Q4 2020 Cedar Fair LP Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Cedar Fair Entertainment company 2024th quarter earnings call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Who asked the question. During this time you will need the press Star then one on the telephone.

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I would now like to hand, the conference over to your first speaker today, Mr. Michael Russell. Please go ahead.

Thank you Amy and good morning, everyone.

This is Michael Russell corporate director of Investor Relations for Cedar Fair welcome to our 2024th quarter earnings Conference call.

Earlier. This morning, we distributed via wire service our earnings press release, a copy of which is available under the news tab of our investors website at IR Dot Cedar fair.

On the call with me. This morning are Richard Zimmerman, Cedar Fair, President and CEO, and Brian Witherow, Our executive 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 a more detailed discussion of these risks you may refer to the company's filings with the SEC.

In compliance with the SEC's regulation FD. This webcast is being available made available to the media and the general public as well as analysts and investors because of the webcast is open to all constituents and prior notification has been widely in unselected <unk> disseminated all content on this call will be considered fully.

Disclosed.

With that I would like to introduce our CEO Richard Zimmerman Richard.

Thank you Michael and thanks to everyone for joining us on the call. This morning.

We hope that you your family and your colleagues are well and staying safe as we move forward through this pandemic with the anticipation of getting it behind us.

A year ago, we opened our fourth quarter call with news of record of 2019 financial results and shared with you a very positive outlook for the year ahead based on our strong start to 2020.

It goes without saying that much has changed since that call a year ago.

What hasn't changed however is the company's mission to be the preferred choice for regional entertainment and to make people happy by providing fun dynamic and memorable experiences they can share with their family and friends year after year.

As conditions continue to improve we remain optimistic that Cedar fair will not only return to but surpassed the record levels of performance, we achieved before the pandemic.

My optimism is not only rooted in our company's resiliency and recovering from prior macro disruptions, but also on how well positioned we are to take advantage of near term growth and value creation opportunities, including the following positive indicators.

The first entering 2021, we have of loyal season pass base of $1 8 million passes outstanding with our most active spring sales season still ahead of us as well as our 2020 to season pass sales cycle, which kicks off this fall.

The efforts, we have taken over the past year to maintain our relationship with our pass holders has been exceptional.

A strong measure of the success is that we have received requests for and process refunds for less than one half of 1% of the season passes we sold for the 2020 season.

We believe this high retention reflects our season pass holders recognition of Cedar Fair's unique and immersive entertainment offerings that are not only fun, but also local and authentic.

Offerings, they cant find anywhere else.

Second steadily increasing attendance at our parks last season, and customer survey showing a strong intent the visit amusement parks. This year are solid indicators that demand should strengthen throughout the 2021 season.

And third with most of our revenues and EBITDA generated in the second half of the year, we believe the broader availability of vaccines during the year's first half.

Bind with pent up demand for outdoor entertainment and a heightened focus on drive to destination vacations will position us well to benefit from improving the attendance trends during the most important stretch of the season.

During very uncertain times last year. It was reassuring to watch our leader to leadership team remains strong and resolute, while responding ably to one of the most difficult business disruptions of imaginable.

For that I am deeply appreciative of all of our entire team for the sacrifices they made in their steadfast determination and managing through the challenges of the pandemic.

Their efforts.

And our determination to reopen as many of our parks as possible. Despite the challenges we faced were rewarded both from a strategic and economic value perspective.

As a result of our prudent planning and superb execution today, we are in a position of strength poised the benefit from resurgent demand.

Before I ask Brian to review, our financial results I'd like to take a few minutes. The update everyone. On an initiative. We began this past year to better position Cedar fair coming out of the pandemic.

As I mentioned on our last earnings call like many other companies that saw their business models disrupted by the pandemic.

We use this time as an opportunity to take a step back and review nearly every aspect of Cedar fair.

These efforts have been focused on a key objective.

Volume and optimizing how we do business.

Along these lines, we have identified opportunities to enhance the guest experience create incremental revenue streams and realize cost savings across the company.

We are confident that these initiatives will collectively make cedar fair, a stronger and more efficient company going forward.

With these objectives in mind, we are implementing of business optimization program over the course of the next 12 to 18 months.

It will consist of multiple initiatives focused on high value areas on both the cost and revenue sides of our business.

That will lead to a better guest experience and improved profitability.

On previous earnings calls, we referenced several of the initiatives already in process, including.

The optimization of our park advertising programs.

The build out of the centralized procurement function designed to reduce spending levels improved product specification standards and streamline our buying processes.

And the introduction of new consumer facing technologies aimed at improving customer satisfaction.

We also remain laser focused on the optimization of park level labor.

We as we have previously noted seasonal labor represents our single largest expense item and it's an area that has been under significant pressure.

To address debt to help address that several years ago, we established a workforce optimization committee that was tasked with improving the efficiency and effectiveness of our labor models.

We also began to implement a new workforce management solution, which will be fully rolled out to all of our properties in 2021.

