Q4 2019 Earnings Call

February 26, 2020

[music].

Good morning, and welcome to see worlds fourth quarter in fiscal 2019 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing to Starkey followed by zero.

Operator: Good morning, and welcome to SeaWorld's Q4 and fiscal 2019 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Matthew Stroud. Please go ahead.

Operator: Good morning, and welcome to SeaWorld's Q4 and Fiscal 2019 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Matthew Stroud. Please go ahead.

After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too.

Please note this event is being recorded.

I would now like to turn the conference over to Matthew Stroud. Please go ahead.

Thank you and good morning, everyone welcome to see worlds fourth quarter logistical 2019 earnings conference call today's call is being webcast and recorded.

Matthew Stroud: Thank you, and good morning, everyone. Welcome to SeaWorld's Q4 and Fiscal 2019 Earnings Conference Call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our investor relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Serge Rivera, Chief Executive Officer, and Marc Swanson, Chief Financial Officer. This morning, we will review our Q4 and fiscal 2019 financial results, and then we will open up the call to your questions. Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities laws.

The press release was issued this morning and is available on our Investor Relations website at Www Sea World investors Dot com.

Replay information for this call can be found in the press release and will be available on our website following the call.

Joining me this morning, our search Rivera, Chief Executive Officer, and Mark Swanson, Chief Financial Officer.

This morning, we will review our fourth quarter in fiscal 2019 financial results and then we will open up the called your questions.

Before we begin I would like to remind everyone that our comments today will contain forward looking statements within the meaning of the federal securities laws.

Matthew Stroud: These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call, we may reference adjusted EBITDA and free cash flow, which are non-GAAP financial measures. More information regarding our forward-looking statements and reconciliations of adjusted EBITDA and free cash flow to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC.

These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward looking statements, including those identified in the risk factor section of our annual report on form 10-K, and quarterly reports on form 10-Q filed with the Securities and Exchange Commission.

These risk factors may be updated from time to time and will be included in our filings with the FCC that are available on our website.

We undertake no obligation to update any forward looking statements.

Addition, on the call we may reference adjusted EBITDA and free cash flow, which are non-GAAP financial measures.

For information regarding our forward looking statements and reconciliations of adjusted EBITDA and free cash flow to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC.

Now I would like to turn the call over to our Chief Executive Officer serves Rivera search.

Matthew Stroud: Now, I would like to turn the call over to our Chief Executive Officer, Serge Rivera. Serge?

Thank you Matthew good morning, everyone and thank you for joining us.

Serge Rivera: Thank you, Matthew. Good morning, everyone, and thank you for joining us. Today marks my 108th day at SeaWorld. Before I get into some comments about the full year and Q4 results, I just wanna make a few brief comments about my early observations and thoughts. This company is made up of a collection of truly differentiated and highly valuable brands and unique and irreplaceable world-class assets. It has a business model that is strong, continues to satisfy and delight its guests, and has meaningful unrealized potential. It also has some of the most passionate, engaged, and hardworking employees of any organization I've ever had the privilege of being a part of. As I've spent time around the organization these past few months, I've been particularly struck by the organization's dedication to education, research, conservation, animal welfare, and animal rescue and rehabilitation.

Today marks my hundred and eight day, if the world.

Before I get into some comments about the full year in fourth quarter results I just want to make a few brief comments about my early observations and thoughts.

This company is made up of a collection of truly differentiated and highly valuable brands and unique an irreplaceable world class assets.

It has a business model that is strong continues to satisfy and delight. Its guess it has meaningful unrealized potential.

It also has some of the most passionate engage in hard working employees of any organization I've ever had the privilege of being a part of.

So I spent time around the organization. These past few months I've been particularly struck by the organization. His dedication to education research conservation animal welfare and animal rescue and rehabilitation.

This company has been executing a thoughtful and clearly effective strategy over the past couple of years that has yielded strong results.

Operator: This company has been executing a thoughtful and clearly effective strategy over the past couple of years that has yielded strong results, with significant increases in attendance, revenue, adjusted EBITDA, and shareholder value. As we have communicated to you over the last several quarters, and as you will hear from us today, we continue to make progress and to see many opportunities across each of our strategic pillars, rides, attractions and events, marketing and communications, pricing and costs, all intended to drive greater profitability and shareholder value. You should expect we will continue to execute on this strategy, and we will make adjustments and tweaks, which we will communicate to you along the way as we identify new and enhanced levers to drive shareholder value. I'm excited to be here and help guide the organization and realize the full potential of our assets, brands, and ambassadors.

Serge Rivera: This company has been executing a thoughtful and clearly effective strategy over the past couple of years that has yielded strong results, with significant increases in attendance, revenue, adjusted EBITDA, and shareholder value. As we have communicated to you over the last several quarters, and as you will hear from us today, we continue to make progress and to see many opportunities across each of our strategic pillars, rides, attractions and events, marketing and communications, pricing and costs, all intended to drive greater profitability and shareholder value. You should expect we will continue to execute on this strategy, and we will make adjustments and tweaks, which we will communicate to you along the way as we identify new and enhanced levers to drive shareholder value. I'm excited to be here and help guide the organization and realize the full potential of our assets, brands, and ambassadors.

Significant increases in attendance revenue adjusted EBITDA and shareholder value.

As we have communicated to you over the last several quarters and as you will hear from us today.

We continue to make progress and to see many opportunities across each of our strategic pillars.

Rides attractions that event marketing and communication pricing in costs.

All intended to drive greater profitability and shareholder value.

You should expect we will continue to execute on this strategy and we will make adjustments in two weeks, which we will communicate to you along the way as we identify new and enhanced levers to drive shareholder value.

I'm excited to be here and help guide the organization and realize the full potential of our assets brands and ambassadors.

With that let me turn to our most recent financial results.

Operator: With that, let me turn to our most recent financial results. We are pleased to report Q4 and full year financial results with record revenue for Q4 and record net income and adjusted EBITDA for the fiscal year. We believe these results were driven primarily by our strategic focus on new rides, attractions, and events in almost every park every year, enhanced overall marketing, communication, and pricing initiatives, and a relentless focus on realizing cost efficiencies across our organization. Attendance in Q4 grew 2.2%, despite continued unfavorable weather in the quarter compared to the prior year quarter. As we discussed in our last call, attendance in our peak summer months in 2019 was meaningfully impacted by weather headwinds compared to prior year.

Serge Rivera: With that, let me turn to our most recent financial results. We are pleased to report Q4 and full year financial results with record revenue for Q4 and record net income and adjusted EBITDA for the fiscal year. We believe these results were driven primarily by our strategic focus on new rides, attractions, and events in almost every park every year, enhanced overall marketing, communication, and pricing initiatives, and a relentless focus on realizing cost efficiencies across our organization. Attendance in Q4 grew 2.2%, despite continued unfavorable weather in the quarter compared to the prior year quarter. As we discussed in our last call, attendance in our peak summer months in 2019 was meaningfully impacted by weather headwinds compared to prior year.

We are pleased to report fourth quarter and full year financial results with record revenue for the fourth quarter and record net income and adjusted EBITDA for the fiscal year. We believe these results were driven primarily by our strategic focus on new rides attractions that events in almost every park every year.

Enhance overall marketing communication and pricing initiatives and our relentless focus on realizing cost efficiencies across our organization.

Attendance in the fourth quarter grew 2.2% despite continued unfavorable weather in the quarter compared to the prior year quarter and as we discussed in our last call attendance in our peak summer months in 2019 was meaningfully impacted by weather headwinds compared to prior year.

Operator: We believe the attendance growth in the quarter was driven in part by our calendar of popular events, including Halloween Spooktacular, Howl-O-Scream, Christmas Town, and Christmas Celebration at our theme parks. We believe we have some of the best theme park offerings in the world, representing outstanding value for consumers. We grew total revenue per capita 1.7% for the full year and 4.2% in Q4. Q4 total revenue per capita growth was driven by a 6.9% increase in admissions per capita and reflects the progress we're making on our strategic pricing initiatives. We continue to see the benefits from our expense reduction efforts and our enhanced culture of efficiency, and we're working diligently to identify and execute on additional cost efficiencies that we expect will flow directly to adjusted EBITDA.

Serge Rivera: We believe the attendance growth in the quarter was driven in part by our calendar of popular events, including Halloween Spooktacular, Howl-O-Scream, Christmas Town, and Christmas Celebration at our theme parks. We believe we have some of the best theme park offerings in the world, representing outstanding value for consumers. We grew total revenue per capita 1.7% for the full year and 4.2% in Q4. Q4 total revenue per capita growth was driven by a 6.9% increase in admissions per capita and reflects the progress we're making on our strategic pricing initiatives. We continue to see the benefits from our expense reduction efforts and our enhanced culture of efficiency, and we're working diligently to identify and execute on additional cost efficiencies that we expect will flow directly to adjusted EBITDA.

