 Welcome to episode two of amusement insiders business banter. I'm your host Jazim and I want to thank you for joining us for our second episode of this series. I really want to start off by thanking you all for watching our first episode, our pilot. It was really an experiment to see if this series was something that our audience would be interested in, something that would be engaging for you guys and that you would want to hear and see more of. So I thank you for all of your feedback, all of your interaction with that video. It was really awesome feedback and I'm really excited to continue this series since you guys are super into it. I also want to start off by thanking you for any patience to do with background noise. I'm here in the tropics and as you can see I've got a new filming location today so you may have to put up with things like parrots and roosters, dogs. So I will try to do my best to work around the background noise but as you can hear some of it's a little bit inevitable and so I thank you for your patience with that. Let me know down below if this is a preferred filming spot for you guys. I personally think it's a nicer filming spot and we won't have any lighting issues out here so let me know what you think. So today we only have one topic on the docket and today we are talking about the Six Flags Q3 business call. Oftentimes when a business goes public meaning it sells its shares and stocks to the public so I can actually go to the stock market and buy stocks in Six Flags Entertainment. What they do is they host quarterly business calls so four times a year we split the year up into four quarters they'll do a business call and that's a call that's available to the public so all of their stockholders can listen in and hear about the health of the business. How much money are they making? Are they beating their profit margins from last year? How healthy is the business in general? And things like that and you also have an opportunity to actually submit questions as a stockholder and have your questions answered live on the call and it's a really great thing that a lot of these public businesses do to keep their investors feeling involved and feeling informed on how their investment is performing. So today we are going to talk about the Six Flags call because it was just recent and there's some really interesting information and things going on in the industry around this call so let's dive in. I've also included a few of the juicier slides from their call. The call is usually accompanied by some kind of visual presentation and in this case it was a slideshow and so we can actually get a closer look at what it is that the investors were seeing as they were having these discussions. At the end I want to talk about how the actual stock market itself has reacted to this call and the information shared on it because a lot of this information isn't public until the investor calls actually happen so you can see a pretty immediate response in the stock markets whether the stocks of that particular company rises or falls due to whatever was revealed on the call. So we'll get to that at the end so stay tuned. So let's start out with in general how Six Flags has presented the health of their business. Their main key points are exceptional brand and business foundation, substantial growth opportunities in multiple different areas, strong recurring cash flow and excellent growth and yield in their stock. Now there are going to be some pretty technical terms in some of these slides so I want to share what a few of these things mean. The EBITDA or EBITDA depending on how you say it that acronym actually stands for earnings before interest taxes depreciation and amortization. So essentially before any necessary fees and expenses are taken out of their earnings that is how much Six Flags has earned over the year. So before you pay tax, before you take into consideration things that are losing their value like when you build a roller coaster you may build it for $20 million but as soon as it starts running it's worth less than $20 million so that's what depreciation is. So these are numbers that are not including all of those expenses so that's something definitely to keep in mind especially later on when we talk about how the actual stocks are reacting to these numbers. So when you take a look at this chart you can see that Six Flags is reporting gradually increasing performance in their earnings before all of these expenses. They're showing ongoing growth and in general a really healthy business. So let's dive in deeper to see what that means. Now there's no doubt that Six Flags is one of the largest theme park operating corporations out there today. They have 25 as you can see here strategically located parks all over the US and internationally and over the past year they've also acquired an additional five theme parks to add to that roster. They recently purchased and acquired Wet and Wild Splashtown which is Houston's largest water park, Wet and Wild Phoenix, the largest water park in Arizona, Darien Lake near Buffalo New York State, Frontier City in Oklahoma City and Whitewater Bay which is near Frontier City. Six Flags is making it a big goal of theirs to have a water park that is somehow associated and nearby to each of their theme parks so that's a big initiative that you're starting to see with all these acquisitions of Wet and Wild Splash water parks. With that said there's also a lot of talk going on about organic growth versus inorganic growth in these charts that we're looking at. So that chart on the previous slide that we saw is showing a lot of growth especially over the past year but