SeaWorld Entertainment, Inc. (NYSE:SEAS) Q4 2022 Earnings Conference Call February 28, 2023 9:00 AM ET
Matthew Stroud – VP, IR
Marc Swanson – CEO
James Forrester – Interim CFO & Treasurer
Conference Call Participants
Steven Wieczynski – Stifel, Nicolaus & Company
Philip Cusick – JPMorgan Chase & Co.
James Hardiman – Citigroup
Eric Wold – B. Riley Securities
Barton Crockett – Rosenblatt Securities
Michael Swartz – SunTrust
Paul Golding – Macquarie Research
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, retail and other in-park guest spending give us confidence in our ability to continue to grow total per caps. These factors, along with the work we are doing to better manage and reduce costs, combined with the significant investments we are making across our parks and business, give us high confidence in our ability to continue to deliver operational and financial improvements that we expect will lead to meaningful increases in shareholder value.
We are pleased with the start to 2023 and looking forward, we are very excited about our plans with an exceptional lineup of new rides, attractions, events and new and improved in-park venues and offerings. Given the investments that we have made and will be making, the continued success of our strategies and our strong financial position, we expect to — we continue to expect meaningful growth and new records in revenue and adjusted EBITDA for 2023.
For 2023, we have an outstanding lineup of new rides, attractions and events and new and improved in-park venues and offerings with something new and meaningful in each of our parks. Our new rides and attractions include the following: Pipeline: The Surf Coaster at SeaWorld Orlando, the first-of-its-kind surf coaster with seats in a surfing position that rise and fall to mimic the sensation of riding a wave. The coaster will accelerate riders to 60 miles per hour through 5 airtime moments and an innovative wave-curl inversion. Arctic Rescue at SeaWorld San Diego, the fastest and longest straddle coaster on the West Coast takes riders through 3 launches at speeds up to 40 miles per hour. Catapult Falls at SeaWorld San Antonio, the world’s first launched flume coaster features the world’s steepest flume drop. North America’s only flume with a vertical lift and the tallest flume-drop in Texas. DarKoaster at Busch Gardens Williamsburg, the first all-indoor straddle coaster in North America. Riders experience 4 launches at speeds up to 36 miles per hour through over 2,400 feet of track. Serengeti Flyer at Busch Gardens Tampa Bay, the world’s tallest and fastest screaming swing will take riders up 135 feet at speeds reaching 68 miles per hour.
Turi’s Kid Cove at Aquatica Orlando, this all-new water play area will feature watering palms, tipping buckets, spraying jets, water bobbles and more, plus kids can grab a tube and slide into fun on the all-new kid-size wave slide. Shaka Laka Shores at Adventure Island, the new slash and play zone located in the heart of Adventure Island will feature an area with over 25 spray elements and a central kid-friendly play structure bound to entertain and engage even the youngest of guests. Riptide Race at Water Country USA, the first dueling pipeline slide in Virginia that will send riders through over 500 feet of slide, all while navigating high-speed tunnels and tight turns alongside their opponents. Bert & Ernie’s Splashy Shores at Sesame Place Philadelphia, a water play area featuring water umbrellas, tipping buckets, spraying jets, water bobbles and a spraying water tower. And finally, The Count’s Splash Castle at Sesame Place San Diego, an enhanced water play area and expanded play structure, which features 3 tipping buckets, 4 water slides and over 100 other water-play elements.
As we have done in previous quarters, we have posted a short presentation on our investor website along with our earnings press release that provides a summary illustration of our earnings potential and some updates on our cost initiatives.
Slide 4 is titled SeaWorld Illustrative Adjusted EBITDA. This presentation is not meant to be guidance. It is just meant as a simple illustration to show what we believe the earnings power of this business would be at 2019 attendance levels and if we return to the 2008 historical peak attendance levels, while growing our total per capita revenue, along with the cost savings opportunities we have identified.
Importantly, this analysis does not reflect the impact of cost inflation or pressure on the business over time. To be clear, again, this is not guidance, and we are not projecting when we will again achieve our 2019 tenant levels or our 2008 peak attendance levels or the total per cap growth in cost savings noted on the slide. This is just an illustration of the earnings potential of this business under these scenarios.
