speaker
Kathy
Conference Operator

Good morning, my name is Kathy, and I will be your conference operator today. At this time, I'd like to welcome everyone to this year's Fair Entertainment Company 2020 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Michael Russell, you may begin your conference.

speaker
Michael Russell
Corporate Director of Investor Relations, Cedar Fair

Thank you, Kathy, and good morning. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to our 2021 Third Quarter Earnings Conference Call. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is available under the News tab of our investors' website at ir.cedarfair.com. On the call with me this morning are Richard Zimmerman, Cedar Fair's president and CEO, and Brian Witherow, our executive vice president and CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC's Regulation FD, this webcast is being made available to the media and the general public, as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. With that, I would like to introduce our CEO, Richard Zimmerman. Richard?

speaker
Richard Zimmerman
President and CEO, Cedar Fair

Thank you, Michael, and good morning, everyone. We appreciate all of you being with us today. Today's opening remarks will focus in three primary areas. First, a review of the third quarter results of our parks and resort properties, as well as more recent performance trends during the month of October. Second, an overview of how we successfully manage structural shifts in the labor market this season and how we plan to address this challenge in 2022. Finally, we will highlight how the organizational changes we have made and the strategic initiatives we've implemented enabled us to offset many of the effects of the pandemic, positioning Cedar Fair for continued growth, success, and value creation. Let me start by saying I am extremely pleased with our company's results since the reopening of our properties in May, and particularly over the last four months, which represents the most important stretch of the season for us. This outstanding performance would not have been possible without the unwavering determination of our leadership team, whom I believe is the strongest, most experienced, and uniquely talented collection of professionals in our industry. Of course, they are supported by the talented and committed teams operating our parks across North America. Collectively, we have demonstrated time and time again how to produce the best possible outcomes in highly challenging environments while also pushing the boundaries of success when momentum is on our side. Every day, the associates of Cedar Fair delight our guests with immersive family experiences, which is an essential element of our differentiated business model. The strong attendance and guest spending trends we reported through Labor Day weekend continued through last Sunday, tapping off in October, in which our parks entertained 3.2 million guests and generated record revenues of $219 million. Our outstanding performance was a result of providing our guests with exceptional experiences. First, we reported record third quarter revenues, which we achieved despite 47 fewer operating days compared with the third quarter of 2019, as well as continued capacity restrictions of several parts and a group sales channel that has yet to fully recover. Second, we set a new high for in-part per capita spending. Credit goes to our business intelligence group for its savvy use of analytics and dynamic pricing strategies to optimize pricing both at the gate and inside the parks as demand remains strong. At the same time, our commitment to elevating the quality of our offerings, particularly within food and beverage, has resonated well with our guests. Our team's relentless focus on enhancing the guest experience and the related investments have served as catalysts for strong growth in per capita spending across all revenue channels. Third, our out-of-park revenue channels continue to perform very well. They exceeded 2019 third quarter out-of-park revenues by 9%, despite fewer operating days and two of our signature resort properties at Cedar Point, Castaway Bay and Sawmill Creek, remaining closed all year for renovations. For our open resort properties, daily room rates were up an average of 6% across the system, with certain locations up as much as 25%. We are very encouraged by the strong rebound in demand for our resort properties, which remain a significant area of growth and a true differentiator for Cedar Fair within the industry. And finally, as I previously mentioned, the impressive and growing demand for our Halloween events produced a record October again this year, with net revenues for the five-week period ended Sunday, October 31st, up more than 40% from the comparable period in 2019. I also want to highlight the significant contribution of our advanced purchase programs to our rapid recovery and our consistent strength in attendance. Proceeds from season pass sales produce a reliable recurring revenue stream year after year, that underscores our confidence that our business model is a consistent generator of strong, resilient free cash flow. Season pass sales also prospectively inform our fiscal planning process and capital allocation strategy. The ongoing success we have captured from the growth of our annual season pass campaigns has served as a primary driver behind our strong top line results this year, as it has for many seasons. Since 2022 season passes and related all season products went on sale in early August, sales have outpaced the record sales volume during the comparable period in the fall of 2019, with the average season pass price trending up 5% year to date. Through the end of October this year, sales of 2022 season passes have topped more than 1 million units for only the second time ever. with all season product sales up in all categories. Historically, the momentum of early season pass sales has served as a very reliable leading indicator for next year's demand, which bodes very well for 2022. We believe the early and growing sales of our season passes and related programs validates our strategies and confirms the value guests place on our unique style of family entertainment. The desire to have fun next summer is widely held. We are uniquely able to monetize that, and we follow through by delivering amazing experiences that create value for both our guests and our unit holders. Based on these strong results, positive momentum, and a bright outlook going forward, we are well positioned to pay down debt in the very near term and resume our quarterly cash distributions longer term. Before I turn the call over to Brian to discuss our financial results in more detail, I'd like to shift gears for a moment to focus on the labor market and how it has changed since the pandemic began. Broadly speaking, business closures, lost jobs, and extended furloughs during a period of enhanced unemployment benefits gave workers an opportunity to reassess their employment options, many delaying their return or leaving the workforce altogether. In such a tight labor market, and with the J-1 visa program remaining in a state of flux, our ability to quickly attract and retain the thousands of associates we needed to open our parks for the 2021 season became our highest priority, resulting in our decision to move quickly and aggressively on wage rates. While a difficult decision to make at the time, as we noted in our last earnings call, These adjustments were critical to ensuring our parks were adequately staffed and able to deliver the high quality experience guests have come to expect at a Cedar Fair park. In response to the labor pressures, we raised hourly rates to market leading levels and included various bonuses to attract and retain associates. The combination of these efforts pushed hourly pay rates as high as $20 in some markets while the other parks used top wages to secure hard-to-fill positions such as security and culinary staff. While these new rates have pushed labor costs higher, I couldn't be prouder of the team's foresight and conviction as this decisive action was a significant contributing factor to the record per capita guest spending levels our parks were able to achieve this year. On the labor front, our attention now turns towards the 2022 season and ensuring we are doing everything we can to alleviate incremental labor cost pressures. This includes a more aggressive and proactive recruiting process and adjusting our pay rate model to provide more flexibility. We are building a labor model that allows us to adequately staff our parks to deliver a high-quality guest experience and continue to drive growth in guest spending levels, but at the same time, allow us to flex rates to match the supply of labor in the markets. The anticipated return of the J-1 visa program, combined with additional operating efficiencies identified by our new workforce management and business intelligence systems, should help alleviate some of the labor rate pressures. Brian will provide more detail on this shortly. I'll finish my opening remarks with these observations. We have historically had success adjusting to labor cost increases during periods of wage rate inflation and are confident that this will continue, particularly as consumer spending remains strong and attendance returns to pre-pandemic levels. I also believe in our team's ability to successfully manage the business through future periods of unanticipated change, an invaluable characteristic they applied brilliantly through the depths of the pandemic this year. As we displayed this season, We remain steadfast in our commitment to delivering the highest quality entertainment experiences. In fact, according to our most recent consumer research, most of our parks earn their highest guest satisfaction scores ever for both our daytime Halloween and nighttime haunt events. I want to acknowledge and congratulate our park teams for a job exceptionally well done. And with that, I will turn the call over to Brian for a review of our financial results. Brian?

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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