United Parks & Resorts Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

There are 12 speakers on the call.

Operator

Good day, and welcome to the United Park Third Quarter 20 24 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matthew Stroud, Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you and good morning everyone. Welcome to United Parks and Resorts' 3rd 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.

Speaker 1

Joining me this morning are Mark Swanson, Chief Executive Officer and Jim Forrester, Interim Chief Financial Officer and Treasurer. This morning, we will review our Q3 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 ks 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.

Speaker 1

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 measures, 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?

Speaker 1

Thank you, Matthew.

Speaker 2

Good morning, everyone, and thank you for joining us. We are pleased to report another quarter of solid financial results. 3rd quarter results were impacted by both a negative calendar shift and meaningfully worse weather, including Hurricane Debbie in August and Hurricane Helene in September. The combined impact of the calendar shift and the meaningfully worse weather was approximately 320,000 guests. Adjusting for these impacts, attendance would have increased approximately 3% compared to the prior year quarter.

Speaker 2

Continue to see strong demand for our parks during normalized operating conditions, and we are growing total revenue per capita. Our investments and strategies related to our in park revenue areas continue to pay off as we again delivered record in park per capita spending during the quarter, representing growth in 17 of the last 18 quarters. During the quarter, we strengthened our balance sheet and liquidity position by increasing the size of our revolving credit facility and decreasing its cost. We also continue to take advantage of our significant free cash flow generation and follow through on our commitment to return excess capital to shareholders by opportunistically and aggressively buying back our shares at extremely depressed and highly attractive prices. We repurchased approximately 4,900,000 shares or more than 8% of our total outstanding shares since the end of June through November 6.

Speaker 2

Year to date, we have repurchased approximately 9,400,000 shares or approximately 15% of our total outstanding shares. Last week, we wrapped up another busy Halloween season at our parks, featuring our award winning Halloween events. Excluding our Tampa Park, we again realized record breaking attendance for increasingly popular Halloween event across our parks. October results were significantly impacted by Hurricane Milton, which resulted in 14 operating day closures in our Florida market and an extended impact at our Tampa parks as that market recovered from the impact of the storm. Attendance trends over the past 3 week period post the impact of Hurricane Milton have been strong with attendance up approximately 8% on a day to day basis through November 3.

Speaker 2

In the coming weeks, we will begin our award winning Christmas events at our SeaWorld, Busch Gardens and Sesame Parks. We believe our Christmas events this year will be our best ever, featuring our popular rides, attractions and exhibits, and with new and exciting shows, specialty food and beverage offerings and holiday shopping for guests of all ages. I want to thank our ambassadors for their dedication and efforts during our busy summer season as well as during our Halloween events and our upcoming Christmas events. As we look out into 2025, we are extremely pleased with what we are seeing in our 4 demand indicators. 2025 intended date ticket sales, group bookings and Discovery Cove bookings are all trending up double digit percentages ahead of prior year.

Speaker 2

We also recently launched our new and improved Premium Patch program, which features our best benefits ever, and we have seen strong sales since launch, with sales up over 10% to date. Our results year to date continue to demonstrate the strength and resiliency of our business model and the increased demand for our parks in our unique and differentiated offerings. While we are encouraged by the payoffs we are seeing from our investments and initiatives across our enterprise, we know we have a lot of work a lot more work to do. As we wrap up planning for our 2025 season and beyond, we're confident in our ability to take advantage of clear and significant opportunities we have to improve our operations, grow our footprint, further monetize our highly valuable assets and brands and deliver meaningful increases in revenue, profitability and shareholder value. We announced our lineup of new rides, attractions, events and upgrades for 2025.

Speaker 2

This lineup includes an immersive flying experience taking guests on a breathtaking journey to the top of the world as this revolutionary attraction invites thrill seekers and families alike to soar through the skies over the Arctic and dive into the icy depths like never before at SeaWorld Orlando. Wild Oasis, an all new realm featuring the sights and sounds of the rainforest, rush of the newly reimagined drop tower featuring state of the art digital and sound effects, an interactive water play Wonderland, a multilevel claiming canopy and an all new multi species animal habitat for up close encounters with some of the world's most fascinating animals at Busch Gardens Tampa Bay. Rescue Junior, an all new kid friendly realm featuring animal rescue themed rides, water play area and so much more at SeaWorld San Antonio. Big Bad Wolf, The Wolf's Revenge, North America's longest family inverted coaster, delivering a unique or delivering a highly immersive and thematic experience, where families are swept into a world of unparalleled excitement at Busch Gardens Williamsburg. Jewels of the Sea, the jellyfish experience attraction offers an immersive and interactive view into the mysterious underwater world of glowing and graceful jellyfish at SeaWorld San Diego.