As you can see from this illustration, this business has the potential to do between $964 million and $1.156 billion of adjusted EBITDA under these scenarios, excluding cost inflation or pressure.
Slide 5 shows our latest 2022 attendance of approximately 22 million visitors and the potential for where our tenants can go by returning to historical levels. As we have discussed, and you can see, we are still below 2019 levels, and we are well below 2008 peak attendance. We also show what our tenants would be if we achieved peak attendance at all of our parks in the same year. As we have said, we have significant potential to achieve meaningfully higher attendance by getting back to historical levels.
Slide 6 shows the multiple opportunities we see to grow total revenue per capita. The opportunities include growing group and international demand, continued revenue management optimization, investments in new and improved venues, continued rollout and improvement of our mobile app, among other things. We also see future opportunities to grow total revenue per cap from our growth initiatives. Slide 7 of the presentation presents an update in more detail about our cost efficiency and reduction initiatives that we shared last quarter.
As we highlighted, we have enhanced our efforts around these initiatives and we have teams dedicated to realize these and additional opportunities. As we highlighted last quarter, this is just a select list, does not necessarily reflect everything we are working on or we’ll work on over the coming months and quarters. Again, this is not guidance, and we are not projecting when we will achieve our 2019 attendance levels or 2008 attendance levels or the total per cap growth in cost savings noted on the slide or when we will achieve this level of adjusted EBITDA. This analysis does not include or estimate the impact of any cost inflation, and it assumes the attendance and park mix of 2022. It is simply meant to show the potential adjusted EBITDA we could achieve with the growth in attendance, the revenue per capita improvements and the cost reductions that we have identified.
Before moving to Jim and his update on financial performance, let me comment on a few more items in greater detail. First, let me speak to our balance sheet, which continues to be strong. Our fiscal 2022 year-end net total leverage ratio is 2.78x and we had approximately $451 million of total available liquidity, including over 75 — including over $79 million of cash on the balance sheet.
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.
In the fourth quarter, we repurchased approximately 1.4 million shares of common stock at a total cost of approximately $70.6 million. In 2022, we repurchased 12.4 million shares of common stock or approximately 16% of total shares outstanding at a total cost of approximately $693.6 million.
We also continue to benefit from the rollout of our mobile app, which is used by an increasing number of guests in our parks and has been downloaded more than 4.5 million times. As of the end of January, mobile ordering has been expanded to additional restaurants and is now operating at over 50% of our target restaurants. We are very excited about the potential of the app and its ability to improve the in-park guest experience, drive increases in revenue and decreases in cost.
Let me spend a few minutes talking about our inorganic growth plans. On the international front, SeaWorld Abu Dhabi is due to open later this year. In advance of the official opening of the SeaWorld Park, the UAE’s first dedicated marine research, rescue, rehabilitation and return center was recently opened which I will discuss more later in my remarks.
SeaWorld Abu Dhabi is a custom-built, 183,000 square meters facility that will feature over 68,000 marine animals, the world’s largest aquarium and 6 different realms that showcase the complexity, interconnectivity and beauty of life under the sea.
We are very proud of this project and along with our partners in Abu Dhabi are excited about introducing a new region of the world to the wonders of SeaWorld and introducing a next-generation SeaWorld Park, the first new SeaWorld Park in 34 years. We continue to progress discussions related to other international opportunities and expect to have more to share in coming quarters.
On the Sesame Street Park front, we continue our work towards opening our third Sesame Place park and we will update you on more specifics when possible.
On the hotel front, we continue to make progress with our plans to build hotels and complement our park offerings. Based on current plans and expectations, we expect to have our first hotel opened in 2025, followed by our second hotel in 2026. We are working on design and planning for these 2 hotels and on-site selection for additional hotels across our park portfolio. We look forward to sharing more specifics in future quarters.
Before I turn the call over to Jim, I want to take few minutes to discuss our recently announced organizational changes and related new positions. We have promoted Chelle Adams, our former CFO, to the role of Chief Transformation Officer where she will be responsible for streamlining and re-engineering organizational processes, implementing high-value initiatives and overseeing our business development and growth activities.
