From the capital allocation press release:
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced its Board of Directors has approved an updated capital allocation strategy, highlighted by the declaration of a cash distribution of $0.30 per limited partner (LP) unit and the authorization of a $250 million unit repurchase program.
- The distribution is payable on September 15, 2022, to unitholders of record as of August 31, 2022.
- The repurchase program authorizes the Company to make unit purchases in the open market, or through privately negotiated transactions, up to $250 million.
From the 2022Q2 results press release:
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced results for its second quarter ended June 26, 2022, and provided preliminary results and operating trends through July 31, 2022.
Separately today the Company announced its updated capital allocation strategy, including the declaration of a cash distribution of $0.30 per limited partner (LP) unit payable on Sept. 15, 2022, to unitholders of record as of Aug. 31, 2022, and the Board’s authorization to repurchase up to $250 million of Cedar Fair units.
Cedar Fair President and CEO Richard Zimmerman, said, “The strength and pace of our recovery post-pandemic, supported by our strong first-half operational performance, has allowed us to deliver strong financial results and advance our key strategic priorities. Since resuming full-park operations, we have generated significant free cash flow that has allowed us to pay down the equivalent of 75% of the debt we incurred during the pandemic, continue to reinvest in our parks and resort properties to further enhance the guest experience, and put in place a capital allocation strategy focused on returning capital to unitholders. This includes reinstating our distribution in the third quarter of 2022 and establishing a new unit repurchase program to opportunistically buy back units of Cedar Fair.”
Second Quarter 2022 Highlights
- Net revenues totaled a record $509 million, an increase of $285 million from the second quarter of 2021. Compared to the second quarter of 2019, net revenues increased by $73 million, or 17%.
- Net income was $51 million, an increase of $110 million from the second quarter of 2021. Compared to the second quarter of 2019, net income decreased by $13 million.
- Adjusted EBITDA totaled $171 million, an increase of $169 million from the second quarter of 2021. Compared to the second quarter of 2019, Adjusted EBITDA increased by $7 million, or 5%.
- Attendance totaled 7.8 million guests, an increase of 4.4 million guests from the second quarter of 2021. Compared to the second quarter of 2019, attendance declined by 654,000 guests, or 8%.
- In-park per capita spending was a record $59.52, a 6% increase from the second quarter of 2021. Compared to the second quarter of 2019, in-park per capita spending increased 26%, driven by double-digit percentage increases across all key revenue categories.
- Out-of-park revenues were a record $60 million, representing a $19 million increase from the second quarter of 2021. Compared to the second quarter of 2019, out-of-park revenues increased by $10 million, or 21%.
First Seven Months 2022 Highlights
- For the seven-month period ended July 31, 2022, preliminary net revenues totaled a record $1.03 billion, an increase of $441 million from the comparable seven-month period in 2021. Compared to the seven-month period ended Aug. 4, 2019, net revenues increased by $152 million, or 17%.
- Attendance for the first seven months of the year totaled 15.4 million guests, an increase of 6.8 million guests from the comparable period in 2021. Compared to the same seven-month period in 2019, attendance declined by 1.0 million guests, or 6%.
- In-park per capita spending for the seven months was a record $60.76, a 2% increase from the comparable seven-month period in 2021. Compared to the first seven months of 2019, in-park per capita spending increased 25%.
- Out-of-park revenues for the seven-month period were a record $125 million, a $33 million increase from the comparable period in 2021. Compared to same seven-month period in 2019, out-of-park revenues increased by $20 million, or 19%
- Through the end of July, sales of 2022 season passes totaled a record 3.2 million units, while sales of all-season products, including all-season dining and all-season beverage, continued to pace well ahead of the previous record established for the sale of season pass add-on products.
“While demand for our parks is foundational to our success, one of our primary objectives is to drive revenue growth by optimizing both attendance and guest spending levels,” said Zimmerman. “By strategically investing in our business and broadly elevating the guest experience, we have achieved new highs for in-park per capita spending and out-of-park revenues, resulting in record net revenues through the first seven months of the year.”
