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Edited Transcript of SEAS earnings conference call or presentation 26-Feb-20 2:00pm GMT

Q4 2019 SeaWorld Entertainment Inc Earnings Call

ORLANDO Mar 12, 2020 (Thomson StreetEvents) -- Edited Transcript of SeaWorld Entertainment Inc earnings conference call or presentation Wednesday, February 26, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Marc G. Swanson

SeaWorld Entertainment, Inc. - CFO & Treasurer

* Matthew V. Stroud

SeaWorld Entertainment, Inc. - VP of IR

* Sergio D. Rivera

SeaWorld Entertainment, Inc. - CEO & Director

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Conference Call Participants

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* Anna Jeanne Lizzul

JP Morgan Chase & Co, Research Division - Analyst

* Brett Richard Andress

KeyBanc Capital Markets Inc., Research Division - Associate VP

* Eric Christian Wold

B. Riley FBR, Inc., Research Division - Senior Equity Analyst

* James Lloyd Hardiman

Wedbush Securities Inc., Research Division - MD of Equity Research

* Steven Moyer Wieczynski

Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst

* Timothy Andrew Conder

Wells Fargo Securities, LLC, Research Division - MD and Senior Leisure Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to SeaWorld's Fourth Quarter and Fiscal 2019 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Matthew Stroud. Please go ahead.

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Matthew V. Stroud, SeaWorld Entertainment, Inc. - VP of IR [2]

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Thank you, and good morning, everyone. Welcome to SeaWorld's Fourth Quarter and Fiscal 2019 Earnings Conference Call. Today's call is being webcast and recorded. The press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Serge Rivera, Chief Executive Officer; and Marc Swanson, Chief Financial Officer. This morning, we will review our fourth quarter and fiscal 2019 financial results, and then we will open up the call to your questions.

Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call, we may reference adjusted EBITDA and free cash flow, which are non-GAAP financial measures. More information regarding our forward-looking statements and reconciliations of adjusted EBITDA and free cash flow to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC.

Now I would like to turn the call over to our Chief Executive Officer, Serge Rivera. Serge?

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [3]

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Thank you, Matthew. Good morning, everyone, and thank you for joining us. Today marks my 108th day at SeaWorld. Before I get into some comments about the full year and fourth quarter results, I just want to make a few brief comments about my early observations and thoughts.

This company is made up of a collection of truly differentiated and highly valuable brands and unique and irreplaceable world-class assets. It has a business model that is strong, continues to satisfy and delight its guests and has meaningful unrealized potential. It also has some of the most passionate, engaged and hard-working employees of any organization I've ever had the privilege of being a part of. As I've spent time around the organization these past few months, I've been particularly struck by the organization's dedication to education, research, conservation, animal welfare and animal rescue and rehabilitation.

This company has been executing a thoughtful and clearly effective strategy over the past couple of years that has yielded strong results with significant increases in attendance, revenue, adjusted EBITDA and shareholder value. As we have communicated to you over the last several quarters, and as you will hear from us today, we continue to make progress and to see many opportunities across each of our strategic pillars: rides, attractions and events; marketing and communication; pricing and cost, all intended to drive greater profitability and shareholder value. You should expect we will continue to execute on this strategy, and we will make adjustments and tweaks, which we will communicate to you along the way as we identify new and enhanced levers to drive shareholder value. I'm excited to be here and help guide the organization and realize the full potential of our assets, brands and ambassadors.

With that, let me turn to our most recent financial results. We are pleased to report fourth quarter and full year financial results with record revenue for the fourth quarter and record net income and adjusted EBITDA for the fiscal year. We believe these results were driven primarily by our strategic focus on new rides, attractions and events in almost every park every year; enhanced overall marketing, communication and pricing initiatives; and a relentless focus on realizing cost efficiencies across our organization.

