Q3 2021 Six Flags Entertainment Corp Earnings Call
Good morning, ladies and gentlemen, welcome to the six flags Q3 2021 earnings conference call.
My name is Catherine and I will be your operator for today.
The presentation all lines will be in a listen only mode.
After the Speakers' remarks, we will conduct a question and answer session.
You have a question at that time simply press Star and then the number one on your telephone keypad.
If you would like to withdraw your question press the pound key.
I would now like to turn the call over to Steve Purtell, Senior Vice President Investor Relations.
Okay.
Good morning, and welcome to our third quarter 2021 call with me are Mike status, President and CEO of six flags and Sandeep Reddy, our Chief Financial Officer.
I'll begin the call with prepared comments and then open the call to your questions. Our comments will include forward looking statements within the meaning of the federal Securities laws. These statements are subject to risks and uncertainties that could cause.
Cause actual results to differ materially from those described in such statements and the company undertakes no obligation to update or revise these statements.
In addition on the call we will discuss non-GAAP financial measures investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports quarterly reports and other forms filed or furnished with the SEC.
At this time I will turn the call over to Mike.
Good morning, Thank you for joining our call.
Over the past few weeks I have been energized by visiting our parks and spending time with so many of our team members. It has been great to witness firsthand, our team's resilience and their dedication to serving our guests and I want to thank them for working tirelessly through the pandemic.
We have to buy our call today into three parts first I will provide an overview of our operating performance and the strong demand trends. We are seeing second sandeep will go into more detail about our financial results. Finally, I will return to provide some comments about the progress we've made on our three long term strategic focus areas.
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Despite the challenging environment in the third quarter, we continued to experience strong consumer demand at all of our parks, we benefited from delivering exactly what consumers are looking for thrilling and affordable entertainment for the whole family that is outdoors and only a short drive from home.
Attendance during the quarter index at 92% of 2019 levels, excluding pre booked group sales our parks indexed 95% in the third quarter compared to the same period in 2019.
Fourth quarter to date trends through this past weekend ending October 24th have accelerated versus the 92% index.
We also continue to make steady progress with our revenue management initiatives. During the third quarter guest spending per capita was up 23% versus 2019.
In addition season pass sales trends have accelerated as of October three 2021, our active pass base was up 3% compared to the third quarter 2019.
While demand trends are encouraging we continue to face a tight labor market and we continue to incur additional costs, while operating in this unprecedented environment.
Looking back on the past two quarters, the speed and magnitude of the resurgence of demand was even stronger than we expected, which exasperated the stroessner costs and operations.
We are working on several initiatives to alleviate some of these cost pressures.
Sandeep will discuss this in more detail.
Overall, we are encouraged by our continued progress yet we are still in the early stages of transforming our operating model. We are confident that our efforts to improve all aspects of the guest experience will fundamentally reshape the future earnings power of our business.
I will now turn the call over to Sandeep will provide details about the quarter's results sandeep.
Thank you, Mike and good morning to everyone.
I would like to start by reminding you that results for the third quarter and year to date trends are not comparable to prior year, because we closed all of our parks in mid March last year and several of our parks remain closed or curtailed operations through the third quarter of 2020.
For that reason I will provide comparisons to 2019.
Total attendance for the third quarter was 12 million guests.
A 14% decline from 2019.
Afflicting capacity restrictions that some of the parks that were open.
The loss of a significant portion of our pre booked group sales.
An unfavorable calendar shift due to our fiscal year change.
Which benefited the second quarter at the expense of the third quarter.
Group sales, which includes school groups and company buyouts.
To experience downward pressure.
As Mike stated attendance at open parks in the third quarter index at 92% of 2019.
Excluding pre booked group sales are indexed 95%.
During the months of the quarter, our attendance indexed 97% in July <unk>, 9% in August and 86% in September.
Concerns about the Delta variance.
Increased over the summer and we experienced a decline in group sales in the second half of August through September.
However, as Mike stated fourth quarter to date trends have accelerated versus the 92% index, we achieved in the third quarter.
Looking ahead, we don't plan to share monthly attendance trends.
However, because of the extraordinary environment, we thought it would be helpful to share this detail.
