Q2 2023 SeaWorld Entertainment Inc Earnings Call
[music].
Good morning, everyone and welcome to the Seaworld second quarter 'twenty to 'twenty three earnings conference call.
All participants are in a listen only mode. After today's prepared remarks, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw. Your question you May Press Star then two.
Please also note that today's call is being recorded at this time I'd like to hand, the floor over to Matthew Stroud Investor Relations.
Thank you and good morning, everyone welcome to Seaworld second 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 reached.
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 second quarter financial results and then we will open the call to your questions.
Before we begin I would like to remind everyone that our comments today will contain forward looking statements within the meaning of the federal securities laws.
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 reconciliation 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 another quarter of solid financial results.
The impact of significantly adverse weather in park venue closures and related disruptions due to construction delays and a shift in the timing of the opening of new rights during the quarter.
Our results during the second quarter further underscore the resiliency of our business the effectiveness of our strategy and the tireless efforts of our outstanding team.
Some combination of unusually hot and cold weather rain and or the fallout from Canadian wildfires impacted most of our markets during the quarter.
In park spending was impacted by the adverse weather and delays in construction projects, resulting in prolonged closures of certain in park facilities and other impact disruptions during the quarter.
Despite the unusual headwinds in the quarter attendance still grew at certain of our parks and total per capita spending increased for the 17th consecutive quarter.
During the quarter Seaworld Abu Dhabi opened.
The first Seaworld park outside of the United States.
We are really proud of this park happy.
Happy to see attendance well ahead of expectations today and excited for what this park will deliver over time.
I continue to be very encouraged by our group booking revenue trends, which are up significantly versus 2022 and 2019.
In group bookings revenue today.
Through the first six months of the year already exceeds 2019 bookings bookings revenue for the full year.
Yeah.
I'm also very excited about our remaining summer events over the next few weeks and our planned Halloween and Christmas events, which are growing bigger and bigger over the years and based on what we have planned we expect this year to be our best events yet.
I want to thank all of our ambassadors for their efforts. These past few months as we wrap up this summer season and head into our increasingly popular Halloween and Christmas events for the balance of the year.
We're also thrilled to have recently received recognition from USA today readers for having some of the best parks and attractions in the country.
Aquatic Orlando was voted best outdoor Waterpark in United States.
Our Mako rollercoaster in Seaworld Orlando was voted best Rollercoaster in the United States.
Tidal surge in Seaworld, San Antonio was voted best non rollercoaster ride in the United States.
And Celtic fire at Busch Gardens, Williamsburg was voted best amusement Park entertainment in the United States.
Several of our other parks and attractions received top 10 rankings as well.
We are proud to receive these awards and the recognition of our of our collection of parks across the country.
We have made significant investments in our business. This year and we will continue to make investments to improve the guest experience allow us to generate more revenue and make us a more efficient and profitable business we.
We expect these investments to yield very attractive returns.
We are currently planning new initiatives for the balance of this year and next year that will make us an even stronger more profitable and more resilient business.
We have high confidence in the plans, we are executing on today and for the future and our ability to deliver substantial operational and financial improvements that will lead to meaningful increases in shareholder value.
Now let me update you on the progress of some of our strategic initiatives.
First we are making good progress on our cost and efficiency related work with our dedicated internal team and specialized outside consultants and continue to find additional cost reduction opportunities.
We have revised up our target savings to $60 million from our previous target of $50 million.
The team continues to find ways for us to source, an organized more efficiently better utilized capital and technology.
Long with scheduling improvements to drive labor efficiencies and eliminate.
Necessary and or redundant expenses.
We expect these cost savings initiatives, along with our own revenue enhancement initiatives will lead to increased margins over time.
Second on the digital transformation front, we continue to build out our CRM capabilities, which are still in their infancy and rollout and improve our mobile app.
On CRM, we see significant obvious.
Upside opportunities from ultimately ultimately having.
More rich data about our pass members and guests and being able to more effectively engage analyze behavior and tailor and target messages and offerings.
Yeah.
In regards to the mobile App. We are pleased it is being used by an increasing number of guests in our parks to improve their in park experience.
