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Ice

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To be fair, third quarter profit was fairly low, and third quarter financials were the ones most likely to see the impact of the necessary pay raises to lead the hiring surge we saw at the tail end of Q2. I would say Q3 is a nice change of direction from Q2, but the greater numbers of this year are definitely concerning.
 

Alf33

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But even with these mixed numbers the stock closed yesterday at $68.78 which is just off of the 52 week high. However it's predicted it will drop today because of the these results.
 

Jahrules

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But even with these mixed numbers the stock closed yesterday at $68.78 which is just off of the 52 week high. However it's predicted it will drop today because of the these results.

Source?
 

Zachary

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Every single quarter they keep insisting that automation is playing a role in their higher margins, but I still can't find that reflected ANYWHERE in the parks. Does anyone have any idea what they could be referencing?
 

Jahrules

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Every single quarter they keep insisting that automation is playing a role in their higher margins, but I still can't find that reflected ANYWHERE in the parks. Does anyone have any idea what they could be referencing?

I can think of a few things.

They likely consider their app automation.

They've talked a few quarters about a business intelligence app that was developed for them. They're using this in place of human number crunching for price increases and adjusting daily prices (i.e. qq price vs forecast attendance).

The robotic deer that monitor their landscaping projects.
 

Jahrules

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SeaWorld Entertainment, Inc. Reports Fourth Quarter and Fiscal 2021 Results
February 24, 2022
Download this Press Release (PDF)
ORLANDO, Fla., Feb. 24, 2022 /PRNewswire/ -- SeaWorld Entertainment, Inc. (NYSE: SEAS), a leading theme park and entertainment company, today reported its financial results for the fourth quarter and fiscal year 2021.[1]

Fourth Quarter 2021 Highlights

Attendance was 5.0 million guests, an increase of 2.7 million guests from the fourth quarter of 2020. Compared to the fourth quarter of 2019, attendance increased by 0.3 million guests or 5.4%.
Total revenue was a record $370.8 million, an increase of $216.7 million from the fourth quarter of 2020. Compared to the fourth quarter of 2019, total revenue increased by $72.8 million or 24.4%.
Net income was a record $71.5 million, an increase of $117.1 million from the fourth quarter of 2020. Compared to the fourth quarter of 2019, net income increased by $95.7 million.
Adjusted EBITDA[2] was a record $152.8 million an increase of $130.0 million from the fourth quarter of 2020. Compared to the fourth quarter of 2019, Adjusted EBITDA increased by $68.8 million or 82.0%.
Total revenue per capita increased 7.9% to $74.87 from the fourth quarter of 2020. Admission per capita increased 5.3% to $43.65 while in-park per capita spending increased 11.7% to $31.22 from the fourth quarter of 2020. Compared to the fourth quarter of 2019, total revenue per capita increased 18.1%, admission per capita increased 15.2%, and in-park per capita spending increased 22.3%.
Fiscal 2021 Highlights

Attendance was 20.2 million guests, an increase of 13.8 million guests from fiscal 2020. Compared to fiscal 2019, attendance declined by 2.4 million guests or 10.7%.
Total revenue was a record $1,503.7 million, an increase of $1,072.0 million from fiscal 2020. Compared to fiscal 2019, total revenue increased by $105.5 million or 7.5%.
Net income was a record $256.5 million, an increase of $568.8 million from fiscal 2020. Compared to fiscal 2019, net income increased by $167.0 million or 186.7%.
Adjusted EBITDA was a record $662.0 million. Compared to fiscal 2019, Adjusted EBITDA increased by $205.1 million or 44.9%.
Total revenue per capita increased 9.9% to $74.43 from fiscal 2020. Admission per capita increased 5.2% to $42.17 while in-park per capita spending increased 16.5% to $32.26 from fiscal 2020. Compared to fiscal 2019, total revenue per capita increased 20.4%, admission per capita increased 18.9%, and in-park per capita spending increased 22.6%.
Other Highlights

The Company's current deferred revenue balance as of December 31, 2021, was $154.8 million, an increase of approximately 48.2% when compared to December 31, 2019.
The Company repurchased approximately 2.2 million shares of common stock at a total cost of approximately $133.0 million during the fourth quarter of 2021.
In the fourth quarter of 2021, the Company came to the aid of almost 370 animals in need in the wild bringing the total number of animals it has helped over its history to almost 39,900.
 

EdK

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Maybe it's just me, but I find stock buybacks a complete waste of money. I'm sure they could have used some of that $133.0 million to build the original event building and add some theming to Pantheon. Buybacks were largely illegal until 1982.
 
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Jahrules

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Maybe it's just me, but I find stock buybacks a complete waste of money. I'm sure they could have used some of that $133.0 million to build the original event building and add some theming to Pantheon. Buybacks were largely illegal until 1982.

I wouldn't say that. Buybacks aren't much different than a dividend. Think of it like a no interest loan. Need money? Add more shares. Making a lot of money? Buy them back (pay off the loan).

