Six Flags Entertainment Corporation (NYSE:SIX) Q4 2023 Earnings Call Transcript

Six Flags Entertainment Corporation (NYSE:SIX) Q4 2023 Earnings Call Transcript February 29, 2024

Six Flags Entertainment Corporation misses on earnings expectations. Reported EPS is $-0.27 EPS, expectations were $0.27. 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’ Fourth Quarter and Full Year 2023 Earnings Conference Call. My name is Jason, and I will be your operator for today’s call. During the presentation, all lines will be in listen-only mode. After the speakers’ remarks, we will conduct a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Evan Bertrand, Vice President, Investor Relations and Treasurer.

Evan Bertrand: Good morning, and welcome to our fourth quarter and full year 2023 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 with the SEC.

Before we begin, a brief remark on the pending merger with Cedar Fair. As many are already are aware, on January 31, we filed with the SEC our definitive proxy relating to the upcoming shareholder meeting to consider the pending merger and related matters. Our shareholder vote is set for March 12 and we are targeting a closing in the first half of 2024. Our call today will focus on the results of the fourth quarter and the full year 2023. We will not be taking questions about proposed merger between Six Flags and Cedar Fair or any of the associated proxy materials. At this time, I will turn the call over to Selim.

Selim Bassoul: Good morning. Thank you for joining our call. Before we begin, I want to express our excitement about the proposed merger with Cedar Fair. We feel that this compelling combination will deliver value to our guests, our investors and to our employees. As a reminder, our special shareholder meeting to approve the merger will be held March 12 so please cast your vote. As we close the second fiscal year in my role as CEO, I am encouraged by the signs I am seeing that our premiumization strategy is working. I see a growing interest and engagement from families wanting to visit our parks, including multi-generational families, grandparents with grandkids, college students and young couples with babies. Our iconic brand is synonymous with thrills and adventure which excites children and makes adults feel like children again.

My eight-year-old begs me every weekend to take her to the park and she can’t wait until she is tall enough to ride the Hero coasters. I see customers willing to spend more time and more money in our parks. By reducing overcrowding and friction at just short points we have become an easier company to do business with, and an easier park to navigate, which creates a better environment for guests and employees. Our guests on average are spending over 40% more per visit than they were before the pandemic. Guests of all ages can enjoy a full day of personalized and immersive experiences, complete with events, meals and attractions, while enjoying more comfort and convenience. We have added VIP lounges, more private cabanas, new kids areas with activities and rides, upgraded sit-down restaurants and expanded our culinary offerings from delicious finger foods and local brews to salads, vegan, premium ice-cream, freshly baked pretzel, Korean corn dogs and Kofta kebabs.

Guests can chill in our sports bar and watch the game on our large TV screens or hang out in our air conditioned state-of-the art eGaming lounges where kids and adult can compete and play. Guests can enjoy new events and clearly themes festival like Oktoberfest, Kids Boo Fest, and Flavors of the World, and our enhanced signature events like Fright Fest with new Haunted Houses built with iconic horror brands such as Saw and The Conjuring. These were a hit with guests this year. I’m also encouraged to see the positive impact that streamlining our organization has had on empowering our employees and creating a culture of expediency, excellence and ownership. I will share a personal experience. I have noticed new food trends such as bubble tea, pop-up in various upscale shopping malls.

My first bubble tea ever was in our park and it was delicious. I watched as our teams skillfully constructed this wonderful, freshly prepared bubble tea using the best ingredients, best mixture of flavors and served with a smile. Employees feel more connected to the guest and I see the pride they have in their work. We’re also seeing encouraging signs in our financials. Since 2021, we have grown guest per caps by 17%, reduced full time headcount by over 30% lowered cash expense in the face of historical levels of inflation, leveraged key partnership to expand sponsorship revenues and paid down over $300 million of debt. In 2023, food and beverage revenues grew in both units and average pricing exceeding our attendance growth over the same period.

