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October 20, 2017

Press Release

SeaWorld Entertainment, Inc. Reports Second Quarter and First Half 2017 Results

| 8/8/2017

ORLANDO, Fla. -- SeaWorld Entertainment, Inc. (NYSE: SEAS), a leading theme park and entertainment company, today reported its financial results for the second quarter and first half of 2017.

Overview

  • Attendance in the second quarter of 2017 was up by approximately 138,000 guests compared to the prior year quarter, and benefited from the shift in the timing of Easter but was largely offset by a decline in U.S. domestic (defined as guests outside of a 300 mile radius) and international attendance. Results for the first half of 2017 provide a more meaningful comparison to the prior year period due to the Easter shift. Attendance for the first half of 2017 was down by approximately 353,000 guests compared to the first half of 2016 and was primarily impacted by an overall decline in U.S. domestic and international attendance, which was largely concentrated at the company's SeaWorld parks in Orlando and San Diego.
    • The company believes that the decline in U.S. domestic attendance, particularly at its SeaWorld Orlando park, was primarily driven by the combined impact of reduced national advertising and competitive pressures. In addition, the company believes SeaWorld San Diego was further impacted by public perception issues which have resurfaced since the company reduced marketing spend on its reputation campaign.
    • These factors were partially offset by improved attendance from guests within a 300 mile radius for the company's Orlando, Tampa, and San Antonio markets. Additionally, season pass sales to date are up in all major markets outside of California. Although attendance at the SeaWorld San Diego park is still down overall, attendance from the local San Diego market has improved since the company's new rides and attractions opened in the second quarter, and this trend has continued through the end of July.
  • Net loss of $237.0 million for the first half of 2017 includes a non-cash goodwill impairment charge of $269.3 million.
  • The company expects to achieve its targeted $40 million in net cost savings by the end of 2018, and is identifying additional areas for cost reduction.
  • The company has updated its Adjusted EBITDA[1] guidance for the full-year 2017 to be in a range of $280 million to $310 million. See "Guidance" section which follows for a further discussion.

"While we are making progress in key areas of our plan, we are not satisfied with our results for the quarter," said Joel Manby, President and Chief Executive Officer of the company. "This quarter provided us with an understanding of what is working and where we need to make adjustments. We are increasing our investment in national advertising to generate sufficient awareness of our brand attributes and strong new rides and attractions, developing a new national marketing campaign emphasizing our distinct experiences, and reinvesting in our reputation messaging to target perceptions in key markets, particularly California. We will offset this increased advertising with additional cost reductions.

"In the first half of 2017, attendance increased from guests within 300 miles of our Orlando, Tampa, and San Antonio markets, and season pass sales to date for all major markets outside of California are up – which we believe is due to the favorable reception of our new attractions and demonstrates our strong appeal with the guests most familiar with our brand, our mission and our attractions. We are committed to our capital investment strategy and will continue to invest in new rides, attractions, and festivals across our parks. At the same time, we are maintaining our rigorous cost discipline, and while we are on schedule to achieve our targeted $40 million in net cost savings by the end of 2018, we are identifying an additional $25 million in potential savings, which we believe could be saved outright or reinvested in our marketing efforts. We believe our plan, with the changes we are making, is the right one and we are committed to working tirelessly to achieve our goals."

Second Quarter 2017 Results

During the second quarter of 2017, the company generated revenue of $373.8 million, an increase of $2.6 million, or 1%, compared to the second quarter of 2016. The increase in revenue reflects an increase in attendance for the quarter, due primarily to the shift in the timing of Easter into the second quarter of 2017. The company reported a net loss of $175.9 million, or a loss of $2.05 per diluted share in the second quarter of 2017. Net loss for the second quarter of 2017 includes a non-cash goodwill impairment charge of $269.3 million related to the full impairment of goodwill for the company's SeaWorld Orlando park. In the second quarter of 2016, the company generated net income of $17.8 million, or $0.21 per diluted share.

Adjusted EBITDA, was $104.2 million, an increase of $20.4 million, or 24%, compared to Adjusted EBITDA of $83.8 million in the second quarter of 2016. Net cash provided by operating activities was $98.9 million in the second quarter of 2017 compared to $79.5 million in the prior year second quarter. 

Attendance in the second quarter benefited from the shift in the timing of Easter into the second quarter of 2017, which was largely offset by a decline in U.S. domestic and international attendance, mainly concentrated at the company's SeaWorld parks in Orlandoand San Diego. In addition, SeaWorld San Diego was further impacted by a decline in attendance from the Southern Californiamarket. 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 that attendance at its SeaWorld San Diego park was additionally impacted by public perception issues which have resurfaced since the company reduced marketing spend on its reputation campaign. To address the decline in U.S. domestic attendance, the company has launched a new national media campaign, introduced targeted national offers and repositioned its summer messaging to increase emphasis on its new attractions to the U.S. domestic market. The company is also relaunching its reputation campaign and increasing its marketing efforts particularly in its California markets to once again address public perceptions, share facts and correct misinformation.

