Six Flags Entertainment (SIX) Q2 2023 Earnings Call Transcript

Six Flags Entertainment (SIX 1.06%)
Q2 2023 Earnings Call
Aug 10, 2023, 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 2023 earnings conference call. My name is Drew, and I will be your operator for today's call. During the presentation, all lines will be in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session.

[Operator instructions] Thank you. I will now turn the call over to Evan Bertrand, vice president, investor relations, and treasurer.

Evan Bertrand -- Vice President, Investor Relations and Treasurer

Good morning and welcome to our second-quarter 2023 call. With me is Selim Bassoul, president and CEO of Six Flags; and Gary Mick, 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 Selim.

Selim Bassoul -- President and Chief Executive Officer

Good morning. Thank you for joining our call. Today, we will focus on three areas. First, I will provide an update on the progress we have made on our transformation.

Second, Gary will provide details on our financial results and our outlook for the remainder of the year. Finally, I will return to discuss our four key strategic pillars for sustainable, long-term profit growth. Our team continues to work hard to transform the company as we strive to reach our full potential. Any transformation begins with a vision for what the company can be. For us, our vision is to deliver a truly exceptional experience for our guests and sustainable profit growth over the long term for our shareholders. The hard work is turning that vision into a reality.

Despite a challenging weather backdrop, we saw a solid growth trajectory in the second quarter and first half of the year. There are five items I would like to highlight that serve as indicators that our transformation is taking hold. First, our guests are responding favorably to the investments we have made in our parks,, in our new seasonal events, and in technology, including our new mobile app. Second, our season-pass sales trends continue to be strong. Year to date through July, our season pass unit sales have increased over 50% versus prior year including the newly released Six Flags Plus subscription offering.

After a slow start to our 2023 pass sale last fall, guests have responded favorably to our simplified product assortment and the compelling values that our season pass products offer. Third, our attendance trends continue to improve with attendance increasing 6% in the quarter and 4% year to date despite a cold and rainy first quarter in California, followed by heavy rainfall in the northeast and a record heat waves in the South in the second quarter. Fourth, our total guest per capita spending continues to be near record levels. As expected, our admissions per capita is down in the first half of the year as we scaled back our season pass pricing. However, we are pleased that our in-park per capita spending was only down 1% in the first half of the year and is up nearly 50% versus pre-pandemic levels. Our consumer appears to be healthy and is responding favorably to our enhanced in-park offerings and, in particular, to our revamped culinary lineup and food festivals. Our guests are spending more on food and beverage this year compared to last year, both in total units and average price paid.

Finally, I am proud to say that our team continues to stay focused on costs with our operating costs up less than 1% in the first half of the year despite inflationary pressures, as well as our investments in advertising and in the guest experience at our parks. We are still in the early stages of our transformation, but we are encouraged by the recent proof points that our strategy is working, and we are excited about the opportunity to take this company to the next level. Before turning it over to Gary, I would like to highlight an encouraging data point that speaks to the strength of our new business model. Adjusted EBITDA achieved by our North American operations, which excludes international licensing revenue, increased 16% in the first half of 2023 versus the same period in 2019. Said differently, we are performing better in the first half of this year on 32% less attendance. While many challenges lie ahead, we are encouraged by our year-to-date results, and we believe we have led laid the foundation for many years of organic earnings growth in a healthy and sustainable manner. Now, I would like to turn the call over to Gary to discuss the financial results for the quarter and our outlook for the remainder of the year.

Gary?

Gary Mick -- Chief Financial Officer

Thank you, Selim, and good morning, everyone. I will start with attendance, revenue, and per caps, then transition to expenses and EBITDA for the quarter and first half of the year. I will then move on to our active pass base metrics, select balance sheet items, and capital allocation. To close, I will provide additional clarity on what we expect for the second half of the year. For second-quarter 2023, total attendance was 7.1 million guests, a 6% increase from second-quarter 2022.

This attendance growth fell short of our expectations due to a challenging weather environment in the second quarter with unusually high rainfall in the Northeast, combined with a record heatwave in the South. Revenue in the quarter increased $8 million, or 2%, to $444 million. This was primarily the result of higher attendance, partially offset by a decrease in total guest spending per capita of $3, or 5%, versus second quarter of 2022. Admission spending per capita decreased $3, or 7%, and in-park spending per capita decreased less than $1, or 2%. The decrease in admission spending per capita was driven primarily by lower average season pass pricing in 2023 versus last year. As Selim mentioned, we have optimized our admissions pricing, which drove pass sales this year and had the expected result of modestly lowering per cap.

In-park spending per capita declined versus prior year due to the lower spend on parking, retail, and flash passes as a result of higher mix of season pass attendance in the second quarter of 2023 versus prior year. Due to the inclusion of parking and other benefits associated with passes, season pass guests generally spend less per visit on these items relative to single-day ticket guests. This decline was partially offset by higher food and beverage sales in the second quarter 2023 versus the prior year, which was largely fueled by our revamped culinary assortment as well as our exciting events and festival lineup. On the cost side, in the second quarter, we incurred $38 million related to an upward revision of our estimated liabilities for our self-insurance reserves, primarily associated with general liability claims, which is recorded in our SG&A. This adjustment is not the result of an increased volume of incidents but rather the broader impact of rising costs of claims driven by various inflationary factors, including increasing litigation and settlement costs being driven, in part, by a general trend of higher jury awards. This trend has been affecting many industries, leading to higher settlement amounts and more unpredictable claims outcome.

