Q2 2022 Six Flags Entertainment Corp Earnings Call
While reduced attendance levels.
Last year, our costs grew faster than our revenue, especially in our corporate office.
We now view corporate role is that of a support center for our parks and we have delegated activities to our parks. We have also continued to optimize our full time and seasonal labor in the parks as a result, we have reduced our full time head count by almost 25% since the beginning.
Of the year.
Our approach to <unk>.
<unk> optimization is to minimize cost that do not impact the guest experience, but to invest in areas that do impact the guest experience.
This change in philosophy helped us offset the inflationary pressures in the first half of 2022 and bring our cost below 2019 levels high.
However, more recently.
Our attendance decline, we did not move quickly enough to reduce our operating costs to reflect the lower attendance levels.
Gary and his team have continued to focus on this initiative.
And we expect to operate much more efficiently in the second half of the year.
Overall, we have made excellent progress in many areas and I feel much better.
About <unk>.
As a company today than a year ago.
Now that we have reset the foundations of our business, we expect to delight, our guests and our shareholders. When it was an improved in park experience and a sustainable profit growth well into the future.
I will now turn the call over to Gary who will provide details about the quarter and the first half of 2022 Gary.
Thank you Simeon and good morning, everyone.
I am very excited to join the six flags team with this iconic brand and long history of providing thrills and memories to our guests.
This company has a tremendous value proposition and I have seen firsthand, how selim unlocked a similar value for the middleby customers employees and shareholders.
<unk> is a visionary with regards to customer engagement.
And I am extremely pleased to be working with him.
Steve and the team at six flags.
Turning to the second quarter results.
Revenue came in at $435 million, which represented a decrease of $24 million or 5% compared to second quarter 2021.
This was driven by lower attendance and a reduction in international licensing revenue, which benefited in the prior year quarter from a one time termination payment.
Related to our China development projects.
Total attendance was $6 7 million guests.
Which represented a $1 9 million or 22% decrease from our second quarter 2021.
Our attendance decrease was related to the elimination of free tickets and low margin product offerings, coupled with increased pricing into a market that had become accustomed to discounts.
It is important.
To note that much of the attendance decline was recovered through increased guest spending per capita of $64, representing an increase of $12 or 23% versus second quarter 2021.
Admission spending per capita increased $8.
Or 27% and in park spending per capita increased $4 or 18%.
The increase in admission spending per capita compared to 2021 was driven primarily by higher realized ticket prices and a higher mix of single day tickets.
The increase in in park spending per capita compared to 2021.
It reflected our improved assortment of in park offerings and our in park pricing initiatives.
We experienced higher spending across almost all categories, including sales of food rentals and retail.
Moving onto costs.
Cash operating and SG&A expenses were $222 million versus $229 million in the prior year.
Representing a decrease of $7 million or 3%.
Driven primarily by reductions in full time wages and benefits seasonal labor and advertising offset by significant inflationary pressures.
Adjusted EBITDA for the quarter was.
<unk> was $155 million compared to $170 million in second quarter 2021.
Excluding the $11 million related to our terminated international development agreement in China, which was recorded in the second quarter of 2021.
Adjusted EBITDA decreased $4 million or 2%.
Due to the impact of spring break timing, which often shifts attendants between the first and second quarter. We believe the most accurate measure of our early season performance as the first and second quarter combined.
In addition, since our park operations were impacted during the first half of 2021 by pandemic related closures and capacity limitations at certain parks. We believe it is more instructive to compare our first half results to 2019, which had a similar operating calendar 2022.
Relative to 2019, our first half 2022 revenue decreased $32 million or 5%.
As a result of our premium innovation initiatives.
Attendance declined by $4 3 million or 34% offset by a significant increase in total guest spending per capita.
Of $23 or 53%.
Adjusted EBITDA decreased $8 million versus first half 2019.
But the periods are not comparable due to a fiscal calendar shift and a reduction in international agreements revenue from our terminated operations in China and Dubai.
Accounting for these impacts adjusted EBITDA for the first half 2022 versus the same period in 2019.
Increased $6 million.
Four 5%.
We believe this growth reflects the impact of our strategic shift in our increased operational efficiency.
I will now review each of these two adjustments in detail.
<unk>.
We changed our method of reporting fiscal quarters, beginning in Q1 2021.
The second quarter of 2019.
Ended on June 30, while the second quarter of 2022 ended on July <unk>.
The net impact of this calendar shift compared to 2019 was an additional 400000 in attendance.
And $26 million of revenue compared to first half.
2019.
Adjusting for this reporting calendar shift.
First half attendance is down $4 7 million or <unk>, 37% versus 2019.
Second we added $26 million reduction in international agreements revenue from China, and Dubai in the first half of 2022 versus the same period in 2019.
Excluding this revenue and adjusting for the reporting calendar shift.
Revenue was down $31 million or 5% versus first half 2008.
I will now move on to expenses.
Our first half cash operating expenses, and SG&A decreased $18 million or 5% versus <unk>.
2019.
Due to a leaner corporate overhead structure less advertising and our initial efforts to optimize full time and seasonal labor based on lower attendance levels.
