Six Flags Entertainment Corp (SIX) 2017 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to the Six Flags First Quarter 2017 Earnings Conference Call.

My name is Audrey, and I will be your operator for today's call.

(Operator Instructions) Thank you.

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

Please go ahead.

Good morning, and welcome to our first quarter call.

With me are John Duffey, President and CEO of Six Flags; and Marshall Barber, our Chief Financial Officer.

We'll 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 the detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports or other forms filed or furnished with the SEC.

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

Well, thank you, Steve.

Good morning, and thank you for joining our call today.

The 2017 season is off to an excellent start, and we are very pleased with our first quarter performance.

Our attendance of 1.9 million would have been up 5% in the quarter if you adjust for the shift in the timing of the Easter holiday and the related spring breaks, which moved approximately 380,000 visits from March 2016 to April 2017.

As you know, we typically do not provide guidance on the past reporting period.

However, since the shift was significant and for the sake of transparency, I will tell you that through today, our year-to-date attendance is in line with the 5% adjusted growth we saw in Q1.

In addition, although fewer parks were open during Q1 in last year, our Active Pass Base was up a healthy 17%, and our Active Pass Base growth accelerated in April as more parks have opened, which is a strong indicator that our strategy is working.

Even as we grow our season pass attendance, our unique visitation is also growing, a continuation of a very healthy trend we have seen in recent years.

We are successfully increasing attendance by investing in special events and upselling guest to season passes and memberships.

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 the strategy.

In the first quarter, we also launched our latest innovative virtual reality concepts.

Keeping up with our history of industry first, we introduced the world's first virtual reality experience on a drop ride at Six Flags Over Georgia.

I had the opportunity to ride it a few weeks ago, and I have to say it is an incredible experience.

Based on guest feedback, they love it as well.

We have also introduced Galactic Attack, a mixed reality concept on our coasters.

For the first time ever, we are combining virtual reality, augmented reality and complex gameplay allowing riders to make key decisions during the course of the ride that can affect their scores and to compete against each other for the highest score, all while experienced the -- experiencing the adrenaline rush of riding a roller coaster.

This is just another example of Six Flags continuing to lead the industry as we bring innovative experiences to our guests.

We think that combining virtual reality technology with our existing ride infrastructure is a winning strategy because it allows us to enhance guest experiences at minimal cost.

We have also been very busy expanding our in-park offerings by implementing new and innovative culinary, retail and photo concepts at all of our parks.

We believe that we have significant opportunities to grow our in-park revenue.

And initiatives such as the All-Season Dining Pass program, a program still in the early stages but growing rapidly, are a perfect way to maximize revenue from our growing season pass base.

During the quarter, we also announced our second Chinese licensing location in the city of Bishan, where our partner intends to build a Six Flags theme park and water park.

This is in addition to our other parks in Dubai and China that are progressing nicely and expected to open on time in 2019 and 2020.

The 2 parks in Bishan bring our total to 5 license parks internationally.

As a reminder, we expect each license park to generate $5 million to $10 million in EBITDA per year for us during the design and development phase and then $10 million to $20 million in EBITDA per year in perpetuity once the park has opened.

Expanding into emerging markets will not be without challenges, and our partner in Vietnam has continued to experience delays in gaining title to the land, which impacted their abilities to secure financing for the next phase of the project and caused them to miss project payments.

Although they are trying to remedy the situation, we have suspended work on the project, and we have initiated discussions with other interested parties in the region.

We will not be recognizing any revenue related to Vietnam until the situation is remedied or we have found a new partner.

But Vietnam remains an excellent market for the Six Flags brand, and we are confident we will be successful there.

We are still in the early stages of our international licensing opportunity, which will drive significant long-term growth for the company.

We have multiple ongoing discussions with high-quality potential partners around the world, some of which we intend to announce very soon.

These deals are very high margin for Six Flags and have minimal financial risk since they do not require us to invest any capital.

This international opportunity fits nicely with our strategy to maximize EBITDA less CapEx margins.

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 2 parts 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 a 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 allows 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.

In summary, we have great momentum as we head into the heart of the 2017 season..

At this time, I'd like to turn the call over to Marshall, who's going to share a few more details on the first quarter financial results.

Marshall?

Thank you, John, and hello to everyone on the call.

As John mentioned, we had a great start to 2017 with our Active Pass Base up 17% despite the fact that not all of our parks were open due to the late Easter holiday.

Deferred revenue was up $27 million or 20%, highlighting the growth of our season pass and our All-Season Dining programs.