Our self-insurance reserves estimates are made utilizing our claims data history, actuarially determined estimates, and other qualitative considerations. As a result of the observed pattern of increasing litigation and settlement costs previously discussed, we performed an actuarial analysis during the second quarter, which resulted in the revision of certain key actuarial assumptions. We want to clarify that this change in accounting estimate relates to open claims associated with incidents that have occurred across multiple historical periods. For the purposes of reporting cash operating and SG&A expenses and adjusted EBITDA, We have excluded the $38 million associated with the change in estimate of our self-insurance reserves as we feel this is a better reflection of underlying operating performance in the current period and provides more meaningful comparisons to our historical results and to other companies in our industry.

Cash operating and SGA expenses were up less than 1% year over year. The impact of higher inflation and higher media spend was offset by our cost-saving initiatives and lower full-time headcount. Adjusted EBITDA for the quarter was $161 million, a $7 million increase, or 5%, compared to second-quarter 2022 driven by higher revenue. For the first half of 2023, our attendance increased by 4%, and our total guest spending per capita decreased by 3%, driving a 2% increase in our total revenue. Cash operating costs for the first half increased 2%, and adjusted EBITDA increased $6 million, or 5%.

As Selim mentioned, we have seen significant growth in our core North American parks compared to the first half of 2019. Adjusted EBITDA attributable to international licensing decreased $24 million from the first half of 2019 to the first half of 2023. The adjusted EBITDA achieved by our core North American operations increased $19 million, or 16%, in the first half of 2023 compared to the first half of 2019. Our active pass base as of July 2nd, 2023 comprised 4.6 million pass holders, which includes the new Six Flags Plus subscription program, representing an increase of 2% versus the same time last year. Deferred revenue as of July 2nd, 2023 was $177 million, up $6 million, or 3%, compared to the second quarter of 2022.

The increase is primarily due to the higher active pass base as of July 2nd, 2023. Total capital expenditures for the quarter was $42 million, an increase of $16 million compared to the second quarter of 2022. For the first half of 2023, capital expenditures was $67 million. We expect our full-year 2023 capital expenditures to be approximately $170 million to $180 million, which includes a mix of exciting new rides, continued infrastructure improvements, and implementation of guest-facing technology and amenities in our parks. Our expectation increased from a prior estimate of $150 million due to higher advanced spend on marketable capital planned for future years. We are also raising capex expectations in future years.

For 2024, capital expenditures are expected to range between $200 million and $220 million, and capex in 2025 is expected to be between $230 million and $250 million before returning to a long-term run rate of approximately 10% of revenue. We have exciting new rides in the pipeline, and we look forward to providing you an update in the near future. Our liquidity position as of July 2nd was $362 million. This included $310 million of available revolver capacity, net of $21 million of letters of credit, plus $52 million of cash. In the second quarter, we successfully increased our revolving credit facility from $350 million to $500 million, which provides us greater capacity and flexibility to pay down debt in the coming years. During the second quarter, we paid down 94 million in debt, and we have paid down an additional $50 million of debt since the end of the second quarter through today.

We will continue to use free cash flow to pay down debt and reduce net leverage toward our target of between three and four times. Before I turn it back over to Selim, I want to highlight a few items to help set expectations for the remainder of the year. First, we expect attendance to increase in the back half of the year driven by an easier attendance comp in the third quarter. July attendance increased 11% versus prior year. We expect total guest spending per capita to decrease year over year due to lower average season pass pricing -- prices in 2023 versus prior year, as well as to the slightly negative impact of higher season pass attendance mix on in-park spend. We expect cash operating costs for the full year to increase by approximately low to mid-single digits as we battle inflationary pressures while continuing to invest in the guest experience and advertising, partially offset by our cost reduction initiatives.

Due to the timing of advertising spend and expected attendance growth, the increase in expenses will likely be more pronounced in the third quarter. For the full year, we are currently tracking behind our previous expectations due to the challenging weather conditions experienced in the first half of the year. Looking ahead, our strategy is gaining traction, and we have many initiatives in place to drive earnings growth, which Selim will now discuss in more detail.

Selim Bassoul -- President and Chief Executive Officer

OK. Thank you, Gary. I would now like to review our four strategic pillars to drive long-term sustainable earnings growth, which are park experience, seasonal events, pricing and products, and organizational culture. First, park experience.

Over the last couple of years, we have made targeted investments in park amenities, beautification, technology, and new attractions, which have reshaped the look and feel of our parks, and our guests are responding positively. While we have made progress enhancing the guest experience, there is still much to do. Our digital transformation is at the core of Six Flags, providing a seamless guest experience. This is a pivotal year as we overhaul guest-oriented technology and elevate the guest experience to new heights. There are several developments I would like to highlight today.

First, we launched our new mobile app in June. We know the parks can be overwhelming at times, so the upgraded app helps guests better plan their day, effortlessly navigate the parks using 3D interactive maps and make mobile food ordering simple and easy. We are working on many other exciting developments for the app such as live ride wait times coming later this year, as well as many others we will be sharing in the near future. Second, we rolled out Six Pay, our new wristband payment technology, at several water parks, allowing our guests to conveniently purchase food and drinks without having their credit card or phone on them. We plan to expand Six Pay to all water parks by next season. Third, we are developing speedy parking, a new automated service at our toll plazas, providing a dedicated fast lane for pass holders to scan their passes to open the gate automatically.

