Q2 2023 Cedar Fair LP Earnings Call

Hello, and welcome to the Cedar Fair Entertainment Company 2023 second quarter earnings 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 one on your telephone keypad. If you would like to withdraw your question again press the star one I will now turn.

The conference over to Cedar Fair. Please go ahead.

Thank you John .

And good morning, everyone. My name is Michael Russell Corporate director of Investor Relations for Cedar Fair Welcome to today's earnings call to review, our 2023 second quarter results for the period ended June 25th.

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.

On the call with me. This morning are Richard Zimmerman, Cedar Fair, President and CEO , and Brian Witherow, Our executive Vice President and CFO .

Before we begin I need to remind you that comments made during this call will include forward looking statements within the meaning of the federal Securities laws. 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's regulation FD. This webcast is being made available to the media and the general public as well as analysts and investors because the webcast is open to all constituents and prior notification has been widely announced selectively disseminated all content on this call will be considered fully disclosed with that.

I'd like to introduce our CEO Richard Zimmerman Richard.

Thanks, Michael Good morning, everyone and thanks for joining us today.

On this mornings call, we will provide context for our second quarter results update revenue trends through this past weekend and provide some perspective on our expectations for the balance of the year along with some early thoughts on 2024 season as well.

Let me begin by saying that our latest trends, while not fully back to where we would like them are improving.

Demand at parks that were impacted by disruptive weather in the second quarter has strengthened as weather conditions have improved and operating conditions normalized.

Preliminary July results reflect net revenues down 2% versus the unprecedented performance of July last year, but July as revenues remained up 11% compared to 2019 pre pandemic levels, our underlying business fundamentals are improving as we head into the second half of the year when we historically Jenna.

Two thirds of our annual attendance and revenues and more than 80% of our adjusted EBITDA.

In just a moment, Brian will provide additional details on second quarter results and the more recent trends we've seen through last weekend.

With that said the first half of 2023 has been a challenge on several levels with exogenous factors constraining demand are negatively impacting operating performance first.

Poor weather conditions, including unprecedented rainfall in extreme temperatures plagued our east coast parks during the second quarter as well as our California parks earlier in the season, the persistent rainfall, meaning meaningfully disrupted demand over the first half of the year as well as sales of 2023 passes which will continue to be ahead.

Wind on attendance over the balance of the year.

Cooler than normal temperatures in the second quarter had a major impact on attendance at our four standalone water parks, including Cedar point shores, not soak city and our two schlitterbahn water parks in Texas, where springtime temperatures were unseasonably cool prior to the recent stretch of more typical under degree days.

Finally, and most unexpectedly.

Attendance in the quarter, Canada's Wonderland and several of our U S. Parks was never negatively impacted by public health concerns over poor air quality caused by the ongoing Canadian wildfires.

While demand challenges have been persistent in certain key markets, most notably in California are solid performance at parks operating under normal conditions underscores the resilience of our business model. The continued strength of consumer demand for experiences and the benefit of our strategic initiatives over the last two years for.

We are pleased by the solid performances at our six Midwest Parks, where combined attendance was up 7% over the first six months of the year compared to last year.

Coincidentally these six parks, where least affected to date by poor weather, demonstrating the extent to which difficult operating conditions can have on park performance, especially when weather occurs on days of peak demand.

Meanwhile, we are pleased to report improvements in other key areas of performance, including guest spending levels and booking trends within the group channel and at our resort properties through the first half of the year. In Park per capita spending is trending up 4% year over year led by improved spending on food and beverage admissions and Merck.

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Consistent growth of per caps indicate our guest willingness to spend to enhance their experience and their willingness to buy up for higher quality items. We're confident we can continue to build on this momentum through further investments in our park facilities and guest amenities.

Including a new consumer friendly mobile App that is currently under development.

The new App is being designed to simplify and streamline the guest experience expedite and expand payment options and minimize wait time beyond the improvements we have already achieved. This is just the latest example of our ongoing investments in technology to improve the guest experience build loyalty and drive higher attendance.

And in park spending.

We will begin rolling out the new mobile App in our parks later this year with full rollout planned for spring of 'twenty four.

Finally, our group sales channel continues to show strong signs of recovery through.

Through the first two quarters group attendance is up 11% over last year and in line with our expectations led by strong early season performance of school and youth events.

This is a key period for the group channel as group events shift from school and youth to corporate groups with a deeper share of wallet and higher per cap potential.

Before Brian reviews, our second quarter results in more detail, let me put in perspective, where we stand with five months remaining this season.

While our results demonstrate that our business fundamentals remain strong we are not satisfied with our financial performance year to date, therefore, with a heightened sense of urgency we have taken deliberate and decisive action to increase demand generate incremental guest spend and drive revenues higher.

With some of the biggest days of the season is still ahead of US we've accelerated our marketing efforts at our largest parks and activated mid season marketing promotions through our season pass and single day ticketing channels to generate incremental attendance. We believe any short term impact. These actions may have on admissions per cap will be more than offset.

