The following discussion and analysis addresses material changes in the financial condition and results of operations of the Company for the periods presented. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q ("Form 10-Q"), as well as the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 12, 2021.

Cautionary Note Regarding Forward-Looking Statements

Any statements in this Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are "forward-looking statements" as that term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," "outlook" and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to:





    ? suspended operations and
      disruptions to our business and
      operations related to the novel
      corona virus COVID-19;

    ? the impacts of the novel
      coronavirus COVID-19 on our
      financial condition, liquidity,
      results of operations, cash flows,
      employees, plans and growth;

    ? the impacts of the novel
      coronavirus COVID-19 on future
      travel and the cruise and airline
      industries in general;

    ? unscheduled disruptions in our
      business due to travel
      restrictions, weather events,
      mechanical failures, pandemics or
      other events;

    ? changes adversely affecting the
      business in which we are engaged;

    ? management of our growth and our
      ability to execute on our planned
      growth;

    ? our business strategy and plans;

    ? our ability to maintain our
      relationship with National
      Geographic;

    ? compliance with new and existing
      laws and regulations, including
      environmental regulations and
      travel advisories and
      restrictions;

    ? compliance with the financial
      and/or operating covenants in our
      debt arrangements;

    ? adverse publicity regarding the
      cruise industry in general;

    ? loss of business due to
      competition;

    ? the result of future financing
      efforts;

    ? delays and costs overruns with
      respect to the construction and
      delivery of newly constructed
      vessels;

    ? those risks discussed herein and
      in Item 1A. Risk Factors in our
      Annual Report on Form 10-K for the
      year ended December 31, 2020, as
      filed with the SEC on March 12,
      2021 (the "2020 Annual Report").

We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.





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Unless the context otherwise requires, in this Form 10-Q, "Company," "Lindblad," "we," "us," "our," and "ours" refer to Lindblad Expeditions Holdings, Inc., and its subsidiaries.





Business Overview

We provide expedition cruising, land-based adventure travel and cycling touring experiences, using itineraries that feature up-close encounters with wildlife, nature, history and culture, and promote guest empowerment, human connections and interactivity. Our mission is offering life-changing adventures around the world and pioneering innovative ways to allow our guests to connect with exotic and remote places.

We currently operate a fleet of nine owned expedition ships and have contracted for a new polar ice class vessel, the National Geographic Resolution, scheduled to be delivered in the fourth quarter of 2021, and operate five seasonal charter vessels under the Lindblad Expeditions Holdings, Inc. ("Lindblad") brand. Our voyages include destinations such as the Arctic, Antarctic, the Galápagos, Alaska and Baja's Sea of Cortez. We have a longstanding relationship with the National Geographic Society dating back to 2004, which is based on a shared interest in exploration, research, technology and conservation. This relationship includes a co-selling, co-marketing and branding arrangement with National Geographic Partners, LLC ("National Geographic"), 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 interface with these experts through lectures, excursions, dining and other experiences throughout their voyage. We deploy chartered vessels for various seasonal offerings and continually seek to optimize our charter fleet to balance our inventory with demand and maximized yields. We use our charter inventory as a mechanism to both increase travel options of our existing and prospective guests and also to test demand for certain areas and seasons to understand the potential for longer term deployments and additional vessel needs.

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

Natural Habitat, Inc. ("Natural Habitat") creates opportunities for adventure and discovery that transform lives with eco-conscious expeditions and nature-focused, small-group tours that include polar bear tours in Churchill, Canada, Alaskan grizzly bear adventures, small-group Galápagos 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.

DuVine Cycling + Adventure Company ("DuVine") provides international cycling adventures and unforgettable travel experiences, connecting with local character and culture on small, intimate group cycling tours around the world with cycling experts as guides, immersion in local cuisine, accommodations and history. Cycling tours include in the United States, from cycling beneath the shadow of majestic California redwoods to pedaling through farmland on a Vermont bike tour, wine tastings in the world-class vineyards of Napa and Sonoma or farm-to-table renaissance dining, cycling through exotic Costa Rican rainforests, the rocky coasts of Ireland, deep in the vineyards of Spain, or high in the Swiss Alps, exploring the roads of ancient cities and trek the Atlas desert by camel, to bamboo forests and Buddhist temples or pedaling past tea plantations in Kyoto.

