Digesting the Cedar Fair and Six Flags Merger

© Six Flags

I had to really let this one sink in for a while before covering it here - but as I'm sure you've all heard by now Cedar Fair and Six Flags have reached an agreement to merge into one company.  The new company will trade on the stock market under the ticker FUN but will be called Six Flags Entertainment Corporation.  Essentially that means that the company we all love named Cedar Fair will cease to exist when the deal closes in the first half of 2024.

Technically neither company is buying the other in the merger, and shareholders of each company will receive shares of the new Six Flags according to set multipliers announced already.  The new company will have an enterprise value of around $8 billion and they will own and operate "27 amusement parks, 15 water parks and 9 resort properties across 17 states in the U.S., Canada, and Mexico."  A big plus for the merger is that the company will be less exposed to bad weather in one specific part of the country as they'll have parks much more spread out.

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The new Six Flags also expects to quickly achieve around $200 million in "annual synergies" - meaning cost savings to the bottom line.  From purchasing power to being able to remove duplicate jobs, the new company can push more toward profits by leveraging their larger enterprise.  They think they can turn that into as much as $80 million in EBITDA within three years.

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The new company will have a 12 person board with six members coming from each company.  The current Cedar Fair CEO, Richard Zimmerman, will service as the new Six Flags' CEO.  Six Flags current CEO, Selim Bassout will become the Executive Chairman of the Board of Directors.  Cedar Fair's CFO will keep the position in the new Six Flags and current Six Flags' CFO will become the Chief Integration Officer.  The new company's headquarters will stay in North Carolina where Cedar Fair's currently is.

Based of where both companies are currently, the new Six Flags will have around $3.4 billion in revenue, $1.2 billion in EBIDTA and entertain around 48 million people per year.  In the end Cedar Fair unit (stock) holders will own 51% of the new company and Six Flags stock holders 49%.

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On a call regarding the merger leaders of both companies were quick to point out that the plan will allow for a larger amount of free cash flow that they can use to pay down debt.  They also say that the larger cash flow will be used for investing in the parks.  Exactly how that will work, at least to me, will depend on their performance as paying down debt to support the new company's stock price will typically come first.  Since the new company will still be publicly traded the burden of making decisions to support the stockholders will always be #1 - not what the coolest coaster is to build.

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To me the leadership set up is telling (along with other facts sprinkled so far in this story).  I know this is a merger of the companies but to me personally it feels like Cedar Fair is adding Six Flags to their company.  From the CEO placement to headquarter location, Cedar Fair seems to be running things here.  And from a purely personal opinion that makes sense as Six Flags' leadership feels underwhelming when compared to Cedar Fair's.  There are definitely pluses from both companies to explore but Cedar Fair even notes that they think they can vastly improve Six Flags' parks in-park spending, mostly through food and beverage.

However no one can ignore that Six Flags is a clear national brand, perhaps a bit global even, and Cedar Fair is not at all, their parks names' are their real brand.  This will also gives all Cedar Fair parks access to Looney Tunes and D.C. Comics, which when done right could be cool, but if smothered into the parks like Six Flags does it could be pretty not cool.  Cedar Fair in the past few years entered a new 'make it themed' era and I pray it doesn't stop with this merger.

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When the deal was announced there was a lot of fear about park areas between the two companies that overlap, and rightfully so.  Northern and Southern California, Virginia, Pennsylvania and New Jersey for example.  Six Flags and Cedar Fair leaders were asked about this and they do not seem to view these as redundancies, instead they see an opportunity to grow season passes that would allow visitors to go to both parks with one pass - creating an even bigger base of visits, and in turn money.

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But, when pushed again about the value of divesting "lower return lower quality" parks Cedar Fair's CEO said "As we look at the portfolio, I said this before, there were these are really irreplaceable assets. We’ve always struggled with, how do you grow if you shrink your portfolio. But I do think as we look at the combined portfolio, we’re going to evaluate a whole range of ways to unlock and maximize the
values. I’m most excited about focusing on all 42 to see how we optimize and, and create the ability to generate as much revenue uplift and cash flow generation as possible.
 

But over time, as stewards of capital in the market, I think our Board will have the opportunity to evaluate what really drives and maximize shareholder returns once we get to that targeted leverage ratio, and we’re looking forward."

So, the new company will most certainly not be afraid of selling (or I shudder to think of other options) parks that are not meeting their standards or present other opportunities that are too good to pass up.  Recall that Cedar Fair sold the land under California's Great America well before this merger, knowing full well it meant the eventual end of the park.  The comment does acknowledge that these are "irreplaceable assets" but at the same time makes it clear that their job is to "maximize shareholder returns."  So while they do not appear to have an immediate plan to divest any parks, it is by no means off the table.

