United Parks & Resorts Inc. Q3 FY2024 Earnings Call

Good day, and welcome to the United Parks Third Quarter 2024 Earnings Conference Call. 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 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.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 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 measures 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 would like to turn the call over to our Chief Executive Officer, Marc Swanson.

Thank you, Matthew. Good morning, everyone, and thank you for joining us. We are pleased to report another quarter of solid financial results. Third quarter results were impacted by both a negative calendar shift and significantly worse weather, including Hurricane Debby in August and Hurricane Helene in September. The combined impact of the calendar shift and the significantly worse weather was approximately 320,000 guests. Adjusting for these impacts, attendance would have increased approximately 3% compared to the prior year quarter. We continue to see strong demand for our parks during normalized operating conditions and we are growing total revenue per capita. Our investments and strategies related to our in-park revenue areas continue to pay off as we again delivered record in-park per capita spending during the quarter, representing growth in 17 of the last 18 quarters. During the quarter, we strengthened our balance sheet and liquidity position by increasing the size of our revolving credit facility and decreasing its cost. We also continue to take advantage of our significant free cash flow generation and follow through on our commitment to return excess capital to shareholders by opportunistically and aggressively buying back our shares at extremely depressed and highly attractive prices. We repurchased approximately 4.9 million shares or more than 8% of our total outstanding shares since the end of June through November 6. Year-to-date, we have repurchased approximately 9.4 million shares or approximately 15% of our total outstanding shares. Last week, we wrapped up another busy Halloween season at our parks featuring our award-winning Halloween events. Excluding our Tampa Park, we again realized record-breaking attendance for our increasingly popular Howl-O-Scream event across our parks. October results were significantly impacted by Hurricane Milton, which resulted in 14 operating day closures in our Florida market and an extended impact at our Tampa parks as that market recovered from the impact of the storm. Attendance strengths over the past 3-week period post the impact of Hurricane Milton have been strong, with attendance up approximately 8% on a day-to-day basis through November 3. In the coming weeks, we will begin our award-winning Christmas events at our SeaWorld Busch Gardens and Sesame Parks. We believe our Christmas events this year will be our best ever, featuring our popular rides, attractions, and exhibits along with new and exciting shows, specialty food and beverage offerings, and holiday shopping for guests of all ages. I want to thank our ambassadors for their dedication and efforts during our busy summer season as well as during our Halloween events and our upcoming Christmas events. As we look out into 2025, we're extremely pleased with what we are seeing in our four demand indicators. 2025 intended date ticket sales, group bookings, and Discovery Cove bookings are all trending up double-digit percentages ahead of the prior year. We also recently launched our new and improved premium pass program, which features our best benefits ever, and we have seen strong sales since launch, with sales up over 10% to date. Our results year-to-date continue to demonstrate the strength and resiliency of our business model and the increased demand for our parks in our unique and differentiated offerings. While we are encouraged by the payoffs we are seeing from our investments and initiatives across our enterprise, we know we have a lot more work to do. As we wrap up planning for our 2025 season and beyond, we are confident in our ability to take advantage of clear and significant opportunities we have to improve our operations, grow our footprint, further monetize our highly valuable assets and brands, and deliver meaningful increases in revenue, profitability, and shareholder value. We announced our lineup of new rides, attractions, events, and upgrades for 2025. This lineup includes an immersive flying experience, taking guests on a breathtaking journey to the top of the world, as the revolutionary attraction invites thrill seekers and families alike to soar through the skies over the Arctic and dive into the icy depths like never before at SeaWorld Orlando. The oasis, in all-new realms featuring the sights and sounds of the rainforest, the rush of the newly reimagined drop tower featuring state-of-the-art digital and sound effects and interactive water play wonderland, a multilevel canopy and an all-new multi-species animal habitat for up-close encounters with some of the world's most fascinating animals at Busch Gardens Tampa Bay. Rescue Jr., an all-new kid-friendly realm featuring animal rescue-themed rides, waterplay area, and so much more at SeaWorld San Antonio. Big Bad Wolf, the Wolf's