Q3 2022 SeaWorld Entertainment Inc Earnings Call
[music].
Good day and welcome to the Seaworld Q3, 2022 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.
<unk> to ask questions to ask a question you May Press Star then one on a touchtone phone.
Draw. 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 head of Investor Relations. Please go ahead.
Thank you, Dave and good morning, everyone. Welcome to Seaworld third quarter earnings Conference call today's call is being webcast and recorded.
Our press release was issued this morning and is available on our Investor Relations website at Www Seaworld investors Dot com.
<unk> 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 Marc Swanson, Chief Executive Officer, and Shell Adams, Chief Financial Officer and Treasurer.
This morning, we will review our third quarter financial results and then we will open up the call to your questions.
Also we have posted a short slide presentation, our investor Web site, along with the earnings press release that we will discuss during our prepared remarks.
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.
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 non-GAAP financial measures and other financial metrics, such as adjusted EBITDA and free cash flow.
More information regarding our forward looking statements and reconciliations of non-GAAP measures 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, Marc Swanson Marc.
Thank you Matthew good morning, everyone and thank you for joining us.
We are pleased to report our sixth consecutive quarter of record financial results.
While we achieved records for revenue net income and adjusted EBITDA in the quarter. These results still do not reflect a normalized operating environment.
And we still have significant scope to improve our execution and our financial results.
We had a meaningful impact from adverse weather in the quarter, including Hurricane Ian.
We estimate led to 90000 less guess visits during the quarter.
International and group visitation are still not back to pre COVID-19 levels.
Our staffing is still not at optimized levels and inflationary pressures continue to impact our cost.
We are pleased with the growth in total revenue and total revenue per capita during the quarter, which continued to demonstrate our pricing power and the strength of consumer spending in our parks.
Our cost management and flow through to adjusted EBITDA for the quarter could have been better.
To this end, we have enhanced and increase our efforts related to monitoring and managing costs throughout the enterprise and our initiatives to reduce costs.
And increase efficiencies.
As we highlighted last quarter, we have several new projects and initiatives in flight that we expect will help us work to offset the unusually high inflationary pressures.
And become a more efficient and profitable operating business over the coming quarters.
While inflationary pressures continue to exist, we expect certain cyclical supply chain related and or temporary cost pressures to moderate over the coming quarters.
We recently concluded another successful Halloween season at our parks, featuring our award winning Halloween events, which led to strong revenue growth. This October compared to October 2021, and October of 2019.
Revenue for October was up approximately 13% compared to 2021.
And approximately 45% compared to 2019.
Over the next few weeks, we will begin our popular Christmas events at our Seaworld Busch Gardens, and Sesame parks.
Our Christmas events feature exciting entertainment unique food and beverage offerings and seasonal merchandise for guests of all ages.
As we have consistently demonstrated our business model is strong and resilient.
And we believe that we have significant opportunities to improve and grow our revenue and profitability.
As I've mentioned previously we operate in an industry and end markets with growing demand trends over the long term and we have significant available guest capacity across our portfolio.
Our tenants levels are still below the total attendance levels, we achieved in 2019.
And well below our historical high attendance of approximately 25 million gas recorded in 2008.
We have made significant investments that we expect will continue to deliver strong returns.
And we have specific plans, we are executing on today and plans for the future that gives us high confidence in our ability to continue to deliver additional operational and financial improvements that we expect will lead to meaningful increases in shareholder value.
Looking ahead we.
We are very excited about our plans for 2023 and the investments we have made and will be making that we expect will drive meaningful growth and new records in revenue and adjusted EBITDA.
We have announced a few of the upcoming new rides attractions events and upgrades, including something new and meaningful meaningful in each of our parks.
This lineup includes among others.
Pipeline, the surf coaster at Seaworld Orlando.
Serengeti fire swing at Busch Gardens, Tampa Bay.
Dark kester straddle tester at Busch Gardens Williamsburg.
Arctic rescue roller coaster at Seaworld San Diego.
Catapult false flume coaster at Seaworld San Antonio.
Riptide race water slide at water country USA.
And a refresh of Laguna Grill at Discovery Cove.
Yeah.
Similar to the previous quarter.
We have posted a short presentation on our Investor website, along with our earnings press release that provides more detail around the visitation of our park portfolio.
Our industry and business performed during historical recessions.
The value orientation of our offering.
Our attendance trends and historical peak attendance levels.
Our cost reduction and efficiency initiatives and an update on our mobile app.