By increased attendance and higher levels of in park guest spending on food and beverage merchandise and extra charge attractions.

Meanwhile, our park teams are tightly managing variable cost to better align with attendance levels, most notably around seasonal labor. These efforts have already contributed to a 2% reduction in the second quarter operating costs and expenses on a per operating day basis.

While recent results show progress has been made there is more work to be done we're committed to rolling up our sleeves and continuing to advance our strategic initiatives to drive improved performance for the remainder of 2023 and prepared for 2024 with margin expansion being a top priority.

To wrap up my opening remarks, I want to emphasize our belief that consumer demand for experiential entertainment remains incredibly strong the consumer is healthy and guest spending levels remain elevated compared to 2019 and even to post pandemic levels. I also want to reiterate that we are in the midst of our most.

Profitable six month period, when we generate more than 80% of our adjusted EBITDA.

We believe the actions we are taking better position us to maximize returns over the remainder of 2023.

After Brian's comments I'll come back with some thoughts on our strategic approach for 2024 and beyond Brian .

Thanks, Richard and good morning, I'll start off by reviewing our second quarter operating results before discussing preliminary results for the five week period ended July 30 <unk>.

And then wrap up with an update on our balance sheet and capital allocation priorities.

During the second quarter, we had 736 operating days compared with 708 days in the second quarter of 2022 the.

The increase primarily reflects operating days added back in the quarter at our mid tier parks to accommodate the return of school and youth groups disease.

As always we will continue to review and optimize our park operating calendars to maximize free cash flow generation.

During the quarter, we entertained $7 4 million guests and generated net revenues of $501 million compared with $7 8 million guests and net revenues of $509 million in the second quarter of 2022.

The decreases in attendance and net revenues are primarily attributable to the disruptive weather patterns that continued from the first quarter, along with the wildfires in Canada, which impacted demand in our park in Toronto as well as several of our U S based parts during the period.

The decline in attendance also reflected a decline in season pass visitation. The result of fewer season passes sold and the impact of carryover past privileges on second quarter results last year.

Overall, we estimate that weather and small from the wildfires accounted for the loss of approximately 300000 visits during the quarter based on average historical attendance on the days and at the parks impacted.

Meanwhile, we estimate the carryover past visits at Knott's Berry farm and Canada's Wonderland accounted for the loss of another 200000 visits during the period.

Excluding the impact of these factors, we estimate that attendance in the second quarter would have been up roughly 100000 visits over prior year due in large part to the incremental operating days in the period.

As Richard noted, helping offset some of the pressure on attendance in the quarter was continued strength in other key performance areas, including guest spending levels and booking trends at our resort properties and <unk>.

In Park per capita spending for the quarter totaled $61 46.

Almost $2 or 3% compared to the second quarter of 2022.

Guest spending levels on admissions and merchandise increased 1% and 3% respectively, but the biggest lift came from within the F&B channel where the per cap was up 9% over last year.

While pricing accounted for some of the increase in F&B spending most of the year over year left is attributable to the growth in both transaction counts per guest and average transaction value the.

The investments we've made over the last few years to improve and expand dining options are yielding outstanding returns.

Meanwhile, the strong performance of our resort properties helped contribute to an increase in out of park revenues of $3 million or 5% when compared to the second quarter of 2022.

On the cost front operating costs and expenses in the second quarter increased to $352 million up 1% or $5 million compared to last year.

The year over year increase reflect higher variable operating costs associated with the 28 incremental operating days in the period.

Despite inflationary cost pressures cost of goods sold as a percentage of food Merchandizing games revenues decreased 70 basis points compared with last year's second quarter.

As Richard mentioned, we remain laser focused on reducing operating costs and improving margins, including taking variable costs out of the system when attendance levels are below expectations.

During the quarter. These efforts led to a 3% decrease in total seasonal labor hours and a 6% decrease in seasonal labor hours per operating day.

The reduction in seasonal labor hours combined with a 1% decrease in our average seasonal labor rate contributed to a 2% reduction in operating costs and expenses per operating day.

Today, we are more nimble than ever and consistent with our focus on margin expansion and we will continue to actively manage the business to optimize operating expenses relative to attendance and revenue trends.

Adjusted EBITDA for the quarter, which we believe is a meaningful measure of the Companys Park level operating results totaled $151 million compared with 171 million for the second quarter last year.

The year over year decline is the direct result of the attendance revenue shortfalls in the quarter combined with the anticipated increases in operating costs and expenses.

Turning our attention to preliminary preliminary results through this past Sunday July 30 for.

For the five week month of July we delivered net revenues of $414 million or 2% or $7 million decline from net revenues for the same five week period a year ago.

Our July revenue performance was driven by a 2% increase in in park per capita spending flat out of park revenues and a 4% or 219000 visit decrease in attendance.

