Ford (F) earnings Q1 2021

Jim Farley, Ford CEO, takes off his mask at the Ford Built for America event at Ford’s Dearborn Truck Plant on September 17, 2020 in Dearborn, Michigan.

Nic Antaya | Getty Images

DETROIT – Ford engine is expected to post a profit for the first quarter on Wednesday despite continued earnings Shortage of semiconductor chips This has depleted vehicle inventories and caused the company to close some of its factories.

Here’s what Wall Street expects, based on the average analyst estimates produced by Refinitiv:

  • Adjusted earnings: 21 cents per share
  • Revenue: $ 32.23 billion

While Wall Street will watch Ford’s profits, it will be more interested in a change in company policy for 2021 due to the shortage of chips.

Ford previously expected the parts problem could cut its profits by $ 1 billion to $ 2.5 billion in 2021. Without releasing any new guidance, the company said last month it would “provide an update on the financial impact of the semiconductor shortage” when it reports its first quarter results.

On a more positive note, the lower inventory levels and lack of production have resulted in higher profits per vehicle for automakers.

Wall Street is looking for any, too additional business changes from Ford CEO Jim Farley, who replaced Jim Hackett effective October 1, and any updates to the company’s electric vehicle plans.

Ford announced on Tuesday that it will produce “sometime” own batteries and battery cells. However, the company declined to discuss a timetable for this. In November, Farley said Ford was “absolutely” keen to see Tesla and follow suit General Motors in the manufacture of its own batteries for electric vehicles in the USA

Ford’s shares have risen nearly 90% since Farley became CEO, including more than 40% in 2021. The company’s market capitalization is more than $ 48 billion.

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World Wrestling Leisure Inc (WWE) Q1 2021 Earnings Name Transcript

Image source: The Motley Fool.

World Wrestling Entertainment Inc (NYSE:WWE)
Q1 2021 Earnings Call
Apr 22, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the webcast entitled WWE First Quarter Earnings. [Operator Instructions] We have just a few announcements before we begin. First, please use the question mark icon in the upper right hand corner of your web console for technical assistance. The option to enlarge slides is located to the right on your slides with the four arrows pointing in different directions. [Operator Instructions]

I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, Michael.

Michael Weitz — Senior Vice President, Financial Planning and Investor Relations

Thank you, Lauren and good afternoon, everyone. Welcome to WWE’s first quarter 2021 earnings conference call. Leading today’s discussion are Vince McMahon, WWE’s Chairman and CEO; Nick Khan, WWE’s President and Chief Revenue Officer; Stephanie McMahon, WWE’s Chief Brand Officer; and Kristina Salen, WWE’s Chief Financial Officer. Their remarks will be followed by a Q&A session. We issued our first quarter earnings release this afternoon and have posted the release, our earnings presentation, and other supporting materials on our website.

Today’s discussion will include forward-looking statements. These statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. Actual results may differ materially and undue reliance should not be placed on them. Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website. You should note that all comparisons are versus the year-ago quarter, unless otherwise described. Finally, as a reminder, today’s conference call is being recorded and the replay will be available on our website later this evening.

At this time, it’s my privilege to turn the call over to Vince.

Vincent K. McMahon — Chairman of the Board and Chief Executive Officer

Thanks. Thanks for joining us, everybody. Like every other form of entertainment, we’re sports. We’re coming out of COVID. At first, we were in survival mode, but we found a way. Once we felt secure, we then saw this as an opportunity too. We think the way we do business and open what, I call, a WWE treasure chest, the only way to do that the best management team in WWE history. We have that team, a team that’s innovative, drives revenue and as we organize our company in a far more efficient way to take advantage of new revenue streams, new online platforms, new consumer products, new content creation and new opportunities to expand our media rights portfolio on a global basis, I’m always excited about our business. I don’t think I’ve ever been as excited as I am now.

Nick Khan — President and Chief Revenue Officer

Thank you, Vince. This is Nick Khan. First of all, thank you, everyone, so much for calling in. It’s going to be nice to speak with all of you again. Since our last earnings call, there have been significant developments in the media industry. We’d like to discuss them and how the economics of these deals signal to us, a marketplace that continues to put premium on live content. Additionally, we’d like to outline a number of new revenue streams we’ve identified in the recent corner — quarter, excuse me. I will end by providing an update on our expanding original programing slate, as well as giving you an update on our return to live events and touring.

Recent developments in media have been highlighted by the completion of new content distribution deals. First, as we discussed last earnings call, Amazon grabbed the Thursday Night NFL package. So we have no inside knowledge of this, we wouldn’t be shocked if Amazon was negotiating now, as we speak, to get that package on its air exclusively early. In terms of leads, both the NFL and NHL realized substantial increases in the rights fees for their license programs, demonstrating the continuing value of live content. The NFL saw a media rights increase of 79% even as linear ratings went down a little bit in recent season.

The NHL has already doubled its media rights AAV, having sold just over half of its package. In the case of the NHL, linear ratings are down about 25%. In this context, the NHL received tremendous credit for already doubling its AAV from $200 million to $400 million, with another package still available for sale in the marketplace. Our bet is that part of the package goes to a new suitor. These deals are indicative of where the media rights marketplace is and where it continues to head.

One of the big takeaways to us, if you look at these packages, is that the overwhelming majority of the media networks are paying to license both the linear rights as well as streaming rights. The days of splitting those rights appear to be over for the moment. Look at the NFL, which often sets the standard in media rights negotiations. Each media partner outside of Amazon paid a multiple of what they were previously paying for the rights to show the games on linear or digital or both.

It’s clear to us that these companies view live rights as meaningful subscription and retention programing for their OTT services. We are confident that our robust marketplace with interested buyers across broadcast cable and OTT positions our rights portfolio for long-term growth. We had an early case study in WWE delivering audiences for our partners’ streaming services a little over two weeks ago, when our premiere event, WrestleMania, was distributed for the first time exclusively on Peacock in the United States. We were thrilled with the result and our partners at Peacock were even happier. Stephanie will provide a more thorough update on these achievements from WrestleMania momentarily, but we couldn’t be more pleased with the first event.

The promotion from our partners at Fox and NBCU leading into it and the number of conversations we have engaged in subsequent for the Peacock partnership announcement. And coming off of the subscriber and viewership success of WrestleMania that was delivered to Peacock, we’re excited about possibly replicating the licensing of WWE’s network to potential streaming partners in key international territories. It’s a story we’re sharing with the international community as we introduced WWE Network to potential partners across the globe.

If you look at the success that we’re having with our Tencent deal in China, we’ve seen a 30 times increase in views across all platforms in China, since striking this deal, with 30% of that coming from the viewership on Tencent. We look at the success we continue to have in India and the United Kingdom, we’re excited to replicate that and to grow it further. Of course, content rights are not our only revenue focus, we’re always looking at new streams of revenue.

On April 10, our first day of WrestleMania, we dropped our first NFT, featuring iconic moments from the Undertaker’s legendary WWE career. Many of these sold out in seconds. We were thrilled with our first foray into this space. Considering our vast library of wholly owned intellectual property, look for more NFTs from us in the near future. In this quarter, we also made a key deal in the gambling space. Stephanie is going to provide background on that deal later as well.

As we continue to expand WWE’s brand beyond the ring, we remain focused on developing the slate of original programing from our WWE Studio. We’ve sold a multi-episode animated series to Crunchyroll, which, as all of you know, is now owned by Sony, Young rock, which we’ve talked about previously, chronicles the real life journey of Dwayne Johnson from childhood to WWE legend and beyond. They debuted on NBC and it’s doing significant business on NBC and with rears on USA and Peacock.

And last Sunday, the Stone Cold Steve Austin documentary was the highest-rated biography in 16 years on A&E. Our other show on A&E that night, WWE’s Most Wanted Treasures retained 79% of that lead end audience. There are seven more biographies featuring our superstars each Sunday for the next seven weeks. Again, all of these projects from sitcoms to unscripted to documentary to animate are produced or co-produced by us via our Studio. Last, as I mentioned earlier, stay tuned for our announcement showcasing our full-time return to live event touring.

To provide further perspective on our progress, allow me to turn this call over to my colleague, Stephanie McMahon.

Stephanie McMahon — Chief Brand Officer

Thank you, Nick. This year’s WrestleMania was historic for many reasons, attracting more than 50,000 fans, representing full capacity for the two-night event. I would be remiss if I didn’t mention how amazing it felt to have the opportunity to stand on the stage, look out at the faces in the audience and hear their cheers.

From the superstars next to me to the people in the crowd to even maybe my father Vince McMahon, there wasn’t a dry eye as we all celebrated something much bigger than ourselves, the power of the lion. Last year’s WrestleMania with no fans at our performance centers went back to Raymond James Stadium with a full circle moment, providing a sense of hope for the future and where our signature then, now, forever became then, now, forever together.

It is because of this powerful fan base, what we call the WWE Universe that we were able to achieve record-breaking performances across all of our platforms, including reaching new audiences through our domestic streaming partner, NBCU’s Peacock. And a world went 52 days, we successfully launched our partnership with Peacock with cross-functional task forces responsible for assimilating meta data, transporting and formatting our most viewed content and creating marketing direct to consumer campaigns and one of the most comprehensive publicity plans we have ever had for WrestleMania.

One executive at Peacock described our process as a best-in-class example for how partnerships should work. The results with the most viewed live events in Peacock’s young history. The launch was supported by two integrated media campaigns executed across the Comcast, NBCU, Peacock and WWE portfolio.

WrestleMania media coverage increased 25% with over 500 individual new stories, representing 1.2 billion media impressions. Creatively, everything kicked off the Friday before with the WrestleMania addition of SmackDown on FOX, where Jey Uso won the esteemed Andre the Giant Battle Royal. Sasha Banks and Bianca Belair became the first African-American female superstars to main event WrestleMania. Pop star, Bebe Rexha, saying the national anthem and hip-hop star, Wale, rapped Big E down to the ring.

Grammy award winning artist Bad Bunny and YouTube influencer Logan Paul found themselves getting in on the action inside the ring. Bad Bunny’s performance received praise from ESPN, counting it as one of, if not, the most impressive showings by a celebrity in the ring. And apparently, a lot of people enjoyed seeing YouTube influencer Logan Paul gets stunned as he trended number two on Twitter and generated nearly 100 million impressions on social media alone.

WWE also secured a record 14 new and returning blue chip partners for WrestleMania, including Snickers as the presenting partner for the sixth consecutive year and presenting partner of the main event. Papa John’s Cricket Wireless, P&G’s Old Spice, Credit One Bank and DraftKings. DraftKings is now an official gaming partner of WWE, focusing on their signature free-to-play pools, which included placing some fun bets on main event matches in both nights of WrestleMania.

Video views during WrestleMania week across digital and social platforms, including YouTube, Facebook and Instagram, hit 1.1 billion and 32 million hours of content were consumed, representing a 14% and 9% increase, respectively. WWE related content saw 115 million engagements and WrestleMania was also the world’s most social program, both nights of the weekend, delivering 71 Twitter trends.

As Nick mentioned, for the first time, we launched a series of NFTs, featuring the Undertaker at record-breaking WrestleMania weekend e-commerce sales and record merchandise per capita sales in stadiums. We also held more than 10 community activations throughout the week, including collaborating with the Mayor’s Office to customize our vaccination messaging for the local market, recognizing local community champions, teaming with FOX Sports to donate equipment to Special Olympics, Florida, and working with various organizations, including Feeding Tampa Bay to combat food and nutrition and security.

On USA Network, the following Night Raw delivered its best performance in the 18 to 49 demo in over a year and NXT’s debut on its New Night on Tuesday was up 29% in the 18 to 49 demo year-over-year. As we move toward our next streaming special, WrestleMania Backlash on Sunday, May 16, we are excited to build on our recent success, grow our audience through Peacock’s enhanced reach, align with Iconic franchises, such as the Olympics and the Super Bowl and continue to leverage Peacock sales and promotional teams.

Additionally, key brand metrics in the first quarter are as follows. TV viewership continued to remain stable, maintaining a trend that began when we transitioned out of the performance center and invested in WWE ThunderDome at the end of August. From that time to the end of this quarter, Raw ratings have held steady and SmackDown ratings increased 9%.

Notably, all Raw appearances featuring Bad Bunny showed an increase of 31% in the Hispanic persons 18 to 34 demo. And Bad Bunny’s total social impressions during the time of his story lines equaled nearly 700 million. Digital consumption increased 7% to 367 million hours. WWE’s flagship YouTube channel crossed 75 million subscribers and is now the fourth most viewed YouTube channel in the world.

WWE sales and sponsorship revenue increased 19%, excluding the loss of a large scale international event. As I mentioned on our last call, brands are looking for unique ways to reach their consumers. WWE is perfectly positioned to do just that with the ability to create customized content experiences and utilize WWE superstars that resonate with target audiences.

For example, the creation of our digital content series, Grit & Glory, for GM’s Chevy Silverado brand and the creation of a new superstar, the Night Panther and a first-ever campaign integration across multiple platforms to market the new scent from Old Spice. In our view, WWE is well positioned to continue to elevate our brand, grow our business and engage new and existing consumers across all media platforms.

And now, I’ll turn the call over to our CFO, Kristina Salen.

Kristina Salen — Chief Financial Officer

Thank you, Stephanie, and hello to WWE shareholders. As Vince, Nick and Stephanie highlighted, transitioning WWE Network to Peacock, while launching WrestleMania with a live audience of 50,000 fans in attendance is a major accomplishment. I would add by the flexibility, speed and sheer brute force of will demonstrated by the WWE team, the innovative and entrepreneurial spirit on display was as strong as I’ve seen in my 25-plus years prior in the tech industry.

Today, I’ll discuss WWE’s financial performance, which underscores that spirit. As a reminder, all comparisons are versus the year ago quarter, unless I say otherwise. In the first quarter, WWE continued to manage a challenging environment. Total WWE revenue was $263.5 million, a decline of 9% due to the cancellation of live events, including a large scale international event and the associated loss of merchandise sales, all due to COVID-19. Despite this decline, adjusted OIBDA grew 9% to $83.9 million, reflecting the upfront recognition related to WWE’s licensing agreement and the decline in operating expenses that resulted from the absence of live events.

To review the first quarter performance in more detail, let’s turn to Slide 3 of the presentation, which shows revenue, operating income and adjusted OIBDA contribution by segment. Looking at the WWE media segment, adjusted OIBDA was $107 million, growing 4% as increased revenue and profit from WWE’s licensing agreement with Peacock, as well as increased revenue from the escalation of domestic core content rights fees more than offset the absence of a large scale international event.

During the quarter, we continue to produce Raw and SmackDown in our state-of-the-art environment, WWE ThunderDome, at Tropicana Field in St. Petersburg, Florida. Our operating results continue to be impacted by the year-over-year increase in production costs associated with bringing nearly 1,000 live virtual fans into our show, surrounded by pyrotechnics, laser displays and drone cameras, we did achieve some efficiency quarter-over-quarter.

With the April transition of WWE ThunderDome to Yuengling Center in Tampa Bay, we expect this investment will continue through at least the second quarter as it elevates the level of excitement and brings our fans back into the show. Despite a challenging environment, WWE continues to produce a significant amount of content, nearly 650 hours in the quarter across television streaming and social platforms. And as Nick described, we continue to develop our slate of original programing from our WWE Studios.

Now let’s turn to WWE’s live event business on Slide 5 of the presentation. Live events adjusted OIBDA was a loss of $4.3 million due to a 97% decline in live event revenue. These declines were due to the loss of ticket revenue, resulting from the cancellation of events. As we’ve said, we are delighted to have entertained ticketed fans and an audience of over 50,000 at WrestleMania a few weeks ago. We look forward to the highly anticipated return of regular ticketed events. However, predicting the pace of that return is challenging and as of this moment, we do not anticipate staging such events until at least the second half of 2021.

Looking at WWE’s consumer products segment on Slide 6 of the presentation, adjusted OIBDA was $6.7 million, growing 76% primarily due to higher royalties and profit from the sale of license video games, including strong sales for our mobile game portfolio. WWE also continues to introduce new products, leveraging a superstar talent brand and strong distribution partners. As examples of WWE’s continuing commitment to product innovation, WWE released three new championship title belts and a suite of branded products to commemorate Stone Cold Steve Austin’s 25 years at WWE. Also in the quarter, WWE continue to be the number one action figure sold at Walmart, where it continues to deliver exclusive products.

Now let’s turn to WWE’s overall cash generation as shown on Slide 7 of the presentation. In the first quarter, WWE generated approximately $54 million in free cash flow, which was down slightly. Improved operating performance and lower capital expenditures were offset by the timing of collections associated with network revenue. Notably, during the first quarter, we returned approximately $84 million of capital to shareholders, including $75 million in share repurchases and $9 million in dividends paid.

To date, more than $158 million of stock has been repurchased, representing approximately 32% of the authorization under our $500 million repurchase program. As of March 31, 2021, WWE held approximately $461 million in cash and short-term investments, which reflected the repayment of the remaining $100 million borrowed under WWE’s revolving credit facility. Accordingly, WWE estimates debt capacity under the revolving line of credit of $200 million.

And finally, a word on WWE’s business outlook. Last quarter, WWE issued guidance for 2021 adjusted OIBDA of $270 million to $305 million. This range of guidance reflects estimated revenue growth, driven by the impact of the Peacock transaction, the gradual ramp up of ticketed live events and large scale international events and the escalation of core content rights fees, offset by increased personnel and television production expenses. The company is not changing full-year guidance at this time. The guidance range is subject to risk over the remainder of the year, particularly related to the impact of ongoing COVID-19 restrictions on the company’s ability to stage live events, including large scale international events.

Turning to WWE’s capital expenditures, as we mentioned last quarter, we anticipate increased spending on the company’s new headquarters, as we restart this project in the second half of 2021. For 2021, we’ve estimated total capital expenditures of $65 million to $85 million to begin construction, as well as to enhance WWE’s technology infrastructure. We’re in the process of reevaluating the headquarter project and will provide further guidance on future capital expenditures when that work is completed.

For the second quarter of 2021, we estimate adjusted OIBDA will decline as incremental profits from Peacock and the escalation of content rights fees are more than offset by increased production, personnel and other operating costs. As a reminder, the year-over-year rise in television production costs reflects the impact of our investment in WWE ThunderDome relative to the lower cost of producing content from our training facility, as we did exclusively in the second quarter of last year.

As the timing and rate of returning ticketed audiences to WWE’s live events remain subject to uncertainties, we are not reinstating more specific quarterly guidance at this time. In the first quarter, WWE generated solid financial results as we executed on key strategic objectives. As Vince, Nick and Stephanie mentioned, we believe we can continue to innovate, enhancing our fan engagement, driving the value of our content and developing new products and markets, as well as cultivating new partnerships. We look forward to sharing our progress on these initiatives with you all.

That concludes our remarks, and I will turn it now back to Michael.

Michael Weitz — Senior Vice President, Financial Planning and Investor Relations

Thank you, Kristina. Lauren, please open the lines for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Curry Baker with Guggenheim Securities.

Curry Baker — Guggenheim Securities — Analyst

Hey, good afternoon, everyone. Thanks for the questions. My first one is on the sponsorship front for Nick. I think sponsorship scenario where WWE’s historically under monetized relative to other live sports. First, can you maybe talk about the inventory that’s tied into the Peacock deal on the sponsorship side and the strategic upside you see partnering with NBCU’s team there? And then secondly, more of a higher level look at sponsorship. Can you maybe size the opportunity you see over the next couple of years and take us through your strategy to more fully monetize that inventory?

Nick Khan — President and Chief Revenue Officer

Curry, absolutely, thanks for the question. I’m going to tag in Stephanie to help answer that question, and I’ll supplement it if anything needs to be supplemented, if that’s OK by you.

Stephanie McMahon — Chief Brand Officer

Great. So Curry, thank you for the question. We absolutely see that the same thing that you see and there is tremendous potential and upside in terms of sponsorship, particularly as it relates to mirroring what has been so successful with the sports leagues, added on to our ability to create this custom content, all of our superstars who are influencers in and of themselves and the fact that WWE owns all of our intellectual property. So there is an ease of engaging and doing business with us that doesn’t exist in other leagues or entertainment media.

Nick Khan — President and Chief Revenue Officer

The second part of that, Curry, this is Nick, as it relates to the relationship with Peacock, we’re going to be selling it with them. So we’re getting all of those ducks in a row, obviously, launching the product on Peacock was the priority. Now that both sides are happy with that launch, the focus is on further monetizing it, so we’re deep in those conversations now.

Curry Baker — Guggenheim Securities — Analyst

Okay. Thanks. That’s helpful. And then maybe just one final one on the ratings front, shifting focus a little bit. There’s obviously pressure on the linear ratings for both Raw and SmackDown. Can you maybe talk to us about the lift you expect in the back half as you return to a more normal product with fans? We obviously saw a bit of a lift when you move to the ThunderDome format last year. Is there any way to think about that? And then I guess secondarily, is there anything you guys are doing new on the story line front or from a talent perspective that you also think might reenergize the fan base and television ratings as we move through the rest of the year? Thanks.

Nick Khan — President and Chief Revenue Officer

We have a four question limit per person. Let us report Curry, I’m teasing you. Couple of things. How we looked at ratings is how we think all the buyers look at ratings. It’s the culmination of everything, linear, digital, streaming numbers, etc. Our numbers are robust, it’s no different than when we referenced the NHL and NFL earlier or on the last call, that we all had together, there is a challenge in linear content for everybody. Eyeballs are going away from it. Think about how you watch your own content yourself, how often are you watching on your phone? How often are you watching it on some sort of Apple TV-like device? Its easy.

So we are there, when we launched the WWE Network in 2014, candidly, we saw that, when we did the Peacock deal a few months ago or finalized that, we saw it then as well. As it relates to live events, that always matters to us. The fans are our fourth wall, if you will. We know immediately from them what’s working and what’s not working. The ThunderDome was a phenomenal creation by the creative team here, but to get live fans back and to get our performers in front of them, we yearn for that as much as our performers do, and we think it’s going to have a direct impact on all parts of our business in an overwhelmingly positive way.

Curry Baker — Guggenheim Securities — Analyst

Okay. Thanks for the question.

Nick Khan — President and Chief Revenue Officer

Thank you for the 14 questions. Appreciate it.

Operator

Our next question comes from Brandon Ross with LightShed Partners.

Brandon Ross — LightShed Partners — Analyst

I think I need to amp up the number of questions I was going to ask to compete with Curry, So let’s say, first I wanted to get more color on the traction on Peacock, which from the sounds of it appears to be expanding your reach. I think you said record viewership of WrestleMania, any way you can size that for us compared to last year on the network?

Nick Khan — President and Chief Revenue Officer

Absolutely. Brandon, we know you always come in with 20 to 30 questions, so we’re going to fine, we love it, and we thank you for that. So a couple of things. Our partners at Peacock have asked us not to do that. What we can tell you is that as you guys know in the content business, when you wake up on Monday morning after the two nights, as we did to phone calls and emails from Peacock and NBCUniversal.

It usually means they’re thrilled. When you don’t hear from them is when there is a problem. So fortunately, for us, a great number of us here heard from them Sunday night, Monday morning, how thrilled they were with the content and how the content delivered for them. So we’re excited about everything that can happen, and yes, expanding the fan base was one of the key reasons why we did that deal.

Brandon Ross — LightShed Partners — Analyst

Awesome. And on NXT, just wanted to ask about the move of nights strategically, how did you weigh the pluses and minuses of that move? I guess, it appears that AEW is reaching record viewership probably because of the move was that in the consideration set. Do you think about them, do you care?

