Q4 2022 Cedar Fair LP Earnings Call
Good morning, My name is Rob and I'll be your conference operator today.
At this time I would like to welcome everyone to the Cedar Fair Entertainment Company fourth quarter 2022 earnings Conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
I would like to withdraw your question again press the star one. Thank you I will now turn the call over to Cedar Fair.
Thank you Rob and good morning to everyone. My name is Michael Russell Corporate director of Investor Relations for Cedar Fair.
Welcome to today's earnings call to review, our 2022 fourth quarter and full year results ended December 31.
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 <unk> Cedar Fair Dot com on the call with me. This morning are Richard Zimmerman, Cedar Fair, President and CEO and Brian Witherow, Our executive Vice President.
And the CFO before.
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. These 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 and compliance with the SEC regulation FD. This webcast is being made available to the media and general public as well as analysts and investors because the webcast is open to all constituents and prior notification has been widely and on selected.
<unk> disseminated all content on this call will be considered fully disclosed.
I'd like to introduce our CEO Richard Zimmerman Richard.
Thanks, Michael Good morning, and thanks to everybody for joining us.
Earlier this morning, we announced record performance for fiscal 2022, which reflects the significant progress, we're making on our strategic initiatives and the incredible work of our team to continue to deliver exceptional experiences for our guests. These.
These record operating results allowed us to return approximately $220 million of capital to unit holders through the reinstatement of our quarterly cash distributions and the implementation of a new unit buyback program.
These results also demonstrate that the strong performance trends that we provided updates on during our quarterly in interim reports throughout the 22022 season came to fruition in the second half of the year.
The result was the second highest attendance here in the company's history near historical highs for in Park per capita spending and record out of park revenues driven in large part by the outstanding performance of our resort properties.
We produced record revenues and adjusted EBITDA for the year, despite continued headwinds, including labor availability the impact of inflation in our group business channel that was still recovering.
We also delivered 30% plus margins a marked improvement over last year with achievable upside as we work back to pre pandemic demand levels.
Much of the credit goes to our park Gms and their teams disciplined cost management practices, including efficiently managing seasonal labor to align with demand. While also actively managing down other variable operating cost to offset general inflationary pressure.
The improvements they are making will ensure the long term vitality of our parks and the growth of our business for years to come.
Before I ask Brian to review, our financial results in more detail I want to take just a couple of minutes to walk through some key elements of our strategy and business that led to our success in 2022 and the strong momentum we have heading into 2023.
First reinvesting in our properties is essential to driving long term growth.
At the heart of attracting millions of guests to our parks and resort properties. Each year has been the company's commitment to consistently reinvest in the business to improve the guest experience.
While M&A activity has certainly played a major role in our historical growth.
The limited number of opportunities to acquire strategic high quality properties emphasizes the central importance of investing in our own assets to produce steady organic growth.
Second prioritizing top line growth was the right recovery strategy, our strong revenue growth in 2022 was a direct result of our ability to attract more guests to our parks provide guests with more exciting and engaging options to drive in park spending and keep guests coming back time and again.
Given the uncertainty of the macro environment at the start of the year, we believe strongly that focusing on the guest experience and topline revenue growth would be the most effective way to create the operating leverage necessary to propel our business over the long term and through whatever economic challenges ahead.
I believe our strong 2022 results showed this was the right strategy.
Third our business is underpinned by reliable recurring and growing revenue streams.
More than two thirds of our annual attendance comes through ticketing channels with pre purchase commitments that are well in advance of the guests visit including season passes group bookings and tickets associated with overnight stays at our resort properties.
These long lead recurring revenue streams also predict produce predictable levels of cash flow that allow us to fine tune, our capital allocation priorities and make informed decisions about our future direction.
We view the consistent growth of recurring revenues to be a valuable cornerstone of our business model and believe it remains the most unrecognized and underappreciated strength of our company.
Fourth we are second half company generating two thirds of our attendance and revenues and 80% of our adjusted EBITDA over the third and fourth quarters.
As with most seasonally weighted businesses, we enjoy peak demand in very narrow windows of the calendar and our case from July through October when we fully leverage our cost structure and maximize flow through on incremental revenues.
Finally, our balance sheet is strong and getting stronger to date, we have reduced total net leverage back to pre pandemic levels, while progressing with purpose towards our net debt target of $2 billion are.
A rapid recovery and strong results have positioned us well to move quickly towards achieving our goals, while pursuing opportunities to add flexibility and capacity to our capital structure for the longer term.
I'll pause here, so that Brian can review our results in more detail before I provide some more color on our outlook going forward Brian .
Thanks, Richard and good morning, I'll start off with a review of our fourth quarter performance compared to last year before providing a more detailed recap of our full year results compared to 2019, our last full season of operations.
During the fourth quarter, our parks had 376 total operating days or fewer days compared with the fourth quarter of 2021. The decrease was related to planned changes to park operating calendars in 2022 as well as weather related closures at several parks during the period for the quarter we generate.
Good record net revenues of $366 million up $15 million or 4% compared to the fourth quarter of 2021.
On a per operating day basis, our fourth quarter revenue performance was even stronger up more than 6% year over year.
Our improved performance was driven by a 3% increase in in park per capita spending an 18% increase in out of park revenues and a 2% increase in the average daily attendance during the period.
To compare our performance to pre pandemic levels average daily attendance was up 1% compared to the fourth quarter of 2019.
The increase in out of park revenues was primarily driven by higher <unk> across most of our resort portfolio, reflecting our ability to price in a strong consumer demand results also benefited from inclusion of the newly renovated Castaway Bay indoor Waterpark in the sawmill Creek resort to Cedar point properties that were closed for renovations.
During the fourth quarter of 2021.
Meanwhile, in park per capita spending in the quarter totaled a record $63 33.
Fueled by higher levels of guest spending on F&B and merchandise along with higher ticket pricing, particularly during our high demand Halloween events in October for the quarter. The biggest improvement in guest spending was within the food and beverage channels up 10% over the prior year, reflecting the success of the meaningful capital.