We remain focused on reaching a higher penetration on sales of our All-Season Dining Pass and broadening our culinary capabilities to take advantage of the growth in our Active Pass Base because season pass holders and members are committing in advance to eat at Six Flags.

Total revenue in the quarter decreased $16 million or 14%, with ticket revenue down $7 million or 12%, in-park revenue down $7 million or 19% and sponsorship international licensing and accommodations revenue down $2 million or 9%.

Revenue was negatively impacted by foreign currency exchange rates due to the weakening of the Mexican peso.

On a constant currency basis, total revenue decreased $14 million or 13%.

The decline in ticket and in-park revenue resulted primarily from a decline in attendance, which was down 14% or 296,000 guests to $1.9 million.

As a reminder, Easter was in April this year versus March last year, and the associated shift in our operating calendar accounted for approximately 380,000 guests shifting from Q1 to Q2 this year.

The last year that Easter and the related spring breaks fell entirely in the second quarter was 2014.

Compared to 2014, our Q1 revenue is up 35% representing a compound annual growth rate of nearly 11%.

Q1 international licensing revenue increased year-over-year, while sponsorship and accommodations decreased primarily due to timing and the Easter shift.

Total guest spending per capita declined $0.55 or 1% with admissions per capita increasing $0.46 or 2% over prior year and in-park spending per capita declining $1.01 or 6%.

The decrease in guest spending per capita was due to the decline in the Mexican peso.

On a constant currency basis, total guest spending per capita increased $0.21 in the quarter with admissions per capita increasing 3% and in-park spending per capita declining 4%.

The increase in admissions per capita resulted from annual ticket price increases and increased monthly payments for members who have been with us longer than the compulsory 12-month period combined with lower visitation related to the Easter holiday shift partially offset by a higher mix of season pass and member attendance.

As you know, season passes and memberships increased annual revenue and cash flow but depressed per capita results, and this has had an effect on our in-park spend as well.

However over the full year, we expect our All-Season Dining program and our other in-park investments to generate strong revenue and EBITDA gains.

Cash operating and SG&A expenses decreased $1 million or 1%, primarily due to decreased labor and other park operating costs as a result of the lower number of operating days and reduced advertising spending driven by the spring break shift into April.

This is partially offset by preopening expenses for our Mexico water park.

We continue to be laser-focused on costs and are confident that we can continue to drive our margins even higher.

Adjusted EBITDA declined $12 million in the quarter, which was primarily due to the attendance shift.

On a constant currency basis, adjusted EBITDA declined $11 million.

We'll not reference LTM comparisons on the call as this year does not include any Easter holiday and the related spring break benefit, whereas the prior year, LTM included 2 Easter holidays.

Accordingly, any comparison is not apples-to-apples, and the more relevant data points will be after the second quarter.

In 2017, in addition to our regular CapEx spending of 9% of revenue, we're spending approximately half of the $18 million of incremental capital expenditures related to completing the upgrades of the Oaxtepec, Mexico, water park.

We are 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.

Given our healthy and improving leverage profile and our expectation that we will continue to grow EBITDA, the management team and board decided to accelerate our share repurchase program.

Our new stock repurchase plan allows the company to purchase an incremental $500 million of its common stock in addition to the $322 million remaining at the end of the quarter under our previous plan.

We continue to believe that our stock represents a tremendous value for our shareholders.

In connection with this new authorization, we issued $700 million of add-on notes to our 4 7/8% notes due 2024 and issued $500 million of new 5.5% 10-year notes due 2027 locking in historically low rates for the long term.

We used a portion of the $1.2 billion in bond proceeds to refinance our $800 million 2021 notes.

This refinancing transaction enhanced our covenant flexibility and extended our maturity schedule putting us is in a great financial position.

We intend to use the remaining proceeds to repurchase shares.

Pro forma for the refinancing transaction, our gross leverage at the end of the first quarter is 4.2x.

We expect that our leverage will soon decline as our earnings increase and as the company generates higher levels of cash flow.

We expect our current cash interest expense of $80 million to be approximately $20 million per year higher going forward.

However, the associated dividend savings from the share repurchases will result in an ongoing net after-tax benefit from the transaction.

I'd like to close by sharing that as of today, 2017 has been the best start of the season in our company's history.

And given all of our growth initiatives and our growing momentum, we are very well positioned for our eighth record year.

And now, I will turn the call back over to John.

John?

Well, thank you, Marshall.