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In order for the deal to happen there are several items that have to take place.  Largest is an affirming majority vote from the Six Flags Entertainment stockholders.  The new company also needs antitrust approval, though that doesn't seem a real issue at all in their minds.  Also, the deal can be killed for a number of reasons including if Six Flags board of directors changes its recommendation that stockholders approve the deal or doesn't make the recommendation at all, then a "Cedar Fair Triggering Event" takes place and then Six Flags owes Cedar Fair a cool $63.2 million.  The deal itself is about 140 pages long, and I personally can't get through it, but you can at this link if you like.

The fact that if the deal falls through Six Flags owes Cedar Fair that much money is also telling to me about who holds the power in the deal.  That gives me some comfort, but as we've seen in countless other large mergers in other industries, there's always some good and often plenty of bad.  Buckle up for this one, indeed.

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

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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.

 

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•  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%.

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•  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. 

Heard On... Six Flags Entertainment's Q4 2021 Conference Call

© Six Flags

Better late than never, I wanted to take a look at what came from Six Flags Entertainment's Q4 2021 earnings conference call, which took place after the quarter and full year results were announced.  This was the first call for the latest CEO, Selim Bassoul, which is important as they took some time to explain how they see the company moving forward.  So while this took place a few weeks ago, it's definitely still worth visiting.  Here we go!

• In Q4 2021 Six Flags had revenues of $317 million, up from $261 million in 2019.  Attendance was 5.8 million, down slightly from 2019 mostly due to a reporting calendar change.  EBITDA was $95 million, up from $72 million in 2019, and net income was a loss of $2 million compared to a loss of $11 million in 2019.  Total guest spending was up to $53 a person compared to $40 in 2019.

 

• In Q4 2021 the company says attendance was at 98% of 2019 levels on an exactly day to day comparison, and when taking out group business it was at 100%.  They also had $9 million of employee termination costs in the quarter, matching up to some large layoffs we read about months ago.  Active pass base represented 66% of attendance vs. 71% in 2019 as the company focuses on single day visitors again.

• For all of 2021 total revenues were $1.4 billion, up just $9 million from 2019.  EBITDA was $498 million, down from $527 million in 2019, and net income was $130 million, down from $179 million in 2019.  Attendance for the year was 27.7 million, down from 32.8 million in 2019.  Guest spending for the whole year was $52 per person, up from $42 per person in 2019.

 

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• At the end of the year the company's active pass base was 8.3 million - 2.1 million members and 6.2 million season pass holders.  In 2019 at year end there were 2.6 million members and 5.1 million season pass holders.  You can count on those trending toward season passes in the future as memberships have been stopped being sold.

• Lots about the new CEO Selim Bassoul, who noted he has 7 children and has spent a lot of time at theme parks in the past.  He wants to create a "customer-obsessed culture" with leaders who are empowered to think like company owners.  He also believes in a decentralized business, where corporate office exists to serve the parks, and parks exist to serve visitors.

• Even more, Mr. Bassoul wants to execute their plans faster, creating a performance oriented culture and ridding "corporate bureaucracy" and not relying on their brand alone.   They want to be the "most innovative and customer-obsessed theme park company in the world."  They have reduced layers of management from 7 to 3, downsized corporate headquarters and given more autonomy to the parks.  The main focus for guest experience is "premiumization" of the experience.

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• In 2021 Six Flags spent $122 million on capital expenditures.  They expect the amount for 2022 to be "slightly" higher than 2021.

• The plan for the future is based on three areas of focus - improving the guest experience, pricing and capital allocation.

• To improve the guest experience they have six initiatives: 

1 - ride efficiency will be improved by reducing wait times, ride downtimes and opening rides with the park each day.  Single rider lines will also be added and they will experiment with virtual queuing. 

2 - create fun through employee friendliness, treating visitors like family.

3 - park cleanliness including better curb appeal, better landscaping and better restrooms.  

4 - better quality food.  They hired a new executive chef and the CEO has tasted hundreds of burgers, pizza and chicken tenders.  They will also add healthy options and more beverages like coffee and alcohol.  F&B was 21% of their revenue last year and they want it higher.

5 - adding more guest amenities like more benches, more shaded areas and parent lounges.

6 - improve guest facing technology, mainly the Six Flags app.

It seems like these items are basic no-brainers that have been touted by previous management time and time again, so let's hope they stick with the plan this time and make improvements as listed above.

