United Parks & Resorts Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 11 speakers on the call.

Operator

Good morning, everyone, and welcome to the SeaWorld Second Quarter 2023 Earnings Conference Call. All participants are in a listen only mode. After today's prepared remarks, there will be an opportunity to ask questions. 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.

Speaker 1

Thank you, and good morning, everyone. Welcome to SeaWorld's 2nd quarter earnings conference call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors .com. Replay information for this call can be found in the press release and will be available on our website following the call.

Speaker 1

Joining me this morning are Mark Swanson, Chief Executive Officer and Jim Forrester, Interim Chief Financial Officer and Treasurer. This morning, we will review our Q2 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 be materially different from those forward looking statements, including those identified in the Risk Factors section of our Annual Report on Form 10 ks and quarterly reports on Form 10 Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time will be included in our filings with the SEC that are available on our website.

Speaker 1

We undertake no obligation to update any forward looking statement. 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, Mark Swanson. Mark?

Speaker 2

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 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 rides during the quarter. Our results during the Q2 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 in park disruptions during the quarter.

Speaker 2

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 1st SeaWorld park outside of the United States. We are really proud of this park, happy to see attendance well ahead of expectations to date 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 2019 And group bookings revenue today through the 1st 6 months of the year already exceeds 20 nineteen's Bookings revenue for the full year. I'm also very excited about our remaining summer events Over the next few weeks and our planned Halloween and Christmas events, which have grown bigger and bigger over the years and based on what we have planned, We expect this year to be our best events yet.

Speaker 2

I want to thank all of our ambassadors for their efforts these past few months As we wrap up the summer season and head into our increasingly popular Halloween and Christmas events for the balance of the year. We are also thrilled to have recently received recognition from USA TODAY readers for having some of the best parks and attractions in the country. Aquatico Orlando was voted best outdoor water park in the United States. Our Mako roller coaster in SeaWorld Orlando was voted best roller coaster in the United Tidal Surge in SeaWorld San Antonio was voted best non roller coaster 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.

Speaker 2

We are proud to receive these awards and the recognition of our collection of parks across the country. We have made significant investments in our business this year and we'll 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 expect these investments to yield very attractive returns. We are currently planning new initiatives for the balance of this year and next year that 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 in our ability to deliver substantial operational and financial improvements that will lead to meaningful increases in shareholder value.

Speaker 2

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 $60,000,000 from our previous target of $50,000,000 The team continues to find ways for us to source and organize more efficiently, Better utilize capital and technology, along with scheduling improvements to drive labor efficiencies and eliminate Unnecessary and or redundant expenses. We expect these cost savings initiatives along with our revenue enhancement initiatives Will lead to increased margins over time. 2nd, on the digital transformation front, We continue to build out our CRM capabilities, which are still in their infancy and roll out and improve our mobile app.

Speaker 2

On CRM, we see significant obvious upside opportunities for ultimately having More rich data about our past members and guests and being able to more effectively engage, analyze behavior and tailor and target messages and offerings. 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 6,300,000 times, up from 5,000,000 times at the end of Q1. Total revenue generated on the app is up over 200% compared to prior year, and we are now seeing a 20% plus increase And 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.

Speaker 2

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 current capabilities and develop additional capabilities to further increase engagement and optimize the experience. 3rd, as you know, we have strategically increased Our Park specific ROI investments this year in an effort to drive incremental revenue and or decrease costs through expanding, enhancing and improving our food and beverage and retail offering, park infrastructure and aesthetics and generally improving the guest As noted, some of these refurbishments and upgrades have taken longer than planned, which negatively affected in park per caps in the Q2. While we are disappointed with the delays and disruption these capital projects caused, We are excited to realize the full benefit of these investments as they come online over the remainder of the year. We are well on our way planning for additional projects in 2024 that will further enhance the guest experience and are expected to yield attractive ROI.

Speaker 2

4th, 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 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 our first hotels and we expect To begin opening in 2026, we continue to work on-site selection for additional hotels across our Park portfolio.

