Six Flags Entertainment Corp (SIX) 2020 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Six Flags Q3 2020 Earnings Conference Call. My name is Megan, and I will be your operator for today's call. (Operator Instructions)

I will now turn the call over to Steve Purtell, Senior Vice President of Investor Relations.

Good morning and welcome to our third quarter call. With me are Mike Spanos, President and CEO of Six Flags; and Sandeep Reddy, our Chief Financial Officer. We will begin the 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.

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.

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

Good morning. Thank you for joining our third quarter earnings call. A few weeks ago, my wife and I spent a day at Six Flags over Texas. I wanted to get some firsthand feedback by chatting with employees and guests. What really struck me on that visit, though, was what I saw all around me. It was something simple, but meaningful. I saw people getting out in the fresh air, riding rollercoasters, eating funnel cakes and our other great food items and having fun while spending quality time together.

COVID has been a worldwide crisis, but to many of us, it has also revealed what really matters. And while COVID has obviously had a severe impact on our business, it has demonstrated just how important the work of Six Flags really is; having fun together is vital to our happiness and well-being.

And so I want to begin by thanking our Six Flags team for rising to meet the challenges of the past few months. By operating our parks at the highest levels of safety and cleanliness, you've made it possible for millions of visitors to make thrilling, personal, positive memories just when they have needed it most; you've helped families and friends connect; you have lifted morale; you have given someone a brighter day during a difficult time. I've never been more proud of what we do or how we do it.

On today's call, we will cover 2 topics. As usual, we will provide our quarterly results. But in addition, we will also describe the outlines of our transformation plan, which is already well underway. First, I will focus on the transformation plan, then Sandeep will discuss our quarterly financial results, including our cash outflow and liquidity. He will also provide details on the financial implications of our transformation plan. Finally, I will conclude with a few comments and why I'm so confident that Six Flags future is bright.

Even though Six Flags offers a truly unique combination of thrills and fun for guests of all ages, our base attendance growth have slowed for several years prior to the pandemic because we did not evolve at the same pace as our guests' expectations. Specifically, our guests expect a seamless and personalized experience that blends the heritage of our theme parks with the conveniences of modern technology. People still want rollercoasters and indulgent foods like our great funnel cakes. They just want it to be an easier and faster experience.

In order to provide our guests with the value for their time and money that they have come to expect, we launched a transformation plan earlier this year to modernize our operations and to improve the guests' experience. While the transformation work is ongoing, we have already developed a strategic framework and are focusing on specific high-value areas that we believe will lead to significant revenue and earnings growth.

We engaged outside consultants to assist with facilitation and provide agility, capacity and a fresh outside-in perspective. However, it is our Six Flags' team that is leading and completing the work. We are also creating an internal office to take on this work beginning in the second quarter of 2021.

Functionally, we have broken our transformation plan into 2 distinct components: cost efficiencies and revenue enhancements. On the cost side, we need to make sure that we are operating efficiently at both the corporate and park level, and that we are eliminating any unnecessary costs within our operations. On the revenue side, we need to ensure that we improve the guest experience from the moment our guests log on to our website to the moment they exit our park in order to maximize our attendance and per capita spending.

Starting with the cost side. Our 3 productivity initiatives are to: first, optimize our corporate overhead structure; second, reduce nonheadcount operating costs; and third, optimize our park level labor expense.

On the corporate overhead piece, we have updated our organizational design to reduce the layers in our organization so that we are leaner and more agile, lowering our total cost and improving our speed of decision-making. I've installed a new senior leadership team that is about 30% more affordable than 2019, but includes a dedicated guest experience team and a transformation team to focus on the guest experience and ensure we operate more efficiently and effectively.

We will also be consolidating certain positions out of the parks into a new park support shared services center. These positions are primarily back-office functions, such as finance, human resources and IT.

Moving some workflows into functional shared service centers allows us to become more efficient. As previously announced, we reduced our full-time headcount by 240 employees or about 10% of the workforce. These have been very difficult decisions as they affect many dedicated and talented team members, but we do believe this will improve our efficiency as an organization.

Despite these changes, one key element of our corporate overhead structure will remain the same: local leaders will continue to lead local markets. Park leaders know their parks, communities, employees and markets best. We want to enable them to provide the best guest experience for the unique demands of each local market.

Our second productivity initiative is to reduce nonheadcount operating costs. This essentially means that we are reviewing each operating cost with a fine-tooth comb to eliminate excess. For example, we are eliminating 2 of our satellite offices and modifying our T&E policies to lower our corporate expenditures.

A large portion of our nonheadcount operating cost reductions will involve leveraging the scale of Six Flags as a whole to centralize procurement, consolidate vendors and renegotiate contracts. As we go through this process, we are leaving no stone unturned, examining line items as small as our lettuce expense, which serves as an interesting example. If we standardize that one order and buy just one kind of lettuce, we will save $40,000 per year. We have hundreds of goods where this concept would apply, from Napkins to paint to chlorine to uniforms.

In addition, optimizing our rides will save us enough CapEx to fund a new ride every single year. Our park presidents, engineers and maintenance teams have studied the performance of each and every ride, calculating the cost against the rides throughput productivity. We now know which rides to redeploy across parks, which rides need to be refurbished and which can be removed entirely. We are eliminating 15 underperforming rides this year, reducing maintenance costs and freeing up significant CapEx resources.