On page four we show a description of the visitation of each of our markets across our 12 park portfolio in the aggregate statistic for the whole portfolio.
As we discussed last quarter and as you can see from the page, we estimate that approximately 85% of our attendees drive to our parks.
A recitation is more similar to a typical regional amusement park business.
At times people compare our business to destination theme parks like Disney and Universal.
But we believe our visitation and business dynamics are more closely comparable to our regional theme park peers as opposed to our destination theme Park peers.
On page five of the presentation, we show an industry graph there shows the growth of the industry over the last 20 years and the resiliency of the industry. During the last two U S recessions.
On page six we show our specific performance during the last two recessions.
As you can see we believe our business demonstrated resiliency in both 2001 slash 2002.
Recession, and the 2008 2010 recession.
As we have discussed before we offer a tremendous value to our customers and given our attractive value proposition and the drive to nature of our parks and how our business has performed in past recessionary periods. We expect it will perform relatively well in future recessionary environments.
On page seven we show the value proposition of our park, our park offerings versus other entertainment offerings.
This slide underscores the incredible value, we provide to our guests and not only highlights the opportunity to continue to grow pricing, but also helps explain the resiliency of our business during economic downturns.
Page eight shows our latest LTM attendance of approximately 22 million visitors and a potential for where our attendants can go by returning to historical levels.
As we have discussed and you can see we are still below 2019 levels and we are well below 2008 peak attendance.
We also show what our tenants would be if we achieved peak attendance at all of our parks in the same year.
The punch line is that we have significant potential to achieve meaningfully higher attendance by getting back to historical levels.
As you can imagine we recognize this opportunity and we are working on plans to recapture loss of tenants.
Page nine of the presentation, we present, an updated target for our cost efficiency and reduction initiatives.
As we highlighted we have enhanced our efforts around these initiatives and have teams dedicated to realize these and additional opportunities.
As we highlighted last quarter. This is just a select list does not necessarily reflect everything we were working on or what or we'll work on over the coming months and quarters.
Yeah.
On page 10, we provide an update on our mobile app.
As you can see we continue to make good progress rolling our new value enhancing features and.
And gaining adoption and usage.
As of September the App.
At $3 4 million downloads and was used by more than 50% of guests parties visiting our parks.
We are capturing up to 15% of impact revenue on the App and.
And for certain products, it's 30, it's 30% or more.
Mobile ordering has been expanded to additional restaurants, and then and is now operating at about half of our targeted restaurants.
We continue to see increases in average transaction value for food and beverage purchases made through the app compared to a point of sale order.
We are excited about the potential of the app and its ability to improve the in park guest experience drive increases in revenue and decreases in cost.
We hope this helps everyone better understand the drive to and regional theme Park nature of our park portfolio, the resiliency and attractive relative value of our industry overall and our business in particular.
Our attendants potential our cost reduction and efficiency efforts and our mobile app.
Before moving to shell in her update on financial performance.
Let me comment on a few more items in greater detail.
First let me speak to our balance sheet, which continues to be strong.
Our LTM September 2022.
Net total leverage ratio is 271 times and we have approximately $480 million of total available liquidity, including almost $110 million of cash.
This strong balance sheet gives us flexibility to continue to invest in and grow our business make opportunistic investments and thoughtfully returning capital to our shareholders.
Second we continued to make progress with our plans to build hotels to complement our park offerings.
We have identified possible sites continued our design and planning efforts and have hired a dedicated experienced leader to help drive this effort.
We look forward to sharing more specifics in future quarters.
Third our partner in Abu Dhabi announced it has reached 90% construction completion of the next generation Marine Life theme Park Seaworld Abu Dhabi.
This park is expected to open in 2023 and will include the Uae's first dedicated Marine research rescue rehabilitation and return center.
We continue to progress discussions related to other international opportunities.
And expect to have more to share in coming quarters.
Finally, we continue to aggressively repurchase shares during the third quarter and into the fourth quarter as we repurchased approximately three 6 million shares of common stock at a total cost of approximately $183 $9 million from August 2022 through October 2000.
'twenty two.
Year to date through October we have repurchased 12 3 million shares of common stock or approximately 16% of total shares outstanding at a total cost of approximately $683 9 million.
We have a strong balance sheet and financial position, our clear belief in our go forward prospects and we believe the markets have offered us an extremely attractive value. This year in regards to share repurchases.
Overall, we are proud to report record.
