United Parks & Resorts - Earnings Call - Q3 2020

Transcript

Speaker 0

Good morning. Welcome to SeaWorld Entertainment Third Quarter twenty twenty Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Matt Straub, Vice President of Investor Relations. Go ahead.

Speaker 1

Thank you and good morning everyone. Welcome to SeaWorld's third quarter earnings conference call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call.

Joining me this morning are Mark Swanson, Interim Chief Executive Officer and Elizabeth Galaxi, Chief Accounting Officer and Interim Chief Financial Officer and Treasurer. This morning, we will review our third quarter financial results and then we will open up the call to your questions. Before we begin, I would like to remind everyone that our comments today will contain forward looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward looking statements, including those identified in the Risk Factors section of our annual report on Form 10 ks and quarterly reports on Form 10 Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website.

We undertake no obligation to update any forward looking statements. In addition, on the call, we may reference non GAAP financial measures and other financial metrics such as adjusted EBITDA, free cash flow and net cash burn, which are non GAAP financial measures. More information regarding our forward looking statements and reconciliations of non GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC. Now, I would like to turn the call over to our Interim Chief Executive Officer, Mark Swanson. Mark?

Speaker 2

Thank you, Matthew. Good morning everyone and thank you for joining us. I continue to be extremely proud of our team's resilience and performance during these extraordinary times and I'm encouraged by our third quarter results which demonstrated steady operational and financial improvement. We saw monthly improvement in attendance relative to prior year as we move through each month of the third quarter and into the start of the fourth quarter. We also saw strong per capita growth in the third quarter relative to the prior year in both admissions and in park spending.

During the third quarter, we successfully and safely reopened three more parks to bring the total number of parks in operation to 10 out of 12 parks in our portfolio at the September. I want to recognize our operating teams for their outstanding efforts to reopen our parks while implementing various COVID nineteen related safety protocols and also following guidelines from state and local authorities. While this continues to be an unprecedented and challenging time for our company and industry, it's been encouraging to see our performance improve and uplifting to see our guests taking treasured time to visit the parks over the last few months. As a reminder, since the beginning of the COVID-nineteen global pandemic, we have taken significant actions to reduce our cost, carefully manage our cash flows, fortify our balance sheet and liquidity position, and operate our parks with new and enhanced operating and safety protocols and reimagine events to meet the realities of the current environment. While our third quarter financial results benefited from many of these actions, results were still significantly impacted by the global COVID-nineteen pandemic.

As we discussed last quarter, we temporarily closed all of our parks effective on 03/16/2020. In the second quarter, we began the process of reopening some of our parks beginning in Texas on June 6 and all five of our parks in Florida on June 11. In the third quarter, we reopened Sesame Place in Pennsylvania on July 24, Busch Gardens in Virginia on August 5, and SeaWorld in California exclusively as a zoo on August 28. Our Busch Gardens Park in Virginia is currently operating with significant state imposed capacity restrictions and limited and modified operations. Our SeaWorld Park in California is currently operating with significantly limited and modified operations as only the zoo elements of the park are opened.

No rides or theme park related attractions are currently open. As mentioned last quarter, we did not end up opening our water parks in Virginia and California for the 2020 operating season. We currently expect to open our Sesame Place San Diego Park in 2022 and as a result, we expect to reopen Aquatica San Diego for an exciting final 2021 operating season. Due to the park closures, our third quarter twenty twenty had a total of 10 parks open with limited capacity and reduced operating hours for five sixty two operating days compared to a total of 12 parks open with nine fifty seven operating days in the 2019 representing a 41% reduction in operating days. Attendance in the third quarter was impacted by fewer operating days and hours versus the prior year, capacity limitations, temporary park closures, limited marketing spend and a more limited events lineup.

