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    United Parks & Resorts (PRKS)

    Q3 2024 Earnings Summary

    Reported on Nov 7, 2024 (Before Market Open)
    Pre-Earnings Price$56.85Last close (Nov 6, 2024)
    Post-Earnings Price$56.33Open (Nov 7, 2024)
    Price Change
    $-0.52(-0.91%)

    What went well

    • PRKS expects to recapture weather-related losses from 2024 in 2025 and aims for a return to record performance, with encouraging signs such as double-digit increases in group bookings and strong pass sales.
    • Despite new competition in Orlando, PRKS believes its differentiated product, value proposition, and unique attractions, like a new SeaWorld Orlando attraction in 2025, will allow it to grow and capture market share.
    • PRKS is leveraging its mobile app to enhance guest experience and drive revenue, with mobile orders showing an approximate 35% increase in average transaction value compared to point-of-sale orders, and currently only about one-third penetration, indicating significant room for growth.

    What went wrong

    • PRKS no longer expects to achieve record revenue and adjusted EBITDA for 2024 due to significant weather impacts, including Hurricane Milton in October, which resulted in 14 operating day closures in their Florida market.
    • Increased competition in the Orlando market in 2025, with a new park opening, has raised investor concerns about potential material impact on PRKS's attendance and revenue. PRKS acknowledges the need to execute strategies to compete against the new entrant.
    • Operating expenses have increased, including labor costs, leading to a decrease in adjusted EBITDA despite flat revenues. EBITDA costs were up approximately 2%, indicating margin compression and challenges in cost management.

    Q&A Summary

    1. 2025 EBITDA Outlook
      Q: Can 2025 surpass 2022's record EBITDA?
      A: Management believes that while 2024 won't be a record year due to significant weather impacts like Hurricane Milton, they expect to recover lost revenue and achieve record performance in 2025 through new attractions, events, and cost savings initiatives.

    2. Competition from Epic Universe
      Q: How will you handle new competition in Orlando?
      A: They've grown despite past competition and view new entrants like Epic Universe as opportunities to attract more visitors. They plan to leverage their differentiated products, strong value proposition, and ease of access to grow market share.

    3. Hurricane Impact on Q4 EBITDA
      Q: What is the EBITDA impact from Hurricane Milton?
      A: The hurricane caused significant closures, including five consecutive days at Busch Gardens, resulting in an estimated EBITDA impact of about $9–10 million for the fourth quarter.

    4. Capital Allocation Plans
      Q: Will there be new share buybacks or dividends?
      A: Management acknowledges the importance of capital allocation and states that the Board will consider the best options to return cash to shareholders but provided no specific plans at this time.

    5. Cost Efficiencies and Pressures
      Q: What are your cost efficiency opportunities?
      A: They plan to implement $20 million in new initiatives next year, including using technology to improve labor efficiencies and reduce spending on utilities and insurance claims.

    6. Real Estate Monetization
      Q: Are there plans to monetize land assets beyond hotels?
      A: Management recognizes the value of their land holdings and is exploring opportunities to monetize these assets beyond hotel partnerships, though no specific plans were shared.

    7. Dynamic Pricing Initiatives
      Q: How are you leveraging dynamic pricing?
      A: They are focusing on dynamic pricing through the app and ticketing, adjusting prices based on demand to drive revenue, with more opportunities expected in the future.

    8. Forward Booking Trends
      Q: Are forward ticket sales increasing for 2025?
      A: Forward ticket sales for intended 2025 dates are pacing up double digits compared to last year, indicating strong demand, though exact figures were not disclosed.

    9. Shift to Premium Passes
      Q: How are season pass sales trending?
      A: While total pass units are flat, sales of premium passes are growing double digits. Premium passes generate more revenue and attract more loyal guests, offsetting declines in lower-tier passes.

    10. CapEx and ROI Projects
      Q: What are your key capital investment areas?
      A: Capital expenditures focus on high-ROI projects like enhancing food and beverage offerings, upgrading exit retail experiences, and investing in technology to improve operational efficiencies.

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