Despite a tenant's remaining below pre pandemic levels preliminary revenues for the month were up $40 million or 11% compared to July of 2019, driven by significantly higher levels of guest spending.

Based on our preliminary results for July through the first seven months of 2023, we have now entertain $14 4 million guests and generated preliminary net revenues of $1 billion.

This compares to net revenues of $1 3 billion and attendance of $15 4 million guests for the comparable seven month period last year.

As we've mentioned over the balance of the season, we will continue to adjust our variable operating costs, including seasonal labor to best align with attendance trends. Additionally, I've highlighted that we will continue to adjust park operating calendars, both adding and reducing days when appropriate.

As our park calendars currently stand we project. This year second half we will have 15 additional days compared to the same period in 2022 with three of those added days falling in the third quarter and the balance in the fourth quarter.

Now turning to the balance sheet as of the end of the second quarter <unk> balance sheet was in solid financial condition with ample liquidity to fund future cash obligations and no near term debt maturities.

As of June 25, we had net debt of $2 $4 billion, and total liquidity of $172 million, including $49 million of cash on hand, and $123 million of available borrowings under our revolving credit facility.

Our deferred revenue balance at the end of the second quarter totaled 283 million. This compares to $307 million at the end of the second quarter last year, which included approximately $9 million of Covid related product extensions at Canada's Wonderland into 2022.

The variance in deferred revenues in large part reflects the impact of weather had an early season sales of <unk> of 2023 season passes, particularly at our California parks.

Which endured monsoon like conditions in the first quarter. This resulted in an approximate 9% shortfall in total passes sold through the second quarter of 2023 compared to the record $3 2 million units sold in 2022.

Regarding capital expenditures during the quarter, we spent $70 million on capex, bringing our total investment through the first half of 2000 $23 million to $124 million, we expect our full year capital spend will be $200 million to $225 million.

Lastly in May our board authorized a new $250 million equity buyback program through calendar July we have repurchased approximately 280000 limited partnership units at a total cost of approximately $11 million under the new buyback program <unk>.

Combined with our original buyback program, which was authorized last August and fully exhausted in the second quarter. This year, we've now repurchased approximately $6 3 million units or more than 10% of Cedar Fair's outstanding equity.

With that I'd like to turn the call back to Richard to provide some additional commentary on our business outlook.

Thanks, Brian .

While today's call primarily addresses the current operating season. We're also aggressively working on the strategic initiatives that will lay the foundation for a strong 2024 season, including our capital program and most importantly, our season pass program.

As we gear up for the imminent launch of our 2020 for season pass sales program. Much work has gone into analyzing last season's marketing and pricing strategies. As we previously noted our 2023 season pass program, which effectively wrapped up at the end of July fell short of our goal of matching the record $3.

2 million units sold for the 2022 season, although this year's program did represent the second largest ever in terms of season pass units sold.

For the 2024 season, our sales strategy will focus on starting out with more attractive pricing in key markets to build demand earlier in the cycle.

We then plan to take price after specific volume thresholds have been reached continuing to evolve our dynamic pricing model for season passes.

Most of our parks will be announcing the start of the 2020 for season pass sales program in the next couple of weeks with compelling early purchase pricing that we're confident will drive strong demand.

Cedar point kick things off earlier this week announcing next season's planned launch of top thrilled to the world's tallest and fastest triple launch coaster the.

The <unk> version of this iconic world class roller coaster the first ever to go above 400 feet may be the most anticipated new attraction, we have ever introduced and we can't wait to see our guest reaction to this one of a kind experience.

Those of you invest in our company or visited our properties no. The importance we place on keeping our parks safe fresh and inviting while offering the finest thrill rides and family entertainment the industry has to offer.

We have a few additional surprises in store for next season that should once again delight families and thrill seekers alike. So please stay tuned.

With the investments we've made over the past several years and those we have planned for 2024, we are confident in our parks offer a combination of family and Thrill entertainment unmatched in our industry.

Given the strength of our underlying business model and the initiatives. We have underway. We are confident we can further expand the appeal of our parks, adding more unique experiences that drive repeat visits and enhance the appeal to a broader audience.

I've challenged our team to develop programs to drive incremental demand and revenues through more premium and customized experiences. In addition to the traditional amusement and water park offerings, we believe meaningful upside potential awaits in these areas.

We are also committed to driving greater flow through from the incremental revenue we generate.

We have successfully flattened the growth curve around most of our operating costs. A stark contrast to the significant inflationary pressures we have faced over the past two to three years most.

Most importantly, this has been largely achieved through seasonal labor our largest single expense, where we have been effectively reducing the average hourly rate we.

We're now focused on further streamlining our parks staffing models for both rate and hours, while also reducing the size of our overhead cost structure.

We believe successful execution of these cost efforts cost reduction efforts combined with a return to the pre pandemic attendance levels of 27% to 28 million guests, while maintaining current guest spending levels would produce EBITDA margins that are near our most recent pre pandemic levels.

