Cedar Fair revenue and attendance down slightly in 2023

Posted | Contributed by Jeff

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.