# LINDBLAD EXPEDITIONS HOLDINGS, INC. (LIND) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from LINDBLAD EXPEDITIONS HOLDINGS, INC.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1512499/000143774924006838/lindb20231231_10k.htm
Accession: 0001437749-24-006838
Filing date: 2024-03-06
Report date: 2023-12-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Company profile: /company/LIND/
All MD&A years: /company/LIND/mda/
Previous year: /company/LIND/mda/fy2022/ (FY 2022)
Next year: /company/LIND/mda/fy2024/ (FY 2024)

Item 7. Management’s Discussion and Analysis of the Results of Operations and Financial Condition

The information contained in this section should be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this Form 10-K under the headings “Risk Factors” and “Business.”

Overview

We provide expedition cruising and land-based adventure travel fostering a spirit of exploration and discovery, using itineraries featuring up-close encounters with wildlife and nature, history and culture, and promote guest empowerment, human connections and interactivity. Our mission is to offer life-changing adventures around the world and pioneer innovative ways to allow our guests to connect with exotic and remote places.

We currently operate a fleet of ten owned expedition ships and operate six seasonal charter vessels under the Lindblad Expeditions, LLC. (“Lindblad”) brand. Each expedition ship is fully equipped with state-of-the-art tools for in-depth exploration and the majority of our expeditions involve travel to remote places, such as voyages to Alaska, the Arctic, Antarctic, the Galápagos Islands, Baja’s Sea of Cortez, the South Pacific, Costa Rica and Panama. We have a longstanding relationship with the National Geographic Society (“National Geographic”) dating back to 2004, which is based on a shared interest in exploration, research, technology and conservation. This relationship, which was recently expanded and extended in November 2023, includes a co-selling, co-marketing and global branding arrangement whereby our owned vessels carry the National Geographic name, and National Geographic sells our expeditions through its internal travel division. We collaborate with National Geographic on voyage planning to enhance the guest experience by having National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers and film crews, join our expeditions. Guests have the ability to interact with these experts through lectures, excursions, dining and other experiences throughout their voyage.

We operate land-based adventure travel experiences around the globe, with unique itineraries designed to offer intimate encounters with nature and the planet's remarkable destinations including the animals and people who live there.

Natural Habitat, Inc. (“Natural Habitat”) provides eco-conscious expeditions and nature-focused, small-group experiences that include 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. 

Off the Beaten Path, LLC (“Off the Beaten Path”) provides small group travel, led by local, experienced guides, with distinct focus on wildlife, hiking national parks and culture. Off the Beaten Path offerings include insider national park experiences in the Rocky Mountains, Desert Southwest, and Alaska, as well as unique trips across Central and South America, Oceania, Europe and Africa.

DuVine Cycling + Adventure Company (“DuVine”) provides intimate cycling adventures and travel experiences, led by expert guides, with a focus on connecting with local character and culture, including high-quality local cuisine and accommodations. International cycling tours include the exotic Costa Rican rainforests, the rocky coasts of Ireland and the vineyards of Spain, while cycling adventures in the United States include cycling beneath the California redwoods, pedaling through Vermont farmland and wine tastings in the world-class vineyards of Napa and Sonoma.

Classic Journeys, LLC (“Classic Journeys”) offers highly curated active small-group and private custom journeys centered around cinematic walks led by expert local guides in over 50 countries around the world. These walking tours are highlighted by luxury boutique accommodations, and handcrafted itineraries that immerse guests into the history and culture of the places they are exploring and the people who live there. 

2023 Highlights

During 2023, we delivered record financial results with tour revenues of $569.5 million and Adjusted EBITDA of $71.2 million, exceeding the financial results of the Company prior to the pandemic, due in large part to additional guest counts across our fleet and land-based businesses.

During May 2023, we issued $275.0 million of 9.00% senior secured notes, maturing 2028, with proceeds used primarily to pay the outstanding borrowings under our prior senior secured credit agreements (the “Export Credit Agreements”).

During June 2023, Natural Habitat renewed its partnership agreement with WWF through December 31, 2028.

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During November 2023, we entered into a Brand License Agreement with National Geographic Partners, LLC (“National Geographic”) through 2040, as an expansion of our longstanding relationship with National Geographic. We will continue to collaborate with National Geographic on science, conservation, education, exploration, storytelling, sustainability and photography in order to provide travel experiences and disseminate geographic knowledge around the globe. We have the global license to use the National Geographic Expeditions brand to market, sell and operate co-branded trips on expedition ships and river cruises, and leverage of The Walt Disney Company as an affiliate of National Geographic to distribute product through their powerful sales channels and support robust joint marketing campaigns. Under the Brand License Agreement, we will no longer pay National Geographic commission on reservations through their channels but royalty fees, based on performance, in connection with the co-branded partnership.