<unk> reported record net income on a trailing 12 month basis of $313 $7 million and record adjusted EBITDA on a trailing 12 month basis of over $727 million, which was achieved with attendance of 22 million guests, which is still below our 2019 attendants and.
Well below our historical high of over 25 million guests, we achieved in 2008.
These achievements reflect the extraordinary efforts of our teams to operate our parks. Despite the challenging environment, we faced and continue to position this company for revenue growth and increased profitability.
With that I would like.
I would like to turn it over to Charles to discuss our financial results in more detail.
Thank you Mark and good morning, everyone as Mark mentioned, our results of operations for the third quarter of 2022, and 2021 continue to be impacted by the global COVID-19 pandemic.
As shown in part by the decline in both international and group related attendance in both periods as compared to pre COVID-19 levels.
First nine months of 2021 was also impacted by capacity limitations.
And our limited operations and our park temporary park closures.
Our commentary today will be focused on our financial results compared to 2021, however, due to the impacts of the pandemic had on our 2021 year to date third quarter results. We provide a comparison of some of our key results versus 2019, and 2021 21 in our earnings release Toric and we will also do so in our Form 10-Q.
Neil.
During the third quarter, we generated record total revenue of $565 million, an increase of $44 million or eight 4% when compared to the third quarter of 2021.
The increase in revenue is due to an increase in total revenue per capita a six 8% and an increase in attendance of one 5%.
Attendance benefited largely from an increase in demand primarily from international guests when compared to prior year, which was impacted by more severe COVID-19 related restrictions on international travel.
The tenants during the quarter was unfavorably impacted by adverse weather, including impacts of Hurricane Dorian in September 2020 to you, which led to closures at the company's parks in Florida, and Virginia for a combined 15 operating days, we estimate adverse weather, including the hurricane.
<unk> a decline of approximately 90000 guests during the quarter.
As Mark said, while improving we continue to experience lingering effects of the pandemic with international and group related visitation still not yet back to pre COVID-19 levels.
In the third quarter International visitation was still down 45% compared to the same quarter in 2019, while group visitation was down 27% compared to the same quarter in 2019.
Our product and our pricing and product strategies continue to drive higher realized pricing, resulting in total revenue per capita in the quarter of $77.05 compared to $72.13 in the third quarter of 2021.
This increase was driven by improvements in both admissions per capita.
Park per capita spending.
Admissions per capita increased by four 1% to $42 and 75 pounds and in park per capita spending increased by 10, 4% to a record $34.30 in the third quarter of 2022 compared to the third quarter of 2021.
The increase in admissions per capita was primarily due to the realization of higher prices in our emission products.
<unk> from our strategic pricing efforts when compared to the prior year.
In Park per capita spending improved due to a combination of factors, including pricing initiatives improved product quality and mix and the impact of new or enhanced and expanded venues and our other product offerings.
Yeah.
Operating expenses increased $28 million or 10, 7% when compared to the third quarter of 2021.
The increase in operating expenses is primarily due to costs associated with new and our extended attractions and events high inflationary pressures and an increase in legal accruals as compared to the prior year quarter.
These factors were partially offset by a decrease in noncash equity compensation expense, along with structural cost savings initiatives when compared to the third quarter of 2021.
Operating expenses for the third quarter of 2021 were also impacted by approximately $9 million of nonrecurring contractual liabilities and legal costs, resulting from temporary COVID-19 Park closures.
Operating expenses as a percent of revenue were 38, 2% for the third quarter of 2022 compared to 37, 4% for the third quarter of 2021.
Well staffing has been created from early in the year as shown by our higher labor hours in the third quarter compared to prior year. We are still not at optimal staffing levels. We continue to suffer from staffing shortages in various roles across our parks at various times during the quarter, which among other things impacted our ability to fully <unk>.
<unk> in park revenue.
Labor costs in the third quarter were primarily driven by increased labor hours as our base hourly wage rate was only moderately higher than prior year.
Selling general and administrative expenses decreased $5 million or 1% compared to the third quarter of 2021 the.
The decrease was primarily due to a decrease in noncash equity compensation expense and the impact of cost savings and efficiency initiatives.
These factors were partially offset by increased marketing and third party consulting costs when compared to the prior year quarter.
Selling general and administrative expenses as a percent of revenue was nine 4% for the third quarter of 2020, Q compared to 10, 3% for the third quarter of 2021.
We believe that approximately 20 million to 25 million of cost in the third quarter compared to 2019 are temporary unusually high inflation driven driven costs.