Nick Khan — President and Chief Revenue Officer

Honestly, everything is competition for everything. The movies are competition, people sitting and deciding just the textile night is our competition. All we’re focused on is attracting eyeballs to our content. So part of the reason for the move to choose the night, the last time we were all here, we were specifically asked about well, what about the NHL and the impact of Wednesdays would be NHL on your content NXT on Wednesday nights in particular.

It’s our belief that NBC and the NHL are not going to continue to be in business together, that was our belief months ago. So that had absolutely nothing to do with our decision-making process. If you look at the efficiencies of Sunday night pay-per-views, Monday Night Raw and Tuesday night NXT, it made sense for us for myriad reasons to do consecutive nights obviously Sunday night is a 15 to 20 time premium event — excuse me, premium event type of thing, but those efficiencies to us is what really drove it. We’re pleased with the increase in NXT ratings and not focused on any one other than ourselves.

Brandon Ross — LightShed Partners — Analyst

Great. And then I guess you gave a little bit of your opinion on where the NHL rights might wind up, talk to about Amazon getting Thursday night earlier. Can you just broadly give us some color on what you’re seeing out there in terms of other suitors in the digital universe beside Amazon’s appetite for sports content? Are there a bunch of players? Is there a real interest outside of Amazon?

Nick Khan — President and Chief Revenue Officer

We think Apple TV is readying for something. They’ve come close on a number of live events. They haven’t decided to go all-in yet. So we’re looking for them to see what their moves are going to be. It’s not just the digital companies and I know your company yesterday, there was an article about a conference you guys were at, where you said hey — not you specifically, but one of your partners, hey, look at these big tech companies coming in. Those are the behemoths, we agree with you, to Disney’s credit to Comcast’s credit for the credit of others, they saw it, maybe a moment in time late, but they saw it. So we think they are going to be significant competitors for different premium content rights for everybody. And what we know is live matters and that’s what we do.

Brandon Ross — LightShed Partners — Analyst

Great. Thank you so much.

Nick Khan — President and Chief Revenue Officer

Thank you.

Operator

We’ll take our next question from Laura Martin with Needham & Company.

Laura Martin — Needham & Company — Analyst

Can you guys hear me OK?

Nick Khan — President and Chief Revenue Officer

Yes.

Laura Martin — Needham & Company — Analyst

Okay. Great. So maybe sticking to that one and building on that, maybe I have this wrong, but my understanding of the way your rights are currently structured is you can’t actually sell anything to anybody, including Apple or Amazon for three or four years. Do I have that wrong? Is there something you guys could actually monetize over the next three-year investor trendline?

Nick Khan — President and Chief Revenue Officer

There is so much, and we appreciate you asking the question. Number one, it’s part of the reason why our focus is so international based right now. In terms of the existing content in the United States, yes, that is licensed through October of 2025 on Raw and SmackDown. In terms of new content, that is not. In terms of licensing that existing content and the WWE Network internationally, that is what we are deeply involved in right now. So a lot of upside in that, obviously, it’s a good time in our opinion, to be a seller of these rights, and we think the proof will be in the pudding on that in the not too distant future.

Laura Martin — Needham & Company — Analyst

Okay. Very helpful. Thank you. And then Kristina, maybe one for you. You’re showing on Slide 2 maybe that EBITDA grew about 9%, but it was like because we didn’t have the Saudi events and we estimate, you show the wide revenue there. We estimate it’s got like 50% to 60% margins. Really is the underlying operating power of these assets closer to 23% growth, which manage your operating income because we add back another $12 million for the lost Saudi event which shouldn’t really be, what I would call, a detrimentally operating cash flow power of these assets, is that fair?

Kristina Salen — Chief Financial Officer

I think what’s really understand in terms of what’s driving our adjusted OIBDA growth of 9% is to understand the accounting recognition for the delivery of both content in subscribers in our Peacock deal. That’s very high incremental margin revenue. And as we discussed before, that was one time in the quarter. The live event worsened as we discussed, was down — revenue was down 97%, and we booked an adjusted OIBDA loss of $4.3 million, so it’s not just the loss of a large international event, but it’s the absence of all live events in the quarter that was a downdraft on adjusted OIBDA.

Laura Martin — Needham & Company — Analyst

Perfect. That’s super helpful. Thank you, Kristina.

Kristina Salen — Chief Financial Officer

You’re welcome, Laura.

Laura Martin — Needham & Company — Analyst

That’s it. Thanks.

Operator

Our next question comes from Eric Katz with Wolfe Research.

Eric Katz — Wolfe Research — Analyst

Hey, good afternoon, everyone. Thank you. I actually like to piggyback a little bit of Laura’s question, maybe focusing more on expenses in the media segment. I heard some of your comments around the moving pieces for opex. I was hoping you can maybe unpack that a bit more for Q1 and into Q2 because media costs were down about $15 million year-over-year.

And I guess, it’s tough to reconcile the loss of the international event. I think Peacock, I think you had furloughed workers back and you’re investing in ThunderDome. So I understand you’re not quantifying, but is there anything you could maybe share qualitatively to think through the margins or flow through, because I think the expectation is that on this be the full year guide maybe should have gone up?

Kristina Salen — Chief Financial Officer

Thanks, Eric. Yes, absolutely, I’ll walk you through that. Again, to understand, I’ll take the last question first. Why didn’t we raise our guidance? It’s really because any — the quarter performance was driven by the accounting for the Peacock transaction, the one-time accounting for the delivery of subscribers and delivery of content. Indeed, there was very little licensing fee revenue related to Peacock in the quarter because we delivered all of these assets on marketing fees.

So the licensing fee revenue in the quarter was really represented the last two weeks or so of March. When we move into the second quarter, we’ll see the first full quarter of Peacock licensing fee revenue, and we won’t see the one-time valuation of our subscription — and of our subscribers and content delivery. So that’s the Peacock portion of network and media.

To understand the opex, you’re absolutely right. What we’ve highlighted in our guidance is that increases in TV production and personnel are an important thing to consider when forecasting 2021 adjusted OIBDA. Now year-over-year, in the first quarter, production expenses as we discussed TV production on a per episode basis, we discussed last quarter, were up considerably 30% year-over-year.

What we’re really excited about in the second quarter is while they’re up — sorry, in the first quarter, while they’re up year-over-year, quarter-over-quarter we were able to obtain certain efficiencies really around our virtual fan technology, but also generally around operating expenses and that’s just a testament to us constantly learning, constantly innovating. And as we move into the second quarter of this year, we think, again, quarter-over-quarter, per episode TV production costs will be down versus first quarter.

And this is a big but, Eric, when you think of the second quarter of 2021 versus second quarter of 2020, remember for the entirety of last year in the second quarter, we were in our training facility. And the per episode costs of our training facility and remember that was the high of COVID, the per episode costs in our training facility were remarkably lower than even steady state pre-COVID levels. So really second quarter is our toughest comparison from a TV production expense perspective.

Does that help you draw the story throughout these two quarters, Eric?

Eric Katz — Wolfe Research — Analyst

Yes, it definitely helps. Okay. And maybe just a follow-up on the touring plans. I guess one thing we’re trying to think through is, as you guys begin to tour, I guess, maybe in the second half, hopefully in the second half, would you continue to hold a residency, while you sort of phase in touring? Is it sort of going right into a 100%, I guess, maybe the decision-making process on once you actually start touring is it full bore or a phase in?

Kristina Salen — Chief Financial Officer

We haven’t yet decided what our trendlines will be for the summer, but we are very hopeful that we return to touring in the second half of this year and our hope is that we go to full touring, not that we retain kind of semi-permanent residency in one location and go half out, so to speak. Our guidance, just that you know, Eric, assumes that we go full touring in the second half of this year, which is what we disclosed when we talked about our guidance back in February. So going to half semi-permanent residency and half touring wouldn’t be the most ideal situation from a financial perspective, but also really just from a fan engagement perspective, we’re really looking forward to getting out on the road again.

Eric Katz — Wolfe Research — Analyst

Okay. Great. Thank you.

Operator

Next question comes from David Karnovsky with JP Morgan.

David Karnovsky — JP Morgan — Analyst

Thank you. Nick, I just wanted to follow up on your commentary to one of Brandon’s questions. With the increased demand coming from streaming for live content, do you see this as sort of a rising tide lifts all boats situation or will some sports like the NFL or even yourself with Peacock disproportionately benefit from this dynamic? And if that is the case, what factors do you think determine success or not here?

Nick Khan — President and Chief Revenue Officer

Thanks, David. I think there’s a couple of things. The newer content, I don’t want to say the lower-tiered content, the newer content that’s not as known as we believe our content to be or certainly the NFL’s to be. There’s only so much money to go around. So somebody is going to be left holding the bag. So if you look at college football for example, the SEC is in great shape. The Big Ten is the next big rights package up. There’s going to be some challenges there even though it’s a major conference because they didn’t perform for part of the season, that always makes it tricky.

If you look at all the conferences outside of that, I’d look for some sort of consolidation school wise or conference wise to happen, and you look at the other folks out there, some businesses are unfortunately going to go away. So the folks who have delivered eyeballs in the past are going to benefit from it. The folks who are trying to prove that they can deliver eyeballs, it’s going to be challenging.

David Karnovsky — JP Morgan — Analyst

Great. That was really helpful color. And then maybe just separate topic, e-commerce has had four really strong quarters since the pandemic started. Just wondering how much you attribute that to a mix shift in venue merchandise and zero versus kind of actions you’ve taken drive higher online sales? Just want to get a sense for how sustainable for the next strengthen WWE shoppers?

Kristina Salen — Chief Financial Officer

Thanks, Dave. I’ll take that question. I think that we’ve made a lot of effort to really take advantage of the trends and bring customers to WWE Shop permanently. The first thing that comes to mind is title belts and the number of — we launched three new title belts just in this quarter, a similar number last quarter. What also comes to mind is the launch of Legends and creating products and merchandise for our fans who are so enthusiastic about historical WWE Superstars. So we haven’t just been sitting on our heels and letting this wave come to us. We’ve been doing a lot to get folks to come and stay.

Nick Khan — President and Chief Revenue Officer

I think I could add to that, if that’s OK, David. The brick-and-mortar business, as we all know, has probably changed forever or at least for the foreseeable future. The e-commerce business is going to continue to grow. One part of the brick-and-mortar business, that we are bullish about, is the live event business, where we do sell a lot of our merchandise, which we have not had in over a year. So if you look at e-commerce, if that stays robust, we believe that it will and the return to live events, where people can buy our products, we are quite bullish on it.

David Karnovsky — JP Morgan — Analyst

Great. Thank you, Nick.

Nick Khan — President and Chief Revenue Officer

Thank you.

Operator

Our next question comes from Ben Swinburne with Morgan Stanley.

Ben Swinburne — Morgan Stanley — Analyst

Thanks, and congratulations on WrestleMania and executing on that. I’m sure that was a tremendous experience to be at, so congrats.

Nick Khan — President and Chief Revenue Officer

Thank you.

Ben Swinburne — Morgan Stanley — Analyst

I wanted to ask — I promise I’ll limit myself to two questions. I just wanted to ask Kristina on Peacock, if at this point or in the first quarter, did we see all the revenue recognition associated with the delivery of I guess what we call one-time assets? Is that done or is there more in Q2? And then I think it was Nick who mentioned NFTs it in the prepared remarks, I know this is very early days, but could you just talk about what you think the opportunity is there? How meaningful that might be? And what you guys are doing to try to maximize that right now? I know it’s early.

Kristina Salen — Chief Financial Officer

The short answer to your first question, Ben, is that, yes, it’s largely done. We’ll recognize some one-time content around the delivery of marquee-free premiere shows like for example WrestleMania in the second quarter or SummerSlam in the third quarter, but those won’t let be anything like the size of what we recognized in the first quarter.

Nick Khan — President and Chief Revenue Officer

And Ben, I can jump in on the second part of that first to your precursor statement on WrestleMania, we remain undefeated against the weather for our outdoor stadiums minus a 10-minute delay on night one Saturday this year, but we are happy to do the event in Tampa and to deliver for our partners down there. In terms of the NFTs, look, if you look at what Vince set up with WWE years ago, to own all of the intellectual property, to own the overwhelming majority of the character rights, that business is going to be something that we are in long term.

So we’re excited to get our first one up for WrestleMania. I think our Silver tier there were 100 limited Undertaker cards, those 100 cards that we sold out in 35 seconds. So we want to make sure that we’re there for our fans as these are the baseball cards of the digital world as you know. So we’re there, we’re going to continue to be there, and we have a plan in place that we’re really excited about.

Ben Swinburne — Morgan Stanley — Analyst

Thank you.

Operator

Our next question comes from Vasily Karasyov with Cannonball Research.

Vasily Karasyov — Cannonball Research — Analyst

Thank you. Good afternoon. Before the pandemic, you talked about your plans to invest overseas into local content production, training centers, developing local talent, etc. So can I ask you to talk about whether your plans changed, given the terms on which you renewed the international rights contracts, the impact of COVID and what’s going on with it? How your strategy is developing domestically in terms of licensing versus WWE Network? And then if you could talk a little bit about how we will see that flowing through the P&L, your international strategy? Thank you.

Nick Khan — President and Chief Revenue Officer

Sure. So the first part of that, Vasily, no, our plans have not changed, they’ve simply been delayed by COVID. So even during COVID, what we did with our partners, and we discussed this the last earnings call. We did a show for our partners, Sony in India, featuring up and coming Indian talent against some of our current Superstars. That product, which we call Superstar Spectacle delivered a 5 times rating compared to our normal high ratings in India.

Again, based on talent that candidly, we don’t believe the Indian fans have heard of and that the American fans have not heard of yet. So we were thrilled to be able to pull that off. We did that one in Florida, as you know very, very difficult with international travel right now, very difficult to go to international booms right now in terms of performance centers, it’s also part of the plan. But like many things just paused by COVID and hopefully roll out a bit soon, certainly seems like it’s heading that way.

Kristina Salen — Chief Financial Officer

And to answer the modeling question, I think we’re really fortunate in that we’re international without even trying. I mean that sarcastically, there’s so much effort going around, but it doesn’t require a significant amount of capex or opex to take advantage of the global reach of WWE brands. And indeed, the demand for our global brand like WWE is so strong that we launched the partners and Nick referenced our partner in India, we have partnership in the UK. And so we look around the world for those partners to help us deepen our relationship in specific regions and countries and also help us co-invest smartly in local content, local talent and local opportunities.

Vasily Karasyov — Cannonball Research — Analyst

Thank you very much.

Operator

Our next question comes from David Beckel with Berenberg Capital Markets.

David Beckel — Berenberg Capital Markets — Analyst

Hey, thanks so much for the question. Just wanted to touch back on Peacock and the sponsorship arrangement, acknowledging there is probably some parts of the deal you can’t really talk too much about. But I’m curious if you can just fill us in on some of the broad strokes. Does the partnership, does that pertain mostly to new deals that have not yet been struck? And to what extent across your properties would the partnership apply? And then I have a follow-up.

Stephanie McMahon — Chief Brand Officer

Certainly. I’ll take that, David. This is Stephanie. So in terms of sponsorship working with Peacock, basically anything that you’ll see that will air on Peacock in terms of sponsorship, we are working with them. There is a lot of white space, if you will, as was recognized I think in the first question around WrestleMania, around all of our major properties and when you’re dealing with teams who have regularly sold the likes of the Olympics and the Super Bowl, you’re working with really top notch team, who will provide us opportunities that we have not had in the past.

David Beckel — Berenberg Capital Markets — Analyst

Great. Thanks for that color. I appreciate it. And just more of a high level one, and actually sort of piggybacking on the last question. A question we get from investors a lot is sort of longer-term thinking, how you approach the investment process, obviously, there are lots of areas you can invest in, and you also have a great degree of certainty on the top line, two-thirds or more of your revenue sort of contracting going forward. So I’m just curious how you’re thinking about the level of investment. Do you think about it as a percentage of revenue, incremental revenue over the coming years or is it less structured than that?

Kristina Salen — Chief Financial Officer

So I think what you can appreciate about our business model, David, is in a normal environment, we are a high incremental margin business, which throws off nice cash flow. And as we’ve discussed, all of these wonderful innovation just in the quarter, whether it was NFTs, it’s the deal with DraftKings, the Peacock integration, none of it required any significant amount of opex or capex on our part. So we’re very — when we think about new opportunities, it’s not about us having to go out and steal this, so it can happen. It’s about us going out and harvesting what’s there or optimizing what’s already there.

It’s not to say that there aren’t opportunities to invest. We’ve highlighted, for example, that this coming year in 2021, we’ll spend about somewhere between $60 million to $85 million in capex largely on our new HQ, which we’ve delayed now more than a year, it’ll be two years delayed by the time we move in and ongoing technology infrastructure improvements that you’d expect every couple of years at any innovative company. So we’re really fortunate in our business model, which enables us to maximize the opportunity for the awesome WWE Universe.

Michael Weitz — Senior Vice President, Financial Planning and Investor Relations

Thanks, Kristina. For our analysts on the line for warning our operator, we’re at the limit of this meeting, we have time for one more question. If we missed anybody, we’re happy to follow up with you offline.

Operator

We’ll take our next question from Steven Cahall with Wells Fargo.

Steven Cahall — Wells Fargo — Analyst

Thank you. Just a couple of maybe. First, Kristina, on the guidance, just wondering, did the Peacock delivery you had in the first quarter outperform your full year expectations for Peacock OIBDA por was this just the timing of how it fell in sort of March versus April? And sort of the same question on NXT, you’ve historically commented about a lot of AAVs of these long-term big rights deals in the US. So just curious how the AAV of NXT performed or was contracted based on what you sort of baked into the year for guidance?

And then second question, just you made a comment about non-fungible tokens. Any idea how much exploration you’ve done into this? It’s certainly a unique asset as you say for a public media company as WWE and any stock with crypto get the heck of a valuation these days? Thanks.

Kristina Salen — Chief Financial Officer

Thanks, Steve. I’ll take the first part, and I’ll let Nick take the second part. And hopefully, you won’t say Bitcoin and Bitcoin bingo. What I would say is, thank you so much for the question about timing, and I’ll just underscore, you’re absolutely right. There is no change with regard to the impact of Peacock in our guidance on a full year basis. We’re really pulling forward a little bit of what we thought would hit in second quarter is hitting in first quarter. And that is exactly why we’re not increasing guidance overall for the year. So thank you for that question.

With regard to NXT, yes, NXT was expected obviously because the contract was up and it is within our guidance range that we provided. So there is no — we’re really pleased with that result, but there is nothing to update with regard to guidance on that front.

Nick Khan — President and Chief Revenue Officer

And Steven, on the NFT part of that, I feel like at the start of the pandemic, we were at newer heights, like I think most others were. And now I would put our level of knowledge as high as I would hope our knowledge of the media space is proceeding. We know it and it doesn’t mean there’s not a lot of room to continue to learn, just like with everything else that we do. But we’re confident from where we sit on what we can deliver and what our audience is looking for.

Steven Cahall — Wells Fargo — Analyst

Thank you.

Michael Weitz — Senior Vice President, Financial Planning and Investor Relations

Thank you, everyone, for participating in the call today. We appreciate you listening. If you have any questions, please don’t hesitate to contact me, Michael Weitz, or Michael Guido. Thank you.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Michael Weitz — Senior Vice President, Financial Planning and Investor Relations

Vincent K. McMahon — Chairman of the Board and Chief Executive Officer

Nick Khan — President and Chief Revenue Officer

Stephanie McMahon — Chief Brand Officer

Kristina Salen — Chief Financial Officer

Curry Baker — Guggenheim Securities — Analyst

Brandon Ross — LightShed Partners — Analyst

Laura Martin — Needham & Company — Analyst

Eric Katz — Wolfe Research — Analyst

David Karnovsky — JP Morgan — Analyst

Ben Swinburne — Morgan Stanley — Analyst

Vasily Karasyov — Cannonball Research — Analyst

David Beckel — Berenberg Capital Markets — Analyst

Steven Cahall — Wells Fargo — Analyst

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Dave & Buster’s Leisure Inc (PLAY) This fall 2020 Earnings Name Transcript

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Dave & Buster’s Entertainment Inc (NASDAQ:PLAY)
Q4 2020 Earnings Call
Apr 1, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone. Welcome to the Dave & Buster’s Entertainment, Inc. Fourth Quarter 2020 Earnings Results Conference Call. Today’s call is being hosted by Brian Jenkins, Chief Executive Officer. He will be joined on the call by Scott Bowman, Chief Financial Officer; and Margo Manning, Chief Operating Officer. I’d like to remind everyone that this call is being recorded and will be available for replay beginning later today.

Now, let me turn the conference over to Scott Bowman for opening remarks.

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Thank you, James. And thank you for all of you for joining us today. Before we begin our discussion on the company’s results, I’d like to call your attention to the fact that in our remarks and our responses to questions, certain items may be discussed, which are not entirely based on historical facts. Any of these items should be considered forward-looking statements related to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on the various risk factors and uncertainties have been published in our filings with the SEC, which are available on our website at www.daveandbusters.com under the Investor Relations section.

In addition, our remarks today will include references to EBITDA, adjusted EBITDA, and store operating income before depreciation and amortization, which are financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings announcement released this afternoon, which is also available on our website.

Now, I will turn the call over to Brian.

Brian A. Jenkins — Chief Executive Officer

Well, thank you, Scott. Good afternoon everyone and thank you for joining our call today. As we close out a challenging 2020 fiscal year, I’m pleased to report today that our business is on a clear path to recover. Our stores are reopening, comp sales trends are improving, our financial performance is rebounding, and our liquidity remains strong. As I reflect back on the agility, the resilience and resolve that our team has demonstrated over the past year, I’m extremely proud of what they have accomplished. Dave & Buster’s is a stronger company today, because of the outstanding effort of our team. And for that, I’m grateful.

Following a temporary setback caused by the COVID resurgence over the holidays, our business recovery remained solid momentum. We concluded our fiscal year in January with 107 reopened stores. Our fully operational reopened comp stores generated January sales at 67% of 2019 levels, representing our strongest COVID impacted month in fiscal 2020. In January, 85 stores representing approximately 80% of our reopened stores achieved positive store-level EBITDA enabling us to post our first month of positive enterprise-level EBITDA since the shutdown of our entire store base just over one year ago.

Our operating and corporate teams continue to execute a lean operating model as our stores rebuild their business. When our revenues return to 2019 levels, we estimate the operational improvements we’ve implemented will drive approximately 200 basis points of incremental EBITDA margin over the rate we achieved in 2019, excluding the impact of cost pressures that may emerge over time. With improving COVID trends, higher seasonal sales and stimulus-related demand, our recovery has continued during the first eight weeks of fiscal 2021; sales at our fully operational comp stores have achieved 74% of 2019 levels; total sales reached approximately $150 million; and we posted our second consecutive month of positive enterprise-level EBITDA in February, the first full month of fiscal 2021. Also encouraging, the recent reopening of limited-capacity dine-in and arcade operations at our 11 New York stores and limited-capacity dine-in at seven of our 16 California stores brings us very close to the complete reopening of our 141 store base. In time, these positive developments give us confidence that we will achieve enterprise-level EBITDA profitability for the first quarter of fiscal year 2021, a significant achievement for our team and our company.

Our accelerating recovery illustrates the resilience of the Dave & Buster’s brand and the important role that good, clean fun plays in the lives of our guests. It also validates the changes we made to our business models that have not only enabled us to navigate the challenges of the past year, but to emerge with a stronger, more competitive and more profitable business. Our team is prepared, they’re excited and fully engaged, and we are optimistic about what the future holds in 2021 and beyond.

