Good day, and welcome to the United Parks & Resorts Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matthew Stroud, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to United Parks & Resorts 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.unitedparksinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Marc Swanson, Chief Executive Officer; and 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 certainly forward-looking statements within the meaning of 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 the 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 strong financial results. We grew attendance and revenue during the quarter despite not seeing any material improvement in weather during the quarter compared to prior year. We also achieved a record level for in-park per capita spending, which is a testament to the continued success of our strategies and investment in this area. We're also happy to have been able to repurchase approximately $6.3 million shares since the end of March through August 5th, or nearly 10% of our outstanding shares at what we believe were depressed and highly attractive prices, underscoring our significant free cash flow generation and our commitment to thoughtfully and opportunistically return excess capital to shareholders. Looking forward, we continue to be encouraged by the booking trends at our Discovery Cove property along with our group bookings, which continue to run well ahead of 2023. International visitation, while still down compared to 2019, was again up for the quarter compared to prior year. We're very excited about our remaining summer events including Bands, Brew & BBQ at SeaWorld Orlando, Summer Spectacular at SeaWorld San Diego, Bourbon & BBQ at Busch Gardens Tampa Bay, Bier Fest Brews & BBQ at Busch Gardens Williamsburg, and Red, White & BBQ at SeaWorld San Antonio over the next few weeks. Later, in September, we will start our popular Halloween events, which will be followed by our Christmas events. These special events have continued to grow in popularity and I expect this year's events to be among the best ever. For the full-year 2024, we continue to expect to deliver new records in revenue and adjusted EBITDA. We have high confidence in our ability to continue to deliver operational and financial…

Thank you, Marc. During the second quarter, we generated total revenue of $497.6 billion, an increase of $1.6 million, or 0.3%, when compared to the second quarter of 2023. The increase in total revenue was primarily a result of an increase in attendance, partially offset by a decline in total revenue per capita. Attendance for the second quarter of 2024 increased by approximately 47,000 guests, or 0.8% when compared to the prior-year quarter. The increase in attendance was primarily due to increased demand. Total revenue per capita decreased a modest 0.4%. Admission per capita decreased 2.9% and in-park capital spending increased 2.5%. Admission per capita increased primarily due to lower pricing on certain promotional admission products and the net impact of the admissions product and part mix when compared to the prior-year quarter. In-park per capita spending, defined as food, merchandise and other revenue divided by total attendance improved primarily due to pricing initiatives when compared to the second quarter of 2023. Operating expenses decreased $5.5 million or 2.8%, when compared to the second quarter of 2023. The decrease in operating expenses is primarily due to decreased non-cash self-insurance reserve adjustments, a decrease in non-cash asset write-offs, and a decrease in non-recurring contractual liabilities and legal costs resulting from the previously disclosed temporary COVID-19 park closures when compared to the second quarter of 2023. Selling, general and administrative expenses decreased $4.4 million or 6.4%, compared to the second quarter of 2023. The decrease in selling, general and administrative expenses is primarily due to an $8.6 million decrease in third-party consulting costs, including approximately $8.3 million of non-recurring costs for strategic initiatives, when compared to the second quarter of 2023. We generated net income of $91.1 million for the second quarter compared to a net income of $87.1 million in the…

Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the second quarter of 2024, we came to the aid of 215 animals in need. Over our history, we helped over 41,000 animals including bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds, and more. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts. We're certainly excited about the remainder of 2024 with the exciting events we have coming with Halloween and Christmas. I want to thank our ambassadors for their efforts during this busy summer season and their preparation for our upcoming fall and winter events, which are guest favorites. 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 our ability to deliver significantly improved operating and financial results that we expect will lead to meaningful increased value for stakeholders. Now let's take your questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Steve Wieczynski of Stifel. Go ahead, please.

Yes. Hey guys. Good morning. So, Marc, I want to first ask about the pressure that you guys kind of saw in the admissions per caps and wondering if you can give us a little bit more color around some of that, maybe the pricing decisions around lowering pricing on certain, what you call certain edition products? And I guess we've heard some of your competitors in that Orlando market talk about their customers maybe becoming a little bit more price-conscious. So just wondering how you're thinking about pricing your daily tickets. I guess, given Jim noted that you still feel like your past product can and probably should get pricing increases in that mid-single-digit range.

