SeaWorld Entertainment, Inc. (now United Parks & Resorts Inc.) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The filing is under the name SeaWorld Entertainment, Inc.; it describes a business operating 12 U.S. theme parks. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $270.7 million | $171.9 million |
| Operating income (loss) | $10.0 million | $(18.9) million |
| Net loss | $(9.0) million | $(44.9) million |
| Operating cash flow | $70.8 million | $18.4 million |
| Capital expenditures | $35.1 million | $15.3 million |
Revenue increased 57.5% year over year. Attendance rose 53.7% to 3.403 million visits; revenue per capita increased 2.5% to $79.54, comprising admission spending of $44.33 and in-park spending of $35.21. Operating margin was approximately 3.7%, compared with approximately negative 11.0% a year earlier. Adjusted EBITDA, a non-GAAP measure, was $65.9 million versus $25.2 million.
At March 31, cash and cash equivalents were $380.0 million. Current assets were $524.7 million and current liabilities $458.7 million; the company reported a 1.1 working capital ratio. Debt principal totaled $2.147 billion, including $1.194 billion of term loans, $725 million of 5.25% notes due 2029, and $227.5 million of 8.75% notes due 2025. The revolving facility was undrawn, with approximately $365.3 million available after letters of credit. The company reported compliance with debt covenants and a 2.42 net total leverage ratio under its debt agreements.
Material changes versus the prior period
- Results improved from Q1 2021, when some parks had temporary closures, capacity limits, restricted operations, and reduced demand. Management attributed higher revenue primarily to increased attendance and, to a lesser extent, higher per-capita spending.
- Operating expenses rose 41.9% and selling, general and administrative expenses rose 46.4%, reflecting more operating days, labor and other operating costs, and increased marketing. Staffing constraints and inflation also pressured operations.
- Interest expense fell 18.0% to $25.4 million, primarily reflecting the 2021 refinancing.
- Operating cash flow increased, while investing outflows rose with capital spending. Financing outflows included $89.7 million of settled share repurchases during the quarter.
- The company repurchased 1.535 million shares for approximately $109.9 million in Q1. Subsequent to quarter-end, it repurchased a further 2.028 million shares for approximately $140.1 million; the program had no remaining authorization as of April 29, 2022.
Outlook, commentary, risks, and unusual items
- No specific earnings or revenue guidance is provided. Management said cash, operating cash flow, and available revolving borrowings were expected to cover capital expenditures, debt service, and working capital needs for at least the next 12 months.
- Management noted the business is seasonal, typically generating its highest revenue in the second and third quarters and generally recording losses in the first and fourth quarters. It cautioned that the interim results are not necessarily indicative of full-year performance.
- COVID-19 continued to affect international and group attendance, though prior-year restrictions and closures had eased. Other cited pressures include labor availability and wage costs, inflation, supply-chain conditions, weather, consumer demand, and travel patterns.
- Disclosure controls and procedures were deemed ineffective at March 31, 2022 because of an unresolved material weakness involving policies and procedures for Board oversight within the control environment. Management said the weakness had not caused a material financial-statement misstatement and described remediation work as ongoing.
- A securities class action had a trial scheduled for September 20, 2022. The company disputed the claims and stated it did not expect any potential loss to be material. It also disclosed a separate dispute involving approximately 300,000 shares claimed by former employees; management likewise considered any potential loss not material.
- The filing reports approximately $25 million of estimated remaining Sesame Workshop license commitments over the agreement’s remaining term. The second Sesame Place park opened in San Diego on March 26, 2022.
Most important facts for investors to verify
- Whether attendance and per-capita spending gains persist beyond comparisons with the pandemic-affected prior-year quarter, and whether labor constraints limit guest services or revenue.
- Cash generation, capital spending, and liquidity after the substantial Q1 and post-quarter share repurchases.
- Debt levels, variable-rate exposure, refinancing terms, and covenant headroom; the filing estimates that a 100-basis-point LIBOR increase would raise annual interest expense by approximately $11.4 million with no revolver borrowings.
- Progress in remediating the disclosed material weakness and any subsequent updates on the litigation matters.
- How seasonality, inflation, COVID-related attendance effects, and other operating risks affect full-year results; the filing provides no explicit numerical guidance.