This new Kronos based platform will provide better tools for managing our labor force in real time, as well as improved data analytics, enabling us to better align our staffing models with guest demand throughout the season.

And as we've proven in the past better staffing leads to a better guest experience, which in turn translates to improved attendance and higher guest spending levels.

In addition to these efforts are already in process. There are several other strategic initiatives still in the ideation and analysis, many of which we anticipate activating yet this year.

While it will take time to fully implement all of the initiatives associated with our business optimization program. We are confident they will have a meaningful impact on the guest experience in our operating results.

Ultimately, we are targeting 200 to 300 basis points of margin improvement on a revenue base that is consistent with 2019 performance levels.

Implying an EBITDA margin that could approach our highest historical margin when operating in the normal business environment.

We will be in a much better position on our first quarter earnings call in May to provide further detail on the progress of our initiatives.

With that I'll pause here to allow Brian to review, our fourth quarter and year end results in more detail Brian.

Yeah.

Thanks, Richard and good morning, everyone I'll start with our full year results before addressing our financial strategies for the year ahead.

First I need to remind you that due to the business disruption caused by the COVID-19 pandemic financial results for 2020 are not comparable to results for prior years. After our parks were closed last March.

We re opened 10 of our 13 properties beginning in late June three.

The three properties remain closed for the full year, including Canada's Wonderland, California's Great America and Valley Fair, while Knott's Berry farm was only permitted to offer culinary festivals. After the first quarter, which are not included in our 2020 figures for attendance per capita spending or operating days for.

For the full year operating days in 2020 totaled 487 compared to 2224 operating days in 2019, a nearly 80% decrease between years.

During the season, we were pleased to see attendance trends improve after our parks reopened upon initially reopening of attendance average, 20% to 25% of comparable prior year levels that percentage improved from 23% in July to as high as 55% in September for the months of August or October attendance was solid averaging close to 40% of prior year of against.

Some of our biggest attendance days in 2019.

For the full year, we entertained $2 6 million gas compared to $27 9 million guests in 2019 as a result of the 91% decline in attendance and a $101 million decrease in out of park revenues 2020, net revenues decreased $1 $3 billion or 88% to of 108.

$2 million.

Meanwhile, in park per capita spending in 2020 decreased by 4% to $46 38.

Compared to $48 32 in 2019.

Per capita spending increases in food and beverage merchandise and games collectively up 14% in 2020 were more than offset by decreases in guest spending on admissions and extra charge attractions, primarily our front of the line fast lane products, which were not available on a comparable basis due to COVID-19 protocols.

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The decrease in admissions per cap was the direct result of a higher mix of season pass visitation compared to 2019, and 2020 season pass visitation represented 61% of total attendance compared to 52% in the prior year.

Excluding the impact of season passes non season pass admission per cap on all other ticket types was up 7% ahead of our normal targeted growth rate of 3% to 4% on.

On the cost side total operating costs and expenses for 2020 declined 51% to $484 million compared with $991 million for 2019.

Abbreviated operating calendars and fewer offerings at our parks combined with the cost saving measures we put in place led to the year over year decline.

The $507 million decrease in operating costs and expenses reflected a 78% or $98 million decrease in cost of goods sold of 46% or $294 million decrease in operating expenses, and a 51% or $114 million decrease in SG&A expense.

Approximately 57% of the decrease in operating cost was related to a reduction in the seasonal labor.

While 50% of the reduction in SG&A was attributable to reduced advertising spend.

Two priority areas for capturing cost savings once park operations were disrupted.

As we've previously noted the.

The flexibility of our business model affords us the opportunity to quickly and significantly reduce expenditures across the board when needed including costs, we generally consider fixed during normal operations.

As we share with you on our last call there were both strategic and economic value and getting properties reopened in 2020, not only do we remain engaged with many of our guests, but operating 10 of our 13 properties, even under modified schedules unlimited offerings reduced our adjusted EBITDA loss by more than $15 million over the last eight months of the year.

When compared to our internal projections under a scenario where no properties reopened after the pandemic shutdown.

Looking at deferred revenues at the end of the year deferred revenue totaled $194 million, which was up 21% compared to $161 million at the end of 2019 the year over year increase primarily reflects the impact of the carry forward of 2020 season pass benefits and use privileges through the 2021.

Isn't or beyond in the case of Knott's Berry farm passes.

With the most active period still ahead of us in the two 2021 season pass sales cycle. We are pleased to report. We currently have approximately $1 8 million valid season passes outstanding or roughly 70% of our 2019 full year of season pass base, which we believe provides solid momentum.

For attendance as we head into the 2021 season.

Turning to our outlook around liquidity with Knott's Berry farm, our only year round park remaining in the state of readiness to fully reopen and non of our other parks currently in operation. We are closely managing our cash burn rate, while appropriately maintaining our properties at the end of the year, we had total liquidity of 736 million.

Which included $359 million of Undrawn revolver capacity and $377 million of cash on hand.

