Q4 2019 Earnings Call
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I would now like to have the conference over to Mr. Michael Russell. Please go ahead.
Good morning, everyone.
Saying, we send money, it's Michael Russell corporate director of Investor Relations for Cedar Fair.
Welcome to our 2019 fourth quarter and yearend earnings conference call.
Earlier. This morning, we distributed beer wire service our earnings press release, a copy of which is available under the news.
Masters website.
Cedar Fair.
Well the calls me this morning, our Richard Zimmerman, Cedar Fair, President and CEO and Brian with the right.
You know vice President and CFO.
Before we begin I need to remind you that comments made during this call will include forward looking statements within the meaning of the federal Securities laws.
Statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements for more and more detailed discussion with these rescue may refer to the company's filings with the C. In compliance with the Fccs Reg FD. This webcast is being made available to the media and the general.
Public as well as analysts and investors because the webcast is open to all constituents in prior notification has been widely used on selectively disseminated all content on this call will be considered fully disclosed.
It's my pleasure now to turn call over to our CEO Richard Zimmerman Richard.
Thank you Michael and good morning, everyone.
On our last earnings call I mentioned that 2019 results through October position, Cedar fair well to achieve its best year ever today I'm pleased to report that indeed it was.
For the full year, we reported record results in net revenues and adjusted EBITDA driven by new highs in attendance in park per capita spending and out of park Robert.
Reported on both a consolidated basis on a same park basis, which excludes our two schlitterbahn waterparks.
Our 2019 capital programs and initiatives clearly resonated within our markets, including the addition of traditional attractions like the Yukon Stryker roller coaster, Canada's Wonderland, and new more immersive attractions like our grand corner about and Winterfest events.
The continued expansion of the critical season pass channel along with the partial year contribution from the newly acquired Schlitterbahn Waterparks also combined to help deliver a record performance this year.
Over the past eight years the evolution success of our season pass program has served as a cornerstone of gross and stable recurring revenues.
I'm pleased to report the continuation of that trend with the early season sales of 22020 season passes and all season products up by more than 40% combined across the portfolio.
While we're still only one third of the way through our season pass sales cycle and have more work to do fewer indicators reflect our guest appreciation and demand for the entertainment product, we offer more than seen a 40% plus ramp in the early sale season passes.
The sustained growth of this program over the long term has been fueled by our willingness to adapt to customer preferences and attract new guest initially the day past visitor who over time, we work hard to convert into a season pass holder.
We measure that success will be a trends and unique visits which were up a healthy 6% in 2019, following a 1% increase in 2018.
This is another key performance metric that gives us confidence our long range plan initiatives are working well.
Our record performance was also fueled by the continued growth of our out of park revenue channel, including resort accommodations.
2019 out of park revenues were up 11% and accounted for more than 10% of total net revenues.
Our investments in hotels and other adjacent resort entertainment offerings represent a strategy, which we believe distinguishes us from other regional park operators.
Our resort properties, including hotels cottages cabins and luxury RV sites create a sticky factor for our parks that boost that both boost attendance and extends length of stay on average to two nights and three days.
When staying at our resort properties guest can enjoy our recreational amenities restaurants, and other conveniences, especially quick and easy access to our parks.
Speaking of restaurant.
Food and beverage continues to be our fastest growing revenue channel with same park food and beverage per cap up 5% and setting another new benchmark in 2019.
Offering chef inspired food choices unique culinary treats during special events, and a more efficient and a mercent versus dining facilities have dramatically enhance the guest experience. We are pleased with how our food and beverage programs have become another hallmark for parks.
[noise] record results aside 2019 proved to be a very important year for our company.
We expanded our operational footprint to the southwest through the strategic acquisition of two Schlitterbahn waterparks, including the world's most highly acclaimed Waterpark slitter brands.
What are Bon new Braunfels.
We opportunistically purchased two additional properties the 112 acres beneath in California's Great America, ending a lease agreement for the land with the city of Santa Clara and saw Mill Creek, a 236 room like front resort and conference center within minutes of our flagship Park Cedar point.
Which will strengthen that parks appeal as an entertainment destination.
We opened a new year round 130 room Springhill suites hotel in Charlotte located just outside the gates of Carowinds.
We finished construction of the Cedar point Sports Center in Sandusky, a world class Indoor sports facility that combined with the sports Force outdoor complex opened in 2017 represents a model for how public partner.
Public private partnerships can work for the benefit of both the community and local businesses.
And we kicked off renovation projects at Knott's Berry Farm Hotel and Castaway Bay Indoor Waterpark hotel at Cedar point.
Both of these properties have been solid producers of revenue and adjusted EBITDA over the years and we're confident that their renovation will deliver similar returns to what we've seen from past projects like the refresh our hotel breakers at Cedar point.
These strategic initiatives are very important to the near term and long term future of our business and our meaningful in our never ending efforts to increase unit holder value in that regard I'm quite proud of our team's commitment and dedication to bringing these important milestones to fruition.
Before I ask Brian to review our financial results in more detail. There are few things of interest about last year I should touch on as we approach the 2020 season.
As we've shared before our busiest days of the year typically occur in July August in October, which collectively represent our peak periods for maximizing revenues and adjusted EBITDA.
This is especially true for our largest parks, including Knott's Berry farm Cedar point, Canada's Wonderland, and Kings Island, all of which enjoyed record or near record performances in terms of attendance and or revenues due in part to near optimal macro factors experienced during the peak of our 2019 season.
Most notably in two key areas.
One was the continued strength of the consumer a trend we saw throughout the entire season and across our entire portfolio as reflected by the improvement of our in park per capita spending results.