Proving operating margin is a top priority for us and a key metric for us to track our continued progress.

Growing free cash flow, while improving margins will allow us to fuel our capital allocation priority of returning capital to investors through a combination of cash distributions and equity buybacks.

Extremely pleased to say, we've returned more than $310 million to investors since the implementation of our first equity buyback program last August and the reinstatement of our quarterly cash distribution payments last September .

The Cedar Fair management team and our board of directors believe that Cedar Fair's units are significantly undervalued and that repurchasing units is an extremely compelling high return investment opportunity.

We will however remain disciplined and opportunistic in deploying unit holders capital.

Looking ahead, we plan to review details of our new long term strategic plan, including new targets for key performance metrics during our third quarter earnings call in November .

With that we'll open the call for question John Luis Please open up the call.

Thank you.

Question.

Thats Star one on your telephone keypad, if you wish to remove yourself from Q simply press the star one again one moment. Please for your first question.

Your first question comes from the line of Steve <unk> of Stifel. Please go ahead.

Yeah, Hey, guys good morning.

So Richard you noted that.

Obviously, you've been disappointed in attendance this year and a lot of that was.

Weather, which has been well documented.

It sounds like for the last couple of months of the season. It sounds like you guys want to get more aggressive on the.

On the marketing and maybe even the discounting side of things in order to drive demand.

I guess my question is if you start to discount single day tickets.

To stimulate demand for the near term does that eventually hurt your ability to take price over time.

Just totally misunderstanding.

You are kind of philosophy there.

Steve on the marketing good morning, Thanks for the question.

On the marketing and we have looked at our digital heavy approach and through the month of the latter half of June and through the month of July we broadened our reach so we wanted to make sure that.

We expanded our ability to connect with our customers we've seen traction in that as we've gotten a little broader in our region in our key markets.

On the pricing front, we're committed to dynamic pricing dynamic.

Dynamic pricing means youre testing different price points. All the time I don't think I would I would take our approach and say that we are leaning into deep discounting I think what we're trying to do is really assess what where dynamic pricing can take us, particularly as we're in peak periods I'm really pleased with the per capita as we're able to drive while.

When weather was good seeing some of our strongest days of the year July was a choppy month weather wise as well, but on the good weather days, we're pleased with the demand we saw and how we translate that demand into higher per caps.

So.

Be crystal clear here.

Normal absolutely normal weather day.

Sentences exactly where you guys would think it should be and spend levels are as good if not better than what you guys would expect them to be.

Okay.

Yes.

As I look at particularly the month of July and there were very few Saturdays, where I'd say, we had really good weather across the system, but we put up some of our strongest days. So yes, we were trending in the zone of where we would expect to be on a bright sunny day in the middle of the summer without rain cover and have the half the east coast.

Thank you. Your next question comes from the line of James Hardiman of Citi. Please go ahead.

Hi, good morning.

I just want to clarify.

Sounds like.

You feel better about the month of July you talked about July trends picking up I guess, if I think about <unk> revenues were down Q on late.

July revenues were down Q seems like attendance, a little bit better forecast from our partners.

Maybe a little worse on a year over year basis.

Maybe what is getting better in July .

Part of the answer is operating days.

<unk> had an operating day benefit maybe that benefit when we in July maybe walk us through.

Some of those items.

Yes, Brian you want to take that.

Yes sure.

<unk>. So I think you hit on it there towards the end rate a bit which is that.

While the July trends overall revenue trends are comparable on a percent basis. Some of the Q2 left as we said on the call was was the benefit of the incremental days in the period.

As Richard noted July is it hasn't been perfect.

Tying it back a little bit to Steves question I think we're pleased when you sort through new breakthrough.

<unk> apart we are certainly saw better demand on single day tickets. The general demand channel in July as operations began to normalize there is still a little bit of a drag and the answer is always a bit different maybe park by park, but still a bit of a drag of certain parks that are are well down in their season pass sales.

That channel for Knott's and Great American do California parks that were most disrupted in terms of season pass sales. This year that will be a drag for them for the balance of the year as we said on the call. So not everything quite perfect, but certainly seeing improvement in July on a relative basis the other.

Thing that I would let me chime in here James you know as we look at our operating calendar July August and October our three most significant and meaningful months, we do arb highest attendance revenues and generate our highest EBITDA and the opportunity to generate margin of those months Thats. What we saw last year in the month of October so when.

We look at July what is different versus the second quarter is it selling the same number of operating days, what we're up against much stronger comps because these are our biggest months and thats thats why its a more meaningful comparison.

Got it that's helpful and then.

Maybe Brian .

If you could bridge the margin versus where we were in 2019.

The comment that you think if we can get back to the 19 level of independence.

And that there was margin growth opportunity at the Schlitterbahn parks as an example, as we as we integrated them into the system. So we're not going to rest on that being dilutive longer term as we think about it going forward.