Expect to moderate in the coming quarters.
We generated record net income of $134 6 million for the third quarter compared to net income of $102 million in the third quarter of 2021.
We generated record adjusted EBITDA of $274 $2 million, an increase of $8 $9 million when compared to the third quarter of 2021.
The improvement in adjusted EBITDA for the third quarter of 2020 to you was primarily driven by an increase in attendance and total revenue per capita when compared to the third quarter of 2021.
Looking at our results for the first nine months of 2022 compared to 2021 total revenue was a record $1 $3 4 billion, an increase of $207 8 million or 18, 3%.
Total attendance was 17 million guests an increase of $1 8 million guests or 11, 5%.
Net income for the period with a record $242 2 million an improvement of $57 $2 million and adjusted EBITDA was a record $574 6 million an improvement of $65 3 million or 12, 8%.
Now turning to our balance sheet.
Current deferred revenue balance as of the end of the third quarter was $182 $3 million, an increase of approximately five 1% when compared to September of 2021, which included the impact of some COVID-19 related product extensions and onetime items.
<unk> September 2019 deferred revenue increased 59, 1%.
At the end of October 2022, our pass base was at a record level for October .
Approximately 26% compared to October of 2019 at very healthy indicator of consumer demand for our parks and the remainder of the year.
We are also still seeing a higher mix of premium passes and our pass base compared to prior year as our pass holders continue to recognize the value and benefits of our higher tier products.
To that end, we're continuing to realize meaningful price increases on our pass products with current pass prices up approximately 10% compared to the prior year.
As Mark mentioned, we have a very strong balance sheet position as of September 32022, our total available liquidity was $479 $9 million.
Including $109 $6 million of cash and cash equivalents on our balance sheet and $373 million available on our revolving credit facility, which has not been drawn.
Cash flow from operations was $169 2 million for the third quarter of 2022.
Free cash flow was $119 6 million for the third quarter of 2022.
We repurchased approximately three 6 million shares of common stock at a total cost of approximately $183 $9 million from August 2022 through October 2022.
Year to date through October 2020 to you we have repurchased approximately $12 3 million shares of common stock or approximately 16% of total shares outstanding at a total cost of approximately $683 9 million.
We spent $49 7 million on Capex in the third quarter of 2022 of which approximately $32 $6 million was on core capex and approximately $17 $1 million was an expansion in our ROI projects.
We expect to spend approximately 190 million to $290 million to $200 million in Capex for 2022.
We have spent considerable time over the last several months analyzing and evaluating opportunities to invest our expected substantial cash flow back into our business in high ROI projects.
While we are still in the midst of finalizing our capital plans for 2023, we can share with you as you already know from our announcements is that we will invest meaningfully to continue our strategy of offering something new and compelling across all of our parks next year.
Beyond our typical cadence of rides and attractions, we have identified a robust list of highly attractive growth and ROI projects. We expect to also execute on in 2023.
We will enhance improve and or create new animal habitats food and beverage outlets and retail venues and we will invest and park infrastructure and technology to improve the guest experience and reduce or eliminate cost.
We'll also invest in our inorganic growth strategies to further drive shareholder value.
In aggregate, we plan to spend at least $200 million in 2023 and will share more details of our plans in the next quarterly discussion.
Now, let me turn the call back over to Mark who will share some final thoughts.
Mark.
Thank you Sal.
Before we open the call to your questions.
I have some closing comments.
In the third quarter of 2022, we came to the aid of 229 animals in need.
Over our history, we have helped over 40000 animals, including bottlenose Dolphins manatees.
The Lions.
<unk> Sea turtles sharks birds and more.
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 about the remainder of 2022 as we head into our popular Christmas holiday events.
As I mentioned over the coming weeks, our Christmas events will start in our parks.
We're also really excited about our plans for 2023.
While we have made good progress over the past year. We continue to believe there are significant additional opportunities to improve our execution.
Take advantage of clear growth opportunities.
It continues to drive meaningful long term 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 that we expect will lead to meaningfully increase value for stakeholders.
Now, let's take your questions.
Yes.
We will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
So please limit yourself to one question and one follow up.
Our first question comes from Phil.
Sick with Jpmorgan. Please go ahead.
Hi, guys. Thank you.
I guess I'll first.
Wanted to start with the 2023 Capex commentary do you think the $130 million to $140 million core sort of stable next year, but the gross number could double or triple or do you think that that core number is up as well.
And then also sort of a follow up on the.
