Q3 2019 Earnings Call

Good day, we'll come to this Peter first third quarter 2019 Conference call Today's conference is being recorded.

I would like to turn the conference over time I call wrestled corporate director Investor Relations. Please go ahead, sir thank.

Thanks, Chloe good morning, everyone can walk into our third quarter earnings Conference call I'm, Michael wrestled corporate director of Investor Relations for C. or is there.

Earlier. This morning, we issued are 2019 third quarter earnings release, a copy of that release is available on our Investor Relations website, and I are dot Cedar fair Dot com under the news.

On the call with me this morning, or Richard Zimmerman here for President in C.E.O., and Brian went around our executive Vice President in C.F.

Four I begin I'd need to remind you that comments made during this call will include forward looking statements within the meaning of the federal security flaws. These statements may involve risks that uncertainties that could cause actual results to differ from those describe in such statements.

A more detailed discussion of these risk you may refer to the company's filings with the Securities and Exchange Commission in compliance with the S.P.C.'s regulation now D. This web cast is being made available to the media and the general public as well as analysts and investors because the web cast is open to all constituents.

Prior notification has been widely and Unselectively disseminated all content on this call will be considered fully disclosed.

Now I'd like to start all over the Cedar Fancy Yo Richard Zimmer richer.

Thank you Michael Hi, good morning, everyone.

Hi, I'm very pleased to report that Cedar fair not only achieved its best ever post labor day performance.

What are strong results here today have us well on our way to make it 2019, the past year the company's history.

Throughout the year I've spoken to you about the strategies that underlie our new long range plan.

Results today are proof of the progress and early success of those strategies.

As a matter of course, each year, we work with our board to update our long range plan, which establishes our strategic areas, a focus and confirms our capital allocation priorities.

This annual exercises invaluable as it helps to reinforce the importance of two primary objectives.

<unk> positive near term results. While also remained committed to long term value creation.

Are Halloween events, which kicked off in mid September once again have produced some of our biggest days of the season.

Through this past Sunday November 3rd record demanding increased year to date attendance, 4%.

Net revenues by 6%.

Park per capita spending by 1%.

And out of park revenues, 70%.

All recorded on the same park same week basis, which excludes any contribution from the two newly acquired Schlitterbahn Waterparks in Texas.

Most significant in our near to Dave result was our ability to generate solid revenue through higher descendants, while continuing to grow in park per capita spending.

Reflecting our sound revenue and yield management practices.

Optimizing attendance and increasing per capita spending have been and will continue to be the key drivers of our ability to generate long term revenue growth going forward.

The macro environment, thus far 2000, a 19 has provided us with an operational tail wind of sorts.

<unk> is that record lows.

Consumer spending has remained healthy.

The weather patterns story critical portions of the season have been favorable compared to last year.

Especially during the month of July .

Well this backdrop our teams superbly executed are long range plan strategies, including introducing more immersive entertainment offerings.

Broadening the appeal of our parks through the successful execution. These initiatives has <unk> as directly contributed to the record numbers are referenced earlier.

Also pleased to say our strategies.

And the momentum retain throughout this season have translated into an outstanding start for 2020 season pass sales program.

Not only are we well ahead of last year's record pace.

We are also seems solid increases in the sales of related all season products, such as all season dining and all season beverage.

This is helped push deferred revenue is through the end of October approximately $40 million over this same time last year.

Brian provide more details on this later, but it's safe to say the ongoing success of our efforts in the critical season pass channel gives us confidence that our approach is the right one.

Are limited duration experiential events, such as granite Carnivale Monster Jam and a host of regional celebrations like Boysenberry Festival, a knots Berry farm.

Create a sense of urgency coaxing guess to visit our parks and multiple times throughout the season.

In 2000, a 19, our best strategy has also proven particularly successful at attracting unique visitors.

Many of whom get a first chance to experience highly immersive entertainment at a size and scale simply unmatched by others.

For the second season in a row, we've produced a solid increase in the number of unique visitors to a parks a critical metric as we look to attract new customers to plug into our C.R.M. database.

The quality and scale of our rights and immersive attractions make our parks unique.

It is why guest recognize our parks as being among the very best parks in the world.

It's also what helps drive our ever expanding season pass programs and our average season pass visitation rate of more than five times per passholder.

The bottom line.

We are very pleased with our record results for the quarter and the first 10 most of the U.

As I stated at the beginning our record performance today provides early validation of our long range plan.

And demonstrates the strength and upside potential of our business model.

[noise] finally.

Based on our results today in our confidence going forward.

My pleasure to also report that our board of Directors has increased our quarterly cash distribution to 93, and a half cents per limited partner unit.

Lifting our annual rate at $3 in 74 cents more than a 6.5% yield at today's prices.

As we have previously stated we are committed to the sustainability of our distribution.

Today's distribution declaration reflects our intent to moderate its growth rate in the near term.

While we work to reduce our debt to adjusted EBITDA ratio to inside four times, which we believe is very achievable in the near term.

With that I would like to turn the call over to Brian to review, our financial results in more detail Bryce.

Thanks richer data morning, everyone.

As a reminder, do do a shift in this year's fiscal calendar. The third quarter of 2019 had 53 fewer operating days combine across our legacy parks when compared with the third quarter of 2018 significantly affecting the company's quarter of a quarter comparisons.

