LINDBLAD EXPEDITIONS HOLDINGS, INC.

Quarterly Report On Form 10-Q

For The Quarter Ended June 30, 20222023

Table of Contents

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands, except share data)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (continued)Deficit

(In thousands, except share data)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LINDBLAD EXPEDITIONS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Lindblad Expeditions Holdings, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Business

Lindblad Expeditions Holdings, Inc.’s and its consolidated subsidiaries’ (the “Company” or “Lindblad”) mission is offering life-changing adventures around the world and pioneering innovative ways to allow its guests to connect with exotic and remote places. The Company currently operates a fleet of ten owned expedition ships and five seasonal charter vessels under the Lindblad brand, operates land-based, eco-conscious expeditions and active nature focused tours under the Natural Habitat, Inc. (“Natural Habitat”) and Off the Beaten Path, LLC (“Off the Beaten Path”) brands, designs handcrafted walking tours under the Classic Journeys, LLC (“Classic Journeys”) brand and operates luxury cycling and adventure tours under the DuVine Cycling + Adventure Company (“DuVine”) brand.

The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “LIND”.

The Company operates the following two reportable business segments:

Lindblad Segment. The Lindblad segment primarily provides ship-based expeditions aboard customized, nimble and intimately-scaled vessels that are able to venture where larger cruise ships cannot, thus allowing Lindblad to offer up-close experiences in the planet’s wild and remote places and capitals of culture. Each expedition ship is fully equipped with state-of-the-art tools for in-depth exploration, and the majority of expeditions involve travel to remote places with limited infrastructure and ports, such as Antarctica and the Arctic, or places that are best accessed by a ship, such as the Galápagos Islands, Alaska, Baja California’s Sea of Cortez and Panama, and foster active engagement by guests. The Company has an alliance with National Geographic Partners, LLC (“National Geographic”), which provides for lecturers and National Geographic experts, including photographers, writers, marine biologists, naturalists, field researchers and film crews, to join many of the Company’s expeditions.

Land Experiences Segment. The Land Experiences segment includes our four primarily land-based brands, Natural Habitat, DuVine, Off the Beaten Path and Classic Journeys.

The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “LIND”.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and footnotesnotes to the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding unaudited interim financial information and include the accounts and transactions of the Company. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for the periods presented. Operating results for the periods presented are not necessarily indicative of the results of operations to be expected for the full year due to seasonality and other factors. Certain information and footnotenote disclosures normally included in the consolidated financial statements in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC for interim reporting. All intercompany balances and transactions have been eliminated in these unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements and footnotesnotes should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto for the year ended December 31, 20212022 contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022March 10, 2023 (the “20212022 Annual Report”).

There have been no significant changes to the Company’s accounting policies from those disclosed in the 20212022 Annual Report.

Ramp of Fleet Operations and COVID-19 Business Update

The Company continued to ramp its operations during the second quarter of 2022, providing immersive expeditions across all ten of its owned vessels including trips to Alaska, the Arctic, the Galápagos Islands, Iceland, Norway and the Baltic and North Seas. Due to the spread of the COVID-19 virus and the effects of travel restrictions around the world, the Company suspended or rescheduled the majority of its expeditions departing between March 16, 2020 through May 31, 2021. Travel restrictions related to COVID-19 have diminished dramatically, and the Company continues to work with local authorities on plans to operate itineraries in additional geographies during the second half of 2022 and in 2023. Where travel restrictions remain, which also includes a limited number of itineraries impacted by the Russia-Ukraine conflict, the Company is adjusting itineraries where possible, and working with guests to reschedule travel plans and refund payments or issue future travel certificates, as applicable.

The Company believes there are a variety of strategic advantages that enable it to deploy its ships safely and quickly, while mitigating the risk of COVID-19 as travel restrictions are lifted. The most notable is the size of its 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 the Company’s ships also allows it to efficiently and effectively test its guests and crew prior to boarding, or as otherwise needed. Additionally, all guests age five and older, crew and staff are required to be fully vaccinated and the majority of expeditions take place in remote locations where human interactions are limited, so there is less opportunity for external influence.

Balance Sheet and Liquidity

As of June 30, 2022, the Company had $126.9 million in unrestricted cash and $48.8 million in restricted cash primarily related to deposits on future travel originating from U.S. ports and credit card reserves.

As of June 30, 2022, the Company had a total debt position of $578.2 million and was in compliance with all of its debt covenants in effect. The Company estimates that it will be in compliance with all applicable covenants over the next 12 months. 

During May 2022, the Company further amended its senior secured export credit agreements to extend the waiver of its net leverage coverage ratio from March 2022 through December 31, 2022.