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• To improve the company's pricing they will rely on the fact that they have done surveys that show guests will pay more for a better experience.  The CEO said the company has long ignored that and packed the parks full of guests with cheap tickets and passes.  They will focus on attracting guests who will pay more for a less crowded park that is easier to navigate with shorter lines and less pressure on park operations.  They've also removed memberships and changed the season pass system to three levels that have higher price points and more opportunities for upselling.

• Changing capital allocation is the last area of focus, and they will be focused on reinvesting in the business, but not only on thrill rides.  In the past they spent about 60% of capital funds on rides which added capacity and were marketable but short lived on bringing guests.  Now they have a ton of rides and will still add them, less frequently, but focus more on spending on guest-facing technology, food and beverage and park infrastructure improvements.  The 2nd focus is to use cash for paying down debt.  For spending on the parks they used to look at it as a percent of revenues, and now they think more of a static amount to spend each year, though that amount was not disclosed.  They note that what they will focus on (technology, F&B, infrastructure) costs much less than thrill rides.  So, more bang for their buck.  Finally, they do plan to try to attract families to the parks again, by working on children's areas, kids meals, etc.

• When asked if mergers and acquisitions were part of the new plan the CEO said that they're only focused on creating a better experience and paying down debt, and that mergers and acquisitions are not a part of the "foreseeable future."  Also, it does not seem that they have any plan to start to pay shareholders a dividend again any time soon.

Six Flags Names Selim Bassoul as Company's New CEO

© Six Flags

Here is a piece of news that broke just before the IAAPA trade show but is worth still covering, Six Flags Entertainment has named a new CEO - Selim Bassoul.  This means that the former CEO, Michael Spanos, will have served in the top spot for just two years.  No direct reason for the change was given by the company, they simply stated that the replacement was effective immediately as Mr. Spanos has stepped down.

Mr. Bassoul was already serving as the company's Non-Executive Chairman of the Board, so he is by no means unfamiliar with Six Flags and their plans.  Ben Baldanza, an independent director for Six Flags and former CEO of Spirit Airlines, has replace Mr. Bassoul as Non-Executive Chairman of the Board. 

“I am honored to serve as the next CEO of Six Flags, and I am excited to bring the magic back to our parks. We are a company led by a purpose–to make a positive and meaningful impact on everyone Six Flags touches,” said Mr. Bassoul. “I will do my best to enable our people to fulfill their passion to make a difference, and to harness their creativity to build on a shared vision for guest satisfaction and financial growth. I am passionate about empowering employees and serving our customers, and together with our team, I know we can set up Six Flags for a new level of success in the months and years ahead.” 

 

I know that press releases tend to be full of only good news and positivity, but I still find it interesting that Mr. Bassoul noted he wants to bring back the "magic" to the parks.  It was gone, I take it? It is often noted that the Six Flags parks are in need of a sprucing up, including general maintenance, paint and modernization of infrastructures.  There were grabs at this during Mr. Spanos' tenure, and perhaps Mr. Bassoul will amp up the speed of the changes planned.  Time will tell, it usually takes over a year to see the real changes a new CEO brings, so I wouldn't put too much stock in the 2022 season reflecting Mr. Bassoul much. 

Interestingly, part of Mr. Bassoul's employment agreement also states that he will purchase $10 million in Six Flags stock on the open market as soon as he starts.  His bonus is tied to overall financial performance, and on a personal level it sounds like he is willing to put up, well, $10 million of his own money to help motivate him to motivate the company to see great results.

Heard On... Six Flags Entertainment's Q2 2021 Earnings Call

© Six Flags

Rounding out our look at the most recent theme park earnings is Six Flags Entertainment, which also generally had good news to share about their season thus far in 2021.  The company's press release is available at this link, but between that release and their earnings call there are some more items to share.  Let's take a look.

• Like the other operators, comparing this year to 2020 makes no sense, so comparisons to 2019 were offered.  For the quarter attendance was 8.5 million visitors, a decrease of 2 million from 2019.  Revenues were $460 million, a decrease of $17 million to 2019, and net income was $71 million, a decrease of only $9 million from 2019.  EBITDA was $170 million, also only a decrease of $9 million from 2019.

• Looking at the first six months of the year attendance was 9.9 million visitors, a decrease of 2.8 million visitors compared to 2019.  Total revenues were $542 million, down $64 million from 2019, net income was a loss of $25 million, down $36 million to 2019 and EBITDA was $125 million, down $23 million to 2019.

• The company has shifted some of their reporting periods starting in 2021 which did make the quarter have four extra days, including most of the July 4th weekend.  So that definitely padded their results a bit, to the tune of 614k in visitors and $32 million in revenue.

