Executive Summary / Key Takeaways

• Material Undervaluation Meets Aggressive Capital Returns: Management explicitly states shares are "materially undervalued" and markets ignore the company's 2,000+ acres of owned real estate, including 400 undeveloped acres adjacent to its Orlando parks, while the company has repurchased 38% of shares outstanding since 2019.

• Operational Discipline Inflection: After 2023's capital project overload caused operational disruptions, 2025 represents a strategic reset with normalized $225M capex, $75M in identified cost efficiencies, and new processes to address execution gaps that plagued Q3 2025 results.

• Orlando Market Expansion, Not Cannibalization: Universal's Epic Universe opening is viewed as a market expander that will drive total visitation to Orlando, where United Parks' differentiated animal-based attractions and value pricing position it to capture incremental traffic rather than lose share.

• Financial Resilience Despite Headwinds: Despite Q3 2025's 6.2% revenue decline from weather and calendar shifts, the company maintains 29.7% operating margins, generates $400M+ in normalized free cash flow, and trades at 7.2x EV/EBITDA versus historical industry multiples above 11x.

• Key Variables for Thesis: Success hinges on execution of $15M additional cost savings in H2 2025, stabilization of international visitation (down 90K guests in Q3), and realization of management's forecast for record 2025 EBITDA assuming normalized weather patterns.

Setting the Scene

United Parks & Resorts Inc., originally founded as SeaWorld Entertainment, Inc. in 1959, has evolved from a single marine park into a portfolio of 13 differentiated theme parks across the United States and United Arab Emirates. The company established its Orlando presence in the early 1970s, and today operates SeaWorld Orlando, Busch Gardens Tampa Bay, Aquatica Orlando, and Discovery Cove within the world's most visited tourist market. Headquartered in the Orlando, Florida area, the company's strategy centers on a unique blend of animal conservation (having aided over 42,000 animals throughout its history), thrill attractions, and water parks that target both local passholders and destination visitors.

The business generates revenue through two primary segments: Admissions (single-day tickets, annual passes, and multi-park products) and Food, Merchandise and Other (in-park spending, parking, and licensing). The Chief Operating Decision Maker evaluates performance based on Operating Segment Adjusted EBITDA, reflecting a focus on cash generation rather than top-line growth alone. This capital allocation discipline has driven the company to repurchase over $1.5 billion in shares since January 2019, reducing shares outstanding by approximately 38% through the end of 2024.

The theme park industry operates as a seasonal, weather-dependent oligopoly. Disney (DIS) and Universal control over 70% of U.S. theme park attendance through IP-driven destination resorts, while the merged Six Flags (SIX)-Cedar Fair entity holds roughly 15-20% share with a regional coaster-focused model. United Parks occupies a distinct 5-7% niche, competing on animal encounters, conservation education, and value pricing rather than immersive fantasy worlds. This positioning creates a different customer base—more local, more pass-driven, and more price-sensitive—while exposing the company to unique risks around animal welfare perception and weather volatility.

Technology, Products, and Strategic Differentiation

United Parks' moat rests on three pillars that competitors cannot easily replicate: irreplaceable real estate, a conservation mission that drives loyalty, and operational assets that generate premium pricing power.

The company's 2,000+ acres of owned real estate includes approximately 400 undeveloped acres adjacent to its Orlando parks, representing one of the largest developable land parcels in America's most visited city. Management explicitly states that "the public markets have not appropriately given credit to these attractive and valuable 100% owned real estate assets." This land provides optionality for hotels, third-party partnerships, or sale-leaseback transactions that could unlock hundreds of millions in value without impairing park operations. Unlike Disney and Universal, which must acquire land at market prices for expansion, United Parks already owns the strategic footprint.

The animal rescue mission, while controversial to some, creates a differentiated value proposition that drives repeat visitation and pass sales. Approximately 40% of annual attendance comes from a loyal pass base that renews year after year, providing a recurring revenue foundation that regional competitors like Six Flags cannot match. This loyalty translates into pricing power: the company has grown in-park per capita spending in 20 of the last 22 quarters, with mobile app transactions showing a 37% higher average value than point-of-sale orders. The app now exceeds 16.8 million downloads, demonstrating successful digital transformation that enhances both guest experience and capture rate.

New attractions reinforce this differentiation. SeaWorld Orlando's Expedition Odyssey, opened May 2025, combines immersive flying technology with live animal exhibits—a hybrid experience that Universal's IP-driven attractions cannot replicate. The 2025-2026 pipeline includes SEAQuest: Legends of the Deep, Lion & Hyena Ridge (expanding Busch Gardens Tampa's habitat by 35,000 square feet), and multiple thrill coasters. These investments target both the value-conscious family segment and the thrill-seeking passholder, broadening the addressable market within the company's existing footprint.

