Q2 2023 Six Flags Entertainment Corp Earnings Call
Excuse me. This is the conference operator, the call will begin shortly please continue to hold thank you.
[music].
Good morning, ladies and gentlemen, welcome to the six flags second quarter 'twenty twenty-three earnings Conference call. My name is drew and I will be your operator for today's call.
During the presentation all lines will be in a listen only mode. After the speaker's remarks, we will conduct a question and answer session.
If you have a question at that time simply press Star then the number one on.
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Thank you I will now turn the call over to Evan Bertrand Vice President Investor Relations and Treasurer.
Good morning, and welcome to our second quarter 2023 call.
With me, it's Julian Mitchell, President and CEO of six flags and Gary <unk>, Our Chief Financial Officer.
We will begin the call with prepared comments and then open the call to your questions are.
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.
The company undertakes no obligation to update or revise these statements.
In addition on the call we will discuss non-GAAP financial measures.
Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports quarterly reports and other forms filed or furnished with the SEC.
At this time I will turn the call over to sling.
Good morning.
Thank you for joining our call.
Today, we will focus on three areas first I will provide an update on the progress we have made on our transformation.
Gary will provide details on our financial results and our outlook for the remainder of the year.
Finally, I will return to discuss our four key strategic pillars for sustainable long term profit growth.
Our team continues to work hard to transform the company as we strive to reach our full potential.
Any transformation begins with the vision for what the company can be for us.
Our vision is to deliver it truly exceptional experience for our guests and sustainable profit growth.
The long term for our shareholders.
The hard work is starting that visit vision into a reality.
Despite a challenging weather backdrop.
We saw a solid growth trajectory in second quarter and first half of the year.
There are five items I would like to highlight that serve as indicators that our transformation is taking hold.
Yeah.
Our guests are responding favorably to the investments we have made in our parks.
Our new seasonal events and in technology, including our new mobile App.
Second our season pass sales trends continued to be strong.
Year to date through July our season pass unit sales have increased over 50% versus prior year, including the newly released six flags plus subscription offering.
After a slow start to our 2023 past say last fall.
Have responded favorably to our simplified product assortment and the compelling values that our season pass products offer.
Sure.
Our attendance trends continued to improve with attendance, increasing 6% in the quarter and 4% year to date.
Despite equally cold and rainy first quarter in California, followed by heavy rainfall in the North East and a record heat waves in the south in the second quarter.
Fourth our total guest per capita spending continues to be near record levels.
As expected our admissions per capita is down in the first half of the year as we scaled back our season pass pricing.
However, we are pleased that our in park per capita spending was only down 1% in the first half of the year and is up nearly 50% versus pre pandemic levels.
Our consumer appears to be healthy and is responding favorably to our enhanced import offerings and in particular.
Revamp culinary lineup and food festivals.
Our guests are spending more on food and beverage this year compared to last year, both in total units and average price paid.
Finally.
I am proud to say that our team continues to stay focused on costs with our operating costs up less than 1% in the first half of the year, despite inflationary pressures as well as our investments in advertising and in the guest experience at our parks.
We are still in the early stages of our transformation, but we are encouraged by the recent proof points that our strategy is working and we are excited about the opportunity to take this company to the next level.
Before turning it over to Gary I would like to highlight an encouraging data point that speak to the strength of our new business model.
Adjusted EBITDA achieved by our North American operations, which excludes international licensing revenue increased 16% in the first half of 2023 versus the same period in 2019.
Said differently.
Performing better in the first half of this year on 32% less attendance.
While many challenges lie ahead, we are encouraged by our year to date resolve and we believe we have led laid the foundation for many years of organic earnings growth in a healthy and sustainable manner.
Now I would like to turn the call over to Gary to discuss the financial results for the quarter and our outlook for the remainder of the year Gary.
Thank you Celine and good morning to everyone.
I will start with attendance revenue and per caps, then transitioned to expenses.
EBITDA for the quarter and first half of the year.
I will then move on to our active pass base metrics select balance sheet items and capital allocation.
To close I will provide additional clarity on what we expect for the second half of the year.
For second quarter 2023, total attendance was $7 1 million guests, a 6% increase from second quarter 2022.
This attendance growth fell short of our expectations due to a challenging weather environment in the second quarter with unusually high rainfall in the northeast combined with a record heat wave in the south.
Revenue in the quarter increased $8 million or 2% to $444 million.
This was primarily the result of higher attendance, partially offset by a decrease in total guest spending per capita of $3 or 5% versus second quarter of 2022.
Admission spending per capita decreased $3 or 7% and in park spending per capita decreased less than $1 or 2%.
The decrease in admission spending per capita was driven primarily by lower average season pass pricing in 2023 versus last year.
As Tony mentioned, we have optimized our admissions pricing, which drove past sales this year and had the expected result modestly lowering per caps.
