Good morning, and welcome to the Lindblad Expeditions Inc., Second Quarter 2021 Financial Results Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Craig Felenstein. Please go ahead, sir.

Thank you, Chris. Good morning everyone and thank you for joining us for Lindblad's 2021 second quarter earnings call. With me on the call today is Dolf Berle, Lindblad's Chief Executive Officer; and Sven Lindblad Founder and Co-Chair of Lindblad Expeditions. Dolf 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. 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. That out of the way, let me turn the call over to Dolf.

Thanks Craig and thank you all for joining us this morning. As most of you know, this is my first earnings call since joining Lindblad in May, and I'm excited to begin establishing a dialog with the investment community, while providing an update on our business. It's a great privilege to succeed, our founder and now co-Chair of Lindblad Expeditions Sven Lindblad in the CEO role. I would like to publicly thank Sven for his partnership thus far and for his very generous efforts and helping me onboard as leader of this remarkable company. Over the past 40 years, Sven has built the preeminent expedition travel business that is the gold standard for providing high quality and immersive experiences in the world's most extraordinary destinations. I look forward to partnering with Sven, his Co-Chair Mark Ein, the Lindblad Expeditions team and our Board of Directors, as we continue to build the company and explore the wonderful potential we all believe is ahead of us. My professional background has been focused on growing companies that I describe as being in the joy business and being able to serve as CEO for the company that pioneered expedition travel fits well with my experience. The opportunity to lead Lindblad also embodies two important themes in my life. First, I have a deep personal connection with Lindblad's mission to help preserve our planet and educate people across the world about the natural wonders that we must protect. In my youth, my father served as the Environmental Commissioner for the State of New York, and then as the President of the National Audubon Society. So I grew up in an environmentalist family. Secondly, I have devoted the majority of my professional career to creating memorable guest experiences. Lindblad does this on a grand scale, creating…

Thanks, Dolf. Before I dive in, let me once again thank our dedicated crew across the world as well as our diligent office personnel for their sustained resiliency and for their commitment in preparing us to return to operations while preserving capital whenever possible. It is extremely exciting to represent the operations, and we do so as a strong and vibrant company, due in large part to the comprehensive plan we put in place back in March of 2020 to reduce costs and further fortify our liquidity position. While it will take some time to fully regain the momentum we were generating when we paused operations, the investments we have made during the pandemic to expand our fleet capacity and diversify our product offerings positions us to drive significant growth over the next few years as we capitalize on the growing demand for authentic adventure travel. And in the short term, we have ample liquidity to ramp up operations and weather any immediate uncertainties while still having the flexibility to explore additional growth opportunities. We ended the second quarter with $160 million in unrestricted cash and $43 million in restricted cash, primarily related to deposits on voyages that originate in the United States. The $203 million of total cash is a $17 million increase over where we ended Q1 2021 and was driven in large part by final guest payments for upcoming voyages and guest deposits for future travel as well as from the company's continued focus on cash preservation measures. As expected, operating cash usage increased during the quarter as we launched itineraries, prepared additional shifts for sailing and increased marketing spend to drive future bookings. In addition to cash used directly in operations, spending during the quarter included CapEx of $6 million, net of export credit funding, primarily…

Our first question is from Steve Wieczynski of Stifel. Please go ahead.

So Craig, this will probably be for you, but is there any way you can kind of help us think about how that $23 million EBITDA loss in the quarter looked on a monthly basis? And you could probably see where I'm going with this question, but trying to figure out if June was closer to breakeven point from an EBITDA perspective? Or maybe you can even help us think about what July looked like? And then based on what you're seeing today, if things stay status quo, would you imagine that you guys would be cash flow or EBITDA positive sometime in the near future?

Sure, thanks for the question, Steve. So obviously, we're not going to break out by months. But certainly, June was the lowest loss month of the quarter that we had, given the revenues that we generated during the quarter. One of the things that you have to be cognizant of right now is that there are some costs that we incur ahead of sailing so throughout June and frankly throughout a big portion of July. We're still prepping ships to begin launch, and that includes doing obviously any dry docks that are necessary on those ships, but also bringing crew back, making sure they're all vaccinated, bringing office personnel back, making sure that they're all vaccinated and ready to go as well. So there is a fair amount of cost that take place ahead of operations. While I would love to sit here and tell you when we're going to reach EBITDA positive or cash flow positive on an operations basis. There is still so many question marks, and it's really hard to answer. So for example, certain geographies, which aren't open, we don't know specifically when we'll be able to go to certain - those geographies. Certainly guest demand, when we look out to the rest of the year has still got some uncertainty to it, specifically more for 2021 than for 2022. But all in all, obviously the company is heading in the right direction. And as long as the geographies that we plan on operating in open up over the next several months, we do feel we'll be able to reach cash flow breakeven and EBITDA positivity within a short period of time.

