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spk05: Good day and welcome to the SeaWorld Q3 2022 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Matthew Straud, Head of Investor Relations. Please go ahead.
spk04: Thank you, Dave, and good morning, everyone. Welcome to SeaWorld's third quarter earnings conference call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release, and will be available on our website following the call. Joining me this morning are Mark Swanson, Chief Executive Officer, and Shell Adams, Chief Financial Officer and Treasurer. This morning we will review our third quarter financial results and then we will open up the call to your questions. Also, we have posted a short slide presentation on our investor website along with our earnings press release that we will discuss during our prepared remarks. 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 factor 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 would like to turn the call over to our Chief Executive Officer, Mark Swanson. Mark?
spk03: Thank you, Matthew. Good morning, everyone, and thank you for joining us. We are pleased to report our sixth consecutive quarter of record financial results. While we achieved records for revenue, net income, and adjusted EBITDA in the quarter, these results still do not reflect a normalized operating environment, and we still have significant scope to improve our execution, and our financial results. We had a meaningful impact from adverse weather in the quarter, including Hurricane Ian, that we estimate led to 90,000 less guest visits during the quarter. International and group visitation are still not back to pre-COVID levels, our staffing is still not at optimized levels, and inflationary pressures continue to impact our costs. We are pleased with the growth in total revenue and total revenue per capita during the quarter, which continued to demonstrate our pricing power and the strength of consumer spending in our parks. Our cost management and flow through to adjusted EBITDA for the quarter could have been better. To this end, we have enhanced and increased our efforts related to monitoring and managing costs throughout the enterprise and our initiatives to reduce costs and increase efficiencies. As we highlighted last quarter, we have several new projects and initiatives in flight that we expect will help us work to offset the unusually high inflationary pressures and become a more efficient and profitable operating business over the coming quarters. While inflationary pressures continue to exist, we expect certain cyclical supply chain related and or temporary cost pressures to moderate over the coming quarters. We recently concluded another successful Halloween season at our parks featuring our award-winning Halloween events, which led to strong revenue growth this October compared to October 2021 and October 2019. Revenue for October was up approximately 13% compared to 2021 and approximately 45% compared to 2019. Over the next few weeks, we will begin our popular Christmas events at our SeaWorld, Busch Gardens, and Sesame Parks. Our Christmas events feature exciting entertainment, unique food and beverage offerings, and seasonal merchandise for guests of all ages. As we have consistently demonstrated, our business model is strong and resilient, and we believe that we have significant opportunities to improve and grow our revenue and profitability. As I've mentioned previously, We operate in an industry and in markets with growing demand trends over the long term, and we have significant available guest capacity across our portfolio. Our attendance levels are still below the total attendance levels we achieved in 2019 and well below our historical high attendance of approximately 25 million guests recorded in 2008. We have made significant investments that we expect. will continue to deliver strong returns, and we have specific plans we are executing on today and plans for the future that give us high confidence in our ability to continue to deliver additional operational and financial improvements that we expect will lead to meaningful increases in shareholder value. Looking ahead, we are very excited about our plans for 2023 and the investments we have made and will be making that we expect will drive meaningful growth and new records in revenue and adjusted EBITDA. We have announced a few of the upcoming new rides, attractions, events, and upgrades, including something new and meaningful in each of our parks. This lineup includes, among others, Pipeline, the surf coaster at SeaWorld Orlando, Serengeti Flyer Swing at Busch Gardens Tampa Bay, Dark Coaster Straddle Coaster at Busch Gardens Williamsburg, Arctic Rescue Roller Coaster at SeaWorld San Diego, Catapult Falls Flume Coaster at SeaWorld San Antonio, Riptide Race Waterslide at WaterCountry USA, and a refresh of Laguna Grill at Discovery Cove. Similar to the previous quarter, we have posted a short presentation on our investor website along with our earnings press release that provides more detail around the visitation of our park portfolio, how our industry and business performed during historical recessions, the value orientation of our offering, our attendance trends and historical peak attendance levels, our cost reduction and efficiency initiatives, and an update on our mobile app. On page four, we show a description of the visitation of each of our markets across our 12 park portfolio and the aggregate statistic for the whole portfolio. As we discussed last quarter, and as you can see from the page, we estimate that approximately 85% of our attendees drive to our parks. Our visitation is more similar to a typical regional amusement park business. At times, people compare our business to destination theme parks like Disney or Universal, but we believe our visitation and business dynamics are more