Speaker 2

We hope to share more specifics in future quarters on what we expect to be really exciting and value creating projects. Overall, I'm very excited about the significant investments we are 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 are building an even stronger and more resilient business that we are confident 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 June 30, 2023 net total leverage ratio is 2.61 times, And we had approximately $518,000,000 of total available liquidity, including over $146,000,000 of cash on the balance sheet.

Speaker 2

This strong balance sheet gives us flexibility to continue to invest in and grow our business And to opportunistically allocate capital with the goal to maximize long term value for shareholders. 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.

Speaker 2

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 our pricing to be And as such, we have canceled the opportunistic repricing and plan to wait for 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 said, have grown bigger and bigger over the years. And based on what we have planned, we expect this year to be our best events yet. We have also already launched 2024 passes in one park and plan to launch 2024 passes, including fun cards, across the remainder of our parks over the coming weeks.

Speaker 2

Our 2024 passes will continue to provide great value to our passholders with exciting benefits and reasons to visit. We are also in the middle of planning for 2024 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 are also excited about our lineup of 2024 rides, attractions, events And or other experiences where we have something new planned for every park. We will have more to say about 2024 in the coming weeks as we begin to announce more specifics for each park. With that, Jim will discuss our financial results in more detail.

Speaker 2

Jim?

Speaker 3

Thank you, Mark, and good morning, everyone. It's good to be back with you for another quarter. During the second when compared to the Q2 of 2022. The decrease in revenue is due to a decrease in attendance of 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 wildfires across most of our markets, including during peak visitation periods.

Speaker 3

Attendance 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 Q1, whereas in 2023, many of the rides opened later in the Q2. 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 Q2 of 2022, admission per capita was essentially flat at $43.96 While in part per capita spending increased by 0.6 percent to a record $36.84 in the Q2 of 2023 compared to the 2nd 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. NPARQ per capita spending improved primarily due to pricing initiatives when compared to the Q2 of 2022.

Speaker 3

InPark per capita spending was Operating expenses increased $5,200,000 or 2.7 percent when compared to the Q2 of 2022. The increase in operating expenses is primarily due to non cash increases in self insurance reserve adjustments and an increase in non recurring contractual liabilities and legal costs resulting from the previously disclosed temporary COVID-nineteen park closures, partially offset by the impact implemented structural cost savings initiatives when compared to the Q2 of 2022. Selling, general and administrative Expenses increased $12,000,000 or 21.4 percent compared to the Q2 of 2022. The increase in selling, general and administrative expenses is primarily due to a $7,100,000 increase in non recurring third party consulting costs for strategic initiatives, along with an increase in marketing costs, partially offset by the impact of implemented cost savings and efficiency initiatives when compared to the Q2 of 2022. We generated net income of $87,100,000 for the 2nd quarter compared to net income of $116,600,000 in the Q2 of 2022.

Speaker 3

The decline in net income is primarily related to the increase in interest expense when compared to prior year. We generated adjusted EBITDA of $224,200,000 a decrease of $10,200,000 when compared to the Q2 2022. The decline in adjusted EBITDA for the Q2 of 2023 was primarily driven by a decrease in revenue compared to the Q2 of 2022. Looking at our results for the first half of twenty twenty three compared to 2022, Total record revenue was $789,400,000 an increase of $13,900,000 or 1.8 percent. Total attendance was 9,500,000 guests, a decrease of 149,000 guests or 1.5%.

Speaker 3

Net income for the period was $70,600,000 a decline of $37,000,000 and adjusted EBITDA was $296,700,000 a decrease of $3,700,000 or 1.2 percent. Now turning to our balance sheet. Our current deferred revenue balance As of the end of the second quarter was $222,700,000 a decrease of approximately 5.5% when compared to June of 2022. At the end of June 2023, our PAS base, including all PAS products, was at a record level for this time of year Up approximately 1% compared to June 30, 2022. We are also quite pleased that we continue to realize double digit price increases on our past products compared to prior year.

