Good day, and welcome to Lindblad Expeditions Inc. Fourth Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.I would now like to turn the conference over to Craig Felenstein, Chief Financial Officer. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us for Lindblad's 2019 fourth quarter and full year 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 fourth quarter and full year results before we open the call for Q&A. You can find our latest earnings release in the Investor Relations section of our website.Before we get started, let me remind everyone that the company's comments today may include forward-looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations. The company cannot guarantee the accuracy of any forecast or estimates, and we undertake no obligation to update any such forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings.In addition, our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release.And with that out of the way, let me turn the call over to Sven.

Thank you, Craig, and thanks, everyone, for joining us this morning. It is a pleasure to be here today to discuss Lindblad's strong financial performance this past year and to highlight some of the strategic steps we have taken and continue to take to build upon this momentum in the years ahead.As the demand for adventure travel and expedition cruising specifically continues to rise with a proven track record of delivering authentic and high-quality experience in some of the world's most remarkable geographies, no company is better positioned to capitalize on this trend than Lindblad Expeditions. This was certainly evident in our 2019 financial results. Craig will discuss the specifics in a moment, but Lindblad's strong growth this past year, once again, demonstrates our ability to maintain high yields combined with high occupancy as we add significant capacity. Since we strategically began investing in our newbuild program back in 2015, Lindblad has increased our Available Guest Nights by over 20% while expanding net yields by 8% and maintaining occupancy levels at over 90% as more and more guests are experiencing the intimate and immersive expeditions we deliver.The latest addition to our fleet, the 100-passenger National Geographic Venture, has completed their first full year of operations, and guests have been extremely pleased with her comfort level, her array of exploration tools, the quality of her service and amenities and her ability to explore where many other ships simply cannot go. With the addition of Venture this past year and her sister ship, the National Geographic Quest in 2017, we have increased the size of our U.S. coastal fleet by over 250%. The primary reason we undertook this level of expansion was the excess demand we believe existed in certain key geographies, most notably Alaska, which certainly has proven to be the…

Thanks, Sven. Lindblad delivered another year of strong growth and sustained operating momentum during 2019, while at the same time, further positioning ourselves for continued expansion in the years ahead. Our strategic investment in capacity and infrastructure is generating strong financial results today as our proven track record of delivering high-quality and authentic expedition experiences is appealing to a growing audience for immersive adventure travel. And we are primed to build on this momentum moving forward as we add additional vessels while leveraging upgraded technology platforms and expanded sales and marketing capabilities.Before I highlight the strong growth expectations we have for 2020, let me take a few minutes to discuss the drivers of our financial performance from this past year. For the full year 2019, total company revenue increased 11% to $343 million, with 11% growth at both the Lindblad and Natural Habitat segments versus a year ago. We also delivered significant operating leverage as the strong revenue growth resulted in a 21% increase in adjusted EBITDA to $67 million, led by 21% growth at the Lindblad segment and 23% growth at Natural Habitat.Turning to each of the segments. The Lindblad segment generated revenue of $272 million during 2019 as compared with $246 million a year ago. The 11% year-on-year growth was primarily driven by a 10% increase in Available Guest Nights, mostly from the launch of the National Geographic Venture in December 2018. As we expanded capacity, we were also able to slightly increase net yields to $1,051 per night while maintaining occupancy at 91%. The increase in net yields was driven by higher ticket pricing and from the impact of changes to certain itineraries, most notably from transitioning some of the inventory on the National Geographic Orion from the South Pacific to the Russian Far East, partially offset…

[Operator Instructions]. Our first question will come from Steven Wieczynski with Stifel.

So Sven, you gave a lot of good detail around the virus or the potential virus impact that could be there. And obviously, your booking window being extremely elongated should help you guys out as well. But I guess -- wondering if you can talk about maybe what you've seen in terms of bookings or lack of them over the past couple of weeks. And then also maybe if you've seen any change in kind of your cancellation rate as well?