Revenge, North America's longest family inverted coaster, delivering a unique, immersive, and thematic experience, where families are swept into a world of unparalleled excitement at Busch Gardens Williamsburg. Jewels of the Sea, the jellyfish experience attraction offers an immersive and interactive view into the mysterious underwater world of glowing and graceful jellyfish at SeaWorld San Diego. Also, Journey to Atlantis, SeaWorld San Diego's first coaster, will be reinvented, paying tribute to the original beloved version, adding new elements to create a more exciting and immersive experience than ever before. During the quarter, we repurchased 4.1 million shares for an aggregate total of approximately $211.7 million. Subsequent to September 30, 2024, through November 6, 2024, we repurchased approximately 0.8 million shares for an aggregate total of approximately $37.7 million. The Board and the company strongly believe our shares continue to be materially undervalued. We have confidence in our business, our prospects, and the value of our assets, and any reasonable way you look at it, we feel we are materially undervalued, and that there is significant upside opportunity in our current share price. Our balance sheet continues to be strong. Our September 30, 2024, net total leverage ratio is 2.98x, and we had approximately $759 million of total available liquidity, including approximately $77 million of cash on the balance sheet. The strong balance sheet gives us the flexibility to continue to invest in and grow our business and to opportunistically allocate capital with the goal of maximizing long-term value for shareholders. We continue to make progress on realizing our cost savings initiatives so far this year, and we still have approximately $6 million more to realize in the fourth quarter. We currently have approximately $20 million of new initiatives planned for 2025 and expect an additional $7 million of full-year run rate impact in 2025 from initiatives started in 2024. As you know, cost management discipline is a key focus of our management team, and we have demonstrated our ability to deliver on cost efficiencies. Now let me update you on some of our other initiatives. In regards to the mobile app, we continue to make substantive progress on functionality, adoption, usage, and financial impact. It is being used by an increasing number of guests in our parks to improve their in-park experience and is available at an increasing number of targeted locations. The app has now been downloaded more than 12 million times, up from 10.7 million times at the end of Q2. Total revenue generated on the app continues to grow, and we are now seeing an approximate 35% increase in average transaction value for food and beverage transactions made through the app compared to point-of-sale orders. We're excited about the potential of the app and its ability to improve the in-park guest experience, drive increases in revenue, and decrease costs. We are still in the early innings of fully monetizing the app. Our CRM program is generating incremental revenue by supporting our existing marketing strategy while demonstrating a more holistic approach to customer engagement. We continue to believe that CRM will play a role in our long-term growth strategy, providing deeper insights and more meaningful connections with our guests as we continue to scale. On the international front, we continue to progress several discussions on new projects and expect to have more exciting news to share on two new projects, in particular, in the coming quarters. On the real estate front, we continue to refine our hotel plans and have discussions with various potential partners. We are also discussing other opportunities to develop and monetize our strategic real estate holdings. As we have discussed previously, we are very excited about the opportunity to monetize our substantial and valuable unused land holdings and have hotels integrated into our properties. As a reminder, we are laser-focused on achieving a minimum ROI for all capital projects. We are excited about our new efforts and the resources we have put towards growing our group business. We see significant opportunity to grow our group business across our park portfolio. As I mentioned, we are seeing a double-digit increase in group bookings for 2025, and we are excited about unlocking the full potential of this profitable channel. We have also recently put more focus around capturing sponsorship opportunities in our parks. We recognize the opportunity we have to generate meaningful profits from leveraging the audience we have in our parks and the success many of our competitors have had in this area. This is not something that we have recently focused on as much. And as a result, we believe we have the potential to generate meaningful incremental profits over time from creating a dedicated effort around this opportunity. More to come in future quarters. 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 our operations and 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, and we are confident we will deliver improved operational and financial results and meaningful increases in shareholder value. With that, Jim will discuss our financial results in more detail.