The App has now been downloaded more than $6 3 million times up from 5 million times at the end of Q1.
Total revenue the total revenue generated on the App is up over 200% compared to prior year and we are now seeing a 20% plus increase in average transaction value for food and beverage purchases made through the app compared to point of sale orders.
Mobile ordering has been expanded to additional restaurants and is now operating at approximately 75% of our target restaurants.
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 are continuing to refine our current capabilities and develop additional capabilities to further increase engagement and optimize the experience.
Third as you know we have strategically increased our park specific ROI investments. This year in an effort to drive incremental revenue <unk> decreased cost through expanding enhancing and improving our food and beverage and retail offering.
<unk> infrastructure anesthetics, and generally improving the guest experience and journey around our parks and facilities.
As noted some of these refurbishments and upgrades have taken longer than planned.
Which negatively affected in park per caps in the second quarter.
While we are disappointed with the delays and disruption in these capital projects caused.
We're excited to realize the full benefit of these investments as they come online over the remainder of the year.
We are well underway planning for additional projects in 2024.
That will further enhance the guest experience and are expected to yield attractive ROI.
Fourth on the International front Seaworld Abu Dhabi opened in late May and attendance has been meaningfully above expectations.
We are pleased to see how strong. This park is open and look forward to growing to its growing contributions over time.
Continue to make progress on discussions related to other international opportunities and expect to have more to share in coming quarters.
On the hotel front, we also continue to make progress on our plans. We are currently refining our design planning on a first hotels and.
And we expect to begin opening in 2026.
Continue to work on site selection for additional hotels across our portfolio, we hope to share more specifics in future quarters on what we expect to be really exciting and value creating projects.
Overall I am very excited about the significant investments, we are making and in many of the initiatives we have underway across our business that we expect will improve the guest experience.
Wow 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 we will deliver substantially improved operational and financial results and meaningfully and meaningful increases in shareholder value.
Let me briefly comment on our balance sheet, which continues to be strong.
Our June 32023, net total leverage ratio is 261 times.
And we had approximately $518 million of total available liquidity, including over $146 million of cash on the balance sheet.
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.
Maximize long term value for shareholders.
Let me also comment on our debt repricing activity last week.
Last week.
We launched an opportunistic debt repricing on the back of strong credit markets and tightening credit spreads.
As you know right. After we launched our repricing activity Fitch downgraded the U S government credit rating, which among other factors negatively impacted credit markets.
While we have the ability to reprice, our loan to a lower interest cost.
It was not at the level, where we and our board expect pricing to be and as such we have canceled the opportunistic repricing and plan to wait for a better time and market conditions to reprice our debt.
Looking ahead, we are excited about our events planned for the remainder.
Of the summer over the next few weeks.
And our incredibly popular Halloween and holiday events, which as I've said have growing bigger and bigger over the years and based on what we have planned we expect this year to be our best events yet.
We are also already launched 2024 passes in one park and plan to launch 2024 passes including fund cards across the remainder of our parks over the coming weeks.
For 2024 passes will continue to provide great value to our pass holders with exciting benefits and reasons to visit.
We're also in the middle of planning for 2024 and are extremely excited about the new investments and initiatives we have in store for next year.
That we expect will improve guest experience increase revenue and drive further efficiencies and margin expansion.
We're also excited about our lineup of 2020 for rides attractions events and or other experiences or we have something new plan for every park.
We will have more to say about 2024 in the coming weeks.
Again to announce more specifics for each park.
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 second quarter, we generated total revenue of $496 zero million dollars a.
A decrease of $8 $8 million or one 7% when compared to the second quarter of 2022.
Increase in revenue was due to a decrease in attendance a 2.0% partially offset by an increase in total revenue per capita of 0.3%. The decrease in attendance was primarily due to significantly adverse weather, including some combination of unusually hot and cold weather rain and or the fallout from Canadian wildfire.
<unk> across most of our markets, including during peak visitation periods.
This was also impacted unfavorably by the timing of new ride openings in 2023, compared with 2022 as a reminder, in 2022 most of our rides opened in the first quarter, whereas in 2023 many of the rides open later in the second quarter.