We also promoted Kyle Miller, our former Orlando Parks President; and Byron Surrett, our former Texas Parks President to the roles of Co-Chief Parks Operations Officers where each will be responsible for the operations of specific regions of the country. Kyle will oversee the Florida parks and Byron will oversee the non-Florida parks.
In these new roles, they will be responsible for operational activities across our parks, including driving strong and consistent operating standards across our parks, improving profitability, planning, park quality and guest experience. Together, Kyle and Byron have approximately 75 years of park-operating experience with the company. Our team and our stakeholders will really benefit from having these 2 outstanding individuals in these roles. I cannot be more excited.
Overall, we are proud to report record net income for fiscal 2022 of $291.2 million and record adjusted EBITDA of $728.2 million, which was achieved with attendance of 21.9 million guests which, as I mentioned, is still below our 2019 attendance and well below our historical high of over 25 million guests we achieved in 2008. I want to thank our ambassadors for their hard work this past quarter and fiscal year. Without their continued dedication and efforts, these strong results would not have been possible.
With that, I’m happy to introduce you all to Jim Forrester, our interim CFO, to discuss our financial results in more detail. Jim has an impressive background, including over 2 decades of experience in the theme park space, and most recently, leading finance operations for our Orlando parks, which, as you know, are among our strongest performing and largest parks. We are very fortunate to have Jim on our team. Jim?
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 to the same quarter in 2019. For fiscal 2022, international visitation was down 49% compared to 2019, while group visitation was down 16% compared to 2019.
Our pricing and product strategies continue to drive higher realized pricing, resulting in record total revenue per capita in the quarter of $79.10 compared to $74.87 in the fourth quarter of 2021. This increase was driven by improvements in both admissions per capita and in-park per capita spending. Admission per capita increased by 4.5% to a record $45.63 and in-park per capita spending increased by 7.2% to a record $33.47 in the fourth quarter of 2022 compared to the fourth quarter of 2021. The increase in admission for capita was primarily due to the realization of higher prices in our admissions products resulting from our strategic pricing efforts when compared to the prior year quarter.
In part for capital spending improved due to a combination of factors, including pricing initiatives, improved product quality and mix and the impact of new, enhanced or expanded in-park offerings partially offset by the negative impact of less than optimal staffing. Operating expenses increased $14.1 million or 8.7% when compared to the fourth quarter of 2021. The increase in operating expenses is primarily due to increased labor-related and other operating costs driven by increased operating days and expanded and/or enhanced events, along with unusually high inflationary pressures partially offset by structural cost savings initiatives when compared to the fourth quarter of 2021.
Operating expenses as a percent of revenue were 45.2% for the fourth quarter of 2022 compared to 43.7% for the fourth quarter of 2021. While staffing has improved from earlier in the year, we are still not yet at optimal levels. We continue to suffer from less than optimal staffing in various roles across our parks during the quarter, which, among other things, impacted our ability to fully capture in-park revenue.
Labor costs in the fourth quarter were primarily driven by increased labor hours as our average hourly wage rate was only moderately higher than prior year. Selling, general and administrative expenses decreased $11.8 million or 20.9% compared to the fourth quarter of 2021. The decrease is primarily due to the decrease in noncash equity compensation expense and the impact of cost savings and efficiency initiatives.
Selling, general and administrative expenses as a percent of revenue was 11.5% for the fourth quarter of 2022 compared to 15.3% for the fourth quarter of 2021. We believe that approximately $10 million to $15 million of cost in the fourth quarter compared to 2019 are temporary, unusual inflation-driven costs that we expect to moderate in the coming quarters.
We generated net income of $49 million for the fourth quarter, the second highest ever for the fourth quarter compared to a net income of $71.5 million in the fourth quarter of 2021, which included a favorable tax benefit and we generated record adjusted EBITDA of $153.7 million, an increase of $0.9 million when compared to the fourth quarter of 2021.
The improvement in adjusted EBITDA for the fourth quarter of 2022 was primarily driven by an increase in total revenue per capita, partially offset by an increase in expenses when compared to the fourth quarter of 2021. Looking at our results for the full year, which were still impacted by the COVID-19 pandemic, total attendance was approximately 21.9 million guests, an increase of 8.6% versus 2021. Total revenue was a record $1.73 billion, an increase of $227.5 million or 15.1% when compared to 2021.