Fourth, we are introducing self-service digital kiosks at many of our restaurants later this year. From my own experience in food service, these digital kiosks result in shorter queues and increase average orders through upselling and cross-selling. Fifth, we are introducing a new automated photo capture solution to provide personalized digital photography and ride videos. Capturing and sharing memories with loved ones is an important part of the Six Flags experience. We have partnered with a leading photography and video company to capture these moments throughout the parks and on the roller coasters.

We want our guests to remember the experience because remembered experiences make people want to repeat the experience. And we also want to enable our guests to easily share these memories with their friends on social media. Another area of focus for us is creating fun and memorable experiences for every member of the family to create multi-generational appeal. For parents and grandparents, our rest areas have been well received. The benches, shade areas, VIP lounges, and water park cabanas enhance the comfort at our parks and help reduce stress for families visiting with children. For younger children, we have introduced new kids' activities including pie-eating contest, water balloon challenges, and kids' rave parties, among other things. We have also installed theme park attractions specifically designed for smaller children, including family rides like Rookie Racer and Kid Flash Cosmic Coaster, as well as a new playground and play areas.

In our water parks, we installed new play structures, several new kids' slides, and larger thrill rides for older children like the new RipQurl Blaster. And for the teens and thrill seekers, we have an exciting lineup of marketable capital for 2024 and 2025, supported by our biggest investment in new rides and attraction in many years. Thrill rides is our DNA. We have significantly increased our capex investment this year and over the next couple of years in anticipation of multiple major ride introductions. And we will have exciting news to provide you in the coming weeks. Turning to seasonal events.

We have really upped our game with even -- with events this year, but we are just getting started. We recently introduced Flavors of the World, a new food festival with lively street markets and specialty food items like tandoori chicken skewers, pork bao buns, and steak frites au poutine to highlight just a few, and Summer Nights Spectacular, a celebration featuring live music, themed food items, and stunning fireworks and drone shows. This fall -- this fall, we are investing to enhance popular events that we introduced last year, including a bigger Oktoberfest and a more immersive kid-friendly Boo Fest. And of course, we are going to amp up our fan favorites like Fright Fest and Holiday in the Park. Exciting news for the horror enthusiast, we have partnered with horror movie franchises, The Conjuring and Saw, to develop new ghoulish haunted houses in select parks that are sure to be a hit with our thrill seekers. Already, social media is buzzing.

And we have some exciting new events to launch in 2024. Stay tuned. Third, pricing and product. We have simplified and optimized our admission pricing.

Restructuring our pricing model has been critical in driving an increase of pass sales this year. We launched our new Six Flags Plus in June. Six Flags Plus is a year-round subscription-style pass, offering a compelling low monthly payment with no down payment for our guests and has a high average admission per cap for Six Flags. In my conversation with our guests, they express overwhelming interest in the payment flexibility and benefits of our old membership program, and Six Flags Plus has been a huge success so far. We are currently testing dynamic pricing at several of our parks.

And while it is still very early, we believe it has the potential to further optimize our single-day ticket sales by adjusting daily pricing based on advanced demand signals. Despite our pricing actions over the past couple of years, our prices remain well below our peers. Over time, as we continue to enhance the guest experience, we expect to increase our prices to ensure they are in line with the industry and are commensurate with the value we deliver to our guests. Finally, organizational culture, very important to me and critical to our success.

We are leaner, more nimble, and we have removed unnecessary layers, which has created a culture of ownership among our team members. During my extensive visits to our parks, I interact with our front-line park employees who are friendly and frequently go beyond the call of duty to make their own kind of magic for our guests. They work each day to improve the guest experience with small gestures that bring smiles to our guests. I observed more and more families having fun with their kids and grandkids. I see teenagers celebrating with their friends. They were all drawn to our parks with people they cherish.

Ultimately, our success depend on our ability to delight our guests with unique and thrilling experiences they cannot get anywhere else. And our ability to deliver an exceptional guest experience will depend on the engagement, creativity, and collaboration of the talented people across our organizations. Following a year of transition, our strategy is beginning to take hold, and we believe we are now on a sustainable growth trajectory in our top and bottom line. We look forward to updating you on our progress as we strive to continue to improve the guest experience and to increase our profitability over time. Operator, at this point, would you please open the call for any questions?

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] The first question comes from James Hardiman with Citi. Please go ahead.

James Hardiman -- Citi -- Analyst

Hi. Good morning. Thanks for taking my call. I just wanted to follow up.

I think you said that, versus your previous expectations, you might be tracking a little bit behind. I think we had talked about an EBITDA number this year somewhere in the low $520 million range. Maybe if you can give us an update on that number. Do you still think you'll do north of -- of at least, call it, $500 million this year? And ultimately, how do you get there? Obviously the -- the algorithm previously was sort of double-digit attendance growth, a little bit of an offset from per caps. How are you thinking about those items?

Gary Mick -- Chief Financial Officer

Yeah, hi. Good morning, James. Great question. The question boils down to how much of the first-half weather impact we can make up in the second half, remaining six months of the year.

And at this stage, that certainly is still an unknown as it's hard to make up for the lost revenue in the first half. We have challenging targets in the second half, which is built into our original estimate of north of 520 million. Selim laid out a significant number of initiatives that we are all really aggressively working on to collect and see how much of that we can make up. At this stage, that is -- remains to be seen. It remains to be execution, and we -- we need to have fairly good weather, right, to -- to collect what was hampered by the weather in the first half. But I think we're somewhere in the range of, you know, 510.