Another king the favorable weather conditions when it matters most of the parks starting just after schools, let out in mid June and extending through the month of October when hot typically produces our biggest crowds of the year last year being no exception.
It was a welcome period of persistent Tailwinds, which also demonstrated the strength of our business model, meaning when push to operate flat out our parks performed exceptionally well.
Not only I'm I'm pleased with the financial results, we generated I am also impressed with the incredible resiliency of our park teams and their ability to consistently deliver a high quality guest experience.
This is how our business excel by delivering on our guest expectations and providing them with the unmatched high caliber entertainment experiences they have come to expect from our parks.
We remain focused on building upon the momentum of this past season, as we provide our guest with reasons to come back for more.
Finally, I want to mentioned the board's recent appointment of Dan Hanrahan as our New Board Chairman.
Dan joined Cedar Fairs Board in 2012 and has served on various board committees. Most recently as chair of the compensation Committee.
Given his successful track record in executive leadership and deep experience in the hospitality travel and retail sectors. Dan is an excellent choice to lead our board going forward.
As many of you know, Matt we met served as executive Chairman for the past two years. It was CEO of Cedar fair for the six years before that.
Matt remains a valued member of our board and I want to take this opportunity to express my thanks to him for his many contributions which when tallied up our a measurable and invaluable.
With that I would like to turn the call over to Brian to review, our financial results in more detail Brian.
Thanks, Richard and good morning, everyone. As a reminder, consolidated results for the year ended December 30, Onest 2019 are not directly comparable with the prior year as the current year period includes results from the operations of the Schlitterbahn Waterparks since our acquisition on July Onest, because many varian variances and consolidated.
Operating results relate to the acquisition I'll also discuss operating results on a same park basis, which excludes results of the two schlitterbahn parks.
Regarding same park operating days 2019 included 2079 operating days versus 2061 in 2018, the increased primarily due to first year Winterfest operations, a Canada's Wonderland.
I'll start off by discussing our full year 2019 results before reviewing results for the fourth quarter.
Reported full year 2019, net revenues were up 9% or $126 million to a record 1.47 billion.
The higher net revenues can be attributed to increases in all three key performance metrics attendance was up 8% in part per capita spending was up 1% and autopart revenues finished the year up 11% on a same park basis net revenues for the year totaled 1.43 billion up 6% or 80.
$4 million, reflecting record performance across all three key revenue drivers. This included a 5% or 1.3 million visit increase in attendance to 27.2 million guest.
1% or 44 cents increase in in part per capita spending to $48 in 13 cents and an 8% or 12 million dollar increase in out of park revenues to $164 million. We're very pleased with the balance growth. We've again generated in 2019.
The increase in same park attendance as a result of our strong capital programs highlighted by the combination of traditional world class Thrill rides like Yukon Stryker and the introduction of more innovative special events and immersive entertainment for the entire family.
Our our advance purchase channels, including season passes again produced the largest tenants increase in 2019 season pass visits represented slightly more than 53% of our total tenants mix up from a little more than 50% a year ago.
As Richard noted we are equally pleased to report strong consumer response to our new attractions and events helped produce a 6% increase in unique visits or just shy of a million visitor lift over the prior year.
While growing our season pass holder base and increasing total visits are important elements of our strategic plan, increasing our unique visitor count remains critical to the sustained long term growth of the business.
Turning to same park in park revenues, the 1% lift in part per capita spending was driven by improved non season pass admission pricing and growth in other in park spending, reflecting the general financial health of our consumer the increase in other in park spending was led by 5% per capita.
Recent food and beverage and an 8% per cap increase in extra charge attractions. We're pleased to see continued improvement in per caps, particularly given the meaningful growth in season pass visits which tend to put additional pressure on these metrics.
As I mentioned, we drove 8% growth than same park out of park revenues in 2019, largely attributable to an increase in transaction fees and revenues from saw Mill Creek.
As evidenced by the recent opening of the Springhill suites hotel and the acquisition of sawmill Creek, we will continue to seek opportunities to grow and expand our resort offerings as part of our long range strategic plan.
Moving on to the cost front.
Operating costs and expenses on a same park basis, and excluding $7 million of acquisition related expenses totaled $956 million for 2019 up 7% or $64 million between years. This increase was driven primarily by planned wage in rate hikes.
And higher labor related benefits all of which comprise nearly half of the total increase in same park costs.
Incremental operating expenses associated with the new and expanded immersive events, including Grand Carnivale Monster GM and the inaugural year of Winterfest at Canada's Wonderland.
Higher variable operating costs directly attributable to the 1.3 million visit increase in attendance such as cost of goods sold and credit card transaction fees.
And costs associated with other operating initiatives in the areas of marketing in IP and the Grand openings of the Springhill suites hotel in Cedar Point's Sports Center.
Full year, adjusted EBITDA, which we believe as a meaningful measure of park level operating results totaled $505 million up $37 million or 8% over the prior year, including the contribution from the Schlitterbahn parks on a same park basis adjusted EBITDA totaled 480.
9 million up $21 million or 5% year over year.
Meanwhile, same park adjusted EBITDA margin declined 60 basis points to 34.1%. The result of planned increases in operating costs associated with the addition of more opex heavy immersive events and entertainment.
Margins in 2019 were also pressured by the acquisition of lower margin operations, such as some of Creek and the startup costs previously mentioned.
While these strategic initiatives put pressure on near term margins each is cash flow accretive and a key contributor to the long term growth of the business. We will continue to use adjusted EBITDA margin as an margin as an important metric for evaluating the efficiency of our parks and there Jason operations. However, in the end, we will not be afraid to pursue lower margin device.