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, to change people's lives through exceptional travel. Off the Beaten Path is known for providing distinctive insider national park experiences in the Rocky Mountains, Desert Southwest, and Alaska, and includes unique trips across Europe, Africa, Australia, Central and South America and the South Pacific, for connecting the heart of the traveler with the soul of the place.

The Company operates two segments including the Lindblad segment, which consists of the operations of our Lindblad brand, and the Land Experiences segment, consisting of our Natural Habitat, DuVine and Off the Beaten Path brands.





First Quarter Highlights

During the first quarter of 2021, we completed the acquisitions of Off the Beaten Path, a land-based travel operator specializing in authentic national park experiences, and DuVine, an international luxury cycling and adventure company focused on exceptional food and wine experiences.





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COVID-19 Business Update

Due to the spread of the COVID-19 virus and the effects of travel restrictions around the world, we have suspended or rescheduled the majority of Lindblad's expeditions and trips departing March 16, 2020 through May 31, 2021 and have been working with guests to reschedule travel plans and refund payments, as applicable. We have announced plans to resume ship operations beginning June 2021 with expeditions to Alaska and the Galapagos and are working with local health authorities on plans to operate in additional geographies during the second half of the year. As our ships are currently not in operations, the majority of our fleet is being maintained with minimally required crew on-board to ensure they comply with all necessary regulations and can be fully put back into service quickly as needed. For those ships that are preparing to resume sailing, we have begun to increase crew levels as needed. In accordance with local regulations, our offices are closed, and most employees are working remotely to maintain general business operations, to provide assistance to existing and potential guests and to maintain information technology systems.

We continue to adhere to the comprehensive plan we implemented in March 2020 to mitigate the impact of COVID-19 and preserve and enhance our liquidity position. This plan employs a variety of cost reduction and cash preservation measures including significantly reducing ship and land-based expedition costs such as capital expenditures, crew payroll, land costs, fuel and food, and meaningfully reducing general and administrative expenses through reduced payroll and the elimination of all non-essential travel, office expenses and discretionary spending. We have also accessed available capital under existing debt facilities and through the issuance of preferred stock, while continuing to explore additional sources of capital and liquidity.





Return to Fleet Operations

We have announced plans to resume operations with vaccinated guests in Alaska and the Galapagos in June 2021 and are working with local health authorities on plans to operate in additional geographies during the second half of the year. We believe there are a variety of strategic advantages that enable us to deploy our ships safely and quickly as travel restrictions are lifted. The most notable is the size of our owned and operated vessels which range from 48 to 148 passengers, allowing for a highly controlled environment that includes stringent cleaning protocols. The small nature of our ships should also allow us to efficiently and effectively test our guests and crew prior to boarding. Additionally, the majority of our expeditions take place in remote locations where human interactions are limited, so there is less opportunity for external influence. Lastly, our guests are explorers by nature, eager to travel and have historically been very resilient following periods of uncertainty.





Bookings Trends

We have experienced a substantial impact from the COVID-19 virus including elevated cancellations and softness in near-term demand. Despite the COVID-19 impact, we still have substantial advanced reservations for future travel. Bookings for the full year 2022 are 39% ahead of the bookings for 2021 as of the same date a year ago and 32% ahead of the bookings for 2020 as of the same date two years ago. We continue to see new bookings for future travel including over $92.0 million since the beginning of 2021 and are receiving significant deposits and final payments for future travel.

For 2021 voyages that have been cancelled or rescheduled, we are offering future travel credits with incremental value or full refunds to our fully paid guests. As of April 24, 2021, the majority of guests have opted for future travel credits.

Balance Sheet and Liquidity

As of March 31, 2021, we had $163.9 million in unrestricted cash and $22.4 million in restricted cash primarily related to deposits on future travel originating from U.S. ports. As of March 31, 2021, we had a total debt position of $498.4 million and were in compliance with all of our debt covenants. Following the quarter, in April 2021, we drew down an additional $15.5 million under our second senior secured credit agreement in conjunction with the fourth installment payment on the National Geographic Resolution, scheduled for delivery in the fourth quarter of 2021.

During the last twelve months, we have taken a variety of steps to strengthen our balance sheet and increase liquidity including:

During April 2020, we drew down $30.6 million under our second export credit agreement in conjunction with our third installment payment on the National Geographic Resolution.





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During May 2020, we amended our $2.5 million promissory note, changing the maturity date of the principal payments to be due in three equal installments, with the first payment due on December 22, 2020, the second due on December 22, 2021 and the final payment due on December 22, 2022.