We have made in that area for the 2022 season.
Moving to the cost front.
Operating costs and expenses in the fourth quarter totaled $286 million up $5 million compared to the fourth quarter of 2021.
The increase was the result of a $4 million increase of cost of goods sold and a $15 million increase in SG&A expense offset in large part by a $14 million decrease in operating costs.
The increase in cost of goods sold reflects higher sales in the quarter as well as the impact of rising product costs. Despite these cost pressures cost of goods sold as a percentage of food merchant games revenue only increased 140 basis points from the fourth quarter of 2021.
The increase in fourth quarter SG&A expense reflects higher full time wages and related benefit and incentive plan cost.
Ongoing investments in technology upgrades are higher spend on park advertising in the period and increased transaction and credit card fees the.
The latter was driven by this year's conversion of all our parks to cashless, which help reduce labor cost by eliminating the need for cash handling positions at the properties.
During the period, we reduced our operating costs by 7% compared to the fourth quarter of 2021 by tightly managing operating and maintenance supplies as well as moderating spending on entertainment and amusement fees.
These savings were somewhat offset by planned increases in head count at select parks higher maintenance wages and the incremental land lease and property tax costs associated with the sale leaseback of the land at California's Great America exclude.
Excluding the impact of the sale leaseback transaction operating costs in the quarter would have been down 9% compared to the first to the fourth quarter of 2021 or 7% on a per operating day basis. A key performance metric. We are closely monitoring as we continue to better manage costs and improve operating margins.
Going forward.
Adjusted EBITDA, which management believes is a meaningful measure of the Companys Park level operating results increased $15 million year over year to a record $88 million in the fourth quarter.
Meanwhile, our fourth quarter margin improved to 24% up from 29% for the fourth quarter in 2021 and up from 21, 2% for the fourth quarter of 2019.
Operating margin improvement during the period reflects the leverage that comes with a return to more historical attendance levels as well as the impact of our successful efforts during the quarter to moderate cost growth.
Shifting our focus to full year 2022 results compared with 2019 operating days in 2022 totaled 2302, compared with 2224 operating days in 2000 1978 incremental days were the result of 85 additional operating.
Days at our two Schlitterbahn water parks acquired in July of 2019, offset by a net seven fewer days due to normal year over year operating calendar differences at the parks.
For the full year net revenues were a record 182 billion up 23% or $342 million compared to 2019.
Our revenue growth was driven by a 28% increase in in park per capita spending at 26% increase in out of park revenues to a record $230 million.
Meanwhile, attendance totaled $26 9 million visits in 2022 down 4% compared to 2019 as we've previously noted the anticipated slower recovery of our group channel, which was down roughly $1 4 million visits compared to pre pandemic levels accounted for the entirety of the attendants gap.
Helping to somewhat offset the shortfall in group attendance was the performance of our season pass channel with a record $3 2 million season passes sold for the 2022 season season pass attendance was up 10% over 2019 levels and comprised 59% of our total 2020.
Attendance mix by.
By comparison season pass visitation represented 52% of the attendance mix back in 2019.
Moving onto the cost front for the full year operating costs and expenses. This past year totaled $1 $2 9 billion up $298 million compared to 2019, including increases in cost of goods sold operating cost and SG&A expense the.
The increases in operating costs and SG&A were primarily due to the impact of general cost inflation over the three year period, particularly around labor costs as well as the full year inclusion of the Schlitterbahn parks, which weren't acquired until mid year 2019.
Looking a little more deeply at labor costs, although the labor markets in 2020 to remain challenging we are very pleased with the progress made around improving staffing levels and controlling costs with better line of sight into operating calendars and less uncertainty around operating protocols, we were able to more proactive.
<unk> plan for our staffing needs.
This helped our recruiting efforts and allowed us to return to a more traditional tiered seasonal pay rate model only paying up for harder to fill positions and associates and supervisory roles.
The changes we made to our seasonal pay structure helped flatten the growth curve around seasonal labor rates, which is particularly important given that seasonal labor represents our single largest operating costs.
For the year, our average seasonal labor rate was down 1% from 2021 with trends continuing to improve in the second half of the year when rates were down 2% year over year.
Based on the success of our strategies. This past year, we are optimistic that we can again maintain our average seasonal wage rate to within 1% to 2% of 2022 levels. Although we will continue to manage rates as needed in order to ensure we have adequate staffing levels throughout the season.
Adjusted EBITDA for 2022 was a record $552 million, an increase of 9% or $47 million compared to $505 million for 2019 means.
Meanwhile, our full year margin this past year improved to 34% compared to 24, 3% in 2021, reflecting the benefit of a recovering attendance base.
And the strong performance of in Park per capita spending and out of park revenues.
Due to the remaining gap to historical attendance levels and general inflationary cost pressure margins still trail pre pandemic levels something we believe can be addressed as we look to better optimize park operating structures.
And as our parks return to historical attendance levels over time.
Now turning to the balance sheet.
As Richard noted earlier, we are pleased to say, we have built a robust balance sheet, which we intend to strengthen even further as we deliver on our strategic initiatives and seek to optimize our capital structure.
We ended the year with $101 million in cash on hand, no outstanding borrowings under our revolving credit facility and total net leverage of four times adjusted EBITDA back in line with pre pandemic levels.
During the year, we used $264 million to fully repay the company's term loan we used $33 million to pay cash distributions to unit holders and we used $185 million to repurchase units under our new unit repurchase program.
By the end of January we have repurchased roughly 5 million units at a total cost of approximately $208 million.
As Richard noted the reintroduction of our quarterly cash distributions and the implementation of a unit repurchase plan were significant milestones and a recovery of this past year.
Going forward, we will continue to focus on unit holder returns is one of the pillars of our capital allocation strategy. This will include in the third quarter determining what level of increase in the distribution is appropriate as we get better visibility into our 2023 performance. We also intend to continue to be active in our unit repurchases anticipating <unk>.
Leading our existing buyback program early in the second quarter at which time, we will assess the appropriateness of implementing a follow up program.