Specifically when comparing results it's important to keep in mind at the 2019 third quarter began on July 1st and ended on September 29, while the 2018 third quarter began on June 25th and ended September 23rd.

In addition, third quarter results are not comparable between years at the current period includes results from the operations of the two Schlitterbahn waterparks since they're acquisition on July 1st of 2019.

Because the material differences in our fiscal operating results are partly due to the Schlitterbahn acquisition and the 53 fewer legacy Park operating days in the period I will also discuss operating results on a Saint Park same week basis.

I'll be getting my briefly discussing our results for the third quarter before moving on to more current revenue and attendance friends.

As Richard mentioned at the beginning of the call and as detailed in our earnings released this morning, we delivered in outstanding quarter with meaningful increases across all key performance metrics for the third quarter of 2000, a 19, we reported net revenues of $715 million <unk> $51 million or 8% from six artist.

64 million a year ago.

The increase in net revenues was due in large part to the contributions of the Schlitterbahn waterparks as well as organic increases in attendance in part per capita spending and out a park revenues.

These games were offset by the 53 fewer operating days, our legacy parks in the quarter same par same week basis, net revenues and the third quarter were up 7% or $43 million, 6% or 732000 visit increase in attendance less than 1% or two.

21 Sad left in any part per capita spending Andy 90% or 6 million dollar increase in outer park revenues.

As Richard noted despite the 6% left in attendance, we were still able to drive higher end part per capita spending led by mid single digit increases and per caps on both food and beverage and extra charge items such as fast Lane.

On the admission is Friday per capita spending and the third quarter was down 1% on the same park same week basis with the slight declined due to a higher season pass attendance makes this year.

Moving on to the costs front operating costs and expenses and the third quarter increased 13% or $42 million to 369 million in part due to the addition of the Schlitterbahn parks in the period.

Same park same week basis, and excluding $6 million of acquisition related costs.

Adding costs in that period, where up 8% or $28 million.

Reflected in the higher cost is seven 7 million dollar increase in variable operating costs in particular costs of goods sold in transaction fees directly related to the impact of the six per cent left in St Park attendance during that period.

Increase in third quarter operating costs also reflects $14 million of higher labor costs, driven by plan wage rate increases.

And for a million dollars of incremental costs associated with our new facilities to enter marks of events.

[noise]. Meanwhile, adjusted EBITDA, which we believe as a meaningful measure of park level operating results total $355 million for the third quarter of 2019.

$17 million, four or 5% year over year.

On a Saint park same wheat basis, adjusted EBITDA for the period was still up $17 million or 5%. The direct results of the record levels of attendance per capita spending and out a park revenues during the quarter.

Set in part by the higher variable cost and the planned increases and operating costs.

Consistent with our commitments and long term practice or providing transparency around operating results, let's turn our attention more recent results that include are increasingly popular Halloween events, including not scary fine and knots Berry farm was where <unk> was first introduced to the industry nearly 50 years ago.

Positive at 10 minutes in or any trends have continued through October highlighted by record performances at several parks during the <unk>.

Including the contribution from the Schlitterbahn parks <unk> preliminary net revenues for the 10 months ended November 3rd.

1.37 billion <unk>, 90%.

10 minutes total 25.8 million gas up 70% in.

In part per capita spanning was $48 in 73 cents, 2% and I don't Park revenues totaled 155 million <unk>, 10%.

[noise], excluding schlitterbahn preliminary same part and that remedies for through the first 10 months of the year totaled 1.33 billion <unk> $71 million or 6% compared with the same time 10 minute period last year.

The increase in St. Part net revenues reflects a 4% or 1 million visit increase in attendance.

1% or 57% increase in any part per capita spending.

Andy 70% or 10 million dollar increase in our park revenues.

Growth in St Park at 10 minutes through the first 10 months of the air is very encouraging, particularly given the slow start to the season, most notably during January and February and knots Berry farm in spite of that slow start and the debut of Star Wars galaxies edge at Disneyland knots. Once again is on pasted deliver it's fast your ever.

As Richard mentioned the increase in attendance also reflects solid growth in the number of unique visitors to our parks through the end of October unique visitation was up 5% on the same part basis, a critical metric when evaluating the success of our new strategic initiatives geared at broadening the guest experience.

[noise] looking ahead to pull your result in the impact of October strong performance on the fourth quarter, while our part teams have done an excellent job managing operate operating costs throughout the season. There are a number of incremental items that will put pressure on fourth quarter costs and margins most notably as the addition of downtime expenses the shorter about parks.

During the third quarter Schlitterbahn contributed $23 million if he bit die since the July 1st acquisition. However, after off season fourth quarter costs that he bit dot contribution will be reduced to $12 million to $14 million for the full year.

Also pressuring fourthquarter margins are first year cost associated with the introduction of Winterfest again is Wonderland.

Start up costs for the openings at the Spring Hill Sweets Hotel, a carowinds and the indoor Sports Center at Cedar point, and the initial cost to kick off our target marketing project and knots Berry farm.

All in all each one of these projects presents great revenue upside potential over the long term, but near term pressure on operating costs.

[noise] looking at longer lead indicators the positive trends remain very strong at the end of October deferred revenues rubber approximately $40 million or 40% from the same time last year.

