Six Flags Entertainment Corporation (NYSE:SIX) Q1 2024 Earnings Call Transcript

Six Flags Entertainment Corporation (NYSE:SIX) Q1 2024 Earnings Call Transcript May 9, 2024

Six Flags Entertainment Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen. Welcome to the Six Flags First Quarter 2024 Earnings Conference Call. My name is Betsy and I will be your operator for today’s call. [Operator Instructions] Thank you. I will now turn the call over to Evan Bertrand, Vice President, Investor Relations and Treasurer. Please go ahead.

Evan Bertrand: Good morning and welcome to our first quarter 2024 earnings call. With me is Selim Bassoul, President and CEO of Six Flags; and Gary Mick, our Chief Financial Officer. We will begin the call with prepared comments and then open the call to your questions. Our comments will include forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in such statements and the company undertakes no obligation to update or revise these statements. In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company’s annual reports, quarterly reports and other forms filed or furnished to the SEC.

While our call today will focus on the results of first quarter 2024, I do want to provide a few updates on the merger process. First, we received overwhelming shareholder approval of the merger on March 12, helping us achieve a key milestone in the process. Second, we have certified compliance with the DOJ’s request for additional information and documentary material. And last, we completed certain credit refinancing in preparation for the merger. We expect the merger to close in the first half of 2024. With that said, we will not be taking any questions on the merger on this call. Now, I will turn this call over to Selim.

Selim Bassoul: Good morning. Thank you for joining our call. We are nearly 3 years into our transformation and we are excited to see our results trending upward. Early indications for the season show positive trajectory for this season and that people are spending more money in our parks. We have carved a clear path for profitable growth and attribute this progress to 2 key aspects of our strategy. The first is premiumization. We are transforming our parks. We are creating multigenerational appeal, proving that thrills know no age, thrills know no age. We alleviate [indiscernible] points and amplified value in every aspect of the park experience. We are also alleviating burden on our rides and on our employees which in turn freed up space to better serve our guests, making us easier to do business with.

We are enhancing park infrastructure, in-park offerings, luxury accommodations, comfort seating and beautified our parks which is resonating with our guests, giving them a reason to stay longer and spend more. The second key aspect is that we are reinventing the customer journey from before they enter the park to after they leave. Through our digital transformation, we have introduced new ways to personalize the guest experience and to increase engagement. I will discuss this in more detail later in the call. Today, I will highlight several leading indicators that give us confidence that we are on the right path for profitable growth. First, our pass sales remained strong. Through April, 2024 total pass sales are ahead of last year by double digits, with both units and average pass price showing solid increases over last year.

Add-on sales of all-season dining and all-season flash passes are also ahead of last year and we are selling a higher mix of diamond and platinum passes. Second, group sales are outperforming expectations. Our move last year to place our sales team back in the park has empowered our team, enabling them to work closely with park leadership and to better engage with customers. Based on our current bookings, we are surpassing last year’s group sales by over 20% and approaching pre-pandemic levels for the full year. Third, in-park spending continues to grow. We are seeing underlying impact spending per capita increasing 5%, excluding the headwinds from our discontinued legacy memberships. This growth helped us achieve record first quarter in-park revenues and reflects our focus on driving monetization through technology, as well as on elevating the experience which promotes multigenerational family visitation in our parks and encourages guests to stay longer.

On technology, for example, our new speedy parking automated toll plazas are quickly gaining popularity and generating additional revenues with roughly half of our guests now using this service. Another example is our new self-service kiosks at our restaurants which are reducing food wait times and increasing average check sizes. It is all about convenience. I repeat, it is all about convenience. We elevate the experience by striving to engage our guests at a deeper emotional level, whether it is riding one of our record-breaking thrill rides, the nostalgia of eating a funnel cake or smelling freshly made cotton candy, watching your child ride his or her first rollercoaster or providing an opportunity for a group of old friends to reconnect, we validate every day that a memorable experience outshines a clouded experience.

A memorable experience outshines a clouded experience every day. I have personally observed to decide for guests to enjoy the Six Flags experience. On a recent Saturday, I was at Six Flags over Texas. There were 11,000 guests in the park that day. Around 7:00 p.m., there were still over 75% of the guests at the park. And I saw many of them sharing a meal, treating themselves to dessert and shopping for their favorite apparel at our retail location. You could see the excitement in their faces and they did not want to leave. As we work to encourage guests to stay longer, enhance our in-park offerings and cultivate memorable experiences, this will drive continued progress in growing guest spending in our parks. Before I hand it over to Gary, I want to reiterate how transformative the past few years have been for us.