Total revenue per capita (total revenues divided by attendance) declined to $61.05 in the second quarter of 2017 compared to $62.02in the prior year second quarter. Admission per capita (admissions revenue divided by attendance) decreased by 1.8% to $36.74 in the second quarter of 2017 from $37.43 in the prior year second quarter. In-park per capita spending (food, merchandise and other revenue divided by attendance) decreased by 1.2% to $24.31 in the second quarter of 2017, from $24.59 in the prior year second quarter. These declines result from ticket product and park mix issues, which include the impact on total revenue per capita of a decline in U.S. domestic and international attendance, increased utilization of season pass products, and associated free promotional ticket offerings. These factors were partially offset by price increases in the company's admission products.

Due to financial performance, particularly late in the second quarter of 2017, the company conducted an interim goodwill impairment test for its SeaWorld Orlando reporting unit. As a result, the company determined that the goodwill associated with its SeaWorld Orlando reporting unit was fully impaired and recorded a non-cash goodwill impairment charge of $269.3 million.

First Half 2017 Results

During the first half of 2017, the company generated revenue of $560.1 million, a decrease of $31.3 million, or 5%, compared to the same period in 2016. The company generated a net loss for the first half of 2017 of $237.0 million, or a loss of $2.77 per diluted share.  Net loss for the first half 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. For the first half of 2016, the company generated a net loss of $66.3 million, or a loss of $0.78 per diluted share.

Adjusted EBITDA in the first half of 2017 was $73.9 million, a decrease of $4.0 million, or 5%, compared to Adjusted EBITDA of $77.8 million in the same period of 2016. Net cash flow provided by operating activities was $104.6 million in the first half of 2017 compared to $111.7 million in the first half of 2016. 

The decrease in revenue was driven by a 3.8% decline in attendance along with a 1.5% decrease in total revenue per capita. Total attendance for the first half of 2017 declined by approximately 353,000 guests compared to the first half 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 SeaWorld parks in Orlando and San Diego. 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.  In addition, SeaWorld San Diego was further impacted by a decline in attendance from its Southern California market, which the company believes was partly due to public perception issues which have resurfaced since the company reduced marketing spend on its reputation campaign. These factors were partially offset by improved attendance from guests within a 300 mile radius for the company's Orlando, Tampaand San Antonio markets which the company believes is due to its new attractions and favorable weather when compared to the prior year period.

Total revenue per capita declined to $62.74 in the first half of 2017 from $63.72 in the first half of 2016. Admission per capita decreased by 2.1% to $38.09 from $38.89 in the prior year period. In-park per capita spending decreased to $24.65 in the first half of 2017, from $24.83 in the same period of 2016. These declines result from product and park mix issues, which include the impact on total revenue per capita of a decline in U.S. domestic and international attendance, increased utilization of season pass products, and associated free promotional ticket offerings. These factors were partially offset by price increases in the company's admission products. 

Other

As previously announced, during the quarter the company entered into a license agreement with Sesame Workshop, a New York not-for-profit corporation, which extends the company's status as Sesame Workshop's exclusive theme park partner in the United States. Under this agreement, a second Sesame Place theme park is scheduled to open no later than mid-2021 in the U.S., and after the opening of the second Sesame Place, the company will have the option to build additional Sesame Place theme parks in the U.S.

The agreement also makes it possible for Sesame Street characters to continue to appear at the Sesame Street lands inside the company's Busch Gardens theme parks and SeaWorld theme parks in San Diego and San Antonio, as well as a new Sesame Street land to be built in SeaWorld Orlando by fall 2022.

 

About SeaWorld Entertainment, Inc.

SeaWorld Entertainment, Inc. (NYSE: SEAS) is a leading theme park and entertainment company providing experiences that matter, and inspiring guests to protect animals and the wild wonders of our world. The company is one of the world's foremost zoological organizations and a global leader in animal welfare, training, husbandry and veterinary care. The company collectively cares for what it believes is one of the largest zoological collections in the world and has helped lead advances in the care of animals. The company also rescues and rehabilitates marine and terrestrial animals that are ill, injured, orphaned or abandoned, with the goal of returning them to the wild. The SeaWorld® rescue team has helped more than 30,000 animals in need over the last 50 years.

SeaWorld Entertainment, Inc. owns or licenses a portfolio of recognized brands including SeaWorld, Busch Gardens® and Sea Rescue®. Over its more than 50-year history, the company has built a diversified portfolio of 12 destination and regional theme parks that are grouped in key markets across the United States, many of which showcase its one-of-a-kind zoological collection. The company's theme parks feature a diverse array of rides, shows and other attractions with broad demographic appeal which deliver memorable experiences and a strong value proposition for its guests.

Copies of this and other news releases as well as additional information about SeaWorld Entertainment, Inc. can be obtained online at www.seaworldentertainment.com. Shareholders and prospective investors can also register to automatically receive the company's press releases, SEC filings and other notices by e-mail by registering at that website.

Tags: Travel & Tourism, entertainment

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