Compared to our pro forma liquidity position at the end of the third quarter of approximately $877 million.

You may recall that during the fourth quarter, we enhanced our financial flexibility by completing the issuance of a $300 million senior unsecured notes offering, which we viewed as a prudent insurance policy to protect against the possibility of the disruption lasting longer than anticipated.

We also amended our credit agreement to suspend and revise certain financial covenants by an additional year and we obtained agreement to extend the term on $300 million of our revolving credit facilities through the end of 2023 the.

The covenant waiver period was extended through the end of 2021 and the Covenant modification period was extended through the end of 2022, along with the widening of the senior secured leverage requirements under terms of the amendment. We are required to maintain a minimum liquidity level of $125 million and we may not make restricted payments such as distribution.

<unk> generally through the end of 2022.

Regarding 2020 capital expenditures after the mid March shutdown of park operations, we effectively suspended all capital projects to minimize cash outflows and preserve liquidity only restarting in completing those that were necessary for reopening parks in 2020 for the full year capital investments totaled 129 million.

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At year end, we were current on our payables for all act of capital projects and we had no material long term commitments for new attractions.

With nearly half of our parks unable to fully operating last year, many new rides and attractions plan for the 2020 season have yet to be introduced to our guests being in that position provides us maximum flexibility to tailor, our 2021 and 2022 capital programs based on the speed of the recovery and our outlook around liquidity.

Therefore, our 2021 capital investment strategy is to focus resources on items of necessity, including a central compliance and infrastructure needs and reactivating select projects left unfinished from 2020 that are critical to this year's park operations.

Beyond the base level of investment, which we estimate to be in the $30 million to $35 million range. We will continue to assess the speed of the market recovery and we will activate additional projects as conditions warrant.

Ply conservatively. This approach should result in our 2021 capital expenditures totaling well inside the amounts we are investing in recent years.

As we reopen parks and get back toward normal operations, we will be in a better position to make decisions on what our capital investments over the second half of 2021 will look like as well as our outlook and timing for returning yearly capital investments back to our targeted investment range of 9% to 10% of revenues.

Let me move on the cash burn for a moment as I mentioned, a moment ago. All of our parks are currently closed and with the possible exception of Knott's Berry farm opening sooner non are scheduled to open before the beginning of May if current trends continue cash burn will remain in the 40% to $50 million per month range until the.

Second quarter, when we have a combination of factors coming into play first in early to mid April operating costs begin to ramp as we prepare our parks for their scheduled season openings in mid to late May.

Second as previously mentioned, we have a modest amount of capital investments planned for the second quarter to address compliance and infrastructure needs and complete projects reactivated from 2023.

Third scheduled interest payments, which are higher in the second and fourth quarter are are due on our outstanding bonds. In total interest payments are projected to average approximately $23 million per month in the second quarter.

And finally in addition to the cash we will generate starting in mid May from Daily Park in resort operations, we are anticipating an uptick in season pass sales during the spring timeframe as guests return to our parks.

While we are encouraged by the solid foundation, we have in some key attendance channels such as season passes as well as certain macro trends like the broad dissemination of vaccines.

Cause the operating environment around the pandemic remains quite fluid, it's difficult to project more than two to three months out.

As such out of an abundance of caution we want to emphasize that should operations again be suspended across our portfolio. We have the ability of adjust our operating plans and remain within or below our previously achieved monthly cash burn average of 30 to $35 million to $40 million covering operating costs and interest payments under either scenario we have sufficient.

Liquidity to satisfy our cash obligations and remain in compliance with debt covenants at least through the first quarter of 2022.

The progress we've made over the last few quarters to improve the efficiency of our operations and infrastructure has certainly had a positive impact on our ability to reduce cash burn our transformation is squarely underway and central to our goal of emerging even stronger and more cost efficient.

Before I turn the call back over to Richard Let me recap of our overarching financial objectives, as our business recovers and transaction transitions back to normalcy.

Our near term capital allocation strategy remains unchanged, we are focused on reestablishing growth in the core business and paying down debt to return our net leverage ratio back inside five times adjusted EBITDA as quickly and responsibly as possible longer term, we're committed to getting net leverage back between three to four times, which is where it has historically been.

We have suspended our distribution for the foreseeable future and we will continue to actively manage our cash burn to its lowest possible levels, particularly while our parks are not in operation. So we may advance our key objectives and finally until we have greater confidence that operations have stabilized and further business disruptions from the pandemic are unlikely we.

We'll continue to withhold current year or long term financial guidance ultimately our performance in 2021 will be highly dependent on speed of the recovery and several other factors not directly in our control, including restrictions on park openings imposed capacity limitations and broad consumer sentiment sentiment around the pandemic.

It is important to note that the longer into the season. It takes for our parks to reach full operation the more challenging it will be to reach historical performance levels.

As a reminder, any normal operating year, we estimate that to achieve adjusted EBITDA breakeven on a consolidated basis, we need to generate attendance in the range of 45% to 55% of 2019 levels.