In park spending per capita declined versus prior year due to the lower spend on parking retail and flash passes as a result of higher mix of season pass attendance in the second quarter 2023 versus prior year.
Due to the inclusion of parking and other benefits associated with passes season pass guests generally spend less per visit on these items relative to single day ticket guests.
This decline was partially offset by higher food and beverage sales in the second quarter 2023 versus the prior year, which was largely fueled by a revamped culinary assortment as well as our exciting events and festival lineup.
On the cost side in the second quarter, we incurred $38 million related to an upward revision of our estimated liabilities.
For our self insurance reserves, primarily associated with general liability claims, which is recorded in our SG&A.
This adjustment is not the result of an increased volume of incidents, but rather a broader impact of rising cost of claims driven by various inflationary factors <unk>.
Including increasing litigation and settlement costs being driven in part by a general trend of higher jury awards.
This trend has been affecting many industries.
Leading to higher settlement amounts and more unpredictable claims outcome.
Our self insurance reserves estimates are made utilizing our claims data history.
Where are you fully determined estimates and other qualitative considerations.
As a result of the observed pattern of increasing litigation and settlement costs previously discussed.
We performed an actuarial analysis during the second quarter, which resulted in the revision of certain key actuarial assumptions.
You want to clarify that this change in accounting estimate relates to open claims associated with incidents that have occurred across multiple historical periods.
For the purposes of reporting cash operating and SG&A expenses and adjusted EBITDA.
We have excluded the $38 million associated with the change in estimate of our self insurance reserves as we feel this is a better reflection of underlying operating performance in the current period and provides more meaningful comparisons to our historical results and two other companies in our industry.
Cash operating and SG&A expenses were up less than 1% year over year.
The impact of higher inflation and higher media spend was offset by our cost saving initiatives and lower full time head count.
Adjusted EBITDA for the quarter was $161 million, a $7 million increase or 5% compared to second quarter 2022, driven by higher revenue.
For the first half of 2023.
Our attendance increased by 4% and our total guest spending per capita decreased by 3%.
Driving a 2% increase in our total revenue.
Cash operating costs for the first half increased 2% and adjusted EBITDA increased $6 million or 5%.
As Susan mentioned, we have seen significant growth in our core North American parks compared to the first half of 2019.
Adjusted EBITDA attributable to international licensing decreased $24 million.
From the first half of 2019 to the first half of 2023.
So adjusted EBITDA achieved by our core North American operations.
Increased $19 million or 16% in the first half of 2023 compared to the first half of 2019.
Our active pass base as of July <unk> 2023 comprised $4 6 million pass holders, which includes the new six flags plus subscription program, representing an increase of 2% versus the same time last year.
Deferred revenue as of July <unk>, 2023 was $177 million up $6 million or 3% compared to the second quarter of 2022.
The increase was primarily due to the higher active pass base.
As of July 2023.
Total capital expenditures for the quarter was $42 million, an increase of $16 million compared to the second quarter of 2022.
For the first half of 2023 capital expenditures were $67 million.
We expect our full year 2023 capital expenditures to be approximately $170 million to $180 million.
Which includes a mix of exciting new rides continued infrastructure improvements and implementation of guest facing technology and amenities in our parks.
Our expectation increase from our prior estimate of $150 million due to higher Ed Vince spent.
Our marketable capital plan for future years.
We are also raising capex expectations in future years.
For 2024 capital expenditures are expected to range between 202 hundred $20 million.
And Capex in 2025 is expected to be between 230 and $250 million.
Before returning to our long term run rate of approximately 10% of revenue.
We have exciting new rides in the pipeline.
And we look forward to providing you an update in the near future.
Our liquidity position as of July 2nd was $362 million.
This included $310 million of available revolver capacity net of $21 million of letters of credit plus $52 million of cash.
In the second quarter, we successfully increased our revolving credit facility from $350 million to $500 million, which provides us greater capacity and flexibility to pay down debt in the coming years.
During the second quarter, we paid down 94 million in debt.
And we have paid down an additional $50 million of debt since the end of the second quarter through today.
We will continue.
To use free cash flow to pay down debt and reduce net leverage towards our target of between three and four times.
Before I turn it back over to Selim I want to highlight a few items to help set expectations for the remainder of the year.
First we expect attendance to increase in the back half of the year driven by an easier attendance comp in the third quarter.
July attendance increased 11% versus prior year.
We expect total guest spending per capita decreased year over year due to lower average season pass pricing prices in 2023 versus prior year.
As well as to the slightly negative impact of higher season pass attendance mix on in park spend.
We expect cash operating costs for the full year to increase by approximately low to mid single digits as we bed battle inflationary pressures, while continuing to invest in the guest experience and advertising.
Partially offset by our cost reduction initiatives.
Due to the timing of advertising spend and expected attendance drove the increase in expenses will likely be more pronounced in the third quarter.
For the full year, we are currently tracking behind our previous expectations due to the challenging weather conditions experienced in the first half of the year.