There are three main factors at play within our cost structure.
First on our last call.
We called out approximately $80 million and cost headwinds.
In 2022 relative to 2019.
In the second quarter of 2022 inflation has accelerated and now we expect $90 million in total cost headwinds for the full year versus 2019.
Second we have reduced our corporate overhead structure as part of our decentralization strategy.
And third we are in the process of lowering park operating costs to better align our costs with our reduced attendance levels.
Going forward, we expect our cash operating and SG&A costs to remain below 2019 levels.
And we expect to further reduce our fixed cost base at our parks.
I will now transition to our active pass base and select balance sheet metrics.
Our active pass base as of July three 2022.
Comprises $4 5 million active pass holders as compared to $6 3 million as of July 4th 2021.
This decline is a result of our <unk> strategy as well as our decision to discontinue discontinue selling new memberships earlier this year.
Deferred revenue as of July three 2022.
It was $171 million down $139 million were 45%.
Compared to second quarter 2021.
The decrease versus prior year was primarily due to a deferral of revenue from guests, whose benefits were extended from 2020 into 2021 due to the pandemic.
The reduction in unit sales was.
It was largely offset by the higher average prices versus 2021.
Compared to the same point in 2019 deferred revenue declined by $64 million or 27% primarily related to the decrease in season pass sales.
Total capital expenditures for the quarter.
Net of insurance recoveries were $26 million.
We expect our full year 2022 capital spend to be slightly higher than 2021 with a balanced approach between several exciting new roller coasters and an increased emphasis on implementing guest facing technology and amenities in our parks.
Over the next couple of years, we expect to invest approximately $130 million in annual capital expenditures, which will prioritize parked beautification and other in park initiatives food and beverage enhancements guest facing technology improvements and.
And new rides and attractions.
On July one we paid down $360 million of principal value on our 7% notes.
Dosing that is a top capital priority after investing in our parks and this prepayment is a big step in reducing our leverage and interest burden.
Our net leverage ratio is currently four seven times.
Over the next 12 to 18 months, we plan to further pay down debt and look to Opportunistically refinance our 2024 maturities as we work towards our target leverage ratio of three to four times.
While debt Paydown remains a primary focus we also opportunistically purchased.
$97 million in common stock.
Our $3 5 million shares.
The dislocation in our stock price provided us the opportunity to repurchase shares at what we believe are attractive prices.
To sum up the second quarter.
2022.
We are encouraged by our strong guest spending and our improved operational efficiency.
Which positions us well to leverage future growth.
Now I will pass the call back over to Selene.
Julian.
Thank you Gary.
2022 is a transitional year for six slides as we reset the foundations of our business model to focus on delivering a premium guest experience while at the same time collecting four decades of heavy price discounting.
Raising price is no easy task for a company that has trained customers to expect discounts and in and in 2022, we have shock the system was a significant increase in ticket price.
This has resulted in lower.
Profitable attendance.
I would like to take a minute.
Our team members, who have been a tremendous driver of our new staci by pivoting adapting and transforming our culture in a very short time.
As the new CEO in my first year I could not have achieved all of these changes without the full support dedication hard work and commitment of the six flags team.
I was brought to six flags to achieve an ambitious goal.
To reach $710 million of adjusted EBITDA within three years.
I strongly believe that as we execute on our goal to dramatically improve the guest experience, we will recapture a portion of our lost attendance overtime at higher pricing and was lower costs to service to reduce at tenant space.
This will position us to achieve this goal and continue to grow earnings in a sustainable manner overtime.
Operator at this point could you. Please open the call for any questions.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from David Katz with Jefferies.
Go ahead.
Hi, good morning, everyone. Thanks for taking my questions.
Two for me.
Sure.
Understanding the.
Our intent and commitment to getting the attendance or the loss of attendance back. If you could talk about some of the data or evidence that you have seen so far that.
That you can recapture or that you will recaptured and then second on the capital allocation side.
Particularly focused on the share repurchases right, which I think.
Reading the math correctly, we're actually purchased at a higher level.
The stock is today and from the looks of it it may go down a bit more today.
And given the opportunistic.
Perspective that you talked about should we expect that you will continue to buy and look to buy more given that obviously, it's going to be lower and therefore, the dislocation as you call it would be more so.
Thanks.
David Let me answer the first part of your question.
What is our confidence level of being able to regain.
The last upturn attendance first of all.
The lost attendance is driven by <unk>.
Our decision to.
To basically change our.
Customer base, our guest base, so let's not forget that this was not a decision like the market drop off we have basically changed our strategy off.
Creating a better guest experience by having fewer people in our parks.
So at the end.
Whats happened so far in the first half of the year.
The first half of year.
Basically we have.
Trended down.
And we have turned down maybe 10% to 15% below where we would like to be.
However, let's go back and say, what's going to happen next what is our sweet spot.
So our sweet spot.
Two per year, when we can still achieve an optimal guest experience.
Is 25% to $27 million.
Yes pretty good.
So we need to grow our attendance today by and others around three three to 4 million people.