Bookings Trends

We have substantial advance reservations for future travel with strong gross bookings, partially offset by the short-term impact of instability in Ecuador and the Middle East. As of February 26, 2024, bookings for travel during 2024 have increased 2% as compared with bookings in 2023 as of the same date a year ago and the Lindblad segment had 85% of full year 2024 projected guest ticket revenues already on the books.

Financial Presentation

The discussion and analysis of our results of operations and financial condition are organized as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","a description of certain line items and operational and financial metrics we utilize to assist us in managing our business;"],["","\u25cf","a comparable discussion of our consolidated and segment results of operations for the years ended December 31, 2023 and 2022;"],["","\u25cf","a discussion of our liquidity and capital resources, including future capital and contractual commitments and potential funding sources; and"],["","\u25cf","a review of our critical accounting policies."]]
[[/GREPCENT_TABLE]]

Description of Certain Line Items

Tour revenues

Tour revenues consist of the following:

[[GREPCENT_TABLE]]
[["","\u25cf","guest ticket revenues recognized from the sale of guest tickets; and"],["","\u25cf","other tour revenues from the sale of pre- or post-expedition excursions, hotel accommodations and land-based expeditions; air transportation to and from the ships, goods and services rendered onboard that are not included in guest ticket prices, trip insurance and cancellation fees."]]
[[/GREPCENT_TABLE]]

Cost of Tours

Cost of tours includes the following:

[[GREPCENT_TABLE]]
[["","\u25cf","direct costs associated with revenues, including cost of pre- or post-expedition excursions, hotel accommodations and land-based expeditions, air and other transportation expenses and cost of goods and services rendered onboard;"],["","\u25cf","payroll costs and related expenses for shipboard and expedition personnel;"],["","\u25cf","food costs for guests and crew, including complimentary food and beverage amenities for guests;"],["","\u25cf","fuel costs and related costs of delivery, storage and safe disposal of waste; and"],["","\u25cf","other tour expenses, such as land costs, port costs, repairs and maintenance, equipment expense, drydock, ship insurance and charter hire costs."]]
[[/GREPCENT_TABLE]]

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Selling and marketing

Selling and marketing expenses include commissions, royalties and a broad range of advertising and promotional expenses.

General and administrative

General and administrative expenses include the cost of shoreside vessel support, reservations and other administrative functions, including salaries and related benefits, credit card commissions, professional fees and rent.

Other Income (Expense) 

Other income (expense) includes interest income and expense, gains and/or losses on foreign currency, disposal of fixed assets, write-offs of deferred financing costs and fees, and other miscellaneous non-operating items.

Operational and Financial Metrics

We use a variety of operational and financial metrics, including non-GAAP financial measures, such as Adjusted EBITDA, Net Yields, Occupancy and Net Cruise Cost, to enable us to analyze the performance and financial condition of our ship operations. We utilize these financial measures to manage our business on a day-to-day basis and believe that they are the most relevant measures of performance. Some of these measures are commonly used in the cruise and tourism industry to evaluate performance. We believe these non-GAAP measures provide expanded insight to assess revenue and cost performance, in addition to the standard GAAP-based financial measures. There are no specific rules or regulations for determining non-GAAP measures, and as such, our non-GAAP financial measures may not be comparable to measures used by other companies within the industry.

The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. You should read this discussion and analysis of our results of operations and financial condition together with the consolidated financial statements and the related notes thereto also included in Item 8 of this Annual Report on Form 10-K.

Adjusted EBITDA is net income (loss) excluding depreciation and amortization, net interest expense, other income (expense), income tax (expense) benefit, (gain) loss on foreign currency, (gain) loss on transfer of assets, reorganization costs, and other supplemental adjustments. Other supplemental adjustments include certain non-operating items such as stock-based compensation, executive severance costs, debt refinancing costs, acquisition-related expenses and other non-recurring charges. We believe Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain operating drivers of the business, such as sales growth, operating costs, selling and administrative expense, and other operating income and expense. We believe Adjusted EBITDA helps provide a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements, such as unearned passenger revenues, capital expenditures and related depreciation, principal and interest payments, and tax payments. Our use of Adjusted EBITDA may not be comparable to other companies within the industry.