Despite these limitations, attendance improved throughout the quarter with total consolidated monthly attendance down 89% in July, down 80% in August and down 61% in September versus the comparable prior year month. Excluding the company's Virginia and California parks, which were only partially open and operating with significantly modified and limited operations due to state imposed restrictions, monthly attendance was down 81% in July, down 68% in August, and down 48% in September. Monthly attendance trends continued to improve into the fourth quarter with October attendance down 50% on a total consolidated basis and down 40% excluding Virginia and California relative to prior year. Further, multiple parks hit capacity limitations on several days throughout the quarter and into October versus the prior year would have been better than what was realized. We are particularly pleased with the performance of our recently concluded Halloween events.

Once again, our operating teams rose to the occasion and created a safe yet modified version of our popular Halloween events that guests could enjoy. For example, Busch Gardens Tampa Bay's annual Hollow Scream event was reimagined with open air scare zones and social distancing adjustments. This modified event drew approximately 60 of the attendance of last year's event. As previously mentioned, Sesame Place reopened on July 24 starting with a three days a week operating schedule and later moved up to as many as five days a week. Sesame Place has been very creative in their reopening.

In addition to normal park visitation hours, the team at Sesame Place created a weeknight drive through Halloween experience as well, where guests stay in their vehicles to experience Sesame Street and all of its characters as they slowly drive through a section of the park. Another example is our Busch Gardens Park in Williamsburg, Virginia, which reopened on August 5 and was subject to a state imposed 1,000 person capacity limitation per session. Our Williamsburg team was also very creative in developing a business plan that makes sense even at those very low capacity levels by opening only a portion of the park for two separate sessions for summer operating days during the third quarter. By offering two separate four hour sessions, the team was able to increase daily capacity in that park while staying within the state mandated guidelines for park capacity. Late last week, the state of Virginia revised its theme park guidance and modified the methodology for calculating restricted capacity at theme parks.

We estimate that this change will allow us to increase the capacity at this park from 1,000 guests per session to approximately 4,000 guests at a time. We are excited to be able to safely offer our popular Christmas Town event in Williamsburg to more guests beginning this month. Finally, let me comment briefly on our SeaWorld Park in San Diego, California, which we were pleased to reopen on August 28 exclusively as a zoo following the state's guidance for reopening zoos. As such, we are not allowed to operate any rides including coasters and certain attractions, but outdoor animal presentations, viewing, and interactions are permissible. The team in San Diego responded in meeting these new requirements, creating an engaging experience that guests could enjoy while still complying with state and local health and safety guidelines.

Looking ahead, we are planning to operate modified versions of our popular Christmas events at our theme parks starting next week. We know that special events are valued by our loyal pass holders and guests, and we are confident that we will deliver compelling, exciting and most importantly safe events with relevant and appropriate operational changes. We remain confident in our ability to operate these events safely and profitably. With that, I would like to turn the call over to Elizabeth to discuss our financial results in more detail. Elizabeth?

Speaker 3

Thanks, Mark, and good morning, everyone. As Mark mentioned, our third quarter results were significantly impacted by the COVID-nineteen global pandemic. With fewer operating days and hours per week versus the prior year, capacity limitations, modified or limited operations, temporary park closures, limited marketing spend and a limited events lineup, attendance for the third quarter decreased by approximately 6,600,000 guests or 81% when compared to the prior year quarter. We generated revenue of $106,000,000 a decrease of $368,000,000 or 78% compared to the 2019. The decrease in revenue results from the decline in attendance and was partially offset by an increase in total revenue per capita.

Third quarter total revenue per capita was $67.94 compared to $58.31 in the 2019, an increase of 16.5% driven by strong improvement in both admissions per capita and in park per capita spending. Admission per capita increased by 22.4% to $40.39 in the 2020, primarily due to the realization of higher prices across admission products and the impact of out of commitment pass revenue, and partially offset by the impact of higher season pass attendance mix. In park per capita spending increased 8.9% to $27.55 in the third quarter twenty twenty. The increase in in park per capita spending results primarily from higher realized prices and product mix, particularly from merchandise, culinary and other in park services, and was partially offset by the impact of visitation mix and limited in park offerings during the quarter. In summary, we are particularly pleased with our overall per capita performance during the quarter, especially considering our higher mix of season pass attendance.

