Q4 2021 Six Flags Entertainment Corp Earnings Call
Good morning, ladies and gentlemen, welcome to the six flags fourth quarter and full year 2021 earnings conference call.
My name is rents and I'll be your operator for today's call.
During the presentation all lines will be in a listen only mode.
After the Speakers' remarks, we'll conduct a question and answer session.
If you have a question at that time simply press Star then the number one on your telephone keypad.
If he would like to withdraw your question press the pound key.
Thank you.
With that I'll turn the call over to Mr. Steve Brookdale Senior Vice President Investor Relations.
Good morning, and welcome to our fourth quarter and full year 2021 call with me are still in Brazil, President and CEO of six flags and Sandeep Reddy, our Chief Financial Officer, we.
We will 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 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.
Sylvia.
Thank you Steve.
Good morning, and thank you for joining our call.
I'm very excited to speak to you today for the first time as CEO of six flags.
To date, we have divided our call into three parts.
First our introduced myself and describe how I have spent my first 100 days, including my initial observations about the business.
Second Sandeep will discuss our financial results.
And finally, I'll return to discuss our strategy and priorities in more detail.
So let me tell you about myself.
I started as CEO of Middleby Corporation from 2000, 2001 and 2019.
<unk> is a public company that manufactures foodservice equipment.
We were the global leader in the manufacture of items like Pizza oven priors grill stoves and beverage equipment.
When I started a little bit.
The enterprise value was $100 million.
By the time of our last almost 20 years later.
It was valued at more than $7 billion.
And literally has continued to grow in fact, middleby stock has appreciated by 50%.
Since our last three years ago, which makes me very proud because it demonstrates that we develop and promote the right internal leaders and we built our company to life.
Our success was driven largely by two things.
One with a customer first culture.
And two we empower our people to think and behave like owners.
This drove a spirit of innovation and Middleby was consistently recognized as the technology leader in its industry.
Middleby is of course, a different business up six blocks.
But I believe that if we can establish a customer obsessed culture and empower our people to act like owners.
Great things can happen at six flags just like they did at Middleby.
I have been on the board of six slides for two years, serving as chairman for the past year until I became CEO .
The reason I joined the <unk> Board.
<unk> because I believe in the power of the brand and of the business model.
And I believe that there was tremendous potential to continue to improve the guest experience.
I have seven children, including a six year old daughter.
As you can imagine I have spent a fair amount of time and money I think box over the years.
I've seen firsthand the.
Type of magic that can be created for a family visiting a six flags park.
<unk> will talk about visits for weeks and they went back to me to take them back.
That's why I'm here to invigorate the magic of six blocks.
During my first 100 days my focus was to get it to everyone.
I started was a town hall meeting to introduce myself to all employees.
Then immediately throughout to meet with all of our park presidents.
I believe in decentralization and empowering business unit leaders.
And at six flags our business is conducted at each of our parks not at our corporate headquarters.
I wanted to send a message of empowerment and also have accountability for our parks.
This is my view.
Our corporate office exists to serve our parks and our parks exist to serve our guests so that will be augmented as an organization.
I also met with more than 100 guests gaining candid feedback about the visit to our parks.
I visited both our own parks, and our competitive sports and interacted with our team members.
I annualize the tremendous data six flags has gathered over the years, allowing allowing me to see through the eyes of all our different types of customers, including families young adults single mothers Glen patents and groups.
This gave me a good understanding of the perception of six flags from our various constituents.
The unique identity of each six flags park is sort of evidence and we have the opportunity.
To further empower each bar <unk>.
To maximize its success.
I have been amazed.
By the passion of our team members have for the company.
For one we.
We have a very talented and committed team.
It's clear that it has tremendous demand for our great Entertainment.
Thrills, and an outdoor setting given the friendly clean and safe environment with fun and memories can be created.
I now understand our strengths, but also where we have opportunity to improve our performance.
We'll focus our efforts in the following areas.
First we have reset our culture, while we have recovered nicely from the pandemic, we need to execute better and we need to execute faster.
This requires an agile nimble performance oriented culture.
No more corporate bureaucracy, no more over relying simply on our brands in our history.
We must elevate our game to the next level.
Our goal is to be the most innovative.
And customer obsessed theme Park company in the World and we are creating a performance oriented culture to take us there.
Second.
We have reduced our layers of management from seven to three <unk>.
Downside, the corporate office and gave more autonomy to the parks.
The purpose of these changes was not to cut costs, but.
To create an agile organization and to expedite decision making.
We have brought in some new talent, particularly on the culinary side and we have given additional responsibility to some of our top internal talent, including leaders with exceptional expertise in revenue management.
Finally, we have reset our strategy and operational priorities.
We'll provide details on our strategy strategic direction later in the call but.
At a high level, we're focused on premium amortization.
This means we will provide a premium guest experience and we will charge prices in line with the value we deliver to our guests.