Our pricing and product strategies continue to drive higher realized pricing, resulting in record total revenue per capita in the quarter of $80 80.
Compared to $80 59 in the second quarter of 2022 admission per capita was essentially flat at $43 96.
While in park per capita spending increased by 0.6% to a record $36 84 in the second quarter of 2023 compared to the second quarter of 2022.
The decrease in admission per capita was primarily due to the net impact of the admissions product mix, partially offset by the realization of higher prices in our admissions products, resulting from our strategic pricing efforts when compared to the prior year quarter.
In Park per capita spending improved primarily due to pricing initiatives when compared to the second quarter of 2022.
In Park per capita spending was impacted negatively by factors, including weather closures and disruption related to construction delays at certain in park locations.
Operating expenses increased $5 $2 million or two 7% when compared to the second quarter of 2022. The increase in operating expenses is primarily due to noncash increases in self insurance reserve adjustments and an increase in nonrecurring contractual liabilities and legal costs, resulting from the previously disclosed.
As temporary COVID-19 park closures, partially offset by the impact of implemented structural cost savings initiatives when compared to the second quarter of 2022.
Selling general and administrative expenses increased $12.01 billion or 21, 4% compared to the second quarter of 2022, the increase in selling general and administrative expenses is primarily due to a $7 $1 million increase in nonrecurring third party consulting costs for strategic initiatives, along with an inquiry.
And marketing costs, partially offset by the impact of implemented cost savings and efficiency initiatives when compared to the second quarter of 2022.
We generated net income of $87 1 million for the second quarter compared to net income of $116 6 million in the second quarter of 2022. The decline in net income is primarily related to the increase in interest expense when compared to prior year.
We generated adjusted EBITDA of $224 2 million, a decrease of $10 $2 million when compared to the second quarter of 2022 the.
The decline in adjusted EBITDA for the second quarter of 2023 was primarily driven by a decrease in revenue when compared to the second quarter of 2022.
Looking at our results for the first half of 2023 compared to 2022 total record revenue was $789 4 million, an increase of $13 $9 million or one 8%.
Total attendance was $9 5 million guests a decrease of 149000 guests or one 5%.
Net income for the period was $70 $6 million.
Line of $37.0 million and adjusted EBITDA was $296 $7 million.
<unk> of $3 $7 million or one 2%.
Now turning to our balance sheet, our current deferred revenue balance as of the end of the second quarter was $222 $7 million a decrease of approximately five 5% when compared to June of 2022.
At the end of June 2023, our pass base, including all past products was at a record level for this time of year and up approximately 1% compared to June 32022.
We're also quite pleased that we continued to realize double digit price increases on our past products compared to prior year.
As Martin mentioned, we have a very strong balance sheet position.
As of June 32023, our total available liquidity was $518 $3 million, including $146 $7 million of cash and cash equivalents on our balance sheet and $371 $6 million available on our revolving credit facility.
We spent $75 $8 million on Capex in the second quarter of 2023 of which approximately $49 $2 million was on core capex and approximately $26 $6 million was on expansion and or ROI projects.
For 2023, we expect to spend approximately 160 million to $180 million on core Capex and we plan to spend approximately $100 million on capex on high conviction growth and ROI projects in total we expect to spend approximately $260 million to $280 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 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.
In the second quarter of 2023, we came to the aid of 96 animals in need.
Over our history, we have helped over 40000 animals, including I don't know Dolphins manatees Sheila.
Sea Lions seals.
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 our ambassadors for all that they do operate our parks.
We are excited about the remainder of 2023 as we finish out the summer and head into our fall and winter events.
<unk> popular Halloween events are starting next month at our Seaworld Busch Gardens, and Sesame place parks.
Recall that in 2022, Seaworld Hollow stream was voted one of the 10 best theme Park Halloween events by USA Today 10, Best Reader's Choice Awards. The Halloween events will be followed by a Christmas events that start in November .
As a reminder, Seaworld Orlando's Christmas celebration was voted number one best theme Park holiday event by USA Today 10, Best Readers' Choice Awards.
We are proud of these events and the recognition we have received from our guests and we expect this year to be our most exciting events yet.