Element opportunities that are strategic to the business and cash flow accretive over the long term.
Now, let me turn to fourth quarter results recall that due to a fiscal calendar shift our 2019 fourth quarter began on September thirtyth compared with a September 24th start for the fourth quarter of 2018 as such the 2019 fiscal fourth quarter included 13 weeks versus Fourq.
In weeks in the fourth quarter of 2018.
Also the current quarter included the impact from operations and off season costs at our two schlitterbahn waterparks because of these variations and for the most comparable results.
Discussion of the fourth quarter will reference results on a same park same week basis, a 13 week period that excludes schlitterbahn.
On a same park same week basis net revenues for the 2019 fourth quarter totaled 256 million up 13% or $30 million driven by a 16% or 686000 visit increase in attendance to 5.1 million visits and a 17% or form.
Selling dollar increase in out of park revenues to $20 million.
These gains were offset slightly by a 3% or $1.25 cent decrease in part per capita spending to $46 in 35 cents.
The 16% increase in attendance was primarily attributable to record attendance during our extremely popular Halloween themed events in October and outstanding first year attendance for Winterfest at Canada's Wonderland.
These attendance gains were partially offset by soft attendance at our California parks in December the results of very wet and unfavorable weather conditions.
We're very pleased with the Toronto markets initial response to Winterfest at Canada's Wonderland, and we're excited about the prospects for further development of this event going forward and most surprising was the two thirds of Winterfest gas at that park purchase single day tickets presenting us with a great opportunity to introduce an incremental audience. The park and all that has to offer.
Side about the potential to convert these new guest into season pass holders over the long term.
After operating costs and expenses, which were up $25 million on a same park same week basis fourth quarter, adjusted EBITDA totaled $62 million up 4 million or 8% year over year. The increase in fourth quarter costs was the results of incremental variable operating costs associated with the record attendance level levels in the period as well.
As anticipated higher labor costs, and operating expenses associated with the startup of our new facilities and immersive events, most notably Winterfest at Canada's Wonderland.
Turning to the balance sheet overall, our balance sheet remains healthy and unsound condition. We ended the year with $182 million in cash on hand, no outstanding borrowings under our revolving credit facility and a total leverage ratio of 4.3 times.
3.9 times on a net leverage basis.
The 4.3 times total leverage reflects the $500 million bond issuance in 2019, which was used to fund the strategic acquisitions, we completed during the year.
As we noted our last earnings call. Our priority is to reduce total leverage back down inside four times as quickly as possible and reestablish balance sheet flexibility to pursue additional growth opportunities.
Based on our record performance in 2019, and our confidence heading into the 2020 season. We believe we are well positioned deliver on that goal through EBITDA growth over the next 18 to 24 months.
Looking at long lead indicators positive trends remain very strong recall that last year on this call, we reported strong trends as well, which for 2019 resulted in a record year across the board.
Along with record season pass sales in 2019, we also set new highs in the attachment rates of add on products such as our all season dining and all season during programs most of which produced double digit revenue increases this past year.
As Richard mentioned earlier sales of advanced purchase commitments for the 2020 season are off to an even better start.
Deferred revenues at the end of 2019 totaled $151 million up more than $40 million or more than 40% will compare with the same time last year.
This year over year increase reflects the record sales of 2020 season passes fueled in large part by the hugely successful introduction of the Cedar point goal pass.
Well I must caution that as of this past Sunday, we are only a little more than one third of of the way through our season pass sales cycle. We are nevertheless, very pleased with a record pace we are on today.
As Richard noted earlier few indicators reflect the appreciation in the man to the entertainment product, we provide better than seeing a 40% plus ramp in the early season sale of season passes.
In summary, we ended 2019 and very solid financial position, we delivered on our goals are driving net revenue growth through improved attendance, while increasing per capita spending even with a higher percentage of season pass attends we're well positioned heading into 2020 with deferred revenues at a record level, reflecting the early strength of our 2020 season pass and all season dining drilling program.
Ramps and we have a capital program in place that positions us to deliver another outstanding year.
We continue to generate a significant amount of free cash flow and our capital structure structure provides us with an assessed the necessary flexibility to pursue attractive market opportunities as they arise we'll continue to prudently manage our cash flows to maximize value for our unitholders through a combination of cash distributions and organic growth opportunities both in the near and long term.
With that I'll turn the call back over to Richard Richard Thanks, Brian I am encouraged with how effectively our strategic initiatives performed in their first year and I expect more of the same level of success as we move forward.
The initiatives, we implemented achieved our primary near term goal of attracting and incremental audience and driving a meaningful lift in attendance.
Throughout the season, we created urgency to visit our parks and once inside our gates guess enjoyed a variety of entertainment choices beyond our world class thrill rides and attractions.
Our team's performance was nothing short of outstanding last year, and our associates should be very proud of what they accomplished.
2019 in the record books, our challenge now is building upon that success for the upcoming season and beyond.
In 2020, we plan to expand upon our strategy of offering limited duration special events and experience oral entertainment of scale with the rollout of additional immersive events like Grand Carnival and some are nights.
At the same time, we'll continue to invest in the traditional rides and attractions, which have worked so well for so long such as the new 300 foot coaster Orion at Kings Island and expansions at several of our water.
We're also excited to see the first full year contributions of new assets like the Springhill suites Hotel and Cedar point Sports Center and the first full year contribution of recent acquisitions like our federal bond Waterparks.
With the early momentum we've generated in the sale of season passes and the capital program and new initiatives, we have planned.
We're confident that we're well positioned to deliver another outstanding year in 2020.
As we previously stated and as evidenced by our recent capital programs. We're focused heavily on broadening our park offerings with more immersive entertainment and special events.
