Six Flags Entertainment Corporation Common Stock New

Thank you for standing by. At this time, I would like to welcome everyone to today's Six Flags Entertainment Corporation second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star one on your telephone keypad. Once again, star one. Thank you. I would now like to turn the call over to Six Flags management. Management, please go ahead.

Thanks, Greg, and good morning, everyone. My name is Michael Russell, Corporate Director of Investor Relations for Six Flags. Welcome to today's earnings call to review our 2024 second quarter pre-merger financial results for our legacy companies, the former Cedar Fair LP and the former Six Flags Entertainment Corporation. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is also available under the News tab of our new Investor Relations website. at investors.sixflags.com. Specific to Cedar Fair, our prior year reported quarter ended June 25, 2023. To provide investors with more informative comparisons due to the fiscal calendar shift, our release this morning offers an alternate set of results comparing Cedar Fair's current year quarter ended June 30, 2024 with results for the three months ended July 2, 2023. Before we begin, I need to remind you the comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC's Regulation FD, this webcast is being made available to the media and the general public, as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. On the call with me this morning are Six Flags Chief Executive Officer Richard Zimmerman and Chief Financial Officer Brian Witherow. With that, I'll now turn the call over to Brian.

Thank you, Michael. Good morning, and thanks to everyone for joining us today. We're excited to welcome you to the very first earnings call for the new Six Flags Entertainment Corporation. In actuality, it's the final earnings call for our legacy companies, Cedar Fair and the former Six Flags, as we begin our journey together as a merged company. I'll start my review by discussing the legacy Cedar Fair second quarter results before providing some color around second quarter results for legacy Six Flags. I'll wrap up with an update on more recent performance in the state of the long lead indicators for the combined portfolio. Before I dig into the details, I'd like to say how pleased we are to report a record-setting second quarter performance for Legacy Cedar Fair. A quarter in which, thanks to our top-line revenue growth and effective cost savings measures, we achieved record adjusted EBITDA for the period and meaningful margin expansion. The strong second quarter performance capped off a trailing 12-month period that saw us produce $585 million of adjusted EBITDA ending Cedar Fair's legacy on a high note and setting a great foundation for our new journey together as the new Six Flags. As Michael mentioned at the beginning of the call, due to a fiscal calendar shift in the current year, Cedar Fair's second quarter of 2024 included 53 net incremental operating days compared to the second quarter last year. Because of the impact of the fiscal calendar shift, I'll focus my comments this morning on comparing Cedar Fair's second quarter with the three months ended July 2, 2023. For the quarter, Cedar Fair generated a record $572 million in net revenues on record attendance of 8.6 million guests. This compares with net revenues of $557 million and attendance of 8.3 million guests for the comparable three-month period last year. In addition to the 368,000 visit increase in attendance, the higher net revenues during the period reflect a $4 million increase in out-of-park revenues to a second quarter record $73 million. The increases in attendance and out-of-park revenues were partially offset by a 3% decrease in in-park per capita spending. The increase in attendance was the direct result of several factors, including a larger season pass base, The continued recovery of the group channel, including our school and youth business, which has now recovered back to pre-pandemic levels. And lastly, stronger general demand in the markets where we introduced impactful new rides and attractions for the 2024 season. We are particularly pleased that we were able to drive increased attendance over 33 fewer operating days than the comparable period last year, reflecting the positive impact of many of the initiatives we've put in place in the last year to drive demand. On a comparable week basis, average attendance per operating day in the second quarter was up 9%, primarily the result of eliminating smaller attendance days during the period at several seasonal parks, as well as increased demand from the season pass channel. The increase in out-of-park revenues reflects the improved performance of the Knott's Hotel, which was under renovation at this time last year, as well as higher ADRs at the other resort properties across the system. Meanwhile, the decrease in per capita spending is due to a planned reduction in season pass pricing at several parks and a higher mix of season pass visitation, somewhat