Cedar Fair revenue up, attendance and EBITDA down compared to Q3 in 2019
Posted
From the press release:
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced results for its third quarter ended Sept. 26, 2021, and more recent performance trends through Oct. 31, 2021.
Highlights
(Note: To offer more informative comparisons, highlights for 2021 below are compared to their respective periods in 2019. During the 2021 third quarter, the parks had 988 operating days compared to 1,035 operating days in the 2019 third quarter.)
- Net revenues for the third quarter ended Sept. 26, 2021, totaled a record $753 million, up 5% from the third quarter of 2019, driven by:
- Attendance that approximated 82% of 2019 third-quarter levels;
- Record in-park per capita spending of $64.26, representing a 29% increase over 2019 third quarter spending levels, with double-digit increases across all key revenue categories; and
- A 9%, or $7 million, increase in out-of-park revenues versus the comparable period in 2019.
- Net income and Adjusted EBITDA(1) for the 2021 third quarter totaled $148 million and $333 million, respectively, compared with $190 million and $355 million, respectively, for the 2019 third quarter.
- For the five-week period ended Oct. 31, 2021, net revenues totaled approximately $219 million, an increase of $65 million, or 42%, from the comparable period in 2019.
- Early sales of 2022 season passes and all-season products are pacing ahead of the then-record pace set in the Fall of 2019 for the sale of 2020 season pass products.
(1) For additional information regarding Adjusted EBITDA, including how the Company defines and uses Adjusted EBITDA, see the attached reconciliation table and related footnotes.
Cedar Fair President and CEO Richard A. Zimmerman, said, “The strong demand and consumer spending trends we previously reported through Labor Day weekend continued in September and October, as our parks hosted their very popular Halloween events. Since the end of the second quarter, revenues have outpaced the record revenues of the comparable 18-week period in 2019 by 12%, or more than $104 million, driven primarily by record levels of guest spending.
“Cedar Fair’s outstanding results clearly reflect the dedication of our incredible team. I couldn’t be prouder of how the team delivered, especially considering the very unique and difficult challenges we’ve overcome. Our talented people are the primary reason our parks and resort properties continue to set the standard for regional, family-focused entertainment.”
Zimmerman continued, “We are also pleased with the early sales of our 2022 season passes and all-season products, which continue to outpace the comparable record sales period in 2019. Early season pass sales have been a reliable leading indicator of the following year’s demand, which bodes well for the 2022 season. Our parks’ quick recovery from the COVID-19 disruption underscores the resiliency of our business model and has unlocked additional strategic options we are evaluating from a position of strength. Based on our positive momentum and outlook, we believe Cedar Fair is well positioned to begin paying down debt in the near future and to reinstate quarterly cash distributions to unitholders by no later than the first quarter of 2023.”
Results of Third Quarter 2021 Compared to Third Quarter 2020
The coronavirus pandemic had a material impact on park operations in both 2021 and 2020. This year, all but one of Cedar Fair’s parks opened for the 2021 season on various dates in May. Canada’s Wonderland, which remained closed through the entire first half of the year due to local COVID-19 restrictions, reopened for the first time on July 5, 2021, under capacity limitations. Last year, full park operations of Knott’s Berry Farm, as well as abbreviated operations of the two Schlitterbahn water parks, had begun prior to the suspension of all park operations on March 14, 2020. The Company was able to resume partial operations at eight of its 13 properties from mid-June through the end of the third quarter in 2020. Given the effects of the coronavirus pandemic and disruption of park operations during the summer of 2020, results for the third quarters of 2021 and 2020 are not directly comparable.
In 2021, operating days in the third quarter totaled 988 compared to 314 in the third quarter of 2020.
For the third quarter ended Sept. 26, 2021, net revenues totaled $753 million versus $87 million for the third quarter of 2020. The increase in net revenues was attributable to a 674 operating day increase in the period, resulting in a 9.5 million visit gain in attendance. In-park per capita spending in the 2021 third quarter totaled a record $64.26, driven by increases in guest spending, particularly for admissions and extra-charge attractions. Out-of-park revenues increased $54 million due to the earlier opening of the parks and resort properties.
