Q1 2022 SeaWorld Entertainment Inc Earnings Call
One 2 million shares at a total cost of approximately $141 million, which now completes our previously our previously authorized $250 million share repurchase program.
As Mark mentioned, we have a very strong balance sheet position.
As of March 31, 2022, our total available liquidity was approximately $745 $3 million, including $380 million of cash and cash equivalents on our balance sheet.
$365 $3 million available on our revolving credit facility, which was undrawn.
Cash flow from operations was a record $70 8 million for the first quarter of 2022.
And free cash flow was a record $35 $7 million for the first quarter of 2022.
Yeah.
We spent $35 $1 million on Capex in the first quarter.
Of which approximately $23 million was on core capex and approximately $12 $1 million was unexpected and ROI projects.
Looking ahead for 2022.
We plan on spending approximately $150 million in core capital expenditures and another $30 million to $50 million and growth ROI capital expenditures.
We are investing in rides attractions events and habitats to continue our strategy of having something new and compelling across our parks each year.
We have more one of a kind world class attractions that we are excited to unveil when the time is right.
We are also investing in and enhancing our food and beverage and retail venues across our parks.
Including offering a higher quality offering and more variety.
We're investing in technology to make our business more efficient and to enhance our guest experience.
And we are investing in our inorganic growth strategies to further drive shareholder value.
Now, let me turn the call back over to Mark who will share some final thoughts Marc.
Thank you Elizabeth before we open the call to your questions I have some closing comments.
In the first quarter of 2022, we came to the aid of over 300 animals. Indeed, bringing the total number of animals. We have helped over our history to over 40000, including bottlenose Dolphins Manatees Sea Lions seals Sea turtles sharks birds and more.
During the quarter, we announced that we will expand our managing critical care facility in Orlando to add more capacity in the state of Florida to care for <unk> and need.
The build out will include a new three pool complex that adds 200000 gallons of water for Manatee response, and a new floor to an existing pool.
That doubles the size of the critical critical care space Seaworld Rescue center in Orlando.
Upon completion Seaworld Orlando will have the ability to care for 60 manatees Indeed, the largest capacity in the state of Florida and in the U S.
The expansion is.
Is necessary to care for the record number of manatees in crisis due to the unusual mortality events.
I'm really proud of the team's hard work and their continued dedication to these important rescue efforts.
I want to thank them and all of our ambassadors for all that they do to operate our parks in this current environment.
We are excited.
<unk> about 2022, particularly as we head into our busy summer season.
We have an exciting lineup of new rides attractions and events that we believe is one of our one of our best offerings ever.
We recognize that we have made good progress over the past year, but we continue to believe there are significant additional opportunities to improve our execution, taking advantage of clear growth opportunities and continue to drive meaningful growth in both revenue and adjusted EBITDA.
We continue to have high confidence in our long term strategy and in our ability to deliver significantly improved operating and financial results.
And we believe will lead to meaningfully increased value for stakeholders.
Now, let's take your questions.
We will now begin the question and answer session.
To ask a question. Please press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw. Your question. Please press Star then two again, we ask that you. Please limit yourself to one question and one follow up and if you have further questions. You may reenter the question queue and at this time, we'll pause.
Materially to assemble our roster.
And the first question will come from Steve <unk> with Stifel. Please go ahead.
Hey, guys good morning.
So wanted to ask about your past base, which is obviously running at record highs at this point and I'm wondering.
If you can help us think about maybe what percentage of your visitation in the first quarter was driven by passes and then.
How have you been expanding your outreach to potential customers that you might not have targeted before.
And then maybe also how you are thinking about total per caps moving forward as you pass base growth. So that's kind of a three part question sorry.
Hey, Steve its mark.
Can take that so look we're really pleased with our pass base as you heard in our remarks up approximately 22%.
This time of the year. So very pleased with that we think obviously our past is offer tremendous value with with our lineup of attractions events and.
And then although the refreshes we've made in the different parks. So a lot of reasons to come out and visit and obviously a path is one of the most effective ways to do that you'll pass visitation is as a mix of our tenants is is at about 48% for the first quarter a higher than normal.
In part because people are coming we're selling more passes and then.
Obviously, we still have a little bit of a drag there from from international and group group business, but certainly we're pleased with our with our pass base, we're going to continue to.