We also made good progress rebuilding our cost (ph) base using more targeted media, promotional pricing and introducing our new Six Flags Plus subscription style program in June 2023 with a more profitable balance of benefits and price. Our progress continues with 2024 passes, which through January are up double-digit over 2023. That said, we fell short of our financial targets. We faced unforeseen challenges like historical levels of inflation, abnormally challenging weather and supply constraints. We have also made missteps and we have learned that not every element of our strategy is equally successful. But we’re able to pivot quickly and we are leveraging our experience to continuously improve and explore new opportunities. For instance, we are optimizing our events calendar to focus on those we have seen the best return, while exploring exclusive events and special access passes to drive monetization.

And we have tested where and when customers are willing to pay for a convenience and we have invested to enhance guest facing technology and create new revenue streams. This includes adding mobile wallets, and tap and pay, which now comprise 40% of all in-park transactions. Our new mobile app, which makes it easier for guests to order food on mobile devices, new handheld point-of-sale devices, providing greater flexibility to accommodate guests and enhance throughput. Dynamic pricing, which has shown traction, extending the booking curve and capturing additional admissions revenue. And SixPay wristbands for water guests, who don’t want to carry their wallet or cellphone. I will discuss more exciting technological initiative later on this call.

We are guided by our mission to deliver an exceptional guest experience and we believe this will deliver exceptional returns to our shareholders over time. With that, I would like to turn the call over to Gary to discuss the financial results for the quarter and the full year.

Gary Mick: Thank you, Selim and good morning, everyone. I will start with attendance, revenue and per caps and then move to expenses and EBITDA for the quarter and the full year. I will then discuss our active pass base metrics, select balance sheet items, and capital allocation. Starting with the fourth quarter. Total attendance was 4.3 million guests, a 6% increase from 2022 driven by higher season pass and single day attendance during Fright Fest. Revenue increased $13 million or 5% to $293 million, driven by higher attendance partially offset by a decrease in total guest spending per capita of $0.96 or 1%. Admissions spending per capita decreased $1.44 or 4%, offset by an in-park spending per capita increase of $0.48 or 2%.

Guest spending per capita decreased primarily due to the lower revenue from memberships beyond the initial 12 month commitment period, what we call 13 plus, which is recognized evenly each month. 13 plus revenue was $12 million lower in Q4 2023 versus Q4 2022 due to the attrition of our legacy members. Excluding the impact of 13 plus revenue from both periods, which we believe is a better reflection of our average higher pricing in the fourth quarter and our in-park monetization efforts. Guest spending per capita would have been higher than prior year by $2.35 or 4%, which includes an increase in admission spending per capita of $1.04 or 4% and an increase in-park spending per capita of $1.31 or 5%. As a reminder, we made a strategic decision to discontinue the sale of new memberships in April 2022 due to the inclusion of rich benefits, difficulty to administer in the park and the drag on per-caps in margins associated with this product.

We launched the new Six Flags Plus in June 2023 and plan to resume growth in the 13 plus base starting in the second half of 2024. However, we expect to face 13 plus revenue headwinds in Q1 2024 that we estimate to be around $14 million. Moving on to costs. In fourth quarter 2023, we incurred $15 million of merger related costs associated with the proposed merger with Cedar Fair. Cash operating costs, which includes cash operating and SG&A expense, but excludes merger related costs, increased $12 million or 8% in the fourth quarter versus the prior year. This increase was due to the following factors. First, higher attendance drove higher seasonal labor cost of sales and other variable costs. Second, we incurred incremental costs associated with new attractions and entertainment for our expanded fall events schedule.