Looking ahead, our strategy is gaining traction and we have many initiatives in place to drive earnings growth, which Selim will now discuss.
In more detail.
Felipe Thank you Gary.
I would now like to review, our four strategic pillars to drive long term sustainable earnings growth, which are <unk>.
<unk> experience.
Seasonal events pricing and products and organizational culture.
First park experience.
Over the last couple of years, we have made targeted investments in park amenities.
Vacation technology, and new attractions, which have reshaped the look and feel of our parks and our guests are responding positively.
While we have made progress enhancing the guest experience that is still much to do.
Our digital transformation is at the core of six flags, providing a seamless guest experience.
This is a pivotal year as we overhaul guest oriented technology and elevate the guest experience to new Heights.
There are several developments I would like to highlight today.
First we launched our new mobile App in June .
We know the parks can be overwhelming at times.
So the upgraded App helps guests better plan to date.
Faultlessly navigate the parks using three D interactive maps and make mobile food ordering simple and easy.
We are working on many other exciting developments for the App such as live ride wait times coming later this year as well as many others, we will be sharing in the near future.
Second.
We rolled out <unk>, our new wristband payment technology at several water parks, allowing our guests to conveniently purchase food and drinks without having their credit card or phone on them.
We plan to expand six paid to all water parks by next season.
Third we are developing speedy parking a new automated service at our toll plazas, providing a dedicated fast lane for pass holders to scan their passes to open the gate automatically.
Laurence.
We are introducing self service digital kiosks at many of our restaurants later this year.
From my own experience in foodservice. These digital kiosks resulted in shortage queues and increased average orders through Upselling and cross selling.
Yes.
We are introducing a new automated photo capture solution to provide personalized digital photography and ride videos.
Capturing and sharing memories with loved ones is an important part of the six flags experience.
Have partnered with a leading photography and video company to capture these moments throughout the park and on the roller coasters.
We want our guests to remembers the expedience because remember experiences.
People want to repeat the experience and we also want to enable our guests to easily share. These memories with their friends on social media.
Another area of focus for us is creating fun and memorable experiences for every member of the family to create multi generational appeal.
Our parents and grandparents are rest areas have been well received debentures shade areas VIP lounges, and water Park, Gabon of enhanced comfort at our parks and help reduce stress for families visiting with children.
For younger children, we have introduced new kits activities, including pie eating contest water balloon challenges and gets rave parties among other things.
We have also installed theme park attractions, specifically designed for smaller children, including family Reits like Ruger racer and gifts flash cost make cost as well as the new playground and play areas.
In our water parks, we installed new play structures several new good slides and allows your thrill rides for older children likes the new Rip curl Blaster.
And for the teams and thrill secrets, we have an exciting lineup of marketable capital for 'twenty 'twenty, four and 'twenty 'twenty four five.
Supported by our biggest investment in new rides and attraction in many years.
Thrill rides is our DNA.
We have significantly increased our capex investment this year and over the next couple of years in anticipation of multiple major ride introductions, and we will have exciting new news to provide you in the coming weeks.
Turning to seasonal events.
We have really upped our game was even with events. This year, but we are just getting started.
We recently introduced flavor of the World and New Food Festival was lively street markets and specialty food items like unduly chicken scores.
<unk> bonds and state creates opportunity to highlight just a few.
And some of them might spectacular a celebration featuring like live music themed food item and stunning fireworks and drone shows.
These four this fall we are investing to enhance popular events that we introduced last year, including a bigger oktoberfest and a more immersive kid friendly booth first.
And of course, we are.
We're going to Amp up our fan favorites like Fright Fest and holiday in the park.
Exciting news for the harder enthusiasts, we have partner was harder movie franchises, the con Judy and salt to develop new ghoulish haunted houses and select parks that are strong to be a hit with our thrill secrets already social media is buzzing.
And we have some exciting new events to launch in 2020 for stay tuned.
So pricing and products.
We have simplified and optimized our emission pricing.
Restructuring our pricing model has been critical in driving an increase of pass sales this year.
We launched our new six flags plus in June .
<unk> plus is a year round.
<unk> style pass offering a compelling low monthly payment with no down payment for our guests and.
And has a high average admissions per cap for six flags.
In my conversation with our guests they expressed overwhelming interest in the payment flexibility and benefits of our old membership program and six flags plus has been a huge success so far.
We are currently testing dynamic pricing of several pop pox and while it is still very early we believe it has the potential to further optimize our single day ticket sales by adjusting daily pricing based on advanced.
Demand signals.
Despite our pricing actions over the past couple of years.
<unk> remain well below our peers.
Peers.
Over time as we continue to enhance the guest experience, we expect to increase our prices to ensure they are in line with the industry and are commensurate with the value we deliver to our guests.
Finally.
Organizational culture.
Very important to me and critical to our success, we are a leaner more nimble and we have removed and necessity layers, which has created a culture of ownership among our team members.