Attendance from a single day guests in the third quarter represented 39% of the attendance mix the same as in the third quarter of 2019.
Despite the negative impact of lower pre book sales on single day attendance.
Excluding pre book group sales our mix of single Vegas increased by three percentage points.
Because of our reporting calendar change our third fiscal quarter 2021 ended on October instead of September period as it did in 2019.
As a result third quarter 2021 includes three calendar days in October.
This was more than offset by four days in July which shifted out of the third quarter and into the second quarter of this year, including most of the July 4th weekend.
The net reduction due to these calendar shifts in third quarter of 2021 was 400 to 437000 of attendance and approximately $24 million of revenue.
We expect group sales to have less of an impact in the fourth quarter when groups typically represent a smaller portion of our attendance than in the second and third quarters.
However, our new fiscal calendar will continue to create attendance shifts in the fourth quarter, which will include an extra weekend in January compared to 2019.
We expect this reporting calendar change to shift approximately 200000 of attendance out of first quarter 2022 into fourth quarter 2021.
When netted against the shift of the October weekend out of the fourth quarter into the third quarter. We expect the changes in our physical operating calendar to negatively impact the fourth quarter's attendance compared to 2019 by approximately 270000 guests.
Total guest spending per capita increased to 23% in the third quarter versus 2019.
Admission spending per capita increased 20% and in park spending per capita increased 26%.
The increase in admission spending per capita compared to 2019 was primarily driven by our new approach to revenue management as we saw double digit growth in admissions per capita for both our active pass base and single day tickets.
Our new approach includes pricing not tickets based on the demand curve.
It also includes a new pricing architecture that allows us to optimize relative pricing amongst our various ticket types and to significantly reduce the depth of discounted promotions.
In addition, as much of our season pass sales are occurring later in the season than the historical pattern. We recognize season pass revenue over a few visits.
Which boosted our admissions per capita in the third quarter.
As expected admissions per capita growth versus 2019 moderated in the third quarter.
We expect to continue growing our admissions per capita over time, but we expect the growth rate to continue to moderate.
The increase in in park spending per capita compared to 2019 was due to early progress on several of our transformation initiatives as well as a stronger overall consumer spending environment.
Highlights from our in park initiatives include.
Our new food and beverage strategy, featuring a new food pricing architecture, and the introduction of more premium offerings.
Our QR code enabled Flash pass program, which has increased flash fast adoption.
Our improved merchandise mix, resulting in higher retail sales.
And a higher mix of single day ticket visitors, who whose tickets do not include parking.
The acceleration of in Park per capita spending during our highest attendance quarter gives us confidence that our transformation initiatives are providing a sustainable lift.
Revenue in the quarter was $638 million up $17 million or 3% compared to 2019.
Excluding the impact of the fiscal calendar change and the impact of reduced sponsorship international agreements and accommodations revenue our base business revenue increased by $55 million or 9% compared to the third quarter of 2019.
On the cost side cash operating and SG&A expenses increased by $45 million or 19% in the third quarter compared to 2019.
The increase was driven by several factors.
First.
Higher wage rates and incentive costs to attract and retain team members.
Second.
An increase in litigation reserves.
Primarily related to an increased estimate of the probable outcome of the settlement of a legacy class action lawsuit.
Third.
Increased security in our parks.
And finally, a shift in the timing of our repair and maintenance costs based on our parks leader opening dates.
As we sit here today, the operating environment remains challenging.
With the tight labor market and ongoing supply chain constraints.
We believe that approximately half of the additional costs. We are incurring are transitory.
And will normalize over time.
However.
Some of these costs, particularly wage inflation.
May prove to be more permanent.
In terms of labor.
If current wage rates were to persist.
We would incur additional labor expenses of $40 million annually.
Compared to 2019 inclusive of the $20 million, we called out in the EBITDA baseline we gave during our fourth quarter 2019 earnings call.
This $40 million is consistent with what we called out in our previous earnings call.
Our team is working on potential opportunities.
To alleviate many of these cost pressures in case, they persist over time.
Adjusted EBITDA for the third quarter was $279 million.
$28 million or 9% versus third quarter 2019.