Third, we accelerated investments in guest facing technology to ensure readiness for 2024. Lastly, higher inflation increased wages and other operating costs. Adjusted EBITDA for the quarter was $98 million, essentially flat compared to fourth quarter 2022, which as you recall was a record with higher costs offsetting higher revenue. Moving on to 2023 full year results. Attendance increased by 1.8 million guests or 9% to $22.2 million. We estimate that adverse weather reduced full year attendance by over 1 million guests. This includes rain and snow in California during spring break, followed by a record summer heat wave in Texas and eight consecutive weekends of rain or threat of rain in the Mid-Atlantic and Northeast after Labor Day. Total revenue increased by $68 million or 5%, driven by higher attendance and higher sponsorship revenue partially offset by lower per capita spending.

Total guest spending per capita decreased by $2.90 or 5%, driven by a decrease in admissions per capita of $2.56 or 7% and a decrease in-park capita of $0.34 or 1%. The decrease in admissions per cap was the anticipated result of lower pass pricing in the first three quarters of 2023 relative to 2022 when prices were significantly elevated. In-park per caps decreased due to the higher mix of season pass attendance, partially offset by an increase in Food and Beverage sales in ’23 versus 2022, which is driven by mobile food ordering new culinary offerings and our expanded events calendar. For the full year, 13 plus membership revenue impact, on the year-over-year per cap comparison was negligible. Regarding full year costs, we incurred $38 million related to an upward revision of our self-insurance reserves in the second quarter of 2023 in addition to the $15 million of merger related costs in the fourth quarter of 2023.

Cash operating costs excluding merger related transaction costs and self-insurance reserve adjustments increased by $61 million or 8%. The majority of expense growth occurred in the second half of 2023, and was caused by several factors, many of which we expect to normalize in 2024. First, we increased advertising by $18 million in 2023 in an effort to help rebuild our Active Pass Base. We expect advertising spending in 2024 to be in line with 2023. Second, we incurred incremental expense associated with the expanded events calendar. We plan to optimize events in 2024, which will help mitigate these cost increases. Third, we accelerated technological initiatives, many of which we expect will help mitigate labor costs in 2024. And lastly, significant inflationary pressure estimated to have cost us $50 million, partially offset by full-time headcount reductions and procurement savings.

Adjusted EBITDA for full year 2023 was $462 million, essentially flat with 2022. Our Active Pass Base, as of December 31, 2023, comprised 5 million pass holders flat with last year. As you will recall, our Active Pass Base at the end of third quarter 2023 was 23% higher than the prior year third quarter. The sequential drop in prior year comparison from third quarter to fourth quarter is primarily due to two factors. First is the timing of our past promotion, which was focused in the third quarter 2023 around Labor Day versus being focused in the fourth quarter in 2022 during our November Cypress sale. Second, there was a difference in the expiration date of our gold season pass between 2022 and 2023. In 2022, Gold Passes were valid through the entire year, expiring in early January of the following year.

2023 Gold Pass has expired in early October ahead of Fright Fest and are not included in the 2023 year end passed balance. Deferred revenue, as of December 31, 2023, was $128 million, down $1 million or 1% compared to the prior year. On our last earnings call, deferred revenue at the end of third quarter 2023 was up 17% over the prior year third quarter. The sequential drop in the prior year comparison in the third to fourth quarter, largely due to the two factors I just discussed, coupled with the transition of membership deferred balances to 13 plus revenue due to discontinued legacy membership passes. We have made many changes to our past strategy over the past two years in an effort to find the right product mix and balance of pricing and benefits.

Despite our active pass base and deferred revenue balance being essentially flat versus the prior year, we feel the progress we have made on new season pass sales in this encouraging data point as we assess our outlook for 2024. As Selim mentioned, since the start of selling in late August, through the end of January 2024, pass sales are up double-digits over prior year, driven by an increase in both units and pricing. CapEx spend, net of insurance recoveries was $61 million in the fourth quarter, an increase of $23 million compared to the fourth quarter 2022. Full year 2023 CapEx was $171 million, an increase of $59 million, driven by investments in our park infrastructure, events, rides and guest-facing technology. Total liquidity, as of December 31 was $377 million, which includes $299 million of available revolver capacity, net of $21 million of letters of credit, plus $78 million of cash.