We have streamlined our organization, removing unnecessary layers, creating a more nimble and agile team. We have decentralized certain key functions to put ownership back in the park, empowering local teams which has been central to better serving customers and reinvigorating our group sales. Our culture of urgency, excellence and ownership has been central to navigating numerous challenges, adapting quickly and setting a strong foundation for the future. We remain dedicated to creating a premium guest experience as well as staying vigilant in managing our costs so that we can deliver profitable and sustainable growth. With that, I would like to turn the call over to Gary to discuss the financial results for the quarter.

Gary Mick: Thank you, Selim and good morning, everyone. I will start with attendance, revenue and per caps and move to expenses and adjusted EBITDA for the quarter. I will then discuss our Active Pass Base metrics, select balance sheet items and capital allocation. Total attendance was 1.7 million guests, a 6% increase from the prior year, driven primarily by the early Easter holiday which occurred in the first quarter of 2024 compared to the second quarter of 2023. We estimate that the Easter timing shift provided a benefit of 90,000 guests in the first quarter of 2024 and will result in a year-over-year headwind in the second quarter. Unfortunately, the weather was just as challenging in the first quarter of 2024 as it was in the prior year and the number of operating days were essentially flat year-over-year.

Revenue was $133 million, a decrease of $9 million or 6% versus last year. The change was driven primarily by 2 factors. The first was a reduction in international licensing revenue caused by a change in the estimated opening date of Six Flags Qiddiya to mid-2025 which shifted $4 million of revenue previously recognized to future periods. The second was a $12 million reduction in revenue from memberships beyond the initial 12-month commitment period, what we call 13-plus which is recognized evenly each month and is not associated with attendance and includes revenue allocated to admissions and in-park revenues. Admissions revenue was $71 million, a decrease of $6 million or 7% versus last year. In-park revenues were a first quarter record at $54 million, an increase of [indiscernible] versus last year with our in-park initiatives more than offsetting lower 13-plus membership revenue.

Total guest spending per capita decreased $6.53 or 8%. Admissions spending per capita decreased $5.77 or 12%. And in-park spending per capita decreased $0.76 or 2%. Excluding the impact of 13-plus revenue from both periods which we believe better reflects our higher average pricing and in-park monetization efforts, guest spending per capita would be higher than prior year by $1.59 or 3% which includes a slight increase in admission spending per capita of $0.31 or 1% and an increase in in-park spending per capita of $1.28 or 5%. We expect revenue headwinds from 13-plus members to continue into the second quarter with an anticipated reduction in 13-plus revenue of approximately $10 million compared to the second quarter last year. As Selim mentioned, our strong pass sales are an encouraging leading indicator that gives us confidence we can grow attendance again in 2024.

We also expect to grow our per caps for each category of guest and across our in-park revenue channels. However, this growth will be tempered by the following factors. First, 13-plus revenue headwinds that we have previously mentioned. Second, a higher mix of season pass attendance which carries a lower per cap versus a single-day visit. Third, a higher mix of group attendance which typically comes at a lower per cap versus our company average. Based on early trends, coupled with these tempering factors, we expect our total guest spending per capita in 2024 to be up slightly versus prior year. Moving on to costs. In first quarter 2024, we incurred $5 million of merger-related expenses associated with the proposed merger with Cedar Fair. Cash operating costs which includes cash operating and SG&A expense but excludes merger-related costs, decreased $1 million or 1% in the first quarter versus the prior year.

Looking ahead, there are several factors driving our cost expectations for the remainder of the year. First, we are optimizing our events calendar, focusing on our guests’ favorite events to deliver the biggest impact which will result in lower event spending in the second half of 2024 compared to the second half of 2023. Second, we expect advertising spend to be flat for the full year 2024 versus prior year. That said, we plan to spend more on advertising in the second quarter to build on our early success and to better align with the timing of our past promotions moving into the peak season. This will make for tougher quarterly comparisons for the second quarter versus last year. Finally, we expect full year average cost inflation to be around 4%.

Keep in mind, many of the parks in jurisdictions with the largest minimum wage increases were either closed or did not have significant operations in the first quarter but will be ramping up operations in the second quarter. Adjusted EBITDA loss for the quarter was $26 million versus a $17 million adjusted EBITDA loss in the prior year first quarter, driven primarily by the shift and international licensing revenue to 2025 and lower membership 13-plus revenue, partially offset by higher attendance and higher underlying per capita growth, particularly on in-park revenues. Our Active Pass Base as of March 31, 2024 comprised 2.9 million passholders, a 10% decrease versus the prior year first quarter. As you will recall, our Active Pass Base at the end of fourth quarter 2023 was flat with the prior year.

