Lindblad Expeditions Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 7 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be conference operator today. At this time, I would like to welcome everyone to the Lindblad Expedition Holdings Inc. Reports 2024 Second Quarter Financial Results. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Dyson Dryden, Chief Financial Officer. Please go ahead.

Speaker 1

Thank you, Desiree. Good morning, everyone, and thank you for joining us for Lindblad's 2024 Second Quarter Earnings Call. With me on the call today is Sven Lindblad, Founder and CEO. Sven will begin with some operating opening comments, and then I will follow with some details on the financial results and our current 2024 expectations before we open the call for Q and A. You can find our latest earnings release in the Investor Relations section of our website.

Speaker 1

Before we get started, let me remind everyone that the company's comments today may include forward looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations. The company cannot guarantee the accuracy of any forecast or estimates, and we undertake no obligation to update such forward looking statements. If you'd like more information on the risks involved in forward looking statements, please see the company's SEC filings. In addition, our comments may reference non GAAP financial measures.

Speaker 1

A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. And with that out of the way, let me please turn

Speaker 2

the call over to Sven. Sven? Thanks, Dyson, and thank you for stepping in and doing such a spectacular as Interim CFO, while we consider our CFO search. Good morning, everyone, and thank you all for joining us today. Wibblad's strong second quarter results set the stage for another year of double digit growth and record results for 2024.

Speaker 2

Dyson will provide additional color on our performance this past quarter. But before he does, let me take a few minutes to discuss some of the drivers of the continued growth this year as well as the steps we are taking to sustain the momentum in the years ahead. First, I would like to emphasize how delighted we are with 2 new additions to our Board of Directors. Annette Rivas currently serves as Chief People Officer at CrossFit. Throughout her career, she has served as a strategic partner for people and business operations and organizational design.

Speaker 2

Perhaps her most defining role was a decade at Meta, where she served as VP of Human Resources, playing an integral role in the company's growth from 1400 to over 40,000 employees. Andy Stewart is a celebrated cruise industry titan. He served as President and Chief Executive Officer and held several other executive level positions over his 31 year tenure at Norwegian Cruise Line Holdings. These two additions to our Board had a significant diversity of key experiences, which will help tremendously in navigating the company's future. And I would like to thank Bernie Aronson for his significant wisdom and insight during his tenure on our Board.

Speaker 2

Now turning to our quarterly results. Bookings to date for future travel were up 17% versus the same period in 2023 and our in year bookings expanded to 6% over the same point in 2023. It's important to note that 2023 benefited significantly from carryover business from prior cancellations during the pandemic. If you remove those from the equation, in year bookings would be up 29% in 2024 and cancellation rates have stabilized to historic levels. 2nd quarter occupancy increased from 74% in 23% to 78%, Each percentage point increase on an annual basis depending on itineraries sold as between $4,000,000,000 $5,000,000,000 in additional EBITDA.

Speaker 2

So clearly, as I've consistently said, the single biggest opportunity is to return as quickly as possible to our historic occupancies. At the same time, we have stayed committed to price integrity, which is fundamental to our business model. Many of our competitors continue to compete on price in pursuit of occupancy gains. This without doubt is a flawed unsustainable strategy. To reliably return to the occupancy levels we historically have enjoyed, we are building back our past guest base.

Speaker 2

This customer cohort is the backbone for a segment of our itineraries, those that are longer and more esoteric. We believe this strategy, barring external influences, will result in us achieving this goal for the full year in 2026. Speaking of external influences, they have had an impact in 2024 and will likely continue to impact future years. The ongoing Middle East conflict has had a significant effect on our Egypt program and we also canceled 2 long Mediterranean voyages as one of our ships had to be rerouted at short notice from transiting the Red Sea. Certain of our Galapagos voyages were affected by concerns about stability in mainland Ecuador, but this has largely stabilized as people realize that issue that the issue was very localized.

Speaker 2

Just as an aside, I just spent 10 days in Ecuador in part meeting with the government, including with President Nogoa. I was very impressed with his vision for the country and his commitment to the imperative of security. Recently, a reality is that since I started this business, there have always been periodic disruptions due to world events, some more dramatic than others. Our business model within reason takes us into consideration. One of the most significant developments for the company is our agreement with National Geographic and Disney to build and significantly grow the company through at least 2,040.