During June 2020, we amended our export credit agreements to defer approximately $9.0 million in aggregate scheduled amortization payments from June 2020 through March 2021 and to suspend the total net leverage ratio covenant from June 2020 through June 2021.

During August 2020, we amended our term loan and revolving credit facilities to waive the application of the total net leverage ratio covenant through June 2021. In connection with the amendment, the interest rate of the term loan has been increased by 125bps, to be paid-in-kind at maturity, a LIBOR floor of 75bps has been added to the term loan facility and certain covenants were amended to be more restrictive.

During August 2020, we raised $85.0 million in gross proceeds through the private placement issuance of Redeemable Convertible Series A Preferred Stock that carries a 6% annual dividend, which is payable in kind for two years and, thereafter, in cash or in-kind at our option. The preferred stock is convertible into shares of Lindblad common stock at a conversion price of $9.50 per share, representing a premium of 23% to Lindblad's 30-day trading volume weighted average price on the date of issuance.

During December 2020, we amended our term loan and revolving credit facilities and borrowed an incremental $85.0 million under the amended term loan facility through the Main Street Expanded Loan Facility program established by the Board of Governors of the Federal Reserve System. The incremental borrowing carries an interest rate of LIBOR plus 3.0%, without any LIBOR floor, and matures December 2025 with no early payment restrictions.

We estimate our current monthly cash usage to be approximately $10-15 million, including ship and office operating expenses, necessary capital expenditures and interest and principal payments. This excludes guest payments for future travel and cash refunds requested on previously made guest payments. As we implement plans to resume operations, the monthly cash usage will increase as we incur costs in preparation for returning ships to service, spends to market and advertise upcoming expeditions and reinstates furloughed and part-time office staff as needed. We also anticipate a significant increase in guest payments as we receive final payments for upcoming expeditions as well as deposits for new reservations for future travel.

We have not previously experienced a complete cessation of our operations and, as a consequence, our ability to predict the impact of such cessation on our costs and future prospects is limited. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of the COVID-19 pandemic on our financial condition, results of operations, cash flows, plans and growth for the foreseeable future. It is unknown when travel restrictions and various border closures will be lifted and what the demand for expedition travel will be once these restrictions are no longer in place. Our estimates for monthly cash usage reflect our current forecast for operating costs, capital expenditures and expected debt and interest payments. Based on the actions we have taken to date, our planned and anticipated actions and our current forecast, we believe that we can meet our obligations for the next 12 months from April 30, 2021, the date of this Quarterly Report on Form 10-Q.

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





       ?   a description of certain line items and operational and financial
           metrics we utilize to assist us in managing our business;

       ?   results and a comparable discussion of our consolidated and segment
           results of operations for the three months ended March 31, 2021 and
           2020;

       ?   a discussion of our liquidity and capital resources, including future
           capital and contractual commitments and potential funding sources; and

       ?   a review of our critical accounting policies.




Financial Presentation

Description of Certain Line Items





Tour revenues

Tour revenues consist of the following:





       ?   Guest ticket revenues recognized from the sale of guest tickets; and

       ?   Other tour revenues from the sale of pre- or post-expedition
           excursions, hotel accommodations, 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.




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Cost of tours

Cost of tours includes the following:





       ?   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;

       ?   Payroll costs and related expenses for shipboard and expedition
           personnel;



       ?   Food costs for guests and crew, including complimentary food and
           beverage amenities for guests;

       ?   Fuel costs and related costs of delivery, storage and safe disposal of
           waste; and

       ?   Other tour expenses, such as land costs, port costs, repairs and
           maintenance, equipment expense, drydock, ship insurance, and charter
           hire costs.




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.

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 Costs, to enable us to analyze our performance and financial condition. 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, they 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 financial condition and results of operations together with the condensed consolidated financial statements and the related notes thereto also included within.

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, the National Geographic fee amortization, 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.





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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, the National Geographic fee amortization, and acquisition-related expenses.

Available Guest Nights is a measurement of capacity 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 less insurance proceeds 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.

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 insurance proceeds, 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 condensed consolidated statements of operations.





Seasonality

Traditionally, our Lindblad brand tour revenues from the sale of guest tickets 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. Natural Habitat, DuVine and Off the Beaten Path 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, while the majority of Off the Beaten Path and DuVine's revenues are recorded during the second and third quarters from their summer season tours and cycling adventures.





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