When the company buys back, the share price rises, much like a dividend.
 
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EdK

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I wouldn't say that. Buybacks aren't much different than a dividend. Think of it like a no interest loan. Need money? Add more shares. Making a lot of money? Buy them back (pay off the loan).

When the company buys back, the share price rises, much like a dividend.
It's not really a dividend since the value is tied to the stock, but it does artificially raise the stock price (usually temporarily). The problem with stock buybacks in general is that money could be used for researching new products, creating better customer experiences, investing in the workforce and so on. The rise in the stock price isn't because of new products or increased market share of the company but is instead using large sums of cash to buy back stock. In 2021 there was a combined $850 billion in buybacks. Most companies also then release shares that then dilute the price making the whole process a wash. The idea is management buys back stock, exercise their options, and then release a bunch of stock bringing the price back down. This is explained in the article below.

 

Mushroom

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Maybe it's just me, but I find stock buybacks a complete waste of money. I'm sure they could have used some of that $133.0 million to build the original event building and add some theming to Pantheon. Buybacks were largely illegal until 1982.

Buybacks are a signal that the company thinks their stocks are undervalued right now. They’re confident that their long-term strategy will increase share value, so by buying shares at a lower price, they’re confident that they’ll make more money in the long term by owning those shares now. This signals that SEAS is confident in their strategy and that they see an opportunity to gain more value.

The operational side of a company and the financial side of a company are in different worlds. The idea that the company’s financial capital should just be floated into their operating budget to buy things like theming and event buildings is unrealistic and could enormously cost the company from a financial standpoint. I want more theming on Pantheon as much as the next guy, but if SEAS operated with this philosophy, their finances would be in the toilet overnight.
 

EdK

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I would argue that a stock buyback is basically taking that money and setting it on fire. This does very little for the company and most likely not much for the long term stock holder. In the end this will have very little effect in the stock price. If you don't want to spend that money by investing in the parks, how about paying down some of that 2B in debt the company is carrying. What's crazy is when they passed the Tax Cuts and Jobs Act of 2017, companies in the S&P 500 Index did a combined $806 Billion in buybacks. Basically, most of the tax cuts didn't go into creating jobs or better products, it mostly went into management's pockets (Since the number of shares for most of theses companies were not diluted). Here is another article that points out the dangers of these stock buybacks.


I agree that they should put a serious tax on these buybacks or better yet, make them illegal again.
 

Zachary

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Biggest takeaways from the earnings call for me:
  • Numbers are great and projections with the eventual return of international guests look even better.
  • The pass holder base at the SEAS parks is still growing like crazy.
  • The chain plans to expand their reliance on imported labor this year.
  • The $150 million in core cap-ex budget that gave the chain that incredible ride portfolio going into 2020 is back in 2022.
  • News on potential hotel, new park, and international expansion opportunities coming later this year.
 

Mushroom

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I would argue that a stock buyback is basically taking that money and setting it on fire. This does very little for the company and most likely not much for the long term stock holder. In the end this will have very little effect in the stock price. If you don't want to spend that money by investing in the parks, how about paying down some of that 2B in debt the company is carrying. What's crazy is when they passed the Tax Cuts and Jobs Act of 2017, companies in the S&P 500 Index did a combined $806 Billion in buybacks. Basically, most of the tax cuts didn't go into creating jobs or better products, it mostly went into management's pockets (Since the number of shares for most of theses companies were not diluted). Here is another article that points out the dangers of these stock buybacks.


I agree that they should put a serious tax on these buybacks or better yet, make them illegal again.

You are misunderstanding the function of debt in a corporate financial structure. Debt doesn't just mean that SEAS owes money to contractors or manufacturers or anything like that. It also refers to bonds and securities issued by SEAS, which are used as an alternative to equity financing (i.e. stock issuance). Bonds and securities work by gradually paying off the bondholders in the form of regular, scheduled payment intervals over a set period of time (often 10 years). So, not only is carrying debt a super common form of financing a company, but SEAS literally isn't supposed to pay off much of that debt yet; it will be paid off in the proper installments over time.

Furthermore, not only is debt financing common, but it can actually be advantageous because it creates a "tax shield," essentially a reduction on taxes by making non-taxable debt part of its capital structure. A company like SEAS has determined that in their case, they will be more profitable by continuing to hold debt as part of their capital structure.
Investopedia said:
Financial leverage [basically a term for debt financing] has value due to the interest tax shield that is afforded by the U.S. corporate income tax law.1 The use of financial leverage also has value when the assets that are purchased with the debt capital earn more than the cost of the debt that was used to finance them. Under both of these circumstances, the use of financial leverage increases the company’s profits.
Source

I don't mean to single you out, but I've noticed a handful of posts across the forum seemingly criticizing SEAS for the amount of debt they have. As long as SEAS is following the rules, there is absolutely nothing wrong with them having debt, and there is no reason that they must prioritize paying it off. In fact, in SEAS' case, it may be the case that going overboard in paying back their debt would actually harm the company's profitability.
 