offset by improved guest spending on food and beverage and extra charge products. Food and beverage spending during the quarter was up 3% versus the comparable three-month period last year. The improved F&B spending was driven by an increase in average transactions per guest and an increase in the average transaction value. reflecting the guest's willingness to buy up for higher quality offerings. Guest spending on extra charge products during the period was up 1%, driven in large part by increased fast lane sales, which benefited from the broad rollout of our new single-ride fast lane product and overall stronger demand as a result of higher attendance levels. Moving to the cost front, Legacy Cedar Fair's operating costs and expenses in the second quarter totaled $387 million, up $15 million compared with the three months ended July 2, 2023. The period-over-period increase reflects a $23 million increase in SG&A expense, offset by a $9 million decrease in operating expenses. The increase in SG&A expense included $11 million of merger related costs and $8 million of higher equity based compensation expense. The balance of the increase was attributable to higher spending on technology initiatives and advertising during the period. The decrease in same week operating expenses, which was accomplished while our parks entertained 368,000 more guests during the period, is the result of planned reductions in entertainment expenses and labor costs, including the use of fewer seasonal labor hours and lower full-time headcount. Adjusted EBITDA for the quarter increased to a record $205 million, while adjusted EBITDA margin for the period improved to nearly 36%, up 230 basis points versus the comparable three-month period last year. the higher margin reflects the value and leverage that comes with driving higher levels of demand while tightly managing operating costs. As we've noted in prior earnings calls, we remain laser focused on improving margins by increasing demand and driving operating efficiencies across the portfolio, particularly around variable operating costs such as seasonal labor. Through the first six months of the year, we reduced our seasonal labor hours by 5% or more than 340,000 total hours while not eroding the guest experience or our ability to drive demand, as evidenced by the meaningful lift in attendance. Through these key initiatives, we've made considerable progress strengthening margins closer to pre-pandemic levels. We have now improved legacy Cedar Fair adjusted EBITDA margin by 300 basis points through the first six months of the year, compared with the same six-month period in 2023. Now turning to second quarter results for legacy Six Flags. As noted in this morning's earnings release, Six Flags' second quarter of 2024 included 58 fewer operating days compared to the second quarter last year. For the quarter, Six Flags generated $438 million in total revenues on attendance of 6.9 million guests. This compares with total revenues of $444 million and attendance of 7.1 million guests during the second quarter of 2023. In addition to the 2% decrease in attendance, the decline in total revenues in the quarter reflects a $9 million decrease in revenue for memberships beyond the initial 12-month commitment period, what we call 13+. The decrease in second quarter attendance and membership revenues was partially offset by a 1% increase in total guest spending per capita. The decrease in second quarter attendance was largely the result of the strategic decision to remove operating days at certain parks and the earlier Easter holiday, which occurred in the first quarter of 2024 compared to the second quarter of 2023. We estimate that the Easter timing shift represented a headwind of approximately 90,000 visits in the second quarter, while the elimination of operating days accounted for the majority of the remaining attendance difference. The increase in total guest spending per capita during the quarter reflects an admissions revenue per capita decrease of 2% and an in-park spending per capita increase of 5%. Excluding the impact of membership revenue from both periods, which we believe better reflects the parks higher average ticket pricing and in-park monetization efforts, Total guest spending per capita for the quarter would be 3% higher than prior year second quarter, reflecting an increase in admissions revenue per capita of less than 1% and an increase in in-part spending per capita of 6%. We expect revenue headwinds for memberships to be negligible in the second half of the year. Moving to the cost front, Legacy Six Flags operating costs and expenses in the second quarter totaled $281 million, down 18 million compared to the second quarter of 2023. The decrease in operating costs and expenses was the result of a $12 million increase in operating expenses, offset by a $30 million decrease in SG&A expense. The decrease in SG&A expense reflects the impact of a $38 million self-insurance reserve adjustment made in the second quarter last year, offset slightly by higher spending on advertising