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Text: 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.
Over the past few weeks, I have been energized by visiting our parks and spending time with so many of our team members.
It has been great to witness firsthand our team's resilience and their dedication to serving our guests.
We have divided our call today into three parts.
First, I will provide an overview of our operating performance and the strong demand trends we are seeing.
Second, Sandeep will go into more detail about our financial results.
Finally, I will return to provide some comments about the progress we've made on our three long-term strategic focus areas.
Despite the challenging environment in the third quarter, we continue to experience strong consumer demand at all of our parks.
We benefited from delivering exactly what consumers are looking for thrilling and affordable entertainment for the whole family that is outdoors, and only a short drive from home.
Attendance during the quarter indexed 92% of 2019 levels excluding pre-booked group sales our parks index 95% in the third quarter compared to the same period in 2019.
Fourth quarter to-date trends through this past weekend, ending October 24 have accelerated versus the 92% index.
We also continue to make steady progress with our revenue management initiatives.
During the third quarter, guest spending per capita was up 23% versus 2019.
In addition, season pass sales trends have accelerated.
As of October 3, 2021, our Active Pass Base was up 3% compared to the third quarter 2019.
While demand trends are encouraging, we continue to face a tight labor market, and we continue to incur additional costs while operating in this unprecedented environment.
Looking back on the past two quarters, the speed and magnitude of the resurgence of demand was even stronger than we expected which exasperated the stress on our costs and operations.
We are working on several initiatives to alleviate some of these cost pressures.
Sandeep will discuss this in more detail.
Overall, we are encouraged by our continued progress yet, we are still in the early stages of transforming our operating model.
We are confident that our efforts to improve all aspects of the guest experience will fundamentally reshape the future earnings power of our business.
I would like to start by reminding you that results for the third quarter and year-to-date trends are not comparable to prior year because we closed all of our parks in mid-March last year and several of our parks remained closed or had curtailed operations through third quarter 2020.
For that reason, I will provide comparisons to 2019.
Total attendance for the third quarter was 12 million guests, a 14% decline from 2019.
Reflecting capacity restrictions at some of the parks that were open, the loss of a significant portion of our pre-booked group sales and an unfavorable calendar shift due to our fiscal year change which benefited the second quarter at the expense of the third quarter.
Group sales, which includes school groups and company buyouts continued to experience downward pressure.
As Mike stated attendance at open parks in the third quarter index at 92% of 2019.
Excluding pre-booked group sales, our parks indexed 95%.
During the months of the quarter, our attendance indexed 97% in July, 89% in August and 86% in September.
Concerns about the delta variants increased over the summer, and we experienced a decline in group sales in the second half of August through September.
However as Mike stated, fourth quarter to-date trends have accelerated versus the 92% index we achieved in the third quarter.
Looking ahead, we don't plan to share monthly attendance trends.
However, because of the extraordinary environment, we thought it would be helpful to share this detail.
Attendance from our single day guests in the third quarter represented 39% of the attendance mix, the same as in the third quarter of 2019 despite the negative impact of lower pre-book sales on single day attendance.
Excluding pre-booked group sales, our mix of single day guests increased by three percentage points.
Because of our reporting calendar change, our third quarter fiscal quarter 2021 ended on October 3, instead of September 30 as it did in 2019.
As a result, third quarter 2021 includes three calendar days in October.
This was more than offset by four days in July, which shifted out of the third quarter and into the second quarter of this year including most of the July 4th weekend.
The net reduction due to these calendar shifts in third quarter 2021 was 437,000 of attendance and approximately $24 million of revenue.
We expect group sales to have less of an impact in the fourth quarter, when groups typically represent a smaller portion of our attendance than in the second and third quarters.
However, our new fiscal calendar will continue to create attendance shifts in the fourth quarter, which will include an extra weekend in January compared to 2019.
We expect this reporting calendar change to shift approximately 200,000 of attendance out of first quarter 2022 into fourth quarter 2021.
When netted against the shift of the October weekend out of the fourth quarter into the third quarter, we expect the changes in our fiscal operating calendar to negatively impact the fourth quarter's attendance compared to 2019 by approximately 270,000 guests.
Total guest spending per capita increased 23% in the third quarter versus 2019.
Admissions spending per capita increased 20% and in-park spending per capita increased 26%.
The increase in admissions spending per capita compared to 2019 was primarily driven by our new approach to revenue management as we saw double-digit growth in admissions per capita for both our Active Pass Base and single day tickets.