Speaker 2

To be clear, this agreement was only realized in November last year, so we are still in the early stages. There are a number of initiatives I cannot speak to here at this time due to competitive reasons. However, there are several that I can. First of all, the rallying cry within the 3 organizations that have chosen to deeply collaborate, Lindblad, National Geographic and Disney is the power of 3. On the surface, the key ingredients each brings is Lindblad Expedition Execution, National Geographic Brand Strength and Disney distribution.

Speaker 2

Aside from these critical components, there is a lot more. Let's focus on primary benefits. We have spent dozens of hours together unearthing how and where we expand our reach with a goal of attracting new travelers. We have determined together to update our consumer brand and this will be launched by the end of September. The updated brand, National Geographic Lindblad Expeditions leads with the power and name recognition of National Geographic.

Speaker 2

Our research and experimentation has demonstrated the power of this new brand, increasing consumer intent, search efficiency and conversion. This is especially important as we begin to market internationally with a National Geographic brand has far more awareness today than the name of Lindblo. We have begun to leverage Disney's ad buying power with our joint marketing fund and have just committed to a new domestic marketing campaign to support the launch of our new co brand featuring radio, connected TV, digital and print advertising. This campaign will reach our target households across the country. We are also working together to create a full suite of new co branded advertising assets to appeal to a diverse audience of potential guests.

Speaker 2

Our first cross selling campaigns to Disney affinity audiences will launch this year, reaching millions of consumers with strong Disney affinity and a love of travel. With our new ability to market together with the NG brand internationally, we are launching sales in Great Britain this quarter and plan further expansions into Europe later this year. We are also looking at a variety of new charter products that we believe will be uniquely successful under the new co brand including possible expansion of river cruising. So we believe that through committed and various testing and campaigns, we will be able to generate meaningful growth as a consequence of our lines beginning next year. A few words on inventory and its importance.

Speaker 2

First, we are working on new thematic content creation, which we hope to articulate soon, harnessing the creative forces within both National Geographic and Disney. A good example of this is our renewed focus on family travel. For those familiar with our current products, you know we have different ships designed for very different missions, operating in different geographies and attracting very different guests. Our voyages range from 4 days to 30 days in length. Certain itineraries are more suited to bring in new guests, Galapagos, Alaska, for example.

Speaker 2

Some particularly esoteric itineraries largely attract past guests, examples include places like Papua New Guinea and the Northwest Passage and somewhere there is a balance, Antarctica and Iceland, for example. We have always worked on calibrating inventory to have the right balance. For many years, we achieved this optimal balance, hence our 90 plus or minus percent occupancies. With COVID, we basically lost 2 years of adding to the funnel, basically 30,000 plus guests. Inventory is planned several years out, so our beautiful, essentially perfect formula was disrupted for a time.

Speaker 2

We have responded by increasing 1st timer itineraries and culling those for past guests. Examples are increasing our presence in Iceland and reducing more of our esoteric Arctic itinerary. Another is our fly in program to Antarctica, making it possible to have a shorter experience by flying from Chile to Antarctica to board our ships, which has opened up an entirely new market. We have also just signed an agreement to acquire 2 additional ships for Galapagos, critical for bringing in new guests, the National Geographic Gemini and the National Geographic Delfina with 4816 passengers respectively. Elapagos is a closed market for ships with a defined number of licenses.

Speaker 2

So the overall market has not increased, but our inventory has by 45%. These two additional ships are expected to begin operation late Q1 next year and the effects on accelerating first time travelers by upwards of 3,000 people a year will be felt across the fleet over time. A few operational highlights. Our first ten governing principles is to ensure that everything we do adds value to the guest experience. This is sacrosanct, but I'm very happy to be able to report to the guest streamline streamline our internal processes and improve the guest experience.

Speaker 2

We believe there is more we can do on this front. For some months now, we have made a concerted effort to further improve efficiency, looking at the organizational structure broadly and how we can modernize, improve and eliminate unnecessary costs. Our land experience sectors continues to perform and grow at exceptional levels. Revenue last quarter was 43,400,000 dollars a 16% increase year over year. Natural Habitat, the largest of our land subsidiaries, has current bookings over 20% greater than at the same period in 2023.

