Hello, and welcome to the SeaWorld Parks Q4 2022 Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I'd now like to turn the conference over to your host today, Matthew Stroud. Mr. Stroud, please go ahead.

Thank you, and good morning, everyone. Welcome to SeaWorld's Fourth Quarter and Fiscal 2022 Earnings Conference Call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Marc Swanson, Chief Executive Officer; and Jim Forrester, Interim Chief Financial Officer and Treasurer. This morning, we will review our fourth quarter and fiscal 2022 financial results, and then we will open the call to your questions. Also, we have posted a short slide presentation on our investor website along with our earnings press release that we will discuss during our prepared remarks. Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements. Including those identified in the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call, we may reference non-GAAP financial measures and other financial metrics, such as adjusted EBITDA and free cash flow. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measures 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 our seventh consecutive quarter of record financial results. In the fourth quarter, we delivered record revenue, our second highest net income and record adjusted EBITDA. For fiscal 2022, we delivered record revenue, record net income and record adjusted EBITDA. Results for the fourth quarter versus the prior year would have been even better if it weren't for significant adverse weather impacts in most of our markets during the November and December holiday period and the negative impact of Hurricane Ian in October and Hurricane Nicole in November. We estimate that these combined weather-related impacts reduced attendance by approximately 249,000 guests visits during the quarter. We continued to drive growth in total per caps, including during our Halloween and Christmas events during the quarter, demonstrating the effectiveness of our revenue strategies, our pricing power and the strength of consumer spending in our parks. I want to thank our ambassadors for their continued dedication, efforts and contributions, without which, these strong results would not have been possible. As I've said before, we have a strong and resilient business model, and we believe that we have significant opportunities to continue to improve and meaningfully grow our revenue and profitability. Our attendance levels for fiscal 2022 were below levels achieved in 2019, primarily due to a decline in both international and group-related attendance, which we expect will eventually recover to and surpass pre-COVID levels. Also, as we have discussed, we are still more than 3 million visitors below our historical high attendance of approximately 25 million guests achieved in 2008. This represents a clear opportunity to recapture lost attendance we once achieved. Furthermore, our pricing power, strategies, investments and opportunities around revenue management, in-park food and beverage,…

Thank you, Marc, and good morning, everyone. It's somehow fitting that someone with a naval background and who was a child marveled at the wonders of the animal world on Sunday night television will lead the finance organization for this amazing company. Thank you, Marc, our Board and my team for giving me this opportunity. As Marc mentioned, our results from operations for fiscal 2022 and 2021 continue to be impacted by the global COVID-19 pandemic, as shown in part by the decline in both international and group-related attendance as compared to pre-COVID levels. Fiscal 2021 was also impacted by capacity limitations, modified in our limited operations and/or a temporary park closure, decreased demand due to public concerns and government restrictions associated with the pandemic and more severe restrictions on international travel. During the fourth quarter, we generated record total revenue of $390.5 million, an increase of $19.7 million or 5.3% when compared to the fourth quarter of 2021. The increase in revenue is due to an increase in total revenue per capita of 5.7%, partially offset by a decrease in attendance of 0.3%. The attendance was unfavorably impacted by adverse weather during the quarter and benefited from an increase in international guests when compared to the fourth quarter of 2021, which was impacted by more severe COVID-19-related restrictions on international travel. As Marc mentioned, we had several weather-related impacts during adverse weather during the November and December holiday periods and Hurricane Ian in early October and Hurricane Nicole in November. We estimate that combined, these adverse weather impacts contributed to a decline of approximately 249,000 guests during the quarter. We also continue to experience lingering effects of the pandemic with international visitations still not back to pre-COVID levels. In the fourth quarter, international visitation was still down 37% compared…