The drivers that will grow our business to achieve our Project 600 goal in 2017 are a continuation of the strategy that we have pursued the last 7 years: One, introducing news in every park and expanding our special events to increase capacity and grow attendance; two, implementing price increases in the low to mid-single digits; three, upselling guest to our high-value programs, such as season passes, memberships and dining passes; four, licensing our brand to partners outside of North America who will develop Six Flags branded parks; and five, actively pursuing a roll-up strategy focused on North American opportunities that provide scale and integration benefits.

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.

In the upcoming weeks, we will be introducing our best and most innovative lineup of new rides and events ever.

It includes the world's first RocketBLAST water coaster, which employs new waterjet propulsion technology to launch custom-designed inline rafts at lightning fast speeds.

Our record-breaking 4D free-fly coaster has received phenomenal responses from our guests, and we are rolling it out to 3 more of our parks this year, bringing the total number of parks to 5. The JUSTICE LEAGUE: Battle for Metropolis dark ride was named the industry's best new attraction in the world in 2015 by our industry association, IAAPA, and we will roll it out to 3 new parks this year, bringing the total number of parks with fifth exhilarating the attraction to 7.

We also introduced Mardi Gras into 2 of our parks, and we are introducing Holiday in the Park at Six Flags New England this year, making this the 10th park to offer our very popular winter event.

The success we have enjoyed around our events strategy has been a key driver as we grow our asset base.

We will continue to lead the way with virtual reality technology on our roller coasters and drop rides in all of our theme parks and have received positive guest feedback and a great deal of excellent media coverage.

The introduction of 2 new virtual reality experiences in 2017 brings the total number to 6 types of fully immersible riding experiences that are perfectly synced to the drops, loops and turns of the ride.

We expect to introduce more exciting content and enhance VR features over time to ensure that Six Flags remains the VR coaster and innovation leader in the theme park sector.

We have successfully grown revenue and attendance while maintaining discipline on both CapEx and operating costs.

As a result, our modified EBITDA less CapEx margin is the best in the industry by several 100 basis points.

We believe this is the best measure to focus on as it is a proxy for the true cash generation that ultimately drive shareholder value.

We are the ultimate growth and yield stock.

We have consistently delivered the highest growth rates and margins in the industry, while growing our dividend every year for the past 7 years and returning all excess cash to shareholders through share buybacks.

Our dividend yield of over 4% is among the highest in the U.S. market.

We have dedicated and energized team members, the best new product lineup in our history and significant growth opportunities, both domestically and internationally.

We are well aligned and laser focused on behalf of our shareholders and very well positioned to deliver our eighth record year in a row and to achieve our Project 600 goal and work toward our Project 750 aspirational goal in 2020.

So at this time, I'm going to ask Audrey, our operator, to open the call up for questions.

(Operator Instructions) Your first question comes from the line of Barton Crockett with FBR Capital Markets.

Okay, great.

And I was really wanting to drill, I guess, first into this very intriguing statement you guys have had for some time that you expect to attain $600 million of modified EBITDA this year, which is as you know in the theme park business there's a lot of vagaries that go into the year in terms of weather.

But you guys are confident.

You're including stock comp as if this is going to happen.

And I was just wondering, if you could walk through in a little bit more detail potentially what gives you the confidence that you can hit 10% growth in modified EBITDA this year versus last year given that you haven't grown at that pace for the last couple of years?

Great question.

And I think the drivers are going to be really following the strategy that we've put in place.

And it's going to be the combination of higher attendance.

We've got great momentum coming out of 2016.

We have record attendance, over 30 million in attendance last year.

We've got -- that's a great momentum.

In the first quarter, our Active Pass Base is up 17%, and this is all while we continue to take pricing.

We've put in a lot of great initiative as it relates to increasing our guest in-park spending, our season pass, season -- All-Season Dining Pass continues to be very strong and growing.

And we continue to invest in our events, particularly around Fright Fest, Holiday in the Park, and then we got this new event, Mardi Gras.

On top of all that, we've got this great growth opportunity on international.

So -- and plus the new water park in Oaxtepec.

So I think if you take a look at all of that with the strategy that has worked for several years and the great momentum that we've got coming out of '16 what we've seen in the first quarter, I am very confident that we can achieve that Project 600 target.

Okay, that's helpful.

Now one thing that was new on this call is to hear you guys talk about, rolling up more water parks, which is interesting I think something we haven't always 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, kind of lot of them do, or you think that 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?

Yes.