Speaker 2

The theory from the beginning that our kind of travelers are omnivorous in their interest and engaged in a diverse set of experiences has absolutely proven to be true. The more people that travel with our land companies, the better as they provide best in class experiences and travelers stay in the family, so to speak. Think of what this diversity represents, natural habitat adventures focused on land based itineraries in natural remote places. Examples include viewing polar bears in the high Arctic or safaris in Africa. Ben Bresler, the Founder and CEO and he also Ben Bresler is the Founder and CEO and he also oversees all of our land companies.

Speaker 2

Nighthav's mission is entirely consistent with our own conservation through exploration, protecting our planet by inspiring travelers, supporting local communities and boldly influencing the entire travel industry. Classic Journeys focus on cultural walking tours all over the world. Think Italy, Spain, South America and beyond. Its founders and leaders, Edward and Susan Pigaza, are really driving and expanding this business. And talk about minimal capital, it's largely 2 feet at a time.

Speaker 2

The mine offers luxury bike tours that offer immersive experience in some of the world's most scenic and culturally rich destinations. It's an exciting company really capitalizing on a growing interest in fitness and cycling. Add to that the advent of e bikes, which massively grows the category, and voila, you have quite a growth story, which in Devine's case is largely fed by love of Italy and France. Founder and CEO, Andy Levine turned a personal interest in Viking, Culture and Lime into a perfect enterprise, and we are thrilled to support his team and their growth. Also beaten path is in the process of extending its strong presence in North American National Parks to other lesser travel destinations globally.

Speaker 2

With 3rd party development of new and exciting hotels, lodges and the expansion of glamorous camping, OVP is in the right market. CEO, Corey Lawrence is ideally suited to lead this growth platform for us. And just last week, we closed the acquisition of our 5th land company, Thompson Safaris, which has been focusing on the spectacular country of Tanzania for over 40 years and their operation will create synergies with Natural Habitat's East African operation. The level of focus and expertise in one of Africa's most desirable countries for safari travel is unmatched and included in the transaction is a spectacular lodge called Gibbs Farm named East Africa's Best Hotel by Crumley House in 2020 3. Gibbs is a place with deep history.

Speaker 2

It actually was my favorite launch back in the 1970s when I was living in East Africa and is consistently related as one of Africa's top lodges today. Each of our land companies is pursuing their stated mission with vigor and aim to be a dominant force in their focus segments. We're excited to continue to expand by adding additional best in class companies to this valuable portfolio. Companies where we are mission aligned and whereby joining our family, we can add value and propel meaningful growth. In summation, 2024 is shaping up nicely and we remain optimistic about the future.

Speaker 2

Now, Dyson will delve deeply into the numbers.

Speaker 1

Thank you, Sven. Lindblad's strong year on year growth continued during the Q2 as we further ramped up ship operations with broader deployment of our expanded fleet and continue to grow our diversified portfolio of land businesses. As we deliver sustained year on year growth, we are taking the operational and strategic steps necessary to take full advantage of the earnings potential of the company. The investments we've made in additional capacity, diverse product offerings, technological capabilities and overall infrastructure have positioned us to capitalize on the growing demand for experiential travel. Turning to the Q2, total revenue of $136,500,000 increased $11,700,000 or 9% versus the Q2 of 2023.

Speaker 1

Lindblad segment tour revenues were $93,100,000 which is an increase of $5,600,000 or 6% compared to the Q2 a year ago. The increase was driven by 4% increase in available guest nights, a 6% increase in net yield per available guest night to $10.94 and an increase in occupancy to 78%, up from 74%. As Sven noted, we canceled 2 voyages as we decided to transit around the Red Sea due to conflict in the region. And our Egypt program was affected by the Middle East conflict. We also saw instability in mainland Ecuador, which impacted Galapagos for a brief period of time.