During my extensive visits to our parks I interact with our frontline Park employees, who are friendly and frequently go beyond the call of duty to make their own kind of magic for our guests.
They work each day to improve the guest experience with small gestures that bring smiles to our guests.
I observe more and more families having fun was that kids and grandkids I see teenagers celebrating was their friends. They were all drawn to our parks was people that cherish.
Yeah.
Ultimately.
Our success.
It depends on our ability to delight, our guests with unique and thrilling experiences they cannot get anywhere else.
And our ability to deliver an exceptional guest experience will depend on the engagement creativity and collaboration of the talented people across our organizations.
Following a year of transition.
Our strategy is beginning to take hold and we believe we are now on a sustainable growth trajectory in our top and bottom line.
We look forward to updating you on our progress as we strive to continue to improve the guest experience and to increase our profitability over time.
Operator at this point would 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.
If you're using a speaker phone 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 James Hardiman with Citi.
Please go ahead.
Hi, good morning, Thanks for taking my call.
Wanted to follow up I think you said that versus your previous expectation.
You might be tracking a little bit behind I think we had talked about an EBITDA number this year somewhere in the low $520 million range, maybe if you could give us an update on that number or do you still think you'll do north of or at least call. It $500 million this year.
And ultimately how do you get there obviously the algorithm previously was sort of double digit attendance growth a little bit of an offset from per caps. How are you thinking about those items.
Yeah, Hi, good morning, James.
Great Great question.
The question boils down to how much of the first half were.
Weather impact, we can make up in the second half remaining six months of the year and at this stage.
Certainly it's still an unknown as it's hard to make up for the lost revenue in the first half we have challenging targets in the second half, which is built into our original estimate of north of $520 million.
Celine laid out a significant number of initiatives.
We are all really aggressively working on to collect and see how much of that we can make up.
At this stage that is remains to be seen it remains to be execution.
We need to have fairly good weather right to collect what was hampered by the weather in the first half.
But I think we're somewhere in the range.
510.
510, Okay. That's helpful. And then maybe along those same lines, if we could dig in a little bit more on July I think you said July attendance was up.
11%.
Is there any way to think about sort of the revenue trend in July I think versus versus the street expectations per caps were lighter than we were anticipating how much of that 11% was eaten up by.
Declining per caps.
And as we go forward do those comparisons get easier or tougher right. So if we're thinking about a plus 11 in July .
All else equal does that 11, better or get worse from here.
Right.
So july's per caps.
Going up against increased pricing in.
July of 2022, we increased our average prices on passes.
Through August which was our peak average monthly pricing for season passes so.
The per caps will in terms of admissions will be a downward pressure on July <unk>.
Offsetting some of that 11% pick up in attendance.
So that's that's kind of where that stands.
Okay, and just to just to clarify if I think about that.
The downward pressure.
Does that indicate that the per cap decline in July .
It is likely to be greater than what we saw in <unk>.
Yes, well, let's let's just do the quarter.
The quarter per caps for Q3 would follow that general trend on admission so down one or two points on the admission side.
In park spend will make up some of that.
It will be Q3, I see the per caps as being down just a little bit more.
Q2, again that $1 two point range.
And then a few for a really helpful. Yeah, Q4 really changes the dynamic because the average past pricing in Q4, and 22 came down quite a bit.
And we have a nice inflection point there.
Got it so Q3 per caps.
Somewhat worse in Q2 before we get somewhat better in Q4, right, Yes, Q4 changes the trajectory.
Got it.
Very helpful. Thank you Gerry you bet.
The next question comes from Steve <unk> with Stifel. Please go ahead.
Yeah, Hey, guys. Good morning so.
A follow up on James' question that because we think about.
Obviously weather was extremely impactful through the.
Through the second quarter I don't know if you guys.
You have an estimate of what you think the actual.
The impact was or was it just so extreme that it it's kind of tough and given the mix with passes and whatnot.
Tough to know.
It really kind of gauge what attendance would have looked like we were saying that a different way I mean, if whether you know the days when weather has been normalized.
His attendance essentially.
<unk> met or exceeded your expectations.
Yes, good morning, Steve.
The Ah.
The weather hedge that the weather impact on our on our Q2.
It really feels like somewhere between five and six points of lost attendance.
So.
That's kind of where we we see that playing out in terms of when we have a good day versus.
No.
A bad weather day. The attendance lift is notable it's exactly where we are or even exceeds our expectations.
So we use that certainly in the season pass sales up 50% year to date really give us some some guidance as to the second half attendance flipped on good days, we do well.
So if I'm to make that clear so second quarter attendance was up little over 6% you guys would you guys think it would've been more in that.
You know call it 10% to 11% range.
Does that are you ready.
That's correct exactly.
So that would I mean that that would essentially still I mean, if you kind of normalize that you guys still would be on that piece for that double digit increase in attendance for the full year, yes, yes, absolutely okay.
