United Parks & Resorts Inc. Q1 FY2025 Earnings Call

Good day, and welcome to the United Parks & Resorts First Quarter 2025 Earnings Conference Call. All participants will be in the listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Matthew Stroud from 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 James Mikolaichik, 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’d 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 strong financial results. Results in the first quarter were negatively impacted by the timing of Easter and spring break holidays moving into the second quarter this year compared to being in the first quarter last year. The shift of Easter and spring break from the first quarter to the second quarter also impacted admissions per capita and in-park per capita as peak operating days that usually come with higher relative pricing and guest spending also shifted from the first quarter to the second quarter this year as compared to the prior year. Despite the negative calendar shift, impact per capita spending increased 1.1% during the first quarter to a record level and has now grown from 19 of the last 20 quarters. First quarter results were also impacted by certain timing-related impacts that resulted in over $5 million more of certain expenses being recorded in the first quarter of 2025, compared to the first quarter of 2024. We are also pleased to report that April 2025 attendance was up 8.1%, compared to April of 2024. As we look ahead to the remainder of the year, we are excited about the significant investments we have made across our parks and business, including the incredible lineup of new, one-of-a-kind rides and attractions, popular events, improved in-park venues and other offerings across our parks. We are also encouraged by the 2025 bookings for our Discovery Cove property, our 2025 group bookings and our 2025 international ticket sales, all of which are running ahead of 2024. With approximately 75% of our historical attendance and revenue opportunity still ahead of us as of April 30, 2025, we continue to expect new records in revenue and adjusted EBITDA in 2025. We strongly believe we have a clear opportunity to drive substantially more attendance and total per capita spending and have high confidence in our ability to continue to deliver operational and financial improvements that we expect will lead to meaningful increases in shareholder value. Finally, I want to thank our ambassadors for their ongoing efforts as we prepare for what we anticipate will be another busy summer season. For 2025, we have an exciting lineup of new rides, attractions, events and new and improved in-park venues and offerings with something new and exciting across our parks. Our new rides and attractions include the following: SeaWorld San Diego debuted Jewels of the Sea in March, an immersive new aquarium experience featuring multiple galleries, including one of the largest jelly cylinders in the country and an engaging multimedia component. The park also announced the reinvention of Journey to Atlanta, San Diego's first coaster, which will honor the beloved original while introducing new storytelling and thrill elements. SeaWorld San Antonio launched Rescue Jr. in March, an all new kid-friendly realm celebrating animal rescue. The area features themed rides, interactive play zones, and a water play area designed for young adventurers. Sesame Place Philadelphia kicked off its 45th birthday celebration in April, offering guests birthday-themed fun, all spring and summer. Fan favorite entertainment has been refreshed with celebratory twists, including the return of the popular Sesame Street Birthday Parade. SeaWorld Orlando opened Expedition Odyssey on May 9, a groundbreaking family-friendly attraction that blends somatic storytelling with ride technology to transport guests on an unforgettable journey from the top of the world to the ocean's depth. The remaining new attractions include the following: Busch Gardens Williamsburg will open The Big Bad Wolf: The Wolf's Revenge, the longest family inverted coaster in North America, which will take riders through over 2,500 feet of track at speeds up to 40 miles per hour. Water Country USA will open High Tide Harbor, an all-new multilevel water play structure designed for families to explore together. This exciting area features over 100 interactive water elements including cannons, sprayers, and tipping fountains, ensuring endless fun for kids of all ages. With vibrant and dynamic water activities, High Tide Harbor promises to be the ultimate family-friendly destination for staying cool. Busch Gardens Tampa Bay will open Wild Oasis, an all-new realm featuring the sights and sounds of the rainforest, a newly reimagined drop tower featuring digital and sound effects, an interactive water play wonderland, a multilevel climbing canopy, and an all-new multi-species animal habitat for up-close encounters. Now let me give a brief update on just some of our strategic initiatives. First, on hotels, our work and discussions continue. We have nothing new to report today, but we continue to work through various options and with various potential partners. We are excited about the prospect of integrating branded hotels into our parks and the expected positive benefits. Second, on real estate as we have discussed, we own over 2,000 acres in valuable real estate and desirable locations, including approximately 400 acres of undeveloped land adjacent to our parks, including significant development land in Orlando. We continue to have discussions with various potential partners as we explore ways to unlock the value of this very valuable real estate. We do not believe that the public markets have appropriately given credit to these attractive and valuable 100% owned real estate assets. Third, on sponsorships, we have been actively working over the past several months on various sponsorship opportunities that leverage our valuable assets and customer database. As a reminder, we have over 21 million annual visitors across our park portfolio and the average length of stay is over six hours. In recent years, we have not pursued nor had meaningful sponsorship partnerships. Clearly, we have been missing this opportunity. Starting late last year, we formalized a partnership with a third-party group and dedicated internal resources to pursuing this opportunity. Since then, we have had meaningful discussions with several potential sponsors and expect to have exciting announcements in the coming months. The reception from potential sponsors has been good, given our annual visitation and the demographic we attract and related opportunities to target these guests through our CRM database and other methods. We expect these opportunities will exceed $20 million over time in high margin revenue, of which we expect to realize mid- to high single digits in 2025. Fourth, on international, we continue discussions with multiple partners on this front in various geographies and look forward to sharing more with you in the near future. Fifth, on IP partnerships, we continue our active discussions with various partners to bring their globally recognized IP to our parks via new rides, attractions, and/or other exciting activations. Finally, on our other initiatives, including park enhancements, technology investments, CRM and mobile app, among other things, all are moving forward, and we expect will help drive growth and financial improvements over the coming quarters and years. We are building an even stronger and more resilient business that we are confident will deliver improved operational and financial results and meaningful increases in shareholder value. Let me briefly comment on our balance sheet, which continues to be strong. On March 31, 2025, our net total leverage ratio is 3.1 times, and we had approximately $764 million in total available liquidity, including approximately $76 million of cash on the balance sheet in advance of us starting our summer season where we generate a majority of our cash flow. 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. During the first quarter, we repurchased 100,000 shares for an aggregate total of approximately $4.6 million. We know buybacks are on the mind of many of our investors, and while we don't have anything specific to announce today, I can tell you that our Board strongly believes our shares are materially undervalued and that purchasing our shares at or near current levels is an extraordinary opportunity. I can also tell you that the Board is working through various governance and other considerations and should have something to announce in the coming weeks. I would add from the management team, we have significant confidence in our business and our prospects. And along with the Board, believe strongly that our shares are materially undervalued. Finally, while we recognize there has been economic uncertainty in recent weeks, and while this may or may not continue going forward, I want to remind you all that we have a proven and time-tested resilient business model and offer a great value proposition to our guests. As a reminder, approximately 90% of our guests come from the United States, and the majority are within driving distance to our parks. Based on the seasonal nature of our business, we have approximately 75% of our attendance and revenue opportunities still ahead of us as of April 30, 2025, which along with the upcoming opening of more ride attractions and the initiatives that we have underway give us continued confidence in our ability to achieve new records in revenue and adjusted EBITDA for 2025. With that, Jim will now discuss our financial results in more detail.