This included the negative impact of the fiscal quarter change, which shifted attendance out of the quarter.
Reduction of international sponsorship and accommodations revenue.
And roughly half.
The $45 billion cost to increase in the quarter that we believe to be transitory.
We are pleased with the growth of our active pass base.
At the end of the third quarter, we had $7 6 million pass holders up 3% from the end of the third quarter of 2019.
This is especially encouraging because we elected to not hold a highly promotional flash sale that we conducted around labor day. The last several years before the pandemic.
We expect to continue to increase our active pass base through the spring, while achieving higher ticket deals.
Our very large active pass base sets us up for a solid fourth quarter and positions us well as we head into the 2022 season.
Deferred revenue as of October three 2021 was $224 million up $26 million or 13% compared with third quarter 2019.
The increase was primarily due to the deferral of revenue from members whose benefits were extended.
Year to date capital expenditures were $62 million.
We expect capital expenditures of $120 million to $130 million in 2021, as we make investments to improve the guest experience and to increase capacity on our rights.
Our capex. This year is heavily weighted in the fourth quarter due to a cautious approach towards capital spending in the early part of 2021.
We continue to believe 9% to 10% of revenue is an appropriate level of annual capital expenditures in a normalized environment.
As the recovery continues we are focused on maximizing cash flow.
Year to date net cash flow for the third quarter.
Was $232 million, an increase of $26 million.
Compared to the first three quarters of 2019.
Our balance sheet is very healthy with no borrowings under our revolver and no debt maturities before 2024.
Our liquidity position as of October 3rd was $850 million $851 million.
This included $461 million of available revolver capacity net of $20 million of letters of credit and $390 million of cash.
Our capital allocation priorities remain the same.
First to invest in our base business.
Second to pay down debt until we reach our target leverage range of three to four times net debt to adjusted EBITDA.
Third to consider strategic acquisition opportunities.
Finally to return excess cash to shareholders via dividends or share repurchases.
Moving to our transformation plan as previously discussed we expect the plan to generate an incremental $80 million to $110 million.
Run rate adjusted EBITDA.
In 2021, we expect to achieve 30% to $35 million from a fixed cost reductions.
We have already realized over $23 million through the first nine months of this year.
Based on year to date trends, we now expect to reach the high end of $80 million to $110 million range. Once the plan is fully implemented and attendance returns through 2019 levels.
Thus far our revenue management initiatives have over delivered on our original plan.
However, our cost initiatives have been negative negatively impacted by labor and supply chain inflationary pressures.
For that reason, we expect our revenue initiatives to provide a greater proportion of the $110 million.
Relative to the midpoint of the company's pre pandemic guidance range of $450 million.
We're well positioned to achieve our adjusted EBITDA baseline of $560 million once that transformation plan is fully implemented and attendance returns for 2019 levels.
This EBITDA level assumes the current wage rate environment persists.
We are laying the groundwork for sustainable earnings growth and once the baseline is achieved we expect to grow revenue by low to mid single digits and EBITDA by mid to high single digits annually thereafter.
Now I will pass the call back to Mike.
Thank you Sandeep.
I'd like to take a few minutes to review some of the progress we have made on our three strategic focus areas to drive long term sustainable earnings growth.
Our first strategic focus area is modernizing the guest experience through technology.
We want to create more personalized and customized experiences for our guests.
Any them in control of their time and activities. This will result in our guest spending less time waiting in line and more time, having fun and enjoying activities. During each visit we believe that improving the guest experience will be the most important driver of our earnings growth.
On past calls I've discussed a number of the exciting long term initiatives that are underway, including our new CRM platform cash.
Cash to card kiosks ride reservations, and an improved mobile app to name a few.
Today, I would like to provide some detail on three additional initiatives that are already starting to have an impact.
First digital fright passes.
Instead of guests having to wait in long lines to pick up hunted attraction Wristbands. This fright Fest season, they are able to go right to the haunted attractions using their season pass card membership card or E. Tickets guests are able to purchase digital fright passes on their phone from anywhere in the park by scanning QR codes. This was.
We increased our fright pass sales, while eliminating wait times for our guests.