To promote those products and outreach to people.
To come and visit the park as far as like how we think about the per cap.
The third part of your question is look pass holders, we know deliver more total revenue.
On a yearly basis and obviously, we're focused on driving total revenue having said that we certainly believe we can continue to drive per cap growth, even with a higher pass visitation and Theres a number of initiatives we have in place to do that and we are getting pricing.
You heard me talk about that we're getting pricing and we believe we continue to with our pricing power and other initiatives continue to drive that so we like where we stand in and look forward to having those folks come out and visit more often.
Great. Thanks, Marc and then second question your balance sheet is obviously.
A very good shape at this point I'm wondering.
With your share authorization now having been exhausted, how how you balance returning capital to shareholders moving forward.
And I guess, what I might be getting out here is theres, obviously, a fear out there around.
The economy and potentially going into some type of slowdown and does that change your view of how you return to return capital to shareholders.
Yeah, Thanks, Steve So.
As we noted we again bought back a number of shares in Q1, and then completed that basket.
As you noted in April of this year. So we will continue.
Like we've always said to work with with our board and our advisers on what is that what is the highest and best use of cash from an ROI standpoint, and I think we've demonstrated our ability to do that and we'll continue to do that.
Okay, great. Thanks, Mark appreciate it sure.
The next question will come from James Hardiman with Citi. Please go ahead.
Hey, good morning.
So maybe following up on <unk> last question there.
What can you tell us this is sort of an open ended question but.
Specific question, but.
State of the consumer right I don't know that I've ever seen as much divergence in terms of.
Years, and some of the economic data.
Versus really excellent results like like what you guys reported this morning, so maybe speak to what you're seeing beyond.
Beyond the reported metrics.
And then <unk>.
Maybe more specifically what can you tell us about.
Yes.
Most notably visitation momentum within the quarter.
And anything you want to give us on April one I think.
<unk>.
Our fear is that it.
Placing this worse than some of the war issues that have cropped up.
That the consumer is deteriorating.
Maybe you can you can tell us otherwise are or may be support that view.
Yes, sure James It's Marc I can take that question.
Obviously as you noted we reported strong strong revenue in <unk> and <unk>.
Tenants and per cap growth in the quarter. So.
Those are we're.
We're very pleased with that so we're seeing consumers coming out spending in our parks, we talked about the double digit pricing.
We've seen.
In our products so.
<unk>.
Coming out and spending I think it just points to the value of visiting our parks parks like ours, and what I can tell you.
In April is that that continued.
Give you a specific numbers, obviously, but we continue to see people visiting and people coming out and spending and again I would just come back to really the value that we offer as a.
As a.
As an offering to come and visit and the resiliency of our business, even if times were to get tough I like.
Where do we stand and if you look historically when there has been a recessionary activity. We have generally outperformed the industry. So we like the position we sit in and we look forward to continuing to provide a great product with people coming out to visit.
Got it and then.
I guess my second question here, you talked to a number of times in the prepared remarks about les.
Labor.
And maybe.
Some headwinds from them.
In Park per capita perspective people not not spending based on sort of.
Maybe suboptimal labor levels of labor.
Labor what does that look like right now specifically from a guest experience standpoint are the longer they are unmanned crude counters.
And then from a financial perspective.
What does that look like.
Labour Normalizes should we be anticipating.
But a positive from better in park spending, but offset to a degree by higher labor costs as we move forward.
Yes, thanks, what I can what I can tell you there is we certainly.
You called it out and look there is times when we don't have optimal staffing in the parks and I view that as again, a tailwind and it's not every day and it's not every park, obviously, but there's times. We know we can do better and our goal is to have a good guest experience and we know there's times, we can do better. So we've done some things here that we think are.
We're going to put us in a better position for the summer and to capture.
The demand, we're seeing really around the in park spend so that's our goal and I view it as really a another tailwind that had we.
Had a more optimal staffing level in Q1, we would have driven I believe more more revenue and a higher higher in park per cap as far as the labor that comes along with it I mean sure there would be some additional labor, but again I think the the revenue that we left on the table, perhaps with more than offset that.
Significantly and still has a very strong margin profile.
Makes sense thanks Mark.
The next question will come from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, everyone.
Maybe to follow up on that on a on Steve's last question you know as we think about going into the peak summer.
