Six Flags Q1 2017 Highlights: Mardi Gras Event Expansion & Water Park Acquisitions

[Medusa42]

Lots of interesting info in today's earnings call. Here are the highlights:

 

https://seekingalpha.com/article/4065686-six-flags-entertainment-six-q1-2017-results-earnings-call-transcript?part=single

 

Mardi Gras Event Info:

Our new Mardi Gras events, which we launched at Six Flags Fiesta Texas in San Antonio and Six Flags Mexico in the first quarter, were very successful. The combination of parades featuring real Mardi Gras floats, entertainers and special Cajun cuisine was a huge hit with our guests, and we anticipate rolling this event out to a few more parks in 2017.

 

As you know, our team has done a great job in recent years of growing attendance and earnings in the shoulder season with events like Fright Fest and Holiday in the Park. So, we are excited to add a new event to this strategy.

 

Tyler Batory - Janney Montgomery Scott LLC

You talked about the Mardi Gras event in 1Q, can you give any more details on that. It's maybe a driver of season pass sales at those two parks. And then how many parks, do you think you could roll it out to next year?

John M. Duffey - Six Flags Entertainment Corp.

Hi, Tyler. So, as it relates to Mardi Gras, probably a little bit too early to tell in terms of the successes that relates to season passes. These events, they build over time. But I think, it was a little bit of a driver for our season pass, but I think going forward, gives people another reason to come to the park, multiple visits per year, all the more reason to buy a season pass.

So, we're very pleased with what we've seen in terms of the attendance during the period of time that we had Mardi Gras at both of these parks, and the in park spend, which has turned out very nice. So, overall, we're very pleased with the Mardi Gras.

The beauty of Mardi Gras is that you can actually do it at any time during the year, it doesn't have to be in March. So, I think, we've got the ability to roll this out to other parks to take the infrastructure that we have – the floats, some of the food stands, and actually move that around to parks throughout the year.

So, I think, we're going to probably see a further roll out to maybe a couple parks in 2017, and based on the success of that, we might expand to even more parks in 2018.

 

Water Park Acquisitions:

This month we also opened our beautiful new 60-acre water park in Oaxtepec, Mexico, located about 50 miles southwest of our theme park. This represents our 19th operating park, taking over or acquiring water parks in close proximity to our theme parks is highly synergistic in several important ways.

 

First, we can bundle the two parks together and sell season passes that provide access to both the theme park and water park. This improved product offering allows us to increase the price of the season pass and at the same time sell more passes.

 

For example, season pass sales in our Mexico City market are already up significantly this year due to the excitement around the bundling of our theme park with the new Oaxtepec water park, and we expect pass sales to continue to grow, now that the water park is open.

Second, we can leverage our existing infrastructure, including our local management team, our marketing expenditures and our supply chain. Taking over the operation of existing water parks, allow us to expand our capacity and attendance with minimal investment, providing a quick payback and high return on invested capital. We will look to accelerate this strategy in other markets as opportunities arise.

 

Now this year, we've added the fifth driver that we believe will enhance our value creation strategy. I'm especially excited about the potential to bundle our existing theme parks in a market with a nearby water park to offer combo theme and water park season pass.

In the case of Oaxtepec, we took over operations of an unprofitable water park at no cost, refurbished it with a new capital investment, and expect to see meaningful earnings contributions in the near term. In other likely deals, we may simply acquire or lease an existing water or theme park and enhance its profitability with our scale and season pass bundling.

 

Barton Crockett - FBR Capital Markets & Co.

Okay. That's helpful. Now, one thing that was new on this call is I heard you guys talk about rolling out more water parks, which is interesting and I think something we haven't really thought about much. I was wondering if you could give us a little bit more sense of how many of your Six Flags parks don't have a water park, because I know a lot of them do or you think there could be an opportunity to add a water park? And also just clarify, I mean are you talking about adding parks where you don't already have a water park or could you double down and maybe get a second water park and get a lift from that?

John M. Duffey - Six Flags Entertainment Corp.