Looking at long lead business indicators for a moment the early trends in sales of season pass products group bookings and reservations at our resort properties are solid and in line with expectations.
Our total deferred back deferred revenue balance at the end of the year was 173 million, representing a decrease of $25 million when compared to deferred revenues at the end of 2021. It is important to note that included in the 2021 year end balance was approximately $30 million of Covid related product extension.
<unk> at Knott's Berry farm and Canada's Wonderland into the 2022 season. Excluding these extensions deferred revenues would have been up approximately $5 million or 3%.
Percent year over year, including results from early sales of 2023 season passes and related all season products.
Through this past weekend sales of 2023 season passes were up 5% or approximately $8 million driven by a 9% increase in the average pass price, which isn't in line with plan somewhat offsetting the higher pricing as a 4% shortfall in season pass units sold compared with the same time last year.
The year over year unit decrease reflects a slow start to the sales program due to poor fall weather as well as a return to normal purchasing patterns coming out of the pandemic with more than half of our season pass sales cycle remaining including the spring window that accounts for more than 40% of total sales we remain focused on maintaining pricing.
Driving increased unit sales and matching or exceeding the record sales performance of our 2022 season pass program.
Regarding capex this past year, we spent $183 million on capex, including investments in new rides and attractions.
Graded and expanded F&B facilities and renovations to several of our resort properties by comparison, we project investing approximately $185 million to $200 million in capital projects in 2023.
Lastly for modeling purposes for full year 2023, we are projecting cash interest payments of $130 million to $140 million and cash taxes of $50 million to $60 million.
Finally, I want to provide an update on how we will be reporting operating results in the coming year.
The strength of our 2022 performance and the stage of our recovery. We believe there is no longer a need to offer the number of interim update reports, we provided last year as such we will be returning to our normal cadence of providing results on a quarterly basis moving forward.
While we will continue to provide updates on our performance through July with second quarter earnings and our performance for October with our third quarter earnings we will no longer provide interim updates relative to Moriel day. The fourth of July our labor day with that I'd like to turn the call back over to Richard.
Thanks, Brian .
We are extremely pleased with our performance this past year and equally excited about the opportunities we see to build on that momentum in 2023.
One important area that has more room to grow as our season pass channel. It's recurring strength reflects two things about our customer base.
One the universe of our most loyal guests continue to grow propelled in part by the benefits offered through our season pass programs, including our past perks loyalty program as well as the continuous improvements we have made to the overall guest experience and to more of our most loyal guests our purchasing our highest priced tickets and <unk>.
Many cases buying up to obtain the perks and benefits of season pass ownership.
Okay.
<unk> to our food and beverage program continue to resonate well with our guests helping to drive in park per capita spending higher.
While pricing is part of that equation most of our F&B per cap per capita growth can be traced to investments made over multiple years to elevate the quality of our culinary offerings, including the opening last year of new high throughput upscale dining facilities at Knott's Berry farm Cedar point Kings.
And Canada's Wonderland.
Sumer response in our guest satisfaction ratings have been overwhelmingly positive for our higher quality more diverse culinary choices faster turnaround times and comfortable climate control dining facilities.
We will continue to upgrade and expand upon our menu offerings and food facilities as we look to drive incremental growth in guest spending.
We have seen a similar guest response to our premium experiences and evolving program that we think is in its early innings and that we believe has considerable potential to drive incremental guest spending even higher.
In addition to continuing to market premium offerings, such as fast Lane, Waterpark cabanas and exclusive VIP areas to our daily guests. We are actively testing a new prestige path at select parks in 2023, a product aimed at our season pass guests who are looking for premium experiences through.
The season.
As we take stock of our progress. We believe there is room for improvement and more work to be done in several areas of our business, including within our cost structure initiatives are well underway for the current year to again manage seasonal labor rates.
Keep seasonal labor hours, consistent with demand and ensure the effectiveness of other variable operating costs.
These are important initiatives as we work to restore attendance back to a previous highs and dynamically price into demand, particularly at our smaller parks that lack the same level of operating leverage as our larger parks.
A return to pre pandemic attendance levels, along with our ability to operate and optimize operations and maintained cost increases inside our target targeted revenue growth rate will be critical to achieving our margin goals.
Along the same lines.
We're actively working to further improve our parks digital infrastructure connecting guests with applications that speed up e-commerce transactions reduced the need for labor and improve our dynamic pricing and analytical capabilities. We.
We are also working on an improved mobile app for the 2024 season to provide our guests with improved visibility of in park entertainment and dining options and enhanced transaction control through their smartphones when purchasing goods and services.
Much like the cost saving benefits, we realized through cashless operations measures to improve technology that also improve the guest experience will make park operations more efficient reduce our operating costs over the long term and help increase margin performance and flow through.
Going into 2023, we will continue to prioritize revenue growth, which will be driven by demand for marketable capital and continued investment in food and beverage highlighted by big new anchor restaurants at our two largest parks Cedar point and Knott's Berry farm.
Recovery of the group channel, which will be led by youth and school bookings in the spring and corporate business throughout the balance of the year.
And expanded park operating calendars over the first half of the year, while operating calendars may need to be adjusted for macro factors such as weather for the full year, we project, adding as many as 70% to 80 operating days this year compared to 2022.
We are focusing the lion's share of our investable capital on the areas of the business that produce the highest return.
We do so with the full appreciation that more than 80% of our adjusted EBITDA is produced by our five largest parks that also have the highest operating leverage.
With that in mind for the 2023 season, we are making investments of scale at each of these parks investments that transform whole sections of the parks where increases in demand and guest spending should be imminent and remain sticky.
We are also planning to invest in new marketable attractions at two of our mid tier partners, namely worlds of fun in California's Great America in 2023.
History shows that adding major new rides and attractions at our smaller market parks as an immediate impact with increases in attendance guest spending and season pass sales.
Our investment strategy for the foreseeable future should look much the same keeping the high capacity engines of our larger parks running at peak performance, while rotating investments in major marketable traction among our smaller market parks for immediate impact and incremental long term growth and improved profitability.