James Hardiman -- Citi -- Analyst

510, OK, that's helpful. And then, you know, maybe along those same lines, if we could dig in a little bit more on July, I think you said July attendance was up 11%. Is there any way to think about sort of the revenue trend in July? I think versus -- versus the Street expectations per caps were lighter than we were anticipating. How much of that 11% was -- was eaten up by declining per caps? And as we go forward, do those comparisons get easier or tougher, right? So, if we're thinking about a plus 11 in July, all else equal, does that 11 get better or get worse from here?

Gary Mick -- Chief Financial Officer

Right, so July's per caps are going up against increased pricing in July of 2022. We increased our average prices on passes through August, which was our peak average monthly pricing for season passes. So, the per caps will-in terms of admissions will be a downward pressure on July, offsetting some of that 11% pickup in attendance. You know, so that's -- that's kind of where that stands.

James Hardiman -- Citi -- Analyst

OK, and just -- just to clarify, if I think about that, the downward pressure is -- does that indicate that the per cap decline in July was -- is likely to be greater than what we saw in 2Q?

Gary Mick -- Chief Financial Officer

Yeah, well, let's just do the quarter. The quarter per caps for Q3 would follow that general trend on admissions. So, you know, down one or two points on the admissions side. The in-park spend will make up some of that.

So, it'll be, Q3, I see the per capita is being down just a little bit more from Q2, again, that one-, two-point range.

James Hardiman -- Citi -- Analyst

OK. Got it.

Gary Mick -- Chief Financial Officer

And then, Q4 -- yeah, Q4 really changes the dynamic because the average pass pricing in Q4 and '22 came down quite a bit, and -- and we have a nice inflection point there.

James Hardiman -- Citi -- Analyst

Got it. So, Q3 per cap's somewhat worse than Q2 before we get somewhat better in Q4.

Gary Mick -- Chief Financial Officer

Right. Yeah, Q4 changes the trajectory.

James Hardiman -- Citi -- Analyst

Got it. Very helpful. Thank you, Gary.

Gary Mick -- Chief Financial Officer

You bet.

Operator

The next question comes from Steve Wieczynski with Stifel. Please go ahead.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Yeah, hey, guys, good morning. So, to follow up on -- on James' question, as we think about, obviously, weather was extremely impactful through the -- through the second quarter. I don't know if you guys have an estimate of what you think the actual, you know, impact was. Or was it just so extreme that it's -- it's kind of tough? And given the mix with passes and whatnot, it's kind of tough to -- to really kind of gauge what attendance would have looked like? Or saying that a different way, I mean, if weather -- you know, the days when weather has been normalized, has attendance essentially met or exceeded your -- your expectations?

Gary Mick -- Chief Financial Officer

Yeah, good morning, Steve. The -- the weather heads that -- the weather impact on our -- on our Q2 really feels like somewhere between five and six points of lost attendance. So, you know, that's -- that's kind of where we -- we see that playing out. In terms of when we have a good day versus, you know, a bad weather day, the attendance lift is notable, it's exactly where we are or even exceeds our expectations.

So, you know, we -- we use that certainly, and the season pass sales up 50% year to date, really give us some -- some guidance as to the second half attendance lift. On good days, we do well.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

So, if I'm to make that clear, so second-quarter attendance was up a little over 6%. You guys would have -- you guys think it would have been more in that, you know, call it, 10% to 11% range, is that right?

Gary Mick -- Chief Financial Officer

That's correct, exactly.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

So, that would mean that -- that would essentially still mean if you got to normalize, that you guys still would be on that pace for that double-digit increase in attendance for the full year?

Gary Mick -- Chief Financial Officer

Yes. Yes, absolutely.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK. Just want to make sure that I understood that right. OK, second question. This is probably for you, Selim.

But as we think about the -- you know, the increase in expected -- your expected capital expenditures moving forward, just to understand, you know, why those might be so elevated moving forward. I mean, is this -- you talked about the rides. So, is this more ride-related things? Or, Selim, as you've dug into the parks, are there -- there are just more overall improvements that need to be made at this point versus what you were previously expecting, I mean, in order for you to -- to really get the pricing where you want it to be over time?

Selim Bassoul -- President and Chief Executive Officer

That's a great -- Steve, that's a great question. First of all, our DNA at the end is -- is thrill rides, and we have to go back and reinvest in rides. So, in the last -- most probably first two years of my tenure, which is last year and this year, we've been very focused on premiumization and beautification. And I would say one of the reasons that -- I'm going to divert -- digress a little bit. One of the reasons that July was good for us despite the weather is the investment we've made in, most probably, putting more shades -- shaded structures, putting on more cooling systems, misting -- misters and splash zones, and doing those air-conditioned areas like VIP lounges and others.

So, those were most probably where we are today. Going into '24 and '25, we're going back to putting new rides in. So, a lot of our capex will be on exciting rides that gives us thrills. We need to go back, and we're retiring a bunch of rides that have high maintenance and then we're replacing them with very exciting, thrilling rides.

State-of-the-art, new rides, we're putting a lot of money into this. Second, I could tell you the other thing we need to discuss is our ride downtime. And part of addressing the ride downtime is going back and looking at resolving issues and maintenance and upgrading maybe trains in making sure that our parts are fully stocked to make sure that we are always predicting and making sure that we're predicting our maintenance and making sure it's all right up. So, it's a combination of maintenance, but it's not the biggest part. The biggest part is the thrill ride.

We're having a lot of thrill ride expenditures.

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

OK, got you. Thanks so much for the color. I appreciate it.