Financial Performance & Segment Dynamics

Q3 2025 results disappointed across key metrics, yet the underlying data reveals a business managing through temporary headwinds rather than structural deterioration. Total revenue fell 6.2% year-over-year to $511.9 million, missing consensus by 5.3%, while Adjusted EBITDA declined 14.2% to $216.3 million. Net income dropped to $89.3 million from $119.7 million in Q3 2024. These declines stemmed from three primary factors: an unfavorable calendar shift (the Fourth of July holiday timing reduced peak capacity utilization), poor weather during peak holiday weekends, and a 90,000-visitor decline in international attendance that reversed positive trends from the first half.

The admissions segment bore the brunt, with revenue down 9.5% to $268.7 million and admission per capita falling 6.3% to $39.57. Management attributed this to increased promotional activity necessitated by competitive pressure and weather-related demand shortfalls. However, the in-park segment showed resilience: Food, Merchandise and Other revenue declined only 2.3% despite 3.4% lower attendance, as in-park per capita rose 1.1% to $35.82. This marks the 20th quarter of growth in the last 22, demonstrating that once guests enter the parks, spending remains robust.

Cost management disappointed in Q3, with operating expenses up 3.4% and SG&A rising 9.6%, including $3.3 million in nonrecurring costs related to a share repurchase proposal. Management acknowledged "less than optimal execution" and implemented new processes to address cost opportunities. The company has identified $75 million in total efficiency initiatives, with $50 million expected to be realized in 2025, including the newly announced $15 million reduction plan for the second half. This represents a 2% adjusted EBITDA cost growth rate for the full year—disciplined by industry standards but insufficient to offset revenue headwinds.

Year-to-date performance through September shows the impact of persistent weather challenges. Total revenue of $1.29 billion declined 3.9% versus 2024, with attendance down 1.5% to 16.4 million guests. Yet the company generated $480 million in operating cash flow and $232 million in free cash flow over the trailing twelve months, demonstrating the business's ability to produce cash even in a down year. Net leverage of 3.2x EBITDA remains manageable, with $872 million in total liquidity providing flexibility for opportunistic share repurchases and strategic investments.

Outlook, Management Guidance, and Execution Risk

Management's 2025 guidance reflects confidence that Q3's challenges are temporary rather than structural. The company continues to expect "new records in revenue and adjusted EBITDA," contingent on weather no worse than 2024's hurricane-impacted baseline. This forecast assumes that the $75 million cost savings program, new attraction openings, and strong forward bookings will overcome H1 headwinds that "took us off the pace we initially set." After 2023's capital project overload caused operational disruptions, 2025 represents a strategic reset with normalized $225M capex, $75M in identified cost efficiencies, and new processes to address execution gaps that plagued Q3 2025 results.

Forward-looking indicators support this optimism. Discovery Cove and group business bookings for 2026 are up over 20% year-over-year, while early pass sales at select parks show positive trends. The 2026 pass program, marketed with "best-ever benefits," launched ahead of the critical Black Friday selling period. Sponsorship revenue is projected to exceed $20 million annually in high-margin income, up from mid-to-high single digits in 2025. International opportunities remain active, with multiple MOUs under discussion and two expected to be signed by year-end.

The Epic Universe opening represents a critical variable. Management maintains that Universal's $2 billion investment will expand the Orlando market from 75 million to over 80 million annual visitors, benefiting all players. SeaWorld Orlando's year-to-date attendance growth through November supports this thesis, as the park has gained share despite Epic's May 2025 opening. The differentiated animal-based product and value pricing (tickets 30-50% below Universal's) position United Parks to capture budget-conscious families and repeat local visitors who may visit both destinations.

However, execution risk remains elevated. The Q3 cost control failures, including $3.7 million in increased consulting and legal fees, demonstrate that management's processes are still maturing. The pass base remains down 4% through October, with macro "tariff noise" cited as a headwind during peak selling seasons. Competitive promotional activity has intensified across multiple markets, pressuring admission per capita. The company must demonstrate that its new cost management initiatives can deliver sustainable savings without impairing guest experience.