Attendance in the fourth quarter grew 2.2% despite continued unfavorable weather in the quarter compared to the prior year quarter. And as we discussed in our last call, attendance in our peak summer months in 2019 was meaningfully impacted by weather headwinds compared to prior year. We believe the attendance growth in the quarter was driven in part by our calendar of popular events, including Halloween Spooktacular, Howl-O-Scream, Christmas Town and Christmas Celebration, at our theme parks. We believe we have some of the best theme park offerings in the world, representing outstanding value for consumers.

We grew total revenue per capita 1.7% for the full year and 4.2% in the fourth quarter. Fourth quarter total revenue per capita growth was driven by a 6.9% increase in admissions per capita and reflects the progress we're making on our strategic pricing initiatives. We continue to see the benefits from our expense reduction efforts and our enhanced culture of efficiency, and we're working diligently to identify and execute on additional cost efficiencies that we expect will flow directly to adjusted EBITDA.

Importantly, we saw growth in our season pass base at year-end, which, as you know, has been an important strategic focus for us. We believe our season pass offerings provide some of the best values in the industry, and we're doing a better job of communicating the highly compelling value these passes offer.

Turning our attention to 2020. We're very excited to introduce what we believe to be the company's strongest year ever for new attractions with brand new record-breaking rides, attractions, events and/or experiences coming to every one of our markets, providing many highly compelling reasons to visit our parks and to visit over and over again. Let me take a few minutes to remind everyone what's coming in 2020.

At SeaWorld Orlando, we will introduce Ice Breaker, which will be the first quadruple swing launch coaster in North America, featuring 4 airtime filled launches, both backwards and forwards, culminating in a reverse launch up a 93-foot vertical spike, leading to the steepest beyond vertical drop in Florida. Ice Breaker will be the sixth coaster at SeaWorld, more than any park in Orlando.

At SeaWorld San Diego, we will introduce Emperor, which will be the tallest, fastest, longest and first floorless dive coaster on the West Coast. After climbing more than 150 feet, the coaster car will dangle at a 45-degree angle before plunging into a 143-foot vertical drop that will accelerate riders to more than 60 miles per hour. At SeaWorld San Antonio, we will introduce Texas Stingray, which will be the tallest, fastest, longest wooden coaster in Texas and will feature a drop of 100 feet, a top speed of 55 miles per hour and over 16 airtime hills.

At Busch Gardens Tampa Bay, we will introduce Iron Gwazi, which will be the tallest hybrid coaster in North America and the world's fastest and steepest hybrid coaster with the world's largest drop. Riders will climb more than 200 feet before plunging into a beyond vertical drop, reaching speeds of 76 miles per hour and experiencing a dozen airtime moments.

At Busch Gardens Williamsburg, we will introduce Pantheon, which will be the world's fastest multi-launch coaster and will accelerate riders to a speed of 73 miles per hour and will include a 95-degree drop, 4 launches, 2 inversions, 15 airtime moments and a height of 180 feet.

At Aquatica Orlando, we will introduce Riptide Race, which will be the first dueling pipeline slide in the State of Florida and will send riders through nearly 650 feet of slide, all while navigating tight turns and accelerations. At Adventure Island, we will introduce Solar Vortex, which will be the first dual tailspin water slide in North America. This family raft slide combines high-banking rotations and rapid descents, sending sliders on a swirling journey through 2 open tailspin features.

At Water Country USA, we will introduce Aquazoid Supercharged, which will be the first of its kind in Virginia. This new water slide experience will take guests in rafts through 59 fully enclosed color-changing rings with dynamic sound spread over 219 feet of slide, providing a new thrill each time you ride. At Aquatica San Antonio, we will introduce Tonga Twister, which will be the first of its kind in Texas, where guests will enjoy 2 thrilling body slides with 350 feet of twisting and turning through tubes with special effect lighting patterns and a high-energy music, giving riders an exciting light and sound show.

And at Sesame Place, we will introduce Big Bird's Tour Bus, where the whole family will enjoy a ride on this oversized red double-decker bus with Big Bird and some of his furry friends. The bus goes around and around with a Sesame Street-inspired cityscape as the backdrop, bringing smiles to everyone on board.