Just want to make sure that I.
I understood that right. Okay second question.
So it was probably for usefully in but as we think about the.
The increase in expected your expected capital expenditures moving forward. It's just I'm just trying to understand why those might be.
So elevated moving forward I mean is this.
You talked about the right. So is this more REIT related things or Selim as you dug into the parks are there theyre just more overall improvements that need to be made at this point versus what you were previously expecting.
Order for you to move to really get the pricing, where you want it to be overtime.
That's a great Steve that's a great question first of all.
Our DNA.
At the end is it's a thrill rides.
And we have to go back and reinvest in right. So in the last most probably first two years of my tenure, which is last year and this year, we've been very focused on premium amortization and beautification and I would say one of the reason that I'm gonna diverse digress, a little bit one of the reason that July was.
Good for us despite the weather is the investment we've made in.
And most probably putting more shades shaded structures, putting on more cooling systems.
Miss things Misters and splashed zones.
And doing those air conditioned areas like VIP lounges and others.
So.
Those were the most probably where we are today going into 'twenty, four and 'twenty five we're going back to putting new rights and so a lot of our capex will be on exciting rights that gives us we need to go back and we're retaining a bunch of fried set have high maintenance.
And then we're replacing them was very exciting thrilling rights are state of the art new right. So we're putting a lot of money into this.
I can tell you the other thing we need to discuss is out right downtime.
And part of addressing the right downtown is going back and looking at.
Resolving issues and maintenance and upgrading.
Maybe trains in making sure that our parts are fully stocked to make sure that we are always predicting and making sure that we're protecting our maintenance and making sure all right. So it's a combination of maintenance, but it's not the biggest part the biggest part is.
Thrilled right, we're having a lot of certain rights expenditures.
Okay got you. Thanks, so much for the color appreciate it.
Okay.
The next question comes from Thomas <unk> with Morgan Stanley . Please go ahead.
Thanks, so much so the acceleration of a season pass product adoption from up 2% at the end of June 50 in July that seem to get you pretty close I mean overall season pass base.
Not so far off from where 2019 levels, where it sounds like the price changes you've made incrementally is the right place to be is that the right way to think about it in on an admissions pricing on an apples to apples basis. Do you think you can kind of grow this from here.
Yes, good morning, Thomas Good question.
Our season pass lift in the first quarter.
Year to date, so we are using year to date so from January two.
The March is.
April Thank you Evan.
Was up about 100% in a year to date, it's up 50.
Think thats the right the right metric.
And hopefully I've answered your question in that regard.
Looking at the pricing, we definitely have optimized our season pass pricing and look at that going forward six plus has been a really strong successes Selim indicated.
And going forward from fourth quarter on we have the opportunity to gently lift season pass pricing over prior year.
Okay. That's super helpful. Just further clarify that that 2% youre, referring to is actually the active pass base.
Which is up year over year, 2% as of June and Gary was talking about the sale of the season pass units.
Understood. Okay, that's super helpful.
And then just another one on the cost control side.
Or are you finding the most efficiencies I think you mentioned that inflation still working against you and Theres plan to lean a little bit more into media spending.
Just given some of the attractions coming online.
Is there still room for more head count reduction just as the attendance base optimizes.
We're having success in procurement.
Procurement, we're doing a nice job there of working with our suppliers.
We have reduced our full time head count, but we don't have a significant.
I think the initiatives in that regard going forward.
But our parks are continued to improve their operational efficiencies and that's where we're seeing our biggest lift.
The cost reduction side.
I would like to add also.
Our procurement has been very very good we have done a great job and.
Our supply chain. When this is continues to be <unk>.
Something you want to push.
I also believe that we have continued to lower some of the head count through automation and rationalizing our F&B locations.
Yes. Thank you so much.
<unk>.
Got it thank you.
Okay.
The next question comes from Ian Zaffino with Oppenheimer.
Please go ahead.
Okay, great. Thank you very much.
As far as the weather comments you made.
Seen any or have you taken any actions regarding the weather, whether it's on pricing more marketing et cetera.
Whats kind of your philosophy on.
Pricing and kind of poor weather periods, and then I don't know if you commented at all on July <unk>, and how that was impacting the parks. Thanks.
Yeah, you bet and good morning.
So.
The challenges we have there.
Yes.
I'm sorry, what was your question again forgive me.
So it was basically what's your philosophy as far as.
Pricing actions marketing actions in poor weather periods, yes. Thank you.
And then I'll say July and August .
Right.
Well one of the things we have had success with and it's still early in the stages as dynamic pricing.
And we had started with three parks and we've expanded it to six.
So that it actually dynamic pricing in its own way acts as a weather hedge.
Which is pretty nice and in the next.
Fairly significant step we need to do.
Increase the active pass base right. So larger active pass base also has a nice weather hedge so we are.
Expanding more on media.
And in the third and fourth quarters.
