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. [Operator Instructions] 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 Marc Swanson, Chief Executive Officer; 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 up 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 reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC. Now, I would like to turn the call over to our Chief Executive Officer, Marc Swanson. Marc?

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 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…

Thank you, Marc and good morning, everyone. It's good to be back with you for another quarter. During the second quarter, we generated total revenue of $496.0 million, a decrease of $8.8 million or 1.7% when compared to the second quarter of 2022. The decrease in revenue was due to a decrease in attendance of 2.0%, partially offset by an increase in total revenue per capita of 0.3%. The decrease in attendance was primarily due to significantly adverse weather including some combination of unusually hot and cold weather, rain and or the fallout from Canadian wildfires across most of our markets including during peak visitation periods. Attendance was also impacted unfavorably by the timing of new ride openings in 2023 compared with 2022. As a reminder in 2022, most of our rides opened in the first quarter whereas in 2023, many of the rides opened later in the second quarter. Our pricing and product strategies continue to drive higher realized pricing resulting in record total revenue per capita in the quarter of $80.80 compared to $80.59 in the second quarter of 2022. Admission per capita was essentially flat at $43.96, while in-park per capita spending increased by 0.6% to a record $36.84 in the second quarter of 2023 compared to the second quarter of 2022. The decrease in admission per capita was primarily due to the net impact of the admissions product mix, partially offset by the realization of higher prices in our admissions products resulting from our strategic pricing efforts when compared to the prior year quarter. In-park per capita spending improved primarily due to pricing initiatives when compared to the second quarter of 2022. In-park per capita, spending was impacted negatively, by factors including weather, closures and disruption related to construction delays, at certain in-park locations. Operating expenses…

Thank you, Jim. Before we open the call to your questions I have some closing comments. In the second quarter of 2023, we came to the aid of 96 animals in need. Over our history, we have helped over 40,000 animals including I don't know Dolphins, Manatees, Sea Lion, 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. We are excited about the remainder of 2023, as we finish out the summer and head into our fall and winter events. Our increasingly popular Halloween events are starting next month, at our SeaWorld, Busch Gardens and Sesame Place Park. You may recall that in 2022 SeaWorld's Hollow screen was voted one of the 10 best theme park Halloween events by USA TODAY's 10BestReaders' Choice Awards. The Halloween events will be followed by our Christmas events that started November. As a reminder SeaWorld Orlando's Christmas Celebration was voted number one best theme park holiday event by USA TODAY's 10BestReaders' Choice Awards. We are proud of these events and the recognition we have received from our guests and we expect this year to be our most exciting events yet. We continue to strongly 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 our ability to deliver significantly improved operating and financial results that we expect to lead to meaningfully increased value for stakeholders. Now let's take your questions.

We will now begin the question-and-answer session. [Operator Instructions]. Today's first question comes from Steven Wieczynski with Stifel. Please go ahead.

Yes. Hey, guys. Good morning. So, obviously, weather was -- seems like it was super impactful during the quarter and we've heard similar comments from some of your peers actually including Disney. So I guess the question is, do you have a ballpark idea of what the weather impact actually was on your attendance in the quarter? And maybe can you help us think about what the parks have looked like on days where weather wasn't impactful. Just trying to understand how the underlying demand for the parks and spend levels look like at this point? Thanks.

Yes. Hey, Steve I can take that question. So, look, there's obviously a lot of factors that we look at on attendance. I would say, one -- in addition to weather one of the other things that we isolated this quarter was the timing of the ride openings. And again, why that's important is if you remember last year we had things opening earlier in the year. And this year they opened later in the year. So we did not have as many rides open in April and May primarily as we did last year. So when you look at the kind of the combination of weather and the delay in the -- or the timing of those ride openings if you adjust for those. And look it's an estimate obviously but if you adjust for those our tenants would have been up a little bit in the quarter. And then on your second question on like-for-like days. I think what I would say, there when we look at like the month of June that is when we had the rides open things like that we did see a small increase in attendance there on like-for-like days.

Okay. Got you. And then second question is that in the previous couple of earnings releases you've talked about 2023 potentially being a record for revenues and EBITDA and that language was least, I missed, it was kind of removed this time around. I assume a lot of that is because of the weather impact you encountered during the second quarter. But is there anything else that is kind of making you take that language out? And I'm not sure if you have comment on this, but any color around how July trends were. And it looked like weather might have been somewhat of a headwind in July as well. Thanks, Marc.