Speaker 2

Also Journey to Atlantis, SeaWorld San Diego's 1st coaster will be reinvented, paying tribute to the original beloved version, while adding new elements to create a more exciting and immersive experience than ever before. During the quarter, we repurchased 4,100,000 shares for an aggregate total of approximately 211 $700,000 Subsequent to September 30, 2024 through November 6, 2024, we repurchased approximately 800,000 shares for an aggregate total of approximately $37,700,000 The Board and the company strongly believe our shares continue to be materially undervalued. We have confidence in our business, our prospects and the value of our assets and any reasonable way you look at it, we feel we are materially undervalued and that there is significant upside opportunity in our current share price. Our balance sheet continues to be strong. On September 30, our September 30, 2024 net total leverage ratio is 2.98x and we had approximately $759,000,000 of total available liquidity, including approximately $77,000,000 of cash on the balance sheet.

Speaker 2

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. We continue to make progress on realizing our cost savings initiatives so far this year and we still have approximately $6,000,000 more to realize in the Q4. We currently have approximately $20,000,000 of new initiatives planned for 2025 and expect an additional $7,000,000 of full year run rate impact in 2025 from initiatives started in 2024. As you know, cost management discipline is a key focus of our management team and we have demonstrated our ability to deliver on cost efficiencies. Now, excuse me, let me update you on some of our other initiatives.

Speaker 2

In regards to the mobile app, we continue to make substantive progress on functionality, adoption, usage and financial impact. It is being used by an increasing number of guests in our parks to improve their in park experience and is available at an increasing number of targeted locations. The app has now been downloaded more than 12,000,000 times, up from 10,700,000 times at the end of Q2. Total revenue generated on the app continues to grow and we are now seeing an approximate 35% increase in average transaction value for food and beverage transactions made through the app compared to point of sale orders. We're excited about the potential of the app and its ability to improve the in park guest experience, drive increases in revenue and decreases in costs.

Speaker 2

We are still in the early innings of fully monetizing the app. Our CRM program is generating incremental revenue by supporting our existing marketing strategy, while demonstrating a more holistic approach to customer engagement. We continue to believe that CRM will play a role in our long term growth strategy, providing deeper insights and more meaningful connections with our guests as we continue to scale. On the international front, we continue to progress several discussions on new projects and expect to have more exciting news to share on 2 new projects in particular in the coming quarters. On the real estate front, we continue to refine our hotel plans and have discussions with various potential partners.

Speaker 2

We are also discussing other opportunities to develop and monetize our strategic real estate holdings. As we have discussed previously, we are very excited about the opportunity to monetize our substantial and valuable unused land holdings and have hotels integrated into our properties. As a reminder, we are laser focused on achieving a minimum ROI for all capital projects. We are excited about our new efforts and the resources we have put towards growing our group business. We see significant opportunity to grow our group business across our Park portfolio.

Speaker 2

As I mentioned, we are seeing a double digit increase in group bookings for 2025, and we are excited about unlocking the full potential of this profitable channel. We have also recently put more focus around capturing sponsorship opportunities in our parks. We recognize the opportunity we have to generate meaningful profits from leveraging the audience we have in our parks and the success many of our competitors have had in this area. This is not something that we have recently focused on as much and as a result, we believe we have the potential to generate meaningful incremental profits over time from creating a dedicated effort around this opportunity, more to come in future quarters. 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 our operations and allow us to generate more revenue and make us a more efficient and more profitable enterprise.

Speaker 2

We are building an even stronger and more resilient business, and we are confident we will deliver improved operational and financial results and meaningful increases in shareholder value. With that, Jim will discuss our financial results in more detail. Jim? Thank you, Mark.

Speaker 3

During the Q3, we generated total revenue of $545,900,000 a decrease of $2,300,000 or 0.4 percent when compared to the Q3 of 2023. The decrease in total revenue was primarily a result of a decrease in attendance, partially offset by an increase in total revenue per capita. Attendance for the Q3 of 2024 decreased by approximately 100,000 guests or 1.4% when compared to the prior year quarter. The decrease in attendance was primarily due to a negative calendar shift and meaningfully worst weather, primarily related to hurricanes Debbie and Helene during peak visitation periods compared to the prior year quarter. As Mark mentioned, the combined impact of the calendar shift and the adverse weather was approximately 320,000 guests.

Speaker 3

Adjusting for these impacts, attendance would have increased approximately 3% compared to the prior year quarter. Total revenue per capita increased 1.0%, admission per capita increased 0.5% and in park per capita spending increased 1.6%. Admission per capita increased primarily due to the net impact of the park mix, partially offset by lower pricing on certain promotional admission products 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 Q3 of 2023. Operating expenses increased $1,500,000 or 0.7 percent when compared to the Q3 of 2023.