So from that.
Basically without losing our stickiness of our per cap and without affecting the guest scores. So one how do we do that our biggest opportunity.
Literally so far is to convert.
A fraction of a record single day ticket holders.
That have come to our park this year versus any other prior years.
Into season pass holders this fall.
That is our biggest opportunity people drove.
And fifth top dollars our single day tickets.
Holders to come to our parks.
We need to create.
Convert a fraction of those backdrops segment.
We have basically discontinuing a very popular PERC.
Which is a limited dining milk plant.
That is a very big Burke and that affected.
Well I would say at least a million plus of.
Our.
Guests.
We are in the process of reintroducing a dining plan.
And that timing plan is going to be a value to our guests but also.
And a way for us.
To be able to.
Make money and not lose money on that plan.
I think we will recapture a part of those guests that we've lost.
Alright, thank you.
<unk>.
If I can just follow that up very quickly.
Yes.
Okay.
The question was really.
Around.
Evidence that it will.
<unk> rebound and whether we should be thinking about next season achieve that impact or is that a this year kind of thing.
I think it's going to be both I think this is a transitional year for us let's make clear that this is a year of transition and I think as we've made in shock. The system honestly. This company has been used to heavy discounting for many many decades now we can.
And shock the system and we are truly in a in a pivoting.
Year for us, which means at this moment, we will expect that some of it will come in this year some of it will come in in 2023.
So we're not dropping.
23 to make 2022, let's make that clear at the same time I have to tell you.
One asked.
Aspect of our attendance being down is group related visitations.
While it's better than 2021, it is much slower than 19, we are down 33% or more from 2019.
We missed a lot of schools, a newsgroup event in the spring.
Hopefully this would get better in spring 2023.
Once you missed it in the spring you don't get a chance to make it up.
Till next year. So basically part of that is try to make up the group sales that were lost in the spring.
Okay.
David I'll take the.
The question you had on capital allocation.
Our priority remains to pay down debt and reduce our.
Our leverage ratio.
On our last call. We stated we also might engaged from time to time to buy back shares Opportunistically if market conditions create a dislocation on our stock price.
And that that stays there.
The same in this quarter.
We're going to focus on investments in our parks first.
We're going to pay down debt.
And.
We will keep an open mind, depending on the opportunities opportunities that we are $40 stock price.
Thank you very much.
The next question comes from Ian Zaffino with Oppenheimer. Please go ahead.
Alright, great. Thank you for taking my question.
I guess can you guys just walk us through.
Some of the pricing mechanisms you guys have how are you coming up with the pricing that you are trying to push through now how do you know that that's the right price.
I get what Youre, saying is you raise price you get rid of.
Let's just say the loan lower margin customers and then Theres hope of rebuilding back that base with a better customer, but how do you know whether you maybe overshot on the pricing side or if theres, an opportunity to maybe even take pricing higher.
So basically what's the system, what's the mechanisms and the walk us through your thinking on the pricing. Thanks.
Okay, Ian Thank you I will.
The answer to that question first of all I'll start with the major premise.
Pricing is still below the other players in the industry, let's start there.
And we provide as good as a value as any of the other players in the industry.
And for that there is no reason for us to be priced below them significantly. Despite today, our price increase was still below them.
Now the question is should we have taken.
All of that pricing all at once.
Or should you have taken it over time that may be the question that everybody has on their mind.
And I believe very strongly that.
<unk>.
Taking the Bandaid ripping off the band date, all at once its a lot better for our guests for our employees and having it every year now we're going back and sticking them with another huge price increase and I believe during this year of inflationary pressures, where everybody has taken price it was a very.
Good.
<unk>.
Timing too.
To take care of that now lets address.
Second part is.
Did we.
Jake.
Right pricing.
Did we take the wrong pricing in terms of price increase.
I strongly believe that there is more opportunity for pricing to take place.
And I have to tell you that having done what we've done not only taking away freebies bring a friend taken away we put in blackout blackout dates we.
Basically didn't allow now your season pass to entry substances by doesn't allow us to grow all the parks or even some of the water parks.
We took away the dining plan the free drink bottles.
I am very pleased to see with our dollar revenues have been in the first half and the number of fans. That's continued to come to our power and willing to spend.
So let me give you some data that for me illustrate why our pricing optimization strategy has worked.
So lets talk first with what I call.
Our realized pricing, resulting has resulted in record revenue per cap.
First half as.
Admissions per cap increased by 57% to a record $37 and 75.
And most interesting is our in park per capita spending increased by 47% to a record $28 46 in the first half compared to the first half of 2019. So we are comparing apple to Apple. So we know that the pricing work we know the <unk>.
<unk> is working.
And the second data point I would like to bring is our high.
Revenues compared to both 2019 and 2021.
When we are comparing to some very aggressive tickets offerings perks and freebies and both those years in 2019 and 2021.
I know, we can do better and we want to do better, especially in the area of marketing and communication.
While I'm very pleased and we are with the revenues.
One dollar revenues, we generate that despite a huge drop in attendance in the first half.