 

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• Right now none of the chain's parks in the U.S. have any capacity limitations.  They do have restrictions at parks in Canada and in Mexico.  They note that they held vaccination sites at several parks and gave away 140,000 tickets as incentive for people in their markets to get vaccinated.

• Through July 25th the attendance levels were at 82% of 2019 levels, with a big part of that being missing group visits.  Excluding group visits they estimate attendance levels to be at 89% of 2019 levels.  While not backed by a statistic, it sounds like trends increased even more in July.

• Six Flags received a payment of $11.3 million in the quarter related to the terminated park contracts in China, which as we know are no longer happening.

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• Total guest per capita spending in the second quarter of 2021 was up 23% compared to 2019.  This was driven by a strong increase in admissions per capita, but in park spending also increased by 22% - a trend we've seen from the other operators as well.  The admissions per capita was boosted by later than normal season pass sales this year, causing revenue to be recognized over a shorter period of time.  In park revenues were helped by mobile dining, going cashless in some areas, creating a QR code based Flash Pass system and more single-day ticket visitors.

• With regard to the active pass base, the total amount increased 65% at the end of the 2nd quarter 2021 when compared to the same quarter in 2020, and increased 2% when compared to 2019.  At the end of the second quarter in 2021 they had 6.3 million in the base, 2.1 million members and 4.2 million traditional season pass holders.

• With regard to liquidity, the company had $253 million in cash on hand as of July 4th, 2021, and $461 million available to borrow.  The net cash flow for the second quarter was $190 million.

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• Six Flags Entertainment is still focused on their "transformation" plan, which will cost $70 million to stimulate long term growth through "modernizing the guest experience through technology, continuously improving operational efficiency and driving financial excellence."  $60 million of that will be spend as cash and $10 million will be asset write offs through retired rides.  To date all the ride write offs have been recorded, which would imply the numerous ride removals might be done... for the moment at least.

• For capital expenditures the company has spent $42 million year to date.  They previously felt they would spend $98 million in 2021 but have now upped that to between $130 and $140 million.  To me that means they have increased the amount of spending to start projects for the 2022 season, but they also will spend on "high-priority and high-return park infrastructure and technology projects".  In the long term they plan to still spend between 9% and 10% of revenue on capital expenditures.  Once things are normalized with their debt levels they will again "consider strategic acquisition opportunities."

Six Flags Announces La Ronde to Open May 22nd

© La Ronde

La Ronde, located in Quebec, Canada, has announced that it has received clearance to open with rides and attractions on May 22nd.  The park is the last of Six Flags' properties to be allowed to reopen as a full theme park, so the operator is understandably excited.  Park officials are also excited to get back to the business of fun, as La Ronde Park President Sophie Emond noted that “This is a great day for our team. We are thrilled to reopen Quebec’s leading destination for thrills and family fun.” 

La Ronde will reopen with a limited daily attendance amount and will utilize reservations to stay within Quebec's reopening guidelines.  The park will also follow other safety measures already in place at operating Six Flags parks.

© La Ronde

Fans of La Ronde will be excited to get back on the park's selection of rides, which includes Goliath, seen above.  It's been a long time since they've been able to thrill passengers!

 

Back before the pandemic La Ronde announced the addition of Vipere, which was Green Lantern: First Flight at Six Flags Magic Mountain.  Like most new for 2020 attractions it was delayed, but I no longer see mention of it on La Ronde's website, so it is unclear if the coaster will be coming in 2022 or if it has been cancelled.

Six Flags Expanding + Extending Holiday In The Park Drive-Thru at Several Parks

© Six Flags

Six Flags Theme Parks have found success with turning their Holiday In The Park events into drive through versions this year, so much that it appears as though the company is doubling down on the change.  We first saw Six Flags Magic Mountain, which is not able to open as a theme park yet, start the drive through experience.  Then Six Flags Great Adventure added a weekday drive through version of Holiday In The Park to their offerings, while still having the usual event on the weekend.  

Before long we saw Six Flags Fiesta Texas also add weekday drive through the park events, and Six Flags Great America, which had opened as a light-display only event (no rides), is now also offering it weekdays through mid-January.

The drive-thru experience at © Six Flags Great Adventure

Six Flags Discovery Kingdom is also offering the Holiday In The Park Drive-Thru Experience, with their event just having opened yesterday.  The drive through version is a great way to keep guests safe and separated during these pandemic times, and it seems that guests are responding to it very well.

For instance, both Six Flags Magic Mountain and Six Flags Great Adventure just announced that they are extending their drive through operations well into January, even till the last day of January for Magic Mountain.  That's quite an extended holiday season!  This will be a nice way for Six Flags parks to keep their guests involved during some of the winter months, and adding value to their season passes.