Zimmerman concluded, “With the momentum we’ve established over the first half of the year, combined with more than three million season passes in the hands of our guests for the first time ever and strong occupancy trends at our resort properties, we are well positioned for a solid finish to the year. Our strong performance over the trailing 12 months gives us the financial strength and flexibility to expedite our strategic priorities and significantly strengthen the core of our enterprise. Although we have more to accomplish, we are well on our way to putting the effects of the pandemic fully behind us and aggressively pursuing the next level of value creation for our guests, associates, communities, and investors.”
Results for Second Quarter 2022 Compared with Second Quarter 2021
Given the material impact the coronavirus pandemic had on park operations in 2021, results for the second quarter of 2022 are not directly comparable to the second quarter of 2021. In the prior period, the Company postponed the opening of its parks to May 2021, when all parks opened except for the Company’s Canadian property, Canada’s Wonderland, which opened in July 2021. As a result, the Company’s parks had 708 total operating days during the second quarter of 2022 compared with 393 total operating days in the second quarter of 2021.
For the second quarter ended June 26, 2022, net revenues totaled $509 million versus $224 million for the second quarter of 2021. The increase in net revenues was attributable to a 315 operating day increase in the period, resulting in a 4.4 million visit increase in attendance and a $19 million increase in out-of-park revenues. In-park per capita spending in the 2022 second quarter totaled a record $59.52, driven by increases in guest spending, particularly for admissions and food and beverage.
Operating income and net income for the second quarter of 2022 benefited from the 315 operating-day increase in the current period and the related improvement in attendance and revenues. These increases were offset in part by higher operating costs in the current period, the result of higher labor rates and an increase in variable operating costs. For the second quarter, operating income totaled $112 million, compared with an operating loss of $38 million in the second quarter of 2021. Net income for the second quarter totaled $51 million, or $0.89 per diluted L.P. unit, which compares with a net loss of $59 million, or $1.04 per diluted LP unit, for the comparable period last year.
Results for Second Quarter 2022 Compared with Second Quarter 2019
Given the material impact the coronavirus pandemic had on park operations in 2020 and 2021, results for the second quarter of 2022 are not directly comparable to the second quarters of the last two years. To provide more informative comparisons, the Company has provided a comparison of its financial results for the three months ended June 26, 2022, to the three months ended June 30, 2019.
During the second quarter of 2022, the Company’s parks had 708 total operating days compared with 726 total operating days in the second quarter of 2019. Of the 708 current period operating days, 96 operating days were at the two Schlitterbahn parks, which were acquired on July 1, 2019. Excluding the Schlitterbahn parks, operating days for the three-month period decreased 114 days compared to the second quarter of 2019, due to a four-day calendar shift and the planned removal of certain early-season operating days at several of the Company’s parks.
In the second quarter of 2022, the Company entertained 7.8 million guests and generated net revenues of $509 million, representing a 17%, or $73 million, increase compared to the second quarter of 2019. The increase in net revenues was the result of a 26%, or $12.30, increase in in-park per capita spending, a 21%, or $10 million, increase in out-of-park revenues, and the inclusion of the Schlitterbahn parks in the current period. These increases were offset in part by an 8%, or 654,000-visit decline in attendance. The increase in in-park per capita spending was driven by higher levels of guest spending across all key revenue categories. In particular, spending on admissions, food and beverage, and extra-charge attractions was up meaningfully, driven by both higher pricing and increased transaction counts. The increase in out-of-park revenues was primarily attributable to an increase in online customer transaction fees, the inclusion of revenues from the Resort at Schlitterbahn New Braunfels, and increased revenues at the Cedar Point resort properties. The decline in attendance was driven by the 114 fewer operating days at the Company’s legacy parks (excluding the Schlitterbahn parks) during the period, an expected slower recovery within the group sales channel, and the strategic elimination of several low-value ticket programs. Despite the recovery shortfall in group business and the discontinuation of certain low-value ticketing programs, same-park attendance per operating day was up 3% in the second quarter of 2022 versus the comparable period in 2019, reflecting the impact of strong demand trends within the season pass channel.