Operating costs and expenses in the third quarter of 2021 totaled $424 million, compared with $141 million for the third quarter of 2020. The $283 million increase was due primarily to an increase of operating days during the quarter versus the same period last year, and the related increase in variable operating costs. Depreciation and amortization expense, which is spread over planned operating days, was $77 million in the third quarter of 2021, up $10 million from a year ago due to more planned operating days in the current period. A loss on impairment of goodwill and intangibles of $16 million was recorded during the third quarter of 2020, which was triggered by the anticipated impacts of the COVID-19 pandemic. Including the items noted above, the Company’s operating income for the third quarter totaled $250 million, compared with an operating loss of $137 million in the year ago period.
Interest expense for the third quarter totaled $46 million, up $6 million from the third quarter of 2020, due to incremental interest incurred on the Company’s 2028 senior unsecured notes issued in October 2020. The net effect of the Company’s swaps resulted in a $3 million benefit to earnings during the third quarter of 2021, compared with a $2 million benefit to earnings in the same period a year ago. The difference reflects the change in fair market value movement in the Company’s swap portfolio. During the third quarter, the Company also recognized a $15 million net charge to earnings for foreign currency gains and losses related to its U.S. dollar-denominated Canadian notes, compared with a $10 million net benefit to earnings for the third quarter of 2020.
For the 2021 third quarter, a $44 million provision for taxes was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes, compared to a benefit for taxes totaling $30 million in the third quarter of 2020. The difference in provision for taxes in the current-year period was due to pretax income being reported by taxable subsidiaries, compared with a pretax loss being reported in the prior year period.
Accounting for the items above, net income for the third quarter totaled $148 million, or $2.60 per diluted L.P. unit. This compares with a net loss of $136 million, or loss of $2.41 per diluted LP unit, for the 2020 third quarter.
Adjusted EBITDA, which management believes is a meaningful measure of the Company’s park-level operating results, totaled $333 million in the third quarter, compared to an Adjusted EBITDA loss of $51 million for the third quarter of 2020. The $384 million increase in Adjusted EBITDA reflects the impact of COVID-19-related park closures in 2020, and the increases in attendance, in-park per capita spending, and out-of-park revenues from the reopening of parks in 2021.
Results of Third Quarter 2021 Compared to Third Quarter 2019
As previously noted, given the effects of the coronavirus pandemic and disruption of park operations during the summer of 2020, results for the third quarters of 2021 and 2020 are not directly comparable.
To provide more informative comparisons, the following information compares results for the third quarter of 2021 versus the third quarter of 2019. The parks had 988 total operating days in third quarter of 2021 compared with 1,035 total operating days in the third quarter of 2019.
Despite modified operating calendars and capacity limitations at select parks and 47 fewer operating days in the current period, net revenues for the third quarter totaled $753 million, representing an increase of $39 million compared with the third quarter in 2019. The increase reflected the impact of a 29%, or $14.32, increase in in-park per capita spending and an increase of 9%, or $7 million, in out-of-park revenues during the period, offset in part by an 18%, or 2 million visit decline in attendance. Attendance for the third quarter of 2021 totaled 10.8 million guests, or approximately 82% of third quarter 2019 levels, driven by general admission and season pass attendance, offset in part by an expected slower recovery in group sales attendance and capacity limitations at certain parks, including Canada’s Wonderland.
Operating costs and expenses in the current quarter increased to $424 million, up $55 million from the third quarter of 2019. The increase was the result of a $1 million increase in costs of goods sold, a $46 million increase in operating expenses and an $8 million increase in SG&A expense. Of the $46 million increase in operating expenses, roughly half was attributable to higher seasonal labor costs resulting from rising wage rates offset in part by a reduction in seasonal labor hours compared with the third quarter of 2019. Both operating and SG&A expense increases were attributable to higher costs for operating and maintenance supplies, as well as higher full-time wages. Lower advertising expense, however, helped to defray some of the increase in SG&A expense. Depreciation and amortization expense increased to $77 million in the third quarter of 2021, up $9 million from the third quarter of 2019 due to more planned operating days in the current period. Including the items noted above, the Company’s operating income for the third quarter totaled $250 million, compared with $275 million in the third quarter of 2019.
Interest expense for the third quarter totaled $46 million, up $18 million from the third quarter of 2019, due to incremental interest incurred on the Company’s 2025 and 2028 senior notes issued in 2020. The net effect of the Company’s swaps resulted in a $3 million benefit to earnings during the third quarter of 2021, compared with a $4 million charge to earnings during the third quarter of 2019. The difference reflects the change in fair market value movement in the Company’s swap portfolio. During the third quarter, the Company also recognized a $15 million net charge to earnings for foreign currency gains and losses related to its U.S. dollar-denominated Canadian notes, compared with a $6 million net charge to earnings for the third quarter of 2019.