Where do you think you are on hiring in terms of having what you have lined up.
What are the what are the are there any potential risks to that with more hiring going on across the across the space.
Yeah, Hey, Chris It's Marc I can take that question. So one of the things I called out which is a little bit new newer to us not entirely new but.
We did not use the international program quite as much as some of our competitors did in the past and this year, we're using it in all our markets and so I think thats one of the reasons, we feel optimistic about being in a better spot those those folks will start to show up here for the summer so.
If that holds true, which it should obviously.
They will show up and we'll be in a better staffing position to capture that demand that I've talked about.
Look we even if you go back to Q1, we still grew revenue pretty pretty.
Significantly so again I view this as a.
As a tailwind we we want to capture more of that demand and we need that we need to have more things open and things like that and we will do that so it should be it should be a tailwind.
Okay very helpful. And then as a follow up is there any way to kind of.
Triangulate the you know the in park per caps between pricing increases or just higher volume than that whether we're talking food and beverage retail is there any way to just directionally think about that.
Okay.
Yes ill try to take a stab if I understand your question correctly I mean, what we what I talked about in my prepared remarks is we are seeing.
<unk> double digit pricing.
Increases on the in park products in most cases so.
So that's good so we're getting the pricing we have the pricing power people are coming out and spending so.
That continued.
Into April as I mentioned.
There were then theres a little bit of a drag on that number obviously is just from the mix of pass holders visiting who who spend more than total revenue, but have less per visit and then we have some some other as I mentioned, just not having everything open that wed like to.
Would have helped as well so those things are.
We will have hopefully more things up in the summer, which should help us and then at some point the past mix, probably normalizes over overtime and also the international attendance should be a positive for us.
Okay.
Okay very good thanks Mark.
Youre welcome.
The next to the next question will come from Ben Chaiken with Credit Suisse. Please go ahead.
Hey, How's it going.
What's the appetite for more Sesame place projects. My understanding is these are pretty high ROI and high margin.
Projects just curious in your thought process.
Hey, Ben Yes. Thanks for the question look where we were really thrilled to get the park up in San Diego.
It opened really late in the quarter, but we've been excited it's a beautiful park I was out there for the opening and just looks looks great and we know thats a good product and certainly we have the.
Under our contract with them ability to do more of those and I think thats something that we are.
As I said are looking closely at I don't don't have anything to share specifically today, but it's something that we definitely.
Ah reviewing in and looking at.
If we if and when we have some of the share we will do that but we like the product we like those type of parks.
And do you think conversions like this I think this one previously wasn't quite a guy does that make the most sense for you or.
Or would you start from scratch as well.
It could be it could be.
It could be a conversion like we are like we have did.
Did in San Diego or it could be a brand new thing I think we would look at.
All of those options it could be an expansion of one of our existing parks as well. So there's a couple of different ways to look at it.
And I think.
Those are all kind of in the options that we're considering.
Got you and then on the.
On the per cap side. However, you want to think about it whether it is total per caps or admission per caps. I think you mentioned there was kind of a pass mix.
Alright headwind and also a park mix slight headwind is there any way to kind of like.
Decipher that or to separate those maybe what was the park mix.
Headwind.
Like can you quantify sure I don't know that I can give you.
Quantification, what I can tell you is the past mix was was up several hundred basis points and so again, we know that more total revenue, but less per visit so that just naturally has just a math on that is going to going to impact your per cap, but can we get more total revenue over the long term on the park mix is a little bit more.
Relative to the parks, we have opened now in 2022 in Q1, the parks that would normally be open. We are open. If you go back to Q1 of last year, we didn't have everything open or the things that were some of the things that were open were more restricted so as those parks came online this year kind of full.
And just the mix of some of those parks had a little bit of a lower per cap relative to some of our other parks that are open. So again that just had a natural impact just from a math standpoint to pull the per cap down a little bit.
And just to be totally clear are you, saying the beginning of the quarter had that headwind or the ended the quarter at that park mix.
I'm not going to comment beginning or I mean, just during the quarter. So I mean, you can kind of go back and look at look at Seaworld, California. When it was opened in 2021 versus 2022, there were some differences there in its operating schedule. Similarly to similarly at Busch Gardens.
Thank you Greg.
Okay. Thanks.
