Six Flags Entertainment's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Six Flags Entertainment Corporation (SIX)

Q2 2012 Earnings Call

July 24, 2012 9:00 am ET


Nancy Krejsa - SVP, IR and Corporate Communications

Jim Reid-Anderson - Chairman, President and CEO

Al Weber - COO

John Duffey - CFO


Ian Zaffino - Oppenheimer & Co.

Ian Corydon - B. Riley & Co.

Scott Hamann - KeyBanc Capital Markets



Good morning, ladies and gentlemen. Welcome to Six Flags' second quarter 2012 earnings conference call. (Operator Instructions) And now I will turn the call over to Nancy Krejsa, Senior Vice President, Investor Relations and Corporate Communications for Six Flags.

Nancy Krejsa

Good morning and welcome to our second quarter call. With me are Jim Reid-Anderson, Chairman, President and CEO; Al Weber, Chief Operating Officer; and John Duffey, our Chief Financial Officer.

We're going to begin today's 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.

Also during the call we will share or discuss non-GAAP financial measures, you may find a detailed discussion of business risks, reconciliations of our non-GAAP financial measures to GAAP financial measures in the company's annual report, quarterly reports or other forms filed and furnished with the SEC.

At this time, I will turn the call over to Jim.

Jim Reid-Anderson

Thank you very much, Nancy, and good morning to everyone on the call. As you can see from our press release, the second quarter was just fantastic for Six Flags, as we drove our ninth straight quarter of growth.

We grew revenue 11%, EBITDA 24% and cash EPS by 60%. On an LTM basis, the company generated $4 of cash earnings per share and achieved a new industry-high modified EBITDA margin of 38.7%.

Our success is directly linked to consistent execution of our strategy. We delivered exciting, innovative news in every park and launched clear and effective sales and marketing programs that helped us attract an incremental 1 million guests to our park in the quarter.

In the area of admissions pricing, we continue to benefit from strong ticket yield due to higher front gate pricing and improved fencing of discounts. On a per capita basis, these gains were offset by higher penetration of season pass visitation. Further penetration of season pass sales is one of our key initiatives.

Although the higher mix of season pass attendance put downward pressure on our per capita spending figures, season pass holders typically generate higher aggregate cash flow for the company than single-day visitors. Over the course of a year, season pass holders spend more than single day visitors on ticket as well as in-park items like food and merchandize.

I am extremely pleased with our success in this important initiative and you can observe the magnitude of our success from our strong revenue, EBITDA and cash flow performance in the quarter and from our deferred revenue balance at the end of June 2012, which was up $19 million to $106 million, which is a 22% increase from a year ago.

We continue to believe we have a multi-year opportunity to improve ticket yields and further penetrate season pass sales. And going forward, we believe these will be the largest contributors to our revenue profit and cash flow growth.

We also continue to see nice growth in our in-park sales with an increase of $17 million, 12% over prior year. We were pleased with this growth, given the higher attendance by season pass holders, who typically spend less per visit than single-day visitors.

Our growth comes from innovative new offerings. For example, this year we have successfully extended our Flash Pass product to all of our water parks. We also introduced a USB memory stick, which allows guests to conveniently store photos of their friends and family on our rides, and our guests absolutely love this new concept.

We've also launched exciting new food concept such as Macho Nacho, Cowabunga Burger, and of course my personal favorite, which is Kickin Chicken. You actually have to go to our park to try these chicken tenders with our special buffalo sauce. Now, sorry, clearly I am getting carried away here, so let me move on.

In summary, our second quarter performance is a reflection of execution. Two years ago we developed a strategy that would help us consistently grow revenue, increase profitability, improve guest satisfaction, strengthen innovation and build employee morale. And I really could not be more pleased with our progress to date.

Our operational performance is excellent, our financial results stellar and our capital allocation strategy is clearly working well. I think you're going to enjoy hearing more details regarding our financial performance.

So at this time, I'm going to hand over to John, to provide more details on Q2. John?

John Duffey

Thank you, Jim, and good morning to everyone on the call. As Jim mentioned, we are very pleased with our second quarter and year-to-date performance.

As we had indicated on the first quarter call, our strategy to increase season pass sales has worked very well and this positive trend continued throughout the second quarter. The increase in season pass sales along with the marketing of our new rides and attraction, significantly contributed to our double-digit attendance growth in the quarter.

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