Operator

The next question comes from Thomas Yeh with Morgan Stanley. Please go ahead.

Thomas Yeh -- Morgan Stanley -- Analyst

Thanks so much. So, the acceleration in seasons pass product adoption from up 2% at the end of June to 50 in July, that seems to get you pretty close on an overall season pass base to not so far off from where 2019 levels were. It sounds like the price changes you've made incrementally is the right place to be, is kind of that the right way to think about it? And on an admission pricing, on an apples-to-apples basis, do you think you can kind of grow this from here?

Gary Mick -- Chief Financial Officer

Yeah, good morning, Thomas. Good question. Our season pass lift in the first quarter year to date -- so, we're using year to date. So, from January to, you know, the March is -- that's right, April, thank you, Evan, was up about 100%, and year to date, it's up 50.

I think that's the right -- the right metric, and hopefully, I've answered your question in that regard. Looking at the pricing, we definitely have optimized our season pass pricing and look at that going forward. Six Plus has been a really strong success, as Selim indicated. And going forward from fourth quarter on, we have the opportunity to gently lift season pass pricing over prior year.

Thomas Yeh -- Morgan Stanley -- Analyst

OK, that's super helpful.

Evan Bertrand -- Vice President, Investor Relations and Treasurer

I just want to further clarify that the 2% you're referring to is actually the active pass base which is up, year over year, 2% as of June. And Gary was talking about the sales of season pass units.

Thomas Yeh -- Morgan Stanley -- Analyst

Understood. OK, that's super helpful. And then, just another one on the cost control side, where are you finding the most efficiencies? I think you mentioned that inflation is still working against you, and there's plans to lean a little bit more into media spending, just -- just given some of the attractions coming online. Is there still room for more headcount reduction just as the attendance base optimizes?

Gary Mick -- Chief Financial Officer

We're having success in procurement. We're doing a nice job there working with our suppliers. We have reduced our full-time headcount, but we don't have significant initiatives in that regard going forward. But our parks are continued to improve their operational efficiencies, and that's where we're seeing our biggest lift in the cost reduction side.

Selim Bassoul -- President and Chief Executive Officer

I would like to add also that our procurement has been very very good. We have done a great job in supply chain, and this is -- continues to be something you want to push. I also believe that we have continued to lower some of the headcount through automation and rationalizing our F&B locations.

Gary Mick -- Chief Financial Officer

Oh, yeah. Thank you, Selim. Absolutely.

Thomas Yeh -- Morgan Stanley -- Analyst

Got it. Thank you.

Operator

The next question comes from Ian Zaffino with Oppenheimer. Please go ahead.

Ian Zaffino -- Oppenheimer and Company -- Analyst

OK, great. Thank you very much. You know, as far as the weather comments you made, have you seen any -- or have you taken any actions regarding the weather, whether it's on pricing, more marketing, etc.? And actually, what's kind of your philosophy on pricing in kind of poor weather periods? And then, I don't know if you commented at all on -- on July heat and how that was impacting the parks. Thanks.

Gary Mick -- Chief Financial Officer

Yeah, you bet, Ian, and good morning. So, the -- the challenge is we -- we have -- there is -- Ian, I'm sorry, what was your question again? Forgive me.

Ian Zaffino -- Oppenheimer and Company -- Analyst

So, it was basically what's your philosophy as far as pricing actions, marketing actions in poor weather periods? 

Gary Mick -- Chief Financial Officer

Yeah, thank you. 

Ian Zaffino -- Oppenheimer and Company -- Analyst

And then also, July heat and August heat, yeah.

Gary Mick -- Chief Financial Officer

Right. So, one of the things we -- we have had success with, and it's still early in the stages, is dynamic pricing. And we had started with three parks and we've expanded it to six. So, that it actually -- dynamic pricing, in its own way, acts as a weather hedge, which is pretty nice.

And the next fairly significant step we need to do is increase the active pass base, right? So, a larger active pass base also is a nice weather hedge. So, we are, you know, spending more on media and -- in the third and fourth quarters, and we're going after, you know, a good sale at the end of August and into Labor Day weekend. And fundamentally, as the weather is -- continues to be hotter every year, it seems at least it feels that way to me, we are going to be looking at more indoor venues, more air-conditioned venues, more air-conditioned restaurants, etc., so that our guests -- and, Selim, you talked about shade.

Selim Bassoul -- President and Chief Executive Officer

Yeah.

Gary Mick -- Chief Financial Officer

And you talked about the benches and the tree --

Selim Bassoul -- President and Chief Executive Officer

Yeah, the lounges.

Gary Mick -- Chief Financial Officer

Lounges. And the gaming is actually a pretty nice initiative in that regard too because, you know, it provides a very nice cool environment and a whole another product and marketing initiative that we have. So, we're looking at more indoor venues and continued effort on shade and misting equipment, etc.

Selim Bassoul -- President and Chief Executive Officer

I would also bring up something. I think that, most probably, something different than most of our other peers is our memberships. I think our membership allow -- allow us to counter weather effects because when you look at membership which happens, we have been able to -- still be able to sell membership whether the weather is whatever the weather is happening. And this has been validated in June, July since we launched our Six Plus -- Six Flags Plus membership. So, we see that as somewhat of a hedge in terms of continuing selling passes and offsetting some of single-day ticket impact during those days.

Ian Zaffino -- Oppenheimer and Company -- Analyst

OK, thank you. And then, you know, can you also maybe comment on how the parks -- the ex-U.S. parks did? And any potential for, you know, additional parks outside of the U.S.? Thanks.