Thank you, Marc, and good morning, everyone. During the first quarter, we generated total revenue of $286.9 million, a decrease of $10.5 million or 3.5% when compared to the first quarter of 2024. The decrease in total revenue was primarily a result of decreases in admissions per capita and attendance, partially offset by an increase in in-park capital spending. Attendance was negatively impacted by an unfavorable calendar shift with the later timing of Easter and spring break holidays when compared to the prior year. Attendance for the first quarter of 2025 decreased by approximately 59,000 guests or 1.7% when compared to the prior year quarter. The decrease in attendance was primarily due to Easter shifting into the second quarter compared to the prior year. The Easter shift impact was approximately 140,000 guests, which adjusting for this impact, attendance would have increased by approximately 2%. If we look at the year-to-date attendance through April, we are seeing approximately 1.3% growth on a fiscal basis and greater than that on a day-for-day basis, indicating a healthy start to the year. In the first quarter of 2025, total revenue per capita decreased 1.8%, admission per capita decreased 4.2%, and in-park per capita spending increased 1.1%. Admission per capita decreased primarily due to the impact of the admissions product mix and lower realized pricing on certain admission products due in part to the shift of peak visitation days from the first quarter to the second quarter. In-park per capita spending increased primarily due to the impact of increased volume for certain in-park offerings when compared to the first quarter of 2024. Operating expenses decreased $3.6 million or 2.2% when compared to the first quarter of 2024. The decrease in operating expenses is primarily due to a $4.6 million decrease in certain noncash adjustments when compared to the prior year quarter. Selling, general and administrative expenses decreased $3.7 million or 7.8% compared to the first quarter of 2024. The decrease in selling, general and administrative expenses is primarily due to a $3 million decrease in third-party consulting costs, including approximately $2.1 million of nonrecurring costs for strategic initiatives when compared to the prior year quarter. We reported a net loss of $16.1 million for the first quarter, compared to a net loss of $11.2 million in the first quarter of 2024. Furthermore, we generated adjusted EBITDA of $67.4 million, a decrease of $11.7 million when compared to the first quarter of 2024. Adjusted EBITDA declined due to a decrease in revenues from the calendar shifts previously mentioned, the timing of certain expenses, and decreases in add-back expenses used to calculate adjusted EBITDA relative to the prior year quarter. More specifically, first quarter results were negatively impacted by certain timing-related impacts that resulted in over $5 million of expenses being recorded in the first quarter of 2025 as compared to the first quarter of 2024. These expenses related to approximately $3 million of costs that impacted the first quarter this year that generally impacted future periods in the prior year and approximately $2 million of expense increase this year versus the prior year due to credits in prior years that were not repeated this year. Now turning to our balance sheet. Our March 31, 2025 net total leverage ratio is 3.1 times, and we had approximately $764 million in total available liquidity, including approximately $76 million of cash on the balance sheet. This strong balance sheet gives us the flexibility to continue to invest in and grow our business and opportunistically allocate capital with the goal to maximize long-term value for shareholders. During the first quarter, we repurchased 100,000 shares for an aggregate total of approximately $4.6 million. As Marc said, and I will reiterate, we believe our shares are undervalued, and attractively priced at current levels and beyond. Our deferred revenue balance as of the end of March was $195.9 million. Deferred revenue decreased approximately 6.7% when compared to March of 2024. As a reminder, our deferred revenue balance contains a number of products, including ticketing, vacation packages, annual and season passes, and ancillary products. In March 2025, our pass base, including all pass products, was down approximately 2% compared to March 2024. Although we are pleased that we are seeing realized price increases on our premium pass products compared to the prior year. We believe we have our best pass benefits program ever, which we expect will drive additional increases in pass sales and a strong pass base for this year, especially now that we are in the peak advertising and selling season. We spent $56.9 million on CapEx in the first quarter of 2025, of which approximately $49.9 million was on core CapEx and approximately $7.1 million on expansion and/or ROI projects. For 2025, we expect to spend approximately $175 million to $200 million on core CapEx and approximately $50 million of CapEx on growth in ROI projects. Now let me turn the call back over to Marc, who will share some final thoughts.

