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Six Flags Entertainment Corporation (NYSE:SIX)
Q2 2021 Earnings Call
Jul 28, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to the Six Flags Second Quarter 2021 Earnings Conference Call. My name is Catherine, and I will be your operator for today's call. [Operator Instructions] After the speakers' remarks, we will conduct a question-and-answer session. [Operator Instructions] Thank you.

I will now turn the call over to Steve Purtell, Senior Vice President, Investor Relations.

Stephen Purtell -- Senior Vice-President, Investor Relations and Treasurer

Good morning, and welcome to our second quarter 2021 call. With me are Mike Spanos, President and CEO of Six Flags; and Sandeep Reddy, our Chief Financial Officer. We will begin the call with prepared comments and then open the call to your questions. Our comments will include forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in such statements.

And the company undertakes no obligation to update or revise these statements. In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports and other forms filed or furnished with the SEC.

At this time, I will turn the call over to Mike.

Michael Spanos -- Director, President and Chief Executive Officer

Good morning. Thank you for joining our call. We have divided our call into three parts. First, I will provide an overview of our operating performance and the strong demand trends we are seeing. Second, Sandeep will go into more detail about our financial results and our capital allocation strategy. Finally, I will return to provide some comments about the initial progress we have made on our three key strategic priorities. I am pleased to report that the strong start we experienced in the first quarter continued through the second quarter into the heart of our summer season.

Our results this quarter are due to the dedication of our team members who really stepped up and pulled together to safely reopen our parks. In fact, the second quarter marks the first time since 2019 that all of our parks were open. And as of today, there are no constraints on park capacity or ride seating in any of our U.S. parks. I am proud to see our employees working hard to deliver a great guest experience in this difficult operating environment. I am also proud of our efforts to give back to our communities. Over the past few months, we have hosted numerous vaccination sites at our parks, and we have donated more than 140,000 tickets as an incentive for residents in areas around our parks in Texas, Illinois and California to get vaccinated.

Turning to our operating trends. We continue to experience strong consumer demand at all of our parks. Through July 25, year-to-date attendance and open parks was 82% of 2019 levels. A significant portion of our attendance shortfall relative to 2019 is a result of lower prebooked group ticket sales, which have historically accounted for a significant portion of our early season attendance and which have been slower to recover. Excluding prebooked groups, year-to-date attendance at our parks during the periods they were open in 2021 was 89% compared to the same period in 2019.

We are also seeing strong guest spending per capita. For the second quarter, our guest spending per capita was up more than 20% versus the second quarter of 2019 due to progress on several of our transformation initiatives as well as a strong consumer spending backdrop. In addition, our season pass sales trends have accelerated. As of July four, 2021, our Active Pass Base was essentially flat with the same day in 2019. As a result of our strong revenue trends and season pass sales, we generated $190 million of cash flow during the quarter. While we are encouraged by our results and the early progress we are making on our transformation, operating conditions continue to be quite challenging.

We continue to operate with COVID-related constraints at our park in Montreal and our two parks in Mexico. And like many other businesses, we also continue to face a tight labor market and supply chain constraints. While labor challenges persist, our team has worked aggressively and creatively to alleviate some of the pressures. We selectively raised hourly rates for seasonal team members, offered a bonus for any team member who were employed as of July one and who stayed through the end of the summer season. And we recently offered an additional bonus for those who stayed through the end of October.

In addition, we have expanded our outreach and recruiting efforts through traditional channels as well as social media. These measures have helped us manage through the labor challenges the entire industry is facing. Our results this quarter are encouraging. We were still in the early stages of transforming our operating model. Our goal is to delight both our guests and our shareholders by providing classic Six Flags thrills enhanced with modern technology while keeping a careful eye on costs. I will now turn the call over to Sandeep, who will provide details about the quarter's results as well as a review of our capital allocation strategy.

Sandeep?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Thank you, Mike, and good morning to everyone. I would like to start by reminding everyone that results for the second quarter and year-to-date trends are not comparable to prior year because we closed all of our parks in mid-March last year, and many of our parks remained closed or had curtailed operations during the second quarter 2020. For that reason, I will provide comparisons to 2019. Total attendance for the quarter was 8.5 million guests, a 19% decline from second quarter 2019, reflecting fewer operating days at several of our parks due to the pandemic capacity restrictions at some of the parks that were open and the loss of most of our prebooked group sales.

These headwinds were partially offset by a favorable calendar shift from our fiscal year change. Because of our fiscal year change, our second fiscal quarter 2021 ended on July four instead of June 30 as we did in 2019. As a result, second quarter 2021 includes four calendar days in July or most of the July four holiday weekend. This was partially offset by four days in April, including the Easter holiday in 2021 that shifted out of the second quarter and into the first quarter this year. The net benefit of these shifts into the second quarter of 2021 was 614,000 of attendance and $32 million of revenue.

In the spring and early summer, we historically derived a significant amount of attendance from group sales, which includes school groups and company buyouts. Because most schools and offices have yet to resume group events and these outings are typically booked in advance, we have experienced a significant decline in group sales during the spring and early summer months. Through July 25, year-to-date attendance at open parks was 82% of 2019 levels and has accelerated since the end of the quarter. A significant portion of our attendance shortfall relative to 2019 is a result of lower pre-booked group ticket sales. Excluding prebooked groups, year-to-date attendance at our parks that have been open all year was 89% of 2019 levels.