We believe the attendance growth in the quarter was driven in part by our calendar popular events, including Halloween Spooktacular Hollow Scream Christmas town and Christmas celebration at our theme parks.

We believe we have some of the best theme park offerings in the world representing outstanding value for consumers.

We grew total revenue per capita 1.7% for the full year and 4.2 present in the fourth quarter.

Fourth quarter total revenue per capita growth was driven by a 6.9% increase in admission per capita and reflects the progress we're making on our strategic pricing initiatives.

We continue to see the benefits from our expense reduction efforts in our enhanced culture of efficiency and we're working diligently to identify and execute on additional cost efficiencies that we expect will flow directly to adjusted EBITDA.

Importantly, we saw growth and our season pass base at year end, which as you know has been an important strategic focus for US we believe our season pass offerings provide some of the best values in the industry and we're doing a better job of communicating the highly compelling value. These passes offer.

Operator: Importantly, we saw growth in our season pass base at year-end, which, as you know, has been an important strategic focus for us. We believe our season pass offerings provide some of the best values in the industry, and we're doing a better job of communicating the highly compelling value these passes offer. Turning our attention to 2020, we're very excited to introduce what we believe to be the company's strongest year ever for new attractions, with brand-new record-breaking rides, attractions, events, and/or experiences coming to every one of our markets, providing many highly compelling reasons to visit our parks and to visit over and over again. Let me take a few minutes to remind everyone what's coming in 2020.

Serge Rivera: Importantly, we saw growth in our season pass base at year-end, which, as you know, has been an important strategic focus for us. We believe our season pass offerings provide some of the best values in the industry, and we're doing a better job of communicating the highly compelling value these passes offer. Turning our attention to 2020, we're very excited to introduce what we believe to be the company's strongest year ever for new attractions, with brand-new record-breaking rides, attractions, events, and/or experiences coming to every one of our markets, providing many highly compelling reasons to visit our parks and to visit over and over again. Let me take a few minutes to remind everyone what's coming in 2020.

Turning our attention to 2020, we're very excited to introduce will we believed to be the company's strongest year ever for new attractions with brand new record breaking rides attractions event and or experiences coming to every one of our markets, providing many highly compelling reasons to visit our parks and to visit over and over again.

Again.

Let me take a few minutes to remind everyone what's coming in 2020.

At Seaworld Orlando, we will introduce icebreaker, which will be the first quadruple swing launch coaster in North America, featuring for airtime filled launches both backwards and forwards, culminating in a reverse launch up a 93 foot vertical spike leading to the steepest beyond vertical drop in Florida ice breaker.

Operator: At SeaWorld Orlando, we will introduce Ice Breaker, which will be the first quadruple-swing launch coaster in North America, featuring four air time filled launches, both backwards and forwards, culminating in a reverse launch up a 93-foot vertical spike, leading to the steepest beyond vertical drop in Florida. Ice Breaker will be the sixth coaster at SeaWorld, more than any park in Orlando. At SeaWorld San Diego, we will introduce Emperor, which will be the tallest, fastest, longest, and first floor-less dive coaster on the West Coast. After climbing more than 150 feet, the coaster car will dangle at a 45-degree angle before plunging into a 143-foot vertical drop that will accelerate riders to more than 60 miles per hour.

Serge Rivera: At SeaWorld Orlando, we will introduce Ice Breaker, which will be the first quadruple-swing launch coaster in North America, featuring four air time filled launches, both backwards and forwards, culminating in a reverse launch up a 93-foot vertical spike, leading to the steepest beyond vertical drop in Florida. Ice Breaker will be the sixth coaster at SeaWorld, more than any park in Orlando. At SeaWorld San Diego, we will introduce Emperor, which will be the tallest, fastest, longest, and first floor-less dive coaster on the West Coast. After climbing more than 150 feet, the coaster car will dangle at a 45-degree angle before plunging into a 143-foot vertical drop that will accelerate riders to more than 60 miles per hour.

We will be the six coaster at sea world more than any park in Orlando.

At Seaworld, San Diego, we will introduce infer which will be the tallest fastest longest and first floor lets dive coaster on the west coast.

After climbing more than 150 feet. The coaster car will dangle at a 45 degree angle before plunging into a 143 foot vertical drop that will accelerate writers to more than 60 miles per hour.

At Seaworld, San Antonio, we will introduce Texas thing right, which will be the tallest fastest longest wooden coaster in Texas and we will feature a drop of 100 feet a top speed of 55 miles per hour and over 16 airtime Hills.

Operator: At SeaWorld San Antonio, we will introduce Texas Stingray, which will be the tallest, fastest, longest wooden coaster in Texas and will feature a drop of 100 feet, a top speed of 55 miles per hour, and over 16 airtime hills. At Busch Gardens Tampa Bay, we will introduce Iron Gwazi, which will be the tallest hybrid coaster in North America and the world's fastest and steepest hybrid coaster with the world's largest drop. Riders will climb more than 200 feet before plunging into a beyond vertical drop, reaching speeds of 76 miles per hour and experiencing 12 airtime moments.

Serge Rivera: At SeaWorld San Antonio, we will introduce Texas Stingray, which will be the tallest, fastest, longest wooden coaster in Texas and will feature a drop of 100 feet, a top speed of 55 miles per hour, and over 16 airtime hills. At Busch Gardens Tampa Bay, we will introduce Iron Gwazi, which will be the tallest hybrid coaster in North America and the world's fastest and steepest hybrid coaster with the world's largest drop. Riders will climb more than 200 feet before plunging into a beyond vertical drop, reaching speeds of 76 miles per hour and experiencing 12 airtime moments.

At Busch Gardens, Tampa Bay, we will introduce iron Guazi, which will be the tallest hybrid coaster in North America, and the world's fastest and seapass hybrid coaster with the world's largest drop.

Leaders will climb more than 200 feet before plunging into a beyond vertical drop reaching speeds of 76 miles per hour and experiencing a dozen airtime moments.

At Busch Gardens, Williamsburg, we will introduce pantheon, which will be the world's fastest multi launch coaster and will accelerate writers to a speed of 73 miles per hour and will include a 95 degree drop for launches to inversions 15, airtime moment and the height of 180 feet.

Operator: At Busch Gardens Williamsburg, we will introduce Pantheon, which will be the world's fastest multi-launch coaster and will accelerate riders to a speed of 73 miles per hour and will include a 95-degree drop, 4 launches, 2 inversions, 15 airtime moments, and a height of 180 feet. At Aquatica Orlando, we will introduce Riptide Race, which will be the first dueling pipeline slide in the state of Florida and will send riders through nearly 650 feet of slide, all while navigating tight turns and accelerations. At Adventure Island, we will introduce Solar Vortex, which will be the first dual tailspin water slide in North America. This family raft slide combines high banking rotations and rapid descents, sending sliders on a swirling journey through two open tailspin features.

Serge Rivera: At Busch Gardens Williamsburg, we will introduce Pantheon, which will be the world's fastest multi-launch coaster and will accelerate riders to a speed of 73 miles per hour and will include a 95-degree drop, 4 launches, 2 inversions, 15 airtime moments, and a height of 180 feet. At Aquatica Orlando, we will introduce Riptide Race, which will be the first dueling pipeline slide in the state of Florida and will send riders through nearly 650 feet of slide, all while navigating tight turns and accelerations. At Adventure Island, we will introduce Solar Vortex, which will be the first dual tailspin water slide in North America. This family raft slide combines high banking rotations and rapid descents, sending sliders on a swirling journey through two open tailspin features.

At aquatic Orlando, we will introduce riptide race, which will be the first dueling pipeline slide in the state of Florida, and we will send riders through nearly 650 feet of slide all while navigating tight turns and accelerations.

At a venture upland, we will introduce solar vortex, which will be the first dual tailspin waterslide in North America. This family RAF Slide combines high banking rotations and rapid descent, sending sliders on a swirling journey through to open tailspin features.

At water country, USA, we will introduce acquisition supercharged, which will be the first of its kind in Virginia. This new waterslide experience will take guest and RAF through 59 fully enclose color changing rings with dynamic sound spread over 219 feet of slide providing a new thrill.