The cost cutting efforts.
The $25 million inflation cost that you expect to moderate I didn't really understand why that is and how that comes into the.
Numbers on slide nine thanks very much.
Yeah, Hey, Phil it's Mark.
Answer to your question. So look on the Capex I think you heard you heard shell in her prepared remarks talked about the efforts beyond kind of the core things that we've identified so as you know.
Our goal is to invest in something new in every park every year and I laid out a number of <unk>.
Rides and attractions that we're bringing to our parks, especially some of the some of the Costar as I mentioned.
But then you heard her mentioned kind of this additional effort that we're undertaking to look at other areas that we can impact in our parks.
And she mentioned like refresh venues.
New new or improved animal habitats.
Refresh retail venues all of those things so, yes, I expect that that'll be a little bit more spend and then maybe we normally had in the past.
I think we quoted $200 million.
In her prepared remarks, so we're really excited about our ability to invest in those things and I think it's a function of our our free cash flow and the ability to to continue to invest in the business.
On the on the inflation efforts what I would tell you is your question about cost I mean, we have a tremendous focus.
Sure.
On.
And continuing to.
<unk> worked hard on our cost refine our efforts around cost management and cost containment and.
We provided a list there as well and there's a number of things that we will continue to do.
Moving forward with those efforts.
If I can sort of follow up on a different subject.
It sounds like you look at your business because most people drive there is a little bit more inflation resistant or recession resistant.
And then some of your peers, how do you think about the impact of gas prices on that and what have you seen I imagine surveying your customers over the last six months with gas prices have moved around in terms of of the impact you expect overtime. Thanks, Ron Thanks again.
Yes.
Yes, thanks, Phil So what I would tell you is what I, what I would look at what they do look at us.
The growth in the consumer spending in our parks I think thats, a pretty good indicator that people are coming out even in a high inflationary environment and they're spending money in our parks and that's a testament to.
The investments we've made in our parks the events, we're doing the offerings that we have and so.
I feel good about our ability.
Even in these in these last couple of quarters, we're seeing inflationary impacts obviously people are still coming out and spending in our parks.
Thanks Mark.
Yes.
Okay. Our next question comes from James Hardiman with Citi. Please go ahead.
Hi, good morning so.
October .
Out of an open ended question, but it sounds like October was really strong.
Heard similar.
Commentary similar uptick.
From one of your peers last week I.
I guess, maybe just be kind of like last October was pretty strong as well maybe speak to what you see going on there versus sort of the third quarter trend and.
And ultimately is that is that October run rate sustainable for the remainder of the fourth quarter.
Yes, Thanks James.
So what I can tell you is obviously October is a good.
The month is centered around our Halloween events switch.
Continued to be popular and I think we saw good response to those.
As you noted.
Our revenue as I noted in my prepared remarks was was up about 13% to two to last year. So Halloween. It's been strong what I would tell you in Q3, especially towards the end of the quarter. We had we obviously had the impact of hurricane Ian and that did lead a little bit into into October as well.
The events continue to be popular like Halloween.
What I was.
As far as runway run rate, how do we think about that on a go forward basis.
We'll be starting some of our Christmas events. This this this.
This weekend and some of our parks and then later later on in the months.
One of the parts to do Christmas. So those events have traditionally been popular with people as well. So I don't know if it will be the exact same run rate as October but I do think those are compelling reasons to come and visit the park.
That's helpful and then.
And I don't know how much youre going to want to answer this one but I figured I'd ask I mean, as we look to 2023 Im certainly not looking for guidance, but as we think about some of the some of the building blocks right attendance per.
Per caps margin and ultimately EBITDA.
Maybe the level of confidence.
That that.
Each of those will grow next year right. Obviously, there's some puts and takes to each one of those numbers, but but any any color you could give us on sort of your level of confidence in growth next year out of those items.
Sure.
What I can tell you is look we're confident in our ability to grow the business and there's all the pillars that you that you mentioned or are things that we can kind of take them apart one at a time.
On attendance, we're investing in the parks, so theres, new rides and attractions and and things like that coming to our parks. We also have the additional capex, we are spending around refreshes and new habitats, an improved habitats and things like that in our parks and that that is exciting as well so.
Yes.
Thats that we know new things generally drive people to parks.
Have.
Hopefully a further recovery of international attendance as well, we're still not back as we've mentioned back to the 2019 levels I don't know when that will occur but that obviously when it does that will that will be.
Aylwin for us.
