EDITED TRANSCRIPT SIX.N - Q1 2021 Six Flags Entertainment Corp Earnings Call

REFINITIV STREETEVENTS EDITED TRANSCRIPT SIX.N - Q1 2021 Six Flags Entertainment Corp Earnings Call

EVENT DATE/TIME: APRIL 28, 2021 / 12:00PM GMT

OVERVIEW: SIX reported 1Q21 results with revenues of $82m and GAAP loss of $1.12 per share. Co. is not providing annual guidance at this time.

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CORPORATE PARTICIPANTS Michael Spanos Six Flags Entertainment Corporation - President, CEO & Director Sandeep Reddy Six Flags Entertainment Corporation - Executive VP & CFO Stephen R. Purtell Six Flags Entertainment Corporation - SVP of IR, Treasury & Strategy

CONFERENCE CALL PARTICIPANTS Alexander Rocco Maroccia Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst Brett Richard Andress KeyBanc Capital Markets Inc., Research Division - Associate VP David Brian Katz Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure Eric Christian Wold B. Riley Securities, Inc., Research Division - Senior Equity Analyst Ian Alton Zaffino Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst James Lloyd Hardiman Wedbush Securities Inc., Research Division - MD of Equity Research Steven Moyer Wieczynski Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst Tyler Anton Batory Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure

PRESENTATION Operator Good morning, ladies and gentlemen. Welcome to the Six Flags Q1 2021 Earnings Conference Call. My name is Catherine, 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.

Stephen R. Purtell - Six Flags Entertainment Corporation - SVP of IR, Treasury & Strategy Good morning and welcome to our first quarter 2021 call. With me are Mike Spanos, President and CEO of Six Flags; and Sandeep Reddy, our Chief Financial Officer. We will begin the call with prepared comments and then open the call to your questions.

Our comments will include forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in such statements, and the company undertakes no obligation to update or revise these statements.

In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports and other forms filed or furnished with the SEC.

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

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Good morning. Thank you for joining our call. We have divided our call into 3 parts. First, I will provide an overview of our recent operating performance and the strong demand trends we are seeing. Second, Sandeep will go into more detail about our financial results and give an update on the progress of our transformation plan. Finally, I will return to discuss why we are excited about our future over both the short and long term.

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I am pleased to be able to report that the 2021 season is off to a strong start despite the significant challenges due to the pandemic. Last year, we were the first company able to safely reopen a theme park in North America. This year, we had the first theme parks open in California, and in many cases, we have opened our parks earlier than in 2019. We have either opened or announced firm opening dates for all of our theme parks with the exception of Montreal. This is due to the creativity and adaptability of our Six Flags team who worked hard to establish the highest standards of cleanliness and safety protocols. I'm also pleased to report that our guests are excited to return to Six Flags, and we are seeing strong demand across all of our markets.

I've spent the last couple of months visiting many of our parks, which has allowed me to connect with our great team members, understand reopening challenges, reinforce our priorities and examine the effectiveness of our operations. My time with our outstanding park leaders only reaffirms that we have a highly capable team, a healthy industry and a resilient business.

Our full-time team members appreciate that we stood by them throughout the crisis and did not conduct furloughs, and they are excited to welcome back our guests to our parks. They are leading admirably in a complex operating environment. The signs of strong consumer demand for our parks are very clear. Through this past weekend, our year-to-date attendance trends have accelerated at our open parks, increasing to 79% of 2019 levels compared to 51% in the fourth quarter of 2020.

We are seeing strong guest spending per capita, and our Active Pass Base has surpassed prior year first quarter levels, placing us solidly on track towards recovery. We have centered decision-making squarely on our guests, extending privileges for season passes and memberships, while also offering high tiered benefits to our members who continue their payments, and they have rewarded us with their loyalty.

Experiencing such robust demand at this time of year does present operational challenges, however. We have encountered difficulty fully staffing our parks upon reopening with a shortage of labor availability due to many factors, including COVID schedules; immigration restrictions, limiting the number of international temporary worker visas; and extended unemployment benefits, keeping people at home. We expect these labor challenges to start to abate as we enter the core of our operating season.

At the same time, the overall operating environment remains challenging as we balance the requirements of delivering a safe experience during the pandemic while still delighting our guests. Our safety protocols have reduced ride throughput, which can result in longer than normal lines and less rides per guest. We are continuing to require masks in our parks, but we'll constantly assess this policy and partnership with our industry, the CDC and local health officials.

We are also working with local health officials on eliminating constraints around park capacity and ride seating as more Americans receive their vaccinations. Our outdoor venues have a tremendous amount of open space. Therefore, our parks are naturally conducive to social distancing, and all states are supportive of working with us to safely increase attendance levels.

