Q1 2020 Earnings Call
Ladies and gentlemen, just to the operator today's conference is scheduled to begin momentarily until that time your life on the can be placed on musicals. Thank you for your patience.
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Ladies and gentlemen, this at the operator todays conference is scheduled to begin momentarily until that time your lines will again be placed on musical. Thank you for your patience.
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Good morning, Ladies and gentlemen, you welcome to the six flags first quarter 2020, <unk> earnings Conference call. My name is traveling and I'll be your operator for today's call.
During the presentation, all lines will be Anna listen only mode.
The speakers remarks, we will conduct a question answer session.
If you have a question at that time simply Park Star then the number one on your telephone keypad.
If he would like to the draw your question [laughter] housekeeping.
Thank you I'll now turn call over to Steve Hotel Senior Vice President Investor Relations.
Good morning, and welcome to our first quarter Paul.
With me are Mike.
President C O six flags and money right.
Yeah.
We will begin problems prepared comments and then open the call to your question.
Our promise wants to forward looking thing within the meaning.
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These statements are subject to risks and uncertainties that could cause actual results could differ materially noticed fright Fest.
The company undertakes no obligation to update robot.
In addition.
Paul will discuss non-GAAP financial measure.
That's you're trying to find bought a detailed discussion and there's a threat and reconciliation of non-GAAP financial measures to GAAP financial measure the Companys annual report quarterly reports and other forms filed or furnished with the FTC.
At this time I will turn the call over to Mike.
Operator, I think Mike got disconnected from the cost.
Okay.
Okay. Thank you.
Mr Spinoff is reconnected.
Hi, Steve I'm back on.
Okay, you can start from scratch, okay, sorry about the technical difficulties everybody on the new World Alright. Good morning, everyone. How are you a thank you for joining our first quarter earnings call. We're living an unprecedented times with the impact of the Cobiz night team pandemic disrupting all.
Our lives.
As a company six flags is committed first and foremost to ensuring the safety of our gas and our employees and we are a body by all CDC state and local health guidelines related to the outbreak.
Despite this unexpected disruption six flags long term growth prospects and value creation opportunities have not changed.
On today's call I will discuss some of the steps that we have taken to position the company to weather. The storm then when he will discuss our financial performance.
That's in how we're setting ourselves up to capture this opportunity to emerge even stronger as we navigate through the crisis.
First I want to think our six flags team I could not be more proud because they have responded with passion for each other our business our gas and our communities.
We have donated food the local food banks, even P P and medical equipment to medical personnel and provided staging areas for blood drives in the National Guard.
Our entire team has rallied in this time of need preparing for the worse well, hoping for the best either it's truly a privileged to lead this outstanding group of people.
Next I want to think or financial partners.
They've responded quickly and urgently to provide us with additional liquidity that will allow us to navigate successfully through this period of uncertainty their support of six flags is a testament to their confidence our strong brand.
Our resilient industry and our dedicated management team.
As I shared on her last earnings call. We're focused on reinvigorating growth in our base business. We started the quarter strong and we were already beginning to see progress on several initiatives underway prior to spending operations.
Our six flags over Texas Park have successfully initiated year round weaken operations.
Our California Parks had strong attendance led by our new ride at match Mountain West Coast racers.
We improved whether we have improved weather versus prior year and our strategy to target single day gas was working as a result before suspending operations. Our attendance was up 19% versus prior year with single day paid attendance increasing 38%.
In response to the Cobot 19 pandemic, we suspended operations on March 30.
This led to a loss of attendance from the 11 parks that were open or scheduled to open prior to the end of the corridor.
Immediately after suspending the operations of our parks, we implemented aggressive cost saving measures that largely offset the resulting in revenue decline.
[noise] evolving conditions mean, we need to remain nimble flexible and focused on modifying operations.
So we are prepared to reopen in a new environment what are the stakes to do so oh.
Oh reopening decisions will be determined locally and on a park by park basis in accordance with CDC guidelines in partnership with state and local authorities.
In the wake of the pandemic, we analyze many scenarios developed a strong plan and began taking decisive cost actions, while maintaining readiness until we can reopen our parks. We also have been proactively communicating with our guests to preserve our active pass base.
Our plan included taking crucial steps to strengthen our balance sheet and to protect long term shareholder value.
These actions have provided us with sufficient liquidity to meet our cash obligations through the end of 2021, even if we remain in a minimal revenue environment.
But would likely require additional covenant relief from our credit facility wonders if the suspension of operations lasted through the end of 2021.
I'm committed to an even greater degree of transparency to our team members our gas and our stockholders. We are encouraged that the regional theme park industry has historically proven resilient through times or turmoil and believe we can thrive in return even stronger once the crisis subsides.
For sure some additional thoughts about her future I will turn the call over 20 to provide details of our first quarter performance in response to the Cobot 19 crisis Lenny.
Thank you, Mike and good morning to everyone on the call.
I will start with a discussion of our first quarter 2020 performance and then address the actions we've taken to improve our liquidity in response to the covert 19 crisis.
Our total revenue in the first quarter declined by $26 million or 20% to $103 million.
Attendance declined 584027% to 1.6 million guest.
The entire attendance decline occurred after we suspended operations.
Part of the suspension of operations attendance was up 255000 guests or 19%.
From March 13, two the ended the quarter our attendance declined by 839000 guests.
Yes spending per cap in the quarter increased 70% to $56 and 67.
