Six Flags Entertainment Corp (SIX) 2019 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to Six Flags' Q2 2019 Earnings Conference Call.

My name is Natalia, 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.

You may begin.

Good morning, and welcome to our second 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, everyone, and thank you for joining our call.

I am very pleased with our performance in the quarter, especially with the progress we have made growing our membership and Dining pass programs.

As a direct result of our growth initiatives, we set company records for second quarter revenue and adjusted EBITDA.

Now that we have absorbed the incremental costs and diluted EBITDA impact of our new domestic parks, which for the most part, were not opened the first 5 months of the year and were not acquired until June 1, last year, we are well positioned to accelerate growth in the back half of 2019 and full year 2020.

With our record high Active Pass Base and significantly higher membership and All-Season Dining Program penetration, we are tracking toward our tenth consecutive record year.

For the first 6 months of 2019, attendance and revenue both grew 5%, representing an increase of almost 550,000 guest visits and $31 million of revenue.

On a comparable park basis, attendance, revenue and EBITDA grew at our legacy parks for the first 6 months.

And attendance, revenue and EBITDA also grew at our new domestic parks for the month of June, the period we owned them in 2018.

Operationally, it has been a good year.

Our new rides and attractions have been very well-received.

Our Active Pass base is up 2%, with our membership base at an all-time high.

Our 1-day ticket and season pass prices are up mid-single digits year-over-year, and we continue to increase penetration of our popular All-Season Dining Programs, with our active dining base up more than 25% versus prior year as of June 30.

I want to reinforce that the company has made a strategic move to memberships in order to aggressively shift to a recurring-revenue model, and we are in the middle of that transition, one that enhances customer loyalty and will ensure consistency and stability in the long-term cash flow.

Historically, most memberships have been sold online, and I am pleased to report an 80% increase in the proportion of guests upgrading to memberships at our front gate in our highly successful new membership centers.

We continued this momentum into July, our prime season for membership sales, and as of today, our membership base is up more than 25% from this time last year.

Although, there will always be a segment of our guests who prefer season passes, there is no reason we can't grow our membership penetration to more than 50% over the next few years, thereby greatly increasing our percentage of recurring revenue.

I am especially pleased with the accelerating adoption rate of our highest priced membership tiers with the proportion of guests choosing Diamond or Diamond Elite up double digits.

Higher-tiered members increased our average admissions price and have higher in-park spending and guest satisfaction.

In the quarter, we successfully reached a settlement regarding that discontinued project in Dubai.

And in China, our partner continues to make progress obtaining local government support for our Chongqing parks.

Construction in both Haiyan and Chongqing continues.

Though our partner has ongoing negotiations concerning the full integrated resort in Chongqing, we are pleased with their consistent progress and are cautiously optimistic that both Haiyan and Chongqing will remain on schedule.

In addition, our partner continues to have positive discussions with the local government in Nanjing, our third location in China, and is still striving to obtain all necessary approvals that will allow us to begin recognizing revenue again.

We are also in the process of completing the master plan for our Saudi park, which promises to be a beautiful entertainment complex with some amazing world record attractions.

Our International agreements provide unique diversification to our portfolio, and represent significant long-term upside above and beyond our base business with no capital at risk.

We are pursuing additional international parks and the opportunity for future growth remains compelling.

Before I turn the call over to Marshall, I would like to give you a quick update on the CEO transition.

Our board search committee is busy conducting interviews with both internal and external candidates.

The process has been going very well and there is great interest in the role.

Once we have a final decision about the new CEO, we will make that public.

So I am very excited about the balance of 2019 and our team remains energized and laser-focused on delivering another record year.

Marshall will now share a few more details on our second quarter and year-to-date financial results.

Marshall?

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

Second quarter revenue was up 7%, driven by an 8% growth in attendance and a 14% increase in sponsorship, international agreements and accommodations revenue, offset by a 1% decrease in guest spending per capita.

The 738,000 attendance increase was driven by incremental operating days at our new domestic parks prior to June 1, the day we assumed operations last year and attendance shift of nearly 200,000 guests from Q1 into Q2, due to the later timing of Easter and the related spring breaks compared to 2018, the increase in our Active Pass Base and incremental operating days from the Magic Waters water park in Illinois, which we began operating in April of this year.

Because of the Easter-related attendance shift between the first and second quarters, it’s more meaningful to review June year-to-date performance.

Revenue in the first half of the year was up 5%, driven by a 5% increase in attendance and a 14% increase in sponsorship, international agreements and accommodations revenue.

International agreements revenue was up $7.5 million or 32% in the first 6 months of 2019, with revenue of $20 million in the second quarter.

This included a $7.5 million settlement related to the termination of our contract in Dubai, an accumulative catch up revenue adjustment related to Chongqing.

You may remember that we did not recognize revenue for Chongqing in Q1.

Since that time, our partners have been progressing with the government approval process and construction has continued.

This adjustment brings us in line with the park opening schedule that was announced in our Q4 2018 earnings call.

Going forward, we expect to continue recognizing revenue for Chongqing and are hopeful to resume development and revenue recognition for Nanjing later in the year or early next year.