I will now turn the call over to Sandeep, who will give some more details about our financial results Sandeep.
Thank you Sally and good morning, everyone.
It has been amazing to be part of <unk> first 100 days.
We have significantly accelerated our speed of execution and have begun to focus on providing a premium experience for our guests.
I feel very confident in our new direction and I'm very excited for the future.
In the fourth quarter, our attendance recovered and per capita spending remained well above 2019 levels.
Dolby saw some impact from the Oerlikon buyers towards the end of the quarter. This did not impact our flight first event.
As a reminder results for the fourth quarter and full year are not comparable to prior year due to the pandemic. So my comparisons will be to 2019.
Total attendance for the quarter was $5 8 million guests.
A 6% decline from 2019.
Revenue in the quarter was up $56 million or 21% to $317 million as a result of increased per capita spending.
This was partially offset by a $4 million decline in sponsorship international and accommodations revenue due to the deferral of some sponsorship revenue.
The change in our fiscal reporting period resulted in three fewer calendar days in October and two additional days in January for the fourth quarter of 2021.
Then were included in the fourth quarter for both 2020 in 2019.
The net impact was a reduction of 363000 in attendance and $26 million of revenue.
Guest spending per capita in the quarter increased 32% compared to 2019.
Driven by a 28% increase in admission spending per capita and a 36% increase in in park spending per capita.
The increase in admission spending per capita.
I'm from higher pricing on singles day tickets, particularly during fright Fest and an increase in the mix of single day guests.
The increase in in Park spending per capita was driven by a robust consumer spending backdrop.
And also by a higher mix of single day visitors.
Who tend to spend more in our parks on average than our season pass holders and members.
Attendance from our active pass base in the fourth quarter represented 66% of total attendance versus 71% for fourth quarter 2019, demonstrating our success in attracting visitation of single day guests.
On the cost side cash operating and SG&A expenses increased by $30 million or 18%.
Primarily due to higher wage rates and incentive costs to attract and retain team members as well as increased security in our parks.
Adjusted EBITDA for the quarter was $95 million compared to $72 million of adjusted EBITDA in 2019.
Moving to full year performance.
Attendance of 28 million guests was down 16% from 2019.
Total revenue of $1 $5 billion was up $9 million driven by higher guest spending per capita that offset both the increase the decrease in attendance and the $52 million reduction in sponsorship international agreements and accommodations revenue.
For the year total guest spending per capita increased more than $10 or 24% due to our revenue management initiatives enhanced in park offerings and strong consumer spending trends.
Door revenue was roughly flat to 2019 cash operating and SG&A expenses were up 5% for the year, primarily due to higher wage rates and incentive costs increased security in a box and higher litigation costs offset by lower advertising costs.
This resulted in adjusted EBITDA of $498 million.
A 5% decline from 2019.
Relative to 2019, our costs grew faster than our revenues over the past year.
This is not acceptable to us and we are focused on improving our expense management going forward.
At the end of 2021, our active pass base was $8 3 million an increase of 600000, what does the end of 2019.
This total included 2000 2020 season passes that.
Our extended through the end of 2021 and have now expired.
Our active base included $2 1 million members and $6 2 million season pass holders.
Attendance from our active pass base for the full year represented 63% of total attendance the same as portfolio 2019.
Looking ahead, we expect our active pass base to decline throughout 2022 versus 2021 and.
2020 season passes that were extended through the end of 2021 fallout of our active pass base and as we increased pricing for our traditional season passes.
Deferred revenue as of January <unk>, 2022 was $178 million down $27 million or 13% from 2020, but up $24 million or 23% from 2019.
The decrease compared to 2020.
It was primarily due to recognition of revenue from season pass holders, whose benefits had been extended through 2021 and are now fully recognized into revenue.
Total capital expenditures for the year were $122 million we.
We expect our 2022 capital spend to be slightly higher than 2021.
Our liquidity position as of January <unk>, 2022, or $797 million, including $461 million of available revolver capacity.
And $336 million of cash.
This compares to a liquidity position of $851 million as of October three 2021.
Net cash outflow for the quarter was $54 million and was driven by a $42 million increase in capital expenditures versus 2019, as we ramped up capex spend late in the year.
We intend to pay down and refinance our debt later this year in order to reduce our annual cash interest costs and to further improve our balance sheet.
Looking ahead, we expect our premium innovation strategy to depend less on total attendance and more on total revenue and profit as we focus on more premium guests.
We expect our 2022 adjusted EBITDA to exceed our 2019 adjusted EBITDA, but we expect to deliver this through higher per caps and lower attendance.
We will also have a strong focus on return on invested capital.
For 2021, our ROIC.
Was 14, 7%.
We expect to grow this metric over time.
We are excited about the opportunities ahead as we lay the groundwork for sustainable long term earnings growth.
Backed by a significantly improved guest experience.