Barton, so all of our locations have a water park with the exception really of 3. And those 3 are one 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 Montréal.

So all the rest of the locations either have a separate stand-alone 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.

So it doesn't -- this strategy will work even at those locations where we have existing water parks.

And it's just -- Barton, it's just not water parks.

I think we also have this ability as it relates to potential theme parks as well.

And Barton, we actually, in Atlanta, it's not an untested to have a water park in the park and an additional water park.

We -- 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.

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

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.

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 because this is an industry we haven't like talked about much, we haven't seen much deal auction there?

So can you frame it for us?

Yes.

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 -- also 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.

And a water park -- a stand-alone water park, when we acquire it, we have so much more potential given our -- the theme park and our combo passes than any water park stand-alone could have.

So regardless of the multiple, there will be EBITDA earnings pretty significantly.

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

You're next question comes from the line of Tim Conder with Wells Fargo Securities.

John and Marshall, thanks for the color on the potential new additive leg here.

Wanted to circle back on a couple of items, on the international front first.

What type of decision time frame do you have on Vietnam here as far as the existing partner getting things resolved and moving forward or switching over to a secondary partner?

So as it relates to Vietnam, I don't think there's like a set time frame.

We continue to have discussions with our former partner there, but we also are having a lot of great discussions with other partners that we potentially think could step in.

Vietnam, I think, continues to be a very good market for us.

So we'll continue to pursue that.

Okay, okay.

And then, John, related to other international opportunities, there's been things last year in the press about the discussions with Saudi Arabia.

Just in general, from an incremental perspective announcements, should we expect 1, 2 this year above getting potentially Vietnam resolved one way or another?

Well, Tim, I can't tell you exactly how many potential further announcements that we expect to make this year, but we've got some great discussions ongoing.

And I would be disappointed if we do not have further deals announced this year.

On Saudi, normally we do not provide guidance on ongoing discussions with parties before we sign definitive agreements.

However, in this case, there has been quite a bit of press.

So I'll provide a little bit more color on where we stand on that.

We continue to make good progress on the project and have had numerous discussions and meetings with the Saudis.

We completed our first phase of the work, and we're moving towards signing definitive agreements, and our hope is that we can get that accomplished in the near term.

But overall, I feel very good about the status of this and continue to believe that this is an excellent market for us.

Okay, okay.

Very helpful.

I know it's a difficult question to answer on timing, but thank you for the color.

Marshall, on the recapitalization -- or John, whoever wants to answer this.

Historically, when you guys have done basically a mini recap here with incremental borrowing and looking to do the share repurchase, you've done that fairly quickly.

Is there any reason to expect that you may be won't pursue a similar type of cadence from what we've seen historically?

Yes, this is Marshall.

There is no reason to think that we wouldn't actually, and we have already repurchased $40 million since we got the bond proceeds.

As long as we believe, our stock is a great value for our shareholders, and we think right now it is.

We will continue to buy shares opportunistically.

But yes, the cadence should be similar given the current price.

Okay.

And then lastly, I guess, if I could ask -- ask for quite or we've asked this for quite a while, any color on penetration of All-Season Dining, beverage passes and then membership percentage of the total Active Pass Base?

Well, yes, you have asked me.

Unfortunately for competitive reasons, we hadn't shared that.

I will say that our dining pass is up significantly double digits, and our membership is continuing to grow at a faster pace in the season pass.

But -- and I guess the other thing is our season pass still is our largest portion of season pass versus season pass and members.

But yes -- go ahead, John.

So Tim, we continue to be very, very pleased with what we're seeing on the All-Season Dining Pass.

And we -- it's still in the early stages, which I think is good news, right, because it's -- I think, it will remain a good growth opportunity for us, but we're very pleased with what we've seen in terms of the penetration that, that is increasing nicely every year.

Your next question comes from the line of Tyler Batory with Janney Capital Markets.

Can you talk about the Mardi Gras event in 1Q?

Can you give any more details on that as to maybe a driver of season pass sales at those 2 parks?

And then how many parks do you think you could roll that out to next year?

Tyler, so as it relates to Mardi Gras, I think a little bit too early to tell in terms of the success as it relates to season passes.

These events, they build over time.

But I think it was a little bit of a driver for season pass.

But I think going forward, it's just another -- gives people another reason to come to the park, multiple visits per year, all the more reason to buy a season pass.

But -- 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 these parks and the in-park spend, which is -- 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 rollout to maybe a couple of parks in 2017.

And based on the success of that, we might expand it to even more parks in '18.