On pricing we continue to.
See strong consumer spending in our parks I think we've done some good things around what we offer we posted a slide.
And I talked about it about the value of coming to our parks.
Relative to maybe other entertainment options.
A very good value to come to one of our parks and I think that gives me confidence that we can continue to.
Showcase that value and probably gives us opportunities obviously to to grow pricing. We also know that more and more people are.
Wanting experiences that matter wanting to experience things over perhaps buying things if you will and our part I think of specifically our parks with our with our world.
Class Zoological collection, we offer just some amazing experiences in our parks that you cannot get elsewhere and I think we will continue to showcase that and highlight that is another reason to come and visit we also have.
The continued.
Learnings and hopefully benefit from our CRM system, we're very early in that.
Kind of rolling that out if you will and learning how to how to better utilize that but again that I think will allow us to to market to people better and things like that so there's a lot of confidence.
I think getting people to come to our park for all the reasons I just mentioned on the cost side, what what I'll tell you is.
We've been at.
Cost for some time, we've done a really good job since 2019 as you know we've had a very strong margin expansion has really led the industry in and expanding our margins. Since 2019 now we've got to do a better job and I think I think as I mentioned we.
We could've done a better job and in fairness, we're operating in a in an inflationary environment here. The last couple of quarters, it's a really challenging environment with labor and things like that but nonetheless, that's the new reality and we have to we have to accept that and we have mobilized our teams and our resources around kind of this new reality.
And I think we're doing a better job of getting to that point, where we're better mobilized better better situated to address some of these some.
Some of these headwinds and we put out again on the slide the different initiatives, we're working on so.
Hopefully that gives you some context on both attendance and costs and how we think about them.
It does it sounds like I don't want to put words in your mouth, but it sounds like you think all four of those.
And to be up next year.
Yes, I mean, our.
Our expectation would be to continue to continue to grow the business.
Going forward, obviously so.
Our next question comes from Steve <unk> with Stifel. Please go ahead.
Hey, guys good morning.
So mark.
Kind of keep going here with the cost side of the equation.
This is the second quarter you guys have laid out kind of these costs, so called Golden they've actually improved over the last quarter.
So mark I guess can you help us think about where margins could actually go over time and I understand look you're not going to give you a number I get that but.
I mean today you are running margins in that let's call. It low <unk> range I'm, just trying to understand what that potential could look like.
70, more normalized environment.
Yeah. Thanks, Steve So I can take that question I mean, the way I think about the business I think I think the way that the way the team thinks about the businesses.
It's fairly simplistic.
Outgrow.
Attendance, a little bit each year.
Grow our per caps, a little bit each year and look we may have years like this where we're growing them.
As more of an outsized pace and then if we and then if we managed cost well if you do those three things.
That translates to good growth in adjusted EBITDA. So that's how we approach it and I think we've put ourselves in a good position to be able to to achieve that.
Where that leads to.
Again, I'm not going to guide you that obviously, we we achieved higher margins last year and I think if we continue to execute on growing attendance growing per caps and being efficient with our cost dollars.
There is.
Not a reason to think we couldnt get back to that point, obviously so.
Okay got you.
And then second question is around slide eight.
That potential attendance metrics could you kind of laid out there in your presentation, which.
That would almost be 20 lets call it 25% higher than where it tends to just kind of running today. So.
Just wondering here if that metric is.
Actually achievable and what I mean by that is if you've got a tenant is up into the $27 million range would you be.
That point starting to sacrifice the customer experience in terms of potential overcrowding just to have more people in the parks.
Yeah, Hey, Steve Good question.
What I would tell you as part of the reason we've put out that slide is couple of reasons, but wanted to show you obviously the potential and we showed you two things one the peak attendance of $25 million and then kind of the peak of each park.
Which gets to the higher number that you.
You mentioned.
And look our our parks rarely operate at capacity. There is just a handful of days a year, where we're having to shut down so we have.
Certainly have room to drive more people into our parks and so I'm not worried about running out of room, if you will.
So.
Yeah.
It's certainly something that we are.
As I mentioned in my prepared remarks, we are working to recapture that loss of tenants and certainly have capacity to do that.
Okay got it thanks, guys appreciate it.
Our next question comes from Michael Swartz with Truest. Please go ahead.
Hey, good morning, everyone, maybe and I think you laid out international attendance is running something like 45% below your 19 levels, but maybe you can just give us a sense of how that's been trending and then.