The sequential drop in the prior year comparison from fourth quarter to first quarter is due to the inclusion of our discontinued annual pass product in the prior year’s active pass space. These annual passes which were sold in 2022 but not in 2023, were valid for 12 months and did not expire in January like traditional passes. Excluding these annual passes which we feel better reflects our past sales, our Active Pass Base at the end of first quarter would have been higher than the prior year first quarter by high single digits. Deferred revenue as of March 31, 2024, was $165 million, an increase of $13 million or 9% versus the prior year. CapEx spend was $37 million in the first quarter, an increase of $12 million compared to first quarter 2023, as we continue our work on enhancing guest-facing technology and rolling out new rides and attractions.

Total liquidity as of March 31 was $310 million which includes $249 million of available revolver capacity, net of $21 million letters of credit plus $61 million of cash. On May 2, we raised $850 million of [indiscernible] senior secured notes due 2032. In anticipation of closing the merger, we have fully repaid the term loan and the outstanding revolver balance. Additionally, we will pay down $165 million of our 2025 secured notes in July when the call premium steps down to par, leaving $200 million outstanding on our 7% notes due July 2025. This refinancing was part of a series of financing transactions that were completed in anticipation of the merger closing, including the refinancing this month of Cedar Fair’s $1 billion term loan B and $300 million revolving credit facility which is expected to be upsized to $850 million upon the closing of the merger and that will be assumed by the combined company.

These steps help put Six Flags and the combined company in a position with sufficient cash flows and revolver capacity to address the near-term debt maturities and the anticipated fees and obligations associated with closing the merger. We intend to use excess cash flows to pay down debt until we reach our target leverage ratio of 3x net debt to adjusted EBITDA. With that, I will turn it over to Selim.

Selim Bassoul: Thank you, Gary. It is exciting to see the premiumization strategy taking hold on our results as evidenced by our positive leading indicators, including our strong season pass sales, improving group sales and consistent growth in our in-park sales channels. As we move into the next phase of our strategy, we are focused on transforming guest engagement from before they enter the park to after they leave. Through our digital initiatives, we are reinventing the customer journey and we are excited to update you on new developments that will propel us in this endeavor. Starting with the previsit experience. First, we are launching a brand-new website with stunning visual displays and it will incorporate an intuitive design and mobile-friendly navigation to help drive website conversions and repeat visits to our site.

The site will utilize our new Gen AI chat feature which will be able to answer most of our guests question instantaneously, reducing the need for a live agent. Second, our new Gen AI concierge named Missi Six will be launched on our app and website. This feature will help guests plan their entire day, tailored specifically to their ride and food preference. Both of these developments are expected sometime in the second quarter. Now, let’s move on to the experience in the park. We are expanding our self-serve kiosks to many of our retail locations later this season. Based on the popularity and success we see at our F&B locations, this will help streamline operations and increased average ticket sizes in our retail facilities, helping guests buy their favorite parks merchandise without needing to wait in line.

Next, live ride wait times will be rolled out to multiple parks this season, providing guests with more accurate wait times, helping guests to maximize every minute in the park. Finally, our new digital wallet is set to be rolled out later in the second quarter. This development will simplify the payment process for guests, consolidating all payment activity for the entire family and can be integrated with your credit card, cellphone or smart watch. This will give parents more control to monitor payment activity and will provide us with valuable customer insight to help personalize our promotions and enhance guest outreach. We are also driving guest engagement after they leave the park to keep them wanting to come back for more. Six Flags is stepping into the metaverse, launching a virtual interactive gaming platform later in the second quarter.

Guests will be able to play online games to earn virtual coins that can be redeemed for real-world benefits at the park. Plus we are developing a new digital loyalty program that we plan to unveil later this year. This will help us to encourage repeat visits, promote in-park offerings and improve overall guest engagement and also reward our most loyal guests. We will provide more detail on this program at a later date. Our digital innovations have shown early success in helping to drive monetization. We feel there is plenty of headroom to expand on this front and unlock even bigger returns in the future. Now, I want to talk about why I’m so excited about the 2024 season. First, our exciting lineup of new rides and multigenerational attraction is already generating buzz and sure to excite our guests.