EdK

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You are misunderstanding the function of debt in a corporate financial structure. Debt doesn't just mean that SEAS owes money to contractors or manufacturers or anything like that. It also refers to bonds and securities issued by SEAS, which are used as an alternative to equity financing (i.e. stock issuance). Bonds and securities work by gradually paying off the bondholders in the form of regular, scheduled payment intervals over a set period of time (often 10 years). So, not only is carrying debt a super common form of financing a company, but SEAS literally isn't supposed to pay off much of that debt yet; it will be paid off in the proper installments over time.

Furthermore, not only is debt financing common, but it can actually be advantageous because it creates a "tax shield," essentially a reduction on taxes by making non-taxable debt part of its capital structure. A company like SEAS has determined that in their case, they will be more profitable by continuing to hold debt as part of their capital structure.

Source

I don't mean to single you out, but I've noticed a handful of posts across the forum seemingly criticizing SEAS for the amount of debt they have. As long as SEAS is following the rules, there is absolutely nothing wrong with them having debt, and there is no reason that they must prioritize paying it off. In fact, in SEAS' case, it may be the case that going overboard in paying back their debt would actually harm the company's profitability.
I understand what you're saying about debt and that it isn't just money owed but also bonds and securities and I'm not saying that debt is necessarily bad. If most of the debt was acquired in the last few years they probably have a decent rate and even less reason to pay it off sooner. The problem is that stock buybacks are definitely being abused creating massive amounts of corporate debt to buy back stocks for temporary gains. I can think of many examples such as Sears, Hertz, GM and Fiat where spending cash assets on stock left them in a bad position when they experienced a decrease in revenue and had to file for Chapter 11. The worst were the airlines that spent a combined 45 billion on stock buybacks before the pandemic and asked the government for 50 Billion in bailouts. We also have a large number of zombie companies that will never be able to pay back all their debt but were kept afloat with the Feds policy of buying corporate bonds during the pandemic. Most of the huge gains in the stock market are also from stock buybacks and not from a general increase in value of many of these companies. In all fairness SEAS did well enough during the pandemic and purchasing $133.0 million on stock buybacks isn't necessarily going to hurt them, unless something happens that seriously impacts their business in a negative way. The real question is what exactly did SEAS gain from buying back stock that the money couldn't have been invested elsewhere for better returns in the long run, paying down some of the higher interest debt or just kept for a rainy day. Here's an article on the airlines that also explains the motivation for these buybacks -

 

Jahrules

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Look, just because something can be abused doesn't mean that everyone is doing it. Seas usage of buybacks here is an example of proper usage. Similarly SiriusXM did a lot of share repurchases as they came out of near bankruptcy as the large number of shares outstanding was seen as a risk.
 
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Mushroom

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I understand what you're saying about debt and that it isn't just money owed but also bonds and securities and I'm not saying that debt is necessarily bad. If most of the debt was acquired in the last few years they probably have a decent rate and even less reason to pay it off sooner. The problem is that stock buybacks are definitely being abused creating massive amounts of corporate debt to buy back stocks for temporary gains. I can think of many examples such as Sears, Hertz, GM and Fiat where spending cash assets on stock left them in a bad position when they experienced a decrease in revenue and had to file for Chapter 11. The worst were the airlines that spent a combined 45 billion on stock buybacks before the pandemic and asked the government for 50 Billion in bailouts. We also have a large number of zombie companies that will never be able to pay back all their debt but were kept afloat with the Feds policy of buying corporate bonds during the pandemic. Most of the huge gains in the stock market are also from stock buybacks and not from a general increase in value of many of these companies. In all fairness SEAS did well enough during the pandemic and purchasing $133.0 million on stock buybacks isn't necessarily going to hurt them, unless something happens that seriously impacts their business in a negative way. The real question is what exactly did SEAS gain from buying back stock that the money couldn't have been invested elsewhere for better returns in the long run, paying down some of the higher interest debt or just kept for a rainy day. Here's an article on the airlines that also explains the motivation for these buybacks -


Those companies — Hertz, Sears, etc. — didn’t go bankrupt because of the buybacks themselves, they went bankrupt because they lacked the positive cash flows to pay back the additional debt they took on as a result. SEAS’ earnings report indicates that they have comfortably positive cash flows right now, and their actions indicate that they believe those cash flows will continue under their current strategy.

I understand your point, but I feel like you’re cherry-picking only the failed examples of these financial decisions. This earnings report seems to indicate that SEAS is doing quite well financially, and as much as I love to criticize SEAS’ management when it comes to how they manage their parks, I feel like both of us simply don’t know enough about SEAS’ internal financial decisions to judge whether or not the buyback was the right decision. Without having any further information, my assumption is that the SEAS finance team knows what they’re doing more than you or I do.
 
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