Parks! America Inc

Good afternoon, everyone. Welcome to Parks America's third quarter fiscal year 2026 earnings call. My name is Doug Jaffe, and I will be your operator for today's call. Today's call is being webcast and recorded. Before we begin, I'd like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities law. These statements may involve risk and uncertainties that could cause actual results to differ from those forward-looking statements. For a more detailed discussion of those risks, you may refer to the company's filings with the Securities and Exchange Commission. In addition, we may reference non-GAAP financial measures and other financial metrics on the call. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included on our Form 10-Q. This past Friday, we filed our quarterly earnings release with our 10-Q and our 10-Q with the SEC. In our quarterly earnings release, you will find summary information related to our segment financial results. We encourage all of our shareholders to read our complete 10-Q. In a few moments, I will turn the call over to our President, Geoff Gannon, for opening remarks. Then, we will respond to questions previously submitted via email, after which we will take any follow-up questions from live participants on today's call. For those who would like to ask a follow-up question, you can use the raise hand feature on the bottom of your screen at any time to indicate you have a question. When you are called on to ask a question, your line will be unmuted. When you are finished asking your question, please state that you have no further questions. Your line will be muted afterwards. We will take as many questions as possible within 30 minutes. That concludes my instructions, and I'm now going to turn the call over to Geoff Gannon for opening remarks. Thank you.

I just wanted to go over three things that are Thank you. Thank you. and the 8K that we had. The main points on that, though, is that it's a seven-year term and a 25-year amortization, meaning it pays down like it's a 25-year loan, but then it's due in full at the end of seven years. It's fixed, as opposed to it was floating before. It's fixed at just under 7%. You can see that we entered into an agreement to convert the rate there to a fixed rate and then you can also see that there's a covenant on that both in terms of debt service for the borrower which is Agunan Parks Inc that's the Texas subsidiary and then you can also see that there's also a covenant for the parent company so if you do the math on that you can see that what debt service is and then you'd multiply that by 1.2 the exact numbers are there in the 10-Q but basically it means that the payments will tend to be lower in the future and they'll be reflected eventually in the debt actually there's a debt schedule that you can see already on that to give you some idea but the loan amount is the same which I wanted to stress there was no cash back on that or anything like that so it's just a refinancing of a tool a longer term paying down slower the other two points were I had mentioned insurance because someone had asked about inflation in the last quarter I had said that if we didn't make changes to the program, it was likely that I thought our insurance costs would rise about 5% for the next fiscal year. Most of our insurance policies were new and effective as of August 1st, so it's already happened. It was after the end of the quarter, but it's happened now. and actually it'll be down about 8% and that's because of changes to the program had that not been the case it probably would have been up about 5% or something so you should see slightly lower insurance costs in the next fiscal year even though I said slightly higher was more likely and then the last point is cost of goods sold because there have been questions about inflation in the last quarter but we're not generally seeing inflation pressures and I would say that they are lower now than they were in the past especially in things like have been talking about increases in earnings, obviously, of weekly earnings. So payroll has been declining in line with kind of the overall economy. And so I don't think we'll see as much pressure on that in next fiscal year as we have this year or in previous years. The one thing that we have seen it on, and it's only been since the start of the Iran war, is animal feed. And animal feed is a very substantial part of our cost of goods sold, especially at Georgia. So actually the entire increase that you have on a consolidated basis for that you can see is really all due to increases in animal food. It says animal food, merchandise, and food, but it's animal food. And those prices are highly commodity-based. Thank you very much. Thank you for joining us. They'll be seeing like 40% year-over-year increases all the time in the future, but right now, commodity prices have jumped by, you know, 20-40% for some sorts of things like this. And so that kind of explains that. Those are my only three for comparisons with questions from last quarter that they're going to make developments on. So that's it for me.

Okay. Thank you, Geoff. We actually have a couple of questions here from a shareholder by the name of Rich. The first one is dealing with the Texas Park. Can you explain why the Texas Park was closed two days a week versus previously being open seven? And is this a permanent change going forward?