While we're pleased with the progress our partner in China has made working through the challenges they have faced over the last 9 months, it is possible that international revenue will remain lumpy going forward, especially if the timing of park openings changes or broader macroeconomic issues persist.

Guest spending for the first half of the year was up $0.03 to $43.33, with admissions per capita down 1% and in-park per capita spending up 1%.

Per capita spending was up nicely in our legacy parks, but was diluted by incremental attendance at our new domestic parks, which have significantly lower per capita spending.

We remain confident that we can grow these per caps over time.

Moving on to costs.

Our cash operating and SG&A expenses in the first half of the year increased 9%, reflecting incremental costs in our 5 new domestic parks in the first 5 months of the year, including lease expense and cost to operate and rebrand the parks.

Incremental costs to lease and operate Magic Waters, increased costs from mandated minimal wage increases and competitive wage rate adjustments in several labor markets and incremental legal and various other costs associated with our Dubai settlement, substantially reducing the settlement's impact on EBITDA.

Aside from the additional costs from the 6 new parks, our core costs grew in line with inflation.

The profit margin on our in-park sales was consistent with prior year and the increase in cost of sales is driven by a higher volume of culinary and merchandise sales.

We had net income of $10 million and diluted earnings per share of $0.12 for the first 6 months of 2019, compared to the net income of $12 million and diluted earnings per share of $0.14 for the same period in 2018.

Deferred revenue as of June 30 was up $8 million or 4% over prior year due to increased sales of new memberships and All-Season Dining products and incremental deferred revenue associated with our international development agreements, offset by a higher mix of longer-tenured members versus last year.

Going forward, the company expects deferred revenue growth will be muted and may decline as a growing pool of members retain their memberships beyond their initial 12-month commitment period at which time revenue is recognized monthly as cash is received and no longer contributes to deferred revenue.

On an LTM basis, our modified EBITDA margin remained the industry high at 40%.

Our balance sheet is very healthy with no borrowings on our revolver, a $115 million of cash on hand and no debt maturities before 2024.

In the second quarter, we entered into an interest rate swap agreement for $300 million of our $800 million variable-rate term loan, which together with our fixed rate bonds, makes 78% of our total debt fixed and an average interest rate of 4.9%.

Net leverage at the end of the second quarter was 3.9x adjusted EBITDA, which should come down as our earnings grow.

We expect to pay minimal federal taxes this year and next, and do not expect to become a full cash tax payer until 2024 at the earliest.

Although our unlimited NOL carryforwards run out at the end of 2020, we have continuing limited NOL carryforwards that shield approximately $32 million of taxable income per year through 2024.

We also have foreign tax credits and bonus accelerated depreciation, which enables us to write off 100% of our current year capital spending plus the remaining makers depreciation from capital expenditures made prior to 2018, the year of tax reform.

We feel our leverage is very appropriate given the recurring nature of our cash flow.

We are comfortable growing our dividend every year.

As has been our consistent policy, all excess cash flow remaining after dividend payments will be used to repurchase shares unless we find compelling incremental investments with a high return.

At the end of June, the remaining amount authorized for share repurchases was $232 million.

Going forward, there are several considerations to keep in mind.

First, our 6 new parks were immediately accretive to EBITDA, and will provide a quick payback, but they are dilutive to margins and per capita spending metrics.

We also incurred incremental lease, rebranding and operating costs during the first half of the year that were not incurred in 2018 due to the timing of the acquisition last year, making year-to-date comparisons challenging.

Beginning next year, all but Magic Waters water park are fully comparable to prior periods, which should allow us to grow EBITDA and margins again.

Second, as members enter their 13th-month, revenue is recognized evenly each month regardless of attendance.

This has the effect of benefiting per cap spending metrics in Q1 and Q4.

Third, as we continue to be successful in upgrading higher volumes of new guest sales from single-day tickets and season passes into our membership programs, a growing proportion of that revenue would traditionally have been fully earned in the current calendar year, will now shift into the following year.

Finally, we expect to record stock-based compensation related to options of $4 million to $5 million per quarter and will not record expense associated with Project 750 until a payment becomes probable.

Like Jim, I feel very good about our ability to grow in the balance of the year, and our ability to accelerate growth in the next few years.

Our Active Pass Base is at a record high, which provides a strong hedge against inclement weather.

In the back half of this year, we'll be overlapping significant rainfall last year that negatively affected attendance at many of our parks.

The last July-through-June time period was the wettest 12 months of all time.

In the last 3 years, it set consecutive rainfall records in the U.S. We have grown nicely, even in that environment.

Our recurring revenue model is strong and building momentum, and we are well positioned to continue to grow even faster once the weather reverts back to the mean.

We should also benefit from our ongoing investment in special events, such as Fright Fest and Holiday in the Park.

The membership and All-Season Dining program penetration of our Active Pass Base continues to grow, with membership units and dining units up significantly.

The continued growth of this programs will drive enhanced performance in 2019 and beyond.

Finally, revenue from our international agreements should accelerate further as we receive approvals in China, continue to add new locations and over the medium-term, begin opening parks.

