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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.
We have divided our call 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 and our capital allocation strategy.
Finally, I will return to provide some comments about the initial progress we have made on our three key strategic priorities.
I am pleased to report that the strong start we experienced in the first quarter continued through the second quarter into the heart of our summer season.
Our results this quarter are due to the dedication of our team members who really stepped up and pulled together to safely reopen our parks.
In fact, the second quarter marks the first time since 2019 that all of our parks were open.
And as of today, there are no constraints on park capacity or ride seating in any of our U.S. parks.
I am proud to see our employees working hard to deliver a great guest experience in this difficult operating environment.
I am also proud of our efforts to give back to our communities.
Over the past few months, we have hosted numerous vaccination sites at our parks, and we have donated more than 140,000 tickets as an incentive for residents in areas around our parks in Texas, Illinois and California to get vaccinated.
Turning to our operating trends.
We continue to experience strong consumer demand at all of our parks.
Through July 25, year-to-date attendance and open parks was 82% of 2019 levels.
A significant portion of our attendance shortfall relative to 2019 is a result of lower prebooked group ticket sales, which have historically accounted for a significant portion of our early season attendance and which have been slower to recover.
Excluding prebooked groups, year-to-date attendance at our parks during the periods they were open in 2021 was 89% compared to the same period in 2019.
We are also seeing strong guest spending per capita.
For the second quarter, our guest spending per capita was up more than 20% versus the second quarter of 2019 due to progress on several of our transformation initiatives as well as a strong consumer spending backdrop.
In addition, our season pass sales trends have accelerated.
As of July four, 2021, our Active Pass Base was essentially flat with the same day in 2019.
As a result of our strong revenue trends and season pass sales, we generated $190 million of cash flow during the quarter.
While we are encouraged by our results and the early progress we are making on our transformation, operating conditions continue to be quite challenging.
We continue to operate with COVID-related constraints at our park in Montreal and our two parks in Mexico.
And like many other businesses, we also continue to face a tight labor market and supply chain constraints.
While labor challenges persist, our team has worked aggressively and creatively to alleviate some of the pressures.
We selectively raised hourly rates for seasonal team members, offered a bonus for any team member who were employed as of July one and who stayed through the end of the summer season.
And we recently offered an additional bonus for those who stayed through the end of October.
In addition, we have expanded our outreach and recruiting efforts through traditional channels as well as social media.
These measures have helped us manage through the labor challenges the entire industry is facing.
Our results this quarter are encouraging.
We were still in the early stages of transforming our operating model.
Our goal is to delight both our guests and our shareholders by providing classic Six Flags thrills enhanced with modern technology while keeping a careful eye on costs.
I would like to start by reminding everyone that results for the second 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 many of our parks remained closed or had curtailed operations during the second quarter 2020.
For that reason, I will provide comparisons to 2019.
Total attendance for the quarter was 8.5 million guests, a 19% decline from second quarter 2019, reflecting fewer operating days at several of our parks due to the pandemic capacity restrictions at some of the parks that were open and the loss of most of our prebooked group sales.
These headwinds were partially offset by a favorable calendar shift from our fiscal year change.
Because of our fiscal year change, our second fiscal quarter 2021 ended on July four instead of June 30 as we did in 2019.
As a result, second quarter 2021 includes four calendar days in July or most of the July four holiday weekend.
This was partially offset by four days in April, including the Easter holiday in 2021 that shifted out of the second quarter and into the first quarter this year.
The net benefit of these shifts into the second quarter of 2021 was 614,000 of attendance and $32 million of revenue.
In the spring and early summer, we historically derived a significant amount of attendance from group sales, which includes school groups and company buyouts.
Because most schools and offices have yet to resume group events and these outings are typically booked in advance, we have experienced a significant decline in group sales during the spring and early summer months.
Through July 25, year-to-date attendance at open parks was 82% of 2019 levels and has accelerated since the end of the quarter.
A significant portion of our attendance shortfall relative to 2019 is a result of lower pre-booked group ticket sales.
Excluding prebooked groups, year-to-date attendance at our parks that have been open all year was 89% of 2019 levels.
Attendance from our single-day guests in the second quarter represented 36% of total attendance versus 39% for the second quarter of 2019, reflecting the impact of lower prebook sales, which are counted toward single-day attendance.
Excluding prebook sales, the attendance mix from our single-day guests increased by eight percentage points versus 2019.
Looking ahead, we expect group sales to have less of an impact since groups typically represent a smaller portion of our attendance during the second half of the year.
However, our new fiscal calendar will continue to create attendance shifts between quarters for the balance of this fiscal year.
Our third quarter will include an extra weekend during Fright Fest compared to 2019.
We expect this calendar shift -- the calendar change to shift approximately 500,000 of attendance out of the fourth quarter and into the third quarter.
When netted against the shift of the July four weekend out of the third quarter, we expect the changes in our fiscal calendar to negatively impact the third quarter's attendance compared to 2019 by approximately 400,000 guests.
Total guest spending per capita increased 23% in the quarter versus 2019.