Admission for capital increased 24% due to higher recurring revenue from members fastener initial 12 month commitment period.
Along with strength in single day attendance per caps and other pricing initiatives.
As a reminder, when our members enter the 13th month in membership.
Begin recognizing the revenue on a monthly basis according to their cash payment.
Whereas for our season pass holders and numbers have been with us for 12 months or less.
We recognize revenue based on visitation.
The suspension of operations Waterpark significantly reduced attendance in the first quarter, which caused it to normally large increase reported admissions per cap.
Pardon me suspension of operations admissions per capita through February was up 7% driven by higher percentage of 13, plus my numbers as well as single shrinking single day per caps another pricing initiatives.
In Park spending per capita increased 5% primarily due to higher revenue from membership dying.
We recognized revenue from certain corporate sponsorships in the first quarter.
Going forward, you're working with our corporate partners on the case by case basis to defer other planned programs until the parks reopened.
Consistent with our guidance on the part earnings call.
We did not recognize any revenue from China or Dupont.
However, our park in Saudi Arabia remains on track for 2023, Okay.
On the cost side cash operating newest DNA expenses decreased by $13 million or 9%.
Primarily due to cost saving measures you check after suspended operations.
Modify the adjusted EBITDA for the quarter, both losses of $42 million and increased lost $10 million versus the prior year quarter.
As Mike mentioned, you have taken aggressive cost actions to mitigate or cost cash outflows.
We eliminated nearly all of our seasonal labor cost.
We announced a 25% salary reduction Raul executive officers salaried employees.
In the 25% reduction in scheduled hours for all full time hourly employees.
We suspended all advertising marketing costs.
We deferred the $20 million increased investments, we had planned to improve the guest experience.
And we identified $10 million to $20 million of additional non labor operating cost savings for 2020.
We're also taking steps to defer or eliminate at least $40 million to $50 million capital expenditures.
And now expect it's been $90 million to $100 million in 2020.
You have kept our full time team members on the payroll and maintain their benefits at the same cost.
We believe this leaves us in the best position to open our parts quickly.
Based on all the magic we've implemented an additional measures we could implement in a more prolonged suspension of operations.
We estimate that are net cash outflows would average between $30 million to $35 million per month through the end of 2020.
This includes all operating expenses and capital expenditures related to our parts.
Along with contractual rent interest in partnership Park obligations.
We were obligated each equal to offer to purchase the outstanding partnership units and unit holders on the third party interest of six lines of protection, such large ever, Georgia, and six flags Whitewater Atlanta.
We calculate the off the price based on the trailing four years of either done of each of the partnership part.
In light of its bench in the park operations, which could cause the value the partnership arguments to decrease in 2021 and thereafter.
We set a minimum price war for all future purchases I used on the 2020 offer price.
This floor provides a significant listen it's a partners to retain their units not stepping back to the company.
As a result, approximately $5 million worth of units would put to six flags during the current year Ginger period that ended on April 28. After the general partner for each partnership exercise that right. The first refusal to purchase one half of the tender unit.
Our partnership bark obligations also requires the thing and I know distribution of $42 million to the unit holders in 2020.
You'll make these payments in the third and fourth quarters, even if the suspension to park operations continues.
Its partnership units.
Represent excellent investments with unit holders yield of nearly 8% guaranteed by booked six flags and time Warner indirect subsidiary of 18 team.
Which is why we have historically experience such a low volume tendered you.
Turning to our active pass base, which represent the total number of guess enrolled in the company's membership program or that have a season pass.
You are seeing improving trends due february due to the strong membership sales in 2019 as more members remained with us into 2020 versus the prior year.
Unfortunately, we lost significant season pass a membership sales March and April.
Our parks have not been able to open due to the impact of covert Nike.
Our active pass base as of March 31st it was down 10% compared to the prior year quarter <unk>.
And as of today are active pass base is down 20%.
We are proactively working to retain or existing members in season pass holders in several ways.
First we offer day to day extensions to our season pass holders for each operating day, we are close.
Second we offered you automatically upgrade.
Memberships to the next year level for the rest of the 2020 season.
Remember should continue to make payments until the parched reopened.
Third you offered to pause payments for any member requesting to do so.
Our research shows against that our guest retention offers are appreciated.
We still have 2.3 million members, making monkey payments, providing an important source of revenue and cash flow to help us maintain core personal functions. All our park operations are suspended.
Our $30 million to $35 million monthly cash outflow forecast assumes minimal membership revenue, but no season pass revenue.
That's based on guest feedback, we currently anticipate but most of our pause members will turn to active paying members. Once we reopened conditions were stable again.
In addition, we'll actually tried and true or cancel members Bachelor programs once or operations have risen.
We have received very to refund request for season passes.
Well, we have no contractual obligation to make a refund in almost all of our existing pass holders of use that that's at least one.
The satisfaction of our guess is very important to us.
You're actively engaged in conversations with them to ensure their continued loyalty.
Deferred revenue of $149 million was down $29 million or 16% to prior year.
This was due to the decline in are active pass base as well as the hard number 13 plus month members.
It was revenue is recognized monthly and therefore has minimal contribution to deferred revenue.
I would now like to discuss our capital structure and liquidity position.
You have historically maintained a very balanced approach to our capital structure preserving secured debt capacity not allows us to quickly raise capital in times of me.
In addition, we have no debt maturities until 2024.