Speaker 3

As Mark mentioned, we have a very strong balance sheet position. As of June 30, 2023, our total available liquidity was 500 $13,300,000 including $146,700,000 of cash and cash equivalents on our balance sheet and $371,600,000 available on our revolving credit facility. We spent $75,800,000 on CapEx in the Q2 2023, of which approximately $49,200,000 was on core CapEx and approximately $26,600,000 Was on expansion and or ROI projects. For 2023, we expect to spend approximately 100 and $60,000,000 to $180,000,000 on core CapEx and we plan to spend approximately $100,000,000 on CapEx on high conviction growth and ROI projects. In total, we expect to spend approximately $260,000,000 to $280,000,000 in CapEx for 2023.

Speaker 3

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. Mark?

Speaker 2

Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the Q2 of 2023, We came to the aid of 96 animals in need. Over our history, we have helped over 40,000 animals, including bottlenose dolphins, manatees, Sea lions, seals, sea turtles, sharks, birds and more. I'm really proud of the team's hard work Their continued dedication to these important rescue efforts, I want to thank them and all our ambassadors for all that they do to operate our parks.

Speaker 2

We are excited about the remainder of 2023 as we finish out the summer and head into our fall and winter events. Our Increasingly popular Halloween events are starting next month at our SeaWorld Busch Gardens and Sesame Place Parks. You may recall that in 2022, SeaWorld's Hollow Scream was voted 1 of the 10 Best Theme Park Halloween Events by USA TODAY's 10 Best Readers' Choice Awards. The Halloween events will be followed by our Christmas events that start in November. As a reminder, SeaWorld Orlando's Christmas celebration Was voted number 1 best theme park holiday event by USA TODAY's 10 Best Readers' Choice Awards.

Speaker 2

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

Operator

We will now begin the question and answer session. In the interest of 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 Wyshinsky with Stifel.

Operator

Please go ahead.

Speaker 4

Yes. Hey, guys. Good morning. So obviously weather was seems like it was super impactful during the quarter. And we've heard similar comments from some of your peers, actually including Disney.

Speaker 4

So I guess the question is, do you have a ballpark idea of what the weather impact actually was on your And maybe can you help us think about what the parks have looked like on days where weather wasn't impactful? Just trying to understand how the underlying demand for the parks and spend levels look like at this point? Thanks.

Speaker 2

Yes. Hey, Steve, I can take that question. So, look, there's obviously a lot of factors that we look at on I would say, in addition to weather, one of the other things that we isolated this quarter was the timing of the ride openings. And again, 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 open in April May, primarily as we did last year. So when you look at the kind of the combination of weather and the delay in the or the timing of those ride openings, if you adjust for those and look, it's an estimate obviously, but if you adjust for those, our tenants would have been up a little bit in the quarter.

Speaker 2

And then on your second question on like 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.

Speaker 4

Okay. Got you. 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 in that language was, at least I missed it, was kind of removed this time around. I assume a lot of that is because of the weather impact you encountered during the Q2. But is there anything else that is kind of making you take that language out?

Speaker 4

And I'm not sure Your comment on this, but any color around how July trends were? And it looked like weather might have been somewhat of a headwind in July as well. Thanks, Mark.

Speaker 2

Sure. I can try to help you out there. So On 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.

Speaker 2

Having said that, revenue was down about 3.4%. We did as well as we could 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 we think about the rest of the year?

Speaker 2

There's a I think we've 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. I guess what gives me Some optimism as I think about the rest of the year is we're coming into popular events. So we know our Halloween and Christmas events Are popular with a lot of our guests. And then if you remember last year in Q3 and Q4, we did have Pretty meaningful weather impacts from combination of the hurricane tropical storms and then also the poor weather around some holiday periods, especially in November December.

Speaker 2

So who knows if that will repeat. Hopefully, that doesn't repeat. And I think if that doesn't repeat, that would be A good thing, but our events and our lineup, I think, are strong. We're going to get some of these things that have been delayed Our parks opened, which should be good for us, the in park 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 tailwinds, but we'll just have to see, where that shakes up.