Operating costs and expenses in the second quarter increased to $347 million, up $70 million compared with the second quarter of 2019. The increase was the result of a $9 million increase in cost of goods sold, a $55 million increase in operating expenses, and a $6 million increase in SG&A expense. Despite inflationary cost pressures, cost of goods sold as a percentage of food, merchandise and games revenue increased only 1% from 2019 levels. The increase in operating costs was largely attributable to an increase in seasonal labor costs driven by higher rates, higher full-time wages primarily related to planned increases in head count at select parks, and the inclusion of the operations of the Schlitterbahn parks. The increase in SG&A expense was primarily due to an increase in full-time wages, including higher incentive plan expense, as well as higher transaction fees. These increases were offset by a decline in advertising costs, the result of a strategic pivot to more efficient and flexible digital advertising.
Depreciation and amortization expense for the second quarter decreased $7 million from the comparable period in 2019, due primarily to the full depreciation of certain property and equipment from the Company’s 2006 acquisition of the Paramount Parks. A loss on impairment/retirement of fixed assets of approximately $1 million was recorded in both the current and prior-year periods, the result of the retirement of assets in the normal course of business. Including the items noted above, the Company’s operating income for the second quarter of 2022 totaled $112 million, up $10 million, or 10%, compared to the second quarter of 2019.
Interest expense for the second quarter totaled $40 million, an increase of $17 million from the second quarter of 2019. The increase in interest expense was due to incremental interest incurred on the Company’s 2025 and 2028 senior notes issued in 2020 in response to the pandemic and the 2029 senior notes issued in the second quarter of 2019 in coordination of the Schlitterbahn acquisition, offset in part by the early redemption of the 2024 senior notes in December 2021. The net effect of the Company’s swaps resulted in an $8 million benefit to earnings during the second quarter of 2022, compared with an $11 million charge to earnings in the second quarter of 2019. The difference reflects the change in fair market value movement in the Company’s swap portfolio. During the current quarter, the Company recognized a $10 million net charge to earnings for foreign currency gains and losses related to the remeasurement of U.S. dollar denominated debt to the Canadian entity’s functional currency, compared with a $9 million net benefit to earnings in comparable period in 2019.
For the second quarter, a $19 million provision for taxes was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes, compared to a provision for taxes of $15 million in the second quarter of 2019. The difference in provision for taxes in the second quarter was attributable to an increase in pretax income from the Company’s taxable subsidiaries versus the comparable period in 2019.
Accounting for the items above, net income for the second quarter totaled $51 million, or $0.89 per diluted L.P. unit, which compares with net income of $63 million, or $1.11 per diluted LP unit, for the second quarter of 2019.
Adjusted EBITDA, which management believes is a meaningful measure of the Company’s park-level operating results, totaled $171 million in the second quarter, representing an increase of $7 million, or 5%, compared with the second quarter of 2019. The increase is the result of higher in-park per capita spending, increased out-of-park revenues, and the inclusion of the Schlitterbahn parks, offset in part by higher operating costs in the current period, particularly higher labor costs.
First Seven Months 2022 Results
Given the material impact the coronavirus pandemic had on park operations in 2020 and 2021, the Company has provided a comparison of its preliminary financial results for the seven months ended July 31, 2022 compared with the seven months ended Aug. 4, 2019.
For the seven-month period ended July 31, 2022, the Company entertained 15.4 million guests, representing a decrease of 6%, or 1.0 million visits, and generated preliminary net revenues of $1.03 billion, representing an increase of 17%, or $152 million, compared to the seven-month period ended Aug. 4, 2019. Over this same period, in-park per capita spending was $60.76, up 25% from 2019 levels, and out-of-park revenues totaled $125 million, up $20 million, or 19% from the same period in 2019. Operating days for the seven-month periods in 2022 and 2019, totaled 1,362 days and 1,352 days, respectively. This includes 94 fewer operating days at the Company’s legacy parks during the current seven-month period, due to a natural calendar shift with the comparable period in 2019 and the planned removal of early-season operating days at several of the Company’s parks.