Yes. This is Craig. Why don't I handle that and Sven can provide some additional color? As Sven kind of mentioned, through January, everything was, I would say, only positive. It was completely -- the growth year-on-year bookings was up, I would say, close to 50% year-on-year in January. February will continue to be opposite, as I mentioned, year-on-year, but we did, towards the end of the month, start to see some more choppiness, I would say, in terms of bookings. Yesterday actually, into itself, is a prime example. Yesterday was one of the best days we've had. Bookings were really strong across the board not just for the new ships but also the returning fleet. So we continue to see strength pretty much, I would say, on a consistent basis.That said, there are pockets of slightly higher cancellations in any given day. We are starting to see bookings, I would say, a little bit further out in the year for travel later in 2020 as opposed to earlier in 2020, more than we had seen previously. But all in all, we're seeing a pretty consistent trend with bookings over the last couple of weeks that we saw earlier in the year.

Okay. Got you. And then I wanted to ask you guys about the partnership with National Geographic and if you've seen any major differences now that they're owned by a different company obviously. And maybe how we should start to think about that partnership or how you guys think about the renewal process and how that might play out?

Yes. Sven here. So our activity together with National Geographic is in a very healthy state. It's -- in fact, in terms of the business generated by their travel business, it's up quite significantly this year. And as everybody knows, I think that our agreement runs into 2025, and we will soon begin to have active discussions as to how we move forward, which have already begun, informally happening. But from a more formal perspective, they'll start in earnest in the next year or so. And we see absolutely no reason from the perspective of National Geographic nor ourselves that we wouldn't wish to continue our relationship, which has been such a positive partnership for both National Geographic and ourselves over the years. Does that answer your question?

Yes, yes. That's fine. And then if I could ask one more? And this is a bigger picture question. But I think the question we get a lot from investors, especially with the luxury exploration space, it seems like there's a good bit of increased competition from kind of new entrants into the space, whether that's Viking or Silversea. And just wanted to get your kind of thoughts now, Sven, around that and maybe how you talk to investors about not being overly concerned about that increased competition. What keeps you guys so unique relative to some of these start-ups?

Yes. So obviously, it's a dynamic situation with -- as it relates to competition. New competition is coming in sort of rather regularly these days. And the way I look at it and the way we discuss it internally from the perspective of how we wish to react to it is, first of all, this has been sort of the expedition segment. It's been an extremely small segment of the travel industry related to the whole, and it is now one of the fastest-growing segments within the travel industry and obviously not in absolute terms but in terms of related to itself.So in a sense, what competition invariably does is it raises the profile of an idea. It expands the sort of interest in a category, if you will. And I think that's what's happening here and will continue to happen. And then I think we're very, very well placed to harvest a lot of that interest. People these days, they're not going to take one person's message in isolation. It's going to usually drive them to the Web. They're going to do some research. They're going to try and figure out, "Okay. What is this all about? What are my different options?" And I think our brand, together with National Geographic, we will fare very well in that conversation, if you will, because -- particularly when people are not exactly -- they're early -- it's an early experience as it relates to this kind of travel, I think they're going to be very cognizant of brand reputation, and I think that's going to play as an important feature.

Our next question comes from Alex Fuhrman with Craig-Hallum Capital Group.

I wanted to ask about the strong booking strength that you've seen here in 2020. Can you comment on how much of that do you feel like is being driven by bookings for the new Endurance when that launches versus for your existing itineraries or some of the newer shoulder season itinerary you've been launching?And then more specifically on the Endurance. As that gets close to launching, can you give us a sense of who's been booking that voyage on that ship? Has that been mostly your long-time customers looking for a new itinerary? Or has that been helping to drive new customers into the brand as well?