Operator

The next question comes from Michael Swartz with Truist. Please go ahead.

Speaker 5

Hey, good morning guys. Mark, maybe I think you laid out commentary that you're now expecting $75,000,000 in cost savings, which is up think $25,000,000 or

Speaker 6

so versus your prior commentary.

Speaker 5

Can you just give us a little sense of where those incremental cost savings Are coming from and the timing in which you expect to achieve them.

Speaker 2

Yes. Hey, Mike. Just to Reiterate, I think what I said was $60,000,000 up from $50,000,000 So just if you go back to my prepared remarks, so Just clarifying that. Look, what I'll say is, look, we have a continual focus on driving efficiencies in the business. We have a lot of work going on that.

Speaker 2

A couple of months ago, We promoted 2 of our most senior leaders to help oversee our park operations, and 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 the type of things that we're going to continue to find 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 some of that come through. And we'll see the exact timing going forward. I don't know that I'm going to comment on that.

Speaker 2

But Obviously, we feel good about the plans and feel good about the work we're doing there.

Speaker 6

Okay, great. And then

Speaker 3

just a follow-up. I might just add, 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 3 months and we are seeing the benefit of those types of investments materializing in cost reductions

Speaker 5

Got you. And then just a follow-up on CSD World, Abu Dhabi. Maybe a little more color on What you've seen to date, I know it's very early. And then if I'm not mistaken, you see the benefits from the licensing fees, I think, in the in part Per caps. What did that add to the quarter?

Speaker 2

Sure. So, look, we're As I said in the prepared remarks, we're pleased with the opening of the SeaWorld Abu Dhabi. If you get a chance, I I know it's a long way away, but highly recommend you take a 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. Still very early on, like you noted, I mean, it didn't even open until May.

Speaker 2

So the Impact for the quarter is probably around $700,000 It's not a super huge amount. And we'll see where that ends up over time. It is a licensing deal and we share royalty and whatnot, but we're excited. I think what it does for the brand, 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 I think that is certainly will help us as we think about other international opportunities and people see what is actually opened.

Operator

The next question comes from James Hardiman of Citi. Please go ahead.

Speaker 7

Hey, good morning. Thanks for taking my call. So Mark, just wanted to clarify a couple of things you said. It sounded like As some of the delayed rides opened up, June was maybe a better month in terms of visitation. But then, I think you said that July revenues were down 3.4% with per caps up.

Speaker 7

So presumably, attendance was down something more And that 3.4 percent, are we just looking at weather or are there any other I guess, is that sort of right that maybe things got better and then a little bit Worse from an attendance perspective. And if so, anything else outside of weather worth calling out here?

Speaker 2

Hey, James. So I would say the weather 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 the number of weather impacted days, It was up meaningfully to last year. And then if you look kind of over kind of the last kind of 13, 14 years, It's among the highest, if not the highest.

Speaker 2

So it's definitely a big driver in July for that.

Speaker 7

Okay. That's helpful. And then maybe how do we think about season passes? So you said Season Pass base is at record levels. I think you said pricing is up, but deferred revenues are down 5%.

Speaker 7

Maybe help us Bridge the gap there. And then it sounds like your path, I think you mentioned 1 park is already selling Help us understand how that timing compares to normal and how we should think about season pass Timing for the 24s I'm sorry, season pass pricing for the 24s?

Speaker 2

Sure. So Look, on the timing of the season passes, we launched the season pass at our Sesame Park in Langhorne Outside of Philadelphia, that park is probably a little bit more traditional in the sense that It kind of largely opens in the spring and kind of shuts down around Christmas. So it makes sense that you would launch that pass Kind of about now. And that's pretty consistent with prior years. And I think in general, you're going to see most of our launches Are very much largely in line or pretty close to what we've done in prior years.

