Q3 2022 Six Flags Entertainment Corp Earnings Call
Good day and welcome to the third quarter 2022 six flags Entertainment corporate earnings Conference call.
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I would now like to turn the conference over to Stephen Purtell Senior Vice President of Investor Relations. Please go ahead.
Good morning, and welcome to our third quarter 2022 call with me is Chilean peso, President and CEO of six flags and Gary Mills, our Chief Financial Officer.
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.
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.
Okay.
Thank you Steve.
And thanks to all of you for joining us today.
I want to begin by thanking the entire six like tea.
The most important thing we have done since I took over as CEO a year ago is to develop and that child culture of excellence.
You should see and results.
Taking risks challenging outdated ways of thinking.
And investing in people.
Is how I have taken companies like Middleby, because the next level.
And in this challenging year, our strategic transition.
Our team worked tirelessly to elevate the experience for every guest.
And to lay the ground work for sustainable profit growth in the future.
Their passion for our parks and serving our guests is inspiring.
And I'm proud to be leading this exceptional team.
We needed this cultural shift because we are making big bets as a company.
On today's call I will discuss those bets why.
Why are we made them.
And the lessons we have learned.
Then Jerry will discuss our financial results.
Finally before opening the call to questions I will return to discuss how we have applied those lessons learned and why we are so optimistic about the future.
So what are the big bets, we have made as a company.
First.
We bet.
Great The park experience by investing in our infrastructure and employee friendliness and.
And by lowering attendance to create an extraordinary value proposition that will allow us to grow revenue by raising prices in line with value we provide.
Second.
That we could add meaningful new experiences beyond just rights, attracting new consumers and multi generational families to create the best memories and earns a long term loyalty with our guests.
Guests.
<unk>.
That's we can deliver these improved experiences with the lower cost structure by investing in technology to become more productive.
Turning to our organization and developing a culture of empowerment and autonomy and all parks.
These big bets.
You can have big payoffs.
And while the third quarter was disappointing from an attendance standpoint.
The sustained improvements we are seeing in guest satisfaction and.
And spending per capita and all improved October results give me confidence we are moving in the right direction.
Why have we made these bets.
The class has a solid foundation was a beloved brand that is recognized around the world.
And a strong affinity in the areas of our parks are located.
We have an incredible consumer following in the markets. We saw was the level of social media outreach second only to Disney among all theme parks companies in North America.
Our assets are irreplaceable.
We are a global leader in delivering thrills hold 245 roller coasters and it tapers collect correction of themed experiences family events.
And nearly 1000 rides curated across their network of regional regional parks that are located in the top 11 markets in the U S, including some of the fastest growing markets in the country.
Yet.
Our earnings have stagnated since 2018 for three key reasons first.
Over the years, who over emphasize attendance growth, causing us to pursue tactics, such as deep discounting and giving free tickets to guests who spend very little in our parks.
In the last two years alone, we spent more than $100 million marketing these discount and conditioning, our guest to expect them.
We have now realized.
That's focusing purely on attendance has historically resulted in lower margins.
Overcrowding in all parks declining guest satisfaction and significant stress on our team members.
So while our attendance is an important metric it was only one of several different variables that impact our bottom line.
Second we centralized decision, making and bill losch bureaucratic organization with many silos.
This had the effect of bloating, our cost structure and pulling decision, making away from our team members who are closest to our guests.
In addition, the overcrowding of Hawk Pax required us to increase our in park labor costs to keep up with demand.
Finally.
We failed to evolve Oh park experience at the same pace as our guests' expectations.
Specifically, our guests expect a seamless experience that blends our thrill rides and attraction with special immersive events.
Great food and beverage offerings enhance amenities and modern technology.
What lessons have we learned through this transformation.
This year wasn't afraid to be bolt was the changes that we made to our business model.
Some of these changes were well received and effective others were not.
The transformation of six flags will take time and our results will not be linear.
The result into source.
To reflect this.
Quarter in which we're all sort of faced with inclement weather the.
The record inflation and Sky high gas prices that negatively affected attendance.
We have historically under invested in basic amenities and key areas important to our guests.
Our number one focus this year was to invest in areas that directly impact the guest experience such as REIT efficiency.
Employee friendliness bought cleanness food variety and quality.
Guest amenities and guest facing technology.
These improvements require time to implement and continued to be a work in progress.
And some box have been more successful than others.
We'll talk about the tremendous progress we have made a little later in the call.
Along with that when you the pricing approach that had been in place at six flags for more than a decade didnt appropriately values experience our guests deserved.
When one of our biggest hurdles or adjusting our pricing and product architecture.
As we raised prices and scaled back benefits when you we made the difficult but necessary decision to permanently lose a segment of our guests.
Particularly those who came on free or heavily discounted tickets.
Raising price is no easy task for the companies that have some condition at customers to expect discounts and it's clear that the segment of our guests experienced sticker shock with all new pricing.
This sticker shock was amplified by the time lag between all park improvement in our price increases.
Additionally.
Research has no show enough.
That six flags guests had a more pessimistic outlook about the economy at the time, we were going into the peak summer season.
There were other lessons along the way.
Based on guest feedback, we realize that we lost attendance by letting go upon membership program.
And our all season dining program.
We also lost attendance by not selling heavily discounting season passes in the fall.
Was the elimination of deep discounts during the periodic sales.
We will need to accommodate the new push thinkpad pattern for season passes was in our marketing strategy.