Yes. Hey Steve, I can take that question. So, look, as we've said in the past, and I'll say again, we're focused on driving total revenue, right? And we're confident we can grow per caps over time with all the initiatives we have going on, our new events, new attractions, our dynamic pricing, CRM, things like that. And look, we -- what we've said, like look, we're going to -- we may use offers at times, and in kind of this current environment, we did use some in the quarter. And then also, you know, you have the mix or the impact of park and product mix. And those things can ebb and flow quarter to quarter, right? So I think overall, we again feel confident over time we can grow per caps, but we're going to defer to driving more total revenue. And that's what we did in the second quarter, and some of those offers, that at times may be at odds with per caps, a little bit helped us achieve that growth.

Okay. Got you.

Yes. Sorry. Let me just add, because you kind of alluded to it. The other thing I'd point out is we do have a strong value proposition. I think to the extent you kind of commented about maybe people being more value conscious, I think we have a tremendous value proposition, especially with our season pass products. You can come to a park for a full year, and when you start to calculate the cost of per visit, when you buy a pass, it's a great value and especially when we're adding new things. So I think that'll continue to be something that we showcase as well. And I think it also points out kind of the resiliency of the business that even in times that maybe people are looking for value, we provide that, and it's a resilient business.

Okay. Got you. Thanks, Marc. And then second question, Marc, we think about the second-half of the year, obviously you're still kind of holding on to the record EBITDA comment, and that would mean you'd probably need to produce, I guess, what is it, about $430 million of EBITDA in the second-half of the year to exceed that 2022 record. So with weather being unpredictable, you know, guess it's not giving you guys a lot of wiggle room or something, you know, does go wrong. So I guess, I'm just wondering if you kind of look at -- we look at kind of current consensus right now, I think it's sitting around $434 million for the second-half of the year. So, what is consensus essentially getting wrong or where do you get that comfort from that kind of getting north of that $430 million for the second-half of the year is really going to be plausible? Thanks.

Yes. I mean, I think, Steve, the way to think about it is we have a lot of focus on the things that are in the second-half of the year. And one of those would be driving more demand with our events like Halloween, Christmas, the new rides that open, like here in Orlando and in Tampa, and then our pricing and per cap initiatives as well, and then our cost initiative. So getting contributions from volume, from per cap, from cost efficiencies, I think when we kind of step back and layer all those things into kind of how we think about the back half of the year, those are the things we're pointing to. So it's a lot of effort on things we are doing to drive that. Now, not to get too cute or anything, but I mean, obviously, you know, anything over a dollar over the prior record EBITDA would be a new record. But certainly, you know, so we'll -- we're focused on getting to something higher than what we achieved in 2022, and we'll continue to focus on that. And that is what we'll work towards, obviously, and we'll be able to update you guys in November on if we feel like we're still pacing towards that. But I think a lot of efforts around our initiatives, our events, our per caps, our cost discipline.

Okay, great. Thanks, Marc. Really appreciate it.

Sure.

Our next question comes from Ben Chaiken of Mizuho. Go ahead, please.

Hey, good morning. Thanks for taking my questions. Just to follow up on the per cap one, I believe last quarter you mentioned that April per caps were up on the admission side and then obviously down slightly for 2Q. Could you just help us with any cadence through the year? And then if there's any color on early July trends? That'd be helpful as well. Thank you.

Yes. Hey, Ben, I can help you on that. So, look, I'll focus on the quarter. Like you said, they were very slightly positive in April, so you can read into that, that they would have been impacted from that point forward. And again, we're focused on driving total revenue. And so there is going to be times that we run promotions that are at odds with per caps, but we feel good about the volume or the revenue that's associated with that. And it's going to vary again from quarter to quarter. But I think over time, we still are confident we can grow the per caps with all the initiatives, the new attractions, the CRM, the mobile app, new things in our parks. So we'll continue to focus on that. What I can tell you, just preliminary, July, is that the per caps were up a very low single digits.

Yes, ben, it's Jim. I think as we look at what we spent last year, what we were spending this year, we continue to right size our amount of capital spend. I would say that we continue to make sure that we're in that 225 to 250 range this year and then continue to find ways to spend less capital and be more efficient with that. That does not include any hotel expansion in those numbers.

Okay. Thank you very much. I appreciate it.

The next question comes from James Hardiman of Citi. Go ahead, please.

Hey, good morning. So, Marc, you mentioned maybe better per caps in July. I figured I'd ask -- anything else you can tell us about July, obviously, the second quarter attendance was up a little bit, per caps were down a little bit. Now, per cap is up in July, is total revenue up in July as well?

