United Parks & Resorts Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Unless otherwise stated, amounts are in U.S. dollars. The company owns or operates theme parks under brands including SeaWorld, Busch Gardens, Aquatica, Discovery Cove and Sesame Place.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $297.4 million | $293.3 million |
| Operating income | $22.1 million | $11.8 million |
| Net loss | $11.2 million | $16.5 million |
| Adjusted EBITDA (non-GAAP) | $79.2 million | $72.4 million |
| Operating cash flow | $71.4 million | $50.3 million |
| Capital expenditures | $87.3 million | $69.8 million |
- Revenue increased 1.4%. Attendance rose 2.1% to 3.45 million, while total revenue per capita declined 0.7% to $86.21. Admission per capita fell 0.9% and in-park per capita spending fell 0.5%.
- Operating margin improved to approximately 7.4% from 4.0%; the company remained loss-making, with basic and diluted loss per share of $0.17 versus $0.26.
- Operating cash flow less capital expenditures was negative $15.8 million, compared with negative $19.5 million a year earlier. Cash and cash equivalents were $203.7 million at quarter-end, down from $246.9 million at December 31, 2023.
- At March 31, total debt principal was approximately $2.123 billion; the balance-sheet carrying amount was $2.104 billion, including current maturities and net of unamortized discounts and issuance costs. Cash exceeded current debt maturities, but current liabilities exceeded current assets: the working-capital ratio was 0.8.
- The revolving credit facility was undrawn, with approximately $372.5 million available after outstanding letters of credit. Covenant net total leverage was 2.57x; the company reported compliance with debt covenants.
Changes versus prior year and notable developments
- Operating income increased 88.1%, principally as operating expenses fell 4.5%, including lower costs associated with international services agreements and legal matters. Depreciation and amortization rose 4.8%.
- Q1 attendance benefited from earlier Easter and spring breaks but was adversely affected by weather across most markets, particularly Florida. Excluding lower one-time international services agreement revenue, in-park per capita spending increased 4.0%.
- Interest expense rose 6.5% to $38.8 million, partly due to a write-off of debt discounts and issuance costs related to January refinancing transactions.
- Capital expenditures increased to $87.3 million, including $31.0 million for expansion/return-on-investment projects. Deferred revenue, including its long-term portion, increased to $224.0 million from $170.0 million at year-end.
- In March, stockholders approved a new $500 million share repurchase program, subject to a restriction intended to prevent Hill Path’s ownership from reaching 50% through repurchases. The company repurchased $20.2 million of shares in Q1; it reported another $80.6 million of repurchases through May 6.
Outlook, risks and contingencies
- No specific revenue or earnings guidance is provided. Management expects cash on hand, operating cash flow and available revolver borrowings to meet capital expenditure, debt service and working-capital needs for at least the next 12 months. Results are seasonal: the company historically generates its highest revenue in Q2 and Q3 and generally incurs a Q1 net loss.
- On May 2, 2024, after quarter-end, the company borrowed $380 million in incremental term loans to fund redemption of all $227.5 million of its 8.75% first-priority secured notes due 2025 and for general corporate purposes. The remaining proceeds and resulting debt terms should be assessed alongside the March 31 debt figures. The term loans carry variable rates; approximately $1.2 billion of debt was variable-rate at quarter-end. Management estimated a 100-basis-point increase in Adjusted Term SOFR would raise annual interest expense by about $11.7 million without revolver borrowings.
- Management cites labor hiring and retention challenges, higher interest rates, supply-chain disruptions affecting ride or facility availability, inflation, weather and consumer-spending uncertainty. Other disclosed exposures include seasonality, animal and safety regulation, litigation, cybersecurity, high fixed operating costs and geographic concentration.
- A putative discrimination lawsuit remained pending; after quarter-end, a May trial was declared a mistrial and reset for September. The company said it intends to defend the case and does not expect a material potential loss. The company is also challenging a Sesame Workshop arbitration award, with accrued amounts recorded; it does not anticipate exposure above accruals to be material. Remaining Sesame license commitments could be up to approximately $20 million over the agreement’s term.
- The filing reports no material off-balance-sheet arrangements and no material changes to previously disclosed risk factors. Disclosure controls were considered effective.
Key facts for investors to verify
- Whether attendance and per-capita spending trends persist after the favorable calendar effect and adverse Q1 weather.
- How the May refinancing changes total debt, cash interest expense, maturities and financial flexibility; also monitor variable-rate exposure and covenant headroom.
- Whether elevated capital spending and the expanded share repurchase program remain consistent with liquidity needs and management’s stated 12-month funding assessment.
- Updates on the September trial, the Sesame Workshop arbitration challenge and related accruals or disclosures.
- Progress on labor availability, operating reliability and cost savings, and any impact on guest experience or park attendance.