United Parks & Resorts Inc. Q3 FY2023 Earnings Call

Good morning, and welcome to the SeaWorld Parks and Entertainment Q3 2023 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Matthew Stroud, Investor Relations. Please go ahead.

Thank you, Chad, and good morning, everyone. Welcome to SeaWorld’s Third 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. 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 in 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 focus, 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. I want to thank 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 less Saturday compared to prior year, we estimate attendance 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 these events are receiving as SeaWorld Howl-O-Scream was voted the best Halloween Theme Park event by USA TODAY’s 10Best Readers’ Choice Awards. As we enter the holiday season, we will begin our award-winning Christmas events at most of our SeaWorld, Busch Gardens and Sesame Parks 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 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 pass 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 into 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 and in markets with growing demand trends over the long term, and we have significant available guest capacity across our park portfolio. Our attendance levels are still below the total attendance levels we achieved in 2019, and well below our historical high attendance of approximately 25 million guests recorded in 2008. We have made significant investments in our business this year, and we’ll 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, more profitable and more resilient business that we expect will ultimately lead to meaningful increases in shareholder value. We recently announced our partial lineup of new rides, attractions, events and upgrades for 2024. This lineup includes, among others, Penguin Truck, an unforgettable family launch coaster adventure at SeaWorld Orlando; Phoenix Rising, a suspended roller coaster at Busch Gardens Tampa Bay; a fully restored Loch Ness Monster coaster with all-new thematic and experiential elements at Busch Gardens Williamsburg; Jewels of the Sea, the Jellyfish Experience, an 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 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 and are confident that these cost savings initiatives, along with our revenue enhancements, will lead to increased margins over time. Second, on the digital transformation front, we continue to build out our CRM capabilities, which are still in their infancy in roll out, and improve our mobile app. With 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 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 are 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/or decreasing costs through expanding, enhancing and improving our food and beverage and retail offering, park infrastructure and aesthetics 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/ROI CapEx. Core CapEx is the amount of CapEx that we believe we need to spend to maintain our current assets and to 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. Expansion/ROI CapEx is CapEx related to specific projects that we have high confidence 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 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 ROI 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 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 and expect to have more to share in coming quarters. Fifth, on the hotel front, we also continue 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 identified the locations of the first two hotels, and we’ll be offering more details about these properties soon. We continue to make progress on projects in other markets. And subsequent to opening our first two hotels, we are planning to continue to open additional hotels in the years following. We have 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 underutilized. 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, increase length of stay at our properties, offer more compelling vacation packages, upsell and cross-sell guests, increase loyalty 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 returns on these hotel projects, we 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 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 September 30, 2023, net total leverage ratio is 2.56 times, and we had approximately $586.8 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 long-term value for shareholders. We have 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 EBITDA generation. We have options on how to use this excess cash flow, including investing in the business, buying back stock, paying the 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. In 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 event 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, our Seven Seas Food Festival and our Food and Wine Festival, among others.

Thank you, Marc. 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 2.8% and a decrease in total revenue per capita of 0.2%. The decrease in attendance was primarily due to significantly adverse weather, including some combination of unusual heat and/or 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 $77.05 in the third quarter of 2022. Admission per capita decreased 1.6% to $42.05, while in-park per capita spending increased by 1.6% 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 weather, the admissions product mix, closures and disruptions related to construction delays at certain in-park locations when compared to the third quarter of 2022. Operating expenses decreased $10.1 million or 4.7% when compared to the third quarter of 2022. The decrease in operating expenses is primarily due to decreased labor-related costs and a decrease in nonrecurring legal costs 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 million 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 in third-party consulting costs and legal fees, including approximately $2.7 million of nonrecurring costs primarily related to an opportunistic loan repricing 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 at our results for the first nine months of 2023 compared to 2022. Total revenue was $1.34 billion, a decrease of $3.1 million or 0.2%. Total attendance was 16.6 million guests, a decrease of 356,000 guests or 2.1%. 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 million. Excluding certain one-time items, deferred revenue decreased approximately 5.4% when compared to September of 2022. At the end of October 2023, our pass base, including all pass products, was down slightly compared to October 2022. We’re pleased that we are seeing high-single-digit percentage price increases on our pass products compared to prior year. As Marc said, we just recently launched our best pass benefits program ever, which we expect will drive additional increases in pass sales and a strong pass base for next year. We’re excited about our key pass selling periods coming up, including during our Black Friday promotion and 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 continue to see an increase in the number of pass holders who have 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 30, 2023, 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 $50.6 million was on core CapEx and approximately $38.1 million was on expansion and our ROI projects. For 2023, we expect to spend approximately $285 million to $295 million of CapEx, of which $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 and returns from these investments flowing through to our financial results next year. Now let me turn the call back over to Marc, who will share some final thoughts. Marc?

Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the third quarter of 2023, we came to the aid of 56 animals in need. Over our history, we have now 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 and 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. 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’s 10Best Readers’ Choice Awards. We’re 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 that we expect will lead to meaningfully increased value for stakeholders. Now let’s open it up for your questions.

Thank you. (Operator Instructions) And the first question will be from Steven Wieczynski from Stifel. Please go ahead.

Hey guys, good morning. So Marc, obviously, weather was impactful during the quarter—maybe not as bad as what you guys witnessed in the second quarter of this year, but it 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? And just wondering if, I mean, attendance was down, let’s call it, 2.5%, 3%, if you believe attendance would have been positive without the weather headwinds?

Thanks, Steven. I appreciate the question. As we said, weather was a very significant factor in the quarter. That was pretty well documented throughout the summer, and both we 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 in attendance. I don’t know that we would have been positive, but we would have been certainly a lot closer. It is an estimate, but certainly it would have been down quite a bit less without the impact of weather.

Okay, got you. And then, Marc, you mentioned in your prepared remarks, you kind of gave us your updated uses of free cash flow going forward. But I’m going to try to ask this question on what—you might give me an answer. But just wondering now, your appetite, the Board’s appetite for acquisitions? And I asked that just given the fact of news that has come out over the last week or so in the amusement park space. So I’m not sure what you can say around that, but any comments around your appetite for acquisitions would be appreciated.

Steve, I’ll just refer you back to my comments. Acquisitions are in the consideration set for use of cash along with buybacks, dividends, capital spend and all the things I listed. I don’t have any specific comment on any specific transaction or anything. It’s something the Board obviously considers 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 models, the decrease in OpEx was maybe the biggest thing, the most impressive piece here and what stood out. If I look back at last year, I think you talked about labor costs 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 OpEx overall, but particularly that labor piece as we make our way into 2024.

Thanks, James. We have a tremendous focus on cost, and that includes labor along with other OpEx areas. We’ve done a better job of looking at how we staff our parks, how we schedule hours, openings and closings, and trying to be as efficient as we can be. Some of that is coming through in the quarter. With parks being open many days of the year, we can test and learn. There are different things we can do around labor that we feel certainly helped in the quarter. Jim can give you some more specifics on actual labor costs.

James, what we found last year is that with shorter staffing, the result was the need to pay some higher wages in certain cases to attract and retain individuals. That led to incentives and, at times, overtime. The Bureau of Labor Statistics would say over the past year you would have seen about a 4.5% increase in leisure and hospitality wage rates. I’m pleased to report that we’re actually opposite of that. We are down; we’ve seen over a 2.5% improvement in wage rates as we are no longer having to offer as many incentives as we once did. We’ve looked at specific labor wages and where we’re seeing strong interest in positions. We no longer have to pay as high a starting wage rate as we had in the past, and we are reducing incentive pay over time because we are better staffed.

Got it. That’s 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 in units and dollars, ideally. But I think a lot of people are trying to sort of bridge that gap between deferred revenue being down 12%, but group bookings and Discovery Cove up double digits. I think in your prepared remarks, you talked a lot about some of the one-time issue or non-comparable items. But maybe the most important piece that I think people care about is just the passes and where we stand versus last year.