Yeah.
We had intentionally dialed back marketing this past year as you evaluate that what matters most to our target customers, but we realized we must be more vocal about the changes, we're making to increase value at the parks.
We also knew.
What we have under invested in technology over the years, but realize we're further behind than we sold.
With a highly competitive market and it digitally engage younger demographic.
These technology investors investments are more crucial than ever.
To ensure were attracting guests of all ages.
We are investing significantly to catch up in this area, adding to the team and our capabilities in a way that will allow frictionless guest experience online as well as in the park.
Finally, we learn how to develop a lean operating cost structure in line with our attendance levels.
While we have made considerable considerable progress on that front, we did not adjust our cost structure fast enough.
During the year as we enter the peak summer season.
We have learned a lot this year.
Allowing us to further refine our approach as we build a model based on healthy attendance growth sustainable per cap gains and an optimized cost structure.
All of which built an attractive bridge to enhance guest experiences and shareholder value.
I would now like to hand, the call over to Gary who will provide more details on our financial performance Getty.
Thank you Celine and good morning, everyone.
Starting with our results for the third quarter total attendance was 8 million guests, which represented a 33% decrease from third quarter 2021.
The attendance trend in September .
Significantly down from July and August for several reasons.
First we experienced poor weather over labor day in the first weekend of Fright Fest, which occurred at the end of the third quarter due to hurricane yet.
Second the adverse impact of a lower active pass base, which historically represents a higher than average proportion of visitation during September .
And third in August of last year, we provided a renewal offered to existing pass holders.
For season passes as low as $40.
This price is not reflective of the value, we provide and we decided not to hold the sale. This year, resulting in fewer season pass is sold in September .
Because guests tend to visit shortly after purchasing a pass.
This negatively impacted September .
Revenue for the third quarter was $505 million.
Greece up $133 million or 21%.
Compared to the third quarter 2021.
Largely driven by lower attendance.
Offsetting by higher per capita spending.
Total guest spending per capita of $61 represented an increase of $9 or 17% versus third quarter 2021.
Admission spending per capita increased $6 or 22% and in park spending.
Her capita increased $3 or 12%.
The increase in admissions spending per capita compared to 2021 was driven primarily by higher realized ticket prices at a higher miske mix of single day tickets.
The increase in in park spending per capita compared to 2021 reflected our improved assortment of in park offerings and pricing initiatives.
On the cost side.
Cash operating and SG&A expenses versus 2021 decreased by $68 million or 24% drill.
Driven primarily by full time head count reductions.
Fewer variable labor hours, partially offset by inflation in.
In the form of higher wages insurance yeah.
Utility.
Adjusted EBITDA for the quarter was $226 million compared to $279 million in the third quarter of 2021.
Moving to our year to date results since park operations were impacted during the first half of 2021 by pandemic related closures and capacity limitations that some of our parks.
We believe it is more instructive to compare our year to date results to 2019, which had a similar operating calendar 2022.
Relative to 2019 revenue.
For the first nine months of 'twenty, 'twenty, two decreased by $148 million or 12%.
This includes a $46 million reduction in sponsorship international agreements and accommodations revenue.
Adjusting for this reduction revenue for the first nine months was down $102 million or 9% versus the first nine months of 2019.
Attendance.
Declined $10 3 million or 39%.
Offset by an increase in total guest spending per capita of $21 or 48%.
Adjusting for free tickets attendance declined 35% versus 2019.
On our last call, we noted approximately $90 million of inflationary headwinds for 2022 relative to 2019.
Despite these inflationary pressures our first nine months cash operating expenses, and SG&A decreased by $41 million or 7% versus 2019.
Due to our aggressive optimization of seasonal labor based on lower attendance levels less dollar spent on advertising.
As well as a leaner corporate overhead structure.
In addition on our last call we highlighted an increase in the annual minimum distribution to Noncontrolling interest of our partnership parks.
The.
Abuse and increases via CPI.
And in 2022 it increased by more than 7% to $45 million.
Compared to 2019. This represents an increase of $4 million for the first nine months of 'twenty, 'twenty, two which negatively impacts our adjusted EBITDA by the same.
Adjusted EBITDA decreased by $89 million versus the first nine months of 2019.
But the periods are not directly comparable because of the reduction in international agreements revenue from our terminated operations in China and Dubai.
Adjusting for this impact adjust.
Adjusted EBITDA for the first nine months of 2022 versus the same period in 2019 decreased by $59 million or 14%.
Turning to the active pass base and balance sheet metrics I will make comparisons to 2021.
Our active pass base as of October 2nd 2022 was comprised of $4 3 million pass holders, a 44% decline relative to last year.
Julian will talk more about this later in the call.
But our most recent season pass sales trends have improved significantly and we expect continued improvement moving forward.
Deferred revenue as of October 20th October 2nd 2022 was $127 million down.
Down $98 million or 44% compared to the third quarter 2021.
The decrease was primarily due to lower unit sales of season passes and memberships compared to 2021.
Total capital expenditures for the quarter.
Net of insurance recoveries.
Were $18 million.
Year to date total capex.
It was $73 million.
Net of insurance recoveries.
We expect our full year 2022 capital spend to be slightly lower than 2021 with a balanced approach between several exciting new water Park attractions.
Theme Park roller coasters with a continued emphasis on implementing guest facing technology and amenities in our parks.
Our liquidity position as of October 2nd 'twenty, 'twenty, two with $292 million.