We generated a net loss of $79,200,000 compared to net income of $98,000,000 in the 2019. Adjusted EBITDA for the third quarter was a loss of $11,200,000 a decline of $218,000,000 compared to the prior year quarter. The relatively small adjusted EBITDA loss reflects our decisive actions and continued efforts around driving revenue and managing costs. Total operating expenses decreased $84,300,000 or 48% when compared to the prior year quarter, largely due to reduction in labor related costs resulting from modified or limited operating days, furloughs and workforce reductions. Operating expenses also declined due to the impact of reduced operating schedules, the use of more efficient staffing models, and other cost savings and efficiency initiatives.

Total selling, general and administrative expenses decreased by $40,300,000 or 62%, primarily due to a reduction in marketing related costs, a decline in third party consulting costs and a decline in labor related costs, along with other cost savings and efficiency initiatives. Total selling, general and administrative expenses decreased by $40,300,000 or 62%, primarily due to a reduction in marketing related costs, a decline in third party consulting costs and a decline in labor related costs along with other cost savings and efficiency initiatives. Now turning to our balance sheet. Our total deferred revenue balance related to all of our products as of the end of the quarter was $130,300,000 an increase of approximately 13% from September 2019. Total deferred revenue related only to our past products increased approximately 24% from September 2019.

With respect to our past products, our annual past base, which we generally refer to as our premium base, was down approximately 28%. And our 2021 fund card base, which generally gives unlimited access to our parks for the rest of 2020 and the calendar year 2021, was down 4%. We are encouraged with the trends we are seeing in past sales. Although still down from prior year levels, sales versus the prior year have improved each month since reopening, especially since launching our 2021 products. We are also encouraged that the impact of our pricing strategies continue to take hold with stronger realized prices on our past products versus the prior year.

As we discussed during our last earnings call, we took additional steps during the third quarter to further strengthen our financial position and flexibility and enhance our liquidity. As a result, we feel very well positioned to navigate through this environment. As a reminder, in July, we entered into an amendment to our senior secured credit facilities to further revise our financial covenants to suspend testing through 2021 and modify the testing of the covenant through the 2022. While we are temporarily exempt from complying with our leverage ratio covenant, we are required to comply with a quarterly minimum liquidity test of not less than $75,000,000 through the 2022 or the date on which we elect to use actual adjusted EBITDA to calculate the leverage ratio covenant. In early August, we issued $500,000,000 of second priority senior secured notes due in 2025.

We used part of the net proceeds from this notes offering to repay the then outstanding balance on our revolving credit facility. The amendment to our senior secured credit facilities along with the senior notes transaction further strengthens our cash position and increases our financial flexibility and liquidity. More specifically with respect to our available liquidity, as of 09/30/2020, our cash and cash equivalents balance was approximately $488,000,000 Total liquidity including our available revolver capacity of $311,000,000 was approximately $800,000,000 as of 09/30/2020. Our estimated average monthly net cash burn during the quarter was approximately $22,000,000 per month. Included in our net cash burn for the quarter are certain vendor payments which were previously deferred through extended payment terms or payment plans in order to manage liquidity during our temporary park closures and limited reopenings.

Excluding these deferred payments, we estimate that the average monthly adjusted net cash burn during the third quarter was approximately $2,000,000 per month, which demonstrates our commitment to effectively manage costs and cash flow through this environment. The deferred vendor payment balance was approximately $70,000,000 as of the end of the third quarter. We continue to work with our vendors and business partners on these deferred payments and anticipate having these fully paid off by April 2021. With the resumption of modified or limited operations across most of our parks, we are even more focused on driving attendance and total revenue, while eliminating unnecessary costs and continuing to identify more efficient ways to operate safely. Now let me turn the call back over to Mark who will share his final thoughts.

Mark?