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

Thank you, Marshall.

We are the leading regional theme park company in the world, and our team will never stop innovating and developing ways to capitalize on our 5 strategic pillars to achieve profitable and sustainable growth.

First, we are increasing membership penetration on a growing Active Pass Base.

Our premium membership and loyalty programs are driving significant recurring revenue by increasing both average selling prices and retention rates.

The annualized cash flow from our current base of members now represents nearly 25% of our trailing 12-month guest-spending revenue, up from 20% in Q1, and benefits will compound as we continue to add new annual membership layers.

Our loyalty program provides incentives for guests to become members and to stay in the membership program.

And we now have more than 3 quarters of 1 million members who have voluntarily signed up to be in the loyalty program.

This structure drives engagement with our members and the guest response is that they love the program.

Second, we are improving ticket yields.

We have very high value for the money ratings in our guest satisfaction surveys, and we provide a compelling value compared to other forms of the entertainment, allowing us to strategically raise prices mid-single digits for years to come.

Our growing membership program also improves ticket yields as member move into higher-price tiers.

Third, we are growing our valuable in-park programs.

Our expansive Active Pass Base and special events provide opportunities to sell more products when guests visit our parks.

This year, we are installing Wi-Fi in all of our parks with installation already complete at most parks.

This will improve the guest experience and guest engagement, allow us to leverage new applications such as mobile dining and our enhanced mobile app and provide additional guest e-mail addresses that along with other actions, has grown our contact list by double digits in just the last 6 months.

Higher membership penetration will also support in-park programs as members are more likely to buy a dining pass and spend more when they're in our parks.

Fourth, we are expanding in North America.

We can significantly improve the profitability of acquired parks in adjacent markets by leveraging our Active Pass Base to grow attendance and revenue and by improving acquired park margins through cost synergies.

We have a very disciplined approach to M&A that ensures we will not overpay for acquisitions or stray from our core business and we have been able to utilize our strong cash flow and balance sheet to quickly capitalize on opportunities.

This has allowed us to acquire 8 parks since announcing this strategy in the first quarter of 2017 and there are a variety of acquisition targets remaining.

Fifth, we are building our international franchise.

Our strong global brand allows us to extend into emerging markets where the middle class is growing and entertainment options are limited, providing growth above and beyond our domestic markets with 0 capital investment.

We have 8 parks in 3 locations under construction and are working to restart construction on 4 additional parks in Nanjing, China.

Our pipeline remains robust, and we are optimistic that we will be able to announce new locations in the coming years.

Underlying these 5 growth drivers, we are very comfortable consistently investing 9% of revenue into capital spending, putting something new and exciting in each of our parks every year.

We are convinced that this is the absolute right level of investment.

And as a direct result, our modified EBITDA less CapEx margin remains the highest in the industry by several hundred basis points.

We are fully committed to enhancing shareholder value by returning all excess cash flow to shareholders in the form of dividends and share buybacks and also protecting shareholder capital by pursuing capital light avenues of growth with high returns on investment.

Our dividend yield of 6.2% is among the highest in the U.S. market, and we are committed to growing the dividend every year for the foreseeable future.

Our aspirational goal of $750 million of modified EBITDA by 2021 reflects an 8% annualized EBITDA growth rate from the end of 2018.

While it remains an ambitious goal, we believe it is achievable, given our significant and unique high-margin growth opportunities.

Remember, our employees are also shareholders, and they are determined to deliver exceptional value to both guests and shareholders.

As I've said on the last few calls, I believe that our shares are undervalued.

Six Flags is a truly global regional theme park company, with an attractive and vibrant brand, excellent team and superb guest satisfaction scores.

Over time, our 5 key strategic initiatives and our growing stream of recurring revenue from membership programs should allow us to rerate to a significantly higher multiple, especially now that we are below the low end of our historical range.

At this time, I am going to ask our operator, Natalia, to open the call for any questions.

(Operator Instructions) And our first question is from the line of Ian Zaffino with Oppenheimer.

This is Mark on for Ian.

So I guess, question will be on, number one, can you just guys speak a bit on retention and specifically what you guys are seeing on the membership side?

Sure.

We are seeing very strong retention numbers with regard to membership.

If you think about what we historically had, Mark, traditionally, the industry has had single-day visitors or season pass holders and come the end of any year, those season pass holders go away.

And then you have to fight, basically, to get them back.

Well, we don't have that with members, they stay with us and many of them stay for years.

We've got some that have been with us right from the start of the program.

The beauty, though, of the new membership program that we introduced last year is that the value opportunity there is much more significant than anything we've had in the past.

And we've seen that people love the program, are sticking with us and really enjoying it.

Obviously, there is some churn, just as you would get with any business like this, but it's substantially below what you'd see with -- if you simply had a traditional seasonal pass program.

Okay.

Terrific.

And then just a follow-up, in terms of growth for memberships and the potential there, what inning would you guys say you guys are in and how much room to grow as fast?

It's a great question.

So you heard me describe earlier being at the point where basically the penetration is still relatively low.

We're getting 25% of our recurring revenue from memberships -- of our total revenue, basically, the guest revenue from memberships.