Speaker 3

The increase in operating expenses is primarily due to an increase in labor related costs and a $2,600,000 increase in third party consulting costs associated with non recurring strategic initiatives, partially offset by decrease in non cash fixed asset write offs when compared to the Q3 of 2023. Selling, general and administrative expenses decreased $4,300,000 or 7.3% compared to the Q3 of 2023. The decrease in selling, general and administrative expenses is primarily due to a $6,600,000 decrease in third party consulting costs, including approximately $4,200,000 of non recurring costs for strategic initiatives, partially offset by an increase in marketing related costs when compared to the Q3 of 2023. We generated net income of $119,700,000 for the Q3 compared to net income of $123,600,000 in the Q3 of 2023. We generated adjusted EBITDA of $258,400,000 a decrease of $8,000,000 when compared to the Q3 of 2023.

Speaker 3

Adjusted EBITDA declined due to increases in expenses used to calculate adjusted EBITDA and a decrease in revenues relative to the prior year. Looking at our results for the 9 months of 2024 compared to 2023, total record revenue was $1,340,000,000 an increase of $3,300,000 or 0.2 percent. Total attendance was 16,700,000 guests, an increase of 20,000 guests or 0.1%. Net income for the period was $199,600,000 an increase of $5,500,000 and adjusted EBITDA was $555,700,000 a decrease of $7,300,000 or 1.3%. Now turning to our balance sheet.

Speaker 3

As Mark mentioned, we further strengthened our already very strong balance sheet and liquidity position by increasing the size of our revolving credit facility from $390,000,000 to $700,000,000 and decreasing our costs during the quarter. As of September 30, 2024, we had approximately $759,000,000 of total available liquidity, including $77,000,000 of cash in the balance sheet. Our net total leverage ratio at the end of the quarter was 2.98x. The strong balance 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. Under our $500,000,000 repurchase authorization from the Board, during the Q3, we repurchased 4,100,000 shares for an aggregate total of approximately $211,700,000 Subsequent to September 30, 2024 through November 6, 2024, we purchased approximately 800,000 shares for an aggregate total of approximately $37,700,000 Our deferred revenue balance as of the end of September was $155,700,000 a decrease of approximately 3.3 percent when compared to September of 2023.

Speaker 3

As a reminder, our deferred revenue balance contains a number of products to include ticketing, vacation packages, annual and seasonal passes and ancillary products. We also continue to see many pass holders who have been with us for at least a year who transition to month to month payments at the completion of their initial pass commitment. This month to month revenue does not show up as deferred revenue. Our pass base improved from the end of Q3. Through October 2024, our pass base including all pass products was flat compared to October 2023 and up 25% when compared with October 2019.

Speaker 3

We recently launched our best pass benefits program ever for 2025, which has led to double digit sales and which we expect will drive a strong pass base for the remainder of this year and next year. We spent $55,400,000 on CapEx in the Q3 of 2024, of which approximately $35,100,000 was on core CapEx and approximately $20,300,000 was on expansion and or ROI projects. For 2024, we expect to spend approximately $250,000,000 on CapEx, of which $180,000,000 will be on core CapEx and approximately $70,000,000 of CapEx on ROI or growth projects. On a normalized basis, we continue to expect to spend $150,000,000 to $175,000,000 on core CapEx, which is defined as rides, attractions and maintenance and up to $50,000,000 on ROI or growth CapEx with a clear and supportable return. Now, let me turn the call back over to Mark, who will

Speaker 2

share some final thoughts. Mark? Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the Q3 of 2024, we came to the aid of 132 animals in need.

Speaker 2

Over our history, we have 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 excited about our upcoming Christmas events that will wrap up calendar 2024 and we are planning for more great events to start in the Q1 of 2025, including Inside Look at the SeaWorld Parks, Mardi Gras at the SeaWorld and Busch Gardens Parks 7 Seas Food Festival at the SeaWorld Parks and the Food and Wine Festival at Busch Gardens Tampa Bay. I want to thank our ambassadors for their efforts during our summer and fall season and their preparation for our upcoming 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.

Speaker 2

We continue to apply confidence in our long term strategy and our ability to deliver significantly improved operating and financial results that we expect will lead to meaningfully increased values for stakeholders. Now let's take your questions.

Operator

We will begin the question and answer session. The first question comes from Steve Wieczynski from Stifel. Please go ahead.

Speaker 4

Hey guys, good morning. So Mark, I know over the past couple of quarters you guys had talked about 2024, you guys were expecting to be a kind of a record revenue and EBITDA year. And I'm guessing now that it's pretty clear that's probably off the table given the adverse weather you guys have experienced across a lot of your Florida parks. But I guess my question is, as we start to think more about 2025 based on what you're seeing today in terms of forward demand spend patterns, you talked about the realization of more cost savings. Is there any reason to believe that 2025 wouldn't get you back kind of well north of that previous EBITDA record in 2022?