Speaker 2

Thank you, Elizabeth. Before we open the call to your questions, I have some closing comments. During the quarter, our rescue teams continued to operate helping wildlife in need. In the third quarter, we helped rescue over three eighty animals and now have reached approximately 37,600 animal rescues over the company's history. We are one of the world's leading animal rescue organizations, and we are proud of our efforts to protect and save wildlife.

We want to thank our employee ambassadors for their dedication and effort to safely reopen our parks and welcome back our guests. We want to thank our loyal pass holders and guests for trusting us and returning to the parks that have reopened. And finally, we would like to thank our financial and operating partners for their continued support and understanding during these extraordinary times. As we discussed, we have been building attendance since June through our efforts around providing a safe and fun guest experience while reintroducing modified special events and creating new events for our pass holders and guests to enjoy our parks while still complying with state and local health guidelines. We are also very pleased with our strong per capita growth in the third quarter relative to the prior year in both admissions and in park spending.

While the future remains uncertain, we are encouraged by recent results and will continue to sensibly navigate the months ahead as we look forward to the time when our parks can return to a more normalized operating environment. As I've said before, we have the right assets, team, balance sheet, and liquidity to navigate through this environment and emerge an even stronger and more profitable enterprise. We continue to have high confidence in our long term strategy and in our ability to deliver significantly improved operating and financial results that we believe will lead to meaningfully increased value for all stakeholders. With that, let's open up the line to take your questions.

Speaker 0

We will now begin the question and answer session. We now question answer session. The first question is from Steve Wieseninski from Stifel. Go ahead.

Speaker 4

Yes. Hey, good morning, guys. So I think the first question is probably going be for Elizabeth. And Elizabeth, I think you said that deferred payments to vendors, the balance there is around $70,000,000 and you're kind of expecting to work through that till April 2021. I guess the question is, how do we think about that $70,000,000 kind of being allocated over the next, call it, or seven months?

Is that going be pretty much straight line? And I guess the actual question is or what I'm trying to figure out is maybe what should we be thinking about that monthly average kind of cash burn? Is it closer to the $2,000,000 or is it closer to the $22,000,000 Hey,

Speaker 3

Steve. Good morning. The cash burn that I would estimate for the next couple of quarters, I think we would keep it at the 20,000,000 to $25,000,000 range for modeling purposes. There's a couple of reasons for that. One is the vendor catch up that you referenced, we do have $70,000,000 that we still need to get, through.

We've got that, estimated to run out and get fully paid off by the end of, by the early April, so really mostly by the end of Q1. We also have our senior notes interest coming due. We had a payment here in November that went out. And then CapEx for Q4, we're estimating between 25,000,000 to $35,000,000 in CapEx. So factoring all of that in, I think the burn rate of 20,000,000 to $25,000,000, for modeling purposes makes sense over the next couple of quarters.

What I would say is obviously we're going to be opportunistic. That could be a little higher, if we decide to be more opportunistic in our spend and in some of our CapEx, if that makes sense.

Speaker 4

Yes, that does. Thanks. And then I don't know if you've kind of had any chance to think about 2021 at this point, but just trying to get an understanding of maybe what that CapEx spend will look like heading into next year.

Speaker 3

Yeah. That's that's a great question. And as you can imagine, 2021, where it's a bit harder to estimate where we're sitting here today. What I can tell you to give you a little bit of context on how we're thinking about it is we the rides that we're opening in in 2021, if you recall, were they were close to being finalized when we decided to postpone them into into 2021. Right?

So, we've got those coming online. We obviously wanna continue to to deploy capital for our later years capital plans. So right now, if you think through, we typically, estimate around 150,000,000 or so in core CapEx, going into our each year for to keep up with our cadence of new rides and attractions across our parks. So I don't I'm not prepared to give you a number just yet, but hopefully that gives you some context in how we're thinking about it. Obviously, it might be a little less than that when when we're looking at 2021 in particular.

Speaker 2

Yeah. And Steve, would just add this is Mark. I would just add on those on those rides. You remember, we we we thought we had the best lineup of new attractions coming into 2020. Very few of them opened, and so most of them, you know, our plan would be to open next year.