I think we can really continue to drive.
Higher dollar revenue was lower attendance.
And what does this bring to us it brings.
Lower costs and a better experience in our parks so to answer your question.
I believe that there are tweaks to happen I don't think we have protected our pricing structure.
We are doing tweaks to it and it depends on each box.
Think we have to go back to each box and make sure that those parks.
Basically connecting with their communities and their constituents.
And what makes sense for each month.
However, we are not going back to the days of heavy discounting freebies and the perks that were given.
This one I think we have some minor tweaks to do but over the long term. We believe that there is more opportunity for pricing going forward.
Okay, great. Thanks, Thanks for the color and then just if I could sneak in one.
Smaller question is the sponsorship revenues.
Touch on the decline that I didn't think I heard that in the prepared comments.
What drove that and should we expect the economy to recover back to where it has been.
In previous quarters.
So let's talk about sponsorship at this moment, our sponsorship revenues are down.
Significantly down and I think part of it has been a dual reason one I think some of our.
Sponsors have faced inflation this year and maybe they've had some slowdown.
We've seen that.
Second I would say we have also turned away some of our.
Answer.
As the stock would have the impact of Covid as covered decreased and then we had also us coming back and saying they don't fit who we want them to be we're changing our sponsorship makeup of the path to make sure that we don't get sponsorship on one end and end up being hit by costs.
On the others. So a sponsor comes in and say I'm going to give you.
Admitted let's take an example.
$5 million to promote my brand in your park, but I want to buy the products and we end up spending $8 million on the cost now it doesn't make sense for us so for us at this moment rehab, a leading our sponsorship and we're looking at a complete different strategy for 2023.
Alright, Thank you very much.
In Q.
The next question comes from Ben Chaiken with Credit Suisse. Please go ahead.
Hey, Thanks, just three quick ones.
And I can repeat them if you need so on the cost side Selim you mentioned still lagging your expectations.
When you want to operate more efficiently going forward. So should we assume that the decline versus 19 accelerates from here, meaning is that the right interpretation youre down let's call. It some ballpark, 3% or so in the first half versus 19 honor.
Behind SG&A and Opex does that does that improve in the back half.
Number two attendance I think you guys gave us some data points on our <unk> call and we can infer that April started now down around 30% versus 19. So are we can you help us with some cadence through the quarter or we run rating at a down 40% or so is that where we are ballpark and then the last quickly on dining.
You mentioned, bringing back some dining plan does that is that going to be different than what you're currently offering now at your parks, which I think is kind of like a bundled package or is it kind of.
I just wanted a faint like what we see today is that it.
So I'm gonna most promptly.
The cost one first.
I will start to say we are.
Very disappointed with our optimization efforts.
While we are pleased with the results. So far I believe we could have done a much better job, we lost money on the table.
For example, our staffing levels were not optimized given the reduced attendance in the first half.
What I mean by that is we could have done.
<unk> was the right mix of our employees the right scheduling dry mix of full time and seasonal worker.
I will go back to cost and talk about also where ISC we.
We have to continue to find efficiencies and other initiatives to offset the impact of inflation in our drop in attendance levels.
I would tell you.
And that we are very focused on costs, while still improving the guest experience.
So I'm going to turn it basically to get it to give you a little bit more color on truly where do we where we are and where do you see ourselves going with respect to our cost.
Thank you Celine.
Ken Good question, so I appreciate that.
We plan to our costs will be lower than 2019.
And that's about as much guidance as I can give you.
The impact of inflation, which is still relatively unknown.
Moving onto the run rate.
Tenants question, we believe we're going to continue Q3 at this stage to be approximately 35% below 2019% attendance levels.
Yes, and then dining Selim up so I'll talk to the dining but before dining before I would like to bring up something very important vendor for one.
I think.
We got hit like everybody in the industry and this is not an excuse for not trying to present something that's not been.
It'll everywhere, but we have been hit this year or will be hit this year.
And around.
$90 million to $100 million in inflationary costs.
And we have spin we have been able to manage those costs very efficiently. So far at least in the first half compared to 2019 and 2021.
And we believe that will continue optimizing our cost to offset that inflation and most important I would like to bring up something very important having to do with maximizing operating efficiencies.
We are using data analytics to adjust the operating calendars of our parks.
Our restaurants, our retail store and our rights.
This is totally new to the clients of being more proactive in decision making.
Dive.
Diving in data to make sure we are driving value creation. This is something that has not been used to that extent at <unk> clock and it's all used on maximizing efficiency in the second half of this year using the data analytics and predictive analytics that we're putting in place to create that culture.
Of maximizing.
<unk> and optimization now, let's go back to dining plan.
The dining plan is something that customer guest blocks.
And we're not going to take that away, it's something that guests love, but it was not something good for us.
For three reasons one.
It was basically priced too low.
Second it.
Basically did a huge traffic jams in our restaurants, so the people who are paying coming and paying for a meal, we're basically fighting in lines.
With people had EMEA plan that could come in back.
And eat whenever they want it.
Number three we had a technology issue.
We could not monitor.