At this time, I’m going to ask our CFO, Scott Bowman to cover the results of the fourth quarter and to share some insights on our expectations for the first quarter. After that, our COO, Margo Manning, will join me to provide an update on our 2021 strategic plan. Scott?

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Thanks, Brian. I’ll first spend some time summarizing our fourth quarter performance and our liquidity position and then, provide some insights on the first quarter and fiscal 2021. For the fourth quarter, our total revenues of $117 million reflected a 70% decline in comparable store sales. We ended the year with 107 open stores, including three new stores opened during the quarter. By month, overall comparable store sales were negative 69% in November, negative 78% in December and negative 59% in January. January performance improved, mainly due to the benefit from the government stimulus and the reopening of 14 comparable stores compared with December.

Turning to the balance of the P&L, gross margin declined 11 basis points to 82.7% in the quarter, primarily due to inventory write-offs related to closed stores, which was substantially offset by a higher mix of amusement sales. Operating payroll and benefits expense was 27.6% of sales compared with 23.9% last year. This was mainly due to deleveraging management labor due to lower sales and our decision to recall a core group of managers in New York and California to help ensure effective restart capabilities. Other store operating expense was 60.3% of sales compared to 31.2% last year. Most of the deleverage was due to occupancy costs and lower sales, along with deleverage in areas such as utilities and repair and maintenance expense. Throughout the quarter, we continued to ramp up repair and maintenance expense to prepare our stores for reopening and the expectation of higher sales across the chain.

G&A expense of $11.6 million decreased 43% from prior year, primarily due to savings, resulting from staffing reductions as well as lower consulting expense. Fourth quarter EBITDA loss was $20.1 million. That said, we were pleased to achieve positive enterprise-level EBITDA in January, driven by improving sales trends and additional store reopenings.

Turning to the balance sheet. We ended the quarter with $12 million in cash and $280 million of availability under our revolving credit facility, net of $150 million minimum liquidity covenant and $10 million in letters of credit. Total long-term debt stood at $610 million at the end of the quarter, consisting of $550 million in senior secured notes and $60 million outstanding on our revolver. Additionally, at the end of the quarter, we had approximately $5 million in deferred vendor payables, which compares with approximately $17 million at the end of the third quarter. We plan to repay most of this deferred balance by the end of the second quarter of fiscal 2021. Excluding revolver draws and repayments, cash burn rate averaged $2.3 million per week during the fourth quarter.

Deferred rent totaled approximately $52 million at the end of the fourth quarter compared with approximately $48 million at the end of the third quarter. As a result of our continued negotiation with our landlords, we have further extended rent deferrals resulting in expected paybacks of approximately $20 million in fiscal 2021, $25 million in fiscal 2022 and $7 million thereafter. In addition, we expect to receive a tax refund of approximately $11 million either late in the first quarter or early in the second quarter of 2021 resulting from CARES Act legislation. We also expect to receive a tax refund of approximately $50 million late in the fourth quarter or early in the first quarter of 2022 related to the carryback of fiscal 2020 losses.

Turning to capital spending. We completed construction and opened three new stores in the fourth quarter. Overall, we had $54 million [Phonetic] in capital additions for 2020 and $51 million net of tenant allowances.

In summary, our operating results for the fourth quarter reflected encouraging sales recovery trends at reopened stores, and we were very pleased to achieve enterprise-level EBITDA profitability for the first month of January.

Now, turning to our outlook for fiscal 2021. We will not be providing detailed full-year guidance at this time, due to continued uncertainty in the operating environment. However, we would like to offer some insights for the first quarter of fiscal 2021. For the first eight weeks of the first quarter, we’ve seen continued improvement in sales trends with total revenue of approximately $150 million and comp sales down 47% compared to 2019. As a housekeeping note, we will continue to report comp sales for 2021 against 2019 results, as we believe this is a more meaningful comparison versus the COVID-affected 2020 results.

For the first quarter, we expect total revenues to be in the range of $210 million to $220 million, which assumes that the month of April will continue to be a seasonally low volume month as it has been historically. Importantly, as Brian noted earlier, we’re also experiencing meaningful improvement in profitability and expect to achieve enterprise-level EBITDA profitability for the full quarter reflecting another significant milestone in our recovery.

Regarding liquidity, we had approximately $309 million of available liquidity under our revolving credit agreement as of the end of the first eight weeks of the first quarter, net of $150 million minimum liquidity covenant and $10 million in letters of credit. From a capex perspective, we will continue to invest in the business in fiscal 2021 to further strengthen our brand, concentrating on our strategic initiatives that Brian and Margo will discuss next as well as a limited number of new store openings. We plan on being conservative on new store openings for the near term, while our business continues to recover, but we will retain some flexibility to be able to begin construction on additional stores should the business improve more quickly than anticipated.

Overall, we currently have 10 new store commitments in our new store pipeline, which we plan to open four in fiscal 2021, along with a relocation of one additional store. We opened the first of the new stores in early February. In total, we plan to invest $65 million to $70 million in capex in fiscal 2021, net of tenant allowances, while maintaining adequate liquidity to meet our operating needs and to position us to lower our debt profile over time.

Finally, I’d like to provide some insights on the operational improvements and business model initiatives, which we estimate will drive approximately 200 basis points of EBITDA margin improvement as we return to 2019 revenue levels. First, we expect to see leverage from hourly labor as we continue to invest in technology to improve efficiency. The main enablers of this deployment will be tablets for our servers, mobile ordering by our guests and more effective scheduling of hourly staff based on anticipated daypart traffic. We also expect to realize leverage from management labor as we adjust scheduling for peak and off-peak hours and utilize key hourly team members to provide coverage in certain situations.

For G&A, we have scaled down the organization to be more nimble, and we’ll benefit from process improvements identified during the past year. From a marketing standpoint, we’re planning on fewer, more strategically placed promos targeting our spend into key windows during the year. And finally, we will achieve savings from other P&L line items from opportunities realized through a zero-based budgeting approach as we continue to cautiously add back expenses at a slower rate than our sales recovery. While this model does not reflect the impact of cost inflation or other cost pressures that may emerge over time, we believe these initiatives will drive approximately $30 million of EBITDA improvement as we return to 2019 sales levels.

With that, I’ll turn it back over to Brian and Margo to discuss our strategic initiatives.

Brian A. Jenkins — Chief Executive Officer

Thanks, Scott. We are very encouraged by the first quarter momentum that Scott just described to you and are confidently implementing our 2021 strategic plan built around four key pillars that really define the Dave & Buster’s brand. The first is to offer novel food & drink to bring people together. The second is to offer the latest entertainment to enjoy together. Third is to deliver an integrated guest experience with an aligned team. And the fourth is to drive deeper guest engagement.

Our COO, Margo, shared further details of the first and third pillars during the last quarter’s call. She will bring you up to date on our more recent progress and then, I’ll follow up with an update on the second and the fourth pillars. Margo?

Margo L. Manning — Senior Vice President and Chief Operating Officer

Thank you, Brian. I appreciate the opportunity to give an update on the progress we have made on our key initiatives. First, however, I do want to recognize our operating team. They are dedicated to bringing our stores up quickly and profitably. Successfully relaunching these stores takes great effort. They continue to deliver strong performance, and I’m incredibly proud of this team.

As Brian shared, our team has been implementing and refining a number of initiatives under each of the strategic pillars that Brian just discussed. Under the first pillar, offering novel food & drink to bring people together, our teams have been working to establish a stronger, differentiated food identity for the Dave & Buster’s brand, exploring virtual kitchen concepts, optimizing back-of-the-house operations and enhancing our bar menu. Our new food identity, Inspired American Kitchen, is rooted in enhanced flavors and quality ingredients across a condensed number of menu items that we have priced to maintain our historic gross margins. This is the most extensive update to our food offerings in more than 10 years, and it allows our guests to explore new flavors while offering a balanced selection of familiar dishes. Our stores have just completed the second phase of our menu initiatives, taking our menu from 17 items to 22. Completion of the third phase of our menu by late May will bring us back to our final target of 28 items. This represents 33% fewer items than we’re on our pre-COVID menu. We expect our menu to drive an improved guest experience and increased food attachment rate, all aimed toward increasing food and beverage sales. By the end of April, we will have completed the rollout of high-speed ovens at all stores reducing cook times by more than 40% on approximately one-third of our menu.

Additionally, we anticipate having new upgrades to our kitchen management system implemented in all stores by June, which will enable a more seamless flow of food and help reduce overall kitchen ticket times. Combined, our new menu, high-speed ovens and new kitchen management system will enable our teams to deliver dishes to our guests hot and fast. To complement these operational improvements, our marketing department has designed a comprehensive internal and external marketing strategy to tell our guests about the new menu and to drive trial. Throughout our buildings, from the dining room to our Wow Walls and video walls, to our Midway, guests will see mouthwatering pictures of awesome dishes from our new menu. Guests will also experience a new digital menu that is visually appealing and easy for them to navigate.

Our external advertising plan is equally compelling and, for the first time, allocates a majority of our spend toward digital channels to communicate with existing and with first-time guests. I’m particularly excited to see us partner with social influencers to help promote this new menu in a fun and relevant way. To further expand our reach and to leverage our kitchen capabilities, we have tested two ghost kitchen concepts that highlight specific food categories from our new menu. We have focused on concepts that can be rolled out nationally or regionally. Our most recent ghost kitchen test is a concept called Wings Out. It offers a narrow menu of wings and tenders with a variety of bev and interesting sauces to select from. We are excited about ghost kitchens as a new revenue stream. As we consider their potential impacts, particularly in the context of our historically category-leading 10 million AUVs and a smaller store count than many of our competitors, we do understand that there will be a relatively small contributor to total sales. Our ghost kitchens, combined with our core D&B to-go offerings, are currently generating approximately $50,000 per store. However, we are just beginning this journey.

The next step is evaluating additional ghost kitchen concepts and third-party providers beyond DoorDash and Uber reach — Uber Eats as well as working to optimize our promotional strategy to fully capture the revenue potential for these concepts. The third of our four strategic pillars, delivering an integrated guest experience with an aligned team, includes evolving our service model to give guests more control over their in-store experience, growing our culture of special fun by freeing up our team members to engage more frequently to enhance the guest experience and opening new stores with the new service model capabilities from the outset. This involves deploying a combination of a new service model, tablets and a mobile web platform to enable a completely contactless order-pay experience. In our test stores, we’ve seen an encouraging improvement in check turns. We have also been able to expand the size of server sections and reduce our staffing levels to be more efficient.

We have implemented this new model in our reopened New York stores and are proceeding with the staggered deployment plans across the brand, targeting full deployment by late summer. Lastly, as Scott mentioned, we have analyzed our lean operating model and identified where we can capture operating cost leverage. We’re confident that our team will continue to apply the learnings from this past year to be an even better operating team in 2021.

In summary, let me be clear. The overarching objective of our food and service model strategic initiative is to efficiently drive increased sales, improve the guest experience and enhance our long-term profitability.

Now, I’m going to turn the call back to Brian to talk about the two remaining strategic pillars, offering the latest entertainment to enjoy together and deepening guest engagement. Brian?

Brian A. Jenkins — Chief Executive Officer

Thanks, Margo, and thank you for your leadership and your team’s incredible commitment and dedication to this company. The two strategic pillars that round out our 2021 strategic plans are also central to enhancing the guest experience. The first is offering the latest entertainment to enjoy together. Over the past 12 months, our entertainment team has been working on several fronts to support this pillar, starting with six new games that will launch exclusively at Dave & Buster’s this summer. This exciting lineup of new games includes titles such as Minecraft Dungeons Arcade, a four-player cooperative game based on the best-selling video game of all time; Hat Trick Hero, which brings the excitement of competitive act flow to Dave & Buster’s guests in a fun, safe, fast-paced arcade format. Then there’s Hungry Hungry Hippos, which brings a life-size version of the classic board game for up to four players. And we’ll add a brand-new VR attraction to our proprietary platform with the launch of Top 1 VR arcade just prior to the release of the new Top 1 maybe this summer.

We also continue to explore a sports betting partnership to bring sports racing and daily fantasy sports to D&B where allowed by law. We believe this could represent a mean accelerator to our appeal as a sports-watching destination and better leverage our watch assets. We expect to bring our negotiations to a conclusion over the next several months.

Finally, we are committed to broadening our entertainment offering by building a programming capability. We are investing in a dedicated entertainment programming function focused on creating compelling content-based events to drive broader reach and increase visit frequency. The fourth and the final pillar of our 2021 plans is to drive deeper guest engagement to fuel our sales recovery and growth. We look to drive seasonal traffic by focusing our marketing into key media windows highlighting new product news, limited-time offers with a message that connects with our guests on an emotional level.

Following a year of limited media spend, we have two campaigns planned for the remainder of 2021. The first campaign this summer will feature our new menu items, new limited-time drinks and our exciting lineup of new games. The second campaign still under development will target a November-December time frame around the holidays. In response to changes in the media landscape that were accelerated during 2020, our plan also includes modernizing our media mix to reach guests where and how they consume content. This includes shifting a meaningful portion of our media spend from traditional cable to a more flexible mix that leverages advanced TV, digital audio and social channels. This new digital approach provides us with the ability to flex spending up or down market-by-market depending on near-real-time results.

Finally, even during COVID, our marketing and IT teams were pushing forward to complete implementation of a new marketing technology stack. These investments now position us to deliver more personalized targeted marketing messages to a wider variety of digital channels as we return to full operation. Before I close, I want to take a moment to thank retiring Board Chair Steve King for his vision and leadership over the past 15 years at Dave & Buster’s. It has been an honor working alongside Steve over the years. He has been a great mentor and friend to me and to many other members of the D&B family. His influence will be long lasting, and he will be greatly missed. So I want to congratulate Steve and his family on his well-deserved retirement. Steve will sort out the remainder of his term that ends in this June with our annual meeting.

At the same time, I want to congratulate Kevin Sheehan, who has been elected as the new Chair of our Board. As a member of the Board over the past 10 years, Kevin has been instrumental in shaping our success, and I look forward to his continued guidance. He will be working closely with Steve to execute a smooth transition between now and the June annual meeting.

I’ll close today by reiterating how encouraged we are by the momentum we’ve seen during these early months of 2021. We’ve achieved enterprise-level EBITDA profitability for two consecutive months in January and February and believe we will do so for the first quarter of 2021, a significant milestone in our recovery. We are laser-focused on our strategic plans and the execution of enhanced business model, with the potential to generate approximately $30 million of incremental EBITDA as annual revenues recover to 2019 levels. We are optimistic that these efforts, along with the waning COVID challenges, will drive the D&B brand to new heights over time.

And I’m extremely proud of every member of the D&B team for their tenacity and their creativity that they displayed over the past year through an unprecedented challenge. We are moving forward together confidently, excited to reopen the remainder of our stores and to thrive once again as a leader in the combined dining and entertainment space.

Now, we’d like to open the call to your questions. James, you can open it up.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And we’ll take our first question today from Jake Bartlett with Truist Securities.

Jake Bartlett — Truist Securities — Analyst

Thanks for taking the questions. Congrats on the improvement in the results here. Exciting that we’re getting beyond this. Brian or Scott, my first question is just on the trajectory of sales and the improvement. I think you said January was down 59% versus ’19, down 47% in the first eight weeks, but how did those eight weeks look? Has it been a continual or a sharp improvement month-to-month or week-to-week? What is the trajectory of the business?

Brian A. Jenkins — Chief Executive Officer

Jake, I hope you’re doing well. Thanks for the question. Well, first of all, we’re super pleased with the recovery we’ve seen here as we got into the month of January. November and December were sort of tough months for us with the resurgence and a lot of volatility there, yes, but since then we’ve seen a pretty — a very strong rebound really. In January, as I mentioned, we hit a high watermark in terms of our comp sales index at 67% at our reopened, fully operational stores that was really, as I said in my prepared remarks, the best month we’ve seen in 2020.

We do think that the stimulus — economic stimulus that hit really in January over a kind of, for us, about a three, four-week period was impactful and starts to [Indecipherable] from others, but we’re really encouraged about how we’ve kicked off the new year. Through the eight — first eight weeks, we’ve achieved a 74% index of the 2019. Comp sales were down 47%, again now new highs for us. And those numbers have been a bit higher in March. We think that we’ve seen some bolstered demand around the next and the second wave of economic stimulus, sparking demand; and that the trends in COVID continue to be better from those levels off here in the last week or so. And I think we’re seeing a little bit of pent-up demand. And March is a higher seasonal sales period for us. And we do have some spring breaks that have shifted a little bit into March. So March is going to get better than we saw in the month of February. Yes. And I’ll just — just one quick comment, Jake. If you look at weeks — the last couple of weeks, it was good timing with the stimulus checks coming out starting in week seven and continuing into week eight. We have a fair amount of spring break activity in those two weeks as well, and so that just seemed to amplify that. And so it was good timing from that standpoint.

Jake Bartlett — Truist Securities — Analyst

Great. I think really interesting charts you guys put out was — I think it was in October, but it was the trajectory in various kind of stores in different states and how long they’ve been open for. Can you give us an update on how, for instance, your stores are performing in states like Florida or maybe the Southeast? At the time, they had been pretty close or at flat to ’19. What is the state of the sales in those markets now?

Brian A. Jenkins — Chief Executive Officer

Another great question. First of all, we’re seeing pretty broad strength right now in the first eight weeks. It’s a bit stronger in the southern states, Southeast, in particular Florida, if you really want to dive into it. It’s performing really well for us, a little less strength in some of the northern states and some of the Upper Midwest stores. I think some of the pandemic restrictions or lack thereof in some cases are playing a bit of a factor in that, but we’re seeing — when I mentioned that we were at 74% as an overall brand — and the comp set for our business, the top quartile is at 91%. So it’s pretty broad.

Our second quartile is now at 78%. And our lowest — bottom quartile is running about 47%. So we’re pretty encouraged about where we sit right now. We just talked about our New York stores here and right with a — in a spring break week up in the Northeast. So we’re pleased with what we’re seeing here early on. It’s obviously early days, but we’re very encouraged about what we’re seeing in terms of performance across the chain right now.

Jake Bartlett — Truist Securities — Analyst

Great. I appreciate it.

Brian A. Jenkins — Chief Executive Officer

You bet.

Operator

Next, we’ll hear from Jeff Farmer with Gordon Haskett.

Jeff Farmer — Gordon Haskett — Analyst

Great. Thanks and good afternoon. I know you guys are reluctant to provide too much detailed guidance on 2021, but I did want to drill down a little bit on G&A. It looks like your G&A dollars were down somewhere around 30% in 2020 versus 2021. So from a big picture’s perspective, how should we be thinking about G&A in 2021 for the company?

Brian A. Jenkins — Chief Executive Officer

Yes, it’s good question. So I think you — as we think about G&A, we have made some pretty significant reductions in 2020 with COVID. And so, I think the way to think about it going forward is we will add back some G&A, but we’ll be very prudent in doing so. For example, as we talk about new programming initiatives that we want to do and some of the things to support our new initiatives for technology and so forth, we want to very prudently add some headcount to support those initiatives, but we still want to retain most of the savings that we achieved in 2020. And so, I think the overriding theme there is that we’ll be very careful as we add expense back to G&A from a headcount standpoint, but also from other areas like consulting. So we plan on spending less consulting this year, especially than we did back in 2019, because we really have the plan in front of us right now. And we have the initiatives. We have the plan to move forward. And so, we’ll need a little bit less of the consulting expenses here in the near term. It’s more about executing the plan that we have in front of us.

Jeff Farmer — Gordon Haskett — Analyst

All right. And just as a quick follow-up on that, and I did want to ask just one more quick question, but incentive comp, stock-based comp, anything from a true-up perspective that could potentially happen in 2021 that we need to be aware of for G&A?

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Yeah. Stock-based comp, just depending on results, always can vary with results. And so, I think that has the opportunity to be a little bit higher. And so, that goes kind of hand-in hand with our performance.

Jeff Farmer — Gordon Haskett — Analyst

Okay. And then final question, and I might have missed this. I apologize for that, but in terms of that $210 million to $220 million revenue guidance, I wasn’t quite sure what that implied or factored in terms of same-store sales level versus the 2019 level for the quarter and the number of stores that you expect to have open on average for the quarter. So those are two big drivers of that revenue number. I’m just curious if you can provide a little bit more detail.

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Sure. I think the way to think about that is we’ll open just a few more stores. We’re getting close to the end on store openings. So there won’t be a dramatic difference there. As we think about the remainder of the quarter, really there’s too many things that you need to think about. Number one, April is a much lower sales volume month historically than either February or March. Just to give you a little perspective, March in 2019 was the highest volume month from an average weekly sales standpoint and then, February was the third highest. And as you look at April, it’s toward the bottom in terms of average weekly sales historically. And so, a lot of it is just the seasonality impact. And then, the other factor that I would consider was — is the effect of stimulus. So we mentioned that stimulus had a pretty large effect, especially in the last couple weeks, weeks seven and eight. It will still have some favorability probably in the next couple of weeks and — but it won’t be to the extent that we saw in the first couple of weeks. So those will be the key drivers as we kind of think about the revenue for the rest of the quarter.

Brian A. Jenkins — Chief Executive Officer

And Jeff, just one. You asked about what was impact to stores. Obviously, the big base of stores that we have left to open right now are California. Our — we’ve got — as we sit here today, we’ve got 130 stores of our 141 that are open. This is obviously up from where we were into the fiscal year. It was around 107. Nine of that 130 are restricted. When I say restricted, in this sense I’m saying restricted from arcade use. And California with — a couple of stores we have in California, we can’t operate arcade, New Orleans, and Albuquerque. So we’ve got about 121 stores out of 141 that are fully operational today. We expect that to move to 138 total stores next week. So another eight are going to come online and those are primarily California stores. And we are not projecting to have California fully operational with arcade use in the quarter. And as you might expect, that makes it really hard to generate for us significant revenue. So…

Jeff Farmer — Gordon Haskett — Analyst

Right. That’s very helpful. Appreciate it. Thank you very much.

Operator

Next, we’ll hear from Andy Barish with Jefferies.

Andy Barish — Jefferies — Analyst

Hey, guys. I hope you’re doing well. I wanted to try to dive into sort of the marketing side of things. I think on previous calls, you highlighted sort of the summer was going to be more brand relaunch related. Is there a shift going on that to kind of focus more on the specific new food and game offerings?

Brian A. Jenkins — Chief Executive Officer

Good question, Andy. Not really a shift. I think we have, along with our new creative agency, really been working on creatives that will really bring our brand alive in the eyes of our guests and just create an emotional connection with the guests. And I think we’re going to be able to do that by actually featuring some of our great new games and some of our new food items. So we’re — as I said last — on the last call, we plan to try to get out big here.

We’ve been relatively silent for 12 months, and we feel like summer is the right time to strike pretty hard. We’re going to have 22 new food items. We’re going to have six new games that’s going to be one of the bigger spends. We’ve also haven’t spent a whole lot on games in the last 12 months. So we have to be very confident. And of course, we’re going to want to use that in our creative. And so, we will be featuring some of that. We’re not going to be particularly — and Scott mentioned this. We found that we’re creating quite a bit of the demand and recovery without discounting. So it’s not really our intent to discount as heavily and as frequently as we have in the past.

I’m not going to say we won’t do that some, but we are going to be talking about our brand with a larger voice, starting around June. And it will have, as a part of that, content and that message and feature some of the — a new game and some of the food. So we’re really excited about what we have in store here as we hit this June window, late May, June.