Operator: At Water Country USA, we will introduce Aquazoid Supercharged, which will be the first of its kind in Virginia. This new water slide experience will take guests in rafts through 59 fully enclosed color-changing rings with dynamic sound spread over 219 feet of slide, providing a new thrill each time you ride. At Aquatica San Antonio, we will introduce Tonga Twister, which will be the first of its kind in Texas, where guests will enjoy two thrilling body slides with 350 feet of twisting and turning through tubes with special effect lighting patterns and a high energy music, giving riders an exciting light and sound show. At Sesame Place, we will introduce Big Bird's Tour Bus, where the whole family will enjoy a ride on this oversized red double-decker bus with Big Bird and some of his furry friends.

Serge Rivera: At Water Country USA, we will introduce Aquazoid Supercharged, which will be the first of its kind in Virginia. This new water slide experience will take guests in rafts through 59 fully enclosed color-changing rings with dynamic sound spread over 219 feet of slide, providing a new thrill each time you ride. At Aquatica San Antonio, we will introduce Tonga Twister, which will be the first of its kind in Texas, where guests will enjoy two thrilling body slides with 350 feet of twisting and turning through tubes with special effect lighting patterns and a high energy music, giving riders an exciting light and sound show. At Sesame Place, we will introduce Big Bird's Tour Bus, where the whole family will enjoy a ride on this oversized red double-decker bus with Big Bird and some of his furry friends.

Each time you ride.

At aquatic a San Antonio we will introduce tongue twister, which will be the first of its kind in Texas, where guests will enjoy to thrilling body slides with 350 feet of twisting and turning through tubes with special effect lighting patterns and a high energy music, giving riders that exciting light and sound show.

And at Sesame place, we will introduce big birds tour bus, where the whole family will enjoy a ride on this oversized red double Decker bus with big Bird and some of his furry friends. The bus goes around that around with assessing industry inspired cityscape as the back backdrop, bringing smiles to everyone on board.

Operator: The bus goes around and around with a Sesame Street-inspired cityscape as the backdrop, bringing smiles to everyone on board. This is the first time in our history we have a major roller coaster opening in each of our five largest theme parks in the same year, and all of these coasters are truly world-class coasters. Equally as important, all of our rides and attractions are scheduled to open before the peak summer season. In fact, Texas Stingray at SeaWorld San Antonio opened for pass members this past weekend and will be open for all guests this coming weekend. Our team have really done a great job refining and reorganizing our planning and construction process, and this year we will see the fruit of this effort. We are also excited about our lineup of events for 2020.

Serge Rivera: The bus goes around and around with a Sesame Street-inspired cityscape as the backdrop, bringing smiles to everyone on board. This is the first time in our history we have a major roller coaster opening in each of our five largest theme parks in the same year, and all of these coasters are truly world-class coasters. Equally as important, all of our rides and attractions are scheduled to open before the peak summer season. In fact, Texas Stingray at SeaWorld San Antonio opened for pass members this past weekend and will be open for all guests this coming weekend. Our team have really done a great job refining and reorganizing our planning and construction process, and this year we will see the fruit of this effort. We are also excited about our lineup of events for 2020.

This is the first time in our history, we have a major roller coaster opening in each of our five largest theme parks in the same year and all of these coasters are truly world class coasters equally as important all of our rides and attractions are scheduled to open before the peak summer season.

Fact, Texas Sting Ray at Seaworld, San Antonio Open for past members. This past weekend and we will be open for all guests this coming weekend.

Our team have really done a great job refining and reorganizing our planning and construction process and this year, we will see the fruit of this effort.

We're also excited about our lineup as events for 2020. The biggest events include our popular seven seas Food festival at our Seaworld parks and food and wine festivals at our Bush Garden Parks, Our award winning electric Ocean event will return to summer at our Seaworld parks, while our summer nice will return to our Bush Garden parks.

Operator: The biggest events include our popular Seven Seas Food Festival at our SeaWorld parks and Food and Wine Festivals at our Busch Gardens parks. Our award-winning Electric Ocean event will return this summer at our SeaWorld parks, while our Summer Nights will return to our Busch Gardens parks. All of our major parks will feature our popular Halloween and Christmas events this year. We will also be introducing brand-new events in 2020, including Elmo's Birthday Celebration at SeaWorld Orlando, Sesame Street Kids' Weekends in SeaWorld Orlando, a new Craft Beer Festival at SeaWorld Orlando, and Mardi Gras at Busch Gardens Tampa Bay. We are pleased with our progress in 2019. As we have mentioned, we strongly believe there is additional opportunity to drive significantly improved operating and financial performance, and we are intensely focused on continuing to execute as we head into the spring break season.

Serge Rivera: The biggest events include our popular Seven Seas Food Festival at our SeaWorld parks and Food and Wine Festivals at our Busch Gardens parks. Our award-winning Electric Ocean event will return this summer at our SeaWorld parks, while our Summer Nights will return to our Busch Gardens parks. All of our major parks will feature our popular Halloween and Christmas events this year. We will also be introducing brand-new events in 2020, including Elmo's Birthday Celebration at SeaWorld Orlando, Sesame Street Kids' Weekends in SeaWorld Orlando, a new Craft Beer Festival at SeaWorld Orlando, and Mardi Gras at Busch Gardens Tampa Bay. We are pleased with our progress in 2019. As we have mentioned, we strongly believe there is additional opportunity to drive significantly improved operating and financial performance, and we are intensely focused on continuing to execute as we head into the spring break season.

All of our major parks will feature our popular Halloween and Christmas events. This year, we will also be introducing brand new events in 2020, including Alamos birthday celebration at Seaworld, Orlando, Sesame Kids weekends, and Seaworld Orlando, a new craft Beer festival at Seaworld, Orlando and Mardi Gras at Busch Gardens.

Tampa Bay.

We're pleased with our progress in 2019, but as we've mentioned we strongly believe there is additional opportunity to drive significantly improved operating and financial performance and we are intensely focused on continuing to execute as we head into the spring break season.

With that I would like to turn the call over to Mark to discuss our financial results Mark.

Operator: With that, I would like to turn the call over to Marc to discuss our financial results. Marc?

Serge Rivera: With that, I would like to turn the call over to Marc to discuss our financial results. Marc?

Thanks search and good morning, everyone.

Marc Swanson: Thanks, Serge, and good morning, everyone. As Serge mentioned, our Q4 and full year financial results were strong, with record revenue for the Q4 and record net income and adjusted EBITDA for the fiscal year. Q4 attendance increased 2.2%. We believe that the improved attendance largely resulted from a combination of factors, including the positive reception of our new rides, compelling attractions and events, and enhanced overall marketing, communication, and pricing initiatives. As mentioned in this morning's press release, we saw unfavorable weather compared to the prior year that limited our attendance growth. Absent unfavorable weather during the quarter, we had some particularly strong attendance days, including some record days. During the quarter, we generated revenue of $298 million, an increase of $18 million or 6.4% compared to the Q4 of 2018.

As mentioned, our fourth quarter and full year financial results were strong with record revenue for the fourth quarter and record net income and adjusted EBITDA for the fiscal year.

Fourth quarter attendance increased 2.2%.

We believe that the improved attendance largely resulted from a combination of factors, including the positive reception of our new rides compelling attractions in events and enhanced overall marketing communication and pricing initiatives.

As mentioned in this mornings press release, we saw unfavorable weather compared to the prior year that limited our attendance growth.

Absent unfavorable weather during the quarter, we had some particularly strong attendance days, including some record days.

During the quarter, we generated revenue of $298 million, an increase of $18 million or 6.4% compared to the fourth quarter of 2018.

Marc Swanson: The increase in revenue results from the growth in both admissions per capita and attendance. We reported a net loss of $24.2 million, a decrease of $13.1 million compared to Q4 2018. Net loss in Q4 2019 includes a legal settlement charge, net of insurance recoveries of approximately $32.1 million. Net loss in Q4 2018 includes approximately $11.7 million of pre-tax expenses, as described in our earnings release. For Q4 2019, we reported adjusted EBITDA of $83.9 million, an improvement of $19.3 million or 29.9% compared to the prior year quarter.

The increase in revenue results from the growth in both admissions per capita and attendance.

We reported a net loss of $24.2 million, a decrease of $13.1 million compared to the fourth quarter of 2018.

Net loss in the fourth quarter of 2019 includes a legal settlement charge net of insurance recoveries of approximately $32.1 million.

Net loss in the fourth quarter of 2018 includes approximately $11.7 million of pre tax expenses as described in our earnings release.

For the fourth quarter of 2019.

We reported adjusted EBITDA of $83.9 million, an improvement of $19.3 million or 29.9% compared to the prior year quarter.