Our recent results in guest surveys indicate that there is extraordinary demand for outdoor entertainment options close to home. And we believe that this widespread desire will help drive attendance in the coming quarters. We see this as a golden opportunity to welcome new guests and delight our loyal fans. So we are focused on opening all of our parks and delivering a great, safe guest experience.

So while it is still early in the season, we are pleased by recent trends and are optimistic about both the short and long-term prospects of our business. In the first quarter, we also continue to make progress on our transformation plan, which focuses on strengthening our core business, and we are on track to achieve our previously issued financial targets.

I will now turn the call over to Sandeep, who will provide details about the quarter as well as our transformation plan and results. Sandeep?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO Thank you, Mike, and good morning to everyone. I want to start by stressing that results for the first quarter are not comparable to prior year because we closed all of our parks in mid-March last year, prior to the spring break for most of our parks. For that reason, I will provide comparisons to 2019.

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Total attendance for the quarter was 1.3 million guests, a 38% decline from first quarter 2019. Revenue in the quarter was down $46 million, or 36%, to $82 million. Because of our fiscal quarter change, our first fiscal quarter 2021 ended on April 4 instead of March 31, as it did in 2019. As a result, our 2021 results include 4 calendar days in April, when many of our parks operated, during which we had 293,000 of attendance. And this was inclusive of the Easter Holiday weekend.

In 2019, the Easter Holiday, which affects the timing of spring break in many of our markets, occurred in the second quarter. So far, through this past weekend, year-to-date attendance at open parks is trending at 79% versus 2019. This trend includes the spring break period in both years and is a better representation of our run rate so far this year at our open parks. As a reminder, our second fiscal quarter in 2021 will end on July 4 and will include a majority of the July 4 holiday weekend, which will shift attendance out of the third quarter and into the second quarter this year relative to our calendar in 2019.

Total guest spending per capita increased 16% in the quarter versus 2019. Since the beginning of the membership program, a portion of the membership revenue has been allocated between admission spending and in-park spending. Beginning in October 2020, the company prospectively began allocating an incremental portion, resulting in a reduction in admission spending per capita and an increase in in-park spending per capita with no change in total guest spending per capita.

Applying a pro forma allocation to 2019, admission spending per capita increased 17% and in-park spending per capita increased 14% compared to the first quarter of 2019. The increase in admission spending per capita compared to 2019 was driven primarily by higher realized ticket yields for both single day tickets and the Active Pass Base as our revenue management team focused on leveraging our pricing and product mix.

The increase in in-park spending per capita compared to 2019 reflected high consumer demand for our products. Attendance from our Active Pass Base in the first quarter represented 54% of total attendance versus 64% for the first quarter of 2019, demonstrating a more balanced approach to ticket sales.

On the cost side, cash operating and SG&A expenses versus 2019 decreased by $29 million or 20%, primarily due to the following: First, cost savings from our transformation efforts; second, savings in labor, utilities and other costs related to the fact that several of our parks were not operating; and third, lower advertising costs.

Adjusted EBITDA for the quarter was a loss of $46 million compared to a loss of $32 million in the first quarter 2019. GAAP loss per share was $1.12 compared to a loss of $0.82 in 2019, primarily due to the lower attendance in our parks.

We are pleased with the retention of our Active Pass Base of 4.1 million passholders, which included 1.7 million members and 2.4 million traditional season passholders at the end of first quarter 2021. Our Active Pass Base is up 1% compared to first quarter 2020 and down only 9% compared to first quarter 2019.

As we reopen our parks, we are steadily reducing the number of paused members to near 0. The retention of these members is a testament to our unique offering and loyal following. Looking ahead, we expect the Active Pass Base trends to continue to improve as we have begun selling new season passes and memberships.

Our very large Active Pass Base is a tremendous asset for our company as passholders generate more annual revenue and cash flow than single-day visitors. They utilize excess capacity as they tend to visit during off-peak periods and shoulder months. They also provide a weather hedge since they pay in advance and have the ability to visit for the entire season.

Finally, our members provide a source of recurring revenue that smooths our cash flow and makes our earnings less seasonal. Deferred revenue as of April 4, 2021, was $245 million, up $96 million or 65% compared to first quarter 2020, and up $67 million or 38% compared to first quarter 2019. The increase was primarily due to the deferral of revenue from members and seasoned pass holders whose benefits were extended through 2021 and the acceleration of season pass sales over the past few weeks of the quarter.

