SeaWorld Breaks the Buck
Image source: SeaWorld Entertainment.
SeaWorld Entertainment (NYSE: SEAS)is still struggling in its turnaround efforts. Revenue slipped 2.3% to $485.3 million during the seasonally potent summer quarter, with adjusted EBITDA going for a 10% slide. Earnings clocked in at $0.77 a share, well short of both the $1.14 a share it posted a year earlier and the $1.08 a share that analysts were expecting.
This is the weakest third-quarter profit that SeaWorld has posted since its IPO, and it's also the second-worst summertime showing when it comes to revenue. It's the first time in SeaWorld's four summers as a public company that it failed to top $1 in per-share profitability.
SeaWorld isn't where it needs to be, but the news isn't all bad. Attendance was essentially flat, dipping 0.4% by roughly 30,000 guests. The turnstile clicks held up despite unfavorable weather impacting its northeastern attractions and an estimated 93,000 year-over-year decline in Latin American visitors during the quarter given the political and currency translation challenges in the region. Attendance at its parks in Texas and California continue to improve, and Florida parks actually increased their visitor counts by 1.3%. It was Florida's attractions that were in the red in terms of attendance through the first half of the year.
Taking a deeper dive
Revenue declined at a headier pace than attendance as a result of a 2.9% decrease in admission per capita. This doesn't mean that SeaWorld is discounting its attractions aggressively again. The dip is the handiwork of more strength at SeaWorld's water parks, which are cheaper for guests to enjoy.
SeaWorld continues to shift the emphasis at its namesake parks away from marine life shows, something that should help it in the battle against conservation activists. Blackfish-fueled critics may never come to embrace the chain of theme parks, but at least shifting to rides and other experiences will make the knocks less emphatic. Brand restoration is a big thing at SeaWorld these days.
We're also going to see more cost controls at SeaWorld. Eliminating its quarterly dividend and nixing the $300 million Blue World Project are just the first steps. SeaWorld expects to shave $65 million in annual costs at SeaWorld with $40 million of that materializing by 2018. That's probably not what theme park employees and fans want to hear, though SeaWorld didn't elaborate on the matter outside of pointing out that a third of the cost cuts will come at the corporate level, with the balance being culled out of operations.
SeaWorld slashed its adjusted EBITDA guidance for all of 2016, but between the stormy weather that smacked financial results in the third quarter and the Hurricane Matthew-related closures that will sting the current period, this isn't really a surprise. Things could still start to improve at this point. SeaWorld pointed out how season-pass sales since September have been improving across all of its parks, and that generates deferred revenue which is recognized over the course of the year as the annual pass tenures play out. Even the stock that initially opened lower on Tuesday morning turned positive shortly after that.
The locals-propelled turnaround in Florida attendance is a big deal. Investors already know that the dividend can't get any lower than the current 0% yield. Investing in cheaper bunt singles at its parks instead of swinging for the fences the way it did this past summer with the Mako world-class coaster at SeaWorld Orlando may seem like a questionable strategy in terms of near-term marketing strategies, but it will make the parks more complete experiences that won't rely on orcas leaping out of the water in the near future. SeaWorld has a long way to go to get to where it needs to be, but this is starting to seem like the bottom of the tank here.
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