closely comparable to our regional theme park peers as opposed to our destination theme park peers. On page five of the presentation, we show an industry graph that shows the growth of the industry over the last 20 years and the resiliency of the industry during the last two U.S. recessions. On page six, we show our specific performance during the last two U.S. recessions. As you can see, we believe our business demonstrated resiliency in both 2001-2002 recession and the 2008-2010 recession. As we have discussed before, we offer tremendous value to our customers, and given our attractive value proposition and the drive-to nature of our parks and how our business has performed in past recessionary periods, we expect it will perform relatively well in future recessionary environments. On page seven, we show the value proposition of our park offering versus other entertainment offerings. This slide underscores the incredible value we provide to our guests and not only highlights the opportunity to continue to grow pricing, but also helps explain the resiliency of our business during economic downturns. Page eight shows our latest LTM attendance of approximately 22 million visitors and a potential for where our attendance can go by returning to historical levels. As we have discussed, and you can see, we are still below 2019 levels, and we are well below 2008 peak attendance. We also show what our attendance would be if we achieved peak attendance at all of our parks in the same year. The punchline is that we have significant potential to achieve meaningfully higher attendance by getting back to historical levels. As you can imagine, we recognize this opportunity and we are working on plans to recapture lost attendance. Page nine of the presentation, we present an updated target for our cost efficiency and reduction initiatives. As we highlighted, we have enhanced our efforts around these initiatives and have teams dedicated to realize these and additional opportunities. As we highlighted last quarter, this is just a select list and does not necessarily reflect everything we are working on or will work on over the coming months and quarters. On page 10, we provide an update on our mobile app. As you can see, we continue to make good progress rolling our new value-enhancing features and gaining adoption and usage. As of September, the app had 3.4 million downloads and was used by more than 50% of guest parties visiting our parks. We are capturing up to 15% of in-park revenue on the app, and for certain products, it's 30% or more. Mobile ordering has been expanded to additional restaurants and is now operating at about half of our target restaurants. We continue to see increases in average transaction value for food and beverage purchases made through the app compared to a point-of-sale order. We are excited about the potential of the app and its ability to improve the in-park guest experience, drive increases in revenue, and decreases in cost. We hope this helps everyone better understand the drive-to and regional theme park nature of our park portfolio, the resiliency and attractive relative value of our industry overall and our business in particular, our attendance potential, our cost reduction and efficiency efforts, and our mobile app. Before moving to Shell and her update on financial performance, let me comment on a few more items in greater detail. First, let me speak to our balance sheet, which continues to be strong. Our LTM September 2022 net total leverage ratio is 2.71 times, and we have approximately $480 million of total available liquidity, including almost $110 million of cash. This strong balance sheet gives us flexibility to continue to invest in and grow our business, make opportunistic investments, and to thoughtfully return capital to our shareholders. Second, we continue to make progress with our plans to build hotels to complement our park offerings. We have identified possible sites, continued our design and planning efforts, and have hired a dedicated, experienced leader to help drive this effort. We look forward to sharing more specifics in future quarters. Third, our partner in Abu Dhabi announced it has reached 90% construction completion of the next generation marine life theme park, SeaWorld Abu Dhabi. This park is expected to open in 2023 and will include the UAE's first dedicated marine research, rescue, rehabilitation, and return center. We continue to progress discussions related to other international opportunities and expect to have more to share in coming quarters. Finally, we continue to aggressively repurchase shares during the third quarter and into the fourth quarter as we repurchase approximately 3.6 million shares of common stock at a total cost of approximately $183.9 million from August 2022 through October 2022. Year-to-date through October, we have repurchased 12.3 million shares of common stock, or approximately 16% of total shares outstanding, at a total cost of approximately $683.9 million. We have a strong balance sheet and financial position, a clear belief in our go-forward prospects, and we believe the markets have offered us an extremely attractive value this year in regards to share repurchases. Overall, we are proud to report record net income on a trailing 12-month basis of $313.7 million and record adjusted EBITDA on a trailing 12-month basis of over $727 million, which was achieved with attendance of 22 million guests, which is still below our 2019 attendance and well below our historical high of over 25 million guests we achieved in 2008. These achievements reflect the extraordinary efforts of our teams to operate our parks, despite the challenging environment we faced, and continue to position this company for revenue growth and increased profitability. With that, I would like to turn it over to Shell to discuss our financial results in more detail.
