a fact. We have launched a new initiative in Egypt in Q4 and the first quarter of 2019, and well beyond that, and that is -- people are responding to that incredibly well. However, we haven't been in Egypt for over a decade and so we're keeping our eye on that closely. So I think that really responds to some of the things Craig was referring to.

And then a lot has been made of 2019 overall industry supply growth, can you talk about kind of what is competitive to your business? And any early booking trends for next year?

Yes. Well -- and Craig can perhaps provide more detail but the booking trends for 2019 are very, very, very strong, in part because we've -- we will have the full year, first full year of the second new ship, the National Geographic Venture and we're opening up some new geographies. As it relates to the competition, I believe what is happening is that there is much more interest in this sector, and so there is a lot more noise, if you will, conversation around the idea of expedition travel. I view that as a good thing. So it just gets more people jazzed, it gets more people incorporated and interested in this. And there's no question that as far as the public goes, this is absolutely one of the strongest growth trends in the travel industry. Of course, not in absolute numbers because it's still a relatively small niche but in terms of growth measured against itself.

Sure. Just to put a little color around some of the pacing that we're seeing for 2019, on the last call we spoke about 2019 pacings being up around 40%. I'm happy to say that trends have continued and we continue to be ahead of 2018 pacings at the same time, up about 40%, which is nice to see. And the best part about it is, Sven kind of touched upon it, is not only are we seeing nice pacing on some of the – our new vessel, the Venture, which is doing really well so far with its early bookings, but we're seeing nice bookings across the entire fleet as we continue to operate in some of our really strong geographies and also add some new geographies like the Russian Far East. So all in, I think we feel very confident about where we sit right now with relation to 2019, but it's still, obviously, a ways to go.

The next question comes from George Kelly with Imperial Capital. Please go ahead.

First one for Sven. You've been in the industry for quite a while now, and I was wondering if you could talk about sort of the state of the consumer and interest around this kind of travel. Have you ever seen the market so healthy?

George, I absolutely, unequivocally, have not seen it as healthy as this. And it's a confluence of factors, if I may expand a little bit. I think that people are becoming more and more aware of the fact that the environment matters, that it is of interest, that we ought to understand, know more about it. So I think part of its driven intellectually on the part of people's desires. I think the factor that everybody now is basically a communicator and a storyteller, everybody likes to share this material. And so where are you going to go to do that, that's more compelling than geographies like the Antarctic and the Galapagos and Alaska and places like this? So I think it's a lot of factors that have come together. I think more and more people are traveling as families or traveling with friends because they want these shared experiences. So it's just there's so many compelling reasons why this is growing at a level it is.

And then next question, sort of related, but as you think about pricing, I know it's -- that generally, you only sort of tweak pricing maybe a couple times a year, correct me if that's wrong, but does the way that you've absorbed this new capacity and the strength in the consumer market, does that give you confidence? Do you think you could become more aggressive with pricing at any point in the next, say, couple of years?

Well, here's our view on pricing. First of all, we believe that the biggest opportunity is adding inventory, broadening our offerings. If you get too aggressive with pricing, it can be problematic in one form or another. First of all, we're at the highest level of pricing in the industry. And if we get too much higher, it just creates too much opportunity for others to make an issue of that, if you will, so our play is really on broadening our offerings. And we think that's where the best opportunity, by far, exists. And we want to be very, very careful because at a certain juncture, you can reach a wall of sorts with pricing and you regret it, you just get too -- I'm not going to use the word "greedy," but there's a line there, I -- and we don't wish to cross it.

And then last, I guess, you mentioned that the Galapagos shorter itineraries, is there anything different in that market that's worth commenting on? Has anything changed, just generally, in the Galapagos?

No, this isn't a factor of anything changing in the Galapagos. And by the way, these shorter itineraries, we're developing these in other parts of the world as well. We have some out of California that we're experimenting with, in Baja, California that we're experimenting with. So the whole notion here is this -- I and colleagues run into people all the time that say we'd love to travel with you, however, we don't have that much time. And so really this is a response to what we've heard from a variety of people. And so what we're trying to do is -- or what we are doing is we're creating programs where people can leave home and get back home entirely within a work week, if you will.

And just one last stab, a modeling question on your full year guidance. Can you quantify the impact -- the negative impact from Venture? Are there any incremental dry docks to what you had last year that -- can you quantify that as well?

Sure. So we're not going to get too specific on the Venture but it is several millions of dollars with regards to the losses in the current year, just given the timing of the vessel. You have to hire crew, you have to put supplies and items on the vessel ahead of launching the vessel, and obviously some of those things you can't capitalize. There's a fair amount of cost at the end of Q3 and into Q4, which will roll through. And then given the Venture won't really launch with guests towards -- until the tail end of the year, there's not a lot of revenue to offset that in the current year, certainly that would be a negative in the current year and we'll see a lot of the benefit from the launch of the Venture, both from an EBITDA as well as the free cash flow in 2019. So that is -- that's the answer to that question. In terms of the dry dock, the dry dock schedule is actually, in totality, it's very similar this year to where it was a year ago, which really is a shift timing from predominantly in Q2 to the end of Q3 into the early part of Q4. The one exception to that really is the Quest – sorry, not the Quest, the Endeavour II, which had launched at the end of 2016, and as a result only had a shorter wet dock in 2017, whereas it will have a full dry dock in 2018. But that's only a few extra days. So all in all, the schedule will be very similar, it's just the shift in the course.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, everybody, for joining us this morning. We appreciate your time. And if you have any follow-up questions, please don't hesitate to reach out, we'll be around most of the day. Thank you.

Thank you.

I apologize, we have one more question if you -- if we may take it please.

Sure.

I'm sorry. They dropped their line. Okay. Thank you so much.

All right. Thank you, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.