We feel we have sufficient capacity to pay down the remaining $57 million of unsecured notes due July 2024 using a combination of free cash flow and revolver capacity. In May of 2023, we increased our total revolver capacity from $350 million to $500 million, providing greater flexibility to pay down debt. Since 2021, we have used $311 million of free cash flow to pay down debt, inclusive of $38 million financing fees, OID and redemption premiums. We expect to continue using free cash flow to pay down debt until we achieve our target net leverage ratio of 3 times to 4 times adjusted EBITDA. Now I will turn it back over to Selim.

Selim Bassoul: Thank you, Gary. Now I would like to discuss why we are excited about the 2024 season. First, 2024 season pass sales are off to a strong start. We are selling a higher mix of platinum and diamond passes as well as more add-on products like the all-season dining and all-season flash pass. Second, we are leveraging technology and automation to improve operational efficiency and safety. For example, our new AI integrated aquatic vigilance system, which will provide real-time monitoring and improved response times to help drive down labor costs and improve safety in our water parks. Our upcoming chat AI guest services web feature will be able to answer a large portion of guest questions and resolve the request reducing the need to transfer to a live agent, and live ride wait times to better manage the flow of guests with better accuracy and visibility.

Third, we are bolstering our revenue streams through technological innovation and operational enhancements. In Food and Beverage, we are expanding mobile app food ordering to more restaurant locations and are introducing new web-based QR code ordering. We are placing QR codes in high-visibility dining areas, so guests can use mobile ordering without needing to download the app. While introducing self-serve kiosks, these sleek modern and easy-to-use kiosk have a proven track record in the restaurant industry for increasing throughput, reducing customer wait times and driving higher average spending by enticing customers to do more customization and add-ons. In retail, we launched a new automated photo capture technology which provide guests with a personalized media library of ride photos, making them simple and easy to purchase, which will provide an additional revenue stream and help create a more memorable experience.

We are also planning to revamp our merchandise strategy with new higher quality and more desirable apparel thanks to new partnership with premium vendors. In Parking, our new speed — speedy automated toll plazas, which will help expedite the entry process, cut down on seasonal labor at the gate and provide additional revenue. In group sales, we restructured our sales team late in 2023 by moving them out of corporate and back to the parks, enabling a more focus and localized operation. We are seeing positive signs with early bookings pointing to solid growth in 2024. And our final reason to be excited about 2024 is the lineup of exciting immersive experiences. This includes our new Savannah Sunset Resort and Spa luxury glamping experience at Six Flags great adventure, where guests will enjoy sweeping views of our 350 acre Safari and participate in up-close animal encounters.

We are also planning the most exciting year yet for Fright Fest, who are ramping up the thrills with new hunted houses, scare zones and other new hair-raising attraction to take the fear factor to a new level. This will include more IP-branded houses, which were a big hit this past year, and of course, new rides and attractions. The anchor of a great amusement park is its ride, and we have always been known for having the most and best in the industry. We previously announced we are kicking up capital through 2026 to bring a wide spectrum of new attractions, targeting every member of the family, and we are following a different strategy that had — what had been done in the past with a focus on putting the right ride in the right place at the right part.

For 2024, we will have a new Dino off-road adventure at Six Flags over Texas which bring you face-to-face with life size and animatronic dinosaurs. New steam town teaming at Six Flags America where the past meets the future and will include the all-new steamroller ride, an exciting family ride with four rotating arms. A new DC kits universe at Fiesta Texas. This young family-friendly environment will bring adventures to our youngest thrill seekers. A new ride, like the fan favorite Giga Discovery in both Six Flags, Great America and in St. Louis, a team favorite ride that creates unique thrill experiences. This ride has been very successful in our other parks. The surfer at Six Flags over Georgia, an intense ride of 144 feet high, 60 miles per hour and almost 600 feet of track complete with this splash zone.