Speaker 1

Planned experiences tour revenues were $43,400,000 which is an increase of $6,100,000 or 16% compared to the Q2 a year ago, led by additional guests and higher pricing across natural habitats, trips to Africa, the Galapagos Islands, Europe, the Amazon, India and Alaska, divine cycling tours across Italy, France, Croatia, Turkey and Spain, Classic Journeys cultural walking tours in places like Portugal and Iceland and Off the Beaten Pass small guided group adventures to the U. S. National Parks. 2nd quarter adjusted EBITDA was $10,400,000 and increased $4,200,000 year over year driven by a 3.9 increase in the Lindblad segment and a $300,000 increase in the Land Experiences segment. Lindblad segment adjusted EBITDA of $6,500,000 increased $3,900,000 as compared to the same period in 2023, primarily due to increased tour revenues, partially offset by higher general administrative costs, which are related to increased personnel costs and increased royalties associated with the expanded National Geographic Agreement.

Speaker 1

Land Experiences segment adjusted EBITDA of $3,800,000 increased $300,000 as I mentioned as compared to the same period in 2023 as increased tour revenues were offset by increased operating and personnel costs, higher marketing spend to drive future growth and credit card fees and commission expense. Looking a little closer at the cost side of the business, operating expenses before depreciation and amortization, interest taxes increased 7,500,000 6.4% versus the Q2 of 2023, led by a $3,400,000 or 13.3% increase in G and A expense, excluding stock based comp and one time items versus a year ago, primarily again due to higher personnel costs associated with the expanded operations as well as from increased credit card commissions related to final payments for upcoming itineraries and higher deposits on new reservations for future travel. Sales and marketing costs increased $3,100,000 or 20.6 percent versus a year ago, primarily due to increased royalties associated with the expanded National Geographic agreement and additional marketing spend to drive future bookings. Fuel costs were 4.2% of revenue in the Q2 2024, which is down compared with the Q2 a year ago. As a reminder, credit card commissions are paid upon cash receipt with the expense recognized today and with trip revenue not recognized until the guest travels.

Speaker 1

With higher bookings in the Q2, which is the same period a year ago, the expense impact is significantly higher on year with the revenue growth to be delivered in the periods ahead. While our expense base will grow in absolute terms, we do continue as we continue to expand the business, we also believe we have an opportunity to improve efficiency over time. Our recent investment in technology is an important enabler of this objective. We are now well positioned to identify ways to further improve existing processes and systems and thereby reduce certain costs. Turning to the balance sheet for a moment.

Speaker 1

Total cash was $217,700,000 as of June 30, 2024, as compared to $187,300,000 as of December 31, 2023. The increase primarily reflects a $63,200,000 increase in cash from operations due primarily to increased bookings for future travel, which is partially offset by the $17,300,000 cash used in the acquisition of additional ownership of Natural Habitat and Devine as well as the $3,900,000 used for purchasing property and equipment over the first half of the year. Lindblad now owns 90% of Natural Habitat and 75% of DuVine Cycling. Both businesses continue to outperform our original expectations. On July 31, 2024, we completed the acquisition of Wineland Thompson Adventures, an adventure travel group that primarily operates African Safaris.

Speaker 1

The acquisition purchase price was $30,000,000 financed through $24,000,000 of cash and $6,000,000 in Lindblad stock. We plan to close our previously announced purchase of the 2 purpose built Galapagos expedition vessels in January of 2025. Importantly, we've already begun adding bookings for the National Geographic Gemini and the National Geographic Delfina ships to effectively use the time period between signing and closing. On closing, the ships will undergo revitalizations, after which they will begin operations late in Q1 of 2025. We continue to explore additional growth opportunities in the year ahead and including diversifying our own product portfolio or opportunistically expanding our fleet to capitalize on the continued growth and demand for experiential travel.

Speaker 1

Turning to the full year 2024, we continue to anticipate significant growth driven by higher guest counts and increased net yields across the fleet, as well as additional travelers across our growing land businesses. Given the strong booking trends, we continue to expect tour revenue in 2024 between $610,000,000 $630,000,000 and adjusted EBITDA between $88,000,000 $98,000,000 dollars The acquisition, Thompson Safaris is expected to have a minimal contribution this year due to certain planned investments in the business. However, it is expected to be a more meaningful contributor for the full year 2025. Please note that quarterly results for the remainder of this year will reflect the seasonality of our business, with the Q3 benefiting from more complete fleet usage and peak seasons across both our fleet and land businesses. Conversely, the Q4 will be impacted by less available guest nights to the heavy dry dock and transit time across our fleet, more shoulder season inventory and seasonality for our land businesses.