Okay, great.

That's helpful.

And then on converting single-day visitors to multi-visit passes, do you track that conversion rate?

How is that maybe trended over time?

Are you finding it easier to convert single-day visitors to a season pass today versus a few years ago?

And can you also talk about maybe some of the strategies to drive that conversion?

Obviously, there's signage in the park.

What else can you guys do on that front?

Yes.

So Tyler, we do a lot of marketing around our season pass and specifically target people that may have bought a one-day ticket last year because we have their e-mail addresses, right, because most of the purchases today are done online.

So we specifically target those folks.

We have a lot of signage in the park in terms of if people came in on a one-day ticket, they can upgrade to a season pass.

And all of this has been very successful.

So it's a combination of that aggressive marketing and having all these reasons why people come to -- should come to the park multiple times during the year, and then they see that real value associated with season pass.

So we continue to really, really like what we're seeing in terms of the conversion rate of one day to season pass.

And then on top of that, once we get them into the season pass holder, if we can also upsell them to an All-Season Dining Pass, we've talked before about the fact that a season pass holder delivers more than twice the amount of revenue over the course of the season than a one-day ticket guest.

If you add an All-Season Dining Pass to that, that goes up in excess of 5x.

So we're pretty aggressive on trying to get all these people to buy All-Season Dining Passes as well.

Your next question comes from the line of Ian Zaffino with Oppenheimer.

Question would be on the pricing you saw during the quarter.

Was there maybe -- was there any kind of a mix shift between daily and season?

Or was that pretty much an apples-to-apples comparison?

Are you talking about pricing?

Yes, admissions.

Well....

Admission per caps, yes.

So admission per caps.

So because of the Easter shift, there was a higher mix of season pass in the first quarter than what we saw last year, and that had an impact on our guests per caps.

But I would tell you that we continue to take pricing -- I've talked, Ian, about the low to mid-single-digit range.

But I think if you look at the success that we had in 2016, record attendance, over 30 million, throughout our parks.

What we're seeing to date on our Active Pass Base, I think we have got more ability today to take pricing than we ever have had before.

And I think we have the ability to maybe be a little bit even more aggressive than that mid to -- or that low to mid-single digit.

So we'll continue to be aggressive on pricing.

Okay.

And then I guess the follow-up would be, when you talk about that, is there a similar amount of pricing on the season pass side as there is on the daily side?

This is the question #1.

And then #2, I guess, what gives you the confidence you have more pricing power now than you did before?

I know you guys always do the studies and the surveys.

You're seeing something maybe in the surveys where the value you're providing is significantly greater than the price you're charging and thus you have a higher umbrella where you can raise those prices?

Or any other type of details that would be helpful.

Yes.

I think it is, it relates to pricing, Ian, we're doing it across every single one of our ticket types.

And I think we have very good pricing opportunity on season pass as well, particularly -- again, as you look at what we've been able to do in terms of the penetration and our growth in our active base.

So we'll continue to be as aggressive as we can on the pricing on our season passes.

Okay.

And then as far as the pricing umbrella, you were mentioning that you have more opportunities than ever.

I mean, what's giving you the confidence on that?

Well, I think it gets back to what I mentioned earlier, which is just our continued growth on our overall attendance, our continued growth on our unique visitation and our growth in our Active Pass Base.

And for us, Ian, and we talked about this before, it's not just about growing attendance and growing per caps.

It's about growing overall revenue.

And so I think the -- what we've seen on the attendance side and the season pass side gives us even more confidence that we can continue to take price up.

On top of that and getting back to your point, the value for the money scores that we're getting are the highest ever, and we've seen a nice pickup in that.

We saw a pickup in that last year.

We've seen a pickup on those scores in the first quarter.

And so all of that means that we can continue to be aggressive on price.

Your next question comes from the line of Mike Swartz with SunTrust.

Just wanted to talk about the new Mexican water park.

Maybe how to think about the contribution from that in 2017?

And I think you've said in the past that the water parks are more profitable on an EBITDA perspective when you open those.

But maybe how to think about that this year in longer-term incremental attendance?

And maybe if you have an internal rule of thumb on payback on those investments?

Sure, Mike.

So I mentioned that we're very pleased -- we just opened up the water park in Mexico, and we actually opened up this past weekend.

We'll have a -- as you do in any new park, we'll have a kind of controlled rollout for a few weeks.

So we'll continue to do that for the next few weeks.

And then we'll actually be -- our plan is to have a immediate day and open it up to the public right at the beginning of June.