Speaker 4

I mean, assuming that weather is kind of normalized. And I'm not trying to get guidance out of you, but I was just looking for more reasons why that wouldn't potentially be the case next year?

Speaker 2

Yes. Thanks, Steve, for the question. So the first part about the record for this year, you're correct. I mean, obviously, we don't have that in our projection given the significant weather impacts that you called out. So it's unfortunate, but we're going to try to finish out the year, obviously, as strong as we can, but no longer expect record revenue and record EBIT adjusted EBITDA as you noted.

Speaker 2

And that's again due to the weather. The weather has been not good, especially with Hurricane Milton here in October. As far as how we look out to 2025, there's some encouraging signs as you heard me talk about. And certainly, our expectation would be that we would recapture a lot of this weather impact that we lost and then find additional ways to grow on top of that with either new attractions, events, other compelling reasons to visit, etcetera. So, yes, again, I can't guide you to a specific number, but I can tell you internally, certainly, our expectation would be number, but I can tell you internally, certainly, our expectation would be to get back to record performance and getting some recovery from the weather and then growing through other means in our business, whether it's our initiatives, all the different things in our business, whether it's our initiatives, all the different things we're doing around our rides and attractions and reasons to visit.

Speaker 2

So, yes, that's how we think about it.

Speaker 4

Okay. And thanks for that, Mark. And then that kind of leads to my second question. Obviously, as we kind of think about 2025, there is going to be increased competition coming online in the market in Orlando. And it's I think it's pretty clear there's some fear out there in the investment community that this new competition is going to have a material impact on you guys in 2025.

Speaker 4

Look, you guys obviously have a pretty big value proposition versus some of your peers in that Orlando market. So maybe just help us think about how you are thinking about 25 in terms of going up against that new competition?

Speaker 2

Sure, Steve. So a couple of things and I know some of this will be repetitive from what I've said in the past, but I'll try to add some new things too. Look, I mean, if you go back, we've been here since the early 1970s. You think about SeaWorld Orlando and then we opened 2 parks since that time with Discovery Cove and Aquatica. And you think about all the parks that have come online in the Orlando market since we opened in the early 1970s.

Speaker 2

We then added 2 of our own. We've continued to participate in the growth of the EBITDA in the market. So we've already demonstrated we can grow when there's competition in this market. And we know we have a view as I've said in the past that new parks opening in the market, we generally view as that's going to be good for the market. It's going to bring more people to the market.

Speaker 2

And we need to execute on our plans to drive those people to our parks. So how do we do that like you're asking? Again, we have a differentiated product. The ride coming in and attraction coming into SeaWorld Orlando next year is going to be very SeaWorld centric. It's going to be animal components to it.

Speaker 2

It's going to be something that would be unique, I think to an experience you get at SeaWorld. That's a product differentiation. We have a value proposition, as you already noted, that we feel really good about. We think we offer tremendous value, especially with our season passes and our multi day tickets. So, our parks also, I would say, in general, I think are much easier to access for people.

Speaker 2

It's an enjoyable experience coming to our parks. I would argue it's a more relaxed experience. And lastly, again, without going into any competitive details or anything, obviously, we're aware that there's new parks coming to Orlando next year. We have our own strategies and our own folks working on that. And so we're going to again, we have to execute on our strategies much like we have over the history of being in this market.

Speaker 2

And I have confidence we can do that. We welcome more people to town. I'm sure Epic is going to do very well and there's going to be days that I'm sure they're very crowded and we might feel it a little bit. But I think we can participate in that growing market share like we've demonstrated in the past with all of the different things we have to offer.

Operator

The next question comes from Matthew Boss of JPMorgan. Please go ahead.

Speaker 5

Great, thanks. So Mark, maybe could you elaborate a little on the cadence of attendance trends that you saw in the quarter? I know maybe parse best you can through weather. And if you could just walk through some of the drivers of the improvement that you cited for October, maybe between weather, macro, how much you think is company self execution? And just putting that all together, maybe is there best way to think about top line puts and takes for the Q4?

Speaker 2

Yes, I can try to help you out there. I mean, the attendance kind of ebbed and flowed a little bit in the Q3 and a lot of that was the calendar shift and the weather impact. So, you can probably most of the calendar shift was more July related and the weather was some of the other months. But I think what's exciting, you kind of alluded to it, is the performance kind of since Milton has calmed down. So Hurricane Milton really put us in a tough spot to start October, right?