Speaker 1

Overall, we are pleased with the operating momentum across our businesses. Thank you for your interest. And now Sven and I would be happy to answer any questions that you may have.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Steven Luczynski with Stifel. Your line is open.

Speaker 3

Yes, thanks guys. Good morning. So, Dyson, this one is probably for you. Don't want to put you in the hot seat right away. But it's a guidance question.

Speaker 3

And you addressed a little bit of this in your prepared remarks, but I'm going to ask it a little bit differently. So if we think about the first half of this year, you guys you generated about $32,000,000 in EBITDA. That is actually below the $35,000,000 you generated in the first half of twenty nineteen. So my question is to get to the low end of your EBITDA guidance for the year, you guys are going to generate about $50,000,000 mid $50,000,000 $56,000,000 in EBITDA in the second half of the year. That's well above what you did in the second half of twenty nineteen.

Speaker 3

And look, I fully understand there's a material change in capacity. But I guess the real question is what gives you guys such confidence with only 5 months left in the year that kind of getting to that mid-50s EBITDA in the second half of the year is going to be possible? Thanks.

Speaker 1

Yes, sure. Thanks, Steve. So let me just talk a bit about our strong booking position. I think that's really going to be the key variable in the back half of the year. The Lindblad segment is in a very strong booking segment for the year.

Speaker 1

So we've already booked 98% of we've already booked 98% of the Ladenburg segment full year projected ticket revenues for 2024. As you know, that last 2% does come at a very high margin. So filling the rest of the 2% is our focus. And if we do that, we should be able to get there, and where we want to be on a for the full year guidance perspective. So we're confident at this point in time based on the trends and the cancellations really going back to historical levels that we're in a good position to reach the guidance.

Speaker 1

I think also importantly, the land business bookings are also very strong. The bookings just in that have which is our largest land segment are up 20% year over year. So we remain confident in achieving the guidance.

Speaker 3

Okay. Thanks for that, Tyson. And then second question, Sven, it's for you. It's a bigger picture question, really around the Disney partnership. As you continue to work and collaborate with those guys, Look, a big piece of this partnership was always going to be around the ability to drive load factors higher over time.

Speaker 3

And just want to ask how you feel about the partnership today and if the ability to drive that long term occupancy is still in play? And then maybe when will we start to see some of the material benefits

Speaker 1

of this partnership? Thanks.

Speaker 2

Thanks, Steve. And I appreciate the question. So like with any new partnership, right, it's like you got to kind of figure out how are you going to play together, how are you going to work together in the most productive way possible, right? So we've been working since 2004 with National Geographic, but National Geographic has morphed from being an independent organization to one owned by Fox to then migrating over to Disney. And Disney is kind of a new player from the perspective of our relationship.

Speaker 2

So the first thing we did was this past April, we took a significant number of people from Disney, from National Geographic and from our own organization and we went to the Pacific and spent 5 days together where we help build understanding about what we do in those different segments and had sort of working sessions every day for 5 days, really exploring how we were going to build out this business together and how we're going to use each other's assets in a combined way to build what we call the power of 3. And so when you think about what we all are individually and how you bring that together into some sort of a chemical mix, it's I believe it's an incredibly potent one. So Nat Geo not only is brand, but also has tremendous content it can help provide in terms of photography, explorers, family idea, education. Disney is a massive, massive distribution entity, right? And we want to harness that and they want to harness it on behalf of our collective effort.

Speaker 2

And then obviously, we're in the execution business of making sure these expeditions happen. So I mean, there is nobody in my view in the travel industry in the expedition space that has so much power behind it as a consequence of these partnerships. And so and everybody is really, really interacting in a very concerted way. There are constantly discussions going on about the next step and the next step and how can we advance the distribution. And so

Speaker 4

I think you're going to

Speaker 2

see in 2025, a lot of this begin to come to real fruition. Remember, we only signed a deal in November and then you have to plan and then you have to and Disney is a big organization and doesn't necessarily move as quickly as a smaller one like ourselves, but it is moving. And once it gets up to full steam, I think it's going to I think it cannot help but have a significant effect on how we grow the business.

Operator

Our next question comes from the line of Eric Wold with B. Riley Securities. Your line is open.