And we're going after.
A good sale at the end of August and into Labor day weekend.
Fundamentally as the weather is continues to be hotter every year. It seems at least it feels that way to me we are going to be looking at more indoor venues more air condition venues more conditioned restaurants et cetera, so that our guests and Selim you talked about shade and you talked about the benches in the three <unk>.
Lounge lounges, and the gaming is actually a pretty nice initiative in that regard too because.
It provides a very nice cool environment and a whole another product and marketing initiatives that we have so we're looking at more indoor venues and continued effort on shade missed in <unk>.
Equipment et cetera.
I would also bring up something I think that.
Most probably something different than most of our other peers as all memberships I think.
Our membership.
Aloha allow us to account for weather effects, because when you look at membership, which happens when you have been able to still be able to sell membership.
Whether the weather is whatever the weather is happening and this has been validated and June July since the launch of <unk> plus <unk>.
Six flags plus membership so we see that somewhat of a hedge in terms of continuing selling.
Passes and offsetting some of single day ticket.
Impact during those days.
Okay.
Okay. Thank you and then.
Can you also maybe comment on how the park.
Ex U S park's good and any potential for additional parks outside of the U S. Thanks.
Ian can you clarify what you mean U S park's did.
The non U S. Parts, you had Mexico do I guess in particular, just given that there's probably less weather issues there.
And then the second piece would be.
Any discussions or are you doing anything as far as developing or thinking about any new parks internationally.
I'll answer the first part of the question I'll, let phillipe talk about if we have any additional.
<unk> internationally.
We don't allocate out our international parks in any specific way in but.
Mexico is still doing very very well.
So the next question for Ian was do we have any additional international opportunities. Yes, we are working on our project.
Sure.
Saudi Arabia, which is due to open in the fall.
Of 2024.
And it's still being built and at this moment, we are acting as a license sort of six flags to some.
And at this moment I'm waiting for the approach to be to be.
Working open so we are the last stage of it with our team working along with the <unk> team in Saudi Arabia, and we're very excited about that project so more to come most probably in 2024.
Alright, Thank you very much.
The next question comes from David Katz with Jefferies. Please go ahead.
Hi, good morning, everyone and thanks for taking my question.
I'd Love just a little further perspective and view of the increased spending for next year and the year after.
It is it is it possible or fair for us to think about.
EBITDA lifting along the way I'm, just trying to envision the capital set up.
As we move into that that spending periods. The next couple of years.
I can answer.
Think David.
We've done a lot of work on the cost discipline.
And allowed US also to invest in the guest experience, while still eliminating inefficiencies that are costly to the business.
We are also looking at.
Data and predictive analytics to reduce labor costs and implement process improvement.
Without negatively impacting the guest experience.
I think we are investing also in technology and automation to reduce operating expenses.
So capex on infrastructure and replacing inefficient rights would also reduce expenses those rides hub high maintenance.
So my feeling is operating leverage efficiency as attendance growth target levels.
Allow us to increase margins over time, so I.
I believe we can grow margins into the mid 40% long term.
And that's our objective modified modified.
<unk> EBITDA.
EBITDA in the mid 40% in the long term.
Understood, but but.
In part I suppose of that Formula.
Is there a potential for revenue lift along the way as well to and driving that EBITDA or does that capex necessarily need to be.
Need to be in place before the revenue lift can occur also.
David.
Fair number of our installations this year in 'twenty three.
Have been delayed in their installation construction progress.
And so those are going to hit in the second half of this year and into 24, we'll have the full impact.
So between that and what we're doing for 'twenty four and we're going to we have a better execution plan on installing the 'twenty four Reits and we have a little more time to plan and get it done.
So the two are going to actually work simultaneously together.
To provide a really nice package improvement for our guests and I do believe we can increase revenue.
I will now I would like to to most probably.
More flavor on that yeah, I think on one hand, I think we've seen that our pricing.
Structures.
That we've started in the fall has started to pay off with the season pass.
Increases we've had so let's put based.
Basically admission on one side, let's talk about the in park.
I believe that our biggest opportunity to monetize it in part goes into areas F&B.
Which remains in my opinion.
At this moment Ian.
Oh, maybe 20% of our penetration.
I would like to see sort of how revenues and I think we have a lot of thing going to number one is mobile food ordering.
Like would it be self service kiosk.
Making sure that our seasonal events.
Basically up a pickup this year when they have done well events done well.
Cup.
Then on the retail side I think the retail is our biggest second biggest opportunity.
We need to we are putting a complete retail strategy to improve our sales in that area.
And finally, our served one group sales.
I would say when it comes to group sales.
I think we have a huge opportunities.
Two two.
To continue to grow that opportunity will continue to be below pre pandemic levels.
And we are in line with what we saw last year, but we have not gotten to pre pandemic levels. So we're putting a strategy to grow our group business and we feel better by engaging local businesses to come and experience our parks.
