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5/4/2023
Thank you for standing by. My name is Sydney and I will be your conference operator today. At this time, I would like to welcome everyone to the Cedar Fair Entertainment Company 2023 first 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Again, press the star and 1. Thank you. Cedar Fair, you may begin your conference.
Thank you, Sydney, and good morning to everyone. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to today's earnings call to review our 2023 first quarter results for the period ended March 26th. 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 President and CEO, and Brian Witherow, our Executive Vice President and CFO. Before we begin, I need to remind you the 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 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'd like to introduce our CEO, Richard Zimmerman. Richard.
Thanks, Michael. Good morning, and thanks to everyone for joining us today. Despite the adverse impact that the very unusual weather conditions have had on our results, we remain confident in what we will believe will be another strong year at Cedar Fair. I want to highlight a few specific factors regarding our business that reinforce my confidence in our ability to deliver another robust performance particularly as we approach full seven-day week operations at all of our parks. First, our full-year results are almost entirely driven by our performance in the second half of the year when we generate two-thirds of full-year attendance and net revenues and more than 80% of our adjusted EBITDA. Our first quarter typically accounts for 5% of our full-year attendance and net revenues. Consumers have showed no sign of slowing down their spending for high-quality experiential entertainment, as demonstrated through increasing levels of per capita spending last year and continuing in the early part of our 2023 season. Third, early season bookings within our group sales channel are increasing, especially among school and youth groups, as are advanced bookings at our resort properties, both of which should create a solid tailwind for attendance through the remainder of the year. Fourth, we are confident the new rides and attractions scheduled to debut this season will generate higher demand and more frequent visits among pass holders and single-day visitors alike. And finally, although unit sales of season passes are down due to the impact of weather during the first quarter as well as last fall, the average season pass price is up 7% as we head into the busiest sales cycle of the season. Having watched our team successfully navigate the recovery from the pandemic to deliver record results in 2022, I have the highest confidence in our team's ability to effectively manage through early season challenges to build on the momentum we achieved last year. So let me address our first quarter from a macro level, then Brian can review our financial results in more detail. While our first quarter results did not meet expectations, The shortfalls are directly attributable to the worst period of weather we've experienced in several decades at our California parks. Cold, wet, and even snowy days at Knott's Berry Farm, our park with the most meaningful first quarter operations, prevented the park from opening at all on seven days, and adverse weather conditions significantly disrupted operations on 30% of total planned operating days during the period, meaningfully impacting our top line. The impact was magnified by off-season costs at several of our other parks as crews of maintenance personnel and seasonal associates were preparing for spring park openings. Given the slow start to the year, we have implemented additional initiatives to identify cost efficiencies throughout our system while maintaining our ability to generate top-line revenue growth and deliver the high-quality guest experience for which our parks are known. This includes leveraging the expertise and purchasing power of our centralized procurement group to tightly manage non-labor-related operating costs and minimize the impact of inflation. Additionally, through learnings and new tools, our park operators continue to improve our alignment between daily staffing levels and demand. Our advancements in workforce management truly came to fruition in last year's second half when we reduced seasonal labor hours per operating day by 7% compared to 2019, and in an environment of high inflation, reduced our average labor rate by 2% compared to the second half of 2021. We are looking forward to building upon that success this year. The actions we've taken over the last several years have also created a more resilient business model, which enables Cedar Fair to perform well regardless of the economic landscape. The strong business fundamentals, and compelling collection of new attractions provide us with confidence in our ability to deliver stronger full-year results, even if a recession were to occur this year, as some expect. Since the Great Recession some 15 years ago, we have significantly grown our recurring revenue streams, with many of our most loyal guests purchasing tickets well in advance of their visits, using payment plans to package season passes with other all-season products, and taking advantage of our resorts and premium experiences to customize and enhance their park visits. For more than a decade, our team has refined its marketing outreach and two-way dialogue with our guests through our CRM system that gets more robust and sophisticated with each season. Our enhanced capabilities to gather and analyze guest data, much of it in real time, has improved our effectiveness in key operational areas ranging from yield management and labor utilization to food services and guest safety. These steady advancements have helped maximize operating leverage, especially when demand is at its historical peak in the months of July, August, and October. In short, we remain very excited about Cedar Fair's prospect for continued growth and value creation in 2023. Let me stop here and ask Brian to review the details of our results. Brian?
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