Yes, Barton. So, all of our locations have a water park with the exception really of three. And those three are in Mexico, and so that's why we're very excited about the addition of Oaxtepec. Also, in our San Francisco park, as well as Montreal. So, all the rest of the locations either have a separate standalone water park or they have a water park within the existing theme park. So, we think that there is opportunity, even at those locations that have existing water parks, where we could potentially acquire a water park maybe in one of the outer markets. So, it would basically expand the size of the market for us and again the ability to sell combo passes and we've proven that to be extremely successful in Mexico, I think, is a great opportunity for us.

Barton Crockett - FBR Capital Markets & Co.

Okay.

John M. Duffey - Six Flags Entertainment Corp.

This strategy will work even at those locations where we have existing water parks, and Barton, it's just not water parks, I think, we also have this ability as it relates to potential theme parks as well.

Marshall Barber - Six Flags Entertainment Corp.

And Barton, in Atlanta, it's not an untested to have a water park in the park and an additional water park. In Atlanta, we had the water park across town and we built a water park within the theme park and had great success, selling combo passes and it actually benefited both the water park and the theme park.

Barton Crockett - FBR Capital Markets & Co.

Now are you thinking, this is more an acquisition or more a new build or really a hybrid?

John M. Duffey - Six Flags Entertainment Corp.

This is more of an acquisition. So, where we would either outright acquire an existing water park or maybe take it over and lease it.

Barton Crockett - FBR Capital Markets & Co.

And these acquisitions, any sense of what the multiples are? I mean, are they to buy a park, I mean, how should we think about how much that cost. This as an industry, we haven't really thought about much, we haven't seen much deal action in there. So, can you frame it for us?

John M. Duffey - Six Flags Entertainment Corp.

Yeah. Well, what I would say is obviously, we would only look at this if it's accretive. And so, we would have to make sure that, if it's an outright acquisition, that we're getting a good price for that. And then as it relates to – absolutely there could be some situations where we don't outright acquire it. There's really no big capital investment on our part upfront, but we may lease an existing water park.

Marshall Barber - Six Flags Entertainment Corp.

In a water park, a standalone water park when we acquire it, we have so much more potential given the theme park and our combo passes than any water park standalone could have. So, regardless of the multiple, there will be EBITDA earnings pretty significantly.

John M. Duffey - Six Flags Entertainment Corp.

And as it relates to margins, if you think about EBITDA less CapEx margin, it is actually higher at water parks than it is at theme parks.

 

CapEx:

In 2017, in addition to our regular CapEx spending of 9% of revenue, we are spending approximately half of the $18 million of incremental capital expenditures related to completing the upgrades of the Oaxtepec, Mexico water park. We're excited about the return potential of this park and believe it will generate a very quick payback on our capital investment.

 

Going forward, we expect CapEx spending to be 9% of revenue or lower excluding any additional water park refurbishments or acquisitions.

 

Barton Crockett - FBR Capital Markets & Co.

Okay. And then one final, hopefully more interesting question. As you're looking at this idea of potentially acquiring some water parks or other parks to expand your regional kind of presence, how should we think about your return on invested capital hurdle for those investments? What can you tell us about that and you guys have been running 9% of revenues kind of CapEx profile on a core theme park revenues excluding international licensing. How should we think about that potentially changing going forward as you look to expand your local footprint?

Marshall Barber - Six Flags Entertainment Corp.

So, in terms of the water park acquisition and the ROIC on that, we are looking at these water parks, and I mentioned it earlier, but what a standalone water park can do versus what it can do as part of an existing theme park close by is for us, we can drive a lot more EBITDA out of that parks than they can. So we expect very quick paybacks on any of those investments.

In terms of your second question on the 9% of revenue, depending on when we purchase or if it's a leased operation when we take over the operation that could be in addition to the 9%. Again, if it's at the beginning of the year, it just really depends on if it's a acquisition or a lease and whether we get revenue or not for the given year.

John M. Duffey - Six Flags Entertainment Corp.

Yeah. Barton, as it relates to the percentage of revenue associated with CapEx, I think, it's really going to depend on the actual deal and what we're taking over. So, for example, in Mexico, which was a excellent opportunity for us, so we did have to spend some capital to upgrade that facility. That facility was not to the level of a Six Flags park and we knew that we would have to spend roughly around $18 million in terms of new capital to get it there.