Now I will pass the call back over to Selene, who will tell you more about our vision.
Thank you Sandeep.
While our results in the fourth quarter were strong.
Enormous untapped potential for our business.
Can capture through a shift in strategy.
I would now like to discuss our new strategic direction in more detail focusing on three areas first.
The guest experience.
<unk> pricing and third capital allocation.
Improving the guest experience is our primary focus.
While there are many different ways to further delight our guests.
We will prioritize the following six initiatives number one.
Improve our efficiency and convenience.
This includes reducing wait times at rights.
Reducing downtime and opening rides when our guests arrive.
To accomplish this we'll reallocate staff from lower value activities to rights and we will improve our processes in order to drive faster and insured cars are full every cycle.
This includes adding a single <unk> lane towards that we can fill single seats that would have otherwise been empty.
We will also experiment with virtual cooling technology to help reduce wait times and allow guest to spend more time exploring our parts and less time standing in line.
We're also in the process of testing digital screens throughout our parks.
The state currently plan for.
Alright, and restaurants, which should help our guests navigate all parts more efficiently.
Number two create fun through employee friendliness.
This means treating our guests like family, having a positive attitude and smiling.
Attitudes are infectious and my experience has taught me that deliver smile can go a long way in the customer service business.
Number three pod cleaners.
This includes better curb appeal at the front gates.
Better than landscaping and clean restaurants.
In fact, we are currently in the process of updating the front gate ex interest experience at several of our large box and we hope to complete this work in advance of our peak summer season.
Number four better quality food.
This is this is a core expertise of mine and an area in which we have we can have an immediate impact.
We have already hired it announced executive chef to oversee our community program and we are broadening the foodservice expert to help us deliver fast food food fast and efficiency will.
I will start by focusing on the top selling items like burgers and pizza and chicken tenders.
Over the past 100 days, we have been Reformulating, our menu and testing new recipes on a daily basis.
In fact, I have thrived over 100 burgers 200 slices of pizza and hundred orders of chicken tenders, we are still putting the final touches on our nuclear really offerings, but based on what I've tasted. So far the quality of these items is better than anything parks.
Visited.
Really excited to won't come back our guests display with new and improved version of our top selling food items.
Overtime, we will expand our focus to include healthier menu items, more grilled option as well as better refreshments, including coffee and alcoholic beverages.
In addition, we will upgrade our point of sale system and kitchen operation to reduce lines and provide fresher healthier and better tasting food.
Food and beverage represented 21% of our total revenue last year, but it can be much bigger overtime.
Number five.
More guest amenities.
Talking to our guests.
Consistently requested more benches throughout our parks to sit and relax more shaded areas to cool off and patent lounges for some quite time.
We are already in the process of adding some of these amenities to our parks for the upcoming season.
Finally priority <unk> is to upgrade our guest facing technology and in particular, our mobile app.
We are updating our app to make it effective intuitive and relevant improve.
Improving personalization by using the wealth of data already available in our system.
Over the next few months, we plan to improve our mobile app to deliver a more seamless guest experience in the following ways.
By increasing speed of entry of the parking lot and at the front gate, increasing access to a digital flash pass enable guests to skip the line was a click of the button and increasing increasing usage of our mobile ordering system for food and beverage.
Our feature will be added over time as the App becomes a remote control that facilitates a seamless guest experience.
We're also committed to investing in technology that will help ensure a more sustainable future such as solar energy and waste reduction.
Improving the guest experience is our obsession.
We will wake up every morning, and good sleep every night thinking of ways to further delight our guests.
Next I would like to talk about pricing.
Our guest surveys and our guest interviews has both indicated that customers are willing to pay more for a better quality of service.
However, we have historically ignored this data this data and instead, we've prioritized filling our parks to maximum capacity at the expense of the guest experience.
Data shows that guests who came on heavily discounted.
Or free tickets pre pandemic did not match spend much time much money in the parks yet they used up our capacity.
So based on our analysis, our historical reliance on heavy discounting was not the right strategy.
<unk> organization.
We are focused on guest who are willing to pay more for a premium experience, which was less which will lessen the crowding of pop parts, reducing pressure on our operations and elevating the guest experience.
Our pricing goal is to provide value for our guests and value for the price paid was.
We'll simplify our ticket offerings, but combining season passes and membership into a new product line up with fewer choices and targeted blackout dates.
Our new pricing architecture will not only be simpler for customers to understand but will also create credible upsell opportunities and have the opportunity to dynamically adjust prices based on the season and the day of the week.
We have already been unsuccessful test of our new pricing program over the past month, and we're ready to rollout the changes company wide over the coming weeks.
It is important to note that our ability today's price is directly related to our ability to deliver a higher quality guest experience.
These two strategic priorities go hand in hand.
Finally before opening the call for questions.
I would like to briefly comment on our capital allocation strategy.