investors are kind of questioning is that just because you're seeing additional profits from these new parks being added on and you know how are the actual individual parks that you had existing previously performing are they really performing up to snuff or are we seeing losses in those parks because inorganic growth is when you just keep acquiring things and adding things on to your roster to make it look like those numbers are going up whereas organic growth is seeing gradual growth regardless of adding on new parks. So the question is if we weren't looking at those new parks and the income that those have slammed on just because they now have them this year are those existing parks doing the kind of organic growth and organic increasing in numbers that you want to see them doing are they still seeing more guests every year are those guests spending more money every year or are they not performing as well and Six Flags is just adding on these extra parks to keep the revenue growing overall rather than individually at each park. I hope I'm explaining this well oh my god. But with that said Six Flags has focused on this call primarily on the positive aspects of their growth so they are seeing a ninth consecutive record year for income they are seeing their active past base growing by 9% as well due to the 2019 new passes and memberships which we actually talked about in last week's business banter video this new dynamic pricing that all of these parks are adopting and we're seeing their year to date revenue and modified and adjusted a bit at record levels so they're showing a growth of 39 million over last year going back to those passes we were just talking about these new dynamic pricing systems Six Flags is actually the first to offer a really dynamic points and reward systems for their their members in this new dynamic pricing game that we're seeing so they're truly leading the industry in rewarding their guests for opting for these higher priced memberships and passes by a point system that allows them to get more value for their money so not only will you get the early ride times and things that you would normally get with a season pass or gold pass platinum pass whatever it may be but you're also going to be collecting points that will give you you know additional perks and discounts and things like that so during the call Six Flags did break down the fact that they do expect that this new rewards program as well as building out their all season membership and dining programs have resulted in higher ticket sales overall and more importantly than that higher ticket sales in the higher priced ticket options so things like your platinum your membership and those those passes that are a little bit more high-end more exclusive and more costly they're actually seeing a higher sales in those particular classes of tickets than they were expecting which is a healthy a healthy sign and good news for Six Flags so you can see that here in this slide as they're referring to there being a global leader in the industry as far as substantial growth opportunities so those innovative products those innovative memberships the pricing and their North American expansion strategy in this call they also covered the fact that in 2019 again Six Flags is an entertainment corporation that is bringing a new ride or attraction of some sort to every single park in their roster so that's another really healthy sign that they do have the ability and the financial stability to continue improving each and every park from year to year so the slide is referring to that growing active base that I discussed of up to 9% as of September 30th generating more annual revenue building recurring revenue increasing visits during off-peak periods which they also did really focus on that they have some parks that will be open for longer periods than in previous years just like we're seeing with some other parks doing winter fast and different events and attractions during seasons when they wouldn't normally be open Six Flags is jumping on that bandwagon as well and increasing their revenues by increasing their overall operating schedule and here you can see where they were discussing the premium tiered membership programs and the different revenue sources that that's providing including the dining options and the incremental in park spending these member programs are really really valuables to Six Flags because of the retention rates meaning that a season pass has a great retention rate because it brings people back for an entire season so that's what retention means retention means holding on to something so in this case we're talking about guests holding on to guests and seeing them return again and again so season pass gives you a great retention over a season a membership gives you three times that retention rate because you're seeing people renew and continue those commitments to being a part of the Six Flags family so compared to a season pass you're getting three times the lifetime revenue of a season pass holder that person's going to come back to your park over and over again multiple parks hopefully and continue to spend money not only on the pass itself but when they're in the park as well on food on merchandise on you know upcharge rides things like that so then Six Flags got into their multi-year approach to improving ticket yields so they really want to see these increase in ticket prices continue I know a lot of us as guests like to complain about you know parkings getting more expensive tickets are getting more expensive everything's getting more expensive what's going on and that's to do with increased cost of living so every