SeaWorld Entertainment, Inc.

Good morning, everyone, and welcome to the SeaWorld Second Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. After today's prepared remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad, and to withdraw your question, you may press star, then 2. Please also note that today's call is being recorded. At this time, I'd like to hand the floor over to Matthew Stroud, Investor Relations.

Thank you, and good morning, everyone. Welcome to SeaWorld's second 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 of and Jim Forrester, Interim Chief Financial Officer and Treasurer. This morning, we will review our second quarter financial results, and then we will open the call to your questions. Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the risk factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call, we may reference non-GAAP financial measures and other financial metrics such as adjusted EBITDA and free cash flow. More information regarding our forward-looking statements and reconciliation 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?

Thank you, Matthew. Good morning, everyone, and thank you for joining us. We are pleased to report another quarter of solid financial results. despite the impact of significantly adverse weather, in-park venue closures and related disruptions due to construction delays, and a shift in the timing of the opening of new rides during the quarter. Our results during the second quarter further underscore the resiliency of our business, the effectiveness of our strategy, and the tireless efforts of our outstanding team. Some combination of unusually hot and cold weather, rain, and or the fallout from Canadian wildfires impacted most of our markets during the quarter. In-park spending was impacted by the adverse weather and delays in construction projects, resulting in prolonged closures of certain in-park facilities and other in-park disruptions during the quarter. Despite the unusual headwinds in the quarter, attendance still grew at certain of our parks, and total per capita spending increased for the 17th consecutive quarter. During the quarter, SeaWorld Abu Dhabi opened, the first SeaWorld park outside of the United States. We are really proud of this park, happy to see attendance well ahead of expectations to date, and excited for what this park will deliver over time. I continue to be very encouraged by our group booking revenue trends, which are up significantly versus 2022 and 2019, and group bookings revenue to date. through the first six months of the year already exceeds 2019's bookings revenue for the full year. I'm also very excited about our remaining summer events over the next few weeks and our planned Halloween and Christmas events, which have grown bigger and bigger over the years. And based on what we have planned, we expect this year to be our best events yet. I want to thank all of our ambassadors for their efforts these past few months as we wrap up this summer season and head into our increasingly popular Halloween and Christmas events for the balance of the year. We are also thrilled to have recently received recognition from USA Today readers for having some of the best parks and attractions in the country. Aquatica Orlando was voted best outdoor water park in the United States. Our Mako Roller Coaster in SeaWorld Orlando was voted Best Roller Coaster in the United States. Tidal Surge in SeaWorld San Antonio was voted Best Non-Roller Coaster Ride in the United States. And Celtic Fire at Busch Gardens Williamsburg was voted Best Amusement Park Entertainment in the United States. Several of our other parks and attractions received top 10 rankings as well. We are proud to receive these awards and the recognition of our of our collection of parks across the country. We have made significant investments in our business this year and will continue to make investments to improve the guest experience, allow us to generate more revenue, and make us a more efficient and profitable business. We expect these investments to yield very attractive returns. We are currently planning new initiatives for the balance of this year and next year that will make us an even stronger, more profitable, and more resilient business. We have high confidence in the plans we are executing on today and for the future and in our ability to deliver substantial operational and financial improvements that will lead to meaningful increases in shareholder value. Now let me update you on the progress of some of our strategic initiatives. First, we are making good progress on our cost and efficiency related work with our dedicated internal team and specialized outside consultants. and continue to find additional cost reduction opportunities. We have revised up our target savings to $60 million from our previous target of $50 million. The team continues to find ways for us to source and organize more efficiently, better utilize capital and technology, along with scheduling improvements to drive labor efficiencies and eliminate unnecessary and or redundant expenses. We expect these cost savings initiatives, along with our revenue enhancement initiatives, will lead to increased margins over time. Second, on the digital transformation front, we continue to build out our CRM capabilities, which are still in their infancy, and roll out and improve our mobile app. On CRM, we see significant obvious upside opportunities from ultimately having more rich data about our past members and guests, and being able to more effectively engage, analyze behavior, and tailor and target messages and offerings. In regards to the mobile app, we are pleased it is being used by an increasing number of guests in our parks to improve their in-park experience. The app has now been downloaded more than 6.3 million times, up from 5 million times at the end of Q1. Total revenue Total revenue generated on the app is up over 200% compared to prior year, and we are now seeing a 20% plus increase in average transaction value for food and beverage purchases made through the app compared to point of sale orders. Mobile ordering has been expanded to additional restaurants and is now operating at approximately 75% of our target restaurants. 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 are continuing to refine current capabilities and develop additional capabilities to further increase engagement and optimize the experience. Third, as you know, we have strategically increased our park-specific ROI investments this year in an effort to drive incremental revenue and or decrease costs through expanding enhancing and improving our food and beverage and retail offering, park infrastructure and aesthetics, and generally improving the guest experience and journey around our parks and facilities. As noted, some of these refurbishments and upgrades have taken longer than planned, which negatively affected in-park per caps in the second quarter. While we are disappointed with the delays and disruption these capital projects caused, We are excited to realize the full benefit of these investments as they come online over the remainder of the year. We are well underway planning for additional projects in 2024 that will further enhance the guest experience and are expected to yield attractive ROI. Fourth, on the international front, SeaWorld Abu Dhabi opened in late May and attendance has been meaningfully above expectations. We are pleased to see how strong this park is open and look forward to growing to its growing contributions over time. Continue to make progress on discussions related to other international opportunities and expect to have more to share in coming quarters. On the hotel front, we also continue to make progress on our plans. We are currently refining our design planning on our first hotels and we expect to begin opening in 2026. We continue to work on site selection for additional hotels across our portfolio We hope to share more specifics in future quarters on what we expect to be really exciting and value-creating projects. Overall, I'm very excited about the significant investments we are making and the many initiatives we have underway across our business that we expect will improve the guest experience, allow us to generate more revenue, and make us a more efficient and more profitable enterprise. We are building an even stronger and more resilient business that we are confident will deliver substantially improved operational and financial results and meaningful increases in shareholder value. Let me briefly comment on our balance sheet, which continues to be strong. Our June 30, 2023 net total leverage ratio is 2.61 times, and we had approximately $518 million of total available liquidity, including over $146 million of cash on the balance sheet. This strong balance sheet gives us 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. Let me also comment on our debt repricing activity last week. Last week, we launched an opportunistic debt repricing on the back of strong credit markets and tightening credit spreads. As you know, right after we launched our repricing activity, Fitch downgraded the US government credit rating, which among other factors, negatively impacted credit markets. While we had the ability to reprice our loan to a lower interest cost, it was not at the level where we and our board expect our pricing to be, and as such, we have canceled the opportunistic repricing and plan to wait for better time and market conditions to reprice our debt. Looking ahead, we are excited about our events planned for the remainder of the summer over the next few weeks, and our incredibly popular Halloween and holiday events, which, as I've said, have grown bigger and bigger over the years, and based on what we have planned, we expect this year to be our best events yet. We have also already launched 2,024 passes in one park and plan to launch 2024 passes, including fun cards, across the remainder of our parks over the coming weeks. Our 2024 passes will continue to provide great value to our pass holders with exciting benefits and reasons to visit. We are also in the middle of planning for 2024 and are extremely excited about the new investments and initiatives we have in store for next year that we expect will improve guest experience, increase revenue, and drive further efficiencies and margin expansion. We are also excited about our lineup of 2024 rides, attractions, events, and or other experiences where we have something new planned for every park. We will have more to say about 2024 in the coming weeks as we begin to announce more specifics for each park. With that, Jim will discuss our financial results in more detail. Jim?