Our capital priorities have evolved.
And we are currently focused on only two areas.
Our number one priority is reinvesting in our business.
Our goal is to lead the industry in terms of innovation and to do that we need to invest in our parks and our and in our system.
Historically innovation was measured in terms of thrill rides.
In fact 40 years, we have spent about 60% of our capital expenditure budget on new rides and attractions.
And we have been able to build an exceptional portfolio of thrill rides.
While this strategy provides an effective marketing tool to attract new guests and increase the capacity of our parks the marketing impact of each right we'll shortlist.
As we sit here today, we have ample thrill rides in our parks and while we continue to selectively add new coasters overtime, our near term focus will be to deploy to deploy our resources into guest facing technology food and beverage offerings and other park infrastructure improvement for a high.
Guest experience its impact with a lower cost than adding new rights.
Now once we have reinvest in our business, our second capital priority will be to pay down debt.
These are the only two capital priorities for this time be in conclusion.
Six flags has a truly unique portfolio of parks and with our new culture, Our research organization.
Ill update.
Strategy in place I'm confident that will delight, both our guests and our shareholders over time.
Hopefully you can sense that.
Really energized to serve in this role and I look forward to updating you on our continued progress in the months ahead.
Operator at this point could you. Please open the call for any questions.
Certainly Sir as a reminder to ask a question you will need to press star one on your telephone.
Again that would be star one on your telephone.
Our first question comes from the line of James Hardiman with Citi. Please go ahead.
Hey, good morning.
Thanks for taking my call and I appreciate all the color.
Around the new strategy saline. So I guess my first question would just be.
Yes, the previous management team, which wasn't that long ago came in and it was pretty clear at the time.
Six flags is going to need to take a pretty significant step back before we move forward.
I know you haven't given any new targets, but it doesn't seem like that.
Position, we're in today, but I guess, how would you characterize that.
Earnings opportunity versus the previous targets.
That were that were laid out and ultimately how would you characterize this.
Call it a turnaround.
Or would you characterize the new era of six flags.
James first of all good morning, and one I think that we feel very comfortable comfortable that moving forward.
The potential for earning growth and EBITDA.
Is has substantial potential to go up so if you start first of all with what was the change as I mentioned the first change in strategy is to price for the value of our parks.
And that's very important that we go back and look at what happened before so before we would very much looking at attendance, let's fill up the parks today, we're looking at premium musician strategy. So truly we want to invest in what I called the social aspects of Hoffe Park. So this is where we're going to spend.
Our money.
The first 100 days basically talking to guests.
Its members or season pass as a single day tickets.
Also spend time looking at our parks and our competitors.
So it's clear that first of all.
Guest we're willing to pay more for a different experience.
Meaning if we can reduce the way clients and improved efficiency and convenience.
Create a better environment.
Our families to come in and talk parks make.
Make sure the opinion of our park the curb appeal of our front end.
And since our landscaping the food.
In our in my basically script I talked about food, representing 21% of our revenues.
I think this is a huge opportunities to improve on our food offering and on our booths.
Revenues from food and merchandising as well as EBITDA from that segment.
And then of course, the guest facing technology.
And this is most probably something that we have lacked in the past we have not been as strong, especially on our mobile app and we are truly spending a lot of money on making sure that all up is intuitive seamless and relevant and allow people to.
Order online much easier.
And in order to do that we'll talk about changing the way we approach the food so going back well I don't want to give guidance I don't want to give guidance.
I would like to say that.
We will most probably be.
<unk> and exceed our EBITDA numbers in of 2019, maybe that's a good stock stock Dave.
Hey, James.
Yes.
But the one point to that what <unk> said, so I think just for context. He has given you the strategic context to what we're looking at going forward, but I think apart from the fact that in 2022, we expect to exceed 2019 EBITDA levels.
We are expecting to produce in a very different construction, we're expecting to do it with less attendance and higher per capita spending.
That goes back to the premium position strategy that we talked about and our goal. While we're doing this is to maintain or improve our per cap spending levels at 2021 levels. While we're doing this so it's a definitely a pivot in the shift compared to what we've been talking about previously and I think that's why it's important to have that context behind.
And the numbers as well as the strategic framework that said interest rate down.
Okay got it and then just maybe speak to the test program that you ran over the course of last month.
I think a lot of people are trying to just figure out what is the order of magnitude that we're talking about here when.
When we talk about less attendance and more per caps.
Whether it's versus 2019 or versus 2021.
How big of a swing should we expect and ultimately it's.
It's clear that the underlying goal is to have better EBIT.
But at the revenue line, we just just to clarify we should also expect.
Despite negative attendance and positive per caps at the revenue level, we should expect growth over over where we previously were was that correct.
Great question, James and I think number one I talked we talked about revenue and growth of.
Growth of revenue and profit being the priority. So thats number one specifically to attendance, yes, we expect to be lower than 2019 attendance levels, but we expect to be at 2021 levels or above.