Heard On... Six Flags Entertainment's Q3 2020 Earnings Call

© Six Flags Entertainment

Today was Six Flags Entertainment's earnings call for the 3rd quarter of 2020.  The company sent out a full press release detailing their results, available here.  No one expected the numbers to be great during these pandemic times, but there are still some very interesting takeaways from both the release and the call that they had today.  Here are some notes.

• In the third quarter attendance was 2.6 million guests, down 11.4 million from the same quarter of 2019.  Total revenue was $116 million, down $495 million from last year.  This resulted in a net loss of $116 million, with an EBITDA loss of $54 million.  The company spent $82 million in cash during the quarter, or around $27 million per month.

 

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• Nine of the company's parks remained closed during the 3rd quarter, out of 26 total.  Attendance at the operating parks started at around 20-25% of prior year totals, increasing to 35% in the 3rd quarter.  They also had a $22 million decline in park licensing agreements, mostly from the cancelled parks in China.  There was also a $9 million write off of park ride assets, more on that in a bit.

• The company's active pass base at the end of the quarter was down 49%, to a total of 1.9 million compared to 2.6 million at the end of the 3rd quarter 2019.  There is another 1.9 million regular season pass holders as well.

• At quarter end Six Flags Entertainment had $673 in liquidity (cash they have or can borrow).  They continue to reduce operating expenses, including deferring or eliminating capital discretionary capital projects for 2020 and 2021.  They still feel that even if all parks close they could sustain the company through the end of 2021.

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• Company leaders have a Transformation Plan underway to change some aspect of the company, utilizing technology to find cost savings and increase revenue.  They've spent just under $30 million year to date on the plan, including consultant fees, costs associated with layoffs and ride retirement write offs.  They expect the Transformation Plan to create $80 to $110 in new EBITDA per year when complete.

• The Plan will modernize park operations and improve the guest experience.  The effort is so large that a new office will house employees dedicated to it starting in Q2 2021.  

 

• For costs, they will optimize the corporate structure, reduce non-labor expenses, and optimize labor costs at the parks.  This includes reducing layers in the corporate structure (see recent layoffs) and creating a shared services area that will do certain jobs for the parks centrally - like finance, human resources and information technology.  They are also eliminating two satellite offices the company had and changing travel and expense policies to reduce costs.  They will also centralize purchasing, so each property isn't buying the same items at different costs; for example they said buying the same lettuce for all parks will save $40k a year.

• More on costs.  They are also looking at ride maintenance budgets and by optimizing ride offerings they can save enough to build one new ride per year (not at each park, just one new ride).  However, this means that they've found 15 rides that are currently being removed from the parks.  To do this they looked at operating costs versus rider throughput... so expensive to operate, low capacity rides are on the way out.  They has let them see what rides are great for each park, what ones need to be refurbished and which ones will be eliminated.  No word on what the 15 rides are... but you can be sure we all want to know.  They also used the term "redeploy" with regard to some rides, saying they can be "redeployed to other parks in lieu of actually spending new marketable capital."  So it sounds like the old Six Flags ride relocation program may be coming back.

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• As for increasing revenues from the Transformation Plan.  This will be done through improved guest experience, improved websites, pricing and promotions, media spending and culinary offerings.  The guest improvements include reservations, prepaid parking, mobile ordering, contactless transactions etc.  They tested a new website in August and saw double digit increases in online sales, and have since rolled out the new website for all parks.  They're using targeted advertising and increasing spending on ads by one additional percent of revenue.  Finally, they are aware that food scores on satisfaction are low, so they are working to offer a better product that will make guests happy and increase revenue.

• Attendance in October has been hitting 50% and higher of prior year attendance, in some places even beating prior year attendance.  During the quarter attendance at the drive through safari in New Jersey was 371,000.

• In order to breakeven and have 0 EBITDA instead of a loss, they estimate they need 45% to 55% of 2019's attendance.  In order to have a breakeven of cash flow, they think they would need 65% to 75% of 2019 attendance.  For cash, those percentages would cover interest payments and partnership park distributions. 

 

• When asked about capital expenditures for 2021 leaders stated they're still doing analysis and due to ever changing market conditions related to the pandemic, it's too early to forecast what they'll spend.  So no real update on if the 2020 rides will open in 2021, or if their will be additional ones too.  They said they will updated again on the next call, which would be in January.