Speaker 4

Thank you. Good morning. A couple of questions, I guess. First question, kind of a follow-up on the last one around the expanded Nat Geo Disney relationship. Obviously, Sven, you made the comment about the organization like Disney maybe don't move as fast as you expected.

Speaker 4

You went with a bunch of the teams in April. You're launching a new brand by September. I guess if you take everything together, is everything kind of expected when you first made the announcement back in November kind of running on schedule ahead of plan behind plan versus where you were? And then can you make any maybe general comments about any bookings tailwind from the same relationship in 2025 as you've kind

Speaker 2

of previously expected you could see? Yes. So first of all, I just want to clarify one thing. I did not say they were moving slower than expected. I just meant that a big organization doesn't necessarily move as quickly as a smaller organization.

Speaker 2

I think they're moving faster than I would have expected, to be honest, given the fact that it is such a large organization. So one of the major things that's going to happen this fall is a real sort of coming out party, if you will, with the trade with their entire sales team, which is huge by comparison, maybe upwards of 10 times the size of our own or more that exposes products, their products and now our products as well to the travel trade. I mean, this is a massive, massive expansion of exposure, right, in a critical area of business development. So that and advertising plans and direct mail campaigns and search. Now we're we used to National Geographic and ourselves, we used to compete for search terms, for example, because we had we worked together, but we also had different entities because there was different attribution as to how the business was sourced.

Speaker 2

All of that is no longer there. So we are collaborating on literally everything to drive the business. And so I can't quantify it in absolute terms, but it's hard for me to imagine that it isn't going to be a very, very powerful force going forward. And we will, I think, start the starting the next earnings call and the one after that, I think we will be in the position to be more specific as a consequence of having more sort of water under the bridge.

Speaker 1

I would just add that, as you well know, we have about a 9 month booking window on average. That's been pretty consistent. And so as all this activity is ramping up, as Sven mentioned, the results really come in 2025, in large part just due to the timing of the booking window. So the activity is beginning to happen in earnest, and we expect the results to really start showing in 2025.

Speaker 4

Perfect. And the follow-up question. On the 2 vessels you acquired and are acquiring in the Galapagos, you mentioned increasing inventory in the region by 45%. Any just more comments in terms of night admissions you get from that potential annual revenue from the 2 ships? And then how does this on a longer term basis, how does this impact digital pricing in the region by taking out 2 competitive ships?

Speaker 4

And what is the opportunity to leverage that customer list to kind of bring them to other expeditions outside of the region?

Speaker 2

Do you want to answer that?

Speaker 1

Sure. So, yes, we're not in a position to update any guidance for 25 at this point. But we did announce that they're going to come in the service at the end of the Q1. And so when we put out guidance, we'll certainly show that contribution. We believe these are going to be really important as far as adding first time guest inventory.

Speaker 1

And we underwrote a very conservative occupancy level for 2025 of the transaction, which we believe is going to be very accretive to shareholders financially and frankly from a leverage perspective as well. So I think we'll just have to give you more guidance as we go forward on that. But this is largely a first time guest product, which is very much aligned with our mission to add new first time guests to the funnel and improve the overall occupancy levels for the organization. The 45% increase is just the fact that there's a fixed license business, which in the Galapagos, which I think most are aware of. And so that just means it's not like 2 new ships are coming to the Galapagos.

Speaker 1

We took 2 ships from our competitor of ours and brought them into our fleet. Is that helpful? Yes. Thank you, both.

Operator

Next question comes from the line of Alex Berman with Craig Hallum. Your line is open.

Speaker 1

Hey guys, thanks very much

Speaker 5

for taking my question. It sounds like you guys are investing a lot more in the Galapagos now as a region with the new ships you have coming online. Can you talk about what your market share in that region is going to be when you have these new ships online giving the fixed supply in the region? And then I think in the past you've talked about the Galapagos being a good region for you in terms of acquiring first time passengers? Is that the case you expect to be able to acquire a lot of new customers as a result of your increased presence in that geography?

Speaker 2

Yes. Well, so Galapagos is a place we've been involved with for a very, very long time. I mean, going back to my father's first bringing people there in 1967. And so it's a place that we're very closely connected with and is very, very important to us. And so the opportunity to expand in a place that we have such a deep connection with and that we're so that the public sort of equates us being connected with is for us a real, real opportunity.