Our third and final productivity initiative is to optimize park level labor. We have developed a system that enables us to model more narrow attendance bands by park, by time of the day and by guest location in order to better forecast our labor needs. Better data analysis will allow us to align labor with guest demand by season, by day and by hour. Better staffing will also increase guest transaction opportunities and decrease wait times. So we expect a revenue benefit from this initiative as well.

Moving to the revenue side, our 5 revenue initiatives are to optimize the following areas: first, overall guest experience in our parks; second, website and search engine optimization; third, pricing and promotions; fourth, media spending; and fifth, our culinary and retail offerings.

Let's start with the most important initiative, modernizing the overall guest experience. We have already begun to implement systems like advanced reservation systems, prepaid parking, mobile ordering, contactless security and cash to debit card kiosk to provide a contactless experience on purchase transactions. All these improvements allow guests to spend more time having fun and less time waiting.

We also started testing virtual queuing in order to learn how we can enable our guests to better plan when they can ride their favorite rollercoasters and reduce waiting in line.

Our second revenue initiative, redesigning the website and improving search engine optimization, can be a significant revenue driver, and we have already witnessed its powerful impact through higher conversion rates. We launched our new website at one of our parks in August and realized improved conversion of website traffic to sales by a double-digit percentage. More than half of our revenue is derived from our website, so this is a very encouraging sign. We launched the new website across all of our parks in mid-October.

We have also seen how our third initiative, optimizing pricing and promotions, can drive attendance and revenue growth. Before the pandemic, we began to change our pricing and outreach to target more single-day guests. In the first quarter, prior to shutting the 7 parks that were opened during that time frame, we sold 38% more paid single-day tickets compared to the previous year with total attendance up 19%.

The fourth revenue initiative is to optimize media spending. Our marketing team and media partners began using a new customized artificial intelligence tool to analyze the return on our media spending by park and by media channel. We have tested this new tool and found that a highly targeted media spend has a clear and demonstrable impact on our attendance growth. So in addition to improving the efficacy of our media spend by using our new analytical tool, we intend to increase our marketing spend to 4% to 5% of revenue versus the historical 3% to 4% based on observed returns of increased investments to drive incremental EBITDA dollars.

Our fifth revenue initiative is to optimize our culinary and retail offerings. Food and beverage consistently rates as our lowest score in terms of guest satisfaction. We know that our guests expect more from us, and we intend to focus on providing a greater breadth of higher quality options, including healthy, indulgent and premium food and beverage choices. We have tested several enhanced food and beverage concepts, and are pleased with the initial uptick in our sales. This is a very big opportunity for us since more than 1/3 of our revenue comes from in-park spending, and the majority of that is food and beverage.

While it will take time to fully implement all of our initiatives, we are already starting to see the impact on our results and look forward to updating you on our continued progress in the months ahead.

Now I'll turn it over to Sandeep.

Thank you, Mike, and good morning to everyone on the call. My first 90 days on the job have only reinforced my belief that this is a great business. Six Flags has an exceptional brand and the largest portfolio of thrill rides that have been providing lasting memories to our guests for generations. I'm thrilled to help drive the transformation efforts that are already underway.

Results from the third quarter were not comparable to prior year because we suspended the operations at 9 of our 26 parks for almost the entire quarter and had attendance limitations at our other parks that were open. The parks that were opened represented slightly more than 50% of our 2019 attendance and indexed at approximately 35% of prior levels in the quarter.

We have been pleased with the sequential improvement in our attendance trends since we began reopening our parks. Upon our initial reopening in the second quarter, attendance at our open parks averaged 20% to 25% of prior year levels. That grew through the third quarter from 27% in July to 43% in September. In October so far, we are indexing more than 50% of prior year, with a number of parks beating prior year attendance on several operating days.

Our guests, government officials and health authorities have given us high locks for our safety standards and procedures, and we expect that we will continue to see improvement in our attendance trends.

Currently, we are operating a modified Halloween event called HALLOWFEST at 7 of our theme parks, and we plan to keep these parks open for Holiday in the Park in November and December.

In addition, we opened our -- we reopened our water park in Mexico on September 12, our theme park in Mexico City on October 23, and we plan to open a holiday walk through experience at our Great America Park outside of Chicago in late November through December. We are pleased to reopen our parks in Mexico as they are able to operate year round, given the favorable climate conditions.

Total attendance for the quarter was 2.6 million guests, 371,000 of which came from our Drive-Thru Safari at our park in New Jersey. As a result of the 81% decline in attendance, revenue in the quarter was down $495 million or 80% to $126 million.

Sponsorship, international and accommodations revenue declined by $22 million due to the following 3 things: number one, the termination of the company's international contracts in China, resulting in no revenue from those contracts in 2020; number two, the deferral of most sponsorship revenue, while many of our parks were not operating; and number three, the suspension of a majority of our accommodations operations.

Guest spending per capita in the quarter increased 10%, driven by an 11% increase in admissions per capita and a 9% increase in in-park spending per capita. The increase in admissions per capita spend was primarily driven by recurring monthly membership revenue from members who retain their memberships after their initial 12-month commitment period ended. Excluding the impact of membership revenue, admissions per capita spending was approximately flat.

The increase in in-park spending per capita was primarily driven by higher mix of single-day guests who tend to spend more on a per-visit basis. In addition, recurring monthly all-season membership products such as all-season dining pass, contributed to the increase.