And the super boomerang at Six Flags great adventure. It triple tower launch coaster with 10 at moments, which we expect to open in time for its 50th anniversary celebration. We operate in a highly competitive market where customers have the choice of many diverse entertainment options. To compete for our share of the discretionary leisure wallet requires continued smart investments in our guest innovations, immersive experiences, and premium park offerings. This keeps us on our toes, and we don’t take anything for granted. I want to finish with two big surprises for me this past year. First is being awarded the best and brightest company to work for in 2023 in Dallas and Indonesia. Given all the challenges executing the strategy, I truly did not expect it.

When you think of all the great companies in Dallas and in the U.S., it’s an honor and it’s quite humbling. It is a testament to the great leadership we have at our parks. I am grateful for our employees who are fully dedicated and willing to work hard to create a great experience. This is a very competitive environment, and we have to continue to be the best each and every day. Second is being part of the largest digital alliance in our industry. This is a credit to our Chief Digital Officer and his team. We are proud to partner with great innovators such as Google, Dell, Pure Imagination, Fuel, Snow Flake and HCL Tech to bring the latest technology to our parks, transforming the amusement park experience to be more personalized, immersive and memorable.

With that, operator, would you please open the call for any questions.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from James Hardiman from Citi. Please go ahead.

James Hardiman: Hey, good morning. Thanks for taking my call. So Selim, you laid out all the reasons why you’re excited about 2024. I guess I should presumably interpret that as you think there should be some top line growth here. I don’t know if you want to sort of put some broad numbers around that. But I guess, as I drill down a little further, if we look back to 2022, you had big per cap growth, right, big pricing growth, but attendance declined, I think, more than that. 2023 was sort of the reverse, right? You had solid attendance growth, but then some modest per cap declines. As we think about 2024, what’s the growth outgo look like? Should it be a more balanced approach to revenue growth where we can see both attendance and per caps grow in the year? Thanks.

Selim Bassoul: Well, thank you. James, thank you so much for the call. So as you know, we are not providing guidance. However, I will tell you that the difference between 2022 and 2023 is simply the fact that we refocused on building the active base. And we ended up saying, okay, it was a matter of recalibrating our pricing, rejiggering our membership. As you all know, in 2022, we had stopped it, stopped the legacy members. And June or July, we re-entered the Six Flags plus membership. So we were working on reactivating the — rebuilding the base. We also spend money on media talking about advertising, and media talking about things we put in. We had to launch this new membership and we had to push it up. We also spend a lot energy on technology.

We also — where we tried to say, we needed to go after food service and retail. So we tried to change our food ordering, mobile food ordering penetration, which was loan (ph), and we spend a lot of money on this, a lot of resources. We went after alcohol penetration. We went after transaction per hour, and then we went into what I call the daily dining plan and the season dining plan, as you remember, in 2022, we eliminated it and relaunched a much more win-win for us and for our guests. And then there were a lot of renovation with bars and coffee shops. So I look at this and I say the emphasis has been on food service, and there was a lot of resource spend. Now some of the things that we did not do well. So we did not do well in ’23 as we launch a lot of new events.

So we launched tons of events. So if you remember, we had a calendar in the fourth quarter of 2022, when we say let’s go back and ramp-up events. And we went — we kicked off Viva La Fiesta!, Flavors of the World, Summer Nights Celebration, [indiscernible] and I can keep on going on and realize and we had fireworks and drone show, and realized that not all those events panned out. To realize that it did not drive additional season passes, some of them. We also realized that they were cannibalizing other things we’re doing in the park, longer operating hours, staffing those events cost us a lot of money and manpower. And now we’re streamlining in 2024 to say what works and what didn’t work. So a lot of experiment in 2023 versus 2022 in rebuilding the base.

