Cedar Fair revenue and attendance down slightly in 2023
Posted
From the press release:
SANDUSKY, Ohio--(BUSINESS WIRE)-- Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced its 2023 fourth-quarter and full-year results, ended Dec. 31, 2023.
2023 Fourth-Quarter Highlights
- Net revenues totaled a record $371 million, an increase of 1%, or $5 million, compared with Q4-2022.
- The Company recorded a net loss of $10 million compared with net income of $12 million in Q4-2022. The decrease was due primarily to $17 million of transaction costs related to the proposed merger with Six Flags.
- Adjusted EBITDA(1) totaled $89 million, an increase of 1%, or $1 million, compared with Q4-2022.
- Attendance totaled a record 5.8 million guests, an increase of 9%, or 466,000 guests compared with Q4-2022. The increase in attendance was primarily attributable to increased season pass visits resulting from the strong start to the 2024 sales program.
- In-park per capita spending(2) was $58.61, a decrease of 7% compared with Q4-2022. The decrease was primarily due to a shift in attendance mix to lower-priced ticketing channels and higher attendance levels.
- Out-of-park revenues(2) were a record $43 million, an increase of 7%, or $3 million, compared with Q4-2022.
2023 Full-Year Highlights
- Net revenues totaled $1.80 billion compared with $1.82 billion in 2022.
- Net income was $125 million, a decrease of $183 million from 2022, primarily the result of a $155 million prior year gain recognized on the sale of the land at California’s Great America and $22 million of transaction costs in 2023 related to the proposed merger with Six Flags.
- Adjusted EBITDA was $528 million compared with $552 million in 2022.
- Attendance totaled 26.7 million guests compared with 26.9 million guests in 2022.
- In-park per capita spending was $61.05, a decline of 1% compared with 2022.
- Out-of-park revenues were a record $223 million, an increase of $10 million, or 5% compared with 2022.
Balance Sheet and Capital Allocation Highlights
- On Dec. 31, 2023, net debt(3) totaled $2.2 billion, calculated as total debt before debt issuance costs of $2.3 billion less cash and cash equivalents of $65 million.
- Cedar Fair’s Board of Directors today declared a cash distribution of $0.30 per limited partner (LP) unit, payable on March 20, 2024, to unitholders of record on March 6, 2024.
CEO Commentary
“With the return to more normal operating conditions in the back half of 2023, the strength and resiliency of Cedar Fair’s business model was on full display,” said Cedar Fair CEO Richard Zimmerman. “We remained nimble and successfully adapted to an evolving marketplace to offset the effects of anomalous macro-factors, including weather, on demand during the first half of the year. In the second half of the year, in addition to more normalized operating conditions, we made mid-year adjustments to our marketing and pricing strategies that successfully drove increased demand while our park teams effectively implemented cost-saving measures to expand operating margins.”
“In addition to our outstanding performance over the second half of the year and record fourth quarter results, I’m encouraged by the pace of our long-lead indicators heading into the 2024 season, particularly sales of season passes and related all-season, add-on products,” added Zimmerman. “With unit sales of season passes through January up approximately 20% versus last year, we expect season pass sales to serve as a tailwind for attendance and revenues all season long.”
Commenting on the proposed merger with Six Flags, Zimmerman concluded, “Since announcing the proposed merger transaction in early November, we have been pleased by the strong support we have heard from unitholders and others in the investor community. We look forward to completing our combination with Six Flags and delivering on the compelling value creation opportunities ahead, which we believe are greater than what either company can achieve independently. Cedar Fair and Six Flags continue to work constructively with the DOJ in its review of the merger and continue to expect it will be completed in the first half of 2024. We look forward to capitalizing on the opportunities ahead for the combined company.”
2023 Full-Year Results
Operating days in 2023 totaled 2,365 compared to 2,302 in 2022.
For the year ended Dec. 31, 2023, net revenues totaled $1.80 billion on attendance of 26.7 million guests, compared with net revenues of $1.82 billion on attendance of 26.9 million guests in 2022. The decrease in net revenues reflects the impact of a 1%, or 247,000, decline in attendance and a 1%, or $0.60, decrease in in-park per capita spending, offset in part by a 5%, or $10 million, increase in out-of-park revenues. The decline in attendance was attributable to a year-over-year decrease in season pass sales and lower demand during the first half of the year due to inclement weather. The decrease in in-park per capita spending was attributable to a decrease in admissions spending, reflecting a mid-year reassessment of pricing strategy at several key parks, as well as the recovery of lower-priced attendance channels over the second half of the year. The decrease in admission spending was partially offset by higher levels of guest spending on food and beverage, as continued investments in food and beverage offerings led to increases in both the number of transactions per guest and the average transaction value. The increase in out-of-park revenues reflects the strong performance of the Company’s resort properties, highlighted by full-year operations of Castaway Bay Resort and Sawmill Creek Resort at Cedar Point following temporary closures for renovations during 2022.