We continue to strongly 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 our ability to deliver significantly improved operating and financial results that we expect to lead to meaningfully increase value for stakeholders.
Now, let's take your questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
So with Jonathan the question queue. Please press Star then two.
And then just as taking as many questions as possible. Please limit yourself to one question and one follow up if you have additional questions you may reenter the queue.
At this time, we will pause momentarily to assemble our roster.
Today's first question comes from Steve <unk> with Stifel. Please go ahead.
Yeah, Hey, guys good morning.
So obviously weather was seemed like it was super impactful during the quarter.
We've heard similar comments from some of your peers.
<unk> Disney.
So I guess the question is do you have.
Do you have a ballpark idea of what the weather impact actually was on your attendance in the quarter and maybe you can you help us think about.
What the parks have looked like on days, where weather wasn't impactful just just trying to understand how the how the underlying demand for the parks.
And spend levels look like at this point thanks.
Yeah, Hey, Steve I can I can take that question.
So.
Look there's obviously a lot a lot of factors that we look at on attendance I would say one in addition to weather one of the other things that we.
<unk> this quarter was the timing of the ride openings.
Why that's important is if you remember last year, we had.
Things opening earlier in the year and this year they opened.
Later in the year. So we did not have as many rides opened in April and May primarily as we did last year. So when you look at the kind of the combination of weather and the delay in the timing of those ride openings.
We adjust for those and look it's an estimate obviously, but if you adjust for those tenants would have been up a little bit in the quarter.
And then on your on your second.
Question on unlike for like days.
I think what I would say there when we look at like the month of June .
That is when we had.
The rides open.
Things like that we did see.
A small increase in attendance there on like for like days.
Okay Gotcha.
Okay.
And then second question is that in the previous couple of earnings releases, you've talked about 23 potentially being a record for revenues and EBITDA and that language was at least I missed it what's kind of removed this time around.
I assume a lot of that is because of the weather impact you encountered during the second quarter, but is there anything else that is kind of making you take that language out and.
Not sure if you'll comment on this but any color around how July trends were and it looked like whether it might've been somewhat of a headwind in July as well thanks Mark.
Sure I can try to help you out there so.
Your question about July obviously.
You kind of nailed it the weather continues to be a significant impact we saw a significant increase in the number of what we call weather impacted days.
Having said that revenue was down about three 4% so.
We did as well as we could give given kind of the weather impacts.
In the month of July I will tell you also that per caps were up so in July so.
That's a little color on July .
As far as.
How do we think about the rest of the year.
Thank you.
We have not called it out and simply that just being a little cautious. This year has been a lot of weather impacts as we've noted here.
And then some of the other factors we called out.
Guess what gives me.
Some optimism as I think about the rest of the year as we're coming into.
Popular events, so we know our Halloween and Christmas events of our popular with a lot of our guest and then if you remember last year in Q3 and Q4, we did have pretty meaningful weather impacts from combination of the hurricane slash tropical storms and then also the <unk>.
The poor weather around some of the holiday periods, especially in November and December So who knows if that will repeat hopefully that doesn't repeat and I think if that doesn't repeat that that would be a good thing, but our events in our lineup I think are strong.
We're going to get some of these things that have been delayed in our parks opened which which should be good for us.
<unk> venues that we talked about that have been delayed and we expect to get some of them open as well. So there are some I think some tailwind, but we'll just have to see.
Where that shakes out.
The next question comes from Michael Swartz with Janice. Please go ahead.
Hey, good morning, guys.
Maybe I think you laid out commentary that you are now expecting $75 million in cost savings, which is up $25 million or so versus your prior commentary.
Give us a little sense of where those incremental cost savings are coming from and the.
The timing in which you expect to achieve them.
Yeah, Hey, Hey, Mike just to.
Reiterate I think what I said was $60 million up from $50 million. So just just.
If you go back to my prepared remarks, so just clarifying that look what I'll say is.
We have a continual focus on.
Driving efficiencies in the business we have.
Have had a lot of work going on that.
Couple of months ago.
We promoted two of our most senior leaders to help oversee our park operations and I think I think they're doing a great job of.
Finding labor efficiencies in our parks and other efficiencies in how we operate.