This is the first time in our history we have a major roller coaster opening in each of our 5 largest theme parks in the same year, and all of these coasters are truly world-class coasters. Equally as important, all of our rides and attractions are scheduled to open before the peak summer season. In fact, Texas Stingray at SeaWorld San Antonio opened for pass members this past weekend, and will be open for all guests this coming weekend. Our team have really done a great job refining and reorganizing our planning and construction process. And this year, we will see the fruit of this effort.

We are also excited about our lineup of events for 2020. The biggest events include our popular Seven Seas Food Festival at our SeaWorld parks and Food & Wine Festivals at our Busch Garden parks. Our award-winning Electric Ocean event will return to summer at our SeaWorld parks, while our Summer Nights will return to our Busch Gardens parks. All of our major parks will feature our popular Halloween and Christmas events this year. We will also be introducing brand new events in 2020, including Elmo's Birthday Celebration at SeaWorld Orlando, Sesame Kids' Weekends in SeaWorld Orlando, a new Craft Beer Festival at SeaWorld Orlando and Mardi Gras at Busch Gardens Tampa Bay.

We are pleased with our progress in 2019. But as we have mentioned, we strongly believe there is additional opportunity to drive significantly improved operating and financial performance, and we are intensely focused on continuing to execute as we head into the spring break season.

With that, I would like to turn the call over to Marc to discuss our financial results. Marc?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [4]

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Thanks, Serge, and good morning, everyone. As Serge mentioned, our fourth quarter and full year financial results were strong with record revenue for the fourth quarter and record net income and adjusted EBITDA for the fiscal year. Fourth quarter attendance increased 2.2%.

We believe that the improved attendance largely resulted from a combination of factors, including the positive reception of our new rides; compelling attractions and events; and enhanced overall marketing, communication and pricing initiatives. As mentioned in this morning's press release, we saw unfavorable weather compared to the prior year that limited our attendance growth. Absent unfavorable weather, during the quarter, we had some particularly strong attendance days, including some record days.

During the quarter, we generated revenue of $298 million, an increase of $18 million or 6.4% compared to the fourth quarter of 2018. The increase in revenue results from the growth in both admissions per capita and attendance. We reported a net loss of $24.2 million, a decrease of $13.1 million compared to the fourth quarter of 2018. Net loss in the fourth quarter of 2019 includes a legal settlement charge, net of insurance recoveries, of approximately $32.1 million. Net loss in the fourth quarter of 2018 includes approximately $11.7 million of pretax expenses as described in our earnings release.

For the fourth quarter of 2019, we reported adjusted EBITDA of $83.9 million, an improvement of $19.3 million or 29.9% compared to the prior year quarter. The adjusted EBITDA improvement was primarily driven by the increase in total revenue and the realization of cost savings initiatives. Fourth quarter total revenue per capita was $63.42 compared to $60.88 in the fourth quarter of 2018, driven primarily by an increase in admissions per capita. The increase in admissions per capita primarily results from the impact of new pricing strategies partially offset by visitation mix.

Looking at our results for fiscal 2019. Total revenue was $1.4 billion, an increase of $26 million or 1.9%. Total attendance was approximately 22.6 million guests, an increase of 0.2%, driven by a combination of factors, including the positive reception of our new rides and compelling attractions and events and enhanced overall marketing, communication and pricing initiatives. These factors were largely offset by negative impacts from unfavorable weather in 2019, particularly during our peak summer and holiday seasons when compared to 2018.

Net income for the year was $89.5 million, a record for the company and an increase of $44.7 million. Adjusted EBITDA was $456.9 million, also a record for the company and an improvement of $55.6 million or 13.9%. Fiscal 2019 total revenue per capita was $61.80 compared to $60.77 in 2018 driven primarily by an increase in in-park per capita spending. Net income in 2019 includes approximately $32.1 million related to a legal settlement charge net of insurance recoveries, $4.3 million of pretax expenses associated with a previously announced equity transaction and $4.2 million of pretax expenses associated with severance and other separation-related costs. Net income for fiscal 2018 includes approximately $54 million of pretax expenses as described in our earnings release.