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We expect to recognize most of this deferred revenue in 2021. The capital expenditures for the quarter were $23 million. We expect our full year 2021 capital spend to be slightly lower than 2020 due to the carryover of new rides rights that were delivered and paid for but not commissioned in 2020.

Our liquidity position as of April 4 was $524 million. This included $461 million of available revolver capacity, net of $20 million of letters of credit and $63 million of cash. This compares to a liquidity position of $618 million as of December 31, 2020.

Net cash outflow for the quarter was $95 million, representing an average of $32 million per month. This is significantly better than the projection of $53 million to $58 million per month that we gave on our last earnings call. This improvement was driven by higher-than-expected attendance and season pass sales. Based on our anticipated park schedules, we expect to be cash flow positive for the balance of the year and will not be providing a quarterly outlook on cash flow going forward.

We are obligated each April to offer to purchase the outstanding partnership units from the unitholders who own the third-party interest of Six Flags Over Texas, Six Flags Over Georgia and Six Flags white Water Atlanta. Less than $1 million of value in units has been put to Six Flags during the current year tender period that will end later today.

I would now like to give you an update on the progress of our transformation plan. We expect the transformation plan to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully implemented and attendance returns to 2019 levels. In 2021, we expect to achieve $30 million to $35 million from our organizational redesign and other fixed cost reductions. We have already realized more than $8 million through the first quarter this year.

As part of our transformation plan, we have incurred $44 million in cost so far through the first quarter 2021, including the noncash write-offs of $10 million that occurred in 2020. We expect to incur the remaining $26 million in 2021 and 2022, the majority of which is related to investments in technology, including a new CRM system.

We continue to make progress with our revenue and cost initiatives, as shown by the positive impact on our attendance, per capita spending and cost savings. Our new revenue management team is up and functioning as we focus on leveraging pricing and product mix to drive incremental unique attendance and yield higher admissions and in-park spending per capita.

We launched more than 20 RFPs as part of our nonheadcount cost savings initiatives, and we are seeing very promising results, especially in procurement savings. We began migrating towards centralized shared services in finance, IT and human resources, and we began testing our new park labor scheduling system.

In closing my own remarks, the operating environment remains dynamic. We will not be providing annual guidance at this time. However, we are extremely encouraged by the improvements we are seeing in our attendance trends and the value creation that will come from implementing our transformation plan. We feel we are well positioned as we enter the heart of our 2021 operating season.

Now I'll pass the call back over to Mike.

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Thank you, Sandeep. Innovation is in our DNA. In 2021, we will be introducing several record-breaking and first-of-their-kind rides, including the Jersey Devil Coaster at Six Flags Great Adventure in New Jersey, the world's tallest, fastest and longest single rail coaster inspired by New Jersey Folklore. Tsunami Surge had Six Flags Great American Illinois, which will be the world's tallest water coaster. And we are reintroducing West Coast Racers at Six Flags Magic Mountain in California, the world's first racing coaster with side-by-side tracks, which is the park's 19th coaster.

In addition, we are rebranding our water parks in Oklahoma City, Oklahoma; and Rockford, Illinois, to Hurricane Harbor and creating a separate gate for our water park in Gurnee, Illinois, creating our 27th park. Finally, due to its popularity, we will continue to operate our Drive-Thru Safari in New Jersey as a separately gated attraction. The park successfully opened in March, creating the longest season in the Safari's history.

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We will also be investing in our park infrastructure, adding technology to help us modernize the guest experience and in specific areas like food and beverage to help us improve our overall food quality and efficiency. In addition to new ride and infrastructure investments, we will be introducing numerous new events and festivals in our parks this year.

Some examples include roller coaster power hours, an event held on Thursday and Friday evenings, when a limited number of guests can ride roller coasters nonstop while listening to a live DJ. Our Mardi Gras festival, which continues to grow popularity as one of our tent-pole events in a bigger than ever July 4th Fest, which includes fireworks and in-park events.

I believe Six Flags is well positioned to delight our guests and to create significant value for our shareholders. In the near term, my optimism is based on a few factors. First, reopening progress. We have approval to operate nearly all of our parks either today or in the near future. And we have proven in several markets that we can safely operate our parks without capacity restrictions. So we expect to gradually ramp our capacity back to normal levels, while adhering to social distancing and other safety protocols.

Second, consumer demand is very strong. Attendance at our open parks continues to accelerate as U.S. consumers are eager to get out and have fun. And Six Flags sits squarely in the middle of everything a consumer is looking for right now. Our venues are extremely safe. They are outdoors and provide ample room for social distancing. Our safety standards and protocols have been recognized as best-in-class by all state, city and county officials. In addition, the vast majority of our guests drive to our parks, so we are not dependent on air travel.

