Six Flags Entertainment Corp (SIX) 2018 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to the Six Flags Q1 2018 Earnings Conference Call.

My name is Julie, 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, Investor Relations.

You may begin.

Good morning, and welcome to our first quarter call.

With me are Jim Reid-Anderson, Chairman, President and CEO of Six Flags; and Marshall Barber, 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 or other forms filed or furnished with the SEC.

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

Thank you, Steve.

Good morning.

Thank you for joining our call today.

The 2018 season is off to the best start in the company's history, with first quarter attendance, revenue and modified and adjusted EBITDA all at record levels.

Our Active Pass Base is also at a record high, and guest spending per capita was up over prior year even as our mix of season pass holders increased significantly.

Modified EBITDA for the 12 months ended March 31 was $574 million, up $41 million from the prior year-end, putting us on track to exceed $600 million of modified EBITDA in 2018.

Having shared those highlights from the quarter, I would now like to update you on 4 areas: one, our newest membership programs; two, the performance of one of our largest parks, Magic Mountain, which started operating on a 365-day schedule at the start of the year; three, our international licensing business; and four, the performance of our newest water parks.

As you know, since 2010, we have successfully increased attendance and raised prices at our parks by leading in innovation, investing in special events and upselling guests to season passes.

But more recently, we have been increasingly emphasizing membership programs.

And I would like to take you through the latest iteration of our membership strategy.

Members are our most valuable and profitable guests.

And our membership mix is becoming just as important as the overall growth of our Active Pass Base.

We are focused on upselling both single-day guests and season pass holders to become members.

And so I'm really excited to announce that we have recently rolled out a new innovative membership program consisting of 4 progressive levels: Gold Plus, Platinum, Diamond and Diamond Elite.

The program is a great value for our guests and has important advantages for the company.

First, it allows us to offer more products and services to those who are willing to spend more money in our parks.

We are offering up to 15 new never-before-offered benefits, such as preferred parking, priority park entry, skip-the-line passes, free soft drinks every visit and discounts on items purchased in the park.

Second, our new program helps us upsell guests to become members who are our most loyal and profitable guests.

They have significantly higher retention rates than traditional season pass holders.

And it's much less expensive for us to retain a member than acquire a new guest or even a new season pass holder.

To put this into context, when I first arrived as CEO in 2010, a very small percentage of season pass holders would sign up for a season pass the following year.

In other words, our churn was very high, and we would then have to spend a lot of marketing dollars to reacquire guests who had already shown a very high interest in our parks.

With our membership program and a higher-quality guest experience, we are addressing this type of churn head on.

Third, our membership program enables us to build closer relationships with our guests, which will help us to better understand their preferences and allow us to tailor our product offerings and messaging around what they value most.

In essence, our focus will change from reselling to retention.

Finally, the ongoing monthly membership payments provide a contractual recurring revenue stream that creates better consistency and predictability of cash flows, providing a weather hedge and making our business less seasonal.

In addition to higher penetration of membership, we have significant opportunities to maximize revenue from our growing Active Pass Base by increasing in-park revenue.

Initiatives such as our All-Season Dining Pass program are a perfect way to engage our members and pass holders.

And through concerted marketing efforts, our penetration has grown really nicely this year.

Even so, penetration is still relatively low, and our dining program remains one of our most important growth initiatives going forward.

These programs provide a powerful engine for growth.

Taken together, over the course of the season, a Diamond Elite member with an All-Season Dining Pass is worth more than 3x the typical season pass holder and 5x the profit of a season -- of a single-day guest.

Because the member stays with us for multiple years, the value of that member is much higher than any other guests.

Our goal in 2018 and beyond is to grow the overall pool of Active Pass members and then, within this pool, to migrate traditional season pass holders to membership and historical membership holders to new, more lucrative tiers.

This strategy can result in higher and more recurring profitability.

Now turning to Magic Mountain.

I am so pleased to report that our move to 365-day operations has been a great success.

It meaningfully contributed to revenue and EBITDA in the quarter and will continue to build in the coming years as both domestic and foreign guests learn about our year-round operations.

I'm also pleased that even with higher volumes, our year-to-date guest satisfaction scores at Magic Mountain are the highest recorded for any park in our company's history.

It is a testament to our outstanding team members and incredible lineup of rides and attractions as the thrill capital of the world.

This month, we announced our newest international licensing locations in Nanjing, China and Riyadh, Saudi Arabia.

We were also able to resolve our payment issues in Dubai as we continue to discuss potential refinements to our relationship and the project moves forward apace.

We now have 12 parks in 5 locations under development since announcing the strategy just 4 years ago.

The 3 new parks in China are expected to begin opening in 2021, and the theme park in Saudi Arabia is expected to open in 2022.

We have an outstanding partner in Saudi Arabia's Public Investment Fund, one of the largest sovereign funds in the world.

And we are thrilled to contribute to the country's transformation as we help build the premier entertainment destination in Saudi Arabia.

Finally, I'd like to share an update on our 2 new water parks.

We have rebranded our water park in Northern California to Six Flags Hurricane Harbor and have been very successfully marketing higher price combination passes.

