Q1 2023 SeaWorld Entertainment Inc Earnings Call
Hello, and welcome to Seaworld first quarter 2023 earnings conference call, all participants will be in listen only mode.
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Please note. This event is being recorded I would now like to turn the conference over to Matthew Stroud Investor Relations. Please go ahead.
Thank you and good morning, everyone welcome to Seaworld first quarter 2023 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.
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 Marc Swanson, Chief Executive Officer, and Jim Forrester interim Chief Financial Officer and Treasurer.
This morning, we will review our first quarter financial results and then we will open the call up 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.
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.
Yeah.
Thank you Matthew good morning, everyone and thank you for joining us.
We're pleased to report another quarter of record financial results, despite adverse weather across a number of our markets, particularly in our California market.
And a shift in the timing of the opening of our new rights.
In the first quarter of 2022, we had seven of our 10, new rides and attractions opened while this year in the first quarter. We only had two out of our 11, new rides and attractions open.
This marks our eighth consecutive quarter, where we have generated record financial results.
I want to thank our ambassadors for their ongoing efforts as we prepare for what we anticipate will be another busy summer season.
We continue to drive growth in total per capita spending in the quarter demonstrating the effectiveness of our revenue strategies, our pricing power and the strength of consumer spending in our parks.
Looking ahead, we are very encouraged by our group booking trends, which are running well ahead of 2022.
And we are really excited about our 2023 lineup of new rides attractions and events.
Several of which are some of the most anticipated rides a 2023 and looking forward to most of them opening in the coming weeks.
Yeah.
On the international front we.
We are also thrilled for the opening of the fourth Seaworld Park in the first Seaworld branded parks outside of the United States in Abu Dhabi on May 23, 2023.
We are very proud of this project and along with our partners in Abu Dhabi are excited about introducing a new region of the world to the wonders of Seaworld and introducing a next generation Seaworld Park the <unk>.
First new Seaworld branded parks built in 35 years.
Seaworld Abu Dhabi is a custom built approximately 183000 square meters almost entirely.
Indoor Park that will feature over 100000 marine animals.
The world's largest multi species aquarium.
Eight different realms that showcase the complexity interconnectivity and beauty of life under the sea.
I spent some time visiting this park last month.
Not have been more impressed by the facility the staff and of course.
The animals and attractions on display.
It's really a one of a kind world class venue and we are excited to see this open.
As a reminder, this is a licensing arrangement with our partner in Abu Dhabi, and we will share more information once the park is operating.
For 2023, the company has a truly exciting lineup of new rides attractions events and upgrades, including four of the most anticipated roller coasters of 2023, according to USA today.
In February Busch Gardens, Tampa opened the Serengeti flyer, the world's tallest and fastest screaming swing that takes riders up to 135 feet as speeds ranging speeds, reaching 68 miles per hour.
In March aquatic <unk>, San Antonio opened tightest cutover of Cove.
<unk> expanded and upgraded 3000 square foot area with multiple unique water play elements Waterspouts, all new private cabanas and a fully themed splash pad and multi shade multiple shade structures.
This month Seaworld Orlando will open pipeline the surf coaster.
The first of its kind surf coaster with seats and a surfing physician that rise and fall to mimic the sensation of riding a wave.
The coaster will accelerate riders to 60 miles per hour through five airtime moments and an innovative wave curl inversion.
Bush Gardens, Williamsburg will open dark coaster.
First all indoor straddle coaster in North America, where riders to experience for launches as speeds up to 36 miles per hour through over 2400 feet of track.
Ah clinical Orlando, we'll open <unk> Kids Cove.
All new water play area, we'll see featuring watering palms tipping buckets sprained jets water bottles and more.
And Sesame place, Philadelphia will open Bert and Ernie Splashy shores.
Water play area featuring water umbrella tipping.
Tipping buckets sprained jets water bottles, and a spring water tower.
Later, this spring and summer Seaworld, San Diego will open Arctic rescue the fastest and longest straddle coaster on the west coast that takes riders through three launches at speeds up to 40 miles per hour.
