Q1 2022 Cedar Fair LP Earnings Call
With the FCC and.
In compliance with the SEC's regulation FD. This webcast is being made available to the media and the general public as well as to analysts and investors.
Because the webcast is open to all constituents and prior notification has been widely and on selectively 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 good morning, everyone. We appreciate you joining us for today's call.
Our prepared remarks. This morning will be focused on the following three areas first I'll provide an overview of our operating results and early season performance trends through May one.
Brian will review, our quarterly financial results in more detail and provide additional color on drivers of our revenue growth and the steps we are taking to manage operating costs and expenses and expand our margins finally with the remainder of our parks opening over the next few weeks I will close with a summary of our outlook for the 2012.
Two season.
Let me say at the outset, we are very pleased with our strong early season performance, which included establishing a new record high for first quarter revenues.
We are also concurrent by the strong trends in our key long lead indicators such as resort bookings season pass sales advanced sales of other all season products and tournament bookings at the Cedar point Sports Center.
Heading into the second quarter reservations at our resort properties are trending well ahead of pre pandemic levels, while event bookings at our sports Center remained very strong.
Meanwhile, sales of season passes and related add on products, such as all season dining and beverage are up meaningfully over 2019 levels at the same time.
Historically early season strength within these revenue categories has served as a reliable indicator of full year performance and the effectiveness of our sales and marketing efforts something we see as critical as we enter the most important stage of our season pass sales cycle.
For the first quarter, we had five parks that had opened for the 2020 to season.
Positive early season results led by Knott's Berry farm, our only year round park generated strong momentum in the first quarter.
Let me share a few highlights first.
<unk> net revenues of 99 million set a new high for the first quarter, representing a 48% increase versus the 41st quarter of 2019.
Second demand remained strong with park attendance up 24% compared to the same period in 2019.
Third in Park per capita spending increased 28% over the same quarter in 2019, reflecting a continuation of the strong levels of guest spending we generated across all key revenue channels over the second half of 2021 and.
And finally total out of park revenues were up 12% compared to the first quarter of 2019.
After reporting record revenues in the back half of 2021, we're focused on evaluating every important revenue metric in our business. While also studying consumer trends in the broader market to ensure that we build on the momentum and achieved record results in 2022.
At this early stage, we are very encouraged by the solid first quarter results and are confident that the positive trends through the first four months of the year indicate we are well positioned for another outstanding year in 2022.
Updating our performance through this past Sunday may 1st.
Net revenues versus the comparable period of 2019 increased 33% or approximately $48 million to a record $193 million.
This record four month performance was driven by continued strength in demand and guest spending across all key revenue channels. These.
These are encouraging signs heading into the busy summer season, when all 13 of our properties will be open on operating without restrictions for the first time since 2019.
I want to shift gears for a moment and provide more context around the labor environment. We are operating in this year, given labor supply shortages and upward wage pressures first I am pleased.
To report, our recruiting and hiring of seasonal associates. This year is improving when compared to the challenging labor market, we face during the 2021 season.
Last year, we made the decision to immediately embraced the market structural shift and offered top dollar rates in each of our markets.
This pay philosophy was not only vital to our strong second half performance, but it has also enabled us to recruit and staff parks. This year from a position of relative strength.
While average hourly rates remain at historic highs, we have been successful in flattening the pay growth curve by reintroducing a wage scale based on seniority responsibility and job specialization.
We are also once again fully participating in the J one visa exchange program an avenue to supplement our domestic recruiting efforts that has proven to be very effective over the years.
As we noted on our last call, we anticipate any meaningful increase in labor cost will come less from pressure on rates and more from a higher number of labor hours as our parks returned to full operating calendars in 2022.
Looking at operating costs more broadly.
With the rate of inflation at its highest levels in recent memory, we anticipate already elevated labor and materials cost to trend higher for some time in our opinion, reflecting a more structural shift in the cost environment than a transient one.
Therefore, we have redoubled our efforts to mitigate pressures on the company's cost structure in.
In addition to the new pay scale, we're taking full advantage of the tools provided by our Kronos workforce management system in an effort to optimize staffing.
With improved real time visibility, we have empowered our park operators to implement incremental labor hour reductions where appropriate aimed at lowering cost without disrupting the guest experience at.
At the same time, our procurement team continues to identify efficiencies through its centralization efforts and cost savings strategies aimed at eliminating nonessential costs throughout the company.
Consistent with our cost management efforts, our business intelligence team is aggressively applying its revenue management and dynamic data driven pricing strategies, particularly during periods of peak demand.
Last season. These efforts proved to be quite effective in optimizing admissions pricing without materially impacting demand, particularly over the last several months of the year.
Since then the team has improved as the data gathering and analytical capabilities. While also expanding its focus beyond just our admission products today.
Today, our team is highly focused on optimizing the performance of our in park revenue centers measuring everything from guest spending patterns related to average transaction value to the number of transactions per guest and per operating hour intelligence that is routinely informing in driving our pricing decisions.
We are optimistic that the combination of these efforts and other planned initiatives give us the best opportunity to drive revenue growth optimize our cost structure and improve operating margins just as we saw in last year's second half I'm confident that we are well positioned to maximize the full potential.
Our portfolio in 2022.
And once again validate the strength and resiliency of our business model I'll pause here, so that Brian can review our financial results in more detail Brian .
Thanks, Richard and good morning, everyone I'll start by discussing first quarter 2022 results in more recent April operating trends before providing an update on the balance sheet and our outlook around capital allocation priorities going forward.