Okay, thanks for that. Second question, you talked - you actually hit it a little bit. But the excess costs that are embedded right now, given the restart phase and I guess, I would think that we have to assume over the next six months, over the next 6 months, you're going to see all kinds of ships probably in your itineraries and whatnot? And so is the right way we should be thinking about kind of the current expense run rate as kind of take what we witnessed or what you guys witnessed in the second quarter and kind of push that into our models for the foreseeable future?

No, I think our cost base will frankly ratchet it up, right. Because when you look at what's happened in the June quarter for example, we only had four ships really operating in June. And two of those didn't really start till the end of June sorry, one of those didn't really start till the end of June. So we only had three ships really operating fully for the month of June. And now to Dolf's point, we have eight of nine ships really operational by the end of July. So the cost to get those ships ready for July will be significant. And then hopefully, when you're looking at August, you're going to have a full month of operating a bunch of ships and that comes along the cost base as well. At the same time, we are continuing to ratchet up spending on marketing as we look to drive the coffers further in 2022. And that has a cost that goes along with it. And then lastly, when you look at all these payments that are coming in for future travel and all these deposits that are coming in for future travel even further out, those come with credit card commissions, right. We have to pay those commissions, and it's a good cost to have going out the door because you're spending money on future revenues. So you will see a ratchet up in cost base. And I do think that when you look out towards the end of the second quarter - sorry, the end of the third quarter. You're going to be reaching levels that you were similar to back in 2019 when you were operating the fleet. And on top of that, to keep providing some more color, we have an additional ship the Endurance, which obviously has additional costs. So when you think about our fleet and you think about the third quarter, you're looking at higher costs just because of the nature of restarting operations and additional ships in operation.

Okay, that's great color, Craig thanks. And then maybe if I can ask one more quick one, so when you look at the bookings that you guys have taken over the past couple of months, is there any way to help us think about who are booking these cruises so to speak? And I'm just trying to get at, is it pretty much all repeat customers or have you seen new to brand?

Yes, it's been fairly interesting. So obviously, throughout 2022 it was such a weird year. So it was hard to take too much away from the booking patterns. But what you see once the page turned to 2021, is that first timers are new to book has really ratcheted up, starting in January, and has continued to grow really through the, I would say, the end of June and even into July. So we are seeing some really nice trend on what I would call first timers. But at the same time, our loyal guests remain very, very loyal. And we're seeing, especially those folks who had voyages that were canceled and then had a reschedule. Those folks have stayed and drove. So the mix is actually really strong right now between new and old, and we hope to see that continue as we move forward.

The next question is from Tyler Batory of Janney. Please go ahead.

Hi good morning, this is Jonathan on for Tyler. Thanks for taking our questions and congrats on the return to sailing. First one for me Craig, you highlighted in the prepared remarks that the booking demand and pent-up leisure demand that you're seeing out there. Just curious how you see the pricing environment evolving over the next couple of years with that? And I know people sign up with some lead time, but given that the demand seem so strong right now, maybe you could provide some color on how aggressive you want to be pushing yields in 2022 and 2023?

Sure, so the way I, always look at the business and maybe Dolf can provide a little bit of color, is we look at it from the perspective of there is multiple drivers here, right. You have the driver of additional price. You have the driver of additional occupancy and you have the driver of additional nights overall. And right now, when you think about our fleet, we've added from 2019 to ultimately when we add the Resolution at the end of this year. We'll have added over 16% more inventory to our fleet than we had previously. That is a pretty massive jump, and we're focused on actually getting that inventory out there and filling it at current prices. If we can do that, the company will have significant growth when you think about 2019 to where we are today. Furthermore, we'll continue to look to drive further occupancy within those existing inventory. So I think price, when you think about it today, is already at a very high price point with regards to the industry. So while we will take a look at price opportunities where we can, the reality is today, we're focused on adding additional inventory and filling that inventory.

Yes, thanks, Craig. I don't have anything to add on that.

Okay thank you, that's very helpful. And then Dolf, you highlighted in your prepared remarks, some of the guest feedback, I believe it was related to the Endurance. I'm curious what you guys are hearing from the rest of the ships that the four ships that have sailed or were sailing in June and early July?