Balance Sheet and Liquidity Update
Deferred revenues as of June 26, 2022, including non-current deferred revenue, totaled $307 million, representing an increase of $73 million, or 31%, from the end of the first quarter of 2022, and an increase of $15 million, or 5%, when compared to deferred revenues as of June 27, 2021. On June 26, 2022, the Company had cash on hand of $125 million and $194 million available under its revolving credit facility, net of $16 million of letters of credit, for total liquidity of $319 million. This compares to $284 million of total liquidity on March 27, 2022. Net debt as of June 27, 2022, was $2.5 billion, calculated as total debt of $2.6 billion less cash and cash equivalents of $125 million.
Those of us who armchair the company have a lot to digest, because the math is so weird. An 8% decline in attendance with a 26% increase in per capita spending represents a pretty serious change in strategy. That's a crazy swing. It also implies that there's at least some gate integrity, despite many of us thinking admission and passes are too cheap, or, because of the decline in attendance, the passholders do not account for a serious percentage of visits.
Regardless of the underlying reason, I'm deeply concerned about the inconsistent at best operations and how they will affect attendance going forward. If a day at the park costs more and half the rides are closed or you're waiting in line for long periods of time, you're not wiring people for return visits the next year. I'm sure unit holders are happy to have the distribution back though.
Time will tell how well this strategy pans out. I've done three of the CF parks this year and I will say I've been enjoying the parks more with fewer people inside the gate. While CP's operations have been pretty dreadful compared to what I grew up with, the ability to move people through higher quality food has gotten me to spend a bit more. But how long will others continue to use the parks as a night out to eat? And how long will it take for people to reevaluate the Gold Pass?
Sounds like a pretty good investment at this moment.
I am not a fan of the Cedar Point pass pricing strategy (at all) but would it kill the armchair quarterbacks to eat some humble pie and admit maybe they got this one wrong?
Again, not defending the $99 Cedar Point/Shores Gold Pass at all... but when they announced it 3 years ago, the armchair quarterbacks were apoplectic that Cedar Fair was turning into Six Flags 2.0
No one would have believed that strategy turned into a 17% revenue increase fueled by an 8% attendance drop and 26% per capita spending increase. That's the definition of a premium experience for less people.
I've said it all along, Cedar Fair's issue is not driving top-line numbers - it's driving EBITDA. Frankly, it was a problem during the Ouimet era as well (although there were a lot of infrastructure - particularly technology and people - "investments" he had to make following the Kinzel era). But to drive revenue 17% and EBITDA only 5% isn't great ..... especially with the reality of how insanely bloated Tim Fisher's strategy of moving people out of the park-level and to Charlotte has made them at the corporate level.
We got the Platinum CF passes for this year at (what I thought was) a good price point. So far, we have visited 4 different parks on 10 different days, with a few more still planned or in the works.
That's $250 I would have had to pay for parking alone... not including admission. We have noticed the crowds are a little down this year. But not that much. In the middle of the day, coasters like Steel Vengeance, Fury, or Diamondback still hover around 1.5 to 2-hour waits. Of course, they are making thousands per day on the Fast Lane passes too.
The more rides they are able to keep open and running means fewer crowds at the food places and restrooms too. I think that's where I've seen the biggest change this year. Almost every time we stand in line for food or drink, it hasn't been terrible. Even though the park is crowded, they are dispersed nicely throughout the various rides and attractions.
There are exceptions though too. On a hot day, the water park is going to be overly crowded with people trying to cool off and things of that nature.
maybe they got this one wrong?
Got what wrong, exactly? We don't know what the pass mix is, or individual park results, so it's impossible to know what is driving the outcomes. But what we've seen in recent years (treating the pandemic as the Marvel "blip"), looks like an extreme version of what went down at Six Flags prior to bankruptcy. To Rob's point, the biggest difference here is the introduction of food that doesn't suck.