So three initiatives that I see.
Driving a big part of our EBIT.
EBITDA margins.
F&B.
Retail and group sales.
Got it thank you very much.
Thank you David.
The next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.
Hi, Thank you for taking my question I, just wanted to ask a bigger picture you've been working through with the premium amortization strategy goal is to get to that 25 to 27 million level of attendance over time clearly it's been tough with the weather has been some commentary about week or perhaps not just from you, but you know what the other regionals, even Disney last night, Yeah. We're in it.
Well today has anything changed about your kind of pricing patterns as attendance formula going forward.
What do you think those are still the kind of right puts and takes in levels going forward.
Hi, Good morning, Lucy. Thank you quick question.
I think we.
We have.
A powerful opportunity to show.
The viability and future opportunity of the strategy that we're executing upon.
And.
When you look at pulling out the X the international licensing.
That we've exceeded 2019 EBITDA.
In the first half by 16%.
Really gives us a base from which to launch.
The launch from and as the season pass pricing in 'twenty two comes down in the last four months of the year, we crossover and we start having increased.
Average season pass pricing on a monthly basis.
Going forward.
Combined our capital.
Into that.
Marketable capital that but we're going to have some exciting announcements in the next couple of weeks.
And you have the cost structure reset.
You put those all together and we really think we have an ability to capture future attendance.
The enhanced value will be perceived by our guests.
In park spending and.
And we eventually can get there so when it happens.
As a basis of execution and time, but we firmly believe we are on the right path.
Thank you.
The next question comes from Robert Aurand, with Keybanc capital markets.
Please go ahead.
Hi, Thank you I guess following up on that last question on the longer term outlook you in the past you've talked about that as kind of a three year turnaround.
You're standing kind of speed bumps. This year is that three year target still intact or do you see it getting pushed out at all.
Okay.
I would still say that the three year target is I talked about our extended it if you remember last year to end of 2025. So if you remember.
You've said that the target.
Is most property will try to achieve.
Our target of being close to $700 million and EBITDA by end of 2025.
And we're still looking at that.
A target for us yes.
Alright. Thank you and then maybe a higher level question around the new membership program I know you had said last call.
As the number one question you were getting from people was to bring back the membership.
Now you've brought it back that's kind of a one size fits all option, where before you had so many different memberships. So understand the simplification on year end, but how does that kind of sit with the consumer now just kind of having the one option to choose from.
Well I can answer that.
Guests have responded very positively to the release of our new <unk> plus so we started it in early June we are seeing a similar mix in sales of $6 plus product versus traditional seasonal pattern as we had in prior years, our boarder surge.
A similar towards the legacy membership used to be in the past is third of our sales are coming from membership right now and we just started selling them in June so it will take time to rebuild that base.
Now, we should not forget that free grandfather, the membership program the old legacy.
So I think I will be able to give you a lot more color on $6 plus is most probably in the first quarter of 2024.
When youre, saying good good good results so far in the first 40 days 45 days.
Thank you very much for taking my questions. Thank you.
Yeah.
The next question comes from Carson Crockett with Rosenblatt.
Please go ahead.
Hi, Bart.
In Crockett and thanks for taking the question.
And I just wanted to drill down a little bit more on July and I think the question was put out there, but I'm not sure I heard it answered which is what's the weather in July when you guys had this nice kind of acceleration.
Was weather better was that part of what helped.
How would you describe the weather backdrop in July .
From my perspective.
Barton It was it was better.
But.
Not great.
And I think there's more upside to that 11% with normalized weather.
Okay.
And then.
Also leaning into that the Capex plans.
I think you guys. Just recently like your March earnings call for the fourth quarter, we're talking to a range of like 150 to 200 and now.
You're up to like $2 50 at the high end for Capex in 'twenty four 'twenty five.
Can you walk us through kind of the process that got you to.
Decide that you need to spend more in that period.
With the decisions that you need to just.
And also it seems like the tone of what you're talking about with Capex I mean, when you started you were talking about.
Less emphasis on the rides and more on kind of just a comfortable kind of.
Amenities in the batches.
And now it's more kind of on the thrill rides.
Just walk us through kind of the process that.
Whats changed in these intervening months to get you from where you were to where you are.
Yes. Thank you Barton good good question.
The the lift in 24 was somewhat related to we have a 50th anniversary coming up at our park in New Jersey.
We had an opportunity to add a nice ride.
Kind of late in the game and that's that's a little bit rare because it takes generally a while to design and build a culture. So we had a fortunate opportunity and we decided to take it. So that's that's the lift.
Versus what we had expected to spend.
In the short run in the long run we're looking at.
All aspects of the Capex and so we've laid that out fairly well.
A couple of questions ago.
We want the focus is eliminated ride downtime and sometimes that's maintenance and new trains.
And new parts, and all that sort of thing and sometimes it's replacing an agent right. So when we looked at that very closely.