We are fortunate to have a business model that has demonstrated resiliency and strength in varying economic and market conditions.
I am encouraged with how effectively our strategic initiatives drove performance throughout the pandemic and more importantly through the recovery this past year.
While we continue to exercise a degree of caution given the current uncertainty of the macroeconomic environment. We believe we are well positioned to deliver another year of record results in 2023, and we remain laser focused on delivering solid returns for our investors.
Ross that's the end of our prepared remarks, please open up the call for questions.
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.
Your first question comes from the line of Chris <unk> from Deutsche Bank. Your line is open.
Hey, good morning, guys and thanks for all the all the color.
And congratulations on a very good quarter.
Wanted to drill down a little bit if we could.
On margins and I know you had a lot of commentary there.
Already but is there a way to think about when you look back to 2019 and theirs.
Impact from Schlitterbahn, when we comp that today is there a way to think about your longer term target and.
What's the cadence to get there is there a step up function.
And how reliant on it is attendance versus some of the operational changes that youre.
You are making.
Chris Good morning.
I appreciate you being with US let me just say to start by saying once again 2022 was a remarkable year and I've got a I've got to thank everybody in the organization all the teams out there they did a tremendous job managing through the pandemic, so hats off to them.
Are margins margin is really something we pay a lot of attention to as we said a return to historical demand levels.
It really will help drive pushing further and getting margins back to those pre pandemic levels, but in addition, we continue to price into demand.
Particularly in the fourth quarter.
The big attendants month of October really showed what we could do in terms of demand pricing and driving high margin revenue incremental revenue.
We spent the pandemic Chris.
Implementing in building technologies that that really allowed us to optimize the recovery or business intelligence function is really doing a great job on two fronts first revenue management and really pricing dynamically into demand, but also working with our operators in the field on workforce management getting a lot more disciplined on that side.
We built a centralized procurement to really make sure that we were doing everything we could to take cost out of the system and be as efficient as possible on all the things that we buy so when I look back over the arc of where we've been I.
I think you've now starting to see the impact of a lot of the decisions that we made over the last two or three years to strategic initiatives and there was more that we chose.
And how they can deliver as you look at our results Brian anything you would add.
No I mean, I think just emphasized Richard which you said, which is getting there Chris is.
Hinges on on both our ability to continue to drive top line revenue as well as manage costs I think as Richard said in the call coming into this year the focus was on.
Driving revenue and returning to historical demand levels as quickly as possible I think we saw that the benefit of that in the fourth quarter. When we did get back to historical.
Levels and so as we think about our business. We are certainly a second half business.
As we as Richard noted two thirds of the attendants and revenues come in the second half, but 80% of the EBITDA that speaks the amount of leverage that exists in Qs three and four and so I think as we work.
Towards getting back to those 2019 levels it'll be critical not only to manage cost better but to continue to drive top line revenue.
Sure.
Okay.
Very helpful. Thanks, guys quick follow up if I if I could.
On capital allocation, you guys had a pretty significant buyback.
In Q4.
And this year no matter, where we think EBITDA may fall youre slogan to generate Milan.
Free cash flow, you've got leverage back to where you want it how do you how do you prioritize getting that.
Distribution back closer to historical levels versus potentially more.
Buyback.
At this level.
Yes, Chris it's Brian as we said when we implemented the buyback program. The board felt that it was an.
An excellent tool to add to the tool belt in terms of another means of returning.
Capital to our investors that was a little bit more discretionary and flexible than the distribution that said the distribution remains at the forefront of of our capital allocation strategies and priorities as I said on the call, we'll wait until the third quarter and get a better.
Your line of sight into how the 2023 season is developing we certainly expect to have an outstanding 2023 as Richard noted.
And that will give us a lot of options as it relates to capital allocation, both reinvesting in the business as well as returning capital to investors through distributions.
And.
And potentially future buybacks.
The size of the.
The distribution increase will depend not only on performance, but also on what are we getting rewarded for from the market as the market seeing value in.
In the distribution is that reflected in the stock price. So I think theres a lot of a lot of factors that will go into that decision, but we're in a really good place based on all the efforts that we've undertaken over the last 12 to 18 months coming out of the pandemic.
Okay very good thanks, guys.
Thanks, Chris.
Our next question comes from the line of Steve <unk> from Stifel. Your line is open.
Yeah, Hey, guys good morning.
So I'm going to ask a question I don't know if you were to give me an answer but I'm going to try it anyway. So.
Look.
I fully understand you guys don't give annual guidance, but if we look at the $5 50, you did an EBITDA this year and let's say we're sitting here at this time next year.
Would you be disappointed if you didn't.
Seed what you put up this year and if you didn't exceed that level. What are some of the factors that we need to be watching obviously I understand the potential macro headwinds, but anything else out there that we would need to watch.
To not have you exceed that level.
Steve Good morning, It's Richard I appreciate the question, while I won't answer a hypothetical and we don't give guidance what I would tell you is I'll take you back to how we look at our business and we've said this forever today, we are an easy business to model.
Three things that we look at for leading indicators season passes we've laid out where those are we feel good about where they are and we think we likely are now far enough past the pandemic that we're going to <unk>.
Probably.
Back to what I call a more normal historical.
Purchasing pattern, which means springs, our biggest sales periods. So we're stepping into the spring sales period with lots of excitement around our new capital with a much higher season pass base to look at so I'll be watching retention really closely.
Many renewals are there within our season pass program. That's a number that is very meaningful to us. The other couple of leading indicators resort bookings still still look very positive at this point I'm encouraged by that but the big thing and we touched on it.
GAAP between our tenants now and 2019 really rest in the group channel I have to tell you over the last several weeks I've had really encouraging meetings with our with the leadership of our sales out of our sales teams and we're seeing really strong response to everything that we're doing we're out in the market sourcing leads.
We've got everybody out there.