On February 4, 2022, the Company issued $360.0 million of 6.75% senior secured notes, maturing 2027, and entered into a new $45.0 million revolving credit facility, including a letter of credit sub-facility in an aggregate principal amount of up to $5.0 million. Proceeds from the senior secured note issuance were used primarily to pay the outstanding borrowings under the Company's prior credit agreement, including the term facility, Main Street Loan and the revolving credit facility. The senior secured notes are guaranteed on a senior secured basis by the Company and certain of the Company’s subsidiaries and are collateralized by certain of the Company’s assets.

NOTE 2—EARNINGS PER SHARE

Earnings per Common Share

Earnings (loss) per common share is computed using the two-class method related to its Series A Redeemable Convertible Preferred Stock, par value of $0.0001 (“Preferred Stock”). Under the two-class method, undistributed earnings available to stockholders for the period are allocated on a pro rata basis to the common stockholders and to the holders of the Preferred Stock based on the weighted average number of common shares outstanding and number of shares that could be issued upon conversion of the Preferred Stock.

Diluted earnings per share is computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the dilutive incremental common shares associated with restricted stock awards and shares issuable upon the exercise of stock options, using the treasury stock method, and the potential common shares that could be issued from conversion of the Preferred Stock, using the if-converted method. When a net loss occurs, potential common shares have an anti-dilutive effect on earnings per share and such shares are excluded from the diluted earnings per share calculation.

For the three and six months ended June 30, 20222023 and 2021,2022, the Company incurred net losses from operations,available to stockholders, therefore basic and diluted net loss per share are the same forin each respective period. For the three and six months ended June 30, 2023, 0.7 million unvested restricted shares, 1.9 million shares issuable upon exercise of options and 7.7 million common shares issuable upon the conversion of the Preferred Stock were excluded from the calculation of dilutive potential common shares for the period as they were anti-dilutive. For the three and six months ended June 30, 2022, approximately 0.8 million unvested restricted shares, 1.4 million shares issuable upon exercise of options and 7.3 million common shares issuable upon the conversion of the Preferred Stock were excluded from the calculation of dilutive potential common shares for the periods as they were anti-dilutive. For the three and six months ended June 30, 2021, 0.8 million restricted shares, 1.5 million shares issuable upon exercise of options and 9.4 million common shares issuable upon conversion of the Preferred Stock were excluded from dilutive potential common shares for the periodsperiod as they were anti-dilutive. 

For the three and six months ended June 30, 2022 and 2021, the Company calculated earnings (loss) per share as follows:

Loss per share was calculated as follows:

NOTE 3—REVENUES

Customer Deposits and Contract Liabilities

The Company’s guests remit deposits in advance of tour embarkation. Guest deposits consist of guest ticket revenues as well as revenues from the sale of pre- and post-expedition excursions, hotel accommodations, land-based expeditions and certain air transportation to and from the ships.transportation. Guest deposits represent unearned revenues and are reported as unearned passenger revenues in the condensed consolidated balance sheets when received and are subsequently recognized as tour revenue over the duration of the trip. Accounting Standards Codification, Revenue from Contracts with Customers (Topic 606) defines a “contract liability” as an entity’sexpedition. Contract liabilities represent the Company's obligation to transfer goods or services to a customer for which the entityCompany has received consideration from the customer. The Company does not consider guest deposits to be a contract liability until the guest no longer has the right, resulting from the passage of time, to cancel their reservation and receive a full refund. In conjunction with the suspension or rescheduling of expeditions primarily related to the COVID-19 pandemic, the Company provided guests an option of either a refund or future travel certificates, which in some instances exceeded the original cash deposit. The Company has recorded liabilities up to the amount of cash deposits. The additional value of any future travel certificates arein excess of cash received is being recognized as a discount when applied to future expeditions. The change in contract liabilities withintour revenues at the time the related expedition occurs. Future travel certificates are valued based on the Company’s expectation that a guest will travel again. As of June 30, 2023 and December 31, 2022, the Company has $272.9 million and $245.1 million, related to unearned passenger revenues presented in our condensed consolidated balance sheets are as follows:revenue, respectively.