Andy Barish — Jefferies — Analyst

Thanks. And then let me follow up with — I appreciate the drivers behind the 200 basis points of EBITDA margin associated with the revenue recovery. Is there an expectation that it’s starting to get built into ’22 can be sort of a full revenue recovery year to look close to 2019, or how are you guys kind of thinking about the ramp obviously given a lot of potential unknowns out there?

Brian A. Jenkins — Chief Executive Officer

Yeah. I guess, I’ll answer it this way. We’re someone who’s taking this a little bit quarter-by-quarter. We’re giving you what we think that we’re going to see this quarter. And we’re reluctant actually to guide full-year sales. Number one, some of this is stores open. We’re extremely optimistic about the recovery, but I think it’s really difficult, Andy, to predict when we achieve 2019 levels. Yes, we’re fighting the battle quarter-by-quarter. We’ve got plans that, I think, are going to set us up really well in 2021. We’re not planning to get back to a 2019 run rate in this year. It could happen, but we’re not projecting that right now, so — and not looking to project 2022 either.

Andy Barish — Jefferies — Analyst

Fair enough. Thanks guys.

Operator

We’ll now hear from Andrew Strelzik with BMO.

Andrew Strelzik — BMO Capital Markets — Analyst

Great. Thanks. Good afternoon everyone. Obviously, the amusement side of the business has been quite strong relative to the F&B business here recently, but there’s a lot that you’re going to be working on. On F&B, it sounds like, going forward. So I guess, with respect to how you expect to exit the pandemic kind of longer term, do you think that the mix of the business will look different than it did pre-pandemic? And have you contemplated any of that in the EBITDA margin target that you’ve given?

Brian A. Jenkins — Chief Executive Officer

So I’ll answer the first part of that and flip it over to Scott, but in terms of what we may expect, we feel like the mix we’re seeing, which has obviously shifted even further into amusement, is likely to continue over the near term. If you think about our brand — we know people. Our guests choose us. And the primary driver for that visit to a Dave & Buster’s is our games. So I don’t think it’s too surprising that we’re seeing a bit of a mix shift here as people want to get back out to their lives and look for an entertainment or experience. So I think we’re going to see that mix be more heavily weighted for some period of time. That doesn’t mean that the incredible efforts by Art Carl and Brandon Coleman, who have been working so hard on our menu, isn’t going to pay some dividends over time, but I think near term, we’re going to see a pretty significant and consistent mix shift to amusement for the foreseeable future here.

Scott J. Bowman — Senior Vice President and Chief Financial Officer

And as we think about the 200 basis points of improvement that we talked about, I did not include any favorability from that in that estimate. And the thinking behind that is we’ll likely see other cost pressures along the way or inflation. And so, that could help offset that, but I did not — and that’s one of the main reasons I didn’t include it in the 200 basis points.

Andrew Strelzik — BMO Capital Markets — Analyst

Got it. Okay. So that’s helpful. And then my other question is going to be around the competitive environment and if you have any updates there. I know it’s kind of difficult to ascertain broadly what’s been going on with — just with closures and things like that, but just any kind of the internal intel you’ve been able to gather would be helpful. Thank you.

Brian A. Jenkins — Chief Executive Officer

Another good question. I don’t know that there’s anything that’s really changed materially since we spoke end of December. Clearly, we — pre-COVID, we’ve seen a lot of, let’s say, massive competitive headwind, a lot of new names and accelerating store growth across that universe of — but as we sit here today, I think a lot of our competitors clearly had to shift their attention, as we have to the core business and managing through whatever liquidity pressures they have and in the face of store closures in some cases and then certainly softer demand that we’re seeing and they are as well, I’m sure. So it’s a bit of a mixed bag.

You can go on to the websites to see that our major competitors, Topgolf, Main Event, they’re essentially fully open right now. How they’re performing, not sure. They have — particularly Main Event has a pretty diverse product offering that requires a little bit more heavy labor-intensive profile to it. And — but I think what we’re going to see is a bit of a lull here as people get their core business back on its feet. And we can go on to websites and see who’s got coming soons, but how quickly those stores actually come back up and actually evolve, I think, remains to be seen this year. What we’re going to do is to concentrate on what we do best and that’s running our stores getting them back up.

I think we’re doing an incredible job right now. We have a lot of liquidity. We have demonstrated, to remind you, a clear path to profitability. We hit that point. We have an extremely attractive financial model with COVID and in my view, much more so than the competitive set, so I feel really confident about our ability to compete. We have a great team. We’re prepared for this post-COVID world, whenever it happens, but we feel really good about where this brand stands.

Andrew Strelzik — BMO Capital Markets — Analyst

Great. Thanks for the color and congrats on the progress that you’re seeing.

Brian A. Jenkins — Chief Executive Officer

Thank you.

Operator

Sharon Zackfia with William Blair has our next question.

Sharon Zackfia — William Blair — Analyst

Hi, good afternoon. I guess, Brian, I want to just follow up on the competitive — I wanted to follow up on a competitive question because you are obviously going to see a lot of fallout in this space and you’ll be a survivor, I mean that’s clear. I guess, instead of kind of take in these savings and flowing them through to the bottom line, have you thought about reinvesting more in the business to really extend a competitive moat coming out the other side? And we all know competitive environments don’t stay benign forever.

Brian A. Jenkins — Chief Executive Officer

That’s — I mean, that’s a really great question. If you think back to 2019, we had talked about some savings we had identified. And so, that’s exactly what you just indicated that our intent was to reinvest in the business. So we are making reinvestments in the business right now around a programming engine, around some of our technology that Margo described a bit, around the service model, really trying to rethink how we deliver the experience in our stores. So we are thinking forward here, and we’ve got some meaningful capital in our budget to make progress in that regard. So we’re going to be very selective and focused on where we make those investments, but I don’t — I totally agree. We agree as a company that we need to invest in the future here, and that’s our intent.

Sharon Zackfia — William Blair — Analyst

If I could sneak in another question, I’m really intrigued by the sports betting, but the parental side of me just wonders. How do you balance that with being a family friendly environment at the same time?

Brian A. Jenkins — Chief Executive Officer

Another really good question. Obviously, we will venture into this over time. Today, we feel like the sports betting could represent a meaningful opportunity for this brand. This is a wave that’s really just kind of beginning. We think states are going to expand the legalization of that over time. We think it could be very complementary to our business. Our core target is adults 21 and up. So we’re going to — we are actively looking to pursue that and we’re in negotiations. That said, as you look at the landscape today, we estimate we could offer online sports betting in about 13 locations or three states. I — there are five or so other states that have made an allowance for mobile sports betting, but present some liquor licensing challenges that we would have to work through. So it’s — this is going to be a bit, let’s say, a journey. And we see this market in the near term could be more like 27, 30 stores out of our chain. So we’re going to see how it works, but we think it’s something that could be very complementary to what we do and so, we are pursuing it.

Sharon Zackfia — William Blair — Analyst

Thank you.

Operator

Next, we’ll hear from Chris O’Cull with Stifel.

Christopher O`Cull — Stifel Nicolaus — Analyst

Yeah. Thanks. Good afternoon, guys. Scott, I apologize if I missed this, but how much of the operational improvements that are expected to improve the EBITDA margin by 200 basis points are already in place today?

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Yeah, good question, Chris. It’s — I’ll give you this, if this may help. If you look at the key drivers here, there’s really three main drivers that drive almost 75% of these savings. First one is hourly labor. And we’ve talked about some of the technology that we’re rolling out with tablets and mobile order and pay, upgrading our kitchen management system, high-speed kitchen equipment, so really investing in that area to try to make our back of house and front of house more efficient, also looking at scheduling improvements and off-peak day parts. And so, hourly labor is a big component of what we’re talking about and the service model surrounding that. Also again, from a management labor standpoint, we will have a reduction in the number of managers in our stores. And in some cases, we’ll augment with some hourly team members or key hourly team members and then, G&A expense that I mentioned as well.

So G&A expense, I think, compared to 2019, it’s more of a like-for-like comparison. We’ll see a fairly nice reduction from 2019 from the headcount standpoint and consulting. And you roll all those three together and you get about three quarters of the savings. Aside from that, there’s other things, other line items that add up the remainder that we’ve identified and we feel comfortable about. And I think, if you just think about it this way, if we were to come back to our 2019 annual volumes tomorrow, which we won’t, but if we did, I feel very comfortable that we would achieve these savings because they really already have been identified. And most of the structure has already been changed to accommodate these savings. So we feel comfortable about the structural changes that we’ve made.

Christopher O`Cull — Stifel Nicolaus — Analyst

Great. And then my other question just relates to labor. I was hoping you could help us understand how labor will be impacted now that the New York stores are open and whether or not you have a sense where we could settle out in the intermediate term once they fully reopen, potentially conditioned on, I guess, a few levels of different index sales performance.

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Yeah. It’s another good question. So New York and then, one in California opens as well. I mean they currently raise the average on hourly labor. So it will definitely come up from where it is and will start to normalize as we get all of our stores open and fully operational. So we got a little bit of runway before that happens, but as that happens, we will settle out definitely at a higher level than we are today, OK? But during that time frame, we’ll also have some of this new technology and service model that will help us sustain a lower level of hourly labor as a percent of sales than we saw in 2019, but it definitely will be higher than it is today because of that.

Christopher O`Cull — Stifel Nicolaus — Analyst

Okay. Great. Thanks guys.

Brian A. Jenkins — Chief Executive Officer

Thank you.

Operator

Brian Vaccaro with Raymond James has our next question.

Brian Vaccaro — Raymond James — Analyst

Hi, thanks. Good evening. I want to circle back on the quarter-to-date. And I think you said the $150 million in sales over the eight weeks. Could you give us how many operating weeks are reflected in that, or maybe just help us level set [Phonetic] where weekly sales dollars are on the fully operational units in February versus March just to make sure we’re all on the same page.

Brian A. Jenkins — Chief Executive Officer

In terms of operating weeks?

Scott J. Bowman — Senior Vice President and Chief Financial Officer

You’re asking about the total number of operating store weeks?

Brian Vaccaro — Raymond James — Analyst

Yes, yes. Because the definition gets a little confusing, the stores open, the stores closed. Obviously, California is open, but the sales are down. So I’m just trying to level set kind of average weekly sales trends that’s reflected in the $150 million quarter-to-date.

Brian A. Jenkins — Chief Executive Officer

Brian, I’m not sure we have the store weeks here to share with you. I don’t have that stat right now honestly. We’ve averaged collectively about $18 million or so a week, but I don’t have the store weeks here to provide to you.

Brian Vaccaro — Raymond James — Analyst

Okay. All right. Maybe we can circle back after, off-line, but I also wanted to clarify the quartile stat that you gave, Brian, I think, earlier in the Q&A, the 91% top quartile; 78%, I think it was for second quartile, etc. Was that a quarter-to-date? That’s over the full eight weeks quarter-to-date period?

Brian A. Jenkins — Chief Executive Officer

That’s right. That is correct.

Brian Vaccaro — Raymond James — Analyst

All right. Okay, great. And then just to shift gears a little bit back to the margin recovery framework you provided, the $30 million in savings, the buckets there, does that include marketing efficiencies as well, or maybe you could just — the $30 million, we’ve got labor, other opex, lead and marketing. Maybe just ballpark kind of how you expect that to fall over the different…

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Yeah. From a marketing standpoint, really the two main things that we see in marketing is, number one, we’re planning on doing fewer promotional discounts. And it’s really a change in thought and really strategy to do more limited-type offers versus kind of always-on type of promotional discounts. And so, that — like that will save us some money. And that’s one of the things that we’ve learned over the last few months. It’s that we’ve done significantly less discounting. And it’s still — we still see sales come in, especially on the amusement side. We haven’t really seen an impact there.

Another smaller item with the menus. It’s kind of a one-page paper-based type of menu, so we’ll save a lot of money there. So the overall savings in marketing won’t be the bulk of it that later you’ll see and that will help us. A couple of other areas that I mentioned, on our special events team we’ve really kind of rethought the organizational structure of our special events team. And we’ve invested in some technology there as well to make ourselves more efficient, thinking more from a kind of a centralized approach using more tools to make us more efficient, so that will help us as well. So those are a couple of other areas, but the other three areas that I mentioned was three quarters of the savings, the G&A, hourly labor and management labor.

Brian Vaccaro — Raymond James — Analyst

Yeah, OK. And on the management labor side, I think, pre-COVID, you had the general manager. And then I think the average store had eight managers per store. Where do you see that settling out in the post-COVID world on average?

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Yeah. So on average, it’s — it will still settle out about between 7.5 and eight or so.

Brian Vaccaro — Raymond James — Analyst

Okay, OK. And that includes the GM.

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Correct.

Brian Vaccaro — Raymond James — Analyst

Okay, great. And then lastly, can you just expand on what you said about the virtual brand? How many concepts are you currently running? I think I heard the wing concept, but is there another one or perhaps that you’re testing? And then, what level of sales per week are you currently generating from the virtual brands? I — you may have said it on the call, but I missed it. Thank you.

Margo L. Manning — Senior Vice President and Chief Operating Officer

Hi. Margo. We have two ghost kitchen concepts right now, the wings out that we have testing in seven of our stores. And then, we have a concept, which is Buster’s American Kitchen, which is basically the Dave & Buster’s menu under Buster’s American Kitchen concept. So we have two ghost kitchen concepts right now and we have one that we have planned to test in September. And I don’t have the weekly sales number right now, but what we had given is the three concepts combined, so the Dave & Buster’s to go, the wings out and then also the Buster’s American Kitchen. We see that averaging at about $50,000 per store and the ones…

Brian A. Jenkins — Chief Executive Officer

Annualized.

Margo L. Manning — Senior Vice President and Chief Operating Officer

Annualized, yeah.

Brian A. Jenkins — Chief Executive Officer

Yeah. I mean we’re — as Margo said, we’re early on here. We’re getting our sea legs around promotional strategy. We — I think we’ve done three — and when we do that, promotional windows, and we’ve seen a pretty good tick-up for the three concepts when we’ve done that. So it’s in our view — and I think Margo said it, we view this as highly incremental here, but we have a 140-store chain. We don’t have 1,000. And our volume is obviously heavily mixed toward entertainment, so the impact that it can have on us versus traditional casual dining is just — it’s not as — it didn’t have the same kind of potential to move the needle for us.

Brian Vaccaro — Raymond James — Analyst

Yeah. That makes sense. Okay. Thank you. I will pass it on.

Operator

We’ll now hear from Brian Mullan with Deutsche Bank.

Brian Mullan — Deutsche Bank — Analyst

Hey, thanks. Just a question on development. It sounds like there’s 10 stores that are in some form of planning now, but looking out beyond that big picture, do you expect Dave & Buster’s to be a consistent unit growth concept once again? And if you do, could you just talk about the longer-term opportunity? Would you do smaller formats than prior? Would you go slower than prior? Just maybe none of that, but how are you thinking about this topic?

Brian A. Jenkins — Chief Executive Officer

Yeah. I mean good question. We have — even pre-COVID, we have communicated that we were looking to moderate our pace of store growth to pivot our attention — more attention toward the core brand in the face of the competition we’ve seen. So as we sit here today, our challenge is to get our stalwart stores reopened and to rebuild that core business. In our view, that is the clearest and quickest path to recovery, I think, for our company and financial health. Not to mention, and this is a real issue, new unit growth at a rapid pace puts a lot of pressure on our store leadership, who are under a lot of pressure right now in the stores. They’re not as deep as we once were. So near term, next year, 2021, we’re going to be really measured. We’re going to be conservative on new store development. As Scott mentioned, we had planned to do four stores. We’ve opened one of them already as one of our kind of new small format stores in Gainesville, doing very well. And we’ve got three more on path. And that cadence for 2021 is really pretty equally weighted. There’s — in that mix, there’s I think two large kind of 35,000-ish square foot, again Gainesville that’s less than 20,000 square feet and then one that’s sort of that medium 30,000 square feet. So it’s going to be measured in 2021. We’ve got a pipeline of about 10 attractive stores that we have right now.

We’re going to be pretty flexible on how we think about those 10, depending on how we recover. And our people pipeline, we’d like to leave flexibility to flex up and/or down depending on how our business recovers. My feeling right now is that there is going to be a time and place for us to really start to accelerate again on units. We feel very confident in our potential that — at that 230 to 250 kind of North American potential, but that’s a much more likely consideration as we head into 2022 and beyond. We’re going to work hard to get this core business back online and performing well. That’s our top priority.

Brian Mullan — Deutsche Bank — Analyst

Okay. Thanks. And then just my follow-up, Scott, I think you mentioned earlier you don’t expect sales recapture to 2019 at any point this year, but if you were to somehow be surprised by that this summer with if this Roaring Twenties theme is real or anything like that, consumer demand, is there a scenario where you could exceed 200 basis points of margin expansion, if the revenue recapture is actually greater than 100%? So if it’s 105%, 106% this summer or even next year, or would there be costs that come in association with that?

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Yeah. I think the way to think about it is, if we were all of a sudden to get back to 2019 levels of revenue much more quickly than we anticipated — I kind of pointed this a little bit before. The changes that are required to get these savings have mostly been made. And so, we’ve thought about the structure that is needed to achieve these savings, and in large part, we’ve already made those changes. And so it’s really a matter of the revenue to increase to show the leverage against that new structure. And so for us, if we saw that happen sooner than later, then I think we would see the savings come through sooner as well because most of the work has already been done.

Brian Mullan — Deutsche Bank — Analyst

Okay. Thank you.

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Sure.

Brian A. Jenkins — Chief Executive Officer

Thank you.

Operator

We’ll now hear from Joshua Long with Piper Sandler.

Joshua Long — Piper Sandler — Analyst

Great. Thank you for taking the question. When thinking about marketing and the shift to more digital, is that more of a strategic pivot here over the near term? As I think about the story over the last several years, incremental weeks and diving deeper into some of these different channels, whether it’s Nickelodeon or other things in the TV category, has been a meaningful driver of sales. And so, just curious on how to contextualize the commentary around moving a significant piece of those dollars into digital and if we should think about that as just a near-term pivot given that there’s a little bit of a lead time in getting back into TV, or is this more of a structural shift longer term into really prioritizing the digital channel?

Brian A. Jenkins — Chief Executive Officer

Well, I think 2020 kind of accelerated our plans. Obviously, we — when we hit COVID, we shut down every element of our media spend we could, as our stores were shut down and canceled whatever we could out of our upfront buy, cable. And we had a little bit of media running for us in the third quarter, but in this kind of environment, number one, we are locking into a more fixed — cable buy is not something we’re really wanting to do, number one. We want to be pretty flexible with the media plan.

And then, secondly, as I look at how our stores are recovering right now with limited media, we’re super encouraged by that. We had an sort of always-on strategy. We’ve gotten ourselves, as you point out, to being on TV, on some channel virtually every week of the year. And so, strategy this year as we come out of this COVID situation, and we’re going to learn some things by it, is to pivot more heavily into digital channels. We spent a significant amount of effort during the COVID shutdown on developing out our marketing tech stack and it is our intent to utilize that to really reach our guests where they are, and that’s not always on broadcast TV. So we’re going to lean into that much more heavily than we had anticipated pre-COVID. Number one, it gives us a lot of flexibility to cut it on and cut it off. And we’re going to use this time — in my view, when you have disruption, you can use the time to think differently about a lot of things. So we’re going to do that here, and we’re going to see what we can deliver.

Joshua Long — Piper Sandler — Analyst

That makes sense. I appreciate that color. And then secondarily, thinking about guest engagement and really leaning into digital, can you talk about where you are on that journey in terms of understanding and developing more of that conversation or that one-to-one marketing opportunity with your guest set either through your digital app or maybe with some of the forthcoming plans on investing in the digital channel?

Brian A. Jenkins — Chief Executive Officer

Well, as I mentioned, 2020 and really early in 2021, we worked hard to put in place a number of new tools within our tech stack. One was a new CDP system where we really can collect and organize, as you might imagine, our customer data into profiles, which gives us to — an ability to create targeting look-like audiences and that sort of thing and help our — reduce our media costs and improve our efficacy here. And that’s something we’re looking to unlock. We’ve invested in a sales force marketing cloud and a CRM system. That’s big for us. We did that in the heat of COVID in July of 2020, so — and we’re really looking to integrate that with our CDP. And that’s — so that was a heavy, heavy lift for us in 2020. And there’s another, a whole — I’ll say we’ve got two other key ones, but I think our marketing team is really armed right now with the tools they need to really engage with our guests more on a one-on-one level, as opposed to what has historically been broadcast TV as the only real play in our playbook.

Joshua Long — Piper Sandler — Analyst

Thank you.

Operator

Our final question will come from Jon Tower with Wells Fargo.

Jon Tower — Wells Fargo — Analyst

All right. And well, I will not take much time. Most of the questions have been answered, but I was curious, if you guys have had any chance to reach out to a number of your core customers that haven’t been able to visit your establishment during the pandemic or first, what they’ve been doing to entertain themselves during the crisis. Meaning, have they decided to pick up their gaming elsewhere? Have they not really engaged in any sort of amusements the way that you guys offer them in your stores?

And then frankly, anything — in the stores that you have reopened, what are you seeing with respect to amusement use within the stores? Meaning, are consumers staying away from highly contact games like pop-a-shot, or are you — or a moving back to that as quickly as you would have anticipated?

Margo L. Manning — Senior Vice President and Chief Operating Officer

So I’ll take the latter part of the question and just let you know, it’s the guests have been coming back. It’s been great to see the stores fill up with guests that are excited to be back at Dave & Buster’s and for us to welcome back to the fun, but what we’ve seen is the guests have been really embracing just coming back and having the Dave & Buster’s experience the way they’d like to have it. We have then social distancing not only in our dining rooms, but also in our midways. And we have sort of tremendous amount of efforts into ensure that we have sanitation stations and really on every shifts, constant cleaning that’s going on through the stores, including the midway and including our games. And so, what we found is the guest is coming back and enjoying all of the games, and we’re thrilled by that. And we’re thrilled to be able to provide the fun, but we haven’t seen any modification in their behavior in the midway.

Brian A. Jenkins — Chief Executive Officer

And I guess the other — I guess, the first part of that question, which is maybe more around how we’re staying in touch with the guests and getting feedback. Well, the reality is with — in 2020, when we were looking to make significant reductions to our cost structure, we discontinued, well, a lot of things and one of which was some of our guest surveys and all those sort of things. So just recently — when I say recently, I’m talking about last month. I mean we’re — it’s ongoing right now, the implementation. We’ve reactivated with a new partner a customer feedback and collection system that we actually feel a lot better about than what we had pre-COVID, but to say we haven’t commissioned, Jon, significant work in research and/or our normal survey-type activity since COVID started. And we’re really just right now starting to reinvest in that. We think it’s important, and we’re spending money on that, but most of the stuff that we’ve been looking at over the last year are commission-type research by other third parties and not ourselves.

Jon Tower — Wells Fargo — Analyst

Got it. Thank you. And best of luck.

Brian A. Jenkins — Chief Executive Officer

Thanks, Jon.

Operator

And that will conclude today’s question-and-answer session. I will now turn the conference over to Brian Jenkins for any additional or closing remarks.