Gary Mick -- Chief Financial Officer

Ian, what -- can you clarify what do you mean U.S. parks did?

Ian Zaffino -- Oppenheimer and Company -- Analyst

The non-U.S. parks. How did Mexico do I guess, in particular, just given that there's probably less weather issues there? And then, the second piece would be any discussions, or are you doing anything as far as developing or thinking about any new parks internationally?

Gary Mick -- Chief Financial Officer

I'll answer the first part of the question, I'll let Selim talk about if we have any additional opportunities internationally. We don't allocate out our international parks in a specific way, Ian, but Mexico is still doing very very well. So, Selim, next question for you was, do we have any additional international opportunities?

Selim Bassoul -- President and Chief Executive Officer

Yes, we are working on our project in Saudi Arabia, which is due to open in the fall of 2024, and it's still being built. And at this moment, we are acting as a license sort of Six Flags to them. And we're, at this moment, waiting for the project to be -- to be working, open. So, we are at the last stage of it with our team working along with the Qiddiya team in Saudi Arabia, and we're very excited about that project. So, more to come most probably in 2024.

Ian Zaffino -- Oppenheimer and Company -- Analyst

All right. Thank you very much.

Selim Bassoul -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from David Katz with Jefferies. Please go ahead.

David Katz -- Jefferies -- Analyst

Hi. Good morning, everyone. Thanks for taking my question. I'd love just a little further perspective.

In view of the increased spending for next year and the year after, is it -- is it possible or fair for us to think about, you know, EBITDA lifting along the way? I'm just trying to envision the capital setup, you know, as we move into that -- that spending period the next couple of years.

Selim Bassoul -- President and Chief Executive Officer

I can answer. It's Selim. I think, David, we've done a lot of work on the cost discipline and allowed us also to invest in the guest experience while still eliminating inefficiencies that are costly to the business. We are also looking at data and predictive analytics to reduce labor costs and implement process improvement without negatively impacting the guest experience. I think we are investing also in technology and automation to reduce operating expenses.

So, capex on infrastructure and replacing inefficient rides will also reduce expenses. Those rides have high maintenance. So, my feeling is operating leverage efficiency, as attendance grows to target levels, will allow us to increase margin over time. So, I believe we can grow margin into the mid-40%, long range, paying term, and that's our objective.

Gary Mick -- Chief Financial Officer

Right. Modified.

Selim Bassoul -- President and Chief Executive Officer

Huh?

Gary Mick -- Chief Financial Officer

Modified.

Selim Bassoul -- President and Chief Executive Officer

OK, modified EBITDA in the mid-40 % in the long term.

David Katz -- Jefferies -- Analyst

Understood, but -- but, you know, in part, I suppose, of that formula, you know, is there a potential for revenue lift along the way as well too, and driving that EBITDA? Or does that, you know, capex necessarily need to be -- need to be in place before the revenue lift can occur also?

Gary Mick -- Chief Financial Officer

So, David, a fair number of our installations this year in '23 have been delayed in their installation construction progress. And so, those are going to hit at the second half of this year, and into '24, will have the full impact. So, between that and what we're doing for '24 and we're going to -- we have a better execution plan on installing the '24 rides, and we have a little more time to plan and get it done. So, the two are going to actually work simultaneously together to provide a really nice package improvement for our guests. And I do believe we can increase revenue on our [Inaudible].

Selim Bassoul -- President and Chief Executive Officer

I will -- I would like to -- to most probably add a little bit more flavor on that. I think -- on one end, I think we've seen that our pricing structure that we've started in the fall has started to pay off with the season pass increases we've had. So, let's put basically admission on one side. Let's talk about the in-park. I believe that our biggest opportunity to monetize in in-park goes into two areas.

F&B, which remains, in my opinion, at this moment, in maybe 20% of our penetration. And I would like to see that a third of our revenues, and I think we have a lot of things going there. Number one is mobile food ordering like in -- would be self-serving kiosk, making sure that our seasonal events that have basically upped our per cap this year when they are done well, events done well, have upped our per cap. Then on the retail side, I think the retail is our biggest -- second-biggest opportunity. We need to -- we are putting a complete retail strategy to improve our sales in that area.

And finally, I would add a third one, group sales. I would say, when it comes to group sales, I think we have huge opportunities to -- to continue to grow that opportunity. We continue to be below pre-pandemic levels, and we are in line with what we saw last year, but we have not gotten to pre-pandemic levels. So, we're putting a strategy to grow our group business, and we feel better by engaging local businesses to come and experience our parks. So, three initiatives that I see driving a big part of our EBITDA margins: F&B, retail, and group sales.

David Katz -- Jefferies -- Analyst

Got it. Thank you very much.

Selim Bassoul -- President and Chief Executive Officer

Thank you, David.

Operator

The next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.

Lizzie Dove -- Goldman Sachs -- Analyst

Hi there. Thank you for taking my question. I just wanted to ask bigger picture. You've been working through the premiumization strategy.

I think your goal was to get to that 25 million to 27 million level of attendance over time. Clearly, it's been tough with the weather. There's been some commentary about weaker per cap, perhaps not just from you but the other regionals, even Disney last night. You know, we're in a different world today. Has anything changed about your kind of pricing versus attendance formula going forward? Or do you think those are still the kind of right puts and takes and levels going forward?

Gary Mick -- Chief Financial Officer

Hi. Good morning, Lizzie. Thank you. Good question.