Sure. So the Texas Park, when I came in as president of the company. I was briefly the general manager of Texas as well while we looked for another general manager. And we found another general manager about a year ago, a little bit, a year ago at the start of this past quarter that we're reporting. So well over a year now. So what you're seeing is we're now getting to a point where it's been about a year. You won't see comparisons anymore after this quarter for where we were open seven days a week last year and only five this year. That change was made by the new GM coming in. You've seen expenses being cut by this GM. In fact, I think for the quarter, every line that we break out actually was down in Texas in terms of expenses, even though the segment income was down as well. That was entirely due to a decline in revenue, right? All sorts of expenses have been cut. And part of the reason for doing that, or part of the way that was accomplished, is by reducing the number of operating days. Some other companies, public companies, so like our most comparable public companies are not in our animal attraction industry so much. There's one that kind of is United Parks, TRKS. and then other comparables we have are Blake Six Flags and Dave & Lester's to some extent. Those kinds of companies do sometimes break out. Things about operating days, we don't. Our parks are generally open every day except Thanksgiving and Christmas, but sometimes we have days that we're not open for whatever reason. We don't really update that and tell you that we have fewer or more operating days. We don't adjust things for that. We have no plans to do that. I will tell you that in general at Aggieland, about 15%, 1.5% of attendance is on the combined days of Tuesday and Wednesday, which are the days that were closed. And that would be true at our other parks, too. Their Tuesday and Wednesday attendance combined is usually 15%. So about 85% of your attendance in the industry is normally on the five days that aren't Tuesdays and Wednesdays. The reason why you don't close on Mondays is that sometimes holidays are on Mondays, so it complicates the schedule more. Tuesdays and Wednesdays are middle of the week and not common for holidays. I don't know if it'll be something that's done permanently. You've obviously seen that attendance has been down a lot in Texas as compared to the other parks. And even sales, even revenue was down this quarter despite the fact there's higher prices. So the complication from not being open on certain days is an issue for marketing and customer acquisition costs, right? Because even though you might only get 15% on those days, There is an advantage to people being able to come at any time. You know, they can just show up and it's never closed. They don't have to worry about that. So there is some complication to doing that. And there's a good reason why many parks in the industry and why we historically have been open seven days, even though it's generally hard to justify a good economic return on, say, Tuesdays and Wednesdays combined throughout the year. So it's an effort to make a lot more profit at Texas without necessarily having to increase attendance, right? and that decision was made mainly because of the condition that Texas was in a few years ago which you saw I think last year was the first EBITDA positive year and then this year was significantly higher EBITDA than last year. So lately the park has been operating at levels of attendance and sometimes even sales that are in line with not last year but The levels that they were at two, three, four years ago on average. So it's returned a lot of ways to what that was. And yet it is reporting profitability in quarters where it did not historically. So the reason for that is many things, cutting payroll, cutting different expenses in the park, increasing prices, but also there being not those two days being open. So it's trying to get a much lower cost structure, much lower expense structure. There is also an advantage, and this is why you can cut payroll, um there's an advantage because if you're open seven days a week there's a minimum level of staffing that you have to have and so there isn't as easy to schedule people to do office work and everything managers if they are doing work with guests let's say and if they're open seven days a week they're more likely to have to do that right so the least busy days allows a lot of things to be done um that aren't guest facing things on the other days which allows not having to schedule as many hours and things like that so that's the logic behind it it makes a lot of sense that way But I don't know that it offsets the possible marketing problems that it causes by added complexity. In theory, for a lot of parks, it would probably be more profitable to operate five days a week instead of seven. But in practice, I'm not sure if it's a big difference. But obviously, we would show lower attendance, no doubt about that, because all the people who come on Tuesdays and Wednesdays won't definitely shift. Some of them won't shift. So it will lower your attendance and your sales to some extent, though I don't know if it really has a huge effect on your profitability. So I can't tell you if it's a permanent change. I mean, we're looking at it and saying, okay, we can see the expense reductions that there were from it. But on the other hand, you know, although we had higher attendance in general initially, even when we were only doing five days instead of seven, we were doing more people on those five days. That's not the case now. A year later, you can see that. So it may be that it doesn't make sense to do it. And so we'll definitely always be reevaluating that. It's You know, whether those are the best days, whether you should do five instead of seven, it's something that we think about. So I don't know if it's completely permanent, but there are no immediate plans to change it.

Okay, got it. And I know you just commented a little bit on the EBITDA at the Texas part. More broadly, can you comment on EBITDA and cash flow margins and whether you're seeing the type of improvement in the measure against what your efforts are planned to improve them further?