Speaker 2

And we typically would look to start launching Around this time over the into the next few weeks into September, things like that. So that's not atypical. Look, on the deferred revenue, there's obviously multiple things besides pass that are in our deferred revenue. And we know when you have some weather impacts, harder to estimate, but I'm sure we lost past sales when the weather wasn't good. And so that can have an impact as Well, on that number.

Speaker 2

And then you just have single day tickets and things like that, that people buy in advance that sit in or deferred. So there's a lot of different factors in

Operator

The next question comes from Thomas Yeh with Morgan Stanley. Please go ahead.

Speaker 8

Thanks so much. Yes, just following up on your point related to the construction timing delays, it sounds like not all of that has Fully normalized either in July. Is that right? And when do you think everything kind of comes back online? And when does that ease?

Speaker 2

Yes. Hey, Morgan, you're right. So unfortunately, we still have A couple of things still closed. In particular, one of our probably our biggest restaurant out in our SeaWorld Park in California Remains closed. We expect it to open hopefully any time now.

Speaker 2

Some of the others, again, I expect that they'll open this year. I don't know the exact timing. There's been obviously delays here that We're not real proud of and I can tell you we're working as quickly as we can to get those open. But certainly, Unfortunately, not open still a number of things not open in July. As I mentioned, per caps, we're up in July Even with that, so that hopefully it's going to be a tailwind when these things open.

Speaker 2

We target pretty attractive returns 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.

Speaker 8

Okay. Makes sense. And then on group booking trends already being above 2019, Is that a pacing number for revenues yet to be recognized? Or are we talking about the 6 months revenues that have already been booked? Maybe just provide some more additional visibility into kind of the second half and what you're seeing in terms of the demand there, that would be really helpful.

Speaker 8

Thank you.

Speaker 2

Yes. The way I think about it is kind of sales that are on the books. So not all of those people have shown up, but like we have bookings for the full year and those are more than what we saw in 2019. So some of those people have come and I see some still to come.

Operator

The next question comes from Chris Woronka with Deutsche Bank. Please go ahead.

Speaker 6

Hey, good morning, guys. I know you're not ready to share all the details of the hotel Plans yet, but is there any way for us to think about balance sheet commitment and kind of structure 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?

Speaker 2

Hey, Chris. I can tell you that, I don't have anything specific to share with you. I think That is we've looked at a number of different options. I think we feel really good about operating the hotel. But as far as how we finance that and how that looks, we'll come back to you.

Speaker 2

There's obviously Multiple ways we could do that and we want to make sure we do the one that's best for shareholders and most opportunistic.

Speaker 6

Okay. Fair enough. And then just a quick follow-up on some of the delays on the rides and attractions You mentioned in Q2, were those also all weather related issues or was there some kind of Supply chain issue or labor or anything like that besides weather?

Speaker 2

Look, I mean, depending what you're 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 and you get even like permitting and inspections, Some of 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 in the municipalities are working really hard, but they have a lot going on. And so, we I think there's in a time some delays in processing permits and things like that, but it's a myriad of factors. Weather never helps.

Speaker 2

I would say weather probably has less certainly a lot less to do with in park things because those are

Operator

The next question comes from Eric Wold with B. Riley Securities. Please go ahead.

Speaker 2

Thank you. Good morning. So you mentioned that weather,

Speaker 6

obviously, also likely impacted season Our sales even though the past base was up in the quarter. I know it's difficult to always know why someone doesn't Purchase or renew, but anything you can glean from renewal rates kind of in the face of higher pass prices, any pushback, anything Surprising you positively negatively around those trends?

Speaker 2

I would say is, we offer a really attractive PaaS Product, and it gives you a number of benefits, gives you ability to visit throughout the year. I think when you couple that with The investments we're making in the parks, whether it's rides or new venues, events, things like that, That is a compelling reason to buy and 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's certainly A very good relative value, especially compared to things like going to a concert or something like that. Buying a season pass To a park like ours is a tremendous value when you consider the amount of times you can visit and how long you can stay in the park And things like that.

