Six Flags & United Parks Earnings: Optimism or Trouble?

0:00 From our studios this week in Houston and Los Angeles. This is Green Tag Theme Park and thirty and this week we're going to talk about the latest earnings reports from six Flags and United Parks, which I would say have me somewhat cautiously optimistic, which is probably for me a good thing. I was going to say, for you, No, for you, that's a stellar thing for you. Now I'm concerned because that could be, you know, like the seventh sign of the apocalypse, Philip. It's right, Or maybe I just had a stroke from this last weekend at Transworld. Who knows. That's true. That's possible too, That's possible. So we are. Scott and I just got back from this year's TRANSORLTS Halloween Attraction Show, which is the largest Halloween trade show in the world, and as well as.

0:50 Talking about this and interactive interactive entertainment and it's I. Don't know if it's the largest Christmas show maybe no, but it's. Cool located, so it's a pretty big show. It's a pretty big show. So we're going to talk about that probably on the Unhinged episode, because we'll be this will be, this will be earning. So for those that have won. That if you if you've been watching the Internet at all and you're interested in Halloween at all, you've probably seen more posts than you could possibly stomach about the show, because like, I can't go through any of my social media without just post after post after post of all the stuff from the show. So we're gonna get unhinged about that and uh and talk about it in greater detail. But anyway, sorry I keep interrupting you. I haven't done that, So I'm literally.

1:31 That will be on our Patreon. You can go to Patreon and just searched green tagged, or look at the link in our show notes for that Patreon link. So, okay, let's begin with six Flags. So the headline here that had the stock market initially tumbling on this news was that six Flags reported a two hundred and six million net loss in twenty twenty four after the merger, And of course, the big thing was supposed to be the merger was going to say money and make money, and they report a loss, so that caused the initial stock to fall. However, ultimately the stock did climb two percent because the CEO outlined the reasons why it happened and their plans and his expectation that they're going to have a two percent increase in attendance and a three percent rise in season pass sales, which now that they're a much bigger company, is a big deal. So that's the gist of it. That's the nutshell. We're going to dig into a little bit give you a little bit more context.

2:28 But basically, I think if you just read the headlines, you might have been maybe misled by that. You know, it really isn't as bad I think as the headline suggest. So first of all, how is it performing. So overall attendance is up, and just to clarify, what we're doing here is looking at we're comparing the total numbers like merged with the numbers unmerged, and so basically we're trying to make this apples to apples, looking at what it was last year unmerged, and then what we're looking at this year with the merge numbers, and it's roughly a three percent increase over twenty twenty three. So basically, attendance is up, revenue is also up, and guest spending is steady, if not slightly up a little bit maybe two percent at some of the parks. So that's a pretty good picture where they have attendants up, they do have revenue up, so things are going in the right direction overall when you look at them, even after you kind of convert everything over into the thing. Because the merger member happened in July, and so essentially this the numbers we're seen are like basically jumping from like January through the end.

3:46 It seems like there's a big jump because that's when they started reporting combined together. So it still did lose money. So why did it lose money? So I was just going to say, is how does this translate into the two hundred and six million loss for twenty ee Yeah, exactly as to Apples. That's a great question. And basically merger related costs. I know, Scott's like, it's almost like we had a script. So merger related costs or a big part of it. You know, they had legal fees, integration costs, et cetera. They did a big non cash UH tax charge that happened in Q four as well. They also had higher operating costs, you know initially and they did warn us about this, but of course initially it means labor, maintenance, operational costs, all that comes in, Uh, they did have the merger did add debt because they took on a debt which increased their interest payments for that. So all of those finan all of those financial costs, basically, like the financing costs is what really ate into their profit. And it's it's also bid to note there that like even though the Halloween events were strong, there was like higher cost that went out, you know for that kind of stuff.

4:58 So you saw a lot of finances. So the initial reaction, as I said, was that it dipped but slightly ended up on a high note. However, there were some detractors out there, JP Morgan being the main one that pointed out that the fourth quarter IBITA was thirty percent lower than the Wall Street had actually anticipated. So kind of like basically it's mixed, right. So you have some people who are like, oh, you know, I buy into the future of that he's painting, and you have other analysts that are saying right, but essentially what the CEO is saying, which is saying about how you know, as soon as we control costs all blah, He's like, that's the best case scenario, Like, you know, the best case scenario is that you're able to entirely control for these costs and you're able to drive attendance and all that. And so the detractors here say that they missed their Wall Street anticipated EBITDA marker and that everything has to go perfectly basically for this vision to come true. But I guess the the hope one out in this because the stock ended up going up. So you know, as I mentioned some of the risk factors they're going to have, like essentially it is it is still a difficult path, right because despite the fact they're growing attendance, they still have to regrow it without loot without a writing their price and power too much, and he did they did hint to that later about really trying to bring in more