The increase approximately 85% is associated with the outstanding start to our 2020 advanced sales programs, including 2020 season pass sales, which are more than 350000 units or 50 per cent in the first few months.

Now let me highlight a few additional items on the balance sheet.

The end of the quarter, our balance sheet remains healthy and it sounded condition with $258 million of cash on hand, and approximately $2.2 billion of debt a majority of which is fixed through long term notes or interest rate swaps. Our debt outstanding we have no significant maturities before 2024 with our nearest tournament charity being.

A revolver in April of 2022.

At the end of the third quarter, our total leverage ratio stood at 4.2 times debt to adjusted EBITDA or 3.7 times on a net leverage basis.

As we set our last call our priority is to reduce total average back down inside four times as quickly as possible.

For modeling purposes, and from a free cash flow perspective for the full year, we expect to invest approximately $190 million in capital expenditures. Excluding are purchased of the Great America land and we expect to pay approximately $100 million in cash interest costs, and approximately $45 million and cash taxes.

With that altering the call back over to Richard Thanks, Brian .

While we're pleased with our results today, we are equally excited about the final two months of the year and the momentum we continue to build heading into 2020.

In the weeks ahead and through the upcoming holiday season, six of our parks will be hosting winterfest events.

And knots Berry farm will be transforming itself into a winter Wonderland for the annual knots Mary farm celebration.

Or immersive season, ending holiday events have proven to be extremely popular with every one from grandkids to grandparents.

While also offering are loyal season Passholders another compelling reason to visit our parks.

We believe the success of our fourth quarter events, which now account for more than 15% of our annual attendance.

Served as a catalyst for higher visitation levels as well as a steady growth of our season pass sales program.

In the fourth quarter.

Continue to make progress on a number of projects that fall under the adjacent property development a primary tenet of our long range plan.

Next week Carowinds, new hundred and 30 room Springhill sweets will debut in Charlotte.

And we'll be open for gas checking shortly thereafter.

This is a beautiful property ideal for both business on leisure travelers alive with sweets designed a bit larger than the typical hotel room with families in mind.

Most importantly, it offers carowinds guest a comfortable inconvenient option for extending their stays that is within easy walking distance of the parks main entrance.

Meanwhile, we'd be gone multi year renovation projects on three of our resort properties, including last week at Cedar points Indoor Waterpark Castaway Bay.

Hotel at knots Berry farm and the recently acquired saw Mill Creek resort near Cedar point.

Once fully renovated.

We will have established a new level of quality and guest experience at these resort properties.

Which collectively represent more than one third of our current room inventory.

We also continue to push forward with permitting planning efforts around I knew Hyatt branded hotel property at our Canada's Wonderland Park in Toronto.

Well. This project has been slow to get started we remain very encouraged by the market demand and potential.

And anticipate the hotel being completed over the next 18 to 24 months.

In total over the next two years, we will invest close to $70 million on the renovation of the three resort properties and the addition of the Toronto Hotel.

Once completed each should contribute meaning play to the ongoing development of our out of park revenue channel, which has contributed nicely to our overall revenue growth over the last several years.

Operating attractive yet affordable resort properties cabins and luxury R.V. sites in close proximity to our parks creates a convenient option for families and other park going groups to enjoy what we call staycations or glamping.

Accommodations creative stickiness factor for our parks with guess stain on average two nights in three days, while enjoying our amusement parks and Waterparks multiple times throughout their state.

Moreover, the availability of combinations drives advance purchase commitment inviting guest book in advance not only hotel rooms, the park passes as well.

From a business perspective, we liked the sticky revenue and <unk> are resort operations generate as well as they're attractive growth prospects over the long haul.

In addition to our accommodations projects Cedar point Indoor Sports Center is nearing completion.

Riding plenty of curb appeal and local curiosity.

Centres design will accommodate a range of amateur sporting events from basketball and volleyball.

Do gymnastics cheerleading in wrestling.

Early tournament bookings are running slightly ahead of our first year pro forma estimates.

The indoor sports centre scheduled to host is first tournament play in mid January following an official ribbon cutting ceremony earlier in the mall.

We anticipate the increased level of tournament activity at Cedar point sports centres indoor and outdoor facilities combined will generate strong demand for incremental room nights at all of our Cedar point resort properties going forward.

Meanwhile, inside our parks, we continue to focus on enhancing the guest experience and improving guess service levels.

Planned additions to accommodate further growth in attendance is critical to executing on our priorities, particularly at several of our larger parks, including our flagship park Cedar point.

Planned initiatives include improvements to parking ingress ski grass to the parks additional food and beverage capacity and expanded restrooms just to name a few.

We also have a compelling line up of new rides and attractions coming for the 2020 season.

Building upon the initiatives and strategies that have driven our growth this year.

The continued roll out of more immersive events, such as Grand Carnival, combined with new attractions within our amusement parks and Waterparks and a full year contribution from the Schlitterbahn parks.

Have us well positioned to deliver another landmark year for Cedar fair in 2020.

Before we take your questions I would like to address two additional items.

First.

Many of our analysts and investors have inquired about the recent marketplace rumors regarding them in a.

Our response has been consistent throughout.

As a matter of policy.

We don't comment on rumors or speculation in the marketplace particular round him in a.

What I would like to emphasize however is my belief that we have continued to create long term unit holder value through the strength of our business model.

Are disciplined execution in all areas of our business.

