The Q3 2022 earnings report showing the performance of Six Flags is out and CEO, Selim Bassoul, started off his comments on the earnings call by stating:
“Taking risks, challenging outdated ways of thinking, and investing in people is how I have taken companies like Middleby to the next level. And in this challenging year of strategic transition, our team worked tirelessly to elevate the experience of every guest and to lay the groundwork for sustainable profit growth in the future.”
I won’t argue that 2022 has proven to be a very challenging year for the company.
A difficult year
Depending on which park you may have visited in 2022, Bassoul’s comments about trying to “elevate the experience of every guest” could open up endless discussions about the various results seen at each park. The overall goal was to lower attendance slightly, while increasing prices to support the drop in attendance, and provide what the operator hoped would be a better experience.
Instead, we have seen endless complaints online about the higher prices for what guests determined was a “lesser experience”. There are also reports of closed attractions or even whole lands within the parks, and so on. At the same time, I know during my own visit to Six Flags over Georgia in June, we had a wonderful time. The park was not full of crowds and all the major rides were up and running during my visit.
We are seeing varying results of success and failure at the parks across the continent. While a few parks have performed well under the initiative, others have not been so fortunate. Otherwise, all the rest is true. Six Flags has been taking some big risks to shake things up, reshape the company, and improve performance.
Later on, Bassoul recognized that Q3 attendance was disappointing, but added:
“The sustained improvements we are seeing in guest satisfaction and spending per capita and our improved October results give me confidence we are moving in the right direction.”
He also recognized that while some of the changes made were well-received and effective, others were not. He added that the transformation of the Six Flags company is going to take time to happen.
So with all that out of the way, let’s get to results and the hard performance numbers.
Six Flags performance data
Total attendance for Q3 2022 was 8 million, down 33% compared to Q3 2021. Attendance in September was also particularly low when compared to July and August. This was attributed to weather issues affecting the start of Fright Fest as Hurricane Ian passed up the coast, and from having a now much “lower active pass base”.
Previously, passholders represented a larger-than-average factor to park attendance in September for the start of Fright Fest. In years gone by, the company issued a large discount to generate a surge in season pass renewal. Yet it opted not to do so this year.
Total revenue for Q3 2022 was $505 million, down $133 million (21%) when compared to Q3 2021. This was a result of lower attendance but was offset partially by a 17% increase in guest spending PerCaps. The PerCap spending increase was further broken down, by listing it as an admissions increase of 22% and an in-park spending increase of 12%.
This is an important distinction, as guests are typically unable to avoid paying more for admission due to increased prices. However, they can opt to spend less money in the park on other items throughout the day if they baulk at prices or don’t like the options they find.
For example, this could result in fewer merchandise sales. But, perhaps more importantly, guests could simply opt to eat before they enter the park. Or they could wait to eat a meal after they leave the park for the day.
During 2022 we saw Six Flags cut back on park hours significantly at many locations. With the park not opening until 11 am in many locations, or even closing by 6 pm, it makes it much easier to guests to opt to eat off-property. By keeping more traditional operation hours, such as 10 am to 10 pm, I would think guests would be more likely to spend more eating in the park, rather than leave early.
A drop in passholders
When comparing Six Flags’ performance for the first 9 months of operations in 2022 to the pre-pandemic results in 2019, the company reports 2022 revenue as being down $148 million (12%). Six Flags writes off $46 million of this loss as being due to the loss of various sponsorship and accommodations revenue. This gives a reduction of $102 million (9%) compared to the first 9-months of 2019. When compared to 2019, attendance in the first 9-months of 2022 was down 10.3 million, or 39%.
Operating costs for Q3 2022 dropped 24% compared to the same quarter in 2021. Most of the savings came from “full-time headcount reductions” and reductions in “variable labor hours”. In total this represented a cost reduction of $68 million for the quarter compared to the previous year.
A major point of contention over the past few months has been the rollout of new annual pass programs, options and pricing. There were also more changes to come a short time later, allowing for potential confusion as Six Flags attempts to find its way.
The loss of pass benefits and higher costs has resulted in a large decline in Six Flags’ pass base. According to the report, as of 2 October 2022, Six Flags reported having 4.3 million passholders. This represents a 44% drop from the same period in 2021.
Six Flags also noted that it expects the full-year 2022 CapEx spending to be down slightly from 2021. Last year already represented a fair decrease in new additions from the company’s pre-pandemic years. Instead, the plan over the next 12-18 months is to use excess cash to pay down debt levels, and refinance remaining debts as market conditions allow going forward.
Future improvements could improve Six Flags’ performance
Meanwhile, future programs to improve the parks will focus on four areas:
1) Improvements to the park’s infrastructure, new rides, improvements to the guest experience, marketing and technology to reach new customers. 2) “fine-tuning our product, architecture, and pricing”. 3) “establishing a strong autonomous culture with an emphasis on cost discipline”. 4) “and finally, amplifying our seasonal events”.
In 2023, this will result in a focus on more in-park amenities and special events rather than new rides. But the company says that there are plans “to add new record-breaking coasters to our parks over time”.
In fact, it hinted at being able to make some announcements during Spring 2023 towards that end. There is a plan to then shift some of the CapEx away from the current beautification and improvement projects, and towards spending investments in attractions and new rides that would be reflected in CapEx budgets for 2023 and 2024.
Unfortunately, with declining attendance and a shrinking passholder base, it remains to be seen if it can capture enough of a new audience in time for any of those long-term plans to add new rides and coasters to take root.