If somebody would come back in the <unk> 5 billion <unk> through the <unk> back in a trash.
Trashcan and came back 10 five minutes later 10 minutes later in line to get it again.
Today, we need to get that technology to make sure that people are not abusing the system and we're putting together this technology, which is in place with our with the other players in the industry.
It's a time lapse when you can come in and to the lifetime labs or monitoring that you can get X amount of meals a day, but you cannot come in and keep on throwing food away and go into every restaurant and abusing the food and strong ready to take a bite of Hamburger and say, okay, I'm going to get it done and taken Baidu hotdogs and I throw the auto grade.
So we had no technology to be able to limit.
The waste and now we're putting all this in place.
That's really helpful. And you mentioned minus 35 is your expectation kind of going forward on attendance, but presumably unless I misheard, you, but presumably.
You have to be lower than that maybe started the quarter. At 39 30. So is the minus 35, assuming you get some benefit on this food initiatives or are you already seeing things getting a touch better.
Yes that makes sense.
Yes. Thank you.
That is the assumption that we will be picking up.
Some of our attendance decrease through the initiatives that <unk> talked about previously.
Thank you very much.
Thank you.
The next question comes from Stephen <unk> with Stifel. Please go ahead.
Yeah, Hey, guys good morning.
So Celine you mentioned.
In your prepared remarks, you were brought into this company to drive EBITDA north of a $700 million over a couple of years.
Based on your commentary I got the sense, you probably still think the company could eventually get to a level that high so.
I guess the simple question is based on what we're seeing today in the business and look I fully understand we're only two quarters into the strategy change but.
How can you get this company to a level of EBITDA that high with attendance.
<unk> in that 25% to $27 million range I mean, either.
So we're going to need to see per caps go.
Substantially higher from here or costs are going to have to be dramatically below 2019 level. So I'm just trying to understand if I'm, if I'm kind of thinking about this the right way.
Very good point I think I'll, let me.
First.
Yes sure.
I remain very confident that reaching the 700 million plus is achievable within <unk>.
Three years.
How we're going to do that simply one.
We are focusing on going back and recapturing some of our.
At the attendance that you've lost and I give example of converting single day ticket holders into that conversing.
I guess, we lost because of meal dining meal plan.
<unk>.
Members.
We have an amazing program, which has been grandfathered and part of the issue we've shown we've lost.
Million or plus members, because we basically canceled that program and I have to tell you on social media.
And people reach out to me, saying, please don't cancel membership I would like to add.
The grant a child or reserve family I would like to add more members and we say no. So we have opportunities to go back and figure out how we grow attendance.
I think we will get there over time to go back to that $25 million to $27 million I think our biggest.
Opportunity.
Is to keep on increasing price.
And catching up with our competitor by elevating the guest experience I think we've at the end the only thing that matters in my opinion is having people come back our success is all about.
The quality of our guest experience the objective is to keep our guests coming back.
For more visitations during the year and next year, and I think something where we're putting a lot of emphasis on this is twofold. One we have.
Change out.
Customer base.
To today.
Having more families.
Coming to our parks and we know that families spend a lot more money in our parks than adults.
Our percentage of families in the first half that attended our parks.
Given our pre musician has been tremendous.
We're talking not about 1%, 5%, but we were talking about multiple percentage points of families coming driving to our parks and spending more money, we need to attract more of those people to our park I also believe.
That.
Once we start promoting the premium position, which we have not done this year.
We have basically been very low key on.
Promoting our advertising and marketing because we wanted to be able to not spend money until the parks are fully.
Done with certification and I believe we will we will get there in terms of getting more of those people we want.
But then we have the expense side on the cost side, we have a lot of cost to be taken out of the business. Today. So if you like what you've seen in our costs. So far I think it's just the beginning.
We are obsessed by our expense side, who are obsessed through data analytics.
To drive and technology guest facing technology to drive the experience up and our cost down.
So thank you very much for that and then.
The second question.
Go back to this premium vision strategy and it's a question that we get a lot from investors.
Is there a point, though I don't know if its six months down the road a year from now let's see the strategy and you can't drive the attendance back to where you want it to be is there a point, where you guys just said hey this.
This isn't working and you pivot back away from where you are today and kind of go back to the way the business was being run before.
Yes.
I think that.
Very pleased onto a piece of overall progress on our strategy I think not only meet the board. The guests I think if you look at the trending of our guest scores. We are very pleased with our strategy.
I think the safety and well being of her guests employee has been a top priority and I think if you look at our safety record our security this year.
If you look at the number of rides are people have taken when you look at the employee friendliness, because now our employees I'm not stressed out I don't think we'll ever come back to what <unk> used to be I don't think there is a return to this otherwise the board would not have embraced our strategy and willing to pay a.
Short term pricing or short term it for a long term benefit.
I think very clearly that we might need to tweak a few things, but I don't think this is a.
A complete.
Going back and doing all of what we've done.
Very clear thank you very much.
The next question comes from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, guys.
Not to beat the dead horse, but just to zoom in a little further on the on the attendants.