And the attractive growth potential of our strategic initiatives.

Her fare has always been committed to achieving current year results. While at the same time, making investments that ensure the long term success of the company.

And finally.

As we prepare to celebrate the hundred and 50 with anniversary at Cedar point.

And the hundredth year at knots Berry farm, we find ourselves not only reflecting on the company's rich history and many accomplishments.

But also <unk> our parks have played in People's lives.

Throughout the decades. The entertainment we have provided along our midway's has brought happiness two generations of families from around the world.

What is most amazing of all is how powerful the memories are people tell stories about their trips to our parks at the mere mention of places like Cedar point or knots Berry farm.

We service custodians of these wonderful parks.

Stewards of our company's cherish legacy and it's unique collection of historic brands as.

As two days liters of Cedar Fair, we have an obligation to preserve the integrity of these parks for the enjoyment of future generations.

Chloe that concludes our prepared remarks, we're ready to say questions.

If you would like to ask the question.

Style, one I a telephone keypad, if you're using a speaker phone. Please make sure you mute function is turned off.

<unk> equipment.

Press Star one ask a question well pots for just a moment everyone an opportunity casino for questions.

Yeah.

Well take our first question from Steve was it ski friends.

Go ahead.

Taking money guys.

<unk>.

So.

You know I guess, if we look at your attendance grow. This court. It was you know it's it was really solid even if we look at <unk> on a like for like type basis, and I think that's a little bit of a different story than we heard from you know from one of your competitors I guess the question is there anything we need to think about the that drove that attendants grow so much and I guess, what I'm getting out here is.

Well you guys.

Overly promotional in the quarter <unk>, you know if that makes sense.

I see good question I can tell you that we ran our our existing plan in terms of promotions and things listen when we generate you hurt us talk about optimizing our revenue mix when we create increase demand. We we brought on board a talented revenue management team and we're always looking to optimize our mission revenue. So I don't think we did anything on.

Unusual we worked our plan we saw was great demand, particularly around or event strategy. We're very pleased with the first year traction we got from things like Monster Jam Grand Carnivale, you know while attributes and is hard I will tell you that the event strategy were in the very early innings.

When we look at that I think there's a long runway on how we were all these things out and you know we translate that demand into into season pass channel, where you've hurt us talk about the seasons of fun I think what you saw this year was both little bit better weather, particularly or in July but well you also saw was the.

Seasons of fun message, our ability to give our guests reasons to visit the park during all four seasons of the year that really resonated well with our within our particular markets and we're very pleased with that and say this Brian I I would just add that you know as we sat on the call and I prepared remarks, the fact that the and the volume left.

Also came with growing per capita spending a was maybe one of things that we were most pleased with I did you know comment that admissions Burke asked was under a little bit of pressure a little less than 1% decline for the corridor driven by the shift in in mix to Richard find more towards season pass when we stripped.

<unk>, we're very pleased with what we're yielding in terms of the the Nazis in passing missions per capita and so it it definitely was not a a discount playbook or or or promotional effort that drove it I think it was more is Richard set that broadening of the guest experience and and these initiatives really resonated with the markets.

Okay got you on that second question would be around your your well documented changing your your capital spending you know plans going forward <unk>, you know I guess the questionnaires.

You know how do you guys envision you know really being able to take price moving forward.

You know I guess with what we would call less impactful capital spending.

[noise] good Brian Yeah, I I think you know as we as we said you know our our shift in in in Catholic strategy is is not be motivated to or the results of any kind of cash flow management or concerns or a shift in in in scope or impact. It really is be driven by.

Our market research and and the fact that we're getting a fully realize the benefits of the investments we've made over the last six to seven years in terms of of pricing. We used we're still going into 2020 with a very similar approach to our pricing playbook as we have the last several years, we don't really well coasters definitely give us.

Cover around pricing you know Richards always comment on it it's really the value of perception and they expanded offerings. The broadening the experience. These events are giving us just as much cover in terms of of of pricing as the coasters hat in the past while driving urgency at the same time you know most of these.

Limited duration, instead, driving that urgency that allows us to to create higher demand.

Okay. Gotcha, then one quick one <unk> if I could I I think you said the deferred revenue was up 40 million. If I heard you correctly is there any way to know what that would look like you'd be stripped out schlitterbahn.

Yeah.

Oh, the Schlitterbahn pack is essentially a no to that number I'm as as we talk about anything on our last call Schlitterbahn. That's one of the areas opportunity for us while we have made some some changes there we have an implemented all of our system. She at at this point in time.

To really go heavy after the the season pass channel that'll be though the roll out of those systems and integration of those systems will be happening during the 2020 season. So while schlitterbahn isn't that number I would tell you. It's not material effect, we're still up approximately $40 million and 40 or per cent.

<unk>.

Okay, great. Thanks, guys appreciate it.

Thanks, Dave.

If you find your question has been answered you may remove yourself from the cube by pressing start to like it's again, if you would like to queue up for a question Press Star Wagner.

Our next question.

Hi, there from Wells Fargo Securities. Please go ahead.

[noise], Thank you, Brian or Richard whoever wants to take this here just one to revisit the season <unk> outlook here X. litter button and I think maybe Brian you alluded to this here in response to seize question, but just wanted to check that on on like more like unit basis.

