Ladies and gentlemen, thank you for standing by, and welcome to the Lindblad Expeditions Incorporated Reports Third Quarter 2020 Financial Results Conference Call. At this time all participants are in a listen only mode. After the speakers presentation there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's call is being recorded. If you require further assistance please press star zero. I would now like to hand the conference over to your speaker today, Mr. Craig Felenstein. Thank you. Please go ahead, sir.
Thank you, Alicia. Good morning, everyone, and thank you for joining us for Lindblad's 2020 third quarter earnings call. With me on the call today is Sven Lindblad, our Founder and Chief Executive Officer. Sven will begin with some opening comments. Then I will follow with some detail on our financial results and liquidity before we open the call for Q&A. You can find our latest earnings release in the investor relations section of our website. Before we get started, let me remind everyone that the company's comments today may include forward-looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations. The company cannot guarantee the accuracy of any forecasts or estimates. We undertake no obligation to update any such forward-looking statements.
If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. With that out of the way, let me turn the call over to Sven.
Thanks, Craig, good morning, everyone. Thank you again for joining us today. During our last earnings call, I spoke to you from French Polynesia. I was there to learn about the possibilities, what could be developed, in order to position one of our ships there. Throughout the years, I've been fortunate to spend a fair amount of time in this remarkable location. If you think of a place like a recipe, French Polynesia has an excess of ingredients. The incredible lagoons, the turquoise waters, reefs, fish, mountains, forests, flowers everywhere, and really some of the nicest and happiest people on Earth. I was able to spend my time there working with local leaders and laying the groundwork for what I believe will be one of the strongest, most sustainable expedition experiences we have ever developed.
Now back in soggy New York we are all somewhat consumed by an upcoming election and made aware each day of the grip that COVID-19 has on our country and much of the world. This is a stubborn pandemic that clearly will be with us into next year and will significantly affect our short-term plans. Over the past few months, our startup team has worked diligently to develop a robust set of stringent protocols that would allow us to operate sooner rather than later in a variety of geographies. We had these protocols vetted by a number of health officials and local authorities who were all impressed with the procedures we had established and were willing to work with us to resume operations.
At the same time, we had reached out to our guests who were scheduled to travel with us over the next few months through a series of webinars to gauge whether they were ready to join us on an immersive expedition, and the response was very encouraging. Based on that feedback, we had planned to start reactivation by operating our newer ship, the National Geographic Endurance, in Antarctica beginning this December. Unfortunately, despite the current guest demand, we have now decided to cancel this Antarctic season. On October 26th, the CDC issued a warning advising U.S. travelers to defer all cruise travel. Clearly, we do not look upon ourselves as a cruise company, and the size of our ships along with where we travel creates a totally different risk profile.
We decided that given the significant uncertainty as to the evolution of COVID over the next months, both in reality and in terms of perception, rescheduling was the right thing to do for our long-term future. We've been around for four decades and will continue to grow and prosper for many, many more. For a while longer, we simply must stay dormant. We are continuing to evaluate the short-term operating potential in additional geographies such as the Galapagos and Baja California, while actively beginning to market April 2021 and beyond with a robust plan that involves every tool in our arsenal. We have also unearthed new concepts and itineraries which we believe respond well to the times.
Please remember we have a very fortunate circumstance in that because of our size and what we are known for and the reputation we have developed over these decades, we offer the kind of travel that countries and regions really want in a post-COVID world. This I've been told over and over and over again. We are also largely nature-based, which means being outdoors and naturally distanced from large human concentrations. Our spring and summer finds us almost entirely in the wild: Alaska, the Arctic, Galapagos, the Amazon, and Polynesia. As a result of our capital raise in August, along with an already significant cash position, we can weather this pause for quite some time. Our teams have done a remarkable job of paring down expenses, while at the same time ensuring that we are ready to reactivate when it is the right time.
Every aspect of the organization has had to undergo an analysis of what can reasonably be saved without damaging the long-term future. That in essence was the driving force behind the capital raise. Never damage your long-term future. Significant capital reserves also allow us to look at and seriously consider strategic opportunities that are compatible and broaden our long-term offerings. Clearly, there are and will continue to be such prospects as companies reevaluate their future. This pause is also a time to look internally and focus on things that never seem possible when you're at full throttle. Internal IT systems, sales relationship, operational structure. In other words, the back-of-the-house items that, while mostly hidden, make a huge difference both financially and in terms of efficiency. I've spoken to many colleagues in the industry who have had the exact same experience.