Prior to this crisis, you reduced our first quarter dividend by 70% to 25 cents per share they $21 million and Oh.
The reduction of $48 million compared to the first quarter 2019.
We invested these dividends savings to repurchase $51 million of our 2024 bonds.
In alignment with our goal to deleverage our balance sheet.
We also invested $51 million and capital expenditures net of insurance recoveries in preparation for the parts opening for the season.
As Mike mentioned upon suspending the operations of our parts you took several financing steps to enhance our liquidity position.
First we increased the size of our revolver from $350 million to $481 million, providing an additional $131 million liquid.
Second in conjunction with our bond offering you obtained an amendment to our credit facilities, because I would describe further in a moment.
Third you raised $725 million with a heavily oversubscribed and upsized secured notes offering price that 7%.
Finally, we use part of the bond proceeds to pay down $315 million of our term loan and the outstanding balance on our revolver.
Because of these steps our pro forma liquidity position as of March 31st It was $832 million.
This included $460 million available revolver capacity.
$21 million of letters of credit and $372 million your cash.
In addition to having ample liquidity or credit agreement Amendment allows us to since it's been testing of our senior secured leverage ratio covenant to the end of 2020.
And to use modified testing of the ratio through the end of 2021.
Giving us the flexibility to manage our business.
As part of the Amendment, we agreed to a $150 million minimum liquidity covenant that will apply to the period of human.
Yes, just spending or dividends and share repurchases for the foreseeable future and our capital allocation strategy will be focused on paying down debt to return or net leverage ratio between three and four times adjusted EBIT.
In addition, as result of <unk> all the uncertainty you drew our guidance postponed our investor day until we have had the opportunity to develop our new strategic plan after the crisis.
In summary, we have moved swiftly and decisively over the last six weeks implement numerous initiatives that will help the company whether through these uncertain times.
Now I'll pass the call back over to Mike.
Thank you Wendy I would now like to turn to our future and discuss what we are doing to ensure that we emerge from this crisis in a strong position to delight our gas.
And to deliver long term profitable growth for our shareholders.
Well our park operations are currently suspended this has not slowed the progress we're making to profitably grow our base business in the future I would like to highlight three key initiatives that our team is focused on right now.
First we are reassessing all elements of our cost base. The shutdown of our operations has allowed us to evaluate each line item of our cost structure in order to determine what is essential.
We've been forced operate more efficiently in this environment and we expect to become a more productive organization.
Second we are extensively soliciting feedback from our gas in order to understand their expectations in a socially distance world and also to understand what we should expect in terms of potential visitation once our parks reopened our large active pass base allows us to have meaningful dialogues with our guests during times like these.
It helps us to make informed decisions despite an uncertain environment.
We have weren't quite a bit over the past month, including the following.
As it relates to guess expectations once our parks reopened the number one focus is on standardization of our parks. It is very important to our gas that we wipe down a rights with increased frequency, including a thorough sanitization every night that we provide handwashing stations throughout our parks and that we provide hand sanitizers.
Our guest.
I guess also would like us to enforce some form of social this unseen in our parks and potentially limit the amount of guess boarding our rights or conquer grading in certain areas at the same time.
In terms of our guests desire to visit our parks as of now over 50% of customers responded to survey indicated that they would visit our parks today, if they were open.
In addition, nearly 80% of gas indicated that they were likely to visit our parks again in 2020, if we implemented certain health measures such as enhanced sanitization.
Third we're continuing to strategic work I mentioned on her last earnings call.
This will allow us to accelerate earnings growth. Once we returned to a normalized environment. One focus area that we previously highlighted was to recapture of lost single day gas we have already seen progress on this initiative through our focused and targeted offers.
Well this is promising the majority of our lost single day attendance came during our peak summer months. So we will lean heavily into this revenue management shifts to drive the more meaningful results what our parks are operational.
Another strategic priority is to incorporate technology into our parks to streamline the guest experience and to make our parks more efficient.
For many of these projects will take time or I T team has done some outstanding work.
We're working on additional initiatives such as virtual queuing for rides, increasing cashless transactions and the ability to order food through our out on a guess phone reducing the need to stand along lines.
We didn't in long likes is consistently ranked as the number one pain point in our guest experience. So we believe I guess, we'll be thrilled by these technology improvements coincidentally. The should also help us to operate socially just its environment by reducing the need for people to stand in line next to one another.
Technology will also allow us to improve our ways of working in the parks to be more effective and efficient slowing the growth rate of operating expenditures as we execute productivity initiatives.
Looking ahead in 2020, we cannot predict with any certainty the lengths and severity of the disruption from cobot, Nike or how long a deep the economic impact will be we're working with state and local government officials determine which parks can open first based on the lifting a restrictions by local health authorities.
This is clearly a very dynamic situation as new information surfaces daily we're continuously reevaluating the potential timing for each of our parks reopenings.
Once we determine a park is ready to open we anticipate a two to three week ramp up period. Our parks go through an opening process every year and are very meticulous in this process to ensure the highest standards. It gets safety or Matt we maintain contact with our seasonal labor force to be able to activate them as quickly as possible.
Given the current environment and the recent increases not appointment we do not believe we will experience. The same type of labor shortages for inflation, we had warned about on our full year 2019 earnings call.
It is also worth noting that we have plenty of experience operating our parks profitably with low attendance levels. As we are often forced to do during rainy days inclement weather periods. As a result of arc spirits, reducing variable labor parks the level of attendance required for each park to breakeven is relatively well.