spk00: Thank you, Mark, and good morning, everyone. As Mark mentioned, our results of operations for the third quarter of 2022 and 2021 continue to be impacted by the global COVID-19 pandemic, as shown in part by the decline in both international and group-related attendance in both periods as compared to pre-COVID levels. The first nine months of 2021 was also impacted by capacity limitations, modified and or limited operations, and or temporary park closures. My commentary today will be focused on our financial results compared to 2021. However, due to the impacts the pandemic had on our 2021 year-to-date third quarter results, we provide a comparison of some of our key results versus both 2019 and 2021 in our earnings release charts, and we'll also do so in our Form 10-Q. During the third quarter, we generated record total revenue of $565.2 million, an increase of $44 million or 8.4% when compared to the third quarter of 2021. The increase in revenue is due to an increase in total revenue per capita of 6.8% and an increase in attendance of 1.5%. Attendance benefited largely from an increase in demand, primarily from international guests when compared to prior year, which was impacted by more severe COVID-19 related restrictions on international travel. Attendance during the quarter was unfavorably impacted by adverse weather, including impacts of Hurricane Ian in September 2022, which led to closures at the company's parks in Florida and Virginia for a combined 15 operating days. We estimate adverse weather, including the hurricane, contributed to a decline of approximately 90,000 guests during the quarter. As Mark said, while improving, we continue to experience lingering effects of the pandemic with international and group-related visitation still not yet back to pre-COVID levels. In the third quarter, international visitation was still down 45% compared to the same quarter in 2019, while group visitation was down 27% compared to the same quarter in 2019. Our pricing and product strategies continue to drive higher realized pricing, resulting in total revenue per capita in the quarter of $77.05 compared to $72.13 in the third quarter of 2021. This increase was driven by improvements in both admissions per capita and in part per capita spending. Admissions per capita increased by 4.1% to $42.75, and in part per capita spending increased by 10.4% to a record $34.30 in the third quarter of 2022 compared to the third quarter of 2021. The increase in admissions per capita was primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts when compared to the prior year. In part per capita spending improved due to a combination of factors including pricing initiatives, improved product quality and mix, and the impact of new or enhanced and expanded venues and or other park offerings. Operating expenses increased $20.8 million or 10.7% when compared to the third quarter of 2021. The increase in operating expenses is primarily due to costs associated with new and or expanded attractions and events, high inflationary pressures, and an increase in legal accruals as compared to the prior year quarter. These factors were partially offset by a decrease in non-cash equity compensation expense along with structural cost savings initiatives when compared to the third quarter of 2021. Operating expenses for the third quarter of 2021 were also impacted by approximately $9.2 million of non-recurring contractual liabilities and legal costs resulting from temporary COVID-19 park closures. Operating expenses as a percent of revenue were 38.2% for the third quarter of 2022 compared to 37.4% for the third quarter of 2021. While staffing has improved from early in the year, as shown by our higher labor hours in the third quarter compared to prior year, we are still not at optimal staffing levels. We continue to suffer from staffing shortages in various roles across our parks at various times during the quarter, which, among other things, impacted our ability to fully capture in-park revenue. Labor costs in the third quarter were primarily driven by increased labor hours, as our base hourly wage rate was only moderately higher than prior year. Selling general and administrative expenses decreased $0.5 million, or 1%, compared to the third quarter of 2021. The decrease is primarily due to a decrease in non-cash equity compensation expense and the impact of cost savings and efficiency initiatives. These factors were partially offset by increased marketing and third-party consulting costs when compared to the prior year quarter. Selling, general, and administrative expenses as a percent of revenue was 9.4% for the third quarter of 2022 compared to 10.3% for the third quarter of 2021. We believe that approximately 20 million to 25 million of costs in the third quarter compared to 2019 are temporary, unusually high inflation driven costs that we expect to moderate in the coming quarters. We generated record net income of $134.6 million for the third quarter compared to net income of $102 million in the third quarter of 2021 and we generated record adjusted EBITDA of $274.2 million, an increase of $8.9 million when compared to the third quarter of 2021. The improvement in adjusted EBITDA for the third quarter of 2022 was primarily driven by an increase