So I think that's basically the tradeoff that we're talking about so in fact, if you want to get a sense of order of magnitude. That's the order of magnitude of attendants tradeoff.
<unk>.
Okay, and just to clarify.
Find me, where you were in 2021 attended.
Versus 2019 for the full year I know you gave us those numbers, but think about that on a full year basis as the baseline even though the most recent fourth quarter numbers you were better than the full year number presumably but thats. How we should think about that correct. We were $32 8 billion of attendance in 2019, we were $27 seven and 2020.
One so what we are saying as well.
We're not really describing for $32 eight, but we're always striving to be at $27 seven a barrel.
Got it that's really helpful. Thanks, guys.
Yes.
Thank you. The next question is from the line of David Katz with Jefferies. Your.
Your line is open.
Hi, Good morning, everyone. Good to talk to you again and I appreciate you taking my questions.
Thanks for all the details so far I just wanted to follow up.
So much of your commentary was around investing in digital investing in the parks.
And at the same time.
The commentary around costs are growing faster than revenues when we put the pieces together.
As you know is it that revenues are going to start to outgrow costs.
And how do we.
Contemplate the investment in the context of keeping the costs from growing too much if you see what I'm getting at.
A little context, there would be helpful. Yes, Dave.
David Good morning, and first of all definitely we are looking at revenues growth outpacing cost growth over when you look across the year, we're not looking at quarter by quarter, but over the year in 2022, when you look back our base to see revenue growth will be faster growing faster than <unk>.
Our Oh.
Cost growth so when I look at our cost.
<unk> and.
All costs are mainly when you think about our cost they are mainly in the parks and it's mostly about.
Hourly wage is our biggest cost and then we have cost on the good side.
So on the hourly wage inflation I think we are very comfortable that between the pricing.
Stretchy were put together as well as.
Most probably looking at what's happening in 2021, I think we're very well positioned for our.
Uh huh.
Most probably stabilizing our hourly wage from there on.
Good sites, which is where we are looking at most probably food costs merchandising cost.
<unk> cost we are today rationalizing our skus, we are standardizing purchasing across the parts and we're adjusting suppliers. We are looking at substituting products now technology, such as the RFP automation of security digital Flash passes.
There is another driver of reducing some of our operating costs.
So from a cost standpoint, we are truly while remaining committed to lowering our fixed and variable cost.
And.
We have to resize our cost structure.
Understood and if I may follow up quickly.
Through all of your thoughtful and comprehensive commentary there was no mention.
Whatsoever of M&A.
Should we consider that to be outside your consciousness.
Pretty much any form at this point.
I think honestly I cannot comment on specific M&A right now and you know my background came from M&A. So <unk> seen my background I've been we have consolidated a major industry in my previous life.
And however, today, we are singularly focused on improving our execution and paying down debt. That's our priority number one no.
No.
I would say over time, we may consider M&A, but I don't see it in the foreseeable future honestly I want our strategy right now is let's go get our balance sheet better.
Now, let's get to our guest experience.
It's where we're going to spend most of our money and making sure that we create one of the best guest experience in what I call a regional amusement parks.
Perfect. Thank you very much.
Thank you. Thank you David.
Thank you. The next one we have the line of Ben Chaiken with Credit Suisse. Please go ahead.
Hey, everyone.
Per caps were strong admission per caps, rather was strong all year.
My take was that there was some organic items in there, but also some inorganic such as mix or changes to the.
Season pass allocation that contributed to the increase as we think about 'twenty two admission per caps, what headwinds and tailwind do we need to consider when comparing 'twenty two versus 21 that would be great. If we could ballpark quantify that as well. Thanks.
That's a great question.
And I think one of the things that's really important to notice we actually talked about this on the last call in Q3.
A big shift that's happened over here is with the premium position strategy and the new product architecture that we're rolling out we're really looking at probably a very similar cadence of sales with pluses and visitation in 2022 versus 2021.
Therefore, we don't expect to see a deterioration in the per caps to 'twenty, one versus 'twenty two from that factor, which was what we discussed.
The Q3 call.
And frankly apart from the fact that the visitation tyburn should be very similar we're taking incremental pricing like we are if anything we see upsides to admissions per caps versus 2021.
Got it and just to clarify when you say visitation patterns are you talking are you referring to Peter on mix like single day versus season pass.
I think it's more of a season pass sales. If you recall last in 2021. The season pass sales started occurring later in the year because of the pandemic and coming out of it and so we actually ramped up pretty significantly in the revenue was recognized over compressed time period.
This year, because we are actually focused more on new season pass products and not really selling new membership products. The timing of it will similarly be much later.
As a result, the pattern of which the revenue gets recorded will be very similar.
And I think the.
The headwind that we were anticipating from that base.
If it goes away.