Once open we will likely need to modify our operations to accommodate concerns from health officials and our guests.
Enhanced attention to health and safety procedures may add some materials and labor costs, where operations and we're committed to taking the necessary measures to make our guest feel comfortable busy our parks.
The good news is that in the weeks before we suspended the operations of our parks, we had already begun implementing enhanced standardization and other health related procedures.
Therefore, we will be more than prepared to implement the required measures across all of our parks when they reopen.
Almost 90% of our attendance is drawn from within 150 miles make it easy for our gas to reschedule visit to six flags because its local it does not require air travel historically, we have witnessed pent up demand after prolong closures of zoo swap saw with the swine flu.
In 2009 and based on our surveys it seems that our guests are eager to return to our parks.
As I said during last earnings call urgency transparency and accountability, our priorities for me our board and I are completely aligned interactions and priorities.
In the near term our focus is on preserving liquidity and on maintaining financial and operational flexibility.
Because of the actions, we have taken to shore up our balance sheet and reduce our operating costs I feel confident that we have more than enough liquidity and financial flexibility to operate under any scenario we encounter.
Longer term, we are taking this time to develop productivity a topline initiatives setting us up to deliver even stronger profitable earnings growth. When we opened our parks again.
We are extremely confident our collection of assets and our company's ability to generate cash flow and shareholder value over the long term and then the enduring strength other consumer experience economy.
Six flags is a leading innovator with the beloved 58 year old Brad dedicated employees and webcast.
We operate in a highly attractive markets and our unique assets provide a truly differentiated experienced in seemed entertainment.
We remain focused on enhancing the strength of the base business and de leveraging and have positioned ourselves to emerge stronger on the other side the pandemic.
We look forward to updating on our progress during the second quarter earnings call.
Beverlin at this point could you. Please open the call for any questions.
As a reminder, swaps they quickly that's why I remember I get telephone keypad.
Okay. So just a moment that can pilots rene roster.
[noise].
Your first question comes from the line at King's Haldeman I'd welcome the charity.
Hi, good morning, Thanks for taking my call. So.
The number one question I keep getting I'm, hoping you can help with is just what the parks are going to look like in this.
Socially distance environment, you talked about some of this and in the prepared remarks, but maybe help us think through.
How you would go about limiting the number people in your parks number one.
Sort of what technologies, you would use how you would communicate that weve potential yes, and then how you would limit people even line and potentially on the right I know you talked about.
Technical investment technological investments that are eventually coming are you going to need those to be up in running that you think through how to do a virtual queuing alike.
Yeah, James how are you going.
I think first I, it's it's a really good question, it's fundamentally what a part present teams have been working on a I mean, the first thing is we've got a gain the trust.
Of state and local health officials and they've got to feel comfortable we can protect the safety of our gas and our team members.
The second is we have detailed plans that have addressed the new normal we're using those plans and discussing those plans based on direct guest feedback medical advice from our epidemiologist local health officials and also CDC guidance.
What that means as we think about the new normal we're gonna have to implement temperature checks, we're gonna be wife and down rights throughout the day, we're gonna have handwashing stations free Sanitizers masks sanitization the parks each night and we're gonna have to enforce social this is seen in all areas starting from a parking lot to writes the Q.
Why isn't the dining areas a lot and that's going to be the reality in a manual reality as well now we already began implementing these measures as I said before we suspended operations were very prepared how we do this manually and how we coach guests as they come and how they come in so I think there's gonna be two phases there'll be some phases where I'd.
Well, we open up park sooner than later and we're gonna have to be there to coach the guest as they come in over time, what I'd like to do is continue to implement technology to enforce more of a contact list environment that'll continue to ramp up so that's that's how we're thinking about it.
Okay, but the latter do you expect to be available as soon as this summer the latter meaning you know a phone app that would allow people to know when they're right is ready as opposed to you know people in the park sorta directing people where to go and how do you communicate with people. It is there a point where you're.
Turning away again in this scenario, presumably I would I would think that would be a case, but how are you thinking about that.
Yeah.
Yes, I mean is where is we're talking that I'm, saying, yes to your latter question James there's going to be up as we ramp up as we're having initial conversations there's going to clearly be.
Ah capacity when it's I mean, we operate at about 50% normally so we will have guidelines in partnership with local health officials around what do they feel comfortable with it we know exactly what our counts are we were already testing before these operations mobile ordering virtual queuing.
Cash lists as well as I look and enhance our security so that will ramp up it'll depend by park itll depend on how we do that but remember we've been doing this before and we know how to manage gas manually and coach them. Accordingly, so it'll be in parallel we'll we'll do it manually to make sure people are clear whether its let him know.
Spots in line by paint a where they stand to four so social this unseen and as we ramp up the up the technology as we move forward that allow people to know when they can come to the ride when they could come to pick their food up et cetera, we anticipate we'll be able to do those things over the next few months.
Perfect and then my second question and I guess.
First off I wanted to really you know commend you guys in and really congratulate you guys.
In terms of your efforts of of extending liquidity in getting these covenants pushed back I'm not really was a unimpressive effort, but so I guess his question is for Lenny.
How should I speak about the covenant beyond 2020 is is it right to think about once we get into one Q 21.
We are doing a trailing 12 months with the last three quarters of 2019 is that how that is going to work.
