Six Flags posts lower guest spending on higher attendance for year
Posted
From the press release:
Six Flags Entertainment Corporation (NYSE: SIX), the world’s largest regional theme park company and the largest operator of water parks in North America, today reported fourth quarter Revenue of $293 million, Net Loss of $22 million, and Adjusted EBITDA(1) of $98 million. For the full year, the company reported revenue of $1,426 million, Net Income of $39 million, and Adjusted EBITDA(1) of $462 million.
"As we close out our second year pursuing our premiumization strategy, we are encouraged by the progress we have made to date. Since 2021, we have grown guest spending per capita by 17%, lowered cash expense in the face of historical levels of inflation, leveraged key partnerships to expand sponsorship revenue, and paid down debt," said Selim Bassoul, President and CEO. “Looking ahead to 2024, we have seen early success in sales of our 2024 passes, which are ahead of last year, and should provide a solid foundation as we head into the core operating season. We have laid the groundwork long-term for profitable growth, and we have many exciting new developments in store for the 2024 season, including new innovative rides, immersive experiences, and new guest-facing technological innovations that will create a more seamless in-park experience, drive guest spending and improve operational efficiency.”
Total revenue for fourth quarter 2023 increased $13 million, or 5%, compared to fourth quarter 2022, driven by higher attendance, partially offset by lower guest spending per capita. The increase in attendance was driven both by higher season pass and single-day ticket attendance during the Fall events line-up versus the prior year. The $0.96 decrease in guest spending per capita compared to fourth quarter 2022 consisted of a $1.44 decrease in admissions spending per capita and a $0.48 increase in In-park spending per capita. The decrease in guest spending per capita was driven by lower revenue from memberships beyond the initial 12-month commitment period, which is recognized evenly each month. Due to discontinuing the sale of new memberships in the prior year, there were fewer memberships in fourth quarter 2023 versus fourth quarter 2022. Lower membership revenue, which includes a portion of revenue allocated to Park food, merchandise, and other, decreased admissions spending per capita by $2.48, and in-park spending per capita by $0.84, when compared to the prior year fourth quarter. This was partially offset by higher average ticket pricing and higher spend on food and beverage and attractions in fourth quarter 2023 versus prior year.
The company had a net loss of $22 million in fourth quarter 2023, compared to net income of $10 million in fourth quarter 2022. The loss per share was $0.27 compared to income per share of $0.12 in fourth quarter 2022, driven by $15 million in merger-related transaction costs and higher cash operating costs(5) in fourth quarter 2023 versus the prior year, partially offset by an increase in revenue. The increase in cash operating costs was driven by higher variable costs associated with higher attendance, higher investments in new entertainment events and digital guest-facing innovations, and inflationary impacts on operating expenses. Adjusted EBITDA, which excludes $15 million in merger-related transaction costs, was $98 million, essentially flat compared to fourth quarter 2022.
Total revenue for full year 2023 increased $68 million, or 5%, compared to full year 2022, driven by higher attendance and higher sponsorship revenue, partially offset by lower guest spending per capita. The increase in attendance was driven by increased season pass sales versus the prior year and increased attendance from an expanded events calendar during the 2023 season.
The $2.90 decrease in guest spending per capita compared to full year 2022 consisted of a $2.56 decrease in admissions spending per capita and a $0.34 decrease in In-park spending per capita. The decrease in admissions spending per capita was driven primarily by lower average pricing on season passes in first nine months 2023 versus the prior year comparable period. The decrease in in-park spending per capita was driven primarily by lower average spending per visit on parking, retail, and flash passes, resulting from a higher mix of attendance from season passes in full year 2023 versus the prior year. Due to certain benefits available to season pass holders, guests visiting on a season pass spend less per visit on certain in-park products than guests visiting on a single-day ticket. The season pass mix-driven decline in in-park spending per capita was partially offset by higher average pending per visit on food and beverage for full year 2023 versus the prior year and higher average spending per visit on attractions during Fright Fest in fourth quarter 2023 versus the prior year fourth quarter.