in attendance and total revenue per capita when compared to the third quarter of 2021. Looking at our results for the first nine months of 2022 compared to 2021, total revenue was a record $1.34 billion, an increase of $207.8 million or 18.3%. Total attendance was 17 million guests, an increase of 1.8 million guests or 11.5%. Net income for the period was a record $242.2 million, an improvement of $57.2 million, and adjusted EBITDA was a record $574.6 million, an improvement of $65.3 million, or 12.8%. Now, turning to our balance sheet. Our current deferred revenue balance as of the end of the third quarter was $182.3 million, an increase of approximately 5.1% when compared to September of 2021, which included the impact of some COVID-19-related product extensions and one-time items. Compared to September 2019, deferred revenue increased 59.1%. At the end of October 2022, our path base was at a record level for October, up approximately 26% compared to October of 2019, a very healthy indicator of consumer demand for our parks and the remainder of the year. We are also still seeing a higher mix of premium passes in our past base compared to prior year as our pass holders continue to recognize the value and benefits of our higher tiered products. To that end, we are continuing to realize meaningful price increases on our past products with current pass prices up approximately 10% compared to the prior year. As Mark mentioned, we have a very strong balance sheet position. As of September 30, 2022, our total available liquidity was $479.9 million, including $109.6 million of cash and cash equivalents on our balance sheet and $370.3 million available on a revolving credit facility which has not been drawn. Cash flow from operations was $169.2 million for the third quarter of 2022. Free cash flow was $119.6 million for the third quarter of 2022. We repurchased approximately 3.6 million shares of common stock at a total cost of approximately $183.9 million from August 2022 through October 2022. Year-to-date through October 2022, we have repurchased approximately 12.3 million shares of common stock or approximately 16% of total shares outstanding at a total cost of approximately $683.9 million. We spent $49.7 million on CapEx in the third quarter of 2022, of which approximately $32.6 million was on core CapEx and approximately $17.1 million was on expansion and our ROI projects. We expect to spend approximately 190 million to 200 million in CapEx for 2022. We have spent considerable time over the last several months analyzing and evaluating opportunities to invest our expected substantial cash flow back into our business in high ROI projects. While we are still in the midst of finalizing our capital plans for 2023, we can share with you as you already know from our announcements, is that we will invest meaningfully to continue our strategy of offering something new and compelling across all of our parks next year. Beyond our typical cadence of rides and attractions, we have identified a robust list of highly attractive growth and ROI projects that we expect to also execute on in 2023. We will enhance, improve, and or create new animal habitats food and beverage outlets, and retail venues, and we will invest in park infrastructure and technology to improve the guest experience and reduce and or eliminate cost. We will also invest in our inorganic growth strategies to further drive shareholder value. In aggregate, we plan to spend at least $200 million in 2023 and will share more details of our plans in the next quarterly discussion. Now let me turn the call back over to Mark, who will share some final thoughts. Mark?
spk03: Thank you, Shel. Before we open the call to your questions, I have some closing comments. In the third quarter of 2022, we came to the aid of 229 animals in need. Over our history, we have helped over 40,000 animals, including bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds, and more. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts. I want to thank them and all our ambassadors for all that they do to operate our parks in this current environment. We are excited about the remainder of 2022 as we head into our popular Christmas holiday events. As I mentioned, Over the coming weeks, our Christmas events will start in our parks. We are also really excited about our plans for 2023. While we have made good progress over the past year, 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 high confidence in our long-term strategy and in 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.
spk05: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Also, please limit yourself to one question and one follow-up. Our first question comes from Phil Cusick with JP Morgan. Please go ahead.
spk02: Hi, guys. Thank you. You know, I guess I'll first wanted to start with the 2023 CapEx commentary. Do you think the $130 million to $140 million core is sort of stable next year, but the growth number could double or triple, or do you think that core number is up as well? And then also sort of a follow-up on the the cost-cutting efforts, you know, the 25 million inflation costs that you expect to moderate, I didn't really understand why that is and how that comes into the numbers on slide nine. Thanks very much.
