Thank you for standing by. My name is Danica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cedar Fair Entertainment Company 2023 fourth 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. [Operator instructions] I would now like to turn the call over to Michael Russell. Please go ahead.

Michael Russell — Corporate Director, Investor Relations

Thanks, Danica. Good morning to everyone. Welcome to today’s earnings call to review our 2023 fourth quarter and full year results for the period ended December 31st. 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.cedarfair.com. On the call with me this morning are Cedar Fair’s CEO, Richard Zimmerman; and Brian Witherow, our chief financial officer. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements.

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For a more detailed discussion of those risks, you may refer to the company’s filings with the SEC. In 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 and unselectively disseminated, all content on this call will be considered fully disclosed. Before I begin, I want to reiterate that the purpose of today’s call is to discuss 2023 fourth quarter and full-year results and answer related questions.

During Q&A today, management will not be taking questions about the proposed merger with Six Flags. With that, I’d like to introduce our CEO, Richard Zimmerman. Richard.

Richard Zimmerman — President and Chief Executive Officer

Thank you, Michael. Good morning and thanks to everyone for joining us today. We’re excited to be here today to discuss another very solid performance by Cedar Fair in 2023, including a record performance over the second half of the year. But before we review our results, let me briefly bring everyone up to speed regarding where we stand in terms of the proposed merger with Six Flags.

I am pleased to say that we passed a key milestone at the end of January when the S-4 was declared effective and the related definitive documents were subsequently filed, including the Six Flags’ proxy statement and prospectus. Meanwhile, we continue to work through the antitrust approval process after receiving a second request from the Department of Justice on January 22nd. This was an anticipated part of the process that our respective teams had prepared for, and we continue to expect the transaction to close within the first half of the year, as originally contemplated.

Since announcing the proposed merger in early November, we have engaged in many conversations with Cedar Fair unitholders, as well as the broader investment community, and we are encouraged by the strong support we’ve heard from many investors.

We look forward to closing the transaction in the coming months and unlocking the compelling value-creation opportunities ahead for our combined company, which we are confident are greater than either company could have achieved independently. Naturally, as this process moves forward, we will keep the market apprised of other material events. Now, let’s move on to 2023 results and our outlook for the year ahead.

I am pleased to report that Cedar Fair capped off an outstanding second half of the year with a record fourth-quarter performance, including new fourth-quarter highs in attendance, net revenues, and adjusted EBITDA.

As we have seen before, the 2023 operating season was a tale of two halves. By midseason, the effects created by anomalous macro factors, namely unprecedented rainfall in California and uncontrolled wildfires in Canada, resulted in shortfalls in early season attendance and spring season pass sales, which posed a challenge to our potential full-year results. Consequently, we modestly adjusted ticket pricing at several key parks while also investing more in our advertising and promotional campaigns.

Along with the return to more normal weather conditions, these midseason adjustments were successful in generating incremental demand and led to a 3% increase in attendance over the balance of the season, recouping a meaningful portion of our early season deficit.

In an effort to drive greater flow-through from the revenues we generated, we also remain laser-focused on identifying new cost efficiencies. While there is still more work to be done in this area, we were pleased that we achieved our goal of reducing second-half operating costs and expenses from 2022 levels and improving adjusted EBITDA margins over the last six months of the year.

As we have previously stated, our best opportunity to streamline cost and drive margin expansion resides in each year’s second half when operating costs are the most variable and attendance and revenues are at their peak. Before I ask Brian to review our financial results in more detail, I want to take just a few minutes to elaborate on the value of several intangibles of our business model that are often overlooked, yet extremely important to our ongoing success.

The Intangibles that Drive Success

First is resiliency. Our historical track record of quickly recovering from macro disruptions is a testament to the resiliency of our business model. Cedar Fair’s resiliency is grounded in our ability to dynamically manage resources, market our unique brand of entertainment, and deliver a diversity of engaging experiences that drive demand through market cycles. This has allowed us to navigate downturns in our industry, as evidenced by our recoveries from the Great Recession and the recent pandemic.