Yes. Thanks, Jim. Before we open the call to your questions, I have some closing comments. In the first quarter of 2025, we came to the aid of 205 animals in need. Over our history, we have helped over 42,000 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 are certainly excited about 2025 with the exciting lineup of new rides, attractions, and events, some of which have already opened with the remainder scheduled to open before the summer. 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. 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 have high confidence in our long-term strategy and our ability to deliver significantly improved operating and financial results, which we expect will lead to a meaningful increase in value for stakeholders. Now let's take your questions.

We will now begin the question-and-answer session. The first question comes from Steve Wieczynski with Stifel. Please go ahead.

Hi, good morning. Marc, I'm curious about your outlook for the rest of the year. You've indicated that you're still aiming for record revenues and EBITDA. However, considering the first quarter's EBITDA loss might be a bit larger than anticipated, partially due to timing of costs, could you help us understand how you plan to move from that first quarter loss to an EBITDA target of around $725 million to $730 million? I know you mentioned that advanced bookings are strong, but with Epic set to open soon and some uncertainties in the consumer market, could you provide more insight into what gives you such confidence in reaching those record figures? Thank you.

Sure, I can address that question. First, I’d highlight the strong performance we saw in April. Attendance increased by over 8% on a fiscal basis, and even more on a daily basis. Year-to-date at the end of April, daily attendance is up over 3%. That's how we measure attendance, comparing like days year-to-date at the end of April. If we maintain that 3% growth throughout the year, it can significantly impact our overall attendance figures. This is particularly noteworthy as we have new rides and attractions still to launch, and while some have opened to positive feedback, there is more on the horizon, including new entertainment offerings and additional Aquaflow events. We also saw better admissions per capita in April compared to the first quarter, and we have strategies in place to improve this further, especially since the first quarter performance was affected by factors like the timing of Easter and spring break. We recognize there’s room for improvement and we have plans in place. Additionally, the upcoming peak pass selling season is just starting, and we believe that the presence of Epic in town will attract more visitors to Orlando. We see this as a great opportunity and have been working on strategies to capitalize on it.