So we're gonna have a robust lineup of attractions, for 2021. That is, like Elizabeth mentioned, that is largely the construction on those is largely complete. You know, it's just just a little bit left to go on most of those. So we're really excited about that. It's gonna be a a great lineup.

Speaker 0

Our next question is from Tyler Batory from Janney Capital Markets. Go ahead.

Speaker 5

Hi. Good morning. This is Jonathan on for Tyler. Thanks for taking our questions. First one for me, Elizabeth, I believe you touched on this, but was wondering if you could provide some additional color on the ticket prices and promotions right now.

What are you guys doing there and how does that compare to prior years?

Speaker 3

Yes. So I think you're referring to the increase that we had in admissions per capita, which obviously we're quite pleased to see the growth, especially considering that we had a higher mix of season pass visitation during the quarter, which as you know typically puts pressure on our admissions per capita. What I would say there is in our admissions per capita, and I referenced this during our prepared remarks, we did have a portion of out of commitment revenue that was recognized during the quarter. But even if we peel that out, we still would have been up about 10%. And that is what we attribute to higher realized prices across our admission products, which is really good to see.

We've got a focus on our pricing strategies even before we went into this COVID environment. We've been focused on pricing. And we've been building out an internal team that's really focused on revenue management and also better communicating the benefits that our passes and our experiences offer. So I think we're starting to really see some of that take hold across all of our products, which is good to see. Now I would also caution you on a going forward basis, although we love to see this type of growth in admissions per capita, we've always focused on total revenue per capita.

As far as the business is concerned, as far as growth is concerned, we've always targeted between low to mid single digit growth there. So for modeling purposes, I think that would be reasonable, to continue to expect to see.

Speaker 5

Okay. Great. That's very helpful. And then, switching gears a little, I was wondering if you could provide some color you know, how the drive to range has changed throughout the summer and as we move into the fall months and kind of a two part. You know, I know it's probably difficult to judge, but are you seeing a meaningful pickup in the fly to guests in the park?

Speaker 2

Hey, Jonathan. This is Mark. Yeah. What I can tell you is, I mean, if if you look across the the company, we've seen not not surprisingly, an an increase in in local attendance. And, that coincides, as Elizabeth mentioned, with our increase in past visitation.

So not a surprise there. But if you look across the rest of markets in The United States outside of the local area, those have held pretty consistent in Q3 on a combined basis from year over year. So one of the things I think where we have an advantage is as we've you've heard us mention, we estimate across our whole company about 85% of our guests, drive to our parks. And I think that's really benefiting us right now. So, you know, if our local attendance is isn't, you know, north of, you know, 50% or so, on average, we're still getting just under 50% from from other markets in The United States that are largely driving in.

So we're excited about that, and I think, we'll continue to utilize that to our advantage. Our parks are easy to access in a lot of cases, so that's, something we'll continue to leverage.

Speaker 5

Our

Speaker 6

next question today will come from Steven Gambling of Goldman Sachs. Please go ahead.

Speaker 7

Hey, good morning. Two quick follow ups. First, with all the cost cuts, where do you think annual EBITDA and free cash flow breakeven attendance levels are? And how do you think about where margins could end up as attendance levels recover more fully? And that's another way.

Is there any way to help size the the permanent cost outs?

Speaker 2

Yeah. Hey. Hey, Steven. It's Mark. I can I can take I can take those questions?

So couple things on, you know, e EBITDA breakeven. You know, look, there's gonna be a lot of a lot of factors that influence that, you know, mix of parks, time of year, that type of thing. But on a to give you a range that you could use, you know, we estimate we could be down about 60% or so in attendance and have breakeven EBITDA. And what I'll tell you is we were down in September 61% as we mentioned, and we had less than a million dollar EBITDA loss for that month. So we were pretty much almost at breakeven in the month of September on EBITDA.