Investments, which tend to be more opex oriented and more capex sufficient.
An important element of this strategy is lengthening the cadence between major thrill ride additions at any one park by at least a year or two.
This shift in approach provides us with budget flexibility and frees up capital dollars. So that we can add something new to every park every year.
It also allows us to efficiently reduced the run rate of our annual Capex spends while maintaining the standard of quality for which our parks are known.
Ultimately this results in incremental free cash flow and the flexibility to allocate capital more effectively including rebuilding our balance sheet reserve to take advantage of attractive growth opportunities in the future.
While we are not committing to a hard line capital investment threshold or amount at this time, we are comfortable in saying that our targeted investments in marketable rides and attractions in park infrastructure needs.
Begin to migrate back towards a 9% of revenue level, beginning with the 2021 season.
2020, we still estimate investing approximately 190 million in our parks and resort accommodations, which is in line with the level of capital investment the past two years.
Before we open the call up for questions I would like to address a couple of other items that have been front and center during our recent meetings with investors.
Over the past year, we have been asked about the variability in the performance of companies in our space given this.
I want to ground us all on why we feel strongly about the health of the industry and the potential Cedar fair going forward.
First.
The business model for the regional amusement parks basis solid.
There are significant barriers to entry.
History has shown the industry to be generally recession resilient.
And even after making appropriate capital investments that generate the business generates significant free cash flow.
Second Cedar fairs approach to the business has proven to be best in class over multiple decades.
Through an abundance of surveys and market research, we have a deep understanding of our consumer.
We always make decisions with consideration for what is best for the business long term.
And we have prioritized returning capital to our unit holders through a sustainable and growing distribution.
Cedar Fair has a long history of delivering attractive returns to investors.
Since going public more than 30 years ago, our investors have enjoyed a compound rate of return of approximately 15% distribution reinvestment.
Our long term success has come from making significant investments that are designed to not only have immediate impact, but also served to create value for many years to come.
The high quality enhancements to our existing parks.
The ongoing growth of the critical season pass channel.
The continued development of our resort properties and adjacent entertainment offerings.
And the meaningful growth opportunities created by acquisitions like splitter bond and saw Mill Creek provide us with the confidence that we will continue to grow cedar fair well into the future.
We are well positioned to deliver another year record results in 2020 and remain laser focused on delivering attractive returns for investors.
With excellent results in 2019, the positive traction produce from new strategic initiatives and the early read of 2020 long read long lead indicators, we've established a new strategic growth target of 600 million of adjusted EBITDA by 2024. This goal implies an average.
Growth rate of 3.5% over the next five years, which we believe is rational yet appropriately aggressive, especially given that several of our largest parks delivered outstanding performances in 2019.
It's important to stress that we do not anticipate growth to be linear over the five year target period because of the potential impact short term macro factors could have on our operations as well as the timing of returns from longer term investments.
Amy that concludes our prepared remarks, we're ready to take questions.
As a reminder, ladies and gentlemen ask a question you will need to press Star then one on your telephone.
Withdraw your question please press the pound or hash key.
Your first question today comes from the line is Steve license of Stifel. Your line is open.
Hey, guys good morning.
So just wanted just wanted to dig into your 2024 EBITDA target that you laid out there and.
Maybe if you can help us think about what's being embedded in that.
At a very high level I'm not trying to get into exact numbers here, but I assume first of all that target does include any acquisitions, but maybe also how you're thinking about long term attendance growth and maybe what's embedded therefore, the labor costs as well or I guess another way to says how are you thinking about margin expansion possibilities.
Yes, Steve it's it's Brian.
So as at a high level.
As Richard said on the call the.
Growth over the next five years isn't necessarily going to be linear and I would equate that also too.
Where that growth comes from I think right now we're in a window of time.
For the last several years, where the growth has been driven largely by volume.
And and modest increase in per cap that.
Different than where it was maybe from 2012 2015, I think we see at least for the next several years, we're still in a little bit more of the volume game. So if we're looking at topline growth it probably leans a little bit more towards attendance that does per cap. We do continue believe we have pricing power, but as we've talked about in the past with such a bike.
Located economy, we have to be careful not to leave too many folks behind at the lower end of the of the economic scale. So we are sensitive to that.
As it relates to cost we've assumed on that.
At least for the foreseeable future that said, we're going to be in a similar.
Place to where we've been the last few years, which is pressures on on labor costs will continue.
As you know, it's our single largest cost line item representing about half of our operating costs and so we're going to build a lot as many continue in season initiatives in there to try and keep those costs tamp down, but I think the model reflects our target number in the model behind it reflects on the cost pressures are going to be similar going forward.
Okay got you thanks for that Brian and then wanted to ask about your early season pass sales and when you look at this past sales, obviously, which are pretty strong.
I want to ask either a are you guys where are you guys overly aggressive or have you been aggressive promotions or marketing and then b.
Are there was pass sales pretty evenly disbursed around the country or is there one or two regions that you're seeing outsize growth and I assume one of those might be.
Cedar point.
Steve It's Richard good morning.
Good question one one as you know we watch our season pass program very closely.
Week to week as we go through the sales cycle. When you look at whether or not we're aggressive Cedar point and we said this on our last call was the last part where we implemented the goal pass program. So it's now got the same three tiers as the rest of our parks. So we saw tremendous response and thats been a significant driver of the growth So weve called.
That out and I would call that again, however, taking season, taking cedar point out of the mix, we are still up double digits across the rest of the portfolio at virtually every side, we see that strength across the bigger parks in the mid tier parks. So what we're really pleased with is the reaction we've seen to our two.
Our.