At Six Flags over Georgia, we are launching the Georgia Surfer Coaster, a first of its kind surf coster, featuring the ultimate combination of a rollercoaster with unique water attraction features, reaching a maximum speed of 60 miles per hour and a height of 144 feet. At Six Flags St. Louis and Six Flags Great America, we are opening 2 new 17-story pendulum rides, a proven fan favorite that takes guests over 170 feet into the air at speeds up to 75 miles per hour. Six Flags Great Escape will be celebrating its 70th [ph] year’s anniversary with the new Bobcat wooden family coasters which will take guests 55 feet in the air and reach speeds of nearly 40 miles per hour. Six Flags Chester Texas will be unveiling our revamped DC Universe area with new theming and rights, including the Cyborg Cyber Revolution, SHAZAM, Tower of Eternity and the Metropolis Transit Authority which will create a truly immersive experience for all members of the family.

And last but certainly not least, we are celebrating our 50th anniversary of Six Flags Great Adventure and we are doing it big. The Flash Vertical Velocity, the first of its kind super boomerang coaster will zip you 100 feet off the ground, feature a 180-degree twisted drop followed by the Zero-G roll [ph] and will reach speed of up to 59 miles an hour. At Hurricane Harbor, New Jersey, we are installing the new Splash Island Kids Play House structure, complete with 50 play features: slides, waterfalls and a gigantic water bucket to splash [ph] seekers. And in June, we will be opening our new Savannah Sunset Resort and Spa, an overnight oasis offering panoramic view within our 350 acres safari and behind the scenes encounters. Spots are filling up quickly, so be sure to book this luxury experience as soon as possible.

Next, this year’s Fright Fest is really going to raise the bar for our signature event. We are ramping up the thrill with new scare zones, upgraded mazes and other new hair raising attraction to take the fear factor to a whole new level. We are also adding new movie theme haunted houses at even more of our parks this year. That’s all I will say for now. So stay tuned for more details. Before opening the call for your questions, I want to highlight an initiative that we are particularly proud of. This summer, we expect to complete our third major solar installation at Six Flags Magic Mountain which is expected to save over $100 million over the next 30 years and it will provide a convenient shaded parking option for our guests. That is another convenience for our guests.

Combined with our solar installation at Six Flags Great Adventures and Six Flags Discovery Kingdom, we will be the largest producer of car port solar power in North America. Also, we have finalized plans to launch our fourth solar installation project at Six Flags Great America. These initiatives are a win-win for everyone we serve. They serve our guests by improving our parking lots, they serve our communities by using renewable energy to power our parks and they serve our shareholders by reducing our operating costs. I will conclude by saying that our transformation from premiumization to the largest investment in rides ever to reinventing the customer journey is about putting the guest at the heart of the experience where every family member, from toddlers to teenagers, to grandparents, find moments of joy and thrills.

Every minute at Six Flags is a minute well-spent. Every minute at Six Flags is a minute well-spent. With that, operator, would you please open the call for any questions.

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Q&A Session

Operator: [Operator Instructions] The first question today comes from Steve Wieczynski with Stifel.

Steven Wieczynski: So Gary, can you help us think about the per caps a little bit better, not only for the second quarter but for the rest of the year. I think you confused me a little bit with some of your commentary. So let me see if I got this right. Full year total guest spending will be up slightly versus last year but it sounds like the biggest drag on those per caps is going to be occurring in the second quarter. So I just want to make sure I have that right. And then anything else you could — you would add on in terms of the cadence for the rest of the year from a per cap perspective would be super helpful.

Gary Mick: Yes. Steve, so the per caps on in-park spend are the aspect that will be favorable for the balance of the year. We’re seeing, again, good traction there from what we would say our in-park revenue generations, investments and revenue strategies are providing a solid lift. The admission side of the per caps is also, we believe, to be up slightly but it will be more moderated over the time of the year. And that goes to the 13-plus impact on that aspect. So the Q2 has the impact of the $10 million of the 13-plus. So that, to your point, is certainly going to moderate the impact, the upside impact of the in-park spend on Q2. But Q3 and Q4 should provide a nice lift.

Steven Wieczynski: So then Q3 and Q4 should be up nicely?

Gary Mick: Yes.

Steven Wieczynski: Okay. And then Selim, I want to ask about pass sales. And I fully understand the unit side of the equation being up so much, given that you guys didn’t sell as many pass sales last year. But I’m surprised that you indicated pricing is up significantly as well. So just wondering if you can kind of break the pricing side down and maybe, what is driving the price increase at this point? And if that’s a much higher mix of the premium priced pass products?

Selim Bassoul: Exactly, Steve. You remember that we all increased pass prices pretty significantly in 2022. And then we knew that this was a challenge but we needed to reset and recalibrate with our guests. Now what we’ve done, we’ve learned a lot since then and we went to a more balanced and holistical approach to our pass offerings. So what we’re doing right now is we are optimizing the balance of single-day tickets and pricing of our simplified passes. So from that perspective, we have basically a promo going on right now where the pricing is very simple. You buy a gold pass, you get a platinum — you become platinum member. You buy a platinum, you become a diamond member. And we’ve seen a significant — so far, we’ve launched it a couple of days ago and it’s been a fantastic, fantastic response to that promo.