The following metrics apply to our Lindblad segment:

Adjusted Net Cruise Cost represents Net Cruise Cost adjusted for Non-GAAP other supplemental adjustments which include certain non-operating items such as stock-based compensation, acquisition-related expenses and other non-recurring charges.

Available Guest Nights is a measurement of capacity available for sale and represents double occupancy per cabin (except single occupancy for a single capacity cabin) multiplied by the number of cruise days for the period. We also record the number of guest nights available on our limited land programs in this definition.

Gross Cruise Cost represents the sum of cost of tours plus selling and marketing expenses, and general and administrative expenses.

Gross Yield per Available Guest Night represents tour revenues divided by Available Guest Nights.

Guest Nights Sold represents the number of guests carried for the period multiplied by the number of nights sailed within the period.

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Maximum Guests is a measure of capacity and represents the maximum number of guests in a period and is based on double occupancy per cabin (except single occupancy for a single capacity cabin).

Net Cruise Cost represents Gross Cruise Cost excluding commissions and certain other direct costs of guest ticket revenues and other tour revenues.

Net Cruise Cost Excluding Fuel represents Net Cruise Cost excluding fuel costs.

Net Yield represents tour revenues less commissions and direct costs of other tour revenues.

Net Yield per Available Guest Night represents Net Yield divided by Available Guest Nights.

Number of Guests represents the number of guests that travel with us in a period.

Occupancy is calculated by dividing Guest Nights Sold by Available Guest Nights.

Voyages represent the number of ship expeditions completed during the period.

Foreign Currency Translation

The U.S. dollar is the functional currency in our foreign operations and re-measurement adjustments and gains or losses resulting from foreign currency transactions are recorded as foreign exchange gains or losses in the consolidated statements of operations.

Seasonality

Traditionally, our Lindblad brand tour revenues are mildly seasonal, historically larger in the first and third quarters. The seasonality of our operating results fluctuates due to our vessels being taken out of service for scheduled maintenance or drydocking, which is typically during nonpeak demand periods, in the second and fourth quarters. Our drydock schedules are subject to cost and timing differences from year-to-year due to the availability of shipyards for certain work, drydock locations based on ship itineraries, operating conditions experienced especially in the polar regions and the applicable regulations of class societies in the maritime industry, which require more extensive reviews periodically. Drydocking impacts operating results by reducing tour revenues and increasing cost of tours. Our Natural Habitat, Off the Beaten Path, DuVine and Classic Journeys brands are seasonal businesses, with the majority of Natural Habitat’s tour revenue recorded in the third and fourth quarters from its summer season departures and polar bear tours, the majority of Off the Beaten Path and DuVine's revenues are recorded during the second and third quarters from their spring and summer season departures, while Classic Journeys’ revenue is somewhat less seasonal with the majority of revenues recorded during their second, third and fourth quarters.

Results of Operations – Consolidated

Our reported consolidated results of operations for the years ended December 31, 2023, 2022 and 2021 are shown in the following table (percentages that are not meaningful to the change are noted as NM in the table):

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["(In thousands)","","2023","","","2022","","","Change","","","%","","","2021","","","Change","","","%"],["Tour revenues","","$","569,543","","","$","421,500","","","$","148,043","","","","35","%","","$","147,107","","","$","274,393","","","","187","%"],["Cost of tours","","","322,376","","","","283,217","","","","39,159","","","","14","%","","","124,484","","","","158,733","","","","128","%"],["General and administrative","","","118,431","","","","96,291","","","","22,140","","","","23","%","","","65,445","","","","30,846","","","","47","%"],["Selling and marketing","","","71,426","","","","60,996","","","","10,430","","","","17","%","","","28,484","","","","32,512","","","","114","%"],["Depreciation and amortization","","","46,711","","","","44,042","","","","2,669","","","","6","%","","","39,525","","","","4,517","","","","11","%"],["Operating income (loss)","","$","10,599","","","$","(63,046",")","","$","73,645","","","","NM","","","$","(110,831",")","","$","47,785","","","","43","%"],["Net loss","","$","(40,876",")","","$","(108,160",")","","$","67,284","","","","62","%","","$","(119,168",")","","$","11,008","","","","9","%"],["Undistributed loss per share available to stockholders:"],["Basic","","$","(0.94",")","","$","(2.23",")","","$","1.29","","","","","","","$","(2.41",")","","$","0.18"],["Diluted","","$","(0.94",")","","$","(2.23",")","","$","1.29","","","","","","","$","(2.41",")","","$","0.18"]]
[[/GREPCENT_TABLE]]

44

Comparison of Years Ended December 31, 2023 and 2022 - Consolidated

Tour Revenues

Tour revenues for the year ended December 31, 2023 increased $148.0 million, or 35%, to $569.5 million, compared to $421.5 million for the year ended December 31, 2022. Lindblad segment tour revenues increased by $118.9 million, or 43%, and Land Experiences segment increased $29.1 million, or 20%, primarily due to operating additional expeditions and trips, and from higher pricing. 