On the cost side, cash operating and SG&A expenses decreased by $94 million or 39%, primarily due to the following: first, cost-saving measures primarily related to salaries and wages, especially at the parks that were not operating; second, lower operating -- lower advertising costs; and third, savings in utilities and other costs related to many of our parks not operating.

While we have taken measures to reduce our variable costs, we have decided to retain the balance of our full-time members and maintain their benefits in order to position ourselves to reopen park safely and quickly as soon as we receive authorization from government authorities.

Employees at closed parks are on a 25% salary reduction as are our senior leadership team and other corporate executives. We will continue to evaluate all options in the future, given the fluidity of the situation.

Adjusted EBITDA for the quarter was a loss of $54 million compared to income of $307 million in the prior year period. Deferred revenue of $199 million was up $1 million or less than 1% to prior year, driven by suspension of operations at our parks and extension of the 2020 season passes through the 2021 operating season. This was mostly offset by fewer membership and season pass sales.

We are making significant efforts to ensure the continued loyalty of our Active Pass Base. We recently extended the used privileges for all 2020 season passes through the end of 2021. For our members, we added an additional month to their membership for every month they paid when their home park was closed. All members have the option to pause their membership payments at any time until spring of next year, but we have offered a menu of benefits, including upgrades to higher membership tiers if they elect to continue on their normal payment schedule.

We also are rolling out a gift card program that members can choose to use in our parks in view of adding the initial months to their membership. We are very pleased with the loyalty and retention of our very large Active Pass Base of 3.7 million, which included 1.9 million members and 1.9 million season pass holders at the end of the third quarter. In fact, our Active Pass Base is close to flat versus the end of the second quarter of this year when we had 2.1 million members and 1.7 million season pass holders.

Although the Active Pass Base at the end of the third quarter is down 49% compared to the same time last year, this is primarily due to substantially lower sales of new season passes and memberships due to the short-term impact on demand from the pandemic. To date, 14% of current members have chosen to pause their membership, and we anticipate that most of these paused members will return to active paying members once we reopen our remaining parks.

In the first 9 months of 2020, we spent $90 million on capital expenditures net of property insurance recoveries, but expect to spend minimal capital in the fourth quarter.

Our liquidity position as of September 30 was $673 million. This included $459 million of available revolver capacity, net of $22 million of letters of credit and $214 million of cash. This compares to our pro forma liquidity position of $756 million as of June 30, 2020, a reduction of $83 million, representing approximately $27 million per month of net cash outflows in line with our prior estimates.

We estimate that our net cash outflows will continue to average $25 million to $30 million per month through the end of 2020, including partnership park distributions that represent an average run rate of $7 million per month for the last 3 months of the year.

The operating environment is quite fluid and changes almost daily, so it is difficult to project more than 3 months into the future. However, the first quarter has historically consumed more cash than the rest of the year when we have been in a normal operating environment. We expect this to be the case next year as well, but we'll have better visibility into the operating environment by the time we report our fourth quarter results next year.

Now let me take a minute to talk about breakeven levels for the company on an annual basis. There are 3 levels of breakeven that we calculate. First, park breakeven levels. All parks that are operating are generating positive cash flow on a variable basis. We wouldn't operate them otherwise.

Second, breakeven EBITDA levels for the company. This level is definitely mix driven, but we estimate breakeven EBITDA levels at an attendance range of 45% to 55% of 2019.

Third, free cash flow breakeven levels for the company. This level is also mix driven, but would cover our cash interest and partnership park distributions. We estimate breakeven free cash flows at an attendance range of 65% to 75% of 2019.

We believe we have adequate liquidity through the end of 2021 even if we need to close our parks. In August, we further amended our credit facility to extend the covenant waiver period by 1 year from the fourth quarter of 2020 to the fourth quarter of 2021 and the covenant modification period by 1 year through the end of 2022. Between our current liquidity and our recent covenant modifications, we have given ourselves significant runway to navigate through this challenging period.

I would now like to turn to the financial impact of our transformation plan. Executing the transformation will require onetime costs of approximately $69 million through 2021, $60 million of which is expected to be cash and $9 million of noncash write-offs. So far, $29 million has been incurred through the end of the third quarter of 2020, $6 million of which was incurred in the second quarter and $23 million of which was incurred in the third quarter.

We anticipate that we will incur approximately $5 million in charges in the fourth quarter of 2020, including the $3 million in employee termination costs related to our full-time headcount reduction previously discussed. The remainder of the $69 million in costs are expected to be incurred by the end of 2021, approximately 2/3 of which will be technology investments. Financially, we expect the transformation to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully executed.

Taking the midpoint of our prepandemic 2020 adjusted EBITDA guidance of $450 million, this implies a new earnings baseline of at least $530 million to $560 million once the transformation plan is completed and we are operating in a normal business environment.

Of the $80 million to $110 million in transformation value, roughly half the value is expected to be realized through a reduction of fixed costs that is independent of attendance levels and is fully in our control. The other half is expected to be realized from incremental revenue initiatives and lower variable costs from better labor optimization. These estimates are based on historical data, tests in operating parks before and during COVID-19 and through the validation of our teams.

From our revenue initiatives, we expect to deliver $30 million to $40 million of EBITDA. From our 3 cost or productivity initiatives, we expect to deliver $50 million to $70 million in EBITDA. Of this, $40 million to $55 million will be realized through a reduction of fixed costs that is independent of attendance levels.