Let me start and then Jim can add. As Jim said, the pass base is down slightly as of the end of October. When we say pass base, that includes passes, Fun Cards, teacher passes, preschool passes and different pass items, and the mix of those can impact deferred revenue. If you normalize out one-time adjustments, that decline was around 5.5%. Also keep in mind many pass holders, after their initial commitment, transition to month-to-month payments. Those month-to-month payments recognize revenue as paid and do not show up as deferred revenue, so that partially explains differences between deferred revenue and underlying momentum. Jim, anything to add?

The only thing I would add is a reminder that, unlike many seasonal operators, the majority of our passes are sold in the April to July timeframe as well as during Black Friday. So more than half of our passes will typically be sold in the spring and early summer periods. We’re somewhat different from other operators who do a higher proportion in the fall.

That’s a really important point. We sell passes year-round, but peak selling is still ahead of us in spring and early summer. We just rolled out our best pass benefits program, and we’re optimistic that will drive renewals and new pass sales as well.

And our next question will be from Michael Swartz from SunTrust. Please go ahead.

Hey guys, good morning. Maybe just one quick question at a broader level. The Six Flags and Cedar Fair acquisition commentary—one of the rationales that they are using for the transaction is increased diversification, limiting the impact of weather variability in different markets. I guess as you take a step back and think about this from a high level, what are you doing internally strategically to really reduce or lessen the impact of weather? Obviously, there’s been a big issue with all operators this year.

Michael, a few things. Building a large pass base helps insulate against weather because those guests have committed to the parks. We’re also investing in amenities that mitigate weather impact—shade structures in hot areas, more indoor experiences where appropriate, and capital investments that improve guest comfort. For example, indoor attractions like the Jellyfish Experience at San Diego provide options when weather is poor. We also focus on guest services like refillable drink programs and other hospitality measures to keep guests comfortable. Operationally we adjust hours and staffing; those scheduling improvements help insure guests still get a full-day experience even with intermittent storms.

I’d add that some of our water parks are heated, so capital investments like boilers can extend usability in cooler weather. We also look carefully at park operating hours to ensure we provide sufficient hours before and after typical afternoon thunderstorms so guests still get a full experience.

Okay, great. And just—I know you don’t give guidance, but in terms of the fourth quarter, you’ve said that October, excluding the extra Saturday from last year, was up low single-digits. Is that the right way to think about how November and December should play out? I know there are calendar differences and weather differentials, but any general commentary about how to frame the entire quarter?

Michael, we’re excited about the rest of the year. We’re starting our Christmas events this week and expect them to be popular as Halloween has been. Passes on sale now are another driver. While I can’t give formal guidance, we like our product and our lineup of holiday events. Historically there was some weather in Q4 last year, and hopefully that doesn’t repeat. We feel good about the product and the reasons people have to visit during the holidays.

And our next question will come from Chris Woronka from Deutsche Bank. Please go ahead.

Hey, good morning guys. Thanks for all the details so far. Marc, I was hoping maybe we could drill down a little bit. Some of the attendance issues in the quarter you covered weather for a lot. But do you think there’s any of that that relates to maybe Orlando seeing a broader slowdown and whether that relates to Disney or something else? I mean I think we’ve started to hear that a little bit from some of the hotel people down there. Just curious whether you have any thoughts on that.

Chris, there are many factors that impact attendance—weather, calendar impacts and others. When I look at our Orlando parks, we’d like to do better, but I don’t see us as being down on the market or our product. We offer a compelling product, and a lot of our Orlando attendance comes from within Florida. If people take closer-in trips, that benefits parks like ours. We’re working to capture more local and regional demand through our events and passes even if broader destination tourism has some softness.

Okay. And then a follow-up on the hotel strategy. You gave a lot of details already. It sounds like you know what you want to do and that you’d go on balance sheet. Is there any thought longer term to either work with a partner or getting those off the balance sheet? Are there structural reasons you couldn’t consider it or why you might consider it?

Chris, we have several financing options. We would work with the Board to determine the best approach at the time. You can assume a combination of debt and internal cash financing, but we’re open to other structures, including partnerships or alternative financings, depending on what makes the most sense.

Thank you. And our next question is from Thomas Yeh from Morgan Stanley. Please go ahead.

