Six Flags (NYSE:SIX) operates 20 theme parks in the United States, Mexico, and Canada while licensing others around the world. The company's parks are thrill-ride based, and that has worked well for the business, which posted solid gains for the first half of 2018.

In this Industry Focus discussion, Vincent Shen and Motley Fool contributor Daniel Kline look at how season passes previously drove the ticketing strategy for the company and how that's changing. They also shed light on the growing opportunity presented by international "franchises".

A full transcript follows the video.

This video was recorded on Aug. 14, 2018.

Vincent Shen: Six Flags, ticker SIX. The company operates 20 parks across the U.S., Mexico, and Canada, not to mention licensing deals for parks in China, Dubai, and Saudi Arabia, some of those being relatively recent. Revenue in line with competitors, just over $1.4 billion for the trailing 12-month period.

When I think about an amusement park, or when I picture one, I definitely think Six Flags, having grown up about half an hour away from Six Flags Great Adventure New Jersey. This is my rare opportunity to brag about New Jersey, because that park is still home of the tallest roller coaster in the world at 456 feet, and also the second fastest. It's a pretty incredible experience, going from 0 to 120 miles per hour in less than four seconds. I highly recommend that if you're in the area, you check out Great Adventure, the roller coaster is called Kingda Ka.

For the company's performance, it also reported results recently. Can you walk us through some of that, and recent initiatives that stood out to you?

Dan Kline: This was absolutely stunning to me. I remember when Six Flags was struggling, its advertising wasn't connecting. But the company has actually had eight years, and expects to have nine years, of growth. It was a little bit tricky to look at its earnings from the last six months, because overall, sales are up, and attendance is up, but, they bought rights to five parks. When you take those five new parks in, spending per customer was actually 2% down. It's a little bit wonky that, if you take those results out, spending was up.

Six Flags has the clearest strategy, in terms of, you know what it is. I don't think there are too many Americans who have seen a Coke can or television commercial for Six Flags that don't understand this is a rollercoaster-based thrill park that also has some kiddie rides and traditional fair elements, cotton candy and funnel cake, that kind of thing.

Their strategy with their annual passes has been very smart. They use different pricing, different passes, to get you from your park that's 30 minutes from your house to the park that's two hours away, maybe even to the big parks, the ones that are a bit of travel. They work really hard at building that audience. They start at a pretty low price point. I know in Connecticut, I could get a Six Flags annual pass, if I watch for the deals -- which were usually on Coke cans, which is why I mentioned that -- for $69-79. Their goal is to get you in the door and get you spending money.

Shen: I absolutely remember the time when, as a kid, I was hunting for Coke cans to get a 50% discount on entry for the one-day ticket sales. You mentioned eight or nine years of consecutive strong results. That really coincides with how season passes have driven the attendance strategy at Six Flags starting in 2010. That's evolving now even further as we look out beyond 2018. There's a great quote from CFO Marshall Barber, he breaks down the company's thinking on its memberships for season passes. We're going to talk about that a little bit more. He said, "The base membership is, say, around $8 a month. For an extra $2, you can get unlimited drinks. For an extra $3, you can get a front of the line pass every time you visit and preferred parking. Then, for an extra $6, you can get two front of the line passes, preferred parking, discounts on spending in-park. What we've found is that we're pretty confident we can get people into the membership program, and we have. We've been very pleased with that. We are very pleasantly surprised at how many people would move into those upper tiers." At highest tier, you're paying $230 a year, vs. $70 for a season pass. "We think this movement to membership is really the next progression on how we sell tickets to our customers, and I think that will be as impactful as the season pass was."

Season pass penetration for unique visitors is currently around 40%, while the one-day tickets sit at 60%. With the ongoing membership, where, in this case, it's kind of like a Netflix -style business model, where you buy into a certain tier for whatever perks you want. The big thing here is, management mentions that the benefits of this membership style ticket strategy is, you don't have to resell the season pass holders each year. The churn can be really bad with renewal rates, as low as 25%. Given the adoption that they've seen at some of the higher-priced tiers for these memberships, that's another boon in terms of what they're seeing in revenue per customer.

Kline: It becomes an auto-pay. That's all of my passes. There are better terms for Florida residents, but all the theme parks down here offer the ability to either pay a deposit and pay for 12 months, and when renewal time comes up, there's usually a deal. They might give you 20% off, 90 days free, whatever it is. In general, it's such a relatively low amount per month -- even my Disney passes for my son and I, it's $40 a month or something for the two of us. It's not that big of an expense. When you look at it, you're just not going to get rid of it. It becomes like a gym. Even if you haven't been to Six Flags in six months, mentally, you remember how much fun you used to have there, so you promise yourself you're going to again and it'll be worth it next year.

All those little add-ons that can now be controlled via web or app make it so much easier. It used to be, you had to wait in a line to get a bracelet for the all-day dining or free drinks or parking or whatever it was. Now, it can all be done through your membership card, through the app. It's become a really easy way to spend. I fall for the $14.99 all you can drink cup every time, and then feel like it's a game of how much soda we can drink in a five-hour visit.

Shen: [laughs] Not the healthiest thing there, Dan.

Kline: [laughs] My son got mad when I got a Powerade once. We have to stick to soda.

Shen: Closing out, in terms of the memberships, what that ultimately amounts to, management said the lifetime value for its members is as high as 3X that of its season pass holders. The company pinned its membership base at over two million during the last earnings call. Definitely something to track going forward.

The last thing I'll mention for Six Flags is, there's been a flurry of licensing agreements in markets like China, Dubai, and Saudi Arabia, that have been announced over the past couple of years. This is an interesting revenue stream for theme park companies that we haven't gone into as much yet. For Six Flags, the company doesn't put in any capital to develop the park. Instead, it initially gets fees for design and development, and once the park opens, Six Flags also gets a percentage of revenue for use of its brand and the management services. This is very similar to a fast food franchise model.

Kline: I like this model, because if you follow the theme park world, as I do, there's probably an oversaturation point. China and Dubai and the United Arab Emirates and all of these places that are building these massive areas that have 10, 12, 15, whatever it is different theme parks. And some of them are working, and some of them are not. If you're Six Flags, you're giving them proven concepts. They don't have to develop a new roller coaster, they don't have to come up with a new ride queue or pass system or any of that. And there's absolutely no risk on your part. If 75% of these parks work and 25% don't, it doesn't really hurt your brand.

Daniel B. Kline has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.