We expect to deliver $30 million to $35 million in EBITDA in 2021 from the reduction of the fixed costs. We expect to deliver the full $40 million to $55 million in EBITDA by 2022, independent of attendance levels, with incremental benefits to be realized from revenue and variable labor initiatives depending on overall attendance in both 2021 and 2022.

Our capital allocation strategy will be focused on growing the base business and paying down debt to return our net leverage ratio to between 3x and 4x adjusted EBITDA over time. We have suspended our dividend and share repurchases for the foreseeable future to allow us to focus on these 2 objectives.

In summary, despite the challenges our entire industry is facing, we have adapted our operations in response to the crisis and have not let these difficulties slow down our efforts to transform our business. We are very excited about the value creation opportunity for the company that comes from implementing our transformation plan.

Now I will pass the call back over to Mike.

Thank you, Sandeep. Despite a challenging operating environment, I am very optimistic about Six Flags' future for the following reasons: First, we have an incredible portfolio of regional theme parks, serving all the top 10 DMAs in the U.S. as well as major metropolitan areas in Mexico and Canada.

Our parks provide a unique live experience for families and teams that cannot be replicated by other forms of entertainment. They are outdoors and spread over hundreds of acres, making them naturally conducive to social distancing, and our guests continue to visit our parks and engage with our brand despite the suboptimal operating environment.

Second, our recent surveys of several thousand consumers reveal that 93% of them would visit a theme park, if they were guaranteed a COVID-free environment by rapid testing. In addition, 87% of consumers say they would visit a theme park after a vaccine becomes available. So while the current environment is tough, we are confident that our guests will return once the pandemic subsides.

Third, our transformational agenda will provide what our customers want, and it is readily achievable from a business perspective. I've overseen 3 distinct transformational agendas over my career, and I am confident that we can execute on our goals.

Finally, we have an exceptional team of dedicated people working at our company. They love Six Flags and are excited to up our game and deliver an outstanding guest experience.

We're also fortunate to be aided by 2 new exceptional board members: Esi Eggleston Bracey, Enrique Ramirez Mena are highly accomplished business leaders who bring complementary, diverse skills and experiences to our organization, skills that are especially critical as we focus on getting closer to our customers and are operating more effectively and efficiently.

In the coming months, we will remain focused on modernizing the guest experience, making it easier for our guests to enjoy Six Flags as the thrill rides destination of the world. We want to provide our guests a memorable experience and an excellent value for both their time and their money.

We will remain intently focused on executing our transformational plan to achieve our earnings baseline of at least $530 million to $560 million once we are operating in a normal business environment. I look forward to updating you on our continued progress in the months ahead.

Operator, at this point, could you please open the call for any questions?

(Operator Instructions) Our first question is from James Hardiman with Wedbush.

So Sandeep, the cash flow analysis that you gave us I thought was fantastic. But just help us understand, if I look at the $27 million per month of cash burn that you did in the third quarter, that's in line with the $25 million to $30 million that you had called out 3 months ago. But it seems like the attendance trends actually got better. So help us understand why that didn't move towards the lower end of the range or better? Because it sounds like as we move forward, if we continue to get even where the attendance sounds like it is right now, it would seem that we should be better than that previous range. Help us connect the dots between those 2 data points.

James, thanks for the question. I think it's a really good question, but one thing that's really important to really note is when you look at the third quarter, there's definitely a different weight between the months. So July, if you remember, when we go back to the July call that we had, was trending somewhere closer to 30% range when we actually announced the second quarter earnings. And we finished at about 27%, like we said in the prepared remarks, but it picks up a significant weight of our third quarter revenues.

So as a result, on a weighted average, even though we saw sequential improvements getting up to 43% in the month of September, the weighted average for the quarter was about 25%. So yes, there was sequential improvement that definitely helped, but it was not massive in terms of the weighted average for the quarter. So we did see a small impact, but not a very material impact in the quarter versus our expectations from a cash flow standpoint.

But that being said, we're really encouraged because sequentially, we've been improving. I mean, September, you saw it at 43%. And October, like we said, was already trending above 50% at the time we actually ended the last weekend. So we're really pleased about the sequential improvement that's coming in. And I think that's why we're very encouraged as we go forward.

And just to clarify, if we're able to pick up -- obviously, seasonally, things are low for the next few months. But if we're able to pick up where we left off in 2021, we should be close to that EBITDA breakeven point based on sort of how you lay things out. Is that right?

Yes. I think really when you think about this year, we're almost done, right? I think after we get past the Halloween event, essentially, there's really on the hold in the parks left. So -- but when we look at 2021 or any year, what we're trying to explain is we've got to get attendance to between 45% and 55% to get to breakeven EBITDA.

And so there's a function not just of attendance on the open parks, but also how many parks are open. Because right now, what's happening is 50% of the attendance base was opened roughly in the third quarter and with parks that are open at 60% of the attendance base of 2019. So you could do the math. But really, open parks are as important as productivity -- sorry, opening parks are as important as productivity in the open parks.

Got it. And then just a quick follow-up here. Mike, you gave us some really good data points in terms of the consumer work that you guys had done. Maybe I can just wait for the transfer to come up. But the last point that you made, about 87% of people willing to come to your parks after a vaccine becomes available, can you just dig into that a little bit? Because it seems to imply that there's some 13% that won't come back even after things, in theory, go back to normal, maybe I'm missing who those people were. But can you dig into that?