Attendance from our single-day guests in the second quarter represented 36% of total attendance versus 39% for the second quarter of 2019, reflecting the impact of lower prebook sales, which are counted toward single-day attendance. Excluding prebook sales, the attendance mix from our single-day guests increased by eight percentage points versus 2019. Looking ahead, we expect group sales to have less of an impact since groups typically represent a smaller portion of our attendance during the second half of the year. However, our new fiscal calendar will continue to create attendance shifts between quarters for the balance of this fiscal year.

Our third quarter will include an extra weekend during Fright Fest compared to 2019. We expect this calendar shift -- the calendar change to shift approximately 500,000 of attendance out of the fourth quarter and into the third quarter. When netted against the shift of the July four weekend out of the third quarter, we expect the changes in our fiscal calendar to negatively impact the third quarter's attendance compared to 2019 by approximately 400,000 guests. Total guest spending per capita increased 23% in the quarter versus 2019. Applying the pro forma allocation mentioned on last quarter's earnings call to 2019, admission spending per capita increased 24%.

And in-park spending per capita increased 22% compared to the second quarter of 2019. The increase in admission spending per capita compared to 2019 was driven primarily by our new approach to revenue management. That approach includes pricing our tickets based on the demand curve as well as a new pricing architecture that allows us to optimize relative pricing among our various ticket types and to reduce promotions.

In addition, as much of our season pass sales are occurring later in the season than usual, we are recognizing season pass revenue over a shorter time frame, which boosted our ticket per capita in the second quarter. Looking ahead to the second half of 2021 and 2022, we expect the ticket per capita growth rate to moderate as our attendance and promotional cadence begins to normalize.

The increase in in-park spending per capita compared to 2019 was primarily due to early progress on several of our transformation initiatives, including an acceleration in the uptake of mobile dining, which carries a higher average order value; our new F&B strategy, including a new food pricing architecture and the introduction of more premium offerings; our new cash to card kiosk, making it easier for consumers to spend money on games and merchandise in our parks; our QR code-enabled FLASH Pass program; and a higher mix of non-group single-day guests, who typically spend more in our parks per visit.

In addition, the overall consumer spending environment was very strong in the second quarter, and we believe that we benefited from an unusually high level of consumer discretionary spending. Looking ahead to the second half of 2021, we expect our in-park spending per capita to increase relative to 2019, but we expect the growth rate to moderate. Revenue in the quarter was $460 million, down $17 million or 4%. Excluding the impact of reduced sponsorship, international agreements and accommodations revenue, revenue was down less than $1 million. The decrease was also a result of lower attendance net of the fiscal calendar change mostly offset by higher guest spending per capita.

On the cost side, cash, operating and SG&A expenses versus 2019 decreased by $4 million or 2%. The reduction in expenses reflected cost savings measures during the quarter driven by our transformation plan, lower advertising costs and a benefit from a portion of the proceeds received in connection with one of our terminated international development agreements in China partially offset by higher incentive costs to attract and retain team members. Due to the labor conditions we currently face, we are incurring higher wage rates for seasonal employees.

During the second quarter, these additional costs were offset by a reduction of hours worked due to the tight labor market. Adjusted EBITDA for the second quarter was $170 million, down $9 million or 5% versus second quarter 2019. This included a net benefit of the fiscal quarter change, which shifted attendance into the quarter. Second quarter 2021 also included $11 million of proceeds received in connection with one of our terminated international development agreements in China. As a reminder, second quarter 2019 included a $7.5 million settlement related to the termination of our international development agreement in Dubai. We are pleased with the retention of our Active Pass Base.

At the end of the second quarter, we had 6.3 million pass holders, which included 2.1 million members and 4.2 million traditional season pass holders. Due to our fiscal calendar reporting change, the second quarter of 2021 benefited from additional sales over the July fourth weekend. Adjusting for the reporting calendar change, the Active Pass Base as of June 30, 2021, was essentially flat compared to June 30, 2019, with an increase in traditional season pass holders offset by a commensurate decrease in members.

We are focused on increasing our membership base, and we expect our total members to grow over time. Our Active Pass Base retention is a testament to our unique offering and loyal following. Deferred revenue as of July four, 2021, was $310 million, up $75 million or 32% compared to second quarter 2019. The increase was primarily due to strong season pass sales in the second quarter of 2021 and to the deferral of revenue from members and season pass holders whose benefits were extended through 2021.

We expect to recognize most of this deferred revenue in 2021. Year-to-date capital expenditures were $42 million. For the full year, we previously expected to spend less than $98 million spent in 2020. However, because of our strong operating results and cash flow and our confidence that our operating performance will continue to improve, we now have capital expenditures of $130 million to $140 million in 2021. We expect to believe 9% to 10% of revenue is an appropriate level of annual capital expenditures in a normalized environment.

Our balance sheet is very healthy with no borrowings under our revolver and no debt maturities before 2024. Our liquidity position as of July four was $714 million. This included $461 million of available revolver capacity net of $20 million of letters of credit and $253 million of cash. Net cash flow for the quarter was $190 million. Given the significant operating losses we incurred in 2020 as well as our pre-existing NOLs, we expect to pay minimum federal taxes this year and next. And we do not expect to become a full cash taxpayer until 2024 at the earliest.