We have also been operating our beautiful year-round Hurricane Harbor water park in Mexico, which contributed to our first quarter performance.

Operating water parks in close proximity to our theme parks is highly synergistic and allows us to expand our capacity and attendance with minimal investment.

We will look to accelerate this strategy in other markets as opportunities arise.

We are still in the early days of this newest acquisitions growth strategy, but based on our early success, I can tell you that my team is very excited about the future from water park and even theme park acquisitions.

There are dozens of parks within reasonable driving distance of our existing portfolio in the U.S. And these parks generate hundreds of millions of dollars of revenue.

As with the 2 recently acquired parks, we will seek to acquire water parks and theme parks at low prices and then realize substantial revenue and cost synergies.

If we can do this consistently and with discipline in the coming years, it will be accretive to our organic growth trajectory that has been significantly higher than the S&P 500 earnings growth.

In summary, we have made significant progress against all 5 of our growth initiatives.

And we have great momentum as we head into the heart of the season.

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

Marshall?

Thank you, Jim, and good morning to everyone on the call.

We had an exceptionally strong start to 2018, and all indicators point to a strong season ahead.

Our Active Pass Base is up 10% while deferred revenue is up $25 million or 16%.

This increase in deferred revenue is even more significant when you consider that memberships contributed very little to deferred revenue after the 12th month.

Total revenue in the quarter increased $29 million or 30%, with ticket revenue up $15 million or 30%, in-park revenue up $11 million or 36% and sponsorship and international licensing revenue up $3 million or 21%.

The increase in revenue resulted primarily from an increase in attendance, which was up 27% or 503,000 guests to 2.4 million.

Easter was earlier this year, and the associated shift in our operating calendar accounted for approximately 1/3 of our attendance increase in the quarter.

Consequently, the second quarter will be adversely impacted by that shift.

The remaining increase in attendance in Q1 was primarily due to the additional operating days for Magic Mountain, our water park in Mexico and strong performance at all parks.

Total guest spending per capita increased $1.78 or 4%, with admissions per capita increasing $0.66 or 2% from prior year and in-park spending per capita increasing $1.12 or 7%.

The increase in admissions per capita resulted from annual ticket price increases and the success of our yield management strategies.

In-park spending per capita increased primarily due to higher food sales as a result of the success of our All-Season Dining program.

Favorable foreign currency rate translation accounted for $0.59 of the increase in per capita spending, although it had a negligible impact on modified and adjusted EBITDA.

Moving to costs.

Cash operating and SG&A expenses increased $11 million or 8%, primarily driven by more operating days and advertising spending at Magic Mountain, our 2 new water parks and adjustments to some park operating schedules due to the earlier timing of the Easter holiday.

Excluding these extra costs associated with additional operating days, new water parks and Easter, our cash operating and SG&A expenses increased approximately 3%.

Like many companies, we are experiencing wage pressures in several markets due to increases in minimum wages and a tightening labor market as we position ourselves as the premier employer in the theme park industry.

However, the majority of these increases were anticipated as we entered the year, and we will work to offset these increases across our large and diverse cost base, just as we have in the past.

As a result of our strong revenue growth and disciplined cost control, we were able to grow modified and adjusted EBITDA by $16 million during our smallest quarter of the year, a quarter when most of our parks are closed, and grow our trailing 12-month modified EBITDA margin to a new industry high of 41.4%.

Even more important, our modified EBITDA less CapEx margin of more than 32% remains the best in the industry by several hundred basis points.

Given the pullback in our share price during the first quarter, we decided to repurchase $81 million of our stock, leaving 83.5 million shares at the end of March.

We still have $262 million remaining under our board authorization for share repurchases, and we'll continue to look for opportunities to repurchase shares using our strong cash flow and balance sheet.

We are also pleased to lower the borrowing rate on our bank debt to LIBOR plus 175 basis points.

In connection with the repricing, we achieved $39 million of add-on bank debt, which we used towards share repurchases.

Now leverage at the end of the first quarter was 4.0x adjusted EBITDA, which we expect will soon decline as the company generates higher levels of adjusted EBITDA and cash flow.

I would like to close by sharing that I have never felt better about our financial position and growth prospects and that we are well -- very well positioned for yet another record year.

And now I'll turn the call back over to Jim.

Thank you, Marshall.

It has certainly been a great quarter, and 2018 is shaping up very nicely, with 5 key drivers that will continue to grow our business: one, introducing news in every park and expanding our special events to increase capacity and grow attendance; two, implementing price increases in the middle -- mid-single digits; three, upselling guests to our high-value programs, such as season passes and dining passes, with a strong and increasing emphasis on memberships; four, licensing our brand partners outside of North America, who will develop Six Flags-branded parks; and five, actively pursuing a North American expansion strategy that includes water park and theme park acquisitions to expand our addressable market and realize synergies.