How we should think about that going into 'twenty, three given currency headwinds international visitors may be experiencing.
Yeah, Hey, Michael.
Yes, I mean, what I can tell you is international now for versus 2018 has been down the last couple of quarters.
And that 45% range, so where that where that goes on on a go forward basis, we'll have to see I don't I don't know when it will be become more of a more of a tailwind but certainly.
Sure.
We want to obviously see more international attendants come back, but but.
That's really there's a lot of factors that impact that and we'll look for opportunities obviously to offset as much of that as we can until it does come back.
Okay. Thanks, and then follow up question just on the October revenue figures you gave I'm just trying to understand whether those are apples.
Apples relative to the number of operating days in 2021, and 2019 I mean, how much difference in operating days were there this year versus those period.
What I can tell you is we ran versus 'twenty, one similar Halloween events there would be.
A slight pickup from the park in San Diego Sesame place that is new this year, but I think even stripping that out we still feel good about the revenue increase and then versus 2019, yes. We've added we've added more.
Of the events. If you will so we did not have the nighttime how scream at.
In Orlando and.
And in California, and we also brought back a little bit better version of it I think in Texas, So certainly that helped us.
And that's what we're focused on is driving.
Total total revenue.
And we will continue to focus on that the other thing I would I would just remind you kind of said this already but.
Early October was still impacted by hurricane Ian So.
That had a that had a negative impact of I don't have an exact number to share with you, but that had a that had a negative impact as well. So we put those numbers, we achieve that revenue growth I guess, even with that impact.
Our next question comes from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, everyone.
No.
I've already talked a lot about attendance, but just going back to that.
Where we are today versus the $3 million or $5 million Delta of 2008, or all prior parks and I know you don't solve exclusively for tenants but.
Is that are there initiatives, we don't know about yet that are that are driving that and is that more of a.
Maybe more of a pricing action.
To get there or is it more on the marketing side.
Yes, I think I think Chris what you're asking is kind of how do we think about recapturing the.
The attendants, we've lost over over.
Versus either.
These are 2008 or versus when the parks are at their peak.
There's a couple ways to think about it one is.
We will continue to invest in our parks and we've been very clear that our stated goal is to have something new in our parks each year and again in 2023, we're going to have new things in each of our parks as I mentioned, and we know thats a important component of people visiting.
We're also.
Investing beyond that and in venues and refreshes and things like that that sell talked about and I think that that helps US also you mentioned marketing I think that's certainly a component of it we have the CRM system that is still relatively new to us and we will continue.
To harness.
The power of that if you will I also think just in general we have opportunities to be.
To be more efficient in our in our marketing messaging and how we communicate things in.
Promote our parks to our guests. So it's a it's kind of a total package of all sorts of things.
That are going to drive us.
Two hopefully recapturing that loss of tenants.
Okay. Thanks, Mark and follow up is on cost and going back to that.
Slide nine.
Is there any specific timing around that $30 million to $50 million and also are there any offsets to that.
Aren't necessarily on the on the slide.
Yes.
I can tell you is I mean, we we are working on those things right. Now. So these would be things that we would endeavor to impact.
The quarters going forward here right. So these are things, we're working on right now and and should benefit us as we go into next year I think.
The.
<unk>.
Offsets I mean look we're still in an inflationary environment.
I think a lot of.
Ability to answer that question is going to be determined by what happens with inflation. We have things that are that are still going up we know we know.
Certain energy prices for example are going to go up here in Florida, but we see other things moderating and we know for example that freight is moderating.
Very much.
See that in our numbers. So I think a lot will depend on kind of more of the macro inflationary environment. If there's if there's offsets, but we're going to do our part.
To identify and execute on the things that we've listed on that chart and work on those.
Our next question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.
Yes.
Hi.
I guess there were two things I was curious about one is.
You guys flagged.
Nine point.
I think the only 10% kind of decline versus 2019 in attendance, but up 2% adjusted for a series of items that included the 90000 from weather.
Wondering if you could breakdown.
Other elements of the delta between the up to a downturn.
You know how much it was international how much was group.
Just so we kind of understand that and then.
And kind of the numbers I was just kind of curious because last night Disney reported and said that international attendance is back to their pre pandemic norm of 18% to 22% of the attendants in Orlando.
Which would seem to be you know.
It would seem to be no reason why you guys wouldn't share in that trend, but apparently art.
Wonder if you could talk to you know whether you think there might be some sustained difference between the two of you or whether what Disney is seeing as maybe a harbinger for it you guys will see.