Cost of Tours

Total cost of tours for the year ended December 31, 2023 increased $39.2 million, or 14%, to $322.4 million compared to $283.2 million for the year ended December 31, 2022. The Lindblad segment cost of tours increased $21.2 million and the Land Experiences segment increased $18.0 million primarily due to operating additional expeditions and trips. 

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2023 increased $22.1 million, or 23%, to $118.4 million compared to $96.3 million for the year ended December 31, 2022. At the Lindblad segment, general and administrative expenses increased $15.4 million, or 23%, from the prior year period, primarily due to higher personnel and sales tax costs associated with the ramp in operations, higher credit card commissions due to the strong booking environment and increased stock-based compensation expense. At the Land Experiences segment, general and administrative expenses increased $6.7 million, or 23%, primarily due to increased personnel costs related to operating additional trips and higher credit card commissions due to the strong booking environment. 

Selling and Marketing Expenses 

Selling and marketing expenses increased $10.4 million, or 17%, to $71.4 million for the year ended December 31, 2023 compared to $61.0 million for the year ended December 31, 2022. At the Lindblad segment, selling and marketing expenses increased $11.1 million, or 24%, primarily due to higher commissions related to the ramp in operations and increased sales and marketing spend to drive future bookings. At the Land Experiences segment, selling and marketing expenses decreased $0.7 million, or 5%, primarily due to decreased commission expense, partially offset by higher marketing spend to drive future bookings.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $2.7 million, or 6%, to $46.7 million for the year ended December 31, 2023 compared to $44.0 million for the year ended December 31, 2022, primarily due to depreciation of assets placed into service to support our digital initiatives.

Other Expense 

Other expenses were $48.3 million for the year ended December 31, 2023, compared to other expenses of $39.0 million for the year ended December 31, 2022. The $9.3 million increase was primarily due to:

[[GREPCENT_TABLE]]
[["","\u25cf","a $7.5 million increase in interest expense from higher interest rates across our debt facilities and increased borrowings; and"],["","\u25cf","the write-off of $3.9 million of deferred financing costs, fees and other expenses related to the repayment of our prior Export Credit Agreements during 2023. 2022 primarily included a $9.0 million write off of deferred financing costs and $1.9 million of fees and other expenses related to the repayment of our prior credit agreement, including the term facility, Main Street Loan and revolving credit facility, and a $1.4 million loss on foreign currency translation, which was mostly offset by recognition of $11.6 million in other income related to expenses covered under the grant for the Coronavirus Economic Relief for Transportation Services Act grant."]]
[[/GREPCENT_TABLE]]

Comparison of Years Ended December 31, 2022 and 2021 - Consolidated

For a comparison of our results from operations for the years ended December 31, 2022 and 2021, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 10, 2023.

45

Results of Operations – Segments

Selected results for our segments for the years ended December 31, 2023, 2022 and 2021 are below. Percentages that are not meaningful to the change are noted as NM in the table. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["(In thousands)","","2023","","","2022","","","Change","","","%","","","2021","","","Change","","","%"],["Tour revenues:"],["Lindblad","","$","397,410","","","$","278,449","","","$","118,961","","","","43","%","","$","82,842","","","$","195,607","","","","236","%"],["Land Experiences","","","172,133","","","","143,051","","","","29,082","","","","20","%","","$","64,265","","","","78,786","","","","123","%"],["Total tour revenues","","$","569,543","","","$","421,500","","","$","148,043","","","","35","%","","$","147,107","","","$","274,393","","","","187","%"],["Operating income (loss):"],["Lindblad","","$","(8,692",")","","$","(77,871",")","","$","69,179","","","","NM","","","$","(111,477",")","","$","33,606","","","","30","%"],["Land Experiences","","","19,291","","","","14,825","","","","4,466","","","","30","%","","$","646","","","","14,179","","","","NM"],["Total operating income (loss)","","$","10,599","","","$","(63,046",")","","$","73,645","","","","NM","","","$","(110,831",")","","$","47,785","","","","43","%"],["Adjusted EBITDA:"],["Lindblad","","$","48,456","","","$","(29,154",")","","$","77,610","","","","NM","","","$","(67,242",")","","$","38,088","","","","57","%"],["Land Experiences","","","22,750","","","","17,628","","","","5,122","","","","29","%","","$","3,199","","","","14,429","","","","NM"],["Total adjusted EBITDA","","$","71,206","","","$","(11,526",")","","$","82,732","","","","NM","","","$","(64,043",")","","$","52,517","","","","82","%"]]
[[/GREPCENT_TABLE]]