Thank you, Marc. During the third quarter, we generated total revenue of $545.9 million, a decrease of $2.3 million or 0.4% when compared to the third quarter of 2023. The decrease in total revenue was primarily a result of a decrease in attendance, partially offset by an increase in total revenue per capita. Attendance for the third quarter of 2024 decreased by approximately 100,000 guests or 1.4% when compared to the prior year quarter. The decrease in attendance was primarily due to a negative calendar shift and significantly worse weather, primarily related to Hurricanes Debby and Helene during peak visitation periods compared to the prior year quarter. As Marc mentioned, the combined impact of the calendar shift and the adverse weather was approximately 320,000 guests. Adjusting for these impacts, attendance would have increased approximately 3% compared to the prior year quarter. Total revenue per capita increased 1.0%, admission per capita increased 0.5%, and in-park per capita spending increased 1.6%. Admission per capita increased primarily due to the net impact of the park mix, partially offset by lower pricing on certain promotional admission products when compared to the prior year quarter. In-park per capita spending defined as food, merchandise, and other revenue divided by total attendance improved primarily due to pricing initiatives when compared to the third quarter of 2023. Operating expenses increased $1.5 million or 0.7% when compared to the third quarter of 2023. The increase in operating expenses is primarily due to an increase in labor-related costs and a $2.6 million increase in third-party consulting costs associated with nonrecurring strategic initiatives, partially offset by a decrease in noncash fixed asset write-offs when compared to the third quarter of 2023. Selling, general and administrative expenses decreased $4.3 million or 7.3% compared to the third quarter of 2023. The decrease in selling, general and administrative expenses is primarily due to a $6.6 million decrease in third-party consulting costs, including approximately $4.2 million of nonrecurring costs for strategic initiatives, partially offset by an increase in marketing-related costs when compared to the third quarter of 2023. We generated net income of $119.7 million for the third quarter compared to net income of $123.6 million in the third quarter of 2023. We generated adjusted EBITDA of $258.4 million, a decrease of $8 million when compared to the third quarter of 2023. Adjusted EBITDA declined due to increases in expenses used to calculate adjusted EBITDA and a decrease in revenues relative to the prior year. Looking at our results for the 9 months of 2024 compared to 2023, total record revenue was $1.34 billion, an increase of $3.3 million or 0.2%. Total attendance was 16.7 million guests, an increase of 20,000 guests or 0.1%. Net income for the period was $199.6 million, an increase of $5.5 million, and adjusted EBITDA was $555.7 million, a decrease of $7.3 million or 1.3%. Now turning to our balance sheet. As Marc mentioned, we further strengthened our already very strong balance sheet and liquidity position by increasing the size of our revolving credit facility from $390 million to $700 million and decreasing our costs during the quarter. As of September 30, 2024, we added approximately $759 million of total available liquidity, including $77 million of cash on the balance sheet. Our net total leverage ratio at the end of the quarter was 2.98x. The strong balance sheet gives us the 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. Under our $500 million repurchase authorization from the Board, during the third quarter, we repurchased 4.1 million shares for an aggregate total of approximately $211.7 million. Subsequent to September 30, 2024, through November 6, 2024, we purchased approximately 0.8 million shares for an aggregate total of approximately $37.7 million. Our deferred revenue balance as of the end of September was $155.7 million, a decrease of approximately 3.3% when compared to September of 2023. As a reminder, our deferred revenue balance contains a number of products, including ticketing, vacation packages, annual and seasonal passes, and ancillary products. We also continue to see many pass holders who have been with us for at least a year who transitioned to month-to-month payments at the completion of their initial past commitment. This month-to-month revenue does not show up as deferred revenue. Our pass base improved from the end of the third quarter. Through October 2024, our pass base, including all pass products, was flat compared to October 2023 and up 25% when compared with October 2019. We recently launched our best pass benefits program ever for 2025, which has led to double-digit sales and which we expect will drive a strong pass base for the remainder of this year and next year. We spent $55.4 million on CapEx in the third quarter of 2024, of which approximately $35.1 million was on core CapEx and approximately $20.3 million was on expansion and/or ROI projects. For 2024, we expect to spend approximately $250 million on CapEx, of which $180 million will be on core CapEx and approximately $70 million of CapEx on ROI or growth projects. On a normalized basis, we continue to expect to spend $150 million to $175 million on core CapEx, which is defined as rides, attractions, and maintenance, and up to $50 million on ROI or growth CapEx with a clear and supportable return.

Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the third quarter of 2024, we came to the aid of 132 animals in need. Over our history, we have helped over 41,000 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. We're excited about our upcoming Christmas events that will wrap up calendar 2024, and we are planning for more great events to start in the first quarter of 2025, including inside looks at the SeaWorld Parks, Mardi Gras at the SeaWorld and Busch Gardens parks, Seven Seas Food Festival at the SeaWorld Parks, and the Food and Wine Festival at Busch Gardens, Tampa Bay. I want to thank our ambassadors for their efforts during our summer and fall season and the preparation for our upcoming winter events, which are guest favorites. 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 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 take your questions.

The first question comes from Steve Wieczynski from Stifel.

So Marc, I know over the past couple of quarters, you guys have talked about 2024, and you guys were expecting to be kind of a record revenue and EBITDA year. I'm guessing now that it's pretty clear that's probably off the table given the adverse weather you guys have experienced across a lot of your Florida parks. But I guess my question is, as we start to think more about 2025 based on what you're seeing today in terms of forward demand spend patterns, you talked about the realization of more cost savings. Is there any reason to believe that 2025 wouldn't get you back kind of well north of that previous EBITDA record in 2022? I mean assuming that weather is kind of normalized. And I'm not trying to get guidance out of you, but we're just looking for more reasons why that wouldn't potentially be the case next year?

Yes. Thanks, Steve, for the question. So the first part about the record for this year, you're correct. I mean, obviously, we don't have that in our projection, given the significant weather impacts that you called out. So it's unfortunate, but we're going to try to finish out the year, obviously, as strong as we can, but no longer expect record revenue and record adjusted EBITDA, as you noted. And that's, again, due to the weather. The weather has been not good, especially with Hurricane Milton here in October. As far as how we look out to 2025, there are some encouraging signs as you heard me talk about. And certainly, our expectation would be that we would recapture a lot of this weather impact that we lost and then find additional ways to grow on top of that, with either new attractions, events, or other compelling reasons to visit, etc. So yes, again, I can't guide you to a specific number, but I can tell you internally, certainly, our expectation would be to get back to record performance and getting some recovery from the weather and then growing through other means in our business, whether it's our initiatives, all the different things we're doing around our rides and attractions and reasons to visit. So yes, that's how we think about it.

Okay. That leads to my second question. As we consider 2025, there will be increased competition coming to the Orlando market. There seems to be concern in the investment community that this new competition could significantly affect your performance in 2025. You have a strong value proposition compared to some competitors in Orlando. Could you share how you are approaching 2025 in light of this new competition?

Sure, Steve. I want to share a couple of points, and I realize some of this may sound familiar, but I’ll try to add new insights as well. We've been part of the Orlando market since the early 1970s, starting with SeaWorld Orlando. Since then, we've opened Discovery Cove and Aquatica, contributing to the growth in the area. We have shown that we can thrive even in competitive environments. When a new park opens, we typically see it as a positive for the overall market since it attracts more visitors, and we need to focus on bringing those visitors to our parks. To achieve this, we have a distinct offering. The new attraction coming to SeaWorld Orlando next year will center around animals, providing a unique experience exclusive to our park. We also have a strong value proposition, particularly with our season passes and multi-day tickets, making our parks more accessible and providing an enjoyable visiting experience that feels relaxed. We are aware that a new park is launching in Orlando next year, and we have strategies in place to address that competition. I believe we can execute our plans effectively, as we have consistently done in this market. We welcome more visitors, and while Epic will likely be successful and may attract crowds, I am confident that we can compete for a larger share of the market, just as we have in the past with our diverse offerings.

The next question comes from Matthew Boss of JPMorgan.