Okay. Marc, that's really good color. I really appreciate that. And then if we could dig into April, maybe a little bit more. So you talked about the 8% increase in attendance. Obviously, the first quarter had the negative impact from Easter and spring breaks. So just wondering if you can kind of break down maybe how much April benefited from that? And also just trying to understand if through April to May, in terms of customer spend once they're inside their parks, have you guys seen any material change in terms of folks pulling back or spending less? And then I assume you haven't had to use any kind of discounting tactics to get people into the parks because I think, Marc, you said in April, your attendance per caps were actually up. So I just want to make sure I have all that stuff kind of right.

Yes, let me clarify that for you, Steve. First, regarding the admissions per capita, they improved in April. I wouldn't say they were entirely positive, but they were not as low as they were during the quarter. When we report Q2, we will have more information, as per capita figures can fluctuate within the quarter due to the timing of certain adjustments related to deferred revenue and similar factors. However, the easiest way to explain this is that the performance we saw in April on a daily basis exceeded the benefits we received from Easter. We not only experienced the expected Easter advantage but also saw an increase in attendance beyond that, which gives us optimism that we had additional attendees beyond what we anticipated from Easter.

Our next question comes from James Hardiman with Citi Group. Please go ahead.

This is Sean Wagner on for James Hardiman. I guess just one really quick follow-up on all of that. I guess what did April revenue, you've kind of given us what admissions per caps looked like in April, did in park per caps, were they similar to 1Q? Or I guess, how does the year-to-date or April revenue look like compared to last year?

Yes. I mean, again, these are preliminary revenue numbers because kind of as I was pointing out on the prior question, we do tend to look at these things more on a quarterly basis, especially with admissions revenue given some of the shifting that can go on. But I think what I can tell you is on in-park per capita, it was positive for April. And maybe part of Steve's question that I didn't get to that I should have was have we seen any pullback in the per capita in April? In-park per capita was up in April.

Are there any other calendar-related comparisons we should be thinking about for the rest of the year? Or are operating days expected to be relatively flat this year? Or do you get some back because of adverse weather last year?

I think full year is roughly flat. I think we've got a couple of trades still between some of the quarters. But when you look at the full year, it relatively flattens out.

Yes. To your point, we will make up for some weather-related closures later in the year due to significant disruptions caused by Hurricane Milton in Q4 last year.

Our next question comes from Arpine Kocharyan with UBS. Please go ahead.

Good morning. Thank you for taking my question. Some competitors have mentioned weaker international sales in Q1 and into Q2, but it seems you are reporting year-over-year growth, which is excellent. Can you discuss the dynamics you are observing? Did you notice any changes in behavior as the quarter progressed, considering some macro developments? You previously mentioned international sales growth being up mid-single digits, but today's release states it's up year-over-year without specifying mid-single digits. Could you provide an update on that figure? Additionally, regarding group bookings, it seems you are also ahead of last year, possibly up double digits. If you could provide an update on how much you are up year-over-year, that would be appreciated. Thank you.

Yes. Let me provide some insights on international sales. We're seeing a modest increase in ticket sales internationally, up by low single digits. While this is positive, it's important to note that we don't depend heavily on international attendance as much as some might assume. Last year, international attendance accounted for approximately 6% or 7% of our total, whereas before COVID, it was around 10%. If that market does weaken, as many have suggested, it may not significantly affect us, as international attendance has traditionally been a smaller portion for us. Additionally, we likely weren't maximizing that attendance before for various reasons. However, we've implemented some changes aimed at improving our service and attracting more international visitors, and we'll continue to monitor this. Regarding the group business, we have a positive outlook on that category and see ongoing opportunities for growth with our team focusing on it.

Great. Great. And just one quick housekeeping, if I may. Just a follow-up on the $5 million of expenses that moved into Q1. Could you just clarify which quarter they moved out of into Q1? I think you said future quarters. Just trying to understand from a modeling perspective how to think about Q2 to Q4? Thank you.