The next question will come from Barton Crockett with Rosenblatt Securities. Please go ahead.
Okay, great. Thanks for taking the question.
I wanted to ask around the attendance opportunity.
And also a little bit around kind of the cyclical environment. So.
Okay.
You've got 15%, let's say kind of left on the table from international and group sales.
And my question is you know.
If those come back we're going to be I think pretty close to your all time high.
So how much room.
Is therefore more attendance in your park.
Some of your peers like six flags.
It was kind of pivoting to lots of candidates higher per caps Disney feels like they're kind of talking at a similar kind of thing in some ways.
So there is ceilings in this industry and you know where do you guys see a ceiling how much room do you have to go before you kind of hit it.
Yes.
Martin Thanks for the question look a couple of things there is a lot of room.
To grow our tenants and.
I said in my prepared remarks, I don't if you caught it but.
Back in 2008.
With one less park, we did over $25 million in attendance and if you look at 2019, we only did $22 six so you just take the math between those two numbers that's several million dollars.
Almost $2 5 million and the tenants just to get back to what we once did.
That's pretty meaningful growth rate in <unk>.
When you flow that through at a average per cap and then if you consider that the rest of the industry. In most cases is growing attendance over time.
We've kind of growing it at sometimes but still not back to what we once did in 2008 and so there is I think a lot of opportunity to grow our tenants and that certainly is our goal and then on top of that.
We've got the other initiatives around new parks, which I talked about we added one this year in San Diego, obviously, and our plan would be to add more of those.
More more more things going forward, we've got the international.
Expansion opportunities so got hotel opportunities. So there is there's a series of I would say tailwind is ahead of us that can continue to drive performance I would just to remind you too.
And Youre kind of question about less attendance higher per caps I mean, we rarely operate at full capacity at our parks. So yes, theres a few days every year that we have to close down obviously, but we have room in most cases for more people. So our goal would be to try to drive more attendance to our parks.
And.
The flow through from that incremental visitation is strong.
Okay.
That's helpful.
Other question I was curious about was.
With looking back at kind of.
Passwords sessions Cmos have been around for some of that under a different management, obviously, but.
You're kind of a tweener right, you're you're in Orlando. So you have kind of a destination traffic, which can be pretty meaningfully hit that kind of travel traffic that comes with Disney and Universal and spent a day at seaworld that can be hit pretty hard in a recession for local kind of regional kind of traffic tends to be more kind of dour.
Oracle in a recession you guys have a mix of both so how do you see your kind of exposure.
Two recession, you know just looking at what's happened historically and how you feel about your set up right now if we get into what what do you think God.
How would you see yourself guys kind of set up for that.
Yeah. Good question so we.
Look at historically when you go back and you look at kind of the recessionary periods.
In 2001, 2002, and then 2008 2009.
In 2001 2002, we actually saw growth and then in 2008 2009, we grew through a little bit in one year and had.
At a small decline in the other year. So we like our ability to weather recessions I think in general we've outperformed the industry and those type of periods. So.
So we like our ability.
Just to unpack a little bit one of the advantages. We have you kind of alluded to it is we are in both regional and destination markets.
Even in Orlando, while it's a destination market, we get a good portion of our tenants over 50% of the attendance.
For the most part is or in that range is coming from.
People in the state of Florida, so or even more local than that so the states, obviously growing and we like our position here I think maybe relative to others I don't know specifically, but I like that setup for us that we get more local attendance. So thats kind of a good play off between local.
Our regional parks and destination and just as a reminder, we've said this before the vast majority of our tenants.
Within driving distance of our drives to our parks. If you will so again I think that sets us up well for recessions, if one were to occur.
Okay. That's great. Thank you.
The next question will come from Michael Swartz with <unk> Securities. Please go ahead.
Hey, good morning, everyone.
Maybe just wanted to follow up on the new Sesame place Park in San Diego I think you had mentioned that you had seen some pretty strong results out of that albeit less than I think a month's operation, but can you give us a little context into what you've seen there and maybe how you measure success and then just a follow up to that as well.
The additional overhead from that park.
Material during the quarter.
Yes, I mean look we opened we opened the park.
At the end of March and obviously, we would have some cost in there too to get it open and things like that but I don't know that I would consider anything material there were more more operating cost obviously.
But we like we like what we're seeing out of that park.