Now I want to remind everybody that pricing of that promo is higher — Gary, could you just make sure that I’m correct on this, is higher than the same time 2023 and higher than 2019, correct?

Gary Mick: Yes.

Selim Bassoul: So in both cases, the promo is more effective because there are 3 things that I’m happy about. Number one, we realized that our guests are trying to move up in terms of passes but some of them might not be able to afford it. So by giving the opportunity to buy a gold pass and you get platinum benefits have been a big plus and we’ve seen that last year. But what’s interesting for us is that we’ve added this year, you buy a platinum, you get a diamond and this has been a very good mix. Yes. We have had a fantastic mix, almost 50-50 so far, since the launch of a couple of days ago, where 50% of our people are upgrading to platinum and 50% are upgrading to diamond.

Gary Mick: Yes. Mix has a lot to do with the average season pass price, Steve.

Operator: The next question comes from James Hardiman with Citi.

James Hardiman: I’m at the risk of trying to do some math on the slide here which is always, I think, difficult. I just wanted to make sure we’ve got all the puzzle pieces for the second quarter because it feels like 2Q is going to be a bit challenged. So you talked about sort of the Easter shift being a negative, call it, 90,000 visit headwinds. So that’s maybe 1 point, 1.5 points of attendance headwinds. And we’ve got this per cap issue which is another 2 points, 2.5 points. So I’m getting to maybe a 4% revenue headwind for 2Q. And then we’ve got advertising which I think, Gary, you said in your prepared remarks, are going to be up, it’s going to be up in the second quarter. And then you’ve got inflation which I think you noted was going to be worse in 2Q than what we saw in 1Q just based on the parks that are going to be coming into the mix.

So I guess, my bottom line question, I mean you did $161 million in 2Q last year. The Street is assuming that you can grow on that this year. That seems maybe overly optimistic based on what you’ve laid out. I don’t know if there’s a way to think about sort of the starting point of EBITDA as we look at 2Q but it just feels to me like it’s going to be really difficult to grow EBITDA in the second quarter. Is that fair?

Gary Mick: Great question. Of course, that depends on many things. But you laid out the items that we had identified. We have 13-plus as revenue headwind, we mentioned that was $10 million and that mostly drops through the bottom line. We’re investing in media. We have a new ad campaign that we’re very excited about and that has recently launched. And we’re carrying that into — deeper into Q2 than we did in the prior year. So we believe that’s going to be very impactful on season pass sales group and single-day tickets. So that’s an additional investment. The Easter shift which we’ve talked about here and inflation, so the offset to those are our cost mitigation strategies which Selim is and the team are aggressively and diligently pursuing, as well as a lift on per caps, all right?

So we’ve laid the investment strategies and the revenue strategies for Q2. It depends on attendance and, of course, weather and penetration factors that determine how much the per cap lift is but that’s upside to those headwinds.

James Hardiman: Got it. Go ahead.

Selim Bassoul: I want to make sure, that you understand that, let’s say, we have not — we are not managing and we’ve never managed quarter-to-quarter. I’m going to tell you, this is why we haven’t done or given guidance. But I’m going to share with you that second quarter, we’re investing in — first of all, investing in our media spend to make sure that our season pass promotion is very effective. And we’ve learned from the last 2 years that we cannot miss the Memorial Day sale and we’re putting a lot of effort into it. So we’re basically moving some advertising money from the third quarter into second quarter. So that’s number one. Number two, we are also facing — we had April, we had significant rain in April and we had several days of rain that affected many of our parks that were open at that time, specifically in Dallas.

And then we have the Easter shift. So your comment about being EBITDA down in the second quarter is correct. And then in the second half is where we will basically — this year is all about the second half. So our second half is where we bring all the emphasis and where all our monetization is coming through. So we’ve got a lot of things coming through. We have a lot of rides opening up. And Fright Fest, we are investing in significant Fright Fest in IP. It will be the biggest investment in Fright Fest ever in the history of this company, 5 or 6 IP that are totally new.

Gary Mick: Right. And the 20 rides and attractions that we have coming out, James, all hit, in general, between May and the 4th of July weekend, more of the 4th of July. So the impact on that lift in attendance would be more felt in the second half.