Yes. The largest portion was some annual maintenance that we do. We typically have been doing that in Q4. We chose to move some of that maintenance into Q1, just given that seasonally, January and February are slower periods. So I'd expect some of the maintenance that we typically do towards the end of the year we pulled that forward and got it done at the beginning of the year. And then the rest are really just odds and ends and some marketing shifts and changes, that some marketing that moved from late last year into the beginning of this year, really around our preparation and production that we are doing on the marketing side getting ready for the summer season. So we're excited about the marketing that we have on some of it on the prepaid side and some expenses that we've already incurred ahead of the marketing that we're doing for the busy season in the summer.

Our next question comes from Brandt Montour with Barclays. Please go ahead.

Good morning, everybody. Thank you for taking my question. So just maybe thinking about weather, you guys cited some pretty strong solid April trend. Was that against the normal weather backdrop in April? And then when you look at the rest of the year, outside of the hurricanes, remind us what assumptions you're making about weather that underpin the commentary about record revenue and EBITDA?

Yes. I think for April, we had slight weather negatives. We can call it out because it wasn't a huge number, but there was a slight negative weather impact, mainly at our park in Lansberg. And then look, for the rest of the year, I think the way to think about it is we had Hurricane Milton last year. We talked a lot about that. We had some other hurricanes as well. Our thought is, hopefully, we don't have something like Milton again or the others. And certainly not having those, you can do the math on those. So we are expecting kind of more normalized weather, and that's how we take our projections and we try to look at kind of more normal weather patterns. So that would be our assumption that we're not going to have quite the things that we had last year. So we'll have to wait and see. Obviously, a long way to go to hurricane season, which is just starting here shortly, but we'll keep you posted.

Okay, that's helpful. I have a follow-up about Epic. I know you're likely closely observing their actions regarding tickets and marketing. There was an initial idea that they would limit access for locals in the first year, but they opened it up to locals earlier this year. Do you think there’s still a possibility that the way they have structured the Epic tickets in this first year could be beneficial, or is that less likely now?

I think our focus remains on our park. The benefit we see is that more people are coming to the market. If they attract more visitors, we are prepared with our strategies to bring those individuals to our parks. This is the opportunity we've been discussing. The recent opening of Expedition Odyssey in Orlando is exciting and unique. Additionally, there are other developments in Orlando that we haven't announced yet but are also thrilling to share when we can. We will concentrate on our value proposition and our appealing product. While they may have various strategies that could change throughout the year, we will stick to the proven methods that have worked for us over the past 50 years in Orlando. We have multiple ways to reach our audience and can adjust our approaches as needed.

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

Hi, good morning, thanks for taking my question. Marc, could we discuss the mix of customers? I understand you mentioned a decrease in your pass base at the end of the quarter. Does that indicate you're seeing a higher number of first-time visitors? Is it reasonable to expect that trend as we go through the year compared to previous years? How can we think about this, particularly in relation to admissions per capita?

Yes. In the first few months, we've noticed more visitors from markets that are driving in rather than locals, which aligns with a slight decline in our pass base. However, the pass holders we have are visiting more frequently. This increase in visits puts downward pressure on per capita spending because they are coming in more often. We appreciate this pattern as it leads to greater revenue, and we want our visitors to come as often as possible since it usually translates to more spending. We will keep an eye on this trend throughout the year. Additionally, we took steps in the first quarter to entice more single-day or multi-day ticket sales, and I admit we may have missed some revenue opportunities there. We recognize these areas for improvement and are making adjustments to our pricing strategies moving forward.

Okay. As a follow-up regarding the hotel, I understand you mentioned there isn't much news to share, but are you waiting on something more significant? Is there a specific deadline? I’m trying to determine if you view this as an ongoing process or if there's a lot happening as you wait for something particular from one party or another.

Well, I think the simplest maybe way I can think about it is we have quite a bit of land, right, as I mentioned, and it is in locations that are attractive to people, and there's a lot of ways you could use that land, right? So one of the ways would be hotels, one of the ways could be housing, rides, attractions, all sorts of things. And then there are a lot of different ways to structure even just the value of that land, the underlying value of that land, like leasebacks and things like that. So when you start talking hotel and you start talking land, we used to using that land, we just want to make sure that we get into the best structure that is best for our shareholders and best for the company. I think those discussions have taken some time. I think there are also different ways to think about that and different people proposing different things. You're obviously familiar with the makeup of our board being almost 50% owned by private equity. I can tell you that they get a number of inbounds on this exact topic of land valuation and how to think about that, whether it's hotels or other uses of that land or other ways to monetize that land.