There is little time to efficiently correct course when you're driving at 100 miles an hour. Of course, everyone is asking, when will this be over? When will we get back to normal? While no one knows for sure when, clearly this will pass. Better, more rapid testing, treatments, credible vaccine, flattening of curves, these will all happen, and then we will return to an altered world. We will have found strengths we didn't know existed. We will have learned more about handling stress than we could have ever imagined. We will be more excited and motivated than ever return to business, and we will respect and nurture our guests more than ever before. When I refer to COVID at this time, I use the word pause. Many have said to me, "Sven, aren't you beside yourself with what's happening to the business?" Frankly, I'm not.
I'm deeply saddened by what's happened in the world, for the people who have become sick or died, for those who have lost their livelihoods, for animals who've been killed because their countries simply couldn't afford to protect them. As to the business, COVID presented a crisis. We acknowledged it and built a plan to ride out a pause, including building a large cash coffer. What I do know, beyond a shadow of doubt, is that when the doors open again, we will be ready with what I believe will be amongst the most relevant and sought-after opportunities for travelers. That position will last far into the future. Lindblad Expeditions and Natural Habitat celebrate the wonders of our world, whether they be natural, cultural, or historical. Our offerings are smart, respectful, and full of value. People will seek out these opportunities in far greater numbers than ever before.
Of that, I am 100% certain. Thank you for your time today, and now please, I'd like to turn the call back over to Craig.
Thanks, Sven. Good morning, and I do hope everyone remains healthy and safe during these truly unprecedented times. I would also like to once again thank our crew across the globe and our office personnel for their resiliency during this period, and for their diligence in preparing us to return to operations while simultaneously finding ways to preserve capital. It has been over seven months since we paused our operations, and we continue to execute on the comprehensive plan we put in place back in March to reduce costs and enhance our liquidity position. Given the uncertainty around when and how quickly we will be able to ramp up operations, in August, we further extended our liquidity runway through the issuance of $85 million in redeemable preferred stock to a diversified group of high-quality, long-term-focused investors.
I will discuss our overall liquidity position in a moment, but this investment, which was substantially oversubscribed, will help secure our return to operations and allow us to explore potential strategic opportunities to augment our long-term growth profile. Operationally, all of our ships remain safely laid up with minimally required crew, and we have eliminated a considerable portion of our ship and land-based expedition operating as well as capital costs. On the advertising and marketing front, we suspended the majority of our spend, focused primarily on digital opportunities and paid media that is generating appropriate returns with regards to future bookings. We have significantly lowered general and administrative spending through employee furloughs, salary reductions, and elimination of all non-essential travel, office expenses, and discretionary spending. Additionally, we've suspended all repurchases of common stock under our existing stock repurchase plan.
On the P&L front, the measures we have taken enabled us to reduce operating expenses before depreciation and amortization, interest, and taxes by 76% during the third quarter versus the same quarter a year ago. On the cash front, we lowered our cash spend this past quarter to $36 million, which included approximately $20 million in operating costs, $5 million in principal and interest payments, and less than $1 million in CapEx. The remaining cash usage was primarily refunds paid to guests, partially offset by payments for future travel.
It has been very encouraging that on the voyages canceled and rescheduled thus far, which includes expeditions through the end of December, as well as our upcoming seasons in Antarctica, South Georgia, and the Falklands, the majority of our guests have continued to opt for future travel credits as opposed to full refunds, and this trend has been very consistent since March. One other important facet with regards to refunds is that our exposure is significantly lower moving forward, as the majority of our unearned revenue is for travel where the guests have already decided on their future travel plans. Turning to current booking trends, as we have highlighted previously, we are off to a great start in 2020. We were off to a great start in 2020 prior to COVID.
While voyage cancellations have resulted in current bookings for 2020 down 74% versus 2019, the demand for future expedition travel remains very strong, and we are well positioned for 2021 and beyond. Bookings for 2021 are still 4% ahead of 2019 at the same point in 2018. While bookings are now behind where they were for 2020 at the same point a year ago, that is predominantly due to rescheduled voyages and cancellations for Q1 of next year. Looking at the last nine months of 2021, which is more apples to apples, we remain 12% ahead of the same point a year ago for 2020. A portion of that growth is certainly from guests on canceled voyages that have opted to reschedule, but we have also generated over $44 million in new bookings since March 1st, from guests not utilizing future travel credits.