Mechanically and where does that leverage ratio now stand given.
The transaction that took place within the last couple of weeks what is that what's the total sort of better mouth, we should be working with the back into the leverage numbers were going forward.
Yeah, well you won't show hadn't take that thanks James.
Sure. So yeah, you're exactly right as far as the mechanics in polycarbonate work. So you know for 2020, we've suspended the testing of our senior secured leverage ratio for 2021, each quarter will be replaced or what the actual quarter for the Q the quarter to.
2021, so essentially due to the Q1 test will use the last three quarters of 2019. The Q2 test will use the first three quarters of 21 in the last two quarters of 19 et cetera until we get through before your 2021.
[laughter] doesn't sit here today are secured.
That is made up of the new 725 million dollar notes that we issued on April 22nd and then $479 million an hour term loans since we paid down $315 million of the term loan with proceeds from the board.
As it relates to the revolver. The revolver also will factor into the calculation and it's it's a rolling four quarter.
Outstanding balance of the revolver on average so you basically take each quarter that we have revolver balance outstanding in the four quarter test period and use that average a further for the quarterly test phase. So today I you know that the first quarter results were fairly in line with prior year.
And we essentially.
Paid down the majority of the $350 million the term loan so our secured leverage ratio as Oh, we ended the quarter was.
A little over 2% and you know that will obviously have pressure as we don't have operations. Yeah for the portion of 2023 are partially open but I can use in the test to you all to.
Well placed the 2021 results in 2019 or will help kinda modify that.
Leverage ratio aggregate a full business.
I guess, what I'm trying to get out is once we get into 2021.
How far would EBITDA I need to sure Paul ER versus the comparable quarter, which I guess would be 2090.
How far would EBITDA need to fall for you to be in and reach of that under that new covenant and when would that not forget about the wind because we know what things are going to look like but what's the magnitude of room that you have even once we get into 2021 with respect to those covenants.
Yeah again, as you mentioned it'd be hard to predict what happens in 2021, but we felt like we have ample cushion, especially using the 2019 results for Q1 in Q2 at a minimum and then it'll be you know looking at how the business performing after Q2, I can determine essentially where it will.
Be well that covenant test, but we feel confident but right now we have the liquidity in the flexibility in the covenants to make it through 2021.
Okay. That's me suspension of operation was longer and more pronounced into 2021, and possibly have to go back to our credit facility lenders for additional covering.
Got it Okay really helpful. Good luck guys.
Your next question comes from the line of David <unk> of Jefferies.
Mr. Hats. Your line is open.
There's probably no response from the language contained to the next question and the next question comes from the line, Tim Condor Wells Fargo Securities.
<unk>.
Thank you and gentlemen, again, congratulations on the on the on the effort with the liquidity and the responses taking care of the employees and Ah sounds like that setting you up well again to attract the right employees are quickly back to when you can reopen.
So on that line, Mike I was it was little bit actually pleasantly surprised it do you think with implementing a lot of the new procedures and training and all that you still think you'll be able to open in two to three weeks. Once you reach a decision point or get get clearance clarity on on timing of when you can can reopen.
Yeah, Tim Good morning, Hope, you're well and I appreciate you calling out or employees I. Our part presence of just on magnificent work our entire team has and keeping people positive and I think it's important or full time folks are really important core a with really important skill sets an experience.
Just to operate the parks and and a that that's been a big part of our decision, making process and keeping those folks close in yes to answer your question. When when you think about it Tim we had roughly about 11 parks as I said there were about to open.
We had seven that were open so we had done a lot of the work and we'd really ramped up a lot of the work in anticipation of opening because we suspended operations March 13th So yeah, we've been doing the right stuff in the interim took to get ready.
As we are having a conversation so we do feel a confident we've done it before a that we can get the parks up and running in a 14 to 21 days and no teams are ready to do it now the lastly, I would say Tim as it's going to be a new normal right. So.
If we are you know we're fortunate enough to get the parks open it's gonna be something that's not obviously at full capacity I'm sure. It's gonna be something that starts with a 25% ramps up in his face based on state and local guidelines and what we're prepared to do that but as you know today, we're we're able to open our parks and operating day to day with route.
Secondly, a low levels of attendance to drive breakevens.
Okay, and and Mike you said that under pre colder than normal on average you were running about 50% of let's say the fire code capacity a a the park system.
So are you, saying that a 25% of that 50 or 25% of the fire code.
So to speak capacity and is that what you would or kind of a initially anticipated.
Yeah, So Tim the first as it's really it's it's not a it's not a fire code number. It's it's what we would call 50% of a good experience just to be clear and the second thing is it's really going to depend.
On the local health authorities in the local officials Tim obviously, there are opening up states you don't forget us for a minute as their opening upstate scare creating guidelines on how they want a phase in reopened states in cities and we're going to fall right in line with that and that math is going to be dependent on how we can give everybody comfort that we.
Craig social this unseen <unk> ability to make sure that there is that social distance seen in the park.
So when I use those numbers, it's really what we would consider a proper experience what a lot of the initial feedback is from the locals is that they would see that that 25% numbers. The first but the number they would feel comfortable with us to create the rights social distant seen the comfort, but again, that's going to vary you were going to have that dialogue with the local.
Folks as we move through this new normal.
Okay. So again that 25% would be 25% of what you historically it has and so indicated so half of that 50 right 25% collective.
25% collective that's right time.