I mentioned the margins associated with water parks that they are at the very, very high margin, particularly as it relates to EBITDA less CapEx.

So they don't generate more EBITDA than theme parks, but they have a much higher growth.

But the real benefit, Mike, is on this whole season pass point.

And so you really not really have to look at what you're generating at the park in terms of EBITDA, but it's all those incremental season -- combo season passes that you're selling.

And I have to tell you, we are just amazed at the success that we've had in Mexico on this.

And that's one of the reason why we believe this is such a great strategy for us maybe in some other markets as well.

And then just a housekeeping question.

I think you said international licensing fees were up in the quarter.

But did you provide the actual number?

We did not, but we can.

It was up 7% for the quarter or about $400,000.

And we've talked about it in the past, these are based on deliverables, the revenue recognition.

So it is a bit lumpy, but we will have growth just with signed deals that we announced in February, we'll have significant growth this year.

Your next question comes from the line of James Hardiman with Wedbush Securities.

So a quick follow-up on the very last question there.

So international fees were up 7%, but sponsorship, licensing and other line was down.

I believe, it was 8%.

Does Easter play a role in that as well?

And maybe more broadly, you've touched on some of these items, but how should I think about the Easter impact on per caps overall and then margins overall for the quarter?

So your first question on sponsorship.

Sponsorship doesn't -- isn't really impacted by Easter, but it is impacted by signing of deals and when deals are signed.

And so that's the sponsorship.

In terms of the per caps, it is so early in the year.

And when you've got a different complement of parks from year -- from last year where we had more parks open to this year where we have fewer parks open and several parks that had just opened, trying to draw any conclusions for the year based on the Q1 is very difficult.

I think the better thing to look at is the momentum in season pass sales in active base and the momentum in the All-Season Dining.

Those are really the things I think to focus on as we look towards the full year.

But drawing per cap conclusions this early is very difficult when you have a shift like this.

Yes, and just to add on to Marshall's comment that there are a lot of moving pieces when you think about shift of Easter from one quarter to the next.

It's just not attendance.

It is per cap as well.

And if you look at last year in the first quarter where we saw the shift out of Q2 into Q1, not only did we see an increase in attendance, but our per caps on an FX-adjusted basis were up $2.60.

So there is both an impact from the shift from attendance and per caps.

And just also add on that the -- you might have noticed that the accommodations line, which is really the revenue associated with our wholesale water park in upstate New York, that's the client, that was due to the Easter shift.

Okay.

And just so I'm clear here, when you said the sponsorship line was impacted by the signing of deals, the internationals, these were up in the quarter.

Are you talking about other deals, non international deals, domestic [ orders wins ]?

Yes.

So basically there's 2 pieces on that line.

One is the international licensing and the other is our sponsorships, really it's North America park related where we get revenue associated with marketing.

It's partnerships with outside companies to basically market their name in our parks.

And that moves around from quarter-to-quarter.

Got it.

And then I just wanted to maybe stress test the Project 600 goal a little bit.

So I guess, 3 questions on Project 600.

Is it dependent in any way on the Vietnam projects coming back online?

That's number 1. Number 2, we talked about some other international parks, those deals being signed and beginning to contribute revenues.

Is it dependent on any incremental deals that haven't officially been announced?

And then, I guess, thirdly, third quarter last year you had some pretty negative weather that I think very much limited the third quarter.

I think everybody is hoping that a more normalized weather environment will help 3Q this year.

But if you see similar weather to what you saw last year, do you think you'd still be able to get to that Project 600 goal?

Yes.

So Let me take the international piece first.

And right now, we're not counting anything on Vietnam.

We're back to having discussions with multiple parties.

So we're not counting anything in terms of that.

So I've talked about the fact that I really feel good about us getting to our target and even without Vietnam.

As it relates to further international deals, yes, we will need some incremental international deals signed this year to get there.

But I have to say based upon the pipeline, the discussions that are ongoing and the opportunities that we have, I feel very good about, as I mentioned earlier, signing some additional deals this year.

And then as it relates to weather, also, as you know, we had a pretty rough summer as it related to weather, that impacted us.

And our expectation is that, we would get more of a normal weather pattern in the summer.

And if -- I'll be honest with you.

If we have some adverse weather particularly to that extent that we saw last year, it makes it a little bit more challenging.

That's really helpful.

And then just a last question from me that one of the last comments in the prepared remarks you talked about the best new product line up in history.

I know that is kind of something that you tend to say most years.

