SeaWorld Entertainment has another record quarter while attendance lags behind 2019

Posted | Contributed by Jeff

From the press release:

SeaWorld Entertainment, Inc. (NYSE: SEAS), a leading theme park and entertainment company, today reported its financial results for the second quarter and first six months of fiscal year 2022[1] and announced that its Board of Directors approved a new $250.0 million share repurchase program (the "Share Repurchase Program").

Second Quarter 2022 Highlights

• Attendance was 6.3 million guests, an increase of 0.5 million guests or 7.8% from the second quarter of 2021. Compared to the second quarter of 2019, attendance decreased by 0.2 million guests or 3.1%. Excluding international guest visitation and group-related attendance, attendance increased by approximately 3.3% when compared to the second quarter of 2019.
• Total revenue was a record of $504.8 million, an increase of $65.0 million or 14.8% from the second quarter of 2021. Compared to the second quarter of 2019, total revenues increased by $98.8 million or 24.3%.
• Net income was $116.6 million, the second highest net income the Company has reported in a second quarter and a decrease of $11.2 million or 8.7% from the second quarter of 2021. Compared to the second quarter of 2019, net income increased by $64.0 million or 121.5%.
• Adjusted EBITDA[2] was a record$234.4 million, an increase of $15.6 million or 7.1% from the second quarter of 2021. Compared to the second quarter of 2019, Adjusted EBITDA increased by $84.8 million or 56.6%.
• Total revenue per capita increased 6.4% to a record $80.59 from the second quarter of 2021. Admission per capita increased 5.0% to a record $43.98, while in-park per capita spending increased 8.2% to a record $36.61 from the second quarter of 2021. Compared to the second quarter of 2019, total revenue per capita increased 28.3%, admission per capita increased 24.8%, and in-park per capita spending increased 32.8%.

First Six Months 2022 Highlights

• Attendance was 9.7 million guests, an increase of 1.6 million guests or 20.5% from the first six months of 2021. Compared to the first six months of 2019, attendance decreased by 0.1 million guests or 1.4%. Excluding international guest visitation and group-related attendance, attendance increased by approximately 7.7% when compared to the first six months of 2019.
• Total revenue was a record of $775.5 million, an increase of $163.8 million or 26.8% from the first six months of 2021. Compared to the first six months of 2019, total revenues increased by $148.9 million or 23.8%.
• Net income was a record of $107.6 million, an increase of $24.7 million or 29.9% from the first six months of 2021. Compared to the first six months of 2019, net income increased by $92.0 million.
• Adjusted EBITDA[2] was a record $300.4 million, an increase of $56.4 million or 23.1% from the first six months of 2021. Compared to the first six months of 2019, Adjusted EBITDA increased by $134.3 million or 80.9%.
• Total revenue per capita increased 5.2% to a record $80.23 from the first six months of 2021. Admission per capita increased 4.4% to a record $44.11, while in-park per capita spending increased 6.3% to a record $36.12 from the first six months of 2021. Compared to the first six months of 2019, total revenue per capita increased 25.5%, admission per capita increased 21.2%, and in-park per capita spending increased 31.2%.

Other Highlights

• The Company repurchased approximately 7.1 million shares of common stock at a total cost of approximately $390.1 million from April 2022 through July 2022.
• The Company announced that its Board of Directors approved a new $250.0 million share repurchase program.
• In the second quarter of 2022, the Company came to the aid of 376 animals in need in the wild. The total number of animals the Company has helped over its history is more than 40,000.

"We are pleased to report our fifth consecutive quarter of record financial results," said Marc Swanson, Chief Executive Officer of SeaWorld Entertainment, Inc. "While our second quarter and first half financial results were strong, these results still do not reflect a normalized operating environment and we still have significant scope to improve our execution and our financial results. International and group related visitation is better than 2021 but not yet back to pre-COVID levels; our staffing improved over the course of the second quarter, but we are still not yet at optimized staffing levels; inflationary pressures while moderating, continue to impact costs across the enterprise. Total revenue for the quarter was up more than 24% versus 2019 and almost 15% versus a record 2021, and our pricing power and consumer spending remained strong with total revenue per capita up significantly versus 2019 and up nicely versus a record 2021. While we were focused on getting all of our parks open and fully operating during the summer season for the first time since 2019, we could have had more effective cost management during the quarter. We can and will work to do a better job going forward, consistent with what we have been doing for the past several years. 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. Further, we expect certain cyclical, supply chain related and/or temporary cost pressures such as energy and utilities, shipping, food and certain wage and employee related costs to moderate over the coming months and quarters."

"We continue to benefit from a very strong financial position with leverage under 2.7x, long term debt maturities, generally low cost of debt of slightly over 5% and significant available liquidity and cash flow generation. Given this strong financial position, our clear belief in our go forward prospects and what we believe is an extremely attractive value being offered by the markets, we continued to aggressively repurchase shares during the second quarter and into the third quarter, exhausting the entirety of our prior repurchase authorizations. And today we are announcing a new $250 million buyback authorization."