Looking to our old business and Theres going to be a real focus on new business. So we'll have more to say as we get through this year, but I think our year. This year will always come back to driving demand with new marketable product, we invest to do that enhancing the guest experience, making sure we're capturing that demand through the season pass on the group in the resort channel.
And then once we get them in the park.
The ability to drive that in park per capita spending and once they get inside the front gate and.
I'm really pleased and proud of what our food and beverage operation is done, but we keep driving that with higher average transaction values and we keep doing more transactions per hour. So we're building capacity to drive that sustainable in park per capita spending so.
Who are the things that I'm gonna be watches look at 2023 and right now.
Those are all encouraging.
Okay, that's great color, Thanks, Rich and then.
The second question I don't know if I misunderstood, Brian , but Brian I think you sounded like you got a little bit aggressive with marketing.
In the fourth quarter and.
Just wondering if I heard you correctly and then B, maybe how we should be thinking about your marketing spend.
Heading into this year given the potential for the for the additional 70 to 80 operating days that you guys might be layering in.
Yes, Steve so as it relates to marketing I think what we saw play out in 2022 is really still just the.
I will use the same term recovery.
Our return to maybe sort of more historical levels I don't know that we will get all the way back to where we were pre pandemic because the.
The methods for marketing the tools that the teams are using today are a lot more efficient.
But spend in 2020, one was very disruptive as you may recall because of the pandemic, we pulled pulled marketing down significantly as operations were impacted 22 getting back to more of a normal operating calendar more of a full operating calendar for the most part across the system.
Required us to start pushing more dollars into back into the system around marketing and I think it's important to note as we get into 'twenty three.
Richard noted a lot of compelling marketable capital going in across the system. The last thing that we would want to do is undermine its full potential by not spending enough on marketing that doesn't mean as I said that we're going to get back to marketing levels or spend levels that.
Are in line with 2019, I think there is still some more efficiencies there, but certainly spending more to drive that top line revenue is a critical part of the guest acquisition formula.
Got you Okay, great. Thanks, guys appreciate it.
Thanks, Steve.
Your next question comes from the line of James Hardiman from Citi. Your line is open.
Got it.
Hey, good morning, guys.
And thanks for taking my questions here so.
Wanted to connect the dots or not maybe I shouldn't be connecting the dots between some of the trends that we saw in the fourth quarter and how we should think about the setup for 2023.
Maybe let's just start with the Kingdom obviously.
Last we spoke October with a gangbusters month right for a minute revenues overall, but attendance in particular.
It doesn't seem like November and December were nearly as good.
Maybe walk us through sort of a dichotomy within the quarter based on the implied results there.
What if anything we should.
Roll forward into 2023.
Yes, Jamie this is Bryan I think you summarized it well right I mean, we already disclosed as part of our third quarter earnings call.
The strength in October the <unk>.
Hans or the Halloween events, certainly are one of if not our most popular event across the system and it's basically offered at the lion's share of our property is only two or three of the properties in the system. The two schlitterbahn parks in Michigan's adventure.
<unk> offer those Halloween event, so it's got scale and it's got huge demand and as Richard noted we priced into it.
And that did not slowdown that demand at all so that was very encouraging youre rolling in November and December .
Most of the more than half of the properties go dark and we only have events winter Fest events. It at six of our properties and and so youre opportunity isn't nearly as high and you also start to get into at the time of the year that weather becomes even more of a factor right. So if.
If I was characterizing the quarter outstanding five weeks of October .
Slow and weather impacted November really good start to December , particularly on the West Coast and East Coast, but then when we got to the the week of Christmas extreme cold temperatures took some wind out of our sale in the third week in the east and Midwest and we lost the fourth week.
At NAS with with rainy season, so it was great sort of <unk>.
Bumpy middle and mixed add into the quarter.
Got it and then.
Basically the same question on per caps.
Looking at the numbers it seems like your per caps accelerated in a pretty meaningful way.
By my math up 36% now versus 2019.
After being down year over year, and <unk> was up again.
Over year in the fourth quarter.
I know the fourth quarter is a small quarter.
Michigan property.
Big role, but I don't know is that a sustainable sort of growth rate in per caps as we think about 'twenty three.
Yes.
Think as it relates to per caps James as Richard said, we feel very good about the interactions, we're having with our guests their willingness to pay up for a quality experience quality product.
It's one of the reasons why we continue to invest in the guest experience and maybe put a little bit of pressure on margins go back to one of the earlier questions.
Because we're investing behind that experience and thats, a little bit more expensive venture.
When you look at the quarter I think you hit on a couple of good points wanted it's a smaller quarter. So sometimes percentages can get a little a little distorted because of that and you also have.
Number of the smaller parks lower per cap parks, not really an operation that said I think what we saw in the fourth quarter was consistent with what we've seen throughout 2022.
When the guests are here they're spending.
And we continue to see strong spend in areas that we would expect to see strong spend food and beverage most notably improving in merch.
And as we noted on the call we priced into the fourth quarter October has got such high demand. We were we're not shy about pricing into that demand, particularly on the highest demand days like Saturdays and Friday nights for the Halloween events and so that's that's a big part of the equate.
<unk> I think as we roll into 'twenty three we continue to feel confident that we can keep pushing per caps.
As we said as we've been saying.
Not all about pricing.
And we certainly will will take price in an inflationary environment, where we have to but Richard noted it's about <unk>.
More throughput.
And it's about higher average transaction value, so providing guests with a higher quality product that theyre willing to pay up for and providing it in a manner, that's efficient and doesn't.
Great long waits in long lines to get the product is key.
That's great and then lastly, one question on the on the margin front. This is maybe the best margin quarter I've seen you guys have in quite some time.
Notably Opex right, you've got a lot of leverage out of Opex on an operating day basis Opex was down materially after after being up in the third quarter I guess.
Thoughts on is that.
Can you can you pull that but that trick again in 2023.
Maybe if I think about the 70 to 80 day.
The increase in your in your calendar is the goal to grow operating costs less than that sort of growth in operating days, how should we think about it.
I'll take that question James I'll go back to my prepared remarks, our plans are to try and keep that expense increase inside our targeted revenue growth rate, we've talked at length about how we can drive the revenue.