But you bring up a good point on single day ticket, we've done extremely well on a single day ticket in the fourth quarter. We continued to expect to see single day ticket strength to play out as we move forward and in the prepared remarks, we talked about active pass base more than likely being lower than 2021 levels throughout 2022, what we see at the same time our.
Penetration of single day tickets to drive our revenue.
Got you that's helpful. And then you kind of I think Selim you alluded to this on the call and then one thing we've noticed over the last few weeks is at a handful of your parks, especially those that are open year round is what appears to be a simplification of your pricing strategy and also a net increase in pricing.
Assuming we are correct are you able to share any of the early results from this around the pricing uplift or the attendance impact.
Yeah. Thanks.
Well, it's still very early to talk about this but I have to tell you. The results have been very encouraging I would say we have been very pleased with just the few couple of weeks.
<unk> had so far it's been very very good.
Believe thats on the few parks that had been open.
With the new pricing strategy, it's been they pay for it.
So that's where we are but we need to remember that's a very very small small tests, yet, but it's been very very encouraging, but let me share with you why I am very.
Mystic about pricing architecture, so, let's talk about it a little bit more specifically.
Our pricing architecture that occurred is very databased one.
One of the things that six flags has makes it powerful company is the fact that the data is.
But it's so good data out there how they can manage.
They can slice and manage attendance and in so many ways.
And I think one of the reason why I was very confident.
When we started looking at our pricing architecture is talking to our guests.
It was clear to me that those guests were randomly selected Oh, we went through calling all types across the nation.
Single day tickets.
The groups.
Memberships.
<unk>.
Seasons passes.
One we are willing to pay more for a better experience from the park.
In fact, one of the comment I've had received.
Constantly is our parks have become overcrowded.
Both our parks and our water parks.
And when I asked the question.
How much more elasticity you can say I found out that there was a lot of elasticity here.
For six flags.
And I think as I look forward to pricing.
I think Michelle.
Play for scales, which means taking adventure or elasticity, which should significantly accelerate our growth and provide more EBITDA than the other interesting part that is interesting for us is.
Is the timing.
What is the inflation happening.
It's really the timing for us to institute pricing is like everybody.
Everybody is accepting the consumers are accepting price increases.
And I think to date.
We will continue adjusting.
The fast according to what happened to the inflation, if we see in the first half or the second half in 2020.
But I have to tell you one thing our strategy here is to make sure.
When we get pricing from our guests it's based on the value we create for them.
And when inflation moves behind us we want this pricing to sticks as well and Thats, where not just riding the inflation curve, we want to make sure that the value is there so that when everything goes back to normal our guests.
Feel that the pricing the new pricing sticks beyond just the inflation.
That's helpful. And then just like last one is a follow up are you seeing at the parks that you have implemented a new pricing are you seeing attendance.
Pullback as expected or is it holding in there.
I'm going to let sandeep and stuff because he is basically analyzing the data, yes, I think Ben it's pretty early early times right now to actually get into that much of detail, but I think as Aleem said, it's a it's a good read we're very encouraged because we've been testing now for a few weeks and we're so encouraged by what we've seen so far that we're rolling out the test.
Across all the parks in the system and so that should give you an idea that where it looks pretty good.
And we're very confident of every day.
Thank you I appreciate it.
Thank you. The next one we have the line of Stephen Grambling with Goldman Sachs. Your line is now open.
Hi, Thanks, maybe a follow up on expenses Sandeep mentioned, a focus on improving expense management going forward and Selim you mentioned the reduction in the layers of management has that already been implemented in any way to think about quantifying the savings or potential reinvestment opportunity that those changes represent.
So let me take that Steven I think theirs is two <unk>.
Layers to it Greg, but the change in layers of management a lot of that happened back in the end of.
Q4, 2021, so that's already embedded in our estimates as we go forward, but what's the league was talking about was a broader cost structure discussion.
We are looking at our total amount of cost, but the fixed cost low variable costs very incisively.
What we want to do is make sure that we look under every rock to find what we can actually do to make sure that we find productivity and.
And at the same time create basically an ability to invest further to improve the guest experience as we go through but all of this with the principle of making sure that our revenues are always growing faster than our costs.
And that really would be what I would say, though the cost element that we're looking at we will take a little bit longer to play out but I think.
The actions on the management structure of already happened at the end of Q4 'twenty one.
Got it and then there was a lot of discussion around reinvesting in the park, but also moving away from the thrill rides, how should we think about the net impact of Capex going forward versus your historical spend perhaps relative to sales.
Yeah, I think what I would say on this is.
The very important thing that we highlighted is for 2022, our capex shouldn't be much different from 2021 and I think for 2021, if you want to look at the percentage. It was about 8% of sales, but rather than looking at a percentage I think we are pivoting more to an absolute value in terms of capex.