Fiscal 2022 total revenue per capita was a record $78.91 compared to $74.43 in 2021, a 6.0% increase driven by an increase in admissions per capita and in-park per capita spending. Admission per capita increased 4.3% to a record $44.0 compared to $42.17 in 2021. Admission per capita increased primarily due to the realization of higher prices in our emissions products resulting from our strategic pricing efforts, which was partially offset by the net impact of the emissions product mix when compared to 2021.
In-park per capita spending improved by 8.2% to a record $34.91 from $32.26 in 2021. The increase was primarily due to a combination of factors including pricing initiatives, improved product quality and mix and the impact of new, enhanced or expanded in-park offerings when compared to 2021. In-park per capita spending was also unfavorably impacted by less than optimal staffing during certain times of the year, which impacted our ability to fully operate and/or open some of our food and beverage and retail outlets.
Operating expenses increased by $113.3 million or 18.2% when compared to 2021, primarily from an increase in labor-related costs and other operating costs due to a return to more normalized operations and an increase in attendance.
Operating expenses were also impacted by inflationary pressures, partially offset by the impact of structural cost savings initiatives when compared to 2021. Selling, general and administrative expenses increased by $15.2 million or 8.2% when compared to 2021, primarily due to increased market-related costs and increased third-party consulting costs partially offset by a decrease in noncash equity compensation expense and the impact of cost savings and efficiency initiatives.
Net income for the year was a record $291.2 million, an increase of $34.7 million. Adjusted EBITDA was also a record $728.2 million, an increase of $66.2 million when compared to 2021, which held the previous record in both net income and adjusted EBITDA.
Now turning to our balance sheet. Our current deferred revenue balance at the end of the fourth quarter was $169.5 million, an increase of approximately 9.5% when compared to December of 2021, which included the impact of some COVID-19-related product extensions and onetime items.
At the end of January 2023, our past phase was up compared to January 2022 and was at a record level for January. We’re continuing to realize meaningful price increases on our past products with current cost prices up more than 10% compared to prior year.
As Marc mentioned, we have a very strong balance sheet position. As of December 31, 2022, our total available liquidity was $450.8 million, including $79.2 million of cash and cash equivalents on our balance sheet and $371.6 million available on our revolving credit facility.
Cash flow from operations was $95.7 million for the fourth quarter of 2022. Free cash flow was $45.7 million for the fourth quarter of 2022. We repurchased approximately 1.4 million shares of common stock at a total cost of approximately $70.6 million in the fourth quarter of 2022. In fiscal 2022, we repurchased approximately 12.4 million shares of common stock or approximately 16% of our total outstanding shares at a total cost of approximately $693.6 million.
We spent $50 million on CapEx in the fourth quarter of 2022, of which approximately $37.2 million was on core CapEx and approximately $12.8 million was on expansion and/or return on investment projects. In light of our significant free cash flow generation over the past several months as we went through our planning process for 2023, we spent considerable time reviewing opportunities to deploy in [indiscernible] high-confidence ROI capital across our parks that would drive increased revenue, decreased costs and our meaningfully improved guest experience.
We identified projects holding up to $100 million related to enhancing, improving and are creating new food and beverage outlets and retail venues and upgrading park infrastructure and technology. In 2019 and 2022, we averaged approximately $150 million per year on core CapEx and that includes investing meaningfully in new rides, attractions, events and venues to have something new and compelling in our parks each year. On top of that $150 million per year in core CapEx, we have spent approximately $40 million per year on growth in ROI projects.
For 2023, we expect to continue to spend approximately $150 million to $180 million on core CapEx and we plan to spend between $100 million and $120 million of CapEx on growth in ROI projects that are a direct result of our 2023 planning process.
We are already making progress on many of these opportunities and expect to have more specifics to share over the course of the coming year. In total, we now expect to spend approximately $250 million to $300 million in CapEx for 2023. We’re excited about our opportunities and the ability to make these high-confidence ROI investments and sincerely look forward to the benefits and returns from these investments flowing through to our financial results. Now let me turn the call back over to Marc who will share some final thoughts. Marc?
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.