So those are those are the types of things that we're going to continue to find it.
In the business and I can tell you we work on it on a regular basis and based on.
What I saw in July I saw I saw some of that that come through.
We will see the exact timing going forward I don't know that I'm going to comment on that but obviously.
We feel good about the plans and feel good about that.
We are doing there.
Okay, and then just if I might.
Just add you know, Mike you're starting to see some of the results of our strategic initiatives, including our sourcing one that we referenced in the call.
When you look at our cost of sales for example for food that's down significantly.
For the three months and we're seeing the benefit of those types of investments.
Materializing and cost reductions throughout the company.
Gotcha, and then just a follow up on <unk>.
<unk> World Abu Dhabi, maybe little more color on what <unk> seen to date I know, it's very early and then if I'm not mistaken you see the benefit from the licensing fees I think in the in park per caps, what did that add to the quarter.
Sure so.
Look we're as I said in the prepared remarks, we're pleased with the.
The opening of the Seaworld Abu Dhabi.
If you get a chance I highly recommend it's a long way away, but highly recommend you.
Ticket visit to it it's really one of a kind park and just really exciting place to visit and the attendance. There is obviously above expectations and it's just an exciting product. It's still very early on like like you noted I mean, it didn't even open until until may so.
The.
Impact for the quarter.
It's probably around 700000, its not a super huge amount.
And we will see where that ends up over time. It is a licensing deal and we share in royalty and whatnot, but we're excited I think what what it what it does for the brand.
You know kind of the art of what's possible with our brand.
And I think as people see that park.
And understand the know how and the experience we can bring to helping construct to park, helping set up of park, helping operate at whatever it may be we bring that experience and I can tell you folks that have gone over and seen it I think that is certainly will help us as we think about other international.
<unk> opportunities and people see what is actually opened.
The next question comes from James Hardiman of Citi. Please go ahead.
Hey, good morning, Thanks for taking my call for Mark just wanted to clarify a couple of things you said.
It sounded like some of the delayed ride opened up June was may be a better month in terms of visitation, but then.
I think you said that July revenues were down three 4% per caps up so presumably attendance, we found something more than that three 4% or are we just looking at weather or are there any any other I guess a is that sort of right that maybe things got better and then a little bit worse from an attendance perspective.
And if so.
Else outside of weather worth calling out here.
Hey, James So I would say the weather was was.
A meaningful significant factor in July I mean, I think that's been pretty well.
Kind of all over the news right. So.
When we look at the what we call kind of a number of weather impacted days it was up meaningfully.
To last year, and then if you look kind of over.
The last kind of <unk>.
<unk> 14 years.
Among the highest if not the highest.
It's definitely a big driver in July .
For that.
Okay. That's helpful. And then maybe how do we think about season.
Season passes so.
You said season pass base.
Is that record levels I think you said pricing is up but.
But deferred revenues are down 5%, maybe help us bridge the gap there and then it sounds like your path.
You mentioned one park is already filling 2020 fours.
Help us understand how that timing compared to normal.
We should think about season pass timing for the <unk> 'twenty for us.
I'm, sorry season pass pricing for the 24th.
Sure so.
Look on the on the timing of the season passes.
We launched the season pass at our Sesame Park in Langhorne outside of Philadelphia that that park is probably a little bit more traditional in the sense that it.
It kind of largely opens in the spring and kind of shuts down around Christmas.
It makes sense that you would launch that passed.
Kind of about now and Thats pretty consistent with prior years and I think in general Youre going to see most of our launches.
<unk> are very much <unk>.
In line or pretty close to what we've done in prior years, and we typically would look to start launching <unk>.
Around this time over the next few weeks into September and things like that so that's not atypical.
Look on the on the on the deferred revenue. There is obviously multiple things. Besides pass that are that are in our deferred revenue and we know.
When you when you have some weather impacts.
Harder to.
Estimate but.
I'm sure we lost pass sales.
When the weather wasn't good.
So that can have an impact as well on that number and then you just have single day tickets and things like that that people buy in advance that that sit in our deferred so theres a lot of different factors in there.
The next question comes from Thomas <unk> with Morgan Stanley . Please go ahead.