The following table disaggregates our tour revenues by the sales channel it was derived from:

NOTE 4—FINANCIAL STATEMENT DETAILS

The following is a reconciliation of cash, cash equivalents and restricted cash to the statement of cash flows:

Restricted cash consists of the following:

As of June 30, 2022 and December 31, 2021, prepaid tour expenses of $25.8 million and $10.3 million, respectively, is the only item of prepaidPrepaid expenses and other current assets in excess of 5% of current assets.are as follows: 

As of June 30, 2022 and December 31, 2021, accounts payable of $17.8 million and $9.7 million, respectively, is the only item of accounts

Accounts payable and accrued expenses in excess of 5% of current liabilities.are as follows:

In 2021, the Company received a $27.0 million grant under the CERTS Act, which provided grants to eligible motorcoach, school bus, passenger vessel, and pilotage companies that have experienced annual revenue losses of 25 percent or more as result of COVID-19. The priority use of grant funds was required to be for payroll costs, though grants could be used for operating expenses and the repayment of debt accrued to maintain payroll. The Company had accounted for the grant as a current liability on its balance sheet, as any amounts not appropriately used within one year of the grant date would have to be returned to the U.S. Treasury and, as permitted expenses for the grant were incurred the corresponding amounts were recognized in other income on the income statement. During the three months ended March 31, 2022, the Company recognized the remaining $11.6 million of the CERTS grant in other income for permitted payroll costs and ship operating expenses, and as of June 30, 2022, has no further liability recorded for the grant.

LoanReceivable

The Company’s loan receivable is recorded at amortized cost within other current assets. The Company reviewed its loan receivable for credit losses in connection with the preparation of its condensed consolidated financial statements for the period ended June 30, 2022. In evaluating the allowance for loan losses, the Company considered factors such as historical loss experience, the type and amount of loan, adverse situations that may affect the borrower’s ability to repay and prevailing economic conditions. Based on these credit loss estimation and experience factors, the Company realized 0 allowance for loan loss for the six months ended June 30, 2022. The following is a rollforward of the loan receivable balance:

NOTE 5—LONG-TERM DEBT

For the three and six months ended June 30, 2022,2023, $0.8 million and $1.5 million, respectively, of deferred financing costs were charged to interest expense, was $0.7 million and $1.4 million, respectively. Forfor the three and six months ended June 30, 2021,2022, $0.7 million and $1.4 million, respectively, of deferred financing costs were charged to interest expense was $0.8expense. During the three months ended June 30, 2023, $3.9 million and $1.5 million, respectively.of deferred financing costs related to the repayment of the Company’s prior senior secured credit agreements (the “Export Credit Agreements”) were written-off to other expense. During the three months ended March 31, 2022, $9.0 million of deferred financing costs related to the repayment of the Company’s prior credit agreement, including the term facility, Main Street Loan and revolving credit facility were written-off to other expense.

6.75% Notes

On February 4, 2022, the Company issued $360.0 million aggregate principal amount of 6.75% senior secured notes due 2027 (the “Notes”“6.75% Notes”) in a private offering. The6.75% Notes bear interest at a rate of 6.75% per year, accruing from February 4, 2022, and interest on the Notes is payable semiannually in arrears on February 15 and August 15 of each year, beginning onyear. The August 15, 2022. 6.75%The Notes will mature on February 15, 2027, subject to earlier repurchase or redemption. The Company used the net proceeds from the offering to prepay in full all outstanding borrowings under its prior credit agreement, including the term facility, Main Street Loan, and revolving credit facility, to pay any related premiums and to terminate in full its prior credit agreement and the commitments thereunder. The 6.75%Notes are senior secured obligations of the Company and are guaranteed on a senior secured basis by the Company and certain of the Company’s subsidiaries (collectively, the “Guarantors”) and secured by first-priority pari passu liens, subject to permitted liens and certain exceptions, on substantially all the assets of the Company and the Guarantors. The 6.75%Notes may be redeemed by the Company, at set redemption prices and premiums, plus accrued and unpaid interest, if any. 

The6.75% Notes contain covenants that, among other things, restrict the Company’s ability, and the ability of the Company’s 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. 

New Revolving Credit Facility 

On February 4, 2022, the Company entered into a new senior secured revolving credit facility (the “New Revolving“Revolving Credit Facility”), which provides for an aggregate principal amount of commitments 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 obligations under the New Revolving Credit Facility are guaranteed by the Company and the Guarantors and are secured by first-priority pari passu liens, subject to permitted liens and certain exceptions, on substantially all the assets of the Company and the Guarantors. Borrowings under the New Revolving Credit Facility, if any, will bear interest at a rate per annum equal to, at the Company’s option, an adjusted Secured Overnight Financing Rate (“SOFR”) rate plus a spread or a base rate plus a spread.

The New Revolving Credit Facility contains customary affirmative and negative covenants, as well as financial covenants and event of default provisions.