As a reminder, we have also not yet, as Sven mentioned, resumed marketing in earnest. We do anticipate ramping up our marketing efforts beginning in Q4, with some additional spend on direct mail and social opportunities, as well as increased outreach through trade advertising and travel advisors. Based on the feedback we are getting from guests directly, we believe that there is a significant pent-up demand to get out and explore the world's most amazing geographies, and these efforts will secure additional bookings for 2021 and 2022. We ended the third quarter with $130 million in unrestricted cash and $17 million in restricted cash related primarily to deposits on voyages that originate in the U.S. This is a $44 million increase over where we ended the second quarter, as the cash usage was more than offset by the capital raised through the preferred stock issuance.
Our monthly cash spend this quarter was below original expectations due to targeted cost-cutting measures and cash management. Moving forward, we continue to estimate that our monthly cash usage will be $10 million-$15 million on average, including all ship and office operating expenses, necessary capital expenditures, and expected interest in principal payments, but excluding any new guest payments for future travel and refunds of previously made guest payments. On the debt front, we ended the quarter with $412 million in principal outstanding and have only $500,000 in principal payments due for the remainder of the year. We have deferred $9 million in principal payments related to our export credit agreements from June 2020 through March 2021, and we have no material debt maturities until 2023.
With regards to our leverage covenants, the company has worked with its lenders to amend its existing credit agreements, including suspension of leverage ratio covenants through June 30th, 2021. Finally, looking at our new build obligations, the remaining installment in payments of approximately $62 million on our second new blue water ship, the National Geographic Resolution, are fully covered by our second export credit agreement and are not scheduled until next year, with the majority due upon delivery of the ship, which is still anticipated to be towards the end of 2021. While there is unfortunately no way to be sure when we will resume sailing, the steps we have taken since the realities of the pandemic became apparent have provided us significant runway to weather the uncertainty.
We are continuing to evaluate additional steps to further reduce our operating expenses and enhance our liquidity position so we can emerge from this unprecedented period as a strong company, ready to once again capitalize on the growing demand for expedition travel. Thanks for your time this morning, now Sven and I would be happy to answer any questions you may have.
At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just one moment to compile the Q&A roster. Your first question comes from the line of Steve Wieczynski of Stifel.
To your continued pause in sailings, I guess the question is, given you don't fall technically under the CDC's guidelines, I guess we're probably surprised, I think other investors are surprised at this point you haven't tried to get something operational sooner rather than later. I guess the biggest question is the issue here still trying to get customers to the ships themselves? Meaning that there's still kind of a lack of reliable air capacity at this point, or are there just other factors that are kind of keeping you out of the water at this point?
Good morning, Steve, and thanks. We discussed elements of this on the last call, but just to reiterate that, sorry for any repetition. You need three things primarily in order to reactivate, obviously. You need a credible medical solution, which we developed and we felt very strongly about. You need to welcome that, meaning that places in the world need to accept you coming. For example, Argentina and Chile and the Antarctic, the starting points for the Antarctic, technically are off-limits to American travelers at the moment. However, we were working very closely on some kind of special dispensation based on our protocols. Third, you need ultimately the will of the people, the guests, to travel. This has obviously been an environment of shifting sand. If you take, for example, last week, we were poised, ready, and had built to reoperate in Antarctica.
We had had webinar with our guests. We had a pretty significant positive reaction from them. We had a marketing plan to fill in the gaps. We were completely ready. Then what happened? You had an extraordinary increase in COVID cases around the country that was dominating the news. Well, there's two things dominating the news, the election and COVID. Then the CDC on October 26th made their announcement. Even though technically we are not in the category that the CDC is regulating from U.S. waters, i.e., 250 souls and above, we are below that. It still has said to U.S. citizens or Americans, do not travel on cruise ships.
Trying to operate in the face of that kind of a recommendation, and particularly, the places that are really quite far away, and the rising tide of COVID corona, we were dealing with what we clearly imagined would be diminishing returns in terms of the people who had said yes, that was going to get further reduced. Our ability to get new people was going to be further reduced, and it just didn't make economic sense to send the ships. The prospect of this getting completely out of hand in the next couple of months prior to when those voyages were scheduled was clearly a possibility. From our point of view, it's better to say, look, we have the reserves. Let's retool the organization for hopefully a significant start in April.
We might be able to do some things between now and April in the United States and in the Galapagos Islands. We're working on that. The circumstances just didn't allow for us to operate and do it effectively.
It sounds like what it comes down to is you're just erring on the side of caution at this point. Is that fair?