First I need to remind everyone that because of the impact of the pandemic on park operations in 2020, and 2021, there is a lack of meaningful data comparisons for the current year quarter to the first quarter of last two years, which is why in some instances we will use comparisons to 2019 instead.
As Richard noted during the first quarter five of our 13 properties opened in plant as planned and without restrictions for the 2022 operating season.
Operating days in the period totaled 130, compared with zero operating days in the first quarter of 2021 and 101 operating days in the first quarter of 2019, which was prior to our acquisition of the Schlitterbahn water parks on July one 2019.
As reported in our earnings release. This morning net revenues for the first quarter established a record for the period totaling $99 million.
This represented an increase of $89 million over last year, and an increase of $32 million or 48% when compared with the first quarter of 2019.
Our record revenues were driven by increases across all key performance metrics.
Attendance in the quarter totaled $1 5 million guests up 24% or 278000 visits compared to 2019 levels and compared to no attendance in the first quarter of 2021, when our parks remain closed due to the pandemic.
While in park per capita spending in the quarter totaled $58 86.
A 28% increase compared to the first quarter of 2019.
The increase reflects a continuation of very strong levels of guest spending across all key revenue categories led in large part by spending on admissions and food and beverage overall guest spending on food and beverage merchandise games, an extra charge attractions was up more than 35% on a combined basis in the first.
Quarter compared to the first quarter of 2019.
Recall there was no in park per capita spending for the first quarter of 2021 due to the suspension of park operations.
Finally out of park revenues for the first quarter totaled $16 5 million a $6 million increase from the first quarter last year, and nearly $2 million or 12% increase compared with the first quarter of 2019.
The improvement over 2019 wasn't was accomplished in spite of our indoor water Park at Cedar point Castaway Bay remaining closed for renovations in the current year quarter by.
By comparison Castaway Bay produced close to $3 million in revenues in the first quarter of 2019.
Moving onto the cost front operating costs and expenses in the current quarter totaled $171 million up $73 million when compared with the first quarter last year.
This increase reflects a $9 million increase in cost of goods sold a $54 million increase in operating expenses and a $10 million increase in SG&A expense.
All of which were largely the result of an increase of 130 operating days in the quarter.
In addition to the impact of the incremental operating days to $54 million increase in operating expenses also reflects higher full time wages related to planned increases in head count as we slowly migrate to a more year round staffing model at several parks.
The $10 million increase in SG&A expense was largely due to higher operating supplies advertising expenses and transaction fees all related to the increase in operating days in the period.
By comparison operating costs and expenses in the current quarter were up $34 million when compared to the first quarter of 2019.
Roughly 70% of this increase is related to higher labor costs reflective of the meaningful increases in labor rates over the past three years.
For the quarter adjusted EBITDA, which management believes is a meaningful measure of the Companys Park level operating results was a loss of $6 million to $8 million.
An improvement of $15 million or 18% when compared with an adjusted EBITDA loss of $84 million for the first quarter of 2021.
And comparable with a $68 million adjusted EBITDA loss for the first quarter of 2019.
The smaller adjusted EBITDA loss in the current year period, when compared with the first quarter of 2021 reflects the impact of COVID-19 related park closures on our 2021 first quarter results and the related improvement in attendance in park per capita spending and out of park revenues in early 2022.
The comparable adjusted EBITDA loss for the first quarter of 2019 is the result of higher operating costs and expenses in the current quarter offsetting the record revenue performance in this period.
Shifting focus for a moment to April operating trends as Richard noted preliminary revenues for the first four months of the year totaled $193 million, a 33% increase over the comparable period in 2019.
This record four months performance was driven by an 8% increase in attendance to $2 9 million visits a 28% increase in in park per capita spending to a record $60 and <unk> 42.
And a 10% increase in out of park revenues to $27 million.
Demand continues to be strong with early season tendons pacing ahead of pre pandemic levels in our most critical attendance channels.
Meanwhile, guest spending patterns, particularly within food and beverage also remain very strong. The result of our successful initiatives designed to drive incremental transactions and support higher levels of in park spend.
Through the first four months of the year, our total F&B transaction count is up 6% or more than 150000 transactions compared to 2019, our last full year of normal operations over that same time, the average F&B transaction value has improved by more than 25%.
We will continue to focus on metrics such as these as we evaluate the effectiveness of our strategic initiatives and look to drive record revenues for the full year.
Turning to our balance sheet at the end of the first quarter the strength of our performance since reopening our parks at this time last year has allowed us to advance our goal of reducing net debt to $2 billion or less last December we took the first meaningful step in reaching that goal with the early redemption of our 2024 senior notes, which represented close to half of the Covid related debt, we put on the book.
Back in 2020.
At the end of the first quarter net debt totaled approximately $2 6 billion.
As of the end of the quarter, we had total liquidity of $284 million, including cash on hand of $50 million and $234 million available under our revolver net of $125 million of outstanding borrowings and $16 million of letters of credit.
This total does not reflect receipt of outstanding U S federal tax refunds totaling approximately $80 million.
Which we expect to collect yet this year.
The $284 million of total liquidity at the end of the first quarter compares to $420 million of total liquidity at the end of calendar year 2021.
Looking ahead, our capital allocation priorities remain consistent with those we described on our February call first continue to reinvest in our core business to drive growth in attendance and guest spending second pay down debt until we reach our net debt target of $2 billion or less further enhancing the strength and financial flexibility of our balance sheet and third re.
<unk> state a quarterly cash distribution to <unk> by the third quarter of this year if not sooner.
We will also continue to look for additional ways to improve our capital structure and enhance our financial flexibility, including a potential refinancing of our credit agreement later this year.