Second expanding our mobile dining locations across our parks and enhancing our food and beverage offerings. We continue to see the adoption of mobile dining leading to higher average transactions and improved guest satisfaction.
Third culinary partnerships to elevate the guest dining experience. We have launched two we probably serve Starbucks locations that serve a variety of the premium Starbucks strengths beloved by our guests early findings reveal that selective partnerships with third party brands improves guest satisfaction.
<unk> and increases in park spend.
Our partnership with Starbucks is only the first of several initiatives centered on enhancing our guest dining experience through strategic partnerships.
Our second focus area is to continuously improve operational efficiency.
We continue to make progress in this area in particular on our centralized back office and procurement efforts are.
Our cost progress is currently being obscured by the labor costs and supply chain headwinds, but over time, we expect our cost savings to show up in our financial results as we scale, our business get closer to full attendants capacity and pursue additional cost opportunities.
Finally, our third focus area is driving financial excellence, while we're keeping a close eye on that Delta and other variance we are optimistic that the global recovery will continue.
<unk> are hard to predict and progress will continue to vary by region, but we believe we are fast on our way to stronger guest attendance beyond the levels of 2019 as.
As we implement more of our transformation program and as our tenants recovers in 2019 levels, we expect to deliver $560 million and adjusted EBITDA, even more important once we achieve that new EBITDA baseline, we expect to sustainably grow adjusted EBITDA from our base.
<unk> mid to high single digits over time.
In conclusion these have been challenging times, but we are looking forward to a bright future.
With a clear focus on improving the guest experience through technology, and a talented and dedicated team to execute our strategy, we are well positioned to accelerate growth in 2022.
Catherine at this point could you. Please open the call for any questions.
Ladies and gentlemen at this time, if you'd like to ask a question. Please press star and then the number one on your telephone keypad.
Your first question comes from the line of Stephen <unk> with Stifel.
Hey, guys good morning.
So just want to make sure I'm thinking about this the right way, but with your revised EBITDA target of let's call it $560 million.
That's including the current labor pressures, which I think you've called out as being around $40 million. So.
It's a labor pressures do start to ease over time and eventually let's say, maybe not go back to normal but somewhere around there that EBITDA range would actually be closer to 600 million I just want to make sure I'm thinking about that.
The right way.
Good morning, Steve how are you doing.
So on the on the.
EBITDA target of $5 $60 Youre correct. It includes the $40 million of wage pressure and where do we sit here today. We believe that these wage pressures are very likely to persist and I think that's why we've incorporated that into our baseline EBITDA target and.
And your math it would be right. If it didn't exist, but I think we actually expect it to exist and Thats, specifically why we called it out and really our run rate in terms of wage rates today.
Flex that investment that's being done.
It's actually are expected to continue.
And just to add on that from here you are in terms of what youre seeing from the labor market today would you expect that to.
Maybe not ease anytime soon but also do you expect that to have you seen that intensify at all basically trying to get the was it is.
Is it getting worse, the same or is it kind of.
Getting a little bit a little bit better.
So I think where we are the legal market contains a continues to be pretty constrained, but what I would say is from a wage rate pressure pressure that we've been seeing a few months ago has pretty much stayed consistent we haven't really seen a huge change.
What really remains to be seen is what happens to the supply side of labor as we actually go into next year, but from a rate standpoint. This is what we're seeing right now.
Yes.
Yeah, Steve Good morning, It's Mike I think to your question first I would say, it's a volatile environment.
For sure.
He made the call to focus on getting staffed ensuring a safe park and provide a quality guest experience in the short term.
To your point about the longer term second we've got to deal with the current tight labor market and wage rates by operating more efficiently through process redesign automation and technology in order to reduce cost as a percent of revenue and we wanted to do that while we still enhance the guest experience. So.
We said we're in the early stages of several initiatives to operate more efficiently we're going to update you all in the future as we test and learn mark.
Okay, Great and then real quick second question is you laid out how the attendance kind of trended through the quarter.
But just trying to understand maybe the in park spend levels did you see any dramatic changes in terms of from July through September or was it pretty steady and pretty strong and does that continue to be pretty strong. So.