We've said this before and Richard's comments hit on it. It's a combination we know we have to get more efficient on the cost front and we're very pleased with what we were able to do in Q2, taking our operating costs and expenses all in down 2% per operating day, even with the added <unk>.

Lease and property tax expense related to the to the Great America.

Park, which wouldn't have been in last year's numbers.

But it's also about getting attendance back getting back to those to that 27 plus million visits because with while the gap does seem pretty big there is a lot of leverage this in the system right and Richard hit on it just a minute ago July August October those are our busiest months and the attendance recovery of attendants in those.

Months, when youre, putting those incremental visits on top of a pretty fixed cost structure.

It can move the needle pretty quickly.

When we think about the balance of this year, while we haven't gotten as much out of costs in the first half as maybe some would have expected part of the challenge. We have there for are particularly for our seasonal parks much of the cost structure for the first four or five months of the year is very fixed it's off season fixed costs associated with maintaining.

Or preparing the parks to open so we run pretty skinny on the cost structure of those properties during the during the down time or the prep time before those parks opened in the spring there is a lot more opportunity over the second half of the year and we would fully expect that our operating costs and expenses, including SG&A and cost of goods.

Over the second half of 2023 are going to be inside of the roughly $760 million that we incurred last year in the second half of 2022 we have a lot more leverage to take cost out of the system. We've activated as Richard noted a lot of.

Initiatives and efforts to already begin taking costs out we're not done there's more to go but I think the ultimate answer to your question is it's both reducing the cost structure and driving volume.

Okay.

Thank you. Your next question comes from the line of Thomas <unk> of Morgan Stanley . Please go ahead.

Thanks, so much Jeff.

Following up on Chris's question on running that discounts for admission it seems like Theres strong spending when someone in the park, but admissions pricing has essentially been a bit more of a barrier. Just curious what you think the drivers of that are from our consumer health perspective, what's limiting that initial point of sale.

Yes. This is <unk>.

Brian I think at the at the top of that list is certainly those macro factors right. What we've seen over the years and this isn't new to 2023, it's been a developing.

Change in consumer behavior is just a shortening of the booking cycle. It's one of the reasons why we try and push as many people to the multi day ticket products like season pass get them to commit a lot earlier, but when weather is so unpredictable and people are buying much later I think thats what disrupts.

Those that purchase that initial purchase certainly what we saw play out this year.

Attendance isn't just driven by the weather in the moment, but the weather during the point in time, you were going to make the purchase so what we what we saw play out. This year was the the impact of weather on sales in the first quarter and the early part of the second quarter, particularly around season passes.

He is a headwind for us for the balance of the year our efforts as Richard noted to increase some of our marketing.

In some of our key markets to be a little strategic with some very limited duration promotions is about trying to stimulate that that urgency and get in front of a few more folks to get them to activate we always plays out then it gets a little bit easier as you get deeper into the year, because theres, a natural sense of urgency that summer.

Winding down kids are going back to school.

<unk> has always worked well for us we would anticipate that working well for US again this year.

Okay, Great that's helpful.

Super helpful in sizing the weather impact for <unk> and it sounds like July also include some weather related headwinds maybe now on the east coast versus the west is that right.

The interpretation.

The expectation there that August September it looks better than July .

Yes, I would say that.

Weather was still certainly a factor.

Now, we're dealing with extreme heat across the country right that certainly has helped us a bit.

In South, Texas, where the Schlitterbahn water parks benefit from $100 a day.

The rain and the heat Hasnt helped us in the South East where carrier wins and Kings Dominion Dorney Park, we're going up the east coast that they've dealt with a lot more rainfall than maybe some of the other parks that has shifted from what was what was a west coast.

Scenario earlier in the year I think the drag that we will contend that has continued in July as I just mentioned on the on the West Coast Parks is a little bit more tied to the fact, they just don't have as many season pass sales outstanding now what we've seen play out in the past and maybe this is.

And answer to the latter part of your question is that yes. This year's pain becomes next year's gain and by that I mean.

Fact that some of our traditional season pass buyers at Knott's Berry Farm California's Great America missed out or elected to skip the 'twenty three pass purchase.

<unk>.

What we've seen play out in past as they often ramp.

<unk> and become earlier buyers of the 2020 forecast. We saw this play out in 2018 to 1918 was a tough year Weatherwise hurt our season pass sales had a record sales of season passes for the 19 season at that point in time. So we really expect some strong demand for season pass sales at a number of our parks, particularly the west coast parks now that.

Going on sale with those here in.

In early August .

Thank you. Your next question comes from the line of Michael Swartz of Truth Securities. Please go ahead.

Hey, Good morning, guys. Just maybe a question following up on James's question earlier kind of bridging how we get to go back to kind of the pre pandemic margin levels call. It 33, 34%.

Understanding that a big part of that is just leverage on attendance coming back two.

<unk> $27 million or so.

Is there a way of looking if we get back to $27 million in attendance.