Thanks so much. Following up on that last question, is one of the alternatives still also owning the hotels outright? And maybe at a broader level, whether it’s thinking about M&A or organic investments, what’s the right leverage target that you’re comfortable with as we think about maybe financing some of it through debt?

Thomas, we are comfortable where we are today, and we would evaluate any incremental leverage in the context of expected returns and cash flow generation. We wouldn’t rule out owning hotels outright; financing could be a mix of debt and cash. The Board would evaluate the best path at the time, and we remain focused on generating strong returns from these projects.

I appreciate that. And then on the Abu Dhabi contribution, it sounds like it’s trending better. Can you help with how much it contributed to the in-park per cap in 3Q and what it might have looked like excluding it?

We’re pleased with SeaWorld Abu Dhabi; attendance continues to exceed original expectations. I don’t have a specific incremental contribution number to provide today, but the property is performing above original expectations and contributing positively to our results.

Thank you. And the next question will be from Barton Crockett from Rosenblatt. Please go ahead.

Hi, I’m kind of going ahead and just ask a question about the obvious point here to make sure we get as clear on this as we can. With the proposal of the merger of Cedar Fair and Six Flags, you guys have in the past had some interest in Cedar Fair that you pulled back from. This merger has been announced. There’s been somewhat of a real estate-driven activist investor at Six Flags voting against the merger. You’ve been silent on this. 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?

Barton, we’re not going to comment on M&A activity. The Board is aware of the transaction and has reviewed it, but we won’t be commenting beyond that.

Okay. All right. And then you made the comment about double-digit rise in group bookings and Discovery Cove being positive indicators for next year. To what extent historically has that been predictive? Is that a good data point to tell you what’s going to happen, or is it a small part of your business and less predictive?

It’s one of many indicators. If people were pulling back from groups or not interested in Discovery Cove, we’d expect to see that in the numbers. The fact that those revenue trends are up double digits is a positive indicator and shows demand for our group and premium products is returning.

Thank you. And the next question will be from Lizzie Dove from Goldman Sachs. Please go ahead.

Thank you for taking the question. I wanted to see your thoughts on CapEx, especially—Universal has a big opening and Disney announced increased park investment over the next 10 years. How does that change how you allocate CapEx across new rides versus hotels or other initiatives?

Lizzie, our goal is to have something new in each park each year, including Orlando. Orlando is the largest tourism market in the U.S., and we’ve benefited from the market’s continued investment over decades. We welcome additional investment in the market; we have a differentiated product and will continue to invest in rides, attractions, hotels and guest experiences where we see attractive returns. We will continue to balance core CapEx and expansion/ROI CapEx in line with our return targets and Board priorities.

Appreciate that. One follow-up: earlier in the year you talked about expecting a record year in EBITDA. I think you had not fully committed to that last quarter. Curious how you’re thinking about that given the weather challenges and the OpEx improvements called out earlier?

I don’t have formal guidance. We will work to finish the year strong and we like our holiday events. On a normalized basis, if you can grow attendance modestly and per caps a few percent while managing costs, you can expand adjusted EBITDA in the mid-single-digit range. We’ve achieved higher attendance in the past—over 25 million in 2008—so we believe there is runway for growth and margin improvement through pricing, cost efficiency and revenue initiatives.

And the next question is from Robert Aurand from KeyBanc. Please go ahead.

Hi, thank you for taking my question. I wanted to follow up on the group bookings commentary. You said up double digits. Can you remind us if any easy comp dynamic is playing into that and how group bookings compare to 2019 at this time of year?

Robert, that was a revenue trend we called out. We feel the group business has come back in a lot of ways since the dramatic slowdown post-COVID. I don’t have a specific 2019 comparison to provide here, but revenue momentum in groups and Discovery Cove is a positive sign.

All right. And then as a follow-up, October per caps were up low single digits. Can you break that between admissions and in-park? And how are you thinking about those buckets into 2024—where you expect more growth?

In October both admissions and in-park per caps were positive and produced the low single-digit increase we reported. Going forward, we think about modest annual price increases on admissions and continued per cap growth from in-park improvements and new venues. Venue refreshes and new additions typically yield good returns, and we’ll continue to invest in those areas while optimizing pricing and penetration.

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, 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. 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.