This past season is just the most recent example of how our resiliency played a key role in our success, allowing us to overcome early challenges and finish the year on a high note, setting new records and reaffirming the strength of our brand.

Cedar Fair Declares Second Half Record Performance Driven by Endurable Appeal

The Enduring Consumer Appeal

Cedar Fair, an iconic name in the world of amusement parks, quickly rebounded in the second half of the financial year, counterbalancing the underwhelming figures from the first half. The secret to their sustained success lies in the timeless allure of their outdoor attractions that have captivated millions of visitors year after year. For over 150 years, Cedar Fair has brewed the potion of consumer enchantment with its enchanting parks – a spell that has not waned over decades.

Economic Resilience and Growth Strategy

The company’s financial prowess is deeply entrenched in their ability to milk the resilient demand for their parks, converting it into a copious stream of free cash flow. This flow is then channeled back into their properties to sow the seeds of future growth. This age-old approach is the bedrock of their enduring durability, with the appeal of their parks standing the test of time. Since its flagship park, Cedar Point, was established in 1870, the company has been dishing out jubilation and thrills across multiple generations of families.

A Commitment to Stability

Cedar Fair’s culture is a bastion of stability, fostered by a seasoned senior leadership team unrivaled among regional amusement park players. With a robust balance sheet, the company can manage its capital requirements and possesses the financial dexterity to grasp any promising opportunities that arise. Fueling this economic stability is the growth of their recurring revenue streams, which are a salient feature of their long-term strategic plans and capital allocation strategies.

Record Fourth Quarter Performance

Cedar Fair’s fourth quarter results sizzle with fervor, reporting a record-breaking revenue of $371 million, buoyed by a noteworthy 9% surge in attendance that crossed the 5.8 million mark. The festivities were further amplified by a 7% increase in out-of-park revenues, stemming from the commendable performance of their resort properties, augmented sponsorship business, and amplified revenues at the Knott’s marketplace.

Full Year Recap

Despite the challenges faced in the first half, the year-long journey culminated in net revenues of $1.8 billion, drawing 26.7 million visitors – a marginal decline from the previous year. This dip was offset by a $10 million hike in out-of-park revenues. Transitional costs associated with a proposed merger with Six Flags permeated the operating costs and expenses, yet the company demonstrated resilience through its cost-saving initiatives and strategic advertising investments in 2023.

The second half saw Cedar Fair embracing nearly 600,000 more guests, a testament to their dynamic approach in captivating the audience and managing their operational expenses efficiently.

The Road to Recovery: Cedar Fair’s Positive Outlook and Strategic Measures for Growth

Cedar Fair, a company known for its amusement parks and entertainment, has reported a strong performance in the latter half of 2023, signaling positive momentum for the future. Despite a decrease in adjusted EBITDA and net revenues compared to the previous year, the company’s emphasis on cost-saving initiatives, along with record revenues, resulted in a notable expansion in adjusted EBITDA margin. This success has instilled confidence in the company’s strategies for driving operational efficiencies and margin expansion, while continuing to deliver exceptional park experiences for guests.

Cost-Saving Measures and Operating Efficiency

The reduction in operating costs during the latter part of the year was attributed to increased efficiencies in operating supplies and entertainment costs, as well as reductions in both seasonal and full-time labor. With a reduction of over 550,000 total seasonal labor hours, the company’s efforts have demonstrated a commitment to prudent cost management. Additionally, changes in the seasonal pay structure have contributed to stabilizing the growth curve of labor rates, a critical factor in managing the company’s largest operating expense.

Looking at the broader financial landscape, the company ended the year with a healthy cash balance, no outstanding borrowings, and total net leverage slightly above their stated goal. This financial position, coupled with a substantial liquidity level, positions Cedar Fair to navigate near-term financial requirements effectively.

Proactive Strategies and Long-Lead Business Indicators

Cedar Fair’s proactive approach is evident in its long-lead business indicators, with strong sales of season pass products and reservations at resort properties pacing in line with expectations. The increase in total deferred revenue and early sales of 2024 season passes reflect positive consumer interest. The company’s deliberate pricing strategy and focus on maintaining demand trends further underscore their strategic foresight.