No, it's not fair because we're not erring on the side of caution. We're erring on the side of facts that tell us that there is no possibility to effectively operate in an area, send a ship down, fill it full of fuel, put crew on, and do all of that, and have it be a good result.
Yeah. Steve, hey, it's Craig. One of the things that's important to remember when you think about Antarctica is that it's a season, right? It runs from November to March. In order to get that season up and running, there's a whole lot of things that have to be done, and then that season is over. Unlike the Galapagos, which runs pretty much year-round. The decision on the Antarctica had to be made by a certain point in time, and there was just too much uncertainty for us to get going from a cost perspective. Just it wasn't worth the risk factor.
Steve, the reason I react to the word caution is that we had developed an unbelievable set of protocols that would keep people safe, that people all over the industry and in countries were using as models for what they said was literally the best and the most well-thought-out protocols they had ever seen. We felt absolutely secure that we could bring people to the Antarctic and do it safely and give them a great experience at the same time. It was just that when the forces outside that you have absolutely no control over, and when a government institution like the Center for Disease Control makes a statement like that creates a huge headwind in terms of trying to go up against it.
Okay, understood. Thanks for that. Second question would be that new booking number that you laid out there, which is $44 million, I think, since March, but that's an increase of $14 million versus where you were three months ago. I guess the question is that $14 million, it seems like you've seen a little bit of a sequential slowdown there in that booking number. Would that be kind of normal to see that slowdown in a normal type of environment? Is that slowing down just because, again, folks have no idea when you guys will resume cruising again? Hopefully, that makes sense.
Yeah. Steve, the slowdown has not really been a slowdown. You got to remember that the early days, when you look at the March timeframe, was still very heavy because there were still a fair amount of new bookings coming in. When I look at the new bookings called over the last four to five months, it actually has been very consistent. Every week it looked very similar. Obviously, there's some higher weeks and lower weeks, but if you look at the averages, the averages per week have actually been very consistent. Even right now, heading into the election, we're still seeing the same consistency, whereas in the past, we've seen a little bit of a slowdown heading into the election. We haven't seen that with regards to new bookings, albeit the numbers are a lot smaller.
Okay, got you. Good to hear. Thanks, guys. Appreciate it.
Thank you.
Your next question comes from the line of Alex Fuhrman of Craig-Hallum Capital.
Just wondering if you could talk a little bit about the range of scenarios that you're planning from in terms of the ability for Americans to travel to other countries. When you think you might see that voyages can resume in other countries and then if this ends up being most of 2021 where it's just impractical to get Americans to Europe and Argentina and Chile, are there possibilities where you could really ramp up your domestic cruises, maybe in the continental U.S. in addition to Alaska to help mitigate the cash burn next year?
Yeah, that's a great question. A couple of things. One, I think we pretty much believe or we believe that if you think about all of the different components that will come into play as it relates to allowing for a robust reactivation of travel broadly, a vaccine, obviously, better treatments, obviously better testing. It seems like all those are along the way, right? They probably will be available somewhat earlier than they would in sort of normal times because there obviously is a lot of urgency around accomplishing those things. We believe that there's a good chance that April more or less onwards, we will be able to operate in a lot of the areas that we traditionally do. Now, remember that if you take the summer broadly, our newer ship, the Endurance, is in the Arctic. Our four American ships are in Alaska.
The Explorer is in the Arctic. The Orion is in the South Pacific. We are really in areas that are way less stressed in terms of COVID. If we had voyages in the Mediterranean, let's say, or on the west coast of Europe, or places where there are large human populations, I would be way more concerned. I'm still concerned, by the way, obviously. We're all concerned. This is like trying to reach into a crystal ball and figure out an answer that's clearly unclear. However, geography matters a great deal, and we can shift some of those geographies. I'll just give you an interesting example, and I think this is key. One of our voyages in Antarctica this year, we had two departures of these 30-day voyages from Argentina down to the peninsula of Antarctica, across Western Antarctica, finishing in New Zealand. 30 days.
They were completely full, these were voyages that cost $65,000-$100,000, depending on cabin section, per selection, per person. We realized we could not go to New Zealand because New Zealand was closed. We had all these people on a webinar and said, "We're completely changing the itinerary. We're not going to New Zealand. We're going to concentrate in Antarctica and South Georgia and the Falklands and other geography, sort of sub-Antarctic islands." Do you still want to go? Most of them who were going to go, who were willing to travel anyway, said, "Absolutely. That's fine.