What kind of cost reduction would be needed to generate the $33 34, and EBITA margin if that makes sense.

Yes.

It comes down to a few other factors that all interplay with one another it's not only the attendance number. It is where are we at what are we able to to driving continued.

Guest spending levels, both inside the park and at our out of Park.

Locations, but there is no doubt that taking some of the overhead costs out of the system and streamlining as Richard noted the operations the variable operating cost in the park operating structures are critical to getting back to that faster I might characterize it as the speed to it to getting back to 33%.

4% has made a lot quicker if we can get those costs out.

Faster and it the more we get out the faster we get back to that 33% 34%.

Adding on to that question I mean, a lot of the improvement we saw in costs in the second quarter was reducing some of the seasonal labor costs.

I guess, how do you balance taking those hours and costs out of the system versus.

Not impairing the guest experience.

What do you what do you put in place to ensure that that doesn't happen.

It's a good question and it's the right question.

We have always prided ourselves on the quality of the guest experience engagement with the customer.

When I look at our NPS scores and our <unk> scores right now.

There are near records at most of our parks. So we got a tremendously valuable guest experience, we're trying to be very mindful as we take cost out what the guest the value of what they don't but we let them tell us that so we continue to do extensive research on our guest.

The attendance number we strongly believe in putting in marketable attractions like top thrilled too to get everybody's juices flowing and get people to come out. So the combination of a really strong capital program, along with disciplined monitoring of what our guests are telling us.

We think there's a way to to thin out costs in the system, while continuing to provide the high quality experience that we're known for.

Thank you. Your next question comes from the line of Lizzie Dove of Goldman Sachs. Please go ahead.

Good morning, Thanks for taking my question two if I may start on capital allocation you guys had a pretty significant buyback in the second half of last year and this year I think no matter, where we think EBITDA may fully are probably going to generate more free cash flow in the second half versus the first half.

Listen it's a good question, it's Richard let me take this and then Brian can weigh in.

We want to understand and as I said in my remarks, we think the units are significantly undervalued by the market we want to.

Look at our capital allocation priorities and go to where we think we can get the most benefit and create the most value.

The last year that the.

Buyback program that we put in place in August of 'twenty, two our ability to be a little bit more aggressive with that program was aided by the.

Cash from the sale of the land at Great America.

As we said when we put this program in place. This is now going to be funded out of operating cash flow and youre exactly right.

We really start building cash as we roll into the core summer, which tends to start the summer season, which tends to start around memorial day second half of the year much more cash generation.

We want to also make sure we're as Richard noted, we're getting value for the distribution.

That's helpful. Thank you and maybe just one more on season pass it sounds like you're pulling back a little bit on the kind of mid to high single digit price increase that you had this year I'm also curious if you have an update on your relatively new prestige paths that you were testing at three of your properties.

The year is that going to be something that you lean into this year and maybe even expand as well.

Yes, so on the prestige pass, let's see yes, we do intend to.

To to make sure that the components and the and the benefits of that of that path of the proceed fast are exactly.

Hitting the Mark and so we'll make some adjustments at the three parks that we did.

<unk> the product at and we will expand it in terms of season pass.

<unk> more broadly.

We're going to continue to try and use the dynamic pricing techniques that we've used in the past to distill Chase mid single digit returns our approach around the season pass program I won't say, it's a complete deviation from where we've been in the past we've always used a program that that sort of emphasizes <unk>.

And getting volume a little bit earlier, and then building to a certain predetermined.

Thresholds are targets and then starting to take pricing more aggressively.

And so if anything in hindsight, we believe in looking back we maybe.

<unk> got a little bit out over our skis or went a little bit too early in a couple of markets.

And so we may be pulling them back a little bit but the goal is still to continue to take price in season pass there is a lot of value for that product.

And we believe that much of the disruption this year as Richard said still the second best year ever in terms of past sales.

The little bit of disruption, we believe was more weather driven.

Little bit more focused on price.

So kind of going back to a couple of previous questions you mentioned.

Getting back to pre pandemic margins at that $27 8 million.

Guess level can you talk about how you view that.

Where you'd feel comfortable pushing attendance about straining the assistance of kind of the opposite.

The earlier question, where you are how much costs, you would want to take out without impacting the experience.

Yeah, Eric It's Richard Good morning. Thanks for the question as we think about what's optimal for each park and that changes as you sort of go through the lifecycle of a park different opportunities different regions. There are a lot of macro factors that go into how we evaluate each part, but we do look at each park on on the basis of what we think we can generate.

Seen us aggressively expand our calendar first with winter Fest in in November December than even this year. Some parks trial year round, we're going to go back and take a look at whether or not we got as much value as we wanted to those days. They certainly were impactful and gave us an opportunity, but as we think about.

Sizing up the optimal attendance as we think through coming back to everybody on this call.

Out with.

Much more clear and precise view of our long term.

Targets in our strategic plan, we will factor all those things in and we'll address that but I would tell you right now.