I would now like to give you a quick update on our transformation plan. We continue to make progress with our revenue and cost initiatives, as shown by the positive impact on our attendance, per capita spending and cost savings. In 2021, we expect to achieve $30 million to $35 million from our fixed cost reductions, and we have already realized more than $16 million through the first half of this year. We continue to be on track to deliver $80 million to $110 million in incremental annual run rate EBITDA once our transformation plan has been fully implemented and attendance returns to 2019 levels.

This includes an incremental investment of approximately $20 million in seasonal wage rate increases annually on a go-forward basis in addition to the $20 million we called out in our previous baseline for a net increase of $40 million compared to 2019. The full impact of the wage rate increases will likely materialize in 2022, but we expect them to be offset by an increase in the expected value of our revenue initiatives. As part of our transformation plan, we expect to incur $70 million in charges.

We have incurred $46 million in cost so far through second quarter 2021, including the noncash write-offs of $10 million that occurred in 2020. We expect to incur the remaining $24 million in 2021 and 2022, the majority of which is related to investments in technology, including a new CRM system. Finally, I'd like to touch on our capital allocation strategy, which is particularly important given our large cash balance and our expectations that we will generate significant cash in the back half of this year.

Our first priority will always be to invest back in our base business when we see opportunities to generate attractive returns. As I just mentioned, we expect to increase our capital expenditures this year, which will allow us to invest in high-priority and high-return park infrastructure and technology projects. Priority #2 is to pay down debt until we reach our targeted leverage range of three times to four times net debt to adjusted EBITDA.

Longer term, once we are within our targeted leverage range, we will consider strategic acquisition opportunities. And if there are none, then we will return excess capital to our shareholders via dividends or share repurchases. To conclude, we are encouraged by the initial progress on our transformation plan and are well positioned to achieve our adjusted EBITDA baseline range of $530 million to $560 million when attendance levels return to 2019 levels including the impact from labor inflation. This new baseline is not the endpoint but rather the beginning. And once it is achieved, we expect to grow EBITDA by mid- to high single digits annually thereafter.

Now I will pass the call back over to Mike.

Michael Spanos -- Director, President and Chief Executive Officer

Thank you, Sandeep. I'd like to take a few minutes to review our strategic priorities. We believe that improving the guest experience will be the most important driver of our long-term sustainable earnings growth. We are evolving our culture to center on our guests. Everything we do will focus on how to delight our visitors with a fun and memorable experience. Our second strategic priority is to continuously improve operational efficiency, which essentially means that we will be laser-focused on managing costs as we grow our revenue.

And finally, our third priority is driving financial excellence, which means that we will make sure that our operating improvements flow through to bottom line profits and that we achieve strong returns on any investments we make. Despite the challenging operating environment, we have already made progress on some of these strategic priorities, and I'd like to highlight a few of these areas before opening up the call for Q&A. On our first strategic priority, modernizing the guest experience through technology, I'd like to call out four initiatives that are already starting to have an impact.

First, customer relationship management. We recently launched our new CRM platform that will allow us to understand and predict our guest preferences from the moment they visit our website to the moment they leave the park. Based on our new consumer database, we have already begun tailoring our communications based on our guest preferences. And over time, we will be able to customize their experiences, so they get exactly what they want, when they want it.

Second, Mobile FLASH Pass, which now includes QR code capabilities. We recently have begun transitioning our traditional FLASH Pass to a mobile environment at certain parks. This has been very well received by our guests as they no longer have to wait in line to retrieve and return a physical FLASH Pass, and they can easily show a QR code on their phones for faster entry to rides. This has helped generate a double-digit increase in our FLASH Pass sales.

Third, cash to card kiosks. This provides several benefits. First, it makes it easier for our guests to spend money on games and merchandise because they don't have to worry about carrying around cash, and it speeds up transactions. Second, it reduces shrinkage in our parks and minimizes cash handling costs. Finally, it improves hygiene. We have already seen a benefit to our in-park per caps from this initiative.

Finally, mobile dining. Our guests will no longer have to wait in long lines to order food. Instead, they can choose to order on their smartphones and pick up their food when it is ready. We are still testing and iterating the implementation of mobile dining, but even in this early stage, our guest utilization of mobile dining continues to accelerate. Mobile dining has already led to higher average transaction spend and improved guest satisfaction with our food ordering and pickup process.

We are pleased that our two key performance indicators for this strategic priority, attendance and revenue, are both accelerating. And we look forward to implementing more of our initiatives to improve the guest experience over time. We've also made progress on our other strategic priorities, continuously improving operational efficiency and driving financial excellence. On operational efficiency, we have moved quickly to streamline our organization and reduce other fixed costs. And we expect to realize $30 million to $35 million of fixed cost savings in 2021.

Finally, our financial excellence, we are pleased to report that our adjusted EBITDA is improving, although we are still a long way from where we would like to be. As the operating environment returns to 2019 levels, and we implement more of our transformation program, we expect to achieve our adjusted EBITDA baseline range of $530 million to $560 million. And most importantly, we expect that level to serve as a jumping off point from which we can sustainably grow mid- to high-single digits over time.