Trends in our long lead indicators remain very encouraging as we look to the remainder of 2022.
As Richard mentioned sales of 2020 to season passes and related all season products remained strong through this past week season pass sales are up $59 million compared.
Compared to sales of 2019 season passes at the same time the.
The strong year over year performance has been driven by a 22% increase in units sold and a 10% increase in the average season pass price.
Meanwhile, sales of all season add on products are up $17 million versus 2019 levels over the comparative timeframe.
These strong results along with improved resort in group bookings and increases in advanced single day ticket sales helped push deferred revenues up $36 million or 18% during the quarter.
As of the end of the first quarter deferred revenues totaled $234 million <unk>.
Compared to deferred revenue to deferred revenues of $198 million at the end of 2021.
In terms of labor. The early indicators have also been favorable as Richard noted earlier because of our decisive actions taken last year to establish market leading pay rates at our properties. We believe this year's seasonal labor cost pressures will be due to planned increases in operating hours and less the result of incremental pressure on rates.
Planned operating days for 2022 are projected to total roughly 2400, while planned operating hours will total more than 23000 hours or nearly 60% higher than in 2021.
While the increases in operating days and hours will result in higher labor costs in 2022, those incremental costs will be more than offset by higher levels of attendance and guest spending over the additional operating hours.
In 2021, our average seasonal labor rate was a little above $17 per hour through the first four months of 2022, our average season elaborate is trending 2% to 3% higher than last year's average, including the impact of strategic rate increases we've already taken at several parks due to early season staffing challenges.
We will continue to monitor and manage our labor situation closely but we feel confident that we are in a better position at the majority of our parks heading into the peak season than we were at the same time last year.
Finally, we decided to extend our practice of not providing formal short term or long term financial guidance. While we have the highest degree of confidence in our long range strategic plan to grow and perform at peak levels in the post pandemic period.
Based on the seasonal nature of our business. We believe there is better value and updating the market more frequently on actual performance trends as such we've opted to focus on transparency and to update the market on our progress throughout the busiest and most pivotal pivotal pivotal parts of our operating season, we will do this by reporting on the most read.
<unk> performance trends as part of our quarterly quarterly earnings announcements, including updated information through the first four months of the season as we did today and through July and October as part of our second and third quarter earnings announcements respectively.
We'll also issue interim releases contain containing updated performance trends that include the weekend celebrating Memorial day July 4th and Labor day.
Collectively our more frequent reporting methodology will provide the market with an updated view on our business nearly as quickly as we can assess the significance of those results internally.
With that I'll turn the call back to Richard.
Thanks, Brian .
This is an exciting time of year for us as most of our parks are only weeks away from ramping up to full seven day operations for.
For those keeping track all but six of our parks are already opened this season and this Friday is opening day for two more parks and Cedar point and Dorney Park.
Meanwhile, reopening in two days as our freshly renovated Castaway Bay hotel in indoor Waterpark, followed by the June 13th reopening of sawmill Creek.
We believe our resort properties serve as demand multipliers for our parks and we cannot wait for our guests to experience are fully renovated properties.
Yet our renovated resort properties at Cedar point are just two of the many improvements planned for the 2022 season as part of our $200 million to $215 million capital program.
Headliners this year at some of our other properties include an expanded and upgraded Safari village at Kings Dominion featuring the addition of Tom Billy Virginia's first 40 spin coaster in the parks 14th roller coaster in total.
More than $60 million in upgrades to our parks food and beverage offerings, including brand new locations like the farmhouse kitchen and grill at Cedar point, and the lazy Bear Lodge at Canada's Wonderland as well as updates two additional facilities and systems designed around meeting evolving guest expectations.
Driving incremental in park spend.
We are also introducing an expanded events calendar across our portfolio of parks highlighted by upgraded versions of our wildly popular Grand Carnival celebration, our Halloween themed special events and our one of a kind winter fest events.
And with Great Pride is our Golden celebration at Kings Island with special Summer long festivities designed to celebrate the parks for 50 years.
I would remind you that over the past several years, we've made significant capital investments beyond. The addition of traditional beyond. The addition of traditional new rides and attractions meaning.
Meaningful investments in food and beverage and other in park guest enhancements as well as the adjacent developments such as our resort properties in the Cedar point Sports Center broaden the appeal of our parks and support incremental guest attendance and guest spending by.
I am pleased to say that in all cases. These investments have produced strong near term financial returns as well as long term strategic benefits.
We're extending that same investment strategy to our newest assets. The two schlitterbahn parks, which we see great potential for in 2022 and beyond.
It's truly impressed with watching our park teams meticulously prepare our properties for opening day, and then maintain those facilities all season long as if each day was opening day all over again.
Thousands of REIT operators chefs groundskeepers and performers serve important roles in their own special way all to deliver the best day experience our guests have come to expect with each visit.
Through the commitment and dedication of our associates.
We have maintain a strong connection to our customers as we recovered from the pandemic.
Our record performance in the second half of last year's abbreviated season put us solidly on track to achieve our near term strategic priorities.
We are encouraged with our fast start this year and are optimistic that 2022 will be a continuation of the great progress we've made in the pandemic wave.
The strength of our recent performance and our optimism for the upcoming season underscore our confidence in our long range strategic plan, which is aimed at producing record breaking results and driving unit holder value.
Along with our board our management team will continue to explore additional opportunities to create value and deliver upon our strategic commitments of improving our capital structure and reinstating a sustainable and growing cash distributions Dave.