Now turning to our balance sheet. Our current deferred revenue balance as of the end of the quarter was $104.4 million, an increase of approximately 3%. If we exclude deferred revenue of approximately $2.4 million related to Zhonghong in the fourth quarter of 2018, our deferred revenue would have increased almost 6% as of the end of 2019.

We spent $195 million on CapEx in 2019, of which $172 million was on core CapEx and approximately $23 million was on expansion or ROI projects. We estimate that approximately $15 million of core capital expenditures in 2019 relates to a shift in timing due to accelerated ride opening schedules for 2020 and 2021 attractions. As we previously mentioned, we have some rides opening before spring break, and all of our rides are on track to open before the peak summer season starts.

Going forward, we expect to target approximately $140 million to $160 million in annual core CapEx. As we have previously discussed, we will spend opportunistically on noncore expansion or ROI CapEx when we find opportunities that meet our return hurdles, including on new parks and expansions like our Sesame Place park in California, incremental revenue-enhancing projects, cost-reducing projects and other similar opportunities.

As noted in this morning's earnings release, our net leverage ratio was 3.24x adjusted EBITDA for the 12 months ended December 31, 2019. As Serge mentioned, and as you have heard me say consistently over the past several quarters, we believe we have significant opportunity for even further improvement. To accomplish this, we will continue to focus on driving additional attendance and total revenue, while eliminating unnecessary costs and continuing to identify more efficient ways to operate our business. We are making good progress, which gives us greater confidence in our ability to achieve the higher end of our goal of $475 million to $500 million of adjusted EBITDA by the end of 2020.

Now let me turn the call back over to Serge, who will share some final thoughts. Serge?

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [5]

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Thank you, Marc. Before we open the call to your questions, I have some closing comments. I want to thank our outstanding team of ambassadors for their efforts. They continue to remain focused on providing meaningful and inspirational experiences to our guests.

Over the past several months, I've had the opportunity to visit our parks and spend time with our ambassadors. I have been incredibly impressed with their dedication to our parks, the animals under our care and our guests. Because of our ambassadors' dedication and care for our animals, guests are inspired to join us in our mission of protecting animals and their habitats across the globe. I believe we have some of the best, most passionate employees in the theme park industry, and I'm sincerely proud to be working with them.

On the rescue side, we announced in 2019 that we surpassed 36,000 animal rescues over the company's history, including over 350 rescues in the fourth quarter. We are one of the world's leading animal rescue organizations, and we are proud of our efforts to protect and save wildlife.

As we have said before, we have an exceptional business model. We are focused on improving our execution and continue our efforts to adjust and enhance our marketing and communication initiatives as well as our pricing strategies with the goal of introducing new compelling rides, attractions and events in every park every year. We will continue to identify and execute on cost and capital efficiency initiatives that we expect will contribute to meaningfully improved margins and profitability. Through these efforts, we are confident we will deliver attendance, revenue and adjusted EBITDA growth that we expect will lead to meaningful increases in shareholder value.

Before we go to questions, I just want to address 1 topic that I expect you all will have, the coronavirus. What I can tell you today is we have seen no discernible impact on our attendance related to coronavirus. We are obviously very aware of and monitoring the situation.

With that, let's open up the line to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from Steve Wieczynski with Stifel.

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Steven Moyer Wieczynski, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst [2]

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I want to go back to the 7% growth you saw in admissions per caps in the quarter, which I think you talked about was due to your strategic marketing initiatives. I was wondering how we should think about admission per caps for this year. And I guess the question really is, how much more room you guys have to push those marketing initiatives as well as price increases right now?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [3]

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Steve, it's Marc. I can take that question. As we've talked about for some time, we thought we would achieve growth in admissions per caps as we got to the back half of the year and towards the end of the year, and you saw that come through in the quarter, as you noted. We believe we have pricing power, and we'll continue to be smart about the price increases we take. We think at a minimum, we can get inflationary increases and perhaps times beyond that.

