Cedar Fair reports record results for 2022

Posted | Contributed by Jeff

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced its 2022 fourth-quarter and full-year results, ended Dec. 31, 2022.

“I am extremely proud of the Cedar Fair team’s execution in 2022, which resulted in record annual performance, strong returns for investors, and millions of delighted guests at our parks,” said Cedar Fair President and CEO Richard A. Zimmerman. “We achieved the highest levels of revenues, net income and Adjusted EBITDA⁽¹⁾ in Cedar Fair’s history, and returned approximately $220 million of capital to unitholders in 2022, through the reinstatement of our quarterly cash distributions and the implementation of a new unit buyback program. At the same time, we strengthened the Company’s balance sheet by repaying $264 million of debt during the year and reducing year-end total net leverage⁽²⁾ to 4.0x Adjusted EBITDA, back in line with pre-pandemic levels. Cedar Fair’s performance in 2022 validates our long-term growth strategies, and the importance of our guest-centric investments and commitment to delivering the most exciting and engaging experiences in the industry.”

2022 Fourth-Quarter Highlights

Net revenues totaled a record $366 million, an increase of 4%, or $15 million, compared with Q4-2021. Compared to Q4-2019, net revenues increased by $109 million, or 42%.

Net income was $12 million, an increase of $40 million compared with a net loss of $27 million in Q4-2021. Compared to Q4-2019, net income increased by $10 million.

Adjusted EBITDA totaled $88 million, an increase of 20%, or $15 million, compared with Q4-2021. Compared with Q4-2019, Adjusted EBITDA increased by $33 million, or 61%.

Attendance⁽³⁾ totaled 5.3 million guests, which was comparable with attendance in Q4-2021. Compared with Q4-2019, attendance increased by 235,000 guests, or 5%.

In-park per capita spending⁽³⁾ was $63.33, an increase of 3% compared with Q4-2021, primarily due to increases in guest spending on admissions and food and beverage. Compared with Q4-2019, in-park per capita spending increased 36%, driven higher over the three-year period by meaningful increases in guest spending across all in-park revenue channels.

Out-of-park revenues were a record $40 million, an increase of $6 million, or 18%, compared with Q4-2021. Compared with Q4-2019, out-of-park revenues increased by $12 million, or 41%.

2022 Full-Year Highlights

Net revenues totaled a record $1.82 billion, an increase of 36%, or $479 million, compared with 2021. Compared to 2019, net revenues increased by $342 million, or 23%.

Net income was a record $308 million, an increase of $356 million compared with a net loss of $49 million in 2021. Compared to 2019, net income increased by $135 million, or 78%.

Adjusted EBITDA totaled a record $552 million, an increase of 70%, or $227 million, compared with 2021. Compared with 2019, Adjusted EBITDA increased by $47 million, or 9%.

Attendance totaled 26.9 million guests, an increase of 38%, or 7.4 million guests, compared with 2021. Compared with 2019, attendance declined by 1.0 million guests, or 4%.

In-park per capita spending was $61.65, a decline of less than 1% compared with 2021. Compared with 2019, in-park per capita spending increased 28%, driven higher over the three-year period by meaningful increases in guest spending across all in-park revenue channels.

Out-of-park revenues were a record $213 million, an increase of $45 million, or 27%, compared with 2021. Compared with 2019, out-of-park revenues increased by $45 million, or 26%.

Balance Sheet and Capital Allocation Highlights

On June 27, 2022, Cedar Fair announced the sale of the land at its California’s Great America amusement park for $310 million, with a lease agreement to operate the park for a period of up to 11 years. Proceeds from the sale were used to accelerate progress towards the Company’s capital allocation priorities of reducing debt, reinvesting in high-return projects within its portfolio, and reinstating its cash distribution to unitholders.

On Feb. 10, 2023, the Company extended the maturity of its $300 million revolving credit facility from December 2023 to February 2028 subject to restrictions on the amount of notes outstanding, further fortifying its balance sheet and improving its financial flexibility. The Company expects to continue to use the facility for general purposes in the ordinary course of business.

With the extension of its revolving credit facility, Cedar Fair has no debt maturities prior to 2025. At Dec. 31, 2022, Cedar Fair had total liquidity of approximately $381 million, including cash on hand and available borrowings under its revolving credit facility, and total net leverage of 4.0x Adjusted EBITDA.

Through Jan. 31, 2023, the Company had repurchased approximately 5.0 million limited partnership units, or close to 9% of its total units outstanding at the beginning of 2022, under its $250 million unit repurchase program at a total cost of approximately $208 million.

Consistent with the Company’s updated capital allocation strategy announced in August 2022, Cedar Fair’s Board of Directors today declared a cash distribution of $0.30 per limited partner (LP) unit, payable on March 21, 2023.

“The capital investments we made in 2022 delivered impressive returns, driving revenue growth across the portfolio through meaningful increases in attendance and out-of-park revenues, as well as near historical highs in in-park per capita spending. We maintained the strong momentum we built in the peak summer months throughout a record fourth quarter, underscoring the continued strength of consumer demand and capping off an outstanding second half of the year,” said Zimmerman.