And then as it relates to Star Wars at California fires, the he seemed to to loot and your preamble that that Star Wars, no really hasn't seen an impact and we really haven't seen anything like that historically, either but they're just they're just to reaffirm that in any comments on the California fires if you're seen.

In any any impact from that.

[noise], Tim I'll take your second question first good morning, Great question in terms of impact to I'll go back to our prepared remarks notches off to its best season start ever so well on our way to a record year I will also tell you their their Halloween Hot was a record Halloween Hot So we continue to see gray.

Strong traction as we have in the past several years when other large scale attractions have have have come on line. So we see continuing demanded that marketplace and we're really pleased with.

We're not to that Brian .

Yeah, Tim and in terms of season pass young we remain as we said on the call extremely please with the star to season pass sales both at the legacy parks and at the Schlitterbahn harks, while the opportunity really lies in the future for us the Schlitterbahn cars, we did make some changes.

Coming out of 19 for the 2020 season, there where we've introduced eight a. payment plan. We are seeing similar percentage lives in the Schlitterbahn a year today sales, but it's a much much smaller base I think are real impact or ability to impact that base and drive season pass more aggressively as I said earlier will.

The beginning with a 21 season, when we have all of our our our systems are ticketing system is R.E. commerce platforms et cetera installed <unk> as I mentioned the call the being up north of 350000, a units a year to date on the 2020 sales programs that is.

Also without schlitterbahn in there so the the core or the legacy parks are really performing very well early on.

Okay. Okay, no great and then <unk> again, you've laid out we're starting to see some lives from the new programs. You <unk> you spent quite a bit of time on that at the end what stay back in August .

Can you just maybe remind us again is it it should we see a little bit more than 20, and then obviously more than 21, but just remind us again sort of of the cadence here, yeah, we should see that need but don flow through accelerate given the fact that you're camp x. is going to be it's more muted as a way to say it.

And then you're gonna be spending a little bit more on the on the immersed of events, but just again, how that interplay goes in that translation and <unk> the flow through dropped down to eat it up.

Tim really good question, we didn't touch on analysts day I'll go back to when we think about new events, which are evergreen was come back year. After year. You think the Best example, we probably have is winterfest and we said at the beginning the winter fast would take three to five years to fully mature we're well on track.

Those that are open multiple years. So we're we're we're pleased about where we are but all these take a little while to seed in the marketplace.

I'm actually quite encouraged by the first year traction I've seen as get on the events. So you know we've talked about how you know we're looking at everything from net promoter scores to in the case of Grand Carnivale, which is a nighttime is that the attendance that comes in late afternoon through early evening, we've seen them.

It's react in a significant way and that's what these events are all about I think in terms of your question terms of financial.

When we talk about getting the maturity, you'll see higher flow through you'll see more impact as you get deeper into the the run of all these events I think Halloween is probably the the the the Ultimate example, we have that's two to three decades in the case of knots, almost five decades of experience and we keep as I just mentioned before keep.

<unk> record numbers in Halloween. So it keeps growing so I think is a very long runway and I think I'll go back to point the Brian made his remarks were listening to the consumer researchers we format. These events as we talk about that as we think about the components, we design in and we keep finding the more we listen to our customer the more they.

Respond so I hope that answers your question.

<unk>, yes, and no. Thank you very much wizard in the gentleman congrats on the on the year to date performance.

They asked him.

Well take our next question kind of James hard and then from what Bush Securities. Please go ahead.

Morning, Thanks for taking my questions, obviously really good quarter, but I I really wanted to poke it.

On the post quarter commentary I guess.

The first question did you say that the the early season pass failed her up.

50 per cent no, it's early but but that might have been one of the most bullish you've ever you guys say in a decade cloth covering your and it's definitely and and how is that possible I guess is.

The question there and then secondly, you know maybe the second most Bush thing I've seen you. There were reports in October that but see repair <unk> see your point was closed for a period of time, because it was full which I didn't know with humanly possible. So what what happened there isn't a good thing.

And then maybe comment on the whole gold path phenomenon, it at Cedar point, and not and and how to think about that going forward.

So so Tamil I take your second question, it's a three questions second one <unk>.

I can say that Cedar point never close I want to clarify the parking not close the park remained open on that particular Saturday, where we where we drove really high demand and listen we saw high demand every October every Saturday in October both at Cedar point in all our other parks, but you know working with the city of Sandusky, We had a lotta people trying to get here.

All at the same time, we see that in other markets as well, where we <unk> some of our events only start at when the the Sun goes down so we see a large demand of people trying to get into our parks in October Saturdays again based upon the pop Arafat Halloween. So the park never close plenty of in park capacity lots of people, who are having a good time for brief period.

Access was shut down so we could sort through the traffic issues, but then we we open the the <unk> the causeway in the shops Ain't people came it.

In terms of the the bullishness or not <unk>, we I can affirm where up over 50% on our on our season pass sales year. Today, you know you've hurt us talk for many years about advance purchase commitment you hurt us talk about format in the season pass program. So we can drive urgency earlier and we continue to see more.

More and more sales earlier in our sales cycle. We think that's a positive thing. It also speaks to a as Brian touched on and you hurt us touch on in August broadening the guest appeal opening ourselves up to all wider audience, because we have more things for more people to do we think that's one of the the critical keys going forward.