Water country USA will open riptide race, the first dueling pipeline slide in Virginia.
And Sesame place San Diego will open accounts Slash castle and enhanced water play area and expanded play structure, which features three tipping buckets.
For water slides and over 100 other water play elements.
And finally, we anticipate that Seaworld San Antonio We will open catapult falls the world's first <unk>.
Launched fluid coaster features the worlds steepest flume drop.
North America is only flume with a vertical lift.
And the tallest flume drop in Texas.
Yeah.
Now, let me give a brief update on some of our strategic initiatives.
First our cost and efficiency related work with our dedicated internal team and specialized outside consultants is progressing well and we are on pace to deliver at the high end of our cost savings target of $30 million to $50 million.
Yeah.
The team continues to find ways for us to source and organized more efficiently replace labor with capital and technology and eliminate unnecessary <unk> redundant expenses.
Second on the digital transformation front.
We kimpton, we continued to build out our CRM capabilities, which are still in their infancy.
And rollout and improve our mobile app.
On CRM, we see we really see upside opportunities from us ultimately, having more rich data about our pass members and guests and being able to more effectively engage allys behavior and tailored messages and offerings.
On the mobile App, we are excited about our performance today, our recently rolled out app, which is being used by an increasing number of guests in our parks.
And has been downloaded more than 5 million times.
As of the end of April the number of active users is up over 20% compared to prior year and the total revenue generated on the App is up over 200% compared to prior year.
Mobile ordering has been expanded to additional restaurants and is now operating at approximately 70% of our target restaurants.
Mobile orders.
Have have had a 26% higher average order volume compared to non mobile orders.
While we are happy with these early results, we see additional upside from continuing to improve the app experience and functionality and it continues to expand mobile ordering capability across our portfolio.
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 costs.
Third as you know we have strategically increased our park specific ROI investments this year in an effort to drive incremental revenue and our decreased cost through expanding enhancing and improving our food and beverage and retail offerings Park infrastructure anesthetics.
And generally improving the guest experience and journey around our parks and facilities.
Many of the new improved and our enhanced venues will be opening as we move into the summer season, and others will be opening over the course of the rest of the year.
We are really excited for our guests to experience these new venues and improvements and.
And to begin to see the benefits of these important investments.
Fourth on the international front as I have already discussed we are thrilled with the coming opening of Seaworld Abu Dhabi.
We continue to make good progress on discussions related to other international opportunities and expect to have more to share in coming quarters.
Fifth on the hotel front, we also continue to make progress with our plans that we discussed last quarter and.
And as we communicated last quarter expect to have our first hotel opened in 2025, followed by our second hotel in 2026.
We are working on design and planning for those two hotels and on site selection for additional hotels across our park portfolio.
We very much look forward to sharing more specifics in future quarters on what we expect to be really exciting and value creating projects.
Very excited about the significant investments we are making in the <unk> and the many initiatives we have underway across our business that.
That we expect will improve the guest experience allow us to generate more revenue and make us a more efficient and more profitable enterprise.
We are building, an even stronger and more resilient business that we are confident will deliver improved operational and financial results and meaningful increases in shareholder value.
Let me briefly comment on our balance sheet, which continues to be strong.
Our March 31, 2023, net total leverage ratio is two seven times and we had approximately $426 4 million of.
Total available liquidity.
Including $54 $8 million of cash on the balance sheet in advance of us starting our summer season, where we generate the majority of our cash flow.
This strong balance sheet gives us flexibility to continue to invest in and grow our business.
And to Opportunistically allocate capital with the goal to maximize long term value for shareholders.
Despite the uncertain times that we're living in our financial position is strong.
Our business is resilient and our first quarter results along with the coming opening of a ride attraction to that lineup.
The opening of new and improved venues and other park upgrades and enhancements and all of the initiatives that we have underway.
Give us high confidence in our ability to continue to deliver meaningful growth and new records in revenue and adjusted EBITDA for 2023.
With that Jim will discuss our financial results in more detail.
Jim.