Thanks, Jim. Well, before we open the call to your questions, I have some closing comments. In the fourth quarter of 2022, we came to the aid of more than 100 animals in need. Over our history, we have helped over 40,000 animals, including bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds and more. Also in 2022, we partnered with a host of other organizations to expand our care and protection for aquatic life to include integrated support of the Florida Coral Rescue Center in the ongoing rescue work on the Florida coral reef. Also, a few weeks ago, SeaWorld's first rescue center outside of the U.S., in Abu Dhabi opened. Yas Research -- Yas SeaWorld Research and Rescue located at Yas Island in Abu Dhabi is the first dedicated marine research and rescue center in the Middle East, North Africa region and will be a key contributor to marine-life conservation in both the UAE and the wider Middle East, North Africa region. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts. I want to thank them and all our ambassadors for all they do to operate our parks in this current environment. We are certainly excited about 2023. We are on track to open all of our 2023 new rides and attractions in the coming weeks and months. 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 in our ability to deliver significantly improved operating and financial results that we expect will lead to meaningfully increased value for stakeholders. Now let's take your questions.

[Operator Instructions]. And this morning's first question comes from Steve Wieczynski with Stifel.

So first, just kind of a housekeeping question. I want to ask about the impact of the weather in the quarter, which you noted it was around 250,000 visit. And I guess, just based on your current per cap levels, is the right way to think about this was the -- that impact was probably somewhere between, let's call it, $7 million and $8 million hit to EBITDA. And then on top of that, just wondering how you guys are thinking about attendance for this year. And look, I understand you don't give guidance. I'm not going down that path. But I'm just more trying to figure out how you guys are thinking about the return of that international and group guests and maybe how those forward-booking trends have been looking?

Steve, it's Marc. I can take that question. So look, on the weather impact, 249,000 people, as we noted. I can't give you an exact EBITDA estimation. I think you can do the math on the revenue per cap and you're probably not terribly far off of what you said there. Maybe it's at higher. But that's certainly, I think, a place to look at. As far as how we think about attendance in 2023, look, we're excited about the rides and attractions and events, things that we've got lined up in our parks. As far as the return of group and international, I mean, as you heard me say, we expect those will return over time. I don't know when that exactly will be. There's still some international travel hurdles, if you will, from certain countries. Group attendance, as you -- I think as we said, group attendance in Q4 was right there with 2019. It was actually just barely positive. So that one, I think we feel a little bit more optimistic about and then international, we'll just have to see how travel opens back up and things like that.

Okay. Got you. And then second question would be around the illustrative EBITDA chart in your deck. And look, again, I know you said multiple times, this isn't guidance. And I fully appreciate that. But if we look at the potential margins of kind of what you have laid out here, I mean, you've laid out a business that could be doing upper 40s, low 50s-type margin. I'm just trying to understand maybe how we should be thinking about the flow-through of this business moving forward? Is your -- I mean, look, it seems like your cost structure just is somewhat pretty set, and there is opportunities to drive it lower. But I assume from here, that flow-through is really going to be pushed more by the pricing and in-park opportunities. Is that the -- kind of the right way to think about it?

Yes. What I can tell you is, I mean, there's a couple of ways we think about the business is if we can grow attendance each year a little bit, grow per caps each year a little bit and then manage our cost, that should have led to adjusted EBITDA growth and margin expansion. So we do have efforts around costs, as we've noted on the illustration and in my comments, and in Jim's comments. And certainly, we're not going to stop those efforts. And then we -- as you noted, we have efforts around growing our revenue and the different strategies we do there. So I think it will certainly be some combination of those 2 that leads us to what we expect will be growth in the future.

And the next question comes from James Hardiman with Citi.

So I mean the cost-controls continue to be really impressive. I guess, most significantly on the SG&A line. Can you just walk us through some of the big buckets that you've been able to bring down, right? Revenue is up a bunch since 2019, that SG&A line is down almost 50%. Maybe just walk us through what's in that, what did you cut and what's left to cut?

James, so I can take that question. Look, there's -- there's some -- I think, as Jim said in his remarks, there's some items like stock comp in there as well, which certainly had an impact for the quarter. But yes, beyond that, we have a number of initiatives around looking at our spend with vendors and marketing and things like that. So really, just across the company, all our efforts around cost are not only applied to the parks, they apply to the corporate center as well. And we'll continue to work on that, obviously, and that's something. But there is a little bit more detail in Jim's remarks as far as some of the noncash expenses were down a little bit, too.