“In 2022, we sold a record 3.2 million season passes and generated more than $450 million in revenues from our suite of season-pass products, including all-season dining and all-season beverage,” added Zimmerman. “The strong performance of our all-season dining and beverage programs, along with increased transaction volumes and higher average transaction values, delivered a $144 million increase in food and beverage revenues during the year. With the reopening of two hotels and higher average daily room rates across most of the system, we also grew revenues at our resort properties by $33 million as compared with 2021. Most importantly, we achieved these results while continuing our growth investments and our disciplined cost management initiatives, including identifying seasonal labor hour efficiencies and flattening the year-over-year growth curve of our average seasonal wage rate, as we worked to offset general inflationary pressure.”

Zimmerman concluded, “The pace of recovery and our record results this past year reflect the strong consumer demand for our parks and resort properties, as well as for the special events programming and the immersive entertainment our parks offer. Additionally, today’s declaration of another quarterly cash distribution underscores the Board’s confidence in our company’s financial position and strategic path forward. With a strong balance sheet, and strong momentum on our capital allocation plan and key strategic initiatives, Cedar Fair is poised to continue delivering exceptional experiences for our guests and driving incremental returns for our investors in 2023.”

Results of Full-Year 2022 Compared to Full-Year 2021

Operating days in 2022 totaled 2,302, compared with 1,765 in 2021.

For the year ended Dec. 31, 2022, net revenues totaled $1.82 billion versus $1.34 billion for 2021. The increase in net revenues was largely attributable to a 537 operating day increase in the period, resulting in a 7.4-million-visit gain in attendance and a 27%, or $45 million, increase in out-of-park revenues. The increase in out-of-park revenues reflects incremental second-half 2022 revenues at Castaway Bay and Sawmill Creek Resort, two resort properties that were closed for renovations in 2021 and for the first half of 2022, as well as higher average daily room rates across much of the Company’s resort portfolio. In-park per capita spending in 2022 totaled $61.65, down less than 1% compared with $62.03 in 2021. The decrease in in-park per capita was due primarily to lower levels of guest spending on extra-charge products and pressure from a higher season pass mix.

Operating costs and expenses for 2022 totaled $1.29 billion, compared with $1.03 billion for 2021. The $259 million increase was due primarily to higher variable costs associated with the increase in operating days during 2022 versus 2021. The increase in operating costs and expenses also reflects higher full-time wages, primarily related to a planned increase in head count at select parks and incremental land lease and property tax costs associated with the sale-leaseback of the land at California’s Great America. Depreciation and amortization expense in 2022 totaled $153 million, up $4 million from the prior year due primarily 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 the Santa Clara based park.

After the items noted above and a $155.3 million gain on the sale of the land at California's Great America during 2022, the Company’s operating income for 2022 totaled $520 million, compared with operating income of $148 million for 2021.

Interest expense for 2022 totaled $152 million, down $32 million from 2021 due to the early redemption of the Company’s 2024 senior notes in December 2021, and the repayment of its senior secured term loan facility and related termination of its interest rate swap agreements during 2022. The net effect of the Company’s swaps resulted in a $26 million benefit to earnings during 2022, compared with a $19 million benefit to earnings in 2021. The difference reflects the change in fair market value movement in the Company’s swap portfolio prior to the termination of the interest rate swap agreements. During 2022, the Company recognized a $2 million loss on early debt extinguishment upon full repayment of its senior secured term loan facility, and it recognized a $6 million loss on early debt extinguishment in 2021 related to the full redemption of its 2024 senior notes. Finally, the Company recognized a $24 million net charge to earnings in 2022 for foreign currency gains and losses related to the remeasurement of U.S. dollar-denominated notes to its Canadian entity’s functional currency, compared with a $6 million net charge to earnings in 2021.

For 2022, a $64 million provision for taxes was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes, compared to a $20 million provision for taxes in 2021. The increase in the Company’s provision for taxes in 2022 was due to an increase in pretax income from the Company’s taxable subsidiaries versus the prior year.

Accounting for the items above, net income for 2022 totaled $308 million, or $5.45 per diluted L.P. unit. This compares with a net loss of $49 million, or $0.86 per diluted LP unit, for 2021.

Adjusted EBITDA, which management believes is a meaningful measure of the Company’s park-level operating results, totaled $552 million in 2022, compared to Adjusted EBITDA of $325 million for 2021. The $227 million increase in Adjusted EBITDA was primarily the effect of early season operating restrictions in 2021, resulting in a 537-operating-day increase and the related improvement in attendance and out-of-park revenues, offset in part by an increase in operating expenses, particularly for cost of goods sold, labor, and other variable costs. See the attached table for a reconciliation of net income to Adjusted EBITDA.