6:30 people and increase their That might cause their their overall you know, price per guest to go down because they're going to have to be doing some discounts for people in. But that's tricky, right, you don't want to road your price and power too much, or it's going to have long term consequence, especially when you lay it out over forty parks, right, it's gonna They do now have a higher cost base because of course they've integrated all this stuff together and they are trying you know, again, this whole synergy is quote unquote synergyes thing. Right. They set one hundred and twenty million in savings, but so far they've only managed to bring out fifty So you know, how long until that comes across and can they balance all these different plates at the same time. So basically bottom line is like the company is making more money with increasing into spending, but it's also spending even more due to merger related costs. And then in twenty twenty five, remember that they're going to invest one point one billion or they're going to invest in I think eleven out of the fourteen parks or whatnot. So they're like investing as well, you know, in this coming season, and a lot also rests on Halloween. You know, they call that out specifically, saying our strong fourth quarter results reflecting outstanding October performance and the incredibly popularity of fall and Halloween themed events. So basically, if they can turn that revenue growth into actual profits once the merger settles and they really bring up those synergies and they don't erode their

8:01 pricing too much, you know, with trying to get an additional guess, you know, and they roll out a good Halloween and and and and than they could be in a really good position, which is what he is painting. So that's where they are. And in fairness, I mean, let's let's kind of even break those down a little bit. When you've got the merger related costs. The merger related expenses, that's a one time thing. They knew that was coming. That's not a surprise, that's not any that does not reflect badly on any of the business decisions that they have made, because the merger itself they knew going into it had merger related expenses. So so there's that, and and that will that, like I said, one time thing. That's not a that's not a oh crap, look we we found more merger expenses. No, that's not going to happen. It's not gonna happen. So we have to keep sure make sure they don't say that in the next reporting of the of the finances.

8:56 I think that you know, if they are we talk about the synergy, the synergy savings, Well, again, when you're talking about a company that is now this large, those synergy savings are not going to happen overnight. Yep. It's more like it's more like turning an aircraft carrier than turning a speedboat. It's gonna you're gonna need a little runway to do it. So it does not surprise me that those they have not reached their their synergy savings goals. And you know, it's it's been less than a year. So it's not really even fair to to expect that that you're gonna start seeing that. It shows.

9:36 What it shows me is it's on track. You know it's not. It's not there, but it's it's heading in the right direction. So and I and I also you know it's they I can't tell you how many parks I have worked with or how many projects I have worked on where they say, well, Halloween is going to make or breakers. It's it's that's always the fallback. And it's partially because of when it happens in the year, and it's partially because they know most most organizations can't squeeze any more out of Christmas, so they always put it on Halloween and say because quite honestly, Halloween has less financial competition from a from a customer standpoint. People have you know when when when the Christmas season rolls around.

10:20 There's Christmas travel, there's Christmas shopping, there's Christmas you know, all Christmas parties. There's all kinds of of of competition for the dollar at the Christmas season. And so they know it's more difficult to grow to grow income during the holiday, during the Christmas season or the holiday season than it is the Halloween season. And quite honestly, Flags, no matter how you feel about their Halloween product or even Cedar Fair, no matter how you feel about their Halloween product, whether you think it's the best things of slice bread or you think it's absolute garbage, it doesn't matter because it's been pretty successful. I mean, it's continued to make money, you know. So the fact that they're just saying, well, we've got to make sure that that continues, well, yeah, the chances of that are pretty slim that it's gonna just magically not make money anymore. What could hurt them?

11:12 What could hurt them as if some and I hope this doesn't happen, but if some catastrophic experience or event happened that created either a lawsuit or a giant insurance claim, that could be detrimental. So I think they're putting that out there as just in case. So it sounds like, you know, since since we're all saying kind of the same thing, it sounds like the investors agree with us, and certainly those who know the industry are looking at it going, yeah, they're probably painting a pretty realistic picture. You know, it's positive, but it's but it's it's realistically positive. It's not right, you know, it's not out of the realm of possibility by any stretch of the imagination.

11:58 I yeah, yes, I I agree with that it's not the own possibility. But I do like the angle that some of the analysts, you know, they're not industry folks, but I think they kind of are correct in that they're like the problem with this scenario that he's painting is that it's the best case scenario. And you know, you always say like it never goes according to plan, and you know, like in this there's nothing about there, like there's no room for failure, basically, like everything has to go right, Like, you know, they have to realize the full synergy. They have to make sure Halloween hits off well, they have to not lose have a dip in attendance, they have to not have a dip in too much of a dip in per cap spending as long as they increase in attendance. But if they don't increase attendance, they need to hire per caps. Like everything has to go right in order to get there, because even if they had the extra you know whatever, one hundred and million, that still would not make up for the loss. And so they do. They need everything to go right. And you know what about weather.