Okay. And then sort of along those lines, I mean, obviously, results have been extremely impressive, particularly on the cost front. Normally, you'd say if it ain't broke, don't fix it. But you guys did a pretty big management shakeup here. Maybe speak to the rationale behind something that's aggressive. And I guess there have been a couple of notes in your filings, the Q and the previous K about weaknesses in internal controls, does this address that in any way?

I think what I would tell you is we're -- as I said in my prepared remarks, we're excited for the different roles that we have -- that we've created. Chelle sitting here at the table with me. I can tell you, she's certainly excited about the transformation efforts that she's leading. I think, obviously, it's something with her background that I think she will be very good at and certainly get sort of an opportunity to really dive into that more so than previously. Obviously, and then with the co-Chief Parks Operations officers, we've put 2 very experienced leaders in those roles and they can get out to our parks a lot more often and make sure that we're driving the standards and the efficiencies that we want to see across the company. And I couldn't be more excited about that, obviously. And then as you heard with Jim's background as our interim CFO, we have someone who brings a lot of park knowledge to the role, which I already see the benefits of having somebody who's run the finance operations at among our biggest parks here in Orlando and what he brings to the table there. So we're excited about kind of mobilizing the team and how we're going to move forward.

And the next question comes from Philip Cusick with JPMorgan.

If you can talk about CapEx. I think you've gone from about $200 million to $250 million to $300 million. Can you talk about the timing of ride launches through the year? How do you expect sort of any marketing spend and launch costs to be shaped and anything as you go beyond '23 as well?

Phil, I can take that question. Look, there's the CapEx spend and Jim can maybe give you some specific examples here when I'm done sharing, but we talked a lot in his comments about some of the additional efforts we have around some spending in ROI areas like whether it's new venues, aesthetics, technology enhancements, efficiency efforts, whatever it may be. And really, that's -- the reason we can do that, as you can imagine, is the strong cash flow that we've been generating. So we're putting that -- some of that cash flow to work in the business, and we're excited about those opportunities. I think as far as the -- your question on the ride launches, we just opened the ride down in Tampa. Some of the other rides will be coming online here in the coming weeks and months. And obviously, I think some of the spend you would see associated with those would tie to that. I would say, in general, we probably opened our rides a little earlier last year. So there may be a little bit of timing differences of some of those costs just from when we opened those this year. But Jim, why don't you give maybe an example or 2 of some of the new things we've done with the CapEx?

Sure. Phil, good to meet you. I've been brushing up on this call, I noticed what you had asked in the third quarter of the year. And so at that time, you would said something about 130 to 140 stable core and about $40 million or so in ROI. And we have increased since that guidance and since we put that out and a lot of that addition has been looking at those attractions, not only that we're putting in place for 2023, but the advanced purchase and design for 2024 attractions and beyond. So that increased a little bit since we last spoke. We are doing some additional infrastructure needs around the properties, actually fairly major investment, they include base infrastructure, if you will, for the physical plant plus enhancements for the guest experience and things like aesthetics, specifically this year, you're going to see a lot of focus on shade and restrooms. That core, not to be outspoken by the ROI benefit of going up to that $120 million range is a lot of food and beverage facility focus. So we're going to be taking a look in double-digit opportunities across the properties to provide new facilities or expand the current facilities, integrate mobile-ordering to legacy facilities and to increase the opportunity to make our business more efficient in those technology advancements.

And the next question comes from Eric Wold with B. Riley Securities.

So two questions. I guess one, if you look back at the illustrative kind of financial targets you laid out back on the 2020 call -- 2020 versus today, the estimated costs went up by about $160 million to $159 million. Can you give us a sense of how much of that is variable costs associated with kind of higher per cap spending and how much is kind of a structural increase in operating costs kind of net of the cost savings you've implemented?