In conclusion, we are pleased with our high customer retention and loyalty, demonstrated by our Active Pass Base, which continues to grow. Our transformation efforts are proving their value as we see cost savings from our changes in the operating model and increased per capita spending from our revenue initiatives. Our team members are working very hard to create fun and thrills for our guests.

With a clear focus on improving the guest experience in a talented and dedicated team to execute our strategy, we are well positioned to accelerate growth in the back half of 2021 into 2022.

Catherine, at this point, could you please open the call for any questions?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Steven Wieczynski with Stifel.

Steven Wieczynski -- Stifel -- Analyst

Want to dig into the labor pressure a little bit more and the impact that it's having or not having on your customer experience. It seems, I mean, if we start to read some of these review sites that are out there, a lot of customers are potentially complaining about parks not having all the rides open or certain parts of the park not being operational, and like I fully understand these review sites are always going to be negatively biased, but just want to get your take on what you're seeing from customer satisfaction scores and how you're trying to combat the labor issue versus balancing the customer experience.

Michael Spanos -- Director, President and Chief Executive Officer

I am worried Steve, thanks for the question. Yes, absolutely, we are committed to an outstanding guest experience, and that is our standard. And as you said, it has been a challenging operating environment given the demand, the supply chain issues and what is a tight labor market. And the surveys that we're tracking with our guests continue to demonstrate that the biggest pain points for our guests are waiting in lines, whether it's for rides or for food, which was before the pandemic and post the pandemic. So that is, without a doubt, our biggest executional, in the short term and longer-term, transformation focus to make the guest experience faster and easier.

And that's where we're going. We do have a large Active Pass Base. They've been very appreciative that our parks are open. They feel really good about this, and I've been personally thanked in many of the parks on this. But the headline here is it's really reinforced what we know we need to do. It's about pivoting to a guest-centric culture. It's about making that guest experience faster and easier and driving that through technology. That's going to drive sustained earnings momentum. That's going to drive sustained loyalty of our guests.

Steven Wieczynski -- Stifel -- Analyst

Okay. Got you. Thanks Mike. And then second question would be around the percent of unique visitors during the quarter. And I'm not sure if I missed that in your prepared remarks. If I did, I apologize. But just trying to figure out what unique visitors look like in the quarter and trying to really understand that your product was basically introduced to customers that really haven't been to your properties before. And I hope that somewhat makes sense.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Well, good morning, Steve, this is Sandeep. I think that's a great question because we did covered it in the prepared remarks, but I think there's a nuance to what actually happened in the quarter. So for instance, during the quarter, 64% of our attendance came from the Active Pass Base compared to 61% in 2019. And on the face of it, that looks like a reduction of single-day ticket, but it's not when you adjust for pre booked sales that we talked about in the prepared remarks. And the shift in prebook sales alone had an eight percentage point impact versus 2019.

So we continue to see strength in single-day tickets in the quarter. But what we're really pleased about was we actually saw strong growth in the Active Pass Base, and we saw strong attendance there, too. So we've said continuously, it's an and, not an or. And so it's very, very reassuring for us to see the strong rebound that we saw in the Active Pass Base in addition to the single-day ticket momentum that we've been seeing for the last few quarters as well. So really pleased, I think, from a transformation standpoint, as Mike talked about. Guest experience is one side of it, but I think driving unique attendance is another key focus area for us. And we feel we're already showing proof points on progress on that front.

Steven Wieczynski -- Stifel -- Analyst

Okay. Great. Thanks, guys. Thanks for the caller.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Welcome.

Operator

Your next question comes from the line of James Hardiman with Wedbush.

James Hardiman -- Wedbush -- Analyst

Good morning. Thanks for taking my call. So first question here, I feel like I should be able to do the math, but I don't think I quite can. July attendance, I'd love a number. But if not, just sort of qualitatively where we were versus '19. Pretty clear that it's improved versus the end of the second quarter, but just how much would be helpful. Thanks.

Michael Spanos -- Director, President and Chief Executive Officer

Good morning, James. How are you? Our attendance trends are strong, and they have been accelerating since the fourth of July. And as Sandeep said in his prepared remarks, if you look at the quarter, quarter two, without the prebooked group sales, our trend was an 89 index versus 2019, and we saw a very strong demand for both Active Pass Base and single-day ticket. I will say this, in July, we saw group sales continuing to rebound.

And as you know, they make up a smaller portion of the attendance during the rest of the year. So we feel really good about how it positions us balance of 2021 as well as into 2022. It's a tight period of time. We're going to give you an update at the end of the quarter. But what I would say everyone should take away, we have seen very strong demand continued acceleration post the fourth of July. And we're hoping to continue to move closer to the 2019 levels.

James Hardiman -- Wedbush -- Analyst

Got it. So let me ask it more bluntly. Was July up versus 2019? Because I feel like the math would suggest it is, but maybe you're not there yet in terms of answering my question.

Michael Spanos -- Director, President and Chief Executive Officer

Yes, close, very close is where we're at. But again, it's a small window of time, James. And I think we won't obviously get through the rest of the quarter. But as I said, strong trends, and we saw a nice balance in the group sales, which helped out.