Results of Operations – Lindblad Segment

Comparison of Years Ended December 31, 2023 and 2022

Tour Revenues

Tour revenues for the year ended December 31, 2023 increased $118.9 million, to $397.4 million compared to $278.4 million for the year ended December 31, 2022. The 43% increase in 2023 was primarily driven by higher guest ticket revenues from a 33% increase in available guest nights due to greater fleet utilization and a 12% increase in net yield per available guest night to $1,097 reflecting higher pricing and a two-percentage point increase in occupancy compared with 2022.

Operating Loss

Operating loss improved $68.7 million to a loss of $8.7 million for the year ended December 31, 2023 compared to a loss of $77.9 million for the year ended December 31, 2022. The decrease in operating loss was primarily due to the increase in tour revenues, partially offset by higher cost of tours and personnel costs due to the ramp in operations, increased commissions related to the revenue and bookings growth, higher sales and increased marketing spend to support future bookings and stock-based compensation expense.

Guest Metrics — Lindblad Segment

The following tables set forth our Guest Metrics for the Lindblad segment. Please refer to our Description of Certain Line Items above for the specific definition by line item and segment. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["","","2023","","","2022","","","2021"],["Available Guest Nights","","","316,091","","","","236,784","","","","75,389"],["Guest Nights Sold","","","243,269","","","","177,521","","","","60,997"],["Occupancy","","","77","%","","","75","%","","","81","%"],["Maximum Guests","","","37,339","","","","29,095","","","","10,596"],["Number of Guests","","","29,719","","","","22,347","","","","8,436"],["Voyages","","","454","","","","393","","","","143"]]
[[/GREPCENT_TABLE]]

46

[[GREPCENT_TABLE]]
[["Calculation of Gross and Net Yield per Available Guest Night","","For the years ended December 31,"],["(In thousands, except for Available Guest Nights, Gross and Net Yield per Available Guest Night)","","2023","","","2022","","","2021"],["Guest ticket revenues","","$","345,871","","","$","240,592","","","$","76,158"],["Other tour revenue","","","51,539","","","","37,857","","","","6,684"],["Tour Revenues","","","397,410","","","","278,449","","","","82,842"],["Less: Commissions","","","(25,787",")","","","(19,149",")","","","(6,474",")"],["Less: Other tour expenses","","","(24,952",")","","","(27,780",")","","","(10,076",")"],["Net Yield","","$","346,671","","","$","231,520","","","$","66,292"],["Available Guest Nights","","","316,091","","","","236,784","","","","75,389"],["Gross Yield per Available Guest Night","","$","1,257","","","$","1,176","","","$","1,099"],["Net Yield per Available Guest Night","","","1,097","","","","978","","","","879"]]
[[/GREPCENT_TABLE]]

The following table reconciles operating loss to our Net Yield Guest Metric for the Lindblad Segment. 