And part of it was pricing. Part of this was offering more perks like the events. And at this moment, going into 2024, a lot of learnings were happened in 2022 and 2023. So that’s why I’m excited about 2024.

James Hardiman: Got it. And then maybe sort of a separate question. One of the things I’ve been asked a lot over the past few months, this isn’t a merger question, but I think it maybe came up as a result of the merger. What’s the proper level of investment in your business? If I look at whether it’s OpEx or CapEx, relative to your closest peer, right, whether or not you team up with them, the level of investment has historically been less. So maybe 44% OpEx as a percentage of sales versus 48% at your peer. CapEx has been — well, CapEx this year was about 12% of sales. But historically, you’ve been in that high-single digit range. Your closest peer has been more in that 14% range historically. So how do I think about that as we move forward? Is there a need to increase investment to sort of catch up or do you think there are just structural differences in sort of how you versus your peers would need to invest properly? Thanks.

Gary Mick: Yeah. Hi, James, it’s Gary. So we don’t comment on the merger in that sense. And we’re operating our business this year as if the merger is not going to happen. We’re assuming, of course, that it is, but we’re running our business as we always would, right? So when you look at the investments on CapEx historically, as you mentioned, it’s been in the single digits, 8%, 9% of revenue. And we have increased it, as you saw this year 12%, and we plan to increase it in ’24 and ’25 because we do need to improve the guest offerings and rides marketable capital and food and beverage retail.

James Hardiman: Just to clarify though, you say increased CapEx in ’24 and ’25. Is that above the 12% that we saw in ’23 or is it just similarly higher than its historically been? And then sort of a similar question on OpEx, like where does that go from here? It sounds like you think that the growth in OpEx, unlike ’23 can be maybe less than the growth in sales, but maybe clarify.

Gary Mick: Yeah. So in terms of, it’s similar to what we announced in the last quarter earnings call, James, we’re going to run around $2 to $2.20 for 2024, that’s the anticipated spend at that point, that includes maintenance by the way.

James Hardiman: Any thoughts on the OpEx side?

Gary Mick: In this case, we’re looking at — as Selim pointed out, we spent quite a bit on events and as we look to reduce the events that are not ROI accretive, we anticipate the expenses will come down. We don’t, of course, have an ideas to the inflation impact of this.

Selim Bassoul: Can I give a little bit more flavor on to OpEx, please? I’m going to break it down into four, four truly buckets. The buckets number one is, we spend in the third and fourth quarter a lot of money on events and advertising. So let’s talk about the events. So we’ll most probably streamline the event and we’ll have a lot less spending on the event, we could figure out the one that was a one didn’t work. And advertising, we’ll expect to have a flat advertising as we maximized and we found that advertising and media promotion was very effective. So this level of advertising will be flat in 2024. However, we’ll continue to most probably invest in technology as we continue having resources in creating — still, we have three elements.

We are investing in — continue investing in self-serving kiosk, AI, in 2024 and some retail initiatives that includes technology. But that’s not really, I call it, slightly a bump up from where we were in 2024. But the biggest — the largest — large bucket that most probably will be a problem for us and we have to figure out is wages. So what’s happening, it’s kicking up in 2024 is what I call state-mandated minimum wages that have now kicked out in 2024 across minimum wages. So now they are all coming in. Almost 90% of the states are now mandating, they issued those mandates somewhere and most probably 2018, 2019. I remember when I was at Middleby, all the restaurants were worried about their wages going up and then it was a delayed process, and it all hits in 2024.

It will hit the industry. It will hit the restaurant business, the hospitality, where labor rate — hourly labor rate with minimum wages are going up. So this most probably will be the biggest issue we have to deal with going into 2024.

Gary Mick: All right. We have tremendous focus on reducing our costs, James. There’s no question that whatsoever. But these other upside factors that Selim just mentioned, make it difficult to predict the total number.

James Hardiman: Got it. That’s great color. Thanks, Gary. Thanks, Selim.