Sure. I can try to help you out there. So on your question about July, obviously, you kind of nailed that the weather continues to be a significant impact. We saw a significant increase in the number of what we call weather impacted days. Having said that, revenue was down about 3.4%. So we did as well as we could given kind of the weather impacts in the month of July. I will tell you also that per caps were up so in July. So that's a little color on July. As far as how we think about the rest of the year, there's -- I think we've not called it out and simply that just being a little cautious this year has been a lot of weather impacts as we've noted here and then some of the other factors we called out. I guess what gives me some optimism as I think about the rest of the year is, we're coming into popular events. So we know our Halloween and Christmas events have -- are popular with a lot of our guests. And then if you remember last year in Q3 and Q4, we did have pretty meaningful weather impacts from a combination of the hurricane/tropical storms, and then also the poor weather around some of the holiday periods especially in November and December. So, who knows if that will repeat. Hopefully that doesn't repeat. And I think if that doesn't repeat that would be a good thing. But our events and our lineup, I think are strong. We're going to get some of these things that have been delayed in our parks opened, which should be good for us. The in-park venues that we talked about that have been delayed, and we expect to get some of them open as well. So there are some, I think some tailwinds but we'll just have to see where that shakes out.

The next question comes from Michael Swartz with Truist. Please go ahead.

Hey. Good morning, guys. Marc, maybe I think you laid out commentary that you're now expecting $75 million in cost savings, which is up I think $25 million or so versus your prior commentary. Maybe just give us a little sense of where those incremental cost savings are coming from and the timing in which you expect to achieve them?

Yes. Hey, Mike. Just to reiterate I think what I said was $60 million, up from $50 million, so just, if you go back to my prepared remarks, so just clarifying that. Look, what I'll say is, look we have a continual focus on driving efficiencies in the business. We have a lot of work going on that. A couple of months ago we promoted two of our most senior leaders to help oversee our park operations. And I think they're doing a great job of finding labor efficiencies in our parks and other efficiencies in how we operate. So those are the type of things that we're going to continue to find in the business. And I can tell you we work on it on a regular basis. And based on what I saw in July, I saw some of that come through. And we'll see the exact timing going forward. I don't know that I'm going to comment on that. But, obviously, we feel good about the plans and feel good about the work we're doing there.

I might just add, Mike you're starting to see some of the results of our strategic initiatives, including our sourcing one that we referenced in the call. When you look at our cost of sales for example for food that's down significantly for the three months and we're seeing the benefit of those types of investments materializing in cost reductions throughout the company.

Yes. Got you. And then just a follow-up on SeaWorld Abu Dhabi. Maybe a little more color on what you've seen today and I know it's very early. And then, if I'm not mistaken you see the benefit from the licensing fees, I think in the in-park per caps. What did that add to the quarter?

Sure. So look, we're -- as I said in the prepared remarks, we're pleased with the opening of the SeaWorld Abu Dhabi. If you get a chance highly rec -- I know, it's a long way away, but I highly recommend you take a visit to it. It's really one of a kind park and just really exciting place to visit. And the attendance there is obviously above expectations and it's just an exciting product. Still very early on, like you noted. I mean it didn't even open until May. So the impact for the quarter is probably around $700,000. It's not a super huge amount. And we'll see where that ends up over time. It is a licensing deal and we share in royalty and whatnot. But we're excited I think what it does for the brand kind of the art of what's possible with our brand. And I think as people see that park and understand the know-how and the experience we can bring to helping construct the park, helping set up a park, helping operate it, whatever it may be, we bring that experience. And I can tell you folks that have gone over and seen it I think that is certainly -- will help us as we think about other international opportunities and people see what has actually opened.

The next question comes from James Hardiman of Citi. Please go ahead.

Hey good morning. Thanks for taking my call. So, Marc just wanted to clarify a couple of things you said. It sounded like as some of the delayed rides opened up June was maybe a better month in terms of visitation. But then I think you said that July revenues were down 3.4% with per caps up. So, presumably attendance was down something more than that 3.4%. Are we just looking at weather, or are there any other -- I guess is that sort of right that maybe things got better and then a little bit worse from an attendance perspective. And if so anything else outside of weather worth calling out here?