Two to achieve cash flow breakeven, which would cover operating costs and cash interest payments. The bar is higher at 70% to 75% of historical attendance levels.

While our market research tells us consumer demand. This year should support these attendance levels 2021 will not be a normal operating year and external limitations on park operations may delay achievement of full potential until later in the year or beyond.

With that I'll turn the call back over to Richard.

Thanks, Brian.

Although we have many reasons to be optimistic about the second half of the year and Cedar fair is longer term prospects, we remain focused and disciplined.

Given how dynamic the operating environment remains we are prepared for a range of scenarios in 2021. Fortunately, we have an experienced team with a proven ability to respond quickly and effectively the challenges.

Our primary goal for the 2021 season is the fully reopen all of our properties.

While the timing for achieving that goal is not entirely within our control. We are encouraged by recent interactions with state and local officials in most of our markets for now however, we continue to factor of the pandemic near term risk into our operating plans and take measures to minimize its effects.

Based on our historical performance, we know that most of our revenues are generated during the peak vacation months of July and August and that 80% of our attendance is produced from June 1st off. We also know that uncertainty caused by the pandemic is likely to remain in the marketplace over the next few months at least until vaccines are administered.

To a greater percentage of the broader population.

We expect these headwinds to persist for much of the first half. So we are delaying the traditional opening dates at several of our seasonal parks, which in prior years opened in March and April.

As stated in this morning's earnings release, we have established park opening dates for the upcoming 2021 season, ranging from May eight to make 'twenty nine.

In a dynamic environment still affected by shutdowns of operating restrictions and as visibility remains unclear. We believe that opening later is the prudent approach in our regional markets and offer several advantages.

First as vaccines and therapeutic treatments of distributed more broadly over the next several months there is a greater chance communities and businesses will have more latitude the ease of COVID-19 restrictions.

We can meaningfully reduce park preopening and operating costs during a period, where we expect demand to be under pressure.

Third we can more efficiently manage our seasonal labor force by consolidating our operating calendars to correlate with anticipated demand.

And finally, we can minimize our cash burn and preserve liquidity.

We will be monitoring events in the marketplace adjusting our plans for the season ahead and continuing our active dialogue with season pass holders at other loyal guests about the upcoming season, while also pressing forward with our initiatives to streamline our infrastructure further enhance operational efficiency and optimize the way we do.

Business.

While challenged by the pandemic our team has not been deterred in fact, we have taken to heart the effects of COVID-19 on our business and professional lives to embrace a new and different way of thinking about our future as well as the future of those we serve.

Im excited about the potential of Cedar fair and the progress we are making to evolve the way we do business I look forward to updating you on the progress of our efforts over the months ahead, and we remain confident that Cedar fair is poised for long term growth and value creation.

Amy at this point.

Could you please open up the call for questions.

At this time, ladies and gentlemen, if you would like to ask a question. Please go ahead and press Star then the number one on the telephone keypad.

Your first question today comes from the line of Eric Wold with B Riley Securities. Please proceed with your question.

Thank you and good morning.

Couple of questions I guess one.

Obviously, you mentioned that Youre starting of Youre planning on some of the the seasonal opening dates to be a little bit later than normal.

Maybe within those plans, where do you have the the least level of confidence of those dates in the southern California is towards the top of that.

Charles.

Maybe confirm that in the World you don't have full visibility on opening date at this point.

Eric Richard Good morning, Thanks for the question.

I would I would answer it this way Eric I think we believe we can get all of our parks reopened and we tried to pick dates debt that we thought made a lot of logic given the likely unfolding of the recovery in each of the states are as I mentioned in my prepared remarks, we had very productive conversations with all of the state of locals.

Coming off of last year, where we were able to open and operate effectively and very safely in a COVID-19 environment. We got we got a lot of credit and the industry got a lot of credit for the the safe way that we were able to operate and still provide unique entertainment offerings that really resonates with a lot of folks in the state local level and as we as we.

We see the stages unfold in each of the particular localities I think we're monitoring those and moving as quickly as we can.

But I would say that.

Have more to share with you as those dates get closer but right now I would turn the <unk>.

All of the conversations even the California very productive.

We understand where we where we sit in the phased reopening of each of the economies and we're working cooperatively and collaboratively with with all the jurisdictions and all of our industry partners to make sure that we move forward.

As quickly as is prudent.

Perfect.

One of course.

I know you've kind of.

What kind of number of labor efficiency.

<unk>, it's going to drive more efficiency driver of margin at the parts of your kind of yes.

The normal.

And then of attendance.

Maybe you can talk about how different will be.

Staffing process the.

This year, given maybe some uncertainties around timing and then should we assume debt.

Do you are in the plan to open a little heavy on staffing even heavier than you'd want to be an.

The opt in the B under the strategy just to kind of get consumers back into the mix and drive the engagement drive the experience and then kind of move later towards the isn't asking the levels, where we would be starting to conducting the levels can they get go.