James Hardiman -- Wedbush -- Analyst

Got it. Okay. And then on the labor front, just want to contextualize this as much as possible. How much of it is -- how much of your cost base -- again, you've given us these numbers before. But how much does it represent? And how much inflation should we expect? Sandeep, you gave us a $20 million number in the prepared remarks, which I believe was sort of the incremental pinch that you now expect long run versus where we were three months ago. I guess, at the end of the day, it's simple enough to say that versus three months ago, you think labor is going to be $20 million worth but that you've found $20 million of additional sort of revenue opportunities to offset that.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Sandeep Reddy, Six Flags Entertainment Corporation-Executive VP & CFO

That's correct, James. I think that's exactly what we said in the prepared remarks. And I think if you go back to the last call that we had in April as well, we talked about doing surgical wage rate increases where it made sense and we saw on ROI. And as the last few months have played out, that process has continued, and we actually now have a pretty good indication that to recruit and retain the quality of labor that we need to deliver the guest experience that we want to, it's going to cost us another $20 million in wage rate increases.

And the impact of this really will be seen in 2022. And -- but we're really confident with the trends that we're seeing on our revenue management initiatives, that we're seeing in our per caps, that we have discovered with our revenue -- with the revenue increase. So from an adjusted EBITDA baseline perspective, we're able to hold the $530 million to $560 million range that we provided previously when attendance gets back to 2019 levels.

James Hardiman -- Wedbush -- Analyst

Got it. And then if I could just slip one more in, just obviously, there's a lot of moving parts. But I'm just trying to figure out sort of EBITDA excluding the international business versus 2019. Obviously, attendance was down in the second quarter, I think, 19%, maybe 24% comparable calendar. I'm trying to do the math on EBITDA. It doesn't seem like it was down much if we pull out -- much, if at all, if we pull out the international business. Do you have those numbers by any chance?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes. I think we don't going to get into specifics on that split on EBITDA, James. But what I'll go back to is what I said in the prepared remarks on revenue, right? So if we take revenue, we actually were relatively flat on revenue excluding international sponsorship and accommodations. So the big piece of what happened was we got a benefit from the fiscal calendar shift that helped our revenue. But that was offset by lower attendance in the end, which actually was netted into the numbers.

So EBITDA-wise, we're very pleased with the trends that we saw. Remember that from an EBITDA perspective in '19 on the international business, we did get a settlement from our Dubai partner of $7.5 million. I mentioned that in the prepared remarks. And we did have a settlement, that we did have a payment that we received this year of $11.3 million as well. So that's the comparison from an EBITDA standpoint.

Michael Spanos -- Director, President and Chief Executive Officer

And James, it's Mike. Just one thing I would add on to this. It's a really good question. I think the first thing that's important for everybody to understand is we're not certain on the exact extrapolation trends, to your question, it's a challenging operating environment. But I'd say the second thing is we're very confident with the recovering aspect of our business, the improvement. I like the trends in the financials. I think our liquidity position is solid. We've got good momentum on Active Pass Base. And transformation is on track. And as Sandeep said, we're highly confident in that $80 million to $110 million.

But I think the last thing I would say is I think what's more exciting is, as we think about the future, pivoting to a guest-centric culture, thinking about sustained earnings momentum that is driven by our strategic focus areas, which is all about modernizing the guest experience through technology and operating more efficiently, that's going to drive the sustainability. And as we said in previous calls that once we achieve that $530 million to $560 million, as we build that capability through transformation, that gives us robust mid- to high single-digit EBITDA growth levels after that $530 million to $560 million. And that's where we're oriented as a group. There's a lot of challenges in the short term, but that's how we're thinking about it as we move forward in the short term and the longer term.

Operator

Your next question comes from the line of David Katz with Jefferies.

David Katz -- Jefferies -- Analyst

Hi. Good morning, everyone. Thanks for taking my questions. I appreciated it. I wanted to go back to, Mike, the four initiatives that you laid out in terms of the FLASH Pass, the kiosks, mobile dining, etc., etc. Can you just elaborate a bit more on what the scale of that rollout is so far, what it would look like through the remainder of this season? And if we were to look at 2022, is that sort of closer to fully baked rollout of those initiatives? And the last part is really how much of any of these are really contemplated in the $530 million to $560 million normalized level you have? Thanks.

Michael Spanos -- Director, President and Chief Executive Officer

Good morning, David. How are you?

David Katz -- Jefferies -- Analyst

Very well. Thanks.

Michael Spanos -- Director, President and Chief Executive Officer

Good. So we're very far along in our progress on these. We've been -- we started the cash card kiosk. We started rolling that out in quarter four of 2020. We also did the same thing with mobile. And we accelerated that with the pandemic. Even the pick-up only locations, that's been very positive. And the QR aspect, FLASH Pass, we started that this year, and it's really gained momentum. We'll continue to roll that out, and we also want to mobile enable it as well.

So very -- all of it is very on track. And we feel, as I said, confident, I'm highly confident in our ability to get to that $80 million and $110 million. As Sandeep mentioned, what I think is important is we do feel good -- very good about the progress on our revenue initiatives as well, which is why we feel good about that number and, as I said, about building even more sustained earnings momentum out of these initiatives.

David Katz -- Jefferies -- Analyst

And if I can just -- sorry, go ahead, please.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes. And David, I think you asked directionally about the value that we are confident on. We are very confident but I think back to the prepared remarks, while directionally, this is really driven by our transformation plan, we do expect that because of the high level of consumer discretionary spending, there will be a moderation in the level of spend, not the direction. So we do expect growth, but I think the level of growth may actually taper a little bit.