There may be other situations where we will take over a park, where it may not require any incremental capital on our park. And so, we may be able to just treat it as our existing parks where we can fit any type of new marketable capital or maintenance capital within the 9% budget. So it really is going to depend on, I would say, the state of the park that we would take over.

 

REIT Status:

Steven Wieczynski - Stifel, Nicolaus & Co., Inc.

And then second question just in terms of not pursuing the REIT conversion. Can you maybe just give us a little more details as to what drove that decision? And then maybe if it was the right way to start thinking about this going forward is that Investors Relation expect you guys to revisit that structure, again until the NOLs expire?

John M. Duffey - Six Flags Entertainment Corp.

Yeah. As you know, we decided not to pursue our REIT structure at this time. And if you look out, market conditions have changed from when we first looked at this, and we conducted a very detailed analysis even utilizing some outside advisors. We've talked in the past about how we, as a standalone company, don't qualify to be a REIT. So, we would have to basically split into two separate companies which creates a very complicated structure. So, as we've analyzed this in terms of where REITs trade in terms of their valuation, the ongoing costs associated with having two separate companies, the operational complexity, and really some of the limitations that it would put on on kind of our future flexibility, it outweighed the benefits.

So that was a decision that we made. Now, it was the decision – the answer is it was a decision that we made looking at even the current federal tax rates to the extent that that those rates go down based upon what we've heard around some potential legislation that would make a restructure even more less favorable. And by the way, if that were to occur, it would be a significant benefit to us going forward. So, Steve, I will be honest with you, at this point in time I don't expect. We'll continue to monitor but I don't expect that we would revisit that decision.

Edited April 26, 2017 by Medusa42

[IBOK]

So if I read this correctly, SF could potentially look at buying a place like Sahara Sams in Berlin and join access to that as well as the park on our passes. They did mention a pass cost increase which would be fine since it's peanuts now anyway. I like the concept. Not sure if they can find a sweet deal to acquire around here but would be nice if they did.

[Medusa42]

It begins...

 

http://investors.sixflags.com/news-and-events/press-releases/2017/04-27-2017-214449204

Waterworld California Becomes Six Flags’ 20th Property

 

April 27, 2017

Waterworld California Becomes Six Flags’ 20th Property

Company Signs Agreement to Operate Water Park in Northern California

GRAND PRAIRIE, TEXAS--(BUSINESS WIRE)-- Six Flags Entertainment Corporation (NYSE:SIX), the world’s largest regional theme park company, today announced it has entered into an agreement with EPR Properties, owner of Waterworld California, to operate the water park located in Concord, California. Waterworld California, formerly owned and operated by Six Flags, is Northern California’s largest water park and is located 18 miles southeast of Six Flags Discovery Kingdom. The agreement is subject to approval by the City of Concord.

 

“This is an exciting new venture and a great opportunity to provide families with more entertainment options in this important market,” said Six Flags President and CEO John Duffey. “Guests in Northern California will now have the opportunity to enjoy two beautiful Six Flags parks. This is truly a win-win, as we welcome our 20^th property—Waterworld California—back into our family of parks.”

The 30-acre Waterworld California features more than 35 water attractions, including the region’s largest wave pool, an interactive children’s play area and its newest offering—Break Point Plunge. This heart-pounding, 270-foot long looping thrill ride launches riders in a capsule from a height of more than six stories. Other extreme slides include Honolulu Halfpipe—a mammoth curved tube slide—and Cliffhanger, one of the park’s signature speed slides.

 

Waterworld California opens for the 2017 season on May 13. Six Flags Discovery Kingdom is now open Fridays, Saturdays and Sundays and opens for daily operation, beginning May 26. For more information, visit www.sixflags.com or www.waterworldcalifornia.com.

[GAcoaster]

It's so funny they bought a park they used to own. What's next, Darien Lake?