David at the end of our prepared remarks, please open the call for questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster, we'll take our first question from Eric Wold with B Riley Securities. Your line is open.
Thank you and good morning.
Two quick questions I guess one.
130 operating days versus 101 on the comparable 19 was there any calendar shift there or is that all.
Purely additional.
You're obligated to you added yourself.
Hey, Eric It's Brian , Yes that actually is.
The incremental days is a combination of a few factors it's.
It's incremental days in the period coming from the Schlitterbahn properties, which we didn't own in the first half of 2019 and it's.
And it is some calendar shift.
Some of which are incremental days that we programmed into the.
Into this into the system.
Got it.
And then on the on the season pass trends that Youre seeing.
Any way to kind of characterize the demographic profile.
Shifting to Britney and kind of who is buying a season pass now.
Pre pandemic are you seeing.
Stronger spending from that base are you, reaching further away from the parks anything you can glean silver biking optimism on your ability to monetize it.
That base versus before.
Eric It's Richard Good morning, and Great question.
What we're seeing whether it's in the trends we're seeing.
What we're seeing when we when I.
I walk the park last Friday, It was at Kings Island for their 50th anniversary celebration and the guests that I see everything that we see says we're attracting more of this similar type of guests that we've had in the past.
As you know we track season pass both the sales, but also the spending in park, we don't see anything that's not.
In keeping with our broader trends. So we continue to see season pass is one of our pivotal programs. It's a foundation of both our tenants and revenue growth.
When the season pass holders are coming they're spending they're spending is very healthy when they're in the park.
And again.
As Brian said and as I think I said in my prepared remarks for us.
We're doing everything we can to broaden the appeal of our product that's bringing in.
All age ranges and all types of demographics.
Got it.
Seeing.
Anything just in terms of the reach that kind of that maybe the distance from the parks, giving getting wider than it has been the passers as being the same youre just going to pick up any further.
A little early to tell for that Eric when you look at our spring attendants, it's heavily anchored by.
On the group side use groups things like that so it's not till you get to the summer that we draw our traditional leisure traveler and Thats, where we really extend our reach so it's a little early to take a read on that given the limited number of parks that are in operation and what typical profile of our spring attendants looks like.
Perfect. That's helpful. Thank you guys.
Eric.
Thank you and next we'll go to Ben Chaiken with Credit Suisse. Your line is now open.
Hey, How's it going.
And with the with.
With the increase in operating days.
In the quarter versus 19 is there anything we should consider on the admission per cap side.
I guess for example, does that put any type of pressure either up or down I guess, what im considering as maybe more operating days, allowing more opportunities to.
Our season pass customers or maybe a higher mix two schlitterbahn, which presumably is a lower per cap I would think.
Anything you would call out if there is something too.
Yes, Ben it's Brian I don't know that necessarily the operating day increase.
We'll be or was a big.
Our headwind in terms of per caps I think your point on the Schlitterbahn.
Days Galveston is the smaller of the two parks and that was the part that was opened in Q1 and added.
The more incremental days to the period.
It has a lower per cap and maybe some of the par other parks that we're operating like Knott's Berry farm as an example, but generally speaking I would say that.
As we said in our prepared remarks, we're extremely pleased by the the guest spending trends that we're seeing very consistent with in building off the momentum we established over the second half of last year, there are always going to be accounting.
Women's whether they tailwind or headwinds in some of these interim periods, but nothing of material notes of call outs in Q1 of 2022.
Okay, Great. That's helpful and then it sounded like from the release. So my interpretation it sounds like Youre going to Youre thinking about bringing the dividend back sooner than maybe.
Last quarter.
I guess, how are you thinking about sizing I know there is a 100 million I think theres, a $100 million restricted payment basket limit above five and a quarter I guess I'm asking that question under the assumption that you are below that leverage level.
Okay.
Yes. So you are correct in terms of the basket Theres, a general basket, the caps restricted payments, which distribution payments falls under at $100 million.
<unk>.
Yes, we said our prepared remarks, the focus is on getting the distribution reinstated I think if you look the last time that we had a disruption in the distribution. When we came back we came back at an annualized rate of one dollar that doesn't mean that will be the case necessarily this time, we will spend time with the board over the next.
Month, or two discussing where we want to land ultimately, but I think the focus is on coming back out with the distribution that's sustainable.
And can grow from whatever that reinstated rate is.
Got you and then just throw in one last one quickly within <unk> itself.
<unk> was speaking is April normally are higher per cap month versus may and June .
Or is it in line or is there no discernible.
How would you think about it.
Historically, what you see earlier in the season.
In terms of guest spending is honestly.
Lower per cap relative to the peak season shorter operating.
Ours.
As Richard mentioned some of the earlier attendance is group that can be school groups in the spring.
So lean a little bit more towards season pass while a season pass holder definitely spend more over the duration of the season on each visit probably a little bit less than what you see a single day visitors spending on along July Saturday or June Saturday and so.
I think what you tend to see our per caps grow as you get deeper into the season and then certainly there are very strong per cast as we get into.
Hans and this late September October operation, So spring tends to be lower than the core summer season.
That's super helpful. Thank you very much.
Thanks Ben.
Next we'll go to Chris <unk> with Deutsche Bank. Your line is open.
Hey, good morning, guys.
Hi, Chris.
Hey, good morning follow up question on kind of labor.
What percentage do you think you have kind of locked in are accounted for for peak summer just trying to get a sense.
The visibility it sounds like Youre pretty confident in terms of.
The cadence of the wages and number of hours, but just how much of that do you think is kind of kind of accounted for at this point.