13:02 You know, it's so in other words, it's exactly the same as every other earnings report we've talked about. No earnings report gives any wiggle room. Well, I think I do think the Disney one probably was the most positive where they did have the most room for wiggle, like room for wiggle, like they oh god, they like you know, Disney ultimately, like Disney streaming is kind of like mah, but you know it could it could still perform terribly or like you know, they're they could just have one box office hit or none or whatever. I mean, like they have sectors in which they could underperform and still be fine because there's so much margin in the in the parks product. And I don't think that is the case here because their six flags is less diversified, right, Yeah, they happen to say.

13:51 I was gonna agree with you one hundred percent. I was just gonna make the same point. They have more wiggle room because they have a more diverse portfolio. Yep. That six Flags is kind of like all bad on this working and you know, if the economy softens and there's less in you know, people are attending attractions last or whatever. And in a weird way, this is a weird thing. I was thinking about this, Like, you know, Disney is really central centralized at least their parks divisions in a few markets, which we've talked about. But in one way six Flags is you know, they have so many locations that it kind of protects them against weather, you know, because like they have so many they're like okay, well if some are closed, others are open. But on the flip side, they almost have more exposure to all Americans and so like, you know, a lot of their parks are in more rural areas, and if those areas are hit harder with economic uncertainty, then they might you know what I mean. It's weird. It's this weird double edged sword, like they're protected against some things that Disney Universal are vulnerable to, but they're vulnerable to other options that you know, those places aren't as much.

14:55 Was there any mention of the Kadia City Park. No? Interesting, Yeah, I did think that was and it might be because it's a I think it's only an operating agreement, right, like they just manage it. They don't, you know, they don't. Right, but you know I would I would think that since we're talking about the court of public opinion here, that they would have at least made some some reference to it in regards to, you know, reaching out, expanding, trying new things. But they didn't. So interesting. That's very interesting. Again. I think my point being in any earnings call, they are going to point out the best case scenario.

15:41 Well, that's their job, right, Their job is to argue. And I'm saying that's kind of what I'm saying. We're now comparing apples to apples. When it comes to comparing this earnings call to Disney's earnings called Universal's earnings call, they've all painted a very positive, rosy light where things have to things have to align in order for it to be perfect. You know, if there are five hurricanes in Florida, notck Wood. If there are five hurricanes in Florida, please God know, then who knows? Then? Who knows what Disney's park performance is going to be? Yep, exactly. Yeah. Yeah, it just seems like they're in a right now. They're in a less advantageous position on some things, just because they have again the pricing powers and the strongest Disney and so you know, they have margin effectively, but more parks. So you know, if they could centralize the synergy and get Halloween rolling out to areas that are underserved, yeah, you know, could be great. But we said that when the emerger was initially announced, right, So I think I agree with you in terms of we're just kind of all this is normal, We're just waiting. I think that some analysts are just kind of trying to move too quickly.

16:47 You know, they're looking at this and going, oh my god. It's like, well, it takes time, like you said, to actually integrate this. It's only been a few months, and in the theme park world, that's not a long time. No, not at all. Yeah, yeah, Okay, February in a theme park, so you know, yeah. So it is encouraged. The last thing I was gonna say, they mentioned too, is encouraging that their annual pass sales, like the new annual pass has Multiparks, is up like three percent, which is which that's encouraging. So, okay, United Parks much, I'm not nearly as optimistic about this one. Actually, I'm not sure you know this is this is tough. Okay.

17:34 So basically United Parks reported declined in attendants and revenue in twenty twenty four, attributing the losses to the hurricanes Debbie, Milton and Helene, which collectively costs the company four hundred and thirty two thousand visitors. According to them, they planned to introduce new attractions in Orlando and Tampa, aiming to boost attendance ahead of epic. So let's give us, let's give you all the big pictures. So, first of all, the three main things the climbing performance, blaming the weather, and struggling to grow. So they're declining revenue. Revenue was flat, if not a tiny bit down. Net income dropped two point nine percent. Attendance was also flat, but the guests spent a little bit more which kept the profits from kind of dipping a little bit more. They blamed the weather, and this is according to them. They claim that the hurricanes cost like I said, four hundred and two thirty two thousand visitors in twenty twenty four, and they said attendants would have grown a two percent otherwise. But I just think that's ridiculous, Like you'd be like, like, well, we think this is how much it would have cost.