Thank you Mark and good morning, everyone. It's good to be back with you for another quarter.
During the first quarter, we generated record total revenue of $293 $3 million, an increase of $22 7 million or eight 4% when compared to the first quarter of 2022.
The increase in revenue was due to an increase in total revenue per capita of nine 2%, partially offset by a decrease in attendance of 0.7%.
The decrease in attendance was primarily due to adverse weather across a number of our markets, particularly at our California parks, including during peak visitation periods attendance was also likely impacted unfavorably by the timing of new rides and attraction openings in 2023 compared to 2022.
Our pricing and product strategies continue to drive higher realized pricing, resulting in record total revenue per capita in the quarter of $86 84.
Compared to $79 54.
In the first quarter of 2022 with.
This increase was driven by improvements in both admissions per capita and in park per capita spending and.
Admission per capita increased by nine 4% to a record $48 51.
And in Park per capita spending increased by eight 9% to a record $38 33.
In the first quarter of 2023 compared to the first quarter of 2022.
The increase in admission per capita was primarily due to the realization of higher prices in our admissions projects and products, resulting from our strategic pricing efforts along with the net impact of the admissions product mix when compared to the prior year quarter.
In Park per capita spending improved primarily due to an increase in revenue related to the company's international services agreements along with the impact of pricing initiatives when compared to the first quarter of 2022.
Operating.
<unk> increased $19 7 million or 12, 9% when compared to the first quarter of 2022.
The increase in operating expenses is primarily due to an increase in costs associated with our international services agreements increased labor related costs due to more optimal staffing and an increase in legal costs, including approximately $3 $5 million related to the previously disclosed temporary COVID-19, part closures, partially offset by structural cost.
Savings initiatives when compared to the first quarter of 2022.
Selling general and administrative expenses increased $2 2 million or four 8% compared to the first quarter of 2022.
The increase in selling general and administrative expenses is primarily due to a $3 6 million increase in third party consulting costs, including one time costs of $1 $7 million, partially offset by decreased marketing related costs, along with the impact of cost savings and efficiency initiatives.
We generated net loss of $16 5 million for the first quarter, the second lowest ever for the first quarter compared to a net loss of $9 million in the first quarter of 2022, and we generated record adjusted EBITDA of $72 $4 million, an increase of $6 $5 million when compared to the first quarter of 2012.
To the.
The improvement in adjusted EBITDA for the first quarter of 2023 was primarily driven by an increase in total revenue per capita partially offset by an increase in expenses when compared to the first quarter of 2022.
Now turning to our balance sheet, our current deferred revenue balance as of the end of the first quarter was $212 8 million an increase of approximately two 3% when compared to March of 2022.
At the end of April 2023, our pass base, which includes all pass products counting premium fund card teacher increase school was at near record levels for this time of year and down only approximately 1% compared to April 2022, we feel well positioned with the current status of our pass base.
With most of our new rides and attractions opening in the coming weeks and the peak advertising and selling season approaching we are also quite pleased that we continue to realize double digit price increases on our passive products compared to prior year.
As Mark mentioned, we have a very strong balance sheet position as of March 31, 2023, our total available liquidity was $426 $4 million, including $54 $8 million of cash and cash equivalents on our balance sheet and $371 $6 million available on our revolving credit facility.
Cash flow from operations was $50 3 million for the first quarter of 2023.
We spent $69 8 million on Capex in the first quarter of 2023 of which approximately $56 3 million was on core capex and approximately $13 $5 million was on expansion <unk> ROI projects.
For 2023 is our investment estimates have been refined and completion timeline solidified we expect to spend approximately $160 million to a $175 million on core Capex, we plan to spend between $90 million and $100 million of Capex in high conviction growth and ROI projects and.
In total we still expect to spend approximately $250 million to $275 million in Capex for 2023.
We're excited about our ability to make these high confidence ROI investments and sincerely look forward to the benefits and returns from these investments flowing through to our financial results.
Now, let me turn the call back over to Mark who will share some final thoughts Marc.