David Katz -- Jefferies -- Analyst

Understood. And just with respect to labor, if I may ask for one impression, how much of the pressures that you're seeing do you think is -- would you guess is transitory, right, and just a function of kind of reopening inconsistencies versus some that may endure and be permanent? Do you have any sense about that?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes. No, I think that's -- it's a great question, David. And I think this is a bit of a unique year. So I would say the supply side of labor has definitely been impacted by some unique factors this year. And I think that is probably a bit more transitory in nature. And as I think we get through this year and into next, we believe that this should basically move on. However, I think as we go through what's available in the market, the quality of labor and the quality of labor that we need to deliver the guest experience, it is clear that in certain areas, we need to make investments in wage rates to hire and retain high-quality labor.

And to that extent, that investment that we've made to deliver a high-quality labor, to deliver that great guest experience, we expect to see that cost increase of $20 million that we're expecting will materialize in 2022. In the current year, I think as we talked about in the prepared remarks, in the second quarter, we actually saw an offset of the wage rate pressures which reduced hours that we were able to staff. And we see more or less the same driver as we move into the second half of the year in the third quarter as well. So I think that part of it, I would say, is more from a timing standpoint on the wage rate increase. We did specifically talk about some seasonal incentives that we're offering to our staff, team members.

For those who were around from July one onwards and stayed through Labor Day, we're offering a 10% incentive. And we are offering additional incentive for those who would actually stay until the end of October. So this would be, again, transitory and temporary in nature. We don't expect this to repeat. I think it's more a function of the unique circumstances of this year, where the supply of labor availability has been impacted. So we want to protect the guest experience as we go through the back half of the year by taking this action. It's a small investment relative to what I think is going to pay back both in terms of per caps as well as the guest experience.

David Katz -- Jefferies -- Analyst

Perfect. Thank you.

Operator

Your next question comes from the line of Ben Chaiken with Credit Suisse.

Ben Chaiken -- Credit Suisse -- Analyst

Hey, everyone. Thanks. Looks like you guys have some good momentum. I think you mentioned the '21 season passes have been sold later in the season than '19, which makes sense. I guess just in regard to that, what's the usage you're expecting this year on the pass, I guess, number one? And number two would be what's an apples-to-apples per cap increase. I don't know if the best way to do that is just ex-season pass or whatever you think is appropriate. Thanks.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes. Ben, great question. I think on the '21 season passes, as you could see from our trends, we sold a lot of season passes -- traditional season passes in the second quarter, which is fairly late in the year for us to be selling and considering the pass will expire by the end of the year. And so the number of visits that we would expect from these passes would be less than our pass that was sold much earlier in the season. So as a result of it, I think the per caps that we actually have reported on the admissions have definitely been increased. And that's why we called out that we expect this to moderate going forward as attendance trends normalize.

And basically, we move forward with a normal promotional cadence, which has been disrupted this year with the pandemic. And so I think I'm not going to get into specific numbers on per caps, on ex the timing because I think there's a lot of moving pieces. And it is going to be strong because I think what is happening with our admissions per caps is very reflective of our transformation efforts on revenue management specifically. We're extremely pleased with our use on our admissions, both growth on Active Pass Base as well as on single-day ticket. And we see continued momentum. Just directionally, we see growth, just like I talked to David about on in-park spend. We see the same thing on admissions as well but just with a moderation in terms of the growth rate.

Ben Chaiken -- Credit Suisse -- Analyst

Okay. Cool. I appreciated it. Thank you.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Welcome.

Operator

Your next question comes from the line of Mike Swartz with Truist Securities.

Mike Swartz -- Truist Securities -- Analyst

Good morning, guys. Just wanted to maybe dig into what you're seeing in the average profile of a visitor maybe in the second quarter or year-to-date. Have you seen any major changes maybe in your distance traveled or those staying for multi-day visits or maybe any other metrics that are relevant?

Michael Spanos -- Director, President and Chief Executive Officer

Mike, good morning. [Speech Overlap] Go ahead, Sandeep.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes. No, I think what we are seeing is really a robust attendance and, I think, typical attendance, I would say. We're a regional theme park, and so a lot of our attendance is coming from the radius of 100, 150 miles around our parks. And that's been our strategic advantage in the face of the pandemic where travel has been a bit more difficult to get to. And for us, having so many potential guests in the DMAs in which they operate within driving distance has been a great help. So we've seen a very strong trend of guests from the demographics in which we operate. And that's been consistent with our expectations.

Michael Spanos -- Director, President and Chief Executive Officer

Yes, Mike, Sandeep hit it. What I was going to tell you, I've been out to every one of the U.S. parks. And what I'm seeing is we are absolutely attracting, as Sandeep said, regional guests, like we always have. And it's roughly you're seeing half families, and the other half is teens and young adults, very consistent. But I think it only reinforces that our outdoor, regional, close-to-home proposition we provide is absolutely in the right spot right now in terms of post pandemic and ongoing.