But I guess to the extent possible, can you expand on that, quantify it in any way?

It seems like a big deal, if it's in fact true because you've had some pretty great years in terms of new products in the past.

So maybe expand on that in any way you can.

Sure.

Well -- and we really believe this is our best lineup of products that we've ever had.

And one of the reason why we believe that is, it starts with our overall strategy around having something new and exciting at every park, every year that we can go out there and market, bring people into the park.

And so the reason why we're so excited particularly about this year is if you look at what we're introducing at a number of our parks, there -- it's capital that's been proving, right?

It's capital that we put in at other parks in the past and it's proven to be very successful.

Our guests love it.

We know it brings people into the park.

We know it sells further season passes.

So it's a proven growth opportunity.

And so that's one of the reasons why we're so excited about it.

And this new water coaster, which is brand new never been done before, we're excited about that as well.

And then the other is just to add on, we're utilizing the DC brand even more now than we ever have in the past.

And I think people love that brand.

It resonates with them.

And I think that will add even more.

Your next question comes from the line Steve Wieczynski with Stifel.

Can we go back to Vietnam real quick?

And I know you guys are probably tired of talking about that.

But as you've gone through this process, have you guys started to rethink maybe how you account for these international opportunities, meaning moving forward, have you thought about possibly delaying the recognition of revenues until whether it's a construction milestone or something like that has reached, if that makes sense?

Well, the -- we are kind of forced into revenue recognition based on the accounting rules.

But I will tell you that the current deals that we have under development are great, all partners are current on payments.

And so we're looking forward to really the rest of the year.

The Vietnam partner was, I think, a one-off.

And it really had to do with land.

And he's still working to get that corrected, but we still feel great about Vietnam.

Yes.

I think we had very good partners in Vietnam.

And one of the things that we said in the past is why it takes so long for us to get to the point where we're announcing deals is we go through a very, very lengthy vetting process, not only on the partner but the markets, and to make sure that they are very good markets, sustainable markets, and then we have the best partner to work with in those markets.

So we go through a long process.

This was simply where he ran into trouble getting title to land, and that delayed the -- his payments to us.

Steve, I will say that I think probably going forward, we'll follow all the generally accepted accounting rules as it relates to revenue recognition.

We may be a little bit more conservative going forward in terms of making sure that we don't get too far ahead of the actual cash payments.

Okay.

Got you.

And then second question just in terms of not pursuing the REIT conversion.

Can I guess -- can you maybe just give us a little bit more details as to what drove that decision?

And then maybe if it there is a 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?

Yes.

As you know, we decided not to pursue a REIT structure at this time.

And if you look, market conditions have changed from when we first looked at this.

And we conducted a very detailed analysis even utilizing some outside advisers.

We've talked in the past about how we on as a stand-alone company don't qualify to be a REIT.

So we would have to basically split into 2 separate companies, which it creates a very complicated structure.

So as we've analyzed this in terms of where REITs trade in terms of their valuation, the ongoing cost associated with having 2 separate companies, the operational complexity and really some of the limitations that it would put on kind of our future flexibility, it outweighed the benefits.

So that was a decision that we made.

Now it was -- to be honest with you, it was the decision that we made looking at even the current federal tax rates to the extent that those rates go down based upon what we've heard around some potential legislation that would make a REIT structure 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'll 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.

Okay.

And then real quick, I don't think you're going to able to answer this.

But with Holiday in the Park that was just announced for New England, I guess, that was about a month ago, I doubt you're going to have any color that yet.

But have you seen any early interest or pick up in pass sales because of that announcement?

Steve, it's too early to say.

And our New England park has just opened up.

And so we're just now beginning to really kind of get the peak of our season pass sales.

So it's a little bit too early to say.

However, based upon history, and if you look at the fourth quarter -- last year's fourth quarter where typically the fourth quarter just 5, 6 years ago was a loss quarter, and we -- it generated in excess of $75 million of EBITDA.

That will have to do with the fact that -- of these investments in these events, how they -- in-park being one of them.

So we feel very good about this -- what we should see in terms of the success adding this to New England.

And if it's any indication what we've seen at other parks where we have Holiday in the Park, we think it will have a impact on our season pass sales.

Your next question comes from Chris Prykull with Goldman Sachs.

I appreciate you sharing some of the early learnings from the Mexico water park.

I was wondering -- you mentioned the success of the combo passes.

But have you seen an extension of the reach of season pass in terms of the actual radius further than what would have been possible with just the original park?