Six Flags Parks to Debut Hallofest This Fall

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Six Flags Entertainment has announced that this fall many of their parks will feature Hallofest, a new version of their popular late-season scare fest that has been adjusted in light of COVID-19.  The new event temporarily replaces Fright Fest, which traditionally takes place at the parks in the fall.

 

The company made it clear not long ago that they intended to have a Halloween celebration this year, however in order to acknowledge that many of the usual scare tactics are off limits right now the event has been rebranded as Hallofest. 

 

© Six Flags Great Adventure

The event is currently planed to open at Frontier City on October 2nd,  Six Flags Over Georgia on September 19th, Six Flags America on October 3rd, Six Flags St. Louis on October 3rd, Six Flags Great Adventure on September 18th, Six Flags Fiesta Texas on September 19th, and Six Flags Over Texas on September 26th.  Hours and dates vary by park, but all are offering family friendly fun during the day, and a spooky park at night.

None of the Hallowfest events will feature any indoor haunted houses, due to safety restrictions.  Instead they will all feature a number of fully outdoor scare zones (also called terror trails at some parks) with actors staying a safe distance from guests.  There will be live entertainment along with plenty of fun things to do during the day, such a trick or treating, hay bale mazes and special food and retail offerings.  Each park's offerings vary slightly and fit with their local markets.

© Six Flags Great Adventure

“Our annual Fright Fest celebration is one of the most anticipated Halloween events of the season. Given the current environment, we are taking special precautions this year and offering our guests a version that is still scary, provides lots of thrilling rides and Halloween fun, and most importantly, is safe for our guests and team members,” said Six Flags President and CEO Mike Spanos. “We will operate HALLOWFEST the same way we have operated our parks all summer, with daily temperature checks and face masks required for guests and team members prior to entry, social distancing, and enhanced sanitization measures.”

Reservations are required for a visit to Hallofest, and are expected to fill quickly.  They will be available for each park soon, keep an eye out on Six Flags' reservation site for more information.

Heard On... Six Flags Entertainment's 2nd Quarter 2020 Earnings Call

Six Flags Entertainment has released their 2nd quarter 2020 earnings, and as everyone expected they weren't good.  Here is the full press release detailing their numbers.  But that doesn't mean that all the news that they shared was bad.  As always, the company had their earnings call and here are some notes worth highlighting.

• Revenue in the quarter was $19 million, with attendance of 433,000 - both a decrease of 96% over 2019.  That led to a net loss in the quarter of $137 million, a decrease of $216 million over 2019.  EBITDA was a loss of $96 million, a decrease of $276 million from 2019. Guest spending was also down 15% over 2019 levels - but half of the attendance in this period came from the drive through safari at Great Adventure, which skewed things quite a bit.

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• Part of many companies survival these days depends on how much cash they have to spend each month.  Six Flags is proud to report that they have reduced their monthly cash spend to $25 million, down from the $30 to $35 million they estimated when the pandemic began.  Six Flags feels they have "adequate liquidity" to survive to the end of 2021 even if they have to close all the parks for some reason.

• Six Flags is currently testing a new virtual queue system that will allow visitors to reserve a spot on a ride from their phone, and not have to stand in a line.  This is a plus not only in terms of social distancing, but also to remove something that visitors always hated even during normal operations.  If the test is a success they will roll it out to all parks.

• When parks started to reopen they saw very strong demand for visits, however in recent days/weeks with COVID-19 cases increasing in many States they are starting to see softer demand.  The company expects to see daily attendance at 25-30% of previous levels for the "foreseeable future."  To further adapt, Six Flags has limited operating days and hours at its parks.

• The only international development that Six Flags still has on the books and earns revenue from is the park in Saudi Arabia. 

• Right now Six Flags has 14 of their 26 parks open.  Those 14 parks accounted for more than 50% of overall attendance in 2019.  In July those parks are seeing around 30% of 2019 daily attendance levels.  Parks in areas where COVID0-19 cases are not increasing are doing better than those where cases are high.  There is no way to know if they will be able to open any additional parks this year that are still closed.

• Some more details on attendance, in areas where the virus is not surging like New Jersey, they're seeing some days where they 45%+ of 2019 attendance levels.  They specifically mention Great Adventure and St. Louis.

© Six Flags

• The Active Pass hoder base was down 38% at the end of the quarter to 2.1 million people, they had 2.6 million at the end of calendar 2019.

• They have further reduced capital expenditure amounts for 2020 - they have pushed off or eliminated $50-$60 million of additions for this year so far.  They now expect to have 2020 capital expenditures come in between $80 and $90 million, $10 million lower than they first said.  Going forward they will be conservative with capital expenditures, adding only attractions with a "good return on investment."