Brian A. Jenkins — Chief Executive Officer

All right. Well, thank you for joining our call today. Sorry, we ran a little long. We wish you and your families a safe spring. Hope you have a great one. And I hope you’ll come out to one of our Dave & Buster’s locations really soon. They are going to be open really soon. We’ve got a few left, but please come out and see us. Have a great night.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Scott J. Bowman — Senior Vice President and Chief Financial Officer

Brian A. Jenkins — Chief Executive Officer

Margo L. Manning — Senior Vice President and Chief Operating Officer

Jake Bartlett — Truist Securities — Analyst

Jeff Farmer — Gordon Haskett — Analyst

Andy Barish — Jefferies — Analyst

Andrew Strelzik — BMO Capital Markets — Analyst

Sharon Zackfia — William Blair — Analyst

Christopher O`Cull — Stifel Nicolaus — Analyst

Brian Vaccaro — Raymond James — Analyst

Brian Mullan — Deutsche Bank — Analyst

Joshua Long — Piper Sandler — Analyst

Jon Tower — Wells Fargo — Analyst

More PLAY analysis

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RH (RH) This autumn 2020 earnings outcomes

Jason Kempin | Getty Images Entertainment | Getty Images

The furniture dealer RH, formerly Restoration Hardware, reported fourth quarter earnings and sales ahead of Wall Street estimates on Wednesday as demand for quality furniture and housewares continued to be robust.

CEO Gary Friedman said the momentum is expected to continue this year. In 2021, sales are expected to grow between 15% and 20% compared to the previous year. That includes expected revenue growth of at least 50% in the first quarter, he said, as the company passes a time when its brick and mortar stores have been temporarily closed due to the Covid pandemic.

“The fact that we have a booming real estate market, record equity market, low interest rates, expectations of economic and labor recovery combined with the recent further acceleration in our demand trends makes us feel more than less optimistic,” Friedman said in a letter to the shareholders.

The RH share gained more than 9% in after-hours trading.

Here’s how the company performed for the quarter ended January 30, compared to the expectations of analysts surveyed by Refinitiv:

  • Earnings per share: $ 5.07 versus $ 4.76 expected
  • Revenue: $ 813 million versus $ 798 million expected

It reported net income of $ 130.19 million, or $ 4.31 per share, compared to $ 68.43 million, or $ 2.66 per share, last year. With no one-time expense, the company made $ 5.07 per share, better than what analysts had been expecting $ 4.76.

Net sales increased from $ 664.98 million a year ago to $ 812.44 million. Adjusted for the cost of goods sold and inventory costs related to product recalls, the company had revenue of $ 812.62 million, exceeding analysts’ expectations of $ 798 million.

In fiscal 2020, RH sales increased 8% to $ 2.85 billion.

“We’re building the world’s most comprehensive and compelling collection of luxury home furnishings,” said Friedman. “The desirability and exclusivity of our product, enhanced in our inspiring spaces, has enabled us to gain significant market share.”

RH’s growth plans in the coming years include further expansion in the food, hospitality and even housing sectors.

The company is planning a shared apartment in Aspen, Colorado. Later in the fall, the first guesthouse concept opens in New York City. It is taking its business to Europe, England and Paris next year.

RH continues to expect this year to be the largest for product launches in the company’s history. Due to the pandemic, it held back the introduction of new home and outdoor collections in 2020. But this week a catalog with 10 new outdoor collections will be sent to customers, which initiated a massive rollout.

The RH share has risen by more than 375% in the past 12 months at the market close on Wednesday. It has a market capitalization of $ 9.3 billion.

The full press release from RH can be found here.

FedEx (FDX) Q3 2021 earnings

Boxes containing the Moderna COVID-19 vaccine are being prepared for shipment at the McKesson distribution center in Olive Branch, Mississippi, United States, on December 20, 2020.

Paul Sancya | Reuters

FedEx reported better-than-expected profits and sales for the last quarter after an “unprecedented” peak shipping season, despite the February storm that “severely affected” operations at several of its major hubs.

FedEx shares rose around 3% in after-hours trading on Thursday.

Here’s how FedEx has performed relative to investor expectations for the third fiscal quarter of 2021 ending February 28, based on Refinitiv estimates:

  • Adjusted earnings per share: $ 3.47 per share versus $ 3.22 expected.
  • Revenue: $ 21.51 billion versus $ 19.95 billion expected.

Revenue increased 23% from $ 17.49 billion in the same quarter last year. The company said the increase was due to “strong volume growth” in domestic home parcel shipping and international shipping.

However, the February storm that hit several of the company’s operational hubs, including the primary FedEx Express hub in Memphis, lowered operating income by approximately $ 350 million.

CEO Fred Smith said in a statement that the company expects “the demand for our unmatched e-commerce and international express solutions will remain very high for the foreseeable future.”

The Memphis-based logistics giant has become a key component of U.S. efforts to distribute Covid-19 vaccines alongside rival UPS. FedEx announced in early March that the third authorized shot had been delivered Johnson & Johnson and expects a “significant increase” in volume in the coming months.

AMC Leisure Holdings, Inc. to Announce Fourth Quarter and 12 months-Finish 2020 Outcomes and Host Earnings Webcast

TipRanks

Goldman Sachs predicts these two stocks will rally over 50%

Stocks started this year on strong gains that fell last week and are now rising again. The big tech giants led the moves, with volatility on Apple and Amazon leading the NASDAQ on its spins. The strategy team at investment bank Goldman Sachs has taken note of the market changes and worked out what this means for investors. Macro strategist Gurpreet Gill, who is closely monitoring bond yields and stock values, said, “The rise in global yields reflects the improved growth prospects to be expected given encouraging vaccine progress and significant fiscal stimulus ahead in the US. [It] also signals higher inflation expectations and in turn pulled forward expectations for the timing of monetary policy normalization. “Monetary policy can be the key to allaying investor worries – and in that regard, Federal Reserve Chairman Jerome Powell’s testimony to Congress is valued positively. In his comments to lawmakers, the head of the central bank pointed out that the Fed had no plans to raise interest rates anytime soon. So far, the outlook has been in line with predictions from Goldman economist Jan Hatzius, who earlier this year expressed his belief that the Fed would hold rates and that 2021 will be a good year for long equities. So much for the macro outlook. At the micro level, Goldman analysts have been busy finding the stocks they think will win if current conditions persist in the short to medium term. In particular, they found two stocks that they believed had 50% or more upside potential. Using TipRanks’ database, we found that both tickers also had a consensus rating of “Strong Buy” from the rest of the street. Vinci Partners Investments (VINP) The first Goldman selection we look at is Vinci Partners, an alternative investment and wealth management firm based in Brazil. The company offers a range of services and funds to its clients, including access to hedge funds, real estate and infrastructure investments, private equity and credit investments. Vinci has global reach and a leadership position in the Brazilian wealth management industry. At the beginning of the new year, Vinci went public in the NASDAQ index. VINP shares traded at $ 17.70 on Jan. 28, slightly below the company’s original price of $ 18. On the first day of trading, 13.87 million VINP shares were offered for sale. After about four weeks in the public markets, Vinci has a market cap of $ 910 million. Analyst Tito Labarta covers this stock for Goldman Sachs and describes Vinci as a well diversified wealth platform with strong growth potential. “We believe Vinci is well positioned to gain market share and outperform market growth in the face of strong competitive advantage. With seven different investment strategies and 261 funds, Vinci has one of the most diverse product offerings among its colleagues in the field of alternative asset management. In addition, Vinci has outperformed its benchmarks across all strategies, has a strong track record, and has received awards from relevant institutions such as Institutional Investor, Morningstar, Exame and InfoMoney. The company has developed strong communication tools to strengthen its brand and institutional presence in the Brazilian market, such as podcasts, seminars, investor days with IFAs and other participation in events and webinars, “said Labarta, assessing VINP with a purchase and its target price of $ 39 implies an impressive upside of 141% for the coming year. (To see Labarta’s track record, click here) A month on NASDAQ has brought Vinci with a 3 positive attention from Wall Street analysts The stock is currently trading for 16 , Sold $ 15, and its average price target of $ 26.75 suggests it has room for ~ 66% growth over the next 12 months. See VINP stock analysis at TipRanks. Ortho Clinical Diagnostics Holdings (OCDX) Die Goldman Sachs analysts have also identified Ortho Clinical Diagnostics as a potential winner for investors, The Un The company is a leader in in vitro diagnostics and works with hospitals, clinics, laboratories and blood banks around the world to deliver fast, safe and accurate test results. Ortho Clinical Diagnostics has several major novelties in its industry: It was the first company to provide a diagnostic test for the Rh +/- blood group for the detection of HIV and HEP-C antibodies, and more recently it has been involved in COVID- worked. 19 tests. Ortho is the world’s largest all-in-vitro diagnostic company, performing over 1 million tests on more than 800,000 patients around the world every day. Like Vinci Partners above, this company went public on January 28th. When Ortho went public, it launched 76 million shares. Trading on the first day was $ 15.50, down from the original price of $ 17. Even so, the IPO raised gross funds of $ 1.22 billion and the subscribers’ over-allotment option raised an additional $ 193 million. Goldman Sachs analyst Matthew Sykes believes the company’s past growth performance warrants positive sentiment and that Ortho is poised to cut its balance sheet. “The key to OCDX’s stock history is to roll back the organic growth rate from a historical pace of roughly unchanged to 5-7% consistently. Given the profitability and potential FCF generation, OCDX could roll back growth to ease the burden on the balance sheet and increase the growth inorganic and organic investments to create a sustainable growth algorithm, “wrote Sykes. The analyst added: “From our point of view the most important growth driver is the increase in the customer value of OCDX for life, which is achieved by the transition of the product range of the Clinical Lab business from a stand-alone instrument for clinical chemistry to an integrated platform and ultimately to an automated platform This transition takes place largely within its own customer base and is therefore not dependent on the shift, but rather serves the need to increase the throughput of a customer’s diagnostic functions. To this end, Sykes values ​​OCDX with a purchase price and sets a price Target of $ 27 fixed target. At current levels, that’s a year-long upward movement of 51%. (To see Sykes’ track record, click here.) Ortho has a long history of delivering results for its clients and the Wall Street is in the mood to rate these OCDX stocks old a strong buy from analyst consensus based on 9 buy ratings set since going public – versus just a single hold. The average price target is $ 23.80, which indicates an upside potential of ~ 33% from the current trading price of $ 17.83. (See OCDX stock analysis on TipRanks.) To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, ‘a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.

Six Flags Leisure Corp (SIX) This fall 2020 Earnings Name Transcript

Image source: The Motley Fool.

Six Flags Entertainment Corp (NYSE:SIX)
Q4 2020 Earnings Call
Feb 24, 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 Q4 and Full Year 2020 Earnings Conference Call. My name is Catherine and I’ll be your operator for today’s call. [Operator Instructions]

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

Stephen R. Purtell — Senior Vice President, Investor Relations, Treasury and Strategy

Good morning and welcome to our fourth quarter and full-year 2020 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.

Mike Spanos — President and Chief Executive Officer

Good morning. Thank you for joining our call. This past year has been exceptionally challenging as the world contends with a pandemic that has upended all of our lives. We are grateful for the first responders who keep us safe and for those who provide the services we all count on every day. I am proud that Six Flags has been able to make a difference in the communities we serve by hosting vaccination sites and testing locations and by donating food banks for those in need. I also want to thank our Six Flags team for rising to meet the challenges of the past year. They have continued to amaze me with their dedication, perseverance and resilience as we found innovative ways to safely entertain nearly 7 million guests as a preferred entertainment choice.

We established the highest standards of cleanliness and safety protocol as validated by local health officials and our guest feedback. We strengthened our liquidity position, significantly reduced our operating and capital expenditures and continue to innovate to safely and successfully reopen our parks. I’ve never been more proud of our company or more confident in our future.

In the fourth quarter, we continued to make significant progress on our transformation plan, which focuses on strengthening our core business. This plan is in full action and will fuel our new strategy to drive long-term profitable growth. Our new strategy is evolutionary, not revolutionary. We are going to do many of the same things we did in the past. We are going to do them better. Specifically, we will modernize all aspects of the guest experience and we will operate more efficiently as an organization.

As I stressed on our last call, our guests still love our roller coasters and funnel cakes. They just want a more seamless experience and we can provide them that through technology. We have divided our call into three parts. First, I will provide an overview of our recent operating performance and the strong demand trends we are seeing. Second, Sandeep will go into more detail about our financial results and give an update on the progress of our transformation plan. Finally, I will return to discuss our new strategy in more detail and review our three strategic focus areas.

We are pleased that our attendance has consistently improved since we first reopened our parks last year in the second quarter. I’d like to highlight a few reasons why we’re so optimistic about the upcoming season despite the challenging operating environment. First, on a comparable period basis, attendance trends in open parks have increased from 20% to 25% of 2019 levels in the second quarter to 35% in the third quarter to 51% in the fourth quarter. We have continued to see strong signs so far this year with attendance in open parks trending at consistent levels as the fourth quarter despite extreme weather conditions in Texas over the past couple of weeks.

Our guest surveys indicate that there is extraordinary pent-up demand for outdoor entertainment options close to home. And we believe that this widespread desire will drive attendance in the coming quarters.

Second, we are encouraged by the resiliency of our Active Pass Base which was approximately flat between the third quarter and fourth quarter of 2020. Even more encouraging, the number of members who retained their memberships after their initial 12-month commitment period, our most valuable guests, is actually up versus this time last year. We see the strong retention of our members even in the midst of a pandemic as a testament to our unique offering and our loyal following. Once our parks are back up and running at full capacity, we expect that our Active Pass Base will quickly ramp back up to previous levels and beyond.

Third, the pandemic encourage us to think creatively about how to maximize use of our parks. Both the creative solutions we found and the underlying dynamism of our team will continue to drive growth well past COVID. Our drive-through safari operators have separately gated attraction through the Thanksgiving weekend. Demand was so high that we will operate the drive-through safari again starting in March 2021 creating the longest season in the Animal Parks history. In the fourth quarter, we also offered drive-through or walk-through holiday experiences with our rides at four of our theme parks giving our guests the opportunity to celebrate the season with lights, beloved characters and festivities. These events proved so popular that we extended them into January. Going forward, we expect to continue many of these events, which will allow us to extend our operating season and give guests even more reasons to visit our parks throughout the year.

So while the environment remains fluid, we are encouraged by recent trends and are optimistic about both the short and long-term prospects of our business.

I will now turn the call over to Sandeep, who will give us some more details about the quarter and our transformation efforts. Sandeep?

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Thank you, Mike and good morning, everyone. Results for the fourth quarter and full-year are not comparable to prior year because of temporary park closures, modified operations and attendance limitations. Total attendance for the quarter was 2.2 million guests, 338,000 of which came from the four parks that offered modified Holiday in the Park lights without rides and our drive-through safari in New Jersey.

Revenue in the quarter was down $152 million or 58% to $109 million as a result of a 65% decline in attendance. Sponsorship, international and accommodations revenue in the fourth quarter declined by $8 million due to the deferral of most sponsorship revenue and the suspension of the majority of our accommodations operations. Guest spending per capita in the quarter increased 17% driven by a 16% increase in admissions spending per capita and a 19% increase in in-park spending per capita.

The increase in admissions spending per capita was driven primarily by recurring monthly membership revenue from members who retained their memberships after their initial 12-month commitment period, as well as an increase in the mix of single-day guests. The increase in in-park spending per capita was primarily driven by a higher mix of single-day guests who tend to spend more per visit.

In addition, revenue from recurring monthly all-season membership products such as the all-season dining pass contributed to the increase. Attendance from our Active Pass Base in the fourth quarter represented 55% of total attendance versus 71% for the fourth quarter of 2019 demonstrating our success in attracting visitation of single-day guests.

On the cost side, cash, operating and SG&A expenses decreased by $30 million or 18%, primarily due to the following: first, cost saving measures, primarily related to reduced salaries and wages and lower Fright Fest and Holiday in the Park related costs due to the restricted operating environment and our organization redesign completed in October; second, lower advertising costs; third, savings in utilities and other costs related to the fact that several of our parks were not operating or were operating with a reduced product offering.

These cost savings were offset by a charge of $19 million due to an increase in legal reserves. The total amount recorded reflects managements estimate of the probable outcome of a legacy class action lawsuit. Excluding the litigation charge, cash costs decreased by $49 million or 29%. While we have taken measures to reduce our variable costs, we retained 90% of our full-time members and maintained their benefits in order to position ourselves to reopen parks as safely and as soon as possible. We reduced salaries of all employees by 25% during 2020 in order to preserve cash and our Directors also deferred their compensation for the last three quarters of 2020. Several of them, including our retiring and new Chairman, opted to take that compensation in the form of stock. Due to the improving outlook, we have restored all our employees to full salaries, with the exception of our CEO who opted to be restored in March. Although these actions offset our cost reduction efforts somewhat, we believe they were the right decisions for both the short and long-term.

By keeping our parks in a state of readiness, we were able to maximize the number of days we could operate. We also were able to keep our guests engaged, our employees motivated and our parks prepared for 2021.

Adjusted EBITDA for the quarter was a loss of $39 million which included a $19 million increase in legal reserves compared to income of $72 million in the prior year period.

Moving to full year performance. Attendance of 6.8 million guests was down 79% from prior year. Total revenue of $357 million was down 76% driven by lower attendance due to park closures, limited operations. Total guest spending per capita increased more than $6 or 14% due to a higher percentage of single-day guests and the positive revenue impact from members who have remained past their initial 12-month commitment period. Attendance from our Active Pass Base for the full year represented 56% of total attendance versus 63% for full year 2019.

Cash, operating and SG&A expenses were down 35% for the year due to cost savings measures taken immediately after we suspended operations. This cost reduction offset a portion of the revenue decline resulting in an adjusted EBITDA loss of $231 million. Fully diluted GAAP loss per share was $4.99, a decline of $7.10 primarily due to the lower attendance in our parks. We are making significant efforts to ensure the continued loyalty of our Active Pass Base. We extended the use of all 2020 season passes through the end of 2021. For our members, we added an additional month to their membership for every month they paid when their home park was closed. We are also rolling out a gift card option in the second quarter that members can choose to use in our parks in lieu of adding additional months to their membership.

Finally, all members have the option to pause their membership payments at any time through spring 2021. However, we have offered a menu of benefits including upgrades to higher membership tiers if they elect to continue on their normal payment schedule. As of today, only about 20% of current members have chosen to pause their membership. We anticipate that most of these paused members will return to active paying members once we reopen our remaining parks.

We are pleased with the retention of our very large Active Pass Base, which included 1.7 million members and 2.1 million season pass holders at the end of 2020. Our Active Pass Base was approximately flat compared to the end of the third quarter 2020 when we had 1.9 million members and 1.9 million season pass holders. Our Active Pass Base at the end of 2020 is down 51% compared to the end of 2019. While this is a significant decline, it is important to assess this in proper context. This decline is almost entirely due to lower sales of new season passes and memberships during 2020 as they were difficult to sell with so much uncertainty during the pandemic.

We also did not hold our usual pass sales events including our flash sale in September, which contribute significantly to our year-end Active Pass Base. That being said, because we extended our 2020 season passes through the end of 2021, our Active Pass Base, as of today, is down less than 10% versus the same day last year, which preceded the pandemic’s impact. We believe this represents a more meaningful comparison for our Active Pass Base heading into the 2021 operating season as we believe the season pass holders and members who were extended will visit our parks in 2021. Looking ahead, we expect the Active Pass Base trends to continue to improve as we start selling more new passes and memberships.

Deferred revenue as of December 31, 2020 was $205 million, up $61 million or 42% to prior year as we expect to recognize most of this deferred revenue in 2021. The increase was primarily due to the deferral of revenue from members and season pass holders whose benefits were extended through 2021, partially offset by lower new season pass and membership sales.

Total capital expenditures for the year were $98 million, a reduction of 30% from 2019. We expect our 2021 capital spend to be slightly lower than 2020 due to the carryover of new rides that were delivered and paid for, but not commissioned in 2020.

Our liquidity position, as of December 31, was $618 million. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $158 billion of cash. This compares to a liquidity position of $673 million as of September 30, 2020.

Net cash outflow for the quarter was $56 million, representing an average of $19 million per month. As a reminder, our net cash outflow in the fourth quarter included partnership park distributions that represented an average of $7 million per month. Our fourth quarter cash flow benefited by $8 million from the sale of some excess land in New Jersey, which was not in our prior estimates. Without the landfill, our net cash outflow was $21 million per month, an improvement from our prior estimates of $25 million to $30 million.

We historically experienced significant cash outflow in the first quarter of the year as the majority of our parks are closed, yet, we incurred an elevated operating and capital expenditures to prepare for our parks opening in the spring. We estimate that our net cash outflow in the first quarter of 2021 will be higher than normal or approximately $53 million to $58 million per month. This is primarily due to three things. First, the normal seasonality of our business. Second, the timing of interest payments on our newly issued $725 million of senior secured debt. And, third, the pandemic-related limitations on our parks, including our California and Mexico parks that typically have year round operations.

We are striving to be cash flow positive for the balance of the year but this is largely dependent upon all our parks opening and attendance levels continuing to normalize.

I would now like to give you an update on the progress of our transformation plan. The headline is this. We are on track with our plan and we are highly confident in our ability to achieve our objectives. Executing the transformation plan will require one-time cost of approximately $70 million through 2021, including $60 million of cash and $10 million of non-cash write-offs. So far, $35 million has been incurred through the end of 2020, including the non-cash write-offs of $10 million. We expect to incur the remaining $35 million by the end of 2021. Approximately two-thirds of the spending in 2021 is related to investments in technology, beginning with the implementation of a state-of-the art CRM system.

We expect the transformation plan to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully implemented and the company is now operating in a normal business environment. In 2021, we expect to achieve $30 million to $35 million from our organization redesign and other fixed cost reductions. In January alone, we realized more than $2 million of fixed cost value due to transformation, so we are well on track to achieve our estimated savings for 2021. We expect to ramp up to the full amount of benefits as attendance grows to 2019 levels.

We have already completed significant portions of the work that will benefit us in 2021 starting with our three cost initiatives. First, as we announced last fall, we reduced our full time headcount costs by approximately 10%. We are piloting new approaches to recruiting and training and moving to centralize some of our back office operations, such as finance, human resources and IT. Second, from a non-headcount cost perspective, we closed offices in New York City and West Hollywood and are in the midst of driving savings through centralized negotiations with a number of our vendors. Initial results are validating the projected value opportunities of these initiatives. Third, from a variable labor perspective, we are piloting our park level labor model, which will allow us to dynamically match stuffing with attendance levels throughout the day. We are conducting this pilot in our Texas parks and plan to roll it out to our remaining parks once we validate that the model is working effectively. We will realize the benefits of the model as attendance levels rise and we will keep you updated as our parks continue to open.

We are also making excellent progress on our revenue initiatives. Specifically, we are testing our new and improved menu assortment, pricing and merchandising strategy in Over Texas and Fiesta Texas. We expect to expand these initiatives to all other parks once they reopen. Our marketing team and media agency have incorporated the use of our media ROI tool and we plan to measure our ROI by park in the future. We continue to improve our website, which we rolled out last fall. We will soon make it available for our parks in Mexico and Canada.

Finally, we continue to make progress with our initiative to bring back single-day visitors, particularly those living far away enough from our parks where a season pass is not an attractive option. While we always prefer to sell a season pass or a membership because of the highest full season revenue, we believe there is a significant opportunity to capture additional attendance by targeting single-day visitors. We are already seeing a positive impact on our attendance and per caps as a result of this initiative.

As we announced last December, we are changing our method of determining our fiscal quarters and fiscal years, such that each fiscal quarter shall consist of 13 consecutive weeks ending on a Sunday. Each fiscal year shall consist of 52 weeks or 53 weeks and shall end on the Sunday closest to December 31. During the years when there are 53 weeks, the fourth quarter shall consist of 14 weeks. Because of this change, our first fiscal quarter of 2021 will end on April 4 instead of March 31 and the current fiscal year will end on January 2, 2022. The purpose of this change is to align our reporting calendar with how we operate our business and to improve comparability across periods.