Third, our Active Pass Base continues to grow, which positions us well for the upcoming operating season with a built-in base of guests. As I mentioned in my opening statement, we are proud of our high customer retention and customer loyalty. Customer loyalty is a very powerful competitive edge of Six Flags and one that provides a valuable recurring revenue stream.

Over the long term, I am optimistic for several reasons. First, we have a unique value proposition. Our combination of thrill rides and entertainment for the entire family provides a truly unique experience in an affordable form of entertainment that is resilient, even in difficult economic periods. In addition, our parks are located in each of the top 10 markets in the U.S., giving us access to the biggest and most lucrative markets around the country.

Second, our transformation initiative will fundamentally improve our guest experience and our profitability. We are already seeing the early benefits in our improved single-day ticket mix, our in-park spending growth and cost savings from our leaner organizational structure in our procurement efforts. But we're just getting started, and we are on track to deliver the full $80 million to $110 million of incremental EBITDA when we are back in a normalized operating environment.

Third and most importantly, we have a talented and dedicated team of people who have created a guest-centric culture. Our team members have exhibited tremendous resiliency during a very challenging period. Our organizational design resulted in a strong balance of theme park expertise and outside industry perspectives, which will help us stay true to the past, while embracing the future. The strength of our people is truly why I'm confident that our future is bright.

We believe the strategic actions we are taking to transform our company will drive our growth and enhance shareholder value. I look forward to updating you on our continued progress. And as we ramp back up to normal operations, you can expect to hear about our progress in our 3 key strategic initiatives: to modernize the guest experience through technology, to improve operational efficiency and to drive financial excellence.

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

QUESTIONS AND ANSWERS Operator (Operator Instructions) And your first question comes from the line of David Katz with Jefferies.

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David Brian Katz - Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure Mike and Sandeep, I just wonder if you can comment yet at this point about how you envision the mix of visitation between membership and pass holders versus single-day visitors. And any insight on what you would consider to be kind of an optimal mix?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So David, I think that's a great question. And I think we actually probably touched on this a little bit on the last earnings call as well. What we see as very encouraging is the penetration of single-day tickets, which is a sign of pent-up demand as we came out of the fall of last year and then into the first quarter of this year, where you can see that there's a big tick up with the wait of active pass dropping from 64% to 54%, driven by single-day tickets. That's great.

But we've always said, and we'll continue to actually emphasize that single-day tickets were an opportunity that we called out in the fourth quarter '19 earnings call, but it's an and, not an all. So we also have a very robust Active Pass Base. And if you actually went through our comments just now, we're very encouraged because our Active Pass Base has now returned to growth, went up 1% against 2020 and up -- and down 9% only against 2019, despite the lack of spring season pass sales. So where we are is we're looking for balanced growth. We're looking to grow single-day tickets. We're looking to grow the Active Pass Base. And I think this healthy growth will be what we expect to see the dynamic of as we move to grow overall attendance and overall per caps with balanced approach in all cohorts.

David Brian Katz - Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure And if I can just follow that up. I recall the and rather than or. If we think about the growth rates of each of those 2 buckets, do you expect, one, should we be expecting the single-day to grow more than the pass base? Or is that still TBD?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO And David, another great question because if you looked at the trend in the last few quarters, it's clear that single-day ticket has actually outpaced versus Active Pass Base, which has made sense because we were underpenetrated on single-day tickets. As that starts to normalize, I think you'd see more balanced growth between all the cohorts. But I think we still obviously had some runway on single-day tickets, which is manifested in the way the single-day tickets that you've seen so far. But I expect that, as time goes, this is going to really start normalizing.

David Brian Katz - Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure Appreciate that. And one last one, if I may. If I were a regular Six Flags customer, and I'm not quite that cohort at this stage of life. But what would I observe in terms of the F&B change this year versus what I might have seen prior to COVID?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO Yes. I think -- that's a great question. And the key is prior to COVID. We introduced something really exciting last year just around the time COVID broke, and we saw reopening in the summer, which is the mobile food ordering. And I think that mobile food ordering option continues to be enhanced and rolled out as we actually go into the heart of the operating season. And that is a pretty big change that is now going to be seen for the first time in some of the parks, effectively that have not been opened, like in California. And so that's exciting.

I mean it's something that we continue to refine and improve as things go along. But that would be one big cohort on the F&B side that we've talked about previously. The other is part of our transformation initiative. We've talked about expanding the assortment of the food offerings. And

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©2021 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 28, 2021 / 12:00PM, SIX.N - Q1 2021 Six Flags Entertainment Corp Earnings Call specifically in Texas, we talked about this previously as well, we've rolled out our new assortments and exciting offerings, and the take-up has been excellent on what we've actually rolled out.