In the upcoming weeks, we will be introducing our best and most innovative lineup of new rides in the company's history, including no less than 5 world-record or first-of-their-kind rides: first, WONDER WOMAN Golden Lasso Coaster, the world's first single-rail coaster at Six Flags Fiesta Texas; CYBORG Cyber Spin, a futuristic ride with a triple-box design at Six Flags Great Adventure; HARLEY QUINN Coaster, a first-of-its-kind looping coaster at Six Flags Discovery Kingdom; CraZanity, the world's tallest pendulum ride at Six Flags Magic Mountain; and Mardi Gras Hangover, the world's tallest loop coaster at Six Flags Great America.

We are also launching our latest innovative virtual-reality concept on our drop rides, the DC SUPER HEROES Drop of Doom, which capitalizes on the growing popularity of Wonder Woman and Superman.

The success of our event strategy has been a key driver to help us grow our Active Pass Base and sell membership.

This year, we are expanding Mardi Gras activities to 2 additional parks, and we're introducing Holiday in the Park at our 12th park, Six Flags Great America near Chicago.

We will also generate growth opportunities from additional days at Six Flags Magic Mountain and Hurricane Harbor, Oaxtepec in Mexico, especially in the fourth quarter.

Finally, I have to tell you that I am most excited about the growth of our new membership program and our membership dining pass, which provide opportunities to increase guest retention rates and spending.

Together with our new international parks in China and the Middle East, we are significantly growing and diversifying our sources of recurring revenue.

The benefits of these programs will extend well into the next year and beyond.

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 8 years and returning all excess cash to shareholders through share buybacks.

Our dividend yield of over 5% is among the highest in the U.S. market.

We are very well positioned to deliver our ninth record year in a row while achieving $600 million of modified EBITDA, and we will continue to work toward achieving our Project 750 aspirational goal by 2020.

This is not as good as it gets.

The best is yet to come.

At this time, I'm going to ask Julie to open the call up for any questions.

(Operator Instructions) Your first question comes from Ian Zaffino with Oppenheimer.

So question would be, Magic Mountain, can you maybe give us an idea of what that contributed to attendance?

I know you gave us the Easter shift, but what does the Magic Mountain add as well?

So we're not going to break out the specifics of how much Magic Mountain contributed.

But I will tell you, Ian, that we're really encouraged by the success at Magic.

You've heard me say before that the park is the undisputed thrill capital of the world, with record-breaking 19 roller coasters.

And this operating calendar that we have now is on par with the other destination theme parks in Southern California.

So we -- it definitely had a positive impact on attendance and EBITDA.

It added 51 days in Q1, so a nice number of days that we were open.

But I will tell you that the ramp-up period before the strategy really achieved its full potential, as we develop relationships with tour operators and ticket agencies, that takes a while.

It's not an immediate thing.

So we think that this benefit from Magic Mountain going 365 days will take several years to get to its full effect.

So very encouraging start.

It really enables us to leverage our assets to increase turnover, grow revenue, EBITDA, et cetera, and ROIC without investing any extra capital.

It's a winner all around.

Okay, great.

And also very encouraged by the parks that you announced in China.

Where are we as far as the Chinese expansion?

Maybe what inning are we in?

Or how many more opportunities do you think we're going to see there or that can be weighted towards just other regions of the world?

Any type of detail you could give us there, that would be helpful.

Well, I would tell you that I don't know if you remember, Ian, when we first started talking about China, when we announced the initial Riverside deals, I said that the discussions with our partner, and we had had focused in on really being in the range of at least 10 parks within 10 years, and we're at 10 announced already.

So when you look at the market itself, it's so encouraging because we've announced these 3 new parks.

We don't have a specific number that we're setting.

But when you look at the demographics of China, the fact that the population is 4x the U.S., there are half the number of parks.

There are massive cities which have very little in the way of entertainment options and certainly not the quality of the sort of parks we have.

So a regional strategy in China makes a lot of sense.

And we will not be stopping at 10 parks, I can assure you that, and our partner is very excited about being able to expand further with us.

Your next question comes from Steve Wieczynski with Stifel.

So I'm going to ask that -- the last question or the first question that Ian asked a little bit differently.

And I don't know if you're going to answer it, but I'm going to try it a different way.

So you talked about Easter doing about 165,000 visits, I guess, so that's 1/3 of the 500,000.

But is there any way you guys can help us think about, if you stripped out -- I know you won't tell us which Magic Mountain contributed, but if you stripped out Magic Mountain, Mexico and Easter, is it fair to say your core assets were still -- on a same-store basis, they were still up?

Yes, it's fair to say that.

When I described in my quote in the press release that we're firing on all cylinders, it's really true.

The base business is up very nicely.

And when you think about the Active Pass Base growth, I mean, I think that's what's really driving it.

Marshall, would you add anything to that?

No, I think that was good, Jim.

Thanks, Steve.

Okay, great.

And then second question.

You -- Jim, you talked about the -- trying to push through, it sounds like kind of mid-single-digit price increases this year.

And I guess there's a little bit of a fear out there, the general health of the consumer might be rolling over a little bit.

But can you give us some color around what you're seeing from your typical customer?

And as you try to push through that mid-single-digit increase, do you expect any type of material pushback?