We're always going to have an eye towards driving total revenue as we've talked about. So we're going to continue to test and optimize different price points all in the -- all with an eye towards driving total revenue and volume. But overall, we're pleased with the growth in the admissions per cap in the fourth quarter. And we believe over the long term, we can continue to get pricing and ultimately, that will be our goal but obviously, again, with an eye towards driving total revenue.

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Steven Moyer Wieczynski, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst [4]

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Okay. Got you. And then you kind of addressed, Serge, at the end, around the COVID impact or lack of impact right now. But I guess, if there was going to be an impact, could you kind of walk us through where you think you would see that first? And I guess, what I mean is whether that would be more domestic, whether that would be international.

And I get -- I assume that at this point, your 2020 EBITDA range that you've got out there in terms of guidance, this is assuming no impact from that virus. And I guess the last part of this question, which I know is super long and it's multiple questions, but it almost seems like the trajectory that you're on today, again, excluding any kind of virus impact, would make us believe you could almost be on the upper to outside of that range. Am I crazy to think about it that way?

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [5]

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Yes. Look, why don't we start with the last part? We've signaled that we have a high degree of confidence in our -- in achieving the upper part of the range that we've described before. So I think you -- your statement will probably be correct, and we still hold to that. Obviously, there's events out there that could threaten us and we recognize that.

To the COVID, the coronavirus question, look, it's early days. As I stated in our remarks, we've seen no discernible impact to date on our business. We're working through and thinking through some contingency plans. Obviously, we take health and safety very seriously for our employees, our guests or the animals under our care, and that's where it would start. Beyond that, I don't really want to speculate or say more. Stay tuned, I guess.

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Operator [6]

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The next question is from James Hardiman with Wedbush Securities.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [7]

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To that last point, could you just help us sort of think about your exposure to Chinese consumers? I know over recent years -- I would imagine it's at least third on the list, right? You've talked about your exposure to South America/Brazil, and you've talked about your U.K. exposure in conjunction with Brexit. Is the Chinese consumer a significant consumer for you guys?

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [8]

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The short answer to that is no, it is not. It's not in the top list. As you stated, U.K., South America, particularly Brazil, Latin America, Mexico, China, Asia -- I'm sorry, Canada. I keep confusing the Cs there. Canada, sorry, for the Canadians on the call. But no, China is not a significant part of our business.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [9]

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That's really helpful. And then maybe just speak to, I guess, a couple of related topics. I mean, obviously, a lot of us look at the lease data coming out of San Diego. That seems to have slowed in the fourth quarter. Obviously, some people would like to connect that to the Star Wars opening, but it seems like a lot of what you're speaking to in the fourth quarter were some negative weather trends. Were those particularly pronounced at your San Diego park? And maybe speak even broadly about if and how you think your Orlando park has been impacted, if at all, from that Star Wars opening.

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [10]

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Yes, let me -- that's -- there's a bit there. Let me jump in on San Diego. And this is how I think about it. You may recall that back in 2018, we saw some meaningful increases in attendance. I think it was around 22% that we saw in that park. And I think the story starts there. I think you really have to think about that park today -- thinking back to a 2-year lens is the way I've been thinking about it.

As you mentioned, we did have some headwinds in 2019. We had weather. We had a new minor attraction that didn't work out as planned. All of those things, we think, were contributors to the retraction that we saw in attendance, though it's still, over the 2 years, up. And we would say pretty meaningfully up.