So there's a long way to go.

So if I put it in simple terms, we're probably in the second or third innings.

Marshall, would you add to that?

No.

I think you said what needs to be said there.

Your next question is from the line of Brett Andress with KeyBanc Capital Markets.

Just 2 quick ones for me.

First, how would you describe the weather during the second quarter, I mean, was the weather normal?

Was it worse than normal?

One of your competitors was out with results that saw trends really pick up in the last few weeks of the quarter and around the holidays.

So I was wondering if you saw similar trends in your business as your quarter ended.

And then the second, Marshall, can you help us to tease out what per caps would've been if we strip out Premier and Magic Waters in the second quarter?

I think the press release seem to indicate that they would have been up if we exclude that?

Yes.

Brett, let me take question #1 and then Marshall can take question #2.

I think it's fair to say, and Marshall did describe this in his prepared comments, but the last 12 months truly have been recorded as the wettest 12 months in North American history.

And I can say that the second quarter was still pretty bad.

I wouldn't comment on July because we try to avoid commenting on current quarters.

But it has continued to have significant rainfall throughout the country, especially on the East Coast.

So weather has definitely impacted us in the last 12 months, and we're hoping that it does turn.

There hasn't been some sort of substantial reversal of that trend.

Marshall, do you want to talk about the impact of the new parks on per cap?

Sure, Jim.

So year-to-date, the guest spending per cap was up $0.03.

If you just look at the existing parks, the legacy parks, per cap spending was up nicely.

It was really diluted by park mix, which was the new parks' attendance in the mix.

Our goal going forward is to further increase the per caps as we grow membership, the membership base, the dining pass penetration, and we continue to apply improving revenues synergies to the parks.

If you look inside the metrics, the actual per cap metrics, they are operating just as we had expected.

The memberships are significantly higher than season passes from a per-cap perspective.

And the 13-plus memberships are even higher than that.

So the per caps are delivering, you just can't see it because of the park mix.

And Brett, I would just add to that, if you think about the 2 topics that we just covered, both weather and per cap with the new parks, even with that, we had our highest second quarter of all time and have delivered record numbers.

So it does show you the power of what we've got, not only with membership, but with the core parks' organic growth and success.

And I feel very good about the ability to continue to see that sort of growth going forward, especially given that we have the opportunity to improve the margins and the performance of those newer parks over time.

Understood.

And I just had one more, I guess, clarification and I'm sorry, if I misunderstood this, but Marshall, I think, you said the settlement from DXBE was $5.7 million?

I thought it was $7.5 million from one of the releases.

So, which one is it?

Yes.

So it's $7.5 million.

I think that's what I said, but if I said $5.7 million, then I misspoke.

It's $7.5 million.

And I think what you may have heard him also talk about is that there -- the impact on EBITDA is substantially lower than that because of incremental legal and other costs associated with the settlement.

So there were 2 comments that he'd made, Brett.

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

So Jim, I guess, if we look at the 2% growth in the Active Pass Base at the end of June, obviously, that's down from 5% at the end of the first quarter.

I guess the question is, does that deceleration in growth surprise you at all?

And am I missing something structurally with the calendar?

Or is that low single-digit growth for the first 6 months kind of in line with what you guys would have expected?

So as you said, Steve, we're up 2% over the last year's record high.

And every single quarter going back for a minimum 5 years since we became -- began tracking this has been a record.

Although, definitely weather, we think, impacted 2019 and diminished somewhat where we could have been.

Now the reality is that the composition of our Active Pass Base has been changing due to the focus on membership, and we have higher annual prices there.

And the benefit of that is that members stay with us longer, which should help to grow the Active Pass Base as we go forward from here.

So I am actually happy with the Active Pass Base growth where it is, an all-time record, consistently growing, and I am looking forward to seeing continued growth going forward.

Okay.

Got you.

And then the second question would be around the wading across the 4 tiers of your membership program.

And I think you talked about Diamond and Diamond Elite growing kind of double-digit.

But what I'm getting at here, are those 4 tiers remaining pretty consistent, especially on the lower end?

And, I guess, what we're trying to figure out here is your core customer still pretty healthy?

Our core customer is very healthy.

And certainly, the thing that most pleasantly surprised us is what you were getting at there, Steve.

But we didn't anticipate having as high a percentage of Diamond, Diamond Elite as we do.

So it's been very positive overall experience.

There's been stability in those numbers over time, if anything, there's been a little bit of a growth in the Diamond, Diamond Elite side at the expense of Gold Plus and Platinum, which I think, obviously, works in our favor.

So this one definitely, we're surprised in a good way and it reinforces the -- our guests seems to be in a good place.

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

I guess just a point of clarification.

I obviously wanted to flush this out a little bit, but it sounds like in China, your Chongqing park that you both recognized revenue for the second quarter and you also did a catch up payment for the first quarter, and you expect to continue recognize revenue going forward on that, is that accurate?

That's correct.

It wasn't so much a catch up payment.

Why don't you describe that, Marshall?

Yes, it wasn't a catch up payment per se, but we had stopped recording revenue in the first quarter.