Our new approach includes pricing our tickets based on a demand curve.
It also includes a new pricing architecture that allows us to optimize relative pricing among our various ticket types and to significantly reduce the debt of discounted promotions.
In addition, as much of our season pass sales are occurring later in the season than the historical pattern, we recognize season pass revenue over fewer visits which boosted our admissions per capita in the third quarter.
As expected, admissions per capita growth versus 2019 moderated in the third quarter.
We expect to continue growing our admissions per capita over time, but we expect the growth rate to continue to moderate.
The increase in in-park spending per capita compared to 2019 was due to early progress on several of our transformation initiatives, as well as a stronger overall consumer spending environment.
Highlights from our in-park initiatives include our new food and beverage strategy featuring a new food pricing architecture and the introduction of more premium offerings, our QR code-enabled FLASH Pass program, which has increased FLASH Pass adoption, our improved merchandise mix resulting in higher retail sales, and a higher mix of single day ticket visitors whose tickets, do not include parking.
The acceleration of our in-park per capita spending during our highest attendance quarter gives us confidence that our transformation initiatives are providing a sustainable lift.
Revenue in the quarter were $638 million, up $17 million or 3% compared to 2019.
Excluding the impact of the fiscal calendar change and the impact of reduced sponsorship international agreements and accommodations revenue, our base business revenue increased by $55 million or 9% compared to the third quarter 2019.
On the cost side, cash operating and SG&A expenses increased by $45 million or 19% in the third quarter compared to 2019.
The increase was driven by several factors.
First higher wage rates and incentive costs to attract and retain teams members.
Second, an increase in litigation reserves primarily related to an increased estimate of the probable outcome of the settlement of legacy class action lawsuit.
Third, increase security in our parks, and finally, a shift in the timing of our repair and maintenance costs based on our parks leader opening dates.
As we sit here today, the operating environment remains challenging with the tight labor market and ongoing supply chain constraints.
We believe that approximately half of the additional costs we are incurring are transitory and will normalize over time.
However some of these costs, particularly wage inflation may prove to be more permanent.
In terms of labor if current wage rates were to persist, we would incur additional labor expenses of $40 million annually compared to 2019 inclusive of the $20 million we called out in the EBITDA baseline we gave during our fourth quarter 2019 earnings call.
This $40 million is consistent with what we called out in our previous earnings call.
Our team is working on potential opportunities to alleviate many of these cost pressures in case they persist over time.
Adjusted EBITDA for the third quarter was $279 million, down $28 million or 9% versus third quarter 2019.
This included the negative impact of the fiscal quarter change which shifted attendance out of the quarter, the reduction of international sponsorship and accommodations revenue, and roughly half of the $45 million cost increase in the quarter that we believe to be transitory.
We are pleased with the growth of our Active Pass Base.
At the end of the third quarter we had 7.6 million passholders up 3% from the end of the third quarter 2019.
This is especially encouraging because we elected to not hold a highly promotional FLASH sale that we conducted around Labor Day, the last several years before the pandemic.
We expect to continue to increase our Active Pass Base through the spring while achieving higher ticket yields.
Our very large Active Pass Base sets us up for a solid fourth quarter and positions us well as we head into the 2022 season.
Deferred revenue as of October 3, 2021 was $224 million, up $26 million or 13% compared to third quarter 2019.
The increase was primarily due to the deferral of revenue for members whose benefits were extended.
Year-to-date capital expenditures were $62 million.
We expect capital expenditures of $120 million to $130 million in 2021 as we make investments to improve the guest experience and to increase capacity on our rights.
Our capex this year is heavily weighted in the fourth quarter due to our cautious approach toward capital spending in the early part of 2021.
We continue to believe 9% to 10% of revenue is an appropriate level of annual capital expenditures in a normalized environment.
As the recovery continues, we are focused on maximizing cash flow.
Year-to-date net cash flow through the third quarter was $232 million, an increase of $26 million compared to the first three quarters of 2019.
Our balance sheet is very healthy, with no borrowings under our revolver and no debt maturities before 2024.
Our liquidity position as of October 3 was $851 million.
This included $461 million of available revolver capacity, net of $20 million of letters of credit and $390 million of cash.
Our capital allocation priorities remain the same, first, to invest in our base business.
Second, to pay down debt until we reach our target leverage range of three to four times net debt to adjusted EBITDA.