And I would think that in the post-COVID world that things -- that demand can get back to where it was or even better. But help us think through that.

Yes. James, look, this will -- we'll want to move on to the others in the queue. But good question. We actually see it as very positive. We surveyed several thousand consumers and that number was at a moment in time, remember, as we surveyed that. So that's what the data suggests is that, that group is saying they wanted -- they're willing to take a vaccine right away.

And as I said, the COVID-free environment numbers were very high as well. And I think if you compare those numbers to the broad society in the way they think about vaccines, I thought those numbers were quite positive versus what you see in the use of other vaccines that are out there. So we see it as a good one at the moment in time, and we'll continue to evaluate.

Your next question is from Steve Wieczynski with Stifel.

So first question would be around the attendance metrics and the improvement that you guys witnessed. And obviously, it started in that 20%, 25% range, moved all the way up to 43% in September. And I guess I'm just wondering, did that change in attendance coincide with any type of increased marketing? Or was the marketing spend pretty much status quo throughout that time frame? And then did any of your parks ever hit those attendance limitations?

Yes. Sandeep, I'll take this. So I think it's -- first, Steve, it's really important to go back -- because you're really getting that demand, and I'll go through those questions. First, it's important to go back to our last earnings call where we saw pretty divergent attendance results, what I would say, were the surge states versus the nonsurge states, if you go back to that point, that's not been the case since July. We are seeing consistently positive trends across all of our open parks, across all the geographies, as Sandeep said through this last week in our HALLOWFEST.

And what we're seeing in here is consumers want to safely visit outdoor venues. They want to write our roller coasters and have great quality time together, and they trust our safety standards. So we're very confident based on these trends that we're going to continue to see a nice rebound. Specific to your point, it was not a function of increasing spends on media, that was not the case. We're seeing good demand momentum as we're seeing the consumer want to get out and they trust our safety standards.

And did any of those parks ever hit the attendance limitations or no?

Yes. So we have room for more attendance flex, if that's what you're asking. We feel good about that as well. So we're initially, yes, earlier in the quarter, where we had capacity limits when we were first opening up, yes, we hit some of those capacity limits because in a number of the open states, we had to start at a 25% of theoretical max capacity. It's not the case now.

When you think about it, Steve, we've been -- yes, we gotten more flex because of our safety standards. Remember, we also have a reservation system. So we're using that to flow the capacity throughout the day at different times. And the other thing the team has done a great job on, Steve, is Bonnie and the Park President team, they've been really good about expanding hours, expanding days as needed.

And as you know, we've got parks that are outdoor. We've got dozens of hundreds of acres. So we're able to flex up with being able to bring more folks in the park and still exercise the proper or social distancing.

Okay. Got you. And then, Mike, my second question, maybe a little bit more of a bigger picture question. But as you start to implement the transformational plan here, how do you balance the cuts that you're going to make versus the guest experience to assure you don't start to diminish that guest experience? And can you maybe help us think about those -- your satisfaction scores and how those trended throughout the summer? Maybe what feedback you got from your core guests?

Got it. It's 2 different questions. The transformation is actually investing more into the guest experience. And Steve, if you pull up on it, what are we really trying to do with transformation? By the way, I'm highly confident in our ability to deliver on the value transformation. But what we're basically doing is we know our guests love our rollercoasters. They love our funnel cakes. They just want an easier experience. And we can do that better by modernizing that experience through technology. And we can also do it while we drive an organization that is more efficient and effective by driving more profit from our core parks.

We are not sacrificing guest experience, we're not sacrificing safety. The guest experience and the safety of our team members and our guests are paramount. We're actually leaning more into that. And technology is a fundamental part of it because it allows us to be both efficient, effective, while we modernize the guest experience.

Next question is from Tyler Batory from Janney Capital Markets.

Just one multipart question for me on CapEx. I know it's a little early, but can you talk a little bit more about what you might be spending on CapEx in 2021? And also remind us what your plans are for spending in 2020?

And then also interested, with the transformation plans, you mentioned some changes in terms of what's going on with the rollercoasters. Traditionally, you had targeted 9% of revenue in terms of CapEx spending. Would you anticipate that changing significantly in the future?

And then last, when you look at the parks right now, I think there was just some discussion previously about some CapEx. So if you could talk about that as well, that would be helpful?

Yes, Tyler. So I'll take this on the CapEx piece. So I think when you look at the CapEx, let's talk about it sequentially in terms of the years. So in 2020, through the end of the third quarter, we have spent $90 million in CapEx. But if you actually parse it by the time the pandemic had rolled on and we reported in the first quarter, we had already spent more than $50 million for the year, and I think what we did do was, we went through and completed some projects that were halfway, but we also put a halt on a number of other projects.

But I think the -- because the commitments were there by the time we got to the end of the second quarter, we've already spent over $76 million. And now in the third quarter, we had tailed off $90 million. We don't expect to spend much more CapEx for the year. So a little bit more than $90 million is where we would expect to be. But this is the year where we had to hit the brakes basically when the pandemic hit.

Now going into 2021, I think part of what we talked about was, it's difficult to talk more than 3 months out, given the visibility that are on -- that we have right now. But the difference between this year, 2020, and next year, 2021, is we already know that we are in a pandemic. And so to that extent, we can probably take more action to actually move spending further out to the extent that we can actually push certain projects out.

