Q3 2023 SeaWorld Entertainment Inc Earnings Call
[music].
Good morning, and welcome to the Seaworld Parks in Entertainment Q3, 2023 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 todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one to.
To withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Matthew Stroud Investor Relations. Please go ahead.
Yeah.
Thank you Chad 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.
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 third 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 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'd 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. Despite the impact of unusual and significantly adverse weather and our peak operating season across most of our markets.
Our results during the third quarter continued to demonstrate the resilience of our business the effectiveness of our strategy and the tireless efforts of our outstanding team.
We are particularly pleased to continue to see strong results from our focused efforts and investment in our in park offerings. As we grew in park per capita spending for the 14th consecutive quarter to a record level during the quarter.
We are excited to see the continued results of our ongoing work in this area.
And in the coming quarters into 2024.
Our relentless focus on cost management also continued to deliver as we improved adjusted EBITDA margin on a year over year basis for the quarter.
We are continuing to execute against our previously discussed cost initiatives and expect to continue to see the results of these efforts in the coming quarters into 2024.
To think our ambassadors across our parks for their dedicated efforts to welcome and serve our guests during the busy summer season.
We just completed another successful Halloween season at our parks, featuring our award winning Halloween events.
We are pleased to have grown per capita spending in October and after adjusting for the calendar shift that resulted in one last Saturday compared to prior year, we estimate of tenants and revenue would have grown as well.
We are proud of the continued strength of our Halloween events and the popularity that they continue to build with our guests.
We're also proud of the recognition of these events are receiving a seaworld Hello Scream was voted the best Halloween theme Park event by USA Today 10, Best Readers' Choice Awards.
Yeah.
As we enter the holiday season, we will begin our award winning Christmas events, and most of our Seaworld and Busch Gardens, and Sesame Park later this week.
Our Christmas events feature exciting live entertainment delicious and unique food and beverage offerings and holiday shopping for guests of all ages.
Looking beyond the holiday season and into 2024, we are pleased to see 2024 revenue bookings trending up double digit percentage ahead of prior year for both 2024 groups and our discovery Cove property.
In addition, we recently launched our best past benefits program ever, which we expect will help drive increases in pass sales and a strong pass base for next year.
We continue to make progress on our strategic growth initiatives related to hotels international expansion and our digital activities. We also have made meaningful incremental investments across our parks. This year that we expect to fully benefit from in the coming quarters.
We look forward to sharing more on these exciting value, creating initiatives and investments in the coming quarters in the 2024.
We have proven quarter after quarter that we have a strong and resilient business model and we still have significant opportunities to improve and grow our revenue and profitability.
We operate in an industry end markets with growing demand trends over the long term and we have significant available guest capacity across our park 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.
Yeah.
We have made significant investments in our business. This year and we will continue to make investments to improve the guest experience, allowing us to generate more revenue and make us a more efficient and profitable business.
We expect these investments to yield highly attractive returns.
And we are planning new initiatives for next year that will make us an even stronger and more profitable and more resilient business that we expect.
We will ultimately lead to meaningful increases in shareholder value.
We recently announced our parcel lineup of new rides attractions events and upgrades for 2024.
This lineup includes among others.
Penguin track and unforgettable family launch coaster adventure at Seaworld Orlando.
Phoenix rising.
<unk> roller coaster at Busch Gardens, Tampa Bay.
A fully restored Loch Ness monster coaster with all new thematic and experiential.
Experiential elements at Busch Gardens Williamsburg.
Duels of the see the jelly fits the jellyfish experience.
And all new immersive aquarium at Seaworld San Diego.
Catapult falls the world's first launch flume coaster at Seaworld San Antonio.
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 and continue to implement these cost reduction opportunities as evidenced by.
The third quarter, adjusted EBITDA margin of 48, 6%, which exceeded the prior year despite lower revenue.
The team continues to find ways for us to source and organized more more efficiently better utilized capital and technology, along with scheduling improvements to drive labor efficiencies and eliminate unnecessary and our redundant expenses.
We expect and are confident that these cost savings initiatives.
Along with our revenue enhancements will lead to increase margins over time.
Second on the digital transformation front, we continue to build out our CRM capabilities, which are still there.
Were still in their infancy, and rollout and improve our mobile app.
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.
By more than.
Seven.
Sorry, the App has now been downloaded more than $7 5 million times up from $6 3 million at the end of Q2.