Looking ahead, the operating environment remains unpredictable. So it’s difficult to project beyond the next three months. For that reason, we are not providing annual guidance at this time. We have announced opening dates for all our parks that are not already open with start dates beginning in March. That being said, we will remain flexible and we’ll be cautious to commit our capital, media and labor dollars only when we believe there will be a strong ROI.

We are extremely encouraged by the improvements in our attendance trends in the face of the pandemic, and we are very excited about the value creation that will come from implementing our transformation plan. We have more work to do, but I’m pleased by our progress so far. The whole company is intently focused on executing the transformation plan over the coming quarters.

Now, I will pass the call back over to Mike who will tell you more about our strategy.

Mike Spanos — President and Chief Executive Officer

Thank you, Sandeep. Our strategy is to drive profit from our core business because this will create sustainable value over time. We can grow our business from its core because we operate in a healthy industry that is benefiting from long-term secular trends as consumers increasingly choose to spend on experiences over objects. Even within out-of-home entertainment, regional theme parks are a compelling sector because they enjoy high recurring cash flow that has proven to be extremely resilient during downturns. These attributes have enabled our industry and our company to deliver strong revenue and earnings growth over time.

However, over the past few years, we did not evolve at the same pace as our guest expectations. As a result, we underperformed the industry from both a top-line and bottom-line perspective. To reinvigorate profitable growth, our team has reassessed every aspect of our business. We have developed an updated strategy to ensure that we constantly evolve so we not only meet but exceed our guests’ expectations, both now and for many years to come.

So here it is. Our strategy is to create thrilling memorable experiences at our regional parks delivered by a diverse and empowered team through industry-leading innovation and technology. Our vision is to be the preferred regional destination for entertainment and our mission is to create fun and thrilling memories for all. Our core values prioritize safety and the guest experience and drive accountability throughout the organization. Our values will result in a guest-centric culture; a commitment to prioritize the guest at every decision point.

Looking to the future, three key long-term focus areas will drive our strategy. First, modernizing the guest experience through technology; second, continuously improving operational efficiency; and third, driving financial excellence. For each of these focus areas, we will measure our progress based on certain key performance indicators.

For our first focus area, modernizing the guest experience through technology, our goal is to create a seamless and improved in-park experience with new applications of technology. First, we will provide opportunities for our guests to tailor the in-park experience to each of their individual preferences. Second, we will decrease wait times wherever possible, especially for our roller coasters where we are testing several virtual queuing and reservation systems. Third, we will facilitate our guests’ ability and desire to share their experience on social media. Finally, we will improve food and beverage quality and the overall appearance of our parks. In everything we do, we will prioritize the guest experience.

Here are a few highlights of our progress on this focus area thus far. Website redesign; our new simplified website has made it easier than ever for guests to find information about our offerings and to purchase tickets. This has led to higher sales conversion rates and higher per caps.

Customer relationship management; we are in the midst of developing a new CRM platform that will allow us to understand and predict our guests’ preferences from the moment they visit our website to the moment they leave the park. Based on this consumer data, we will begin tailoring our offerings to their preferences and customize their experiences so they get exactly what they want when they want it.

Contactless security; our guests no longer have to wait in long lines or have their bags searched to enter our parks. They now walk seamlessly through our contactless security systems which scans them for anything unsafe and also measures their temperature to ensure safe environment.

Cash card kiosks; our domestic parks that opened for normal operations in the fourth quarter have offered any guests who only have cash the ability to obtain cash cards from kiosks throughout the parks in order to facilitate electronic transactions. This improves hygiene within our parks, while also speeding up transactions and eliminating cash handling costs.

Mobile dining; our guests 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. Mobile dining has also led to higher average checks.

For this first focus area of modernizing the guest experience through technology, the key performance indicators will be attendance and revenue.

Moving on to our second focus area; continuously improving operational efficiency, we will deliver products and services in a more cost-efficient manner, including effectively deploying park-level labor, leveraging our scale of increased purchasing power and optimizing our ride portfolio. We are also focused on increased guest throughput on our rides, as well as our food and beverage locations. As Sandeep mentioned, we have moved quickly to streamline our organization and reduced other fixed costs and we expect to realize $30 million to $35 million of fixed cost savings in 2021.

For the second focus area; continuously improving operational efficiency, the key performance indicator will be operating expense ratio, which is the ratio of our operating expenses relative to our revenue. We will begin to measure this ratio once we return to a more normal business environment.

Finally, our third focus area is driving financial excellence. We expect our transformation initiatives to create a new adjusted EBITDA baseline of $530 million to $560 million once our plan is implemented and we are operating in a more normal business environment. After we achieve this baseline, we believe our strategy will allow us to grow revenue at low-to-mid single-digits, in line with the overall out-of-home entertainment industry. Combined with our annual productivity initiatives, we will continue to invest back in our parks and improve margins to accelerate annual adjusted EBITDA growth to a range of mid-to-high single-digits. In addition, we will be disciplined in the way we allocate capital to ensure we deliver sustainable earnings growth.

We have developed the following capital allocation priorities to guide our path toward financial excellence. First, invest in our base business to facilitate profitable and sustainable growth. this includes investments in our park infrastructure, in technology for our parks, and in systems that help us oversee our park operations. This also includes investments in new rides and attractions, as well as other in-park offerings such as food and beverage. We expect to maintain our annual capital expenditures at 9% to 10% of revenue. Second, use free cash flow to pay down debt and return our net leverage ratio to between 3 and 4 times. Third, once we are within our targeted leverage range, consider strategic acquisition opportunities to further build our regional network of parks. Finally, if there are no acquisition opportunities that meet our strategic and financial return thresholds, we will return excess cash flow to shareholders via dividends or share repurchases.

For this third focus area of driving financial excellence, the key performance indicator will be adjusted EBITDA. We have a resilient team and a resilient business. Our team’s focus for 2021 is to safely open all of our parks and ensure that we successfully execute our transformation plan.

I look forward to updating you on our continued progress in the months ahead.

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

Questions and Answers:

Operator

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

Steve Wieczynski — Stifel — Analyst

Hey, guys, good morning. So, Mike, I guess, first of all, when you guys talk about becoming potentially cash flow positive over the last nine months, can you help us understand maybe what is going into making that statement? I guess what I’m trying to get at here is, is that assuming kind of park operations are — everything is basically up and running and still running at some kind of capacity restraint or are there other things that’s kind of embedded in there?

Mike Spanos — President and Chief Executive Officer

Steve, how are you doing? Good morning to you. And I’ll take the first part of it and Sandeep can go from there. I think the first thing is we are seeing consistent and continued improving signs of pent-up demand across all the geographies and we’re ready to operate all of our parks starting in the spring of 2021. As far as right now, which parks are open and not open that go into that, as we saw last week, we got the green light to open up our water park in Mexico, Oaxtepec, February 27 and we got the green light in New York as well. We are still working collaboratively through California, Massachusetts, Illinois and Mexico and Montreal. But remember, it’s a volatile environment as far as where we’re at and we continue to work with the cities and states.

Sandeep has been clear in the past that the assumptions to get to cash flow neutral assumes that we’re roughly at about a 65 to 75 index to 2019 attendance levels. And that’s the guard rail. But again, we’ll continue to keep you posted. So Sandeep anything there I missed?

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah, I think just to be clear on the assumptions. What we’re saying is, once we get past Q1, for the remaining nine months, we are looking to be cash flow positive. It’s to, definitely an extent, dependent on the park opening schedule. We’re ready to open in spring 2021. It’s more a question of getting authorization. And I think if you go back to look at our historical cash flows, the second quarter and the third quarter typically are significant cash generators and if you think back to what happened last year, especially the second quarter and third quarter, we didn’t really have that much of attendance because of the closure for the most part of the second quarter and limited operations in the third quarter. So I think, yeah, it is dependent for sure on the opening cadence, but I think we feel that we can get to positive cash flows if it actually works to what we’re expecting.

Steve Wieczynski — Stifel — Analyst

Okay, got you. Thanks, guys. And then second question, Mike and Sandeep, you guys saw a nice uptick in the fourth quarter in terms of the single-day guest, so to speak, and I’m just wondering, do you have any more data from — meaning, from where did those folks come from? And I guess what I’m trying to get at here is, are these folks that were potentially on a path before and dropped off the paths or are these folks that essentially have never even really visited one of your parks before?

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah, I think on this one, Steve, we are extremely pleased on the single-day ticket strength that we actually have been seeing. And it’s actually not just the fourth quarter. If you go back to Jan, Feb of 2020 before the pandemic hit, we were already seeing significant single-day ticket improvement in terms of penetration and growth. We were up 38%, I think, in the first couple of months of 2020. And I think, historically, we’ve actually probably in the last few years, lost a bit of traction on single-day tickets and this has been an initiative that we actually looked to embrace in the early part of 2020. And, in fact, when we went and talked about the transformation plan back in October, we identified the pricing and promotion initiative as one of our key prongs, and this is a key component of it, because we are looking to drive a mix improvement in our portfolio, but it’s an and, it is not an or.

So these single-day ticket guests are intended to be incremental to the Active Pass Base that we have and I think we feel very pleased that we’re getting traction on this — on the single-day tickets side and what’s really good is, we are actually pleased about our Active Pass Base because we’ve been able to retain — our Q3 to Q4 was relatively flat. And frankly, going back to Q2, Q2 was relatively flat with Q3. So it’s been pretty consistent over the six-month period in terms of the Active Pass Base in total. There has been a bit of a trade between members and season pass holders.

But overall, we’re really pleased about it and in the prepared remarks, I told you, because we extended the season pass holders from 2020 to the end of 2021, given the pandemic, if we look at it today, we’re actually down less than double-digits on the Active Pass base and these season pass holders and members who have been given extensions are going to come and visit our parks and they will definitely drive attendance, and in addition to that, incremental revenue on in-park spend, depending on the type of [Indecipherable]. So overall we feel really good about the single-day ticket attendance being incremental to the Active Pass Base and accretive to our overall attendance long term.

Steve Wieczynski — Stifel — Analyst

Okay, great, thanks, guys. Appreciate it.

Operator

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

David Katz — Jeffries — Analyst

Morning, everyone.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Morning.

David Katz — Jeffries — Analyst

And thanks for all of the detail. When we look forward to this notional or aspirational kind of normal year again, that we all wish for, that you’re basing the $530 million to $560 million EBITDA on, can you talk about the mix of membership/pass members coupled with kind of the spend per capita and how you’re assuming that mix evolves within that kind of $530 million to $560 million, please? Because we can sort of think out loud both ways where perhaps there is less growth in the pass base or membership base and more of it coming from the spend per capita or we could probably argue with the other way too.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

David, great question and I think if you think back to what I just talked about in the earlier answer on single-day ticket penetration in the Active Pass Base, look, I mean, our per caps have been extremely strong as we’ve gone through this past year and the fourth quarter in particular and I think as you have been seeing the sequential acceleration in the per caps within Q3 and Q4, it was driven by a few things. One is, our members on core parks with 12-month commitment period contributed definitely to those admissions per caps growing. In addition, the single-day ticket holders contributed to the growth in per caps. The single-day ticket holders actually spend more per visit in the parks when they come in. So all of that actually contributed to the per cap increase.

However, we do have a good strong retention of the Active Pass Base and I think what we are looking for is the and not the or. So we want to basically layer these single-day tickets on top of the Active Pass Base and as we move into the normal operating seasons, we would like to actually rebuild the Active Pass Base as we go through the year to have a much more balanced approach between single-day ticket and Active Pass Base. It’s not trading of one for the other, it’s just that I think we were further behind on single-day tickets and so the growth was actually a bit higher in the initial phases, but over time, it should be very balanced. And so the revenue mix that should come from that should reflect that balance and the per caps will adjust accordingly.

David Katz — Jeffries — Analyst

And if I can follow that up, right, with what Mike laid out is sort of a flow-through of 1 to 1.5 times growth on that mid single-digit top-line. How does the evolving mix sort of slide the outcome, right, the profit outcome within that? Presumably the more single-day visitors you have, the closer you can get to the top end of that range. Is that a fair assumption?

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah, I would say that — let me just step back a little bit, David, and just say that overall, we’ve been talking about mid-to-high single-digit improvements in EBITDA growth. It is based on productivity improvements, which include elements of the cost structure that we are investing in, as well as the revenue growth levers. And so what I would say is the mix impact is part of our revenue growth plans and so it’s embedded, but I wouldn’t necessarily say that it’s going to hurt us or help us one way or the other. The key is to maintain the balance at all times and we will continuously evaluate if the balance is out of kilter and push one side or the other a little bit more.

But the key over here is we’re looking to make sure that we deliver the option the guest looks for because we can look at both our pricing and promotions approach on the transformation initiative to understand if they are more inclined to go for a single-day ticket because of the cohort they belong to, like Mike described. And — or if they want to basically trade up and buy a season pass or a membership and that balance is something we’ll continuously reevaluate. As part of the transformation, we’ve invested in this revenue management team that is now in place and you have seen the results, you’ve actually seen the results in Q4, there’s more of it that should come as we continue down this year.

David Katz — Jeffries — Analyst

Perfect, thank you, all.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Thank you.

Mike Spanos — President and Chief Executive Officer

Thanks, David.

Operator

Your next question comes from James Hardiman with Wedbush Securities.

James Hardiman — Wedbush Securities — Analyst

Hey, good morning, guys. Really appreciate all the color, particularly, with respect to the longer term outlook, the longer term plan, obviously, we’re in the midst of some pretty unprecedented disruption. But I wanted to continue down this path of what things look like sort of post-pandemic, particularly, on the capital priority side. As you sort of laid out your priorities, it seems like M&A is a higher priority than dividends and share repurchases. Maybe just help us think about why that’s the case. Are you seeing — do you believe that they are better returns sort of in a post-pandemic environment on M&A than dividends and share repos? And then the previous management team obviously had a pretty well-defined strategy for acquiring small parks, water parks, specifically, at the local level. Do you see your M&A strategy as a continuation of that or something that’s new and different in some way?

Mike Spanos — President and Chief Executive Officer

Well, good morning, James. What I would start with is our focus is on our core business and that’s the focus. We want to absolutely leverage transformation to drive real operational effectiveness in our core business and I start there. Second, on M&A, as you know, it’s always been our policy not to comment on that topic, but I want to go to your question as well is we — as we said in our prepared remarks, our first priority, consistent with transformation and our focus on the core business and delivering sustainable value creation there, is to invest in the base business to facilitate profitable sustainable growth out of rides, attractions, other in-park areas. That is absolutely going to be the focus. Second is to use that free cash flow to pay down the debt, get that net leverage ratio to between 3 and 4. And then we’ll consider opportunities on the M&A front and any excess cash will definitely return in terms of dividends and share repurchases. We’re always going to look at the return aspect, but that is the priority. But I think everybody should take away, the focus is the base business here.

James Hardiman — Wedbush Securities — Analyst

I definitely get that. I guess to the question of the previous water park acquisition strategy, is that sort of something we should think about as the previous management team and not continued under your leadership?

Mike Spanos — President and Chief Executive Officer

No, what I would say is we’ve been clear on this, I think with any M&A, it’s always going to be about, is it strategically relevant? Does it deliver shareholder value? And do we think we have the capability and capacity to deal with it? And I think we’re going to look at anything in that framework.

James Hardiman — Wedbush Securities — Analyst

Got it. And then my second question. I wanted to talk about wages, which are obviously an important topic, just given the momentum that a federal minimum wage seems to be gaining here, who knows, obviously, that wouldn’t — presumably wouldn’t happen over overnight, if at all. But just curious where you stand in terms of sort of a weighted average basis in terms of your associates at your parks. And maybe as I think about this $530 million to $560 million baseline EBITDA number, sort of what’s assumed in there? Is there potentially some downside if we do see a ramping up of the minimum wage? Thanks.

Mike Spanos — President and Chief Executive Officer

Sure, sure. Yeah, it’s a really good question, James. Let me start with this is clearly an area that we’ve been focused on in managing for quite some time. As you remember in our earnings baseline, as part of our 2020 earnings guidance prior to COVID, we already reflected minimum wage risk in seven states, which was about approximately $20 million. And so we know and we knew that was an issue, we got ahead of it. So that’s why our second strategic focus area is about continuously improving our operating efficiencies. It’s a major part of the strategy. Now we also believe conversely, there is going to be potentially bigger labor pools out there as well because there is a higher unemployment rate, but I think the last thing I would say on this is, that’s the whole reason we engaged on park-level labor as part of transformation. We knew we had to get ahead of this. So we’re going to continue to monitor it and stay close to the states, but we do think we got the right tools in place with transformation and we also think that our earnings baseline before the pandemic reflected that. Sandeep anything I missed there? Apparently not. So, pick the next question, who’s next in the queue. And one question please, just because I know we’ve got a number of other folks in the queue.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Sorry, Mike, I actually have been on mute. Just to answer the question that you asked specifically, James, on what’s assumed in our EBITDA goal of $530 million to $560 million, we have assumed both the headwind from minimum wage and also the offset from productivity gains from the park-level labor model that Mike just talked about. So that is already assumed in our EBITDA goals.

James Hardiman — Wedbush Securities — Analyst

Got it. Thanks, Mike. Thanks, Sandeep.

Mike Spanos — President and Chief Executive Officer

Thanks, James.

Operator

Your next question comes from the line of Tyler Batory with Janney.

Tyler Batory — Janney Capital — Analyst

Good morning. Thank you. I wanted to circle back on pent-up demand, specifically this year. And in the prepared remarks, you cited some guest survey data but just interested if you can give us a better sense of what indicators you’re looking at that’s informing your opinions on pent-up demand for the second half of this year, whether it’s group bookings or the pass sales. Just trying to get a sense of what’s most important there and what those indicators are telling you about what demand might look like in the summer season.

Mike Spanos — President and Chief Executive Officer

Yeah, good morning, Tyler. I hope you’re well. So I’d start with the broad umbrella of — I think it’s fantastic that as an industry and we at Six Flags have — we’ve entertained nearly 7 million guests and I believe that our safety protocols and standards have created a significant trust lever with our guests, both in terms of recruiting guests, as well as retaining. This gets to the single-day ticket and the retention of the Active Pass Base. So I’d start there because people feel confident in the safety umbrella we give them and I think that is a big deal for the industry and it’s a big deal for us in a positive way. Specifically, to your question, first, we’re seeing very consistent demand across all geographies, which I think, number one, is a really positive sign. Second, as Sandeep mentioned, we continue to see really good attendance trends from 35% in Q3 of 2019 to 51% in Q4 and similar levels year-to-date that includes what has been two weekends of tough weather in Texas. We’re also, as part of that, seeing guest satisfaction surveys now equal or better in our open parks in 2019. We think that’s a very good positive as guests are understanding the safety protocols.

The other item, obviously, is the resilient Active Pass Base. We think that’s a big positive that we’re roughly flat really from actually quarter two and we still have the opportunity with our Active Pass Base to revamp once we reopen up the parks. And then lastly, when we look at our surveys, I mentioned this on the last call, we’ve seen an improvement. As we’ve been surveying guests, we’ve seen that 97% of those surveyed want to visit in a COVID-free environment. Last call was approximately 93% and we’re seeing 96% of guests who are saying they want to visit immediately after taking a vaccine. And as part of that, we are seeing data that people want this close-to-home fun, safe experience and we are seeing data that says people do have more vacation days and they have saved up money, but they want to be able to enjoy it in a safe, fun, close-to-home experience.

And then we’ve also been watching the overseas parks as well. And we’ve seen some good trends there. So we’ll continue to monitor it. We stay close to our guests every week, but we’re ready to go. We’re ready to operate in 2021.

Tyler Batory — Janney Capital — Analyst

Okay, very good. I appreciate the color. I’ll leave it there. Thank you.

Mike Spanos — President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Ian Zaffino with Oppenheimer.

Ian Zaffino — Oppenheimer — Analyst

Hey, great. I’ll kind of touch on that minimal wage question again on the revenue side, maybe just kind of give us an idea of what your demographics are as far as people who are showing up to the parks. Does a boost in minimum wage actually put more dollars into your visitors’ pockets or are you planning for just a higher demographic? Any type of color you could give there would be great.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Ian, you’re right because I think to the extent that there is minimum wage increases in certain of our demographics where we operate, that has got a halo effect on the revenue side as well. I think we’ve talked about this in the past too. But that is a factor and I think that’s part of what plays into the assumptions that I talked about on the $530 million to $560 million adjusted EBITDA goal that we’ve articulated previously and reiterated today. So it’s all in there in the assumptions. The headwind on wage is definitely in there and it wasn’t there back when we guided for 2020. And also the assumptions of improving productivity are in there because of park-level labor. And on the revenue side, the assumptions include the assumptions of benefits from a more disposable income available in those demographics too. So it’s all in there and it’s embedded in the EBITDA goal of $530 million to $560 million.

Mike Spanos — President and Chief Executive Officer

And just quickly to add, I mean we’re roughly — specific, were roughly half teens and young adults, and roughly half families and children. And to Sandeep’s point, we think it absolutely helps in that regard, put more money in their pockets.

Ian Zaffino — Oppenheimer — Analyst

Okay, great, thank you very much.

Operator

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

Eric Wold — B.Riley FBR Capital Markets and Co. — Analyst

Thank you and good morning. I know obviously from the way you talked about today, you’re focused on the core business, improving base and operations and getting those ramped back up. But can you maybe provide just an update as to where you are with potentially restarting the China park development? Have you been in discussion with any potential new partners there since that fell out a year or so ago? And is there a timetable as to kind of when you would want to get that restarted or potentially it becomes maybe too late on that front?

Mike Spanos — President and Chief Executive Officer

Morning, Eric. So we’ve been clear with this and I have stated this in the past, we obviously are — from an international standpoint, we are focused on Qiddiya in Saudi Arabia. And we are excited about the future there. And we do not anticipate any revenue or operations from China in ’21 or moving forward.

Eric Wold — B.Riley FBR Capital Markets and Co. — Analyst

Got it. Thank you.

Operator

Your next question comes from the line of Stephen Grambling with Goldman Sachs.

Stephen Grambling — Goldman Sachs — Analyst

Hey, good morning. Very quick follow-up on the transformation plan. I think last quarter you gave some big buckets on the fixed cost savings. Can you Just confirm the total amount of $40 million to $55 million hasn’t changed and what are the big buckets being achieved this year versus next?

Sandeep Reddy — Executive Vice President and Chief Financial Officer

So I think we talked about a $30 million to $35 million of value being achieved in 2021, which is consistent with what we said last time in October. And I think for what we’re expecting is the $40 million to $55 million is achieved in 2022. And I think that’s the fixed costs, independent of attendance. The total transformation value as we said was $80 million to $110 million with the remaining part of the $40 million to $55 million coming from a combination of the revenue initiatives that we outlined and the park-level labor initiatives that we talked about earlier as well. So, no change really in what we previously communicated. I think from a proof point standpoint, we’re just a month into the year and as I mentioned in the prepared remarks, we’ve already realized over $2 million in the first month of the year.

So we feel pretty well on track to getting the fixed cost savings that we’ve actually outlined for the year. And it’s really coming from a couple of major areas that we’ve outlined in the previous call, which was the org redesign, which we executed in Q4. And in addition to that we also have the procurement effort on non-headcount, which is going to be an additional element that’s going to drive it. So pretty confident of the $30 million to $35 million and we’re going to continue to update you every quarter as we go along on progress that we’re making.