Speaker 2

So we had to close our Busch Gardens Park for 5 consecutive days and that's quite a long time and then we had other parks closed. And then you have the lead up where people are not coming because they're getting ready for the storm and then you have the recovery process, especially in Tampa, which has taken some time. So what we tried to do in our remarks there is give you an idea of what's been like the last 3 weeks ending on November 3. And that's where on a day to day basis, the attendance is up. I think we said about 8%.

Speaker 2

So that is driven by, I think, the popularity of our Halloween programs. We were able to extend Halloween into the 1st weekend in November, which was a good decision on our part and we saw a nice demand for that on that last weekend. So that's helping drive that and helping make up some of that very significant amount of attendance we lost in October.

Speaker 5

Great. And then maybe Jim, just on the cost side, could you speak to continued efficiency opportunities or how best to think about the multi year cost profile relative to top line?

Speaker 3

Hey, yes, good morning. I would say as far as we're thinking about for the continued cost profile, as Mark mentioned, we have a number of significant initiatives that we're planning for next year. These could include things like uses of technology to improve labor efficiencies or to reduce some of our spend and things like utilities or our insurance claims area that we've got. We've said in the remarks that we've got about $20,000,000 of new initiatives that we are in the planning stages on that we believe, although we talked to you on a gross basis, we clearly would like those to flow through and we'll continue to work toward making sure that they do that.

Operator

The next question comes from Jamie Hardiman from Citi. Please go ahead.

Speaker 6

Hey, good morning. So just wanted to walk through some of the math or the accounting, I guess, in two respects. Revenues were pretty flat in the quarter, the Q3. I guess they were down $2,000,000 but EBITDA was down more like $8,000,000 and then cash from operations were down $25,000,000 So maybe sort of bridge the revenue to EBITDA walk and then the EBITDA to cash from operations, it seems obviously there's a bunch of adjustments to get from sort of EBITDA to adjusted EBITDA and it seems like that's where some of that delta is coming in, but conceptually maybe walk us through some of those items.

Speaker 2

Yes. Hey, James, I can help you with that. So, look, on the total revenue, just down a little bit, as you said, and that's driven by those attendance headwinds with the calendar shift and the weather, right. We did as I pointed out, we grew our per caps. That continues to be a very a good story especially on the in park per caps, right.

Speaker 2

So we're doing a good job of growing per cap even in the face of lower attendance for the quarter. And then kind of the walk from there to, I guess, adjusted EBITDA, as you said, look, you heard Jim mention there were some cost pressures in some labor areas. And certainly, we had some learnings from that. There are some things that we've got to probably do a little bit better job of going forward. We recognize that.

Speaker 2

It's not like our costs are out of control or anything like that. I mean, the EBITDA costs are only up, I think, 2%. So we're still doing a really good job of managing to a pretty low level. And you've got a lot of inflationary pressures. You've got insurance things and other things in this labor efforts that we've learned from, I think, in Q3 and we can apply into Q4.

Speaker 2

So that's kind of the walk from there to get to where how we think about things.

Speaker 6

Got it. And I didn't know if you want to touch on the cash flow piece.

Speaker 2

No, I mean, I think you can probably read into that pretty clearly on the press release.

Speaker 6

Okay, Fair enough. And then maybe I misheard, you mentioned in your prepared remarks on real estate. I couldn't tell if there was something incremental there or it was sort of more of the same. You talked about continuing to try to find partners in terms of hotel development, But then you also said you're also discussing other opportunities to develop and monetize. Is that sort of incremental versus what you'd previously communicated?

Speaker 6

Are you is there an opportunity to do your own development versus just the partnership track? Thanks.

Speaker 2

Yes. I think what I was alluding to James was, we recognize and we've talked about it that we have a lot of land and we have land in desirable areas, right? And you could use that for hotels or other things. And I'm not sure it's always fully appreciated by everyone what that land how much we have and how valuable we believe it is. And we recognize, the Board and others recognize that there's ways to monetize or at least ways that we should consider how to use that land.

Speaker 2

So those are just discussions that we can have internally or as people approach us with ideas. And so I think we're just making it clear to people that we recognize there are other ways to monetize our assets beyond just hotels. And I don't have anything specific to share with you, but it's something that obviously our Board is aware of.

Operator

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

Speaker 7

Hi there. Thanks for taking the question. I just wanted to keep going with the capital allocation point. It looks like you're on pace to finish the buyback by the end of the year. So could you just give us a refresh like in terms of whether you would want to have another authorization, I think that would require a shareholder vote or do a dividend or go down the hotel route.

Speaker 7

Could you kind of outline what your kind of order of priorities there is as you look to 2025?