18:37 But you know what if those hurricanes didn't happen, you know, which is just ridiculous because we know that more hurricanes are going to happen. But anyway, they aren't really losing customers yet, but they aren't gaining them basically, so and this is all again ahead of Epic opening, and so speaking of Epic, they were grilled about Epic, like grilled like like in every like Actually they were grilled a lot more than I think Disney was, and that which is weird, but which I think in each of its own case kind of says that people are not buying exactly what they're selling. But basically they're saying it's all good news. They're making the argument that not that that Scott and I made, not that you know, we're claiming this for them, but we're you know, we're making they're saying that they're kind of taking the rising tide argument and saying that it's just going to be better for everybody.

19:31 And yes, the halo effect, yeah, the halo effect, yeah, he said. He said, we're aware that there's a new park coming to Orlando next year, which is hilarious. We we welcome more people to town. I'm sure there's gonna be days when Epic is doing very well and it is crowded. We're going to feel that a little bit. But but we need to execute on our plans to drive more people to our parks. What plans, you might ask, which people did ask to which replied, not quite concepts of a plan, but pretty close. You know. They said that they have new IP partnerships and major new rides that are in the works, but no details whatsoever have been announced about any of that. They also talked about launching major new attractions tied to a recognizable brand in twenty twenty five, but you know, didn't really talk about anything.

20:28 And in terms of their strategy, when asked about how they compare to Epic, he said, we are a differentiated product than a universal park. We are a better value, we have a good value proposition. Those among lots of other things, gives us confidence that we can continue to participate in the market grow and analysts were not really convinced. They don't see in this case. I think Scott and I agree, you know, about the halo effect for Disney, but I think for me, I don't agree with it with SeaWorld because I think that again, the pricing power the thing like if you're going to show up and you're going to add something to your vacation, I think you're gonna add Disney before you're going to add SeaWorld, and I think that they're their whole you know, quote unquote value proposition. I don't think that's really gonna tip the scale, you know, unless you're talking where they're going to discount their ticket to like fifteen dollars or something like.

21:30 I don't think that you're gonna I think the difference between like those tickets, I don't think it is going to tip the scale for people when they could visit Disney World versus SeaWorld with their you know, spared days. I just I don't I don't buy that that they're that they're selling so essentially overall numbers not great, flat, if not flipping, they're downplaye the Epic Universe thing. The numbers are slipping. They're just saying we're different. But I don't know if that's enough. Scott, what do you think? Well, I think you know in fairness, because again I have I have history, I have history with this company.

22:13 You have a lot of history. You know a lot of history of this company. And I've worked and I've worked independently, so I've worked on both sides, both as an internal and as an independent contractor on the outside looking in, I think that you know they are They're in a unique position, it seems, and and I think there I think their call kind of reflects this, or their their earnings picture kind of reflects this. They keep saying that they are unique, which in fairness, they are. The parks are you I mean, they're you can what you can experience at Sea World is nothing like anything you can experience at any of the Disney parks. It's nothing like you can experience at anything at any of the the the Universal parks. It's it is different.

23:01 Thin Animal Kingdom is the closest, but it doesn't have, you know, the aquarium, it doesn't have like a lot of the animals that doesn't you know, they have the Safari Animal Kingdom, but they don't have. They don't they don't have the signature. They don't have the signature animals. They don't have the they don't have the the killer whales, they don't have the penguins, they don't have the dolphins. Those are the that's the holy trinity of the SeaWorld's animal collection. So they're right, they are unique. What they have to do, in my opinion, is tap into that uniqueness and stop trying to be everybody else. I think that, you know, I have no idea what this new ip is going to be. I just did a quick search to see if I could find if anybody was speculating. There's not a lot of speculation is what it is. There's an awful lot of discussion about what it can't be because all the other parks have them already, so it will see I'm going to be minecraft. I mean they still have you know, they still it's still there's still a Sesame still a Sesame connection, as Sesame Street connection, there is still a there is still for the holiday season, for the Christmas season, there's still a Rudolph the Red Nose reindeer connection. But you know what other big ips are out there, and I have no idea. I'm curious to see what that is. So, you know, if they feel that IP is the way to go, I would even I would even venture to say, if they are truly trying to be different, take the

24:31 opposite approach. You know what, what isn't your competition doing? And both both Epic and Disney are leaning heavily into IP. Now, I'm not saying that that going away from IP is is definitely going to work. But if you're saying we're different, we're different, we're unique, then be different unique, don't be a don't be a less than impression of Disney or Universal. Yeah. Yeah, so you know, dive into what makes the parks unique and really embrace that. And I don't know whether I don't know what that is. I don't know whether that is I don't know whether that is the animal component of the Sea World Parks or the bush parks, because you know, Bush Gardens in Tampa still has a ton of animals, a ton of animals. Williamsburg has a bunch of historic charm to it, and San Antonio is just San Antonio is really the beast in the area.