This included $219 million of available revolver capacity net.
Net of $21 million letters of credit.
And $73 million of cash.
As of October 22 was if October 2nd 2022.
Any balance on our revolver was $110 million.
Reflecting a $90 million paid down during the third quarter.
Over the next 12 to 18 months, we plan to use our excess cash to pay down debt as we work towards our target net leverage ratio.
A three to four times net debt to adjusted EBITDA.
Our next debt maturity is 2024, and we will seek to opportunistically refinance the remain balanced as market conditions allow.
Although it is likely that the interest rate on a portion of our debt will increase.
We expect our total interest expense to decrease overtime as we continue to pay down debt.
Now I will turn the call back over to Sidney.
Thank you Gary.
I would now like to discuss how we're applying the lessons we have learned over the last year to our new strategy.
Our team is applying these lessons in four main areas.
First making further investments as our parks infrastructure, new rights and the guest experience, including marketing and technology initiatives to reach new consumers that are likely to enjoy the theme park experience.
Second.
Fine tuning our product architecture and pricing.
Third establishing a strong autonomous culture with an emphasis on cost discipline, and finally amplifying our seasonal events.
These initiatives will never be complete as we seek to continuously improve but we are beginning to see green shoots that this is the right path forward.
Now, let me tell you more about each and why we're excited about the future.
The first way we are applying these lessons is by.
Further investing in box infrastructure, and the guest experience, including marketing and technology initiatives.
We are just beginning to re imagine our parks and to invest in innovative guest facing technology.
As guests visit US next year, we will better leverage the digital ecosystem to presell items in a new manner.
Guests will encounter if park environment that is less crowded and more enjoyable have access to better food options.
Enjoy improved merchandise offering.
And be offered a variety of add ons that will both enhance that experience and increased spending.
One thing I discovered in partnering with Domino's for so long at Middleby was that speed matters.
And throughout the park, we're working on delivering better experiences.
Pete.
And a lot of that relies on technology.
Can you believe that our guests cannot choose apple pay in our parks.
By improving simple things like wait time logistics and checkout speeds will be able to improve the offering of food and merchandise to a happier guests, enabling greater attachment.
We continue to enhance our guest amenities and park infrastructure.
It ties in the comfort of our guests.
Improvements such as new from gates.
Benches, and shaded areas cleaner bathroom upgrade with restaurants additional water park cabanas and overblown notification on parks was more flowers and greenery.
Have helped increase guest satisfaction.
These types of improvements are.
Crucially important for us to attack multi generational family visitation.
While in park amenities.
And events are our primary focus in 2023, we'll continue to add new record breaking coasters too our parks overtime.
And we look forward to some exciting announcements on this front in the near future.
We'll be pushing a renewed focus on marketing and making use of the digital capacities. We have built out this fall.
As we drive stop.
'twenty 'twenty Street plans. They will include an optimized marketing budget to better highlight the improvements we have made in the parks.
And the value our passes delivered to guests we have already increased our advertising spend sequentially in October .
We have seen success, adding QR codes in our parks will be utilizing more of our digital capabilities with improvements to enhance the guest experience such as digital passes mobile Pos systems and increased mobile application ability which allowed.
Off to increase sales and decreased wait times for our guests.
We recently hired a new chief Digital officer, and I have utmost confidence in his ability to scale to speed what are often our guest facing technology initiatives.
Enhancing our guest facing technology.
And in particular, our mobile App is vital to ensuring an excellent park experience for our guests.
Secondly, we are applying these lessons is by optimizing our product.
Detector and pricing.
We have heard from guests that our pricing structure has been complex and confusing.
So what is structured and simplified our season pass program lending on an approach to pricing.
We believe optimally balances attendance and revenue.
We also reintroduced the dining plan that is of great value for our guests, but still profitable for six flags.
Our leadership team is hyper focused on being in touch with the communities we serve.
And we will continue to evolve our product architecture based on data analytics and guest feedback.
We are listening to our guests.
Okay.
The surgery, while applying these lessons is by continuing to create a strong autonomous culture with an emphasis on cost discipline.
So I'll do you.
We have reduced layers of management and shifted decision, making to the Pax empowered them empowering regional management and decreasing full time head count more than 25% relative to last year.
We optimized our seasonal labor, but adjusting our staffing models optimizing park hours and improving labor planning.
You can see this in our reduction in costs, despite the impact of inflation.
We will first go to eliminate inefficiencies by rationalizing restaurants and stores.
Optimizing seasonal labor, taking advantage of our purchasing power strip.
Stripping all our.
All costs that do not.
Directly impact our guests all while investing in areas that rewards our guests.
As we grow attendance, we expect to grow revenues.
<unk> of costs.
The final way we have applied these lessons is by amplifying our efforts around seasonal events.
Recently.
He brought to life, it bigger and better fresh fast, creating a more immersive experience was more scared zones and haunted houses.
We introduced two new events with kids boot fast and Oktoberfest, which were very popular and gained momentum each week through word of mouth.
Social media engagement with exceptional was at each more than 5 million people highlighting the type of innovation and excitement we're delivering to consumers who have not recently visited all walks.
We are also very excited to host our first ever veterans day weekend. This week honoring those who have served in our armed forces and our digital marketing has been active in driving targeted awareness for weeks.
Through our new culture, we have been able to deliver these events with speed and quality executing in weeks what would have previously taken up to eight years.
