Shares of Six Flags (SIX) are sliding after the company reported earnings per share for the quarter well above estimates, but revenue below expectations. The company also said it was pushing out its medium-term EBITDA target due to "lumpiness" in its international development assets.
QUARTERLY RESULTS: Six Flags reported on Thursday fourth quarter earnings per share of 93c, well above analysts' consensus of 28c, and revenue for the quarter of $270M, which was below the expected $284.23M. "Record fourth quarter 2018 revenue of $270M grew $13M or 5% compared to the fourth quarter of 2017. The strong revenue growth was primarily driven by a 6% increase in guest spending per capita and a 3% increase in attendance. This growth was offset by an unfavorable revenue adjustment of $15M related to the company's international agreements due to delays in the expected opening dates of some of the parks in China caused by a challenging macroeconomic environment. This resulted in a 38% decline in sponsorship, international agreements and accommodations revenue compared to the fourth quarter of 2017," the company said in a press release. Six Flags also reported guest spending per capita for the fourth quarter increased $2.35, with admissions per capita increasing $1.74 or 8% and in-park spending per capita increasing $0.61 or 4% relative to the same period in 2017. Additionally, the amusement park company said that, "2018 represented [the company's] ninth consecutive record year as revenue increased $105M or 8% to $1.5B. The full-year revenue growth was primarily driven by a 5% increase in attendance; a 2% increase in guest spending per capita, driven by a 4% admissions per capita increase due to improved pricing on all admissions products and sales of memberships with premium tiers; and a 7% increase in sponsorship, international agreements and accommodations revenue. Attendance at the company's parks grew to 32M guests in 2018, primarily driven by five domestic parks acquired in June 2018, the benefit of 365-day operations at Six Flags Magic Mountain, strong growth in Mexico, and growth at the company's waterparks."
MEDIUM-TERM TARGET PUSHED OUT: During the company's earnings call, Chairman, President and CEO Jim Reid-Anderson said the company's international agreements continue to be a significant contributor to revenue growth, but also discussed delays in some of its China parks opening schedules caused by what he described as "3 main areas." Namely, the economy in China is "experiencing a general malaise due to global trade tensions and the lowest pace of GDP growth in almost 30 years"; new policies and regulations have reduced the volume of real estate transactions and made it more difficult for private companies to obtain loans; and the recent turnover of government officials has caused development plans to be temporarily delayed unless the plans can be reviewed and reapproved by new leadership, the CEO explained. "Although we have reasons to believe conditions could improve in China during the second half of 2019, we now expect our high-end parks to begin opening in mid to late 2020, versus 2019...For this reason, we anticipate the quarterly revenue from our international agreement may be lumpy in 2019 and possibly 2020 as our China partner works through these economic issues...We will never ever give up our pursuit of the best possible results for our shareholders and our guests. Nevertheless, the required growth rate combined with a potential lumpiness of our international development assets over the next couple of years has led us to revisit our medium-term outlook and conclude that on-time achievement of our aspirational target of $750M of modified EBITDA by 2020 is highly unlikely. At a minimum, we are still striving for late achievement of the target in 2021, with modest growth likely in 2019 and acceleration thereafter," Reid-Anderson stated, according to a transcript of the call.
ACQUISITION OF SMALLER PARKS: Looking to realize revenue and cost synergies by acquiring water parks and theme parks at low prices, Six Flags announced back in May of last year that it had entered into a purchase agreement with affiliates of Premier Parks to acquire the lease rights to operate five parks owned by EPR Properties (EPR). The acquisitions expanded the company's portfolio of North American parks to 25, as Wet n' Wild Splashtown in Texas, Wet n' Wild Phoenix in Arizona, Darien Lake in New York, and Frontier City and White Water Bay in Oklahoma joined the "Six Flags family."
WHAT’S NOTABLE: When Comcast (CMCSA) reported fourth quarter results last month, the company said Theme Parks revenue increased 3.5% to $1.5B in the quarter, reflecting higher attendance and per capita spending. Adjusted EBITDA increased 0.7% to $666M in Q4, reflecting an increase in revenue, partially offset by higher operating expenses. For the 12 months ended December 31, 2018, revenue from the Theme Parks segment increased 4.4% to $5.7B compared to 2017, reflecting higher per capita spending. Adjusted EBITDA increased 3.0% to $2.5B compared to 2017, due to higher revenue, partially offset by an increase in operating expenses.
PRICE ACTION: In afternoon trading, shares of Six Flags have plunged almost 14% to $55.16.
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