Yes, Steve.

I can tell you that I've never been more confident in our ability to raise prices.

Our guests recognize the tremendous value of our operating, demonstrated by improved overall ratings, which have increased every year since 2011.

Our Active Pass Base is up 10% at the end of March and as we've raised prices.

Pricing remains a multiyear opportunity and remains a key component of our growth strategy.

And this shows the -- our opportunity to grow per caps using a strategic and disciplined pricing strategy.

And one of the benefits of our new membership program is that it is also yielding strategy that allows guests to upgrade into more expensive products.

So I can only tell you that we haven't seen any pushback on price, and we're still -- I think this is a multiyear opportunity and continue...

I would echo what Marshall said, and just this membership push that we've had has revealed that plainly not just in terms of ticket pricing but also in terms of the ability to sell other goods within the park.

Folks are spending, and that momentum is very strong.

And Marshall pointed this out, but I'd reiterate, our overall guest satisfaction scores, not just at Magic Mountain, which has hit a new record for our company, but throughout the company, we've never had as high guest satisfaction scores in our history.

And that's coming through in terms of value perception as well.

Guests are very happy, so we feel good about where the economy is right now and how guests are reacting.

Your next question comes from James Hardiman with Wedbush Securities.

I think color so far has been really helpful.

I'm just trying to square a few things.

So it sounds like the operating days were up a lot more than attendance growth, and I think I get that, right?

I mean, it was mainly -- the incremental days were mainly either weekdays or water park days, right?

So presumably, those are going to have lower attendance than the days that you had last year.

But I would also think that the per caps would be down, but your per cap growth was nicely positive.

So maybe help me square those sort of seemingly disparate data points just so we can understand some of that.

Per cap spending, just to reiterate, was up 4%.

Admissions per cap was up 66%.

We took pricing up on all ticket types.

And I think exchange rates, we talked about that a little bit, that was $0.59 of it.

But I think what you're seeing is that the pricing in our ticketing; the pricing in our season passes; the membership program pricing, which is higher than the season pass; and then the ability for those members to upgrade into higher tiers all had a positive impact on the pricing and the per cap.

So again, I think it reiterates how we feel about pricing given that we continue to have no pushback on pricing.

Jim?

The only thing I'd add to that was that there's also a benefit that comes in terms of having Magic Mountain open, which is a fantastic park and the pricing is very strong there.

So that also helps, too, James, to address your question.

And you're right, in terms of days, if you're open on quieter days, you won't see as high attendance as you might do on a weekend day where you might have been open in the past.

But what I would say to you, you may remember this, James, we went through this intense effort a few years back to really work on breakeven points and reducing the breakeven points at every single park.

And I can tell you that we are very successful at being way over breakeven even on those quieter days.

So we feel great about where we are.

Okay.

Let me ask it this way then.

The incremental operating days, did those help or hurt your per caps?

They helped our per caps, but we found that it was literally a function of everything that Marshall described.

It wasn't one thing on its own that contributed to the per caps.

Got it, okay.

And then on the new international opportunities, I mean, you've talked about $5 million to $10 million in the development phase, $10 million to $20 million per year in EBITDA once they open.

Maybe help us frame Saudi Arabia in that context.

And then I'm assuming that the 3 parks announced yesterday for China would amount to sort of one big -- would be in those ranges combined as opposed to on an individual basis, like the previous trio that you announced for China.

But maybe help us put those on -- in those spectrums.

Yes.

James, so the park in Saudi Arabia, think of that as a large theme park.

In terms of the announcements we made in Nanjing yesterday, it's one theme park and 2 smaller parks.

For modeling purposes, I think you can count them as 2 theme parks that we will be in that $10 million to $20 million range.

The -- China by itself, we should think about as 2 theme parks both in that $10 million to $20 million range, you're saying?

No, in total.

So in -- it's 2 theme parks which are $5 million to $10 million, and you can count them as 2.

China and Saudi Arabia are the 2, you're saying?

No, I'm sorry.

So in China alone, the 3 parks that we have, which is the theme park and 2 smaller parks, I'm saying count those as 2 theme parks.

And then in Saudi Arabia would be an extra theme park as well.

So just so we're clear, what you announced yesterday, I guess that would be $10 million to $20 million in the development phase and $20 million to $40 million once they're open?

That's for China only, right?

Yes.

Right, right, right.

That's right.

Okay.

Just making sure I understand that properly.

That's all right, James.

Okay.

And then last question for me.

Just help me understand the new progressive levels.

Is it all incremental on price, meaning if I'm a member today, is Gold -- are all 4 levels an upgrade?

Or is it just Diamond and Diamond Elite that would be an upgrade?

I guess put another way, the -- yes, go ahead.

But James, they are all upgrades on price.

So the approach has been, historically, we will only have offered one level, which is our base level in the new membership program.

So they're pretty much all upgrades on price.

Okay.

And just so I understand that, historically, the more people that did either seasons passes or membership passes, obviously, it's a positive to your EBITDA.

It was certainly a positive to attendance, but it would typically be somewhat of a negative on per caps.