What I would point out to you in July is there is a -- if you look at July of this year versus July of last year, there is two less weekend days in July of this year versus July of last year. So, as you can imagine, that certainly has an impact on the reported numbers when you're just looking at one month like that. So that would be a drag on revenue. And so I think overall, you can assume revenue would be down. But one of the ways we look at it though is on a day-to-day basis, which is kind of lining up like days which adjust for that calendar shift, right? And when you do that, you know, the attendance was up a little over 2% or so in July, which is I think an indication that on a like-for-like basis or day-to-day basis attendance increased there.

Got it. That's really helpful. And then maybe speak to the state of Orlando, you've got Universal who put out some pretty weak numbers, and Disney with some cautionary comments. Obviously, that's just the portion of your business, but are you seeing any of that weakness in the Orlando market? You talked about some mix effects, I didn't know if Orlando underperformance was maybe one of the factors impacting mixed, but anything you could tell us there? And is the local business may be offsetting some of that destination business?

Yes. So I can take that, James. So, look, I think the -- one of the things I would start with is just the resiliency of the business, right? So I think we've proven over a pretty long history here of when there are perhaps people looking for other alternatives or cutting back on things. Our business has remained resilient through past recessions. And so we like the opportunity to continue to be a great value proposition to people in the market for wanting to have fun. And we know people are reluctant to want to cut activities with their family and friends. And I think we offer a strong value proposition for that. I'd say specifically to Orlando on a year-to-date basis, we are pleased with our Orlando parks. And so I won't comment any more beyond that, obviously for competitive reasons. But we're pleased with our Orlando performance and we like the resiliency of the business here.

Got it. Thanks. If I may, what's the mix comment? When you talk about mix hurting per caps, can you be a little bit more specific on that?

Well, I was saying in general, James, so each quarter you're going to have the potential of mix from either the type of product that somebody's using. So if there's more of a multi-day product or more promotional products, that can be a negative to the per cap rate. And then on the park mix, if you have water parks doing better, for example, they traditionally have a lower per cap than a bigger non-water park. So there is mixed impacts that can impact the quarter as well.

Got it. Thank you.

Our next question comes from Thomas Yeh of Morgan Stanley. Go ahead, please.

Thanks so much. Maybe just to ask James's question a little bit of a different way. Can you help put a finer point on the consumer health picture and how that's evolved over the last quarter or two? Any indication on the consumer behavior at the low end versus the high end? I think historically you've spoken to Orlando attendance being like 65% of coming in from a driving distance and then 80% to 90% at your other more local parks. Is that still holding true generally?

Yes. What I would say, Thomas is, I'll just reiterate. On a year-to-date basis, we're pleased with the attendance performance in Orlando. So obviously we get a good portion of our attendance from people who drive to our parks and from the state of Florida, that type of thing. So I think, again it's a resilient business during maybe what -- we see the news, we know there things are a little tougher out there, obviously. So, I think it shows the resilience of our business. Specifically, I think your other question on the health of the consumer was -- I look at a couple of things. One would be our in-park per caps and they were up in the quarter, they're up again in July. So, I think that's one indicator people are -- our strategies on in-park are working. Jim mentioned the past pricing and getting the increases on that is a positive. And then certainly our group revenue bookings are trending ahead of '23. And then our Discovery Code bookings over 19' to '24, but in the '25 we're pleased with as well. So, I take all those things together. I mean, you could even look at our deferred revenue being positive. If you take all of those things together, I think at least in our parks, we're still getting spending and I think it points to what we offer, which is a compelling value proposition and the resiliency of the business.

Okay, that's helpful. And maybe just one last one from me. Any help on thinking through the new attraction timing? I think last year you saw some delays on launches. I noticed Penguin Trek opened in July, and you talked about Halloween and Christmas and some more opportunities in the back half of the year. Is the capacity that's coming online greater than the launches that we saw last year? Is that kind of supportive of an opportunity on the attendance front?

Yes. I mean, I think what I would point out is our parks rarely operate at full capacity, right? So, there is room for more people to come to our parks. And so, I think that will remain. And so, our goal is to certainly drive as many people for the most part, as we can to our parks and especially our events. So, whether that's Halloween or Christmas or the opening of the new ride. So, like the ride in Orlando Penguin Trek, it's a really well-done ride. And what I like about it, and back to my maybe comment about our business model. It's differentiated in the sense that it's one of the few places you can go and ride a ride. And then when you're off that ride, you're getting up close with penguins. So, it incorporates not only a ride but then our animal experiences as well. And I think that's obviously somewhat a unique thing to us relative to some of the others in the industry. And I like that product differentiation, and we're pleased with that ride.