Selim Bassoul: Thank you.

Operator: The next question comes from Steve Wieczynski from Stifel. Please go ahead.

Steven Wieczynski: Yeah. Hey, guys. Good morning. So I want to ask James question, maybe his first question there a little bit differently. And look, Selim, I know you’re not going to give specific guidance for this year. But trying to understand how you guys are thinking about per caps. Look, obviously, there’s shifts in attendance in the attendance mix. But look, if we sit here a year from now, I guess the simple question is, are per caps both on the attendance and in-park side, do you think you can grow those over 2023?

Selim Bassoul: Yes. Steve, that’s a great question. Impact spend has not been an issue for us. It will grow and it’s growing. If you take — so we need to start focusing on something where we haven’t done as good of a job going through it because now we understate very well is what you call the 13 plus members. And maybe I’ll turn it to Gary a little bit to discuss the 13 plus and the impacts of 13 plus on what’s happening in 2023, and why the numbers. So if we start taking away 13 plus from the equation, you’ve seen that our per cap has grown in park. And maybe I’ll turn it over to Gary to go at it.

Gary Mick: Thanks, Selim and great question, Steve. Just in general to answer the question on 2024 per caps, both admission and in-park, we anticipate to be elevated over 2023. If you take out the 13 plus as Selim just mentioned, from the fourth quarter, our — both admissions and in-park are up like, let’s say, an average of 4%. So almost all of our products that we are pricing into ‘24 are priced with an increase over prior year. The thing we do actually like the 13 plus revenue stream. It is a subscription-based revenue stream. So once the 13 plus member gets beyond the 12 month initial commitment period, the revenue flows in monthly. What makes Q1 and Q4 difficult in terms of analyzing the per caps is that, its time-based, right.

It’s recognized monthly and supposed to our season pass based which is recognized at an active sense or business per pass. So what we have the headwind in Q1, Selim that we’ve mentioned regarding the 13 plus, it really is just a function of a pass divided by 12. So as we sell more 2024 season passes, that, of course, replaces the revenue from 13 plus, but that revenue goes into deferred in the first part of this year and doesn’t get recognized until the parks actually open. So there’s a timing difference between those two. But we do appreciate 13 plus revenue. The guests love the monthly payment option. They are our most loyal guests and we appreciate the cash flow in the slower months. So the Six Plus that Selim launched last year, that will start rolling off being in the 12 month commitment period and will actually roll into 13 plus in the second half of the year, which will help rebuild that base.

Steven Wieczynski: So from a cadence perspective, it seems like 1Q is obviously the toughest comparison. You talked about the $14 million headwind. So your per caps, especially on the attendance side will probably be down in 1Q and then from there, it kind of eases and through the year. Am I kind of thinking about it the right way?

Gary Mick: Yes. You have it exactly.

Steven Wieczynski: Okay. And then, Selim, look, a bigger picture question. I’m not sure what you’ll say here. But look, this is a business that was supposed to do whatever EBITDA level you want to throw out that guys have talked about before, but a number that is much higher than where you’re run rating today. So look, I guess the simple question is, as your premiumization strategy finally all comes together, attendance normalizes what level of and you don’t have to give an exact number, but what level of EBITDA do you eventually see Six Flags getting to?

Selim Bassoul: Excellent question. I think this has been most probably, I mean I do EMEA Copa (ph) here because I underestimated the cost and the complexity of the transformation. We had to change a lot of things. We had to change the culture from attendance to yield from a corporate centralization to part decentralization, some several layers of management to serialize all but-only (ph). We had to most probably change our demographic a little bit and increase the presence of families in our parks. In addition, I have to tell you that was surprising to me. It was how much old and calcified systems that we had in our computer system, ERP system, point of sale, that were CRM system, POS system that were hard to integrate and evolve.