This seems like it might be a slightly different animal.

This seems like this would potentially be a positive to your per caps, I would assume?

That could be.

I mean, it is -- if you look at where we've been on the season pass, it's definitely a positive to that.

And because they are coming multiple times, I guess you could consider it an extensive season pass.

And again, the levels go all the way up to well over $200 for a price.

So that'll put upward pressure on our per caps going forward.

So it's an offset to the sort of pressure that we have historically seen as we've expanded season pass.

We won't stop selling season passes.

We're going to sell them actively.

We're going to sell membership very proactively.

And the combination of both, we think, is a huge winner for us.

Your next question comes from Michael Swartz with SunTrust.

Just wanted to touch on deferred revenue up 16%, I think you said, at the end of the quarter.

Just trying to understand maybe if we break that down between units versus pricing.

And then secondly on that, how much of that increase is being driven by Magic Mountain being open 365 days?

So I guess just to start, this 16% growth is driven by the season pass, the memberships, the All-Season Dining.

And in terms of how much is being driven by the Magic Mountain, it's very small.

I mean, we've been -- if you recall, historically, we've been open on the weekends in Magic Mountain.

So now we're just open during the week.

So from a season pass sales perspective, it's not a huge driver.

I think really, what's driving it above the 10% Active Pass Base is the other products that we're selling, the All-Season Dining and some of the other All-Season products that we're selling.

Okay, that's helpful.

And then a second question.

Just I -- and I apologize if I missed it in your preamble, but did you say how much you -- during the quarter you had in international licensing revenue?

We did not say, but it's about $9 million.

It's just under $9 million for the quarter.

Your next question comes from Barton Crockett with B. Riley.

I guess a couple of things.

One is, are you guys able to update us on the situation in terms of payments from Dubai?

I know there were some question about that last quarter.

Just wondering where we sit at this point.

So we are fully caught up on payments from Dubai, Barton, and we're continuing to talk with our partners about the relationship.

But I need you to know that the park development is moving forward very speedily, it looks beautiful, and we're progressing nicely.

Okay, that's great to hear.

And then on the tuck-in strategy in North America, I've heard in the past you guys talk about water parks, but now you're also talking about theme parks.

I was wondering if you could be a little bit more specific about what you have in mind when you see opportunities in acquiring theme parks because my understanding is that the bulk of the meaningful theme parks in this country are owned by other big companies, most of which are public, and I don't think you're talking about that.

And beyond that, largely what I know are kind of supermarket parking lot carnivals, which I don't think you're eyeballing.

So I was wondering if you could tell us what the opportunity is in theme parks that you see.

Carnivals, Barton, no, that's not our focus.

Here's how I think about it.

You may remember and in some of the prior presentations we've done, I have talked about theme parks, but I have kept them secondary to water parks for a reason, because we've been intently focused on the water parks, they're the easiest add-on.

But what we're finding is that there are opportunities.

Doesn't mean we're going to move on any of them, but there are opportunities with some single theme parks that may be available down the road that would be a good fit.

And at the right sort of pricing, we would certainly consider those.

So when we look at the dozens of opportunities that are out there, when they're within a reasonable driving distance of our existing portfolio so that we can really leverage costs and at reasonable price points, it will make sense to look at acquiring those.

Okay, great.

And then one final thing here is, with the new emphasis on membership and these premium-price kind of membership plans, can you give us any sense now of the portion of active pass that is membership and how that's inflecting in the mix relative to season pass?

It's a very good question to ask, Barton, but I will -- we'll not be giving that data yet.

At some point, we will be giving you that information, but it's too early right now.

But I -- what I can say is the portion of the Active Pass Base that is membership is growing really nicely.

And I think you understand there's recurring revenue benefit that comes with membership and all the positives of membership.

And we really get that.

And being in this position where we can not have to go through the process of selling season passes very actively every year and just having people stay with us is obviously a huge upside for us long term.

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

Just to follow up on the membership, have you guys historically been able to upsell your season pass holders to memberships?

And I know it looks like you started rolling out these new tiers in February here.

Have you seen any benefits so far, seeing people upgrade?

And then maybe the last question if I could.

When you look at the season pass base you have right now versus the membership base that you have right now, is there much difference in those customers, whether it be their behavior, income levels or other things?

So in terms of upselling, here's how I think about it.

We've had membership for a few years, and it's done fine.

But the real difference is now we've taken a different approach, and we're laser-focused on converting folks to membership, whether they are single-day visitors or season pass holders.

And so it is a company-wide, park-specific, detailed approach to make sure that whether it's online or live in park, we convert folks.

And we have been seeing a noticeable change in the way that we have been converting members.

So yes, I would say that the initial reaction is very positive.

Now I -- what I would say is historically, members have been a smaller portion -- to your second question, they've been a smaller portion of the total Active Pass Base versus traditional season pass holders, but we are converting them and -- from membership to season pass.

And it is a positive for many reasons.

And I explained them earlier, the higher retention rates, but there are 2 others that are actually really important.

They actually spend more time in our parks in a season if they're a member versus a season pass holder, we have found that.