Speaker 2

Yes. Hey, Lindsey, I can take that question. So I think the simplest way to sum it up is obviously, we know capital allocation is something that our investors are obviously going to want to know about and ask about. And so you can be assured that our Board is well aware of that and it's something that they will like they have in the past, make sure that they're considering what are the best options for shareholders. And I think what I can leave you with is that I think you can feel confident that that is work that they will continue to consider on a go forward basis.

Speaker 2

So I don't have anything specific to direct you to other than they'll continue to consider what are the best ways to return cash to shareholders.

Speaker 7

Got it. And then just a follow-up on one of the earlier kind of hurricane questions. Could you kind of help outline maybe what the kind of EBITDA impact of the hurricane was for the Q4? I guess it hit ahead of the kind of Halloween events, which typically I think are higher per cap events. It has been more obviously so in Florida, which again I think come with higher ticket prices versus the rest of the mix.

Speaker 7

So just curious kind of I guess how that's kind of impacted per cap trends that you've seen quarter to date and also just what the kind of EBITDA hit has been?

Speaker 2

Yes. Hey, I can take that question. So, it had a meaningful impact, obviously, a pretty significant impact on the start to October. And as I mentioned, being closed so many days and when we went back, I think 30 years, we hadn't been closed 5 days in a row at Busch Gardens that we could see. And then we had the impacts over here in Orlando.

Speaker 2

And then you kind of have this lingering impact, at least in October for Tampa. So, the impact is pretty significant. I would say probably $9,000,000 or so or more. It's hard to put an exact number on it, but maybe $10 ish million in EBITDA would be a way to think about it, but that's clearly an estimate. What we got to kind of keep an eye on is, if it lingers into Thanksgiving or Christmas with some of the recovery down in Tampa with some of the beaches and stuff are just now kind of reopening in a lot of cases.

Speaker 2

So hopefully, it will continue to return to normal like we kind of saw here at the beginning of November, but yes, a very meaningful impact.

Operator

The next question comes from Ben Chaikin of Mizuho Securities. Please go ahead.

Speaker 8

Hi. Thanks for taking our question. It's Alok Patel on for Ben Chaikin. Can you talk about your cash cost in the quarter? I think up slightly year over year.

Speaker 8

Was there anything lumpy or abnormal to call out? And then as a follow-up, I wanted to ask about cash conversion from EBITDA to cash flow from operations was slightly lower than we expected. Anything in working capital we should be considering for the quarter and going forward?

Speaker 3

I'll take your second one first. No, nothing to be concerned about. There's nothing really to it's not seasonal in nature or expected to discuss on that one.

Speaker 2

Yes. And I mean on your first one, I think James kind of asked a similar question. Obviously, there's some pressures in the quarter from additional labor in the parks and some things like that. We did have some other costs that maybe are a little bit more lumpy. But in general, again, the cost the growth was only, I believe, about 2%.

Speaker 2

And so there's some things we learned from the quarter as far as just some staffing and some other things that we tried that will apply on a go forward basis. So we still have a lot of confidence and rigor around cost and that will continue to be obviously a hallmark of what we do.

Speaker 8

Great. Thanks for that. I appreciate it.

Operator

The next question comes from Paul Golding from Macquarie Capital. Please go ahead.

Speaker 9

Yes. Thanks so much. Just wanted to ask with weather becoming a more consistent headwind, particularly in the core summer months. And we saw the elevated temperatures, heat waves in SoCal and obviously the hurricanes on the East Coast. Wondering how your view around operating days may be evolving here.

Speaker 9

Is there an opportunity or are you considering maybe driving concentration of visits on a close in basis on certain days when weather is good? Just trying to understand how you may be strategizing around weather now that we've seen a few years of really consistent headwinds from this? Thank you.

Speaker 2

Yes. Thanks, Paul. Appreciate the question. So look, I mean, you're right, weather has been certainly a problem in the last several years here. And I think there's some things we are doing to address that.

Speaker 2

But I would also remind you, I think over the long term, I mean, I've been in the business quite a long time. I do think these things will normalize out. I mean, if you want to even just here in the last couple of weeks post Hurricane Milton, the weather has been pretty good in our location. So, I'm optimistic it will eventually normalize. Until that time and in recognition that we have had some tougher times in the recent years, we're trying to do more indoor attractions, for example.

Speaker 2

So, we have an indoor attraction coming to SeaWorld Orlando next year. The attraction we opened this year in Orlando has an indoor component to it as well. And then we have we've invested in shade structures. We've invested in drink programs where you can have drinks all day and stay cool and things like that. So there's different things we're doing and I'm certainly not listing all of them, but there's things we're doing in recognition that we want people to come here regardless of the weather and make it comfortable for them.