Thank you Jim before we open the call to your questions I have some closing comments in the first quarter of 2023, we came to the aid of 85 animals in need.
Over our history, we have helped over 40000 animals, including bottlenose Dolphins Manatees Sea Lions seals 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 they do to operate our parks.
Also I want to call out some recent awards received for some of our parks, which underscore the quality of our assets and the enthusiasm for our parks and experiences.
USA today readers once again voted of Quantico, Orlando as the best outdoor water park in the United States.
They voted to make a roller coaster at Seaworld Orlando as the best Rollercoaster in the United States.
They've added title search at Seaworld, San Antonio as the best non roller coaster ride and.
And they voted Suffolk fire live Irish step dancing at Busch Gardens, Williamsburg, as the best theme Park Entertainment.
Additionally, Seaworld Orlando Busch Gardens, Tampa Bay, and Busch Gardens, Williamsburg, all placed in the top 10 for best theme parks in the United States.
The iron quasi roller coaster at Busch Gardens, Tampa Bay, and the Emperor roller coaster at Seaworld San Diego also placed in the top 10 for best roller coasters in the United States, while water country USA in Williamsburg, and adventure Island in Tampa also placed in the top 10 for best.
Outdoor water parks in the United States.
We are very proud that our parks are receiving this kind of recognition from readers of USA today.
We are certainly excited about 2023 with the <unk>.
With it with an exciting lineup of new rides attractions events, and new and improved embarked venues and offerings. Some of them opening in the coming weeks ahead as we start the busy summer season.
We continue to believe there are significant additional opportunities to improve our execution take advantage of clear growth opportunities and continue 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.
We expect will lead to meaningfully increase value for stakeholders.
Now now let's 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.
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At this time, we will pause momentarily to assemble our roster.
Today's first question comes from Steve question, Steve <unk> with Stifel. Please go ahead.
Yeah, Hey, good morning, guys.
Mark So real quick just first.
Housekeeping question.
Any idea in terms of the weather impact that you guys might have seen from an attendance standpoint on what there is there.
If there is any way you can kind of help us think about that or quantify that.
Yes, Hey, Steve So I can help you with that obviously.
The biggest impact was in in California, I think you've heard our competitors talk about that as well and that was over a over 100000.
In attendance last alone just in just in California, and then we have other markets, notably, Texas, and Virginia, where we had.
Some some declines and whether you know in fairness, we had a little bit of better weather and a few spots. So when you net it all out.
Basically took us from being down 1% without with the weather to probably up.
Low single digit percentages, if you didn't have the weather impact.
Okay. That's perfect. Thanks for that Mark and then second question.
Obviously, you had Abu Dhabi opening up in a couple of weeks here and we're starting to get a lot of questions from investors about what this could look like from a.
From a return perspective, and just wondering if you could kind of help us and investors understand the flow through here and how this is going to look in terms of the impact on the income statement, what the potential impact it could have and maybe what the ramp is going to look like and look maybe you guys already mature yet given the park hasn't opened but.
Just trying to get an understanding of how youre thinking about the financial impact of this new asset.
Sure.
We're really excited obviously about the park as I mentioned.
And here later this month it is a it is a licensing agreement and so we would we would share.
Obviously in some of the revenue and then a percent of adjusted EBITDA.
I would say, it's a little early.
The parks not open right now as you mentioned, but I think you can expect that's going to likely deliver.
<unk> digit millions.
This year and ramp accordingly on the go forward basis, obviously, depending on on how popular the park as we think.
Great Park I'm very excited for it so I think over the longer term certainly can expand from there.
What you can expect us to do is as it gets opened and operating we can provide.
Some updates and some more details going forward, but certainly very excited about it.
So the impact this year, you said kind of mid to upper single digit from an EBITDA perspective, and then going forward it should be higher.
Higher than that.
Yes, again, a little early to tell I'd, probably model more in the maybe the.
Low to mid <unk> for.
This year, just hard to know until till we get it open.
Low load question, sorry, low to mid millions sorry.
The next question comes from Mike <unk> with <unk> Securities. Please go ahead.