We have also found that they spend more money in the parks, including they are more likely to purchase a dining pass.

So it is a company-wide focus on this.

We are going to be continuing to convert folks from traditional season passes to membership, and the initial -- it's very early in the process, but the initial results are very positive.

Okay, great.

That's helpful.

And then yes, as a follow-up, I mean, you talked about 10% Active Pass Base growth, obviously at a record.

How should we think about that number long term?

I mean, is that something that you would expect to slow on the margin?

I mean, obviously, you have the law of large numbers coming into play here, but you've referenced opportunities with water parks and membership changes as well.

How are you thinking about the Active Pass Base growth into the future?

Well, I'll start, and then maybe, Marshall, you can jump in.

I'm very excited about the potential to continue to grow the Active Pass Base.

That's what we want to be able to do.

And certainly, the results have been very good, very strong and encouraging when you think about our discussion about members and the fact that we're at a higher price point and we're up 10%.

It's very encouraging.

So we will continue to emphasize that and push it very, very aggressively.

In terms of the law of high numbers, and that is honestly -- we're definitely seeing that.

We're talking about millions of people.

But that will certainly not stop us from pushing it further.

And the reason I say that is we're still in this position where less than 40% of -- if you look at our overall unique visitors to a park, it's more than 60% of those people do not have a season pass or a membership.

So we're talking about millions and millions of people and -- who could convert to membership or to season pass holders.

And on top of that, you look at the number of people that will live within 100 miles of our parks, you're talking about basically 200 million people that we can go after.

And our targeting is much more effective than ever.

So we're looking to continue to grow that Active Pass Base, and there are many, many ways that we will do that into the future.

The only thing I'd add to that is that the water park strategy helps expand the range of potential pass holders.

And so if you think about our growth in the Active Pass Base, we've grown it double digits 48 out of the last 49 quarters.

And really, you have to go back to 2014 to find a quarter where we grew at less than 10%.

So we feel very good about the future of the Active Pass Base.

And we -- also, the signs we're seeing about upgrading to memberships and then upgrading into the higher tiers of memberships, we're extremely pleased about.

So we feel very good about the future.

Your next question comes from Ryan Sundby with William Blair.

So there was a noticeable and I'd say pleasant absence of weather talk in the script there.

But it has been unseasonably cool in April and the end of March in the -- at least the north part of this -- of the country.

Any kind of concerns that there's -- that's impacted attendance in -- as we kind of get into Q2 here?

So Ryan, that's a naughty question.

You know that because we never talk about the current quarter.

But I'll give you a sense as to how I feel, and you can check the weather data itself.

Clearly, the first part of April was a little worse than any of us would have liked from a weather perspective.

So that's fact.

We also have to take into account in Q2 the fact that, as someone else mentioned earlier, there was a shift in Easter.

So that affects the second quarter, too.

But I would tell you that our core business is very strong.

And so as Marshall just said, we feel very good about not just the quarter but the year.

The only thing I'd add to that is that the percentage of attendance that is in April for the full quarter is a very low percentage, less than 10%.

So we still feel very good about where we're heading into the quarter.

That's helpful.

And then, Jim, I guess since you've kind of come back on in your role as CEO, we've certainly seen a big pickup in international licensing activity.

Just curious there, has there been any kind of change in strategy?

Or is this just the timing of these deals that happen to fall this way?

I think that you may remember, Ryan, I've mentioned before that many of these deals, whether they be international deals or the water park deals that we've talked about or theme parks, we end up -- they're like mini versions of bigger M&A deals.

They take -- sometimes they take a long time to come to fruition.

And so we've been working on these -- many of them for many years.

Sometimes they're faster.

Sometimes they are slower.

If there has been a change, maybe Marshall could attest to this because I'm coming in -- having been away for a little while as CEO, it would probably be around the sort of emphasis on speed and actually getting things done fast, right?

Yes.

I think I might have mentioned it on the third quarter call.

But there's an intensity around really everything, not just international but season pass sales, membership sales, innovation, an intensity that is hard to match.

And it's just something, I think, special that Jim brings to the table.

I would want to make sure that you understand, though, that -- how strongly I feel about this.

There's a lot of speculation about risk, and there's risk in anything you do, right?

Any business has risk.

We have 5 major initiatives that we've got underway that are going really well right now, and we think they can continue to go for many years.

And that the international piece of this is going to continue to grow as we build our resources and expertise -- we can run multiple projects annually.

We're in this position where we've developed all these incremental parks, 12 parks coming, we've got a great pipeline of deals that provide a hedge against any one single deal or any one single market.

China is the biggest of all, and the vision of both Six Flags and Riverside is to build multiple parks.

I mentioned it earlier, 4x the population, half the theme parks.

I believe that China will overtake the U.S. in total theme parks sometime after 2020.

And forget just about China.

You've got Asia, the rest of Asia with hundreds of millions of people.

I think I mentioned to you before, I lived in Singapore.

I really feel strongly about the ability to do more in Asia.

You look at Saudi and the potential for multiple parks there.

Latin America, not only with existing parks but also the potential to expand.