"We are pleased that preliminary July revenue continued to grow versus a record July 2021 and was up approximately 20% compared to July 2019 and we look forward to closing out what we expect to be another solid summer. Looking ahead to the fall, we are excited about our popular Halloween events we have scheduled at our SeaWorld, Busch Gardens and Sesame Place parks. We look forward to building on the strength of last year, including the return of "Howl-O-Scream" at SeaWorld Orlando and SeaWorld San Diego following last year's introduction, along with the first year of the Count's Halloween Spooktacular at our newest park, Sesame Place San Diego."

"As we continue to demonstrate, our business model is strong and resilient and we have significant opportunities to improve and grow our revenue and profitability. As a reminder, 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 park portfolio. Our recent attendance levels are still below the total attendance levels we achieved in 2019 and well below our historical high attendance recorded in 2008. We have made significant investments that we expect will continue to pay off and we have specific plans we are executing on today and 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," concluded Swanson.

The Company's results of operations for the second quarter of 2022 and 2021 continue to be impacted by the global COVID-19 pandemic due in part to a decline in both international and group-related attendance in both periods. Additionally, results of operations for the second quarter and first half of 2021 were impacted by capacity limitations, modified/limited operations and/or temporary park closures, decreased demand due to public concerns associated with the pandemic, and restrictions on international travel. In particular, beginning on April 1, 2021, capacity at the Company's Busch Gardens Williamsburg park was limited to approximately 13,000 guests. On May 28, 2021, theme park capacity restrictions in the State of Virginia were removed. At the beginning of the second quarter of 2021, the Company's SeaWorld San Diego park was operating under capacity restrictions in compliance with state safety guidelines for zoos. On April 12, 2021, SeaWorld San Diego resumed theme park operations with limited capacity in accordance with the State of California guidelines for theme parks. On June 15, 2021, all capacity restrictions for SeaWorld San Diego were removed in accordance with the State of California guidelines.

Second Quarter 2022 Results

In the second quarter of 2022, the Company hosted approximately 6.3 million guests, generated record total revenue of $504.8 million, net income of $116.6 million (the second highest net income the Company has reported in a second quarter) and record Adjusted EBITDA of $234.4 million. Total attendance for the quarter increased by 0.5 million, or 7.8%, when compared to the prior year quarter.

Total revenue for the quarter increased by $65.0 million, or 14.8%, when compared to the prior year quarter. The revenue improvement was a result of an increase in attendance and total revenue per capita. Attendance benefitted primarily from an increase in demand resulting from a return to more normalized operations when compared to the second quarter of 2021, which included COVID-19 related impacts including restrictions on international travel, modified/limited operations and capacity limitations at some of the Company's parks.

Admission per capita (defined as admissions revenue divided by total attendance) increased by 5.0% to $43.98, primarily due to the realization of higher prices in the Company's admission products resulting from its strategic pricing efforts, which was partially offset the impact of the park mix when compared to the prior year quarter. In-park per capita spending (defined as food, merchandise and other revenue divided by total attendance) increased 8.2% to $36.61 due to a combination of factors including pricing initiatives, improved product quality and mix, the impact of new or enhanced and expanded venues and/or events or other in-park offerings. These factors were partially offset by the impact of a higher mix of pass attendance when compared to the prior year quarter. Adjusted EBITDA was positively impacted by the increase in total revenue resulting from improvement in attendance and total revenue per capita partially offset by an increase in expenses. The increase in expenses is primarily due to higher operating costs related to more normalized operations, including labor, and marketing, and the impact of inflationary pressures which were partially offset by structural cost savings initiatives when compared to the second quarter of 2021.

First Six Months 2022 Results

In the first six months of 2022, the Company hosted approximately 9.7 million guests, generated record total revenue of $775.5 million, record net income of $107.6 million and record Adjusted EBITDA of $300.4 million. Total attendance for the first six months increased by 1.6 million, or 20.5%, when compared to the first six months of 2021.

Total revenue for the first six months of 2022 increased by $163.8 million, or 26.8%, when compared to the first six months of 2021. The revenue improvement was a result of an increase in attendance and total revenue per capita. Attendance benefitted primarily from an increase in demand resulting from a return to more normalized operations when compared to the first six months of 2021, which included COVID-19 related impacts including limited operating days, a temporary park closure, capacity limitations at some of the Company's parks and restrictions on international travel.

Admission per capita increased by 4.4% to $44.11, primarily due to the realization of higher prices in the Company's admission products resulting from strategic pricing efforts, which was partially offset by the impact of the park mix when compared to the first six months of 2021. In-park per capita spending increased 6.3% to $36.12 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 events or other in-park offerings, partially offset by a higher mix of pass attendance and the impact of park mix when compared to the first six months of 2021. In-park per capita spending was unfavorably impacted by less-than-optimal staffing, particularly during the first quarter of 2022, that impacted the Company's ability to fully operate and/or open some of its food and beverage and retail outlets. Adjusted EBITDA was positively impacted by the increase in total revenue resulting from improvement in attendance and total revenue per capita partially offset by an increase in expenses. The increase in expenses is primarily due to higher operating costs related to a return to more normalized operations, including labor and marketing and the impact of inflationary pressures which were partially offset by structural cost savings initiatives when compared to the first six months of 2021.