James Hardiman: Got it. And so — and that dovetails nicely into the second part of my question. Sounds like 2Q is sort of an investment quarter effectively. And the way you’ve laid out the second half, it sounds like per cap should inflect positively. Sounds like all else equal, maybe margins get a little bit of a lift because you’re shifting some of that advertising spend. I wanted to talk specifically about attendance in the second half. In the first quarter, ex the Easter benefit, you’re basically flat. But it sounds like you think in the second half, you can do something meaningfully better than flat. I don’t know if I’m reading too much into that but it seems like you’re pretty optimistic about second half.

Gary Mick: Yes. James, I agree with you and that’s the way we’ve modeled it out. We have — the rides and attractions I just mentioned, the season pass sales trend, the group sales trend which is very strong. Selim mentioned Fright Fest, we’re really investing heavily in that. Media campaign and our adjusted Active Pass Base, you take out those annual passes which generally start to fall off pretty heavily at the end of Q2 and Q3, we should have a pretty strong Active Pass Base at the end of Q3. So all of those leading indicators are saying the second half should be good.

Operator: The next question comes from David Katz with Jefferies.

David Katz: I wanted to go back to the loyalty program, Selim, that you talked about. And I just wanted to get a little more color on what you’re going to do with it. But more importantly, how that is intended to fold into the merged company whenever that occurs? Is that going to be a single unified loyalty program? Or how does that — what is the notion of that?

Selim Bassoul: David, it’s a fantastic question. We have been — I am a big believer in loyalty programs. I use them. I believe in them and it allows me to go back to fly the same airline or the same hotel because I like enjoy those loyalty programs. So since I joined this company, I wanted to put a loyalty program. But we, at the time, we needed to upgrade 2 things. We need to upgrade our POS systems so it can honor the points and make that. So we need the technology to help us to put a loyalty program. Second, we needed a better mobile app which we just launched and a better website. So people can track all their points and they can redeem them easily at all times. So the question has been is, where do you see that loyalty program?

We see it to be rewarding our repeat visitors, could spend it in our parks and make sure that they get great value from it. Now the success of whether we integrated with Cedar Fair or not, at this moment, we are trying to make sure that this is a very powerful program. So if you notice about what we’ve done, everything we’ve done at the company in the last 2 years have taken longer time because we want to do it right. So we went in and put a lot of effort into our website and it took a little bit longer to implement because we wanted that website to be stunning. And we spend more money and we put a lot of time and we tested it with many of our park president, with our staff and some of our guests. The same with mobile ordering. The same with every technology we’re launching, it’s taking it very cautiously.

So our loyalty program, our loyalty program is also being vetted [ph] correctly. So from the get-go, it gives people excitement. It has to be something that people say, “Wow, I like it”. And we’re modeling it very much so to what I call the Marriott program. We like the Marriott Hotel program and we like the way it’s easy to use and it’s not complicated and that’s a program we’re going after.

David Katz: Understood. And I think part of my question, I know we’re not supposed to be asking about the merger but is the notion that it would be — there would be a single loyalty program across the platform one day?

Selim Bassoul: I don’t know about that. I honestly — at this moment, I’m going to answer one thing that me and Richard Zimmerman have agreed upon. We like to have our parks remain basically autonomous, being able to cater to their local communities. So we start with something that we’ve agreed upon. We’re trying to make sure what is best for the guest is first. And if merging the loyalty program is better, we’ll make that happen. If it’s too complicated and we won’t make it happen. So one thing I love about this merger is that this merger is truly about the guest and I will talk about it. We are not, for example, merging anything. The names are remaining the same. As Cedar Point remains Cedar Point. It doesn’t become Six Flags, Cedar Point.

Our Great Adventure remains the same. I think there is a lot of autonomy of keeping those parks operating very decentralized and operating on its own. I think they are all different competitor, different communities. They have local competitors from one to another and we’re keeping it very basically fluid and let those parks be run and compete and operate as a stand-alone.

David Katz: Understood. One last quick one, if I may. You made some commentary about AI and it’s certainly top of mind for everybody. If you could spend a second and just elaborate on — is that a customer engagement tool? Is that on the operating side? What — where are you starting with that?

Selim Bassoul: It starts in 3 places. AI, we’re using AI first for training our employees. So this has been already launched internally where our employees can now be trained. All our seasonal workers are being trained and be able to use AI to get all the answers. The second feature is our guest engagement and that goes into, specifically, making sure that we start with the chatbox. We want people to be able to get answers and have answers. Today, we have, call it, 100 people plus in customer service answering the questions. And the last thing you want to do is be able — not be able to get through to answer your questions. And we are using AI to make sure that we can personalize your question. The AI feature goes into your specific season pass and specific issue and we’ll come back and tell you whatever you need delivered to you.