And we really believe that the amount of Capex dollars that we're deploying right now makes sense given the capital that we've already got and thrill rides and given that the assets that we can leverage because what we're talking about whether its guest technology or whether it's a food and beverage offerings.
Our <unk> infrastructure is much less expensive to invest in a thrill ride and so we don't really think about it necessarily in terms of percentage terms at this point, we're still evolving the strategy of course, but that's kind of how we're thinking about it.
Helpful. Thanks, so much.
Thank you Steven.
Thank you. The next one we have Paul Golding with Macquarie.
Thanks, so much for taking the question and filling congrats on the new role.
I was hoping I was hoping we could get some more color around how you were thinking higher level about the active pass base I know Sandeep you were referencing that.
Past space versus.
Single day mix.
You know it is falling in.
Yes. My question is is this intentional you've got a new pricing structure.
That you referenced in the prepared remarks, how should we think about your view around single day as a proportion of mix, whether youre going to.
Lean into pass or not.
And sort of the puts and takes of the recurring revenue base.
So let me let me give you a stratification of our guests that's very important to talk about.
On any given day, our highest value guest is the single day guests.
They spend more time in part purchases foods souvenir in parking and.
Nah capital guests as they come as a single day ticket is the highest.
The season pass holder guest has the highest lifetime value.
So we are trying to truly.
Find a balanced mix of both but.
Truly the biggest interest for us is making food that single day guests become somebody who is coming into our parks exponentially higher rate because they come to our parks they spend more money and they are usually coming because they find the park.
Estimation, an escalation to are willing to spend that.
Money to come to our park.
This has been something that we've seen that trend.
Growing on single day tickets.
In 2021, and we're seeing it started at the beginning of this year. So we're very excited about that.
I'll turn it to Sandeep, if you want to add a few more colors on that.
Yes, I think so limited perfectly I think the only thing I would just add to that is with the pricing discussions that you had previously on the call. We are expecting to get increased yield on each unit of the active prospects that we sell so so looking at the absolute number of active pass base units is probably less relevant than the yield from each unit.
And I think Thats really the way to think about it and that's how we're thinking about total revenue we're not talking about specifically attendance. Our active pass base units were talking about revenue growth.
Got it so pushing price broadly.
And then.
Another question I guess around the investment and guest facing technologies.
There's a lot of emphasis and the strategy around.
Making the guest experience.
More efficient more more premium I guess.
Is there anything that we should be thinking about in terms of.
How the strategy May also focus on reducing.
Physical.
Wage hours.
In terms of just the Digitization of the experience should we think that you know as we see some of these platforms rollout them that we may see some.
Attached relief in terms of labor cost.
Yeah, No I think that's actually a really very good question and I think.
Got it.
There's there's two pieces of it.
Guests facing technology or to really enable the experience for the guests will make it much more seamless to enjoy the park and with all the offer everything that we offer in the park. There is an opportunity to leverage technology to get productivity in terms of labor management as well.
Anything which is not specifically guest facing in terms of labor that we are deploying we're looking for ways to actually automate it and actually move it out completely and eliminate that labor because not only is it going to be much more efficient and effective but I think from it so from a productivity and Seamlessness standpoint, that's a lot better for us as well and Thats.
That's the layer beneath what we talked about on cost structure. When we talked about looking at our fixed and variable cost that includes investments that we may need to make on a capital standpoint, which drive cost improvements on the P&L and give you example of Paul would be automating the back of the kitchen and that expertise I have and automating.
Our security and we are working in truly putting some.
Amazing.
Our state of the art.
Technology for automating, our security and automating our back of the house kitchen.
Great. Thank you so much.
Paul Thanks, Paul.
Thank you. The next one we have the line of Steve with Zain ski with Stifel.
Hey, guys good morning.
Wanted to ask about the capital allocation strategy, which now it sounds like reinvesting in your business is number one paying down debt is number two and historically six flags has always been more about what we'd call kind of a dividend growth story and now that seems like that's clearly changed I guess I guess the question is how are you thinking about.
Reinvesting in the business and growing those ROIC sees what you referenced in your prepared remarks, and I guess what level do you think you can get those ROIC to ROIC <unk> two in <unk>.
Order to justify essentially not returning cash to shareholders at this point.
So Steven I think this is a great question I think if we look at where we were in ROIC. This past year, we were at about 15%.
It's slightly lower than where we've been historically at a peak.
Tremendous runway to at least get to that level, but we believe there is significant upside beyond that as well and so our focus is continuing to invest in the business to drive that ROIC being up significantly we're not ready to give a specific number but there is tremendous potential to have incremental ROIC appreciation. So as long as we can keep on driving that revision.
Excellent opportunities our capital allocation priorities remain the same that we just talked about investing in the business and pay down debt to get the balance sheet into better shape.
So Steve I believe I believe in my <unk>.
<unk>.
Overtime.
And again going back to my previous slide.
The best investment for return for shareholders is making sure that we create.
