SeaWorld Entertainment, Inc.

Good morning, and welcome to the SeaWorld Q4 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I'd now like to turn the conference over to Matthew Stroud. Vice President of Investor Relations. Please go ahead.

Thank you, Ian, and good morning, everyone. Welcome to SeaWorld's fourth quarter and fiscal 2020 earnings conference call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Also, we have posted a short slide presentation on our investor website, along with earnings press release, that we will discuss during our prepared remarks. Joining me this morning are Mark Swanson, Interim Chief Executive Officer, and Elizabeth Galaxi, Chief Accounting Officer and Interim Chief Financial Officer and Treasurer. This morning, we will review our fourth quarter and fiscal 2020 financial results, and then we will open up the call to your questions. Before I begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the risk factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time, and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call, we may reference non-GAAP financial measures and other financial metrics, such as adjusted EBITDA, free cash flow, net cash burn, and adjusted net cash burn, which are non-GAAP financial measures. 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 Interim Chief Executive Officer, Mark Swanson. Mark? Mark Swanson Thank you, Matthew.

Good morning, everyone, and thank you for joining us. I'm pleased to report that we saw strong improvement in attendance trends and strong per capita spending in the fourth quarter. I'm also pleased to report that we generated positive adjusted EBITDA in the quarter and approached net cash flow breakeven when excluding deferred vendor payments. I continue to be extremely proud of our team's agility, resilience, and performance during these extraordinary times, and I'm encouraged by our fourth quarter results, which demonstrated continued operational and financial improvement. Our quarterly attendance on a year-over-year basis improved compared to the third quarter. We also saw clear benefits of our pricing and revenue management work with strong per capita growth in the fourth quarter relative to the prior year in both admissions and in-park spending. We began the fourth quarter with 10 of our 12 parks open, all with capacity limitations, modified or limited operations, reduced operating days, and or reduced operating hours. We finished the quarter with seven of our 12 parks open, which is one park less than what we were operating at the end of 2019. As of today, we have eight parks open, including SeaWorld Orlando, SeaWorld San Diego, SeaWorld San Antonio, Busch Gardens Tampa Bay, Busch Gardens Williamsburg, Sesame Place, and Discovery Cove and Aquatica in Orlando. We have also implemented new operating calendars across several of our parks in 2021 based on learnings over the past 12 months. In particular, for the first time in over a decade, we are operating year-round at SeaWorld San Antonio. And for the first time ever, we have begun year-round operations at Busch Gardens Williamsburg and at Sesame Place. These parks are now open primarily on weekends and holidays during the winter season in advance of their traditional operating seasons. We now have year-round operations at eight of our 12 parks. Only our water parks in San Diego, San Antonio, Tampa Bay, and Williamsburg, Virginia are not open year-round. We are planning to have all 12 of our parks open, including Aquatica San Antonio, Adventure Island in Tampa Bay, Water Country USA in Williamsburg, and Aquatica San Diego, for their full 2021 operating seasons, subject to local, state, and federal guidelines related to COVID-19. I want to recognize each of our operating teams for their outstanding efforts to safely operate our parks, while implementing various COVID-19 related safety protocols and following established health and safety guidelines. While this continues to be an unprecedented and challenging time for our company and industry, it's been encouraging to see our performance improve and assuring to see our guests visiting our parks over the last few months. As a reminder, since the beginning of the COVID-19 pandemic, We have taken significant actions to reduce our costs, carefully manage our cash flows, fortify our balance sheet and liquidity position, and operate our parks with new and enhanced operating and safety protocols to meet the realities of the current environment. While our fourth quarter financial results benefited from many of these actions, results were still significantly impacted by the COVID-19 pandemic. Attendance in the fourth quarter was impacted by fewer operating days and hours versus the prior year, capacity limitations, temporary park closures, and a more limited events lineup. Despite these limitations, attendance remained fairly steady throughout the quarter, excluding the company's Virginia and California parks, which were only partially open and operating with significantly modified and limited operations due to state-imposed restrictions or temporarily closed, monthly attendance was down 40% in October, down 47% in November, and down 44% in December. Further, several parks operated at or near capacity limitations on multiple days during the quarter. If the parks were not capacity constrained on these days, Our performance versus the prior year would have been better than what was realized. Monthly attendance trends continued to remain steady into the first quarter, with January attendance down 42 percent, excluding Virginia and California, and down 53 percent on a consolidated basis relative to prior year. While the month of February is not complete, attendance trends are similar to what we saw in January. We are particularly pleased with the performance of our Halloween and Christmas events during the quarter. Once again, our operating teams rose to the occasion and created a