We're also really trying to enhance the customer experience.
Through the Capex investment and we feel that it will really bring.
Additional attendance and revenue and excitement.
Ultimately bottom line profits to our investors and shareholders.
So it sounds like you're just leaned into it more than you decided that this was the number that made more sense.
Yes.
And in looking at the right package, which we will announce overtime.
As Cindy mentioned there is some of the yards are state of the art and state of the art is generally expensive. So as we look into it and we say, yes, that's a great ride yes. It fits in that park, yes, it's the right metric, yes, it's the right dynamic.
Wow, Okay, that's what it cost alright, and we.
We all agreed that was the right thing to do.
Okay. Thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Lynn.
For any closing remarks.
Thank you very much once I want to thank everybody for all your questions and your interest in six flags.
I would like to recap my talking points, we see with a concluding statement.
Six flags has a strong position was at very attractive industry.
We've talked about our four strategic pillars.
Our park experience.
Of culture.
Pricing and product.
Our seasonal events.
So when you look at all what has been accomplished in the last.
20 months.
I took over as CEO , we have basically implemented a lot of new items from doing our events, better and stronger and new and immersive like Scream Scream Scream break like flavors of the world like summer nights spectacular, including fireworks and Ron.
Shows parades.
<unk> first and now we're enhancing what we started last year, New Oktoberfest Bucharest, and then we're expanding on the best Halloween event in the World fly fast and and then HIV holiday in the park.
Through our pocket speeding says and the improvement in our premium position was team improvement in pass sales, 50% year to date through July attendance, 6% in Q2.
Our F&B is up despite pud weathers, we lost into almost 400000.
Standards.
And our pricing and product we launched again.
As we listen to our guests asking us to bring back a monthly a lower monthly payment with no down payment and we launched a $6 plus which so far in the first 45 days have been very well received.
Our culture has changed.
Innovation now is our core.
We have a lot to do.
Transformation, which has become seamless drop people and we could not have done that result.
The hard work of our team member.
Parks have become friendlier cleaner.
And a lot more smiles are seasonal worker frontline employees at our parks have embraced our vision and embraced the fact that you want to be easier to do business with I applaud each one of them.
We are seeing promising trends despite weather challenges against strong pass sales, 50% over the years through July attendance trends unimproved approving Q2, 6% July 11%, improving F&B improving sponsorship sales are.
Our digital transformation driving our guest experience and lowering our costs our ability to now capture memories through videos and photos using artificial intelligence and be able to capture people underwrites the advising our clusters self serving kiosk speedy parking.
<unk> Waterpark Wristbands, a new mobile App and a new website all of those have happened at a fast speed of execution kudos to all our teams.
We've gone to multi generational appeal.
We want to be able to appeal to kids activities.
It gets right in place structure comfort and shaded area in VIP lounges for parents and grandparents thrill rides and new haunted houses for our thrill seekers and teens.
And then we want to capture all of this on video and pictures and they can stream them all day long emotion.
Emotion.
I believe that remembered experience, bringing repeated visit.
We own we want to engage all of our senses.
Our guests now wants to go and experience our dyno adventure a screen pump as we expand them throughout all our parks, we have exciting new revenue initiatives dynamic pricing, increasing mobile food ordering seasonal events and E gaming.
On our cost control, we continue to be driven by cost discipline.
Automation.
Reduced downtime procurement committed to deliberate deleveraging our debt we look at the target of two five to three time long term net leverage target, we've paid $94 million down in Q2 with an additional $50 million paid down through today.
Almost $150 million paid since the beginning of Q2.
Our second half expectations low to mid percentage per cap decline.
If past headwinds more media to launch our full promotion remember last year, we did not have a good full fare.
So now we're trying to put media behind it and go back to a two having a good full self promotion, our capex of $170 million to $180 million.
No we do not give EBITDA guidance, but do we expect debate, we do not expect to make up weather related losses, our ultimate strategy is focused on delighting our guests.
I've spent enough time analyzing our offerings and operations traveling around our parks to observe guest behaviors and talking to our friends, our France to uncover hidden opportunities you.
You did hear today on how we are innovating across every part of our business from culture Digital training revenue management guest facing technologies immersive experiences rights beautification foodservice retail and much more.
Success requires not just leveraging your strengths, but also taking risks.
Overcoming challenges and learning from failure evolving your vision and sometimes reinventing yourself.
Does that is true for both our organization and our leadership we are excited about our momentum.
On behalf of the six flags team. We appreciate your continued support and the support of our shareholders and investors our guests and fans our suppliers.
Our bankers.
And most important to support of our team and our employees who resolve them.
Nothing could have happened.
We have many exciting events lined up for the second half of the season, including <unk>.
It's Bucharest, Oktoberfest and holiday in the park, we still have 40%.
<unk> of our revenues coming still.
So far.
And we hope to see you at all both event.
This year have a great day, and we look forward to speaking with you next quarter.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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