So where do you think that the customers that you're you want to get in the future where are they today because it sounded like there is a certain group and type of customer you don't really want back based on their spending patterns and other things and then where does this customer come from is it somebody that's intentionally avoiding the park today or are they going to.
Baseball games that are they going into.
Some kind of competitive other competitive outdoor product in the market is there any way to think about that.
Wow.
I can tell you I can start with friends of mine who.
The last time, we had been at the park.
At the Los Angeles Park, and they used to go out to the park was four years ago.
And then <unk>.
And the part again.
And those people who are spending a lot of money on flash passes spending a lot of money on.
Oh on eating in the park.
And they never came back.
So ultimately.
I asked him to visit the park.
In in June .
And I say, please visit the park and see what you've gone through.
Yeah.
The husband took his.
Our children.
And once the park.
And send me an amazing.
And the amazing message from the park with pictures about how he enjoyed the park is a claim its a different park.
You said.
There's not it's not overcrowded.
I look at people like looked like me I want my children to be safe I don't want throughout the teenager running around.
He said I saw a lot of families.
He'd like to he loved the park.
It just went back again and bought tickets for next week.
<unk>.
His children and all their friends to growth of the park. This type of people we need no.
Other sites.
What is missing.
Most probably missed on our marketing and communication.
I'll have to admit this is an area where we have not.
Promoted.
As well this year.
What's happened in our parks and we're going to put a big drive in 2023 to make sure that people understand was a lot of influence or digital media, but most importantly, driving testimonials of why people want to come back to our parks testimonial.
Testimonial of somebody like my friend.
It was delighted to come back.
Yes, that's right.
Very helpful. Thanks, Thanks, Aleem and then just follow up is I think you said one of the keys going forward is going to be to convert the single day pass as Youre getting.
Now into into the season passes right for next year, how does that can impact the pricing dynamic obviously there is.
The difference kind of how that's how that's priced and how should we think about that going forward in terms of <unk>.
It's going to look in the.
And the ticket per caps.
That's very very good question. So let me break down a little bit where do we see the future growth of our attendance.
So single day tickets.
This year.
While it's a big part of our business.
So it's.
It's the highest it's $7 billion.
So it's around $6 million ticket single day tickets.
Orders this year.
So my feeling is most people do usually one visitation.
If I can get some and they spend money, we know that single day ticket holders spend money they pay for parking they paid for food. They pay per flash passes if I can convert them in a single into seasons pass.
And be able to have some visit more this type of customer we want.
So our.
Objective is to get a fraction of those $6 million to become seasoned pass holders hopefully given the experience they have given what they need to be at least to get them to come back a second time. This year, if not the seasons pass get them to come back to our October fast to our Fright Fest and holiday in the park.
Art.
So thats one of our objective that we need to do and we're lucky that we have so many single day ticket holder that came to us. This year. So that's a good conversion second.
We have a <unk>.
Legacy season pass holders that came and expired those people expired and they were.
From the old pricing architecture that we're both last year.
And those people expire.
Most of them, it's around $2 million of force people that expired this year and we're hoping that to get those people attraction of them to switch to our new pricing architecture.
And convinced them that with the new presentation and all of that they will come.
Then we talked about the dining meal plan.
So we lost.
Over a million between <unk> million to 2 million guests because of the dining meal plan and we're hoping once you introduce that they would come back.
So between those several initiatives we have.
I'm very confident that we will basically over time.
That has not happened in a year people need to be convinced that wait a minute the experience better.
All of that coming so we will basically over time and I'm talking now three years, but I'm talking maybe by this time next year, we'll most probably start seeing a much we will close the gap to that 27 million guests.
And Chris if I might this is Gary.
And to add that.
The conversion of summer pass.
Two or a single data to annual pass would be accretive.
At the absolute worst would be neutral to our current per cap rate.
Okay very helpful. Thanks, guys.
Okay.
The next question comes from Barton Crockett with Rosenblatt.
Please go ahead.
Okay. Thanks for taking the questions.
I was curious about the variance versus what you were expecting coming into the first quarter.
If your strategy is that first of all kind of seasonal quarter.
I assume you had.
Some kind of internal projection or ask another.
What happened to your attendance this quarter and now you have an actual.
I'm just curious to what degree were the actual different than what you expected and to what degree have you been able to kind of analyze that and see what drove the variance.
So that kind of.
Postmortem as my first question.
So I think when we when we did the strategy.
We recognize it will be between 2025% down.
Throughout basically right now between 10% to 15% below what we expected.
Think it came up a few.
To break that different so we wanted 2025% down so we knew that I think it was part of the strategy.
New debt our parks, we're not delivering a great experience stress on our employees to stress on our.
Rides to stress it was choking points everywhere. So let's go back and define the strategy again so.
So I want to define it so people understand that this was not a decision to come in and just raised prices to the first decision was we had in the park five talking points.
Remain trucking is.
Places with touch points with our customers it started with the parking.
To enter our parks at any times in 2021, 2019 will take 20 to 30 minutes to enter the park.
Because the lines with tremendous to come in that's one choking point the second talking point was coming into a part because you need to resource and that all used to take also another 20 to 25 minutes.