Thanks, So much yeah just.
Just following up on your point related to the construction timing delays it sounds like not all of that has fully normalize either in July is that right and when do you think everything kind of comes back online.
And when does that ease.
And when does that ease.
Yeah, Hey, Morgan Youre right. So unfortunately, we still have.
A couple of things still still closed.
In particular, one of R. R.
Probably our biggest restaurant out in our Seaworld Park in California.
Remains closed we expect it to open.
Hopefully anytime now.
Some of the others again.
I expect that they will open this year I don't I don't know the exact timing theres been obviously.
Delays here that we're not real proud of.
I can tell you we're working as quickly as we can to get those open but certainly unfortunately not open.
A number of things not opened in July .
As I mentioned.
Per caps were up in July .
Even even with that.
So that hopefully is going to be.
A tailwind when these things open.
Sure.
We target.
Pretty attractive returns when we when we do these refreshes and new venues in our parks. So we're excited once they get open and we just got to get there.
Okay makes sense, and then group booking trends already being above 2019 is that a pacing number for revenue yet to be recognized or are we talking about six months revenues that have already been booked maybe just provide some additional visibility into kind of that second half and what youre seeing in terms of.
The demand there that would be really helpful. Thank you.
Yes, the way I would think about it as kind of sales that are on the books. So not all of those people have shown up but like we have a bookings.
For the full year and those are those are more than what we saw in 2019. So some of those people have common obviously, some some still to come.
The next question comes from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, guys.
I know you're not ready to share all the details of the of the hotel plans, yet but is there any way for us to think about.
Balance sheet commitment and kind of structure of those deals in terms of is it going to be all on balance sheet are you going to consider joint ventures or things like that with.
Potential brand partners.
Hey, Chris I can tell you that.
Yes, I don't have anything specific to share with you I think.
That is.
We've looked at a number of different a number of different options I think we feel really good about operating the hotel.
But as far as how we how we finance that and how that looks.
We'll come back to you. There's obviously multiple ways, we can do that and we want to make sure. We do the one that's best for shareholders in most opportunistic.
Okay Fair enough and then just a quick follow up on some of the.
The delays on the rides and attractions that you mentioned in Q2 were those also all weather related issues or is there.
Was there some kind of.
Our supply chain issue, where labor or.
Yeah anything like that besides weather.
Look I mean, depending on what what Youre, what youre talking about.
I would say there's multiple factors.
We've obviously got to do a better job, but also there's things with vendors and supply chains.
You get even like permitting and inspections.
These things come down to just moving around a little bit one thing we hear from some of the places we operate is that the folks.
And the municipalities or are working really hard, but they have a lot going on and so.
We.
I think there is a time some delays in processing permits and things like that but it's a myriad of factors.
Whether whether never helps I would say whether it probably has less certainly a lot less to do with embark things because those are typically more indoors, but certainly on an outdoor ride or something whether whether it can have an impact.
The next question comes from Eric Wold with B Riley Securities. Please go ahead.
Thank you good morning.
So you mentioned that weather.
Also likely impacted season pass sales the past speeds.
In the quarter.
Difficult to always know.
Why someone doesn't purchase or renew but anything you can glean from <unk>.
Renewal rates kind of in the face of.
Higher <unk> prices and any pushback anything surprising you positively negatively around those trends.
Yeah.
I would say is.
We.
We offer a really attractive past product.
And it gives you a number of benefits gives the ability to visit throughout the year I think when you couple that with the investments, we're making in the parks, whether its rides or new venues.
Events things like that.
That is a compelling reason to buy in a compelling reason to visit so I think as long as we continue to do that.
That's going to be attractive to people and it certainly.
Very good relative value, especially compared to things like going to a concert or something like that and buying a season pass two apart.
Ours is a tremendous value.
When you consider that.
The amount of times, you can visit and how long you can stay in the park and things like that so we will continue to emphasize those things I think it's a great product.
Obviously, when when rides and things or Refurbishments get delayed.
Again hard to.
Estimate exactly.
What the impact is and like you mentioned the weather hard to estimate that but I think I'd like to think that.
Things are better in those areas you'd like to think you'd have more more sales but.