I would say.

We did as you saw us do last year, we're going to match, our our seasonal labor to what we anticipate the demands will be.

We think in each of our respective markets every market has its unique challenges, but in each of our markets. We think we'll be able to get the amount of labor that we need.

The matter of fact in some markets we've seen a lot of good upfront.

Indicators with people, calling us for internships and other things like that so I think we'll be in a good spot to as I said in my prepared remarks really match, what we think the the demand for labor will be with better tools to manage the work force, Brian anything you want to add to that.

No I would just say Richard yeah of the staffing.

For 'twenty, one as is largely going to be educated by what we saw in 2020.

It's definitely maybe not just like a demand from the gas side is.

Influenced by Covid, there are still implications on our staffing model and a good example is the status of where the <unk> visa program will be at which several of our parks have historically leaned on.

But early indications from application flow is pretty solid and that was the case last year in 2020, Eric as well I think what disrupted a little bit was all of the uncertainty around the opening day.

And some of those folks that we would normally be hiring just going and finding other jobs. So while we continue to see solid application flow and and as Richard said, our focus right now is making sure that we manage aggressively our staffing model to best align with with what our anticipation is around demand levels and the new platform that we're introducing the workforce management.

The solution. The Kronos solution is going to give us a lot more flexibility to adjust those staffing levels in real time during the course of of a week or even an operating day based on how attendance trends are.

Developing.

Perfect. Thank you Bob.

Your next question comes from the line of James Hardiman with Credit Suisse Securities. Please proceed with your question.

Hey, good morning, guys.

So I actually wanted to stick with that the the last conversation about labor and maybe look.

I guess backward and forward with that.

But in the context of the 200 of 300 basis points of margin expansion that you called out.

Versus 2019 and of normalized environment.

The first question when I looked at when I look at 2000, and I guess the thing to that 36, 37% range in terms of EBITDA margin remind us what the biggest delta between 2019 and sort of the peak margin that you've done one of the labor the biggest factor there.

And then as we look forward.

Do you still think that sort of margin goal is achievable.

We see of significant ratcheting up of both of the federal minimum wage, which is obviously getting a lot of <unk>.

Most of the blades.

Yeah sure James It's Brian.

Good morning, good questions.

I think as I look back.

At 19 relative to those peak.

Margin years, I think while there are a number of of initiatives that had been maybe introduced in the mix can come into play as well right I mean, the portfolio of properties.

In.

And the system plays into that.

A bit as well, but you called out I think the most demonstrative of.

After that is labor costs, particularly that season.

And of Labor.

A bucket we have taken a lot of significant increases market adjustments.

In minimum wage.

Rates beginning in 16, 17, and even a little bit of 18, mostly 16, and 17, where the big increases and we did that in anticipation of a broader move to higher rates.

We were focused on our individual markets of course is we're trying to be competitive in each of the regions that we operate.

But theres no doubt that we sort of saw the wins and which direction. They were they were blowing and so I think thats the largest and most demonstrative delta between those of those those 2014 15 types of timeframes or maybe even a little bit earlier than that we were at the higher margins and were 19 was that as.

As we think about the the.

The the optimization program the business optimization program that Richard mentioned in that target of building a plan to get US 200 of 300 basis points of margin expansion, we've taken that into account.

There are some headwinds in addition to the opportunities that are before US there are some headwinds around.

Things like labor ultimately the Devil's in the detail and there's a lot. We don't know about what the proposal to of $15 $15 per hour wage rate would look like.

But as I mentioned, we've been planning for that for several years and to put into some kind of some context, our average seasonal labor rates in 2020 was close to $12 50.

Across the entire system.

With a number of our parks several parts of the system, including the two bars from California already at or near that $15 per hour level.

We're working on analysis, right now and how potential jumped to 15 could impact.

But again the true the true impact is going to is going to depend on the on the details of what that would actually look like so we will continue to manage it. We think there are definitely efficiencies on the hour side.

And then the other piece that I think often gets overlooked is as there's more.

The labor dollars.

Into the into the pockets of our associates our employees.

As of the same folks that our guests.

Jim age bracket.

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The equivalent of are of much of our guest base and it gives us a little bit of pricing power and so I think that's the other half of this but we'll be we'll be definitely focused on the labor side of things as we work towards that 200 of the 300 basis point of margin expansion goal.

Got it and then just the just the point of clarification.

The last point, Brian you made in the prepared remarks about.

45% to 55% of 2019 getting you the breakeven EBITDA in the 70% to 75%.

The attendance because of obviously getting you back to breakeven free cash flow.

I didn't quite catch.

You may have commented on the likelihood of either of those two things happening.

And maybe the answer was yes, we do.

Don't know based on the operating schedule, but maybe flesh that out.

How realistic is it that we get to one or both of those target from 2021.