So I'm not going to comment and tell you we're going to build x number of parks or identify partners, but we are working with multiple people.

And my sincere hope is that we can continue to make new announcements as we go forward.

Okay, great.

And then I guess just following up on China specifically there, we have seen some, I guess, news flow from the National Development and Reform Commission that they would maybe put more scrutiny on these kind of large-scale theme park developments.

Any kind of color or commentary there, if that impacts you guys or how that can impact the industry overall?

We obviously keep track of what's going on in all of the countries in which we operate.

And I think the way to think about it is really as follows.

You've heard me talk about our partners, an incredible partnership with Riverside.

They are building 10 parks.

They're on their way to building 10 parks.

We've talked about building multiple parks.

There is no ban on theme park development in China.

There are a series of guidelines that were issued regarding theme park developments.

They're mostly focused on the real estate aspects of theme park development but also touched on enhanced theme park standards.

They're not laws, but they do portend greater regulation of theme park development, in line with what we have in North America or Europe or around the world generally.

Our partner has not only successfully navigated the regulatory environment in China before but will continue to do so going forward.

And I think it's really good to have regulations that make sense.

So right now, barring some other decision that's made, all our parks are progressing nicely towards their anticipated opening dates.

And hence, we've announced 3 more parks.

We're very confident.

Your next question comes from Chris Prykull with Goldman Sachs.

Your next question comes from Tim Conder with Wells Fargo.

Just wanted to hit a couple of items.

One, back to the M&A comment on water parks, clearly, you guys are looking for opportunities there.

But just to clarify a little bit, you said parks that may be within driving distance on the theme park side.

Are we talking any type of range of size?

I mean, could it be a sizable park?

Or could it be more of a local, I would consider a Tier 2 park, similar to what you're looking at for the water parks?

Just a little more clarification on that, sir, if you would.

So Tim, I think you realize, we never stop looking -- once we were in the position where we were so strong financially post the emergence, we began the process of looking not just at larger-scale families of theme parks but also at single water parks, single theme parks.

So we've never ever really stopped looking at theme parks of any size.

And in what I'm describing, they may be stand-alone, fairly big theme parks, and the same may be true of water parks.

But generally, especially with the water parks, they would be within driving distance.

Marshall, would you add to that at all?

No, I think that's good.

I think as we look at theme parks, we have our strategies around season pass and memberships and All-Season Dining.

I think we can take a theme park, run a mom-and-pop-type theme park and create a lot of value with it.

So if the price is right, we're in the market for theme parks as well.

Yes.

And I think Marshall mentioned this, Tim, earlier, but the results are stunning, all right?

Mexico sold record season passes, and this is really on the back of that -- the water park expansion.

And then in California, by adding Hurricane Harbor in California to our lineup, they basically not only achieved the highest attendance days in their history, but that park is also at a high in terms of season passes.

And I would add that in almost every single case, the opportunity to add incremental season passes and memberships is far greater because of the relatively small percentage of unique pass holders.

So we have an opportunity, I think, that has not played out fully yet.

And I think someone earlier asked, where are we in terms of the innings?

And on all of these, we're just up.

We're so early in the process in the third or fourth innings on many of these.

In the case of the water park strategy, it's probably the second inning.

Marshall?

Yes, no, I would agree with that.

Very, very early.

Okay, okay.

And since we're talking baseball parlance here, from a penetration perspective of your dining pass, what inning are we in?

So Tim, you really -- I shouldn't have used that baseball terminology.

I'd like to go back to crickets terminology if it's okay.

But I think I've confused everybody.

Really, really early.

We've got an incredible team running.

Our culinary program, in-park services -- Bonnie Sherman Weber took over as the head of that group, having come from our most successful park, Magic Mountain.

And she is doing an unbelievable job, and the team there are firing, again, on all cylinders.

And it's so early in that process on dining.

There's more to come.

It's not just selling dining passes or All-Season Dining Passes, selling dining memberships, and then looking at all of the other aspects of in-park sales and really pushing that.

And so I'm very excited about what's to come there.

It is very early in the process on dining as well.

Okay.

And if I may, just to circle back to Dubai, is everything still on track for the original opening date that you all talked about?

Or has that changed?

And how should we look at Dubai in perspective to -- within that $10 million to $20 million range once it's open?

Is it on the smaller end of that?

Just to refresh us on that, please?

Well, in terms of where we are, the progress in the park continued through the first quarter.

We actually never stopped working.

We have people on the ground there.

They've been continuing to work.

The park is coming out of the ground nicely.

So the opening date remains where it was in 2019, at the end of 2019.

And the other question you had was around the revenue.

I think I'd say that it would be in the $10 million to $20 million range still.

And in terms of where in that range, I think it's probably early to say.

But I will say that a thrill park is what that park area group needs.

And so we think we're going to deliver that, and that'll be -- I think that'll be good for us and good for the complex.

I would echo that.

It just feels very good.

There's a lot of work still to be done.

But think about the World Fair 2020 coming to the UAE and Dubai, it's central to that.

There are going to be so many visitors coming in.