Yeah, Hey, good morning, guys.
Just maybe a clarification question on deferred revenue in.
Your season pass base I think you said at the end of April I'm, just trying to do the math here I think you said deferred revenue was up 2% at the end of the first quarter.
Youre seeing a double digit increase in past products, then you're talking about the end of April .
It was only down 1% so does that.
Does that mean, there was a pretty considerable uptick in season pass sales in the month of April am I reading that wrong.
Okay.
Well, let me let me start and then if Jim wants to add anything he can.
I think what we're seeing is.
As Jim mentioned that with the past space.
Down.
Just about 1% and remember that's versus a record last year of April of 'twenty two.
And without really many of our new rides open so that the new rides are ahead of us and we think Thats, obviously, a time that many people would look to buy a pass so I think once we get those rides up and we would expect to see.
Our pass base, hopefully sales would be going up.
Also we will have hopefully some more normalized weather so the lack of weather and the <unk> and.
And kind of the Earth.
The bad weather I should say.
The rise is not being up and put a little bit of pressure on that number so to be down 1% I think it's still a pretty good story with kind of the tailwind is ahead of us I think.
The only thing I would add Mark is we did have a nice increase in our.
Pass sales between March and April , which we're comfortable with.
Our deferred balance sheet.
Our deferred revenue, we did see an increase year over year respectable and our season pass sales and our deferred revenue. So again I think we're comfortable with where we are relative to our plan for the year.
Okay perfect that's helpful and then.
And then just on the following up on the Abu Dhabi question. Prior I think you had mentioned that that contributed to the in park per caps in the first quarter any way to break out how much of the per cap I think it was a 9% per cap growth was driven by the international agreements and is that how we should think about.
That revenue stream falling kind of in that.
In park per cap number going forward or that be broken out a little separate differently or separately.
Yes, let me let me try to help you with that so I think what you.
I'd say there is a route.
<unk> hundred $5 million or so just over that in that in that number for the quarter.
That's going to that's going to ebb and flow a little bit depending on.
Obviously that how the park performs and different things related to the revenue agreement.
So hopefully thats, a little bit of color I wouldn't necessarily model that and obviously as I said, it's going to it's going to ebb and flow a little bit here on a go forward.
Okay. Thank you.
Your next question comes from Phil Cusick with JP Morgan. Please go ahead.
Hi, one specific and one maybe bigger picture. The specific is can you tell us more about the financing for your hotels, how do you think about owning and operating versus partnering with someone outside that will matter on the capital side I imagine and then a bigger picture question. What are the big levers you think to get back to record attendance.
When you were at that record attendance and I know that was a lot fewer potential.
Was it less competitive was there more demand overall do you think that the black fish issue is still weighing on the parks how should we think about that thank you.
Yeah, Hey, Phil it's Marc I can take that so on the on the hotel financing.
We don't have a final determination on that that we can share. So when we do that is something that we can we can share on a go forward basis.
Obviously excited about.
The hotel, we're one of the few in the industry that doesn't own our own hotels or have our owned hotels. So we're excited for those possibilities.
As the attendance of Big picture, what what it takes to kind of get back to what we once did and I'll reference what we put out on some slides last quarter we did.
$25 million in attendance in 2008, which is probably what you're what you're referencing.
We're obviously.
Several million dollars less.
Than that right now so I.
I think we have to continue to do the things we're doing.
Make investments in our parks.
Certainly you've seen and we've demonstrated that we are doing that.
<unk> heard Jim talk about some of the things we're doing for this year you heard me talk about the rides and attractions. So continue to make investments in our parks.
Adding things like hotels.
Certainly I think gives us.
Should should hopefully lineup nicely with with some attendance opportunities as well.
We're refreshing.
Venues in our parks, we've added more events to our parks, if I think back to where we once were so trying to do things to drive more people, we have the CRM system, which we think.
Still really learning how to use that so there is I don't want to suggest that we've optimized that by any means we have a lot of learning still to do on that and I think that can help drive.