Yes. Eric, I can again, try to help you out here. I mean, again, keep in mind that the illustration, it's just that it's an illustration. And if you look at the footnotes, I believe we noted right the flow-through on this, right? So you can probably get some sense of what the flow-through is on the per cap and attendance growth. I mean, maybe said more simply is we should be able to add attendance to our parks and especially if we're just adding it to a day where we're already open, and we're bringing in another 1,000 people or something, that should not have a meaningful increase in costs for us. Where you would get more structural cost increase would be if we have to open days, we weren't open before or built new areas of the park that we didn't have before, that type of thing. But in general, if we're kind of adding to existing days, that flow-through is going to be pretty high.

Got it. And then kind of going back to an attendance question that was asked or kind of looking at this year. I guess, how do you think about the record season pass is what you've done to push that? How do you think about season pass versus daily focus in '23? Just with an expectation, and obviously, season pass usage would ramp up and you've got obviously some increases in pricing with season pass as I assume similar ones with daily. Can you keep the admissions per cap moving higher in '23 and with that push and pull?

Yes. What I would tell you is we obviously believe our pass products offer a great value, and we've been able to get the higher pricing that you heard Jim talk about in his comments. And when we're able to invest in the business like we've been doing with new rides and attractions and events and refreshed venues, those type of things, that just makes that, I think, that value even more apparent for pass holders. So I'm confident we can continue to drive higher admissions per caps through our pricing. And I think we've demonstrated that over the last several quarters. And look, there can be a trade-off, as you noted, between pass and single-day ticket. I mean, really, we're targeting the total revenue equation overall. But even within that equation, I think we're optimistic we can continue to grow pricing and ultimately grow per caps.

And the next question comes from Michael Swartz with SunTrust.

I just wanted to start off and maybe a follow-up on CapEx. Your CapEx plans, I think you said $250 million to $300 million for 2023, which is the -- that's the highest amount since at least you've been public. But maybe talk about the ROI piece of that, which is, I think, what's being stepped up meaningfully. And I know you're generating a lot more cash now. But is this a structurally higher level of ROI spending going forward? Or is this a timing element? And then how do we think about the ROI profile of some of the things you're investing in, in '23 and beyond maybe to prior years?

Yes. I can start, and then if Jim wants to say anything, he can. Look, I think we guided you to the core number is going to be in that $150 million to $180 million range. And then again, we're taking advantage of the cash flow generation that we are generating and using that to deploy to other ROI projects in our parks. And as you can imagine, I mean, that -- we're not going to target ROIs in the single digits or things like that. These are going to be returns that we would feel good about spending the cash on. So look, I don't know that it's permanent. I mean in a sense, it would be permanent if we continue to find more ROI opportunities, we're going to continue to go after them. But at some point, you probably do reach a point where you've done all you can do or those things start to slow down a little bit. But I think as long as there's continued opportunities to drive ROI, whether it's refreshed venues, technology enhancements, efficiency efforts, aesthetic reasons, we will pursue those.

Yes. The only thing I would add, Marc, is we started these back in 2020 and 2021, we do a couple of facilities, all the improvements that resulted from those in food and beverage. And use those [indiscernible] to realize that we had a lot of opportunity, especially in our food and beverage operation. You'll see also the first 100% guest exit flow at the Accessory park being installed this year. So we learn from that opportunity in the first of our parks and others like it, some efficiency projects to reduce utilities and continue to, again, figure out where we can be more efficient, reduce our labor costs from some of these implementations and continue to see if this is the right amount going forward to achieve those revenue and cost-of-savings targets.

Okay. Great. And I think you laid out about $50 million in identified cost savings for that illustrative example. And I think in the past, you were talking about $30 million to $50 million, if I remember correctly. Maybe what's driving that delta? Is that incremental projects? Is that certain things just firming up relative to the prior range that you gave?

Yes. I can take that question. I think it's -- as we do more work and more time on this and have more people kind of dedicated to these efforts, it's kind of like you said, we're able to, I think, firm up some of these numbers, have a better sense of what's doable. So you're seeing some of that in those numbers, obviously. So we said $30 million to $50 million. We showed you the $50 million and obviously, we have plans. Our goal is to always be identifying additional cost savings and we have some teams now that can help do that.