Hey James, so I would say the weather was a meaningful significant factor in July. I mean I think that's been pretty well kind of all over the news, right? So, when we look at the what we call kind of the number of weather-impacted days it was up meaningfully to last year. And then if you look kind of over kind of the last kind of 13 14 years it's among the highest if not the highest. So, it's definitely a big driver in July for that.

Okay, that's helpful. And then maybe how do we think about season passes. So, you said season pass base is at record levels. I think you said pricing is up but deferred revenues are down 5%. Maybe help us bridge the gap there? And then it sounds like your pass I think you mentioned one park is already selling 2024s. Help us understand how that timing compares to normal. And how we should think about season pass timing for the 2024 -- I'm sorry season pass pricing for the 2024?

Sure. So, look on the timing of the season passes, we launched the season pass at our Sesame Park in Langhorne outside of Philadelphia. That park is probably a little bit more traditional in a sense that it kind of largely opens in the spring and kind of shuts down around Christmas. So, it makes sense that you would launch that pass kind of about now. And that's pretty consistent with prior years. And I think in general you're going to see most of our launches are very much largely in line or pretty close to what we've done in prior years. And we typically would look to start launching around this time over the into the next few weeks into September and things like that. So, that's not a typical. Look on the deferred revenue there's obviously multiple things besides pass that are in our deferred revenue. And we know when you have some weather impacts, harder to estimate but I'm sure we lost pass sales when the weather wasn't good. And so that can have an impact as well on that number. And then you just have single-day tickets and things like that that people buy in advance that sit in our deferred. So, there's a lot of different factors in there.

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

Thanks so much. Yes, just following up on your point related to the construction timing delays, it sounds like not all of that has fully normalized either in July. Is that right? And when do you think everything kind of comes back online. And when does that ease?

Yes. Hey Morgan, you're right. So, unfortunately, we still have a couple of things still closed. In particular one of our -- probably our biggest restaurant out in our SeaWorld Park in California remains closed. We expect it to open hopefully any time now. Some of the others, again, I expect that they'll open this year. I don't know the exact timing. There's been obviously delays here that we're not real proud of. And I can tell you we're working as quickly as we can to get those open. But certainly unfortunately not open -- still a number of things not opened in July. As I mentioned, per caps were up in July even with that. So that hopefully is going to be a tailwind when these things open. We target pretty attractive returns when we do these refreshes and new venues in our parks. So we're excited once they get open and we just got to get there.

Okay. Makes sense. And then on group booking trends already being above 2019. Is that a pacing number for revenues yet to be recognized, or are we talking about the six months revenues that have already been booked? Maybe just provide some more additional visibility into kind of the second half and what you're seeing in terms of the demand there that would be really helpful? Thank you.

Yeah. The way I think about it is kind of sales that are on the books. So not all of those people have shown up. Like we have a bookings for the full year and those are more than what we saw in 2019. So some of those people have come and obviously some still to come.

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

Hey, good morning, guys. I know you're not ready to share all the details of the hotel plans yet, but is there any way for us to think about balance sheet commitment and kind of structure those deals in terms of -- is it going to be all on balance sheet, or are you going to consider joint ventures or things like that with potential brand partners?

Hey, Chris, I can tell you that I don't have anything specific to share with you. I think that is -- we've looked at a number of different options. I think we feel really good about operating the hotel. But as far as how we finance that and how that looks, we'll come back to you. There's obviously multiple ways we could do that. And we want to make sure we do the one that's best for shareholders and most opportunistic.

Okay. Fair enough. And then just a quick follow-up on some of the delays on the rides and attractions that you mentioned in Q2. Were those also all weather-related issues, or was there some kind of a supply chain issue or labor or anything like that besides weather?

Look I mean depending on what you're talking about I would say there's multiple factors. We've obviously got to do a better job, but also there's things with vendors and supply chains. And you get -- even like permitting and inspections. Some of these things come down to just moving around a little bit. One thing we hear from some of the places we operate is that the folks and the municipalities are working really hard, but they have a lot going on. And so we -- I think there's at times some delays in processing permits and things like that. But it's a myriad of factors. Weather never helps. I would say weather probably has less -- certainly a lot less to do with in-park things because those are typically more indoors. But certainly on an outdoor ride or something weather can have an impact.

The next question comes from Eric Wold with B. Riley Securities. Please go ahead.

Thank you. Good morning. So you mentioned the weather also likely impacted season pass sales, right? Even though the pass base was up in the quarter. I know it's difficult to always know why someone doesn't purchase or renew. But anything you glean from renewal rates kind of in the face of the higher pass prices? Any pushback? Anything surprising you positively negatively around those trends?