So far into the fourth quarter.
So Steve I think that's a great question I think it really ties into a lot of what we talked about on the last earnings call with.
We definitely saw from an <unk> spend perspective.
An improvement in trend as you went through as we got more staffed and Thats why we talked about the fact that we were making these investments in wage rates to get the quality of labor that we needed to deliver the in park services that we are that I guess, we're expecting and sure enough you saw that in our per caps.
<unk> actually accelerated versus Q2, and we're really pleased to see what we did.
Great. Okay. Thanks, guys appreciate it.
Your next question comes from the line of James Hardiman with Wedbush Securities.
Hey, good morning, guys.
Good morning so.
While we're on the topic.
Your last question there.
To your point Sandy.
The expectation is that admissions per caps will decelerate.
Or moderate I should say going forward, whereas the in park actually accelerated during the third quarter is there any reason to think that.
In park per caps will will come down meaningfully in the next few quarters or.
Thanks, Brian.
Yeah. So I think that's a very good question regular follow up James.
So I think where we are to the extent that the investment in labor has actually helped us to accelerate on the in park spend that that dry bulk continues as we go into the fourth quarter.
And we continue to get better it's conference.
Compared to Q2, Q3 was sequentially definitely better and we're making progress into the fourth quarter as well. So we will see two things one we will see wage pressure.
The rates actually.
I was going to run through the financials on the expenses, but we still we still should be seeing tail winds.
And Fox spend.
That being said I think it really was said on the last call. We say it again, we are definitely benefiting from the consumer discretionary backdrop that we're dealing with right now and that's that's a tailwind, which we don't know how long that will sustain for it but what was what is for certain is that a lot of the value that.
We're seeing on in park spend.
Is driven by our transformation initiatives. Thank you.
Sure.
So the direction is definitely up in terms of increased spend but we do expect some level of moderation once the consumer discretionary.
<unk> environment becomes a little bit more stabilized.
James It's Mike Good morning.
Deep set of Wow.
We're very pleased that the in park spending was up 26% and that as you said, that's an increase from the 22% in Q2.
Excited about the future.
What we've done with transformation, we've built capability.
And that capability, a big part of it is in our revenue management initiatives and how we're also connecting that to in park merchandising food and beverage retail games and that muscle is in the organization. So I'm very confident that that's going to build.
Old to sustained earnings after we get to that adjusted EBITDA of $560 million, we're going to continue to build that capability continue to refine.
Both in the short term and the longer term.
Got it and then I.
I did want to hone in a little bit about some of the attendance commentary.
So I guess first.
Safe to say that you're attributing the sequential deterioration over the course of the quarter Delta concerns.
October was better than than now.
92% of 2019 level that you called out.
For the quarter, which would imply an even bigger step up versus September.
I guess two things there.
I'd say that we're still not at 2019 level, but I'm, assuming you would tell us that we were at 2019 levels given what a benchmark that is.
For the industry, but then also do you attribute that October improvement too maybe.
Maybe people feeling better about delta.
Is there something else in October I know, some parks or maybe Scott.
Calendars, but help us unpack some of that.
Yeah, you bet James So first I think it starts with.
Excuse me Fright Fest is huge.
Start there.
Second is consumers continue to want to engage with us because we offer thrills, we're safe, we're outdoors, where close to home and we know we have not been a source of spread of Covid, given our contactless protocols and safety standards and as Pat said, we've had governor's tell us we're best in class.
We we did as you said attendance should open parks salary to 92% of 2019 levels.
Q3.
We have seen an acceleration of that.
In October through October 24th and we've also seen group sales.
Coming back as well so we do feel good about that now specific a couple of other things you mentioned, which is part of it but the good news here is were seeing.
A point, maybe about capacity constraints and Delta, let's just start with capacity Montreal, and Mexico had constraints in the third quarter, Mexico is now at full capacity as of October 18th. So I think that's a good thing.
In terms of Delta.
I think Sandeep said, it really well.
I feel good about our trends, but yes, we're going to be always focused on the safety of our guests and team members. We continue to feel good about attendance again, we're outdoors, we've got hundreds of usable acres and.