in the second quarter this year. The increase in operating costs was driven by increased seasonal labor costs resulting from higher average seasonal wage rates and an increase in seasonal labor hours. Through the first six months of the year, the average seasonal wage rate at Legacy Six Flags parks was up 3% over the same period last year and seasonal labor hours were up 3% or approximately 150,000 hours. Six Flags adjusted EBITDA for the quarter decreased $23 million to $138 million, driven primarily by the decline in attendance, lower membership revenue, and higher operating expenses, offset in part by higher total guest spending per capita. Due to the increase in operating costs and lower total revenues, Legacy Six Flags modified EBITDA margin for the second quarter, which excludes the impact of non-controlling interest in partnership parks, decreased to 36.9%, from 41.6% in the second quarter last year. Taking a closer look at more recent results and the long lead business indicators for a moment. During the month of July, difficult weather conditions, including the impacts of Hurricane Beryl and record heat and rain across much of North America have impacted demand at several parts in the combined portfolio. Over the five-week period ended August 4th, 2024, attendance across the combined portfolio totaled 10.9 million visits, down 3% or approximately 350,000 visits compared to the same five-week period last year. A meaningful portion of this attendance decline can be attributed to four parks where operations were either partially or entirely disrupted by macro events, including a utility disruption at Michigan's Adventure, excessive flooding at Valley Fair, and the effects of Hurricane Beryl on our Galveston and Houston water parks. Excluding these four parks, attendance within the balance of the combined portfolio was down 1%, or approximately 150,000 visits during the fiscal month of July. Meanwhile, when compared to the same five-week period last year, July guest spending trends were essentially flat year over year across the combined portfolio. Despite the pressure from attendance mix on admission spending, in-park guest spending in July continued to benefit from higher levels of demand for food and beverage and premium experience products. Despite recent demand disruptions in certain markets caused by weather events, we remain encouraged by the overall attendance trends as we approach the end of the summer. This validates the strength we saw earlier this year in our long lead indicators, including strong season pass unit sales and solid booking trends within our group sales channel and our resort properties. As of June 30, 2024, the Legacy Seer Fair season pass base totaled 3 million units, a 9% increase versus the prior year second quarter, while the Six Flags active pass base comprised 4.3 million pass holders, a 6% decrease versus the prior year, which still included the Six Flags discontinued annual pass product. Excluding discontinued annual passes, the balance of the Six Flags active pass base at the end of the second quarter would have been higher than the prior year's second quarter by 5%. Driven in large part by the solid momentum in the season pass programs, Legacy Cedar Fair deferred revenues as of June 30, 2024, totaled $282 million, up 3% compared to the same time last year, while deferred revenues at Legacy Six Flags totaled $191 million, an increase of 8% versus the prior year. On the capital allocation front, during the quarter, Legacy Cedar Fair spent $61 million on CapEx, bringing total investment through the first half of the year to $118 million. For the full year 2024, we expect capital investments in the Legacy Cedar Fair parks will be $200 to $220 million. Meanwhile, during the second quarter, Legacy Six Flags spent $77 million on CapEx, bringing total investment over the first six months of the year to $114 million. We expect full-year CapEx spend in the Legacy Six Flags parts will also be in the $200 to $220 million range. As we are in the early days of our combined company, we are still conducting the analysis for our long-term CapEx outlook. With that said, we are very encouraged by what we see in terms of both our combined company's existing infrastructure as well as the opportunities to drive growth in the combined portfolio. While there will be some level of capex necessary to address deferred infrastructure needs within the portfolio, the majority of our investments will be on initiatives and new attractions that can achieve a minimum ROI and that are meant to increase demand, drive higher levels of guest spending, and make us a more profitable business over the long term. We plan to provide more details around the scale and scope of future capital programs by spring of next year. Lastly, for cash flow modeling purposes on a go-forward basis, we are projecting annualized cash interest payments of $300 to $310 million and annualized cash tax payments of $140 to $150 million before further tax planning efforts. With that, I'd like to turn the call over to Richard.