Throughout 'twenty 'twenty, three we will be launching exciting new events and festivals such as part of the graph developed yes, the Brewster and bites gets fast and coastal phone celebration, giving our guests a reason to visit multiple times per season.
I would encourage everyone on the call today to come to one of these new events. It's why do you will see the type of excitement and newness. That's one guests to experience all the time.
And it's our best demonstration of what the new six flags is delivery.
<unk> check out the off 2023 calendar on our website.
Now.
Let's turn to why we're so optimistic about the future.
We implemented three significant changes to our business in October .
One well upgraded our seasonal events I've, just talked about which have received very positive reviews and attracted new guests to our park.
Two we restructured and simplified our season pass program lending on a price point, we feel good about and that we believe optimally balances attendance and revenue.
Three we increased our advertising spend.
When Chile in October .
To put this into perspective.
Our paid media spend year to date through the third quarter was 47% of 2019.
In October it was 17% higher than 2019.
We are willing to invest in the right places and when we see the opportunity we will hit the gas.
As a result of these changes we have seen an improvement in the trajectory.
Our results thus far in the first quarter.
For example.
Our attendance relative to 2019 has improved from 61% through the third quarter to 85%.
Our capital spending plans continued to be robust.
Year to date through September .
Capital spending has increased nearly 50% compared to 2019 and these trends have helped in the fourth quarter, even as it attendance improved.
Our season pass sales trends have improved significantly.
He used to date through the end of the third quarter, our season pass unit sales indexed at 34%.
At 43% of 2019.
Fourth quarter to date, our season pass unit sales are running 18, 9% 2019.
In light of these trends.
Our progress related to cost management, we are on track to deliver strong fourth quarter adjusted EBITDA.
One month does not make a trend but two are encouraged that the recent changes we've made to our business are having a positive impact on our financial results.
Changing our business is never easy.
It takes time and sometimes you have to take a step backwards before taking two steps forward.
Buck we remain confident in our approach to change the culture here at six flags.
Optimizing attendance and per caps and overhauling of cost structure.
And this year, we just covered a lot about how to drive guest satisfaction and how to optimally price all tickets.
We've continued to stay close to our guests and response to that feedback during this transition.
I'm listening to our guests and we have to transform our business to quickly make changes that are important Tucson.
I love visiting the pox I loved mingling with our guests.
And I would say it throughout October .
I think many of our parks during Fright Fest Oktoberfest, who first.
And I watch and observe.
Our guest enjoying themselves.
And smiling.
I watched.
As multi generational families.
What does that.
I watched the strollers I watched grandparents.
Patents.
Their children to the park.
I watch our teenagers.
Enjoying the rights.
And having fun and meaning was that friends.
It was butte.
Beautiful to watch.
When I took over as the CEO of nearly a year ago I suppose a key key challenges facing our company to invigorate long term, earning growth we have adopted it transformative strategy.
The training to the journey requires flexibility Looney.
And our relentless focus on our core values and culture.
I want to close our prepared comments by once again thanking our team for their resiliency. During this period of transition for our company, we owe a huge amount of gratitude to our team members in the parks where are the ambassador to our guests who are not satisfied with our third quarter financial results.
But critical organized theyre laying the groundwork for long term sustainable earnings growth often involves taking a step backwards. We believe that we are on the right path and we are encouraged by the improvements in our recent performance.
We have done much of the heavy lifting this year and my commitment to the company is stronger than ever.
I see significant potential and opportunities in the years ahead.
Operator.
At this point could you. Please open the call for any questions.
We will now begin the question and answer session.
I'll 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.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
In the interest of time, please limit yourself to one question.
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At this time, we will pause momentarily to assemble our roster.
Okay.
The first question today comes from.
With the policy.
Go ahead.
Okay.
Hey, good morning, Thanks for taking my question.
Mike My question is on per caps. So you're in park spending per capita declined in <unk> sequentially versus Q and the pace of growth relative to <unk> 19, also decelerated compared to your year to date pace Selim you mentioned several learnings in your prepared remarks, and then your attendance in October I think its down if I caught it correctly down 15.
Is that <unk>.
The down 40% or so in experienced and three Q is it fair to assume that you're rethinking the strategy between volume and price and then where do you think the right level is versus 19.
Thanks.
Ben Good morning.
I am now celebrating.
On the job and.
And I remember he was the first analyst that I spoke to.
A year ago.
And today a year later than it has been a lot of lessons learned.
The first lesson I've learned is we have historically been priced well below our peers and other out of home entertainment options concert ski resorts sports venues.
And we learned that we have much more room to grow our pricing to match. Our elevated experience also this shift in an inflationary environment. It has created a unique opportunity to raise prices.
And.
Our objective is to make our parks much less crowded.
No.
We have moved away from the practices of opening offering deep discounts on season passes.
And specifically in the fall.
Which significantly lowered our average season pass steel.
No.
We are we have listened to our customers.
Calibrated all pricing accordingly.
I think we got it wrong at first.
And priced our season pass is too high and our pricing structure, where the confusing and complicated we eliminated we froze memberships we added annually.
Past annual passes we have too many configuration that would confuse all customers. So what did we do in October we simplified our pricing architecture much much simpler and we basically.
We reduced our season pass pricing.
To be much more of the mix for our guests that allow us to reach our goal attendance level and.
Factor in our guests sensitivity to increased admission however will remain higher.