Timelines are going to vary by region, but we're optimistic about the global recovery and we need to be ready to capture the demand.
That's all really helpful. I appreciate it pretty open ended question, but I appreciate the candor yeah. Thanks Scott.
Thank you thanks James.
Your next question comes from the line of Ian Zaffino with Oppenheimer.
Hi, great. Thank you very much.
Just sort of a question on <unk>.
The cost versus price I think in the past you've mentioned that.
As your employees and as the demographics get paid more.
That raises your labor costs, obviously, but then mentioned offset on the revenue line.
I guess youre not seeing that now just given that we're talking about kind of flat.
Admissions per cap.
Thanks to this $40 million.
Incremental cost.
Yes.
Maybe you can kind of give us some color there. Thanks.
Yes, I think Ian.
It's a good question and I think.
What I will say is there is two different things going on and I think you are actually talking about the cost pressures that we are.
Being already.
And I'll talk a little bit more about.
The drivers in the quarter, but what I would say is we have historically been able to to see the pricing come through in costs actually go up and if you look at what's happening in our per caps you look at our admissions per caps and what we actually yielding we're doing extremely well because our per caps are up 20%.
And we actually seen that very consistently across all ticket types. So we are seeing the pricing yields along with the cost structure as it's evolving and we are expecting to see a continuation of this as we go along.
But I think specific to the cost right now the environment as we touched on Illumina is tough I mean, we have $40 million of wage pressure that is clearly in front of us that we've actually incorporated into our adjusted EBITDA baseline of $560 million and I think that's.
When things are at but we're very confident in our ability to price to cover the cost.
Yes.
It's a fair question.
As we think about the future we are committed to an operating expense ratio and we've talked about that.
I would say in the short term as I've said.
We know there are a lot of short term unknowns, it's a fluid challenging operating environment. So in the short term as I said I made the call we're going to spend more on cost to ensure we had the right guest experience we felt great about getting staffed.
And safe, but we're still in the early stages.
Now I would say also though we are very confident and I like our recovery when I think about our business really strong bounce back in the revenue liquidity is very good good per caps in attendance momentum.
And our active pass base shows really good resilience, which I also think bodes to their resilience and brand loyalty.
Really implies that there is also more pricing power.
Now I would say is I think about that we are going to focus on the future and to your point that gets set from a financial excellence, we gotta be zoned in on that operating expense ratio, we got to be more thoughtful about the cost in terms of process redesign automation technology.
And modernizing the guest experience through that technology and they are not mutually exclusive so we're going to we're going to stay focused on that we're confident in that adjusted EBITDA of $560 million as we get to the 2019 levels and after that we'll be in the mid to high single digit EBITDA growth after that 2019 attendance levels.
Okay, and then just as a follow up.
What's sort of the target date for the $5 60 is this something you think you could hit.
Soon or.
Is it can be a little while.
So I think it's.
Difficult to predict timelines I think Mike said it towards the end of the prepared remarks, there, but I think.
We see sequential improvement in attendance, we feel more and more confident that its closer rather than further away, but you saw what happened with the Delta variant in the third quarter were looking good in July than we had in August September blip in terms of a slowdown. So we just don't want to get ahead of ourselves. We're doing all the things that we need to do to actually drive towards that but.
The health.
<unk> is really going to be the driver of our winter attendance comes back, but I think we're very optimistic that this is sooner rather than later.
Based on the way to help the outlook has been evolving.
Alright, great. Thank you so much.
Thank you.
Your next question comes from the line of Stephen Grambling with Goldman Sachs.
Hey, Thanks, I guess as a follow up maybe I'll ask the question a little bit differently, but what's been the historical kind of rule of thumb for flow through from admissions per cap and in park per cap growth as we think about how strong it's been so far and how might that have that flow through have changed from some of the actions.
You've taken versus some of the labor inflation.
Yes, I think it's a really good question, Stephen and I think it's.
Probably less comparable to the current environment.
More because of some of the dynamics that we've talked about on an.
How the drive the driving forces behind the admissions per caps and Ips. So I touched on this in the prepared remarks, but I wanted to recap them because they're important to bear in mind.