So you see this manifesting in the per caps. I mean we've seen very strong per caps on IPS. And this reflects the attraction -- the attractiveness, sorry, of our offerings in park, and it's also combined with the desire to spend. There is pent-up demand and the disposable income with the propensity to spend from our guests so coming into the park. So it's all a win-win from that perspective.

Operator Your next question comes from the line of Eric Wold with B. Riley Securities.

Eric Christian Wold - B. Riley Securities, Inc., Research Division - Senior Equity Analyst Two questions, if I may. I guess one, just a follow-up on the last questions around kind of the Active Pass Base and season passes. I guess if you look at trends in the start of the year, memberships being flat, but season passes increasing from Q1 to Q4. How should we think about those trends? Would you expect both season passes and memberships are going to increase at a similar rate or more people migrate to membership? Is this kind of what you've been expecting, given how you're marketing those 2 plans?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So Eric, I'll take that. I think we're actually extremely encouraged that membership is pretty much flat as we go from Q4 to Q1. I'll tell you why. We had close to 20% of our members on pause at our closed parks. And that was until we actually got reopened. And as we've been reopening, we've been taking members off of pause. So now I think we're down to 5% in terms of pause members. And as we open up all our parks, that will go to almost 0. So it's really a testament to the fact that as we've taken off pause and effectively payments have been restarting for those pause members, we haven't seen an attrition rate on the membership.

And I think as we actually move into the peak of the operating season, you will actually see that headwind go away and new membership sales to basically take off and grow. Whereas in the case of traditional season passes, as parks were reopening and the season is beginning to get more traction, we saw the natural demand come through and we sold traditional season passes in the first quarter. So it's encouraging. I think it is more of the dynamic of how we're coming out of COVID, and that you saw in terms of the balance between membership and season pass. But we're pleased with the direction of both numbers.

Eric Christian Wold - B. Riley Securities, Inc., Research Division - Senior Equity Analyst Perfect. And then last question. With California, Governor Newson given the green light for business to return to 100% occupancy or 100% capacity on June 15. How do you expect your parks in the state to play into that? Are you planning to move to 100% on that date or still more gradually throughout the year?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO I mean on this, Eric, the reality is our parks have been operating 100% capacity in Texas, Oklahoma and Georgia already, and we've demonstrated that we can very safely operate in those states. So as far as we are concerned, we've already got the playbook. We're demonstrating that we can do it. And I think, at the moment, states like California lift capacity restrictions and are able to let us operate at full capacity, we're very confident we can get there pretty quickly or immediately.

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

Steven Moyer Wieczynski - Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst So Mike or Sandeep, wanted to see if you could provide us with some color or feedback that you've gotten from guests during recent visits. And I guess what I'm trying to figure out is, Mike, you talked about the lower ride throughput and potential longer wait times for rides. And so is this something that guests at this point are kind of okay with and they understand it? Or are they showing up? They don't like it? Basically meaning they potentially would delay visits. And until some of these capacity limitations are eventually removed.

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Steve, so my direct interaction with the guests and what I'm reading is very consistent across all geographies. The first is they're just really excited and appreciative we're open. The second is they actually quite understand the COVID safety protocols, and they've articulated that quite well through surveys as well as in personal interactions.

They're also clear on 2 other things, which we're working collaboratively with all of the state and local county governments. The first is they do want to get on more rides per day, and they understand that the safety protocols of cleaning the coasters and in some states where we're not seating every row is a frustration.

And then the other issue that has been a frustration, which we mentioned in our prepared remarks, is as we're ramping up staffing, we have seen longer lines, which I'm not happy with at the food and beverage locations. But that will abate as the season goes. But we are focused on working with the states and the counties. They all want to work with us to expand the park capacity and also with the guidance we've seen out of the CDC to allow less constraints on ride capacities in other areas of the park. So we're very confident we're going to continue to see progress as we see more vaccinations throughout the nation.

Steven Moyer Wieczynski - Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst Okay. Got you. And then second question would be around the in-park spend, and it obviously continues to be very strong. And we've seen that across a lot of other verticals that we're looking at. But how do you guys think or maybe talk us through how you guys are thinking about the way the in-park spend will kind of move through the rest of the year? And I guess, again, what I'm trying to get at here is are people coming in just loaded with stimulus money and other things like that, and that should start to abate through the summer? Or do you think the consumer right now is just so healthy that you would expect kind of current run rate levels to be maintained through the rest of the year?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So Steve, I think in-park spend is actually, like I said in my previous answer as well, very robust. I think we've introduced a lot of innovations and improvements in terms of product offerings, both in terms of easy transaction, so like in the mobile food offering and in terms of the assortment, with the example I gave in Texas. So there's definitely an enhancement to the assortment and the ease of transactions for the guest that is an enabler.

