United Parks & Resorts Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with 2022. The company, formerly SeaWorld Entertainment, changed its name and NYSE ticker from SEAS to PRKS in February 2024. It operates 12 U.S. parks and earns royalties and fees from the licensed SeaWorld Abu Dhabi park, which opened in May 2023.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $1.727 billion | $1.731 billion | Down 0.3% |
| Operating income | $459.8 million | $507.5 million | Down 9.4% |
| Net income | $234.2 million | $291.2 million | Down 19.6% |
| Diluted EPS | $3.63 | $4.14 | Down 12.3% |
| Adjusted EBITDA | $713.5 million | $728.2 million | Down 2.0% |
| Operating cash flow | $504.9 million | $564.6 million | Down $59.7 million |
| Capital expenditures | $304.8 million | $200.7 million | Up $104.1 million |
Operating margin was approximately 26.6% (2022: 29.3%); net margin was approximately 13.6% (2022: 16.8%). Operating cash flow less capital expenditures was approximately $200.1 million, versus $363.9 million in 2022; this is a simple derived measure, not a company-reported free-cash-flow metric.
- Attendance fell 1.5% to 21.606 million visits. Management attributed the decline mainly to unusually adverse weather across most markets, including peak periods.
- Revenue per capita increased 1.3% to $79.91: admission per capita rose 0.4% to $44.16 and in-park spending per capita rose 2.4% to $35.75. Pricing initiatives supported per-capita growth.
- Operating expenses rose 3.2% and selling, general and administrative expenses rose 10.6%. Operating income declined despite lower food, merchandise and other revenue costs.
Debt, liquidity and capital allocation
- Year-end gross debt was approximately $2.126 billion, compared with $2.138 billion in 2022. Cash was $246.9 million, up from $79.2 million.
- The $390 million revolving credit facility had no borrowings at year-end; after $18.4 million of letters of credit, approximately $371.6 million was available. The reported working-capital ratio was 0.9.
- Interest expense increased 24.8% to $146.7 million, primarily due to higher rates on variable-rate debt. About $1.2 billion of debt was variable-rate and unhedged; a 100-basis-point increase in Adjusted Term SOFR was estimated to raise annual interest expense by $11.7 million with no revolver borrowing.
- Debt included $1.173 billion of term loans, $725 million of 5.25% notes due 2029 and $227.5 million of 8.75% secured notes due 2025. The company reported covenant compliance and a 2.53x net total leverage ratio under its debt agreements.
- On January 22, 2024, the company repriced its first-lien term loan facility. The filing describes the transaction as improving debt terms; verify the amended pricing and resulting interest savings in the amendment and subsequent disclosures.
- 2023 share repurchases totaled approximately $17.9 million; $38.5 million remained under the authorization at year-end. The company pays no dividend.
Outlook, commentary and risks
- No quantified revenue, attendance, earnings or cash-flow guidance is provided. Management expected a 2024 slate of new rides, attractions, events and upgrades, with something new planned for every park. Named projects include Penguin Trek at SeaWorld Orlando, Catapult Falls at SeaWorld San Antonio and Phoenix Rising at Busch Gardens Tampa Bay.
- Management cited continuing labor-market and hiring challenges, higher interest rates and supply-chain disruption; staffing constraints and attraction or facility availability could affect operations and guest experience. Cost-saving and efficiency initiatives are ongoing, but management cautioned that benefits are not assured.
- Inflation, weather, discretionary-spending weakness, seasonal operating patterns and competition are material business risks. Revenue is geographically concentrated: approximately 59% came from Florida, 16% from California and 13% from Virginia in 2023.
- Animal-welfare regulation, activist scrutiny, animal or guest safety incidents, cyber and technology disruption, insurance adequacy, permits, and ride construction or supplier delays could adversely affect performance. The SWIMS Act was reintroduced in Congress in January 2024; its potential impact is uncertain.
- Hill Path owned approximately 42.5% of the shares at year-end and has significant governance influence. Variable-rate debt and debt covenants constrain financial flexibility.
- Unusual or notable items included higher non-cash asset write-offs and self-insurance reserve adjustments, increased consulting and legal costs including strategic-initiative costs, and $9.1 million of COVID-related incremental costs included in the company’s Adjusted EBITDA reconciliation.
- The Sesame Workshop arbitration panel awarded royalties, interest and costs; the company is challenging the award and had accrued amounts. It did not expect additional exposure above accruals to be material. A separate putative race-discrimination class action remains pending; the company disputes the claims. In February 2024, the Delaware Supreme Court affirmed dismissal of former employees’ claims concerning equity awards.
- Management said a previously disclosed material weakness in financial reporting controls was remediated by year-end 2023. Management and the auditor concluded internal control over financial reporting was effective; the financial statement audit opinion was unqualified.
Important facts for investors to verify
- Attendance, weather and pass visitation trends, and whether higher per-capita spending can offset attendance softness.
- 2024 operating performance and whether the announced attraction openings, cost savings and international royalties meet expectations.
- Updated variable-rate borrowing costs, term-loan repricing savings, debt maturities and covenant headroom, particularly ahead of the 2025 secured-note maturity.
- Cash generation after the elevated 2023 capital-investment program, and the balance between capital spending, debt reduction and share repurchases.
- Developments in the Sesame arbitration, the pending class action, animal-welfare legislation and other regulatory or litigation matters.
- The company’s reported financial data and non-GAAP Adjusted EBITDA reconciliation; Adjusted EBITDA is not a GAAP measure and may not be comparable across companies.