Total revenue generated on the App is up 136% compared to prior year and we are now seeing a 26% increase in average transaction value for food and beverage purchases made through the app compared to point of sale orders.
Mobile ordering is operating at approximately 75% of our target restaurants.
We are excited about the potential of the app and its ability to improve in park guest experience drive increases in revenue and decreases in cost.
We're continuing to refine current capabilities and develop additional capabilities to further increase engagement and optimize the experience.
Third as you know.
We strategically increased our park specific ROI investments this year with the goal of driving incremental revenue and are decreasing costs through expanding enhancing and improving our food and beverage and retail offering park infrastructure anesthetics and generally improving the guest experience and journey around our parks and facilities.
As we said last quarter some of these refurbishments and upgrades took longer than planned which negatively affected in park per caps in the third quarter. However, these venues are now open.
And we are realizing the benefit of these investments.
We have additional projects planned in 2024 that will further enhance the guest experience and are expected to yield attractive ROI.
As we speak to some of our investors we have learned that there may be some confusion about this incremental capital spend.
As a reminder, we break our capital spending into two categories core Capex and expansion Slash ROI capex.
Core capex as the amount of Capex that we believe we need to we.
We need to spend to maintain our current assets and execute on our annual ride and attraction strategy. For example, opening new rides and attractions across our parks each year.
The average amount we estimate we need to spend on core capex is approximately $150 million to $180 million annually.
We believe this amount of spend is sufficient to allow us to grow our business at a normalized growth rate over time.
Spansion ROI capex.
It's capex related to specific projects that we have high confidence, we will generate attractive ROI typically 20% plus cash on cash returns.
This is capital spending that we believe will allow us over time to grow adjusted EBITDA in excess of normalized growth rates. Historically, we have allocated approximately 25 million to $50 million each year to this type of capital spending.
Based on our incremental I'm, sorry, based on our increased cash flow generation in recent years.
This year, our board challenged the management team to identify and present, a comprehensive list of the high confidence.
Projects across the enterprise.
Based on discussions with our board, we aligned on spending an additional roughly $80 million this year on such high confidence projects.
We hope this clarifies for people how do we think about capital spending ROI and uses of excess cash flow.
Fourth on the international front attendance.
At Seaworld Abu Dhabi continues to exceed original expectations.
We continue to make progress on discussions related to other international opportunities.
To have more to share in coming quarters.
Fifth on the hotel front, we also continued to make progress on our plans.
As we mentioned last quarter, we are refining our design planning on our first hotels and we expect to begin opening in 2026.
We identify the locations of the first two hotels and we will be offering more details about these property soon.
We continue to make progress on projects in other markets.
Subsequent to opening our first two hotels, we are planning to continue to open additional hotels in the years following.
We've also received questions from some of our investors about our hotel strategy.
As you all know we have significant excess land across most of our parks that is currently under utilized.
We have a unique opportunity to build highly compelling hotels that will integrate with our parks allow us to capture profits from our guests that are currently staying at other properties in.
The increased length of stay at our properties.
Offer more compelling and vacation packages.
Up sell and cross sell and gas.
Increase loyalty and.
And generate an attractive ROI.
Some investors have asked how we might finance these hotels.
While cash is fungible, we have several options given the nature of these projects.
We expect to finance these hotels with a combination of debt and cash from our balance sheet.
Given our expected cost of capital.
And the expected return.
Expected returns on these hotel projects, we expand it expect to generate north of 20% returns on equity for these projects.
These are highly compelling projects that are long overdue.
Many of you are fully aware of the value. These types of hotels provide to our peers in our various markets including in Orlando.
I'm very excited about the significant investments, we're making and the many initiatives we have underway across our business 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're building, an even stronger and more resilient business and we are confident we will deliver substantially 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 September 32023, net total leverage ratio is 256 times and we had approximately 580.
$6 8 million of total available liquidity, including over $215 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.
We've also received questions from some of our investors about our expected use of our free cash flow.
As you know we have the benefit of generating significant free cash flow at our current adjusted EBIT generation, we have options on how to use this excess cash flow, including investing in the business buying back stock paying a dividend paying down debt and making acquisitions.
Our board is highly experienced and knowledgeable and very focused on allocating capital to the highest available return opportunities and recent history. Our board has determined that buybacks and investing in our business has been the highest and best use of our excess cash.
More recently, we have devoted more capital to investing in the business you should assume that the board is very focused on allocating capital to the best available opportunities and is working to ensure this outcome.