Eric I don't know that I can give you a percentage, but I think as we get into seven day operation, we feel much better about this year versus last year, two things that are really helping us we talked about the wage rates that we go to market with last year.
We've got a base of re hires that we didn't have going into last season. Because 2000 22020 was so disrupted so you've got the returning hires they are already trained they move up into supervisor roles. We feel really good about that we've also got now the impact of a lot of what we did last year with the what we're calling the full time flip where we're taking some seasonal positions.
And migrating them to more part time year round more full time status, but the other thing that will help us once we get into the summer and we alluded to it in our prepared remarks is our full complement of J ones coming in that's a 90 day visa program typically it supports our memorial day to Labor day operation at the parks, where we most heavily invest in.
That most notably here at Cedar point, So we've got a couple of markets that is.
Bryan alluded to that we're watching a couple of job classifications within certain markets, but all in all compared to last year.
In much better shape, and we're reasonably confident that we'll be able to put on the guest experience that we want.
At our parks as we get into seven day operation.
Okay.
Okay.
Helpful and then.
You guys have already laid out the capital plan for this year, but.
Can you maybe tell us what youre seeing in terms of inflationary pressure on the on the <unk>.
Hard dollars in that in terms of some of the equipment and the rides that go into that.
I know youre not going to talk about next year, yet, but is that something that substantial enough.
We have to think about a.
Bigger step increase next year.
No.
I think we'll provide more look at that as we get into the summer in terms of what the dollars are but as I think about what we're seeing we've been able to manage through and I think our design team our construction guys in the field.
<unk> done a really nice job, particularly on some of the renovation project of substituting one material for another do things that because of supply shortages have had let us keep onto the schedule, we're no different than any other business as.
As we build things out there.
Every everything has got a number of components in it and we are grappling with the supply chain challenges just like everybody else.
Think when we look forward most of the things that we've contracted for in the next year or two from the right side from the attraction side you have <unk>.
He has got to be 24 months out or so so we know what those look like and are working with the ride manufacturers.
Clearly there has been an uptick is.
As a certain number of slots in spots with right and attraction manufactured those are quickly being filled as the strength of the recovery becomes apparent but on the other projects, whether we're building a food and beverage stand it's no different than being in the construction business and the general housing market, we've had to kind of work our way through.
But I am excited about the plans we've got for 23 and 24 as well. We don't think we think we've got an ability to manage through any cost pressures on that number but I would say, what we've said before it's more challenging to get the same value out of it but we've got a way to manage through.
Okay very helpful. Thanks, guys.
Thanks, Chris.
And as a reminder, ladies and gentlemen to ask a question press Star one on your telephone Keypad next will go to.
Next we will go to <unk>.
Baron Crockett with Rosenblatt Securities.
Okay, great. Thank you, it's Barton Crockett and thank you for taking the question.
Why don't you ask.
Two things one.
I'm curious about your view on the degree to which your ability to grow per caps.
Can exceed inflationary cost pressures I mean, that's been.
Kind of the classic question.
To what degree can you pass on higher costs in the theme park industry and <unk>.
This impact per cap, 28% above 2019, a lot of noise around kind of labor cost right now.
Do you feel about that kind of generally looking over from what you can see over the course of this year.
It's always tough to answer that question in a very small window of time, but as I look at the broader landscape look not only just at 22% 23 and beyond we've always been able to pass along price increases that are at or exceed the level of inflation, that's why mark.
<unk>.
Pre pandemic, we're at historic levels.
Levels, we've always been able to make sure that we tap into the demand.
I think the resiliency of our business model is what's showing through for us and others in the industry. So I have a lot of confidence in the appeal of our product. The NPS scores, we're generating and what that allows us to do in terms of both maintaining the relationship with our customers, which I characterize as a lifetime.
Generation will connection, but also below that will pass along increases over time, we think we can we can raise revenues and outpace the cost pressures.
Okay.
Hi.
Just I guess to follow up on that.
8% per cap growth I mean, it seems like that might be a lot faster than you are.
Labor per unit kind of cost inflation.
Is there a chance that maybe that relationship is larger than normal in terms of pricing leverage relative to costs.
At this juncture or is it just too noisy to even go there.
Hey, Barton, it's Brian as we said in our prepared remarks that per cap growth was fueled by by a couple of things as Richard noted we are certainly taking price, where we feel we can take price, but it's also.
Our laser focus on transaction volume a lot of the investments we've made over the last several years to improve capacity at our food locations to improve efficiency.
Is all focused on driving more transactions so.
<unk>.
Longer term as we get deeper into the season.
It's Q1 and so it's often.
Tough to take the trends in such a short sample size and extrapolate those over the full season, but we're very confident and pleased with the trends we're seeing so far and we will certainly continue to price behind the demand and try and outpaced as Richard noted that there was cost growth curves.
Okay.
And then if I could just switch to the dividend.
I'm just curious if you can provide any markers on how we should think about your.
Appetite for dividend payments as a percentage of free cash flow, which obviously skewed by the environment, but there might be a normalized view.
That you can talk to you I think historically you guys have had a view in Q.
Curious if there's any kind of update you can provide to that.
And then on top of that just more broadly.
To what degree structurally are you guys kind of required to pay out dividend.
Even if maybe the.
The environment is such that the value of that is less because of high inflation decreasing the value of yield assets do you have any kind of ability to kind of use a judgment call on the value of the shareholders around out or is it really just kind of a structural if you have the cash you have to pay it out because you are an MLP.