Other than peak attendance days, which we've always said run 2025% of any parks operating calendar and those are the bigger days in July August and October that we've always references our biggest months, we think there's opportunity to continue to bring in more guests still service some of the high level. So we've got we've got plenty of capacity at all or.

Got it and then.

Question.

You focused on managing labor in the hourly wage.

Employment kind of kind of coming out of post pandemic, maybe talk about how you handle that around the difficult weather days now versus maybe what had been what would've been the system or procedure.

Pre pandemic, how did you get better at it and maybe what would handle better maybe kind of what do you think what's going to be.

Eric as we as we went through the pandemic to great question, we built out what we call business intelligence with two primary functions first really ramping up our revenue management function and you've seen that.

Thank you. Your next question comes from the line of Robert Aurand of Keybanc capital markets. Please go ahead.

Hi, Thank you for taking my question wanted to ask again on the margin front, a lot of color versus kind of a pre pandemic margins, but I wanted to look kind of more recently to 2022. When you guys did kind of just below $27 million of attendance and put up a 34% EBITDA margin I guess, assuming good weather next year.

We could get back to that $27 million attendance can you talk about kind of the puts and takes relative to that 34% margin for next year.

Timing of the cost savings and would there be enough by that point, you'll get back to those levels.

Yes.

Yes, Robert it's Brian .

So I think as we look at where we were coming right out of the pandemic.

We opened up our reopened parks with a keen focus on delivering the best possible experience, we could and getting as much attendance back as quickly as we could and.

In hindsight, we may we may have over swung the pendulum around an area like seasonal labor, we talk about it so much because labor is the biggest single cost item for us and so when we look back and versus where we're at now we're managing a lot more hours out of the system.

Then where we where we're managing more hours hours out of the system quite frankly than where we were even pre pandemic because thats, what we have to do these elevated.

Average hourly rates for that seasonal staff base.

Continuing to push the seasonal wage rates down and we've done that.

Maybe call it around $11 an hour to closer to 17 $18 an hour. It wasn't just a flat rate. It was a base rate plus a premium or a bonus. However, you want to look at it and so as we've dialed that bonus back as we've dialed.

Hours out of the system and we're not done by any means as Richard noted theres more work to be done on that front, but that's that's where that's where the biggest chunk of it comes out now we also have to get more efficient as we said in some of our fixed overhead costs. So that's everything from reviewing staffing levels and looking for more.

NCS also eliminating third party consulting fees and things of that nature. So it's a multi pronged effort to get there, but a lot of it lies in labor because that 60% of our overall cost structure.

Understood. Thank you I wanted to ask on group.

We called out kind of $1 4 million visit gap there versus pre pandemic levels I know youre, saying group has been stronger here kind of any update in terms of where we stand relative to that $1 4 million and kind of how quickly you think that can still come back.

Yes, as Richard said on the call, we're really pleased with the pace.

That we've seen in the recovery it hasn't been perfect.

Side of the business that.

Gets disrupted by macro factors as well we've lost as an example, this is a small.

A bit but we lost a couple of days, maybe close to 10000 school visits at some of our parks on the east coast because of the.

The warnings of air quality related to the Canadian wildfires and the timing of those hitting in mid to late June once we lost that group. The schools were done for the season. So we won't get them back until next year. So it hasnt come back completely but what we've seen school and use up probably 20 plus percent to where it was a year ago.

So.

Big step function for that corporate is coming back and we will continue we will continue to book corporate events and buyouts for the balance of the year the team.

He has done an excellent job at the park level of of bringing that back we're not going to get all the way back to the one three to $1 4 million. This year as we said at the beginning of that could take two or three years, but we're certainly moving quickly in the right direction. When it comes to the group side of things.

Thank you and again, if you would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Paul Golding of.

Mccurry capital. Please go ahead.

Thanks, So much I just wanted to ask a couple of technology questions.

From an F&B perspective.

Additional dining options contributed to the per cap growth. So I was wondering how much of the transaction count.

Can attribute to the mobile <unk>.

Ordering or mobile app penetration across the footprint and then as a follow on whether we should continue to expect some uplift from this as you mentioned on the call.

We're rolling out a revised or updated consumer facing app across the footprint spring of next year I believe thanks, so much yes.

Yes, Paul Thanks, It's a great question right now mobile food mobile ordering is still a small percentage of the transactions, we do but we're testing it at every park and it's working really well and we're testing a variety of formats. So what we're really trying to see what works best depending on facility in terms of the mobile App that we're writing and Brian I just.

Briefing last week, and we're making great progress.

Ease and the integration of everything into the mobile App will make it so much easier as we roll this thing out to really be able to then leverage food mobile ordering we think theres a lot of opportunity. We think we can do a lot more transactions and drive that transaction count and it's a key a key plank of that engagement with our with our consumer next year.

For the overall are we seeing.

Any pilot results that you may be able to share around maybe admissions sell through or ability to retarget any quantitative metrics that you could share.