Like the product, obviously I was out there.
People are seeing.
What what.
What that type of product can deliver so we're excited about the about the park out there.
Okay. Thanks, and then just maybe digging in a little further the season pass and I think you've said that it was kind of diluted the per caps in the quarter, but just in terms of maybe visitation trends on season pass has anything changed materially over the past.
The six to 12 months versus what you've seen historically.
Yes, I mean look it's as I mentioned, it's a greater mix of our.
Attendance here in Q1 of 48, roughly 48%, so it's higher than kind of the.
The mix, we've seen in the past by <unk>.
Several hundred basis points and some of that is because we have less international.
Tenants in some of that is we're selling more passes.
But just in terms of visitation on season pass I am just talking about how many times someone visits in a single year with a single path yes.
It is up.
Okay. Thanks.
The next question will come from Paul Golding with Macquarie. Please go ahead.
Great. Thanks, so much for taking the question.
Wanted to dig a bit deeper into the group versus international and just wanted to see if theres any color you could give around.
Anything structural happening there it seems like.
Sort of makes logical sense, we're seeing group come back in international presumably waiting for testing requirements to abate I guess any pricing color you could give around.
Group that Youre seeing in terms of is it benefiting to the same extent that.
Pricing is increasing just relative to to its own segment prior.
And any leading indicators on international so.
Those two two to areas. Thanks, so much.
Yes, no problem Paul so.
What I would tell you is.
Okay.
I talked about this the international.
Is improving still still down.
If you think about.
For the quarter it was down.
And the 75% range as we move into April .
Yes.
<unk>, but but still negative obviously the group business is coming back.
At a stronger rate and we.
We feel pretty good about where that's trending and how do we think about that on a go forward basis, just being out in the park I've seen more moorefield trips and things like that which is which is cool to see as far as your question on pricing.
I think similar to our other products I mean, we're taking pricing.
So that would include group tickets as well and then on the forward indicators, we don't we don't have.
Massive massive amount of indicators, but obviously, what we're seeing some of our bookings in discovery Cove, which is.
Generally a pretty popular place with international guests.
We like what we're seeing there.
Great and on Discovery Cove, which was at a higher price point to start do you still have pricing levers there you're still benefiting.
Even at that sort of more intimate experience level.
Yes.
I'd say Thats, certainly one area or one park, where we have taken a number of pricing initiatives and I think we certainly feel like theres opportunity. There. It's just a world class experience that.
I would argue it's price list basically in the exclusivity of it.
<unk>.
Private nature of it or more more intimate experience is just a really we.
We know people are willing to pay for things like that and it's a great experience. So yes, we have opportunity there.
Okay. Thanks, so much sure.
And the last question will come from Philip Cusick with Jpmorgan. Please go ahead.
Hi, guys. Thank you for getting me in.
I know you sort of push this one off on the call but on the hotel.
Thinking anything you can give us.
About your thoughts maybe on or off balance sheet running the hotels yourself, we're working with an outside company as well as timing when we might hear more about that thank you.
Yes.
I think the different options you laid out.
Are all those things are under consideration when we have something to report, we certainly will what I would point you to I think is one advantages we have we have land right and so if you look.
Across our parks, there's some great locations to put a hotel and I think just that to me is one of the key things do you have the right location and the right land and I think I think we definitely have that.
Okay, maybe one more if I can the buybacks.
Thank you.
You did all the optimal leverage level in the business as we sort of come out of.
Or maybe more violent.
Downturn in revenue.
We've seen before.
Yes, our leverage ratio as I mentioned is just below two five times.
And we're comfortable there not to say we wouldn't be comfortable in other places, but we don't really avid target. Our goal is obviously to two.
Deploy our cash in manners that we believe drives the highest return for shareholders. So we'll be opportunistic where it makes sense in and work with our board and our advisers on that.
Thanks again.
This concludes our question and answer session I would like to turn the conference back over to Mr. Mark Watson for any closing remarks. Please go ahead.
Yes, Thank you Chuck.
Behalf of Elizabeth and the rest of the management team at Seaworld Entertainment, we want to thank you for joining us this morning.
As you heard today, we are confident in our long term strategy, which we believe will drive improved operating and financial results and long term value for stakeholders.
Thank you and we look forward to speaking with you next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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