And we're really happy with the early traction goal passes been a significant lift at Cedar point in particular, but as it was last year. When we entered so we introduce that for the first time. This year, we introduce the goal passive Canada's Wonderland last year.

Program of having three tiers of regular a goal passing a platinum is working extremely well. So we think are are <unk> I call. It fine tuning in our playbook and when we find two in our playbook, we mind all the all the potential out of all of our market. So we operated and the other thing that I would just one more thing to add we're seeing the strength.

Cross you know virtually all of our site. So it's not as we've talked about it we're not seeing strength just isolated in one region or one park were seen strength across the chain and and I think that speaks to our strategies and how their resonating.

That's that's all really helpful and maybe just to clarify the 50 per cent early season feeding path growth.

Doesn't seem like a number that <unk> I'm assuming that there's some.

Shift in timing, there such that you're convincing some sub sub segment to just by being.

Earlier <unk> what do you think is is a reasonable growth expectation per season pass this year and should I think about some sort of offsetting per cap head when we look at 2020.

Hey, James It's a it's Brian and so first off yes, I mean, you write the law of of small and big numbers right. The 50 per cent is off is based on you know early sales of season passes and by you know at this point in time, we might only be you know, 20% or so through the.

All program. So I think your your your your comments about being able to maintain that percentage.

Is is a very fair one with that sat as Richard Sad, we're seeing strength across all of the properties. The lion's share of the year over year increase that north of 350000 is being driven by the performance of gold at Cedar point. So it's all separate you know that separate the parks.

Into the into C.P. and and the non C.P. parks.

<unk> the left we're seeing at the at the non see your point parks and their pass programs much like we've seen the last couple of years is is you know probably you know three quarters that what we see at least if it plays out languishing last couple of years as poll forward, we're getting consumers to make the decision in the commitment to buy a season pass in the fall or you know.

As we get into the winner of Winterfest events here in November and December .

And so that's a good thing right. It from the standpoint of it voice disruption to just that might disruption events that might have caused them to make a difference decision in the spring.

At Cedar point, our our early data is telling us at the left there and it is <unk> extremely big it is an extremely big left it's about a seven to one new passholder versus versus a a renewal and so we're getting a big left and new Passholders now that will ultimately.

It'd be a migration potentially from single day tickets, but again getting that commitment up front and buying the most expensive ticket in the park, which is what a season pass represents a is a very good thing and so I don't want to put a cap on where this can get to what I can tell you is our marketing teams led by Kelly <unk>.

Demo and and her and her group are going to keep their foot on the accelerator, we're going to continue just try and sell as many passes.

We can and so we're off to a very good start in terms of pressure on on a per cat. There's no doubt that having more season passes outstanding <unk> in particular at a park like Cedar point is gonna mathematically put pressure on the admissions per cap. It at the parks that adapt that park in particular, but it again at the end of the day, we don't take.

After the bank and we we sure do like having a lot more season passes outstanding and so we'll take that as a tradeoff.

[noise] Gray color Guy and great performing thanks, Thanks, James Thanks James.

Once again.

So if you would like to ask a question it's.

Star one on your telephone keypad.

Our next question from Brett and just from keeping capital markets. Please go ahead.

Hey, good morning, Congrats on a great corridor.

And thank you for the clarity earlier on on October can you maybe help put that October strength into into numbers for us. That's one and then following up on that does sound like some operating costs pressure in four Q. is there any way you can elaborate or you know size that up for our models discourse.

Yeah sure brightest, Brian So let me I mean tackled the the the at the attendance first you know given that we put out the labor day numbers.

You can start a sort of work your way back. So I'll give you a couple of Datapoint's you can work your way back to see sort a post labor day other other results of that and and if you do that math, you'll see it.

Niweek period, or it's been a very strong on a performance with a tennis being up close to 13 or 14 per cent and and revenues I'm pushing 10 per cent left month of October those those numbers are pretty comparable which speaks to the strength is richards.

Said earlier for for Hawn, and these percentages and numbers are all of that that that I'm speaking to our all on the same park basis stripping out any benefit or impact from Schlitterbahn. A month of October you were looking at about 15% lift in a in a 10 minutes and in close to a 12.

<unk> left in in revenues. So you can you know you do the mapping and see there's <unk>, there's a little bit a pressure in there and perhaps but that's understandable based on on the the season pass it makes continuing to push out to push north.

<unk> one other point to make you know we talk.

October let's remember we're up against they record October last year, So really pleased with the movement that we've seen.

Yeah. Thank you there I'd rather have you guys do the math.

And then Brian just following up on the operating costs in in Fort you.

Just if you could elaborate on it.

Yeah. So you know much like we even started to see it creeping in a little bit to to Q3, because some of these things yeah. We actually started activating some of this stuff. After the parks go out of date, a daily operations right post Labor day.

As I sat in my prepared remarks on the the introduction of of some new facilities like the Carowinds a hotel like the the indoor sports complex at Cedar point or new initiatives like the advertising the targeted advertising right now most of that being focused at at NASA.

<unk> those things are going to put a little bit of pressure on fourth quarter costs. You know some of yeah. You know some of that will the timing of how quickly we can activate some of that will ultimately impact the magnitude, but there's no doubt between those items like that and then and then the introduction or the inclusion and maybe I should say of.

Schlitterbahn us off season carrying costs November December are going to put pressure on on our fourth quarter operating costs, and and and and margins.