Speaker 2

So we'll continue to emphasize those things. I think it's a great product. Obviously, 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 if things go better in those areas, You'd like to think you'd have more sales, but regardless of that, what we can control is offering a good product and continuing to invest in our parks and

Speaker 6

Got it. And then kind of follow-up, just update us on what you're seeing with hourly wage rates Kind of around the system, any pockets of more difficulty in terms of wage pressures or anything you're seeing Regions where it's still maybe difficult to getting everyone you want to have in the park?

Speaker 2

Yes. Let me just comment kind of overall and then I think Jim can give you the kind of the specific labor number. I mean, look, there's still pockets of labor That are challenging. I think year over year, it's in a better spot, as I'm sure others have noted. But you still have pockets of especially trade positions, Lifeguards, things like that, that are challenging, but certainly, I think we feel better this year than last year.

Speaker 3

And then as far as the rates, Jim? Yes. Mark, I think in the wake of the Bureau of Labor Statistics talk about Leisure and hospitality up 5.4% year over year. I think we're very pleased that our wage rates are very moderate. In fact, They're actually down year over year overall for hourly labor.

Speaker 3

So I think we're in a very good position with our labor management in this topic.

Operator

The next question comes from Phil Cusick with JPMorgan. Please go ahead.

Speaker 6

Hi, guys. A little bit of follow-up on the spending side. You kicked up CapEx again. Is this due to the delays? Or can you dig into the incremental projects, Either maintenance or new projects that you're doing?

Speaker 6

And 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.

Speaker 2

Hey, Phil. Let me start with your second one, I think, on the competition in Orlando. Look, We've been in Orlando since 1973 with SeaWorld. A lot of parks have obviously opened since that time. We have great Competitors in the area, obviously, Disney Universal have a very good product.

Speaker 2

But look, I like our product. It's differentiated. It's different. We offer, I think, a very tremendous value at our parks as well and maybe a little bit of a lesser read Then you might find some of the other parks in the area. And we added a water park in Aquatica back in 2 1,008 and we've added Discovery Cove back, I believe, in 2000.

Speaker 2

And so we like our ability to Be here and compete here. And we know our competitors are here, but I think they're also rational competitors and We are all going to I think we all benefit from more people coming to the area. And I think certainly That's something that we will 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

Speaker 3

the capital front, I think over the time, we continue to try to focus on spending on average about 150,000,000 Core CapEx over a period of years. I think what we're seeing is a refinement of our plans for 2024, 2025 and 2026 As we refine our attractions menu, we also, as mentioned, had some delays in our ORA projects. I think what we've learned is a need to start to do some design and prep work much earlier. So we're making some allowance for that so that we can get those projects for 2024 Ready to go much sooner next year.

Speaker 6

Thanks, Chris.

Operator

The next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.

Speaker 9

Hi there. Thank you for taking my question. I wanted to start by asking on capital allocation. I know there's not much more you can say on the hotel side of things, but It does seem like you're also reaching kind of critical mass in terms of your buybacks from an ownership perspective, but still a lot of cash flow generation. So I'm curious how you're thinking Capital allocation priorities going forward, whether that be paying down debt or potentially a dividend or anything else?

Speaker 2

Hey, Lizzie, it's Mark. I can help you with that question. So, look, we put it into a couple of different buckets. Obviously, one of our Main priority is to invest in the business, new things in our parks every year, And I think we've demonstrated that over the last several years here and we have a plan to continue to do that. So that will continue to be kind of a hallmark of our Capital allocation will be investing in our business.

Speaker 2

We've talked today a little bit already about kind of the high growth ROI initiatives that we continue To invest in our parks. And again, I think as long as those opportunities remain, I think our Board is Supportive of making those type of investments on those ROI initiatives as well. And then you kind of come to kind of your next Set of things you can do and that's whether it's paying down debt or buying back shares or paying a dividend or whatever Strategic alternatives, whatever it may be. What I would just tell you is, 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 of the cash going forward.

