Cedar Fair (FUN) 8 Aug 24 2024 Q2 Earnings call transcript

Six Flags Entertainment Corporation recently held its second quarter 2024 earnings call, marking a significant milestone for the newly merged company. The call provided insights into the financial performance of the legacy companies, Cedar Fair and Six Flags, before and after the merger. In this analysis, we will focus on key themes and trends that emerged from the call.

Record-Setting Performance and Margin Expansion

The call began with a strong emphasis on the record-setting second quarter performance for legacy Cedar Fair. Despite the fiscal calendar shift, which resulted in 53 net incremental operating days, the company achieved record adjusted EBITDA for the period, signaling a meaningful margin expansion. This impressive performance sets a strong foundation for the new Six Flags as it embarks on its journey together as a merged company.

Revenue Growth and Attendance Expansion

Cedar Fair reported a record $572 million in net revenues, attributing the growth to increased attendance and out-of-park revenues. This highlights the success of initiatives aimed at driving demand and expanding the season pass base, leading to a record attendance of 8.6 million guests. On the other hand, Six Flags reported a decline in attendance, largely due to strategic decisions to remove operating days and a shift in the Easter holiday. Despite these challenges, the company remains optimistic about the potential for attendance and revenue growth in the second half of the year.

Operational Efficiencies and Cost Savings

The call underscored the company's focus on improving margins through operational efficiencies, particularly around variable operating costs such as seasonal labor. The reduction in seasonal labor hours by 5% or more than 340,000 total hours demonstrates the company's commitment to tightening its operational belt while maintaining guest experience and demand levels. This strategic approach has resulted in a significant improvement in legacy Cedar Fair's adjusted EBITDA margin, which stands at a 300-basis-point improvement through the first 6 months of the year.

Strategic Diversification and Geographic Scale

The merger has created a highly diversified footprint for the combined portfolio, with a larger geographic scale never before seen in the regional amusement park industry. This strategic diversification helps mitigate weather-related and seasonal earnings volatility, ensuring that no single park contributes more than 17% of park level adjusted EBITDA and no single region contributes more than 30%. This diversification also provides a larger portfolio of properties to efficiently allocate capital and pursue high-ROI initiatives for growth.

Financial Strength and Flexibility

The combined company's financial strength and flexibility are expected to be key drivers of growth. The company's proven playbook to significantly increase attendance across a larger customer base, particularly in underperforming markets, is expected to generate consistent long-term revenue and free cash flow. This financial strength will provide flexibility in capital allocation and investment decisions, enabling the company to improve its capital structure.

Guest Experience and Innovation

The call emphasized the importance of the guest experience in driving long-term success and making everything else in the business easier to accomplish. The company is tapping into a deeper talent pool to develop a richer guest experience, positioning its parks as essential destinations for out-of-home family fun. The merger also presents an opportunity to refresh and renew the guest experience, leveraging the combined intellectual and practical know-how obtained over decades of market leadership.

Conclusion

The Six Flags Entertainment Corporation's second quarter 2024 earnings call provided a comprehensive overview of the company's financial performance and strategic direction. The call highlighted the company's record-setting performance, operational efficiencies, and strategic diversification, underscoring its commitment to driving growth and margin expansion. With a focus on enhancing the guest experience and leveraging its financial strength, Six Flags is poised to continue its journey towards sustainable, profitable growth.