Capital Expenditure and Future Outlook

The company’s investments in new rides, attractions, and property enhancements position Cedar Fair for a compelling and broad-reaching capital program in the coming year, with notable projects such as Cedar Point’s Top Thrill 2 generating significant anticipation. Leveraging business intelligence and data analytics, Cedar Fair remains committed to informed decision-making processes that foster revenue growth and operational efficiencies.

The strategic decision to adjust operating calendars at several parks aims to concentrate attendance over fewer days, enhancing operational efficiency and ultimately driving stronger performance. Despite the reduction in operating days for 2024, the company is optimistic about its ability to build on the momentum established in the latter half of 2023 and work towards achieving attendance levels akin to those observed before the pandemic.

Resilience and Focus on Delivering Returns

Cedar Fair’s resilient business model, effective midseason strategic decisions, and emphasis on operating parks more efficiently position the company to deliver another outstanding year in 2024. The leadership’s unwavering focus on delivering solid returns for investors underlines their commitment to sustainable growth and financial prudence.

The company’s positive outlook is based on consumer demand for amusement park entertainment, a robust capital program, and enhanced business intelligence and data analytics. With a solid start to the year and a well-defined operational strategy, Cedar Fair remains optimistic about its prospects for 2024.

Road Ahead and Investor Confidence

Cedar Fair’s emphasis on its operational performance and future prospects underscores its commitment to driving long-term value for investors. The company’s steadfast approach to navigating challenges and capitalizing on opportunities sets the stage for a compelling growth trajectory.

As Cedar Fair demonstrates resilience and advances on the path to recovery, investors and industry stakeholders are poised to witness the company’s strategic measures translate into sustained growth and value creation.

Q&A Session

After the presentation of prepared remarks, the session opened for questions and further insights, reflecting a candid and transparent approach to engaging with stakeholders and providing clarity on investor inquiries. This open forum is indicative of Cedar Fair’s commitment to fostering open communication and addressing investor interests.

As the company charts its course for the future, its focus on operational excellence and sustainable growth remains at the forefront, reinforcing investor confidence in Cedar Fair’s resilience and strategic initiatives.

The Roller Coaster of Recovery: A Bright Outlook for Attendance and Revenue

Signs of Recovery

Good morning! Investors are perched on the edge of their seats with excitement for the twists and turns that lie ahead for one large amusement park company. In a recent call, Richard Zimmerman, President and Chief Executive Officer, suggested a compelling future as he indicated the possibility of demand soon outpacing 2019 levels. The numbers paint a promising picture, with attendance down about 5% versus 2019 in 2023, leading to the belief that a 5% attendance growth could bring them back to pre-pandemic levels.

When we gaze into the company’s rearview mirror, the latter part of the year stood out as a testament to the park’s resilience. Despite the odds, their biggest period of the year in the fourth quarter boasted substantial revenue, showcasing robust demand during these trying times. Zimmerman’s confidence rings through as he highlights the recovery in Southern California and the Ohio Valley, emphasizing the resounding, widespread strength in consumer demand across all the park’s regions.

Strategy, Pricing, and the Road Ahead

The company’s prudent strategy in shoring up its base layer of season pass sales and then balancing it with competitive pricing has begun to yield fruit. Brian Witherow, Executive Vice President, and Chief Financial Officer, explained that while price adjustments were made at select parks, it was not a universal shift across the board. The impact of lower season pass prices on per capita spending in 2024 remains a matter of intrigue, as do the potential directions of future pricing strategies. The nuanced approach of adjusting pricing market-by-market and seasonally allows the company to navigate the unpredictability of consumer trends.

As the company navigates the seas of uncertainty, Brian Witherow assured investors of the company’s resolve to elevate guest spending inside the park, especially on food and beverage—a heartening sign that bodes well for the future.