Long range plans strategies being put in place the reaction to the limited time duration events.
When you look at our expanding the calendar for Winterfest into December you go back several years, none of our parks were open in December we've now got a very robust seals season pass sales window, and we saw that growth again over the over the month of December in 2019. So.
I really like what I'm seeing in all of our markets.
Think again I think it speaks to the fact that we feel we've got the REIT strategies to drive that topline growth going forward.
Okay got you then one real quick when Brian anything we'd need to be thinking about this year and just in terms of calendar shifts or stuff like that or how the quarters might kind of play out.
Yes. After this year, that's a great question, Steve because I know this year was a little a little difficult in a lot of the messaging and how as for modeling from a fiscal perspective on the quarters. The fiscal quarters are going to be comparable to 2019. So.
Nothing to note there that'll be good from a from a modeling and definitely good for us from a reporting perspective as it relates to the operating calendar. Unlike the past few years, where we've been introducing a new winterfest event, we don't have a new winterfest event.
Targeted for the 2020 season, so there won't be any incremental operating days because of something along those lines.
We're still tweaking some of the operating calendars. So you could see an extra day or two here there across the system from parked at par maybe the most notable thing I would call out this doesn't change anything necessarily in terms of as I said fiscal cost close but it is a late labor day this year.
So for the industry Thats, a good thing with summer extending a little bit longer so for those parks in our portfolio that have daily operations, all the way through labor day.
Which include a couple of big parts like Cedar point and debt Canada's Wonderland.
That will mean, an extra week of operation, so that hopefully bodes well for us for the summer season.
Okay, Great guys really appreciate it thanks a lot.
Thanks, Dave.
Your next question comes from the line is Tim Conder of Wells Fargo Securities. Your line is open.
Gentlemen, congrats to you in the team on the on the other great execution. This year with lot of moving parts. So.
A couple of things here.
Maybe.
Little specifics on the 6% unique guests growth.
You talked about the sports complex being able to feed in some.
New contacts via via that but maybe just drill into that a little bit what what was driving then and how you what you anticipate going forward.
And then just maybe from a summer metrics perspective, you referenced that the dining beverage pass penetration kind of set all time high is any any percentage reference points or ranges you can kind of talked about there and then just an update on your guest visitation frequency.
In 2000, 2019, and then do you have a one or two others.
All right Tim Let me take the first question about unique visitors, we really started to see the unique visitor number trend up as we got into the meat of the summer and we really rolled out our our events so back to tying it to our strategic initiatives.
Grand corn about monster Jam in the other things that we rolled out last year on a more limited basis will be a more extensive bases. This year really started and seem to be the catalyst when we got into the Summertime. Then you go into the acceleration through October the continued reaction to our strong attendance.
October to Halloween Hot and lastly, with the with the new.
With the new Winterfest up in Canada, combined with the existing Winterfest events, one of things, we're really encouraged by and Brian called it out in his remarks was the amount of single day tickets that we sold two in the Toronto marketplace.
Where the weather was very conducive, but we saw great guest reaction. So theres a lot of demand we tapped into that.
So.
As we look at unique visitors. It is a metric that's very important to us we want to grow our tenants overall, but we want to grow our our unique visitation as well as our duplicated visitation. So Brian you want take the other two yes, Tim as it relates to the dining and beverage programs, we don't disclose specifics around the penetrate.
Alan.
Our attachment rates to those and we look at amount of household basis, I think we've talked about that in the past and they have been improving every year.
Since the program's were introduced and it marries up with other initiatives, we have in place right Richard talked a little bit about the strength of the food and beverage channel from a per cap perspective. The investments we are continuing to make in that channel I think as Richard said, something that's very much and become a hallmark for Cedar fair parks in a differentiator for us.
As we continue to add more capacity at higher quality locations and offerings around food and beverage that seems to translate well into also pushing those penetration.
Or or attachment rates higher on the on the dining and drink programs.
In terms of average season pass visitation pretty comparable between years.
As we continue to grow the season pass base, which is probably reasonable to expect that you're not always going to acquire the or you are going to acquire maybe more casual users. So the fact that we're holding that in 2019.
It was was well received given the big step function and total season passes sold and as we looked at 2020, we would expect to see some.
Something.
Similar one thing that I think we should.
Remind everybody.
Past perks, our loyalty program, we tested in 2019 at four parks.
Being rolled out broadly across the system sand the Schlitterbahn parks for 2020, those parts will come on in 2021, most likely but the big part of the past first program is not only to to drive retention of season pass holders, but also to encourage and drive more visitation, so having that tool in the tool belt for.
Our park marketing teams will will go a long way towards hopefully pushing those visitation numbers up going forward.
Okay, Okay very helpful gentlemen.
Wanted to circle back here it seems like.
If I interpreted things right and correct me if I'm wrong here, but we probably should not expect to see the EBITDA margin growth but.
Or should we start to see little bit growth with with the flow through and just maybe work through I guess, the math or dynamics. So that because I know you were talking about in August about concentrating on EBITDA flow through improving and then also of course, the de leveraging that you've already mentioned.
And then on the Capex moderation, Richard I think you said that.
That would start moderating in 21 and going targeting towards 9%, but obviously that would think would be a multi year type of a gradual slowed down to that 9% of revenue rate.
Yes, Tim it's Brian.
As it relates to the margin question, yes, as we said in our remarks I mean, it's a key metric for US right I mean, it really is.
Core metric for evaluating the efficiencies of our operations both the core parks in their adjacent offerings.
The challenge we have is balancing.
Driving higher margins with with the addition of some of these lower margin lines of business and as I said in my prepared remarks.