Our performance as well as we learned how to better utilize that so those are some.
Examples of things that we believe.
We will drive US there we've done a lot of work around conservation and rescue efforts and broadcasting those people will continue to do that we know we need to do more of that so I'm excited about that.
The prospects on a go forward basis.
And also if you just think about if that if the population of the United States.
She needs to grow and we we.
We take our share of that.
Largely as you know in markets that are I think very attractive from a from a population growth standpoint, when you are in states like Florida and Texas.
California, Pennsylvania, Virginia, we like we like those locations and so we feel poised that over the long term here. We can we can begin to grow attendance and our goal is obviously to not only get back to what we want to add that to do better than that.
Thanks, Mark if I can follow up on the hotel if youre going to open one in 25, I imagine breaking ground pretty soon it's going to be important is there a time at which youre going to tell us about the financing side. Thank you.
What I can tell you is we will.
I think when we have more to share we will we will come back to you on that.
Don't have anything to share right now.
Thanks, Ken.
The next question is from James Hardiman with Citigroup. Please go ahead.
Hi, This is Sean Wagner on for James.
Wonder if there's any quantification you can give on that right time and that you called out.
Whether the first quarter.
From that or is there a benefit to <unk> as well that you can quantify.
Yeah, Hey, Hey, Sean So what I would tell you is kind of what I, what I said in her prepared remarks, if you remember last year, we had.
A lot of the new rides were already opened in Q1.
This year.
I ride opening is following kind of a more historically traditional opening time of right around.
Memorial day or in that range into the summer obviously so.
We would expect we build Reits, because we expect people will find them attractive and want to come visit so whatever what that lift ultimately ends up being still to be determined, but certainly I think that would be a positive for that.
The year going forward once we get these rides open as I mentioned, a number of them are some of the most anticipated.
Rides out there.
Should be nice additions to our park.
Yes, the only thing.
Mark We survey our guests periodically and no <unk>.
<unk> why they would come to our parks and we had a very good survey results last year for those rides. We opened in 2022, we don't have that same level of detail on 2023, but we have a fair estimate that there was some impact and that's why we called that out.
Okay understood.
And is there any way we should think about operating expenses in SG&A this year.
Growth greater or absolute numbers kind of what are the major pressure points, there and how much of your savings that you've earmarked will come this year.
Well.
Let me just give you some high level thoughts on on costs I mean, we have as you know.
Tremendous focus on costs you heard me mentioned that I think the team that is working on that.
<unk> has done done a good job and is pacing well towards.
30% to $50 million that we set out we believe we're closer to the higher end of that and that would include efforts around SG&A.
As well as Opex. So we're going to I don't know that I have an exact number for you obviously, we would like to target.
Low single digit expense growth.
That's a good recipe over the long term, if we can grow our per caps.
And grow our tenants.
Single digits, and then keep our costs in check by by growing them at a lower at a low single digit percentage as well that generally is a good recipe in this business. So that's what we would target hopefully that is helpful.
Yes, thank you very much.
Yeah.
The next question comes from Thomas <unk> with Morgan Stanley . Please go ahead.
Great. Thank you so much.
To ask about group booking you mentioned some healthy recovery there from 2022 level can you give us an update on where that stands relative to pre COVID-19 and maybe also just on international visitation compared to 2019, and how that might be trending.
Yes, I can help you there so.
Let me start with international I mean international.
Was.
Obviously up in Q1 versus.
2022, it's still not up to.
2019, so again that is a.
Reason to be optimistic in my opinion that we are still down roughly over 40% in Q1 to 2019 and international attendance. So we have more ground, obviously to make up there there is macro factors.
That youre, obviously I'm sure aware of there.
They are things I'm sure, we could be doing better as well and so that's.
That's something that we're clearly working on so that is a.
That's a good opportunity I think for us the <unk>.
Group business is trending very well versus 2022.
We have we're well ahead of kind of.
The typical pacing we would have this time of year in head and units versus 2022 versus 2019.
<unk>.
We're in line. If you will it was still down slightly in Q1, but it's really close to being back.