Barton I'll take the second one first which is as an MLP. We are required to distribute all available cash flow as defined in the partnership agreement. So the distribution is one of the central tenets of the investment thesis in the entity being an MLP. So that's what we think about it more.
Versus.
As you put it more like maybe a REIT thinks about it and your first question is is there a percentage we're tied to theres not we're going to have that conversation with the board as Brian indicated, but I'll take you back up to our stated goals, we want to get down to $2 billion net debt that factors into how we look at the capital structure.
And Brian and the team are looking heavily at what the next several months look like and when or if we may want to address our capital structure in terms of possible refinancing on the on the back side of that I think we'll have a clearer view of the path forward as to what is.
What level gives us a sustainable and growing distribution.
Okay, Alright, that's great. Thank you very much.
Yes, Barton Thanks Martin.
Next we'll go to Stephen Grambling with Goldman Sachs. Your line is open.
Hey, thanks.
A few follow ups here I know you previously gave some targets on kind of permanent cost outs through the pandemic from some of the learnings.
You had kind of a total of $50 million ish I.
I guess any updated thoughts on what that looks like and any ability to quantify that in any offsets from the labor inflation that youre youre alluding to.
Yes, Steven it's Brian so the $50 million target that we laid out.
After the outset of the pandemic was really an optimization target that was partially.
To be achieved through cost savings.
Savings, but also some revenue.
Hansman to ultimately drive that $50 million EBITDA lift.
As we said on the last call I think.
Looking back at.
It was more heavily weighted maybe as much as two thirds.
Cost savings and about a third revenue.
Now, where we find ourselves in this inflationary environment as you noted that the heavy pressure around labor.
That may have pivoted significantly or at the inflationary environment has also given us a lot of opportunity to price.
So the product as Richard noted in his comments.
On the call.
We've seen great traction out of the <unk> group, there and so I think how we we get to the ultimate $50 million target is probably going to look very different than how we envision. It out. This year, we continue to make great strides on the cost side, but a lot of those efforts at this point are really about trying to flatten the broader.
<unk> cost curve than they are maybe the efficiencies we thought a couple of years back when we set that target originally.
Got it so the $50 million, maybe is more strength in per caps and revenue.
Less cost because of labor inflation, but still get into that 50.
Yes. We are we are certainly finding places to take cost out of the system. A great example, right all of our parks going cashless. This year has taken a lot of seasonal labor out Theres a lot of cost as you would imagine handling cash preparing cash.
It's also been a big driver in the early going around.
<unk> cap growth, that's helping drive that per cap growth of it much more efficient transaction using credit cards and other digital forms of payment versus cash. So one example of an initiative thats benefiting us both on the cost savings, but also the revenue generation side. So we're going to continue as we noted in the call to use our.
RBI resources as well as our centralized procurement team to mine more cost savings. There is a number of initiatives that the procurement team has in motion right now that are focused on those permanent cost savings whether they'd be saved.
Savings in areas like utilities or just centralizing.
Supplies on the maintenance and operating sides of the business.
Yes.
Helpful and then.
As you look at the season past strength year over year or even versus 2019, so any way to split that out between price and volume as we think about what that might mean for the season ahead.
Yes, we noted on the call.
We're on pace for our targets in terms of season pass price lift you may recall in the last our February call. We commented that we were targeting.
North of a 10% increase and right now we're pacing.
Towards that we are at 10% as we go into this peak sales cycle and continue to to use again that business intelligence capabilities to dynamically price even products like season pass. So we're we're seeing price lift, but we're also seeing units up north of 20% through.
Through the this past week in terms of season pass unit sales.
Important though to maintain that momentum right as I mentioned, where we're going into the window of our peak sales period here as we get into May and early June so theres a lot of units that typically move over the next four to eight weeks. So it's going to be critical that we maintain the momentum that we've established.
In terms of our season pass sales volume.
And one last one which maybe you've alluded to in the past.
Just want to make sure I'm clear on this on the castle AK and sawmill Creek.
Renovation expansion.
How are you generally thinking about the ROI or incremental EBITDA those investments.
Okay.
Typically for <unk>.
New rides and attractions, we're always targeting.
<unk> that are in that mid teens to upper teens.
When it comes to our resort properties much like other hotel operators that might be.
Slightly lower target, but.
These properties and their proximity to Cedar point give them huge advantage over maybe a hotel like the springhill suites at <unk> for us. They are both year round properties and so we're confident that says we get into a full year of operation of this years.
Our returns maybe a little bit.
Muted by the fact that it's only a partial season here in 'twenty two with castaway opening here.
A couple of days in and saw mill.
In a few weeks, but we're excited about the potential to improve upon the pre renovation pre pandemic operates and ADR at both of those properties, we've seen significant lift in ADR and operates at our other renovator properties like the hotel breakers or the Cedar Point Express hotel.
In past renovations. So we're very confident in the potential and the returns on these investments for both of those properties and Steve One thing to note and we touched on our prepared remarks, the increased bookings and trends at.
At the Cedar point Sports Center.
One of the attractive features of having so many hotel rooms in Sandusky marketplace around Cedar point is that we get to tap into that demand pre pandemic. The cedar point hotels were the largest booker of rooms from the sports Center as you would expect.
Sawmill Creek was second.
Pre pandemic. So we're really excited by the year round nature of our resort portfolio here at Cedar point, driven by the sports Center, which again.
We invested in with our partners Erie County, and city Sandusky.
All helpful. Thank you so much.
Thanks Steven.
Next we'll go to Steve <unk> with Stifel. Your line is open.
Yeah, Hey, guys good morning.
So so Richard in the release USD.