So really, we were just getting back on the schedule that we had talked about in the fourth quarter.

And so our expectation now is that it will continue -- we'll continue to record revenue there going forward.

Okay.

That's really helpful.

Yes, my bad, catch-up revenue recognition, I guess, I should say?

Correct.

That's right.

So I guess, my next question then would be if the timetable holds, I think for Nanjing, you had talked about 6 to 9 months, we were pleasantly surprised this morning that you were able to hold the timetable on Chongqing.

Should we similarly expect in the announcement on Nanjing on the third quarter call, if that holds up?

And, I guess, sort of secondary question there, if you're able to keep that timetable, should we expect a similar revenue recognition catch up for 1Q and 2Q in the third quarter numbers?

So James, I genuinely cannot comment and say time it here or there.

We don't know because those discussions are ongoing.

But the reality is that once we get to the point that we are comfortable, I'll promise you, we'll communicate.

And yes, if it's a positive decision, then we have the ability to record a catch-up value to -- for that park.

But it's too early to say that right now, although discussions are ongoing and they seem very positive.

Got it.

And then, I guess, just lastly on the international front, maybe with the first China site, maybe an update on construction?

And I'm assuming the opening date is still on schedule there, but maybe just update us.

I think there's a lot of investors or potential investors that aren't sure we'll ever get to that finish line.

So maybe just a bit of an update there.

No.

I'm happy to go through that.

And I can tell you that the parks that we've talked about, both in Haiyan and Chongqing, the construction has continued there.

And the timing that we had given you -- I think Marshall referred to this as being on the fourth quarter call, those hold.

At this time, if there's ever an update, I promise you, we will give you an update.

But we are progressing at both of those parks.

Your next question is from the line of Michael Swartz with SunTrust.

Marshall, just a clarification, housekeeping question, and I may have missed it, what -- how much did you record in international licensing revenue during the quarter?

$20 million.

It was $20 million and that included the $7.5 million settlement, and the -- I think, the catch up as you referred to it to James' question?

That's correct.

Okay.

Perfect.

And then just with regards to the membership program, have you ever broken out or can you talk about -- give us a little context to what percentage of your membership activity are coming from upgrades of season pass versus people who may have never been part of the Active Pass program before?

I won't to give you a number, Michael, but I can tell you that it is a fairly high proportion.

We're getting -- we're really getting from a number of sources.

We're getting season pass holders who are upgrading to memberships.

We're also getting single-day visitors.

And because of our ability to go after new potential members and season pass holders through our Wi-Fi program, we are actually finding new people that maybe would visit the park but never be registered for us to contact.

So it's coming from multiple sources, but as you said, single greatest source, it'd probably be season pass holders.

Your next question is from the line of David Katz with Jefferies.

Congrats on a solid quarter.

I just -- I know that we maybe addressed this matter, but I just wanted to make sure I'm clear about it.

When I read the release about Active Pass growth for the first 6 months and then I look at the first quarter release, I believe the first quarter indicated 5% growth and the 6 months indicated 2% growth, which kind of implies a direction in that Active Pass growth.

Am I reading that correctly?

How should I interpret that?

Go ahead, Marshall.

Yes.

You are reading that correctly.

One of the things that Jim mentioned was that we've actually grown at record quarters every quarter since 2014.

We've done that by finding different ways to continue to grow what has really become a massive season pass and membership base of 8 million people at the end of the year.

And so memberships is a way that we will continue to grow.

So -- but you are reading it correctly.

I think having a record...

Let me clarify one thing though...

Go ahead.

Yes, sure.

Marshall, because David I want to make sure we understood what you said because you talked about the growth being over the end of the year, but I may have misheard you.

The growth is over the equivalent time period last year.

So remember that the base of Active Pass holders does move as we go forward and changes over time.

So Marshall's right, it's an absolute record, but our comparison of 2% is to June of last year as well, not to December of 2018.

All right.

I think we're clear.

And my second issue that I wanted to raise is just within operating expenses, I think in there, there was sort of one-time rebranding.

And I want to make sure that we're sort of treating the OpEx the right way going forward.

Have you indicated as to how much the one-time rebranding was?

And we're just trying to sort of get to the run rate that we should be thinking about going forward?

Sure.

Yes, we have broken out exactly what the rebranding is, but the cost increases were driven by the new parks, which included the rebranding.

So if you strip out the new parks, I think you can assume we'll be in line with inflation, which is where we have been year-to-date.

Got it.

And one last one if you don't mind, which is Jim, I heard your commentary around stock and stock value and so forth.

Is it fair to ask the question about how you think about repurchasing your own stock relative to the investment opportunities that you have?

And how those 2 -- you see those 2 comparing with each other today?

Yes.

I think that's a really good question, David.

And you know that I am one of the largest personal shareholders in the company.

I think I'm in the top 5. So I firmly believe in the ability for the company to grow consistently and for the share price to continue to grow.

But if you look at the company's position, it's fairly simple.

We return all excess cash flow to shareholders.

I've described this being in the form of growing dividends and share repurchases.

In the last few years, we've basically returned nearly $3.7 billion to shareholders in the form of dividends and share buybacks.