Yeah, James we didn't specifically say what the likelihood is I think the way I would answer that is that as I said I think Richard alluded to as well in his prepared remarks, it's hard to look out much beyond three months with any degree of certainty given how dynamic the.

The World is right now, even though I will say we are.

Are we feel a lot better right now than we did several months ago and clearly a lot better than we did.

In March or so of last year, when the pandemic was hitting.

The the fact that the way I guess I would frame it up one of the challenges we're going to having the I alluded to it in the 'twenty one is not going to be of normal operating year as I mentioned in my remarks, our operating days were down almost 80% in 2020 from those 2019 levels on the.

The adjustments we've made to our calendar this year and the announced May.

<unk> for reopening we're still looking at an operating calendar is going to probably be somewhere between 25% to 30% light in operating days relative to 2019. So.

That's a pretty big Delta.

When you marry that up with capacity limitations that may still be imposed in some of our our key markets like California, as an example, or Toronto with Canada's Wonderland being our third largest park.

Those those are challenges that make achieving those breakeven levels.

That much more difficult.

Got it.

It makes a lot of sense I mean, basically it sounds like the free cash flow is going to be of real tough one to get to breakeven on just given where the operating calendar.

Right.

With those capacity limitations, maybe maybe EBITDA, obviously more likely book, but still uncertain. Okay. That's really helpful. Thanks, guys.

Thanks, Tien tsin.

Yeah.

Your next question comes from the line of.

Yes.

Please proceed with your question.

Hey, guys good morning.

So first question would be around your pass sales and I think the normal year. You would have typically opened up your pass sales in mid of mid August and that would have run through mid fall and then you open it back up in the spring.

If I remember correctly, you had indicated that given the fact that you have a longer runway.

Get more aggressive with those sales. So I guess my question is did that essentially hold true in the fall and then maybe give us some color around what past sales look like or what youre basically expecting going into the spring selling season and also when do you start to really turn on your your marketing spend.

Yeah, Steve Good morning, it's Richard.

We were pleased with the sales we had last year in the fall.

Remembering that we only had kings island and Cedar point open for the most part after Labor day, we were able to open our Richmond and Charlotte parks for of modified.

Holiday celebration. So we're pleased with the response and all of those markets. We've seen interest even now as we're in January and February, but it's not to the normal levels. We would expect to see with parks that would be opening in March typically as we've always told you. The spring sales period is our biggest sales per.

Of the year. So we think as we get closer to opening that will.

And we will ramp up making sure everybody knows that we're going on sale. We think we've got the opportunity to jump into a pretty good sales cycle. This year again, it'll be a little bit truncated from what we normally do and certainly our advertising efforts around that will be pushed back a little bit but once we get into May then we'll get a real sense of.

How that looks and then the other thing that I would remind you is that our 2022 as I said as we said in our prepared remarks typically we go on sale of those in mid to late August. So we ramp into the fall, where we think conditions will continue to be improving and we really think we've got opportunities with that side of the program this year as well.

Okay Gotcha, and then second question would be as you guys start to open back up in May.

I'm not sure. If you guys of have you been thought about this yet but will there be a requirement either for your employees or the guest to to actually be vaccinated.

I'll speak with respect to our own employees and as you know, we we consult with outside medical experts.

Really work closely with state and local officials as well we're going to strongly encourage our employees to get vaccinated. When we look at our 2000 and when we look back at 2020 and the way we were able to do $2 6 million guests and not have of single case trace back to US we thought we had of safe and.

The effect of environment, we proved our protocols of procedures were effective. So we are certainly going to strongly encourage our associates and our employees to go get vaccinated. We are working closely by the way in several jurisdictions and already of hosted vaccine taken our parks and being a vaccination site.

And as we work and there are several more of that debt, we reach out to everybody. The several more that I think could come on line over the next month or two.

In the for the most part in those situations.

The ability to access of vaccinations for our own employees as well as the general public so.

The.

A lot lots going on at the unpacking that comment, but we're certainly putting a focus on what we can do to help the community.

Moving forward as quickly and effectively as possible and we're also looking to see if we can help our own employees get access as well.

Okay, great. Thanks, guys appreciate it.

Thanks, Steve.

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

Please proceed with your question.

Good morning. Thanks, so much for taking my question I guess my question comes back to the 25% to 30% fewer operating days estimate.

The Brian mentioned.

Does that cadence look for the year in other words, how are you looking at.

Obviously, there's the.

A cap weighted schedule here, but are you limiting.

Certain intra week.

How should we think about about how condense the the schedule will be from a week to week basis.

Yes, Paul it's Brian.

As it relates to the operating <unk> calendar as you can imagine a big chunk of of that Delta is driven by the fact that our year round Park Knott's Berry farm remains idle and not in full operation.

As it was basically for all of last year and again, while we will be hosting.

Culinary festivals beginning in early March and not we're not counting those an operating day. So that's a little bit of of of nuance. They just want to call out.

The operating calendars, then for the 'twenty one season are largely.