year you see the general cost of living go up anywhere from one to two percent and that's usually that's pretty standard within North America but you can take that on a global scale as well life always gets more expensive and so parks have to keep up with that as well so not only are they going to continue to be innovative with what types of tickets they're offering but you're also just going to see general increases in pricing to those different tiers of tickets and moving on we also heard discussion about in-park revenue initiatives this is talking about the businesses within the businesses and I just mentioned this a little bit in that you know they want to see you spending money on food and merchandise while you're actually in their parks and that's what this is talking about is the businesses within the businesses so the restaurants within the parks the shops within the parks and you're seeing them get innovative with how they're increasing their spending in that way as well because they're including things like all-season dining passes they're increasing their offerings and they're renovating and enhancing a lot of their venues so the expansion strategy this is where some of the I don't want to say controversy but definitely heated discussion is coming in about what kinds of growth six flags is opting for we all know that the industry is I don't want to say struggling but it's not at its healthiest peak right now that's for sure and it's interesting to see how these different corporations are handling that the ups and downs of the industry you often see parks real back when the industry is at a low but six flags is taking a really like charge forward sort of perspective with this and there are other industries that have done that as well and sort of changed their outlook as a result of choosing to continue expanding and continuing pushing people to have reasons to contribute to their industry rather than taking a step back and just taking the financial hits as they come so six flags has chosen an expansion strategy instead of a savings strategy so they're looking to own and operate water parks and markets adjacent to all of their theme parks so they're already the largest water park operator in North America and they want to increase that presence now I personally think this is a really smart strategy for six flags because as this slide indicates it's actually going to allow them to leverage different passes so they will see a lot more people opting for passes that allow them to combine these parks especially since they're so close together even if you're only getting a season pass for your local theme park you're likely to opt in for a more expensive version of that pass if it allows you to go to the nearby water park as well all season long so I think it is a very smart strategy it'll be interesting to see how the margins work out if such a big investment ends up being worth it if they get enough of those additional season passes and memberships being sold because of the acquisition of these water parks but time will tell and it sounded like something they were really confident in on the call so moving on to their international theme parks you can see that they're really branching out outside of North America with 13 parks in China Dubai and Saudi Arabia and they're looking for global brand recognition so they really want to be the global name in the theme park industry now on this particular topic I would love to know what you guys think about this one this is a really tricky strategy for them to be taking because markets can be so different in different countries so I'd love to know what you think about this how successful you think their acquisition of these parks is going to be and how they have been performing to date let me know what you think down below so I'm just gonna speed through these last few slides because things get kind of technical around here but with that said this slide is talking about their recurring revenue so this higher ticket pricing that we're talking about and the attendance that they've been seeing is combined allowing them to see this slow rise in revenue the first chart that we're looking at on the left is talking about attendance and guest spending per capita so the blue bars that you see on that is looking at your attendance and then the red dots on top is showing for each year on average how much each individual guest spent while they were in the park so it's interesting to see these trends because you'll notice that the two the two numbers do kind of correlate as the red dots go up the blue chart goes up as well but there are some years where you see actually lower attendance overall like look at 2014 where we only see a result of 25.6 but it's interesting that the guests actually spent more that year so 42.97 so they did talk a little bit about how they've been learning from their different trends and trying to keep that on an upward swing overall and I think they've been doing a pretty good job of guest spending per capita and as you can see obviously attendance is going up as well so something is something is being done right there for sure and then on the right we're looking at just the overall revenue in millions as you can see that's been on a slow and steady rise even in the years where they had lower attendance so in 2014 where we saw less attendance you still saw a rise in revenue because they managed to get each guest to spend a little bit more money so it made up the difference so overall this does reflect a fairly healthy company if you're seeing things slowly on the rise we're not seeing you know attendance going down we're not seeing per capita