2019 levels. The good news is we're driving more revenue out of the out of the.
In most cases the bookings we are doing.
Okay makes sense and then back on caught any incremental color on just maybe overall labor hours. This year, how should we think about maybe just staffing levels and how that might look during peak season compared to last year is there an opportunity to kind of pull some stuff that with the tech initiatives that youre kind of putting in place.
Yes, I would say, it's Jim prefer overall labor hours I think we feel comfortable that our staffing is somewhat improved in many of our areas. There is still a couple of pockets that we would like to see especially.
And a few of our select locations.
What is more comfortable to me is the recent labor rate.
From the Department of Labor said that inflationary pressures was about four 5% year over year, our labor rate.
Is much less than that measurably less and so I think we're pleased with at least the the labor expense side of the equation labor hours, we do have some initiatives in place to make ourselves more efficient as mentioned last quarter. There are a couple of technology projects that we look forward to at our main entrance as we.
We are doing some things with modifying our restaurants and the capital spend to make them more efficient and we're also doing some very detailed labor hour analysis, and making sure. We've got the right labor at the right place right time that will also moderate our labor hour growth year over year to support our expected attendance.
The next question comes from Eric Wold with B Riley Securities. Please go ahead.
Thank you.
Two questions I guess, one just to follow up on the last comment.
The last topic, you mentioned that youre at about 70% of the planned restaurants.
For mobile ordering can you get to a 100%. This season is that at 24.
Or maybe later.
And then.
Where does it go to the ultimate goal around that is the goal.
Actually drive reduced labor staffing in those restaurants, when it's fully implemented or is the goal more on driving the <unk>.
Higher basket size has been purchases from consumers.
Yes, let.
Let me give you just.
Some high level comments, and then Jim can fill in maybe.
And the timing that you talked about.
The goal with the mobile ordering and the App in general.
Several fold I mean, one is we want it to be.
A better experience for our guests so.
Certainly that's a key component of.
Better guest experience with an app, whether it's being able to order food or a quick queue or buy a reserve seat or.
Have a math download whatever it may be we like we like that from a guest satisfaction standpoint, we know clearly.
That people spend more when they are when they're buying through the app. So that's another advantage.
I guess, the third thing would be obviously.
Some of these mobile order locations. We believe we can staff more efficiently and ultimately so we have we have lower cost. So it's a combination of all those things that I think are kind of the goal of the App and then as far as how we're thinking about the target and the timing of that you want to talk about that yes sure Mark So.
Part of our capital spend that I mentioned, we do have a significant amount of that dedicated to changing our service style of our restaurants and as part of that install and mobile ordering and retrofitting on those legacy restaurants.
We will of course design new ones in the future to incorporate that but thats going to be a multiyear project. We've got some very major restaurants, and we're approaching the busy season. So we're somewhat limited the ability to take down restaurants. All at the same time to do some of these retrofits. So we'll do it methodically over 2023 2024, because our goal for that.
As far as the labor I would only add that while we are going to be more efficient a lot of times when we're in a constrained labor environment, we're able to take the labor and move them to other locations other revenue generating areas. So that it also helps us to maximize revenue there.
Thank you and then just a follow up question with a question.
Obviously, you've been repurchasing a lot of shares over recent years.
Interest rates have moved higher what point.
We're focused on.
Excellent capital shift towards.
Reducing the debt.
Would you see as the.
Yeah.
The optimal ratio leverage ratio over the coming years.
Yeah, Hey, Eric I mean, what I would tell you is I mean, we're obviously.
Comfortable where we are with the ratio we have now too.
Two seven.
Seven times not.
We won't be comfortable lower than that or or even higher than that but we don't we don't really guide to a target.
What we do is work with our board on.
What's the best use of cash and so we'll continue to do that going forward.
Thank you.
The next question comes from Ben Chaiken with Credit Suisse. Please go ahead.
Hey, How's it going.
In last year, you highlighted a bucket of transitory inflation costs.