So we're really pleased on where we are on the per cap trends and we saw a 20% increase in admissions per caps, which is a deceleration from 24% that we saw the prior quarter and.
It's very good because it's been driven by growth in both the active pass base for Capstone single day ticket admissions per caps, both actually growing in the double digits, but the one thing I would say about this particular situations because of the pandemic Europe.
We've actually sold the season process much later in the year.
As a result of this.
Amount of per cap boost that we're getting because of the shorter window of time of which the revenue is being recognized.
Is actually lifting the per cap.
In this particular Europe, that's one of the reasons why we said, we're expecting that the admissions per cap trend to moderate.
So that's one and then I would say the.
The next one would be on Ips.
There are two different things going on over there one we talked about the labor investments that we've made as we got stuffing in a better place in the third quarter going into the second we saw that we were able to execute on a lot more and we saw a sequential acceleration in in park spend.
That's great and I think that the transformation initiatives that were already underway in the second quarter continued as well, but the key over here is we have a backdrop of consumer discretionary spending.
Elevated in the marketplace. So we're not quite sure what actually sustains on that particular piece of it hard to predict exactly how much that is either.
Overall, we tend to actually see a pretty good flow through from the increase.
Increase in per caps in our EBITDA.
Okay, and I guess, one other follow up just on the labor pressures and the shortages that you had talked about in the past are you seeing any significant difference in.
Those wage pressures or the shortages based on geography, given some states kind of let some of the stimulus lap earlier. Thanks.
Yes, Steve Thats, a very good question.
Yes.
I would say that there are nuances by state, but broadly it's a nationwide problem.
Definitely seeing this across the board.
And I think sequentially, we've gotten better at stopping in some parts versus other products just because of the variation by geography, but it's it's tough everywhere. It is not easy.
It is a national issue that we're dealing with right now.
But again.
Really pleased about the initiatives, we took and we talked about on the last call. We've put into the seasonal incentive plan. It's worked fairly well. So our staffing is actually sequentially improve and we expect to keep improving it as we go into the fourth quarter. So it's looking good but the backdrop is tough and thats exactly what we talked about in the prepared remarks.
Yes, Stephen the only thing I would.
Put on top of it is I do think one thing I see is the closer you get to the population centers.
It does get easier to get staffed I think thats, probably the one thing we have seen across parks.
Everything else Sandeep said is right.
Feel good about our retention recruitment incentives, we've improve but it's going to continue to be a.
Big focus area for us in terms of connecting that to execution.
That's helpful. Thanks, so much.
Your next question comes from the line of Ben Chaiken with Credit Suisse.
Hey, How's it going.
Good morning, Ben.
Good morning, Hey, just sorry, just to clarify as you as you think about the I apologize if I missed it but as you think about the higher range in EBITDA that you called out.
On the revenue side, how do you how do you delineate between maybe sustainable idiosyncratic things that you guys are doing versus maybe what we're seeing in the overall consumer environment and I'm not suggesting that the current environment will or will.
Will or will not.
I'm just curious on the thought process and then part two just to clarify did you say the growth that admissions per caps there'll be growth in 'twenty two versus 'twenty. One is your expectation sorry, if I missed any of that previously thanks.
No I think very good questions.
Ben I think.
Number one I think when we talk about the.
$660 million EBITDA goal, the PRC updated too and we also talked about the fact that it is going to come more from revenues and less from cost given the environment that we're facing right now.
We're really over delivered on our plan so far on the revenue side and then I think you can see that in the admissions per caps in the in park spend per cap trends that <unk> been seeing so far this year and so what we have caveat. It in my previous answer as well I did mention that.
Steve.
Look I mean, the consumer discretionary environment is definitely.
One which is allowing for a heavy spend from the consumers and so we're not quite sure how much of a drop off there will be if that moderates later on but what we can see is that exclusive of debt from our transformation standpoint, we see guidance.
From the admission side, which was extremely strong and thats really a function of our revenue management process.
That revenue management process has been in place for the entire year and we've done a really good job with the revenue management team of adjusting pricing across different ticket types and making sure that fare.
We're actually moderating our promotional expenditures as well our promotional activity as well to actually drive that that.