Yes at this point no Paul the pilot of the App.

It will be later this year, so what we're getting out of mobile right now is off of the existing platform. That's been in place. So I think what youre the lift that we're seeing in areas like F&B the higher transaction counts at this point Richard.

Comment Richard just made.

Probably not much attributable to <unk> mobile is still a small piece of our business more of a lift we're seeing there is the investments we've made.

To enhance expand the dining options higher throughput engines, certainly going cash cashless.

Has has sped up transactions and then just just more efficiency simplification of the checkout process and the and the offerings right streamlining offerings different offerings at different locations, but keeping it narrow so the consumer doesn't stand around and have to make a lot of decisions. It's pretty it's a it's a more simplified.

<unk> and inefficient.

Experience and so going forward I do think as Richard just noted mobile is going to.

Thank you. Your next question comes from the line of Barton Crockett of Rosenblatt. Please go ahead.

Okay, great. Thanks for taking the question.

Couple of questions one is.

Was there any impact on the attendance from the publicity around the issue with the roller coaster I think <unk>.

Got a lot of press play does that have any impact in the quarter.

Barton it's Richard.

Kosta Youre referencing <unk> three to five and from our look the the weather's had far more significant impact on <unk>.

Ill timed rain a lot of rain a significant portion of the last six months on weekends. So that's really been a significant factor.

Okay.

And then on.

The topic of whether I mean, I know you talked about this historical situation where season pass sales can be weak one year and maybe demand stronger than next year.

Kind of a catch up and certainly people about the past.

And everything but.

I'm just wondering to the extent that we're seeing more kind of media discussion about the weather issues that climate change is something that will be sticky persistent leaving aside the debate.

How accurate that is certainly I'm curious from your perspective, if youre seeing youre.

Youre consumers perceive that is true.

That might have any.

Negative headwind on their desire to put their money into weather dependent kind of pre spending experiences like the season passes for the theme Park.

Barton Great question I would say the first let me go back to our firm belief that over time, whether we will average itself out. So you do revert to the means I understand that we're in a period, where there's been disruptive impact, but more broadly if I take a step back I think couple of things have fueled the back half of the year for us.

Around the holidays, so the back half of the years, where we've actually benefited from the weather driving the demand. So that's sort of a shift over the last decade or two that we've seen which is where the opportunities. It has created opportunities a little more challenging in the springtime when the weather has been a little more disruptive so we're evaluating that impact, but I think.

I think the appeal of the back half of the year and the events we have in the back half of the year combined with slightly better weather is one of the reasons, we continue to both do well, but generate so much of our attendance revenue and EBITDA in the back half of the year.

Thank you and our final question comes from the line of Chris <unk> of Deutsche Bank. Please go ahead.

Hey, good morning, guys. Thanks for all the details so far.

One question for you I guess, Richard maybe you can.

Give us a little bit of.

Our view of the landscape overall for the industry in terms of whether you think there's going to be any.

M&A opportunities or just M&A that happens because we've got.

A higher for longer interest rate environment, we've got.

Some some private owners that might be coming up with some some debt maturities or other things so.

Just curious as to your view of the landscape.

Yeah.

So we this company has been built through M&A, we've talked at length. On these calls we'll look at anything Thats available Thats out there I do think if you go back to pre pandemic everybody was healthy we posted a record year in 2019 as most others.

The strength of the recovery I think has helped both the.

The public companies with the private companies, we have all improved our capital structures.

The private operators, we talk to have benefited from the recovery as much as the public. So I think the industry is healthy so I think.

M&A if it happens probably is more linked to opportunity then significant weakness but.

Everybody is healthy and they are doing well so that's actually good for the industry. The industry being healthy is good for all of us and I think that.

The continued appeal the strengthen and the rapidly so the recovery, where we also have 20 to be so strong and now continuing although again not in line with where we'd like to see it. Despite the disruption we're starting to see that improvement you'd want to see in the second half of the year. So I think what we're seeing is what most of the others are seeing.

Okay very good thanks Richard.

Okay.

There are no further questions at this time I will now turn the call back to Richard Zimmerman for closing remarks.

Thanks to everybody for joining us and thanks for your continued interest in Cedar Fair has a summer winds down and kids return to school, we will be transforming our parks for the always popular Halloween events in October , which historically have produced our biggest attendance days of the year.

Please look at our upcoming announcement regarding Cedar Fair's 2024 capital program, highlighting our planned investments in new rides slides and major attractions for next season at our portfolio Irreplaceable Entertainment landmarks, we look forward to keeping you apprised of our progress on these and other initiatives Michael.

Thanks again, everybody. Please feel free to call our Investor Relations Department at 4196272233, our next call will be in November after the release of our 2023 third quarter results.

Sean Lee that concludes our call today, Thank you very much.

You may all now disconnect.

Okay.

Includes our call today, Thank you very much.

You may all now disconnect.

Okay.