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["(In thousands)","","2023","","","2022","","","2021"],["Operating loss","","$","(8,692",")","","$","(77,871",")","","$","(111,477",")"],["Cost of tours","","","222,413","","","","201,255","","","","85,588"],["General and administrative","","","83,004","","","","67,564","","","","49,028"],["Selling and marketing","","","57,334","","","","46,226","","","","22,187"],["Depreciation and amortization","","","43,351","","","","41,275","","","","37,516"],["Less: Commissions","","","(25,787",")","","","(19,149",")","","","(6,474",")"],["Less: Other tour expenses","","","(24,952",")","","","(27,780",")","","","(10,076",")"],["Net Yield","","$","346,671","","","$","231,520","","","$","66,292"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Calculation of Gross and Net Cruise Cost","","For the years ended December 31,"],["(In thousands, except for Available Guest Nights, Gross and Net Cruise Cost per Avail. Guest Night)","","2023","","","2022","","","2021"],["Cost of tours","","$","222,413","","","$","201,255","","","$","85,588"],["Plus: Selling and marketing","","","57,334","","","","46,226","","","","22,187"],["Plus: General and administrative","","","83,004","","","","67,564","","","","49,028"],["Gross Cruise Cost","","","362,751","","","","315,045","","","","156,803"],["Less: Commissions","","","(25,787",")","","","(19,149",")","","","(6,474",")"],["Less: Other tour expenses","","","(24,952",")","","","(27,780",")","","","(10,076",")"],["Net Cruise Cost","","","312,012","","","","268,116","","","","140,253"],["Less: Fuel Expense","","","(27,913",")","","","(31,135",")","","","(8,027",")"],["Net Cruise Cost Excluding Fuel","","","284,099","","","","236,981","","","","132,226"],["Non-GAAP Adjustments:"],["Stock-based compensation","","","(13,787",")","","","(6,992",")","","","(5,429",")"],["Other","","","(10",")","","","(450",")","","","(1,700",")"],["Adjusted Net Cruise Cost Excluding Fuel","","$","270,302","","","$","229,539","","","$","125,097"],["Adjusted Net Cruise Cost","","$","298,215","","","$","260,674","","","$","133,124"],["Available Guest Nights","","","316,091","","","","236,784","","","","75,389"],["Gross Cruise Cost per Available Guest Night","","$","1,148","","","$","1,331","","","$","2,080"],["Net Cruise Cost per Available Guest Night","","","987","","","","1,132","","","","1,860"],["Net Cruise Cost Excluding Fuel per Available Guest Night","","","899","","","","1,001","","","","1,754"],["Adjusted Net Cruise Cost Excluding Fuel per Available Guest Night","","","855","","","","969","","","","1,659"],["Adjusted Net Cruise Cost per Available Guest Night","","","943","","","","1,101","","","","1,766"]]
[[/GREPCENT_TABLE]]

Results of Operations – Land Experiences Segment

Comparison of Years Ended December 31, 2023 to December 31, 2022

Tour Revenues

Tour revenues for the year ended December 31, 2023 increased $29.1 million, or 20%, to $172.1 million compared to $143.1 million in 2022, primarily as a result of operating additional trips, and higher pricing.

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Operating Income

Operating income increased $4.5 million, or 30%, to $19.3 million for the year ended December 31, 2023 compared to $14.8 million in 2022. The increase was primarily due to the higher tour revenue, partially offset by increased cost of tours and personnel costs related to operating additional departures, higher credit card commissions related to revenue growth and increased marketing spend to drive future bookings.

Reconciliation of Net Loss to Adjusted EBITDA

[[GREPCENT_TABLE]]
[["Consolidated","","For the years ended December 31,"],["(In thousands)","","2023","","","2022","","","2021"],["Net loss","","$","(40,876",")","","$","(108,160",")","","$","(119,168",")"],["Interest expense, net","","","45,014","","","","37,495","","","","24,578"],["Income tax expense (benefit)","","","3,146","","","","6,076","","","","(2,019",")"],["Depreciation and amortization","","","46,711","","","","44,042","","","","39,525"],["(Gain) loss on foreign currency","","","(751",")","","","1,236","","","","1,265"],["Other expense (income)","","","4,066","","","","307","","","","(15,487",")"],["Stock-based compensation","","","13,886","","","","6,992","","","","5,563"],["Other","","","10","","","","486","","","","1,700"],["Adjusted EBITDA","","$","71,206","","","$","(11,526",")","","$","(64,043",")"]]
[[/GREPCENT_TABLE]]

The following tables outline the reconciliation for each segment from operating income (loss) to Adjusted EBITDA:

Reconciliation of Operating (Loss) Income to Adjusted EBITDA

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

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[[/GREPCENT_TABLE]]

Liquidity and Capital Resources

As of December 31, 2023, we had $187.3 million in cash and cash equivalents, including $30.5 million in restricted cash, which is primarily related to deposits on future travel originating from U.S. ports and credit card reserves. As of December 31, 2023, we had $635.1 million in long-term debt obligations, including the current portion of long-term debt. 

We continually assess our available liquidity and our expected cash requirements. We believe we have access to financing sources to fund our operations and our long-term capital needs, including debt service and necessary capital expenditures. We expect to meet these needs by using a combination of the following: cash on hand, expected cash flow from operations, borrowings from our revolving credit facility, and when the capital markets are favorable, proceeds from the sale of equity securities or the issuance of new debt.