As we have more to share on this we will communicate this clearly.
Looking ahead, we are excited about our award winning holiday events, which start this week.
We expect this year to be our best holiday that yet and expect to finish 2023 strong.
Following our holiday events.
We will kick off 2024 by returning with many of our popular events, including inside look Mardi Gras or <unk> food Festival, and our food and wine festival among others.
With that Jim will discuss our financial results in more detail.
Jim.
Thank you Mark good morning, and thank you for all your interest in our company. It's good to be able to join you to report out on our quarterly performance.
During the third quarter, we generated total revenue of $548 2 million, a decrease of $17.0 million or 3.0% when compared to the third quarter of 2022.
The decrease in revenue was due to a decrease in attendance of two 8% and a decrease in total revenue per capita zero 2% the.
The decrease in attendance was primarily due to a significantly adverse weather, including some combination of unusual heat and rain across most of our markets, including during peak visitation periods.
Total revenue per capita in the quarter decreased slightly to $76 90 compared to $77 in <unk>.
In the third quarter of 2022 admission per capita decreased one 6% to $42 five.
While in Park per capita spending increased by one 6% to a record $34 85 in the third quarter of 2023 compared to the third quarter of 2022.
Admission per capita decreased 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, partially offset by factors, including whether the admissions product mix closers and disruptions related to construction delays at certain park in park locations when compared to the third quarter of 2022.
Operating expenses decreased $10 1 million or four 7% when compared to the third quarter of 2022. The decrease in operating expenses is primarily due to discrete labor related costs and a decrease in nonrecurring legal cost and contractual liabilities, resulting from the previously disclosed temporary.
COVID-19 park closures, along with the impact of implemented structural cost savings initiatives when compared to the third quarter of 2022.
Selling general and administrative expenses increased $6 $6 billion or 12, 5% compared to the third quarter of 2022, the increase in selling general and administrative expenses is primarily due to a $5 $6 million increase and third party consulting costs and legal fees, including approximately $2 seven.
<unk> million dollars of nonrecurring costs, primarily related to an opportunistic loan re pricing and strategic initiatives, partially offset by the impact of implemented cost savings and efficiency initiatives when compared to the third quarter of 2022.
We generated net income of $123 6 million for the third quarter compared to net income of $134 $6 million in the third quarter of 2022. The decline in net income is primarily related to the decrease in total revenue when compared to prior year.
We generated adjusted EBITDA of $266 $4 million, a decrease of $7 $8 million when compared to the third quarter of 2022 the decline in adjusted EBITDA for the third quarter of 2023 was primarily driven by a decrease in revenue when compared to the third quarter of 2022.
Looking our results for the first nine months of 2023 compared to 2022 total revenue was 134 billion a decrease of $3 1 million or zero, 2%.
Total attendance was $16 6 million guests a decrease of 356000 guests or two 1% net.
Net income for the period was $194 1 million a decline of $48 million and adjusted EBITDA was $563 $1 million, a decrease of $11 $5 million or 2.0%.
Now turning to our balance sheet, our current deferred revenue balance as of the end of the third quarter was $161 1 billion, excluding certain one time items deferred revenue decreased approximately five 4% when compared to September of 2022.
At the end of October 2023, our pass base, including all past products was down slightly compared to October 2022, where completion that we are seeing high single digit percentage price increases on our past products compared to prior year as Mark said, we just recently launched our best past benefits program ever which we <unk>.
We will drive additional increases in pass sales and our strong past space for next year. We're excited about our key pass selling periods coming up including during our Black Friday promotion in the spring and early summer periods.
As a reminder, our deferred revenue balance contains a number of products to include ticketing vacation packages annual and seasonal passes and ancillary products. Some of those 2022 ticketing product balances were one time items as mentioned last year. We also encouragingly continued to see an increase in the number of pass holders who.
Been with us for at least a year, who transitioned to month to month payments at a higher rate at the completion of their initial pass commitment. This month to month revenue does not show up as deferred revenue.
As noted we have a very strong balance sheet position as of September 32023, our total available liquidity was $586 $8 million, including $215 $2 million of cash and cash equivalents on our balance sheet and $371 $6 million available on our revolving credit facility.
We spent $88 6 million on Capex in the third quarter of 2023 of which approximately $56 million was on core capex and approximately $38 $1 million was on expansion and our ROI projects for.