Mike Swartz -- Truist Securities -- Analyst

Okay. Great. And then just a follow-up, if I may, on the labor cost front. And I think, Sandeep, you had mentioned that some of the bonus programs you're running this year may not be repeated in the future. But just help us understand how those bonus programs flow through the P&L. Have you already expensed those? Are those expensed at the time the bonuses are actually paid?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Really good question. I think no, we haven't expensed them yet. They're going to be our expense -- they're going to be in our expenses in the back half as they're earned because these are retention bonuses. So to the extent that the team members that we're trying to incent to stay, do stay, then they'll have done the calculation, that they've earned it, and then we pay it out. So for the one through staying to Labor Day, that will be a third quarter cost. And for the ones that are going to be offered to stay through the end of October, that would be a fourth quarter cost.

Mike Swartz -- Truist Securities -- Analyst

Okay. Wonderful. Thank you.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Welcome.

Operator

Your next question comes from the line of Eric Wold with B. Riley Securities.

Eric Wold -- B. Riley Securities -- Analyst

Thank you and good morning. A couple of questions. Obviously, I don't want to beat the labor horse too much further. But I guess, Sandeep, you talked about a lot of the transitory costs, this year bonuses and whatnot and kind of going into next year getting to a $20 million kind of annualized higher level just to get to the quality of labor you want. How should we think about, kind of under that scenario, the average wage rate increase for hourly workers in 2022 versus what you saw in 2019? And should that be considered kind of a catch-up to get to where you needed to be for the quality of labor and that labor rate growth rates beyond '22 are more normalized? Or would you expect to be a little bit higher than normal to kind of keep up that pace?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Great question, Eric. And I think -- and this actually gets back to the nuance in the prepared remarks. So when we provided guidance in fourth quarter '19 on the earnings call for 2020 pre-pandemic, we've called out a $20 million headwind on wage rate inflation that we were expecting on a go-forward basis with statutory increases and the like. And so that was already in our $530 million to $560 million EBITDA baseline when we announced it. This $20 million in wage rate increases that have been identified during this past quarter is incremental to that $20 million.

So in total, it's about a $40 million increase against 2019. And that should be all in with what we know about today and is part of our projections as we move into 2022. Clearly, I think if things change as time goes along, we'll adapt to that. But this is where we're working on our productivity initiatives through our transformation plan. We've talked about our park-level labor initiative where we'll be looking at artificial intelligence to do programmatic staffing of our labor needs in the parks as that actually comes online. The productivities from that should unlock some improvements on the productivity levels that are baked into our $530 million to $560 million adjusted baseline. But I hope that answers your question.

Michael Spanos -- Director, President and Chief Executive Officer

Yes, Sandeep, if I can add on. I think, Eric, Sandeep absolutely gave you the right information. But I think from a future focus, we -- it is that $20 million incremental. But I think the key is to focus on is this gets back to transformation. The capability -- we're building the platforms of capability, where building will allow us to continue to operate more efficiently and pivot that labor into the guest-centric culture and making it faster and easier for the guest. And as we said in the last call, we've said we're going to have a very sharp eye on where the costs go, the returns of those costs in terms of building, recruitment, retention and per caps. And that's what we're doing as a team. We're being very focused as we think about our returns and our operating expense ratios in any cost investment, which includes labor.

Eric Wold -- B. Riley Securities -- Analyst

Perfect. And then just last question. Obviously, great kind of in-park spending cap levels that you're doing with mobile dining and the kiosks, etc. Can you give us a sense of how much of the gains you're seeing are higher purchase frequency, larger baskets versus just absolute price increases on the strategy?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

So Eric, a really good question. And I think it's one of these things where directionally, like I said in the answer to David earlier, this is exactly what we were expecting to see because of our revenue management initiatives. And on all of them, there's a pricing element, but there's also an execution element from transformation. And so I think we see that continuing to be impactful as we go forward. But we are in a situation between stimulus payments and a number of other factors where consumer discretionary spending has been elevated in the second quarter. So we do see this actually tapering as we move into the back half, but we still see a lot of strength in our in-park services per capita spend.

Eric Wold -- B. Riley Securities -- Analyst

Got it. Thank you.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Welcome.

Operator

Your next question comes from the line of Paul Golding with Macquarie Capital.

Paul Golding -- Macquarie Capital -- Analyst

Congratulations on the quarter, guys. And, thanks so much for taking my question.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Thank you.

Paul Golding -- Macquarie Capital -- Analyst

The first item I wanted to ask about was the lower advertising costs called out as a source of savings in the quarter. I was wondering if you could give me some color around whether that was just from advertising efficiencies and platforms, whether it's CRM or otherwise, or if that was intentional just around labor constraints and what the footprint could support as far as demand?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes. I think we talked about this on the last call as well, Paul, where I said we were standing ready to deploy media dollars as demand basically came back -- came in. And so we actually started accelerating investments in advertising as we got deeper into the quarter. So most of the savings have come from earlier in the quarter where we were still waiting for the signs of demand actually manifesting to the levels at which we would get the returns of the media.

But I think this goes back to our transformation initiative on media spend and media ROI. We see tremendous value that we can generate by making sure that the targeted media investments that we're making by channel and by park and by DMA have returns that we could actually get by being much more strategic in the way we deploy the spend. So going forward, we continue to expect to invest media and advertising dollars especially given what Mike talked about on the attendance trends.