And I think we'll do that with a balance because we really do want to make sure that the assets that we have are operating effectively in the parks, and we are investing for the future as well to make sure that we have the innovation that guests are looking for when they come to the park. So too early to talk about 2021 specifically. So we're not going to give you a number on that right now.

But I'd say, overall, strategically, what we're going to be doing is looking at what our CapEx spend is more from an allocation of the CapEx than anything else. And at this time, we really haven't finished that analysis. But I think by the time we end the year and are going to report to you next year, we'll have a better sense of what the CapEx spend of the ratio to sales would be.

And I think you had a fourth question on specific park spend. Can you just repeat that question for me because I'm not quite sure I got it?

No, I think you pretty much covered it. But my other -- my last part of the question was just in terms of potential catch-up CapEx. You had some deferred maintenance and whatnot, interested if you had any thoughts about that as well.

Yes. I think that catch-up spend is part of what we're definitely making sure we're investing in because we're operating parks. And so the safety of our guests is paramount. So we continue to make those investments as we go while we're operating the parks. And that's included in 2020 and will be a portion of 2021 as we go into 2021.

Our next question is from Stephen Grambling with Goldman Sachs.

Just following up on the transformation plan. I appreciate all the color on the components as we think about what's dependent, independent of attendance levels. But as a quick clarification, on the component that is related to attendance, what's the assumption in terms of where attendance needs to be to achieve those and then the sensitivity of each point of attendance to those buckets?

Yes...

Sure. Steve -- sorry, go ahead, Mike.

Yes. Stephen -- I'll take it, Sandeep. So I appreciate the question. Let me start on the revenue initiatives, Stephen. We're also very confident in our ability to get these results. And we've already seen positive results across the revenue enhancements. Remember, we've been doing this through A/B testing. We've done this before COVID, and we've actually been testing during COVID.

And again, just remember, the 5 revenue initiatives are roughly a delivery of $30 million to $40 million. Specific to your question, the value is based on achieving 2019 attendance levels, okay? But again, however, it's variable. So what that means, it's going to increase as attendance builds towards that 2019 levels. It also increases when the attendance levels go above 2019 levels. So we're confident with it.

As far as the exact sensitivity, I really wouldn't want to give that out on a public call, but it is variable. So as I said, it builds as we get back to those 2019 levels.

Got it. And then maybe an unrelated follow-up question on season passes. How should investors be thinking about the impact of the extension of the season pass into next year as we think about both GAAP accounting numbers, revenue and EBITDA, but then also thinking about the cash impact as potentially people are repurchasing their season pass next year?

Sure. Steve, I'll take this one. And I think the guest satisfaction is absolutely paramount to us. And I think given the disruption in business for this year, we actually made sure that we address their concerns and extended the season passes to 2021.

I'll give you a data point, though. Typically, only about 20% of the same season pass holders renew for the following year. So a lot of the season pass holding is churned and turned as we move year-over-year. And so we don't see that being a huge impact to cash flow as a result. But that being said, there is a revenue impact because all of the season passes that got extended into 2021, the portion of the revenue from those season passes will be recognized in 2021, even though they've been sold a long time before that.

But I think from a members at open park standpoint and members at a closed park standpoint, there is an impact, but I think for the members at open parks, there's really not much of an impact because now we're recognizing revenue for all those members that have been members for more than 12 months in the current year -- in the current month that they're actually paying and those in the first 12 months are being recognized as usual.

So overall, I think the distortion that we saw probably in the second quarter has already been moderated as we moved into the third quarter. And I think with the closed parks that are remaining being the only ones where they had replacement months being offered month for month as we go along and those months will be recognized when the members utilize their months in the end of their membership.

Our next question is from David Katz with Jefferies.

I wanted to just go back to a topic, I think, you may have touched on earlier. And while we can use the information to determine kind of a notional earnings rate or earnings power going forward, can you just talk about your sort of normalized vision for CapEx to the degree that you've gotten to what you think a normalized level could look like?

So Dave, I think I touched on this a little bit with -- in the answer I provided earlier to Tyler. And I think the process really is, if you go into our history, we've spent about 9% on CapEx. And we're working through our strategic plans right now with the new leadership team. And I think we'll have more visibility or more clarity on this because I think it's not just the absolute amount, but it's also how we're allocating the capital that we're working through right now.

So by the time we report our fourth quarter, we'll be much more -- in a much better position to give you more clarity on that. But at this time, 9% is where it's been historically, and it's worked pretty well for the company. And so I think there's nothing further I can update at this point, but we'll be happy to talk about that once we have more clarity.

Yes. And David, it's -- one thing we've realized in this process, we both talked about it is, we've seen we can optimize our portfolio. We've done that well. The park-present teams, maintenance teams engineering team, they've come to us saying, "Hey, here's what we can remove in terms of rides. Here's what we need to refurbish. Here's what we can redeploy." That allowed us to basically eliminate 15 rides, and that's really given us some savings on both the ongoing costs as well as the CapEx.

So we feel that we can continue to be productive. And as Sandeep said, we'll give more granularity as we move forward to include if there's -- I think it's more about the allocation versus the amount as we think about it moving forward. But again, we'll give more clarity as we get into next year.