Operating costs and expenses for 2023 totaled $1.32 billion compared with $1.29 billion for 2022. The approximate $27 million year-over-year increase was primarily attributable to $22 million of transaction costs related to the proposed merger with Six Flags, which are classified as SG&A expenses. Excluding the merger-related costs, operating costs and expenses for the year increased $5 million, or less than 1%, the result of a $14 million increase in SG&A expenses partially offset by a $4 million decrease in cost of goods sold and a $4 million decrease in operating expenses. The decrease in operating expenses was primarily due to cost savings initiatives resulting in a reduction in seasonal labor hours and less in-park entertainment costs. These cost-savings were somewhat offset by six incremental months of land lease costs at California's Great America, higher early-season maintenance wage costs at several parks, and increased insurance claims and related costs. Excluding the merger-related costs, the increase in SG&A expenses was primarily attributable to higher planned advertising costs in 2023.
Depreciation and amortization expense in 2023 totaled $158 million, up $5 million over the prior year, due to the reduction of the estimated useful lives of the long-lived assets at California's Great America following the sale-leaseback of the land at California's Great America. During 2023, the Company also reported a loss on impairment/retirement of fixed assets of approximately $18 million, compared with a $10 million loss in the prior year.
After the items noted above and a $155 million gain on the sale of the land at California's Great America in 2022, operating income for 2023 totaled $306 million, compared to operating income of $520 million for 2022.
Interest expense for 2023 totaled $142 million, a decrease of $10 million compared with 2022, the result of the repayment of the Company’s senior secured term loan facility and related termination of interest rate swap agreements during 2022. The reduction in interest expense was partially offset by interest on additional borrowings on the Company’s revolving credit facility in 2023. Prior to the termination of the Company’s interest rate swaps, the net effect of the swaps resulted in a $26 million net benefit to earnings for 2022. Finally, during 2023, Cedar Fair recognized a $6 million net benefit to earnings for foreign currency gains and losses compared with a $24 million net charge to earnings for 2022. Both amounts primarily represented the remeasurement of U.S.-dollar denominated notes to the functional currency of the Company’s Canadian entity.
Accounting for the items above, and after a $16 million decrease in the provision for taxes driven by the sale of the land at California’s Great America, net income for 2023 totaled $125 million, or $2.42 per diluted L.P. unit. This compares with net income of $308 million, or $5.45 per diluted LP unit, for 2022.
Adjusted EBITDA, which management believes is a meaningful measure of the Company’s park-level operating results, totaled $528 million in 2023, compared to Adjusted EBITDA of $552 million for 2022. The $24 million decrease in Adjusted EBITDA was primarily attributable to a decrease in net revenues driven by a decline in attendance caused by extreme weather during the first six months of 2023, and to a lesser extent by higher advertising, land lease and insurance related costs.
See the attached table for a reconciliation of net income to Adjusted EBITDA.
Balance Sheet and Liquidity Highlights
Deferred revenues on Dec. 31, 2023, including non-current deferred revenue, totaled $192 million, compared with $173 million of deferred revenues on Dec. 31, 2022. The $19 million increase was due to strong sales of advance purchase products, including season passes and related all-season add-on products.
As of Dec. 31, 2023, the Company had cash on hand of $65 million and $280 million available under its revolving credit facility, for total liquidity of $345 million. This compares to $381 million of total liquidity at the end of 2022. Net debt on Dec. 31, 2023, calculated as total debt of $2.3 billion (before debt issuance costs) less cash and cash equivalents of $65 million, was $2.2 billion.
Distribution and Unit Repurchases
Today the Company announced the Cedar Fair Board of Directors has approved a quarterly cash distribution of $0.30 per LP unit, to be paid on March 20, 2024, to unitholders of record on March 6, 2024.
During 2023, the Company repurchased approximately 1.7 million limited partnership units at a total cost of approximately $75 million – representing approximately 3% of its total units outstanding at the beginning of 2023.
They're doing an awful lot of celebrating in this release for a year that is mostly moving in the wrong direction outside of EBITDA. Lower attendance on more operating days isn't good. Decreased per capita spending and less revenue when consumer spending (and inflation) is up isn't a good look either. This part is exactly the thing that us armchair park executives predicted, emphasis mine:
In-park per capita spending was $58.61, a decrease of 7% compared with Q4-2022. The decrease was primarily due to a shift in attendance mix to lower-priced ticketing channels and higher attendance levels.