Regardless of that what we can control is.
Offering a good product and continuing to invest in our parks and giving people a reason to visit.
Got it and then kind of a follow up.
Curious on what Youre seeing.
Hourly wage rates kind of around the system any any pockets of.
More difficulty in terms of wage pressures or anything youre seeing.
Regions, where it still may be difficult to getting everyone you want to have them apart.
Yes, let me just comment kind of call.
Kind of overall and I think Jim can give you the kind of the specific labor number I mean look there is there are still pockets of labor that are challenging I think year over year, it's in a better spot.
There are others have noted that you still have pockets of.
Trade positions lifeguards things like that that are challenging, but certainly I think we feel better this year than last year, and then as far as the rates and Jim.
Mark.
Thank you.
The wake of the Bureau of Labor Statistics talk about leisure and hospitality up five 4% year over year.
I think we're very pleased that our wage rates are very moderate in fact, they are actually down year over year overall for hourly labor. So I think we're in a very good position with our labor management in this topic.
The next question comes from Phil Cusick with Jpmorgan. Please go ahead.
Hi, guys, a little bit of a follow up on the on the spending side you ticked up Capex again is this due to the delays or can you dig into the incremental projects either maintenance or new projects that youre doing how quickly can that extra capital impact the business.
And then second of all can you discuss competition in the theme park market, especially in Orlando, what are you seeing from a pricing and promotion standpoint, among your peers. Thank you.
Okay.
Hey, Phil.
Let me start with your second one I think on the competition in Orlando.
We've been in Orlando since.
$19 73 with Seaworld a lot of parks have obviously opened since that time, we have great competitors in the area, obviously Disney and Universal.
Very good product.
Hi.
I like our product that's differentiated.
It's different.
We offer I think a very tremendous value at our parks as well.
Maybe a little bit of a lesser REIT experience than you might find that some of the other parks in the area and we added a waterpark aquatic <unk> back in 2008, and we've added discovery Cove back I believe in 2000, and so we like our ability to.
B here and compete here and we know our competitors are here, but I think theyre also rational competitors.
We're all going to.
I think we all benefit from more people coming to the area.
Certainly that's something that we'll continue to.
Differentiate our product and hopefully take advantage of growing trends in Orlando over time I know that.
Ebbs and flows a little bit, but I think over the long term Orlando remains a desired destination.
And on the capital front.
I think over the time, we continue to try to focus on spending on average about $150 million net core capex.
Over a period of years I think what we're seeing is a refinement of our plans for $2004 25, and 26 as we refine our attractions menu. We also as mentioned had some delays in ROI projects and I think what we've learned is the need to start to do some design and prep work much earlier. So we're may.
<unk> some allowance for that so that we can get those projects for 2024 ready to go much sooner next year.
Thanks, guys.
The next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.
Hi, Thank you for taking my question I wanted to start by asking on capital allocation I know there is not much more you can say on the hotel side of things, but it does seem like you'll also reaching kind of critical mass in terms of your buyback from an ownership perspective, but still a lot of cash flow generation is im curious how youre thinking about capital allocation priority is getting full.
Whether that be you know paying down debt or potentially a dividend or anything else.
Hey, Lindsay, it's Marc I can.
I can help you with that question. So look we put it into.
A couple of different buckets, obviously.
One of our main.
The main priority is to invest in the business.
New things in our parks every year.
We've demonstrated that over the last several years here, we have a plan to continue to do that so that'll continue to be a kind of a hallmark of our capital allocation will be investing in our business.
We've talked today, a little bit already about kind of the high growth ROI initiatives that we continue to invest in our parks.
Again, I think as long as those opportunities remain I think are our board is supportive of making those type of investments on those initiatives as well and then you kind of come to kind of your next set of things you can do and thats, whether its paying down debt or buying back shares or or paying a dividend.
Whatever strategic alternatives whatever it may be what I would just tell you as well.
We continue to work with our board on that.
Certainly our board is focused on maximizing value for shareholders and that's something that we will continue to work with them on what is kind of the best use.
The cash going forward.
That makes sense. Thank you I just wanted to follow up on Phil's question on Orlando, but slightly different focus you know theres been a lot of headlines this quarter like Disney attendance.