I think we have a powerful opportunity to show the viability and future opportunity of this strategy that we are executing upon. And, you know, when you look at pulling out the -- the international licensing and that we've exceeded 2019 EBITDA in the first half by 16%, it really gives us a base from which to launch from. And as the season pass pricing in '22 comes down in the last four months of the year, we cross over and we start having increased average season best pricing on a monthly basis going forward. You combine the capital into that, this marketable capital that -- but we're going to have some exciting announcements in the next couple of weeks -- and you have the cost structure reset, you put those all together, and we really think we have an ability to capture future attendance. And the enhanced value will be perceived by our guests, and we'll have in-park spend, and -- and we eventually can get there.

So, when it happens is -- is a basis of execution and time, but we firmly believe we're on the right path.

Lizzie Dove -- Goldman Sachs -- Analyst

Thank you.

Operator

The next question comes from Robert Aurand with KeyBanc Capital Markets. Please go ahead.

Robert Aurand -- KeyBanc Capital Markets -- Analyst

Hi. Thank you. I guess following up on that last question on the longer-term outlook, you know, in the past, you've talked about that as kind of a three-year turnaround. You know, understanding kind of the speed bumps of this year, is that three-year target still intact, or do you see it getting pushed out at all?

Selim Bassoul -- President and Chief Executive Officer

I would still say that the three-year target is -- I talked about I extended it, if you remember, last year to end of 2025. So, if you remember, I said that the target is most probably will -- we'll try to achieve our target of being close to 700 million in EBITDA by end of 2025. And we're still looking at that as a target for us, yes.

Robert Aurand -- KeyBanc Capital Markets -- Analyst

All right, thank you. And then, maybe a higher-level question around the new membership program. I know you had said last call that that was the No. 1 question you were getting from people was to bring back the membership.

Now you've brought it back, this kind of a one-size-fits-all option where, before, you had many different memberships. So, understand the simplification on your end, but how does that kind of sit with the consumer now just kind of having the one option to choose from?

Selim Bassoul -- President and Chief Executive Officer

Well, I can answer that. Guests have responded very positively to the release of our new Six Flags Plus. So, we started it in early June. We are seeing a similar mix in sales of Six Flags Plus product versus the traditional seasonal pass that we had in prior years.

About a third -- similar to what the legacy membership used to be in the past, a third of our sales are coming from membership right now, and we just started selling them in June. So, it will take time to rebuild that base. Now, we should not forget that we grandfathered the membership program, the old Legacy Membership. So, I think I will be able to give you a lot more color on Six Flags Plus is most probably in the first quarter of 2024.

Robert Aurand -- KeyBanc Capital Markets -- Analyst

Interesting. 

Selim Bassoul -- President and Chief Executive Officer

Good -- good -- good results so far in the first 40 days -- 45 days.

Robert Aurand -- KeyBanc Capital Markets -- Analyst

Perfect. Thank you very much for taking my questions.

Selim Bassoul -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from Barton Crockett with Rosenblatt. Please go ahead. Hi, it's.

Barton Crockett -- Rosenblatt Securities -- Analyst

Hi, it's Barton Crockett, and thanks for taking the question. And I just wanted to drill in a little bit more on July. And I think the question was put out there, but I'm not sure I heard it answered, which is, was the weather in July, when you guys had this nice kind of acceleration, was weather better, was that part of what helped? How would you describe the weather backdrop in July?

Gary Mick -- Chief Financial Officer

It -- for -- from my perspective, Barton, it was -- it was better but not -- not great. And I think there's more upside to that 11% with normalized weather.

Barton Crockett -- Rosenblatt Securities -- Analyst

OK. And then, also leaning into the capex plans. I think you guys has recently, like in your March earnings call, for the fourth quarter, we're talking to a range of like 150 to 200. And now, you're up to, like, 250, at the high end for capex in '24 and '25.

Can you walk us through the process that got you to decide that you need to spend more in that period with a decision that you need to just -- and, you know, also, it seems like the tone of what you're talking about with the capex, I mean, when you started, you were talking about less emphasis on the rides and more on kind of just a comfortable kind of, you know, amenities and the benches. And now, it's more kind of on the slow rides. So, just walk us through kind of, you know, the process and then what's changed in these intervening months to get you from where you were to where you are?

Gary Mick -- Chief Financial Officer

Yeah, thank you, Barton. Good -- good question. The -- the lift in '24 was somewhat related to we have a 50th anniversary coming up at our park in New Jersey, and we had an opportunity to add a nice ride kind of late in the game. And that's -- that's a little bit rare because it takes generally a while to design and build a coaster. So, we had a fortunate opportunity, and we decided to take it.

So, that's -- that's the lift versus what we had expected to spend in the short run. In the long run, we're looking at all aspects of the capex. And Selim laid that out fairly well in a couple of questions ago. We -- we want -- the focus is eliminating ride downtime, and sometimes, that's maintenance and new trains and -- and new parts and all that sort of thing. And sometimes, it's replacing an aging ride.

So, we look at that very closely. And, you know, we're also really trying to enhance the customer experience through the capex investment. And we feel that it will really bring additional attendants and revenue and excitement and, ultimately, bottom-line profits to our investors and shareholders.

Barton Crockett -- Rosenblatt Securities -- Analyst

So, it sounds like you just leaned into it more, and you decided that this was the number that made more sense at the time.