But hooking up with Six Flags, that'll fix everything.
Jeff - Editor - CoasterBuzz.com - My Blog
Hey I got another bright idea to fix attendance, lets cancel all the live E and cut down on staffing even further. That should fix our attendance slippage.
Can I get my bonus now?
I had the same reaction re: lower attendance vs higher operating days: Not Great, Bob.
Management indicated that lower attendance was due to decreased year over year pass sales and bad weather in first half of the year. Don't remember what the weather was like early last year but do recall parks noting that was an issue in the first half of the year. And ultimately, the success of the parks in very dependent on weather (which is out of management's control).
Many here think Cedar Fair is giving away its gate and should increase its pass prices. That would be expected to decrease the number of passes purchased which, given what they said happened in 2023, would further decrease attendance.
As the percentage of guests visiting under passes (both for admission and food) increases, the significant of attendance numbers decreases.
People here also want the parks to increase staffing for more live entertainment, faster throughput in lines (for food/rides), etc. With either increasing prices or seeing increases in attendance (which results in higher revenues not just increased number of people through the gates), your profits decrease.
You can increase your prices (though your average CF guest is more price sensitive than your average Disney/Universal guest) with the goal of increasing profits (revenues you lose from people who are priced out outweighed by revenues of people you gain). But what if those gains do not materialize (at all or at sufficient levels to offset the losses)?
Ultimately, I think the challenges facing Cedar Fair are more complicated and nuanced than many here paint them to be.
Zimmerman is nothing more than a smoke blower. He’s full of crap in this press release. How someone as competent as Ouimet could have put a guy like this in charge boggles the mind. I wonder how long the tenured Cedar Fair folks will hold on before bailing once this merger proves to be an absolute disaster.
I have to also wonder if some of the shift is also due to summer being shorter for the areas where Cedar Fair parks are at. Ohio schools now start in Mid August. Same for most Virginia schools and schools in NC. But, at least with Cedar Point, I'm not seeing the shift to the park being fully up and ready earlier.
In the 90's when I was in college, we routinely went to Cedar Point the last day of our exam week. Park was fully running 10am to 10pm. This was mid May. But I don't think those days are happening now.
I don't mind the attendance declines. Handling less guests - who pay more - is the winning Disney formula. And FUN has leaned into increasing per caps, particularly with F&B and to a lesser extent merchandise, since the Ouimet days. What is odd to me is Zimmerman talking up the Q3 and Q4 performance - going so far as to say:
"With the return to more normal operating conditions in the back half of 2023, the strength and resiliency of Cedar Fair’s business model was on full display.... our outstanding performance over the second half of the year and record fourth quarter results"
In Q4, revenue was up 1%, EBITDA up 1%, attendance up 9%.... but per-capita spending down 7% and net income down 41% (and that decrease is calculated removing the SIX merger costs) .... that is an outstanding and record-setting performance?
Gunkey Monkey:
Zimmerman is nothing more than a smoke blower. He’s full of crap in this press release. How someone as competent as Ouimet could have put a guy like this in charge boggles the mind. I wonder how long the tenured Cedar Fair folks will hold on before bailing once this merger proves to be an absolute disaster.
There are very few tenured Cedar Fair folks left. Zimmerman and Fisher let go most of the legacy Cedar Fair and Ouimet era executives. The main remaining one is the CFO, Brian Witherow. The 2 regional VPs are both Paramount people and of the 11 park GMs, 6 are Paramount folks, 3 are legacy Cedar Fair and 2 are Disney from the Ouimet era. I am curious how long some of the marketing/sales senior level people stay after Zimmerman fired Kelley Ford, the former CMO, and replaced with Bob White, a former Paramount and Village Roadshow guy - as much of that team was brought on in the Ouimet era.
Reference was to record 4th quarter results. Net revenues for 4th quarter were a record. Out of park revenues for the quarter were a record. Attendance for the quarter was a record. How many records are needed to justify saying it was a record quarter?
Earnings calls tend to be more PR statements and spin than they are substance/hard looks within. And analysts rarely ask any challenging questions. Very friendly with management.
GoBucks89:
decreased year over year pass sales
So I'm trying to square that with "unfavorable attendance mix." I can think of two reasons. One: day-ticket guests dropped by an even larger percentage. Two: group sales have rebounded.
IMO, recovering group sales is a good thing.