Educated by what we what we learned in 2020. So some of what you are referencing early in the <unk>.

In the season before we sort of hit those peak July August months as an example, we will try and skinny up some of the the operating days at some of the smaller to mid sized parks to better align operating cost with the demand demand is still the highest in the weekends and so what we the.

Calendar as we migrated to this past year, where we were only open in certain markets, maybe four days of week or five days of week.

There will definitely be a little bit of that early on.

We will continue to adjust our calendar is one of the things that we've learned this past year that we have to remain nimble in a dynamic market.

And so as demand either.

Proves or if it remained soft we will make adjustments, but it's a little bit the delta of the 25% to 30% operating day that I mentioned is a little bit of.

Both of its big swaths of time, where we're just not open up parts of that normally would be opened like Knott's Berry farm, it's delayed openings as Richard said instead of getting parks like our parks in Texas or are the Carolinas opening in March or early April Theyre now into May and then it is some adjustments to the daily or the weekly the weekly calendar, particularly early in the season.

Yeah.

And do you see the the operating calendar extending later into the season the surround before you.

My grid to winter festivals, just to get the operating days in with better vaccine penetration or how are you thinking about that.

I'd say right now the operating calendar when we look out farther.

Want to the fall and winter fast from a day perspective, it's more in line with the historical operations clearly our it is our intent to host the events that we had to either truncate or not hosted all of this past year because of Covid, so getting Hans.

Our Halloween events back in place winter fast back at the parks that traditionally hosted this past year as Richard said, only only carrier wins and Kings Dominion, we're able to host and those were very limited. So I would say that the latter part of the year looks a lot more like 19, but again very dynamic we will make adjustments if there is.

Reason to stay open as we've shown in other years reasons to stay open more days because demand is there we have the luxury and the ability to make those adjustments to our calendar, but at this point in time, we are focused on managing.

Against what we think is still going to be somewhat of a disrupted 2021.

Great. Thanks, so much.

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

Please proceed with your question.

Hey, guys good morning.

Just wanted to talk a little more detail around the the business optimization plan. It looks like Youre thinking about 30 to 40 million $45 million in annualized savings.

Maybe you get back to 2019 attendance levels, So maybe give us a sense of where those savings come from exactly and then maybe how much of that has been executed upon as we sit here in February.

Mike Good morning, Richard Great question at this point as I said in my prepared remarks, we're not prepared to go into the specific details behind each of these of these time will be in a better position to do that in our first quarter earnings call I will say that each of the areas. We highlighted represents meaningful opportunities for cost efficiencies.

But the timeline on each is is a little bit different depending on the initiatives procurement in particular that we keep calling out probably has the most upside at full maturity, but that will take the longest of fully implement so.

We'll be prepared to lay a little bit more out on all of those things as we get into the May call.

Okay.

That's helpful and then just maybe.

Taking a step back and thinking about some of the seasonal or.

Limited duration events that you run and you've really strategically pivoting more.

Two over the past couple of years maybe.

How do you think about that and your plans around some of those shorter duration of events as we look at 2021.

Beyond.

Well you know one of our learnings is that we could.

The particularly out in California, with Knott's is that we could really still tap of really strong brand and create a culinary festival that really resonated with the marketplace.

Reinforced and enhance the strength of the brand. So as we think about it I would put it in the another tool in the toolkit scenario, which is we've got an opportunity to see how those limited duration of its work. When we are fully open and fully reopened in a full range of operations, but I think what we saw this year and what we learned is there's an opportunity to reconfigure.

How we use our sites and as we see demand start to ramp up I think it lets us configure our operations to the demand we see the marketplace. So we're rethinking that on a broad front right now we really like the impact that it's had on our full operation go back to the momentum we had in 2019 and heading into 2020.

We do think it's a key plank of of how we continue to generate strong.

Appeal and demand in our regional markets.

And I think Youll see us continue to lean into that as we think about of what are the drivers of our demand as we get into 'twenty, one, but also of 22 and beyond.

Okay. Thanks, a lot.

Your next question comes from the line of Ben Hogan with Credit Suisse.

Please proceed with your question.

Hey, How's it going thanks.

You guys have one 8 million passes I think the majority of that revenue is allocated for this year 2021, how do you think about the strategy to sell new passes as you get into the season, meaning are you typically reselling to the same customer hoping for renewal or would you typically selling two of brand new customer and I guess, what I'm getting at is if it's the law.

Are you of a real opportunity so.

Maybe any color around the portion of the passes.

Historically that are new versus returning customers.

And then do you have the granularity in your CRM to specifically allocate your outreach efforts to new customers given the $1 8 million people already hold of past.

That didnt make sense I can try to different way no Ben It's Richard I think I get what you're looking for in terms of color.

Say it this way we've got over the last several years, we've built the state of the art CRM system.

Our folks internally do a great job continuing to upgrade debt and continue to evolve. It we know the most about our season pass holders have a lot of data for them in any given year in any given period. The fall sales for all of the spring that we're about to launch into Youll have a combination of new and renewals come in we're constantly looking to fill the.