And then, you know, as you as you move up the chain, obviously, to cover debt service and and CapEx, would would add to those numbers. As far as the margin improvement, I'm really proud of the work we've done in this area. We've been at this for a couple of years, but then we also spent a lot of time as with COVID, you had the most visibility you're ever going to get into your cost. We were down to the most essential costs and we've been very careful and sensible as we've added costs back. And so we have more visibility than ever.

One thing I'd like to point out is if you look at our revenue of just over $100,000,000 $106,000,000 for the quarter, and then you look at an EBITDA loss of just about $11,000,000 I mean, we're maximizing that revenue. We're being very careful on our cost. And when I look across others in the space, I think our performance stands out in that regard. So on a go forward basis, getting to your question, I think the opportunity is several 100 basis points when we get to a more normalized environment where we're back to doing, you know, hopefully 22,000,000, 23,000,000 in attendance. We think we can with this new cost structure with the work we've done on labor and vendor spend and operating expenses, marketing, etcetera, we think we can flow through several 100 basis points, more in margin.

Speaker 7

That's helpful. And then, you mentioned the increase in local attendance. Can you see whether the the customers coming back are new or repeat customers and has the demographic changed at all as there's potentially, you know, more limited options for leisure and entertainment spend for them?

Speaker 2

I think what I would tell you is, look, I think we, you know, we are a a favorite in a lot of our markets. Right? So for example, you know, here in Orlando, we know Aquatica, you know, was wedded couple years ago. USA Today is number one water park. A lot of locals like SeaWorld obviously.

So we are getting I think what local guests who like to come out and have a good time. I think there's, as I mentioned in the press release, we view this as people increasingly desire and willing to visit our parks. We've proven we can operate them safely and we're also providing a great experience. We've reimagined events and these are things that people wanna do. I would also tell you, I think one huge advantage we have is our parks are outdoors in most cases, very much outdoors.

Just about the whole experience in many cases is outdoors and I think that is helping us and will continue to help us. So I think we'll continue to attract a wide variety of people going forward and we're seeing not only like I said local visitation up, but also those markets that can drive in are holding on a combined basis pretty steady to what we've seen in prior years.

Speaker 6

Our next question today will come from Chad Danone of Macquarie. Please go ahead.

Speaker 2

This is Paul Golding on. So I was wondering if you could walk us through the marketing cadence here for reintroducing costs and understanding how you're thinking of approaching that as we get into 2021 given the SG and A benefit from from the low marketing costs? Yeah. So I think, you know, there's a couple ways to look at it. One, we have, you know, when I talked about the cost initiatives that would definitely apply, to marketing.

And I think, you know, we've we've been at work, at that for some time. We also have some some new folks, you know, on our team who I think are gonna bring some good insights into that area as well. So I think we'll find efficiencies in our marketing spend going forward. And, you know, we're we're doing some things differently perhaps a little bit now than than we've done in the past. And so I think we'll continue to do that.

So, you know, ultimately, look over time, as we get back to normal, we would we would expect to probably spend more in marketing, but I think we're gonna find more efficiencies in that spend. I'm confident of that work and that's work that's ongoing right now. Great. And did you have to do any retooling of sort of the marketing mechanism here in the interim that baked into into costs while you you pivoted to zoo experiences in in California and limited experiences elsewhere? Well, certainly, we've had to do a lot of communication.

And and I think, you know, Elizabeth kind of alluded to that with I think our communication has gotten better. But, yeah, it's a it's it's a it's a little bit of a different experience going to a theme park now. One thing that hasn't changed is it's a lot of fun. And, but there's some communications we've had to make, and we've done that through email and digital channels and Facebook, things like that that we've, I think, done a pretty good job of of communicating all the different things going on in our park. So, you know, some of that some of that kind of, you know, is reflected in the dollars, you know, digital spend and things like that, but we'll continue to watch that going forward.

Speaker 6

Our next question will come from Alexia Quadrani of JPMorgan. Please go ahead.

Speaker 3

Hi. This is Anna on for Alexia. Thank you so much for the question. Just wondering if you could comment a little more on the restrictions for SeaWorld San Diego operating as a zoo and what that means for your attendance limits in that park? And then on the other hand, are there any markets where you saw better capacity from eased restrictions on attendance such as in the Florida market?