For 2023, we expect to spend approximately 285 million to $295 million of Capex of which a $160 million to 175 million will be spent on core capex. We're excited about our ability to make these high confidence ROI investments and sincerely look forward to the benefits of returns from these investments flowing through to our financial results.
Next year.
Now, let me turn the call back over to Mark will share some final thoughts Marc.
Thank you Jim before we open the call to your questions I have some closing comments in the third quarter of 2023, we came to the aid of 56 animals in need.
Over our history, we have now 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 our ambassadors for all that they do operate our parks.
We are excited about the remainder of 2023 as we start our holiday events as a reminder, Seaworld Orlando's Christmas celebration was voted number one best theme Park holiday event by USA Today 10, Best Reader's 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 confidence in our long term strategy and our ability to deliver significantly improved operating and financial results.
<unk> that we expect will lead to meaningfully increase value for stakeholders.
Now, let's open it up for 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 Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
We ask that you please limit yourself to one question and one follow up if you have additional questions you may reenter the question queue.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Steve <unk> from Stifel. Please go ahead.
Hey, guys good morning.
So mark obviously weather was impactful during the quarter, maybe not as bad as what you guys witnessed in the second quarter. This year, but still seemed like it was impactful and we heard.
Similar comments from some of your peers. So I guess the question is.
Do you have a ballpark idea of what the weather impact was on your attendance.
Wondering if I mean attendance was down let's call it 253%.
If you believe attendance would have been.
Positive without the without the weather headwinds.
Yeah. Thanks, Steve I appreciate the question I mean, obviously as we said whether it was.
A very significant factor in the quarter I think as you noted that's been pretty well documented by.
It was in the news throughout throughout the summer and us and others have talked about it.
I don't know that I can give you an exact number I think we would have been obviously much better than attendants I don't know that we would have been positive, but we would've been certainly a lot a lot closer it is an estimate.
But certainly would have been down.
Quite a bit less without without the impact of weather obviously.
Okay got you and then Mark you mentioned in your prepared remarks.
You kind of give us your updated uses of free cash flow going forward, but.
I'm going to try to ask this question of what you might you might give me an answer.
But you know.
Just wondering now your appetite the board's appetite for for acquisitions and when I asked that just given the fact the news that is.
Has come out over the last week or so in the amusement park space So not sure.
What you can say around that but any comments around your your appetite for acquisitions would be would be appreciated.
Yes, Steve.
I'll just refer you back to my comments I made I mean, obviously acquisitions as in the consideration set for use of cash right along with <unk>.
Buybacks dividends capital spend all of the things I listed.
So I don't I don't have any specific comment on any on any specific transaction or anything I think it's just something that the board obviously considered along with the other uses of cash.
Okay understood. Thanks, guys appreciate it.
And the next question will be from James Hardiman from Citi. Please go ahead.
Hey, good morning.
Thanks for taking my questions here so.
I think versus a lot of our model the decrease in Opex, maybe the biggest thing the most impressive peak here.
<unk>.
If I if I look back at last year, I think you've talked about labor cost actually being.
Lower I think you said you were short staffed in last year's third quarter, but it seems like labor is what was called out as maybe the biggest driver there maybe walk us through.
Where labor is today, where it's likely to head from here and how we should think about.
I guess, opex overall, but particularly that labor piece.
As we as we make our way into 2024.
Yeah. Thanks, James I can take that question.
What I would just.
Cardiovascular some of my prepared comments that we have a tremendous focus on.
On cost.
And that includes labor, but obviously opex in other cost areas. So I.
I think we've done.
A better job of looking at.
How we staff our parks, how we how we schedule our.
Our hours in openings and closings and things like that I'm trying to be the most efficient that we can be.
In our parks and I think some of that is coming through there.
Obviously.
In this business able to with.
With parks being open some of our parks are in almost every day of the year, we were able to test and learn from that as well. So there's different things we can do around around labor that we feel.
Certainly helped in the quarter.
Jim can give you maybe some more specifics if you'd like an actual labor costs, yes, James I think what we found last year is that what that shorter staffing. The result of that was the need to pay some higher wages in certain cases to attract and retain individuals that incentives to again attractive.
The visuals and we were running some overtime that we didn't want to necessarily run to staff, our parks and provide service to our guests and drive revenue.
Bureau of Labor Statistics would say that over the past year, you would've seen a four 5% increase in leisure and hospitality wage rates.
I am pleased to report that we're actually opposite of that we actually are probably down close to in excess of two 5% of wage rate improvement.