Speaker 2

Your point about on the days where you have good weather, obviously, we would we like the idea of kind of peaking the peaks. So if the weather is really good, try to get people to come to the park and there's a lot of economies of scale when we have more people in the park, for example. So all things that we're considering, but I would leave you with I do think these things do normalize over some period of time, but we are taking actions in the immediate term here.

Speaker 9

Thanks, Mark. And then as a follow-up around Discovery Cove, given the strength in bookings versus prior year and what is generally lower capacity but higher yielding product. How do you how are you thinking about this type of product category? Obviously, Discovery Cove is a contraction in and of itself. But when we think about the appetite for higher yielding type of visit, but maybe a lower capacity type product.

Speaker 9

How are you thinking about that mix in the context of getting visitors and maybe the weather as part of that conversation as well? Thanks.

Speaker 2

Yes. I mean, what I would tell you is Discovery Cove is a wonderful park, right? It's one of the top rated theme parks you can go visit. And it's an all inclusive oasis, as I like to call it. It's just a great experience and certainly has attracted quite a following over the years.

Speaker 2

It is limited capacity, to your point. And I think we have opportunities there, especially around dynamic pricing, where we can price more on the peak days and then there might be days in the shoulder seasons or weekdays, that park is essentially open year round, where we might be willing to still increase price over the prior year, but less of than what you would pay in the peak. So we like our ability to kind of manage that park. I do think also to the extent international attendance comes back more international attendance happens in Orlando next year, which would seem perhaps reasonable with Epic opening, that Discovery Cove has been a pretty popular park with international guests. So that's another, I think, in its something in its favor with internationals.

Operator

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

Speaker 10

Thanks. Good morning.

Speaker 9

I guess looking forward in

Speaker 10

the 'twenty five and 'twenty six, I know you talked about Orlando, you noted obviously the value proposition relative to peers in that market. I guess where do you think you have room to tick price on admissions over the next year or 2? And do you expect to lean into price or be maybe a little more cautious on that to drive a chance and subsequent in part spend? I guess, on that also, what has been kind of the recent sensitivity to price that you've seen when you move it around?

Speaker 2

Yes. So Eric, I mean, I think I'd look at a couple of things. I mean, one, if you're talking specifically in Orlando, I mean, I think we have opportunities. We are still at a value proposition to Universal and Disney, and I think that will only continue. So as they get more expensive, I think it showcases our value and we have the ability to increase our prices over time as well.

Speaker 2

So, I think we feel good about the opportunity to continue to grow pricing across not only Orlando, but across most of our markets and that's what we that's certainly kind of a key tenet of our strategy is to grow pricing. Again, we're always going to focus on total revenues. So there may be times that we do different things to simulate more sales of a certain product that may not involve taking price or even discounting, but all of the guys are driving total revenue. But certainly, I think over the medium to long term, we feel our opportunity to take price will remain.

Speaker 10

Got it. And then follow-up, you called out kind of consistently on the calls on the app and the number of downloads and the 35% increase in average transaction value for food and beverage, what percentage of food and beverage transactions are currently going through the app versus POS? And where do you think that could go over the next few years?

Speaker 2

Yes. Let me just comment on the app and then I'll let Jim talk about kind of the penetration. But I did also try to emphasize in there that we're still, I think, early innings of all the things the app can do. And I see people using it. And I think it's certainly has helped people and but I think there's a lot more engagement we can do through the app.

Speaker 2

And we're seeing, like I said on the call, when people do use it for mobile ordering, they tend to buy more, right? We saw that on kind of the average transaction value. And we're trying to make it more available at more places. I think that over the near to medium term here, the idea would be to make it available as many places as we can all day, if you will, so that it's not just available at certain times of the day at certain restaurants. We want to make it more permanent, if that makes sense.

Speaker 2

But Jim, do you want to talk about kind of the how many people are using it or?

Speaker 3

Yes, I would say from a penetration standpoint, you're looking at it maybe almost less than a third of penetration from all eligible categories. That's not only food and beverage, but all other things that we offer on the app, which would include zoo experiences or our quick queues or things like that. Yes. So quite a bit

Speaker 2

of room to grow, it sounds like.

Operator

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

Speaker 11

Thanks so much. A few more on the forward booking commentary. The 2025 intended date ticket sales, you mentioned that's pacing up double digits as well. What portion of your typical attendance base in any given quarter? Has a ticket get purchased 2 or 3 or even more months in advance?

Speaker 11

Have the lead times changed at all on date specific purchases? And any help sizing how that translates into your overall visitation mix would be helpful.

Speaker 2

Look, it's one of the indicators, like I said. It's I don't know that we'd give out the exact number for competitive reasons, obviously. But look, people depending who you are, if you've planned a long planned vacation, you're probably buying those tickets further in advance versus somebody who is more from Florida. So it's going to vary by the type of person visiting the park. I think just in general, what we're pleased with is that more of those tickets are being sold than last year at this time.