Being new to this industry, I'm reminded occasionally that this is not unusual to see a retraction after such a substantial gain year in like 2018. So -- also coming from where I came from, I'm not happy with that. I don't think retraction is really our goal. So we're working diligently to improve upon that. We got a great lineup of events and attractions coming to San Diego. We have the new roller coaster, Emperor, which I described. We think that's going to be a meaningful addition to the landscape in Southern California. So we're confident that that's going to help drive attendance. Then there's plenty of potential in San Diego. And we're working diligently to realize that. So let me stop there.

As it relates to Orlando, and you've heard us say this before and I've lived here in Orlando for pretty -- most of my adult life, I've seen a lot of capital investment from the various theme parks, and I've seen this market grow substantially as a result of it. Disney has built a fabulous attraction with their Star Wars land. We expect and are seeing increases in attendance here in Orlando as a result of it. I think our results, I'm generally pleased with what I'm seeing come out of Orlando, what we saw in the fourth quarter and even what we're seeing today. So I'm generally pleased about that. I'm going to ask Marc if he's got anything else he wants to add to that, but...

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [11]

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Yes, I would just add, James, as Serge mentioned, we've been in this market a long time, over 40 years in Orlando and lots have come into this market. So we welcome the increase in capital investment. We welcome the increased visitation. And as he mentioned, it would be hard to have the type of recovery we've had over the last 2 years without good performance out of Orlando, obviously being our biggest park.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [12]

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That's really helpful. But to clarify, you guys don't think any of the San Diego weakness is competitive-related?

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [13]

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I don't think we could attribute anything to that. So there's nothing that we can attribute to that attraction being our opportunity. And I don't want to use that as an opportunity. I mean we have control over our destiny, and we're comfortable with what we're doing and we're working towards. And we've seen positive results when we apply ourselves as we've stated. So I'm confident that what competitors do is -- they will do, and we will compete effectively.

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Operator [14]

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The next question comes from Tim Conder with Wells Fargo Securities.

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Timothy Andrew Conder, Wells Fargo Securities, LLC, Research Division - MD and Senior Leisure Analyst [15]

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Just a couple here. So I'll lump them all into one. One, if you could just give us some color on an annual basis on your unit season pass growth that you saw, what that represented as a percent of your total attendance, the uniques and then your frequency of visitation on a year-over-year basis from your season pass base and then, I guess, on a unit and dollar basis, what that represents here as you're looking into 2020.

And then back to the COVID question. Just to clarify, at this point, you have not seen any impact or negative feedback or any metric you're trying to monitor here on advanced sales in any way related to COVID?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [16]

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Tim, this is Marc. I can take the first part and then maybe Serge can take the last part. But look, on pass base, I think, as Serge said in his prepared remarks, we -- the combination of people that have a pass or a Fun Card, which we would refer to as our base, that was up at the end of the year, and we're not going to give you the exact increase or anything like that. But I mean, I think it was -- we were fairly pleased with that increase. And it ties in nicely to the deferred revenue.

One thing I want to make sure came across in the remarks. The deferred revenue, if you normalize for the Zhonghong fees that were sitting in deferred at Q4 of '18 that are not in there this year, our deferred revenue would have been up almost 6%. And I think that gives you some indication of the strength of the pass base and kind of the revenue associated with that.

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Timothy Andrew Conder, Wells Fargo Securities, LLC, Research Division - MD and Senior Leisure Analyst [17]

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And then on uniques, Marc, and frequency of visitation?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [18]

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I mean, I think, in general, we had -- if you look at the full year of '19, we did have an increase in number of unique visitors. I don't know that we're seeing any significant differences in how many times people visit. We're just pleased overall that more people have a product that gets them into the park effectively on a year-round basis. And that's something that we've obviously worked hard and we'll continue to focus on.

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [19]

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Tim, to your question around coronavirus, I'll just emphasize again that we've seen no discernible impact to our business that we can attribute to coronavirus so -- and that's to date. So there's really not much more that I think we can add.