What I would describe it very interesting adjective to describe your revenue growth this year, which was the word compelling and I.
I understand you aren't going to give guidance, but that agitated can mean, a lot of different things to different people.
If my wife key moment today, only spent 1% more of the grocery store that's compelling to me, but 1% growth for your business probably wouldn't be compelling to a lot of investors. So I'm just wondering if you're wondering if you could help us.
Think about what compelling means to you.
Compelling to me means we are continuing to maintain that relationship to the customer we're building upon our strength of drawing demand which is both.
Attendance driven but also in park spending we're building and broadening our appeal as we touched on so we see an IC all good things in terms of the trends and the indicators now so I keep going back to the strength and resiliency of our business model for us in the <unk>.
<unk> I don't think we've always gotten credit for it as a company or as an industry. There's other industries like the ski resort industry gets what gets more credit for the recurring nature of their their season pass program I don't think the market has always given us credit in particular.
That base is.
As we know last year season pass attendance was 55% when you when you package in our advanced.
Advanced bookings in other sales on the web where close to two thirds to three quarters of our of our admissions revenue already sold before anybody walks in the gate and I think there is a compelling nature to the appeal of our product and there is a compelling nature to the business model that I don't think we are always getting credit for it so.
That's how I think about compelling Steve.
Okay I appreciate that and then second question maybe.
Maybe a bigger picture question around the economy and there is there is clearly some fear out there at this point around the potential slowdown with the economy or consumer spending and I guess I'm wondering if you could maybe give us a little bit of a history lesson about how your business has performed in tougher times whether that's.
Around the overall economy, whether thats related to gas prices inflation, or however, you want to answer that would be.
Helpful.
So.
Good question, let me go back to what I was just saying about the strength and resiliency, we've never been able to we've always had great deal of appeal, regardless of environment and there's always been a view that for our company in our industry when things get a little tougher when we're in recessionary times people don't take the longer trips they may not.
<unk> international, but they stay closer to home go back.
<unk>, that's when the Staycation term came into Vogue and I think.
When times are good and.
There's a lot of discretionary income and the market people may have other choices, but some of our middle to lower end customers get to trade up even though we may lose the higher end customer to a trip to Orlando or again, an international trip or whatever they may do I do.
Do think that the.
One of the trends we are watching it was a question earlier are people going to travel further for experiences that they want that was what the research suggested was happening during COVID-19, we're going to watch that now but from a historical perspective.
Our industries.
Both pre pandemic as we recover from the pandemic.
Pandemic has posted higher revenue numbers higher margin numbers. There is a trend line that over the course of times almost on broken in terms of the.
The performance of us or others in the industry. So that returned to historical trend lines has always been something that I think is validated.
The performance of our company and I think that.
And every slowdown we've come out of it stronger and better and found ways to retool our business make it stronger and more efficient.
So from our perspective, I don't see anything right now that says that there is not a great desire to go out and do experiential things I think we're well positioned I think the consumers spent the better part of a pandemic buying goods now, they're really booking and adjacent businesses are seeing the.
Same thing the other adjacencies be cruise lines hotels, others bookings look strong this year and it's not just our sector I think it's the broader sector. So I understand the concerns about a potential slowdown.
Given the nature of who we are the peak demand that we see particularly in July and August the traditional.
Vacation months and given the strength, we always see in October with our Halloween events and then.
Take that into winter Fest in the holiday appeal the back half of the year is always really strong for us I feel really good about our cycle for 'twenty, two and where we are and I think once again, what we'll see is even if there is a slowdown we have tremendous appeal.
And the recurring nature of our revenue stream the loyal customers that come back generation after generation I think really fuels our growth.
That's great color really appreciate it Richard Thank you.
Next we'll go to Paul Golding with Macquarie Capital Your line is open.
Thanks, so much and congrats on a strong start to the year.
I wanted to dissect the single day proportion of.
Attendance a bit more I was wondering if you could give any color on how single days contributing.
What kind of pricing power you are seeing there or expect to see there.
And how do you think you can say around how you are you are acquiring that customer or is it costing you a bit more to acquire that single day visit.
As we look at the SG&A line or.
How third party channels, maybe abating, just anything around around that thanks, so much.
Yeah, Paul it's Brian .
We said.
On the call, we're seeing strength out of the most important channels for US Richard noted season pass always an extremely important channel.
It represents more than half of our attendance, but that single day guest is also critical.
And and we're seeing good growth there both in terms of early demand again, it's a small sample size right first quarter, 5% or so of the full operating day, so have to take that with a grain of salt pricing, though much like we saw last year.
Where we got very aggressive and started using some of the momentum that we had around demand in RBI capabilities to dynamically price that's always.
Ticketing channel that provides great opportunity for dynamic pricing and we're seeing that in the early going.
As we mentioned on I guess, maybe the last couple of calls how we're selling to those folks is definitely a lot more efficient these.
These days one of the silver linings of the disruption from the pandemic was unplugging of a lot of third party ticketing channels.
And that's given us more control over our pricing and our ticket distribution also gives us more data on the consumer right more of those ticket.
Buying decisions.
And transactions are flowing through our e-commerce portal now versus third party.
Partners like grocery stores.
Fast food restaurant chain et cetera, so having more of those folks come directly through us as a much more efficient and profitable transaction in terms of how we're reaching them. Yes, I think like we said last year, we got the pandemic made us get a lot more aggressive around the digital marketing.
<unk> and move away from.
Some of those traditional mainstream.
Advertising channels I don't think were going to they will always play some role, but I don't think youll see us go back to anywhere near the the weighting that was the historic approach maybe $75 25.