And provided that we can add EBITDA and find accretive opportunities to add to free cash flow going forward, even at lower margins will continue to pursue that so as I look out to 2020 I think back over the last couple of years, what have been some of the things that have put pressure on margins in some cases, it's been the addition of of events like winter.
Fast.
So those are lower margin businesses pretty heavy opex in the fourth quarter, we don't have a new one of those coming on so that should work in our favor, but we do have coming on line some.
Not working against US some lower margin operations like the Springhill suites hotel full first full year of operations there the indoor sports complex in Sandusky.
Sawmill Creek, which will reopen later this year, so there'll be a little bit of pressure on your longer term is there opportunity for us to expand margins most definitely.
At the park level as we've said in the past our parks most of them operate north of 40% with some pushing as high as fifties to low fiftys.
In in record years or years, where they are entertaining record numbers of gas and so the opportunities for some of the parks to go above that is pretty challenging, but we definitely have some parks in the system, where we can continue to improve our margins and you can bet will be focused on doing that to the best we can.
And then Tim your second question back to the Capex, Yes, I would I sort of said as we migrate towards that 9% level. Starting in 2021, we think will be close to that and as you look at 2020 want to get into 2022 lot of our more significant investments in the renovations of our resort accommodations will start to be behind us.
We'll also be be working our way through our initial investment in the Schlitterbahn parks to bring them up to our standard and prepare them for some of the revenue generating ideas. We've got for them. So as you look at 2021 into 22, we're really started to generate a significant amount of free cash flow and then we'll turn around to look at.
How we can best use that obviously.
Maintaining the.
And growing the distribution is one of our priorities, but we also look at how we can invest that debt free cash flow, we generate to continue that growth well into the future you've seen us take those steps in the last couple of years. If there. If there were opportunities that came on the market on the M&A front, we certainly would be interested.
Before this past year, the last major acquisition by Cedar Fair was that Paramount parks in 2006 of those opportunities don't come along but we're obviously working hard as Brian said in his remarks to make sure. Our balance sheet is is well preserved and that we've got an opportunity to jump on those opportunities when they become available.
Thank you gentlemen.
Thanks, Tim Thanks tip.
Your next question comes from the line of James Hardiman.
Wedbush Securities Your line is open.
Good morning, Thanks for taking my call so.
Morning, So just wanted to clarify because I think there's obviously some confusion around the operating calendar. When we last spoke you talked about October theme Park.
Same calendar essentially attendant being up 15% revenue being up 12, now we're basically saying.
For the quarter same park same calendar, 16% growth in attendance.
13% growth in revenue so.
I guess is it safe to sort of summarize move.
If anything funky last spoke thing.
Accelerated on a same park basis, a little bit and then if I do think about the delta versus the.
The reported numbers the 4% attendance growth in the 2% revenue growth that was just the the week in September that you had last year that essentially you didn't have with you.
Yes, I think you're thinking about it correctly James you know as we look at fourth quarter.
October was without a doubt a extremely strong month record attendance across the system.
As we look towards November December.
Some good and bad so to your point on accelerating some of that acceleration.
In going from up 15.
As a percent to 16, 17% was the.
Was the performance of the first year event Winterfest event at Canada's Wonderland.
So you could say in one hand, thats not really quite a same park. We think of same park just as Canada's Wonderland was in the system is in the system, but there clearly were incremental operating days and incremental attendance associated with those days.
Some of that lift.
By the first year event, there was offset as I said by soft.
Tenants in December and a few parks.
Most pronounced impact us felt in California, where it was a very wet and rainy December.
And not had had a rough go of it in December as did Great America up in San Fran up in the Santa Clara market.
We had a little bit of of of weather impact across the system, otherwise if I strip Canada's Wonderland out you're looking at Winterfest events and in terms of attendants being flattish.
Sans the incremental tenants that we got from from Canada's Wonderland, and so forth quarter, though overall very pleased with where things shake out.
Got it that's really helpful and men wanted to sort of fuel back the layers on on the long term guide here.
A little bit so a year ago, you targeted 575 million by 2023 that with about a little bit north of a 4% CAGR.
You just finished the Bennett banner year, obviously, EBITDA grew 8% you acquired some parks, which presumably add to that.
Long term EBITDA target now, it's more like a three and a half a percent CAGR I guess I'm getting at here, obviously, you had a great year.
But the implication here is that the organic growth rate is a little bit slower beyond 2019 bet conservatism.
I know you talked about conditions being near optimal.
This past year, but but how should we process on that.
James Great question is one that we always talk about internally when we think about the growth rate going forward first there is growth. So so we're in an industry as we said and as I highlighted on my remark that has a tremendous foundation of success and a lot of resiliency.
We got to its just the first year of our long term strategies and we saw great traction. So we're just really getting started on a number of them. So we look going forward. We think there is continued growth, but it will be it'll be choppy overtime, we got some of that growth earlier.
But when you look at the ability to to pair both the growth rate on the EBITDA line with how we can manage our capital more efficiently I think what we're focused on is the free cash flow generation and making sure that we absolutely deliver on our commitments, but also fine give ourselves an opportunity to go chase growth opportunities.
When they come available so Brian emphasized in his remarks, we always try and balanced delivering in the short term while continue invest in things that will take a few years to pay off.
Some of the initiatives we've got in play will still take two to three years. So we start to look at where we are now and then ultimately investing to drive growth beyond the next two to three years, we'll be making those investments as you get into 22, and 23, but the payoff will be a little bit longer term.
And just good.
The comment about sort of the near perfect.
Or near optimal macro conditions.
Obviously had a great year and weather probably helped I guess.
Should we interpret that to me that.