Got it Okay and then at this point granite Cali seems to have the little bit more heavier restrictions or a and then you've got the the northeast New York, New Jersey area, and it's had had a lot more of the or the impact. Unfortunately.
Would you anticipate areas in Chicago also Juntas, various say, maybe Texas, Georgia areas that could open first a prior to some of the stuff some of those other regions that have been impacted more severely they kelvin.
So it's a not another good point, Tim we were tracking the numbers closely I mean, we look at all sorts of data.
Welcome to the local officials and it's it's a moving target, but when you look at what's going on with the states. It would suggest that we should be staying close to Texas, Oklahoma, Georgia.
Missouri in Mexico, and look we're really regionally diversified as well as you know I think the other part of this is we you know talked all the state officials is remember not one of our parks represents a even 10% of our company's EBITDA. So we're very diversified.
And I think that's a good Q for us, but those would seem to be the areas right now, whereas we're watching the state or the country dynamics that would suggest.
Dealer, we could open at some point hopefully in the summer, but again time will tell a there's a lot to be learned in next few weeks is allow these states are opening and they see how.
You know, they're moving forward in terms of the brought state opening and what that means but again. The good thing is we got no park. That's you know more than 10% of the attendance based.
Okay and last question Sir.
And I appreciate all the transparency and again or is this question is subject to competitive. However, you want to answer it but on your active pass retention base or lending if you want to take this whoever feels comfortable here.
The the 10% you'd said at the end of Q1 down 20% currently again not surprising given everything we're seeing parks closed and it'll probably rant bumped up pretty quickly as people come to the parks as you mentioned, but in the breakage that you're seeing is that skewed.
And your customer base is it skewed to more higher income customers within that a base lower income customers.
You'd more to newer or or or existing longer term customers any any color you could offer there.
Yeah, Tim I I can take this and one if I Miss it again jumped and.
Well first of all I think you know were broadly you know comparatively you know I look at the industry a in total but I think the way I would think about the membership cancellations. Tim is as follows if you. If you start with the base on let's just take membership and we basically we had come out of 2019 at about 2.6 million members that was.
80% increase in our membership base when you look at year to date 2020 active membership base has declined by about 14% to roughly 2.3 million members now about half of that was due to covert 19, and we do anticipate that rate can.
Increase if the crisis is prolonged now what I would tell you that the most of that reduction is due your credit cards being declined versus voluntary cancellations or pauses. So what we saw was about five points of that 14, Tim is roughly members cancer voluntarily.
With many just choosing the positive memberships so.
Yeah, I wouldn't say as far as cohorts, where you're going on there were really were seen it just kind of more consistently across the board. So what we're doing by the way what I'll tell you what the actions are which we can public with is a we've been really clear with the members want to give offers to upgrade their membership levels for the balance year and at time at the end of the membership that's been well receive.
So people want to keep pan they automatically upgrade and we've also give them the ability Pos so that's probably I think that's the best way to respond to that you know, but it's been pretty consistent across the board okay.
Okay, Great think repeated you've had so much [laughter] [laughter] and take care cover real quick to add on to that and part of your question I think was related to the total active pass nice and really what we're seeing is the lost sales of not having the sales all departure and operations is really what's driving the overall active pass base down so.
Memberships are an important part and that's what Mike was.
Mentioning on just on those but essentially the big drop from the 14 to the 20 is really the fact that we're not selling passes or to the same level. We were last year, while apart from an operating.
Okay. Thank you gentlemen.
You bet, and Hey, a Beverly move and everybody I would just asked I try to keep it though one question just because I know we have some technical issues and people join in late so I do want to try to get through everybody's questions of possible. Oh go ahead. Please next question.
Your next question comes from the line in pilot Detroit, obtaining capital hockey.
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Thank you good morning, Marty Tyler question I've. A question I was just on the expense side of things and now you can get through specific in terms of guidance and whatnot, but could you talk just about your expectations in terms of what the cost structure may look like going forward here I mean, certainly on the positive side you guys are.
Focused on being more efficient and be on negative side I would assume some of the actions that you guys are implementing on safety side of things could be a little bit had been offset so.
When you look longer term hum.
There's a negative offsetting you end up at the same waste or you need an awful lot. There is a significant change in terms of what your cost structure looks like.
Oh, Yeah. So I think yeah I'll take this I think the first in terms of cost structure, maybe I'll get to burn rate Tyler I well as we said we're going to be between this 30 and 35 million dollar per month burn rate and I think that's what we see and what we.
From an expense standpoint, I would say that as far as the work we're doing all right now we are still in the middle that we're looking at cost in terms of our the organization is set up we're looking at park operations broken a direct and indirect costs. Those are areas were really digging into as a team we're still in the middle that work and as we finish that.
Work, you know will provide a more clarity money anything else you wanted to add on that.
No I think is as you mentioned, that's essentially we're still going going through the entire cost base, but one thing, but keep in mind is that none of our.
Cost reduction measures whatever do anything that would impact the safety of our employees or I guess, so a safety is always a has always been and will always be our number one priority as it comes to cosmos.
Okay, great appreciate the detail. Thank you.
Thanks Oh.
Your next question comes from the line on that Dino Oppenheimer.
Great. Thank you very much question would be on cash refunds I believe you've given any you know at what point do you have to start giving them maybe you could frame the liability that would face it's you need to get refunds.