Yes, I'm happy to do that and I'd love for Sven to share a little bit also on his specific experience on the Endurance. But over the years, the company has I think, done a nice job of getting - get feedback, which are surveys that each of the guest fill out prior to leaving the ship. And we are seeing at/or higher than previous levels in terms of the feedback. And I think that's for a couple of reasons. I do think that guests are excited to be back and some of the pent-up demand that we anticipated has come true. And some of that is an emotional pent-up sort of excitement to get back out into the wild and experience things that are so remarkable. And so, we've had really strong guest feedback. And I think by way of background, the company did a very nice job of ensuring that we had proof-of-concept, practice runs with the ships prior to going live. And so the standard for the guest experience was one that was as high as ever. And so that was a strong return. And because we have the benefit of Sven here, and Sven actually has spent a little bit of time on the Endurance, I think it would be good for him to share a little bit about that experience. And it was actually many of our legacy guests, some of whom had 20-plus voyages behind them who joined him on that voyage so Sven, perhaps a few words on the Endurance.

Yes, well just - so in June, because I think this is an important point to make, in June I went on the first voyage of the Sea Bird, our smallest, simplest ship. And now in July, I went on the National Geographic Endurance, our most sophisticated ship. And there were two guests that had been on both of those voyages. And what I thought was interesting and palpable was that these people and many others I have met over the years find both of these extremes equally interesting. From a perspective of each is pertinent where it operates. So if you're in Southeast Alaska, a small ship like the Sea Bird is way more suitable than the National Geographic Endurance. If you're in the North Sea and Greenland, the National Geographic Endurance is way more suitable than the Sea Bird. So I'm really delighted that our fleet is quite diverse. And while we're raising the standard on these newer ships, it does not devalue the older ships where they are used. And I think that's a really interesting circumstance. The Endurance however, I have to say, is the most extraordinary ship I've ever set foot on, on any possible level. From the perspective of its expedition excellence, we launched 15 Zodiacs - sorry, 10 Zodiac in 15 minutes. Now that may not mean a lot to you folks on the phone off hand, but that is extraordinary in terms of being able to deliver, to be able to get somewhere, launch the boats, get people out. And the ship is so quiet, you don't even know you're moving. It's fast, it can maneuver on a dime, and it is the most comfortable ship you could possibly imagine, with lots and lots of diverse spaces aboard. So this is definitely, from the perspective of Bluewater ships, creating a totally new standard, and there is no ship out there, in my view, in the Expedition space that comes close to being as extraordinary as this vessel from the perspective of Expedition Excellence/Elegance.

Thanks, I think it was very helpful.

Okay. Go ahead.

Okay, thank you for all the color. That's all from me.

Thanks Jonathan.

The next question is from Chris Woronka of Deutsche Bank. Please go ahead.

Thanks for all the details so far. I was hoping you could talk a little bit about in some of the markets where you haven't been able to get back to yet with restrictions. How much lead time do you get in terms of those restrictions being implemented I mean, I'm just trying to get a sense for how much visibility you have into whether it's later this year or early next year? How quickly some of these restrictions change and how that impacts your ability to kind of plan these itineraries where you have to make modifications?

Sure, Sven here. So it's very dynamic, and it's changing on a daily basis all over the world. And so we, are having to pivot really fast on many occasions. But what we're finding is that there are people out there that are so anxious to travel, and they will make decisions at such short notice. I mean when we pivoted from the Northeast Passage to Iceland and Greenland, I mean people came immediately. I mean, not only the people who were on the first trip, but we've got very good occupancies on all our Icelandic programs with a month or two notice, which is unheard of in normal conditions, I think to this degree, right. So, but we know very specifically what countries matter to us. And right now, going into the winter or going into the fourth quarter, a lot of the countries don't matter so much to us. Like Norway, Russia doesn't matter. These are critical countries in the second or more importantly, in the third quarters. So we're focused really on a couple of geographies that sort of matter at this point and we feel optimistic about those. And then when we - what's really important is that by next year, Q2, Q3, the countries like Norway, Britain, Russia, Greenland, Iceland are open for business, and we believe they will be, right.