Is it safe to say that just on a new attraction launch perspective, that it's more normalized relative to last year? I guess, just given the delays that we had seen last year.

Look, I mean, all things equal, we would generally want to open things earlier than July. So I would not necessarily consider this year that much more normal. I mean, that ride, we would have preferred to open earlier, and there were some things that popped up that kept it from opening as early as we'd like. But ideally, we would have opened that ride closer to Memorial Day or early June or something like that. So we lost almost a month or so of not having a ride. We have it for the rest of the year, and we'll lap next year with that ride in June. So ideally we're focused on trying to get things open before the key parts of the season, which would be either for spring break or Memorial Day, depending on the park.

Okay, understood. Thank you so much.

Our next question comes from Matthew Boss of J.P. Morgan. Go ahead, please.

Hey, this is John on from Matt. Marc, maybe can you elaborate on some of the changes you're seeing from international traffic? What did you embed in the back half of the year and how you view the multi-year recapture opportunity there?

Yes. Sure, John. So as I said on my prepared remarks, the international attendance is still down to 2019. It was up slightly for the quarter versus 2023. So we still have, I think a pretty substantial opportunity to recapture international. You know, we're trying to do things on our end, but obviously, there is macro factors and I'm sure other reasons as well, things we can probably do better also. But I don't know when that'll come back, but it used to be back in 2019, roughly about 10% of our attendance overall. So a little more than 2 million people. We are not -- we are still, I don't know, probably 40%-ish shy of that between -- I don't know, 35% and 40%, depending on kind of the quarter and how it ebbs and flows throughout the year. Between like 35%, 40%, 45%, still down to '19, depending on the quarter.

Okay, great. Thank you. And then just one more on the cost side. Can you speak, I know you reiterated the $50 million this year, but longer term can you speak to kind of the efficiency opportunities you have and how best to think about the multi-year cost profile here relative to the top line growth?

Well, yes, so I'll give you just a high-level comment and then if James wants to add anything, he can. I think, we've talked about this before. We view this in a business in a somewhat simple way. If we can grow our tenants a little bit each year, if we can grow our cost -- I'm sorry, grow our per caps a little bit each year and then manage our cost to a reasonable level, that equation will generally result in EBITDA expansion. So, there is a lot of focus on cost. It's something we spend quite a bit of time on, as you can imagine. And I think we've proven over time that we can deliver on efficiencies and we have new things that we work to identify and new things that we'll continue to identify into the future. So we have a lot of focus on that, something we take it very seriously.

Yes. The only thing I'd just add, Marc has -- we had provided the $50 million of cost savings in '24 in our illustration at the beginning of the year. I think we continue to remain pleased at our progress on meeting that commitment and that we also have good plans in our 2025 planning cycle to achieve the balance in the coming year.

Great. Thank you.

Our next question comes from Chris Woronka of Deutsche Bank. Go ahead, please.

Hey, good morning, guys. So as we think about the kind of Universal, the epic opening next year. Marc, do you guys have any plans? Is the marketing going to ramp up or change much ahead of that? I mean, is there going to be any kind of, I guess, I'd call it counter-programming to try to reach folks as they consider their Orlando plans?

Yes, of course, we would have things. So we have a new attraction coming to our SeaWorld, Orlando next year that I'm really excited about. And we'll have other, obviously, initiatives. One of our things we do, I think a good job with our events, and we brought back Bands, Brew & BBQ this year, which was an event we had done in the past, and bringing it back this year. We've done some things even for Halloween this year we're adding what I think is a really cool 5K Run that starts at midnight on Friday the 13th. So I think those are the type of things that are -- other reasons that make our events exciting and reasons to come visit. So, yes, we will absolutely add things, we have obviously been focused on. Just like any other year, we're focused on growing the business. The thing I would just remind everyone is we've been in Orlando since the early 1970s, so -- and we've added two parks of our own, Aquatica and Discovery Cove, since that time. And we have, as the market is growing -- as the market has grown since the 1970s, with Disney and Universal and other parks coming onboard, we've continued to participate in EBITDA growth. So we like the opportunity to -- when more people come to the market, that we have an opportunity to compel those folks to come visit our park as well. I'm sure Epic is going to be a great park, and I'm sure there is going to be days where they're very crowded and we might feel it a little bit. But I think we like the opportunity to participate in more people coming into the market. We'll have our attractions, we'll have our events, we'll have our strategies around that as well. Also, it's a differentiated product, as I mentioned previously. So coming to SeaWorld is different than going to Universal. We have animals, we have different events and things like that. So that is another thing that sets us apart. And then certainly our value proposition, I think we feel good about our value proposition and the opportunities that people can take advantage of that. And then, as I mentioned previously, we get a lot of our attendance in Florida from people who can drive in. So taking all those things together, we're excited about being in Orlando and we're going to continue to do our part to attract people.