And then sort of related but in regards to all of your parks, have you thought about or tested sort of different season pass or membership pricing or promotions based on the customers distance from the actual park to try to extend the reach of season pass?

And what would kind of be the drawbacks from that type of dynamic pricing?

Well, Chris, great question as it relates to our new water park in Mexico.

And what we have seen is not only does having a second park increase the number of passes that we can sell, but you're absolutely right, it increases the overall market area.

So -- and that's why I mentioned before on our adding this new leg of our overall strategy is that not only do we get the benefit of combo passes, but we'll be looking at water parks that may be at a -- it's got to be relatively close but -- but a distance from our existing theme park because what it does is it increases the target market.

So that's one of the benefits here.

And that's exactly what we've seen in the situation of Mexico.

So it has broadened that market.

And then as it relates to the particular pricing around the season passes and particularly differences in the markets, we do target outer markets maybe a little bit differently.

And so we'll reach out to those people based upon ZIP code and maybe do a little bit more strategic pricing opportunity for them to buy a season pass.

But we're also very careful not to aggressively discount.

Makes sense.

That's helpful.

And then just one quick follow-up on international.

Has anything changed in terms of the number of or type of discussions you're having with potential international partners since that new administration took office?

No.

We have not seen any change whatsoever.

Your next question comes from Barton Crockett with FBR Capital Markets.

I just wanted to follow-up on a couple of quick numbers if I could.

First off, could you guys just update us when you are with the NOL balance?

And just to reiterate where you are in your expectation in terms of becoming a cash taxpayer and the timing for that?

So it really -- you have to look at it.

At year-end we were at $200 million of NOL plus excess tax benefits.

And if you take the excess tax benefits plus the NOLs, that will carry us through at least to 2018 before we're a full federal taxpayer.

Okay.

You guys -- you're provisioning, I think, differently than you're paying in cash taxes.

But the effective tax rate that you're provisioning last year was around 33%.

In the first quarter here, it was around 39%.

Any thoughts about how we should think about the effective rate that you're provisioning on the income statement going forward?

Yes, Barton, the effective rate that we had last year at 33% is about where it will end up for the year.

The 39% this year is a -- it's a bigger benefit because we're in a loss position.

And it relates to some discrete tax benefits that we had in the quarter.

But if you look at overall for the year, it will be in the 33% to 35% range.

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 to 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 on 9% of revenues kind of CapEx profile on core theme park revenues excluding international licensing.

How should we think about that potentially changing going forward as you look to expand your local footprints?

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

So we expect very quick payback on any of those investments.

In terms of your second question and 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 just really depends on if it's acquisition or a lease and whether we get revenue or not for the given year.

Yes, 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, we did have to spend some capital to upgrade that facility.

It wasn't 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 part.

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.

Your next question comes from the line of Tim Conder with Wells Fargo Securities.

Yes.

Just a couple quick follow-ups here.

One, we've had a couple of questions.

And given that the quarterly is so small, do you have a little bit more precise attendance number on the quarter 1.8 as you got and take that out just a little bit.

And then, John, I want to circle back to something I think you can put in one of the press releases a few weeks ago relating to the dividend and your expectation that when you become a full taxpayer, you still anticipate that growing high single to low double digits on an annual basis?

The attendance is 1,854,000.

So that takes off of it further, and that's down 296,000, like we talked about.

Okay.

Yes.

And Tim, on the dividend, we talked before about the fact that our goal is to have a very attractive dividend, which is if you look at our yield, I think that's the case, but also a dividend that we can grow every year and it's sustainable.

And as we look at, we want to make sure that even if that's some in the future, if we were to become a full taxpayer at the current corporate federal rates that we can continue to grow -- it's not only sustainable, but we can continue to grow it every year.

So that's why we baked the dividend and we look at that every year as we increase the dividend.

Okay.

And then you did mention, I think, in the press release, high single to low double digit that was sort of an area you're thinking about?

In terms of pricing?

Pricing?

Dividend growth rate.

No, I don't think we've ever -- we talked about low to mid-single-digit pricing.

(Operator Instructions) At this time, there are no further questions.

Presenters, please proceed with your presentation or closing remarks.

Well, in closing, I would just like to say thank you to everyone for joining the call.

And we have incredible momentum.

And I personally have never been more confident in the future of this company.

And I hope you've had the opportunity to come out and visit one of our parks soon to see our amazing lineup of new rides and VR attractions.

So thank you very much and take care.

Thank you.

This concludes today's conference call.

You may now disconnect.