This is not answering the hours of operating in the park, it’s going and answering customized questions and answers. And the third, we’re using AIs in safety. So we are using — upgrading our AI cameras and we’re starting with our water parks, with our lifeguards and that has been very, very big for us. So it’s 3 ways. It’s one is making sure that our employees can use AI day in, day out doing their work. We’re using AI in interfacing with our parks in, with our guests. And the third for safety, where our cameras are becoming very AI-driven.

Operator: The next question comes from Ian Zaffino with Oppenheimer.

Ian Zaffino: Just wanted to kind of ask about the trend in group. Is that all just an internal effort? Are you seeing anything different in the market as far as, is there a trade down or anything like that? And state of the consumer, maybe you can wrap it there? And then, I guess there was a water park recently sold kind of outside of your Chicago Park. Any comments on that? Did you take a look at it, was it interesting? Or any other comments would be great.

Gary Mick: I’ll answer the questions in reverse order. I don’t have a comment on the water park acquisition. I do not believe it will affect us in any negative way in that market. State of the consumer, from what we see so far, is very healthy. The in-park spend, as we indicated in Q1 which is continuing the same directional into April and May, it certainly gives us a good look at the spending and it remains healthy and we feel good about that’s Of course, weather and macro and whatever the state of the consumer mindset is, it can affect that, those things we can’t control. But what we see so far is solid. And then on the group side, we restructured the group teams to go local. And so we physically moved our staff out of the corporate office here in Arlington and back to the parks and the engagement and the additional media support that we’ve also provided has given a good lift.

I think as I listen to other entertainment and theme park companies that it is a trend across the United States that groups are coming back. I think it’s also part of the exiting of COVID and as people realize that there’s a really great fun thing to do and we’re benefiting maybe from that macro.

Operator: The next question comes from Chris Woronka with Deutsche Bank.

Chris Woronka: Question on — as you look at your portfolio parks, would you say that the top to bottom, are these parks getting closer together in performance in terms of year-over-year growth? Are they getting further apart? So not asking about specifics really but just kind of rank ordering. Curious as to how that’s going the way you guys look at it.

Gary Mick: We don’t really give out individual park performance metrics, Chris, at this stage. But Selim’s vision and strategy has been applied equally across all parks and it has certainly responding. Each park has a different demographic, each park has a different locale and a different appeal and different ride package. But yes, they are — they are moving in the same direction.

Chris Woronka: Okay. All right. And then as a follow-up and it’s not a merger question but as mentioned, Cedar Fair. I know that one of the things they talked about heading into the season was kind of adjusting some of the operating days and even the hours. And I know you mentioned, your days were roughly flat in Q1. Is that something you consider as we move into through shoulder season into prime season, should we expect any changes in your operating days or hours?

Gary Mick: We don’t have anything published at this stage, Chris but we will always look at a day as to whether it’s EBITDA accretive. But the other thing we look at is our events. And last year, we talked about this on our third quarter earnings call where we executed a significant number of new events. And this year, in Q2, Q3 and Q4, we’re going to focus on EBITDA accretive, ROI-accretive events and so we should save some OpEx.

Operator: The next question comes from Thomas Yeh with Morgan Stanley.

Thomas Yeh: I appreciate all the puts and takes on the per cap. Gary, I think you mentioned in-park, continuing the same kind of directionally in terms of growth into April and May. So maybe just to put a finer point on that. If we strip out the $10 million headwind from membership revenues, should we think about kind of the organic per cap growth? You did 3% this last quarter in 1Q. Is that still kind of holding up in that zone through the course of the year?

Gary Mick: Great question, Thomas. Yes, I think that’s fair to say and it’s more meaningful in Q3 and Q4.

Thomas Yeh: Okay. Great. And then I think you cited the 4% cost inflation. Is that inclusive of essentially what your view is on the impact you’re seeing from the minimum wage increases for the parks that are opening back up? And should we kind of think about labor costs generally moving in that direction, offset by potentially some efficiency initiatives that you’re kind of putting in place?

Gary Mick: Yes. The 4% is a blended overall average which includes the wage rate increases and it also includes merit increases for our full-time staff.

Thomas Yeh: Okay. Awesome. And maybe just to squeeze one last one in. On the Active Pass Base, can you maybe just elaborate a bit on that dynamic that you mentioned about the annual pass comparison sold in ’22 versus not in ’23? Is that revenue timing headwind that’s impacting the cadence of quarterly revenues in a meaningful way? How should we think about that as it translates into your revenue recognition?

