Ladies and gentlemen, thank you for standing by, and welcome to the Lindblad Expeditions' First Quarter Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Craig Felenstein. Thank you, you may begin.

Thank you, April. Good morning, everyone, and thank you for joining us for Lindblad's 2021 first-quarter 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 financial results and liquidity 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.

Thanks, Craig, and good morning, everyone, and thanks for joining us today. This morning started with some pretty interesting news that New York may be fully opening on July 1, which certainly gave me a smile and I'm sure many people on this phone call. Responsibly opening on July 1, that would be a huge victory that we've been waiting a long time for. As you all know, these past 12 months have been inordinately hard for our industry and for so many people who depend on tourism for their livelihoods, but now it's clear that there is significant positive momentum. And that momentum is due in large part to vaccinations. The acceleration of distribution in the U.S. has been a monumental achievement. And just a few days ago, the European Union stated that U.S. citizens who are vaccinated would be allowed to travel to EU countries. The details, of course, will take some time to emerge, but this is a huge and welcome step. At the end of March, when we announced our reactivation plans, we also announced that we would require all adults, all adults to be vaccinated. That was premised on a number of factors, but most importantly, it was based on our commitment to keeping our guests, our crew and the people we visit safe. It was also overwhelmingly what our surveyed guests indicated that they wanted in order to return to travel. We couldn't be more excited to begin sailing again during the first week in June with two ships in Alaska and one in the Galapagos Islands, and our excitement has been matched by our guests. The demand has been so strong, particularly in Alaska, that we will likely be activating two more ships later in June. The 5th ship, the National Geographic Orion, may also be activated in Alaska if we can secure permission to effect clearance in a Russian port, as incorporating a foreign port is unfortunately necessary for a non-U.S. ship in order to comply with the Jones Act. I think this reflects on the value of flexibility, which our size ships allow for. Soon, we will also reactivate sailings in parts of Europe, beginning with Iceland and hopefully, Greenland shortly thereafter. These are both geographies we know extremely well and areas that are in high demand from our audience.

Thanks, Sven. Before I jump in, let me once again thank our dedicated crew across the world as well as our diligent office personnel for their resiliency over the past year and for their commitment in preparing us to return to operations while preserving capital whenever possible. It has been over a year since we paused our operations, and we continue to execute on a comprehensive plan we put in place back in March of 2020 to further fortify our liquidity position and ensure we emerge from the COVID pandemic as the same strong and vibrant company we were prior to the cessation of operations. The targeted capital raises and cash preservation measures implemented over the past year allowed us to end Q1 2021 with $164 million in unrestricted cash and $22 million in restricted cash related primarily to deposits on voyages that originated in the United States. This is a $26 million increase in total cash over where we ended Q1 2020. So as we begin to sail this June, we have ample liquidity to begin ramping up our operations. At the same time, the investments we have made over the past year to expand our fleet capacity and diversify our product offerings will allow us to build upon the momentum we had prior to the virus and capitalize on the growing demand for authentic adventure travel.

And your first question comes from Steve Wieczynski with Stifel.

So Sven, first of all, congratulations. I guess, it's congratulations. So I want to understand how you're thinking about layering in additional ships at this point. You mentioned, Sven, in your prepared remarks that it sounds like you might already be ready to launch some additional shifts at this point. I just want to dig in that a little bit more and understand how you guys go about making those decisions, I would assume that, at this point, that's all demand-based. Is that the right way to think about it?

Yes. Well, it's based on two factors. One is identifying geography that you think our audience is interested in and, secondly, really understanding the demand curve and the timing of those things. So it's a really rigorous process because, obviously, it's a big commitment to build a ship or ships, and you want to make sure that there's a confluence between geography and demand.

Steve, just to be clear, are you referring to launching new ships ultimately, several years now, or you're talking about launching new ships this year?

No, no. What I meant was later this year. So obviously, you have the three ready to go in early June. And I guess, maybe I misunderstood you, but it sounds like you're ready to actually start to think about putting additional ships back in the water sometime later this summer?

