SeaWorld Strikes a Familiar Tune With Fresh Focus on Animals

After spending the last couple of years moving away from talking about its animals, the new leadership at SeaWorld Entertainment sounds like it wants to start talking more about its animals.

During his second earnings call with analysts Tuesday, Interim CEO John Reilly said the theme park operator is doing a better job of explaining why people should visit, highlighting its animals, rides, events, and value proposition.

But he said SeaWorld needs to improve the way it talks about its veterinary, marine biology, and animal care teams as well as the work they do on conservation, animal rescue, education, and animal research. It's a familiar refrain for the company, which has been under fire for years by criticism over its treatment of captive orcas.

"We need to continue to showcase these activities through our marketing and communications strategy, so that more people know about this outstanding work," Reilly said. He mentioned the recent marketing initiative called Park to Planet, which showcases animals both in parks and in the wild and draws a line from visiting the theme parks to supporting rescue work. And, he said, the company is optimizing its spend to get more out of digital, social, and earned media.

"These activities signal a more aggressive shift to better inform, better educate, and engage prospective guests as well as season pass holders about who we are as an organization and what we do, particularly as it relates to animals and the habitats in which they live," Reilly said.

The company in recent years has been putting less emphasis on its animal entertainment, especially the killer whale program, instead focusing on rides and other "experiences that matter." That followed the release of the 2013 documentary Blackfish, about the killing of a trainer by an orca. SeaWorld has since ended its orca breeding program and started to transition away from theatrical killer whale shows.

Reilly also talked up the company's new offerings for this year, and said a new capital strategy to offer a new ride, attraction, show, or event every year in each park should boost attendance. SeaWorld has 12 parks around the country under brands including SeaWorld, Busch Gardens, Aquatica, and Sesame Place.

"To support this effort, we have a renewed more disciplined focus on efficiency of capital spend and return on investment," Reilly said. "We believe we can do more and spend less."

A 'Strong' Quarter Despite Loss

The company used positive language to describe the quarter that ended March 31, and there was good news to be found. Revenue increased 16.5 percent to more than $217 million, beating analyst expectations, and attendance jumped almost 15 percent to 3.2 million visitors.

Still, the net loss increased from $61.1 million during the first quarter of 2017 to $62.8 million during the first quarter of this year. Because only five of the company's 12 parks parks are open during the full three months, first-quarter results usually end up at a loss.

Adjusted earnings before interest, taxes, depreciation, and amortization amounted to a loss of a little more than $100,000, an improvement of more than $30 million over the first quarter of 2017. It was, the earnings release said, "the highest first quarter adjusted EBITDA the company has reported since 2013."

Executives did not provide a forecast during Tuesday's call but promised to lay out long-term plans during the next quarterly call in August. Shares rose more than 8 percent to $17.20 by late afternoon.

Executives said the improvement was due to new marketing and communications initiatives, excitement about new rides and events, new pricing strategies, and the earlier timing of Easter. The holiday shift likely drove about half of the increase in attendance, Swanson said.

There were some downsides in the quarter, too. SeaWorld said its financial results for the first quarter took a $21.5 million hit, in part due to "separation-related costs." The company's former CEO, Joel Manby, resigned in February, followed over the next month by two executives he brought in: Chief Creative Officer Anthony Esparza and Chief Marketing Officer Denise Godreau.

The $21.5 million in expenses also included "a legal settlement accrual" during the quarter. While a spokesman would not answer a question about that item, SeaWorld said earlier this year in its annual report filed with the U.S. Securities and Exchange Commission that it may put money aside in case of lawsuits. "Matters where an unfavorable outcome to the company is probable and which can be reasonably estimated are accrued," the filing said. "Such accruals, which are not material for any period presented, are based on information known about the matters, the company’s estimate of the outcomes of such matters, and the company’s experience in contesting, litigating, and settling similar matters."

A class-action lawsuit accuses SeaWorld of covering up the damage caused by Blackfish.  In June, he company revealed it was under investigation by the SEC and U.S. Department of Justice for disclosures and public statements made after the documentary came out. Last Month, the company said it had been warned by the SEC that some sort of enforcement activity was likely.

Discipline or a Dodge?

Unlike his predecessor, Reilly didn't engage in much conversations about difficulties SeaWorld is facing. Earlier calls often touched on challenges in international markets as well as what the company called reputational issues.

"A lot of these calls in the past have been dominated by discussions of attendance in Latin America, Brexit impacts, animal activism kind of headwinds in San Diego, I don't hear any of that on this call," said Barton Crockett, an analyst with FBR Capital Markets. "I was wondering if that suggests that these aren't issues right now?"

Reilly said international visitation from most markets was up in the first quarter, though UK visitors declined "at a moderated pace."

And on the question of animal activism, he reiterated that marketing and communications are a priority, as is promoting the zoological team.

"We're going to be more disciplined on that communications front going forward," Reilly said. "We brought in leading firms to assist us with that effort. So, it's a priority going forward."