And then 2019 and 2021 and we'll continue doing what I call dynamic pricing, which I think will we'll see in 'twenty 'twenty three and we're very optimistic that we are now.
The level, where we feel comfortable with the pricing we might have to tweaks to tweak a little bit, but we're very comfortable.
Yeah.
That's very helpful. Thank you and then I'm just thinking about cost here for a moment normally you have a deceleration in costs in kind of the shoulder periods. Torquay <unk> does that trend still apply just for modeling purposes does that trend still apply given the lower top line that we have.
Hum.
Sure.
Hi, Ben This is a this is gary.
We are really very disciplined on our cost side and fully intend to.
Drive the cost savings initiatives that we are.
Implemented in Q3 into Q4 as well as continuing into Q1 in 2023.
Much as is practical.
Yeah.
That's helpful. Thank you.
You bet.
The next question comes from Hong Kong with Macquarie. Please go ahead.
Thanks, so much for the question.
I wanted to ask how you're thinking about extra charge products in the context of this new attendance level and with our front gate pricing up.
Have you seen any any change in uptake there or maybe how your strategy has changed in terms of pricing those extra charge products. Thanks.
Paul I can address that in general was attendance going down we have basically.
<unk> seen our.
Like Flash buses has been down it's been down however, we've seen some other things that have gone up people have been spending more time in our parks and they are spending more on food retail is way up for us and we feel very good.
And of course, the events the events have been a additional the new events, we introduced a high quality that we introduced in October late October Fest buffa.
And no veterans day celebration coming up this weekend.
<unk> increased the spend and the time people are enjoying it off box I will add also Paul that.
We've been very successful with monetizing areas of our parks.
Parks with Cabanas <unk>.
And other rentals that our guests are really appreciated that has said that has added to our Ips revenue.
Great. Thanks, and then on AD spend you noted that you're you're investing incrementally here in sequentially in October .
And shoring up the AD spend relative to.
The consumer here I was wondering if you could speak to how you might see scale in that cost line, especially in the context of your increased digitization and potential efficiencies in advertising through those channels. Thanks.
So I have to say, we did claw back marketing on purpose this year.
Oh, we were still doing the beautiful station of our parks, we wanted to make sure that when we promote the brand.
We will promote them in line of making sure that.
When people come up they seem to have experienced so we had a lag between our marketing and advertising and.
When we started pushing advertising in the fall.
And I have to say that in.
In the previous years, we spent almost <unk>.
2019, 2021, who spent almost 100 minions all between the two years advertising discounts.
As Laura 70% as low as 29 99.
Our approach to marketing as we go forward is all about branding, it's all about events and the quality of invest it it's all about reaching social media influencers to spread the message, it's about reaching new guests and followers desktop affinity to a park. So it's a complete different stretching trying to talk.
Get the Hispanic community.
Through the channels that are very targeted and focused on that Hispanic community going to go up and focus on our neighbor Hood our communities all right. They have the more affluent communities come to our parks and most important.
Go on and have <unk>.
Social and means that the targets are teenagers, we want to stay connected with our teenagers and let them know about all of our new right. So it's all about branding versus message of discounting and we will be increasing our marketing expense in 'twenty two 'twenty three.
I will follow up that too as well selling for you Paul.
We have.
Yeah.
I Love the phrase you said, we hit the gas.
Oh, whereas we have dialed in and noted what really works and this has worked out so in October and we find an event we find a season pass.
We find these.
These things that we want to promote we will not hesitate to spend on advertising and marketing.
Great. Thanks, so much.
The next question comes from the licensee with Stifel. Please go ahead.
Yeah, Hey, guys good morning.
So selenium noted before that you thought the optimal attendance level over time would be.
Let's call it 25 to 27 million guests than that you.
Obviously based on what you're run rating to that I mean, you're you're really still pretty far off from that range. So I guess I'm wondering how should we think about the well first of all is that range.
Fair and then second of all what kind of should.
Should we think about in terms of how long it potentially could take you guys to get somewhere close to that range.
I would say Steve I will answer one is we are still very comfortable with 25 to 27 million guests put together I think we will not go back to a $30 million that we've seen before over 33 million we saw in 2019.
And the reason is we literally is we need to make sure.
That our parks are not overcrowded.
And we've seen this this year.
Is it true correlation.
Between.
Our customer being able to be not oh lining up in retail stores.
Lining up in restaurants lining up everywhere.
Their spend in the park at very strong correlation when they are comfortable in the park they spend more and we've seen that you know spend.
Guests and all in in park spending all guests.
Second I truly believe that we have to target and invest with customers potential customers won't be no affinity for parks and we have identified those that represent.
Present around.
Oh 16 million.
People do have affinity to parks and we are looking at them and making sure that the portion of those will come to our park by focusing and talking them don't know.
Where do we stand on the timing of reaching the 25% to 25 7 million guests per year I think we've always said that it's three years.
Yes, we.
We feel that within the next three years will reach that.
Target.
Yeah.
Okay.
Okay, just to be clear that that's three years from the start of a win this process started or three years from today I just want to be clear there.
I think that looking at it I think from today.
We've learned the lesson that is gonna be from today.
Okay got you and then second question wondering maybe how we should think about Capex spend for you know for next year. It's it's it's clear that you know probably a lot of your parks still aren't where you want them to be in order to attract higher quality guest so should we expect a.
A material increase in Capex spend next year or you know what capex would be similar to what we're what we've kind of seen this year, but allocated more towards those certain parks out there that maybe you might need more help.