If anything those conditions are likely to be headwinds in 2020.
How should we think about that.
Well I'd take a step back and even I know your question relates to 2019, James I guess takes back a little bit further ahead.
Highlighted in my remarks, I Gotta go back to the late Ninetys to look at a time period, where I thought the consumer felt as good as they feel now so we saw because of the whether because of the health the consumer a lot of demand in the marketplace.
We were able to capture a lot of that because of the things that we do on our side the immersive experiences our strategies the quality to guest experience that we deliver we're able to capture a lot of those you go back to two any in any given year, how much of that demand do we are able to capture as much as we can.
And given that we generated and then want to have the timeframe and deal with time poverty in the things that have challenges. So as we think about it from a historical context 19 seems to rank up there in terms of our ability to both generate the demand and capture the demand and we're not saying we can't do that going forward. We think we've got all the levers we can to go create that demanded.
Captured but how much of that demand that we generate and capture ultimately depends on macro factors. We are late in the economic cycle. So one thing I would say we've talked a lot about we like what we're seeing in terms of health consumer we don't think thats going to change certainly through 2020 into 2021.
We're at a point in the economic cycle, where it's getting very very late so as we think about 2024 and beyond the were late in the economic cycle, we're not saying it can't continue but we're just saying we've got a factor that is.
Makes a lot of thanks, thanks, guys. Good luck.
Thanks James.
Your next question comes from the line of Mike Swartz with Suntrust Robinson Humphrey Your line is open.
Hi, good morning, guys.
Morning.
Hey, just wanted to follow up on some of the commentary you made to previous question regarding I believe those labor inflation and I think.
You had made some commentary back on the third quarter call that you expected, maybe the pace of labor inflation to start to moderate going forward, but it sounds like in your 2024 targets that may not be the case and something change in the past couple of months or maybe a little more quantification or clarity you can provide there.
No Michael as Brian I don't think anything has really changed we definitely have seen a slowing.
Of pace in terms of the pressure on rates, if I look back to 2018.
And when the comments that we made at that point in time some of the market adjustments. We took in addition to the statutory increases that we were facing we saw pressures in the high single digits in terms of rate.
Thats pared back into more into the mid single digits, four or 5% range. This past year and I think thats, what our expectation is.
For for at least for the near future.
Well, a little bit what's difficult with these labor rates in the in the minimum wage hikes as you only now which you know right now clearly there are markets. We operate in that we know will be under continued pressure, California Toronto.
Just to name too.
And so where we see maybe a little bit more the pressure is things that are in our control right. The events that were adding are much more labor intensive and opex intensive than they are capex intensive.
We added upgrade to our Winterfest Savannah Carowinds. This past year, we'll be rolling out more of those.
At two more parks next year on those tend to be a little more labor heavy so I think the pressure at least for the next couple of years is going to be a little bit more our driven than it is rate driven.
But again it all is part of enhancing the guest experiences and as Richard said, those things and we entertain more people we have to have more employees in order to maintain service levels, particularly around food and beverage.
And other places where we're lines are an accepted and are clearly.
Guest to satisfy or so some of the late that labor pressures are our because of the success, we're having on some of them or because of the initiatives. We're implementing but we still feel pretty confident that the that the model can support those those on those higher costs.
Okay. Thank you. That's that's very helpful. Next question just on one Schlitterbahn and I think we've got six month.
The year before that is fully calendarize could you maybe give us a sense of how would you anticipate that contributing a may be more importantly, the cadence of that in the first in the second quarter.
Yes.
Michael It's Brian again, we're very pleased with a with the.
Partial year contribution chiller bond in 2019.
Not only on its operating performance in the abbreviated year, but also in our ability to to monetize some of the cost synergies as we look to 2020, you're right. The first half of the year is going to be new for us and Theres a lot of investment going into that park both in terms of.
Capex dollars as well as some early operating costs that.
We don't expect to to recur going forward. Some of it is cleanup painting of of things et cetera, as we bring it up to our standards and really try and get to ultimately at the next level.
As we said at the time of the acquisition, it's going to take.
A couple of years to mine some of the revenue synergies.
And so I don't think will we don't expect by 20 or 2021 that.
It's going to be at its peak performance, but we're very pleased with the the early traction that we've got.
Okay, but but in terms of the just the contribution how to think about it I just want to make sure. The Modelings correct is the first quarter, but another loss from that business and then the second quarter. We start just to the profitability ramp up again is that is there any parameters you can provide there.
Yes, thats the way to think about it being heavily water park based youre looking at similar to the pressure put on Q4 results Q1 will be similar with very little.
Operating days and significant cues to starts to ramp up but I wouldn't think of Q2 in the same vein is what it contributed in Q3 Q3 is its peak operating in revenue and EBITDA contribution quarter.
Similar to our other other waterparks and regional properties.
Okay, great. Thank you.
Thanks, Mike.
Your next question comes from the line of Brett Andrew.
Keybanc capital markets.
Line is open.
Hey, good morning, So just thinking about the the 2020 capital plan this year with Orion going into Kings Island.
I don't see those kinds of meaningful investments that often so can you just provide some context on what kind of sales are attendance lifts that these good coasters had provided in the past from when you put them in.
Good morning, breadth, great question and by the was down.
Last week and saw Ryan I think it's going to do extremely well I think my comments into team down at Kings Island of real winner on their hands. So when we seen it in the past.
I'll, let Brian comment on specific numbers, but we've seen as is.
The increase in attendance, but also a new significant new product like this gives us ability also take price. So we generate a lot of demand we price into it so we're able to derive.
Significant top line growth and then carry that through the next season Thats, what we model in our ROI, we look at it over several seasons, but you get the spike in attendance you also get to.
