Cedar Fair sees rise in first quarter net revenue, EBITDA, decrease in per capita spending

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 financial results for its first quarter ended March 31, 2024, which included a planned extra week compared to the first quarter of 2023 due to a fiscal calendar shift. To provide more informative comparisons, results for the first quarter of 2024 are also compared on a same-week basis with the three months ended April 2, 2023.

Highlights: First Quarter of 2024 Compared to First Quarter of 2023

• 44 net fewer operating days compared to Q1-2023.
• Net revenues totaled a record $102 million for the quarter, an increase of 20%, or $17 million.
• Including $10 million of costs related to the proposed merger with Six Flags, the Company recorded a first quarter net loss of $133 million compared with a net loss of $135 million in Q1-2023.
• The Adjusted EBITDA(1) loss for the quarter totaled $97 million compared with an Adjusted EBITDA loss of $101 million in Q1-2023.
• Attendance totaled 1.3 million guests, an increase of 27%, or 290,000 guests.
• In-park per capita spending(2) was $60.53, a decrease of 6%.
• Out-of-park revenues(2) totaled a record $23 million for the quarter, an increase of 21%, or $4 million.

Highlights: First Quarter of 2024 Compared to Three Months Ended April 2, 2023

• 62 fewer operating days than comparable three-month period ended April 2, 2023.
• Net revenues for the quarter of $102 million increased 3%, or $3 million.
• Including $10 million of merger-related costs, the Company’s first-quarter net loss of $133 million improved by 3%, or $4 million.
• The Adjusted EBITDA(1) loss for the quarter of $97 million improved by $4 million, or 4%.
• First quarter attendance of 1.3 million guests increased 10%, or 125,000 visits.
• In-park per capita spending(2) for the quarter of $60.53 decreased 8%.
• First quarter out-of-park revenues(2) of $23 million increased 8%, or $2 million.

Balance Sheet and Capital Allocation Highlights

• On Mar. 31, 2024, net debt(3) totaled $2.42 billion, calculated as total debt before debt issuance costs of $2.46 billion less cash and cash equivalents of $35 million.
• On May 1, 2024, the Company entered into new credit facilities, comprising of a 7-year $1.0 billion senior secured term loan B maturing in 2031 and a new $300 million revolving credit facility maturing in 2028. Proceeds from the new term loan were used to redeem all of the Company’s outstanding $1.0 billion 5.500% Senior Secured Notes due in May 2025.
• Cedar Fair’s Board of Directors today declared a cash distribution of $0.30 per limited partner (LP) unit, payable on June 19, 2024, to unitholders of record on June 5, 2024.

CEO Commentary

“Our performance trends through the first four months of the season extend the momentum we established in the second half of 2023 and underscore the strength of our portfolio and business model,” said Cedar Fair President and CEO Richard Zimmerman. “We entertained 290,000 more guests despite 44 fewer operating days compared to the first quarter of 2023. Our highly marketable capital investment program has created widespread pre-season excitement, which has helped drive up season pass sales nearly 250,000 units through the first four months of the year. We are optimistic that these positive trends, combined with tailwinds in other demand channels such as group bookings and reservations at our resort properties, position us to deliver another outstanding year for Cedar Fair in 2024.”

Commenting on the proposed merger with Six Flags, Zimmerman added, “We were pleased that Six Flags shareholders overwhelmingly approved the merger-of-equals transaction, which we continue to believe will be completed before the end of the second quarter. We were also encouraged that our recent refinancing transactions were very well received by the credit markets, validating the strong financial profile and compelling growth opportunities of the combined company post-closing. Both Cedar Fair and Six Flags continue to work constructively with the Department of Justice (“DOJ”) in its review of the merger, having complied fully with the DOJ’s Second Request received in January. Teams from both companies are also working diligently to complete the initial phases of a joint integration plan that, upon closing of the transaction, will allow us to drive toward realizing the full potential of this strategic combination,” concluded Zimmerman.

Results for First Quarter 2024 Compared to First Quarter 2023

Historically, first quarter results represent approximately 5% of the Company’s full-year attendance and net revenues, as most parks in Cedar Fair’s portfolio are closed during the period. Consequently, the Company typically operates at a loss during the first quarter.

Operating days in the first quarter of 2024 totaled 117 compared with 161 operating days in the first quarter of 2023. The decrease was primarily due to a strategic decision to reduce the number of planned operating days in the first quarter of 2024 at several of the Company’s seasonal parks, including Carowinds, Kings Dominion, and California’s Great America. This decrease in operating days was somewhat offset by an additional week in the first quarter due to a calendar shift that resulted in the current quarter including 13 weeks of results while the first quarter of 2023 included 12 weeks of results.

For the quarter ended March 31, 2024, net revenues totaled $102 million on attendance of 1.3 million guests, compared with net revenues of $85 million on attendance of 1.1 million guests in the first quarter of 2023. The increase in net revenues reflects the impact of a 27%, or 290,000-visit, increase in attendance and a 21%, or $4 million, increase in out-of-park revenues(2), offset in part by the impact of a 6%, or $3.94, decrease in in-park per capita spending(2). The increase in attendance during the current quarter was primarily driven by higher season pass sales and improved weather at Knott’s Berry Farm, as well as the inclusion of the extra calendar week in the 2024 first quarter, offset in part by the impact of fewer planned operating days in the period. The increase in out-of-park revenues reflects the impact of the extra week, as well as increased revenues from the Knott’s Hotel following a recent renovation. The decrease in first quarter in-park per capita spending is primarily due to a planned decrease in season pass pricing and a higher mix of season pass visitation at Knott’s Berry Farm, partially offset by improved in-park per capita spending at the four other parks with limited first quarter operations.