Applying the pro forma allocation mentioned on last quarter's earnings call to 2019, admission spending per capita increased 24%.
And in-park spending per capita increased 22% compared to the second quarter of 2019.
The increase in admission spending per capita compared to 2019 was driven primarily by our new approach to revenue management.
That approach includes pricing our tickets based on the demand curve as well as a new pricing architecture that allows us to optimize relative pricing among our various ticket types and to reduce promotions.
In addition, as much of our season pass sales are occurring later in the season than usual, we are recognizing season pass revenue over a shorter time frame, which boosted our ticket per capita in the second quarter.
Looking ahead to the second half of 2021 and 2022, we expect the ticket per capita growth rate to moderate as our attendance and promotional cadence begins to normalize.
The increase in in-park spending per capita compared to 2019 was primarily due to early progress on several of our transformation initiatives, including an acceleration in the uptake of mobile dining, which carries a higher average order value; our new F&B strategy, including a new food pricing architecture and the introduction of more premium offerings; our new cash to card kiosk, making it easier for consumers to spend money on games and merchandise in our parks; our QR code-enabled FLASH Pass program; and a higher mix of non-group single-day guests, who typically spend more in our parks per visit.
In addition, the overall consumer spending environment was very strong in the second quarter, and we believe that we benefited from an unusually high level of consumer discretionary spending.
Looking ahead to the second half of 2021, we expect our in-park spending per capita to increase relative to 2019, but we expect the growth rate to moderate.
Revenue in the quarter was $460 million, down $17 million or 4%.
Excluding the impact of reduced sponsorship, international agreements and accommodations revenue, revenue was down less than $1 million.
The decrease was also a result of lower attendance net of the fiscal calendar change mostly offset by higher guest spending per capita.
On the cost side, cash, operating and SG&A expenses versus 2019 decreased by $4 million or 2%.
The reduction in expenses reflected cost savings measures during the quarter driven by our transformation plan, lower advertising costs and a benefit from a portion of the proceeds received in connection with one of our terminated international development agreements in China partially offset by higher incentive costs to attract and retain team members.
Due to the labor conditions we currently face, we are incurring higher wage rates for seasonal employees.
During the second quarter, these additional costs were offset by a reduction of hours worked due to the tight labor market.
Adjusted EBITDA for the second quarter was $170 million, down $9 million or 5% versus second quarter 2019.
This included a net benefit of the fiscal quarter change, which shifted attendance into the quarter.
Second quarter 2021 also included $11 million of proceeds received in connection with one of our terminated international development agreements in China.
As a reminder, second quarter 2019 included a $7.5 million settlement related to the termination of our international development agreement in Dubai.
We are pleased with the retention of our Active Pass Base.
At the end of the second quarter, we had 6.3 million pass holders, which included 2.1 million members and 4.2 million traditional season pass holders.
Due to our fiscal calendar reporting change, the second quarter of 2021 benefited from additional sales over the July fourth weekend.
Adjusting for the reporting calendar change, the Active Pass Base as of June 30, 2021, was essentially flat compared to June 30, 2019, with an increase in traditional season pass holders offset by a commensurate decrease in members.
We are focused on increasing our membership base, and we expect our total members to grow over time.
Our Active Pass Base retention is a testament to our unique offering and loyal following.
Deferred revenue as of July four, 2021, was $310 million, up $75 million or 32% compared to second quarter 2019.
The increase was primarily due to strong season pass sales in the second quarter of 2021 and to the deferral of revenue from members and season pass holders whose benefits were extended through 2021.
We expect to recognize most of this deferred revenue in 2021.
Year-to-date capital expenditures were $42 million.
For the full year, we previously expected to spend less than $98 million spent in 2020.
However, because of our strong operating results and cash flow and our confidence that our operating performance will continue to improve, we now have capital expenditures of $130 million to $140 million in 2021.
We expect to believe 9% to 10% of revenue is an appropriate level of annual capital expenditures in a normalized environment.
Our balance sheet is very healthy with no borrowings under our revolver and no debt maturities before 2024.
Our liquidity position as of July four was $714 million.
This included $461 million of available revolver capacity net of $20 million of letters of credit and $253 million of cash.
Net cash flow for the quarter was $190 million.
Given the significant operating losses we incurred in 2020 as well as our pre-existing NOLs, we expect to pay minimum federal taxes this year and next.
And we do not expect to become a full cash taxpayer until 2024 at the earliest.
I would now like to give you a quick update on our transformation plan.
We continue to make progress with our revenue and cost initiatives, as shown by the positive impact on our attendance, per capita spending and cost savings.
In 2021, we expect to achieve $30 million to $35 million from our fixed cost reductions, and we have already realized more than $16 million through the first half of this year.
We continue to be on track to deliver $80 million to $110 million in incremental annual run rate EBITDA once our transformation plan has been fully implemented and attendance returns to 2019 levels.
This includes an incremental investment of approximately $20 million in seasonal wage rate increases annually on a go-forward basis in addition to the $20 million we called out in our previous baseline for a net increase of $40 million compared to 2019.