safe yet modified version of these events that guests could enjoy. We've also recently featured our inside look and all new Mardi Gras events at several of our parks and have been pleased with their performance in driving attendance during January and February. Looking ahead, we have started to offer our food and music festivals across many of our theme parks and are extremely proud and excited to have live concerts back at our SeaWorld Park in Orlando and soon to start at Busch Gardens Tampa Bay. These special events are valued by our loyal pass holders and guests, and we are confident we are able to deliver compelling, exciting, and most importantly, safe events with relevant and appropriate operational changes. We are looking forward to spring break and the spring and summer season where we are planning to have even more events and open more of our parks, including our water parks, which we know our guests are really looking forward to visiting again. Last quarter, we mentioned that we believe there was a several hundred basis point opportunity to grow margins in our business. For discussion purposes, we have posted a short presentation on our investor website along with our earnings press release that provides an illustration of how to think about the profitability we believe we can achieve when we return to 2019 attendance levels. To be clear, this is not guidance. We are not projecting when we will return to 2019 attendance, and we are certainly not suggesting we don't expect to grow attendance beyond our 2019 attendance levels and per caps beyond our 2020 levels over time. This is just meant as a simple illustration to show what we believe the earnings power of the business would be at 2019 attendance levels based on the changes and improvements we have identified and largely implemented over the past year. Importantly, this analysis This analysis does not reflect the impact of cost inflation or cost pressures on the business over time. As you know, starting well before the COVID-19 pandemic, we have spent significant time working closely alongside our board to review our business and identify and implement cost savings opportunities and efficiencies that will strengthen our business. We have also spent considerable time and investment in driving greater revenues from our business, including working closely with pricing consultants to develop new pricing strategies, creating a new centralized revenue management function, enhancing our MPARC revenue team, revamping our MPARC product assortment and mix, developing and utilizing a more analytical and data-centric decision-making process, and implementing dynamic and other pricing initiatives. Some of the benefits of this work was reflected in our results prior to the onset of the COVID-19 pandemic. A meaningful portion of these benefits were planned to be realized in 2020, and as you know, our first quarter in 2020 was off to a record start through February 2020. With the onset of COVID-19 and the forced closure of all of our parks and operations, we took advantage of the opportunity to further refine our revenue teams and strategies and look at our operations and cost structure in a way that we never could have before. We doubled and tripled down on our already in-process efforts and looked at nearly every part of the business from top to bottom across the entire enterprise. The results of this new effort yielded demonstrable results in 2020 on our total revenue per caps, with our 2020 per caps up $5.95, or 9.6%. The results of this effort also yielded identified cost savings of roughly $100 million from our 2019 cost base, assuming 2019 attendance levels. Said another way, we would expect our cost base to be lower by roughly $100 million when we achieve our 2019 attendance levels again prior to the impact of any cost inflation or cost pressures. We've included on slide four how these cost savings roughly break down by category and included some select examples of the types of cost savings we have identified and or implemented. But the vast majority of these cost savings have already been implemented, and we expect the vast majority of the remaining cost savings will be implemented this year. To be clear, again, we are not projecting when we will achieve our 2019 attendance levels. That will largely depend on the evolution of the COVID-19 impact on our lives, our economy, and our business. What we are projecting is that we will have materially lower costs and a significantly more efficient and profitable business when that time comes. As you can see on slide two of the presentation, we present a simple illustrative analysis that shows if we were to achieve 2019 attendance levels in MIPS, our 2020 per caps, and the roughly $100 million of cost savings that we have identified and largely already implemented, our adjusted EBITDA would be approximately $690 million. Again, this is not guidance, and we are not projecting when we will achieve our 2019 attendance levels or when we will achieve this level of adjusted EBITDA. This analysis does not include or estimate the impact of any cost inflation or cost pressures, assumes the attendance and park mix of 2019 and the cost reductions are predicated on 2019 attendance levels. It is simply meant to show what level of adjusted EBITDA we expect we would have achieved in 2019 had we had the benefit of the revenue management improvements and cost reductions that we have identified and largely implemented in 2020. Needless to say, we are excited about the progress we have made and look forward to returning to a more normalized operating environment as we believe the actions we have taken will lead to significantly improved financial results for the company. Our teams have worked hard to better position this company for revenue growth and increased profitability. With that, I would like to turn the call over to Elizabeth to discuss our financial results in more detail. Elizabeth?