Operating costs and expenses in the first quarter of 2024 increased $25 million compared with the first quarter last year. The increase in operating costs and expenses was the result of a $15 million increase in SG&A expenses, a $9 million increase in operating expenses, and a $1 million increase in cost of goods sold. The increase in SG&A expenses was primarily attributable to $10 million of costs related to the proposed merger with Six Flags, as well as the impact of the additional calendar week in the first quarter and higher spend on information technology initiatives. The increase in operating expenses was due to the additional calendar week in the first quarter of 2024, offset in part by a reduction in full-time wages and related benefits. Meanwhile, cost of goods sold as a percentage of food, merchandise and games revenue decreased 250 basis points compared with last year’s first quarter, the result of planned reductions in food and beverage costs.

Depreciation and amortization expense in the first quarter of 2024 totaled $10 million compared with $14 million in the first quarter of 2023. The decrease reflects the impact of fewer planned operating days during the first quarter of 2024. There was also a loss on impairment/retirement of fixed assets of $3 million during the first quarter of 2024, compared with a loss of $4 million in the first quarter of 2023.

After the items noted above, the Company reported a 2024 first quarter operating loss of $126 million compared with an operating loss of $123 million in last year’s first quarter.

Interest expense for the quarter totaled $35 million, an increase of $3 million from the prior-year first quarter, the result of the additional calendar week in the first quarter of 2024. During the first quarter, Cedar Fair also recognized a $5 million net charge to earnings for foreign currency gains and losses compared with a $4 million net charge to earnings in the prior year period. Both amounts primarily represented the remeasurement of U.S. dollar denominated notes to the Canadian entity's functional currency.

During the first three months of 2024, the Company recorded a benefit for taxes of $32 million to account for publicly traded partnership taxes and income taxes on the Company’s corporate subsidiaries, compared to a benefit for taxes of $24 million in the first quarter of 2023. The increase in benefit for taxes was primarily attributable to a higher estimated annual effective tax rate resulting from the effect of proposed merger-related costs on partnership pre-tax income.

After the items above, the Company reported a net loss of $133 million, or $2.63 per diluted LP unit, for the first quarter of 2024. This compares to a 2023 first quarter net loss of $135 million, or $2.61 per diluted LP unit.

For the 2024 first quarter, Adjusted EBITDA(1), which management believes is a meaningful measure of the Company’s park-level operating results, was a loss of $97 million, compared with an Adjusted EBITDA loss of $101 million for the first quarter of 2023. The smaller Adjusted EBITDA loss in the current-year quarter was primarily the result of increased attendance as a result of higher season pass sales and improved weather at Knott’s Berry Farm during the period. See the attached table for a reconciliation of net loss to Adjusted EBITDA.

Results for First Quarter 2024 vs. Three Months Ended April 2, 2023

As previously noted, the results for the first quarter of 2024 included an additional calendar week as compared with the first quarter of 2023. On a same-week basis, or comparing the three months ended March 31, 2024, with the three months ended April 2, 2023, net revenues would have increased 3%, or $3 million, and attendance would have increased 10%, or 125,000 visits. Meanwhile, out-of-park revenues(2) would have been up 8%, or $2 million and in-park per capita spending(2) would have been down 8%, or $5.39.

On a same-week basis, operating costs and expenses would have increased $10 million, or 5%, as a result of a $13 million increase in SG&A expenses offset by a $2 million decrease in operating expenses and a $0.3 million decrease in cost of goods sold. Excluding costs related to the proposed Six Flags merger, operating costs and expenses would have been essentially flat between years.

Balance Sheet and Liquidity Highlights

Deferred revenues on March 31, 2024, including non-current deferred revenue, totaled $233 million, compared with $208 million of deferred revenues on March 26, 2023. The $25 million increase was due to strong sales of advance purchase products, including sales of season passes which were up 8%, or $15 million, through the end of the first quarter.

As of March 31, 2024, Cedar Fair had total liquidity of approximately $157 million, including cash on hand and available borrowings under its revolving credit facility. This compares to $144 million of total liquidity on March 26, 2023, and $345 million of total liquidity on Dec. 31, 2023. Net debt(3) on March 31, 2024, calculated as total debt of $2.46 billion (before debt issuance costs) less cash and cash equivalents of $35 million, totaled $2.42 billion.

On May 1, 2024, the Company announced it had entered into new credit facilities comprising a 7-year $1.0 billion senior secured term loan B maturing in 2031 and bearing interest at SOFR plus 200 basis points, and a new $300 million revolving credit facility maturing in 2028 and bearing interest at SOFR plus 200 basis points. The new revolving credit facility replaced Cedar Fair’s former revolving credit facility.

On May 2, 2024, the Company used the proceeds from the new term loan and cash on hand to fund the redemption of all of its outstanding $1.0 billion 5.500% Senior Secured Notes due May 2025, and to pay related expenses of the refinancing.

Distribution

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 June 19, 2024, to unitholders of record on June 5, 2024.