Speaker 9

That makes sense. Thank you. And just wanted to follow-up on Phil's question on Orlando, but slightly different focus. There's been a lot of headlines this quarter like Disney attendance, Universal, it sounds like reading between the lines, they were down maybe mid single digit percent year on year on attendance in Orlando and they kind of called out There's some impact of kind of an international trade up actually happening. I'm curious if that's something that you think you've been seeing and whether that might be an impact that might continue into Queue if travel kind of continues to ramp up in that quarter?

Speaker 2

Yes. I mean, I don't know that I am going to comment specifically on our kind of Orlando parks other than And what I've already said, I mean, certainly, I think it's been in the news that people are these people in the United States are More internationally, it seems like. So that is what it is. Again, I think we'll continue to invest in our parks, continue 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.

Speaker 2

So we'll continue to be here and be in the market and It would be a good place for people to visit in this area.

Operator

The next question comes from Robert Alland with KeyBanc Capital Markets.

Speaker 6

Hi. Thanks for taking my questions. As we look at attendance in the 2nd quarter, is there any way you can kind of break it out between group versus international versus domestic non group attendance trends?

Speaker 2

Well, let me just Robert, let me give you just a comment or 2 on that. I International relative to 2019 continues to be down. Look, it's down in kind of that 50% range. So when you look at a kind of a run rate basis on an annual basis, that's over 1,000,000 people. But I think you've heard at least one of our competitors here in Orlando talk about international being down for them as well.

Speaker 2

So I'm not That's international. The group business, we talked about the bookings, the revenue bookings there are strong. And so, hopefully, that continues. So, you have a little bit of a mixed bag there with those 2. And as far as just like domestic, What I'll call tourism, if you will, or domestic kind of visitation into the markets.

Speaker 2

When we look Across all our parks, our domestic attendance is up a little bit. And then what for the quarter, What's 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 weather the quickest and things like that and can delay their visit if need be.

Speaker 6

Understood. And then just a quick follow-up on Abu Dhabi. I think you mentioned $700,000 in the quarter. I think last call, you were talking about a Low to mid single digit $1,000,000 EBITDA impact for the year. Are there any updates there given attendance that's trending better than you expected?

Speaker 2

Hey, Robert, I would still use that low to mid single digit millions. We will just have to see the park. Park, just it's still really new. We're excited about it, obviously, but I think you can stick with The kind of the guidance or modeling we gave you last time last quarter.

Operator

The next question comes from Barton Crockett with Rosenblatt. Please go ahead.

Speaker 10

Okay. Thanks for taking the question. I was interested in hearing if you are detecting any impact on the Attitude of your customer base from all of the Experience that we've had in all of the media reporting around climate change, consumers being asked to buy a season pass, which It's a financial commitment that exposes them to weather. Weather was 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?

Speaker 2

Hey Barton, I can try to give you an answer on that. I will do the best I can. Look, I think, as I said, weather Certainly impacted the quarter. It impacted July. So we know there is obviously because of weather there is people who likely did not Buy a pass or obviously buy a ticket or come to visit.

Speaker 2

I don't know what that means over the long term. I would like to think that weather eventually normalizes over Some longer period of time, we'll have to see. I think we just have to be cognizant 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 comfortable on a hot day or try to do other things. We can heat our pools if we had to in our water parks in some cases.

Speaker 2

So we may just have to think about things differently a little bit, but I think we're still very early To say if there is some seismic shift here in how people think about it, I think hopefully these things will normalize out over time.

Speaker 10

Okay. That's it. Thank you.

Operator

This concludes our question and answer session. I would now like to turn the floor back to Mark Swanson for closing remarks.

Speaker 2

Thank you, MJ. On behalf of Jim and the rest of the management team At SeaWorld Entertainment, I want to thank you for joining us this morning. As you heard today, we are confident in our long term strategy, which we believe will drive improved operating and financial results and long term value for stakeholders. Thank you. We look forward to speaking with you next quarter.

Operator

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.

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Earnings Conference Call
United Parks & Resorts Q2 2023
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