I see. Yes. Sorry, I think I misunderstood your question. My apologies. So as we've always said, there are three things that are necessary in order to relaunch a ship in a particular area. One is it's obviously a medical solution and we have that. We're requiring everybody to be vaccinated, and that's a very clear path. And then the second one is the challenge at the moment in certain areas, which is, are you allowed to come into that area or not. And there still are some restrictions. I'll give you an interesting example, the Columbia River in the United States. Washington state has a particular perspective. Oregon, which is the other side of the river, has another perspective. County-by-county now all these things are changing really, really rapidly. The acceleration of openings is really at a much higher pace. And the minute places are open, we've got sort of plans in place. A lot of these voyages, we have guests booked, lots of them. We just cannot officially go there yet, right? So for example, Norway, we have lots of people booked on our voyages that involve Norway, but Norway is not yet open. We have lots of people interested and booked in Iceland. Iceland is open. Greenland is not yet open, and it's an important place for us, but we anticipate that it's highly likely that we'll be able to operate Greenland later this summer. So it's all a series of processes that have to happen in order to pull the trigger finally on reactivating a ship.

One of the things that I'll add, Steve, is that we've talked about this a lot in the past, even while we were operating, but even more so now, which is we have an immense amount of flexibility, both given the size of the ships and kind of how we operate. So as a result, if there are geographies that aren't opening, we can pivot and pivot quickly, as long as there is guest demand, to a different itinerary. And given the experience that the team has here in operating in these geographies for many, many years, we have some interesting unique ideas we can pivot to. So we do envision some openings later this year. It's just a matter of figuring out what those are and when they are.

Thanks for the color and then I guess this will be for you, Craig. If you look at the booking trends for '22, I think if I read my notes right, 39% and 32% higher versus '21 and '20. Obviously, those are being, at least, I think they are being pushed up by the Resolution and Endurance. And I guess the question is, what booking trends for '22 would look like without the new capacity? Just trying to get it on a like-for-like basis? I don't know if you guys can do that or you can't.

Let me give you a little color rather than giving you specifics, but I can get you close. It's always an interesting question because it's not like we have same-store sales. If we didn't have the Resolution or the Endurance, a lot of these guests would've likely travel on our other ships, whether it be the Explorer or the Orion or some of our other destinations. So it's really not a fair apples-to-apples comparison to just strip out those two ships. But the way we tend to look at these things is when you look at where we are from a percentage of the max revenue that we can get in any given year, where we sit today as a percentage versus where we sat in prior years. And what I can tell you is that as a percentage of max revenue for 2022, we are further along today than we were last year for 2021 and the year prior for 2020. So in terms of percentages, we are definitely pacing ahead in terms of the overall bookings, even when you strip those two voyages out.

Understood. And if I can ask one more quick one. I guess, on the pricing front, I mean, everything that we see and everything sounds like you guys are seeing in terms of pent-up demand from your customer base looks, I mean, extremely, extremely strong in the out years, especially for a lot of the exotic itineraries. So I guess the question is going to come from a pricing standpoint. And it seems like you guys should have some extreme strong pricing power over the next couple of years. And I just want to kind of get your thoughts in terms of the way you think about pricing power moving forward?

Yes. So it's interesting. We have never felt it wise to sort of -- well, I'm not suggesting you're suggesting gouging, but what could be perceived as sort of gouging. We believe that our greatest opportunity is expansion of inventory rather than pushing prices too, too hard. Because at a certain point, you could fall off a cliff or just put you in a position where there could be too much focus on pricing. Our pricing is already the highest in the industry. I mean without question. And so we're very cautious about that. We don't want to be a hog that gets slaughtered because of pushing that too fast, too hard.

And we'll continue to evaluate that, Steve, as we move forward. When you think about the drivers of our revenue, it's pretty simple, right? You have occupancy, you have the availability of Guest Nights and you have price. And when you think about what's happened from 2016 through where we are today, obviously, not operating today, but before the pandemic, we were able to maintain pricing and we were able to maintain occupancy as we dramatically increased the Available Guest Nights. And when you think about where we're going to be in 2022 post-Resolution, we're going to be 66% above in terms of our inventory where we were back in 2016. It's a massive increase. If we can maintain the other two aspects of that, which are occupancy and pricing even at a relatively stable level, you're going to see some significant growth. And then we'll continue to push price in those geographies where we think it makes sense to do so. But it is something that we want to be cognizant of. You don't want to put too much stress on the system in all aspects, both in terms of distribution, as well as price, but we'll evaluate pretty much on an itinerary by itinerary basis as we move forward.