Sources and Uses of Cash

Net cash provided by operating activities was $25.4 million in 2023 compared to $2.2 million used in operations in 2022. The $27.6 million increase was primarily due to increased operating results and higher guest deposits for future travel. 

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Net cash used in investing activities was $14.8 million in 2023 compared to $49.6 million in 2022. 2023 included capital expenditures on our vessels and our digital transformation initiatives, partially offset by a sale of marketable securities. 2022 primarily included routine vessel maintenance across the fleet, renovations to the newly acquired National Geographic Islander II ahead of its 2022 launch, investment in digital initiatives and an investment in marketable securities, partially offset by the $3.6 million principal loan repayment by Ulstein Verft. 

Net cash provided by financing activities was $60.7 million in 2023 compared to $4.9 million used in financing activities in 2022. 2023 primarily included the issuance of $275.0 million of 9.00% senior secured notes which were used mainly to repay our prior Export Credit Agreements. 2022 primarily included the issuance of $360 million in 6.75% senior secured notes which were used to repay the prior credit agreement, including the term facility, the Main Street Loan and the revolving facility and principal payments on the senior secured credit agreements prior to repayment. 

Contractual Obligations

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[["","","Payments due by period"],["(In thousands)","","Total","","","Current","","","2-3 years","","","4-5 years","","","Thereafter"],["Operating Activities:"],["Operating lease obligations","","$","4,005","","","$","1,923","","","$","1,689","","","$","393","","","$","-"],["Charter commitments","","","28,414","","","","15,767","","","","12,647","","","","-","","","","-"],["Financing Activities:"],["Long-term debt obligations","","","635,077","","","","47","","","","30","","","","635,000","","","","-"],["Interest on long-term debt obligations","","","185,269","","","","49,051","","","","98,100","","","","38,118","","","","-"],["Total","","$","852,765","","","$","66,788","","","$","112,466","","","$","673,511","","","$","-"]]
[[/GREPCENT_TABLE]]

Funding Sources and Needs

Debt Facilities 

6.75% Senior Secured Notes due 2027

On February 4, 2022, we issued $360.0 million aggregate principal amount of 6.75% senior secured notes (the “6.75% Notes”). We used the proceeds from the 6.75% Notes to prepay in full all outstanding borrowings under our former term loan, including the Main Street Expanded Loan Facility, and former revolving credit facility, and paid all related premiums, terminating in full our credit agreement and the commitments thereunder. Interest on the 6.75% Notes is payable semiannually in arrears on February 15 and August 15 of each year. The 6.75% Notes mature February 15, 2027, subject to earlier repurchase or redemption.

Revolving Credit Facility

On February 4, 2022, we entered into a revolving credit facility, which includes an aggregate principal amount 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 “Revolving Credit Agreement”). Borrowings under the facility will bear interest at a rate per annum equal to, at our option, an adjusted Secured Overnight Financing Rate plus a spread or a base rate plus a spread. As of December 31, 2023, no amounts were outstanding under the Revolving Credit Agreement.

9.00% Senior Secured Notes due 2028

On May 2, 2023, we issued $275.0 million aggregate principal amount of 9.00% senior secured notes due 2028 (the “9.00% Notes”) in a private offering. We used the net proceeds of the 9.00% Notes to prepay in full all outstanding borrowings under our prior senior secured credit agreements, to pay any related premiums and to terminate in full the prior senior secured credit agreements and the commitments thereunder. The 9.00% Notes bear interest at a rate of 9.00% per year, and interest is payable semiannually in arrears on May 15 and November 15 of each year. The 9.00% Notes will mature on May 15, 2028, subject to earlier repurchase or redemption. 

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Covenants

The 6.75% Notes, 9.00% Notes and Revolving Credit Facility contain covenants that, among other things, restrict our ability and the ability of our 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 6.75% Notes, 9.00% Notes and Revolving Credit Facility. As of December 31, 2023, we were in compliance with the covenants currently in effect. 

Other

Our 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 interest at a rate of 0.53%.