Marc Swanson: The adjusted EBITDA improvement was primarily driven by the increase in total revenue and the realization of cost savings initiatives. Q4 total revenue per capita was $63.42 compared to $60.88 in Q4 2018, driven primarily by an increase in admissions per capita. The increase in admissions per capita primarily results from the impact of new pricing strategies, partially offset by visitation mix. Looking at our results for fiscal 2019, total revenue was $1.4 billion, an increase of $26 million or 1.9%. Total attendance was approximately 22.6 million guests, an increase of 0.2%, driven by a combination of factors, including the positive reception of our new rides and compelling attractions and events and enhanced overall marketing, communication, and pricing initiatives.

The adjusted EBITDA improvement was primarily driven by the increase in total revenue and the realization of cost savings initiatives.

Fourth quarter total revenue per capita was $63.42.

Compared to $60 in 88 cents in the fourth quarter of 2018.

Driven primarily by an increase in admissions per capita.

The increase in admissions per capita primarily results from the impact of new pricing strategies, partially offset by visitation mix.

Looking at our results for fiscal 2019 total revenue was $1.4 billion, an increase of $26 million or 1.9%.

Total attendance was approximately 22.6 million guess, an increase of 0.2% driven by a combination of factors, including the positive reception of our new rides and compelling attractions and events and enhanced overall marketing communication and pricing initiatives.

These factors were largely offset by negative impacts from unfavorable weather in 2019, particularly during our peak summer in holiday seasons, when compared to 2018.

Marc Swanson: These factors were largely offset by negative impacts from unfavorable weather in 2019, particularly during our peak summer and holiday seasons when compared to 2018. Net income for the year was $89.5 million, a record for the company and an increase of $44.7 million. Adjusted EBITDA was $456.9 million, also a record for the company, and an improvement of $55.6 million or 13.9%. Fiscal 2019 total revenue per capita was $61.80, compared to $60.77 in 2018, driven primarily by an increase in in-park per capita spending.

Net income for the year was $89.5 million a record for the company and an increase of $44.7 million.

Adjusted EBITDA was $456.9 million also a record for the company and an improvement of $55.6 million or 13.9%.

Fiscal 2019 total revenue per capita was $61 in 80 cents compared to $60 in 77 cents in 2018, driven primarily by an increase in park per capita spending.

Net income in 2019 includes approximately $32.1 million related to legal settlement charge net of insurance recoveries.

Marc Swanson: Net income in 2019 includes approximately $32.1 million related to a legal settlement charge, net of insurance recoveries, $4.3 million of pre-tax expenses associated with a previously announced equity transaction, and $4.2 million of pre-tax expenses associated with severance and other separation-related costs. Net income for fiscal 2018 includes approximately $54 million of pre-tax expenses as described in our earnings release. Now, turning to our balance sheet, our current deferred revenue balance as of the end of the quarter was $104.4 million, an increase of approximately 3%.

$4.3 million of pre tax expenses associated with a previously announced equity transaction.

And $4.2 million of pre tax expenses associated with severance and other separation related costs.

Net income for fiscal 2018 includes approximately $54 million of pre tax expenses as described in our earnings release.

Now turning to our balance sheet, our current deferred revenue balance as of the ended the quarter was $104.4 million an increase of approximately 3%.

If we exclude deferred revenue of approximately $2.4 million related to strong hung in the fourth quarter of 2018, our deferred revenue would have increased almost 6% as of the end of 2019.

Marc Swanson: If we exclude deferred revenue of approximately $2.4 million related to Zhonghong in Q4 2018, our deferred revenue would have increased almost 6% as of the end of 2019. We spent $195 million on CapEx in 2019, of which $172 million was on core CapEx and approximately $23 million was on expansion or ROI projects. We estimate that approximately $15 million of core capital expenditures in 2019 relates to a shift in timing due to accelerated ride opening schedules for 2020 and 2021 attractions.

We spent $195 million on Capex in 2019 of which $172 million was on core Capex and approximately $23 million was on expansion or ROI projects, we estimate that approximately $15 million of core capital expenditures in two.

As 19 relates to a shift in timing due to accelerated ride opening schedules for 2020 in 2021 attractions.

As we previously mentioned, we have sunrise opening before spring break and all of our rides are on track to opened before the peak summer season starts.

Marc Swanson: As we previously mentioned, we have some rides opening before spring break, and all of our rides are on track to open before the peak summer season starts. Going forward, we expect to target approximately $140 to 160 million in annual core CapEx. As we have previously discussed, we will spend opportunistically on non-core expansion or ROI CapEx when we find opportunities that meet our return hurdles, including on new parks and expansions, like our Sesame Place park in California, incremental revenue-enhancing projects, cost-reducing projects, and other similar opportunities. As noted in this morning's earnings release, our net leverage ratio was 3.24 times adjusted EBITDA for the 12 months ended 31 December 2018.

Going forward, we expect to target approximately $140 million to $160 million in annual core Capex.

As we have previously discussed we will spend opportunistically on noncore expansion or ROI capex, when we find opportunities that meet our return hurdles, including on new parks and expansions like our semi place park in California incremental revenue enhancing projects cost reducing projects and.

Other similar opportunities.

As noted in this morning's earnings release, our net leverage ratio was 3.24 times adjusted EBITDA for the 12 months ended December 31 2018.

As Serge mentioned.

Marc Swanson: As Serge mentioned, and as you have heard me say consistently over the past several quarters, we believe we have significant opportunity for even further improvement. To accomplish this, we will continue to focus on driving additional attendance and total revenue while eliminating unnecessary costs and continuing to identify more efficient ways to operate our business. We are making good progress, which gives us greater confidence in our ability to achieve the higher end of our goal of $475 to 500 million of adjusted EBITDA by the end of 2020. Now, let me turn the call back over to Serge, who will share some final thoughts. Serge?

And as you've heard me say consistently over the past several quarters. We believe we have significant opportunity for even further improvement.

To accomplish this we will continue to focus on driving additional attendance and total revenue, while eliminating unnecessary costs and continuing to identify more efficient ways to operate our business.

We're making good progress, which gives us greater confidence in our ability to achieve the higher end of our goal of $475 million to $500 million of adjusted EBITDA by the end of 2020.

Now, let me turn the call back over to search who will share some final thoughts search.

Thank you Mark before we open the call to your questions I have some closing comments.

Operator: Thank you, Marc. Before we open the call to your questions, I have some closing comments. I wanna thank our outstanding team of ambassadors for their efforts. They continue to remain focused on providing meaningful and inspirational experiences to our guests. Over the past several months, I've had the opportunity to visit our parks and spend time with our ambassadors. I have been incredibly impressed with their dedication to our parks, the animals under our care, and our guests. Because of our ambassadors' dedication and care for our animals, guests are inspired to join us in our mission of protecting animals and their habitats across the globe. I believe we have some of the best, most passionate employees in the theme park industry, and I'm sincerely proud to be working with them.

Serge Rivera: Thank you, Marc. Before we open the call to your questions, I have some closing comments. I wanna thank our outstanding team of ambassadors for their efforts. They continue to remain focused on providing meaningful and inspirational experiences to our guests. Over the past several months, I've had the opportunity to visit our parks and spend time with our ambassadors. I have been incredibly impressed with their dedication to our parks, the animals under our care, and our guests. Because of our ambassadors' dedication and care for our animals, guests are inspired to join us in our mission of protecting animals and their habitats across the globe. I believe we have some of the best, most passionate employees in the theme park industry, and I'm sincerely proud to be working with them.

I want to thank our outstanding team of ambassadors for their efforts. They continued to remain focused on providing meaningful and inspirational experiences to our guests over.

Over the past several months.

I've had the opportunity to visit our parks and spend time with our ambassadors I had been incredibly impressed with their dedication to our parks the animals under our care and our guests.

Sales of our ambassadors dedication and care for our animals guests are inspired to join us in our mission of protecting animals and their habitats across the globe.

I believe we have some of the best most passionate employees in a theme park industry and I am sincerely proud to be working with them.

On the rescue side, we announced in 2019 that we surpassed 36000 animal rescues over the company's history, including over 350 rescues in the fourth quarter. We're one of the world's leading animal rescue organizations and we are proud of our efforts to protect and save wildlife.

Operator: On the rescue side, we announced in 2019 that we surpassed 36,000 animal rescues over the company's history, including over 350 rescues in Q4. We are one of the world's leading animal rescue organizations, and we are proud of our efforts to protect and save wildlife. As we have said before, we have an exceptional business model. We are focused on improving our execution and continue our efforts to adjust and enhance our marketing and communication initiatives, as well as our pricing strategies, with the goal of introducing new compelling rides, attractions, and events in every park every year. We will continue to identify and execute on cost and capital efficiency initiatives that we expect will contribute to meaningful improved margins and profitability.