So Marc, maybe could you elaborate a little on the cadence of attendance trends that you saw in the quarter? I know maybe as best you can through weather. And if you could just walk through some of the drivers of the improvement that you cited for October, maybe between weather, macro, how much you think is company self-execution? And just putting that all together, maybe is there a best way to think about top line puts and takes for the fourth quarter?

Yes, I can provide some insights on that. Attendance fluctuated a bit during the third quarter, largely due to the calendar change and the effects of weather. Most of the calendar change was related to July, while the weather impacted some of the other months. However, it's encouraging to note that attendance has improved since Hurricane Milton calmed down. The hurricane caused significant disruption at the beginning of October, leading to the closure of our Busch Gardens Park for five consecutive days, which is quite substantial. Other parks also experienced closures, and there was a preliminary decline in attendance as people prepared for the storm. The recovery process in places like Tampa has taken some time. In our comments, we aimed to provide an overview of the last three weeks up to November 3. During that period, daily attendance has increased by about 8%, largely thanks to the popularity of our Halloween programs. We extended Halloween into the first weekend of November, which proved to be a smart decision as we saw strong demand that weekend. This helped to compensate for the significant drop in attendance we experienced in October.

Great. And then maybe, Jim, just on the cost side, could you speak to continued efficiency opportunities? Or how best to think about the multiyear cost profile relative to top line?

Regarding our ongoing cost structure, we are planning several significant initiatives for next year. These may involve leveraging technology to enhance labor efficiency and cut expenses in areas like utilities and insurance claims. We have noted that we are in the planning stages for approximately $20 million worth of new initiatives. While we have discussed these on a gross basis, we are hopeful they will effectively contribute to our financial performance, and we will keep working to ensure that they do.

The next question comes from Jamie Hardiman from Citi.

I wanted to discuss some of the financial figures from the third quarter. Revenues were relatively stable, with a decrease of $2 million, but EBITDA fell by about $8 million, and cash from operations decreased by $25 million. It would be helpful to explore the transition from revenue to EBITDA and then from EBITDA to cash from operations. Clearly, there are several adjustments involved in moving from EBITDA to adjusted EBITDA, and I think some of the differences can be attributed to those adjustments. Could we go through those details?

Yes, James, I can assist with that. Regarding total revenue, it was slightly down as you mentioned, primarily due to attendance challenges from the calendar shift and weather. However, we have successfully grown our per capita spending, particularly in the parks, which is a positive development even amidst the lower attendance for the quarter. Moving to adjusted EBITDA, as Jim mentioned, we are facing some cost pressures in certain labor areas, and we've learned from those experiences. We're aware that there's room for improvement. However, our costs are not excessive, with EBITDA costs only rising about 2%. We're effectively managing our expenses at a relatively low level despite inflationary pressures, insurance costs, and labor challenges we've identified in Q3 that we plan to address in Q4. This outlines our thought process moving forward.

Got it. And I don't know if you want to touch on the cash flow piece.

No. I mean, I think you can probably read into that pretty clearly on the press release.

Okay. I may have misunderstood. In your prepared remarks about real estate, I wasn't sure if there was something new or if it was similar to what you've said before. You mentioned that you are still looking for partners for hotel development, but also noted that you are exploring other opportunities to develop and monetize. Is this something new compared to what you previously communicated? Is there a possibility for you to pursue your own development instead of just following the partnership route?

Yes. I think what I was alluding to, James, was we recognize, and we've talked about it, that we have a lot of land and we have land in desirable areas, right? And you could use that for hotels or other things. And I'm not sure it's always fully appreciated by everyone what that land, how much we have and how valuable we believe it is. And we recognize the Board and others recognize that there are ways to monetize or at least ways that we should consider how to use that land. So those are just discussions that we can have internally or as people approach us with ideas. And so I think we're just making it clear to people that we recognize there are other ways to monetize our assets beyond just the hotels. And I don't have anything specific to share with you, but it's something that obviously our Board is aware of.

The next question comes from Lizzie Dove from Goldman Sachs.

