SeaWorld Reports Attendance and Revenue Drops in Q3 2017

Nov 07, 2017 Joe Kleiman Business, News, Theme Parks 0

SeaWorld Entertainment, Inc. today reported its financial results for the third quarter and first nine months of 2017.

Total revenues were $437.7 million, compared to $485.3 million in the third quarter of 2016. Net income was $55.0 million, or $0.64 per diluted share, as compared to net income of $65.7 million, or $0.77 per diluted share, in the third quarter of 2016.

Attendance in the third quarter of 2017 declined by approximately 732,000 guests compared to the prior year third quarter. Attendance was adversely impacted by a decline in U.S. domestic and international attendance, largely concentrated at the company’s parks in Orlando and San Diego, as well as the effects of Hurricanes Irma and Harvey.

The company expects to achieve its targeted $40 million in net cost savings by the end of 2018. The company has also identified an additional $25.0 million in cost savings opportunities which is inclusive of the new restructuring program executed in October to increase efficiencies, reduce duplication of functions, and improve operations.

With less than 15% of the company’s expected 2017 attendance remaining in November and December, the company has narrowed its 2017 Adjusted EBITDA guidance range to $280 million to $295 million, primarily as a result of the weather impacts mentioned previously.

“This quarter, we made progress implementing the targeted actions we outlined in August to stabilize our business and to drive sustainable growth, while continuing to advance the core elements of our five-point plan,” said Joel Manby, President and Chief Executive Officer of the company. “We finalized our new ‘From Park to Planet’ national advertising and marketing campaign, which was named the top breakthrough ad for the third quarter by a leading marketing research firm, and we continued to develop and test pricing initiatives which are driving early positive results with our 2018 season pass sales. We also implemented a new restructuring program by eliminating approximately 350 positions by the end of the year. We expect to deploy a majority of the cost savings from the restructuring program into enhanced marketing and advertising initiatives in 2018 to drive revenue growth.”

“More recently, attendance trends have improved since we launched our Fall and Halloween events in late September. We remain confident in our plan to drive growth over time by addressing reputational challenges and creating fun and meaningful guest experiences, while maintaining a sharp focus on financial discipline. Our compelling product lineup, updated pricing strategies, and aggressive marketing and advertising promotion will begin to roll out early next year which we believe will position us well for improved performance in 2018.”

During the third quarter of 2017, the company generated revenue of $437.7 million, a decrease of $47.6 million, or 10%, compared to the third quarter of 2016. The decline in revenue results primarily from a decrease in attendance for the quarter. The company reported net income of $55.0 million, or $0.64 per diluted share in the third quarter of 2017. In the third quarter of 2016, the company generated net income of $65.7 million, or $0.77 per diluted share.

Adjusted EBITDA, was $172.3 million, a decrease of $23.7 million, or 12%, compared to Adjusted EBITDA of $196.0 million in the third quarter of 2016. Net cash provided by operating activities was $99.5 million in the third quarter of 2017 compared to $147.1 million in the prior year third quarter.

Attendance in the third quarter was primarily impacted by a decline in U.S. domestic and international attendance, largely concentrated at the company’s parks in Orlando and San Diego. In addition, SeaWorld San Diego was further impacted by a decline in attendance from the Southern California market. Attendance for the third quarter was also adversely impacted by the effects of Hurricane Irma in Florida, which caused park closures in Orlando and Tampa, and to a lesser extent, the effects of Hurricane Harvey, which caused park closures and travel disruptions in Texas as well as weather impacts in Virginia. The company believes the decline in U.S. domestic attendance, particularly in Orlando, results primarily from the combined impact of reduced national advertising and competitive pressures. The company believes the decline in attendance at its SeaWorld San Diego park partly results from public perception issues which have resurfaced since the company reduced marketing spend on its national reputation campaign.

Total revenue per capita (total revenues divided by attendance) declined to $57.52 in the third quarter of 2017 compared to $58.18 in the prior year third quarter. Admission per capita (admissions revenue divided by attendance) decreased by 1.4% to $34.82 in the third quarter of 2017 from $35.32 in the prior year third quarter. In-park per capita spending (food, merchandise and other revenue divided by attendance) decreased by 0.7% to $22.70 in the third quarter of 2017, from $22.86 in the prior year third quarter. The decline in total revenue per capita results primarily from the mix of guests, including a higher mix of season pass attendance and free promotional ticket offerings along with the impact of less barter revenue when compared to the third quarter of 2016. These factors were partially offset by price increases in the company’s admission products when compared to the third quarter of 2016.

During the three months ended September 30, 2017, the company amended its existing agreement with Loro Parque concerning the orcas at that park. The agreement was amended in order to end its business relationship due to a contractual dispute. As a result, the company recognized an impairment loss of approximately $7.8 million during the third quarter of 2017.

During the first nine months of 2017, the company generated revenue of $997.8 million, a decrease of $78.9 million, or 7%, compared to the same period in 2016. The company generated a net loss for the first nine months of 2017 of $181.9 million, or a loss of $2.12 per diluted share. Net loss for the first nine months of 2017 includes a non-cash goodwill impairment charge of $269.3 million related to full impairment of goodwill for the company’s SeaWorld Orlando park, which was recorded in the second quarter of 2017. For the first nine months of 2016, the company generated a net loss of $0.6 million, or a loss of $0.01 per diluted share.

Adjusted EBITDA in the first nine months of 2017 was $246.2 million, a decrease of $27.7 million, or 10%, compared to Adjusted EBITDA of $273.9 million in the same period of 2016. Net cash flow provided by operating activities was $187.8 million in the first nine months of 2017 compared to $258.9 million in the same period of 2016.

The decrease in revenue was driven by a 6.2% decline in attendance and, to a lesser extent, a 1.2% decrease in total revenue per capita. Total attendance for the first nine months of 2017 declined by approximately 1.1 million guests compared to the first nine months of 2016. Attendance was primarily impacted by an overall decline in U.S. domestic and international attendance, which was largely concentrated at the company’s parks in Orlando and San Diego. In addition, SeaWorld San Diego was further impacted by a decline in attendance from the Southern California market. These factors were partially offset by improved attendance from guests within a 300 mile radius for the company’s Orlando and San Antonio markets which the company believes is partly due to the success of its new attractions. Attendance, particularly for the third quarter of 2017, was also adversely impacted by the effects of Hurricane Irma which caused park closures in Orlando and Tampa, and to a lesser extent, the effects of Hurricane Harvey which caused park closures and travel disruptions in Texas as well as weather impacts in Virginia. The company believes the decline in U.S. domestic attendance, particularly in Orlando, results primarily from the combined impact of reduced national advertising and competitive pressures. The company believes the decline in attendance at its SeaWorld San Diego park partly results from public perception issues which have resurfaced since the company reduced marketing spend on its national reputation campaign.

Total revenue per capita declined to $60.34 in the first nine months of 2017 from $61.10 in the first nine months of 2016. Admission per capita decreased by 1.6% to $36.59 from $37.20 in the prior year period. In-park per capita spending decreased to $23.75 in the first nine months of 2017, from $23.90 in the same period of 2016. The decline in total revenue per capita results primarily from the mix of guests, including a higher mix of season pass attendance and free promotional ticket offerings along with the impact of less barter revenue when compared to the first nine months of 2016. These factors were partially offset by price increases in the company’s admission products when compared to the first nine months of 2016.