Serge Rivera: On the rescue side, we announced in 2019 that we surpassed 36,000 animal rescues over the company's history, including over 350 rescues in Q4. We are one of the world's leading animal rescue organizations, and we are proud of our efforts to protect and save wildlife. As we have said before, we have an exceptional business model. We are focused on improving our execution and continue our efforts to adjust and enhance our marketing and communication initiatives, as well as our pricing strategies, with the goal of introducing new compelling rides, attractions, and events in every park every year. We will continue to identify and execute on cost and capital efficiency initiatives that we expect will contribute to meaningful improved margins and profitability.

As we've said before we have an exceptional business model, we are focused on improving our execution and continue our efforts to adjust and enhance our marketing communication initiatives as well as our pricing strategies with the goal of introducing new compelling rides attractions and events in every park every year.

We will continue to identify and execute on cost and capital efficiency initiatives that we expect will contribute to meaningfully improved margins and profitability.

Through these efforts we are confident we will deliver attendance revenue and adjusted EBITDA growth that we expect will lead to meaningful increases and shareholder value.

Operator: Through these efforts, we are confident we will deliver attendance, revenue, and adjusted EBITDA growth that we expect will lead to meaningful increases in shareholder value. Before we go to questions, I just want to address one topic that I expect you all will have, the coronavirus. What I can tell you today is we have seen no discernible impact on our attendance related to coronavirus. We are obviously very aware of and monitoring the situation. With that, let's open up the line to take your questions.

Serge Rivera: Through these efforts, we are confident we will deliver attendance, revenue, and adjusted EBITDA growth that we expect will lead to meaningful increases in shareholder value. Before we go to questions, I just want to address one topic that I expect you all will have, the coronavirus. What I can tell you today is we have seen no discernible impact on our attendance related to coronavirus. We are obviously very aware of and monitoring the situation. With that, let's open up the line to take your questions.

Before we go to questions I, just want to address one topic that expect you all will have the corona virus.

What I can tell you to days, we have seen no discernible impact on our attendance related to Corona virus, we're obviously very aware of and monitoring the situation.

With that let's open up the line to take your questions.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. We please ask that you limit yourself to one question and one follow-up. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. The first question will come from Steve Wieczynski with Stifel. Please go ahead.

If you're using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then too. We please ask that you limit yourself to one question and one follow up if you have further questions you may reentered the question Q.

At this time, we will pause momentarily to assemble our roster.

The first question will come from Steve why Censky with Stifel. Please go ahead.

Hey, guys good morning.

Steve Wieczynski: Yeah, you guys, good morning. Wanna go back to the 7% growth you saw in admissions per caps in the quarter, which, you know, I think you talked about was due to your strategic marketing initiatives. Was wondering how we should think about admission per caps for this year. I guess the question really is how much more room you guys, you know, have to push those marketing initiatives, as well as price increases right now?

What I go back on some percent growth you saw on admissions per caps in the quarter, which I think you talked about was due to your strategic marketing initiatives.

I was wondering how we should think about admission per caps for this year and I guess the question really is how much more room, you guys have to push those marketing initiatives.

As well as price increases right now.

Hey, Steve, it's Mark and I can take that question.

Marc Swanson: Hey, Steve, it's Marc. I can take that question. You know, as we've talked about for some time, we thought we would achieve growth in admissions per cap as we got to the back half of the year and towards the end of the year, and you saw that come through in the quarter as you noted. You know, we believe we have pricing power, and we'll continue to be smart about the price increases we take. We think at a minimum, we can get inflationary increases, and perhaps at times beyond that. We're always gonna have an eye towards driving total revenue as we've talked about, so we're gonna continue to test and optimize different price points all with an eye towards driving total revenue and volume.

As we've talked about for some time, we thought we would.

Achieved growth in admissions per caps as we got to the back half of the year and towards the end of the year and you saw that come through.

In the quarter as you noted we believe we have pricing power and we'll continue to be smart about.

The price increases we take we think at a minimum we can get.

Inflationary increases and and perhaps at times beyond that we're always going to have an eye towards driving total revenue as we've talked about so we're going to continue to test and optimize different price points all into all with an eye towards driving total revenue in volume, but overall, we're pleased with the growth in the admissions per cap.

Marc Swanson: Overall, we're pleased with the growth in the admissions per cap in the Q4. We believe over the long term, we can continue to get pricing and, you know, that'll be our goal. Obviously again, with an eye towards driving total revenue.

In the fourth quarter, and we believe over the long term, we can continue to get pricing in ultimately.

That will be our goal, but that obviously again with an eye towards driving total revenue.

Okay got you and then you kind of addressed surgeons at the end around the coveted impact or lack of impact right now.

Steve Wieczynski: Okay, gotcha. You kind of addressed, Serge, there at the end around the COVID impact or lack of impact right now. You know, I guess if there was going to be an impact, could you kind of walk us through where you think you would see that first? I guess what I mean is whether that would be more domestic, whether that would be international.

But I guess, if there was going to be in impact could you could you kind of walk us through where you think you would see that first and I guess, what I mean is whether that would be more domestic whether that would be international.

Again, I assume that at this point of your 2020 EBITDA range that you've got out there in terms of guidance. This is assuming no impact from that virus and I guess the last part of this question, which I know, it's super long in its multiple questions, but it almost seems like the trajectory that you're on today again, excluding any kind of a virus impact.

Steve Wieczynski: You know, again, I assume that at this point, your 2020 EBITDA range that you've got out there in terms of guidance, this is assuming no impact from that virus. I guess the last part of this question, which I know is super long and it's multiple questions, but it almost seems like the trajectory that you're on today, again, excluding any kind of virus impact, would make us believe you could almost be on the upper end or outside of that range. Am I crazy to think about it that way?

I would make us believe you could almost be on the upper to outside of that range am I crazy to think about it that way.

Yes look I've learnt why don't we start with the last in the last part.

Serge Rivera: Yeah, look, why don't we start with the last part? You know, we've signaled that we have a high degree of confidence in achieving the upper part of the range that we've described before. I think your statement would probably be correct that we still hold to that. Obviously, you know, there's events out there that could threaten us, and we recognize that. To the COVID and the coronavirus question, look, it's early days. As I stated in our remarks, we've seen no discernible impact to date on our business. We're working through and thinking through some contingency plans.

We believe Weve signal that we have a high degree of confidence and are in achieving the upper range. The upper part of the range that Weve described before so I think you your statement will probably be correct and we still hold to that.

Obviously, there's now there is there's events out there that that could threaten us and we recognize that.

To the to the cultivated and grown virus question.

Like it's early days.

As I stated in our our remarks, we've seen no discernible impact to date on our business.

We are we're working through and thinking through some contingency plans, obviously, we take health and safety.

Serge Rivera: Obviously, we take health and safety very seriously for our employees, our guests, or the animals under our care, and that's where it would start. You know, beyond that, I don't really wanna speculate or say more. You know, stay tuned, I guess.

Very seriously.

But for our employees, our gas or the animals under our care.

And Thats, where it would start beyond that I don't really want to speculate or say more.

And I will say stay tuned I guess.

Okay, great. Thanks, guys appreciate it.

Steve Wieczynski: Okay, great. Thanks, guys. Appreciate it.

Yeah.

Serge Rivera: Thank you.

The next question is from James Hardiman with Wedbush Securities. Please go ahead.

Operator: The next question is from James Hardiman with Wedbush Securities. Please go ahead.

Good morning.

James Hardiman: Good morning. To that last point, could you just help us sort of think about your exposure to Chinese consumers? You know, I know over recent years, I would imagine it's at least third on the list, right? You've talked about your exposure to South America/Brazil, and you've talked about your UK exposure in conjunction with Brexit. Is the Chinese consumer a significant consumer for you guys?

About last point.

Could you just help us sort of think about.

Your exposure to Chinese consumers on over recent years.

I would imagine if at least third on the list right you've talked about your exposure to South America, Slash, Brazil, and you've talked about your UK exposure.

In conjunction with Brexit are the Chinese consumer a significant consumer for you guys.

The short answer to that is now is not.

Serge Rivera: The short answer to that is no, it is not. It's not in the top list. You know, as you stated, UK, South America, particularly Brazil, Latin America, Mexico, China, Asia. I'm sorry, Canada. I keep confusing the Cs there. Canada, sorry for the Canadians on the call. No, China is not a significant part of our business.

It's not in the top lists.

And now as you stated UK, South America, particularly Brazil, Latin America, Mexico, China.

Asia, I'm, sorry, Canada, I keep confuse indices there.

Canada, sorry for the Canadians on the call.

But no China is.

China is not as a significant.

Part of our business.

That's really helpful and then maybe just speak too.