Projections and Positivity

With the pendulum of attendance swinging positively, a question on everyone’s mind is whether the heartwarming positivity will translate into increased per capita spending. Witherow dissected this query with finesse, highlighting the potential impact of channel mix and the intricacies of revenue streams across different parks. Even with the potential pressure on admissions per capita, the influx of revenue paints a comforting horizon, a type of challenge the company welcomes with open arms.

As we fasten our seatbelts in anticipation, the company’s refusal to offer annual guidance adds an air of suspense. However, the sheer prospect of possibly exceeding previous EBITDA thresholds hints at an impressive journey ahead, building on the favorable weather comparisons foreseen in the coming year.

We stand at the cusp of witnessing a remarkable recovery story as the amusement park company harnesses resilience, strategic pricing, and consumer demand to pivot towards a brighter, more exhilarating financial future. With each turn, twist, and loop, the roller coaster of recovery seems poised for a thrilling ride filled with promise.

Analyzing the Future of Amusement Parks: A Verbatim Earnings Call Highlights

Richard Zimmerman on the 2022 Performance and Future Outlook

The 2022 earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at an impressive 550 million, giving a solid point of comparison for the performance evaluation this year. Regardless of whether the 2023 figures exceed this benchmark, we must delve into the manifold factors influencing the trajectory.

Richard Zimmerman, the President and Chief Executive Officer, offered a poignant perspective, affirming a deliberate, pragmatic approach to their parks’ portfolio and opportunities. Emphasizing the indispensable capital investments driving demand in specific markets, he candidly conceded that elements like weather and regional economic conditions, while beyond their control, played a pivotal role. The company’s unwavering commitment to an agile approach, utilizing business intelligence, and honing analytical capabilities to optimize decision-making, underscores their strategic positioning.

Richard Zimmerman on the Long-term Business Strategy

While scrutinizing the performance at the end of each year remains vital, Zimmerman shed light on their resolute focus on the long-term health of the business. Balancing short-term imperatives with prudent long-term planning substantiates their vision for sustained performance.

Brian Witherow on Dynamic Pricing Strategies

In response to inquiries about the adjustment of ticket pricing and marketing spend in 2023, Richard Zimmerman reiterated their overarching dynamic pricing strategy. This revolves around the perpetual quest to optimize volume and pricing, acknowledging the inherent challenge of striking the perfect balance. The strategic focal points included leveraging market dynamics and consumer behavior to harness revenue streams and maneuvering through various ticket channels and markets to calibrate pricing strategies effectively.

Brian Witherow on Cost Control and Operational Efficiency

With regard to cost outlook and standalone expenses, Brian Witherow exhibited robust confidence in their cost-saving initiatives. The strategic optimization to concentrate attendance within a shorter operating span signified a pivotal move toward operational efficiency and financial prudence. Notably, the identification of 45 million in savings underscored the company’s steadfast commitment to scaling down expenses, fostering a favorable EBITDA outlook.

The interactive earnings call transcended the financial jargon and entrenched analytics, offering insights into the intrinsic dynamics underpinning the amusement park industry. As the industry navigates the complexities of consumer sentiment, market volatility, and operational agility, astute responses from industry leaders exemplify the pragmatic grit that shapes their resilient outlook.

Conversing through the lens of core business strategies, financial maneuvering, and the relentless pursuit of operational efficiencies, the industry’s resilience amid uncertain times comes to the fore. The evocative narrative encapsulated within the earnings call offers a rare glimpse into the strategic mosaic that underpins the amusement park business, encapsulating industry realities that transcend traditional financial metrics and forecasts.

Revolutionizing Operations to Bolster Profitability

Adapting to the Ever-Changing Landscape

Rising to the challenge of restructuring operations, many amusement park companies have shifted their focus to optimize program planning to mitigate the impact of seasonal labor dependence – a strategy aimed at curbing the largest single cost. This ambitious reprogramming endeavor contributes to a comprehensive overhaul of the operating calendar, designed to structurally reduce overhead costs, in line with fortifying steadfastness against variable operating expenses.