Speaker 2

But I don't know if we can give you what that translates into. I don't think it's certainly not a lion's share of our sales or anything like that, but it's one of these indicators that we have. We don't have a ton of leading indicators, but it is one we have along with Discovery Cove bookings and some of the other things I mentioned.

Speaker 11

Okay, understood. Yes. And then just maybe on the season pass update, can you help us square the flat season pass units versus the double digits on the premium pass program? I mean, is it fair to say that premium is still smaller, but growing as a portion of your overall Pass product offering? And I might have missed it, but do you share any blended pricing on the season Pass uptake so far?

Speaker 11

That would be great. Thank you.

Speaker 2

Yes. So we let me help you with that a little bit and then if Jim has anything to add, he can add it as well. But remember, when we say pass, we have our premium passes, we have our fun cards, we have our teacher pass, we have our preschool pass, all that kind of generically gets labeled as pass. And that's the number that Jim was referencing as being flat, right? And so you have a couple of things, how to square that with the premium passes being up.

Speaker 2

So I think that's a good sign and that we are selling more of the more expensive passes. The passes that the people that buy tend to be more loyal. They tend to visit more. So these are passes with benefits. And as you move up the tier, those benefits are increasingly better.

Speaker 2

And so that's a bigger total revenue play than if we sell you like a fun card, which is basically an entry level like season pass with very little benefit, if any. So we like the idea of selling more premium passes even if it's at the expense of less fun cards. So the idea would be the base is flat now, but if we can continue to grow the premium pass and kind of hold our own in the other categories, we would like to think that would expand over time. We'll have to see. We're still very early in the launch process and our sales will especially ramp up as we get into next spring and things like that.

Speaker 2

We have a big day coming up with Black Friday, but that's kind of how we think about it.

Operator

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

Speaker 4

Hey, good morning guys. I was hoping we could just drill down for a second on some of the CapEx. I know you've given the target for this year and for ranges for kind of ongoing. Can you maybe give us a little bit of an idea on the ROI piece? What kind of things those are going to or is that kind of a premiumization strategy, whether it's cabanas at one of the parks or something else?

Speaker 4

Can you just give us a little more detail on what kinds of things those might involve? Thanks.

Speaker 3

Yes. And Chris, are you talking specifically 25 or 2024?

Speaker 4

I guess more generally, I mean, whatever you want to talk about, Jim. I mean, I'm just trying to figure out the yes, kind of what all that involves.

Speaker 3

Yes. So generally, we found a lot of opportunity in our food and beverage offerings. That's when a large short section of our capital spend is going for the ROI projects. And this could be generally revamping those facilities, one to provide new food and beverage offerings to update it, to allow guests to be more efficient and get lines through quicker. So, there's more of an opportunity to buy up to the full meal as opposed to go into a Carter Kiosk if lines are too long.

Speaker 3

So, that's going to take up some of that ROI capital. We're also looking at things like exit retail for either parks like we did in Sesame Place or for our attractions that are coming up soon or currently in progress to make sure that there's an ability to buy a tangible memory from that ride experience. And then we have a number of items as I mentioned earlier in the call about using technology to be more efficient in our expenses through solar power, through automatic or reduced labor in our turnstiles in our main entrances or efficiencies in our utility spend.

Speaker 4

Okay. Appreciate that. And then just a quick follow-up. You talked a lot about some of the opportunities that are coming through the app. But can you talk maybe a little bit about where you are on some of the dynamic pricing and whether that's going to be a play a bigger role in the kind of the mobile and pricing strategy going forward?

Speaker 4

Thanks.

Speaker 2

Sure. Certainly, dynamic pricing is something that we continue have efforts around and we do think there is going to be more and more opportunities to do that. So whether I'll give you a silly example, if it's on the app and you're it's not a silly example, but an example would be if you're on the app and you're in the park and you're standing in line, line maybe is longer than you'd like to wait or you don't have a lot of time, all right, here now you can buy a front of the line pass through the app, right? And depending on how busy the day is, we could dynamically price that accordingly. So that's, I think, a pretty simple example.

Speaker 2

So you have some components around using the app to do things like that or even other areas. And then I think just outside of the app, you even have dynamic ticketing opportunities. So the price you pay to come to our park, again, we can flex that certainly at times and the more dynamic we can get on that, I think, will help us over time. So certainly, it's something that we will continue to focus on going forward.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mark Swanson for closing remarks.

Speaker 2

Okay. Thank you. On behalf of Jim and the rest of the management team at United Parks and 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 for stakeholders. Thank you, and we look forward to speaking with you next quarter.

Operator

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

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Earnings Conference Call
United Parks & Resorts Q3 2024
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