Sunday, May 29, 2022

Heard On... Six Flags Entertainment's Q1 2022 Earnings Call

© Six Flags
Six Flags Entertainment Company also had some generally good news to share when they recently announced their Q1 2022 earnings.  The company is moving ahead with their new CEO at the helm, and the bulk of their priorities have shifted to a focus on guest comfort visit experience.  To that end, let's take a look at some notes from the call.

•  In the first quarter, revenues were $138 million, up from $82 million in 2021.  That translated to a EBITDA loss of $16 million, improved from a loss of $46 million in 2021.  Attendance was 1.7 million guests, up from 1.3 million guests in 2021.  Total guest spending per capita was $75.46, an impressive increase from $56.16 in 2021.


•  Comparing 2022 to 2019 we see that revenue increased by $10 million, based off a $15 admission per capital increase and a $12 in park per capital increase.  2022 saw a 22% reduction in attendance when compared to 2019, and EBITDA in 2022 improved by $16 million over 2019.

•  Active pass base at the end of the quarter was 3.6 million, down 12% from last year.  They've stopped selling memberships, so that is to be expected.  The 3.6 million is split evenly between 1.8 million members and 1.8 million season pass holders.  The company expects their active pass base to decrease over time as they raise prices and legacy memberships end.


© Six Flags
•  However, the Six Flags leaders do recognize that someone people like to pay on a monthly basis for budget reasons, so they'll probably bring back a payment plan option for season passes this summer.  But it won't be a membership... it sounds more like how Cedar Fair lets you pay over a certain number of months.


•  The new CEO seems to really hate the all season dining plans that he eliminated.  He went on for a good while about how people would pay $80 for an all season plan and it was very unprofitable for the company, and made food lines super long and terrible.  And alienated day visitors who just wanted to get their family dinner.  By increasing admission prices, eliminating season dining and getting rid of free tickets they are pleased with the guest quality, noting that security incidents this year are down 80% compared to last year.

•  Interestingly, Six Flags has almost 3 million non-paid visits last year, a result of various program benefits.  They've eliminated that for this year, and are trending about 20% less attendance year to date than 2019.  However, guest scores and spending are up.  They believe that running at 30 million visitors a year is far too many guests for the parks to hold, and having all season dining attracts a certain kind of visitors that clogs the parks up.  They think that an overall decrease needed in attendance is probably between 10% and 15%.

© Six Flags
•  Progress is being made on six initiatives listed three months ago; priorities set out by the new CEO.  Ride throughput has been helped by adding single rider lines at many parks on busy days.  Second, staffing levels have been improved and more training is creating friendlier employees.  Third is the appearance of the parks, which is being worked on through brand new entrances at a couple parks, improved landscaping, renovated restrooms and improved dining facilities.  Fourth is offering better food, which a new executive chef has debuted items like rotisserie chicken, salads, and better versions of park staples like hamburgers and pizza.  They also debuted their own brand of coffee shop - Roller Coasters Coffee.  Fifth is guest amenities, and more benches, sun covers, more dining areas, seat cushions and improved wifi.  Sixth is upgrading park apps for guests to use, allowing them to reserve a parking spot, plan which lines to pay to skip, order food on their mobile, and in the park actually posting digital sign with ride wait times listed.

•  The park has been able to bring up the daily ticket price, part of their strategy of not giving away the gate, and that resulted in an $5 or so average increase per visitor in admission revenue.  They note that their competitors, Cedar Fair and SeaWorld, have 25-30% higher ticket prices across all types.  But, they expect to close that gap this summer or by the start of 2023.

•  2022 full year capital expenditures should be a bit higher when compared to 2021, as they have a balanced approach of "several exciting roller coasters and a focus on guest facing technology and amenities" that they are spending on.  I could not find any updates on what they plan to spend next year and moving forward.

•  The company has opted to no longer just try to grow attendance, now they're focusing on their premiumization strategy and improving guest experience to build a base to grow from.  That means reducing attendance for more comfortable visits that in turn create higher guest pending on premium products - everything from reserving lounge chairs to being able to sit and buy fancy coffee drinks and pastries.  The new CEO does a lot of defending of how that is a good plan, which makes sense, since it is his plan.  There was even a lot of justifying how parks will be busy since people want to get out of the house post-pandemic... things we already well know.  But he says that his plan is working, referencing how they plussed up the France area of Six Flags Over Texas and added a shop to buy coffee and pastries and the guests are loving it and spending money.