I just wanted to keep going with the capital allocation point. It looks like you're on pace to finish the buyback by the end of the year. So could you just give us a refresh like in terms of whether you would want to have another authorization, I think that would require a shareholder vote? Or do a dividend or go down a hotel route? Could you kind of outline what your order of priorities there is as you look to 2025?

Yes. Lizzie, I can take that question. So I think the simplest way to sum it up is, obviously, we know capital allocation is something that our investors are obviously going to want to know about and ask about. And so you can be assured that our Board is well aware of that and it's something that they will, like they have in the past, make sure that they're considering what are the best options for shareholders. And I think what I can leave you with is that I think you can feel confident that, that has worked that they will continue to consider on a go-forward basis. So I don't have anything specific to direct you to, other than they'll continue to consider what are the best ways to return cash to shareholders.

Got it. And then just a follow-up on one of the earlier kind of hurricane questions. Could you kind of help outline maybe what the kind of EBITDA impact of the hurricane was for the fourth quarter? I guess it hit ahead of the kind of Halloween events, which typically, I think, are higher per cap event. It has been more, obviously, so in Florida, which, again, I think, come with ticket prices versus the rest of the mix. So just curious kind of, I guess, how that's kind of impacted per cap trends that you've seen quarter-to-date and also just what the kind of EBITDA hit has been?

Yes. I can take that question. So we had a meaningful impact, obviously, a pretty significant impact on the start to October. And as I mentioned, being closed so many days. And when we went back, I think 30 years, we haven't been closed for five days in a row at Busch Gardens that we could see. And then we had the impacts over here in Orlando. And then you kind of have this lingering impact, at least in October, for Tampa. So the impact is pretty significant, I would say, probably $9 million or so or more. It's hard to put an exact number on it, but maybe $10-ish million in EBITDA would be a way to think about it. But that's clearly an estimate. What we got to kind of keep an eye on is if it lingers into Thanksgiving or Christmas with some of the recovery down in Tampa with some of the beaches and stuff are just now kind of reopening in a lot of cases. So hopefully, it will continue to return to normal, like we kind of saw here at the beginning of November. But yes, a very meaningful impact.

The next question comes from Ben Chaiken of Mizuho Securities.

It's Ali Patel on for Ben Chaiken. Can you discuss your cash costs for the quarter, which appear to be slightly up year-over-year? Was there anything unusual to highlight? Additionally, I wanted to inquire about the cash conversion from EBITDA to cash flow from operations, which was a bit lower than we anticipated. Is there anything in working capital we should take into account for this quarter and looking ahead?

I’ll address your second question first. There’s no reason for concern. It’s not seasonal in nature, and there’s nothing significant to discuss regarding that aspect.

Yes. Regarding your first question, I believe James asked something similar. There were pressures this quarter from increased labor costs in the parks and other related factors. We also incurred some additional costs that were somewhat irregular. Overall, the growth in costs was only about 2%. We gained insights from this quarter about staffing and other initiatives that we will implement moving forward. We remain confident and disciplined regarding our costs, which will continue to be a key aspect of our operations.

The next question comes from Paul Golding from Macquarie Capital.

Just wanted to ask, with weather becoming a more consistent headwind, particularly in the core summer months, and we saw the elevated temperatures heatwaves in SoCal and obviously the hurricanes on the East Coast. Wondering how your view around operating days may be evolving here? Is there an opportunity or are you considering maybe driving concentration of visits on a close-in basis on certain days when weather is good? Just trying to understand how you may be strategizing around weather, now that we've seen a few years of really consistent headwinds from this?

Yes, thank you, Paul, for your question. You're correct that weather has been a challenge in recent years. We are taking steps to address this. However, I believe that over the long term, conditions will stabilize. For instance, following Hurricane Milton, we've seen positive weather in our locations recently, which gives me hope for normalization. In light of the challenges we've faced, we are working on introducing more indoor attractions. Next year, we'll have an indoor attraction at SeaWorld Orlando, and the one we launched this year also includes an indoor aspect. Additionally, we’ve invested in shade structures and drink programs to help keep guests comfortable. While I'm not listing everything we're doing, we're committed to making the experience enjoyable regardless of the weather. Regarding your point about maximizing attendance on nice days, we want to encourage more visitors during such times, as increased attendance brings significant benefits. Overall, while I believe things will normalize over time, we’re actively implementing strategies for the immediate future.

