United Parks & Resorts Inc. Q1 FY2024 Earnings Call

Good day, and welcome to the United Parks & Resorts First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matthew Stroud, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to United Parks & Resorts first 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.unitedparksinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Marc Swanson, Chief Executive Officer; and Jim Forrester, Interim Chief Financial Officer and Treasurer. This morning we will review our first quarter financial results and then we will open the call 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 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. 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.

Thank you, Matthew. Good morning everyone and thank you for joining us. We are pleased to report record financial results this quarter, including record revenue and adjusted EBITDA. While attendance in the quarter benefited from a positive calendar shift, including the shift of the Easter holiday into the last day of the first quarter from the second quarter, this benefit was almost entirely offset by unusually wet and cold weather during the quarter, particularly on certain peak attendance days and mainly in our Florida parks. In-park per capita revenue, excluding the impact of certain one-time revenue, increased 4% during the quarter, representing the 16th consecutive quarter of growth. Looking ahead, we are excited about our plans for 2024 with an exceptional lineup of new, one-of-a-kind rides, attractions, and events. We have already launched SeaWorld Park's 60th anniversary celebration featuring special events, shows, and attractions that will continue throughout the year. We hope many will come celebrate with us at SeaWorld's 60-year history of conservation, education, and fun for all ages. We're also encouraged by the booking trends at our Discovery Cove property, along with our group bookings, which are running well ahead of 2023. In addition, in the first quarter of 2024, international visitation, while still down compared to 2019, improved meaningfully compared to 2023. We strongly believe we have a clear opportunity to drive meaningfully more attendance and total per capita spending, and we have high confidence in our ability to continue to deliver operational and financial improvements that will lead to meaningful increases in shareholder value. We continue to expect to deliver new records in revenue and adjusted EBITDA for 2024. I want to thank our stockholders and Board of Directors for their recent overwhelming approval of our $500 million share repurchase program, which we have already begun to implement and through which we are continuing our track record of returning meaningful capital to shareholders. Finally, I want to thank our ambassadors for their dedication and commitment as we prepare for what we believe will be an exciting and busy summer season.

Thank you, Marc. Our team is looking forward to sharing our quarter's strong performance with our audience this morning. During the first quarter, we generated record total revenue of $297.4 million, an increase of $4.1 million or 1.4% when compared to the first quarter of 2023. The increase in total revenue was primarily a result of an increase in attendance, partially offset by decreases in admissions per capita and in-park per capita spending. Attendance for the first quarter of 2024 increased by approximately 72,000 guests or 2.1% when compared to the prior year quarter. Attendance was positively impacted by a favorable calendar shift, including the earlier timing of Easter and certain school spring breaks, and was negatively impacted by adverse weather, particularly at our Florida parks. Excluding the impact of certain one-time revenue associated with the opening of SeaWorld Abu Dhabi in 2023, total revenue per capita increased 1.2%, and in-park per capita spending increased 4%. Operating expenses decreased by $7.8 million or 4.5% when compared to the first quarter of 2023. The decrease in operating expenses was primarily due to a decrease in costs associated with our international services agreements, and a decrease in legal costs.

Let me highlight a few of our new rides and attractions, along with a couple of events. In March, SeaWorld San Antonio opened Catapult Falls, the world's first launched flume coaster featuring the world's steepest flume drop and the tallest flume drop in Texas. In Tampa Bay, Busch Garden Tampa Bay will open Phoenix Rising, a family-friendly roller coaster that takes riders soaring above the Serengeti Plain. We are also 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 and allow us to generate more revenue. Our financial position is strong and the business is resilient. Our coming openings of more of our ride attraction and event lineup give us confidence in our ability to continue to achieve new records in revenue and adjusted EBITDA for 2024. I want to again thank our stockholders and Board of Directors for their recent overwhelming approval of our $500 million share repurchase program.

We generated a net loss of $11.2 million for the first quarter compared to a net loss of $16.5 million in the first quarter of 2023. The increase in net income was primarily a result of the impact of lower operating expenses. Our deferred revenue balance as of the end of April was $217.7 million, which indicates positive trends. We also continue to see many passholders who have transitioned to month-to-month payments, which does not show up as deferred revenue. Our balance sheet remains strong, giving us flexibility to invest in and grow our business.

We continue to believe there are significant additional opportunities to improve our execution, take advantage of clear growth opportunities, and continue to drive meaningful long-term growth in both revenue and adjusted EBITDA. We are building an even stronger and more resilient business that we expect will deliver improved operational and financial results and meaningful increases in shareholder value.

As far as the pricing, look, we continue to execute on pricing, that's a tenet of our strategy. So we're going to continue to do that. I think overall, we have confidence in the overall pricing strategy on the admission side on a go-forward basis. In-park per cap was positive in April as well.

We talked a lot about this last quarter regarding our hotel opportunity across our portfolio. So, we're in the process of finding the right structure and way to set this up that achieves the ROI we talked about. We have committed to being laser-focused on that ROI and we're going to take the appropriate time to make sure we get that right.

So Marc, as we think about the remainder of this year, is there any way you can help us out with how you guys are thinking about per caps both on the admissions and in-park side? Any updated thoughts on how you guys are thinking about taking more price?

Yes. So first on pricing, you heard Jim talk about the price increases we’ve seen on pass pricing. We're going to continue to execute on pricing. Overall, we have confidence in the pricing strategy on the admission side moving forward.

It would be helpful if it would be possible to speak to underlying demand trends that you're seeing at your parks, maybe if any way to parse through the best you can weather and some of the timing shifts during the quarter.

Attendance was positively impacted by the Easter timing, but we experienced adverse weather, particularly in our Florida markets. Excluding the impact of one-time revenue, attendance for March and April combined was slightly positive.

I think we've had a very successful focus on managing our labor expense. This quarter was no different than the previous quarters where we're actually down year-over-year in our labor rate. We have shown an ability to control that cost pretty effectively.

On Epic Universe, we view new attractions in the market positively as it drives overall traffic. We believe we have a differentiated product and a strong value proposition.

Congrats on a nice set of results. How do you evaluate the pacing and capital allocation priorities for share repurchase versus other investments like hotels?

We'll work with the Board on the use of cash. To the extent the stock remains undervalued, that would lean towards doing more buybacks. But we do recognize the stock is undervalued and certainly believe in the buybacks.

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 for joining us today. We are confident in our long-term strategy, which we believe will drive improved operating and financial results. We look forward to speaking with you next quarter.