What I'd say is we offer a really attractive pass product and it gives you a number of benefits, gives you ability to visit throughout the year. I think when you couple that with the investments we're making in the parks, whether it's rides or new venues, events things like that that is a compelling reason to buy and a compelling reason to visit. So I think as long as we continue to do that that's going to be attractive to people. And it's certainly a very good relative value, especially compared to things like going to a concert or something like that buying a season pass to a park like ours is a tremendous value when you consider the amount of times you can visit and how long you can stay in the park and things like that. So we'll continue to emphasize those things. I think, it's a great product. Obviously, when rides and things or refurbishments get delayed again hard to estimate exactly what the impact is. And like you mentioned the weather. Hard to estimate that, but I think I'd like to think that, if things go better in those areas, you'd like to think you'd have more sales. But regardless of that what we can control is offering a good product and continuing to invest in our parks and giving people a reason to visit.

Got it. And then kind of a follow-up. Appears on what you're seeing with hourly wage rates kind of around the system. Any pockets of more difficulty in terms of wage pressures or anything you're seeing regions where it's still maybe difficult to getting everyone you want to have in the park?

Let me just comment kind of overall and then I think Jim can give you the kind of the specific labor number. I mean, look there's still pockets of labor that are challenging. I think year-over-year it's in a better spot as I'm sure others have noted but you still have pockets of especially trade positions lifeguards things like that that are challenging. But certainly I think we feel better this year than last year. And then as far as the rates, Jim?

Marc, I think in the wake of the Bureau of Labor statistics talk about leisure and hospitality up 5.4% year-over-year. I think we're very pleased that our wage rates are very moderate. In fact they're actually down year-over-year overall for hourly labor. So I think we're in a very good position with our labor management in this topic.

The next question comes from Phil Cusick with JPMorgan. Please go ahead.

Hi, guys. A little bit of a follow-up on the spending side. You ticked up CapEx again. Is this due to the delays, or can you dig into the incremental projects either maintenance or new projects that you're doing? And how quickly can that extra capital impact the business? And then second of all, can you discuss competition in the theme park market especially in Orlando what are you seeing from a pricing and promotion standpoint among your peers? Thank you.

Hey, Phil, let me start with your second one I think on the competition in Orlando. Look we've been in Orlando since 1973 with SeaWorld. A lot of parks have obviously opened since that time. We have great competitors in the area. Obviously, Disney Universal have a very good product. But look I like our product. It's differentiated. It's different. We offer I think a very tremendous value at our parks as well and maybe a little bit of a luxury experience than you might find in some of the other parks in the area. And we added a water park in Aquatica back in 2008, and we've added Discovery Cove back I believe in 2000. And so we like our ability to be here and compete here and we know our competitors are here, but I think they are also rational competitors and we're all going to -- I think we all benefit from more people coming to the area. And I think certainly that's something that we'll continue to differentiate our product and hopefully take advantage of growing trends in Orlando over time. I know that, ebbs and flows a little bit, but I think over the long term Orlando remains a desired destination.

And on the capital front, I think over the time, we continue to try to focus on spending on average about $150 million in that core CapEx over a period of years. I think, what we're seeing is a refinement of our plans for 2024, 2025 and 2026 as we refine our attractions menu. We also as mentioned had some delays in our ROI projects. And I think what we've learned is a need to start to do some design and prep work much earlier. So we're making some allowance for that so that we can get those projects for 2024. Ready to go much sooner next year.

Thanks, guys.

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

Hi, there. Thank you for taking my question. I wanted to start by asking on capital allocation. I know, there's not much more you can say on the hotel side of things. But it does seem like you're also reaching kind of critical mass in terms of your buyback from an ownership perspective but still a lot of cash flow generation. So, I'm curious how you're thinking about capital allocation priorities going forward, whether that'd be paying down debt or potentially a dividend or anything else?