Stephen Grambling — Goldman Sachs — Analyst

And so, just to be clear, it sounds like some of the park-level labor expenses like the system to better forecast attendance and labor needs, maybe that will evolve and be what kind of builds on this into next year.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah, you’re exactly right. So park-level labor is a variable component. So the $30 million to $35 million is fixed costs, independent of attendance. Right? So the park-level labor will flex based on the attendance and also based on when we implement it. The revenue initiatives should also be happening depending on where the attendance basically goes. So we’re going to basically update you on the fixed piece and the variable piece as time goes along. So you know how much of transformation value has been realized.

Stephen Grambling — Goldman Sachs — Analyst

Understood. Clear. Thank you.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Okay.

Operator

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

Paul Golding — Macquarie Capital — Analyst

Yeah. Thanks so much. Mike, you mentioned earlier in the call that you’re testing the virtual queuing and reservation system for some rides. I was wondering just what the outlook is on capacity this year, any limitations and, I guess as an indication of that, whether you’re going to maintain the reservation system to get through the front gate. And then I have a quick follow-up.

Mike Spanos — President and Chief Executive Officer

Yeah, good morning, Paul. How are you? First, on your latter, we have the ability to continue the reservation system and we have used it where we’ve needed to use it based on local, state officials, as well as where we’ve been able to flow capacity and we’ve made decisions park-by-park, based on the local guard rails. As far as capacity in total, to your former question, first, we’re very confident. We have ample capacity to meet pent-up demand and satisfy our safety standards. Remember, the same thing I would stress again, is we’re outdoor, we’re spread over dozens to hundreds of usable acres which allows us to reach high levels versus our theoretical max capacity, while still satisfying social distancing.

And then the third, which you alluded to, when you look at our technology and safety protocols we put in place in 2020, it’s really allowed us to, even beyond the pandemic, control the flow capacity and safely increase throughputs. From the website to going through security, you are not even touched. And I think, lastly, just as a reminder, we only reach our max capacity on roughly a handful of days. So we average about 50% of theoretical max capacity on a pretty typical year. So all that combined with why we’re excited about the progress of vaccines, we feel very good about our capacity to meet that pent-up demand across all geographies. And, as I said, we’re ready to operate.

Paul Golding — Macquarie Capital — Analyst

Thanks for that color. And then just a quick follow-up on the earlier question around international. I know you were saying that you don’t expect to see anymore revenue or EBITDA to come from licensing in China. In parts of the world where maybe COVID wasn’t as protracted, do you still see an opportunity for maybe any new deals where the appetite for mass gatherings may be higher than it is currently in the States?

Mike Spanos — President and Chief Executive Officer

Relative to — you mean in terms of pent-up demand or business opportunity? Just so I’m clear on your question, Paul.

Paul Golding — Macquarie Capital — Analyst

Yeah. Just business opportunities because we know that the China arrangement — that we shouldn’t expect to see anything further come from that. So I guess the question is maybe you…

Mike Spanos — President and Chief Executive Officer

Got it.

Paul Golding — Macquarie Capital — Analyst

[Speech Overlap] opportunities or you’re still open to other opportunities since COVID was not as severe in some other parts of the world.

Mike Spanos — President and Chief Executive Officer

Yeah. Very clear. What I would reinforce again is our focus is delivering profit from our core business. And again transformation is all about driving operational effectiveness of that core business, and that’s going to be our focus.

Paul Golding — Macquarie Capital — Analyst

Got it. Thanks so much, Mike, appreciate it.

Mike Spanos — President and Chief Executive Officer

Yeah, you bet.

Operator

Your next question comes from the line of Alex Maroccia with Berenberg.

Alex Maroccia — Berenberg Capital Markets — Analyst

Hi, good morning, guys. Thanks for taking my questions. Based on some of the technology and park improvements you outlined, it sounds like many of these could be related to the pandemic or at least accelerated by it. And here, I’m talking about contactless security, mobile dining and the cash kiosks, all due to their hygienic benefits. How will you be measuring the return on the investments, both financially and then in terms of customer satisfaction going forward?

Mike Spanos — President and Chief Executive Officer

Alex, I think it’s a really good point. What — I think, first, the pandemic helped us accelerate what we needed to do to be a more guest-centric culture. And as we looked at even the pre-pandemic, as I said in the last call, our guests love our parks, they love our roller coasters, they love our funnel cakes, they just want an easier experience and part of that is just modernizing that guest experience through technology, which is one of our key strategic focus areas. So our measure, our KPI is going to absolutely be attendance and revenue. As we look at that, it should — we should be seeing top-line momentum as we modernize the guest experience through technology and we will obviously continue to look at guest satisfaction surveys and other levels of guest feedbacks. So very consistent, as I said, albeit, attendance and revenue will be the key KPIs.

Alex Maroccia — Berenberg Capital Markets — Analyst

Right. That’s great. Thank you, Mike.

Mike Spanos — President and Chief Executive Officer

Thank you.

Operator

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

Michael Swartz — Truist Securities — Analyst

Hey. Good morning, guys. Just maybe for Sandeep, I think you said that, in your prepared remarks, that each park that was open in 2019 was also open in the fourth quarter of 2020 and I may have missed it, but did you give us the operating days in the fourth quarter versus — of ’20 versus ’19?

Mike Spanos — President and Chief Executive Officer

Yeah…

Sandeep Reddy — Executive Vice President and Chief Financial Officer

So, Mike — sorry, go ahead.

Mike Spanos — President and Chief Executive Officer

I got it, Sandeep. So we’ve been focused on — obviously, on open parks. And as you know, not all operating days are created equal. The way you want to think about it for the fourth quarter is, first, for the days that the parks were open in 2020, comparable operations in 2019 represented approximately 70% of the 2019 total attendance. That was an increase from about 60% at the end of the third quarter. So we feel good about that. We think that’s also another sign of good pent-up demand. Remember, in those numbers, that includes Mexico. Mexico was open part of the quarter but we ended up closing it early. And it also includes the fact we have four additional parks that offer drive-through or walk-through Holiday in the Lights experiences and also the drive-through safari that was open for a portion of the quarter. So — and I think we’re also clear on — in the table — releases, but we had 18 parks, one water park in the Great Escape Lodge were open during that quarter.

Michael Swartz — Truist Securities — Analyst

Okay, that’s helpful. And is there maybe a way to think about that kind of comparable ops percentage for ’21 and maybe how that flows throughout the year? I know first quarter will be constrained but how does that look as we progress through the year?

Mike Spanos — President and Chief Executive Officer

It’s a good point. I mean, we’ve been — it’s, obviously, as Sandeep said, it’s really a volatile environment. And we’ve been very focused on open parks and getting the parks reopened in terms of that focus because we think that’s where it is. So our focus is about getting all the parks open by the spring of 2021 and that would be the guidance I would give you. That is the true north for us is to continue to leverage our safety protocols. We’re collaboratively in those places, we don’t have set dates and to get all the gates open to drive that positive performance, balance of the year.

Michael Swartz — Truist Securities — Analyst

Okay, great. And maybe just follow — sorry, go ahead, Sandeep.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah, just to add on. I think, obviously, once we get open especially across 2021, we should be going to normal operating schedules. So what you’ve seen historically is what you would expect to see if the parks are open. So that’s the objective.

Michael Swartz — Truist Securities — Analyst

Okay, that’s helpful. And maybe just related to that talk about marketing spend, the cadence of marketing spend and maybe how does your marketing strategy compare in 2021 relative to maybe when we were — had normal operations back in 2019?

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah. And I think one of the things that we talked about is, we’re going to be very choiceful about how we deploy our media and which is the effect of the marketing spend that we’re incurring. And I think we’re just [Indecipherable] look at what is happening actually with the pandemic and the pandemic trajectory. So depending on when things become much more clear in terms of pent-up demand being leveraged in a much more significant way, we’ve historically done a lot of advertising and marketing around the time we actually sell our passes, and so that that typically has been done spring and fall. But I think in this year, we could look at it as spring, summer and fall and we will time our spend to make sure we are driving that demand and accelerate it.

Michael Swartz — Truist Securities — Analyst

Okay, great. Thank you.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Sure.

Operator

Your next question comes from the line of Brett Andress with KeyBanc.

Brett Andress — KeyBanc Capital — Analyst

Hey, good morning. Just to be clear on the last point on the operating days. So assuming all of the parks open, how many operating days are you planning for right now compared to 2019? I mean, is this as simple as just taking a normal calendar, backing out 1Q and then maybe adding some of the extensions you talked about earlier? I’m just looking for kind of a ballpark, as you said today.

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Yeah, Brett, I would say, I’ll go back to the last part of what I answered on the calendar. So once we get past spring ’21 and we could reopen, go back to normal operating calendars starting Memorial Day, give or take, sometime in the second quarter. So that is what the expectation is. So if you go back and look at 2019, that should give you a pretty good indication of what the operating calendar would look like. The additional, the add-ons, I would say, that are incremental to that are the safari that became a stand-alone experience, some of the holiday events that we did, which were incremental. But I think that’s the way you would think about the operating calendar.

Brett Andress — KeyBanc Capital — Analyst

All right, thank you for the clarity.

Mike Spanos — President and Chief Executive Officer

Yeah. And Brett, just the last thing I’d add. The reason, and we’ve been clear on this, is just they’re just not created equal as you know. So that’s why we’re not drilling into that as much as just focusing on the calendar of the parks.

Brett Andress — KeyBanc Capital — Analyst

Yeah, understood. Okay, thank you.

Operator

Your last question comes from the line of Ryan Sundby with William Blair.

Ryan Sundby — William Blair — Analyst

Yeah, hey, thanks for taking my question. Mike or Sandeep, just I guess to follow up a little bit on the last question. When you look at adding something like West Coast Customs Car Show at Magic Mountain or even just some of the way you’ve modified operations to do more drive-through or walk-through of the parks, has there been any change in view, I guess, internally on the kind of programing or types of activities your parks need to support it? I guess what I’m asking here is, just given some of the popularity, is there more demand for using the parks than you realized kind of pre-pandemic?

Mike Spanos — President and Chief Executive Officer

Ryan, it’s a good question. I think what you’re seeing is a testament to how we have and will continue to lead innovation and that’s a driver of being the regional entertainment choice and it’s going to be — we’re going to always focus on our core assets and we’re going to focus on our core offerings and if our guests are looking for a product, we can bring it to them safely and it’s cash flow positive on a variable basis, we’re going to do it because we got a great set of team members that can do it. So we will continue to be innovative and listen and learn from our guests and that’s a big part of the guest-centric culture.

Ryan Sundby — William Blair — Analyst

Perfect, thanks, guys.

Operator

And there are no further questions at this time.

Mike Spanos — President and Chief Executive Officer

Thank you, Catherine. For everyone, again, I want to thank you for your continued support. Our guests are eagerly looking for a memorable experience that is fun, safe, convenient, affordable and close to home; something Six Flags is uniquely able to offer. Six Flags is truly the preferred regional destination for entertainment, creating fun and thrilling memories for all. Take care and please stay safe.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Stephen R. Purtell — Senior Vice President, Investor Relations, Treasury and Strategy

Mike Spanos — President and Chief Executive Officer

Sandeep Reddy — Executive Vice President and Chief Financial Officer

Steve Wieczynski — Stifel — Analyst

David Katz — Jeffries — Analyst

James Hardiman — Wedbush Securities — Analyst

Tyler Batory — Janney Capital — Analyst

Ian Zaffino — Oppenheimer — Analyst

Eric Wold — B.Riley FBR Capital Markets and Co. — Analyst

Stephen Grambling — Goldman Sachs — Analyst

Paul Golding — Macquarie Capital — Analyst

Alex Maroccia — Berenberg Capital Markets — Analyst

Michael Swartz — Truist Securities — Analyst

Brett Andress — KeyBanc Capital — Analyst

Ryan Sundby — William Blair — Analyst

More SIX analysis

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Walmart (WMT) earnings This autumn 2021 miss expectations

Walmart A fourth quarter result was reported on Thursday that fell short of Wall Street’s expectations as the retailer seeks to convert the strength of its e-commerce business into lasting momentum and higher profits through increased investments during the pandemic.

Shares fell more than 5% in premarket trading as investors reacted to the retailer’s warning that sales are expected to be modest this year. Earnings per share will fall slightly, but will be unchanged or even higher after the exclusion of sales.

The big box retailer has benefited from pandemic trends as Americans buy more groceries, cleaning products, and other essentials. There was also a boost in the fourth quarter of the fiscal year as many customers issued their stimulus checks. But the pandemic has also increased its costs – in the fourth quarter alone, spending on Covid was $ 1.1 billion.

Part of Walmart’s recent strength can be attributed to investments made long before the health crisis to boost its online business and provide services like roadside collection and fast delivery.

Doug McMillon, CEO of Walmart, told a virtual investor conference Thursday that the company is retooling to better serve customers, find new revenue streams, and create a diverse ecosystem of services, from delivering groceries to people’s refrigerators through to annual health checkups and new types of funding services. It is also building its advertising business. Together, he said they would act as a “flywheel”.

He said it will increase investment to adapt to the significant changes in the retail pandemic in retail. For example, he said Walmart will spend on automation to speed up the number of roadside pickups it can do.

Overall, Walmart is targeting $ 14 billion in investments this fiscal year, from $ 10 billion to $ 11 billion as the company invests in supply chain, automation and customer experience enhancement, said the company’s chief financial officer, Brett Biggs.

McMillon described Walmart +, its subscription service, as “an important part of our strategy”. He said the membership program, launched in the fall, will drive repeat purchases from customers and provide the company with valuable data that it can use to customize its experience and grow its advertising business. The service costs $ 98 per year or $ 12.95 per month.

He said it will too raise US workers’ wagesThis brings the average for hourly workers to over $ 15 per hour.

“This is a time to be even more aggressive because we see the opportunity we have ahead of us,” he said in a press release. “The strategy, the team and the skills are in place. We have momentum with customers and our financial position is strong.”

Stimulus increased sales

In the last quarter, Walmart’s US e-commerce sales rose 69% – a huge number, but the slowest growth rate since the global health crisis began. Revenue from the same store in the United States rose 8.6%, above the 5.8% increase expected by a StreetAccount survey. Subsidiary Sam’s Club also saw low single-digit sales growth in the same business excluding fuel and tobacco.

For the three months ended January 31, Walmart posted a loss of $ 2.09 billion, or 74 cents per share, compared to earnings of $ 4.14 billion, or $ 1.45 last year. The company said a loss in the UK and Japan reduced earnings by $ 2.66 per share, which was partially offset by earnings of 49 cents per share on equity investments.

Without these and other items, Walmart made $ 1.39 per share due to a lack of analyst estimates.

Total revenue increased 7.3% to $ 152.1 billion from $ 141.67 billion last year Wall Street’s expectations of $ 148.30 billion.

Sam’s Club reported that in the same store excluding fuel and tobacco, sales increased 8.5% while ecommerce sales increased 42%.

Biggs told CNBC that the company could get another boost if the government approves a new round of stimulus payments.

“When the money hits we see spending go up pretty quickly and I would expect to see something similar if we get another round of incentives that are obviously being discussed,” he said.

Sales growth in e-commerce is slowing

The slowing pace of the e-commerce growth rate suggests some challenges that will be addressed by the tailwind from global trends of the health crisis. More and more Americans are getting Covid vaccines and are able to spend their budget in other ways, e.g. B. going out to dinner or filling up the gas tank on the way back to the office.

Walmart is also under pressure to turn thriving parts of its business into money makers. Online services that have grown in popularity, such as roadside collection, require additional manpower when employees pick up and package orders. This translates into higher labor costs that Walmart has not passed on to its customers, even if more benefit from the convenience of online shopping.

Walmart’s e-commerce business has grown dramatically but is still not turning a profit. However, according to Biggs, ecommerce margins continue to improve.

Walmart increases its dividend by one cent to 55 cents per share and approves a $ 20 billion share buyback program.

Read the full press release here.

– CNBCs Courtney Reagan contributed to this report.

CVS Well being (CVS) earnings This autumn 2020 beat estimates

People walk past a CVS drug store in Manhattan, New York.

Shannon Stapleton | Reuters

CVS healthFourth-quarter earnings exceeded Wall Street expectations on Tuesday as prescription volume spiked sales and the drugstore chain attracted new customers with Covid-19 testing and vaccines.

The company’s shares fell more than 4% early Tuesday.

The company reported for the fourth fiscal quarter ended December 31, versus analyst expectations, based on an analyst survey conducted by Refinitiv:

  • Earnings per share: $ 1.30 adjusted versus $ 1.24 expected
  • Revenue: $ 69.55 billion versus $ 68.75 billion expected

The drugstore chain posted net income of $ 975 million, or 75 cents per share, for the fourth quarter, compared with $ 1.74 billion or $ 1.33 per share a year earlier.

Excluding items, the company earned $ 1.30 per share, beating the analysts polled by Refinitiv, which was forecasting $ 1.24 per share.

Revenue rose from $ 66.89 billion a year ago to $ 69.55 billion. That’s higher than analysts’ expectations of $ 68.75 billion.

For CVS, the pandemic has brought advantages and disadvantages. On the one hand, the global health crisis has resulted in some people skipping trips to the store and the doctor’s office. This has reduced sales in the store and has resulted in fewer new recipes. On the other hand, fewer visits to the doctor have resulted in lower costs for CVS ‘own health insurance, Aetna it was acquired in 2018. The pandemic has also given the drugstore chain an opportunity to showcase its health services like telemedicine and MinuteClinic, and to open up new business opportunities like drive-thru testing.

Sales in the same store increased by 5.3% in the three-month period compared to the same period last year. In the pharmacy division, they rose 7.5% as prescription volume increased but the front end fell 1.8% as customers had fewer visits and did not have to buy as much flu and cold medication during the pandemic.

CVS warned that the first quarter of the fiscal year will be the lowest earnings quarter of the year due to the weaker flu season and investments in the Covid vaccination program. The health care business will generate higher profits in the first half of the year, but these will taper and drop to their lowest level in the fourth quarter.

CVS predicts earnings per share for 2021 will be between $ 6.06 and $ 6.22, but after adjustments, between $ 7.39 and $ 7.55 per share. Cash flow from operating activities for the full year is projected to be between $ 12 billion and $ 12.5 billion.

Brian Tanquilut, health services research analyst at Jefferies, said the market reaction on Tuesday may reflect disappointment with the company’s outlook for the year. He expects the CVS prognosis to be conservative. He estimates the company has more than $ 700 million chance of delivering Covid vaccines.

Expansion of Covid vaccines

CVS is gradually take on a bigger role with the vaccinesbecause it gets more offer. Last week the Federal government sent cans directly to pharmacy stores – including CVS locations in 11 states.

Speaking to investors and analysts on Tuesday, CVS CEO Karen Lynch said that around 8 million consumers first came to CVS because of Covid testing. She said it expected a similar experience with vaccines.

“We will take this opportunity to create a health experience that shows the value we bring,” she said. “It will create the opportunity to expand our customer base while deepening relationships with current customers.”

She described the federal program with CVS and other pharmacies as “the linchpin of the Biden government’s plan to vaccinate 300 million Americans by the end of the summer”. She said CVS has the capacity to deliver 20 to 25 million doses per month, depending on the offer.

CVS said it ran around 15 million tests across the country. In addition, more than 3 million Covid vaccines have been administered in over 40,000 long-term care facilities.

The drugstore chain and its competitor Walgreens, signed a contract with the federal government in October to give employees and residents of nursing homes and assisted living facilities the opportunity. It started vaccinations in December and plans to deliver both doses in long-term care facilities in mid-March.

Combination of its assets

As the largest pharmacy chain in the country and a major insurance provider, CVS has pooled assets to increase sales and reduce costs. It has turned more than 650 locations into HealthHubs, where people can treat their diabetes, meet with a behavioral health therapist, or even take a yoga class. Some Aetna insurance plans encourage members to go to MinuteClinics in lieu of other health care providers by not requiring co-payment for the visits.

Lynch, the company’s new CEO, has a strong insurance background. Prior to joining the role this month, she was the head of CVS’s Aetna business. She worked for health insurance Cigna and health company Magellan Health Services before joining CVS.

Next year, the company will again participate in the public exchange created by the Affordable Care Act, which will allow people to buy their own health insurance. She said it will be CVS Health-Aetna’s first branded product. She said the exchange has stabilized and has become more attractive as a profit maker.

According to Lynch, CVS is accelerating investments in a broader range of services beyond just filling out prescriptions. She pointed out a program that brings kidney dialysis services home to reduce hospital admissions and an oncology program that matches people with clinical trials.

At the close of trading on Friday, CVS shares were up less than 1% last year. The company’s stock, valued at $ 97.13 billion, hit a 52-week high of $ 77.23 in mid-January. It closed at $ 74.21 on Friday.

Read the full press release here.

Madison Sq. Backyard Leisure Corp. (MSGE) Q2 2021 Earnings Name Transcript

Image source: The Motley Fool.

Madison Square Garden Entertainment Corp. (NYSE:MSGE)
Q2 2021 Earnings Call
Feb 12, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Theresa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Madison Square Garden Entertainment Corp. fiscal 2021 second-quarter earnings conference call.

[Operator instructions] I would now like to turn the call over to Ari Danes, investor relations. Please go ahead, sir.

Ari Danes — Investor Relations

Thank you. Good morning, and welcome to MSG Entertainment’s fiscal 2021 second-quarter earnings conference call. Our president, Andy Lustgarten, will begin today’s call with an update on the company’s operations. This will be followed by a review of our financial results with Mark Fitzpatrick, our EVP and chief financial officer.

After our prepared remarks, we will open up the call for questions. If you do not have a copy of today’s earnings release, it is available in the Investors section of our corporate website. Please take note of the following. Today’s discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results, development and events may differ materially from those in the forward-looking statements as a result of various factors. These include financial community perceptions of the company and its business, operations, financial condition and the industry in which it operates as well as the factors described in the company’s filings with the Securities and Exchange Commission, including the sections entitled Risk Factors and management’s discussion and analysis of financial condition and results of operations contained therein. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On Pages 5 and 6 of today’s earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure.

And with that, I will now turn the call over to Andy.

Andy Lustgarten — President

Thank you, Ari, and good morning, everyone. Let me start by saying that we are thrilled with Governor Cuomo’s announcement on Wednesday that arenas in New York can reopen with limited capacity. This comes on the heels of the governor’s reopening New York City restaurants for indoor dining at reduced capacity starting today. We believe this is the beginning of our path back to normal operations, and we look forward to returning to what we do best.

We’ve been preparing for this moment, working with state and local health officials to develop a comprehensive plan with rigorous safety protocols for our reopening. In addition, thanks to the NBA and NHL, we’ve learned best practices as a number of teams have been playing with limited in-arena fan attendance this season. We think the time is right to welcome back fans, and we’ve been encouraged by the tremendous demand for live events we’ve seen recently. From the success of the Buffalo Bills playoff games to the crowds at the Super Bowl this past weekend, it’s clear that people are eager to gather again.

And we expect to see this enthusiasm once we’re able to reopen our doors to fans, which we intend to do on February 23 with the Knicks and February 26 with the Rangers for roughly 2,000 people per game. These types of events will be taking place not only at The Garden, but also in arenas across New York. And we believe this push forward, coupled with the ongoing vaccine rollout, will pave the way for our other assets and brands to participate in a broader reopening. With this week’s news, we’ve taken the next step and started talking to artists and managers to gauge their interest in playing in The Garden to reduce capacity crowds.