Okay. So that's a lot of questions all wrapped up into one, but let me try and give it a stab and then let's -- hopefully I won't miss too much. So as it relates to the Endurance. Of course, every -- any time we come up with something totally new, the initial primary driver is a community of people that have some familiarity with these past guests. But this is gaining traction on a wider basis than just past guests, and we're very, very pleased about it because it's such an innovative leap for us.But as it relates to the rest of the fleet, we're not seeing any sort of destruction of activity on the rest of the fleet because all of these different products appeal to very distinct audiences. So for example, the person we're marketing Escapes to is not the person we expect to see, at least at this stage in their lives, going to the Endurance. The people that go to the Galápagos in Alaska, for example, which are "bucket list destinations" are very different than the people who go with us to Costa Rica and Baja California and the Arctic.So our audience is not sort of monolithic. It's very, very diverse, and it's very targeted according to their interest and their sort of at the stage of their life and their psychographics. So we have that, I think, very, very well in order. And so we can have this sort of approach where newness, whatever comes in that's new, does not unduly compete with that which is old because they really belong to different audiences.

Yes. Let me just follow up a little bit with some color on the booking profile today. When you look throughout 2019, we certainly saw a large increase due to the Endurance because she went on sail at the end of 2018. So that was really the first year of her booking. When you look at the bookings that we're seeing right now, in the early part of 2020, it's really across the fleet, as Sven mentioned, because for those folks traveling on the Endurance in the middle part of this year compared to the later part of this year, most of that has already been booked. So when we see bookings today, we're seeing bookings for across the fleet for the remainder of 2020, and then for 2021, a combination of both new and existing vessels.

Great. That's really helpful. And then if I could just ask quickly on the Wild Escapes? It seems like that's successfully helping you go after a slightly younger audience. Have any of these customers then been transitioning to longer, more traditional itineraries? Or has there been booking interest amongst those new customers coming in through Wild Escapes?

Yes. So I think these programs are sufficiently new that they're -- we're not going to get a lot of data or a lot of subsequent activity that quickly necessarily. What we do know is that it definitely has been bringing in new people. It definitely has been bringing in people of a somewhat younger demographic. And when it comes to sort of looking at it from a lifetime value perspective, we absolutely believe we will be able to generate further interest amongst this community.

Our next question comes from Tyler Batory with Janney Capital Markets.

First, I wanted to actually follow up on the Wild Escapes and some of the shoulder season itineraries that you guys have added. Can you speak to the profitability of those trips? And I think in your opening comments, you talked about building occupancy there. Do you think the gap could ever close with what you're doing with your traditional trips versus some of the shoulder season inventory from an occupancy perspective?

Sure. This is Craig. Let me give a little bit of color and Sven can chime in if he sees the opportunity. So when you look at the Wild Escapes from a profitability perspective today, they're a little bit less because we're not quite at the occupancy levels that we want to be on these trips just yet. They're still very profitable for us, and they're still adding to the overall bottom line of the company. But when you look at the really high margins that we have on our existing, but I would say, busy season itineraries, those margins are certainly higher just given the fact that they're full and they're traveling at very high yields.That said, when you look at the occupancy on the Wild Escapes that we're doing today, the occupancy that we've added with new inventory is actually very similar to what the occupancy was on these shoulder-season ships previously. So when we had two ships, we had occupancy at a certain level. Now we have 4 ships, we have occupancy a little bit less because we know 4 ships, but the yields overall are very much where we expected them to be. It's just a matter of now increasing the overall profile in terms of getting more guests on these ships, so we can fill them even further, which will certainly be increasing profitability because the cost basis is already there. So when you look across the fleet -- I'm not going to get to the occupancy at the time of the year, but the reason the occupancy is lower traditionally in Q4 is because of this shoulder season inventory.

Okay. Got it. That's helpful. And I also wanted to follow up on the competition. Given you have Endurance and then the Resolution coming online in the polar regions, just wondering if you can talk a little bit more to the competitive dynamics of those markets specifically and how you're positioned there. And then also how the competition in those locations compares to some of your other geographies, especially Alaska?