spending going down it's pretty good sign okay so near the end of the call they did include quite a few slides and discussions that were getting pretty technical and accounting and business terms and so I don't want to confuse everybody because I know we've got audience members of all different levels of knowledge as far as businesses stocks and accounting goes so I've just included them here for visual reference but do let me know if you want to see a separate video either on the AI channel or on my own going into a deep dive of these types of slides and how to interpret them how to read them and how to see what these numbers actually mean but in a nutshell what Six Flags is saying is hey we have a healthy business we're seeing growth year after year we're seeing record results in some cases and we're coming out on top we're coming out in the positives not in the negatives so this is where things get interesting now I want to get into the talks about how the actual stock market has responded to these results into this call because Six Flags stocks took quite a dip right around the time or just after the time of this business call and it's really interesting to see that happen because when Six Flags is presenting things so positively and and such growth and so many improving results it leads you to wonder why are this stock markets responding in a negative way so let's talk about it essentially what's happened is Six Flags although they're beating their own results from previous years they're not beating what the industry expects them to be achieving there's a company called Zaxe it's a research corporation and what they do is they put out estimates for what they think certain industries and certain businesses within those industries should be reaching as far as targets you know numbers earnings things like that and according to Zaxe Six Flags should have come out with quarterly earnings of about 2.32 dollars per share however at the end of Q3 they came out with earnings of only 2.16 per share so this is significantly below the estimated results that we were looking for within a company of this magnitude so what's causing this it's a combination of things it's a combination of the sustainability of certain aspects of the industry it's a combination of the health of the industry overall like we discussed last week in our business banter the industry although it is moving upwards like what we see with Six Flags it's not moving up at the rate that we want it to be moving for the industry to be as healthy as we want it to be so that's exactly what this is reflected on an individual company scale rather than the entire industry scale now with that in mind you can actually look at this on an industry scale as a whole the leisure and recreational services industry is actually at the bottom 27% of the 250 plus industries that Zaxe does these kind of estimates for so we're not seeing a really positive reflection in the amusement park industry and the entertainment industry in general people just aren't spending as much money on that right now because we're seeing that wage gap we're seeing economic factors leading into lower earnings in general in the industry in addition just ahead of the earnings release the estimate revisions trend for Six Flags wasn't particularly great either Zaxe also does ranking systems so you can be ranked as a number one which is a strong buy so you really want to buy that kind of stock all the way to a number four which is a sell so that's a stock that you don't want to hang on to you want to sell because things are on a downhill swing and just before this investors call Six Flags was actually rated a number four by Zaxe so those would be the main contributing factors to the drop that we've seen in stock in recent days in addition to that I think we saw some answers that people weren't completely satisfied with in the Q&A portion of the investor call in particular Six Flags has refused to break down how much a tenant specifically was lost at each park over the past quarter in the past year they really stuck to their guns on this one because traditionally Six Flags has never given that kind of information out for individual parks they've only given the numbers for their company as a whole however we did see some weather related attendance drops in a number of their parks due to things that were out of their control environmental conditions and different reasons but they have really refused and adamantly refused to give those specifics on any individual park and I think that has people a little bit concerned going back to that topic of organic growth versus inorganic growth people are really concerned that they're trying to cover up the organic losses that they're seeing by adding in a whole bunch of inorganic growth with these new acquisitions so that's really where I want to wrap this up and at this point I would like to open the floor to questions for you guys what do you think about the kind of stock losses that we've seen in the Six Flags stocks what do you think about the information covered in the investor call do you feel like there's some kind of losses being covered up with the overall growth that the company is seeing thanks to these acquisitions or do you think that Six Flags is pretty healthy and that we're going to see things go back to an upward swing love to hear your opinions down below let us know what you think and again we'd love any feedback on this series as a whole as we continue to grow and evolve what business banter is going to be so all of your thoughts all of your opinions down below is really appreciated thank you so much for watching and we'll see you next week