Then it gets worse from here.
To hit our restaurants.
The restaurant with basically because we were running at almost full capacity in our parks.
The restaurant at anytime you need to wait 15 to 2025 minutes to be able to utilize our restaurants. Then you go to our restaurants. It was an hour to two hours to get your meal then at the right towards the minimum two hours to ride the rides.
So basically we realized that literally.
We had discounted too much.
And the philosophy of filling our parks.
It was not the right strategy.
And.
All we're doing people did not have a good experience as I mentioned was our friend.
Who did not come back.
40% four years ago, because it was not a speeds for him willing to pay for it. So we only got the discount of <unk>.
We became a daycare center for teenagers it was a cheap daycare center for teenagers during breaks in the summers.
We changed the stretch themselves okay.
What is the sweet spot and the sweet spot was.
$25 million to $27 million.
No.
In order to be able to institute, a new pricing strategy.
We have to stop.
Going after customer who wanted to families.
Young adults, who are willing to come and spend the money in our parks.
And we wanted our members who we were.
We feel strongly about to have a great.
Guest experience.
So we went and did a lot of.
Analysis on what the pricing should be.
Of course, we would have liked to be almost the same price our other players.
But we say we will tend to take a big jump this.
This year and over the next two years will catch up with our.
Well I don't like to call them competitors was the other players like Seaworld and Cedar fair, who have been able to have more of this pricing discipline them yet.
So that's what we've done.
And that's where we continue to grow with our pricing and we believe that.
As we move and transfer our guests.
From the produce.
Customer, we have to a new customer base of which 65% to 70% of stock with US we're very comfortable that we will reach the other three to 5 million guests that we need.
Okay.
Okay, and if I could.
And another question.
I'm curious about the demographics.
The base that you're starting with so.
Season pass members.
Database you have the people who are coming for a single day pass.
To what degree are those people who.
Are comfortable in the current kind of economic circumstances and to what degree are those people who are stress we're seeing.
A divide in the economy, the Walmart consumers.
Can't afford to buy clothes, because they are spending their money on fuel and food.
And the Disney customers.
Who are willing to pay up for a premium experience at their parks.
Yes.
That would be great any data on where your customer demographics.
So I can I can answer that question.
They clearly.
At the end.
Our objective is not to become a.
Yes.
Okay.
The part that's not affordable to everyone. So let's make that clear.
Our objective has always been want to be a part for the middle class and even lower middle class. Unfortunately.
Over the.
Last year.
I think many.
Many of our customers, even if you kept the pricing the same as last year that disposable income has been hit pretty hard.
So there was no point to try to say how to capture those people again.
Zika they suffered these suffered with gasoline prices they suffered Brazil utilities as home they suffered reserve pricing at the supermarket.
Those people.
We are not able to come and hopefully win if inflation comes back to normal I am hoping that some of those people come back to our parks and enjoying the new pre musician and.
And beautification.
But let's put that aside from the second path behalf.
We believe that we our demographic is what I call. The average income of the U S.
That's who we are and I think we.
We are trying to migrate.
I call it weighed on migrating a little bit from what I call the Kmart.
Walmart to maybe the target customers.
If I want to say that.
Okay alright, thank you.
The next question comes from Brett <unk> with Keybanc capital markets. Please go ahead.
Hey, good morning, just to clarify do you expect 2022 EBITDA to still be above 2019 levels.
Okay.
Hi, Brad Thats, a great question.
At this stage, we are striving to.
Exceeded 2019 EBITDA.
And that is that is our goal.
Whether we can get there or not depends on the headwinds that we're facing with inflation.
Whether or not the attendance metric increases in the second half of this year, which we are determined and we have wonderful effective programs that Selim has laid out.
And to achieve.
And our long term goal as he has also indicated as always north of $700 million within three years.
That is where we're focused.
And everything we do is on the long term vision.
Got it Okay and then at this point to get all of these people back that Youre talking about.
Do you think that these parks need more reinvestment in the form of Capex and rides and attractions.
I mean, you talk about getting pricing closer to the other players but I.
I think many of US would argue that those players have historically invested more than you.
So do you think that you need that to.
Great stack out.
I can answer the question for Q1 I think.
First of all.
Okay.
The question I'm going to repeat it in a different way.
Are we spending enough to impact our guest experience.
<unk>.
I will answer very clearly that we have ample right capacity in our parks.
Each of our parks have introduced a new radar traction every year on larger parts now have between 10% to 18 roller coasters each.
I don't think Thats initial I'm going to also say.
Very proud Vida. Despite all what people have said we are introducing a lot more right still today that we have introduced a lot of fried going on.
But which I'll talk about in just a minute, but let's go back now.
No we.
Have to deploy more resources.
On effectively on guest facing technology.
On food and beverage service and other attractions.
This investment in my opinion are less capital intensive than new rights.
So well.
<unk> been able to our pump today is not important to have and you're right. If you have to wait two hours to get to a REIT to ride the coaster.
The question is we need to make sure that we increase our right for guests per day.