Equity

Preferred Stock

On August 31, 2020, we issued and sold 85,000 shares of Series A Redeemable Convertible Preferred Stock, par value of $0.0001, (“Preferred Stock”) for $1,000 per share for gross proceeds of $85.0 million. The Preferred Stock has senior and preferential ranking to our common stock. As of December 31, 2023, 62,000 shares of Preferred Stock were outstanding. The Preferred Stock is entitled to cumulative dividends of 6.00% per annum, and for the first two years, the dividends were required to be paid-in-kind. After the second anniversary of the issuance date, the dividends may be paid-in-kind or be paid in cash at our option and we have continued to pay dividends in-kind through December 31, 2023. The Preferred Stock is convertible at any time, at the holder’s election, into a number of shares of our common stock equal to the quotient obtained by dividing the then-current accrued value by the conversion price of $9.50. At any time, at our 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 number of shares of common stock received in such conversion shall be equal to the quotient obtained by dividing the then-current accrued value by the conversion price. At the six-year anniversary of the closing date, each investor has the right to request that we repurchase their Preferred Stock and any Preferred Stock not requested to be repurchased shall be converted into our common shares equal to the quotient obtained by dividing the then-current accrued value by the conversion price. During the years ended December 31, 2022 and 2021, 18,000 and 5,000 shares, respectively, of Preferred Stock and related accumulated dividends were converted by the holders into 2,109,561 and 566,364 shares of our common stock, respectively. As of December 31, 2023, the outstanding Preferred Stock and related accumulated dividends could be converted, at the option of the holder, into approximately 8.0 million shares of our common stock.

Funding Needs

We generally rely on a combination of cash flows provided by operations and the issuance of debt or equity financings to fund obligations. A vast majority of guest ticket receipts are collected in advance of the applicable expedition date. These advance passenger receipts remain a current liability until the expedition date and the cash generated from these advance receipts is used interchangeably with cash on hand from other cash from operations. The cash received as advanced receipts can be used to fund operating expenses for the applicable future expeditions or otherwise, pay down debt, make long-term investments or any other use of cash. We traditionally run a working capital deficit due primarily to a large balance of unearned passenger revenues and as of December 31, 2023 and 2022, we had working capital deficit of $74.7 million and $157.8 million, respectively. 

Our 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 us to purchase from time to time our outstanding common stock. 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 our Board of Directors at any time. These repurchases exclude shares repurchased to settle statutory employee tax withholding related to the exercise of stock options and vesting of stock awards. The Repurchase Plan was suspended through February 4, 2023, due to restrictions related to the now-terminated Main Street Expanded Loan Facility program that remained in place for one-year upon repayment. We have cumulatively repurchased 875,218 shares of common stock for $8.3 million and 6,011,926 warrants for $14.7 million, since plan inception. All repurchases were made using cash resources. The balance for the Repurchase Plan was $12.0 million as of December 31, 2023. No shares were repurchased under the Repurchase Plan during 2023.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in Note 2—Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Form 10-K, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and/or assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.

Ship Accounting

Ships, including ship improvements, are our most significant assets. We make accounting estimates with respect to our ship accounting related to estimating the useful life of each of our ships as well as their residual values. If conditions relating to industry norms or where we will use a ship change, we may need to change our assumptions of ship useful lives and residual values, which could impact future depreciation expense and loss on retirement of ship and/or components. We believe we have made reasonable estimates for ship accounting purposes.

Future Travel Certificates

We have issued and currently have outstanding future travel certificates, some of which expire and some of which do not. In determining the value of these certificates as of each period end, as well as the amount that impacts revenues, we estimate the amount of breakage that will occur in the future. This estimate is primarily based on historical customer behavior and, if applicable, the time remaining until the certificates expire. Based on customer behaviors, our estimate may change. We believe we have made reasonable estimates related to future travel certificates. 

Stock-Based Compensation

We account for stock-based compensation issued to employees, non-employee directors or other service providers in accordance with Accounting Standards Codification 718, Compensation - Stock Compensation, that requires awards to be recorded at their fair value on the date of grant, which is based on assumptions of performance, volatility and expected term or grant instrument. Stock-based compensation costs are recognized on a straight-line basis over the requisite service period of the award, which is generally the vesting term of the equity instrument issued.

Valuation of Long-Lived Assets

We review our long-lived assets, principally our vessels and operating rights, for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Upon the occurrence of a triggering event, the assessment of possible impairment is based on our ability to recover the carrying value of our asset, which is determined by using the asset’s estimated undiscounted future cash flows. If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value. A significant amount of judgment is required in estimating the future cash flows and fair values of our vessels and operating rights.

Future Application of Accounting Standards

Refer to Note 2—Summary of Significant Accounting Policies-Recent Accounting Pronouncements included in our consolidated financial statements elsewhere in this Form 10-K for further information on Recent Accounting Pronouncements.