Yes. Thanks, Marc. Appreciate all the perspective there. And then the follow-up is on the 25 pass product lineup, you kind of previewed it earlier. But I know that the details might be limited, but are you -- is there going to be any kind of change in strategy relating to ancillary attachment in the way you might be able to do that through the pass or any other changes that might be notable on strategy?

I think, overall, I mean, we will continue to offer a great suite of benefits to our pass holders. And again, we're going to target reasons for them to buy a pass. So that strategy is not going to change. I think, we're always looking for new ways to engage our pass holders, new ways we can drive them to come more often and to secure their commitment. So there will be some things we do and we'll announce that, Jim alluded to. We feel we're going to have some of the best benefits we've had, right? So details will be forthcoming, but I think the strategy of really securing people's commitment earlier, securing their commitment for the year, is -- will continue to be a strategy. And in fairness, people bypasses to our parks throughout the year. So we're always kind of selling passes. But obviously, when we launch something new for 2025, we're going to try to make sure people have a compelling reason to buy that product.

Okay. Very good. Thanks, Marc.

Sure.

The next question comes from Lizzie Dove of Goldman Sachs. Go ahead, please.

Hi there. Good morning. Thanks for taking the question. Going back to the kind of park mix comment that was kind of made, I am curious, we will all see the foot traffic data, and it's interesting because the Orlando Park kind of attendance growth is holding up nicely, but there's been some weakness this year, like year to date in terms of the Busch Gardens parks. Curious if there is anything you can kind of share there in terms of trends between the different parks and the different brands.

Yes. Thanks, Lizzie. I mean, I don't want to get into too much for competitive reasons, but I think you kind of echoed my comments that we're pleased with the Orlando performance on attendance here year to date. So you can kind of read into that. Certainly, we have opportunities at all our parks, and certainly, Busch Gardens Tampa would be one of them. It's a great park. It's got a lot of great rides and animal attractions. I think we need to do a better job of making people aware of what that park has to offer. It's a wonderful park with the rides and the animals. So we'll continue to work on that. I think that's a big opportunity for us.

Got it. Thank you. And then also as we kind of look to 2025, as I think it was Chris just mentioned, Epic launching. I guess, what is your base case here? Are you assuming that there's this rising tide? Maybe you get some kind of pricing power with a pricing umbrella. Or I guess, said a different way, Orlando is a big part of your base, maybe 40% of the EBITDA, if I were to kind of guess. Do you think EBITDA growth is achievable on the business as a whole in '25?

Yes. Yes. No, we would expect to grow the business in 2025. Again, I would go back to -- we've been here a long time in the market. Like I said, we've participated in the EBITDA growth of the market, and the EBITDA of the SeaWorld Park has grown over time. So our expectation is we'll continue to grow, right? So that's what we're planning for. Again, more people we would -- you would think would come to Orlando next year with Epic opening. And again, I'm sure there is going to be days where they're very crowded and we might feel it a little bit, but I think we also have the opportunity to pick off people. I mean, if there is a lot of people in town that not everybody, the park can only hold so much. So there is going to be an opportunity for us to pick off people that are in town, like we have done historically in this market. On a just -- geography basis, we are closer to Epic than some of the other competitors, so we're not terribly far from that park. I think, again that -- I would view that as a positive. So, we welcome people to the market. I think our value proposition, our product differentiation are going to be good reasons to still want to come and visit SeaWorld. And like I said, we're going to have our own attraction, our own new things to do in this park, which I think once we get those announced and talked about, people will see it's going to be an exciting year.

Great. Thanks so much.

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

Yes. Thank you, Cindy. On behalf of Jim and the rest of the management team at United Parks & Resorts, I want to thank you for joining us this morning. As you heard today, we are confident in our long-term strategy, which we believe will drive improved operating and financial results and long-term value to stakeholders. Thank you, and we look forward to speaking with you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.