Risks and Asymmetries

The investment thesis faces three primary risks that could materially impair earnings power. First, weather volatility has proven devastating in recent years. Q2 2025 experienced "amongst the worst weather we have ever experienced," while 2024's hurricanes impacted 432,000 guests. With approximately two-thirds of revenue generated in Q2 and Q3, a repeat of 2022's hurricane season or an unusually wet summer could derail the record EBITDA forecast despite cost savings.

Second, labor market pressures threaten both cost structure and operational quality. The company has experienced increased union organizing activity, with two employee groups (approximately 115 workers) voting for unionization in 2025. While this represents less than 1% of the workforce, it signals broader wage pressure in a tight labor market. Labor costs constitute the largest expense category, and any significant wage inflation or work stoppage could overwhelm the $75 million efficiency program.

Third, competitive dynamics are intensifying. Management notes "more competitive offers, more promotions from some of our competitors in several markets," requiring reactive pricing that compresses admission per capita. Disney's destination resorts and Universal's Epic Universe can absorb promotional activity through hotel and food & beverage revenue, while United Parks' day-visitor model lacks these cross-subsidies. If this promotional environment persists, the company's ability to grow admission per capita while maintaining attendance could be compromised.

On the positive side, two asymmetries could drive upside beyond consensus. Real estate monetization remains entirely unvalued by the market; a single sale-leaseback or hotel partnership could unlock $100-200 million in value while providing stable rental income. Additionally, international visitation, currently just 6-7% of attendance versus 10% pre-COVID, represents a 40% recovery opportunity if visa and travel headwinds abate. The company's international ticket sales are already running ahead of 2024, suggesting pent-up demand that could materialize in 2026.

Valuation Context

Trading at $35.53 per share, United Parks & Resorts carries a market capitalization of $1.96 billion and an enterprise value of $4.12 billion. The stock trades at 7.2x trailing EBITDA, 10.7x earnings, and 8.9x free cash flow—multiples that management argues represent a material discount to both historical industry norms and peer valuations.

This discount appears stark when compared to direct competitors. Disney's Parks segment trades at 11.8x EBITDA despite growing slower and carrying integration complexity from its media assets. Comcast (CMCSA)'s Universal Destinations & Experiences trades at 5.0x EBITDA but benefits from corporate parent's cable cash flow and is currently expanding with Epic Universe. Six Flags, following its Cedar Fair merger, shows negative margins and trades at a distressed 1.8x EV/EBITDA multiple, reflecting integration challenges that United Parks has already navigated.

Management's frustration with valuation is palpable. They note that "the public market is currently valuing our company at around seven times forward EBITDA" while the industry "historically was valued at over eleven times EBITDA." They further argue that "forward multiples are based off of Wall Street consensus assessments, which are below our internal plans and expectations." This suggests management believes the market is both undervaluing the asset base and underestimating earnings power.

The balance sheet supports an aggressive capital return strategy. With $221 million in cash, $872 million in total liquidity, and net leverage of 3.2x EBITDA, the company has capacity to continue its share repurchase program while funding $225 million in annual capex. The recently authorized $500 million buyback program, with $32.2 million already executed, indicates management's conviction that investing in their own shares offers better returns than alternative uses of capital.

Conclusion

United Parks & Resorts presents an asymmetric investment opportunity where the downside is protected by owned real estate and strong cash flow generation, while the upside depends on execution of an operational turnaround and market expansion in Orlando. The company's 38% share count reduction since 2019 demonstrates a management team willing to act decisively on valuation disconnects, while the $75 million cost efficiency program shows recognition of past execution shortcomings.

The core thesis hinges on two variables: whether management can deliver the $15 million in additional H2 2025 cost savings while maintaining guest satisfaction, and whether Orlando's market expansion from Epic Universe will offset competitive promotional pressure. If weather normalizes and international visitation recovers from its 90,000-visitor Q3 decline, the company's forecast for record 2025 EBITDA appears achievable.

The real estate portfolio provides a backstop that regional peers like Six Flags cannot match. With 400 undeveloped Orlando acres and over 2,000 total owned acres, United Parks controls irreplaceable assets in the world's top tourist destination. While the market currently assigns no value to this land, any monetization event—whether through hotels, sale-leasebacks, or third-party partnerships—could unlock substantial shareholder value independent of park operations.

For investors, the story is one of operational discipline meeting asset-backed value creation. The company has learned from 2023's project overload, right-sized its capex, and is aggressively returning capital while competitors grapple with integration challenges and expansion risks. If management executes on cost control and captures its share of Orlando's market growth, the current 7.2x EBITDA multiple should re-rate toward historical industry norms, amplening returns from both earnings growth and multiple expansion.