Speaker 2

Yes. Hi, Anna. So what I'll tell you in in in San in San Diego yeah. I mean, we are open as as a zoo. We're we're obviously a zoo, an accredited zoo.

So we're we're pleased that we're open and offering an experience. You know, what where we're limited there is, you know, the capacity to see some of the presentations we have there, is limited. And then the there's no rides, obviously, and then there's not nothing any sort of shows that would be non animal related we're we would not have. So, you know, that that you know, it's hard to give you an exact number, but it's a pretty significant reduction. And until, we're able to open up fully as a theme park us and others in the state, you know, I think that's going be pretty limited capacity.

What I will tell you is on your on kind of the rest of the markets, you know, we alluded or we didn't allude. We we specifically mentioned, Williamsburg, the capacity there, just recently, here was allowed to go up to about 4,000 people per session. So that should be a positive for us. What what I'm excited about with that is we have a a great Christmas event there called Busch Gardens Christmas Town, and, it's very popular, and, I'm excited that we're gonna be able to offer that to even more people. And so, you know, outside of that, the the steady improvement in the attendance that you've seen, we gave you the numbers without California and Virginia, so you should get a sense that the others continue to steadily, for the most part, increase through the quarter and then into October.

So we're going to keep operating safely. What I can tell you is, you know, we that that'll always be, what we do, but we're excited that more and more people are coming out to see our events. We'll be starting Christmas events in, some of our parks next week, and, we're excited about that.

Speaker 0

Thank you.

Speaker 2

Sure.

Speaker 0

Our next question is from Brett Andress from KeyBanc Capital Markets. Go ahead.

Speaker 8

Hi, good morning. My first question is what did the local visitation mix look like in Florida versus, destination during the quarter? Is that the 50% that you referenced earlier? And I guess what I'm getting at is, I mean, how much more local headroom do you think you have without a meaningful, destination recovery in that market?

Speaker 2

Yeah. Hey, Brad. It's Mark. So yeah. I mean, in, so to take SeaWorld Orlando, for example, you know, the the local visitation there was about 55% for the quarter in that range.

You can take the math from there that 45% was coming from other non local markets. People driving in from other areas, other states, there's really no international attendance. As far as the headroom, I mean, look, I think we offer a great value. I think we're even if it's not locally, if you just look at the state of Florida, it's a big state. There's people moving here every day.

I think we continue to focus on those markets. Our pass program is tailored very well to obviously local or nearby guests. Don't know what the limit would be, but we're not planning, we're planning to just continue to move forward to try to attract more and more visitation.

Speaker 8

Got it. Okay. And then just drilling down into the in park per caps, you know, strong there again. But have you learned anything during, you know, this pandemic in terms of what customers are willing to pay for or what events they're they're willing to attend? I guess, anything that might carry in the periods when things maybe start to return to normal.

Speaker 2

Sure. So I think, you know, we have, look, I think we learn things every year, but I think right now, I think people are, as I as we mentioned, you know, they have a desire and a willingness to get out and visit theme parks. And I think that includes doing experiences. You know, we've had focus for for for a while now on, you know, more more interactions with with some of our animals, better food and drinks in our parks, more compelling merchandise, for example. You know, and what's what's kind of impressive about the in park is, you know, with higher local and past visitation that that kind of depresses a little bit your your parking per cap.

So, you know, I think I think we're gonna continue. We just opened, for example, like a new a new, venue here in Orlando at SeaWorld called Glacier Bar. And, that's, you know, an example of a of a a bar area that that has just a lot of coolness to it that people can come out and if you're local you can go and hang out and visit and have a good time. Even if you're not a local, it's a neat place to stop and have some meat or something to drink. So I think people, in summary, I think people are willing to pay for quality products and compelling products and one the kind experiences which we offer all of those things.

Speaker 0

Our next question is from Ben Chaikin from Credit Suisse. Go ahead.