And also I just wanted to get a clarification as well on the part capacity, if you're saying, it's that 25% number what I'd imagine as your busiest days are substantially higher than 50% and get the limit those substantially your other dates makes sense you say during the week that would be well below that.
That's 50% number so I'm just trying to frame that impact is it actually you know could be lower than half of your gas.
Because of the way the math works. Thanks.
Oh, Hi Inn, so a first on on the refunds I already covered the ground on members, where we'd given people they ability to voluntarily pause payments and as far as refunds, if you're going to season pass holders. We refuse we received very few refund request a day.
That could increase if the crisis this prolonged.
And job again, we're not contractually obligated to provide refunds the majority of our pass holders and members have used surpassed one or more times a bottom line that was this guest satisfaction is important to us. We're actively engaged in conversations to ensure added value continued loyalty and we'll continue engage both with our season pass.
Pass holders and our members I'm in terms of capacity, we we have the ability to schedule visits to the park and we're being very thoughtful or if you know when we have the pleasure of reopening the parks, how we monitor that how we schedule folks to ensure we leveraged the capacity or what I would say the limits.
Of capacity day to day, whether it's a week day or weekend and that is again, that's gonna be something very driven a in partnership with the local health authorities in city officials, there's nothing we're going to do that they're not comfortable with a that ensures the safety of our gas and the safety of our employees. So it's going to be very local and we're going to work through.
Without knowing what stop comfortable for everybody and gives confidence in the and everybody safety.
Great. Thank you.
Thank you your net like your next question person a line of Mike for a central.
Hey, good morning, guys.
Mike just wanted to maybe a little clarification on the comment you made in your opening statement that the you said and correct me, if I'm I'm wrong, but that monthly rate of cash from the 30 to 35 million doesn't include.
Payments from your membership base is that what I heard.
Yeah. So it it why do you want to take US one Oh go ahead.
Oh, the 30 to 35 million dollar average monthly cash outflows, Oh I'm trying to.
The high end right now our range is are you currently maintaining the state of readiness to open our parks.
Additional cost measures may be required to will be required to achieve the lowering of the range.
Our average monthly cash outflow right now seems to fool suspension of our operations through December 31st 2020.
Oh, the ongoing cash flows, let's assume you know our current operating costs, including contractual rent payments and several of our parks contractually obligated capital expenditures for 2020 that can't be canceled or deferred.
Debt amortization interest or partnership put and distribution obligations.
All of our federal state and local tax obligations.
It does include minimum membership revenue in our international development revenue related to our Saudi Arabia project.
That's what's included 30 to 30 Fives again right now we're at the high end of the range and there's additional batches, we'd have to take it to that low into the range based on the dependency of how long the suspension of operations contained.
Yeah, I think Mike Mike I think the key there as membership does create some upside but we also as I've said were.
Preparing for the worst hoping for the bass.
If we're in a minimal revenue environment or prolong suspended operations or do you assume that that becomes minimal in a decreasing over time. So any membership is as upside and if we can open up park sooner that that creates upside versus the current model.
Okay, just to clarify if its members continue paying their their monthly membership payments it would be upside to that 30 to 35 is just another way to say that.
That's right.
Okay. Okay, and then just one follow up me Lenny <unk>, how should we be thinking about cash interest for the year.
Oh, sorry cash interest for 2020 will be very similar to 2019. The first interest payment on Monday 2020 underlying bonds, we issued isn't due until January 1st 2021.
Okay. Thank you.
Your next question comes from the line right angle Keybanc capital.
Hi, Good morning, just just want to worry about for me, though in terms of the guest survey that you did which I think was very interesting. How many guests did you did you survey and then did you see any regional differences.
In the responses you got.
So Brett we've been survey and the answer is we've been surveyed thousands of gas every week, we do that BREP teach t. Mark Cooper is team they do really good work on this.
We actively engaged with our active pass base and they give us really get feedback so since before the pandemic, a we were and we really ramped it up so it's been on a weekly basis, we're asking a lot of questions of gas, it's and it's in the thousands a each week and.
We look at it and we're looking at it I'd see how folks are evolving and their sediments et cetera. So that that's that's how we've been looking at it I'm as far as regionally pretty consistent were not seen regional spikes or to get to the second part of your question pretty consistent and we look across cohorts and everything. So it's a began we continue to look at it.
But it's been fairly consistent results that were seeing.
Thanks appreciate it.
You bet.
Your next question comes from the line, Alex right, Yeah I Berenberg.
Hi, good morning, and thanks for taking the question I understand it's gonna be difficult to model any numbers until the park start to reopen or we get more visibility into plus virus operations. However, given the comments earlier on the monthly membership dynamics at the 13th month it sounds like you'll be recognizing membership revenue in Q2, even if the.
Hard to close for the entire time is this correct.
Yeah, Hey, Alex So I think it's the answer is I think it's going to depend and I'm not trying to be sake. It's what we we don't know is the time of opening in the parks and while we don't know based on that is the consumer household dynamic does that trigger more credit card.
The false do we have more members wanting to pause.
We're we're observing it everyday and I think it's so what we haven't seen very transparently, we have been preparing for the worse, hoping for the best if we keep those members, which today is approximately 2.3 million.
Yes that does create upside, but we're also as we talked about we have seen about 14% of those members decreased since the beginning of the year and about five points that was from cobot. So we think if there is a long suspension of operations that probably starts to get worse. So that's what we know today, that's what we've assumed.