Because we are no longer having the offers many incentives as we once did and we've actually looked at specific labor wages and where.
We are seeing a good amount of interest in these positions we are no longer having to pay a higher starting wage rate as we had in the past and lastly, we are reducing that over time as I mentioned, because we are better staffed.
Got it.
Actually really good color and then I guess secondly.
Maybe help us with any quantification you can provide in terms of.
Where we are in terms of the 2024 passes.
And.
Units and dollars ideally what I think.
A lot of people are trying to sort of bridge that gap between deferred revenue being down.
12%, but group bookings in discovery Cove up double digits I think in your prepared remarks, you talked a lot about some of the onetime ishares or non comparable items, but maybe the most important piece that I think people care about it.
Passes and where we stand versus last year.
Yes, let me let me start and then Jim can add anything that he'd like to add so I think you heard in his prepared remarks.
Marks.
The past basis down slightly as of the end of October and keep in mind. When we say pass base. You know that includes passes fund cards teacher pass preschool pass all the all the different kind of pass items at that.
Passes and so the mix of those the mix of those.
Those passes can can certainly impact your deferred revenue, obviously and then Hugh.
You mentioned already some of the onetime adjustments that Jim talked about if you. If you normalize those out obviously that decline I think was around five 5% and then you also heard Jim talk a little bit about people that are in the attic commitment time period that they they.
They are in a period, where they are a month to month.
Payer almost like a gym membership.
And those are we love customers like that when they get to that month to month after 12 months.
The accounting treatment on that it does not flow through deferred revenue. It just flows right from the payments to revenue so.
Bypasses deferred revenue.
That might be a little more color.
And I think thats kind of what Jim said that anything you want to add there.
The only thing I would add to that is just a reminder, for those who follow this industry.
Like many who are more seasonal in nature, we have actually the majority of our passes are sold in this April to July time frame as well as the Black Friday promotional period. So if you look at those more than half of our passes will be sold more next year than they were would be this year and I know a lot of Oh.
Those in the space really focus on this fall period is getting most of their passes sold were a little bit different yes, that's a really important point that Jim just mentioned.
Certainly we saw passes year round right and as he noted a lot of those are sold in that spring early summer time period, when we're opening our rides and things like that so perhaps a little bit different than some of the others.
Certainly I think the peak selling season is still ahead of us and we just rolled out as I mentioned.
Our best benefits ever just rolled out here in the last few days and so we're optimistic that that'll be another reason that people will have.
Bypass or retain their existing pass so we're excited about the opportunities that.
That hopefully has ahead of us.
And our next question will come from Michael Swartz from Suntrust. Please go ahead.
Hey, guys. Good morning, maybe just one quick question broader broader level.
Six flags and Cedar Fair acquisition, one of the rationale that they are using for the for the transaction is just increased diversification and limiting the impact of weather variability in different market I guess as you take a step back and think about this from a high level.
Are you doing internally strategically to really maybe reduce or lessen the impact of weather. Obviously, that's been a big big issue with all operators this year.
Yeah, Hey, Michael I can I can help you out there. So look certainly one of the things. We just we just talked about a little bit is.
Building building our pass base certainly that that helps insulate you from from weather and I think you'll see our efforts around that and Youll continue to see us push that program that kind of locks in that that commitment.
We still want those people to come but if for some reason the weather is bad and they can't come you still have that commitment from them, but beyond that really it's taking a look at different things in our parks, we've talked a little bit about some of this aesthetic capital that we've deployed and so that can be around like shade structures for example.
<unk>, where we are.
We're particularly hot or <unk> part of the park, we tried to put more more shade there to make if you're visiting on a hotter day it can make that make that visit.
More comfortable for you I think the other thing we've looked at is what are what are the opportunities to do.
Some more things indoors.
So next year.
We look at we look at shows like we've got an indoor.
Jellyfish experience coming to San Diego for example, so theres indoor opportunities as well that can be that can be good. So we recognize it's something that will we will continue to work on with the various initiatives. We have we have.
Keep going here we have.
Programs around like.
Drink refills and things like that that people can avail themselves. They can buy a refillable cup for a certain price and they get.
Refills.
Very low cost refill, so just things to try to make guests more comfortable while they're here.
Yes, the only thing I might add.