<unk> total shareholder return.
In terms of.
Creating a.
Right.
The best EBITDA, the best cash flow the best balance sheet, Cleanness, and I think distributing dividends is not something we have much better way to return to shareholders and distributing dividends at this moment, our opportunities and investing in getting return on invested capital from older in Boston, we're going to make in the parks will yield very strong.
Return back into our shareholder.
And down the road, who knows more additional M&A that comes on top of that I think it is.
Fantastic. So I want to tell you something because you bring it up you bring up something about our proposition of Capex.
I have to say that while we have ample thrill rides in our parks and we are most probably the <unk>.
Thrill rides, we have more streamlined than any of our competitors in all of our parks Park to park, we have more than anybody else and thrill rides.
Now, while we're investing in all parts of our systems, including guest facing technology foodservice and infrastructure improvement that are more guest facing.
And while Reits have not been a priority this year.
<unk> record breaking and first of its kind rides. This year. So at Magic Mountain, we're introducing wonder woman flight of course single rail coaster.
And it will be the 20th Kosta adjust up we're introducing Dr. Debacle cliffhanger the world's deepest dive coaster.
In Dallas equipment power wave the first of its kind water coaster in North America, and our parts <unk> Costa <unk>.
Women with going in St. Louis Discovery Kingdom signed signed window separately.
A unique combination of family cost of animal exhibit and we are rebranding water Park and Daniel.
So it can leap harbor, so we're doing a lot when it comes to right still but it's not the priority what we're spending 60% of our capex, so it's going to be faster.
<unk> to see how we go back and.
Listen to our guests.
In terms of what they really need.
Talking about that.
I'm going to give you a simple thing.
On the guest experience, we want to make <unk> make sure.
That all desk guests one of the issue I've heard there's a lot of people we lose a lot of people on foodservice because our rates are so long and by the time they order their food the food is cold enough and.
And in the best of shape.
And we need to make sure that we are dedicating pickup lanes for our guests.
Who are ordering food digital pleased to our mobile app.
And I think that will improve significantly the guest experience.
Two single Rider Lane, we're gonna most probably also reduced the talking point.
So those are some of the example was doing so thank you. Thank you very much and let's go to one more question.
Brian I think you are mixed.
Thank you. The next one we have the line of Ryan Sundby William Blair.
Yeah, Hey, guys. Thanks for taking my question.
So with the focus on premium innovation can you talk about what kind of rebranding investment as may be needed here to help communicate this change that consumer will we see maybe a new marketing effort here to help kind of explain the shift in why prices are going higher.
Your experience.
And then just more about reaching out to a new or a different guest what you've attracted to the to the parks in the past or maybe one that's been turned away by that experience.
Or is this more about segmenting and enhancing experience for your peer set or had been department for years.
I think let's look at the marketing approach. So marketing approach is no longer going to be traditional we're going to be going through and we've hired we have basically hiring right now we've hired a few and we have realigned our marketing department to look at three segments of how we're going to market all of those new changes to our guests number one we're going to go to social media.
A strong social media.
We are lucky to have some phenomenal influencers that used our parks and we reach out to a couple of them and we're going to basically keep on spreading the message through Influencers number three that has been interesting for us we have not been a using a lot of Ceos search engine optimization to make sure that when you are.
Look at the Internet and will search we have not put a lot of energy on that so we're putting a lot of <unk>.
<unk>.
Investments to make sure and when Youre looking at outdoor entertainment, we always come up first and we will detail what our outdoor entertainment means.
No.
Perfect great.
This is more about reaching a new or different guests than maybe what you've attracted.
We're going to we're going to reach definitely I can tell you that we would like to reach a.
I hate to go back to retail, but let's assume.
It's easy to do that it's not exactly equivalent but think about the Walmart Kmart customer will go into a target customer hopefully with what we're going to do and we want to attract more families want more strollers in a park. That's for sure. That's most probably a big new area that we have not been focusing on in the pump families in our <unk>.
ARX <unk> strollers coming off park. So we're investing gets areas when it gets the kids meals when investing in tremendous way to bring families back to our park, which has not been an emphasis.
Got it thank you.
Helpful.
Thank you we don't have any further questions at this time presenters. Please continue.
I would like to.
Closing remarks, I would like to thank all the dedicated and hard working employees of six flags for committing to our new strategy and vision.
This is a great time for <unk> to shine and I'm thrilled to be part of <unk> team.
We want to remain one of the very best places to work for the most promising and diverse talent as evidenced by our revenue recognition.
Mitchell from Forbes as one of America's best employers for new graduates in 2021, and one of the best employers for women in 2021.
To our investors and analysts.
Thank you for your support our guests are seeking truth in an environment Thats fate is fun safe convenient and affordable something six flags is uniquely able to offer I look forward to seeing you in our parks. This season to witness our improvement firsthand have been blessed date and thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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