Today.
Got it okay. Thank you good luck in say sit down there.
Yeah. Thanks, all the best socks.
Your next question comes on the line it seems like asking at Stifel.
Hey, good morning, guys. So I actually wanted to ask a question about the the first quarter believe it or not.
And the attendance in the first quarter, I guess and like you talked about the Texas part being opened on on weekends, a new rides in California, and better weather, but you know what really stands out is that 30% increase I think you said in terms of single day tickets is there any way to understand a little more what what drove that increase was it something you guys were doing from the promotional side of things.
For the simplest just more demand in general or what were some of the things you guys did to drive that that single day visitor.
Yeah <unk>, thanks for asking I Hope you don't allow Steve I'm, sorry, if you if you break let me break down the math first it was prior to the park closures. The attendance was up about a 255000 gas or not that 90%.
And the single day ticket paid attendance was up 38% six flags over Texas did a great job initiate or year round operations engendered fab now that contributed about six point, so that plus 19, Steve. Okay. So if you look at the base if I, if you backed out over Texas.
Base attendance was running up about 13% roughly and where we really saw some nice momentum was as I said, California match mounted a really nice job, that's really good programs and that and I do think west coast racers helped and we did have some some positive weather now if I told your real quick what I would say was a bit of the how.
And what we what we did in simple terms I think we started to get them. Some things right, meaning in terms of we first focused on where and I'm I'm, giving you some of the revenue management logic, but we got really good by Geo Cody targeting incremental attendance in the where focus than we were.
Really close on the watch which gets to the right consumer value, we're really clear looking out where at prices moved up what do we think was the right price in the markets convert a consumer insight. There was then the when I said, we also looked at what days do we want up plus up attendance, where we have more capacity to say.
Sweater assets and lastly, I would say is I think that the beauty of our CRM data is we're able to test the stuff before we put a penny discounts and allowances in the market. We can go online conserving consumers. We can test offers and they can engage with us and tell us if they think it's the right value or not so that's basically what we were.
No one and we're going to continue to refine that it is a it isn't arc science, but that's a effectively what we were doing.
Okay. Thanks, Mike appreciate it good color I see about thanks, Dave.
Your next question comes from the line right Wendy of William Blair.
Hi, good morning.
Hi, Mike are there any challenges with realty apart.
Basis, I mean, it's really mckeesport, China pretty essentially way, but theres some overlap with these again.
S access and then within that are there any differences in the way you're approaching the waterparks versus the theme parks any color there it'd be great. Thank.
You bet, Oh, Hey, Ryan so as far as a reopening by park no I I actually think that's one of our strengths were were very local were very regional and as I said before we've gotten 90% of our gas or within a 150 mile radius is the parks and we've been able to make that model work, where we can plus up into.
Vigil parks and that was even the case in quarter, one where we have you know it's certain parks. We we have defined schedules for based on third or local markets as far as.
The Waterparks now we've been staying close to local health officials as we study bromine in Macquarie. We're finding that that does the job. So that's a process of us opening up a water park or a theme park. It is very much the same the local health officials the local city leaders the state.
They want to know everything we're doing and we've got a really detail playbook and how to do that so what we're finding is it's more about how they feel about the opening up of the local market and then how they feel about density in social distancing how that impacts the experience we give castle consumers.
Your next question comes from the line acquired Endo Jefferies.
Hi, Good morning, I'm, sorry about before I'm on for David Katz with juggling a few calls at sometime the question is really more since you didn't maybe perhaps you might have mentioned it on the Dallas data for me was pulled but.
Throughout their surveys were there any indications of the pencil part of confusion between memberships and season passes and Oh.
Would you or have you contemplate and maybe using this reset.
To to rightsize the pot of structure.
Yeah, Hey, Chris How're, you doing and give our best that David as well. So we're working through that the other part of the strategic work. We are looking at is we are looking at our revenue manager pricing a in terms of simplicity and I think that's going to run across the gamut, whether its single day.
Paid attendance throw passes season passes memberships word we're doing that work. We're also looking our website were also looking at returns on marketing and other sometimes those are kind of the three major buckets, where we're looking at and I I think that would would fall in there what I told you, though in the past and I would reinforce that I do believe it's an am proposition when.
Do you think about consumer demand occasions.
The membership program the active pass program works, because you've got will gas loyal consumers. They have a higher frequency of use they're willing to trade off on the incentive curve, meaning go pay more for more value they have a bit more disposable or elastic discretionary income those are great.
Yes, okay. The real you're really good guess and we want them. We also have value gas or valley consumers. They may have more limited out of pocket spending and they may only wanted just come once for some reason ideally if they come at once we flip them into active pass, but the bottom line as we need to be true to both I do see.
I think we're going to need to have an and equation and we were starting to see that we could in fact do that in Q1, we can grow that active pass base and be smart and focused in really responsible and how we think about single day ticket. So that work will continue as high as we as we flush out strategy.
Thank you.
Thank you.
Steve I believe that was last question and a two to two folks powders about some of the technical difficulties we had.
Let me what I'll do is let me, let me I'll close out Oh, I want to emphasize that we will open our parks.
And our company in industry will emerge stronger.
I'm looking forward to seen you in our parks when that day comps I do want to thank all of you for joining our call and most importantly for your continued support please everybody take care and be safe. Thank you. Thanks for everyone.
That concludes today's conference call you may now disconnect.
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