So it's very clear that we believe in the potential for growth.

But you also got to remember there is seasonality to this business, so we tend to build most cash over the summer as the parks are open.

And then we spend most capital in the first half of the year.

So we tend not to -- if you look, unless there is some sort of special event, we tend not to repurchase shares in the first half of the year.

We tend to do it in the second half, and we'll continue to look for opportunities to repurchase shares using our strong cash flow and balance sheet as we go forward.

Yes.

And the only thing I'd add to that is, as we balance whether to do share repurchases or other acquisitions like we did last year, it's really about shareholder value.

And if we can get it -- if we can get parks for a great value that we know that we can add synergies to, like we did with the last purchase that we did, then we'll, obviously, go after those parks.

But we'll never overpay, and as you said, we always have our stock price, which we think is a great value, as a backstop for excess cash.

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

So I wanted to ask about the acquisition parks, specifically Chicago and the Premier Parks.

How are those performing versus your expectations when you did those transactions?

And any color you can provide on what those parks are doing as far as contributing to season pass sales and memberships?

Marshall, you go ahead and take this.

Sure.

We are very pleased to have -- the Chicago Park is brand new, so we haven't really had enough time to do anything there.

Although, we are selling upgrades to Chicago Park.

In terms of the Premier Parks, I think I'd say that we're very pleased with how they finished up last year.

We're also very pleased with how they're doing this year.

We've had some rain in Buffalo, but even with that, we were able to grow for a comparable period in June for those parks.

And I think the other thing -- and Jim mentioned in the script, but the -- if you look at the June month, those parks grew in attendance, revenue and EBITDA, which is the comparable period.

If you look at the existing parks, they actually grew on a year-to-date basis in attendance, revenue and EBITDA.

And international also grew in revenue and EBITDA.

So I think we got a nice balance of growth in all 3 of those areas.

I want to add one more thing which is, Marshall referenced some weather in Buffalo, and it's really important to note that on days when there isn't weather, we do extremely well.

In other words, on normal days, we do extremely well.

And I mentioned earlier that even with all of that, we've set records in the second quarter.

So we're very proud of not only of our existing parks, the original ones, but the new parks that we added, Premier and Rockford, they are doing very well.

Okay.

Great.

That's helpful.

And then I wanted to ask if you have any updated thoughts on M&A, Potential industry consolidation?

Obviously been a few deals out there since the last call.

So wondering what you think about the opportunity set that's out there?

There are always opportunities out there.

I think I mentioned in my -- in the prepared comments that we're looking at potential deals.

These tend to be smaller deals, involving single or a handful of parks together.

So we do that on an ongoing basis as a matter of course.

With regards to bigger deals, we look at everything that comes up.

But we are extremely disciplined about how we spend our shareholders' money.

And so there've been several deals that we have walked away from because we felt that they have been too expensive, and we'll continue to do that and only make purchases that we think will really add long-term shareholder value.

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

A couple of -- just clarifications on China first.

So broadly, when you look at China collectively, would you say the timeline overall has improved, stayed the same, or slipped a little since 90 days ago?

I think the timeline that we described 180 days ago still holds right now, Tim, and the same as it was 90 days ago.

And if anything changes, we will update you and all of our shareholders.

Okay, okay.

And then within the international revenues, was anything recognized for Saudi Arabia during the quarter?

Yes.

So Saudi Arabia, as -- we're recognizing revenue as we've always done.

So if you think about the way that these -- we recognized revenue in the preopening periods, it's largely a fixed amount of revenue that we spread over the time it takes to develop and build those parks.

So we are recording revenue with all parks on a quarterly basis that are in process.

Okay.

And then Jim or Marshall, whoever wants to take this, in relation to the cash taxes, you gave a little bit of commentary, Marshall, quite a bit, actually, in the preamble.

But could you just remind us the cash tax amounts '19, '20, '21 that you expect, I know that you guys have talked about that in conferences and so forth, but just maybe give us an update?

Remind us where those stand at this point?

Sure.

So '19 will be very similar to 2018.

It will be $30 million to $35 million.

The same is true in 2020.

In 2021, there'll be a lot of variables.

But we'll start to grow in 2021.

It could be -- depending on earnings, up to $50 million or so.

But -- and then in 2024 is when we'll really become a full tax payer.

Okay, okay.

And then gentlemen, back to any comments on -- and you gave some color and we appreciate that, any color on the memberships as of June 30 as a percent of your total Active Pass Base?

And then a comparable maybe amount from a year ago?

Yes.

We don't -- if you remember, Tim, we don't comment on the Active Pass Base totals until the end of the year.

And we'll be happy to do it then, but what I can tell you is that it's been growing really, really nicely.

As I said, double-digit growth overall, shifting percentage of the mix in favor of membership.

So we're really, really happy with that growth.

Okay.

And lastly, gentlemen, the growth in the memberships that you talked about and it was asked about earlier, historically, I think -- and trying to think of this for one of your competitors also, has that been impacted to a degree by park visitation, meaning if Q2 has some weather impacts, does that impact the rate at which members sign up?