When you look at the operating environment today, or those kind of transitory items, you highlighted 20 to rolling off or is it pretty sticky versus what you were seeing last year.
Yes, but I would say that we continue to be mindful of the cost pressures we have seen.
Moderation in many areas like I mentioned already about the labor I think we're very pleased at our ability to manage labor rate either through a reduction in overtime hours, if it being more efficient or be more targeted at our labor rate growth allowance than abroad shotgun approach, we're very targeted on that.
The others with cost of sales, we've had very dedicated negotiations with our vendor partners to ensure we're getting the best pricing on that so we've seen moderation there I think.
Going forward, we sort of reset or very close to that we continue to look at some of our inflationary pressures.
But in general I think we were at a new fairly good baseline.
That's helpful.
And then I think if I heard you correctly I think you said you saw a nice step up in pass sales between March and April .
And a fair assumption that this kind of correlates with.
Some attendance trends youre seeing or is there something else.
Well, yes, I think what I would what I would tell you is.
Without commenting on attendance I think.
As we get closer to opening our eyes and things like that.
That's a driver a lot of times of people.
People buying past products and so.
And we have the we have those rights are ahead of us obviously.
Okay. Thanks.
The next question comes from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, guys. Thanks for all the detail so far.
I was hoping we could maybe drill down a little bit into the into the customer buckets or the segmentation and if we think about your visitation is local and then group and then international and were probably talking a little bit more about the Florida parks have you noticed any is there any delineation and I guess I would say kind of in par.
<unk> spend among those groups or any change over the past.
369 months.
Look I don't know that were going to.
Break that out or.
Any more details I think what what.
You can.
Read into is obviously are our per caps have been have been growing in for sure.
Quarter over quarter for some time now.
And that that's with.
Different so our levels of visiting our parks throughout the year. So I think we're generally pleased with the spending that we're seeing across our across our parks in and from the folks coming coming to visit our parks.
There's a number of new things in our parks.
Specifically here in Orlando that I think are compelling to people.
When they do visit whether they're a local or a tourist.
Okay Fair enough. Thanks, Mark and then just follow up with the Abu Dhabi now opening.
Is the licensing or perhaps joint venture thing is that something that could be on the table domestically, whether it's for a larger park or even a smaller kind of sesame size things that something you'd look at.
Well look without getting into specifics I think what I can tell you is.
We certainly entertain a lot of different things and so we will we will continue to do that.
The right opportunity the right situation, we would certainly look at it whether it's domestic or international.
Yes.
Okay very good thanks.
The last question today comes from Barton Crockett with Rosenblatt Securities. Please go ahead.
Okay.
Thanks for squeezing me in.
I wanted to I was curious about.
A description of the Cajun <unk>.
Right construction.
And.
A little bit of explanation about why things are starting later this year than last year is that.
By design in other words this is the optimal time to.
And what's your new rides for less impact on the season.
Or does this reflect maybe.
Kind of labor markets and construction markets.
Just not being.
Quite as efficient or as open as they were last year. When you are able to get things out sooner.
Yes, so Brian I can take that one and if you remember most of the Reits. We opened in 2022, we had under construction.
During the Covid time period, so they were they weren't a lot of cases.
Fairly far along when when Covid hit you remember a lot of them are going to open.
2020.
And got delayed due to COVID-19. So there was less kind of runway to have to complete those rides, which was which was a pretty big advantage and why we were able to open them earlier.
Obviously.
We're opening them now in many cases here in the coming weeks and that is a more like you said kind of historically more traditional time to open new rights I mean, just like any construction projects.
We certainly have our challenges in certain rides with construction delays, whether its weather impacted our labor labor or whatever it may be so but.
You have that all in a lot of different things. So we'll work through that and I'm excited that we're going to be.
Delivering a compelling lineup for guests to enjoy.
As we move into the summer.
Okay. That's it thank you.
<unk>.
Okay.
This concludes our question and answer session I would now like to turn the call back to CEO , Marc Swanson for any closing remarks.
Thank you Ajay on behalf of Jim 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.
Okay.
Yeah.
[music].
Yeah.