Gary Mick: The annual passes, Thomas, were included in the last year’s deferred revenue. So they certainly contributed to prior year’s revenue stream and they won’t this year. So that helps the correlation between Active Pass Base and deferred revenue.

Thomas Yeh: So to the extent that you’re kind of seeing it flow through into other pass sales, you presumably — the timing of the season pass sales kind of makes up for some of that over the course of the year? Is that how to think about it?

Gary Mick: Yes. I think that’s exactly right. And I’ll follow up a little bit with the 13-plus. I mean it’s a lot of noise, right? It’s a time-based revenue recognition as opposed to a visits per pass active with the parks open revenue recognition. But essentially, it’s nothing more than a season pass. And so to make up for the 13-plus, we sell more season passes. And that’s how that will all balance out.

Operator: The next question comes from Lizzie Dove with Goldman Sachs.

Lizzie Dove: Just wanted to go back to attendance trends. I think excluding the 90,000 benefit in the first quarter, it grew around 1%. And so I just want to kind of get a sense of what’s the right exit rate to use here? Mexico is a big piece. I think some of the parks opened a little earlier. Your pass units are also up to double digits. So just kind of, what’s the right kind of underlying excluding these kind of puts and takes rate to use going forward?

Gary Mick: Great question, Lizzie. It’s a complex equation, right, with many, many, many elements in it. I certainly think that the full year has a meaningful lift of attendance. Based on what we see on our season pass sales trends, the group sales, I mean all the rides that we have coming in, we talked about the media. Exactly how that ends up is a function of many things, including weather and the economy and other things we can’t control.

Lizzie Dove: That makes sense. I guess to kind of follow up. James mentioned the 1.5% headwind in 2Q with the calendar shift. But you’ve got an important, call it, 6 weeks to play for with volumes going up. Do you think there’s a chance that you can grow in 2Q and make up for that headwind that you’ve got or kind of too early to say at this point?

Gary Mick: It is too early to say at this point, Lizzie but yes, there’s a chance. It all depends on — we have the meat of Q2, when you take April out of the equation, 85% of our active volume is in the next — is in May and June. And we’re set up very well for May and June to be good. But as you know, the parks are frequently open on the weekends for the first, let’s say, 3 weeks of May before we go into full operation. And if it rains on those weekends, that’s always a challenge. But assuming normalized weather, per cap lift is possible, yes, it is possible.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Selim Bassoul for any closing remarks.

Selim Bassoul: Thank you for being with us on this conference call this morning. I think we have laid the ground work for profitable growth in 2024. This is a year we’re very excited about. Our solid 2024 pass sales up double digits, both in higher units and in pricing; the higher mix, I’ve just mentioned, me and Gary, about the mix of diamond and platinum, the higher all-season dining and FLASH pass, our group sales, now near pre-pandemic levels, 20% above last year so far; strong in-park growth, record first quarter IPs [ph], 5% underlying per cap growth, new immersive experiences, glamming a lot of rides coming up and the best Fright Fest ever with brand new IP that are amazing. I think the next phase — we start — we kept on talking about originally the premiumization in part of our transformation.

And premiumization has most probably helped us be where we are today. But the second phase is reinventing the customer journey, engaging guests before, during and after park visit. And we’re doing a lot of all of this through technology. Nearly half of our guests now are using our speedy gate, a very innovative technology. Our self-serve kiosks streamlining operation and expanding it into retail. We are driving IPs [ph] seeing growth in nearly all our revenue channels. We believe we can grow attendance and per cap this year. We have a continued underlying price growth in admissions and IPs [ph]. We are raising the bar. We are focused on families, appealing to all ages. Thrills have no age or know no age. People are staying longer, as I mentioned, in my example, where people at 7:00 p.m., 3/4 of the people came at 11:00 in the morning are still in our park.

Rides and attractions geared to all members. We invested a lot in our kids area and now we are upgrading our big rides. And now we are also putting water structures and slides in our water park. It took some time. We spent a lot of money in the first 2 years making sure that we’re providing shaded structure, VIP lounging, gaming houses, cooling system, better restaurants; and now we are going back to what’s our core making sure that our rides and our slides are better. Our new technology, making it easier to do business with. Our digital wallet, our Gen AI planning, our easier website to navigate. We are putting a lot of amenities in our park infrastructure. And at the end, to make a memorable experience, it’s all about convenience, value, ease of doing business and premiumization and personalization of experiences.

Again, making memorable experiences are very simple. We want to provide a convenient way to do business, want to provide value, want to be easy to do business with and we need to personalize and customize premium experiences. On behalf of the Six Flags team, we appreciate your continued support. Have a great day and we look forward to seeing you in our park this season. Thank you. Bye-bye.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.