So it sounds like reading between the lines. They were down maybe mid single digit percent year on year in attendance in Orlando and they kind of called out.
Impact of kind of an international trade actually happening I'm curious if that something that you think you've been seeing and whether that might be an impact that might continue into <unk> travel kind of continues to ramp up in that quarter.
Yes, I mean, I don't know that I'm going to comment specifically.
On our on our kind of Orlando parks other than what I've already said I mean, certainly.
I think it's been.
And the news that people are at least feeling an ice age are traveling more internationally. It seems like so that is what it is again I think we will continue to invest in our parks.
You need to have reasons to visit our parks specifically in Orlando.
I mentioned in my prepared remarks that the Christmas event here in Orlando is really well done and I think that's something that people can come out and see so yes.
We will continue to be here and.
In the market.
Good again at a place where people to visit in this area.
Yeah.
The next question comes from Robert <unk> with Keybanc capital markets.
Hi, Yeah. Thanks for taking my question as we look at the attendance in the second quarter is there any way you can kind of break it out between group versus international versus domestic non group attendance trends.
Okay.
Well, let me let me just.
Robert Let me give you just a comment or two on that I mean.
Hi.
International relative to 2019 continues to be to be down.
Well it gets down in kind of that 50% range. So when you look at a kind of a run rate basis on an annual basis.
Over 1 million people.
But I think <unk> heard.
At least one of our competitors here in Orlando talked about international.
International being down for them as well so I'm not.
International the group business, we talked about the bookings.
The revenue bookings are strong and so.
Hopefully hopefully that continues so you have a little bit of a mixed bag there with those two and as far as dislike domestic.
What I'll call tourism, if you will or domestic kind of visitation.
Into the markets when we look when we look.
Across all of our parks are domestic attendance is up a little bit.
And then what for the quarter, what whats down is more in your kind of people that are closer in your local same day and that kind of makes sense. When you think about it because those are the folks that have the ability to react to whether the quickest and things like that can delay their visit if need be.
Understood and then just a quick follow up on Abu Dhabi I think you mentioned $700000 in the quarter I think last call you were talking about a low to mid single digit million dollar EBITDA impact for the year are there any updates there given attendance is trending better than you expected.
Hey, Robert I would still use that low to me.
Loaded.
Mid single digit millions, we'll just have to see the park Park just.
It's too early really knew we're excited about it obviously, but I think you can stick with them.
Kind of the guidance or modeling, we we gave you last time last quarter.
The next question comes from Barton Crockett with Rosenblatt. Please go ahead.
Okay. Thanks for taking the question.
I was interested in.
Hearing if you arent detecting any <unk>.
Impact on the.
<unk>.
Attitude of your customer base from all of the experience that we've had in all of the media reporting around climate change.
Consumers are being asked to buy a season pass which is the financial commitment that exposes them to weather.
Weather was pretty.
Pretty bad this year, a lot of media reporting about this being kind of a new normal.
Is this impacting people's desire to buy a season pass and what you see from your customer base.
Hey, Barton I can.
Try to give you an answer on that.
Do the best they can.
I think as I said wet weather certainly impacted the quarter.
It impacted July so we know there is obviously because of whether theres people, who likely did not buy a pass or obviously buy a ticket or come to visit.
I don't know what that means over the long term I would like to think that whether eventually normalizes over some longer period of time.
We'll have to see I think we.
Just have to be cognizant of.
Of years, where we have.
Difficult weather like this year, we have to try to give people still reasons to come visit we can try to make the park more more comfortable on a hot day or or tried to do other things, we can heat or pools, if we had to and our water parks in some cases.
So we may have to think about things differently.
A little bit, but I think we're still very early to.
To say it.
Theres some seismic shift here in how people think about it I think hopefully these things will normalize out over time.
Okay.
This concludes our question and answer session I would now like to turn the floor back to Mark Watson for closing remarks.
Thank you J.
On behalf of Jim and the rest of the management team at Seaworld Entertainment when I. 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.
Thank you we look forward to speaking with you next quarter.
The conference has now concluded. Thank you for your participation you may now disconnect your lines.
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