Okay. I heard what you said. And so I can -- if you don't mind, I'm going to respectfully just follow that up from a maintenance perspective, right? If you could help us think about what a maintenance run rate might look like, that would be helpful.

Yes. I think from a maintenance capital standpoint, I would say that the historical ratio has actually been much less than the marketable capital investment. And so that will continue to be a proportion that is applied. The -- but what Mike is getting at is actually something which is very important, which is by going through the right optimization process, we can figure out which rides are the keepers, which rides can be redeployed to other parks in lieu of actually spending new marketable capital, and which rides we basically don't need to invest in going forward. So we're cutting the tail off.

So I think it's a little bit iterative. So depending on what marketable capital we're spending, the asset maintenance goes in sync with it. But I can tell you that it's a significantly smaller proportion than the marketable capital that we invest in.

And David, rest assured, we are going to continue to make sure that maintenance capital is right. One of the earlier questions was around some of the guest satisfaction. And look, we know during COVID, rides productivity or throughputs is the biggest pain point for the guest. So one, safety is always paramount for the guests and the team members, and we want to make sure we've got the optimal number of rides, all the rides up and operating safely. We're going to continue to do that as well as the other maintenance that needs to be done to ensure we're doing the right things by our guests and team members.

Got it. And if I can slip one more quick one, and I appreciate it. With respect to the past few weeks, where we've seen cases start to respike -- or spike anew in certain areas, through this copious process, have you observed any changes or any data points you can share with respect to that, please. And that's it for me.

Yes. Thanks, David. Well, I think the first is, we've demonstrated, as an industry, by the way as well as Six Flags, that we can operate with the highest safety standards. I personally receive feedback from reopening task force and even governors about they have seen our safety standards as a model to apply across other industries.

So we have continued to show we can operate safely within COVID, again, for both the team member and the guest. And we've been able to do that back starting day one. We've been consistent in our safety standards. So we've had states continuing to work with us. And I think the other thing to remember, too, is we've shown we can be very creative as we reopen parks and operate them as we're working through that.

Sandeep mentioned it, but I think our work at the Great Safari, our work in Marine World, Discovery Kingdom, our Great America is going to have a modified operation for holiday in the park. We've shown we can be very thoughtful and safe with our assets, and we'll continue to do so.

Our next question is from Paul Golding with Macquarie Capital.

I guess from a customer relations perspective, just building off of a prior question, we're coming up on the end of the calendar year on season pass expansion, do we continue to expect that if conditions continue to be sort of COVID persistent that we would see that extension continue?

And then as part of that question, anything -- any comment you can give on the progress in California or lack thereof, given the most recent reopening guidelines that came down from state government.

You bet, Paul. Thanks. First, I think the overarching theme we've applied always at Six Flags, but I do believe strongly and the team is so passionate about this during COVID is, we've got to be consumer-centric in our solutions. And as we've done that, we've also said that means you've got to give the guest options. And that's what we've been doing and that has worked. And we will continue to do that. And we think we've seen the benefit of that. You look at our attendance trends, which we talked about, they continue to click up as we've done that. In addition, our per caps are increasing in park.

So we're seeing our guests reward us for being consumer-centric and giving options. So we'll look at all options. I don't want to get into specifics of what would we do at the season pass just in the interest of the information, but we'll continue to look at what's right for the guests.

In terms of California, to that question, Paul, it goes back to the way we've looked at our approach with reopening parks everywhere. Our principles have been so consistent we've always said: number one, we're going to start with the safety of our guests and team members every time, and we're going to do that in alignment with local health and city/state officials; and second, we're going to do it collaboratively with those officials, and that includes the State of California.

And beyond that, as we've said, the other 2 is, we're going to always look at making sure we're cash flow positive on a variable basis. And we're going to, lastly, make sure we do things that create a really positive guest experience and protect the brand. So that won't change, and that won't change in any state or a country we operate in.

Our next question is from Alex Maroccia with Berenberg.

Can you explain the future strategy for both the season pass and membership offerings, given this new focus on pricing and marketing? And then secondly on that, how much of your future attendance do you want to come from that Active Pass Base?

Alex, thanks for the question. So we -- I've said this before on other calls, and I want to reinforce it, I would not say there's not a change in strategy. We've been consistent that it's an and, and what I mean by an and is: number one, we feel that we've got to grow both Active Pass and paid single-day tickets that -- because there's just different cohorts. You've got one that may have either a different distance issue or not a pocket spend issue; and you have others, the Active Pass, that really want to visit us a lot, and they are willing to pay more for more -- for the benefits. We need to be approaching both.

Specifically, when you look at -- to your question on media and the spend with our media ROI and our ability to have more awareness and granularity by media channel, by geography, by time of year and by area, we can be very surgical in where we spend to get reach as well as to increase frequency. And also, we can test before we spend any money.

We have the ability to do the testing with our guests through our systems before we spend $0.01. So we will -- that's how we'll look at it. We know what those optimal fall-off rates are and the optimal spend rates.

Okay. Understandable. And then last one for me. Historically, how much of your revenues have come from large in-person events that might be at risk of lower levels in '21 and beyond? And here I'm referencing things like concerts, corporate events, one-off festivals, et cetera.