Steve This is gerry.
We will be.
Reverting essentially a beautiful <unk> capex.
And we will be referring it over to attractions and rides and yes, we will be increasing capex in the next couple of years.
We are looking forward to making an announcement in the spring towards that effect.
And so we definitely will be investing in the attractions and rides that our customers really appreciate it and have been asking for.
Okay understood. Thanks, guys appreciate it.
Thank you.
The next question comes from Ian Zaffino with Oppenheimer. Please go ahead.
Great. Thank you very much.
I wanted to ask you on you mentioned gas prices and.
We never really heard that from from six select before about gas prices impacting attendance.
Can you maybe give us a little bit more color there.
And then also did you notice any kind of degradation in in park spend because of that just having less disposable income and kind of how do you square that with the comments about you know an inflationary environment being not beneficial to you guys. Thanks.
So I'll start about what you've seen and you have Ace survey research that came out this summer that showed that all.
Customers with.
<unk> buys a financial tightening or they felt that the financial tightening would affect them.
And what happened is literally that happens with <unk> started seeing that in mid June through July .
July .
And then on through the summer I think definitely old guests started feeling the pinch on.
Gasoline prices on utility prices on food in the grocery store and I think it might impact us because somehow some way is we have the research shows that all.
I guess, we're sensitive to those does the inflation that they did they had on the on the disposable income.
Literal.
Literally we have.
Also seeing that those guests some of those guests came back when gasoline prices went down and before I assume there is somewhat of a correlation as they came back and we saw the return to a little bit more normalized attendance in October and November .
Okay. Thank you and then just building on on October and November can you maybe talk about some of the products that you reintroduced all season dining payment plans.
How is the take rate going there and is that what's helping drive a lot of the.
Improvement in attendance or is it the marketing like you had talked about if you could talk about that that'd be great. Thank you.
I think it was many things that happen to make this again from the lessons we've learned.
We've learned that.
Quality event.
Oh, that's not a done.
Well implemented executed well in all.
Parks.
Have tremendous appeal to our especially our season passes.
We have also learned that's concert and shows that are also high quality.
And appeal to all.
Our season pass holder and single day ticket in that case.
So we invested in Bucharest, which was new we invest and Oktoberfest, which is new and what is amazing about that it's not like we did some they were all simultaneously was an improved and much much better fly fast we elevated the franchise. So no we have in the park you come in.
Uh huh.
Patents adults who want to enjoy.
Not to go to a how long did the house could have their kids and teenagers and enjoyed the haunted houses in fright Fest and they will be enjoying our oktoberfest.
Kids parents with small kids, who don't want to go to a fright Fest was all those teenage we created the Booth festival them, where there was a trick or treat in the afternoon and those were very successful. So this is on the events on the shows we had significant improvement in <unk>.
Investment and characters.
That's what I thought I piece, we had also parades concert and unique shows that will implement those would also part of the pre musician.
Finally, I would say our marketing was a lot more targeted we did a lot of online posting.
With content driven by those shows by those events. So we have something new and newness to shares of why you need to come back to the park.
Okay. Thank you very much that's very helpful.
The next question comes from Jamie Hardening with Citi. Please go ahead.
Okay.
Hey, good morning, Thanks for taking my question I just wanted to start off.
And you've given us some.
Bread crumbs here, but just.
Can you maybe walk us through the attendance trends over the course of the quarter and into October I think what we were supposed to conclude coming off in the last call was that July was maybe down high thirties versus 2019.
I don't know where August was good it sounds like what you're saying your September was meaningfully worse than that run rate and then October maybe down 15 versus 19, so maybe give us whatever whatever quantification could there.
Yeah, Good question, Jamie and good morning.
Our.
The months the first preceding months right. We're looking at July and August trended very similar.
The range of what I mentioned, which is a 35% down versus 2019.
And.
September was the month of disappointed us the most and it has to do with timing of season pass sales and a really big discounted effort, we put forth in 2021.
So in in and around the Labor day weekend, we held a sale with very aggressive pricing, which we mentioned it was about $40 average and we sold between five and 600000 passes at that sale.
People tend to.
Go to the park once they buy their path and.
That drove September attendance up in 'twenty, one, whereas we chose not to have such a discounted sale and have moved our season pass efforts more towards the October Fright Fest Timeframes.
That's helpful.
And then.
Maybe as we think about this October number it.
It seems like.
You think there's a pretty strong causal relationship between some of the some of the efforts that you guys put in and a much better month of October .
We did see an improvement really across the industry in October and maybe there is some sort of secular trends at play there or maybe the consumers just feeling better I guess ultimately what I'm trying to figure out.
You had a.
Down 40 plus percent in the third quarter, you had a down 15% again versus 2019 and October .
Do we think about the go forward rate clearly you don't think that sort of a down 15.
Available given the.
Sort of attendance commentary and how long, it's going to take you to get back to that that optimal level.
How do we digest.
You know to such a disparate data point.
Between the third quarter in October .
Yeah. So when you when you look at the.
The deferred revenue being down 44%.
On our balance sheet.
You're certainly right.
Understand and correlate that as well.
I'm looking at the same kind of commentary regarding September .
Jamie, which you know the timing of the season pass sales will affect that that effort.
We were looking to have a strong fourth quarter and then it's the language I believe it's the only news.
As we go forth something to keep in mind is that H I P. A holiday in the park.