[Medusa42]

They didn't buy the park, it is an operating/lease agreement. I would think they will go after Super Aqua Club in Montreal so they can offer combo passes with La Ronde. I wonder if it would be more beneficial to pair Great Adventure & Hurricane Harbor with a park like Splish Splash Water Park on Long Island or take over Clementon Park & Splash World, remove the dry part of the park and expand the water park there. Would this help address some of the capacity issues at Hurricane Harbor?

[Mr.Six]

It's so funny they bought a park they used to own. What's next, Darien Lake?

I hope. Trying to get over 100 coaster credits this year, the more the merrier! It just seems more well rounded as a Six Flags park. I also saw a rumor about SF buying out Adventureland They are a very charming park, but it's just a rumor I heard about.

[Medusa42]

We might see some new water parks added to the chain in 2018.

 

https://seekingalpha.com/article/4148565-six-flags-entertainments-six-ceo-jim-reid-anderson-q4-2017-results-earnings-call-transcript

 

Quote

James Hardiman

 

Good morning. I wanted to touch on the water parks. Obviously, that's a leg of the strategy that was added on last year. Maybe give us any color on where you stand in having those conversations with some of these water parks across the country.

 

And is there an opportunity to bring on any additional water parks for the 2018 operating season? Obviously, with the Concord parks, you were able to bring it online shortly after acquiring it. So, it sounds like it doesn't take long. Maybe give us an update there.

 

Jim Reid-Anderson

 

I think that's right, James. It's a great opportunity for us and we're really excited about it. And in the right circumstances, you can bring these parks online very quickly. In the case of Concord, we're able to -- in the case of Oaxtepec that took a little bit longer because we were reconfiguring a park that had been shut down. But in both cases, both of those have been negotiated over long periods of time, as I described last time.

 

The opportunity does add this incredible driver to leverage the large and growing Active Pass Base that we have and to accelerate growth. It's proven, as you described, with regard to both those parks. Mexico sold record season passes and Concord actually achieved its highest attendance days in history under our leadership.

 

So, we are speaking with a number of promising potential partners, obviously not at the point where we can share details yet. We will -- but it's just like any other M&A transaction, the timing of the deal is just hard to predict. But our goal would be to add parks in 2018.

 

But in order to do so, we want to get the best possible terms. We want the shortest payback with the lowest investments. And so we'll continue to do that privately, get to the point where we're happy, and then we will announce. But discussions are ongoing, James.

 

[Coaster Justin]

San Antonio has a Seperate admission waterpark not far from SFFT

 

 

And If I can Blue Sky Wish, I won't be surprised to see Six Flags Busch Gardens Tampa

[Lemur]

45 minutes ago, Coaster Justin said:

San Antonio has a Seperate admission waterpark not far from SFFT

 

 

And If I can Blue Sky Wish, I won't be surprised to see Six Flags Busch Gardens Tampa

 

Which has a water park right across the street from it ...

[Medusa42]

My pipe dream idea is for Six Flags to purchase Seaworld San Antonio and Aquatica.  They could continue to operate the water park and the Seaworld land could be sold off for redevelopment.  The roller coasters would be relocated to other Six Flags parks with St Louis getting Steel Eel.

[Lemur]

On 2/22/2018 at 3:59 PM, Medusa42 said:

My pipe dream idea is for Six Flags to purchase Seaworld San Antonio and Aquatica.  They could continue to operate the water park and the Seaworld land could be sold off for redevelopment.  The roller coasters would be relocated to other Six Flags parks with St Louis getting Steel Eel.

 

That sounds like a retread of the Geauga Lake/Worlds of Adventure/Seaworld Ohio disaster.

[mugnezz]

they can do it too, as long as they do not spend tens of millions on coaster and attractions.
You know, doing things calmly and calmly.
cmq sooner or later six flags will buy the busch gardens

[Lemur]

On 2/24/2018 at 12:21 PM, mugnezz said:

they can do it too, as long as they do not spend tens of millions on coaster and attractions.
You know, doing things calmly and calmly.
cmq sooner or later six flags will buy the busch gardens

 

Once they hit rock bottom and can find a way to safely rid themselves of the captive orcas, maybe.