25:40 They They are a great park, and they run themselves very smart. So, but what is it that's unique about the United Parks and Resorts brand. That's something that has to really be pushed forward, and they need to educate their guests and their potential guests as to what that uniqueness is and not just say we're different without saying how or why. That's so to me, it sounds more like a communications situation and tapping into what is exciting from a guest standpoint, you know, is let me put it this way, is SeaWorld going to pull people away from a second day at Epic Universe. No, it's not.

26:26 But once again, looking at and we've talked about this several times, looking at international tourists. When they come to a place, they sit down and want to see everything there is to see there. And European tourists especially are very fond of animal experiences, and SeaWorld is really the only game in town other than Animal Kingdom. But even then, I don't think of Animal king I think of Animal Kingdom is as using animals as a thematic tool, not necessarily as a zoo or an a querum. You know, a lot of what you're saying It kind of reminds me of what we talked about when we talked about we we did our episode on Sadi and the kind of the difference, you know, between Boulevard World and the strategy there and the strategy here, and how they were very clear at Boulevard World, like they were they're like now and I think about it, they're so clear about their strategy. We're open for this, this is what we do. We're for the locals, we bring in pop culture, we bring in all this.

27:30 But I mean, it's actually the the entity is actually called Redd seasonal or seasonal re addit don't camera which it is, but they they basically say we're open here, we're closed here, we open here, we close here. During that time, we will have different I don't even know whether I'll call them pop ups, but to a certain extent, yes, different pop ups that will will represent different ips, different brands. We saw that when we were there and then we close and then we go away and save money. Yep. Well, and it's interesting because yeah, to your point, right, like what I'm not I think if I'm looking at the differences between the Six Flags one and this one, it's pretty clear, like six Flags has kind of a plan and there they are trying to sell you on that vision and people are mostly buying it, right, And they also have the numbers to back it up. They have the attendance growth, they have this and that. So even though they're like bleeding money, they're like, we have a plan. We're going to you know, bring all of this to all you know, they have all the parks, they have all these regional they have a lot of things that make them different right, and then, like you to your point with United, they're they're like concepts of a plan here in the corner. We're like, what's the plan?

28:44 They're like, well, we have and like what is it? Though? Tell us how you're going to get yours out of this whole. And on top of that, they don't have the numbers to back it up, right, Like they're flat or declining in their main metrics, And they also don't have a plan that they're communicating. Maybe they do have it and they're not telling us, but they're not differentiated. And you know, again, like you said, fighting an IP battle, they're not necessarily going to win that fight with people with the other brands, And then what are they going to fight six flags on roller coasters or like like, you know, the only thing they have that nobody else can can win is the animals. And potentially they need to make a pivot like Boulevard did, where they're like, you know, we're going to do more seasonal local focus for that type of stuff and hone in on the animals and do stuff with the animals, like like what you always say, you know, one roller coaster could pay for so many festivals that they could do there if they just didn't build a roller coaster, And is that coaster really going to win when compared to the other parks.

29:47 And I think and I think they're trying to do some of that. I think they are trying to do as many festivals as possible. I mean, Marty grow is going on right now. But I think they have to My when I use the term earlier lean in, I think they need to lean into what they know how to do and lean into what they do well. You know, there was a time where they were known as the festival parks. They were the ones who really did the festivals. You know, there was there was a time where hollow Screen in Tampa was considered by many in the industry to actually be outperforming from a customer experience standpoint outperforming Universal Halloween Hornites. There were there, but now, like for example, there is a Mardi Gras situation going on that is not being in my opinion, not being leaned into and it's I'm concerned that it's over promising and under delivering.

30:40 This is this is. This is a series of parks that is filled with a bunch of really smart, hardworking people. It is a series of parks that have the potential to be a contender, but they just have to lean into what they do well and stop trying to be everybody else. I think that's the success that we're seeing with Universal pretty much across the board. They know what they do well and they don't try to do other stuff. So we'll see, we'll see how that all turns out. We'll also see what happens when we come back next week because we're at a time for this week, so on behalf of Philip Bernandez and myself Scott Swinson. This is Green Tagged theme Park in thirty and thank you once again for watching or listening, and some of you we will see in our Patreon show. Green Tagged unhinged and the rest of you. We'll see all next week.

31:28 Thanks