And we have been able to do that and we're very proud of that and then you can see our guest scores subtraction score has gone up tremendously.
So.
What we want to do now we have been able to effectively invest in single writer lanes in Q.
Technology throughout part.
And we will continue helping our guests navigate better our park and become easier to do business with.
Unfortunately today will not as easy to businesses as I would like it to be as we all like it to be so that's where we're spending the money now.
Now, let's talk about something else.
Even though we have basically.
Oh, sorry.
Say that.
We have not invested in Youre right.
And it has not been a priority this year.
We will introduce.
We will be introducing record breaking and first of its kind right. This year at <unk> Mountain Wonder woman flight of courage single real close to the parks 20th cluster.
At just that Texas, Dr. Diab, diabolical cliffhangers, the worlds steepest dive coaster.
Over taxes in dollars.
A common power wave the first of its kind water coaster in North America, and Fox 14th 15th coaster in that park.
St. Louis.
Cat women width is going there.
In discovery Kingdom side, when winter suffering a unique combination primarily coastal and animal exhibits.
And then in Daniel link, we are rebranding the waterpark and making it up.
Up to standard of Hurricane Harbor, I think if you look at what we're introducing still this year I think that we've introduced.
Think a lot of fried even though this has not been a priority going forward at least for the next two years.
Thanks.
The next question comes from Eric Wold with B Riley Securities. Please go ahead.
Thank you two questions. If I may I guess, the first one I want to follow up on your comment that.
You lost 2 million pass holders from renewing because of the old price architecture, and the new pricing how.
How much was the delta in twice in dollars between what they were paying before and what they would have paid knew that kept them from renewals and trying to get a sense of how price sensitive. There's 2 million holders were and then the second question.
Obviously, you cut back on marketing spend substantially this year or to not kind of promote the parks until you got into a point, where you felt they could be promoted you kind of evaluate your plan for next year.
Your destination marketing purely informational marketing is that.
Keeping customers informed as the park offerings, new amenities rides et cetera, or when you think about your marketing expenditure next year does that also include.
Maybe a return to some level of promotions and discounting at higher initial price points, you're trying to get back some of those attendees.
<unk>.
Thank you Eric for your question.
I'll take the first I'll take the first half which is a question on.
The past level change price level change.
It depends on the product.
It was offered.
Eric So I'm going to give you a range of percentages.
As it pertains to the the year over year changes.
It is it is 50% to 100%.
As the price level change in our pass offerings.
The second question was on media spend.
I would like to talk about the advertising so.
What has changed our pricing methods, one we'd like to target.
Two types of customers that we have not done in the past in the past at six flags over the last 10 15 years, they've only targeted people who come to the park we tried.
Two basically incentivize people come to our database is only going to people who have been at the pass through of who've never been in a park.
You will never get an email from us.
Now we are changing that philosophy, and we're going to a broader market, we're going to what I call more absolutely neighborhoods, where we would like to bring people from those neighborhoods come to our park, who have not been targeted before that's one that's changed over time, not only targeting the existing anchor customer or potential customer who used to come to our park, but.
Target completely new customers that have never been talk pumps.
Second.
Our adjustments in our marketing is shifting and pivoting to focus more on digital advertising and Influencers.
What you've done this year.
That's been the fact that influence.
Monitored and.
And watched and observed the change in our parks and there has been a lot of them blogging about how great. The pockets are biggest reach.
Is places like Tictoc, where we have been nonexistent and would like to go back with the influencer and be able to be on tictoc and reach a complete different.
Population young population adult as well as families that have not been able to reach the other one is focusing on more.
Mothers.
A big decision maker and drivers of young adult to our parks.
And there are a lot of bloggers and there are a lot of.
Entertainment blogging by mothers, who refer about where do we need to be and where we need to do and we need to catch that up.
I think thats, our focus is focusing mothers.
Influencers, social media like Talktalk and targeting not only the people who use have used the park would come in but people who are outside of database and tried to get people to try to experience all part for the first time.
Was there a follow up Mr. <unk>.
No all set thank you.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Selene Barstool.
<unk> remarks.
I would like first to conclude this call this morning by saying.
How proud I'm proud of our team and what we have accomplished.
I think our team has worked hard.
To create a unique guest experience and.
And operating.
Our best parks in the industry.
And by achieving what I call a record.
Total.
Guests spent.
Scott.
Both on the admission level.
As well as on the in park spend.
And that has been evidenced by our credit data borrower guest satisfaction rating.
Our safety and security in our parks.
And by basically.
Making sure the <unk>.
Paul are enjoying themselves from upon second I would like.
Two on behalf of Gary and the rest of the management team at six flags I would like to thank you for joining us this morning.
As you heard today, we are.
We're confident in our long term strategy.
And we believe that we will drive.
Operating and financial resort results to meet.
Ambitious goal of $710 million EBITDA in three years.
Thank you for your continued support sick flag is uniquely positioned to create fun and thrilling memories for.
Take care.
And we hope to see you at our park. This fall for Fright Fest or October Fest for holiday in the park.
Bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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Yeah.