To that I don't think some of our guests are fully appreciative that some of our water parks are heated for example, so we're doing some some nice capital investment is sure. We've got boilers to keep people warm when the weather's colder and we also look at our park operating hours to ensure that if we've got consistent let's say afternoon thunderstorms in certain locations that we provide an opportunity for <unk>.
Just to get a full day experienced by ensuring that we're providing enough hours before and after the traditional storms to allow for that.
Okay great.
And just I know you don't give guidance, but just in terms of the fourth quarter. Obviously, you said that October excluding the extra Saturday from last year is up low single digits.
Is that maybe the right way to think about how November December should should play out I know, there's probably some calendar differences in weather differentials, maybe even easier comps, but any general commentary you can provide about maybe how to frame the entire quarter.
Yeah, Hey, Michael I mean look what I would tell you is.
We're we're excited about.
The rest of the year I mean, we're starting.
Our Christmas events in some of our parks.
This week and I think somewhat like Halloween, we have found those to be.
Pretty pretty popular.
Things that people like to come do come and do and in some cases people who come annually to visit.
Tradition with their family or something so.
I feel good about our product.
I feel good about like the passes that.
Our on cell now to enjoy that product and we have obviously a lot more than just pass holders that come past passes.
Only a component of our tenants, it's a big one but certainly we have other.
Ticket types as well and we will have other reasons for people to buy certain tickets and come and visit so I think theres a lot of reason to come.
Sure I can guide you to anything other than last year. Obviously, there was some weather in Q4 that we talked about.
On the on the Q4 earnings call.
Hopefully that doesn't repeat who knows.
But I.
I think we like the product and I think that's a big reason that we have we have confidence.
And our next question will come from Chris <unk> from Deutsche Bank. Please go ahead.
Yeah.
Hey, good morning, guys. Thanks for all the details so far.
Mark I was hoping maybe we could drill down a little bit.
Some of the attendance.
I guess issues in the quarter, you covered whether for a lot, but do you think theres any anyway. It just relates to maybe Orlando.
Seeing a broader slowdown in whether that relates to Disney or something else I mean, I think we've started to.
With that a little bit from some of the the hotel people down there. Just curious is whether you have any thoughts on that.
Yeah, So Chris like I don't know that I can comment on.
On the other parts.
You can you can you can read up unlike Orlando tourist tax collections and things like that.
Which to your point had been negative for I think.
Couple of months, but in general we.
We have a lot of factors that impact our attendance certainly weather is one that is.
There's probably a little more quantifiable in any calendar impacts in other things.
There's a lot of factors.
In general when I look at our Orlando parks, yes, we'd like to be obviously.
Do a little bit better, but I don't think we are.
Right.
At all like down on on the on the market or our parks or anything like that I think we offer a very compelling product here and as I've said previously we get a lot of our attendance in the Orlando market from the state of Florida. So I think people continue to look maybe if youre.
Turning to like taking closer in trips I think that that is helpful to parks like ours, whether it's in.
Orlando, specifically or even even down in Tampa, but we're working hard to make sure.
That concluded Halloween events, and then our Christmas events that we give people reason to come and visit even if even if to your point, maybe that tourism tourism into the destination is down.
Want to make sure we capture more locals and people that are nearby.
Much as we can.
Okay. Thanks for that Mark and then follow up is on the hotel strategy and you gave you gave a lot of details already I know there is more to come but my question would be you know.
It sounds like you know what you want to do and it sounds like as of now.
You would go on balance sheet is there any thought longer term too.
Either working with a partner or really just kind of getting those off of the balance sheet are there are there any structural reasons why you could consider it or why you might consider it.
Yeah, Chris what I would just tell you I mean I think in my prepared remarks, I alluded to that there is there are several options.
When we look at how you would how you would approach the hotels from a funding standpoint.
No I don't.
I think there's multiple ways you can do you have kind of alluded to one already so.
I think like.
Like anything else, we would work together.
With our board to determine what is what is the best option for us at the time.
I said, you can kind of assume we would probably do some sort of debt.
Internal cash combination.
Again, I think we're open to looking at other options.
Which there are several as you noted.
Thank you and our next question is from Thomas <unk> from Morgan Stanley. Please go ahead.
Thanks, So much yeah, just following up on that last question is one of the alternatives. They will also just owning the hotels out right.
Maybe at a broader level, whether it's thinking about M&A or organic investments.
<unk> leverage target that you are comfortable with as we think about maybe financing some of it through debt.
Yes.
I appreciate the question Thomas I mean look we're you know I think we're comfortable.