For the 2021 third quarter, a $44 million provision for taxes was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes, compared to $49 million in the third quarter of 2019. The difference in provision for taxes in the current-year period was due to a decrease in pretax income being reported by the Company’s taxable subsidiaries.
Accounting for the items above, net income for the third quarter totaled $148 million, or $2.60 per diluted L.P. unit. This compares with net income of $190 million, or $3.34 per diluted LP unit, for the 2019 third quarter.
Adjusted EBITDA totaled $333 million in the current third quarter compared with $355 million for the third quarter of 2019. The $22 million decrease in Adjusted EBITDA was largely due to higher labor costs in the period, as well as the negative impact that operating restrictions, including mandated capacity limitations, had on attendance.
October 2021 Update
Preliminary net revenues for the 10-month period ended Oct. 31, 2021, totaled $1.2 billion. Over the same period, attendance totaled 17.3 million visits, in-park per capita spending was $62.73, and out-of-park revenues totaled $153 million.
Given the effects of the coronavirus pandemic and suspension of park operations during the summer and fall of 2020, results for the October 2021 and October 2020 periods are not directly comparable. To provide more informative comparisons, the following information reflects results for the five-week periods of Sept. 27 through Oct. 31, 2021, versus Sept. 30 through Nov. 3, 2019. The parks had 176 total operating days in October 2021 compared to 166 total operating days in October 2019 due to a shift in the timing of the Halloween holiday.
For the five-week period ended Oct. 31, 2021, preliminary net revenues totaled $219 million, representing an increase of 42%, or $65 million, from the comparable five-week period in 2019. The increase was driven by an 8% increase in attendance to 3.2 million total visits; a 32% increase in in-park per capita spending to a record $64.86; and a 33% increase in out-of-park revenues to $19 million.
Balance Sheet and Liquidity Update
Deferred revenues as of Sept. 26, 2021, totaled $211 million, representing an increase of $62 million, or 42%, when compared to deferred revenues at Sept. 29, 2019. Of the $211 million of total deferred revenues outstanding at Sept. 26, 2021, approximately $100 million is projected to be recognized as revenue during the fourth quarter of 2021. The balance of the deferred revenues is projected to be recognized as revenue in 2022 or later, including 2022 season passes and all-season pass products, as well as use privileges of 2021 season passes at Knott’s Berry Farm and Canada’s Wonderland. These use privileges have been extended into next year due to COVID-19-related disruptions to the parks’ 2021 operating calendars.
As of Sept. 26, 2021, the Company had cash on hand of $563 million and $359 million available under its revolving credit facility, net of $16 million of letters of credit, for total liquidity of $922 million. This compares to $652 million of total liquidity at the end of the second quarter. The Company's $270 million of positive cash flow in the third quarter benefited from increased attendance and guest spending levels during the period, as well as strong early sales of 2022 season pass products.
Read the entire press release from Cedar Fair.
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It feels like they're kind of burying the lede here. Great to hear about the revenue, but that's a non-trivial drop in attendance, and if your operating costs are up 15%, and EBITDA is down 6.6% despite the new revenue heights, that's not great.
It's obvious that the strategy has changed at the company post-Ouimet, but what is it, and what is the desired outcome? It feels like they're marching toward a lower margin business despite the pent up demand for leisure activity, which doesn't make any sense to me.
Jeff - Editor - CoasterBuzz.com - My Blog
Jeff, I would argue that the 15% increase in cost is actually quite modest, considering that they had to basically increase wages by 25%, 50%, or even towarsd 100% in some locations, and that the cost of goods has riseen substantially as well this year. As an FEC owner, I have seen my food costs rise about 30% since the pandemic began, and I would assume a decent chunk of CF's short term COGs is food/merchandise.
Regarding the EBITDA, yeah, that's a disappointment to be setting record sales and having lower EBITDA. They kind of dance around it in the press release, so I'm not sure what to think there either.
I get all that, but when your per-unit cost for a food item is $2 and you charge $12, even a doubling in cost shouldn't tank your EBITDA against a revenue increase like that.
Totally absent is any discussion of average admission, which I think says a great deal.
Jeff - Editor - CoasterBuzz.com - My Blog
Yeah, I wondered about the admission average as well. Have they normally mentioned that in other years?