I don't know Thats quite flipped to the universe, but it is probably probably darn close and so a lot more efficient a lot more nimble in terms of how we're marketing to guest.
In 'twenty two than how we marketed to them back in 2019.
Alright, Thanks, and then just a question around.
In park experience.
I.
You mentioned in terms of optimization.
The going cashless across the footprint, but I was wondering if there was anything else in terms of.
In park experience, whether digital or otherwise that would be new or.
You may see us being more meaningful this season with a full roster versus last season.
Just to get ready to go back.
Yes.
Paul I will say touch.
<unk> touched on in my prepared remarks, a $60 million, we were spending this year.
Fully a third of our capital without if you take the resort properties out.
Is incredibly impactful we see it both in the increased transaction counts, we see it and the ability to service more customers more and more the focus that we started several years ago and food and beverage.
And executive chefs and sous chefs and a lot of culinary talent in all of our parks is paying off handsomely. It's also meeting our guests' expectations. The evolving guest expectation is that food and beverage is now a bigger part of the experience they want better quality food they want to be able to access it more quickly so from my perspective I.
I think I Wouldnt underscore several years' worth of building facilities from a capital standpoint streamlining.
Menus all that stuff.
We are working on and several parks the mobile ordering aspect from the digital there's more for us to do there, but it's been well received where we rolled it out on a test basis. So we continue to look at all of those things, but most most notably in park I'd focus on food and beverage there is other opportunities, but going <unk>.
<unk> is one piece, we've done that in our games operation prior to that but now going fully cashless really speeding up transactions.
Through across the system.
Great. Thanks, so much.
Thanks, Paul.
Next we will go to James Hardiman with Citi. Your line is now open.
Hey, good morning.
So most of my questions have been answered, but I wanted to hone in on a little bit of the map here.
I think we probably had a similar conversation after the fourth quarter, but.
Attendance was up 24%.
Which is great operating days up 29%, obviously, some people want to do that sort of attendance per operating day, which would actually be down, but it seems like thats problematic as well right because all operating data.
Created equal so.
I guess the question is do you think like for like or same store attendance is up.
Down or flat versus 19 or is there any way to think about the bump that you got from some parts of it didnt exist, which would be presumably 100% additive as opposed to.
Days added to existing parks, where they would probably be a lot of cannibalization.
Okay.
Yes, Hey, James It's Brian I understand the question and you're exactly right I mean, not all operating days are created equal and not all parks are created equal right. So as I mentioned earlier some of the incremental operating days in Q1, 'twenty two relate to a park like Galveston.
Flitter bond part there.
Moller Park on a relative basis. So the addition of those kind of operating days will certainly pull down on average.
That is largely.
Driven in prior years historical your numbers like 2019 by Knott's Berry farm right much bigger on a relatively on a relative comparative basis.
In terms of the attendance I think you need to sort of break it apart into the pieces, where we're extremely pleased as what we're seeing out of season pass visitation, we're very pleased as well out of the single day, what we call the general admission channel and the one channel that's recovering and we've talked about this in the past is always the slowest to recur.
Over his group.
But we are seeing.
Good momentum in group.
It's recovering I would say faster than what we would typically see in an economic disruption the pandemic very different than an economic disruption, where the motivations for visiting our more budget constrained driven than they are what.
What we saw this past year around protocols health protocols et cetera, So I'd.
I'd say on a comparative basis.
The number of savings so to speak to this the attendance trends in 'twenty two are extremely strong relative to 2019.
Got it and then.
Sort of follow up for me.
24% attendance growth through March.
8% through April .
In isolation that seems like a deceleration, but it occurs to me that the calendar has probably also normalize to some degree.
So is there any way you could give us sort of the operating days through April versus 19.
Or have has attendants actually accelerated since the end of the quarter.
So your operating days in.
In the month of April are generally consistent we talked about 2009 incremental operating days.
In the first quarter, we pick up three in April so you're you're up 32 through the first.
Four months of the year.
I agree with you.
Matt I think what youre going to start seeing right is it's a little bit of a law of big numbers as you get deeper into the season the.
The trends are at least from a percentage perspective are going to start coming back down right I mean that incremental.
29 days ways much more heavily on first quarter than it does on four months, and then et cetera, right. As we continue it out but it's also we're starting to get back to James as you and I've talked about over the years you start to get it in a month like April and a lot of our focus was on more traditional macro factors like weather, we certainly saw some weather and some.
The early spring openings at parks beyond just knott's and so.
And that's frustrating in the moment, but after the last two years I think we all will welcome worrying about rainy weekends versus pandemic disruptions.
Just to clarify the 32 incremental day through the first four months, what's the based on that and just trying to figure out what sort of percentage.
Increased cases.
It's about a 15% increase we had 221 operating days through the first four months of 19 versus 253 through.
Through the first four months of this year and that May one so when I say four months perfect.
Perfect really helpful. Thanks.
Thanks James.
There are no further questions at this time I'll now turn the call back over to Richard Zimmerman for any additional or closing remarks.
Thank you David and thanks, everyone for your interest in Cedar Fair, we look forward to visiting with you by phone or at an upcoming conference through a chance. This summer. Please consider visiting one of our parks for the thrill of a lifetime or simply having fun with friends be well Michael.
Thanks again, everybody should you have additional questions feel free to contact our Investor Relations Department at 400, 96272233, and we look forward to speaking with you again in August after releasing our 2022nd quarter earnings report.
David Thats the end of our call today. Thanks.
This concludes today's conference call you may now disconnect.
Okay.
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