Got it and then just my last one here I was hoping.

On the path Perks program, obviously, the full rule out next year, but I guess, what kind of incremental impact on either spend or did it did you see you know in the pilot program. This season.

[noise] Yeah, Brett So good question definitely something that we're very excited about that we piloted at four parks. This year introduced a you know early to mid mid June testing, a variety of different different approaches and strategies around loyalty trying to to see what resonated with the.

Consumer what motivated behavior, maybe got that the the gas to come out to the park on on a day that they normally wouldn't have so lots of good learnings <unk>. You know we found <unk> was you just to give you a little inside baseball one of the most motivating offerings was anything that seem to include.

A food and beverage offer that always seem to to get the the consumer out to move we were also very pleased with the with that <unk>, we would call the quick thriller or the activation rate on on the offers and so all of those learning as they're going to go into into the the the process for the broader roll out on 2020 as we say.

At earlier, we still intend to roll this out across the system.

Sans the Schlitterbahn parks, it might be a little bit of a phase roll out you know given the fact that park like knots. Berry farm is open year round I'm really doesn't matter, we don't have to make an opening day for them because there is no real opening day, so, but we will roll out for 2020, and we're very encouraged I'm sure there will be anchorage.

Mental learnings as we go along but there's no doubt that we think we've got something here that has the potential they're really not only drive more value for the season pass older but motivate a them to not to visit more often.

Okay. Thank you very much.

Thanks, Brett.

Well I'll take our next question from <unk> from the quite capital. Please go ahead.

Thanks, so much congrats on recorder.

Thanks, Paul.

That's not a couple of questions around or anything you can you can share on on turn is is there any incremental turn on season pass now that you've been you've had this the pricing structure and products structure in there for a bit or you know is it is is just being overwhelmed by the new new season pass in fact.

Positions or is it is it's stable and then a second part of my question is around it costs, a particularly around labor and how we should think about labor costs and labor management going forward. After the step up and plan costs here thinks that much.

Thanks, Paul Good questions, let me take the first one <unk> take a second no we scheme seen renewal rates trend higher they've trend at higher over last several years and as we continue to provide more value and I'll go back to the seasons of fun message more reasons to visit more often we continue to see higher renewal rates a year over year. So.

So we certainly saw that 2019 anticipate seen that in 2020 right. Yeah. Just won a lot of thought on on season pass I think and just connecting the dots of the previous question around passports. Our loyalty program, we really believe that the loyalty program and some of the aspects of it will you know continue to help what Richard alluded to in terms of the.

Proving renewal or retention rates around season pass.

Terms of cost base, you know as we've talked about.

Prior orders in prior years labor, particularly seasonal labor continues to be a big area of of costs pressure.

You know last year, we as if you recall this time I was talking to you about the pressure's on rate that were in the high single digits eight nine per cent and we're managing a lot of labor hours out of the system to try and keep that down to mid single digits, which we were effective at this year. The the the the rate pressure is as bad more around 5%.

And so I think we're benefitting from a number of the market adjustments that we took a in 2018 I hand. So hours are are down slightly to essentially flat, we're keeping our overall costs right around that 5% I think that's pretty fair to just you know or at least our expectation is we're going to plan for that.

We'd rather plans for the worst and hope for the best and try and managed to a better number but I think it's reasonable to expect that seasonal labor costs are going to see probably that around that mid single digit that five per cent kind of pressure for the foreseeable future. It's why initiatives like our workforce management initiative to roll out the new Cronos platform.

How important we've been testing that running that sort of parallel and doing a lot of testing here in 2900 season, we will be added.

Heavy implementation mode over the fourth quarter and early part of next year as we roll that out across the system and so I think the real benefits of that initiative in terms of our ability to manage hours better more efficiently manage season labor hours is going to really start bearing fruits more on 2021.

But I'm sure we'll get some winnings in in 2020 as part of the roll out just it just not at at at a at a full return <unk> quite in the first year.

Right.

I appreciate it.

Like ball.

[noise] Hi next question <unk>, Chris Hi call from Goldman Sachs. Please go ahead.

[noise] morning, guys. Thanks, so much taking the questions.

<unk>, Thanks, Chris <unk>.

I think you said earlier that you expect roughly 12 to 14 million dollar contribution from <unk> here can you may be just quantify yeah. The expected synergies in how you're thinking about the ramp of that into 2020, and 2021, and then secondarily, but related just how much capital.

Only to put into that business.

Yeah, Chris a as Brian So I know Schlitterbahn as we said we made the acquisition. We really are excited about the long term potential for the property. We think it it's got upside in terms of what it where we can take the the attendance and and and revenues, but there's also efficiency used to be get to be to be a mind.

On the you know on the costs side that will push towards better margins long term I think it'd work. So the integration I would say is going well not a lot that we could do to impact the 2019 seizing given we bought it on July 1st it was really more a matter of run their playbook and as I said earlier in our prepared remarks on some earlier question is hard for us.

To make a lot of changes or all of the changes that we want to and and just one off season. So a lot of our systems implementation, which will drive the revenues synergies those are going to be those systems are going to be built up and implemented.

During the 2020 calendar year, so we'll be ready for 2021, so I think in terms of revenue synergies, probably a little bit longer to get to those than the costs energies. You know ultimately we're not looking for it you know it was never about what schlitterbahn could bring to the table for us and 2020, but more aware we can take it too by 2022 2023.

