United Parks & Resorts Inc. — Q1 2023 filing summary
Filing identity: The supplied 10-Q is filed by SeaWorld Entertainment, Inc., for the quarter ended March 31, 2023. It is not filed under the United Parks & Resorts Inc. name.
Business context and reporting period
The company operated 12 U.S. theme parks under brands including SeaWorld, Busch Gardens, Aquatica, Discovery Cove and Sesame Place. Results are unaudited and cover the three months ended March 31, 2023, compared with the same period in 2022. Operations are seasonal; management says revenue is typically highest in the second and third quarters and the company generally incurs a first-quarter net loss.
Financial and operating metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $293.3 million | $270.7 million |
| Operating income | $11.8 million | $10.0 million |
| Operating margin | 4.0% | 3.7% |
| Net loss | $16.5 million | $9.0 million |
| Net loss per diluted share | $0.26 | $0.12 |
| Operating cash flow | $50.3 million | $70.8 million |
| Capital expenditures | $69.8 million | $35.1 million |
| Cash flow after capital expenditures | $(19.5) million | $35.7 million |
| Cash and cash equivalents at quarter-end | $54.8 million | $380.6 million, including restricted cash |
Revenue increased 8.4%. Attendance was 3.378 million, down 0.7%; total revenue per guest rose 9.2% to $86.84, including admission per capita of $48.51 and in-park spending per capita of $38.33. The filing reports Q1 2023 Adjusted EBITDA of $72.4 million, a non-GAAP measure, versus $65.9 million.
At March 31, debt principal totaled $2.135 billion: $1.182 billion of variable-rate Term B loans, $725.0 million of 5.25% notes due 2029, and $227.5 million of 8.75% secured notes due 2025. The revolving facility had no borrowings; $371.6 million was available after letters of credit. The company reported a 2.71x net total leverage ratio under its debt agreements and compliance with covenants. The working capital ratio was 0.5.
Material changes versus Q1 2022
- Revenue rose $22.7 million, driven by higher admission and in-park spending per guest, partly offset by lower attendance. Management attributed lower attendance mainly to adverse weather, especially at California parks, and timing of new ride openings.
- Operating expenses increased 12.9% to $172.7 million, reflecting international-services agreement costs, labor costs associated with more optimal staffing, and legal costs, partly offset by cost savings initiatives. SG&A increased 4.8%.
- Operating income improved 17.4%, but net loss widened 83.2%, principally as interest expense rose 43.5% to $36.4 million, primarily due to higher rates on variable-rate debt.
- Operating cash flow declined $20.5 million, primarily due to increased interest payments. Capital expenditures nearly doubled, largely for future attractions, resulting in negative cash flow after capex.
Outlook, commentary, risks and unusual items
- Management said existing cash, operating cash flow and available revolver borrowings should cover capital expenditures, debt service and working capital for at least the next 12 months. No specific earnings or revenue guidance was provided.
- Management cited labor-market and wage pressures, staffing shortages, inflation, supply-chain disruption and higher interest rates. Staffing constraints have affected or could affect outlet and attraction availability, wait times and guest experience. Weather and seasonality also affect attendance.
- SeaWorld Abu Dhabi was scheduled to open in May 2023. Related project and services revenue and expenses were expected to be recognized as performance obligations were completed during 2023.
- Disclosure controls and procedures were reported ineffective because of an ongoing material weakness involving policies and procedures for Board-management engagement. Remediation actions were underway; management said the weakness had not caused a material misstatement in the periods presented.
- Legal matters include a pending Sesame Workshop royalty arbitration and other litigation. The company said it had accrued its best estimate for the disputed royalty and did not expect material losses from the described matters, while noting outcomes are uncertain.
- After quarter-end, the company repurchased 235,000 shares for approximately $13.9 million through May 4, 2023. About $42.4 million remained under the repurchase authorization at that date.
Important facts for investors to verify
- Confirm the issuer and reporting-period match: this filing is SeaWorld Entertainment, Inc.’s Q1 2023 10-Q, despite the request naming United Parks & Resorts Inc.
- Track attendance, per-capita spending and weather impacts as peak-season results become available.
- Assess variable-rate debt exposure, interest costs, capital spending and liquidity; the filing estimates that a 100-basis-point LIBOR increase would raise annual interest expense by about $11.8 million with no revolver borrowings.
- Review progress in remediating the material weakness and any subsequent updates on litigation, the Abu Dhabi project and share repurchases.