To the point that you're making, guests are loaded with disposable income, and that's great. And I think the propensity to spend is high, and we expect that tendency to continue to play out. I don't think it dries up anytime very quickly. It's been a year of pent-up demand that actually is manifesting, and I think we're likely to see that.

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The key over here, though, is when does it start basically normalizing? You think you're going to see that at some point. We definitely see food and beverage was a big opportunity pre-pandemic, and we called that out in transformation as one of the unlocks of value that we see. And so we do see growth. The magnitude of it, I think, will just -- will abate so far as time goes along, but it's definitely going to be growth. And I would say growth versus 2019 because that was where we were pre-pandemic.

Operator Our next question comes from the line of Tyler Batory with Janney Montgomery.

Tyler Anton Batory - Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure Just 1 question from me. I just -- I wanted to circle back to the comments on labor, if I could. Can you expand on that a little bit and talk more about how you might address some potential shortfalls in the labor pool that might be out there? And what are you seeing in terms of wages as well?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So great question, Tyler. And I think Mike touched on the fact that definitely, as we started opening up, we've been experiencing labor shortages. There are few factors, like Mike mentioned, these COVID schedules, immigration restricts in the number of international -- temporary work visas. And then I think the extended unemployment benefits, combined with the stimulus checks are resenting people to stay home more in the short term.

And so I think from that perspective, the shortages that we experienced manifested in the food and beverage line that Mike just mentioned and other areas in the park as well. But I think we do have a plan. We've already been executing the plan to get fully staffed as we enter the heart of the operating season.

And we've actually probably seen some media around some hiring that we're doing currently and a media push to actually -- to bring in more employment on the seasonal labor front. We're doing job fairs. We're doing advertising. So I think we are confident we're going to get there by the heart of the operating season. And it's already been good progress since March.

But I think there is, to some extent, wage pressure, demand-supply dynamics. And -- but the thing about the wage pressure, it's not new. I mean we call it out on our Q4 '19 earnings call. And where we do need to surgically address wage rates, we're doing it as necessary, not only when we see a clear financial return, like in per cap growth and value and revenue.

And I think, overall, what that means is we're very comfortable that this was all within the construct of our adjusted EBITDA target of $530 million to $560 million, and we continue down the path of getting there. And this is one piece of it. But we feel we'll get past it both from a supply of labor perspective as well as from a profitability standpoint, I think we're pretty comfortable that we have it covered.

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

James Lloyd Hardiman - Wedbush Securities Inc., Research Division - MD of Equity Research Really good quarter here. The number I wanted to hone in on was this attendance level of 79% versus 2019 year-to-date. Is that a comparable number? Is that an apples-to-apples number? I appreciate sort of putting it at a place where the calendars are comparable. But I know you talked about opening some parks a little bit earlier than you did in 2019. Is that a similar number of operating days as I compare those 2 numbers?

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Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So James, I think the headline is it is very comparable for the open parks in terms of a trend rate. And it's about 79% year-to-date after you include Easter and spring break in both years. So that's relatively like-for-like in terms of the events. From an operating base perspective, it's kind of a mixed bag just because of what we've actually been dealing with in this past year. We talked last year about all the innovations that we've actually brought in, including holiday in the park events that we had drive-thru, walk-through events, which were unique in nature. They were so successful. We continued them into January. So you've got more operating days from that.

And then I think from a timing standpoint, especially against '19, you had Texas Park basically wasn't open early in the year, but we were open in '21. So there's puts and takes like that in terms of operating days. They're not all created equal. But I think when you think about the bulk of the attendance, that really starts coming in once you approach Easter and the spring break, and that's when it heavies up. And the majority of the wait of attendance comes from that time period, which is why we highlighted the 79% year-to-date because it really smoothed out the majority of when the attendance was occurring. And I think that trend rate is a very good indication of where our trend in attendance is going on in open parks right now.

James Lloyd Hardiman - Wedbush Securities Inc., Research Division - MD of Equity Research Okay. And I guess my follow-up there would be, I think through the fourth quarter call, you said that attendance was pretty similar to the fourth quarter, which was about 50% -- like 51% of 2019 levels. Now I know through February, there's a lot less wait to that. But I guess if I think about 79% year-to-date here in '21, have the last couple of months, maybe the last month been significantly better than that?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO You hit it on the head, James. You're exactly right. To get from roughly the same as Q4 to 79% year-to-date, we have to have performed significantly better in the last couple of months, and that has what has happened. And that's precisely what we're talking about. We've been seeing a significant acceleration in trend as we've actually gone into post earnings call of Q4. And that is why we said we expected to see pent-up demand. Frankly, the level of pent-up demand has exceeded our expectations, and the direction is very, very encouraging.