Gary Mick -- Chief Financial Officer

And -- and, you know, in looking at the ride package, which we will announce over time, the -- as Selim mentioned, there's -- some of the rides are state of the art, and state of the art is generally expensive. So, as we look into it and we say, yes, that's a great ride; yes, it fits in that park; yes, it's the right metric; yes, it's the right dynamic; and wow, OK, that's what it costs, all right. And, you know, we all agreed that was the right thing to do.

Barton Crockett -- Rosenblatt Securities -- Analyst

OK, thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Selim Bassoul for any closing remarks.

Selim Bassoul -- President and Chief Executive Officer

Thank you very much. First, I want to thank everybody for all your questions and your interest in Six Flags. I would like to recap my talking points with a -- with a concluding statement. Six Flags has a strong position with a very attractive industry.

We talked about our four strategic pillars, our park experience, our culture of pricing and products, our seasonal events. When you look at all what has been accomplished in the last 20 months since I took over as CEO, We have basically implemented a lot of new items from doing our events better and stronger and new and immersive, like scream -- scream -- Scream Break, like Flavors of the World, like Summer Nights Spectacular, including fireworks, and drone shows, parades, Gaming Fest. And now, we're enhancing what we started last year, new Oktoberfest brew fest. And then, we're expanding on the best Halloween event in the world, Fright Fest, and -- and then HIP, Holiday in the Parl.

Through our park experiences and the improvement in our premiumization, we see improvement in pass sales: 50% year to date through July; attendance, 6% in Q2. Our F&B is up despite poor weather. We lost, in 2Q, almost 400,000 in attendance. In our pricing product, we launched again as we listened to our guests asking us to bring back a monthly -- a low monthly payment with. With no down payment, we launched Six Flags Plus which, so far, in the first 45 days, have been very well received. Our culture have changed.

Innovation now with our -- is our core. We have a lot of digital transformation which has become seamless to our people, and we could not have done that without the hard work of our team member. Our parks have become friendlier, cleaner, and a lot more smiles. Our seasonal worker and our front-line employees at our parks have embraced the vision and embraced the fact that we want to be easier to do business with. I applaud each one of them.

We are seeing promising trends despite weather challenges. Again, strong pass sales, 50% year over year through July; attendance trends are improving, Q2, 6%, July, 11%; improving F&B, Improving sponsorship sales; our digital transformation, driving our guest experience and lowering our costs.; our ability to now capture memories through videos and photos using artificial intelligence and be able to capture people on the rides as they are riding our coasters; self-serving kiosks; speedy parking; waterpark wristbands, a new mobile app; and a new website, all of those have happened at a fast speed of execution. Kudos to all our teams. We've gone to multigenerational appeal.

We want to be able to appeal to kids activities, kids rides, and play structure; comfort and shaded area and VIP lounges for parents and grandparents; thrill rides and new haunted houses for our thrill seekers and teens. And then, we want to capture all of this on video and picture, and they can stream them all day long, immersion. I believe that remembered experience bring repeated visits. We -- we want to engage all of our senses.

Our guests now want to go and experience our Dino Adventure, our Screampunk, as we expand them throughout all our parks. We have exciting new revenue initiatives, dynamic pricing, increasing mobile food ordering, seasonal events, and e-gaming. On our cost control, we continue to be driven by cost discipline, automation, reduced downtime, procurement, committed to deleverage -- deleveraging our debt. We look at the target of 2.5 to three times long-term net leverage target.

We paid $94 million down in Q2, with an additional $50 million paid down through today, almost $150 million paid since the beginning of Q2. Our second-half expectation, low to mid percentage per cap decline; active pass headwinds; more media to -- to launch our fall promotion. Remember, last year, we did not have a good fall sale. So, now, we're trying to put media behind it and go back to a -- to having a good fall sale promotion.

Our capex of $170 million to $180 million. Now, we do not give EBITDA guidance, but do we expect to make -- we do not expect to make up weather-related losses. Our ultimate strategy is focused on delighting our guests. I have spent enough time analyzing our offerings and operations, traveling around our parks to observe guest behaviors, and talking to our friends, to our fans to uncover hidden opportunities.

You did hear today on how we are innovating across every part of our business from culture, digital training, revenue management, guest-facing technologies, immersive experiences, rides, beautification, food service, retail, and much more. Success requires not just leveraging your strengths but also taking risks, overcoming challenges and learning from failure, evolving your vision, and sometimes reinventing yourself. That is true for both our organization and our leadership. We are excited about our momentum. On behalf of the Six Flags team, we appreciate your continued support and the support of our shareholders and investors, our guests and fans, our suppliers, our bankers, and most importantly, the support of our team and our employees who, without them, nothing could have happened.

We have many exciting events lined -- lined up for the second half of the season, including Fright Fest, Kids Boo Fest, Oktoberfest, and Holiday in the Park. We still have 40% of our revenues coming still so far, and we hope to see you at all those events this year. Have a great day, and look forward to speaking with you next quarter. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Evan Bertrand -- Vice President, Investor Relations and Treasurer

Selim Bassoul -- President and Chief Executive Officer

Gary Mick -- Chief Financial Officer

James Hardiman -- Citi -- Analyst

Steve Wieczynski -- Stifel Financial Corp. -- Analyst

Thomas Yeh -- Morgan Stanley -- Analyst

Ian Zaffino -- Oppenheimer and Company -- Analyst

David Katz -- Jefferies -- Analyst

Lizzie Dove -- Goldman Sachs -- Analyst

Robert Aurand -- KeyBanc Capital Markets -- Analyst

Barton Crockett -- Rosenblatt Securities -- Analyst

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