Six Flags' stock soars as investors look past theme-park operator's loss to focus on strong start to season

By Ciara Linnane

Six Flags still expects its merger with Cedar Fair to close in the first half of 2024

Six Flags Entertainment Corp.'s stock reversed early losses to trade up 6% Thursday as investors looked past a wider-than-expected first-quarter loss and revenue shortfall to focus on a positive setup for the summer season.

"Our 2024 season is off to a promising start, with 2024 season-pass sales through April increasing by double digits compared to last year, prebooked group sales approaching prepandemic levels, and our park-beautification and technology initiatives resonating strongly with our guests," CEO Selim Bassoul said in prepared remarks.

On a call with analysts, Bassoul said people are spending more money at the company's parks, which he attributed to some strategic moves.

"The first is premiumization. We are transforming our parks," he said, according to a FactSet transcript. "We are creating multigenerational appeal, proving that thrills know no age. We alleviate chokepoints and amplify value in every aspect of the past experience."

Six Flags has also invested in infrastructure, in-park offerings, accommodations and comfortable seating, he said, "which is resonating with our guests, giving them a reason to stay longer and spend more."

Group sales are also exceeding expectations, he said, noting that they are up more than 20% from a year ago and are close to prepandemic levels.

Arlington, Texas-based Six Flags (SIX) had a net loss of $83 million, or 98 cents a share, for the quarter, wider than the loss of $70 million, or 84 cents a share, posted in the year-earlier period.

Revenue fell 67% to $133 million from $142 million a year ago.

The FactSet consensus was for a loss of 92 cents and revenue of $137 million.

The revenue decline was partially due to a $12 million reduction in revenue related to memberships beyond the initial 12-month commitment period, which the company recognizes each month, and was not based on attendance.

It was also due to a $4 million adjustment to international licensing revenue related to a change in the estimated opening date of Six Flags Qiddiya, in Saudi Arabia, to mid-2025.

Those were partially offset by higher attendance, mostly related to the early timing of the Easter holiday in 2024.

Total guest spending per capita fell 8% to $74.35, while admissions spending per capita fell 12% to $42.04. In-park spending per capita fell 2% to $32.31.

Total attendance was 1.7 million guests, up 6% from the year-earlier period. The Easter holiday timing added an estimated 90,000 guests and is expected to create a headwind in the second quarter.

Six Flags ended the quarter with debt of $2.4 billion and cash of $61 million.

The company completed the private sales of $850 million of 6.625% eight-year bonds on May 2, with the proceeds used to fully repay a term loan and revolving-credit facility. Another $165 million will be used to repay bonds that mature in 2025 on July 1.

The company is still expecting its merger with Cedar Fair (FUN) to close in the first half of 2024 after winning shareholder approval for the deal at a March meeting. The companies agreed to a merger of equals valued at about $8 billion including debt, which will create a new entity with a current portfolio of 27 amusement parks, 15 water parks and nine resort properties across 17 U.S. states, Canada and Mexico.

The company is expecting ad spend to be flat through the rest of the year, although it said it will spend more in the second quarter to build on the early success of the season.

The company expects average cost inflation to be around 4%, with many of the parks with the biggest minimum-wage increases expected to ramp up business in the second quarter.

The stock is down 0.1% in the year through Wednesday's close, while the S&P 500 has gained 8.8%.

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-09-24 1156ET

Copyright (c) 2024 Dow Jones & Company, Inc.