We have also talked about and I'll say from a qualitative perspective, James I thought this was the first quarter. It takes a while to build things and then roll them out we really put tools in the hands of the operators that they are now starting to use so we're getting far more fluent workforce management. We continue to focus on how we can best utilize the labor that take.
Time to training and Domino through the system, but our challenge is to continue to give every every member of our management team the tools. They need so they can help us drive this business forward.
Or at some levels, that's about focusing on revenue and on a lot of levels thats about focusing on how efficient we can be on the cost side. The more tools, we give them the better we're going to perform.
Okay.
Good stuff thanks, Richard Thanks, Brian Thanks.
Thanks James.
Your next question comes from the line of Ben Chicken from Credit Suisse. Your line is open.
Hey, How's it going.
Hey.
Hey, good morning.
But it was particularly another one on margins will discuss the chase it was a little bit towards the end of the last kind of question and answer.
It sounds like Theres, a little bit of a renewed focus on costs that kind of manifested itself in the quarter. You mentioned several cost saving initiatives. It's all it's all awesome and impressive I'm just trying to understand like the Stark contrast between results year to date, and then and last quarter and then this quarter and even for Q2.
22 versus <unk> 19, I'm, just trying to understand what changed is that what is it stuff that was already in process. It just took a couple of months or a couple of quarters to show up.
What it sounded like in the previous answer, but I'm, just kind of dive into tomorrow.
That doesn't make sense I can rephrase it yes, no no no that's not us.
This is Brian .
Yes, I think to your last point there in the point Richard made to James final comment I think some of this is.
The.
The outcome of some initiatives taking longer to take root and particularly some of the things around labor.
Labor is as we've talked about before it's our largest single cost item close to 60% of our cost structure total labor with seasonal labor, representing maybe close to half of that.
So it's.
Those initiatives, sometimes downs, you don't get the full benefit.
Right away, so I think theres, a little bit of that but yes.
I don't want I want to reemphasize again, when it comes to optimizing costs as Richard alluded to Theres two sides to it optimizing the cost structure in some cases and we saw this a little bit in the first and second quarter spending a little bit more to make sure that we're prepared to deliver the best guest experience possible because of the sub debt.
Sub optimized in that area to not have the right staffing the right systems et cetera would put per caps in demand at risk on the other hand, we do know we have to optimize the cost structure around labor and other variable costs to.
To make sure that those costs are best aligned with demand levels, and Thats, where those tools that Richard was alluding to come into play our workforce management tools the software and the.
<unk>.
Tapping.
<unk> that our teams in the field use to change in real time staffing levels as demand levels fluctuate because of things like weather et cetera, we need to continue to actively work in those areas.
And that's where the <unk> comes into play and the other variable cost that's where the procurement team comes into play. So I think when I look back at 22 I think.
The thing that plays out for me is that the second half company.
A company that we are the real opportunity for more margin expansion as is always the best in the third and fourth quarter I think that's even a little more exaggerated right now because we still are are light in Q2, because of some of the disruption or the slower recovery of the group Channel group is a bigger part of the business in Q2 than it is in Q3 and four and.
And so not having group put a little bit more margin pressure on that first half of the year than it did the second half of the year.
That's really helpful and just so just to be clear some of the workforce management.
Processes are those were those not in place earlier in the year or is that more of us.
This tool.
Yes, no those tools, we began rolling those tools out.
Ben in during the pandemic in 'twenty, one I think some of it is just the fact that.
As we go through the implementation of those things, there's best practices to get established right. Our business every month and every quarter is a little different than the previous and so you almost have to go through a full cycle. So the learnings of 'twenty, one and learnings of 'twenty to educate going forward and we see what parks do what things back.
And then we pushed those learnings those best practices down so when we look back at 'twenty. Two we have a couple of parts of our system that did.
Things better around staffing were more efficient around staffing and where we're taking those learnings and we're pushing those things down. So I think you saw some of that playing out in 'twenty. Two that you just you get better the longer Youre working with these tools and the longer the team's been together.
Italy.
To help us with my understanding is that a lot of the group bookings and please correct me if I'm off on that.
Her in the first couple months of the year is there any way you can kind of Directionally tell us how you are pacing, if that's an appropriate kind of like vernacular versus 2019.
Yes, Ben it's Richard.
Again I've met.
Consistently with our sales team.
<unk> occurred at the pacing that im seeing.
What is different in the pandemic accelerated people are corporate bookings are coming in later typically what we will get through the first quarter on the youth in school group those happen a lot in the second quarter those get booked through the first quarter into the second quarter, but corporate bookings.
Are very robust right now and I would say that the booking cycle is more compressed than it was if you go back a decade ago, where it was a much longer booking cycle people booked earlier, we're booking buyouts, where Bakken big groups small groups.
But I do think the booking window has tightened considerably post pandemic.
Moved earlier or later, sorry to belabor the point Jay.
When the events going to happen so.
We had an event that Knott's Berry farm in late January early February that was only booked in December it was a sizable event so companies and larger groups are coming to us much closer to the date that they want to actually come we do have visibility on some long lead but I would say were returned.
More to pre pandemic pacing.
With a tighter booking window and that was the trend that we saw pre pandemic year by year.
Got it thank you.
Your next question comes from the line of Mike Swartz from <unk> Securities. Your line is open.
Hey, good morning, guys.
Just maybe wanted to touch quickly on the additional but I think the additional operating days you said, 78% for the full year I guess, one how do we think about the cadence of those days more heavier weighted to the first half of the year. The second half of the year and maybe just how.
How accretive or additive or are those days that you are putting in the calendar.
Yes, Mike it's Brian .
So I would tell you that.
Majority of those days.
Probably as much as maybe 80% 90% of those days are going to be in the first half of the year Q1 and Q2.
As we announced late in.
The fourth quarter last this past year, we're adding days in markets like Richmond, with our Kings Dominion Park in Charlotte with our <unk> Park in January and February those days are already going on so they are in that number that I that I mentioned that we mentioned on the call.