Senior Secured Credit Agreements9.00% Notes

InOn January 2018,May 2, 2023, the Company entered into a senior secured credit agreement (the “First Export Credit Agreement”) making available to the Company a loan in anissued $275.0 million aggregate principal amount not to exceed $107.7 million for the purpose of providing financing for up to 80% of the purchase price of the Company’s new ice class vessel, the National Geographic Endurance, delivered in March 2020. In June 2021, the Company amended its First Export Credit Agreement to, among other things, waive the net leverage coverage ratio through March 2022 and annualize EBITDA used in its covenant calculation through December 31, 2022. During May 2022, the Company further amended its First Export Credit Agreement to extend the waiver of its net leverage coverage ratio from March 2022 through December 31, 2022. Certain other covenants continue to be more restrictive during the extended covenant waiver period. The First Export Credit Agreement, as amended, bears interest at a variable interest rate equal to three-month LIBOR plus a margin of 3.50% per annum, for an aggregated rate of 5.22% over the borrowing period covering June 30, 2022. 

In April 2019, the Company entered into a9.00% senior secured credit agreementnotes due 2028 (the “Second Export Credit Agreement”“9.00% Notes”), to make available to the Company and subject to certain conditions, in a loan in an aggregate principal amountprivate offering. The not9.00% to exceed $122.8 million for the purpose of providing pre- and post-delivery financing for up to 80% of the purchase price of the Company’s new expedition ice-class cruise vessel, the National Geographic Resolution, delivered in September 2021, and borrowed $122.8 million under the Second Export Credit Agreement. In June 2021, the Company amended its Second Export Credit Agreement to, among other things, waive the net leverage coverage ratio through March 2022 and annualize EBITDA used in its covenant calculation through December 31, 2022. During May 2022, the Company further amended its Second Export Credit Agreement to extend the waiver of its net leverage coverage ratio from March 2022 through December 31, 2022. Certain other covenants continue to be more restrictive during the extended covenant waiver period. The Second Export Credit Agreement, as amended, bears a variable interest rate equal to three-month LIBOR plus a margin of 3.50% per annum, for an aggregated rate of 5.56% over the borrowing period covering June 30, 2022.

Notes Payable

In connection with the Natural Habitat acquisition in May 2016, Natural Habitat issued a $2.5 million unsecured promissory note, amended in May 2020, to Benjamin L. Bressler, the founder of Natural Habitat, with an outstanding principal amount of $0.8 million as of June 30, 2022. The promissory note accruesbear interest at a rate of 1.44% annually, with9.00% per year, accruing from May 2, 2023, and interest is payable everysemiannually in arrears on sixMay 15 and November 15 of each year, beginning on November 15, months2023. The 9.00% Notes will mature on May 15,2028, subject to earlier repurchase or redemption. The Company used the net proceeds from the offering to prepay in full all outstanding borrowings under its prior senior secured credit agreements, to pay any related premiums and to terminate in full its prior senior secured credit agreements and the remaining principal payment duecommitments thereunder. The 9.00% Notes are senior unsecured obligations of the Company and are guaranteed (i) on a senior secured basis by certain of the Company’s subsidiaries (collectively, the “Secured Guarantors”) and secured by a December 22, 2022. first-priority lien, subject to permitted liens and certain exceptions, on the equity and substantially all the assets of the Secured Guarantors, and (ii) on a senior unsecured basis by certain other subsidiaries of the Company. The 9.00% Notes may be redeemed by the Company, at set redemption prices and premiums, plus accrued and unpaid interest, if any. 

The 9.00% Notes contain covenants that, among other things, restrict the Company’s ability, and the ability of the Company’s 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 9.00% Notes. 

Other

The Company’s Off the Beaten Path subsidiary has asubsidiary’s original $0.3 million loan maturing June 2023 for the purchase of guest transportation vehicles. The loan’s original principalvehicles was $0.3 million, is collateralized by the vehicles and bears an interest rate of 4.77% annually.repaid during June 2023.

The Company’s Off the Beaten Path subsidiary has asubsidiary’s $0.8 million loan under the Main Street Expanded Loan Facility, which originated on December 11, 2020.2020, For thewas repaid during firstMay 2023. 12 months, interest was not payable and accrued to the principal balance, thereafter, monthly interest payments are required. The outstanding balance will amortize at a rate of 15% on both December 2023 and December 2024, with the remaining balance due December 2025. The loan bears a variable interest rate equal to one-month LIBOR plus a spread of 3.00%, or 4.79% as of June 30, 2022. This loan may be voluntarily prepaid at any time and from time to time, without premium or penalty, other than customary “breakage costs” and fees for LIBOR-based loans.

The Company’s 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 an interest rate of 0.53% annually. 

Prior Senior Secured Credit Agreements

In January 2018, the Company entered into a senior secured credit agreement (the “First Export Credit Agreement”), for the purpose of providing financing for up to 80% of the purchase price of the Company’s new ice class vessel, the National Geographic Endurance, and borrowed $107.7 million upon delivery in March 2020. The First Export Credit Agreement was repaid in full on May 2, 2023.