The full impact of the wage rate increases will likely materialize in 2022, but we expect them to be offset by an increase in the expected value of our revenue initiatives.
As part of our transformation plan, we expect to incur $70 million in charges.
We have incurred $46 million in cost so far through second quarter 2021, including the noncash write-offs of $10 million that occurred in 2020.
We expect to incur the remaining $24 million in 2021 and 2022, the majority of which is related to investments in technology, including a new CRM system.
Finally, I'd like to touch on our capital allocation strategy, which is particularly important given our large cash balance and our expectations that we will generate significant cash in the back half of this year.
Our first priority will always be to invest back in our base business when we see opportunities to generate attractive returns.
As I just mentioned, we expect to increase our capital expenditures this year, which will allow us to invest in high-priority and high-return park infrastructure and technology projects.
Priority #2 is to pay down debt until we reach our targeted leverage range of three times to four times net debt to adjusted EBITDA.
Longer term, once we are within our targeted leverage range, we will consider strategic acquisition opportunities.
And if there are none, then we will return excess capital to our shareholders via dividends or share repurchases.
To conclude, we are encouraged by the initial progress on our transformation plan and are well positioned to achieve our adjusted EBITDA baseline range of $530 million to $560 million when attendance levels return to 2019 levels including the impact from labor inflation.
This new baseline is not the endpoint but rather the beginning.
And once it is achieved, we expect to grow EBITDA by mid- to high single digits annually thereafter.
Now I will pass the call back over to Mike.
I'd like to take a few minutes to review our strategic priorities.
We believe that improving the guest experience will be the most important driver of our long-term sustainable earnings growth.
We are evolving our culture to center on our guests.
Everything we do will focus on how to delight our visitors with a fun and memorable experience.
Our second strategic priority is to continuously improve operational efficiency, which essentially means that we will be laser-focused on managing costs as we grow our revenue.
And finally, our third priority is driving financial excellence, which means that we will make sure that our operating improvements flow through to bottom line profits and that we achieve strong returns on any investments we make.
Despite the challenging operating environment, we have already made progress on some of these strategic priorities, and I'd like to highlight a few of these areas before opening up the call for Q&A.
On our first strategic priority, modernizing the guest experience through technology, I'd like to call out four initiatives that are already starting to have an impact.
First, customer relationship management.
We recently launched our new CRM platform that will allow us to understand and predict our guest preferences from the moment they visit our website to the moment they leave the park.
Based on our new consumer database, we have already begun tailoring our communications based on our guest preferences.
And over time, we will be able to customize their experiences, so they get exactly what they want, when they want it.
Second, Mobile FLASH Pass, which now includes QR code capabilities.
We recently have begun transitioning our traditional FLASH Pass to a mobile environment at certain parks.
This has been very well received by our guests as they no longer have to wait in line to retrieve and return a physical FLASH Pass, and they can easily show a QR code on their phones for faster entry to rides.
This has helped generate a double-digit increase in our FLASH Pass sales.
Third, cash to card kiosks.
This provides several benefits.
First, it makes it easier for our guests to spend money on games and merchandise because they don't have to worry about carrying around cash, and it speeds up transactions.
Second, it reduces shrinkage in our parks and minimizes cash handling costs.
Finally, it improves hygiene.
We have already seen a benefit to our in-park per caps from this initiative.
Our guests will no longer have to wait in long lines to order food.
Instead, they can choose to order on their smartphones and pick up their food when it is ready.
We are still testing and iterating the implementation of mobile dining, but even in this early stage, our guest utilization of mobile dining continues to accelerate.
Mobile dining has already led to higher average transaction spend and improved guest satisfaction with our food ordering and pickup process.
We are pleased that our two key performance indicators for this strategic priority, attendance and revenue, are both accelerating.
And we look forward to implementing more of our initiatives to improve the guest experience over time.
We've also made progress on our other strategic priorities, continuously improving operational efficiency and driving financial excellence.
On operational efficiency, we have moved quickly to streamline our organization and reduce other fixed costs.
And we expect to realize $30 million to $35 million of fixed cost savings in 2021.
Finally, our financial excellence, we are pleased to report that our adjusted EBITDA is improving, although we are still a long way from where we would like to be.
As the operating environment returns to 2019 levels, and we implement more of our transformation program, we expect to achieve our adjusted EBITDA baseline range of $530 million to $560 million.
And most importantly, we expect that level to serve as a jumping off point from which we can sustainably grow mid- to high-single digits over time.
In conclusion, we are pleased with our high customer retention and loyalty, demonstrated by our Active Pass Base, which continues to grow.
Our transformation efforts are proving their value as we see cost savings from our changes in the operating model and increased per capita spending from our revenue initiatives.
Our team members are working very hard to create fun and thrills for our guests.
With a clear focus on improving the guest experience in a talented and dedicated team to execute our strategy, we are well positioned to accelerate growth in the back half of 2021 into 2022.
Catherine, at this point, could you please open the call for any questions?

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six flags entertainment q2 revenue $460 million.
q2 revenue $460 million.
reported attendance of 8.5 million and revenue of $460 million for q2 2021.

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