James Lloyd Hardiman - Wedbush Securities Inc., Research Division - MD of Equity Research Got it. And then maybe last follow-up to my follow-up. I apologize. To that point about pent-up demand, I mean, obviously, you've still got some parks that need to open up. You've got still some caps on attendance in some of your parks. But if I just think about -- maybe this is an unanswerable question. But do you think there's more demand for your parks in '21 than there was in 2019?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So James, I think it's pretty early to make that call. It's clear that people haven't really had the access to parks across the nation that they do -- that they are likely to have now. And so the pent-up demand is very strong. But we'd really only know that as we get into the summer in terms of what the magnitude will be. The direction is very clear based on what we're seeing.

What I will say is, while the pent-up demand is very strong, I think Mike alluded to it in the prepared remarks as well, the key is capacity constraints. And certain states like Texas, Oklahoma and Georgia, the capacity constraints have been lifted, and we're operating essentially with no capacity constraints. And we're operating very safely, and we're able to deliver the experience that we would like to deliver our guests on that.

However, I think in certain states, California was an example, I think it came up on an earlier question, there are restrictions. And I think that puts a limitation on a good guest experience at some point with the capacity restrictions that we have, including things like ride throughput. So I think that is going to be what we need to get pass.

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But I think Eric asked the question, June 15, once capacity restrictions are lifted, does it change? Yes, it does. Then you can actually realize more for demand. But I think as we go through the summer, it's going to probably happen at varying times across different states, different parks. So it isn't quite clear when it's all going to happen. And so I'd say, 2019 was a very normal year, 2021 is not a very normal year. Demand may be there, but the path to actually realizing that demand is not as linear as it would be in a normal situation.

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director James, and maybe for you and just as I'm tracking the questions, a couple of different thoughts here. First, I think it's important that everyone understands. We've learned a lot about our guests during COVID, and that has focused us on unique visitation and making sure we deliver products and promotions for different cohorts. So for example, Safari and many of the special events we've executed, we're going to continue those going forward. And as we said, where we have a safe product and it's cash flow positive and it drives that unique visitation and positiveness, we're going to do it. And we've also leveraged our revenue management team.

The second thing I would say, maybe a little bit more specific to your question, we got to remember that our parks typically operate at an average of 50% of the theoretical max capacity. So that does provide us ample capacity, to me, what we see is very consistent and improving demand across all geographies. And we've proven, and we've been selling this to all the states and the counties, we've entertained over 8 million guests since the pandemic. And as we've proven, we can do it safely. They are collaboratively working with us. As the CDC moves, as vaccinations move, they want to help us expand capacity. So we'll continue to do that, and we'll continue to safely operate as we capture that demand.

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

Ian Alton Zaffino - Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst Just wanted to ask one more question on the labor side. I know you mentioned that you think it's going to abate over -- at least the shortage is going to abate over time. Why is that specifically? I guess because a lot of the headwinds you had mentioned, it seem like they're going to persist for some time. So is it just a matter of you have more time to kind of find people and turn over every stone? Or kind of what's driving your confidence in your thoughts that it's going to abate?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO That's a really good question. And I think the key is part of the driver that we mentioned on why there is a labor shortage, it's school schedules. And frankly, as schools close for the summer, a lot of our employees, from a seasonal labor standpoint, tend to be school kids who are looking for work over the summer, and that will be a big unlock in terms of labor supply. And I think that's why we expect that come Memorial Day weekend, we should be in pretty good shape with that supply basically being unlocked.

Ian Alton Zaffino - Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst Okay. And then just on the M&A side, I mean where is bid-ask spread now? Or how has COVID sort of changed? Or at least some potential targets went through COVID. Obviously, that was pretty rough for them. Has that changed the dynamics of M&A? And sort of how are you thinking about it now?

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Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Yes. Ian, it's Mike. I'll just give you a consistent answer that I provided on the last earnings call. Our first priority is to invest in our base business, our park infrastructure, from a capital allocation. And our transformational strategy is all about profit from the core. That's our focus.

Operator Your next question comes from the line of Brett Andress with KeyBanc Capital Market.