It is an event that happens at the beginning after Thanksgiving and this year, we are not doing it in approximately five of our parks.
So it is not EBITDA accretive.
Those parks and so we made the decision not to do it but that will negatively affect attendance in the latter part of the fourth quarter, but not EBITDA. So I just want to make that clear.
That's helpful. Thank you.
Thank you James.
The next question comes from David Katz with Jefferies. Please go ahead.
Hi, Good morning, everyone. Thanks for taking my questions and appreciate all the detail. So far I just want to go back to one detail from the very first question, what we're looking at cash Opex.
The third quarter, which was down if if my math is correct around $23 million or 10% versus.
19, and that's been a progressively ah.
A bigger reduction through the course of the year.
How should we how specific can you be in helping us model that for <unk> and <unk> before we get into the high season next year and then I have a couple of other details as well.
Yeah, Good morning, David.
I think you can model the consistency of Q3's reduction into Q4 on a relative basis I think that's reasonable.
Our reductions are in corporate head count.
They are in full time head count at the parks there also in seasonal labor.
And so those are the costs that we've seen that's some of that is in SG&A and on the Opex side, we have.
Fair amount of production related to.
Other expenses that are parks that we have been optimizing.
Through our initiation cost reduction initiatives at the park level.
And that should also continue through Q4.
Excellent.
And just two other details number once a selim in your comments you made some reference to I believe it was some positive qualifier for one <unk> EBITDA and I was hoping you could just go back and sort of repeat or qualify that a little bit and sort of what you meant by that.
And then second.
For for perhaps both I mean, where where seemingly very very focused on attendance levels.
And what the ramp and those are and I see that the per caps here.
In this quarter are starting to reach.
Those of a competitor right you're in that low sixty's all in level.
Is it fair to assume that you expect to push those per caps considerably higher than where your peers are and and so you know while it may take three years to get to that aspirational attendance level you know the EBITDA can grow.
Along the way to some of the aspirational levels that have been discussed in prior prior periods.
<unk> got great question David.
We have three really important metrics that we use and guest satisfaction.
Yield and ultimately EBITDA and these are the three that we are using today and of course, there's many more of that go into those functions in yield as a as attendants of course as a part of the yield equation.
And yes, we intend to grow.
And our aspirations are to grow per caps to those levels as you mentioned.
And we have these ambitious goals here, we're also although cognizant that.
We're going to take a more.
Measured approach.
Our our increases in our passes and our single day tickets and our ancillary events.
So that.
Our customers that I believe experienced some sticker shock this year that do not have that.
Same feeling in subsequent years.
Okay.
Can I sneak one more detail on there that may be instructive for everyone's absolutely.
Gary you I think in your commentary you talked about Capex being.
Being slightly lower than 'twenty, one and then if I listen to all the commentary.
Putting sleeves, there there's kind of a lot to do digitally and experiential a.
In terms of spending are you sure that that down slightly versus 'twenty one is enough.
And David I am going to refer to 'twenty two first.
And say, yes, it has enough regarding 20 twos capex spend.
'twenty three we need to increase it and we plan to.
We've mentioned in previous calls approximately a 130 million of Capex spend going on a go forward basis.
We intend to increase that for 'twenty, three and 'twenty four pending some announcements that we plan to make in the spring.
That increase versus 130 <unk>.
Correct.
Noted thank you very much.
Thank you.
The next question comes from my English.
Please go ahead.
Okay.
Hey, Good morning, guys, just maybe a clarification follow up on one of Jim's questions earlier, just around the cadence of fourth quarter and I. Thank you.
You had mentioned that you'll have fewer operating days are probably in November and December maybe can you give us any kind of quantification or context on how to think about how many fewer operating days, we will see over the balance of the quarter.
Yeah.
Well, we don't really focus on operating days because there are so different.
Having a night event is not so different from the opening on the weekend, but there's about five of our parks are they're not doing the holiday in the park opened typically on weekends or over Thanksgiving and Christmas So it's not a big.
Amount of attendance I think it does affect the growth rate for that part of the quarter, but overall.
They were not EBITDA accretive so we feel it.
This move is.
To help us with the quarter over all of their profitability.
Okay got you and.
I mean, one of the one of the the under.
One of the goals of this kind of strategy that you have is improving the guest experience I think you've mentioned a number of <unk>.
Count reductions in the park, so I guess, how do you balance.
The cost you are removing from the parks with with you tried to maintain or actually improve the guest experience.
That's very good Mike I would have to tell you. This is a very balanced approach. This year was a year of totally building back our culture.
Building our.
New in a sense.
What do you want the amenities to be in the park elevating the experience so from that perspective.
There was three elements to that strategy element number one.
Was stop the heavy discounting that has happened, which does not reflect through lease or value that we provide we were priced too low and.
And we have seen the stagnation of EBITDA over the years.
And that had to be changed.
And second we found that we had entered invested in North Park when it comes to the beautification landscaping Bill flowers, so that the clean and this benches amenities the food.
Number three.
We have also not made it easy for our customers from a technology standpoint, we want to be easier to do business with on boarding you into park be able to book tickets. So you look at technology.
Look at the in park experience and look at the pricing.
I think those three elements most probably you would have done all at a certain time, we we most probably did a lot of them.
In a very difficult environment, which is very inflationary environment on all our guests, but we did and then that reflection, we most probably as J D said well might have affected some of our guests' ability to come to our parks this year.