That yield from the admission side. So that's a big piece will be really confident that its more driven by transformation and is relatively agnostic of the consumer discretionary spend that's going on right now.
Got you and then just just to clarify the second part what are you assuming that are you assuming that PERC admission per caps next year versus <unk>.
'twenty, one sorry, just to confirm yes, I think it's.
Basically early days right now because of the admissions compared to <unk> 19 for short has different strength, but because of the dynamics of the season pass and we sold the season pass later in the season as the cadence of sales of season passes basically stops reverting to historical norms that you could see some pressure in relative terms.
Compared to 'twenty, one but against 19, the yields that were seeing broadly a very very strong. So I think we should see <unk> strength.
Yes, Ben I think the obviously the other offset us.
Ideally and hopefully we anticipate there's going to be more attendance next year in 'twenty two as well.
So obviously we will.
We're tracking both of those between the your point the admissions yield per caps, but we also expect to see a nice continued momentum on the attendance line.
Especially in Europe passengers or so yes.
And it passes are sold earlier, obviously that that that'll support as we move into 'twenty two as well in the early part of the year.
Got you and you guys have any way to quantify that.
The dynamic of season passes maybe being sold over a smaller period. This year for us are too.
I think it's too early then because I think as we're coming through the pandemic, we changed the cadence of our promotional activity. We didn't do the seasonal labor day season pass sales flash sale that we have done historically, so I think things will start normalizing as we go into 'twenty, two but I think because of the pandemic.
Situations being very different in 'twenty two would likely.
21, you will see some noise 'twenty one versus 'twenty two as we go through.
Cool thank you very much.
Okay.
Next question comes from the line of Ryan Sundby with William Blair.
Yeah, Hi, good morning, everyone.
As part of the business.
It is the smaller part of the business, but I think we take licensing out of 2019 numbers.
So it looks like sponsorship and accommodations are down pretty meaningfully in the quarter.
We see it tend to start to build back towards 2019 levels. When when should we see that side of the business can be a catch up.
Okay.
Great point drive, yes, that's definitely the case I think definitely boats sponsorship and accommodations have been impacted.
The pandemic this year as we move into next year, we should start seeing recovery on that side as well so.
But.
We agree with you.
Okay, Great and then.
Closing out that remaining attendants gap versus where we were in 2019.
Are there any parks or maybe key demographics, I think historically families with kids were about half year visitation.
That kind of stand out that need to recover.
And then I guess as we see vaccines are allowed to children under 12.
Do you see that as a material impact to visitation for next year.
Ryan It's Mike.
I don't as I said.
What we are seeing consistently in every geography, if I understand your question is.
We are getting guest recognition.
For the fact or safe for outdoor Edward close drive from home.
Given the guest a high level of confidence and safety.
We've been recognized for our safety protocols.
As we've talked about in previous calls were contactless from the point of purchase to your entry in the park all the way through to your active pass base activation.
And that gave us some gas a high degree of comfort coming to our parks.
And then of course, you've got the usable acre factor, where they just feel they can naturally in effectively a mini city park socially distance.
So what we like is the fact, we're seeing the capacity constraints are lifted we saw that in Mexico as I stated right now the only one we have under that situation is Canada.
We.
To get great feedback from all the.
The park areas of cities and the counties that they want us to continue to expand operations, which I think is very good. So we're seeing across all cohorts, whether its families young adults teens, it's a very consistent feedback on our strong trust in what we're doing safety wise.
Great. So it doesn't sound like there's any any one group that's been suppressed or held back.
No and the one I didn't mention but just because we brought up on the prepared remarks.
It's just we're seeing the same feedback on group sales.
People the groups, who want to get back out they want togetherness. They just.
Togetherness and memories, and a place such thrilling safe and fun and Thats, what we are at six flags.
Yes, I think we are let's.
Great. Thanks.
And there are no further questions at this time.
Thanks, Katherine and thank you for your continued support our mission is to create fun and thrilling memories for all as we leverage our iconic brand and the investments we have made in the guest experience to launch our next phase of growth.
Take care and we hope to see you at our parks for the last weekend of Fright Fest and for our holiday in the park event. This winter.
Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.
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