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

Great. Thank you very much for taking my question. I was wondering if you could talk a little bit more about some of the acquisitions that you've made? And kind of what you're seeing so far in terms of interest in those properties from some of your existing customers? I don't know if that's anything you've marketed at all, but I'm sure some people have just seen that news. And how you plan to market that just broader portfolio of offerings going forward? Is it just about finding good assets at good prices? Or could there be bigger opportunities to really integrate your offering?

Great question. Thank you. Well, first of all, it's only been a couple of months that we've had these companies in essence. And what we've done is we are really committed all these companies, that have Off the Beaten Path, DuVine and ourselves to aggressive cross-marketing efforts, right? Because we know for a fact that our audiences are diverse in terms of their interest. And that's the whole thesis behind acquiring these companies is I'll meet somebody who's in Antarctica one year, you'll meet -- they'll be on a safari in Africa the next year, they'll be bicycling through Burgundy the following year, whatever, and they just have this diverse set of interest. And so constantly putting the opportunities in front of our collective audiences that is more than just our individual companies, to us, feels like a really, really smart strategy. Now we have started with a whole bunch of emails introducing these new companies to our audiences. And DuVine and OBP, for example, the inquiries not only records, but like multiple records in terms of inquiries as a consequence of being exposed to are obviously much larger audiences. So we believe this strategy makes a tremendous amount of sense. We're very eager to find additional companies that fit this strategy and the cross-marketing component as well as taking advantage of certain synergies makes a huge amount of sense.

Great. That's really helpful. And then wondering if you could also comment just about the impact over the past one and a half years or so, you've had a lot of canceled voyages and a lot of travel credit that have been issued to customers. Can you give us a sense of how you're thinking about that, both from a business standpoint and then what we're going to see from a financial reporting standpoint as those 125% credit start to get used? And curious to the prior question's point, I mean, it sounds like you've got just a huge surge of demand for a couple of years here, and there's not going to be a lot of sensitivity to price or there may be opportunities for customers to use those credits on some of your other properties, like Off the Beaten Path, as they start to rebook plans over the next few years?

Please remain on the line. Just one moment. Okay, Mr. Felenstein, you're reconnected now.

April, can you hear us?

I can. I can. You're reconnected now.

Okay. Alex, you still on? We may have lost Alex. Sorry about that, everybody. We got disconnected. It never happened to me in 20-plus years of doing this, but hopefully, you can hear us. So we had a question that was raised about future travel credits and the implications that it's going to have over the next several years. As I mentioned earlier in my comments, right now, the future travel credit implication is in 2021 and 2022 is really only about 21% of our future bookings. So we have a significant cash opportunity still in 2022 and beyond with regards to the bookings. The majority of the bookings, I'd say, close to 75% of them of the future travel credit bookings have already been made. So a lot of that's going to be utilized over the next couple of years. The other facet of this, which is actually helpful for us when you look outward is if folks reschedule their voyages from Point A to Point B from the same voyage they were going to take a year ago, they will burn off part of that credit, but then they will have an additional credit to utilize moving forward. And what they can do with that credit is they can book an additional voyage. And given the high repeat balances that we see among our guests in terms of frequency of travel, if they have a great experience, which we're confident they will, they're likely to travel again sooner if they have a future travel credit. So it should help us stimulate some additional business moving forward. While at the same time, be a little bit of a cash overhang in the next one year and one and a half years.

And there are no further questions at this time.

Okay. Thank you, everybody, for joining us. We appreciate your time this morning. And if you have additional questions, please feel free to reach out, and we can connect over the next several days. Thank you.

Thank you.

Thank you for joining today’s conference. This concludes the call. You may now disconnect.