Weathering the Storm and Cycling Through Volatility

Saddled with a bifurcation in consumer behavior earlier this year, amusement park heavyweight Six Flags Entertainment Corporation contended with Midwest robustness and California fragility. The assessment of this disparity between regional resilience and vulnerability indicates a melange of weather-driven factors and regional price sensitivity. The inaugural phase of season pass sales, with a strategized lower pricing tier, was intended to galvanize in-park spending strength. Despite this, a discernible dip in food and beverage revenue per guest year-over-year is noteworthy. The pivotal role of pricing strategies in tandem with consumer trends is instrumental in navigating through, and ultimately conquering, turnabouts in market dynamics.

Strategic Insights and Capital Investment

Reflecting on the consumer marketplace in California, President and Chief Executive Officer Richard Zimmerman acknowledged early weather-induced consumer inertia, which trended towards a transformative revamp in the latter half of the year. Emphasizing a historically resolute consumer landscape, Zimmerman expatiated on the symbiotic relationship between incorporating enthralling capital investments, such as the much-anticipated Top Thrill 2, and buoyancy in park attendance. The resurgence to a time-honored playbook is predicated on leveraging urbane investments to augment both footfall and in-park spending, thereby wielding a semblance of authority in gate pricing.

Looking Ahead: An Overview of Capex on the Horizon

In response to inquiries about the forthcoming merger, the company’s stand-alone capex outlook for the future endeavors oscillates between 210 and 220, indicative of astute fiscal planning. Furthermore, highlighting a comparable projection for the full year of 2023, the company’s astuteness in financial projections underscores a meticulous attention to detail and strategic dexterity. The meticulousness in forecasting and setting the tone for the forthcoming endeavors epitomizes unwavering stewardship in financial governance.

Financial Decisions Incremental Cost Savings at Amusement Park Company

Optimizing Financial Decisions to Maximize Returns in the Amusement Park Industry

Executive Insights into Variable Costs and Revenue Potential

Industry Leader Brian Witherow, the Executive Vice President and Chief Financial Officer, reflected on the delicate balance between adapting to fluctuating demand levels and optimizing variable costs to enhance guest experiences while driving revenues. Witherow emphasized that some of the cost reductions implemented were in direct response to adjusting variable costs to the demand levels witnessed in previous quarters. While higher demand levels may warrant re-inclusion of certain costs, there are also permanent savings attributed to adjustments made in park operating calendars and programming. Moreover, the executive highlighted the significant impact of variable costs, particularly in Q3, emphasizing the company’s ability to yield substantial savings during this period.

Strategic Considerations for Fixed-Cost Base

President and Chief Executive Officer Richard Zimmerman shed light on the organization’s strategic approach, emphasizing that the first and second quarters require a more fixed-cost base, especially at the park level. Additional caution is exercised during the fixed offseason, with a focus on managing thin cost bases to ensure preparedness for the seasonal opening of parks in the spring.

Operational Adjustments and Revenue Implications

Zimmerman further delved into the organization’s plan to adjust park operating days to concentrate attendance into fewer days. Addressing potential risks and inhibitions, he emphasized the revenue implications of stripping out shorter length-of-stay days, expressing confidence in driving attendance within the optimized operating calendar. With a focus on scalability and flexibility, Zimmerman highlighted the company’s ability to drive per capita revenues even on peak days, leveraging its operational capabilities to optimize guest experiences and revenue generation.

Market Response to Demand Variations and Operational Flexibility

During the discussion, Witherow reiterated the importance of remaining nimble and flexible in response to market evolution, including weather impact and demand fluctuations. The emphasis was on adapting operating hours and days in response to external factors while maintaining a proactive approach toward meeting market demands effectively.

Exploring Ancillary Revenue Streams

Witherow also touched upon potential strategies to attach ancillary pre-sale options to season pass products, outlining the possibility of driving built-in revenue while encouraging park visitation through incentivized discounts. The strategic approach would aim to create additional value for guests while contributing to enhanced revenue generation for the organization.

The Rollercoaster Ride of Cedar Fair (FUN): A Look into Q4 2023 Earnings Call

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Unveiling Resilience: Q4 2023 Earnings Call Insights