Yes. So I'll take that. It's -- so we -- look, we don't see that as inhibitor. We've not been dependent. For us -- I mean concerts are not a big event for us, these big events, they're actually quite small. The meat of our business, the meat of our attendance, to meet our revenue is from our Active Pass Base and our single-day ticket holders. And obviously, we'll continue to engage on the group sales portion. But the vast majority of our business is in revenues reflecting what we've got in our Active Pass Base and single -- paid single-day tickets.

Our next question is from Ryan Sundby with William Blair.

I guess just following up on Paul's question earlier. Sandeep, you mentioned opening parks is just as important as improving the productivity of the parks that are open. As you look at those 9 parks that were closed during the quarter, is there a way to help us understand how many of these parks you could have reopened if you wanted to and maybe just ran out of time on the calendar to make the variable cash contribution work? And how many of these parks are kind of out of your control in terms of reopening?

Well, I think, Ryan, to be clear, I think on all of the parks that were not open, I think we were in a place where we work with the local health and city and state officials to get permission to open. And then once we get that permission, we look at our own safety filters. In all the parks that we were not open, we didn't have permission to open, and that's why we didn't open. So I think it was not about us being able to execute, it was more about getting authority to open.

Got it. It is helpful to know. Okay. And then I just wanted to get, I guess, an update on the status of the licensed park in Saudi Arabia. Just given the impact of COVID, does that continue to move forward? And is international licensing, that conversation you're still having with people? Or has that come to a stop here with COVID?

You know, Ryan, I think...

Ryan, yes -- I got it, Sandeep. By the way, to your earlier question to Sandeep, Ryan, remember, we can move very quickly to reopen parks. And so we're very confident in our safety standards. We continue to work with the city and state officials to keep getting parks open, and we'll keep everybody updated.

Specific to Saudi, absolutely, we're committed to Saudi Arabia. It's moving along. We feel really good about the progress there. And I think it's going to be a fantastic attraction both for the Kingdom of Saudi Arabia as well as for Six Flags.

Our final question is from Ben Chaiken with Crédit Suisse.

Just a quick clarification here, and I'm sorry if it's been asked already. But I guess on the transformation plan, you guys talked about $80 million to $100 million of EBITDA uplift relative to the base of $450 million. But I guess if we rewind the clock a little bit, that $450 million included, what I think I remember was like, $60 million of costs. And so can you just help us kind of like separate those 2 dynamics.

So is the read that those $60 million of costs reverse and then there's some revenue on top? Or are the cost savings that you have that you've discussed with -- that are presumably within that $80 million to $110 million like different buckets and the $60 million previously discussed is kind of a -- maybe a little bit stickier than previously expected? If that didn't -- I can say it a different way if that didn't come across.

No. I think we got it absolutely, Ben. So let me take that. The -- what I'd say is if you go back, our earnings guidance for 2020 was -- the mid-range was basically $450 million. And so you start there, and that did include that $60 million you referenced. The $60 million was 3 buckets; it was a bonus bucket of $20 million approximately; it was a wage portion, which was another $20 million; and the third $20 million was basically some investment in OpEx as well as marketing, okay? That -- so we started with that. The transformation then pivots off that start point of $450 million, Ben, if that makes sense.

So you take that $450 million, then you go to transformation. The transformation amount, which I'm highly confident will get, is that $80 million to $110 million in benefits. Of that, about half, $40 million to $55 million is in a reduction of fixed costs, independent of attendance levels; then the second half of that $80 million to $110 million is through the revenue opportunities and variable labor optimization that will vary with attendance.

And just to give you a little more double-click, as we say, just to stress it, we see $30 million to $35 million from fixed costs coming to us in 2021, again, independent of attendance and the full cost coming by 2022, which is approximately $40 million to $45 million, okay?

So it's a bridge from the guidance, if you think about it in terms of like a fall, Ben, if that makes sense.

Sure. That's helpful. And then just quickly, one other on the membership side of things. I know it was discussed a little bit, but how are you thinking about reengaging with the memberships that tend to be a little bit stickier? Like, yes, I guess, just how you think about reengaging with the membership customers? And how is that different than people who traditionally buy just your normal season passes, if there is a difference?

We -- it's another really good point. And as I said, I start with act -- look, Active Pass is a critical component of the future attendance growth, and our members have been incredibly loyal to us. So the first is, what I said, we're going to start with just a whole principal consumer centricity. We are surveying our members. We're listening to our members. And the beauty is with the new guest experience team that is in place we're talking to them every day. We know what they want from the minute they hit the website to when they exit and also how we service them when you think about it, Ben.

So we're listening to them, we're adjusting with them, and we'll continue to look at the offers that make sense for them. So we're going to refine the offers as we listen to them. But we feel good about it. We feel good about our program. We're also going to see should we simplify some of those programs? But that's the work that Mark Kupferman and the team -- Mark's leaned up the guest experience team. He's got 30 years of out-of-home experience, over 20 years in theme parks, and he's going to be leading now with the team both for present and future trends in that space.

We have no further questions. I turn the call back to Mike Spanos for closing remarks.

Okay. Thank you, Megan, I appreciate it. For everyone, thank you again for joining our call, and more importantly for your continued support. Our guests continue to want fresh air, they want to experience our great rollercoasters and eat our great funnel cakes and other indulgent foods. They're looking to have a fun and safe environment, something Six Flags is uniquely able to offer.

We look forward to updating you on our progress on the fourth quarter earnings call. Take care, and please be safe.

This concludes today's conference call. You may now disconnect.