Speaker 9

Hey, how's it going? Thanks for taking my question. I guess you said there was several 100 basis points of margin opportunity. And I think my interpretation was when volumes come back, I guess the question would be, is that with the current cost cuts? Or does that assume incremental cost cuts?

And then just kind of like related to that, I guess, the release, you guys have been helpful and give us some color. And I think in there, it says there's $1,900,000 remaining on the EBITDA on the cost savings side. At the same time, I think you had a headcount reduction of close to 3,000 employees. So I'm just trying to get were those anticipated? Or do you or do you see incremental cost cuts in the business?

Just just any color there would be helpful. Thanks a lot.

Speaker 2

Yep. Hey, Ben. It's Mark. I I can take that. So look, I think it's a it's a combination of things.

One is we as as I mentioned, we spent a tremendous amount of time looking at our labor models, operating models when we were closed. And as we've reopened, we've we've deployed those obviously. And as we as we grow and and to your point, what I was trying to say there is when we get back to to the normal attendance that we've seen, like 02/2019, 02/2018, yeah, that's where you're gonna get the margin expansion I was alluding to. But look, we're not gonna stop, you know, even while we're operating at a lower level. We're gonna continue to find new savings as well.

So I think it's a combination of executing on what we're doing now and also additional efficiencies. And I think as far as your question on headcount specifically, I think we're always looking for opportunities to operate in the most efficient manner. And I think certainly get to a more variable labor model that we can more easily flex to our tenants.

Speaker 9

Got it. I appreciate it. Thanks.

Speaker 0

Our next question is from Michael Swartz from SunTrust. Go ahead.

Speaker 9

Hey, guys. Good morning, guys. Just a quick follow-up question on actually ramp up marketing spend during the quarter to generate the improving attendance levels?

Speaker 2

Yeah. Hey, Michael. We're having a hard time hearing you, but I think you were you were asking a little bit about marketing spend and and whether that was was ramped up. Look. There's there's a, I I guess, a a thoughtful increase in that.

But, you know, I would say still relative to to prior years, still down, significantly. So we're, we're gonna look at that. Like I said, I think we've have found efficiencies in that model, in our marketing spend. I think we will continue to do that. And where it makes sense to pulse and and spend a little bit more, we will because we feel we got visibility into into a higher ROI.

But I think, you know, we're a lot, and, you're seeing the efforts of some of that kinda come through.

Speaker 10

Okay. Great. And and just a a second question on I think you you announced that you won't be officially opening the the the new Sesame Place in in San Diego until 2022, and I I believe the terms of the original agreement that that was, to be opened in 2021. Were were there any financial penalties or anything of that nature in in terms of moving that back a year?

Speaker 2

Yeah. Look. There is a, what I would tell you, first off, we we have a really good relationship with with Sesame Workshop. And so you can you can dive into our footnotes in our queue. But, yeah, there is a a penalty.

It's, I think, about $2,000 a day. And so we're you know, we'll address that. I think we are very confident, that we can work with our partners to come to a resolution that makes sense for both of us. Again, it's a great relationship. More importantly, we're just excited to get that park open.

And I think the delay will allow us to open it hopefully when things are at a better spot in California. I mean, right now, we we can't even really open a theme park there, right, fully. We can operate as a zoo. So I think this, delay makes a lot of sense, and I know there's gonna be more information in our 10 q, regarding the penalty, that I talked about. Hey, Michael.

Just one additional point on sesame before I get to our closing comments. I meant in the 10 k is where you'll actually find more information about that that contract, not the 10 q. Sorry about that. So thanks thanks, Kate. I think we're done with the questions.

And on behalf of Elizabeth and and the rest of the management team here at SeaWorld, wanna thank you all for joining us this morning. You know, as you heard today, we're we're confident in our business strategy and we look forward to continuing to come out of this crisis and and drive improved operating and financial results and long term value for all stakeholders. So thanks for joining and we look forward to speaking with you next quarter.

Speaker 0

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.