They did for 2020 refer to a "higher season pass mix" as negatively impacting per-capita spending, so I assume they're baking the gate into that number. With that said, we can infer from this quarter's "29% increase or $14.32" to mean the amount was $49.37 in the quarter. (Year-end results were $46.38 in 2020, $48.32 in 2019, $47.69 in 2018, $47.30 in 2017, $46.90 in 2016.) So assuming they can get close to that number for the year, per cap spending has increased 5% in five years. Adjusting for inflation, where 2016's $46.90 in 2021 dollars is $53.60, per capita spending is actually down over the last five years. They're headed in the wrong direction.
I still believe they're giving away the gate. I realize the per capita spending is an average across all visits at all parks, but a day at Cedar Point is worth $50 before you even get into the place. I'm seeing a touring Broadway show tonight for $80, and that's barely two and a half hours with intermission. Whether it's Holiday World or Walt Disney World, it isn't getting cheaper to visit most parks not run by Cedar Fair or Six Flags.
Jeff - Editor - CoasterBuzz.com - My Blog
Agreed. I'm heading to a hockey game Saturday night. $80/person for good (not great) seats (plus the ridiculous fees) and that will be 2 1/2 hours or so. Think my one day Epcot tix are going to run me $140ish each. Cedar Point has to be careful not too price out midwesterners but the gate price is pretty soft.
I really wish they posted numbers on a per park basis. It’s hard to decipher the new strategy at Cedar Point when they mix it in with all their other parks.
But then again, what do I know?
The high revenue this year won’t continue. People had cabin fever this year. That will fade in the future. But their higher costs and interest will continue.
The major parks were overcrowded this year. That chases off return customers.
Cedar Fair breaks out revenues by Admissions, Food/merchandise/games and Accommodations/extra-charge products/other. Its in the financial statements that are part of their quarterly reports. With attendance numbers, you can figure out averages. Don't recall if they have discussed that separately in press releases and its been a while since I have listened to a CF earnings call.
The increase for revenues was for 3rd quarter only. For the 9 months of 2021, net revenues are down from $1.218 billion in 2019 and $148 million in 2020, each for 9 months in those 2 years. $987 million for 2021.
... and Admission percap is up 24% when comparing 2019 to 2021. If they are guilty of giving away the gate, their commentary on the call indicates they believe they can keep raising those prices. Perhaps there is some thought that has gone into how and when they take price.
Any strategy they had in the fall of 2019 when they sold the first $99 Cedar Point Gold Pass went away when the market changed in ways nobody could have predicted. That they did it again this year still shocks me.
Yes, that. They could be forgiven for the squeeze caused in the pandemic recovery, but to pile it on again this year is completely odd. When you have to close the parking lot at Cedar Point in October, you probably should have charged more to get in.
Jeff - Editor - CoasterBuzz.com - My Blog
And like so many other things, I would rather spend $200-$300 on a pass that all but guarantees me a good to great experience any time I visit rather than a $99 pass that gets me a questionable experience at a place that used to deliver Orlando style ride efficiency and uptime.
I still want to know how they calculate per cap spending on admission or food & drinks when it comes to Season Passes or all-season add-ons*. No way per-cap admission was up 24% when they had record sales of $99 passes that were valid for 2 years.
*From what I recall, all-day & all-season dining & drinks ring up as regular price but when you scan the bar code it “comps” the price. I’ve always had a feeling that led to some rather creative accounting.
But then again, what do I know?
Jeff said:
They did for 2020 refer to a "higher season pass mix" as negatively impacting per-capita spending, so I assume they're baking the gate into that number. With that said, we can infer from this quarter's "29% increase or $14.32" to mean the amount was $49.37 in the quarter. (Year-end results were $46.38 in 2020, $48.32 in 2019, $47.69 in 2018, $47.30 in 2017, $46.90 in 2016.) So assuming they can get close to that number for the year, per cap spending has increased 5% in five years. Adjusting for inflation, where 2016's $46.90 in 2021 dollars is $53.60, per capita spending is actually down over the last five years. They're headed in the wrong direction.
Unless I am not understanding what you were trying to calculate - you did the math wrong. They disclose it at the top of the press release - their Q3 per capita spending was $64.26 (not the $49.37 you calculated) for a 29% increase from 2019 (which was a record year).... further commenting double digit increases across all revenue categories (admissions, F&B, merchandise/games).
Jeff said:
It feels like they're kind of burying the lede here. Great to hear about the revenue, but that's a non-trivial drop in attendance, and if your operating costs are up 15%, and EBITDA is down 6.6% despite the new revenue heights, that's not great.