I know they can do it online also, but is that a factor that could potentially have some impact here?

Yes.

It definitely, Tim, can have an impact if there's really bad weather, it can affect you for a period of time.

But as we've always said, over a period of a year or so, it tends to even out.

Even though, it has been certainly a rough 36 months, as Marshall described.

We're still at record levels, not only in terms of the Active Pass Base, but we've never seen levels like we have today of member sign up.

They are really powering ahead and doing very, very well.

And I also mentioned in the script, the ability that we now have to sign people up in park as well as online.

So even if somebody is not able to be at the park for whatever reason, we can still sign them up online.

So while it may have some sort of dampening effect, if weather is bad, we're certainly, I think, powering through that.

Your next question is from the line of Alex Maroccia with Berenberg.

Just a quick follow-up on some of these season pass discussions you've been talking about.

So are you seeing any success in the ancillary season passes, such as the season FLASH Passes or the Picture Pass right now?

Yes.

I should have -- I should really have commented about that because we are seeing success there.

The programs that we have in place target multiple areas for getting season passes and actually memberships.

And so the increases there have been very strong too.

Okay.

Great.

And then just one on the balance sheet.

You mentioned during the comments earlier that you're currently unconcerned with the debt right now, given that a lot of it matures in 5-plus years.

But are you planning to deploy any cash towards repayment in near future?

Well, our plan has been -- like it's been over the last several years, as earnings grow, the leverage will come down.

So right now, other than the amortization of the term loan which we have, we don't plan on any other paydowns in the future.

Your next question is from the line of Chris Prykull with Goldman Sachs.

On admissions per capita, how should we think about the growth of that line item going forward, given the success that you're having in upselling memberships?

I guess, all else equal, 3Q, you don't have as many incremental operating days from acquisitions, really just Magic Waters, I guess.

And so would that number be sort of more similar to what you actually are seeing from a price increase standpoint?

Yes.

That's true.

It's much more comparable in the third quarter.

There is always a park mix that will impact it.

So if it's really hot, and water parks do better, that will impact it.

But yes, generally it's comparable in Q3, and we should see some growth...

I would add to that, that over time that you should see an acceleration above that growth that Marshall talked about.

If you think about the mix that we've got, we've got several factors that were -- first of all, you don't have the new parks' comparison impacting it the same way as you have traditionally.

So per caps will be normalized as we go into Q3 and forward.

And then over time as memberships become a much bigger proportion of our overall base, they are at higher price points than traditional season passes.

And so we should see a shift in our favor from a per-cap perspective over a period of time.

Got it.

That's helpful.

And then just going back to the Active Pass Base for a second and I don't mean to harp on it.

I think it was up 2% year-over-year as of 6/30.

It was up 8% last year, 10% the year before that.

Obviously, each of those growth rates on top of a record base to your point.

How should we think about your ability to grow the Active Pass Base going forward?

What's a reasonable rate?

What are the key levers?

Is it really going to grow with population growth from here?

And then do you look at that metric as a leading indicator for attendance internally?

Well, it's a very good metric.

And I think you know we're the only company that actually publishes our Active Pass Base.

Annually, we describe what it is.

At the end of last year, it was 8 million.

I can assure you that there isn't a regional theme park company that has sort of Active Pass Base that we have.

And it is growing nicely and yet, even with all of that, when you look at penetration, we are only in the position where 40% of our unique visitors have a pass.

So I look at it and I say, over time, we will consistently and aggressively go after growing the Active Pass Base.

It's a big number, but there's tremendous opportunity to be able to grow it.

So my perspective is, you will see growth there.

It will vary.

And it depends on the initiatives that we have in place.

But we anticipate growth.

I just won't give you a number, a specific number.

As you know, we won't provide the guidance, Chris.

Fair enough.

Worth trying.

How many trips per year are season pass and members at right now?

And how has that trended over time?

Has it been up or down?

It's -- our season pass and members visit 3 to 4 times.

Our members actually visit more, and actually the higher tier members visit more often than the lower tier members.

If they get a dining pass, they visit even more.

But in general, it's been 3 to 4 times that's been consistent.

It's been up 1 point or down 1 point different years.

But that's generally what we see is 3 to 4 times.

And we really haven't seen much of a change in terms of the number of visits as Marshall said.

Got it.

And then maybe just lastly, dividend growth.

How are you all thinking about that going from here?

So Chris, we will be growing the dividend, and we'll do it consistently over the next few years.

I am not going to give you a number and say, "Here's what it's going to be," because, obviously, that's decided annually by our board in meetings.

But strong sustainable cash dividend is a really important part of the value proposition that we offer shareholders.

And we will grow that every year, just as we have done successfully for the past 8 years.

Your next question is from the line of Paul Golding with Macquarie Capital.

My first question is around the loyalty.

I was wondering if there was anything you could say to size, incremental monetization or the opportunity with the loyalty program for pass -- for membership members?

Yes.

It's a really good question, Paul.

I described earlier that we already have 750,000 people who signed up.

And by the way, we don't force people to take loyalty, they sign up for it.

And so it's been a very positive response.