Results of Full-Year 2022 Compared to Full-Year 2019

Given the effects of the COVID-19 pandemic and disruption of park operating calendars in 2020 and the first half of 2021, as well as a delayed opening date of July 5, 2021 at Canada’s Wonderland, the Company’s park near Toronto, in the prior year period, Cedar Fair is providing the following information comparing results for 2022 versus 2019. While the 2022 and 2019 seasons are more comparable, the 2022 results are not directly comparable with the 2019 results due to general inflationary impacts following three years of passed time, including rising costs coming out of the pandemic, and the acquisition of the two Schlitterbahn water parks in July of 2019.

Operating days in 2022 totaled 2,302, compared with 2,224 in 2019.

In 2022, the Company generated net revenues of $1.82 billion versus net revenues of $1.47 billion for 2019. The increase in net revenues was due primarily to a 28%, or $13.33, increase in 2022 in-park per capita spending and a 26%, or $45 million, increase in out-of-park revenues compared to 2019. These increases were partially offset by the impact of a 4%, or one million-visit, decline in attendance in 2022 versus 2019. The increase in in-park per capita spending was driven by higher levels of guest spending across all key revenue categories, particularly in admissions and food and beverage. The improved guest spending on food and beverage was the result of both higher average transaction values and increased transaction volume. The increase in out-of-park revenues was primarily attributable to higher average daily room rates across much of the Company’s resort portfolio, and an increase in online transaction fees charged to customers. The attendance decline in 2022 relative to 2019, was driven by an expected slower recovery in group sales attendance and the planned reduction of low-value ticket programs during the period.

Operating costs and expenses for 2022 totaled $1.29 billion, compared with $991 million for 2019. The increase was the result of a $38 million increase in cost of goods sold, a $222 million increase in operating expenses, and a $38 million increase in SG&A expense. Cost of goods sold as a percentage of food, merchandise and games revenue increased 0.6%, the result of general inflationary cost pressures. The $222 million increase in operating expenses was largely attributable to higher seasonal labor costs resulting from rising wage rates, higher full-time wages due primarily to increased full-time headcount at select parks, higher related employee taxes and benefits, the inclusion of the Schlitterbahn parks, higher costs for supplies, and higher land lease and property tax costs associated with the sale-leaseback of the land at California’s Great America. The increase in SG&A expense was primarily due to higher full-time wages, including higher incentive plan expenses, as well as an increase in transaction fees and technology-related costs. These increases in SG&A expense were offset in part by lower advertising expense, the result of a more efficient digital media program. Depreciation and amortization expense in 2022 totaled $153 million, down $17 million from 2019 due primarily to the full depreciation of property and equipment from our 2006 Paramount Parks acquisition.

After the items noted above and a $155.3 million gain on the sale of the land at California’s Great America during 2022, the Company’s operating income for 2022 totaled $520 million, an increase of $211 million, or 68%, compared with 2019. Net income for the year totaled $308 million, or $5.45 per diluted L.P. unit, which compares with net income of $172 million, or $3.03 per diluted LP unit, for 2019.

Adjusted EBITDA for 2022 totaled $552 million, compared with $505 million for 2019. The $47 million increase reflects higher net revenues attributable to higher in-park per capita spending, increased out-of-park revenues, and the inclusion of the two Schlitterbahn water parks for a full year, offset in part by higher labor costs and general inflationary pressures that increased other operating costs and expenses across our operations. See the attached table for a reconciliation of net income to Adjusted EBITDA.

Balance Sheet and Liquidity Highlights

Deferred revenues on Dec. 31, 2022, including non-current deferred revenue, totaled $173 million, compared with $198 million of deferred revenues on Dec. 31, 2021. Included in the prior-period balance was approximately $30 million of deferred revenue carryover related to the extension of 2020 and 2021 season passes into 2022 at Knott’s Berry Farm and Canada’s Wonderland due to pandemic-related park closures in those two markets. Excluding the carryover, deferred revenues at the end of 2022 would have been up approximately $5 million, or 3%, from the balance at the end of 2021.

As of Dec. 31, 2022, the Company had cash on hand of $101 million and $280 million available under its revolving credit facility, for total liquidity of $381 million. This compares to $420 million of total liquidity at the end of 2021. Net debt(2) on Dec. 31, 2022, calculated as total debt of $2.3 billion (before debt issuance costs) less cash and cash equivalents of $101 million, was $2.2 billion.

In February 2023, the Company extended the maturity of its $300 million revolving credit facility from December 2023 to February 2028 subject to restrictions on the amount of notes outstanding. The Company expects to continue to use the facility for general corporate purposes in the ordinary course of business.

Distribution and Unit Repurchases

From the inception of its $250 million unit repurchase program in August 2022 through Jan. 31, 2023, the Company had repurchased approximately 5.0 million limited partnership units at a total cost of approximately $208 million – representing approximately 9% of its total units outstanding at the beginning of 2022.

Today, the Company also announced the Cedar Fair Board of Directors has approved a quarterly cash distribution of $0.30 per LP unit, to be paid on March 21, 2023, to unitholders of record on March 7, 2023.

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