Okay. So far, so our newer ships, the Endurance and then the Resolution coming on its heels, will be primarily polar vessels that will operate in the Arctic in the summer and the Antarctic in the winter. They can operate longer in these areas because of the specific class -- the ice class of the vessels. So for example, we will be going up now in April to the Norwegian -- the high Norwegian Arctic, and there will be no other ships essentially, except maybe some small -- like the Swedish icebreaker -- little small Swedish icebreaker which I chartered a couple of years ago to investigate what the Arctic would be like at this time of year. And none of us had ever been up there this early before and discovered that it was spectacular.So in any case, we'll be up there in April and early May. And there will be no other competition there in essence because either those ships don't have the capacity to be there at this time of year or they don't believe that there's interest. And so I feel we can go further, we can differentiate. And I believe that will hold us in good stead as it relates to the competition. I wasn't 100% sure of the second part of your question, so you might want to restate that.

No, I think that's helpful. I mean I was just trying to get a sense of how the -- if there's new supply coming online that might compete with you guys in some of those locations. And maybe how your competitors, they're doing some of these trips, what they're doing and how that compares to what you're seeing in some of your other markets.

Yes. You mentioned Alaska. And Alaska is -- this is primarily why we built U.S. -- 2 of our ships as U.S. flagships: because it allows you to operate in Alaska without the limitations of the Jones Act. So other ships, foreign ships, you have to come from Vancouver, and you have to spend a fair amount of time outside of Alaska on a voyage where the interest is primarily Alaska. And so what we're able to offer people is a pure concentrated Alaska experience. And there are not too many other U.S. flag vessels competing in that regard. So I think the size of the vessels matters a great deal. I think the fact that they're U.S. flag matters a great deal. It allows us to create -- or offer a really differentiated experience from the mass activity that exists in Alaska.

And our last question today will come from Greg Pendy with Sidoti.

Craig, I think you mentioned earlier just -- you're targeting April for the new ship launch, new ship costs. How should we be thinking about that relative to your prior ship? I mean should it be about 20% more new ship launches? Just thinking the capacity is about 20% more. Is that something we should be thinking about in 1Q?

I would say I wouldn't look at it that way. I would say when you're looking at the new ship launch, there's a couple of things you're going to do. Certainly, you're going to be hiring crew to go over there and train on the vessel. You're going to be purchasing things that will be used for the ship that are not capitalized expenses. So it's more of those kind of things rather than the operating cost of the ship.I think when you look at the additional costs associated with launching the launching the Endurance plus additional costs that we're going to have likely for the new technology platforms, I think if you look at the first quarter, that will probably layer in another $3 million to $4 million of cost in Q1 versus where we were a year ago on those two items.

Okay. That's helpful. And is the Resolution still kind of targeting late 2021? I think that was the last comment last time you mentioned it.

Yes, that's correct. So currently, she's scheduled to launch in the fourth quarter of 2021.

Okay. And then just one final one, if I can. Just thinking about the 2020 guidance. I mean you guys did a very good job with Natural Habitat. But now we're anniversarying a lot of, I guess, the cross-selling of the databases. I mean how do you continue the further momentum out into 2020 of just the top line on Natural Habitat?

Yes. I think Ben Bressler and his team are doing a fantastic job of marketing what I would say is a very targeted and focused set of itineraries. They're doing a great job building up, what I would say is geography that they know are going to be the most profitable for them, such as safaris or polar bears or things of that nature. And we continue to see guest demand ratchet up. So when they continue to market appropriately and they continue to attract more and more guests, there's no reason why that top line can continue to grow. It's not fully predicated on obviously sales between Lindblad and Natural Habitat. That's just a benefit that we have because of the relationship we have. But they're doing a great job of attracting guests on their own. And as long as they can continue to come up with a unique and innovative new itineraries, I see no reason why that can't continue to grow at a nice clip for, I would say, several years.

This concludes our question-and-answer session. I would like to turn the conference back over to Craig Felenstein for any closing remarks.

Thank you, operator. Thank you, everybody, for joining us today. We look forward to catching up over the next few days with any additional questions you may have. So please just give us a call with anything we can help with. Thank you.

Thank you.

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