As a follow-up about Discovery Cove, considering the strong bookings compared to last year and the generally lower capacity but higher-yielding product, how do you view this product category? Discovery Cove is a unique attraction, but when contemplating the demand for higher-yielding visits, which may have lower capacity, what is your perspective on that mix in relation to attracting visitors and the impact of weather on this discussion?

Yes. I mean what I would tell you is Discovery Cove is a wonderful park, right? It's one of the top-rated theme parks you can go visit. It's an all-inclusive oasis as I like to call it, this is a great experience and certainly has attracted quite a following over the years. It is limited capacity, to your point. And I think we have opportunities there, especially around dynamic pricing, where we can price more on the peak days. And then there might be days in the shoulder seasons or weekdays, that park is essentially open year-round, where we might be willing to still increase price over the prior year but less than what you would pay in the peak. So we like our ability to kind of manage that park. I do think also, to the extent international attendance comes back more or more, international attendance happens in Orlando next year, which would seem perhaps reasonable with Epic opening. That Discovery Cove has been a pretty popular choice with international guests. So that's another, I think, something in its favor with internationals.

The next question comes from Eric Wold from B. Riley Securities.

Looking forward in the '25 and '26, I know you talked about Orlando, you noted, obviously, the value proposition relative to peers in that market. I guess, where do you think you have room to take price on admissions over the next year or two? Do you expect to lean into price or be maybe a little more cautious on that to drive tenants and subsequent import spend? I guess on that also, what has been kind of the recent sensitivity to price that you've seen when you move it around?

Yes. So Eric, I mean, I think I'd look at a couple of things. I mean one, if you're talking specifically in Orlando, I mean, I think we have opportunities. We are still at a value proposition to Universal and Disney, and I think that will only continue. So as they get more expensive, I think that it showcases our value, and we have the ability to increase our prices over time as well. So I think we feel good about the opportunity to continue to grow pricing across not only in Orlando, but across most of our markets, and that's certainly kind of a key tenet of our strategy is to grow pricing. Again, we're always going to focus on total revenue. So there may be times that we do different things to simulate more sales of a certain product that may not involve taking price or even discounting, but all of that is driving total revenue. But certainly, I think, over the medium to long term, we feel our opportunity to take price will remain.

Got it. And then a follow-up. You called out kind of consistently on the call on the app and the number of downloads and the 35% increase in average transaction value for food and beverage. What percentage of food and beverage transactions are currently going through the app versus POS? And where do you think that could go over the next few years?

Yes. I'll comment on the app before letting Jim discuss its penetration. I want to emphasize that we are still in the early stages of what the app can achieve. I see users engaging with it, and I believe it has been beneficial for them. However, there is significant potential for increased engagement through the app. As mentioned in the call, when people use it for mobile ordering, they tend to spend more. We noticed this reflected in the average transaction value, and we are working on making it more accessible in various locations. Our goal in the near to medium term is to ensure that it is available all day at as many places as possible, rather than just at limited times in select restaurants. We aim to make it a constant feature. Jim, would you like to discuss the user numbers?

Yes, I would say from a penetration standpoint, you're looking at maybe almost a little less than 1/3 of penetration from all other both categories that's not only food and beverage, but all other things that we offer on the app, which would include zoo experiences or our quick queues or things like that.

Yes. So quite a bit of room to grow, it sounds like, yes.

The next question comes from Thomas Yeh from Morgan Stanley.

A few more on the forward booking commentary. The 2025 intended date ticket sales, you mentioned that's pacing up double digits as well. What portion of your typical attendance base is in any given quarter has a ticket, get purchased 2 or 3 or even more months in advance? Have the lead times changed at all on date-specific purchases? And any help sizing how that translates into your overall visitation mix would be helpful.