So it's more Q1, Q2 Q3 should be about flat there'll be a little bit of a calendar shift in there, but but pretty comparable operating days and then Q4.
May have a few incremental days, but probably close to 90% of those days of the first half of the year in terms of accretive.
The days that we're looking to add are expected to be.
Added to two cash flow there is always.
So we run I would characterize what we're doing right now in Richmond and Charlotte.
A little bit of that and we will give it a couple of years in CF.
If we like the results that come out of it but.
We're always looking to add days right as we look to push topline revenue and attendance higher.
Much like we did some years ago. When we started adding days in late September and October with Halloween events, and then November and December with winter fast events at some point, it's about finding more opportunities for guests to visit and finding more opportunities for us to sell season passes and the all season products that go along with those things. So we fully expect that as we're adding will be.
Accretive.
Some of those days in Q2 as Richard just noted are going to be tied back to our expectation of returning use in school.
Bookings.
Side of the group business is having in the spring and we took days out of the system in 2022, because we knew that business wasn't there where some of this is about putting those days back in.
Okay. That's helpful. Thank you for that and then just the second question I think Richard you referenced do admissions product. The prestige passed I think is what you called it maybe just give us a general overview of what maybe some of the benefits of that past.
Entail and how should we think about the pricing of that I know, it's in a test phase, but just generally speaking is it is it 20% premium to your highest patch right now or how should we think about that.
From a value perspective, we've done a lot of research we've layered in access to VIP lounges special benefits some limited.
Product of fast lane and things like that.
On a on a daily basis. So we've layered in the things that are that our research has told us the consumers really value where pricing that your var.
Again, it varies park by park, because the demand levels are different but what we're trying to test is if you've got a 200 ish price point low two hundreds on the platinum can we.
Our new prestige fastest price somewhere in the three hundreds to low three hundreds. So we're really really is a premium product and a premium set of experiences and we're testing different concept as Brian just said both in terms of what the benefits are but what our guests value. So I think youll continue to see us.
Test different things as we go through but the early response has been very encouraging. This is really as we look to two segment. Our audience. This is really the benefit oriented customer and what we found and you've seen that over the past several years as we said I think it's the early innings as we continue to find ways to design and cream.
Eight different benefits.
There is a ready market there.
Okay, great. Thank you.
Your next question comes from the line of Eric Wold from B Riley Securities. Your line is open.
Thanks, Hey, good morning.
My questions have been answered just kind of two hopefully quick ones I guess one just.
Back on the.
Question around operating days.
And I understand that some of that is adding back Dave that we're going to remove from the system last year are there any parks that once you have.
This year removed or related report either be flat or up.
Operating gains from last year.
Eric It's Brian .
I would say as I look at it for the most part it will be.
Flat to up in terms of operating days.
But let me caveat that with that's planned and to the extent that weather plays into it we could see some parks go backwards on Great example, right when it rains in California, given not as open every day.
To save cost, we'll shut the parked down and so we may end up where park might have several fewer days in 'twenty three because in 2022, but for the most part that would be an unplanned change and more responsive to macro events.
Got it and then just last question on margins I know you're talking about.
<unk> really watching pricing and taking pricing where.
You need to when youre hitting inflationary pressures.
Are there any cases, where you're actually willing to eat margin, maybe in the short run or longer to maybe keep pricing from going up.
Fast in front of consumers or.
You always look to price above the inflationary pressure.
Good good question, Eric I think I'll answer it this way if this helps I think the scenario that you just laid out.
Is exactly one of the challenges that we've had when we look at the portfolio of the parks right from the standpoint of being able to price into this level of inflation is very difficult or bigger parks are able to absorb that because they've got such.
High demand levels of our attendance levels right. So when you are entertaining 3 million or $4 million or even in the case of not six plus million people you don't have to take as much price because you've got the leverage of that attendance space. It's been hard we have eaten a lot of the inflation, particularly at the at the mid tier parks, because we couldnt take the kind of price.
Increases, we would need two to odd fully offset it without eroding our attendance space. So I think we're already doing that that's why I think we've said on previous calls that these mid tier parks it might take two or three years of price increasing in order to push through the kind of inflation that we've seen so.
Again for US we don't want to underscore the importance of margin. It's a critical metric for us and hopefully that's come across on this call and the efforts that we've been undertaking to improve it are very real with that said the scenario you just outlined we have to be careful to not.
Do everything just about margin at the detriment of ultimately that attendance number and topline revenue.
Got it thank you.
And again, if you'd like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Paul Golding from Macquarie Capital. Your line is open.
Thanks, so much congrats on the quarter and the year I wanted to ask about just parsing, where we can grow with with per cap growth here I wanted to ask about extra charge I noticed in the press release.
You noted lower levels throughout the year of extra charge impacting per caps are offsetting to some extent, but we're now talking about some higher tier products is it a matter of bundling should we.
To expected some extra charge will actually re fleet and help per caps going forward and how should we think about the language you used for the full year basis versus what you're you're testing right now and then I have a follow up thank you.
Yes, yes, so certain Paul.
Brian So the the comment about the shortfall in extra charges really focused probably on one core primary.
For premium experience that is fast lane vaseline was.
Negatively impacted this past year by a couple of factors. The most notable is just the fact that attendance is still down right. We're down about 4% and fast Lane. As you can appreciate is is a product that's sold.
<unk> on the busiest days right. So when we've got 35000 people in the park, there's a higher demand for fast lane, because the lines are longer and people want to avoid those lines with with group being disrupted in some situations more so at certain parks those lines and those those 35.
Days might have only been 29000, so the demand was a little bit impacted there we were able to still price into fast lane, which was encouraging. So we would fully expect that as we get back to historical attendance levels those demand.
That demand for fast Lane will continue to increase and return to its historical levels as well the other piece that impacted it a little bit and this is more part specific we had a couple of parts in the system that had key fast lane driver type attractions out of service. So it takes some capacity out and it also.
<unk> some demand out maybe most notably was at Cedar point, not having postural dragster, an operation in 'twenty two.
