But first, taking a look at the headline numbers, SIX posted EPS of $2.16, missing the consensus expectation by $0.16. Adjusted EBITDA, which is a key metric for SIX, did increase by 2% to $306.7 mln, but as a percentage of revenue, it dipped to 48.3% from 51.8% in the year ago period.
On the top line, revenue grew by 7% to $620 mln, but it also came up well short of the $635.5 mln estimate. The increase was driven by a 5% increase in attendance to 13.6 mln guests, as well as an $11 mln (42%) jump in international licensing revenue. One of the company's primary growth strategies is to expand international licensing, and it has accomplished this via the addition of 11 new parks in China. SIX doesn't operate these parks; rather, it licenses out the Six Flags brand and collects royalty revenue. The concept here is two-fold: 1) stronger international presence can lessen the seasonality of its business, and, 2) this licensing strategy can enhance margins while lowering cost structure.
Another positive is that the average selling price of its new membership program is more than 25% higher than its traditional memberships, and its active membership base has increased by more than 25% year/year. The company noted that within its Active Pass Base, which tallies the total number of guests enrolled in one of its membership tiers as well as those with season passes, the mix of memberships, the higher revenue category, increased significantly due to the roll-out of a premium-tiered membership program. Additionally, it has successfully expanded its all-season dining program; as of the end of the third quarter, it counted more than 1 mln active dining passes. Consequently, its deferred revenue climbed by 8% to almost $200 mln, the highest Q3 balance it has ever achieved.
That's the good news. The not so good news is that unfavorable weather kept a lid on attendance. While attendance was up 5% in the quarter, this was mostly driven by newly acquired parks as well as the full year operation of two other water parks it acquired last year. So excluding newly acquired parks, attendance likely would have been in negative territory.
To put this headwind into further context, its CEO said this during the conference call this morning: "Without any doubt, this is the worst third-quarter weather we had experienced since I came to the company nine seasons ago." While there wasn't a major hurricane event, as there was during last year's Q3, sustained rain on the East coast, combined with heat and rain in Texas, kept hundreds of thousands of people away from the parks, according to SIX.
Another drag for SIX was that cash operating costs were up 14% due to its five newly acquired parks -- each of which have substantially lower margins that its existing parks. As some may recall, this past May SIX acquired five North American parks from Premier Parks, namely Wet n' Wild Splashtown in Houston; Wet n' Wild Phoenix; Darien Lake near Buffalo, New York; Frontier City in Oklahoma City; and White Water Bay, near Frontier City. With these new parks contributing a higher percentage of revenue in Q3, SIX's margins were negatively impacted. This factor, on top of the weaker-than-expected attendance, had a major impact on the company’s Q3 bottom line performance.
Looking ahead, SIX is confident that it can rebound and deliver a strong Q4. It believes this for several reasons, including the fact that it grew its active membership base while also implementing price increases. Furthermore, its Mexico parks have now fully recovered from last year's earthquake and are poised for solid growth in the quarter.
To conclude, it was a rough quarter for SIX as the company was hit by one factor that is out of its control (weather), and one that is (lower margins from newly acquired parks). Still, SIX does have a few growth catalysts ahead in the form of rising ticket prices and a growing membership base, the possible acquisition of more parks, and rapidly growing international licensing revenue.