It's one of the indicators we look at. I can't provide the exact number due to competitive reasons, but generally, people buy tickets differently based on who they are. For those with long-planned vacations, tickets are often purchased further in advance compared to someone from Florida. Overall, we're encouraged that more tickets are being sold compared to last year at this time, though I can't specify how that affects our overall sales. It's not the majority of our sales, but it's an indicator we track, along with Discovery Cove bookings and a few other metrics.

Okay. Understood. And then just maybe on the season pass update, can you help us square the flat season pass units versus the double digits on the premium pass program? I mean, is it fair to say that premium is smaller but growing as a portion of your overall pass product offering? And I might have missed it, but do you share any blended pricing on the season pass uptick so far?

Yes. Let me clarify that for you. Jim can add his thoughts as well. When we refer to passes, we include our premium passes, fun cards, teacher passes, and preschool passes, which are all categorized under the term 'pass'. That's the figure Jim mentioned as remaining flat. We have a couple of factors to consider regarding that flat number compared to the increase in premium passes. It's a positive sign that we are selling more of the higher-priced passes because those customers tend to be more loyal and visit more frequently. These passes offer better benefits, and as customers upgrade to higher tiers, those benefits improve significantly. Selling more premium passes is preferable for us, even if it means selling fewer fun cards. Currently, the base remains flat, but if we can continue to grow the premium passes while maintaining our position in other categories, we hope to see an overall expansion in time. We are still early in the launch process, and our sales will increase, especially as we approach next spring and events like Black Friday. That's our perspective on it.

The next question comes from Chris Woronka from Deutsche Bank.

I was hoping we could just drill down for a second on some of the CapEx. I know you've given the target for this year and ranges for kind of ongoing. Can you maybe give us a little bit of an idea on the ROI piece? What kind of things those are going to? Is that kind of a premiumization strategy, whether it's cabanas at one of the parks or something else? Can you just give us a little more detail on what kinds of things those may involve?

Yes. And Chris, are you talking specifically '25 or '24?

I’m just trying to understand what that involves, Jim.

Yes. So generally, we found a lot of opportunity in our food and beverage offerings, that's when a large short section of our capital spend is going for the ROI projects. And this could be generally revamping those facilities, one, to provide new food and beverage offerings, to update it, to allow guests to be more efficient and get lines through quicker. So there's more of an opportunity to buy up to the full meal as opposed to going to a cart or kiosk if lines are too long. So that's going to take up some of that ROI capital. We're also looking at things like exit retail for either parks like we did in Sesame Place or for our attractions that are coming up soon or are currently in progress, to make sure that there's an ability to buy a tangible memory from that ride experience. And then we have a number of items, as I mentioned earlier in the call, about using technology to be more efficient in our expenses through solar power, through automatic or reduced labor in our turnstiles in our main entrances or efficiencies in our utility spend.

Okay. Appreciate that. And then just a quick follow-up. You talked a lot about some of the opportunities that are coming through the app. But can you talk maybe a little bit about where you are on some of the dynamic pricing and whether that's going to be a play a bigger role in the kind of the mobile and pricing strategy going forward?

Sure. Dynamic pricing is an area we are actively exploring, and we believe there will be increasing opportunities to implement it. For instance, if you're using our app while at the park and find yourself waiting in a longer line than you'd prefer, you now have the option to purchase a front-of-the-line pass through the app. The price for that pass could vary based on the day's busyness. That's a straightforward example. Additionally, there are dynamic ticket pricing possibilities outside of the app as well, allowing us to adjust the ticket prices for entry to our park as needed. The more flexibility we can incorporate into our pricing strategies, the more beneficial it will be over time. We plan to keep focusing on this moving forward.

This concludes our question-and-answer session. I would like to turn the conference back over to Marc Swanson for closing remarks.

Okay. Thank you. On behalf of Jim and the rest of the management team at United Parks & Resorts, 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, and we look forward to speaking with you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.