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Timothy Andrew Conder, Wells Fargo Securities, LLC, Research Division - MD and Senior Leisure Analyst [20]

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Okay. And gentlemen, just as a follow-up, I've had a couple of questions from clients already this morning. And one of the big, I guess, areas that you guys over the last couple of years have saved on is eliminating consulting fees or internal things that kind of effectively duplicated the same functions. Yet we saw here, if you look at your disclosures in 2019 versus 2018, your consulting fees effectively doubled. In Q4, they almost quadrupled. So can you kind of help us with that and then also why it's treated as an add back to your EBITDA?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [21]

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Yes. Tim, it's Marc. I can take that question. So -- and we -- what I should point out is we have a really good disclosure and reconciliation in our adjusted EBITDA table in the press release. But obviously, our credit agreement allows us to add back strategic initiatives and related business optimization cost. So as we've noted, we've been engaging different firms to help us on different business optimization and strategic initiatives. We don't expect these things to last forever by any means. And therefore, they're added back. But we -- I should also tell you, we look at that bucket very carefully and have a lot of scrutiny around that bucket before we would add something back, but it's basically strategic initiatives, business optimization costs to help drive the business forward.

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Operator [22]

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And our next question will come from Alexia Quadrani with JPMorgan.

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Anna Jeanne Lizzul, JP Morgan Chase & Co, Research Division - Analyst [23]

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This is Anna Lizzul on for Alexia. Just regarding the coronavirus, is there any other prior experience you can draw from in the company's history that would give us insight on how the potential spread of the virus could impact your business, meaning what cost could you take out of the business in a prolonged shutdown of a certain park or of multiple parks?

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [24]

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Anna, let me try to add something to that. Look, I think the best thing is to -- is for us to be prudent and responsible and not speculate. But have we seen things like coronavirus in the past? The obvious answer is yes. We've seen SARS. We see the flu. We have -- we see a lot of exogenous events impact us, earthquakes, fires, hurricanes, things of that nature.

What we can say, to your question, is, in the past, we have seen nothing that has truly impacted the business in a significantly negative way. But again, I don't think we should draw parallels between things in the past and what coronavirus presents today. So I don't think it's prudent to connect those.

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Operator [25]

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The next question will come from Eric Wold with B. Riley.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [26]

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Just thinking about some of the -- kind of the headwinds you saw with the San Diego park last year. I know you don't kind of discuss kind of performance or kind of outlooks on a park-by-park basis. But maybe given that that's been at least called out as kind of a headwind for last year, how should we think about your expectations kind of for the relative performance of that park in 2020 versus kind of the consolidated average?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [27]

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Yes. Eric, it's Marc. So I mean, I think, as Serge mentioned, we're really excited about the ride that's going into that park. And I think it's -- as he described, it's a great dive coaster. It's going to be one of the best on the West Coast. I think that will help jump-start that park. There's obviously other things we're going to continue to try to do better. And that park also had some weather impacts in 2019.

So look, I think exactly what he said, we're optimistic to get the ride open and get the year going in that park and we're going to keep performing as well as we can out there. As he said on -- when you look at it on a 2-year basis, we're pleased over the last 2 years, but we'd obviously like to do better in 2020.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [28]

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Okay. And then last question, as you think about the cost cuts you took last year, how -- can you frame maybe kind of how much of those were kind of structural permanent cost cuts? And then kind of what you benefited in '19 and still would -- has yet to kind of flow into the company, and we'd see that benefit in 2020?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [29]

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Yes. Eric, it's Marc. I can take that question. Look, I mean, we've been pretty clear on the cost cuts that they've applied to the corporate offices and to the parks and around various services, consulting fees, labor optimization, labor efficiencies. So there's still some run rate to come in 2020 and -- from things we identified this year. And if you look at our pro forma cost savings in our release, you'll see a number that we've laid out for that.