Yes, we wanted to go to This is what we bought, and you're offering something that's different, but it's equally compelling, and we're going to go. We do have an enormous amount of latitude in terms of how we can shift itineraries if there's a good reason to do so, and if the alternative is equally compelling. I feel, I'm sorry, this is a bit of a long answer, but it's an important question you asked. Flexibility, so if you're stuck with a situation where you have to use a dock in a city on a certain day, you have in essence a slot. If you miss that slot, you've got a problem. We don't have slots anywhere. We can go pretty much wherever we want.
We are constantly looking at the landscape, and we constantly have a plan B and a plan C in terms of how to move these ships in accordance with external circumstances.
Great. That's really helpful. Thank you.
Your next question comes from the line of Chris Woronka of Deutsche Bank.
Hey, good morning, guys. Wanted to ask if you have done any work around trying to understand the opportunity to potentially get some folks who may have been loyal to one of the bigger cruise brands, and now they're looking for post-COVID, a different experience. Is there any way to kind of gauge or how do you direct your marketing efforts to some of those people?
Yeah. That's a great question. One of the things I personally learned during this period of COVID, which was a great sort of an awakening of sorts, is while I always felt that the travel advisor community or travel agents as some people may refer to them, was important. What I realized during this period is they were way more important than I had really fully realized. They have a real relationship with their clients, and they really do act as advisors. Just like a financial advisor would act in relationship to finances, they advise in relationship to their travel opportunities, which they know are really important to the people they deal with. We've had conversations with many of them about this very subject.
People are going to change their preferences, and I think that's going to bode well from our perspective because I think the idea of being in any sort of large gathering is just going to become less attractive. People are just going to be less attracted to crowds. Obviously, a large cruise ship, and I'm not saying, I don't want to denigrate that in any way, shape, or form, but it's a fact of life. It's a critical mass that is significant. In our situation, it's a critical mass that is way lower. Certainly people in the travel trade recognize this, and they're going to be instrumental in an acceleration of shift in our favor. That isn't just something I believe, that's something we've discussed, that's something I've heard over and over again, and something we will really nurture.
Hey, Chris, one other thing that I'll add is when you look at the new bookings that we're getting in right now versus folks that are being rescheduled, out of the new bookings, it's pretty much split down the middle between guests that have been here previously, but also new guests. That percentage of new guests is nice for us to see, especially during this time. We are seeing just natural inbound interest on top of some of the work that Sven said we're going to be doing with some of the third-party travel agents.
Incidentally, that's not the only avenue, but I just want to illustrate that as a specific avenue. Obviously, in our communication, in our marketing, we are completely sort of rebranding, not rebranding, but for example, our catalog, the one piece that is critical every year that sort of launches the following year and the year after. We're completely reinventing it, if you will, in terms of emphasis and focusing on getting back into and developing a different relationship with wild places. The combination of size and the combination of geography, I think, is a very potent mix.
Okay, great. Appreciate all that color. Just when you think about starting up again, and whether it's April or before, and you think about some of the protocols that are probably still going to be in place and hopefully eventually they go away, but does that dramatically change the economics if you're who's paying for testing and some of the other things you have to do? I know it'll be a great trade to get sailing again. As we think about kind of modeling that out, is it a different margin profile for the first X number of months or quarters?
Yeah. Certainly, there's a couple things that are going to happen out of the gate for us. When you need to get all the crew up and running and get them from where they are to the ships, and then get the ships ultimately ready to sail, and then the ships down to where they ultimately are going to take guests, that will certainly be additional cost in the startup process, nothing that we haven't planned for and part of the overall economics when we factor in whether it makes sense to sail or not. That shouldn't be too out of the ordinary. There will be, when you start up, depending on the geographies, some additional costs. Certain geographies are going to require charter planes, potentially. Certain geographies are going to require more medical capabilities. Certain geographies, you may decide to pull some cabins out of service.
I would say in the short term, your margins will be a little bit impacted, albeit not too dramatically. You'll still be significantly profitable. When you think about these ships in general, the majority of our ships operate at gross margins well over 50%, we would still expect to have very high margins on these ships when we operate them, those costs will certainly dissipate over time. I would expect the first year the margins to be impacted, when you look out to years two and three, we should get back to the places where we've been historically.
Okay. Very helpful. Thanks, guys.
At this time if you would like to ask a question once again please press star then the number one on your telephone keypad. Gentlemen, there are no further questions.
Thank you, operator, and thank you everybody for joining us today, and we look forward to connecting over the next few days if you have additional questions. Thank you.
Thank you.
This concludes today's conference call. You may now disconnect.