Heard On... Six Flags Entertainment's 2019 Full Year Earnings Call

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This past week also saw the announcement of Six Flags Entertainment's full year 2019 results... and they weren't nearly as rosy as Cedar Fair's news.  The chain's stock took another plummet downward after the news was announced, for various reasons.  The company had their earnings call just the same, here are some notes from that along with their results.

• Overall, revenues were up 2% or $24 million to just under $1.5 billion.  They had a 2% or 788k increase in attendance to 32.8 million, a "slight decline" in per capita spending, and a 3% decline in sponsorship, international agreement and accommodations revenues.  These figures include 2019 full year totals from 5 new parks purchased in June of 2018 and one new water park purchased in April of 2019.

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 • Taking out those six new parks the legacy parks, revenues only grew $1 million, costs grew $15 million and EBITDA was down $15 million.  The six "new" parks contributed 90% of the attendance growth in the year, while the legacy parks only saw a small, 65,000 visitors increase.

• The bottom line suffered from these figures and certain other adjustments, however.  Net income was down $97 million to $179 million and EBITDA was down 5% or $27 million to $527 million.  Other factors challenging the bottom line included a $10 million charge due to the China parks agreement, higher costs from the new parks and higher stock-based compensation.

•  Six Flags has formally terminated their agreement with Riverside, and believe it is "unlikely" that they will recognize any revenue in 2020 related to park development in China.

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• Six Flags has seen challenges from their legacy, or existing, parks in the U.S. during 2019.  Attendance, per capita spending and revenues were flat this year, but operating costs were up 2% reducing EBITDA by 3% from those parks.

• The company now says they see 2020 EBITDA coming in at $435 - $465 million, which is way down from 2019's total of $527 million.  To fight this they have decided to "make incremental investments in the base business to enhance the guest experience," though they're not saying what that is at this point.

• More on their 2020 outlook.  They estimated EBITDA based off of $30 million less in international development (loss of China parks), $20 million less due to wage increases, another $20 million for OpEx spending for park maintenance projects and operational improvements along with marketing spend for single day visitors, and finally restoring a $20 million bonus program for employee recruitment and retention.

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• Due to the depressed earnings, the company has slashed their stock dividend by 70% for the first quarter of 2020, down to $0.25 a share from $0.83 a share in the 4th quarter of 2019.

• In quite a reversal from prior management, the park's new CEO, Mike Spanos, says they saw a big decline in single-day tickets, and need to work to get those back.  Prior leadership was all about getting everyone to be a pass member, seemingly ignoring the single day visitors.

• The company was trying to fight operational cost increases by saving money elsewhere in the parks, and that has shown up in the form of lower guest satisfaction scores.  That's a scary thing for them I would imagine, as that could be the start of unhappy visitors that will turn on the parks.

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• At the end of 2019 the total number of active pass members actually decreased by 3%.  The number of active pass members increased by 18% to 2.6 million, but that was fully offset by soft regular season pass sales during the holiday season.  Overall, the active pass base contributed 63% of attendance last year.

• Six Flags spent a total of $140 million in capital expenditures in 2019.  That feels quite low for the 26 parks they have, in fact that averages to $5.4 million per park.  Considering one large coaster probably costs 3 times that, or more, that doesn't leave much for the small guys.

• The chain's new CEO is embarking on a new comprehensive plan that will play out over the next 3 to 5 years.  They intend to address revenue growth, margin improvement and capital deployment and have hired the Boston Consulting Group to give an external perspective to their plan.  The full plan will be revealed at the May 28th Investor Day for Six Flags.  The Investor Day sounds like a very big deal, specifically regarding capital expenditures going forward, so be sure to watch out for that.

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• Understanding that former management's goal of 750 million in EBITDA "Project 750" is "not realistically attainable" a new, shorter reward system for employees will be uses.  Focused on awarding restricted stock units, the hope is to closely align employee reward with stock growth.  To help out, the new CEO will not participate in the award plan in 2020.