James Hardiman: That's really helpful. Maybe just speak to, I guess, a couple related topics. I mean, obviously, a lot of us look at the leads data coming out of San Diego. That seems to have slowed in Q4. Obviously, some people would like to connect that to the Star Wars opening. It seems like a lot of what you're speaking to in Q4 were some negative weather trends. Were those particularly pronounced at your San Diego park? Maybe speak, you know, even broadly about if and how you think your Orlando park has been impacted, if at all, from that Star Wars opening. Thanks.

I guess a couple related topics.

Obviously, a lot of us look at the lease data coming out of San Diego that seems to have slowed in the fourth quarter. Obviously, some people would would like to connect that to the star Wars opening but it seems like a lot of what you're speaking to.

In the fourth quarter were some negative weather trends were those particularly pronounced at your San Diego Park.

And maybe speak.

Even broadly about.

And how you think you Orlando Park has been impacted if at all from from that Star Wars opening thanks.

Yes, let me that's that's there's there's a bit there.

Serge Rivera: Yeah, let me. There's a bit there. Let me jump in on San Diego. This is how I think about it. You may recall that back in 2018, we saw some meaningful increases in attendance. I think it was around 22% that we saw in that park. I think the story starts there. I think you really have to think about that park today, thinking back to a two-year lens, is the way I've been thinking about it. As you mentioned, we did have some headwinds in 2019. We had weather. We had a new minor attraction that didn't work out as planned.

Let me jump in on San Diego and this is how I think about it.

You may recall that back in 2018, we saw some meaningful increases in attendance I think it was around 22% that we saw net park.

And I think the story starts there I.

I think you really have to think about that park today think thinking back to a two year lenses the way I've been thinking about it.

As you mentioned, we did have some headwinds in 2019, we had weather.

We had a new minor attraction that didn't work out as planned all of those things we think were.

Serge Rivera: All of those things, we think were contributors to the contraction that we saw in attendance, though it's still over the two years up, and we would say pretty meaningfully up. You know, being new to this industry, I'm reminded occasionally that this is not unusual to see a contraction after such a substantial gain year in like 2018. Also, coming from where I came from, I'm not happy with that. I don't think contraction is really our goal. We're working diligently to improve upon that. We got great lineup of events and attractions coming to San Diego. We have the new roller coaster Emperor, which I described.

Contributors to the to the retraction that we saw in attendance, though it's still over the two years up and we would say pretty meaningfully.

Being new to this.

To this industry.

I'm reminded occasionally that.

This is not unusual to see a retraction after such a substantial gain euro in late 2018. So.

Also coming from where I came from.

I'm not happy with that I don't think retraction.

Is really our goal so we're working diligently.

[music].

To improve upon that we got great lineup.

Of events and attractions coming to San Diego, we have the new roller coaster ampere, which I described.

We think thats going on that's going to be a meaningful addition.

Serge Rivera: We think that's gonna be a meaningful addition to the landscape in Southern California. We're confident that that's gonna help drive attendance. There's plenty of potential in San Diego, and we're working diligently to realize that. Let me stop there. As it relates to Orlando, and you've heard us say this before, you know, and I've lived here in Orlando for most of my adult life. I've seen a lot of capital investment from the various theme parks, and I've seen this market grow substantially as a result of it. Disney has built a fabulous attraction with their Star Wars land.

To that to the landscape and southern California. So we're confident that thats going to that's going to help drive attendance.

Then there is plenty of potential and San Diego and what we're working diligently to realize that so.

Let me stop there.

As it as it relates to Orlando and you've heard us say this before.

And I am I not I've I've lived here in Orlando for pretty most of my adult life.

I've seen a lot of capital investment from from the various theme parks and I've seen this market grows substantially as a result of it.

Disney has built a fabulous attraction with their star Wars land.

Serge Rivera: We expect and are seeing increases in attendance here in Orlando as a result of it. I think our results. I'm generally pleased with what I'm seeing come out of Orlando. What we saw in Q4 and even what we're seeing today. I'm generally pleased about that. I'm gonna ask Marc if he has anything else he wants to add to that, but.

We expect and are seeing increases.

In attendance.

Here in Orlando as a result of it I think our results.

I'm generally pleased with what I'm seeing come out of Orlando, what we saw in the fourth quarter and even or we're seeing.

Today, So I'm I'm generally pleased about that I want to ask market. The has anything else he wants to add to that but.

Yes, I would just add.

Marc Swanson: Yeah, I would just add, James, you know, as Serge mentioned

James.

Third dimension.

We've been in this market along time over 40 years in Orlando and lots of lots as common come into this market. So we welcome the increase in capital investment we welcome the increased visitation and as you mentioned it would be hard to have the type of recovery. We've had over the last two years without good.

Marc Swanson: We've been in this market a long time, over 40 years in Orlando, and lots has come into this market. We welcome the increase in capital investment, we welcome the increased visitation. As he mentioned, you know, it would be hard to have the type of recovery we've had over the last two years without good performance out of Orlando, obviously, being our, you know, our biggest park.

Performance out of Orlando, obviously being being our our biggest park.

That's really helpful. But to clarify you guys don't think any of the San Diego weakness.

James Hardiman: That's really helpful. To clarify, you guys don't think any of the San Diego weakness is competition related?

Competitive related.

I don't think we could attribute anything.

Serge Rivera: I don't think we could attribute anything, you know, to that. There's nothing that we can attribute to that.

To that.

So there is theres.

Theres nothing that we can attribute to do that got of that attraction being are very helpful. An opportunity and I don't want to use that as an opportunity I mean, we have we have control over our destiny and we're comfortable with what we're doing and we're working towards and we've seen we've seen positive results when we have.

James Hardiman: Got it.

Serge Rivera: to that attraction being our-

James Hardiman: Very helpful.

Serge Rivera: our opportunity. I don't wanna use that as an opportunity. I mean, we have control over our destiny, and we're comfortable with what we're doing and we're working towards. We've seen positive results when we apply ourselves, as we've stated. I'm confident that what competitors do is they will do, and we will compete effectively.

Apply ourselves.

As we stated so im confident that.

What competitors do is.

Yeah.

They will do and we will compete effectively so.

Much appreciated thanks, guys.

James Hardiman: Much appreciated. Thanks, guys.

Your next question comes from Tim Conder with Wells Fargo Securities. Please go ahead.

Operator: The next question comes from Tim Conder with Wells Fargo Securities. Please go ahead.

Thank you and good morning, gentlemen.

Tim Conder: Thank you, and good morning, gentlemen. Yeah, just a couple here, so I'll lump them all into one. One, if you could just give us some color on an annual basis, on your unit season pass growth that you saw, what that represented as a % of your total attendance, the uniques, and then your frequency of visitation, on a year-over-year basis from your season pass base. I guess on a unit and dollar basis, what that represents here as you're looking into 2020. Back to the COVID question, just to clarify, at this point, you have not seen any impact or negative feedback or any metric you're trying to monitor here, on advanced sales in any way related to COVID?

Just a couple here so I won't from all into one.

One is you can just give us some color on an annual basis.

On your your units season pass growth that you saw what that represented as a percent of your total attendance the uniques and in your frequency of visitation on a year over year basis from your season pass base and then I guess on a unit and dollar basis, what that represents here as you're looking into into Htwo.

On a 20.

And then and back to the Cold question.

Just to clarify at this point you have not seen any impact or negative feedback or any any any metric you're trying to monitor here.

On advanced sales in any way related to cobot.

Hey, Tim. This is this is mark I can I can take the first part and then and then maybe search can take the last the last part but look on pass base I think as search said in his prepared remarks, we.

Marc Swanson: Hey, Tim. This is Mark. I can take the first part and then maybe Serge can take the last part. Look, on pass base, I think as Serge said in his prepared remarks, you know, the combination of people that have a pass or a fun card, which we would refer to as our base, you know, that was up at the end of the year. We're not gonna give you the exact increase or anything like that, but I mean, I think it was we were fairly pleased with that increase, and it ties in nicely to the deferred revenue. One thing I wanna make sure came across in the remarks.

The combination of people that have a pass or a fun card, which we would refer to as our as our base that was was up at the end of the year and.

We're not going to give you the exact increase or anything like that but I mean I think it was.

We were pleased fairly pleased with that increase in it ties in.

Nicely to the deferred revenue and one thing I want to make sure came across in the remarks, you know the deferred revenue. If you if you normalize for this long Hong.

Marc Swanson: You know, the deferred revenue, if you normalize for the Zhonghong fees that were sitting in deferred at Q4 2018 that are not in there this year, our deferred revenue would have been up almost 6%. I think you know, that gives you some indication of, you know, the strength of the pass base and kind of the revenue associated with that.