• Six Flags has embarked on a mission to make themselves "a more agile, commercially driven and technology-savvy organization."  This will improve guest experience, help is growing the pass base and reduce operating costs.

• Changes include continuing to go after single-day visitors, redesign their websites to make them more user friendly, create better value in food and beverage offerings, restructure the company to make sure there are no duplicated efforts in the corporate office and at the parks but also reduce costs without reducing staffing.  They are also making a diversity and inclusion council within the company to guide things as training, addressing biases, building a diverse team and community outreach.

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• The company's COVID-19 changes are sitting very well with guests in regard to getting in the park quickly and easily.  They plan to keep many changes in the long run, such as advanced ticket sales and paying for parking ahead of time.  The reservation system is being monitored and it is not clear if they would keep it post-pandemic.

• Regarding Fright Fest and Holiday in the Park, both events are being planned but they are questioning best safety practices, how to make sure they are cash flow positive, and how to protect the Fright Fest image if they can't put on a traditional event... not to tarnish its reputation.  While they didn't go into details, social distancing does not work well with haunted houses, so things will have to be very different this Halloween.

Six Flags Shares More on COVID-19 Operating Plans + Frontier City to Reopen June 5th

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Six Flags Entertainment sent out a mega-update today covering their elaborate plans to operate their theme parks in a COVID-19 world.  This is the "new normal," as they put it.

But first, they've also announced their first theme park to reopen, which will be Frontier City on June 5th.  The park will have very limited attendance and will open on June 5th through June 7th only for Members and Season Pass Holders only.  It will then open to all guests and gradually increase the maximum daily attendance throughout the month.  As stated earlier, the park will require the use of a reservation system to visit, and has a host of other information available here.

© Frontier City

“Frontier City, like all Six Flags parks, is an outdoor attraction that poses a significantly lower risk of exposure than indoor venues.  Our guests are not confined to one space for lengthy periods.  Guests move constantly throughout their experience; some are riding rides, some are eating in restaurants, while others are shopping in our souvenir stores, or playing games.  Because our parks cover dozens or even hundreds of acres, we can easily manage guest throughput to achieve proper social distancing,” said Six Flags President and CEO Mike Spanos.

“We have developed a comprehensive reopening safety plan that includes best practices from theme park and waterpark industry experts, along with top destination parks from around the world, which will allow guests to experience our parks in the safest possible way.  This ’new normal’ will be very different, but we believe these additional measures are appropriate in the current environment.”

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Along with the first park in the Six Flags chain to have an opening date set, the company also released a very robust set of standards for operations that meet or in most cases exceed local and government minimums for the safety of workers and visitors.

The plans are so thorough that they've created a 37 point summary of the changes they have implemented, which you can view online as part of Frontier City's reopening news.

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A lot of the programs we have already discussed in previous stories, so I will not go through each point one by one.  Some other things have come up or been clarified for us, though.

For instance, "contact-less IR thermal imaging" will be used to scan guests as they enter the park, a fast way to determine if anyone's temperate is more than 100.4, at which point they need further screening to see if they can enter.

Also guests over the age of two need a face mask that covers their mouth and nose, and it must be worn at all times.  Exceptions will be made on a "case-by-case basis for persons with disabilities, health concerns, religious restrictions, or other circumstances that in Six Flags’ discretion warrant a modification of this face mask requirement."

© Six Flags

The parks will also use new technology to scan bags with no contact to make sure proper safety standards are met.

Souvenir drink bottles, which grew very popular in recent years, will not be refilled, instead a new paper cup will be given.  Guests can then just use that, or put it in their bottle on their own.

This is the first time we've also been able to read the Six Flags Health & Safety Policy, which every guest must adhere to.  If not, Six Flags says that "if at any time Six Flags determines that a guest does not meet the criteria outlined in this policy, Six Flags reserves the right to refuse entry or (if the guest is already in the park) immediately remove the guest from the park.  These actions are at the sole discretion of Six Flags."  That sounds good to me, and I hope that is enforced.

A summary video of the changes and plans was also released today, which has been uploaded to YouTube by Amusement Insiders:

Stay tuned for more Six Flags parks reopening dates, I think there will be plenty over the next few weeks!

Six Flags Entertainment Details New Reservation System for Park Visits

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In an effort to manage attendance in order to keep workers and guests safe, Six Flags Entertainment has announced details of a new reservation system that will be employed when the chain of theme parks reopen.

In a press release from the company, they state that the 'user-friendly process will allow parks to manage daily attendance levels and avoid overcrowding in accordance with Centers for Disease Control recommendations on social distancing."