This is Dolf. And we're in regular contacts with all these authorities across the world. And what that allows us to do is get a sense of directionally what's happening. I think the quicker pivots that we've seen, that Sven mentioned, really relates to activities surrounding COVID. And so, if there is a surge of cases or an outbreak related to the Delta variant in a, certain geography and the government, therefore, takes swift action, we're affected by that. And that goes both ways for us. That can be something that might cause us to amend an itinerary and make a change or it perhaps opens up a new area. And so the key for us is being very close to what's happening on the ground in these geographies. And then as Sven said, we have these priorities, which relate to the established routes that we have and the known geographies and the ones that our guests are most fond of, and we focus on those primarily. And so as you said, Antarctica is really the focus today.

Okay great, that's helpful. And then a question probably for Craig, Craig, is there any way to - when we think about this EBITDA and you have these incremental expenses that are happening now, is there a way to triangulate at what point we get back to breakeven, whether it's a number of ships or percentage of inventory you have? Or of just number of months that you're operational at a certain percentage and then second to that is, if we assume that we're basically back to fully normal next year with all your capacity, is there any reason to think margins wouldn't be higher than they were in 2019 with all the inventory out there?

Sure, let me start with the first question. It's really a difficult question to answer because there's so much variability with regards to what each of these ships at least requires to get started again and also how the operational realities are, in each, geography. Let me give you an example. Right now, if we are able to operate our Antarctica season, there is a high likelihood that we will be using charter aircraft to fly folks down to Antarctica. That changes the cost structure certainly moving forward and changes the cost structure of the overall organization. It's certainly still profitable for us, but it's certainly not profitable at the same level that it would have been previously. So there's a variety of factors that go into this. So it's really hard for me to say that at ex percent of occupancy won't be profitable as a company because there's not a new normal right now. And certainly, when you think about it on a ship level, what I will say, on an overall ship basis, each ship can be profitable anywhere from 40% plus occupancy in most, geographies. So we feel that getting the ships back in the water will certainly allow us to be profitable from a ship level perspective, but certainly having enough scale to have all these ships in the water will allow us to get there from a company perspective. In terms of 2022 and margins looking forward, it's hard to say for 2022 because, again, 2022 still will have some of the challenges with regards to Antarctica potentially from a charter perspective and certain geographies still may not be open. That said, I would fully expect that when we get all the way back to having all our ships in the water, the way they're supposed to be in the water, and we have occupancies at the levels that they're supposed to be at. That we will continue to see margin expansion of the company moving forward as we expand our fleet. Because we're expanding our fleet, we get certain economies of scale that obviously don't sit there when you're at only six or seven ships. So when we have 10 ships in the water, four of which are Bluewater ships, we fully expect the realities of our margins to increase over time.

Thank you. The next question is from Alex Fuhrman of Craig-Hallum. Please go ahead.

Great, thanks very much for taking my question. Can you talk a little bit more about who's been booking on your upcoming voyages, and looking into 2022? Does your mix of new versus returning customers look similar today as it did before the pandemic?

Yes. I would say today, it's still skewed a little bit more towards returning guests, not surprising, obviously, because those folks certainly understand what it is we do and how we operate, because they've done it many of them many, many times. But we have been very, very pleased with the ramp-up in first time guests. And part of that also will be, as people get more and more comfortable traveling internationally, first timers tend to be less comfortable with that, whereas returning guests feel very comfortable. They've been on our ships. They know how easy it is for us to - what I would say is operating it by - safely as possible, whereas if you haven't been on one of our ships, it's hard to really understand how they and work and how they operate. So I think you'll continue to see the first timers ratchet up. But in the short-term, I certainly expect the repeat guest to still be the lion's share of what we're doing here.

Okay, that's really helpful. And then I know it's obviously really early, but it sounds like a lot of people are interested in itineraries that are even further out, are you starting to get a lot of bookings for 2023 and anything there that you can share with us?

Yes, we have started to see a fair amount of bookings for 2023. But frankly, it's not that dissimilar than what it would have been two years ago. We tend to get a significant amount of bookings for several years out as people plan these significant experiences, these significant expeditions. So the levels that we're seeing today for 2023 are not that dissimilar. They're higher, because we have more, inventory so that's expected, but overall, the demand for 2023 is very similar. What's been interesting right now is the significant demand that we're seeing for 2022, and that continues to ratchet up very, very quickly.

Thank you very much. This concludes our question-and-answer session. And I would now like to turn the conference over to Craig Felenstein for some closing remarks.

Thank you everybody, for joining us this morning. We appreciate your time, and if you have any follow-up questions, please reach out, and we'll be happy to set up time to do. Thank you.

Thank you very much, sir. Ladies and gentlemen, that concludes this event. Thank you for attending today's presentation and you may now disconnect your lines.