So I think we had a modest expectations for 2020, we definitely expect to see some growth and we're already seeing very early signs of some of that impact as I mentioned, just driving better season pass sales and the teams are already down there and given those waterparks wrapped up their their courses in an early to mid September we.

Already gotten a lot of the off season work both in terms of capital.

And on Capitol some of the work that we're doing and that it speaks to why we're seeing Schlitterbahn go from you know $23 million have you been dot contribution and the third quarter to maybe something in the low to mid teens by the end of the year. Some of the work that we're going to be doing just doesn't capitalizable under our accounting policies and so that's kind of way on us a little bit in terms of the 19 in the.

2020 numbers, but it'll make for a much better product long term.

[noise] great. That's helpful. And then you touched on this in a variety of questions earlier, but just curious why do you think your results. This year year today, and I've, just been so robust relative to peers and and maybe even relative to sort of the broader leisure backdrop and even relative to the prior to years results.

For yourselves like what has anything pain isn't the backdrop weather related to the consumer related to competition or is it really just better execution on your part.

Chris I think it's a great question you know as we look at our business you go back to the foundation, which is the consumers very healthy right now the macro drop backdrop as I said in my remarks say that the consumer isn't a good place and historically anytime we've seen sustained movement in the average hour and increases in the average.

<unk> right, that's usually been pretty good for our business, but I think if you look back over the last couple of years and I'll be more specific to us and the rest of the industry look back over the last couple of years, we did a number of things that it had a number of both initiatives and and attractions that we had our parks that resonated really well, but 18 when I look at 18 it was really.

The anomaly in terms of whether we clearly have gotten better whether this year, but bigger than that we really seen our strategies start to really increase our penetration all our markets. So you know I think it's it's it's our execution of our strategies, but I also think it's listening to our customers and it's on a daily basis, you know I've got to go back to.

Our our management teams really paying attention to the fundamentals and making sure we're delivering on the quality of the guests experience that is you know are consistent take away.

Oh God that's helpful. And then maybe if I could just squeeze one more in maybe a more modeling related question Brian .

Looks like S.G.N.A. growth, there's been up pretty materially year over year year to date, and then in a third quarter, which I assume some of that's emanate related but what's the and maybe some of it's really to the operating day shift too, but what's the right way to think about that line item going forward, what's on more normalize growth rate.

Yeah. It's a it's a fair question, Chris I I think if we if we try and strip out at least the the costs that are R.N.S.G.N.A. related to the acquisitions, whether it be schlitterbahn or sawmill or or even the land at.

Great America, you're looking at I think I saw this in your your note you're looking at maybe close to a 12%.

Increase in in S.G.N.A. costs about three to four per cent of that yeah, yeah, and that's in the nine month numbers right that are in a in the <unk>.

We'll be in the queue, you only need about 3% to 4% of that is related to the incremental S.G.N.A.S. schlitterbahn as well as the extra week. So <unk>, we have to keep it into account that the the nine months of and in 2999 29 versus 923 last year said incremental week and a schlitterbahn account for about 3% to 4%.

So that pulls you down and maybe even closer to that that eight per cent and then there are a number of of items that are are just holy incremental transaction fees associated with and and you know and I called it out of my prepared remarks as one of the key variable cost that that when you sell more tickets and you have more people in your parks you know spending money.

And using credit cards things like a transaction online transaction fees credit card fees all of those things go put that together with the huge left in the season pass sales for 2020, and you're looking at a little north of a 2% lift in our transaction fee costs, which all sit in that S., you know side of S.G.N.A. the selling side.

<unk> advertising costs are are up a couple of percentage points in there and and be a labor a cost that sit in S.G.A. So full time labor you know just you know 2% to 3% staying started with inflation you work at all down I think when you look at at the core you're probably stripped out those types of items and you're probably back.

We're into that you know three and a half the 4% kind of range, which is maybe the the base, but I I can't say, that's what I would necessarily model because of the extent, we keep selling more tickets and selling more season passes worried I keep seeing more pressure on on those costs and it's a tradeoff will take everyday the week.

[noise] right that was really helpful and good luck over the holidays.

Thanks, Chris Thank you.

[noise] no further questions on that and I question answer session for today.

Dependent conference back over to you for any closing remarks. Thank you.

Thanks Chloe.

Too close I Wanna again emphasize that we are delivering on all key metrics attendance per capita.

Individuals revenue <unk> and deferred revenue have all met or exceeded our expectations. This year.

This is a credit to the hard work that every member of our team delivers on a daily basis.

Beyond our current performance success, the broader industry fundamentals remain attractive.

Barriers to entry or real.

The industry has proven to be resilient through economic downturns and consumers continue to prioritize experiences over possessions the bottom line.

Cedar fair as well positioned headed into 2020 beyond Michael.

Thanks, Richard Thanks, everyone for joining us and I invite you to call the industry Relations Department with any questions. You might have 4196 to 722 33 look forward to reporting are full year results on our next earnings call in February of 2020.

That concludes our call today Chloe thank you.

Thank you for your participation you may not disconnect.

Yeah.

Mmm.

Yeah.

Yeah.

Yeah.

Oh.

Oh.

Yeah.

Yeah.

Yeah.

Mm.

Yeah.