It's an exclusive benefit only for members, and it rewards the people who are most loyal and who voluntarily sign up.

They earn the majority of their points by spending money in the park.

So there really is a goal to monetize loyalty.

And they are rewarded for behaviors that we want to encourage.

So it's not just spending money, it's visiting the park, going on ride, participating in the contests, doing surveys, things that really engage guests.

And they are in a position where it's quite attractive for them because they can redeem points for food, souvenirs, park tickets and one-of-a-kind experiences.

And these are relatively low cost to us, but really valued highly by members.

In addition, we get information about members and about -- over time about people who are related to the members or friends of members and we encourage them to join up in the loyalty program and also become a member.

So we're in a position where the growth has been very strong and building every day.

And we think the potential to monetize that is very strong.

Yes.

I think, the other thing I'd add to that is, if you're a member prior to February of 2018, you don't have the ability to get loyalty unless you upgrade into the new membership program.

So we've now made it very easy on the app.

So it's really just a 1 click upgrade into the new membership program.

They commit to another 12 months and then they also get to enjoy the loyalty.

So it's been a nice incentive to upgrade from the old membership program into the new one as well.

And the difference in the upgrade is you're saying going from traditional season pass to membership or a prior version of the same membership program?

Yes.

A prior version of the same membership.

Because we know if we can get them into the new membership, they commit to 12 months and then they have the opportunity to upgrade into the Platinum, the Diamond and the Diamond Elite.

The higher tiers.

Right.

I see, I see.

Great, that's helpful.

And then my last question is around Project 750.

So just keeping it in sight, I was hoping you could give us some color around if there is a main focus or a lever to pull in the coming periods to get there, if you were to focus on one strategic goal?

I would say, it's not going to be a focus on one strategic goal.

I don't think really because, Paul, because we are -- we have 5 initiatives, 5 major initiatives.

They all have tremendous potential.

But if you maybe force rank them, I would definitely say the whole opportunity to drive attendance through membership and season pass penetration will probably be top of my list, followed by pricing ticket yields, and then in-park potential through culinary and other programs, especially membership programs, and then the North American expansion strategy and international.

Those 5 will drive the success we get in going after Project 750.

The entire -- as I said earlier, the entire organization, in terms of full-time staff, are shareholders, and they really want very badly to be able to achieve this goal.

Your final question is from the line of Ryan Sundby with William Blair.

Just again, I'll end here on one last Active Pass Base question.

Could you maybe talk about how the sales cycles line up between season passes and memberships?

Because it feels like season passes are incentive to be sold earlier before the season starts.

And I would think membership maybe happens closer to the date of visitation.

So just wondering if there is maybe a misalignment of timing there and maybe that's working towards kind of lower pass base growth number earlier in the year?

Right.

So the season pass, you're right, because we actually increase price throughout the year, the season pass incentive is to buy now.

We still -- from a membership perspective, we like -- we're working to sell those people a membership as well.

But in terms of where the big sales, it's really the incentive, if you think about it, because if you buy it in May, June, July, if you buy a membership, you get 365 days, whereas if you buy a season pass, you just get to the end of the season.

So the incentive to switch is really higher in the summer months than it is in the lower months.

But we've actually seen -- I think we talked about in Q3 and Q4, we've seen nice growth and transition from season pass into memberships in all quarters.

But just in terms of the natural cadence, there is a little bit of a difference.

It's summer for memberships, and the incentive would be more in season pass.

So Ryan, I would add on top of that, that we have a team that is dedicated to looking at sales, obviously, and marketing.

And there is a calendar that is very clearly laid out to optimize timing on how we sell membership season pass single-day tickets.

So, for example, coming up in about a month, we have flash sale, which focuses on season passes and making sure that we sell a lot of season passes in advance of next season.

And we have the same sort of thing for membership, we have it for -- sometimes for single-day tickets, and that is a calendar that's laid out and goes throughout the year and targets optimizing how we sell.

And that has traditionally been very successful and continues to be.

Okay, great.

And then lastly on China.

So next quarter we're kind of back to normal, right?

So the 3 parks that are kind of approved and if that's right, Marshall, just given the kind of the catch up stuff and the Dubai attainment, can you just tell us, what's a good number kind of use for that going forward?

Well, we're not going to give guidance for what the revenue number is.

What I will say is that there is -- it is a normal revenue recognition for the Saudi park, the 4 parks in Chongqing and then the 3 parks in Haiyan.

So that's 8 parks.

And you remember, from my comments that we're still waiting on Nanjing, for the remaining 4 parks.

So 8 parks total, not 3 as you'd mentioned there.

Sorry, yes.

I meant the 3 sites.

3 sites, yes.

Got it.

There are no further questions.

Are there any closing remarks?

There are, Natalia.

Thank you.

So our 2019 season is off to a good start, and we are looking forward to delivering our tenth consecutive record year.

Thank you very much for your continued support of Six Flags.

We hope to see you at one of our exciting parks very soon.

Take care.

Natalia, that ends our call.

Thank you.

This concludes today's Six Flags' quarterly earnings conference call.

Thank you for your participation.

You may now disconnect.