Any visitor with a single day ticket, group ticket, Membership or Season Pass will have to reserve their visit on Six Flags' website.  Six Flags says the entire process will only take 5 to 7 minutes.  Visitors will enter a number from their ticket or pass, then select the date and approximate time they want to arrive.  They will then see a brief video regarding social distancing and sanitization processes at the parks, acknowledge the company's health policy and pay for parking, if applicable.

This process is required to visit, as those who do not complete the process cannot enter the park.  However, it is noted that if guests show up and there is room and a reservation can be completed at that time, they may be able to enter.

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If a date is full guests can also sign up for a waitlist in case of cancellations or additional inventory becoming available.  Six Flags will send online visit reminders prior to the visit date.  Also of note, Diamond and Diamond Elite Members will get added to a "priority waitlist," followed by regular members and passholders, all above single day tickets.

There are a ton of details on the reservation website.  Here are some other interesting notes:

• Initially when parks reopen for a short period only Members and Passholders will be able to visit the parks, after that time all ticket holders may reserve.

• When reservations begin the entire 2020 season for each park will be open to be booked, however, additional inventory will be added to the calendars over time on purpose.

• A reservation can be made for a 'party,' or all guests visiting together.  Different order numbers, pass numbers, ticket numbers, etc., can be added to one reservation.

• Using the online system there can only be on reservation at a time per pass.  Six Flags customer service can be contacted for additional reservations to be manually made.

© Six Flags

• You can join waitlists for multiple days, but as soon as you're granted access to one you're removed from the other days' waitlist that you signed up for.

• If you arrive early for your reservation you may have to wait for your time, and if you're late they will let you in at an appropriate time that you can fit, so as not to cause crowding in the entrance facilities.

• Regarding guests who do not cancel their reservation and do not show up, Six Flags states that they "are subject to penalties such as reduced system priority and blockout periods."

This is the first information we've got for a reservation system for park-visiting in the U.S., and I expect there to be many more such systems for chains such as Cedar Fair, SeaWorld Entertainment, Universal and Disney in the future.  I'm sure there will be a huge amount of test and adjust to learn how it will work off-paper with actual, unpredictable, and always complicated humans, but it's certainly a smart and safe approach to dealing with the pandemic fallout.

Heard On... Six Flags' 1st Quarter 2020 Conference Call

© Six Flags

Late last week was Six Flags Entertainment's 1st Quarter 2020 earnings conference call.  This one was a bit different since we're in the middle of a pandemic, but there were still some interesting items to note from the call.  Here is a link to the company's press release about the quarter.

•  Revenues for the quarter were $103 million, a decrease of $26 million from the prior year.  They had 1.6 million guests, down 584k from last year.  However, prior to the park's closing attendance was up 255k over last year.  The park also had $10 million less revenue due to the international licensing agreements in China and Dubai which were cancelled.

•  The company's active pass base decreased 10% over the prior year.  The company attributes that to the pandemic, causing deferred revenue to be $149 million, down $29 million from the prior year.

•  Prior to closing the parks in March, single day paid admission at the operating parks was up 38%, something important as that metric failed last year and was going to be a big push for the operator in 2020.

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•  The Six Flags branded park in Saudi Arabia is "on track" and is still planned to open in 2023.

•  Reaffirming their plans to save cash, they clarified that they have deferred $20 million of "increased investments" they planned to help the guest experience, and found $10 - $20 million of extra non-labor operating costs to cut.  They are also "taking steps to defer or eliminate at least" $40 - $50 million of capital expenditures for this year.

•  More on the active passholder base - at the time of the call the program was down 20% over the prior year.  Six Flags is working to retain the current passholders.  They have offered guests the ability to pause payments on their passes, get a free tier upgrade if they keep paying, and get an extension for the time the parks are closed.

•  Six Flags is working with their active pass base to understand what they expect to see once the parks are able to open.  This is helping them plan to operate the parks in a way that will make the customers feel comfortable.  50% of guests said they would visit a park right now if it were open, and 80% said they would visit this year if the park includes social distancing and increased disinfecting standards.

© Six Flags

•  They are also turning to technology to allow for virtual queues, cashless transactions for payments and mobile food ordering, all of which are designed to help with social distancing.  As for other methods, there will be temperature checks, hand washing stations, and plenty of hand sanitizer among others.

•  Once a park is deemed okay to be opened, they will need two to three weeks to prepare.  They also note that they know how to operate a park with small attendance so that it is still profitable, so they are prepared if attendance is weak.

•  When asked about what parks could open first, the company made it clear it's all up to local governments, however the parks in Georgia, Texas, Oklahoma, Missouri and Mexico appear to be the first in line at the moment.