The customer acquisition funnel at the top and acquire new customers, but as we've shared with you over the years and we try and be as transparent as possible, we've seen higher and higher levels of renewals. So we're both of acquiring new customers our unique visitors.

We're up significantly worse, but we were up I think 6% in 2019 season pass holders of part of that but we've also renewed more season pass holders. So as we get into the spring we reach out to both so.

We've got so much data on our on our season pass holders, we certainly craft the different message for each but what we also know Ben is that for the most part season pass holders will make their purchase within a short window before that when they intend to go use the past so reopening our parks is of significant.

The advantages significant lever in terms of then going out and selling the season pass so.

I hope that helps.

Yes, yes, it does.

And then I think just one other I think some of your peers experimented with some unique ways to essentially expand the daily capacity restrictions in place.

Maybe you're running multiple ticket shifts for example are there any learnings in the last 12 months that you guys think you can apply to this upcoming season would be interesting to share.

Yeah, nothing nothing specific I will tell you we've taken note of everything in the industry and we've looked at our own.

Our own experience with reservation systems, and how we calibrate to the demand so you'll see us in particular, where we're we've got maybe smaller smaller footprints. If I can say it that way you will see us try and use all of the all the ways we can to best.

Give both of our guests an opportunity to visit so water parks in particular have the tightest footprint. So on the water parks, we're thinking about a number of different ways to make sure that we can satisfy the demand thats out there so there'll be more to come on that as we get closer to opening.

Got you I appreciate it thank you.

And again, ladies and gentlemen, if you would like to ask the question. Please go ahead in the press Star then the number one on the telephone keypad.

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

Please proceed with your question.

Hi, Thanks.

Kind of bigger picture follow ups I guess first.

Have you gone through this.

Period, where you haven't had the normal connectivity with your customer base.

Has there been things that you've been testing or that you've changed as you think about trying to stay engaged with the consumer going forward or even looking to expand the consumer base that youre going after and the new way.

We've we do have our past perks loyalty program, we've rolled out some sort of unique offers through some strategic partnerships. We have there. So we've tried to rethink to your point, Steve It how do we stay engaged and what's relevant in this disrupted.

Environment.

I'll also tell you that the we've also come up with unique ways.

No.

Putting out information doing back of house tours, we tried to come up with a lot of different ways to.

To create forms of interest for those people that really want to talk about coming back what it could look like talk about the heritage and the tradition of all of our sites.

When we talk about engagement with our customers. We don't always think about that in the context of the strength of our brands, but with such a big season pass base in which such loyal guests who come to us of year after year, even the day guests in the day visitors theres been a lot of a lot of good chatter on the.

The engagement between us and them on how we can stay relevant and what.

What is it going to op comm I will tell you theres a lot of excitement going into 2020 season. When you think about things like the 150 of the anniversary of Cedar point, the 100th anniversary of not those are all things that resonate with our with our loyal customers. So there was a lot of interest on their side, we're staying engaged with us as well as our side staying engaged with them.

Then of unrelated follow up I think you mentioned on the labor front. The Crone of time management rollout are there other opportunities or or even restrictions on the ability of take labor out of the system that could be changing and I'm thinking about just from a regulatory standpoint or safety.

And part of the things that you can do to to actually reduce the number of people kind of operating the park versus what may have been mandated in the past.

We've been as I said in my prepared remarks, we've been focused on this for several years. If you go back to the wage inflation, we have seen over the past few years and the Brian referenced as we took.

So some wage rate increases to position us competitively in the in all of the markets as we want it to be we have found ways to take hours out our teams all of our ops team of particular has always done a great job of finding ways to become more efficient I should take hours out but the flip side also is the we'd always talk about this or emphasize is we're also look.

<unk> for ways to be as productive as possible with the labor. We do have so in some cases, Stephen it's a great question. We're looking at how do we get more transactions per hour out of our food standard our food and beverage folks of the revenue per hour.

Location, so it's equal parts of trying to really look at productivity and generating.

Many transactions as possible.

On a day in hourly or daily basis at some of our facilities safe food for example, but it is also still about making sure we're as efficient as possible.

Great. Thanks, so much.

Thanks Steven.

And at this time there are no further questions in queue.

I turn the call back to Mr. Zimmerman for any closing remarks.

Thanks to everybody for joining us on today's call and for your interest and ongoing support of Cedar Fair. We look forward to keeping you updated on our progress through 2021, and we hope to see you either virtually or in person at an upcoming Investor conference or non deal Roadshow. Please let me know if we can be of any further assistance along the way in the meantime.

I hope everybody stays safe and well thank you again Michael.

Yes. Thanks again, everyone should you have any follow up questions. Please feel free to contact our IR Department at 4196272233, and we look forward to speaking with you again in May after our release of the 2021 first quarter report Amy that's the end of park.

Call today. Thank you.

And this concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

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