Hey, Barton this is mark I can take that question. So look on the attendants I mean, we called out I don't know that we will get more specific than what we've already called out there.
There was versus 19, a couple of impacts International group and then obviously the.
The calendar shift in there when you get to kind of the more year to date comparison of the first nine months.
'twenty one versus 19.
<unk> impact tends to normalize out a little bit more so.
That may help you and then obviously you have the the weather impact as well.
So look.
Look on the international attendance.
I don't know that I can I can speak to what to what Disney is doing I can tell you that.
We will continue to promote the.
Our parks here in Orlando, and our differentiated product and the things that we can offer that that are different than what they offer. So we'll continue to work on that and historically for us.
International attendance has not been.
Or has been roughly 10% of the total company's attendance, so theres might be more if you will but.
Our goal is to try to drive more.
Continue to capture international attendance when it when it more.
Hopefully fully comes back we'll be able to do that.
Okay.
Our next question comes from Paul Golding with Macquarie. Please go ahead.
Thanks, so much and congrats on the <unk>.
Quarter I wanted to ask a sort of along those lines, but maybe in a different.
Category around timing when do you is there any color you can give around when you typically start to see these longer lead time bookings come on with respect to group or international.
Do the trend in line with our.
Season pass purchases or is it.
Sure.
What what the lead time might look like could help inform sort of when we should start to see those come back on.
So any color around that.
Yes, I mean look I mean, one of the one of the challenges we have maybe a little bit different than some of our other other parks that are in Orlando as we don't have hotels and things like that so our.
Our view into the future is a little more limited if you will.
And we I think in general tend to see.
Speaking generally here I think we tend to see people book closer in to their visit that then maybe against some of the destination parks, whether it be Disney and Universal So.
I don't have any specific numbers to share with you though on that.
Alright, and then on the cost side.
With respect to shell's numbers on the 20 to 25 million in Q3 cost.
To moderate that.
Relation related.
Et cetera is there any any color you could give on the split of what might be.
Versus variable out of that bucket.
Even if it's not.
Numerical but just directional.
Sure I think I can take Cowen. Thanks for the question Paul on the inflationary costs I have referenced that approximately $20 million to $25 million of expenses. We had received in Q3 of <unk> compared to <unk> 19.
A lot of those costs were related to labor and wage pressures above normal inflation. We also saw increases in rates and utilities energy insurance transportation and shipping and then also some of the commodities within food and beverage and retail items.
As Martin mentioned, we are starting to see some moderation in those pieces from freight and shipping, but we're also continuing to see increases in utilities as he mentioned some increases in utilities from Florida, specifically, but we are we do have some investments specifically related to your address that like our solar project that we are getting ready to kick off in one.
Our part so.
Overall, we do think that those are moderating and we will continue to see that but they are moderating into that as we go into the next quarters.
Okay. Thank you.
Our next question comes from Ben Chaiken with Credit Suisse. Please go ahead.
Hey, How's it going.
Let's try a different one.
In Abu Dhabi, you got to the large attraction opening up in 'twenty three.
Somewhat of a black box I would say for the market can you help us frame this a little bit not in terms of size of the project, but more so is this like a hotel management contracts or your types of revenue profitability. Both and then one quick follow up.
Yeah, Hey, Dan I can I can give you some feedback on that question look we're <unk>.
Excited that the.
The park there will is.
It is expected to open in 2023, and I think it really showcases kind of what the what the next generation of Av.
Seaworld.
And will be and it brings our brand to a whole another part of the part of the world. So.
Is like as you mentioned kind of what I'll call of <unk>.
Capital light.
Arrangement, if you will and we would have we would share a licensing.
Agreement with them I think.
While we hit that opened its a little bit too early to guide you to anything but I think you can look for maybe future updates in the coming quarters on that.
Got you I appreciate it and then on the buyback I think.
Plan moving forward to continue to buyback more than you're generating in free cash flow for the time periods.
I guess the perceived dislocation.
Yeah.
Yes, what I would tell you that as you know.
Like we do.
Throughout the year, we'll work with our board and our advisers on what the best use of cash is for shareholders and so.
I can't guide you to anything but other than that we will work to deliver what we believe is the highest and best return to our shareholders.
Thank you I appreciate it.
This concludes our question and answer session I would like to turn the conference back over to Marc Swanson for any closing remarks.
Thank you Dave on behalf of shell and the rest of the management team at Seaworld Entertainment, one and 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.