Where we are now and not to say that.
As we've said in the past that we wouldn't be comfortable at something higher than that but again I think.
Sitting here today and.
Given the markets today and things like that so.
I think you also got to take a little bit about.
Our ability to generate cash flow as I noted I think is strong.
So I think between some combination of cash flow and debt financing I think we feel.
Comfortable where that would put us from a from a leverage ratio.
Sitting here today.
Okay I appreciate that and then on the Abu Dhabi contribution it sounds like it's trending better can you maybe just help us with <unk> how much it contributed.
In park per caps and what it might have looked like excluding it.
I mean look we're pleased with the.
The performance of.
As I noted the performance the attendants there is above original expectations I think I gave you.
Some color in the past on how to think about that so I don't I don't know that its.
Anything that we're going to we're going to guide to a whole lot it.
Yeah.
I would just leave it at that.
Thank you and the next question will be from Barton Crockett from Rosenblatt. Please go ahead.
Hi.
Can I just ask a question about just the obvious point here just to make sure that we get as clear on this as we can.
So with the proposal of the merger stuff SEDAR parents ex flags.
Have in the past.
I had some interest in Cedar fair.
But you pulled back from.
This merger has been announced there's been.
Somewhat kind of real estate, driven activist investor of some sort at six flags et cetera kind of vote against the merger.
And.
You guys have had really been very silent on that I'm just wondering.
Is it reasonable for your shareholders to assume right now that you guys are closing the door on making a run at one or the other company in that merger process or is that not the case right now.
Yes, Barton I mean, what I will tell you is obviously, we're not going to really comment on M&A I mean, I think what you can assume is that our board is aware of that is aware and have studied the transaction, but beyond that.
We're not going to comment on it.
Okay, Alright, and then you made the comment about.
Back to your business the double digit rise in group and discovery Cove.
A positive indicator for next year.
To what extent historically at that than predicted.
Is that is that really a good data point to tell you, what's going to happen or or not it's a particular small part of your business but.
How good of an indicator is that.
I mean.
No.
What I would I would tell you is it's obviously I think a positive stating the obvious here a positive that those things are doing what I said they were doing.
It's just one of one of many things we look at it I don't know that we've ever looked at like how predictive it is but certainly I guess my point is if.
If people were suddenly not.
Interested in our parks are pulling back.
Not wanting to go to discovery Cove or not wanting to hold their group event at one of our parks.
I think that would show up in the numbers. So the fact that those things are are moving.
On a revenue basis up double digits percentages I think I think is a positive indicator.
Thank you and the next question will be from Matt Fassler from Goldman Sachs. Please go ahead.
It's absolutely Lizzie Dove from Goldman Sachs, but thank you for taking the question.
Wanted to see just see your thoughts on Capex, especially.
Universal opening at back in the summer of 2025, you've got Disney announcing that.
It's been an extra 60 billion on its part some results over the next 10 years, which I imagine a decent chunk of that is going to go to Orlando. So in light of all of that how does that kind of change how you allocate your capex in terms of the new rides that you've talked about versus hotels all of those different things.
Yeah, Let me let me take that question I mean for a couple of things one I think we've been.
Pretty clear that.
Our goal is to have something new.
In each of our parks and certainly that would include Seaworld Orlando.
Each year going forward. So we'll continue to obviously invest in Orlando and in our other parks.
But just a reminder, on Orlando because occasionally people people do ask this question.
I really like being in Orlando right.
It's the largest tourism market.
In the United States, we've been here since the early 19 seventies and if you think about it we had one Seaworld Park and if you think about all the parks that have opened since that time, including US we opened two others Kalydeco and discovery Cove and then you've got all the Disney Parks that came all the universal parks that have come.
<unk>.
All the other other ancillary things, whether its lego land or after that.
Whatever it may be theres been a lot of investment in the market and I think we've obviously continued I think the benefit from that so we welcome the investment.
We have a differentiated product and I think that sets us apart.
And a lot of ways from from our competitor. So we will continue to I think benefit from being in a market that's growing and will continue to find ways to take advantage of that like we have over the last 50 years.
It's pretty remarkable when you look at the investment into this market over.
Over that time since reopened seaworld in the early 19 seventies and I think we've continued to be.
Performing in this market.
Well enough that obviously, we hope in two additional parks that we are really proud of so we like we like the investment we welcome the investment we're glad we're in Orlando.
I appreciate that that's helpful and just one follow up if I may.