Brett Richard Andress - KeyBanc Capital Markets Inc., Research Division - Associate VP So a few more questions on 79% versus '19. I guess, first, is there any way to break that down by region? I guess, I'd be more interested in what some of the southern, maybe less restricted parts did? And then second, to your earlier answer that March and April trended above that 79%, which was implied. Is there any way to quantify what margin April maybe were versus 2019?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO So Brett, I think the first part of your question really was, was there variation across geographies. And the answer is it is broad-based and good, and consistently good across all geographies, not specifically region by region. And the second is -- what I would say is it's going to be a little bit difficult for me to quantify March and April. We're not going to get into that level of detail. But you do the math.

And if we were at close to 50% in the first couple of months and now with another couple of months gone, it's about 79%, it had be pretty good in March and April for it to have gotten to the 79% number. So very strong and a significant acceleration. And I think, as Mike said in the prepared remarks, a great demand came with its challenges because some of the neighborhood issues that they had. And I think we're totally cognizant of where things are at right now, and we expect a very robust demand going forward. And that's why we're looking at year-to-date trend and saying this is a very good indication of where we're trending from a demand standpoint at this point.

Brett Richard Andress - KeyBanc Capital Markets Inc., Research Division - Associate VP Got it. Okay. And then second question, more of a modeling question. I mean we've never had to model a 4th of July shift for Six Flags before, I think. So is there any way to frame up what kind of impact that could have or will have for you this year, maybe just putting some bookends around it?

Sandeep Reddy - Six Flags Entertainment Corporation - Executive VP & CFO Yes. I think from a trend standpoint, just like we've given you the color that we're giving you right now, you're going to have that color when we report Q2, including the 4th of July. So from a modeling standpoint, what I would say is, just like you saw the attendance value shift from Q2 to Q1 for about 293,000 with the calendar shift, you're going to see those days go out of Q2, and you're going to see the 4 days in July come into Q3.

So order of magnitude, it typically is a much bigger event, July 4, because it's in the summer versus around Easter. So you're going to see a net benefit in terms of value of attendance in Q2 as a result of that shift. And I think the headline, I would say, from a trend standpoint is we will basically normalize and give you the normalized attendance trend as we report Q2.

Operator And your last question comes from the line of Alex Maroccia with Berenberg.

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Alexander Rocco Maroccia - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst You touched on this a bit, but I'm trying to learn more about the labor constraint impact on customer experience. Which parts of the park outside of food and beverage will be most heavily impacted by continued labor shortages? And then how are you working with customers to make sure they understand the impacts?

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Alex, so I think it's very consistent with what we said. We're being -- first of all, we're -- on the labor specific to availability, we're being very focused by type of functional work and what the competitive market is and assessing that. And so we've got a very good plan in place. As Sandeep said, we've got a lot going on right now last week and this week with national hiring week. So that's the first thing.

The second is we've leveraged technology to deal with the problem, and this was even a big -- the early part of COVID, when you think about it, the way we've been able to address this is we've just allowed a lot of technology to provide contactless entry. Our front-gate process is significantly faster than it was before. We've used mobile dining, and mobile dining only pickup areas. And we've communicated that to the guests in the park. We've been very proactive in signage and in other ways to let them know that. And we'll continue to do that.

So it's predominantly technology. There's other parts. If you look at things like the reverse ATMs and games, that's also been a big enabler of faster experience in parts of the park. We've also done work with FLASH Pass to accelerate that process to reduce waiting. So there's a lot we've been doing with technology, and we'll continue to do that.

Alexander Rocco Maroccia - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst Okay. That's helpful, Mike. And secondly, you mentioned in the prepared remarks that you've spoken with and surveyed some guests to get feedback on just their general thoughts right now. Have you asked them the study about guest entertainment preferences, once we see a lot of other options open to full capacity, such as sports stadiums, movie theaters and some other places?

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Yes. So we survey guests every week, Alex. And with the consistent feedback we are seeing is our guests broadly and out-of-home, they want safe, they want fun, they want thrilling with coasters, and it's real important to them to be outdoor and a drive away from that experience, which is why we feel very good the way we're positioned the demand where it's coming from. But those seem to be the very consistent themes that we're seeing from guests, and it's been very consistent. It's very broad-based across all the geographies as well.

Operator And there are no further questions at this time.

Michael Spanos - Six Flags Entertainment Corporation - President, CEO & Director Thank you for your continued support. The essence of our transformation plan is using technology to create an improved and personalized guest experience. We are solidifying our connection with our guests from the time they purchase their ticket all the way through to their online visits. Six Flags is truly the preferred regional destination for entertainment, creating fun and thrilling memories for all. Take care, and we hope to see you at our parks this summer.

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Operator Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.

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