The company had a net income of $39 million in full year 2023, compared to net income of $101 million in full year 2022. The income per share was $0.46 compared to income per share of $1.20 in full year 2022. In second quarter 2023, we incurred a $38 million charge in self-insurance reserves. Self-insurance reserves are periodically reviewed for changes in facts and circumstances and adjustments are made as necessary. During the second quarter of 2023, the company revised the estimate of its ultimate loss indications for both identified claims and incurred but not reported (“IBNR”) claims in connection with our general liability and worker’s compensation self-insurance reserves. The increase in the revised estimate was based on greater than previously estimated reserve adjustments on certain identified claims as well as an observed pattern of increasing litigation and settlement costs and changes to key actuarial assumptions utilized in determining estimated ultimate losses, including loss development factors. Also, in fourth quarter 2023, the company incurred $15 million in merger-related transaction costs. Finally, cash operating costs(5) increased in full year 2023 versus prior year due to several factors, including an increase in cost of sales and seasonal labor driven by higher attendance, increased advertising to promote season passes, increased investments in new entertainment, shows, events, and guest-facing digital initiatives, and inflationary impact on operating expenses. Adjusted EBITDA, which excludes the $38 million self-insurance reserves estimate adjustment and $15 million in merger-related transaction costs, was $462 million, an increase of $1 million, or less than 1%, compared to the prior year(3).
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Higher attendance and lower per cap spending. We've seen this movie before, only this one ends by being combined with another movie.
Jeff - Editor - CoasterBuzz.com - My Blog
What does Bassoul have on the board to keep his job? His incompetence is stunning.
Net income and spending capita are down and he is bragging about how well their ”premiumization” is working?
Trashy parks will never support premium pricing.
But he is filling his own pockets with a merger bonus. while destroying the business.
I’m still game for a seance in Sandusky at George A. Boeckling’s grave site to prevent the travesty of this merger from happening.
super7*:
What does Bassoul have on the board to keep his job?
After the merger, he has a seat on the board. In fact, the most important seat. :( I know that's not what you meant though. :)
The more I think about it, the more I really feel like Cedar Fair's board ought to be sued by the unitholders. That they specifically crafted this merger deal so that they'd pay Six Flags shareholders $85 million so it would appear that Cedar Fair is the buying company (51% vs 49%), thereby getting around the requirement for the FUN unitholders to vote, really seems criminal or at the very least a violation of their fiduciary duty. They really didn't negotiate any sort of walk away clause should a better offer come along? This is what happens when the board gets filled with "yes men." They're allowing this management team to enrich themselves at the expense of the unitholders and park fans.
-Matt
I'm kind of surprised that some activist investor hasn't already done that. I don't know if there are any really large institutional investors these days, but it's absolutely not a good deal for unit holders.
Jeff - Editor - CoasterBuzz.com - My Blog
I saw an article from cleveland.com talking about cedar fair investors being unhappy with the merger. I can't see more than the first two paragraphs without at least logging in, but based off the headline, anyway, it looks like the FUN board has structured this deal such that the FUN unit holders really can't do anything to get out of it.
Business transactions can typically be structured in different ways with the end result being the same. But its often the case that one structure over another makes the deal easier to close. Could avoid needing regulatory approval or make obtaining it easier. Could lessen negative tax impacts. Avoid shareholder or lender approvals (or make those approvals easier to obtain such as with a reduced % needed for approval). Typically, it isn't problematic to use the structure that makes the deal easier (at least not if the underlying documents, laws, regulations, etc allow it). Here from what I have seen, the Cedar Fair partnership agreement allows the deal to be structured as it has been without unitholder approval.
A maxim in the law: If the law is in your favor, pound the law. If the facts are in your favor, pound the facts. If neither is in your favor, pound the table.
Cleveland.com article indicates that one of Cedar Fair's largest shareholders sent a "sharply worded letter" to the company's board/management. Sounds like they are pounding the table. Maybe a lawsuit is next. Six Flags shareholder vote is March 12th from what I have seen. And they haven't gotten regulatory approval to my knowledge meaning there is still some time to enjoin the transaction (if unitholders are inclined to sue and prevail).
I voted against the merger with all 10 of my SIX shares. Think it'll matter? 😂
Jeff - Editor - CoasterBuzz.com - My Blog
Maybe I’m the doom and gloom, but this is probably the beginning of the end for these parks. Not the end as in closing, though some may, but I have an underlying feeling that they will become places I no longer have much desire to visit within the next 2 years or so.
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