Third, to consider strategic acquisition opportunities.
Finally, to return excess cash to shareholders by our dividends or share repurchases.
Moving to our transformation plan as previously discussed, we expect the plan to generate an incremental $80 million to $110 million in annual run-rate adjusted EBITDA.
In 2021, we expect to achieve $30 million to $35 million from our fixed cost reductions.
We have already realized over $23 million through the first nine months of this year.
Based on year-to-date trends, we now expect to reach the high end of $80 million to $110 million range once the plan is fully implemented and attendance returns to 2019 levels.
Thus far, our revenue management initiatives have overdelivered on our original plan.
However, our cost initiatives have been negatively impacted by labor and supply chain inflationary pressures.
For that reason, we expect our revenue initiatives to provide a greater proportion of the $110 million.
Relative to the midpoint of the company's pre-pandemic guidance range of $450 million, we are well positioned to achieve our adjusted EBITDA baseline of $560 million once our transformation plan is fully implemented, and attendance returns to 2019 levels.
This EBITDA level assumes the current wage rate environment persists.
We are laying the groundwork for sustainable earnings growth and once the base line is achieved, we expect to grow revenue by low to mid-single-digits and EBITDA by mid-to-high single-digits annually thereafter.
Now, I will pass the call back to Mike.
I'd like to take a few minutes to review some of the progress we have made on our three strategic focus areas to drive long-term, sustainable earnings growth.
Our first strategic focus area is modernizing the guest experience through technology.
We want to create more personalized and customized experiences for our guests, putting them in control of their time and activities.
This will result in our guests spending less time wait in line, and more time having fun and enjoying activities during each visit.
We believe that improving the guest experience will be the most important driver of our earnings growth.
On past calls, I've discussed a number of the exciting long-term initiatives that are underway including our new CRM platform, cash to card kiosks, ride reservations and an improved mobile app to name a few.
Today, I would like to provide some detail on three additional initiatives that are already starting to have an impact.
First, digital fright passes.
Instead of guests having to wait in long lines to pick up hundred attraction wrist bands, this Fright Fest season they able to go right to the honored attractions using their season pass card, membership card for e-tickets.
Guests are able to purchase digital fright passes on their phone from anywhere in the park by scanning QR codes.
This has increased our fright pass sales while eliminating wait times for our guests.
Second, expanding our mobile dining locations across our parks and enhancing our food and beverage offerings.
We continue to see the adoption of mobile dining leading to higher average transactions and improved guest satisfaction.
Third, culinary partnerships, to elevate the guest dining experience we have launched two we probably serve Starbucks locations that serve a variety of the premium Starbucks drinks beloved by our guests.
Early findings reveal that selective partnerships with third-party brands, improves guest satisfaction, and increases in-park spend.
Our partnership with Starbucks is only the first of several initiatives centered on enhancing our guest dining experience through strategic partnerships.
Our second focus area is to continuously improve operational efficiency.
We continue to make progress in this area in particular on our centralized back office and procurement efforts.
Our cost progress is currently being obscured by the labor cost and supply chain headwinds, but over time, we expect our cost savings to show up in our financial results as we scale our business, get closer to full attendance capacity and pursue additional cost opportunities.
Finally, our third focus area is driving financial excellence.
While we are keeping a close eye on the delta and other variants, we are optimistic that the global recovery will continue.
Timelines are hard to predict and progress will continue to vary by region, but we believe we are fast on our way to stronger guest attendance beyond the levels of 2019.
As we implement more of our transformation program and as our attendance recovers at 2019 levels, we expect to deliver $560 million in adjusted EBITDA.
Even more important, once we achieve that new EBITDA baseline, we expect to sustainably grow adjusted EBITDA from our base business mid to high single-digits over time.
In conclusion, these have been challenging times, but we are looking forward to a bright future.
With a clear focus on improving the guest experience through technology and a talented and dedicated team to execute our strategy, we are well positioned to accelerate growth in 2022.
Catherine, at this point, could you please open the call for any questions.

user
compname reports q3 revenue of $638 mln.
q3 revenue $638 million.
qtrly total revenue was $638 million, an increase of $17 million compared to q3 2019.
six flags entertainment - expects transformation plan announced in march 2020 to generate incremental $80 million to $110 million annual run-rate adjusted ebitda.
qtrly increase in operating costs was driven by higher wage rates & incentive costs to attract and retain team members.

assistant