spk03: Yeah, hey, Phil, it's Mark. I can answer your question. So, look, on the CapEx, I think you heard Shell in her prepared remarks talk about the efforts beyond kind of the core things that we've identified. As you know, our goal is to invest in something new in every park every year, and I laid out a number of rides and attractions that we're bringing to our parks, especially some of the coasters I mentioned. But then you heard her mention kind of this additional effort that we're undertaking to look at other areas that we can impact in our parks. And she mentioned, like, refreshed venues, new or improved animal habitats, new refresh retail venues, all those things. So, yeah, I expect that that'll be a little bit more spend than maybe we've normally had in the past. But, you know, I think we quoted $200 million in her prepared remarks. So we're really excited about our ability to invest in those things, and I think it's a function of our free cash flow and the ability to continue to invest in the business. You know, on the inflation efforts, what I would tell you is your question about cost. I mean, we have a tremendous focus on continuing to, you know, work hard on our costs, refine our efforts around cost management and cost containment. And we provided a list there as well, and there's a number of things that we will continue to do going forward with those efforts.
spk02: If I can sort of follow up on a different subject, it sounds like you look at your business because most people drive there as a little bit more inflation resistant or recession resistant than some of your peers. How do you think about the impact of gas prices on that? And what have you seen, I imagine, surveying your customers over the last six months as gas prices have moved around in terms of the impact you expect over time? Thanks again.
spk03: yeah thanks phil so what i would tell you is what i what i would look at what i do look at is you know the growth and the consumer spending in our parks i think that's a pretty good indicator that people are coming out even in a in a high inflationary environment and they're spending money in our parks and that's a testament to the the investments we've made in our parks the events we're doing the offerings that we have and so um i feel good about our ability You know, even in these last couple quarters where we've seen inflationary impacts, obviously people are still coming out and spending in our parks. Thanks, Mark.
spk05: Okay, our next question comes from James Hardiman with Citi. Please go ahead.
spk08: Hi, good morning. So October, that's kind of an open-ended question, but it sounds like October was really strong. We heard similar, you know, commentary, similar uptick from one of your peers last week. I guess maybe just the conflict last October was pretty strong as well. Maybe speak to what you see going on there versus sort of the third quarter trend. And ultimately, is that is that October run rate sustainable for the remainder of the fourth quarter?
spk03: Yeah, thanks. Thanks, James. So what I can tell you is obviously October is a good, you know, the month is centered around our Halloween events, which continue to be popular. And I think we saw a good response to those, as you noted, and our revenue, as I noted in my prepared remarks, was up about 13% to last year. So Halloween's been strong. You know, what I would tell you in Q3, especially towards the end of the quarter, we obviously had the impact of Hurricane Ian, and that did bleed a little bit into October as well. But I think the events continue to be popular, like Halloween. As far as run rate, how we think about that on a go-forward basis, I mean, we'll be starting some of our Christmas events this weekend in some of our parks and then later on in the month at the rest of the parks that do Christmas. So, you know, those events have traditionally been popular with people as well. So I don't know if it'll be the exact same run rate as October, but I do think those are compelling reasons to come and visit the park.
spk08: That's helpful. And then I don't know how much you're going to want to answer this one, but I figured I'd ask. I mean, as we look to 2023, I'm certainly not looking for guidance. But as we think about some of the building blocks, right, attendance per CAPS, margin and ultimately EBITDA, maybe level of confidence that each of those will grow next year, right? Obviously, there's some puts and takes to each one of those numbers, but any color you could give us on sort of your level of confidence in growth next year out of those items.
spk03: Sure. So what I can tell you is, look, we're confident in our ability to grow the business. And there's all the pillars that you mentioned are things that we can kind of take them apart one at a time. On attendance, I mean, we're investing in the parks. So there's new rides and attractions and things like that coming to our parks. We also have the additional capex we're spending around refreshes and new habitats and improved habitats and things like that in our parks. And that is exciting as well. You know, we know new things generally drive people to parks. We have hopefully a further recovery of international attendance as well. We're still not back, as we've mentioned, back to the 2019 levels. I don't know when that will occur, but obviously when it does, that will be a tailwind for us. You know, on pricing, we continue to – see strong consumer spending in our parks. I think we've done some good things around what we offer. We posted a slide and I talked about it about the value of coming to our parks relative to maybe other entertainment options. It's a very good value to come to one of our parks and I think that gives me confidence that we can continue to showcase that value and probably gives us opportunities obviously to grow pricing. We also know that more and more people are wanting experiences that matter, wanting to experience things over perhaps buying things, if you will. And our park, I think of specifically our parks, with our world-class zoological collection, we offer just some amazing experiences in our parks that you cannot get elsewhere. And I think we will continue to showcase that and highlight that as another reason to come and visit. We also have... the continued learnings and hopefully benefits from our CRM system. We're very early in that kind of rolling that out, if you will, and learning how to better utilize that. But, again, that I think will allow us to market to people better and things like that. So there's a lot of confidence in, you know, I think getting people to come to our parks for all the reasons I just mentioned. You know, on the cost side, what I'll tell you is, you know, we've been at, costs, you know, for some time. We've done a really good job since 2019. As you know, we've had very strong margin expansion have really led the industry in expanding our margins since 2019. Now, we got to do a better job. And I think, as I mentioned, we could have done a better job. And in fairness, we're operating in an inflationary environment here. The last couple quarters, it's a really challenging environment with labor and things like that. But nonetheless, that's the new reality, and we have to accept that, and we have to mobilize our teams and our resources around kind of this new reality. And I think we're doing a better job of getting to that point where we're better mobilized, better situated to address some of these headwinds. And we put out, again, on the slide, the different initiatives we're working on. So, you know, hopefully that gives you some context on both the tenants and costs and how we think about them.