But.
As we look forward, we're seeing that.
The improvement we've done.
Have been well recognized I've been in the park.
Every weekend.
This.
Past Shaw weekend mingling with all guest menu was all remembers mingling with our teenagers.
And they would stop me I'm, while recognizing the parks and they told me that the experience have gotten much much better.
And it was worthwhile to wait and in fact I have several guest who told me it's not worthwhile the price increase that they are willing to pay for the experience. So that's the way we feel.
Okay. Thanks, and then maybe if I could just fit one more in I think you had mentioned that there was some impact from hurricane even at the end of.
The third quarter, I guess I'm trying to figure out.
I understand which parks were actually impacted and maybe how much attendance you you lost due to that.
Great Great question Mike.
Hurricane Ian came up the east coast at the end of our.
Our quarter and impacted nearly all of our parks on the East Coast total attendance loss approximately 150000 in nearly $10 million in revenue.
Okay, great. Thank you.
Okay.
Okay.
The next question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.
Okay. Thank you.
I wanted to.
See if I can understand a little bit better.
What you're saying about the the change in October or I think you said that attendance was down 15% versus 2019.
But I don't think I heard a commentary and maybe I missed it on revenues.
You know given your per cap trend that would suggest that maybe revenues were up a lot in October and I was wondering.
Unless the per cap trend changed then.
And so I was wondering if you could address that to be kind of like.
Yes Barton.
Per caps are staying very consistent.
In October .
And the attendance of course has been driven by all of our events that the team has put forth at our parks.
At this stage.
Okay. So it's fair here and I'll kind of give us a revenue number but it's not crazy to think you had some decent growth in October .
Yeah.
Yes, that's correct.
Okay, Alright, and then.
Turning to the liquidity.
262, I think you said you know and the deferred revenue balance is less because of the season pass change.
Coming into a capital consumptive period, where commonly in the first quarter you guys would you say $100 million or so of cash.
You know how should we think about liquidity puts and takes from here and in the past you guys had 150 million dollar liquidity covenant.
And I'm, just wondering where the covenant kind of.
Positioning sits at this point.
Yeah.
Hey, Barton this is Steve.
We don't have any covenant around minimum liquidity any longer. So we only have a secured leverage ratio, which for a company with them and we have plenty of liquidity as you go into the off season.
Although we were spending capital during that time and our parks are closed.
You have a ample revolver capacity well above our historical needs a lot of cushion. So we feel really good about it.
Okay, all right I'll follow up more offline. Thank you.
Thank you Barton.
Concludes our question and answer session I would like to turn the conference back over to Selina cool for any closing remarks.
Thank you very much I would like to do a closing remarks possible.
First I want to thank.
Every one of you for being on the call today with us.
I would like to also talk a little bit about.
Oh.
Our improving experience apart millions of loyal existing customers.
While also attracting first time guests.
That's our priority and is central to our plans to improve the company's financial performance overtime.
I'd like to take a minute to empathize with our shareholders and investors.
As we've made the turnaround that the.
The value creation.
Will happen overtime and we at Weil.
Positive about the evidence that is showing up in October and November that the strategy is working and progress has been made.
Pursuing a strategy aimed at improving guest experience and delivering value.
Is ongoing in the meantime, our tenders attendance and pass base has been lowered and will be lower in 2021.
This is it transition period for our company.
We're confident.
Confidence in our ability to transform.
Six flags.
That has been underperforming relative to its peers.
And the leadership team that is guiding dispute chapters.
Is very confident in our ability.
To become best in class.
Higher per caps and guest satisfaction reflects improved product offerings and in park revenue management.
It is sticking.
Creating fun through employee friendliness.
Crowds create the better experience for guests and employees and as I said earlier more spending in our parks.
Does this I wanted to say kudos to.
To our frontline and ambassadors in the parks for.
Delivering an amazing experience and it shows in our guest satisfaction the interviews and surveys we've seen where they are commending you for yours.
French for your courtesy for Ya friendliness.
The cleanness of the park.
And the ability to enjoy this time with you while they are visiting us.
Empowered.
Our parks, resulting in quicker execution, and improving social media sentiment and guest satisfaction scores have been as Gerry said at.
A top objective of ours.
We have to invest directly in our guest experience.
Meaning.
Our guest facing technology.
Once you have also ample right capacity.
And most important our next capital a collection priority is to reduce our debt.
With our new such underway, we expect to see more investment and more capex in marketing.
Digital outreach and mobile application.
As well as in rights.
We have taken our fixed cost and we are scaling our variable cost for the new attendance levels, we have still more room to optimize further.
And we are confident that you will be.
Optimizing our inefficiencies.
In 2023.
We have we are a great <unk>.
Industry.
And I salute.
Our other peers.
Because we all have been resilient to inflation and.
And we are hard to replicate.
Out of home.
Outdoor safe regional entertainment experience close to our guests and in our case close to 11 fast growing markets that six flags surf.
On this I would like to thank you for your continued support both as shareholders.
As analysts and as our guests.
We hope to see you all at the park. This weekend for our first ever Veterans day weekend celebration.
Celebrating those who have served and served our country.
And in the coming weeks for our magical holiday in the park event as we kick off the holiday season.
Please also as we said in our earnings script.
Please check out all our 2023 fabulous events lineup.
Take care have a great day.
And happy holidays.
<unk>.
Okay.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Thank you.
[music].