It's obvious that the strategy has changed at the company post-Ouimet, but what is it, and what is the desired outcome? It feels like they're marching toward a lower margin business despite the pent up demand for leisure activity, which doesn't make any sense to me.
Wasn't everyone complaining the park (Cedar Point) is TOO busy because they are giving away the gate. And weren't you arguing they should works towards less people but driving higher per caps/premium experiences and more money out of those people? Isn't that exactly what they are doing? An 18% decline in attending while driving a 29% increase in per-caps while driving a 5.5% increase in overall revenue? Listen, I don't get how they are doing it either but they are delivering.
But the attendance piece can likely be explained by significant capacity limitations at their largest seasonal attendance park (Canada's Wonderland) which lasted through the quarter (and I don't even think that park opened until early July) plus only 5 day/week operation at Worlds of Fun, Valleyfair, Michigan's Adventure and Great America.
I think to an extent, people get too caught up on Cedar Point - and really it's just the season pass there. We know the season pass base as a % of total attendance at Cedar Point is nowhere near what it is at a park like Kings Island (or really any of the former Paramount parks). Cedar Point has really cut back on any single day promotional pricing and their gate price this year with the online discount I think was around $45. Just as an aside, I was looking at Knott's Haunt, which is not included in any season passes. It was $89 for just entrance on a Saturday night in October for 7 hours. It's $109 for an entire season (plus some) at Cedar Point, Cedar Point Shores and parking - but $89 for passholders or the general public for 7 hours at Knott's in October - and it was selling out.
Anyway, I could not disagree more with the season pass strategy at Cedar Point but somehow what they are doing is working. The EBITDA can be and is explained away by higher cost of sales plus taking 40-100% increases in one of their single largest expense - seasonal labor. If one of your largest expenses increases by 40-100% across your properties, in the midst of one of the highest inflationary periods in recent memory and you can manage an EBITDA drop of only 6% - most leaders would take that any day.
Like I said, I don't get how they are doing it, but they are doing it. And if momentum means anything, those October numbers are eye-popping - and that is against a then record October 2019. 42% increase in revenue, 8% increase in attendance, 32% increase in per capita spending, 33% out of park revenue increase (even with Castaway closed) - all against a record prior year. Hell, as much as I loved Ouimet, even he wasn't delivering numbers like that.
ShaneDenmark said:
*From what I recall, all-day & all-season dining & drinks ring up as regular price but when you scan the bar code it “comps” the price. I’ve always had a feeling that led to some rather creative accounting.
That's correct. Each of my "free" drinks rang up as a season pass refill at (I think) $3.25, which is then taken off of the check in the subtotal.
Hi
Cedar Fair discusses how they recognize revenue in its financial statements (under "Revenue Recognition"):
As disclosed within the consolidated statements of operations and comprehensive (loss) income, revenues are generated from sales of (1) admission to our amusement parks and water parks, (2) food, merchandise and games both inside and outside the parks, and (3) accommodations, extra-charge products, and other revenue sources. Most revenues are recognized on a daily basis based on actual guest spend at the properties. Revenues from multi-use products, including season-long products for admission, dining, beverage and other products, are recognized over the estimated number of uses expected for each type of product. The estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally occurs no later than the close of the operating season. The number of uses is estimated based on historical usage adjusted for current period trends.
Due to the effects of the COVID-19 pandemic, we extended the validity of our 2020 season-long products through the 2021 operating season in order to ensure our season pass holders receive a full season of access to our parks. The extended validity of the 2020 season-long products resulted in a significant amount of revenue deferred into 2021. In order to calculate revenue recognized in 2020 on 2020 season-long products, management made significant estimates regarding the estimated number of uses expected for these season-long products for admission, dining, beverage and other products for the 2021 operating season. Actual results could materially differ from these estimates depending on the ultimate extent of the effects of the COVID-19 pandemic. Due to the ongoing development and fluidity of the COVID-19 pandemic, the ultimate extent of the effects of the COVID-19 pandemic cannot be reasonably predicted.
kpjb*- That’s what I thought. So are they running the regular price through to calculate per cap spending? Because if I buy all season drinks for $35 and use it for 35 drinks throughout the season, counting that as $115 looks a lot better than $35 when calculating per cap spending.
*I love that my iPhone autocorrects “kpjb” to “Kombat”!
But then again, what do I know?
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