You talked about expecting a record year in EBITDA I think you had not fully committed to that last quarter Im curious how youre thinking about that obviously you've had some challenges with the weather and also kind of the outlook for 2020 full or especially when you have seen some improvements on the opex side, which James.
James called out Wailea.
Yes.
I don't have anything to guide you to other than <unk>.
You can see what our LTM number is but look we're going to we're going to work our hardest to finish.
Finished this year I already in a strong fashion.
I like our lineup of.
Of events with the Christmas that we've talked about so we're going to finish strong as we can here for the rest of the year, we'll see where that ultimately lands in total for the year as far as like again I'm not going to give you guidance for 2024 or anything like that but just.
Kind of mentioned this in my prepared remarks, how do we think about growing the business.
It's I think a pretty simple formula if you can grow your attendance.
1% or so if you can grow your per caps two to three 4% or so and if you manage your cost well, while you're doing that you can expand your.
Your EBITDA your adjusted EBITDA, probably in the 5% range and that's certainly not guiding you to anything but that's how we think.
Think about it on a normalized basis and then if you think about where we once were as a as a company we did over $25 million in attendance back in 2008. So we still have a lot of runway left to get back to that so that that gives me confidence.
We can and we've achieved something in the past and theirs.
Reasons.
If we achieve that in the past why can't we achieve it again in the future. So.
That's kind of how we think about the business going forward.
And then you layer on.
Really.
The efficiency efforts that you've talked about the pricing efforts all the other things that we've talked about so again not guiding you to anything but just give me some color on how we think about the go forward still a lot of opportunity, especially to get back.
It's that we want to achieve whether it's 2008 or other years. So a lot to think about there.
And the next question is from Robert <unk> from Keybanc. Please go ahead.
Hi, Yes. Thank you for taking my question wanted to follow up around the group bookings commentary you had set up double digits can you just remind us is there any kind of easy comp dynamic playing into that and maybe you could give us kind of how group bookings compared to 2019 at this time of year.
Well, what I would tell you Robert as you know and that was the revenue trends that we talked about I don't know that we have back to 2019, but.
What I would what I would tell you is we feel.
On the revenue trend the group business, we feel we feel.
Has come back.
Back and a lot of ways from a revenue standpoint versus.
Dramatic slowdown after Covid. So I think we're optimistic that we can continue to.
Grow that part of our business.
And we have a <unk>.
Great product to showcase at our parks, we have opportunities for groups to come in here and do things that you know again like I've said, our differentiated and unique to us and that youre not going to find another park. So we're going to I think.
Okay is that better and try to do a better job of that on a go forward basis.
Yeah.
Alright, and then just as my follow up.
I wanted to ask about October per caps, you had said in the release up low single digits can you give us any kind of color there kind of break them out between admissions versus in park, and then kind of how youre thinking about those buckets in the 'twenty four I mean, it sounds like you want to grow both of those buckets, maybe where you'd expect kind of more of the growth to come from.
Yes, so just a little bit of color on <unk>.
Per caps and in October I mean.
I think.
Admissions and in park were both positive.
For the month and that gave you the total.
The increase that we talked about in the I think in the low single digits, we said so.
That's hopefully helpful and really the way we think about it.
Kind of what I already said that if you can grow your.
Your pricing a little bit each year.
On the admissions.
You don't have to grow per caps, a couple percentage points right two to three 4% and if and if you can grow your attendance a little bit and manage our costs well.
That that can drive.
An increase in EBIT that I've already talked about so again, that's how we think about it going forward I think what else we add into that as some of the venue refreshes that we're doing some of the new additions in our parks, whether it's getting things open that were under construction previously or new new venues.
Down in Tampa.
A couple of weeks ago Busch Gardens, Tampa, and they just opened or refurbished pizza venue, that's really well done.
I think it's new and then the bathrooms adjacent to it are all redone. So it's very nice and I think those are the types of things that we'll continue to do and typically when we do refreshed venues.
We do see good returns as we've talked about that's why we do them. So we're going to continue to make the investments in those types of things, but then we'll also look for.
And of other opportunities to take pricing or get more penetration as well on a go forward basis.
This concludes our question and answer session I would like to turn the conference back over to Marc Swanson CEO for any closing remarks.
Thank you Chad on behalf of Jim and the rest of the management team here at Seaworld Entertainment one of 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.
So thank you and we look forward to speaking with you next quarter.
And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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