And we've got a team that's working really hard to get that park ready and open in time.

So we feel good about it.

And I think adding Saudi Arabia -- the combination of Saudi Arabia and Dubai in the Middle East, complementary and will really help to build the markets consistently for entertainment.

Okay.

And then 2 more if I may.

One, housekeeping.

Marshall, you gave us the international revenue in Q1.

Can you give us an EBITDA for that?

And then, Jim, on the -- driving folks to the membership side, how should we -- are you going to tend to pursue what you did when you -- when the team early on came on to Six Flags, drive up the single-day passes?

Could we see both single-day and traditional season pass prices be pushed to where it's -- pushes people towards the tiering of the memberships?

Well, let's start with Marshall taking the first question.

I will take the second one.

Okay.

Yes, in terms of the international EBITDA, it's in line with our 80% margins that we've been running.

So you could do the math there.

But...

Okay.

And then with regard to pricing, I won't be specific in saying, okay, it's going to do this here, there and everywhere.

But I will tell you and I think -- I do think you said it earlier, Marshall.

Like Marshall, I've never been more confident around the ability to raise prices.

You heard me talk about the value perception being the strongest it's ever been, the Active Pass Base up 10%.

And I talked about being in the mid-single digits on price increases.

And I want you to know that we've moved prices up on -- in every category.

So I think that answers your question, Tim, but we feel very, very good about where we are.

And yet we still sit well below the sort of price increases that companies like Disney and Universal have taken in the destination parks.

So people see us as a great value.

We want to be cautious about how high we go, how quickly because we don't want to put anything at risk.

And the approaches that we've taken have been very, very well received up until now.

(Operator Instructions) Your next question comes from Brett Andress with KeyBanc Capital Markets.

Don't mean to beat a dead horse on memberships here.

But there was really a focus on retention and in reducing churn with those memberships in your prepared remarks.

Can you just help frame up what the opportunity looks like there?

Basically, what has the churn been historically?

Where do you think you can take it?

And then also, what are the economics of these memberships?

Seems like you're offering a lot more services with that.

Is that still a profit profile that is similar or higher to comparable guests?

So I've talked about this before, Brett.

And when I joined the company and even more recently, it's a much higher churn than anybody imagines, and it's true of the whole industry.

Basically, the industry ends up retaining 15%, maybe 20% -- in terms of the regional players, 15% to 20% of season pass holders.

And we've been pushing that up pretty consistently.

But the real way to get to a much reduced -- or increased retention rate is to have a membership program, and you get all the benefits that I've described that come with retention.

And you asked specifically about profitability.

But there is 0 doubt that membership brings us much higher profitability even with the added services, so very, very high margin.

I won't get into specifics about what that is, but it's not just that it's a high margin but that the folks that are members spend more money in the parks.

They come more often, and they spend more money when they come.

So the approach to retention is so much cheaper than having to go through this process of buying guests back again.

I think you understand that.

Yes, no, got it.

There's another -- there's a secondary benefit, which I think we're beginning to see.

You remember, there was a point not that long ago where we only made money in 2 quarters.

We now make money in 3 quarters, right.

With the amazing turnaround in the fourth quarter, we think we can continue to build that with Six Flags Great America coming online, with Holiday in the Park and many other initiatives that we have and the growth of Fright Fest, which is a super brand.

I look at that, and I say, "I want to make money in the first quarter, too." And I think membership makes that something that could be achievable.

Because you're spreading the revenue over a year, because you're opening up parks earlier and staying open longer through Holiday in the Park, there's a greater value there.

Guests see that, and they're willing to sign up for memberships as a result.

Got it.

And Marshall, I wanted to circle back on wages in the commentary there.

I think in the past, you mentioned $5 million to $6 million as kind of the usual annual increase you've seen historically.

Is that still the expectation for this year?

So Brett, the minimum wages -- we have minimum wages increasing in 6 of our markets.

The bulk of the wage increase this year will be driven by those mandated increases, which equate to the $5 million to $6 million that you've mentioned and that we've previously discussed.

But we've also made some targeted wage increases for some select positions in some parks.

We have our management team focused on managing those costs.

The majority of these increases, as I said earlier, were anticipated as we entered the year.

And we'll continue to mitigate and offset those increases across the large and diverse cost base, just as we've done in the past.

I will say that low unemployment and higher discretionary income among teens and young adults were actually good for business.

And we've seen that in the markets such as California where we've had significant wage increases over the last several years.

And given our high-margin growth drivers, I think we can continue to maintain and grow our industry-leading margins.

So I hope that provides a little bit more color, but it's -- it will be slightly above the $5 million to $6 million.

We have no further questions at this time.

I will now turn the call back over to the presenters.

Thank you, Julie.

In closing, I would like to say thank you for joining the call today, and thank you for all of your ongoing support of Six Flags.

We have incredible building momentum, and like Marshall, I am very optimistic about the future of our company.

I do encourage you to come out and visit one of our parks soon, see our amazing lineup of new rides and attractions.

Take care.

This concludes today's conference call.

You may now disconnect.