Speaker 2

So now we will have a total of 206, I think it is beds in the Galapagos, which is which doesn't sound like a lot when you think of cruise ships, but it's there's only in terms of boats that are like 40, 50 passengers or more, there are only about 600 beds total, I think, somewhere in that neighborhood in the Galapagos, including our own. So we represent a very, very sizable percentage of the market. And as a consequence of that, we can change our investment mentality in terms of promoting the area because obviously we have a level of scale that is proportionately different, which is very, very helpful. And yes, new people, see, Galapagos is an iconic place for people who are interested in nature, probably as an island group more known than any other in the world and more aspirational than any other in the world from the perspective of natural history. And so it absolutely is a place where you can get people in the door for the first time, probably more easily than any place else on earth.

Speaker 5

Great. That's really helpful. Thanks very much.

Operator

Next question comes from the line of Chris Woronka with Deutsche Bank. Your line is open.

Speaker 6

Hey, guys. Good morning. Thanks for all the details so far. Samet, I think you mentioned earlier that you might be looking to increase your activity in the river cruising space. And so the question is, you do have 2 new vessels coming for Galapagos.

Speaker 6

Would that require if you decide to go down the river cruising path in a bigger way, would that require additional fleet? Or can you make that happen with your current fleet?

Speaker 2

Yes. So anything that we envision doing on rivers, but we do a lot on rivers already, on the Colombian Snake River, on the Amazon. So we have we already are deeply involved with rivers and we know that people really like rivers and in Egypt obviously as well. So we would envision at least for the moment to pursue rivers on a chartered basis, not on building for rivers or not taking our ships into rivers more than they currently do in the Colombian Snake River. So we own now 12 ships and we charter 8 ships.

Speaker 2

And those 8 charter ships are also important because they fill different niches, maybe certain places that are seed, particularly seasonal. And we don't want to necessarily own something. We don't want to own something where you can only successfully operate it 3 months a year and be stuck with it for the other 9. So Charter is really a, for us, a great mechanism to expand our offerings and in certain instances to test areas that after which we might decide we want to get more deeply involved. So we have in the past chartered ships to certain areas and then eventually bought a ship or built a ship to accommodate that interest.

Speaker 2

But right now, it's going to be primarily focused on charter work.

Speaker 1

Okay. And I just add that I just want to add one thing, which is unlike the river product that Sven is mentioning, the Galapagos is a 52 week operational deployment. So that's a place where owning a ship makes a lot of sense. I did find the statistic in my notes here. There are only 9 ships in the Galapagos with over 40 passengers in existence.

Speaker 1

So it is a pretty limited market.

Speaker 6

Yes. Understood. Thanks, Tyson. Appreciate that. And then, obviously, there's a lot of moving parts here, you guys.

Speaker 6

You take probably looking relative to 2019 or 2018 whatever the right year is, you've taken on more land based businesses. You're growing the fleet now. You have the Nat Geo and Disney partnership. And we've had inflation, of course. So, the question is, as we look out to maybe 2024 is not the right year, maybe it's 2025, 26, the margin profile of the overall business, we just think about the EBITDA margin of 20% or so reached in 2019.

Speaker 6

Is that is there a lot of upside in the out years? Or is there are there structural limits? Just trying to get a sense of how to frame the 2 to 3 year potential, right?

Speaker 1

Yes. Without giving specific guidance, we did mention that we're focused on cost and efficiency as well. We think a combination of returning to historical occupancies and also a focus on efficiency and cost, there should be an opportunity there. And that work is ongoing right now. But certainly that Chris, to your point, that would be the goal.

Speaker 1

There shouldn't be significant operating leverage in the business. Some will depend on the ultimate mix of land versus marine, because they do carry different margin profiles. But yes, your focus is similar to ours.

Operator

There are no further questions at this time. Mr. Dryden, I turn the call back over to you.

Speaker 1

Okay, great. Thank you, Desiree. Thank you for everyone for joining our Q2 earnings call. Hope everyone has a wonderful day. And if you have any questions, don't hesitate to reach for us directly.

Speaker 2

Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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Earnings Conference Call
Lindblad Expeditions Q2 2024
00:00 / 00:00
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