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

Thank you so much. Just one more on EPIC. Is there any early signs or tea leaves on seeing incremental traffic into the market? And are you expecting to run promos or tweak your selling strategy in any way to try to capture that opportunity, maybe just if you are kind of assuming it helps or hurt at the margin in terms of what's embedded in your expectations would be helpful.

Thomas, I haven't noticed anything specific. However, we do anticipate an increase in visitor numbers. This is an exciting opportunity as the park is strong, and the new attraction is poised to draw more visitors, allowing us to enhance visitation as we've previously discussed. Without delving into competitive specifics, we have various strategies to attract visitors, similar to previous years where we try and refine what we do--different offers, ticket packages, and so forth. This approach will continue, tailored to each market and park based on current observations.

Okay. Understood. And then just as a follow-up, some pretty helpful color on the sponsorship revenue ramp. I believe your in-park revenues currently do include some small licensing revenues, I think like for Abu Dhabi, for example. Has that been a net tailwind year-over-year? Just any update on how that's contributing to your in-park per cap number would be helpful. Thank you.

Yes. I can help you on that. What I probably should have said is at the moment, that sponsorship revenue, the large majority of that would still be ahead of us. That is not in the Q1 numbers. Abu Dhabi is largely, I think, in line or a little bit higher than prior years, but I wouldn't say that's a material increase or anything like that. But maybe over time, it will continue to build. But I think for now, it is not a material increase.

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

I just wanted to ask, I guess, about the kind of cost impact around Epic. Have you seen any kind of pressure in terms of labor? I think the wages are a little higher than your any wage pressure that you've seen or anticipation for kind of higher marketing spend or more events that you're putting on in Orlando that might pressure costs a little bit?

Yes, we anticipated some labor increases for minimum wage across various markets, not just Epic. We have observed some pricing changes specifically in Orlando. However, we have effectively managed labor from an hourly perspective and have done well in aligning our attendance forecasts with our labor needs to ensure a quality guest experience. Throughout Q1, our management of labor costs has been very strong. We have absorbed most of the cost increases from any marginal rate hikes and competitive pressures, so that aspect is going smoothly. On the marketing front, we initially planned to increase some marketing expenses, but as I mentioned earlier, we have decided to keep our marketing spending relatively flat. Instead, we have strategically redeployed our resources across different markets to maximize impact at crucial times. This is why we had some spending that transitioned from last year into the first quarter, as well as some prepaid expenses related to media production for our upcoming selling season. In summary, both labor and marketing are on track, and we've been very strategic in our approach.

Got it. And then just one follow-up on the buyback. I know you said it sounds like there is an announcement coming, but the pace is a little bit slower than might have expected in the first quarter with the market performance. But just curious how level, how you think about comfortability with leverage, whether you'd be willing to kind of tick up a little bit from where you are here? Or just how you think about capital allocation and buybacks?

Sure. No, you can refer to my comments, like you said, that I made earlier on that. And look, I think, as always, we work very closely with the Board on the use of cash and what's the highest return to shareholders, and we'll continue to do that. So I don't have any specific comments on what that means for leverage or anything like that. I mean, we are comfortable where our leverage ratio is now, not to say we're going to be comfortable at a different level, higher or lower, right? So it really just comes down to what is the best way we can return cash to shareholders. I would also point out we're going to be entering kind of our peak cash earnings season here in Q2 and Q3. So that will obviously be a benefit to cash building throughout the year. So more to come on that, as I said, hopefully in the coming weeks.

Yes. It's important to note that leveraging isn't the only consideration based on Marc's comments about free cash flow, but it is something we could consider given our balance sheet. Additionally, it's worth mentioning that our share count has decreased by 9 million shares compared to last year. With 14% fewer shares, our earnings power is quite solid, and we're pleased with our performance and the trajectory Marc has outlined for the remainder of the year. If we think about the possibility of further reducing the share count, that would make our earnings power even more appealing.

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

Yes. Thank you, Doran. 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.