It appears the strategy is sustainable, but on two conditions: Operations have to improve, and whatever the pass mix is, it can't drift toward a higher pass visit mix. (We don't know the current mix, but that drift would require substantial increases in spending for that cohort.)
I know attendance is down across the board, but it certainly does NOT feel like that at Cedar Point. It's as busy as I've ever seen it, if not busier, so I don't think we can write off the fact that the lower-priced passes are still packing the park. Just this past Saturday, at 4 PM, there was an hour+ long line of traffic to get down the Causeway, and I heard they were parking people in overflow. We went on Sunday and had a wonderful time, but it was certainly very busy - we parked in 38, and it was parked back to 43 when we left.
Got what wrong exactly?
Oh I don't know --- predicting the demise of Cedar Fair and it becoming nothing more than a cheap Six Flags by giving away the gate, juicing attendance numbers and providing crappy guest experiences to the swarms of people who would come.
You answered it yourself in your second paragraph - "it appears the strategy is sustainable" --- was not the song the armchair quarterbacks were singing over the past 3 years (but rather what was mentioned above).
The Q2 release specifically called out admissions revenue (along with F&B and extra-charge attractions aka Fast Lane) was up "meaningfully" vs 2019 - and that's on 8% dip in actual admissions.
Sometimes it is OK to say - hey, we outside armchair quarterbacks might have gotten this one wrong
I still think they are leaving money on the table at Cedar Point in particular --- but as I mentioned, it's not driving sustainable top line revenue growth that is Cedar Fair's issue --- it's driving meaningful EBITDA and net income growth which has been an issue since the Ouimet era as well. And they aren't going in the right direction on the expense front with Fisher's "corporate" model. People thought it was bad during Kinzel; these GMs have no autonomy now with a huge corporate apparatus hanging over them.
predicting the demise of Cedar Fair
Literally no one suggested that as a possibility, but cool story bro.
I don't understand. Can you convert that distance to Timbers?
Somewhere between mid-timbers and the turnaround
Since they are doing 2019 comparisons, the total inflation rate since then is about 17%. So an increase in EBITDA of 5% dollar wise is actually a 12% loss in that net income……..
They also missed the projected EPS The stock didn’t move much today
The oft quoted rate that I see is 12%, but regardless, that's a good point. In real dollars, they're actually not winning.
I've done three of the CF parks this year and I will say I've been enjoying the parks more with fewer people inside the gate. While CP's operations have been pretty dreadful compared to what I grew up with, the ability to move people through higher quality food has gotten me to spend a bit more.
Good point, and I can relate. Speaking about Cedar Point specifically, we used to be 100% "not eating in the park" (except maybe a pretzel or some other snack) people. We would grab something small in the park and save our appetites for Chet and Matt's or Thirsty Pony, or back in the day we would just tailgate in the parking lot mid-day.
This past season, out of about 5 total days in the park, there wasn't a day when we didn't eat multiple times throughout the day, because of both the quality and the efficiency.
The same was true at Knott's and Kings Island this year.
So our family was certainly a contributor to that rise in spending. And it tasted good.
Promoter of fog.
They've come a long way from Kinzel's "people gotta eat" conference call gaffe. Not to mention the anti-investment in IT.
I've gone to the parks significantly less this year due to gas prices and sadly, family health issues. I think gas prices are effecting people coming from further distances and affecting local hotels, but don't quote me on that. If prices drop a bit, hopefully they will have a stronger end to summer and fall.
Reading the earnings call transcript, one thing that surprised me is the season pass mix actually increased from 2019 - 56% to 62%... and they were still able to drive per cap spending up 26%
Also, Witherow calls out admissions per capita is up 20% from 2019.
The results clearly aren't as bad as all the armchair quarterbacks predicted they'd be --- which I think is partly attributable to the fact we all probably put way too much stock in how much the season pass price at one of their parks (CP) would or would not affect results for the entire company. Looks like they are trending close to $2B in revenue this year...
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