GoBucks89:
Ultimately, I think the challenges facing Cedar Fair are more complicated and nuanced than many here paint them to be.
Maybe, but everything that you're describing is transactional, which is the lens they're using. I think a lot of us are saying that view is wrong. You can charge more, spend more, and in the process sell something worth paying more for. I read an article the other day about experiential spending not backing off post-pandemic the way analysts expected. What other business has roller coasters and 360° escapism?
And it's worth mentioning that Q4 as a percentage of the year's business is not huge.
Jeff - Editor - CoasterBuzz.com - My Blog
Brian Noble:
So I'm trying to square that with "unfavorable attendance mix." I can think of two reasons. One: day-ticket guests dropped by an even larger percentage. Two: group sales have rebounded.
In the Q&A portion of the earnings call, there was this on group sales:
Just a quick one on group. I know coming to the year, you were missing 1.4 million group visits versus 2019. Anyway you can frame up kind of where we exited the year and what you think you can get further back in 2024?
Yeah, we -- Robert, it's Richard. You know, we're very encouraged by what we saw over the last six months. We saw a strengthening in the group channels. And now, as we look forward, you know, while we said in our prepared remarks, group is in line with expectations, we're seeing what we would expect to see our expectations another year out from the pandemic.
If you go all the way back to 2008, 2009, took us about three years to recoup the group. So, the slowest channel to come back. But we saw companies booking. We saw youth group bookings.
And the second half looking really good. And we're still seeing that trend as we would expect to see coming out of a macro disruption. So, I've got -- I'm very encouraged by what we're seeing with our group channels, understanding that, you know, we did filter out some of the lower-priced, more demand-oriented channels through groups. But when we look at what is rep-driven, what is specific day, both in the youth and the corporate sector, I'm very encouraged right now.
So, group sales have rebounded. And in terms of just attendance (not necessarily profits, revenues, etc), each reduced pass sale results in some multiple in terms of fewer visits.
There is a lot of discussion about their views on pricing in the Q&A portion. They are planning to reduce operating days in 2024 by 112 days looking to concentrate attendance and improve operating efficiency. Stated that reduced operating days will be primarily in first 2 quarters of the year, most notably at small to mid-tier parks. There was discussion about whether attendance would get back to 2019 levels. And an expectation (in a nod to many a discussions here) that the concentration of attendance would drive increased Fast Lane demand.
This company has absolutely no plan to grow financially . They are maintaining margins with cost cutting which in turn negatively will affect attendance. It’s bad investment currently.
Growth requires investment that actually improves the customer experience, and I don’t believe they’re capable of that right now
I don’t care who laughs at me for this comment. But it’s absolutely HILARIOUS but they like to blame Weather for their low attendance when their policy at many parks is to close the entire park if attendance is low and the weather isn’t perfect. They have basically told people to stay away from the park if there’s any bad weather.
Lots and lots (and lots) of talk in the Q&A about reduction of entertainment costs in the parks and "re-programming" how the parks are staffed --- looks like Tim Fisher's gutting of live entertainment and guest experience is here to stay. Frankly, I am surprised they so boldly and repeatedly called out gutting entertainment costs in the parks - as Live E is such major component of the guest experience at the largest parks.
They have decided to limit themselves to two kinds of customers. Thrill seekers and kiddies.
Cedar Fair is going more toward the Six Flags direction. Cheap season passes and meal plans plus attractions only for those 2 markets. We’ve seen how well that’s worked out for Six Flags over the years
Meanwhile the majority of people probably don’t fall into those 2 categories.
Their operating schedule will never grow if those are the only two target markets, because school season comes in to play What a waste to have billions of dollars a facilities, sit empty, and earn no revenue, a majority of the days of the year
Their stock is a bad investment with the current management.
super7*:
But it’s absolutely HILARIOUS but they like to blame Weather for their low attendance when their policy at many parks is to close the entire park if attendance is low and the weather isn’t perfect. They have basically told people to stay away from the park if there’s any bad weather.
In addition to closing all the coasters if someone within five miles feels a droplet of mist.
TheMillenniumRider:
In addition to closing all the coasters if someone within five miles feels a droplet of mist.
I thought that was just Cedar Point. And they were already doing that back in at the end of the Kinzel era when Bill Spehn was still in charge of operations. I feel like that one is more overreaction and for show after the 2007 Magnum train bump rather than for any cost savings.
I have a feeling that's more about lightning and severe weather than anything else. I went on a cold and rainy Thursday night during Halloweekends and the coasters were running. I made myself sick riding Steal Vengeance that night.
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