While the economics may prove to be more challenging for concerts, if there’s one thing we know, it’s that there’s an intense desire by the entire industry for the return of live music. Nowhere is this more apparent than the impressive bookings schedule we’ve lined up for the second half of calendar 2021, which has the potential to be one of our busiest ever if we are able to fully reopen. And although it’s still early, we’re also seeing artists hold dates during the first half of calendar 2022. Demand from fans is also strong, as evidenced by our rescheduled shows where 73% of ticket holders have chosen to hold on to their tickets instead of requesting a refund.

We’ve also continued to see strong engagement with our Rockettes and Christmas Spectacular brands, which we believe bodes well for the production’s continued success. Traditional broadcast media still reaches the widest audience for the Rockettes. And their feature performance at Macy’s Thanksgiving Day Parade and the Rockefeller Center Christmas Tree Lighting were seen by more than 29 million viewers. We also partnered with NBC to televise a Christmas Spectacular special, which became one of the season’s most watched holiday shows with nearly nine million viewers over two airings and led to a noticeable bump in ticket sales around those areas.

Social media platforms have become another key tool we’re using to stay connected with our existing audience as we also engage the next generation of fans. This fall, we relaunched the Rockettes’ presence on TikTok, and during the holiday season shared a video highlighting fun facts about the Rockettes that generated more than five million views, significantly exceeding our average views. This enthusiasm from a younger demographic has only reinforced our strong belief in the enduring popularity of the Christmas Spectacular and the Rockettes. Turning to Tao Group.

Tao entered the quarter with a number of its venues, including in New York, Las Vegas and Chicago, opened at reduced capacities. However, as a result of government mandates, select restrictions were reinstated in late fall. For example, in Las Vegas, nightclub capacity was reduced from 50% to 25%. And while venues in New York City were again closed, as I noted earlier, that changed today with indoor dining now reopened at 25% capacity.

In this fluid environment, we are pleased with the Tao Group’s creativity and flexibility, which will help ensure they’re able to reopen their venues quickly as restrictions are lifted. We truly believe that this is a significant moment for the company. And until we can fully reopen, we are confident that the steps we have taken over the past several months to cut costs, raise additional capital and strengthen our balance sheet have provided us with sufficient liquidity to weather this period. While protecting our core business is, of course, our top priority, we are also making important progress on the construction of MSG Sphere in Las Vegas, a venue that we believe will create significant long-term value for our shareholders.

We recently announced that we have assumed the role of construction manager for MSG Sphere. AECOM has transitioned from its role as general contractor to a new service agreement that facilitates their ongoing support through the project’s completion. This new structure enables us to continue benefiting from AECOM’s experience while also giving us greater transparency and control over the construction process. Jayne McGivern, who joined us in 2018, has been named president of Development and Construction and will continue to lead our construction efforts.

As many of you will recall, she has spearheaded a number of large development projects, including her work on Wembley Stadium and leading the development of the O2 Arena. Jayne has taken significant steps to build out our internal construction team, which played an important part enabling us to assume the Construction Manager role. Our internal team now has direct responsibility for strategic planning and the construction time line and also currently oversees 30 AECOM employees who continue to support key areas, including specialist roles, such as health and safety. On the construction front, we remain focused on several of MSG Sphere’s critical path elements, including structural steel work, and we anticipate starting to build the steel frame for the venues group in the coming months.

In closing, we are excited to see the start of live entertainment return to New York. We have already been hosting Knicks and Rangers games at The Garden without fans. And we’re now thrilled that later this month, those teams will play in front of crowds at the arena for the first time since last March. With this reopening, we believe that we’ve started down a path that, aided by vaccinations and better health and safety protocols, will lead to the return of normal operations.

And when that day comes, our premier collection of assets and brands places us in a prime position to capitalize on the significant pent-up demand for live entertainment. I’d like to thank our employees, partners, fans and shareholders for their continued support. With that, I will now turn the call over to Mark.

Mark FitzPatrick — Executive Vice President and Chief Financial Officer

Thank you, Andy, and good morning, everyone. I will start by discussing our second-quarter financial performance, and then I will review our liquidity position. For the quarter, total revenues were $23.1 million, and our adjusted operating loss was $64 million. This compares to $394.1 million in revenues and adjusted operating income of $108.5 million in the second quarter of fiscal 2020 as the vast majority of our operations remained impacted by COVID-19.

Also as a reminder, our results are not directly comparable on a year-over-year basis as the second quarter of fiscal 2020 is based on carve-out financials and does not include the impact of the various agreements between our company and MSG Sports. In terms of our revenue, I wanted to spend a moment discussing the Arena License Agreement with MSG Sports. We were happy to welcome the Knicks back to The Garden in the second quarter. And as a result, we started to recognize arena license revenue and AOI related to these agreements, although at a substantially reduced rate this year given the current environment.

As a reminder, while cash payments from these licenses grow at 3% per year, we recognize the revenue on a straight-line basis over the 35-year term of the agreement. As a result, in this quarter, approximately $1.2 million of the $1.6 million of revenue recorded was noncash. For the purposes of determining adjusted operating income, we exclude the noncash portion of the arena license fee revenue. This adjustment can be seen in the reconciliation of operating income to adjusted operating income on Page 6 of our earnings press release.

So turning to our liquidity position. As of December 31, we had $1.45 billion of cash and short-term investments, which represented an increase of approximately $487 million compared to our September 30 balance of $965 million. This increase was driven by the net proceeds from our $650 million debt raised in November, $6.5 million of drawdowns under our Tao revolving credit facility and $20.6 million from the partial sale of our equity position in DraftKings. As a reminder, we invested approximately $10 million in DraftKings.

And as of quarter end, we have sold shares for total proceeds of approximately $28.2 million while retaining approximately 894,000 shares. These inflows were partially offset by $64 million of operational cash burn for the quarter, or about $21 million per month, which was slightly better than our previously disclosed expectations. We also had $107 million of capital expenditures, which is primarily related to the construction of the MSG Sphere in Las Vegas. Through December 31, project to date construction costs incurred were approximately $645 million, which includes $73 million of accrued costs that were not paid as of December 31 and which is net of $65 million received from the Las Vegas Sands.

In February 2020, we announced the cost estimate for the MSG Sphere, inclusive of core technology and self costs of approximately $1.66 billion, but this is subject to uncertainty given the project’s complexity and more than two years remaining until the planned opening and the ongoing impact to the global pandemic. That said, we continue to aggressively manage costs. We’re happy with the progress we made on the construction so far this fiscal year and look forward to opening the venue in 2023. Finally, I would note that our cash balance as of December 31 included approximately $190 million in deferred revenue and collections due to promoters, which was roughly unchanged since September 30.

With that, I will now turn the call back over to Ari.

Ari Danes — Investor Relations

Thanks, Mark. Operator, can we open up the call for questions, please?

Questions & Answers:

Operator

[Operator instructions] And the first question comes from John Janedis with Wolfe Research.

John Janedis — Wolfe Research — Analyst

Thanks. Good morning. Maybe one for Andy, one for Mark. Andy, starting with your opening remarks.

On a practical level, can you talk about what being able to operate at 10% capacity actually means? And to your point, is talent toward that level? And for other the teams or concerts, does 10% translate to positive cash flow? And then for Mark, just wanted to follow up on the cost of the Sphere project. I’m not sure, but your comments suggest some incremental uncertainty around the cost side and as moving away from AECOM impact, again, the cost or timing of the project.

Andy Lustgarten — President

Thanks, John. So in terms of the 10% capacity, so let me start as I started the call. Like we are absolutely thrilled by this move. This was earlier than we had expected.

We’ve been preparing for a long time. We’ve been working with the government and health officials. I’ll say 10% — we should split the types of events that would come through, right? So the sports teams, which, mind you, as the MSG Entertainment, we have a license agreement where we got paid rental fees as well as shares of ticketing, of suite revenue, of F&B revenue, merch revenue. Since the events are already on because they’re being produced by the sports team, it’s automatically marginally profitable, right, minus the small number of people that we would staff the building to make it worthwhile.

So put that into one bucket of events. The touring business, it’s going to be much more challenging. It’s a big production to put somebody on the road. There’s a lot of pieces, and not only the talent, but the risk involved.

So while we’re enthused by the moving toward capacity, I don’t expect a big piece of the touring market to be on the road at 10% capacity. But we hope that this is the beginning, right? We think this is the beginning of where the governor starts to reopen the economy. And we think that, as the capacity is raised, we’ll see further interest. I mean we’ve had a lot of interest already on 10% because everyone understands that this is the beginning.

And then on top of it, we were a little different than almost any other venues in America because of where we are and our relationships. So there are — it is possible to have one-offs where an artist comes directly to us and either uses our equipment or brings in something small. But that’s a — those will be more one-off events, and the exception rather than the rule. But we really feel this is a great start toward getting us back to normal because this will — 10% is the beginning, not the end.

Mark FitzPatrick — Executive Vice President and Chief Financial Officer

Thanks, John. This is Mark. And I just want to kind of hit on your question about the cost estimate. First of all, just want to clarify upfront, the movement to AECOM had no impact on the cost or the timing of the construction.

So we’re still planning to open the Las Vegas Sphere in 2023. But as you know, last February, we announced the cost estimate was $1.66 billion. And since then, we and the rest of the world were hit by COVID, which ultimately resulted in us announcing last August that we have lengthened our construction timetable by two years. It’s six years later.

We’ve learned a lot more, made some substantial progress on the construction. But we thought it was important to flag that there is uncertainty that we’re seeing around the cost estimate. The uncertainty reflects the impact of the pandemic, which has added another layer of complexity to an already unique project. But as you know, we’ve transitioned to construction manager, which is giving us more — even more control of the progress.

We continue to aggressively manage every aspect of the project, and we look forward to opening the venue in 2023.

John Janedis — Wolfe Research — Analyst

Right. Thank you.

Operator

And your next question comes from Brandon Ross with LightShed Partners.

Brandon Ross — LightShed Partners — Journalist

Hey, guys. I have follow-ups, I think, on each of John’s questions. First, I was hoping to dive a little deeper into the decision to become the construction manager on the Spheres project. Maybe if you could walk us through the rationale and benefits for taking that over.

And is there anything to glean about your plans for future venues from that decision?

Andy Lustgarten — President

So as I mentioned, we — so we took over as the construction manager. We should take a step back. The strategic decision on how we set up this project was in the cost-plus structure with AECOM, right? We did that for a very specific reason. We thought it would allow us to make some quality of the work, allow us much greater transparency into the costs.

And the labor being — and materials being used by the subcontractor, providing us a much more bigger role in managing our costs overall and what product we’re going to get here, so that we have the best consumer experience. With the — with COVID and the lengthening of our time line, it allowed us to reassess how are we going to work and go forward and how can we actually deliver the best way. So we decided to restructure the project — the relationship with AECOM. It allows us to get the best of really both worlds, right? When it comes to expertise, we’ve got 30 of their top people on the sites still working with us, but at the same time, allows us even greater transparency, even greater control.

And it also gave us a little of time, over the last seven months, eight months to really put together to fill out Jayne’s team to allow her to have the staff that she needs to be able to effectively manage and drive this project, both the time line and the cost structure. And to your point, this is also giving us our ability to think about what and who do we need and what infrastructure we need as we think about the future. So this does give us the further insight when the time is ready that we have the people and we have the infrastructure, and so when that time is there, we will be even better for them in our next project when it occurs.

Brandon Ross — LightShed Partners — Journalist

Cool. And then on the partial reopening, can you just walk us through the health and safety protocols that are now in place? Maybe share the fan experience from when we arrive at The Garden to when we take our seats, and how you see that 10% capacity evolving. What have been the discussions maybe with Cuomo and others about milestones for further reopening from that 10%?

Andy Lustgarten — President

So I’ll start. We are always focused on the guest experience and customer experience. So right now, safety of our guests, our talent and our employees is by far No. 1 and something that we’ve always been focused on, even before the pandemic.

But now we’re going to be even further focused on it. We’ve been preparing for this for a while. Obviously, you could do a lot of preparations, but information keeps on changing. So there’ll be always tweaks as we learn more about the disease and how it affects people.

But in the highest level, we’ve been — we also benefit from when we take a step further back. Our venue was built in 2013 — less than seven years ago, and we have one of the best venues. We’ve got amazing health and safety already built in. We had to supplement it, change filters, add some more touchless sinks.

So those types of changes are in and well thought through. In terms of the customer experience, so there’s going to be — and in safety, COVID tests before the event, health screens. When they’re inside the event, there’s going to be limited specific types of food, and food and beverage in certain locations. You can’t eat on the hallways.

But we’re — it’s going to be the best experience that keeps people safe. We’re going to have obviously social distance within the venue. And we’re going to continue to go above and beyond. We’ve been working with many medical professionals to make sure that we’ve got the best state-of-the-art technology.

And of course, we’re going to acquire face masks, temperature checks on the entrance. And the governor’s office has been great. I don’t think that there’s a specific number that we know of when the next capacity jump will be. But he’s clearly created a road map in other types of industry.

When inflection rates are down and hospitalizations are down, parts of the economy open. And so as — if we continue on the path that we’re on, I think we’re on a path to continue to increase capacity. But obviously, this disease will change in — over the next few months and we might be in a different place, both very good or very bad in the future. It looks like everything seems to be going in the right direction, and we feel pretty good.

So we feel good about this at the beginning of the opening.

Brandon Ross — LightShed Partners — Journalist

Awesome. Thank you.

Operator

And your next question comes from the line of David Karnovsky with J.P. Morgan.

David Karnovsky — J.P. Morgan — Analyst

Hi. Thank you. Andrew, maybe just to follow up on some of the commentary prior. I guess how solid should we consider the bookings for the back half of the year in the context of potentially still having capacity restrictions? Like at what level do you think artists, promoters — or maybe if it’s easier to answer regarding their own residencies, right, where would you find it viable to have shows at the bubble?

Andy Lustgarten — President

It’s a difficult question to answer directly, right? So it’s obviously 100% capacity. It’s no question, right? There’s just some of the incremental costs around safety and protocols, but most of that’s already in. 10% is very difficult. And on the gravy end, as we get closer to 100%, it’s a lot easier.

So I will say the back half of our calendar is, as we keep on saying, very — we feel very good about right now, both between the artists that move their schedule from before COVID to all the other artists who are looking to be on the road. But I can’t give you the exact answer if the number is 50%, 60%, 70%, 80%, 90%. I think it’s going to be very artist-specific, very promoter-specific in terms of the risk level they want to take on. But with our relationships and its venue, we feel very good that we’ll be the leader of it.

This market is different than other markets. And we think that we’ve shown over and over our ability to deliver for artists amazing experiences as well as our customers. And so we think we’ll be back, and we feel very good about where this is going in the future.

David Karnovsky — J.P. Morgan — Analyst

OK. And then is there any update you’d be willing to provide on how you’re thinking about the return profile on the Sphere, or maybe when you’d be willing to disclose to investors or provide some view into how to think about the financials once the venue is up and running. Thank you.

Mark FitzPatrick — Executive Vice President and Chief Financial Officer

Sure. This is Mark. I can take that one. So look, I think we just want to reiterate, we continue to believe that MSG Sphere will create significant long-term value for shareholders, and that has not changed.

You’ve heard us talk before about the venue’s unique platform, which will create compelling growth opportunities across the spectrum of opportunities, including events, sponsorships, premier and hospitality. And we believe that this is going to translate in a substantial level of revenue and AOI. So I talked about there being uncertainty due to the pandemic. We also talked about the positive signs we’re seeing, including the pent-up demand for live entertainment that Andy’s noted.

But overall, we’re confident the pandemic will end. We’re confident that Las Vegas will return, and that we’re building a venue that will capitalize on people’s intense desire to gather and take part in new experience. In addition to this, with our extended timetable, we may — has enabled us to preserve cash in the near term. It’s also given us — it’s given Las Vegas time to kind of recover.

So we believe that’s going to be work to our advantage that tourism and convention business will be in full swing by 2023. So in terms of your second question about when we’re going to give additional information, I think with two years left to go, we’re not really ready to get into specifics. But overall, I just want to reiterate, we’re very bullish on the opportunity.

Operator

And your next question comes from the line of David Beckel with Berenberg Capital.

David Beckel — Berenberg Capital Markets — Analyst

Great. Thanks. Thanks for the question. So I had a question on Christmas Spectacular and the Rockettes.

Thank you for all that color regarding engagement and social media. I’m just curious, it sort of dovetails on what you’ve already talked about with respect to reopening. At what point will you need to make a go, no-go call on the Spectacular? And what are some of the contingency plans you have in place for that production this year?

Andy Lustgarten — President

So as I mentioned, we’re very happy so far with the engagement we’ve had through social media and other — and through our special in NBC. And I mentioned earlier, we are — you probably picked up, we’re already on sale. So we’re planning on having our show. And we benefited from the bump from those — that exposure even this past Christmas.

So we’re on sale right now with about 200 shows for the 2021 holiday season. Obviously, we’re going to have to continue to monitor the developments, but we’re really excited about this week’s decision, and we think this is just a path to begin to open. So we’re planning on a show.

David Beckel — Berenberg Capital Markets — Analyst

Great. And just to be clear, at any capacity level, you’ll be having a show?

Andy Lustgarten — President

I didn’t say at any capacity level. But as I said, we think this is the beginning of an opening, not the end of an opening and very much are planning on a higher capacity by next November.

David Beckel — Berenberg Capital Markets — Analyst

Fair enough. Appreciate that. And just as a follow-up, I’m curious if your — the unfortunate circumstances surrounding live entertainment has left some venues and less than ideal financial condition. Are you seeing opportunities for venue acquisition in the marketplace that look interesting as a result of the pandemic? Or is that even a marketplace you’re currently interested in?

Andy Lustgarten — President

Well, let me start. We generally don’t discuss M&A that are — that we don’t have planned or said exactly. But I’ll say, we’re focused right now on the Sphere. That’s our main focus for our company and that’s meaningful growth.

That’s on the entertainment side. Obviously, there is a lot of opportunity, given to your point about the financial conditions of venues, both on the entertainment as well as in our hospitality or in the restaurant business. On the Tao side, we have a really strong management team who is very focused on growth. That could be organically.

Such as in three weeks, we’re opening up a new restaurant, Tao up in Mohegan, or maybe inorganically through either new leases or any opportunity. But I’ll tell you, there’s nothing — so we’re looking at things, but at the same time, we’re very focused on our base business and getting back to operations and growing and getting ourselves back and running.

David Beckel — Berenberg Capital Markets — Analyst

Thanks so much.

Operator

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

David Katz — Jefferies — Analyst

Morning, everyone. Thanks for taking my questions. No. 1, with respect to the Tao Group, can you just talk about whether you can be profitable at this initial stage, or where that pivot point is? And my second question is really around New York sports betting, which has become topical.

What your interest level is, what your expected engagement might be and how you see yourselves playing a role in that? Thank you.

Andy Lustgarten — President

Absolutely. So on the Tao side, it’s — the operating restrictions have been extremely fluid in that environment. So remember, we have both dining as well as nightlife and hospitality. Both don’t necessarily have the same capacity restrictions and don’t necessarily have the same between cities and even within the — cities within state and definitely not — in different states.

So it’s really hard to give you a single number that says here’s where we’re profitable. But I will say, the momentum is moving in the right direction. Today, New York City reopened dining at 25%. It’s been outside, which obviously has been not the best operating conditions.

And I think it’s the first step toward going to higher capacities. There’s still a curfew at 10:00 p.m. here in New York City on entertainment. So that will obviously be a big restriction that will affect performance in the long run.

But again, as things get better, we’re hoping that, that restriction changes as well. In other markets, there’s different indoor dining and outdoor dining restrictions, and it will be — it’s really case-by-case. But we do feel like most of the locations we’re in are all moving in the right direction. Protocols — ensuring our safety and healthy protocols, we’re proving that we can be safe — health and safety — very safe for our customers, and we feel good about Tao’s growth path to profitability.

On the gaming side, yes, there’s been a lot of noise, especially, or a lot of talk right here in New York City about or New York State about gaming, and we’re very thrilled that Governor Cuomo’s recent announcement that they’re intending to pursue mobile sports gaming. So many times, there’s — we very much like sports gaming and what the impact is on consumer experience in terms of engagement. We think that it just further drives people’s interest in sports, so it’s very strong given that we have two tenets, tenants here in New York, The Garden. We note that Governor Cuomo said approximately 20% of all New Jersey sports wagering has come from New York residents.

So we’re very bullish about what does that mean for New York. And you might have noticed that the Meadowlands, which opened in 2018, is now one of the largest sports books in the country. So again, piques our interest as to what we could do here. Obviously, the legislation is going to affect how we could play.

But I’ll note, in D.C., Capital One Arena, with The Wizards and Capital partnered with William Hill to create a sports book. The Cubs in Chicago have partnered with DraftKings and is pursuing a sports book inside Wrigley Field. Those are opportunities for us. And I’ll also note that here at MSG Entertainment, we represent MSG network through an advertising agreement and MSG Sports through a sponsorship arrangement.

And so as both of those businesses continue to receive the benefits of the advertising and sponsorship from sports betting, you will see or sports gaming we will the effect on MSG Entertainment’s results as well. So we feel pretty good. There’s lots of opportunity, and we look forward to hearing more about the rules and the regulations that will be coming into place as mobile sports gaming comes — becomes authorized.

David Katz — Jefferies — Analyst

Appreciate it. Thanks very much.

Operator

And your last question is from Ben Swinburne with Morgan Stanley.

Unknown speaker

Good morning. This is Mary on for Ben. Just one question on reopening in New York. If there’s anything you guys can share on what you’re hearing from the state in terms of for the reopening plans and capacity and what you’re doing during the interim process to prepare for a fuller reopening down the line that can impact the financials that aren’t fully obvious to us today.

Thanks.

Andy Lustgarten — President

Thanks. So I think we talked a lot about the path reopening, and we really — we’re thrilled with the 10%. But it’s really in the sense that we believe this is the beginning of the path toward reopening, not the end of that. There’ll be as — not that — those who follow the governor and, actually, he even said this in the very beginning in terms of the way he’s thinking about reopening New York I think this is eight months ago, right.

He laid out periods of time that said, as caseloads come down, as hospitalizations come down, he opens up certain sectors of the economy. We’re now turning to the entertainment and dining, which I think is a very important sector for New York City to come back because that’s what will drive New York’s resurgence. And so this is the beginning of the reopening. And as caseloads continue to go down and hospitalizations go down, we’re expecting capacity to continue to go up.

In terms of the second part of your question of what would we be hitting? I mean I think, look, we’re — we have an infrastructure. We need to continue to build back up our arena staff and or — including our ushers and F&B. But that’s — it’s — that’s about training and development. And we expect that, that will continue to grow as we increase capacity.

And so we’re very focused on our first event on the 23rd — sorry, 26th? 23rd, right? 23rd and look forward to hosting a next Warriors game, and we look forward to just beginning — the beginning of us welcoming fans back to The Garden.

Unknown speaker

Thank you.

Operator

I would now like to turn the call back over to Ari Danes.

Ari Danes — Investor Relations

Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.

Operator

[Operator signoff]

Duration: 39 minutes

Call participants:

Ari Danes — Investor Relations

Andy Lustgarten — President

Mark FitzPatrick — Executive Vice President and Chief Financial Officer

John Janedis — Wolfe Research — Analyst

Brandon Ross — LightShed Partners — Journalist

David Karnovsky — J.P. Morgan — Analyst

David Beckel — Berenberg Capital Markets — Analyst

David Katz — Jefferies — Analyst

Unknown speaker

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