I think if you look over kind of a 2-year basis, we've had pretty good success with the cost reductions. We've -- over the last 2 years, '18 to '19, we grew attendance 1.8 million. We grew revenue $135 million, and we grew adjusted EBITDA $160 million. So we had $25 million right there of just cost savings, the difference between EBITDA and revenue growth. But then we also covered the associated variable costs associated with the 1.8 million in attendance growth.

If you go back and look at our -- kind of the target we laid out, we said attendance largely flows through at about a 20% cost or an 80% margin. So we covered off those costs. You add those things together, you get close to $50 million. And then when you add in things like new rides, new attractions, things that we're putting into our parks that are brand new, so they require operators and mechanics and things like that, those have an associated cost. And in some cases, we've added incremental days.

We've obviously had wage pressures like others in the industry. When you add all that up, I think you get to well north of $50 million in cost savings.

But we're not going to stop. We're going to continue to focus on this and continue to drive forward. And as we -- I don't have a specific number to share with you for 2020. But as we report each quarter, we'll try to highlight how we feel about the cost and what initiatives we're taking and what other buckets we have that potentially could drive more efficiencies going forward. I think what I'd leave you with is, we just have a culture of focus on efficiencies and driving those through the business.

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Operator [30]

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The next question will come from Brett Andress with KeyBanc Capital Markets.

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Brett Richard Andress, KeyBanc Capital Markets Inc., Research Division - Associate VP [31]

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Can you give some more detail on the pricing strategies that you implemented during the quarter? I guess what did you do in 4Q on price that worked? Did you take price on season passes? Was it less discounts on single-day tickets? Just any color there. And how much of the per capita increase in the quarter was the mix component that you referenced?

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Marc G. Swanson, SeaWorld Entertainment, Inc. - CFO & Treasurer [32]

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Brett, it's Marc. I can take that. Look, there's a lot of different levers we have on pricing. So in some cases, we can take headline price, but in a lot of other ways. We can just reduce discounts, reduce promotions, things like that. And so I think what I would tell you is we generally do a combination. And kind of for competitive reasons, I don't know that we want to get into the specifics.

But we believe, in general, again, we can take pricing. We believe we have pricing power. So for example, as people -- as we put new passes on sale for the following year, we're generally trying to find ways to increase that price, for example -- would be 1 example. So I think you'll continue to see us do that, and it showed up, like I said, pretty well in the fourth quarter. And I think it largely makes sense. As you've noted, we had -- as we've talked about, we had -- in past years, we've been -- or in past quarters, we've talked about that we thought this would show up kind of towards the back half of 2019. I think I would probably kind of leave it at that.

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Brett Richard Andress, KeyBanc Capital Markets Inc., Research Division - Associate VP [33]

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Got it. And then I know it's early days, but can you talk about the transition of the orca show in Orlando and in San Antonio? Just what guest feedback are you getting? How is that show performing? That would be helpful.

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [34]

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I'll take that one. Thanks for the question, Brett. You are correct, we have a new presentation. We refer to it as Orca Encounter. It's educational-based and really speaks to the orca's positioning in the natural order of the oceans, describes what we've learned and how we interact with them, how they live and the threats that they face. The show has just received tremendous reception from our guests and the media, and I would encourage everyone on the call to come see it if you haven't seen it.

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Operator [35]

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Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Serge Rivera for any closing remarks.

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Sergio D. Rivera, SeaWorld Entertainment, Inc. - CEO & Director [36]

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Thank you, Chad. On behalf of Marc and the rest of the management team here at SeaWorld Entertainment, we want to thank you for joining us this morning. I would be remiss to not thank our employee ambassadors for their efforts every day to further our mission to protect animals and their environments.

As you've heard this morning, we have confidence in our ability to achieve the higher end of the 2020 adjusted EBITDA goal of $475 million to $500 million. We believe our 2020 slate of rides, attractions and events are the strongest in our history. We have confidence that we will deliver attendance, revenue and adjusted EBITDA growth. And we expect all of this to result in increased shareholder value. We thank you. We look forward to speaking to you next quarter.

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Operator [37]

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Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.