spk08: It does. It sounds like, I don't want to put words in your mouth, but it sounds like you think all four of those could and should be up next year.
spk03: Yeah, I mean, our expectation would be to continue to grow the business going forward, obviously.
spk05: Our next question comes from Steve Wisinski with Stiefel. Please go ahead.
spk11: Yeah, you guys, good morning. So, Mark, I want to kind of keep going here with the cost side of the equation. And, you know, look, this is the second quarter you guys have laid out kind of these cost so-called goals, and they've actually improved over the last quarter. So, Mark, I guess, you know, can you help us think about where margins could actually go over time? And, look, you're not going to give me a number. I get that. But, you know, I mean, today you're running margins in that let's call it low 40s range. And just trying to understand – you know, what that potential could look like in a more normalized environment?
spk03: Yeah, thanks, Steve, so I can take that question. I mean, the way I think about the business, I think the way the team thinks about the business is, you know, it's fairly simplistic. We grow attendance a little bit each year, grow our per caps a little bit each year, and look, we may have years like this where we're growing them at more of an outsized pace. And then if we manage costs well, if you do those three things, that translates to good growth in adjusted EBITDA. So that's how we approach it. And I think we've put ourselves in a good position to be able to achieve that. And where that leads to, again, I'm not going to guide you, but obviously we achieved higher margins last year. And I think if we continue to execute on growing attendance, growing per caps, and being efficient with our cost dollars, there's not a reason to think we couldn't get back to that point, obviously.
spk11: Okay, gotcha. And then the second question is around slide eight. It's that potential attendance metric you kind of laid out there in your presentation, which that would almost be 20, let's call it 25% higher than where attendance is kind of running today. You know, just wondering here if that metric is, you know, A, actually achievable, and what I mean by that is if you got attendance up into that 27 million range, would you be, you know, at that point starting to sacrifice the customer experience in terms of potential overcrowding just to have more people in the parks?
spk03: Yeah, hey, Steve, good question. Well, what I would tell you is part of the reason we put out that slide is a couple reasons, but one, to show you obviously the potential of And we showed you two things. One, the peak attendance of 25 million, and then kind of the peak of each park, which gets to the higher number that you mentioned. And look, our parks rarely operate at capacity. There's just a handful of days a year where we're having to shut down. So we certainly have room to drive more people into our parks. And so I'm not worried about running out of room, if you will. You know, and so it's certainly something that we are, as I mentioned in my preparedness remarks, we are working to recapture that loss of tenants and certainly have capacity to do that.
spk11: Okay, gotcha. Thanks, guys. Appreciate it.
spk05: Our next question comes from Michael Schwartz with Truist. Please go ahead.
spk07: Hey, good morning, everyone. And I think you laid out international attendance is running something like 45% below your 19 levels. But maybe give us a sense of how that's been trending and then just how we should think about that going into 23, given currency headwinds that international visitors may be experiencing.
spk03: Yeah, hey, Michael. I mean, what I can tell you is, International now versus 2018 has been down the last couple quarters in that 45% range. So where that goes on a go-forward basis, we'll have to see. I don't know when it will become more of a tailwind, but certainly we want to obviously see more international attendance come back, but there's a lot of factors that impact that. And we'll look for opportunities, obviously, to offset as much of that as we can until it does come back.