Fees that were sitting into for Q4 of 18 that are not in there. This year, our deferred revenue would have been up almost 6% and I think that gives you some indication of the strength of the the pass the pass base and kind of the revenue associated with that.

And then on Uniques, Mark and frequency visitation.

Tim Conder: on uniques, Marc, and frequency of visitation?

We I think in general.

Marc Swanson: I mean, I think in general, you know. If you look at the full year of 2019, we did have an increase in number of unique visitors. I don't know that we're seeing any significant differences in how many times people visit. We're just pleased, you know, overall that more people have, you know, a product that gets them into the park, you know, effectively on a year-round basis. That's something that we've obviously worked hard and will continue to focus on.

We had we had if you looked at the full year of 19, we did have an increase in number of unique visitors.

I don't know that we're seeing any significant differences in how many times people visit we're just we're just pleased.

Overall that more people have.

Product that gets them into the park effectively on a on a year round basis and that's that's something that we've obviously worked hard and we will continue to focus on.

Okay. So your question around.

Tim Conder: Okay.

Serge Rivera: Yeah. Tim, to your question around coronavirus, you know, I'll just emphasize again that we've seen no discernible impact to our business that we can attribute to coronavirus. That's to date. There's really not much more that I think we can add.

All right Corona buyers.

I'll, just emphasize again and we've seen no discernible impact to our.

To our business.

We can attribute to grown a virus so.

And Thats to date, so there's really now much more.

That I think we can add.

Okay, gentlemen, this as a follow up.

Tim Conder: Okay. Gentlemen, this is a follow-up. I've had a couple questions from clients already this morning and you know, one of the big, I guess, areas that you guys and over the last couple of years have saved on is eliminating consulting fees or internal things that kind of effectively duplicated the same functions. Yet we saw here, if you look at your disclosures in 2019 versus 2018, your consulting fees effectively doubled, and in Q4, they almost quadrupled. Can you kinda help us with that? Then also why it's treated as an add back to your EBITDA?

A couple of questions from clients already this morning and.

One of the Big I guess areas that you guys.

Over the last couple of years have saved on his eliminating consulting fees or internal.

Things that kind of effectively duplicated the same functions.

Yes, yes, we saw here if you look at your disclosures in 2019 versus 2018 year consulting fees effectively doubled in Q4, they almost quadrupled.

So can you kind of help us with that and then also why it's treated as an add back to your EBITDA.

Yeah, Hey, Tim its market I can take that question. So.

Marc Swanson: Hey, Tim, it's Marc. I can take that question. What I should point out is we have a really good disclosure and reconciliation in our adjusted EBITDA table in the press release. Obviously, our credit agreement allows us to add back strategic initiatives and related business optimization costs. As we've noted, we've been engaging different firms to help us on different business optimization and strategic initiatives. We don't expect these things to last, you know, forever by any means, and therefore, they're added back. I should also tell you, we look at that bucket very carefully and have a lot of scrutiny around that bucket before we would add something back.

And we what I should point out as we have a really good disclosure and reconciliation in our in our adjusted EBITDA table in the press release, but that obviously, our credit agreement allows us to add back.

Strategic initiatives and related business optimization cost so as as we've noted we've been we've been.

Engaging different firms due to help us.

On different business optimization and strategic initiatives.

We don't expect these things to last.

Forever by any means and therefore, there they are added back but we I should also tell you we look at that bucket very carefully and.

And have a lot of scrutiny around that bucket before we would add something back, but it's basically strategic initiatives business optimization costs to help drive the business forward.

Marc Swanson: It's basically strategic initiatives, business optimization costs to help drive the business forward.

Thank you and our next question will come from Alexia Quadrani with JP Morgan. Please go ahead.

Operator: Thank you. Our next question will come from Alexia Quadrani with J.P. Morgan. Please go ahead.

Hi, This is analyze all on four yeah. Thank you so much for the question Jeff regarding the current of Iris is there any other prior experience you can draw on and the company during that would give us some empire and how to Samsung part of the virus could impact your business.

Anna Lizzul: Hi, this is Anna Lizzul on for Alexia. Thank you so much for the question. Just regarding the coronavirus, is there any other prior experience you can draw from in the company's history that would give us some insight in how the potential spread of the virus could impact your business? Meaning what costs could you take out of the business in a prolonged shutdown of a certain park or of multiple parks? Thanks.

Meeting what cost could you take out of the bed Bath and a prolonged sat down with a certain park or multiple mark. Thanks.

Marc Swanson: Anna, let me try to add something to that. Look, I think the best thing is for us to be prudent and responsible and not speculate. Have we seen things like coronavirus in the past? The obvious answer is yes. We've seen SARS, we see the flu. You know, we see a lot of exogenous events impact us. Earthquakes, fires, hurricanes, things of that nature. What we can say to your question is, in the past, we have seen nothing that has truly impacted the business in a significantly negative way. Again, I don't think we should draw parallels between things in the past and what coronavirus presents today.

Ana.

Serge Rivera: Anna, let me try to add something to that. Look, I think the best thing is for us to be prudent and responsible and not speculate. Have we seen things like coronavirus in the past? The obvious answer is yes. We've seen SARS, we see the flu. You know, we see a lot of exogenous events impact us. Earthquakes, fires, hurricanes, things of that nature. What we can say to your question is, in the past, we have seen nothing that has truly impacted the business in a significantly negative way. Again, I don't think we should draw parallels between things in the past and what coronavirus presents today. I don't think it's prudent to connect those.

Let me try to.

Let me try to add something to that.

Look I think the best thing is the as for us to be prudent and responsible and not speculate but.

Have we seen things like Corona virus in the past the obvious answer is yes.

We've seen Sars, we see the flu.

So we have we see a lot of exons units events impact us earthquakes fires hurricanes things of that nature.

What we can say to your question is in the past.

We have seen nothing that has truly impacted the business.

In us in a significantly negative way.

But again I don't think we should draw parallels between Ah things in the past and what what Corona virus presents today.

So I don't I don't think it's prudent degree to connect those.

Marc Swanson: I don't think it's prudent to connect those.

Okay. Thank you.

Anna Lizzul: Okay, thank you.

Our next question will come from Eric Wold with B. Riley. Please go ahead.

Operator: The next question will come from Eric Wold with B. Riley. Please go ahead.

Thank you good morning.

Eric Wold: Thank you. Good morning. Just thinking about some of the kind of headwinds you saw with the San Diego Park last year. I know you don't kind of discuss kind of performance or kind of outlooks on a park-by-park basis. Maybe, given that that's been at least called out as kind of a headwind for last year, how should we think about your expectations kind of for the relative performance of that park in 2020 versus kind of the consolidated average?

Just thinking about some of the kind of the headwinds you saw what the San Diego Park last year I know you don't tend to discuss going to performance you're going to outlooks on a park by park basis, but maybe.

Given that it's been these called out is going about a headwind for last year, how should we think about.

Your expectations going into the relative performance about park in 2020 versus.

The consolidated average.

Yes, Hey, Hey, Eric its Mark I mean, I think as Serge mentioned.

Marc Swanson: Hey, Eric, it's Marc. I mean, I think as Serge mentioned, you know, we're really excited about the ride that's going into that park. I think you know, it's as he described, the great dive coaster, it's gonna be one of the best on the West Coast. I think that'll help jumpstart that park. There's obviously other things we're going to you know, continue to try to do better. You know, that park also had some weather impacts in 2019. Look, I think exactly what he said, we're optimistic to get the ride open and get the year going in that park.

We're really excited about the ride that's going into that park and I think.

As he described that the great died closer to that's going to be one of the vast on the west coast.

I think that'll that'll help help jumpstart that part there is obviously other things were going to you.

Continued to try to do better and.

You know that part also has had some weather impacts in 2019, so like I think exactly what he said we're we're.

We're optimistic to get the write up in and get the you're going in that park and we're going to.

Marc Swanson: We're gonna, you know, keep performing as well as we can out there. As he said, when you look at it on a two-year basis, you know, we're pleased over the last few years, but we'd obviously like to do better in 2020.

Keep performing as well as we can out there.

He said on when you look at on on a two year basis.

We're pleased over the last years, but we obviously like to do better in 2020.

Okay, and then lastly, you think about the cost cuts you took.

Eric Wold: Okay. Last question. As you think about the cost cuts you took last year, how can you frame maybe kind of how much of those were kind of, you know, structural permanent cost cuts? Kind of what you benefited in 2019 and still, you know, has yet to kind of, you know, flow into the company when you see that benefit in 2020?

Last year, how can you frame, maybe going and how much of those were going to structural permanent cost cuts and then kind of what.

You benefited 19, and still when you're going to be flow into the company, we see that benefit in 2020.