Hey Lizzie, it's Marc. I can help you with that question. So, look we put it into a couple of different buckets. Obviously, one of our main priorities is to invest in the business new things in our parks every year. And I think we've demonstrated that over the last several years here and we have a plan to continue to do that. So that will continue to be kind of a hallmark of our capital allocation. We'll be investing in our business. We've talked today a little bit already about kind of the high-growth ROI initiatives that we continue to invest in our parks. And again, I think as long as those opportunities remain, I think our Board is supportive of making those types of investments on those ROI initiatives as well. And then you kind of come to kind of your next set of things you can do. And that's -- whether it's paying down debt or buying back shares or paying a dividend or whatever strategic alternatives, whatever it may be. What I would just tell you is, we continue to work with our Board on that. Certainly, our Board is focused on maximizing value for shareholders and that's something that we'll continue to work with them on what is kind of the best use of the cash going forward.

That makes sense. Thank you. And I just wanted to follow up on Phil's question on Orlando, but slightly different focus. There's been a lot of headlines this quarter like, Disney attendance. Universal, it sounds like reading between the lines, they were down maybe mid-single digit percent year-on-year on attendance in Orlando and they kind of called out there's some impact of kind of an international trade up actually happening. I'm curious if that's something that you think you've been seeing and whether that might be an impact that might continue into 3Q if travel kind of continues to ramp up in that quarter.

Yes. I mean, I don't know that I'm going to comment specifically on our kind of Orlando parks, other than what I've already said. I mean, certainly, I think it's been in the news that people are -- at least people in United States are traveling more internationally it seems like. So, that is what it is. Again, I think we'll continue to invest in our parks. Continue to have reasons to visit our parks, specifically in Orlando. I mentioned in my prepared remarks, the Christmas event here in Orlando is really well done. And I think that's something that people can come out and see. So, we'll continue to be here and be in the market and be a good place for people to visit in this area.

The next question comes from Robert Aurand with KeyBanc Capital Markets.

Hi. Thanks for taking my question. As we look at attendance in the second quarter, is there any way you can kind of break it out between group versus international versus domestic nongroup attendance trends?

Well, let me just, Robert, let me give you just a comment or two on that. I mean, International relative to 2019 continues to be down. Look, it's down in kind of that 50% range. So when you look at kind of a run rate basis on an annual basis, that's over one million people. But I think you've heard at least one of our competitors here in Orlando talk about international being down for them as well. So, I'm not -- that's international. The group business we talked about the bookings, the revenue bookings there are strong. And so, hopefully that continues. So, you have a little bit of a mixed bag there with those two. And as far as just like domestic, what I'll call tourism, if you will or domestic kind of visitation into the markets. When we look across all our parks, our domestic attendance is up a little bit. And then what -- for the quarter, what's down is more in your kind of people that are closer and your local same day. And that kind of makes sense when you think about it, because those are the folks that have the ability to react to whether the quickest and things like that and can delay their visit if need be.

Understood. And then just a quick follow-up on Abu Dhabi. I think you mentioned $700000 in the quarter. I think last call you were talking about a low to mid-single-digit, $1 million dollar EBITDA impact for the year. Are there any updates there given attendance is trending better than you expected?

Hey Robert, I would still use that low-to-mid-single-digit millions. We'll just have to see the park. Park just is still really, really new. We're excited about it obviously. But I think you can stick with the kind of the guidance or modeling we gave you last time, last quarter.

The next question comes from Barton Crockett with Rosenblatt. Please go ahead.

Hi. Thanks for taking the question. I was interested in, hearing, if you are detecting any impact on the attitude of your customer base from all of the experience that we've had and all of the media reporting around climate change, consumers being asked to buy a season pass which is a financial commitment that exposes them to weather. Weather was pretty bad this year, a lot of media reporting about this being kind of a new normal. Is this impacting people's desire to buy a season pass? And what you see from your customer base?

Hey Barton, I can try to give you an answer on that. I'll do the best I can. Look, I think, I -- as I said weather certainly impacted the quarter. It impacted July. So we know there's – obviously, because of weather there's people who likely did not buy a pass or obviously buy a ticket or come to visit. I don't know, what that means over the long term. I would like to think that weather eventually normalizes over some longer period of time. We'll have to see. I think we just have to be cognizant of years where we have. Difficult weather like this year we have to try to give people still reasons to come visit. We can try to make the park more comfortable on a hot day or try to do other things. We can heat our pools, if we had to in our water parks in some cases. So we may just have to think about things differently a little bit, but I think we're still very early to say if there's some seismic shift here in how people think about it. I think, hopefully these things will normalize out overtime.

Okay. That's it. Thank you.

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

Thank you, MJ. On behalf of Jim and the rest of the management team, at SeaWorld Entertainment, 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. We look forward to speaking with you next quarter.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.