We had no choice. To be successful, we have to use modern, cloud-based tool that allow us to react and change with agility and execute our strategy to achieve what literally in 2024 and 2025, what I call, achieved above average outcomes at below average cost. And the way I look at that is, if you remember, I had spoken about it last year, early last year, I started figuring out that the original projection of what we call the 710 million was not achievable given — it was not achieved by end of 2024. So I went back and I said I needed two more years. If you remember, I have said I would like to start looking at 2025 and 2026 start achieving those numbers and that’s what I’m feeling comfortable about.

Steven Wieczynski: Okay. Great. That’s very good color. Thank you guys so much.

Operator: Your next question comes from Thomas Yeh from Morgan Stanley. Please go ahead.

Thomas Yeh: Thanks so much. I wanted to ask about the pass sales pacing into January. Gary, you mentioned some timing impact related to Q4, keeping it flat. Is the January number relatively clean. So now we’re on an apples-to-apples basis, and we’re seeing more unit growth even on higher blended pricing. Is that a fair characterization?

Gary Mick: Right. Yeah. I will simply say that our 2024 season passes, Thomas, are up double-digits over the same period prior year.

Thomas Yeh: Okay.

Gary Mick: That goes through the end of January, yeah.

Thomas Yeh: So specific to ‘24 pass sales relative to the ’23 ones?

Gary Mick: Yeah. We just — we use it holistic, we used the period holistically, Thomas.

Thomas Yeh: Okay. Understood. And then apologies in advance for torturing you more on the 13 plus membership revenue dynamic. But I guess, excluding that, you highlighted the underlying 4% is maybe the right way to think about the trend line. Is that expectation for that as you see it now because of the pricing stabilizing more and your strategy kind of lining out a little bit more that, that’s a fair outlook in terms of an expectation on the core?

Gary Mick: Yes. I think that’s fair. It’s early in the year to make a long-term prediction. But based on what initiatives we laid out our commentary and Selim has talked about, we feel that’s a reasonable expectation of per capita.

Thomas Yeh: Okay. Helpful. And then just last one from me. On weather, I know you mentioned some headwinds, obviously, there were clear headwinds through the year, but nothing very specific to Q4, was whether net bad guy in the quarter just reported? And maybe any commentary on the weather conditions that you were seeing in February and January, that would be helpful.

Gary Mick: Yeah. Thanks for the question and yes, weather. Weather impacted us in two ways. If the — we mentioned eight weekends of continuous rain or threat of rain post Labor Day weekend. And of course, Fright Fest, 80% of our EBITDA pretty much comes out of October. And from the Mid-Atlantic all the way to Montreal, all of our parks were under the threat of rain or it actually did rain for seven out of those eight days. We calculate we lost about 150,000 of attendance at those areas, more about $10 million of revenue in Q4. So in one sense, I’m proud of the efforts that parks our team did to generate the $98 million because we had the weather headwind of $10 million of revenue, and we had the 13 plus of 12. So we went into it $22 million down in terms of revenue and ended up $13 million up.

So all in all, a good performance. And that is the strength of Fright Fest at our other locations. So when we added the IP hunted houses this year and increased investment, the attendance lift and the revenue lift above prior year came from the Fright Fest, Boo Fest and Oktoberfest, that we laid out at the other parks that we’re not so much affected by weather. So that gives us just real excitement about the same time period in 2024, and Selim is increasing the investment in Fright Fest, as mentioned, and we’re adding more IP, more excitement, more haunted houses, it’s going to be a blast.

Thomas Yeh: Great. That’s helpful context. Thank you.

Operator: The next question comes from Ian Zaffino from Oppenheimer. Please go ahead.

Ian Zaffino: Great. I just wanted to ask a question on season passes so far. Can you maybe help us understand what may be the — what each cohort is doing as far as getting more diamond sales. Have you noticed any sort of meaningful change in the buckets between the highest tier passes, lowest tier passes and maybe what you’re kind of seeing as far as demand for each of them? Thanks.