Yes, Hey, Eric its Mark I can take that question look I mean, we've been pretty clear on the cost cuts that they have applied to.

Marc Swanson: Yeah. Hey, Eric, it's Marc. I can take that question. Look, I mean, we've been pretty clear on the cost cuts that they've applied to you know the corporate offices and to the parks and around you know various services, consulting fees, you know labor optimization, labor efficiency. So there's still some run rate to come in in 2020. You know from things we identified this year. If you look at our pro forma cost savings in our release, you'll see a number that we've laid out for that. I think if you look over a kind of a two-year basis, we've had pretty good success with the cost reductions.

The corporate offices and to the parks and around.

Various services consulting fees.

Labor optimization labor efficiencies, so theres still there's still some run rate to common in 2020 and.

From from things, we identified this year and if you look at our pro forma cost savings in our release you'll see.

A number that we laid out for that I think if you look over over a kind of a two year basis, we've had.

To get success with that with the with the cost reductions we've.

Marc Swanson: We've, you know, over the last two years, 2018 and 2019, we grew attendance by 1.8 million. We grew revenue $135 million, and we grew adjusted EBITDA $160 million. We, you know, we had $25 million right there of just cost savings, the difference between EBITDA and revenue growth. Then we also covered the associated variable costs associated with the 1.8 million in attendance growth. If you go back and look at our kind of the target we laid out, you know, we said attendance largely flows through at about a 20% cost or an 80% margin. We covered off those costs. If you add, you know, you add those things together, you get close to $50 million.

Over the last two years 18 to 19, we grew attendance by 1.8 million. We grew revenue 135 million and we grew adjusted EBITDA 160 million. So we.

We had 25 million right there of just cost savings the difference between EBITDA and revenue growth, but then we also covered the associated variable costs.

Associated with the $1.8 million in attendance growth. If you go back and look at our kind of the target we laid out.

We said attendants largely flows through at about a 20% cost or an 80% margin. So we recovered off those costs. The AD add those things together you get you get close to 50 million and then when you when you add and things like new rides New attractions, you know things that we're putting into our parks that are our brand news to there.

Marc Swanson: Then when you add in things like new rides, new attractions, you know, things that we're putting into our parks that are brand new, so they require operators and mechanics and things like that, those have an associated cost. In some cases, we've added incremental days. We've obviously had wage pressures like others in the industry. When you add all that up, I think you get to well north of $50 million in cost savings. You know, we're not going to stop. You know, we're gonna continue to focus on this and continue to drive forward.

Require operators and mechanics, and and things like that those does have an associated costs in some cases, we've added incremental days.

We've obviously had a wage pressures like others in the industry when you add all add up.

I think you get to well north of 50 million in cost savings, but we're not going into.

Stop.

We're going to continue to focus on this and continue to drive forward and as we don't have a specific number to share with you for 2020, but as we report each quarter, we'll try to highlight what how we feel about the costs and what initiatives, we're taking in what.

Marc Swanson: I don't have a specific number to share with you for 2020, but you know, as we report each quarter, we'll try to highlight, you know, how we feel about the costs and what initiatives we're taking and what, you know, other buckets we have that potentially could drive more efficiencies going forward. I think what I'd leave you with is we just have a culture of focus on efficiencies and, you know, driving those through the business.

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Other buckets, we have that potentially could drive more efficiencies going forward I think what I'd leave you with as we just have a culture of focus on on efficiencies and and.

Driving those through the business.

That's helpful. Thank you.

Eric Wold: That's helpful. Thank you.

Sure.

Marc Swanson: Sure. Thanks, Eric.

Thanks.

Operator: The next question will come from Brett Andress with KeyBanc Capital Markets. Please go ahead.

Next question will come from Brent Andrus with Keybanc capital markets. Please go ahead.

Operator: The next question will come from Brett Andress with KeyBanc Capital Markets. Please go ahead.

Hey, good morning.

Brett Andress: Hey, good morning. Can you give some more detail on the pricing strategies that you implemented during the quarter? I guess, what did you do, you know, in Q4 on price that worked? Did you take price on season passes? Was it less discounts on single day tickets? Just any color there. And how much of the per capita increase in the quarter was the mix component that you referenced?

Can you give more detail on the pricing strategy that you implemented during the quarter I get what did you do.

In Fourq you on price that work did you take price on patent was it like discounts on single day ticket just any color there.

How much of the per capita increasing the quarter was.

The mix component that you reference.

Hey, Brad its mark I can take that look there's there's a lot of different levers we have on on pricing. So.

Marc Swanson: Hey, Brett, it's Marc. I can take that. Look, there's a lot of different levers we have on pricing. You know, in some cases we can take headline price, but in a lot of other ways, we can just reduce discounts, reduce promotions, things like that. I think what I would tell you is we generally do a combination and kind of for competitive reasons, I don't know that we wanna get into the specifics. You know, we believe in general, you know, again, we can take pricing. We believe we have pricing power.

In some cases, we can take headline price.

But in light of and a lot of other ways, we can just reduced discounts.

Reduce promotions things like that and so I think what what I would tell you is we generally do a combination and kind of for competitive reasons I don't know that we want to get into the specifics, but we believe in general.

You know again, we can take pricing we believe we have pricing power. So for example, as people as we as we put new passes on sale for the following year, we're generally trying to find ways to increase that price.

Marc Swanson: You know, for example, as we put new passes on sale for the following year, you know, we're generally trying to find ways to increase that price, for example, would be one example. I think you'll continue to see us do that, and it showed up, like I said, pretty well in the Q4, and I think it largely makes sense as you've noted. You know, as we've talked about, we had in past years, you know, or in past quarters, we've talked about that we thought this would show up, kinda towards the H2 of 2019. You know, I think I would probably kinda leave it at that.

For example would be one example, so I think you'll continue to see us do that and it showed up I.

Thank you so pretty well in the fourth quarter and I think it largely makes sense as you've noted.

We had.

As we've talked about we had in past years, we've been or in past quarters, we've talked about than we thought this would show up kind of towards the back half of 2019.

I think I would probably kind of leave it at that.

Got it and then I know, it's early days, but can you talk about the transition of the Orca show in Orlando and.

Brett Andress: Got it. I know it's early days, but can you talk about the transition of the Orca show at Orlando and San Antonio? Just what you know, guest feedback are you getting? How is that show performing? That would be helpful. Thank you.

San Antonio just what guest feedback are you getting how is that show performing that would be helpful. Thank you.

Sure I'll take that one thanks for the question Brian.

Serge Rivera: Sure. I'll take that one. Thanks for the question, Brett. You are correct. We have a new presentation. We refer to it as Orca Encounter. It's educational-based and really speaks to the orcas' positioning in the natural order of the oceans, describes what we've learned and how we interact with them, how they live, and the threats that they face. The show has just received a tremendous reception from our guests and the media, and I would encourage everyone on the call to come see it if you haven't seen it.

You are correct, we have an anew presentation, we refer to it as orca encounter.

It's it's educational based and really speaks to.

To the orcas positioning in the natural order of the oceans.

Describes what we've learned and how we interact with them.

How they live in the threats that they face. The show is just received a tremendous reception from our guests in the media and I would encourage everyone on the call to come come see it if you haven't seen it.

Thank you.

Brett Andress: Thank you.

Thank you.

Serge Rivera: Thank you.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to search Rivera for any closing remarks.

Operator: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Serge Rivera for any closing remarks.

Thank you Chad.

Serge Rivera: Thank you, Chad. On behalf of Marc and the rest of the management team here at SeaWorld Entertainment, we wanna thank you for joining us this morning. I would be remiss to not thank our employee ambassadors for their efforts every day to further our mission to protect animals and their environments. As you've heard this morning, we have confidence in our ability to achieve the higher end of the 2020 adjusted EBITDA goal of $475 million to $500 million. We believe our 2020 slate of rides, attractions, and events are the strongest in our history. We have confidence that we will deliver attendance, revenue, and adjusted EBITDA growth, and we expect all of this to result in increased shareholder value. We thank you. We look forward to speaking to you next quarter.

On behalf of Mark and the rest of the management team here at Seaworld Entertainment, we want to thank you for joining us this morning.

I'd be remiss to not thank our employee ambassadors for their efforts everyday to further our mission to protect animals in our and their environments.

As you've heard this morning.

We have confidence in our ability to achieve the higher end of the 2020, adjusted EBITDA goal of $475 million to $500 million.

We believe our 2020 slate of rides attractions and events are the strongest in our history.

We have confidence that we will deliver attendance revenue and adjusted EBITDA growth.

And we expect all of this to result in increased shareholder value.

We thank you.

We look forward to speaking to you next quarter.

Thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Q4 2019 Earnings Call

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