Pass through a little bit more of the price increase side. So very revenue friendly. The other thing I'd point out is put in and this is how we try manage that on the opex side as well to put in a Ryan we actually took out.
Different coaster and took out another coaster. This year. So as we have more efficient capacity is the way I would put it when we had big rides like this for anything you want to yes, I would just say for partly Kings Island.
Little bit more towards what I would call unum mature in our portfolio, sometimes the attendance lift is little bit different for our I'd like.
Ryan It Kings Island that maybe it would be at a park that said earlier in its growth cycle like some of the tenants bumps, we've seen out of a big new coasters that like Fury at Carowinds.
Where it does definitely benefit us at a Barkley Kings Island is in the season pass sales and then in terms of in park spend.
Hassling on that front line product and so I would expect that Brett the we'd see.
This attraction benefiting really each one of those sort of core metrics. Both the a bump in attendance on driving per cap not only through the price increases that it allows as Richard said, but also the Fastlane left bottom line, we would expect to ride like this.
To generate mid to high teens returns on a on a year one cash on cash.
Provided the macro factors like weather dumb conspire against us.
Very helpful. Appreciate that.
Just one kind of quick question on the pass Perks program can you maybe quantify any anecdotal with in visitation frequency that you saw as you've started to test that product in 2019, just how successful was that test.
Yes interesting, it's it's a fair question given.
Time of the year that we implemented and how we were piloting it Brad.
Our test was was more about trying to sort to what worked.
We definitely by using a variety of different offerings, a different parks to see what resonated most what what did change behavior and motivate visitation. So I wouldn't say that there was anything.
That was a stark.
Huge benefit or for us necessarily in 19 in terms of impacting results, but but but definitely gave us visibility into what worked in what didn't work. So.
We would definitely able to through certain rewards move.
People to visit at a time of the week or at time of the summer that they normally wouldnt visit based on historic visitation patterns.
So that's what we'll lean into and I think it definitely has the ability to be more meaningfully impactful when is rolled out across the entire system for the 2020 season.
Thank you.
Thanks, Brett.
Ladies and gentlemen, just as a reminder, if you'd like to ask a question. Please press Star then the number one when your telephone keypad.
Thank you have a question from the line Tim Conder of Wells Fargo Securities. Your line is open.
Yes, gentlemen, I know.
Probably not that repeatable, obviously, but.
Can you give any color as to the any benefit that you saw during Q1 here from.
Or any at all from the catering what the 40 Niners NFL playoffs out at the same unclear at facility.
Yes, Tim I mean as it relates to Q1, I guess I'd, maybe taking a level up and talk about a little bit more broadly tying it back to something that.
James asked earlier about in terms of 19 and the weather.
We definitely.
Have started 2020 very strong.
For factors like having operations and Red Zone rally running while the 40 Niners, we're in the playoffs that definitely out it's not material to the overall.
Results, but but what has really been a big plus as we look to the started 2020 as the strong outstanding start that Knott's Berry farm is off to when we look at back to last year.
And the whole whether macro factor while summer July as Richard said July through October was very much. Some tailwinds there were headwinds that we faced early in the year, most notably that was a knott's Berry farm. So January and February 19, very wet and rainy this year, it's been the exact opposite so we're off to a great start.
There.
Let's hope that that those weather patterns continue as we get into the spring because last year spring was pretty wet for us for those early opening parks and our system and Great America was one of those.
Okay, great. Thank you.
Thanks, Tim.
Your next question comes from the line of Michael Swartz with Suntrust Robinson Humphrey.
Your line is open.
Hey, guys quick quick follow up for me I think you had mentioned in terms of.
Winterfest in Toronto that a lot of the visitation you saw was single day tickets.
Provided maybe some context of what you've seen historically maybe in year two in terms of the shift from from single single day to season pass is there anything you could provide us.
Yeah, Michael actually Canada's Wonderland.
Is maybe a little bit of an anomaly in the system from what we've seen broadly for Winterfest to this point Winterfest on I think we talked about this in previous.
Calls, while as I mentioned.
Season pass was little north of 53% of our overall attendance for the year Winterfest events have typically been.
Whether it be their first year their third year.
In one case, the fourth year have typically been well north of 60% of total attendance somewhere in that 60 to 70 ranges, where they where the rest of Winterfest parks tend to average except for Canada's Wonderland Canada's Wonderland.
Was was only about a third a little more than a third of its attendance was season pass driven so.
Its first year. So we don't know that that will continue for 2020.
But it was a little bit of an anomaly. So it's hard for me to really say.
What to expect for Canada's Wonderland, because it's been the one that was the most.
The most heavily weighted towards single day tickets.
Okay, great. Thank you.
And there are no further questions in queue at this time I turn the call back to the presenters for any closing remarks.
Thanks, Amy and thank you all for your interest in Cedar Fair in your time.
As I hope you can tell from our comments today, we're excited about the future, including the 2020 season, which we certainly expect to be another outstanding year for Cedar fair and our investors.
We are fortunate to have a business model that has demonstrated resiliency and strength in varying economic and market conditions. We're extremely proud of our parks and rain remain committed to broadening our offerings and continually enhancing the guest experience our high quality assets, well run parks and constant focus on operating excellence.
Continue to differentiate Cedar fair and I encourage all of you to visit our parks. This summer to experienced this first hand for yourselves Michael.
Thanks, Richard appreciate everyone for joining us on the call today. If you have any follow up questions. Please contact our IR Department for 196 to seven two to three three.
Joining us for our next call in early May when we report our 2021st quarter results.
Amy that concludes our call today, Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
You may now disconnect.
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