spk07: Okay, thanks. And then a follow-up question, just on the October revenue figures you gave, I'm just trying to understand whether those are apples to apples relative to the number of operating days in 2021 and 2019. I mean, how much difference in operating days were there this year versus those periods
spk03: What I can tell you is we ran versus 21 similar Halloween events. There would be a slight pickup from the park in San Diego, Sesame Place, that is new this year. But I think even stripping that out, we still feel good about the revenue increase. And then versus 2019, yeah, we've added more of the events, if you will. So we did not have the nighttime hollow scream at in Orlando and in California. And we also brought back a little bit better version of it, I think, in Texas. So certainly that helped us. And that's what we're focused on is driving total revenue. And we'll continue to focus on that. The other thing I would just remind you, I kind of said this already, but early October was still impacted by Hurricane Ian. that had a negative impact. I don't have an exact number to share with you, but that had a negative impact as well. So we put those numbers, we achieved that revenue growth, I guess, even with that impact.
spk05: Our next question comes from Chris Waronka with Deutsche Bank. Please go ahead. Hey, good morning, everyone.
spk10: I know we've already talked a lot about attendance, but just going back to that, where we are today versus the 3 million or 5 million delta of 2008 or all prior parks. And I know you don't solve exclusively for attendance, but, you know, is that, are there initiatives we don't know about yet that are driving that? And is that more of a, you know, maybe more of a pricing action to get there or is it more on the marketing side?
spk03: Yeah, I think, Chris, what you're asking is kind of how do we think about recapturing the the attendance we've lost over, you know, versus either 2008 or versus when the parks are at their peak. And I think there's a couple ways to think about it. One is, you know, we'll continue to invest in our parks. And, you know, we've been very clear that our stated goal is to have something new in our parks each year. And, again, in 2023, we're going to have new things in each of our parks, as I mentioned. And we know that's a important component of people visiting. We're also investing, you know, beyond that in venues and refreshes and things like that that Shell talked about, and I think that helps us also. You mentioned marketing. I think that's certainly a component of it. We have the CRM system that is still relatively new to us and will continue to harness the power of that, if you will, I also think just in general, we have opportunities to be more efficient in our marketing messaging and how we communicate things and promote our parks to our guests. So it's kind of a total package of all sorts of things that are going to drive us to hopefully recapturing that loss of tenants.
spk10: Okay. Thanks, Mark. And the follow-up is on costs and going back to that slide nine. is there any specific timing around that 30 to 50 million? And also, are there any offsets to that that, you know, aren't necessarily on the, on the slide?
spk03: Yeah, what I, what I can tell you is, I mean, we, we are working on those things right now. So, you know, these would be things that we would endeavor to impact on, on the quarters going forward here. Right. So these are things we're working on right now and, and, and should benefit us as we go into next year. I think the, you know, offsets, I mean, look, we're still in an inflationary environment, and so I think a lot of, you know, ability to answer that question is going to be determined by what happens with inflation. We have things that are still going up. We know certain energy prices, for example, are going to go up here in Florida. But we see other things moderating, and we know, for example, that freight is moderating very much. We see that in our numbers. So I think a lot will depend on kind of more of the macro inflationary environment if there's offsets. But we're going to do our part to identify and execute on the things that we've listed on that chart and work on those.
spk05: Our next question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.
spk01: Hi. I guess there were two things I was curious about. One is you guys flagged the 9. I think nearly 10% kind of decline versus 2019 in attendance, but up 2% adjusted for a series of items that included the $90,000 from weather. I was wondering if you could break down The other elements of the delta between the up 2 and down 10, you know, how much it was international, how much was group, just so we kind of understand that. And then, you know, beyond kind of the numbers, I was just kind of curious because last night Disney reported and said that international attendance is back to their pre-pandemic norm of 18 to 22 percent of the attendance in Orlando, which would seem to be, you know, there would seem to be no reason why you guys wouldn't share in that trend, but apparently aren't. I was wondering if you could talk to, you know, whether, you know, you think there might be some sustained difference between the two of you or whether what Disney is seeing is maybe a harbinger for it. You guys will see.