And I'll just remind you, we talked about 4% to 5% relative to 3% to 4% historically. We fully believe in this. We believe that this will actually drive tremendous brand equity and brand strength over time. And the purpose of media is twofold. One is share of voice. And I think our brand basically has to be top of mind to guests, and we want to make sure that we continue to do that. And then there's also the actual driver of incremental sales that we want, the incremental demand that we're going to drive from that. So that's a high level where we take this.

Paul Golding -- Macquarie Capital -- Analyst

Thanks so much for that Sandee. And then just a quick follow-up on single day, I was wondering if you could give any color on that dynamic as it continues to unfold. Is this strategic pricing intelligence that you're deploying to drive this momentum in single day, is it the spot need of the guest, uncertainty around continued reopening? How should we think about the impetus behind the single-day momentum?

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Yes, Paul, I think that's a great question. And I think I'll go back to a point I made earlier, which is our focus is on driving unique attendance, and so we're agnostic to whether the attendance comes from single-day tickets or the Active Pass Base, be it season pass holders or members. And I think what we have been doing has been very strategically focused on pricing at the right value for all the different ticket types and allowing the guests to make the decision on what type of product they want to buy.

And I think what has been shown is that on the single day tickets, perhaps we hadn't gotten to the right price value equation to drive as much momentum as we were looking for, but that momentum has actually been coming through as we've gone through the past year. And we're really happy to see that. But I think what we're equally happy to see is the momentum that's building on the Active Pass Base, which shows that our revenue management strategy is working very well because we're attracting guests of all cohorts into our unique attendance.

Paul Golding -- Macquarie Capital -- Analyst

True. Thanks so much for that.

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Welcome.

Operator

And your last question comes from the line of Brett Andress with KeyBanc.

Brett Andress -- KeyBanc -- Analyst

Good morning. So back to your answer to James' question on July, it seems like we're flirting with 2019 levels. But I guess you still have capacity constraints in Mexico and Canada. So if you exclude that, is it safe to say that we're above 2019 in the domestic business? And then more specifically, have you seen any discernible impacts from Delta in the most recent days?

Michael Spanos -- Director, President and Chief Executive Officer

Hey, Brett. How are you doing? So let me start with your latter point. First of all, in Delta -- around the Delta variant, so first of all, we have been seeing very strong demand post July four, as I already stated. And we expect high demand for Fright Fest and Holiday in the Park bounce year based on what we're hearing from our guests. Second, as far as Delta, we will comply with all local requirements. And we've been collaboratively working with local health officials to ensure we provide our guests and our team members a safe and fun product.

Matter of fact, we have already started discussions with local officials prior to yesterday's CDC announcement because we've been staying very close to our infectious disease doctor and consultant. So I think in the end, again, this is really, as we do this or anything else, it's going to be very much about guest-centricity culture, modernizing the guest experience and creating a really great experience for Fright Fest as we move forward. As far as your other question, I think I gave plenty of color to James on it. And like I said, what I'll say again is that we've seen very strong demand post the fourth. We were seeing group sales coming back, still has room to go. And we'll continue to provide more transparency as we just get through the third quarter.

Brett Andress -- KeyBanc -- Analyst

Got it. Well, fair enough. And then just on the guest experience, I think we talked about earlier and then also your mix to higher single day tickets. Do you think any negative experiences this summer could impact future periods, maybe particularly for people showing up for the first time? I mean have you seen any evidence of repeat visits or anything like that falling off? Just curious on the knock-on effects, if there is any to that, with the guest experience.

Michael Spanos -- Director, President and Chief Executive Officer

Yes, good question. Again, as I said before, it is a challenging operating environment. And we have seen -- and I've personally seen this as I've been out in the parks, we have a whole lot of guests that are just so appreciative we are operating, we're open, and they get it in the broader society. We also know we can do better. As I said, we've had a tight labor market. We've seen some up and downs with some of the supply chain. And as I said, it only has made us more focused on pivoting to a guest-centric culture.

What we know is people don't like the wait in lines too long. We've seen that before the pandemic. We're seeing it post the pandemic. And that's our focus is reducing the lines, making it easier, faster for our guests, modernizing that experience with technology. The one thing which David asked, too, if you think about it, which we started during the pandemic, our entry in the park is now completely contactless. We'll continue that. From the minute you get on the website all the way through getting through the evolve contactless security, all the way to activating season pass, we've gone contactless. And we'll continue to accelerate that to make the experience better, to get guests in the park faster.

Brett Andress -- KeyBanc -- Analyst

Got it. Thank you.

Operator

And there are no further questions at this time.

Michael Spanos -- Director, President and Chief Executive Officer

Thank you for your continued support. Six Flags is truly the preferred regional destination for entertainment, creating fun and thrilling memories for all. Take care, and we hope to see you at our parks for our Fright Fest. [Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Stephen Purtell -- Senior Vice-President, Investor Relations and Treasurer

Michael Spanos -- Director, President and Chief Executive Officer

Sandeep Reddy -- Executive Vice President and Chief Financial Officer

Steven Wieczynski -- Stifel -- Analyst

James Hardiman -- Wedbush -- Analyst

David Katz -- Jefferies -- Analyst

Ben Chaiken -- Credit Suisse -- Analyst

Mike Swartz -- Truist Securities -- Analyst

Eric Wold -- B. Riley Securities -- Analyst

Paul Golding -- Macquarie Capital -- Analyst

Brett Andress -- KeyBanc -- Analyst

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