And the next question comes from Barton Crockett with Rosenblatt.

Okay. I wanted to ask about the CapEx outlook. As I understand it, you're looking at it meaningfully higher CapEx spend in 2023 and your CapEx spend in 2022 is already elevated. And a lot of that, I thought was going into the secondary park opening out in San Diego. So I'm just wondering since it's already opened, what -- can you be more -- little bit more specific about what's driving the increase in 2023? And is that kind of a peak? Or does it keep going up into 2024 and beyond as you start building more hotels? And I thought the international was capital-light, but maybe there's some spend there.

Yes. Barton, it's Marc. I can try to help you on that question. So again, I'd reference you back to Jim's comments that we said the core would be $150 million to $180 million. And again, that's going to be your new rides, your attractions and things like that in the park. And then we said for 2023, the ROI would be $100 million to $120 million to get us to the $250 million to $300 million. Again, that second bucket is -- I would not think of that as like permanent in nature. It's going to be dependent on what type of ROI opportunities we have. As you noted, if there's other things that we pull in over time, whether it's the timing of hotels, new parks, things like that, they would fall into that bucket. But again, it's going to be dependent on things that we identify and execute on or new opportunities for expansion, things like that. And we'll try to continue to provide some updates at the appropriate time going forward.

Okay. I mean that -- just to lean on that a little bit. I mean that would be, I think, the highest CapEx total between the essentially maintenance and the expansion, maybe ever as a public company or certainly in many years. So a big kind of change in your stance on opportunities there to invest. And are these investments that we would expect to get any sense of return next year? Or is this really spend for '23 and see the return in later periods?

Well, a couple of comments. So I mean, one, I mean we're also generating -- I mean we're at record adjusted EBITDA. So the cash flow we're generating is allowing us to obviously reinvest in the business. And I think Jim made a really good comment about some of the projects we did in earlier years, refreshes that only take months to do, not years to do, and they have an impact in that given year when you refresh a restaurant or venue or a bar or something like that, we can see that impact more quickly than something that takes multiple years. So I do think there's certainly benefits to 2023 from the CapEx we're spending now. Those things all come online at different times. So the full run rate is not necessarily going to occur this year. But as those things open, we would expect to get the benefit. I think we are just seeing opportunities. We have more people who are kind of uncovering those opportunities, if you will. And we're also clearly generating the cash to be able to pursue those opportunities. So there's a little bit more for you.

And the next question comes from Paul Golding with Macquarie Capital.

First, I wanted to ask about the suboptimal staffing levels here. You also noted that mobile ordering is at 50% of food venues, I believe. I just wanted to ask where we may start to see an offset between those 2? In other words, what we could expect in terms of staffing up from labor hours perspective to get to optimal levels to hit those per cap opportunities versus filling that in with technology and the expenses associated.

Yes. So I can take that. Look, we talk about the mobile app a little bit there in my remarks, and we're at over 50% of the restaurants that we've targeted to have mobile ordering and we'll continue to hopefully grow that over time. And we know clearly, like you would see in other companies, there are some benefits to doing that as far as convenience and generally lower costs and things like that. As far as the optimal staffing, I mean, we've called that out because we know at times, there's areas of our parks that we want to have better staffing at. And we -- and opportunities for more revenue generation from being better staff, primarily in our food and beverage areas would probably be the area we'd see that the most. So there's, I think, a desire to not only increase the mobile app, but also make sure for those that aren't using the mobile app, we still have opportunities for them to spend money. I don't know when that exact intersection will occur. But one of the things we're doing with our labor management is really a pretty meaningful project around kind of labor optimization, scheduling deployment, things like that. And I think those are the type of things we would take into consideration.

Thank you and this concludes the question-and-answer session. And now I would like to turn the floor to Marc Swanson for any closing comments.

Well, thank you, Keith. On behalf of Jim and the rest of the management team at SeaWorld Entertainment, 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.

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