spk03: Yeah. Hey, Barton, it's Mark. I can take that question. So look on the attendance. I mean, we called out, I don't know that we'll get more specific than what we've already called out. There was versus 19, a couple of impacts, international group, And then obviously the calendar shift in there. When you get to kind of the more year-to-date comparison of the first nine months of 21 versus 19, the calendar impact tends to normalize out a little bit more. So that may help you. And then obviously you have the weather impact as well. So look, on the international attendance, I don't know that I can speak to what Disney's doing. I can tell you that you know, we will continue to promote the, you know, our parks here in Orlando and our differentiated product and the things that we can offer that are different than what they offer. So we'll continue to work on that. And, you know, historically for us, you know, international attendance has not been or has been roughly 10% of the total company's attendance. So theirs might be more, if you will. But, you know, our goal is to to try to drive more, continue to capture international attendance, and when it more hopefully fully comes back, we'll be able to do that.
spk05: Our next question comes from Paul Golding with Macquarie. Please go ahead.
spk09: Thanks so much, and congrats on the quarter. I wanted to ask... sort of along those lines but maybe in a different category around timing, is there any call you can give around when you typically start to see these longer lead time bookings come on with respect to group or international? Do they trend in line with season pass purchases or is it, you know, what the lead time might look like could help inform sort of when we should start to see this come back on? So any call around that?
spk03: Yeah, I mean, look, I mean, one of the challenges we have, maybe a little bit different than some of our other parks that are in Orlando, is we don't have hotels and things like that. So our view into the future is a little more limited, if you will. And we, I think in general, tend to see, you know, I'm speaking generally here, I think we tend to see people book closer in to their visit than maybe, again, some of the destination parks, whether it be Disney or Universal. So I don't have any specific numbers to share with you, though, on that.
spk09: All right. And then on the cost side, with respect to Shell's numbers on the $20 to $25 million of Q3 costs expected to moderate that were inflation-related, et cetera, is there any call you could give on a split of what might be fixed versus variable out of that bucket, even if it's not numerical, but just directional. Thanks.
spk00: Sure, I can take that one. Thanks for the question, Paul. So on the inflationary costs, I referenced the approximately 20 to 25 million of expenses we had received in Q3 of 22 compared to 19. And a lot of those costs were related to labor and wage pressures above normal inflation. We also saw our increases in rates and utilities, energy, insurance, transportation and shipping, and then also some of the commodities within food and beverage and retail items. So as Mark had mentioned, we are starting to see some moderation in those pieces from freight and shipping, but we're also continuing to see increases in utilities. As he mentioned, there's some increases in utilities from Florida specifically. But we do have some investments specifically related to address that, like our solar project that we are getting ready to kick off in one of our parks. So overall, we do think that those are moderating, and we'll continue to see that, but they are moderating as we go into the next quarters.
spk05: Okay. Thank you. Our next question comes from Ben Chaykin with Credit Suisse. Please go ahead. Hey, how's it going?
spk06: Let's try a different one. In Abu Dhabi, you guys have a large attraction opening up in 23. It's been somewhat of a black box, I would say, for the market. Can you help us frame this a little bit? Not in terms of size of the project, but more so, is this like a hotel management contract? Are you tied to revenue, profitability, both? And then one quick follow-up.
spk03: Yeah. Hey, Ben. I can give you some feedback on that question. Look, we're excited that the You know, the park there is expected to open in 2023, and I think it really showcases kind of what the next generation of a SeaWorld could be and will be, and it brings our brand to a whole other part of the world. So it is, like, as you mentioned, kind of what I'll call, you know, a capital light arrangement, if you will, and we would share, you know, in a licensing – agreement with them. I think, you know, until we get that open, it's a little bit too early to guide you to anything, but I think you can look for maybe future updates in the coming quarters on that.
spk06: Gotcha. I appreciate it. And then on the buyback, I think, is the plan moving forward to continue to buy back more than you're generating in free cash flow for the time period, just given, I guess, the perceived dislocation?
spk03: Yeah, what I would tell you, Van, is like we do throughout the year, we'll work with our board and our advisors on what the best use of cash is for shareholders. And so I can't guide you to anything, but other than that, we will work to deliver what we believe is the highest and best return to our shareholders.
spk05: Thank you. I appreciate it. This concludes our question and answer session. I would like to turn the conference back over to Mark Swanson for any closing remarks.
spk03: Thank you, Dave. On behalf of Shell and the rest of the management team at SeaWorld Entertainment, I want to thank you for joining us this morning. As you heard today, we are confident in our long-term strategy, which we believe will drive improved operating and financial results and long-term value for stakeholders. Thank you, and we look forward to speaking with you next quarter.
spk05: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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