That's a lot of capacity and it's a lot of demand as one of our highest demand.
Rides in that park. So a couple of things working against US there, but broadly speaking I don't think thats reflective of the fact as Richard noted guests want premium experiences.
And so we continue to find different ways to introduce those whether they are front of the line experience, whether they're a VIP tour, whether they're cabanas and water parks or VIP lounges, and the parks those continue to be in high demand and some of the fastest growing revenue sources for in park spending.
Got it so all else equal from a product offering perspective, maybe qualitatively so we're not guiding.
You would say that you would expect SaaS line and extra charges the category to improve in 'twenty three versus 22.
As a function of just the attendance.
Congestion.
I would say that that's a fair statement yes.
Great. Thanks, and then.
A follow up on the operating day.
780, more operating days in 2003 expected.
As we normalize here for.
Group and days that were taken out I'm wondering just maybe longer term basis, how we should think about operating days now that you've made the pivot to more of a full year calendar and you've added the group days back.
Are there any more days that you think.
Calendar may have that you can squeeze out beyond 'twenty three.
How is sort of the capacity versus weather and timing laid.
<unk> out.
Relative to sort of a fully employed.
Our asset base.
Yes, I would say Paul we will continue to evaluate opportunities to add operating days I don't want to give the impression that once these days in the system that were sort of done as I mentioned before we only have as an example, six of our parks with winter fast events.
There are still opportunities to potentially find other parks in the system to introduce that event too. So we will continue to evaluate those those opportunities and where they make financial economic sense will we will consider adding those days or piloting and testing.
<unk> expanding our calendar.
Thanks, so much Brian .
Thanks, Paul.
Your next question comes from the line of Barton Crockett from Rosenblatt Securities. Your line is open.
Hi, Thanks for taking the question.
I wanted to ask you about real estate, that's come to the floor in the industry with <unk>.
<unk> and R&D buildings.
You guys have done obviously a little bit.
Our version of kind of monetizing real estate with your Northern California Park.
To what degree do you think there are more opportunities to look at things.
With your land.
Not shutting down parks necessarily but in other ways, how much opportunity do you think or not really.
Do you think you are differently positioned or similarly positioned than some of the other.
Theme Park peers.
Barton, it's Richard Good morning, Thanks for the question.
When I think back the transaction Great America really was a unique set of circumstances. That's what we said at the time not indicative of a shift in strategy from US, we really think theres, great synergistic value in maintaining ownership of all the properties. We operate we call controller ship economics, we marry the capital investment we put in with our ability to drive returns great.
Merica was such a unique case of such a high value given that's in the middle of Silicon Valley are the real estate versus what we have versus the cash flow. We thought we could generate that over the long term and the cost to do that so we will look at there is if there are things in our portfolio or it might be small pieces.
But by and large.
As I said in my remarks, we believe in investing in our parks and driving and marrying that investment in driving demand and.
And we've got our five big parks that are in those that drive 80% of our EBITDA, obviously, we want to capture as much of that as possible. We don't want to partner in that and then as we rotate through the mid tier parks. We've talked about we think we can we can continue to drive their long term success. So.
No no significant change in our in our outlook on.
On real estate.
Okay and then.
I was curious.
Before the pandemic you guys had a 2024 EBITDA ambition I think around $600 million.
Was withdrawn.
Where do things stand now with that.
Any thoughts about that number that level that kind of ambition at this point.
At this point, we don't want to.
We're not planning to reinstate guidance at this time, we will continue to review the appropriate sense of providing any guidance in the future, but given the current uncertainties and the concerns around the macroeconomic environment.
We're not sure.
I don't believe the market's going to give us credit right now so.
For the moment going to continue to relay everything we're seeing give an update on our indicators about the health of the business but.
Which is encouraging at this point as we said throughout this call, but no plans to reinstate guidance at this time.
Okay, and then just one final thing just.
As I look at your fourth quarter with the tenants kind of flat year over year.
For cats.
Source of strength.
I think a lot of people are just wondering if the consumers may be getting fatigued.
Little bit price sensitive about theme parks as kind of the.
Talk out of Disney and.
Concern that inflation is maybe causing people to.
Shut down some of the things are maybe the big party after the pandemic.
Kind of fading and people are coming back to normal lives and maybe not doing the fun thing like they were.
Do you have any sense or anything like that how do you feel about the attendance opportunity.
Going into 2023.
So Barton great question.
It was such a focus on the health of the consumer throughout all of 2022, and what we kept saying is is while we understand.
Operate in different markets in each region economically is different we saw a substantial strength, we continue to see the sustainability of the spending in our parks as a key plank of our our program and our strategy to drive value ultimately drive free cash flow.
We haven't seen it.
We continue to see.
And in my earlier remarks, our leading indicators are encouraging so as we look at it and I'll go back to it.
You had a mistake my my answer to guidance, we're very optimistic and have a lot of confidence in our business model and our ability to continue to drive revenues.
EBITDA and free cash flow going forward, so we're not seeing a.
A.
We're not seeing.
The health of the consumer the consumer not willing to be spent and if anything as you track resale sales and other things we continue to see that the consumer is spending.
No.
We haven't seen any change in behavior.
Rodley throughout our park, even though were in limited operations. So we're watching like everybody else, but.
It seems like the consumer is healthy and is spending.
Okay, great. Thank you.
And there are no further questions at this time, Mr. Richard Zimmerman and I turn the call back over to you for some final closing remarks.
Thanks, Rob and thank you all for your interest in Cedar Fair for the analyst community in March we will be participating in three banking conferences hosted by JP Morgan at Loews Miami City, It turned Barry Miami and Macquarie in New York City, if you're attending we look forward to seeing you there otherwise we hope you will give a chance to visit one of our parks.
Season, and we will keep you apprised of our progress Michael.
Thanks, again, everybody and please feel free to contact our Investor Relations Department at 400 96272233, our next call will be held in May after the release of our first quarter 'twenty three results.
Rob that concludes today's call.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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