Yeah, so actually I would say in terms of margins and looking at the entire year now, margins are not really the problem. I know that our margins are down this year versus last year for the same quarter, and a large part of that is the heavy blending in of the size effect of Georgia, right? So even if Georgia is only down 500 basis points or something, that's super significant because it's a bigger part of the overall mix of all three parks, right? But you have margins at Texas, even in a Thank you for having me. America Inc, Rebecca McGraw, Geoff Gannon and that is an issue at Texas in that the sales level, right, is very low versus the amount of assets that it has. So it's really the sales turnover, sales divided by assets, that's the big issue. Certainly the park could be profitable and successful with these margins if it had higher sales and higher expenses but not higher assets. So it's obvious from the perspective of, say, Texas or something that large increases in sales even if they also had fairly large increases in expenses so that dollar for dollar we were making more dollars but we weren't necessarily making much higher margins would be fine. I mean a park that's doing what Texas for instance is doing throughout the year in terms of margins is actually fine for the industry for a well-performing park. What is not fine is the sales level versus the amount of assets. That's really low and so that is a problem. I think our goals are always on the side of the return on the capital. And so it's both a matter of how much capital is invested in and what the sales level needs to be to justify that and not purely on the margin basis. I know that we break out the margins, talk a lot about the margins, and that's the thing that you see fluctuating year to year. But these are all now pretty high margin businesses, at least in their stronger part of their season. So I don't know that you need to get your margins from, say, 30% to 50% or something. You know, a good... for a great park like Georgia's name might be 50% and not so good for a park that isn't doing as well might be 30%. I don't think that's just about getting the margins up that way. I think it is really the level of sales and stuff. So you can see, for instance, that Georgia has much higher expenses, but it also has over three times the sales that Texas had this quarter, right? So it's that kind of thing is needing to get sales up, but not necessarily needing to squeeze margins any tighter on that. Having said that, I do think we are getting closer to where we want to be in terms of operating costs that aren't, so not cost of goods sold, but the other parts of it. So our corporate costs are getting to where we want them to be. And I think that certain other things that we break out as other segment expenses, things like that in the parks are also good on those things. I talked about insurance. Insurance as a percent of revenue should be down. This year it was down. Thank you. Thank you. America Inc, Rebecca McGraw, It's not necessarily super short term, but it is something that you're adjusting to all the time. If the overall price level adjusts, then we do have to adjust our prices, but that happens throughout the economy. It's just a lagged effect, and I'm not too worried about that. The much bigger one is the advertising and marketing, which you saw we did cut during the quarter, but I did not cut it fast enough. We had really bad results, like I said, from basically March. and so we saw that and I did not slash those down to you know dramatically at the beginning of the quarter or something so only part of that is what you're seeing in the quarter and that is definitely the area where we have the most problems so return on ad spend is by far the most important thing for driving the kinds of results that we want but I can't guarantee that that would be higher margins as much as it would be that what we're going for is higher returns on capital okay

And the next question from Rich is in regards to new business, wanting to know if there are any new business initiatives on the horizon.

Yeah, so the only new business initiatives really are, if we define that broadly, is we do have a bunch of things changing with marketing. So we do have someone at... Missouri who does work for the overall company but also does work directly in the park there and then we have two employees added in the last added actually just recently in one in Georgia and one in at Aggieland that only do work at that one place which are social media coordinators basically and so that's why we can do TikTok now that's also though that they can do things at the parks in terms of you know we just have more information at the parks about events annual passes you know additional things that we do by producing material internally and then putting it out in flyers and things in the parks brochures so that started and then from that we you know so we have much more investment in organic social media some investment in influencers to some extent too and user generated content kind of encouraging that stuff but most of those initiatives with marketing things are going to happen in the next few months and then you won't really see a lot of the benefit from that probably until the start of the next season because the biggest changes will happen during the off season so the changes that are likely to happen in some of these I should say I can't tell you the exact time it'll happen because they're they have elements to them that might be slower than I think or something so the biggest one that could be slower than I think is digital signage So there'll be digital screens added at all the parks. We've already started work on that but that does involve actually physically putting things in and electrical work and stuff like that. So I don't know exactly when that will happen but it'll be probably around the fall of this year and then you would have those up pretty quickly because they're already doing work on what content would be up on them throughout the parks and that'll be centrally controlled by corporate marketing employees who can change the screens at each of the parks and everything. Redo of website things, which we're in the process of doing, but again, I don't know exactly when they'll be, but probably a couple months. That might be a little bit faster, because it does involve actual work at the parks. And then you have new billboard campaigns, and you also have a new digital, I should say, social media online, a new ad agency, meaning covering meta Primarily Meta and Google, honestly, is our biggest advertising online. So paid ads that we do. So a change in that as well. All those things should happen, I would say, by around November. I would expect, though, you know, we have that in place. And then some of it has been more fast-tracked, I guess, in terms of AggieVamp. So I would say that there's already efforts going on with that stuff right now that should be in place in say the September to October period in Aggieland. And the reason for that is we're doing a promotional campaign in terms of pricing built around the football season there. So we're not doing what we did a couple years ago where we had days where there was actually free admission. but we are doing something for home game weekends so there's about I think that's seven days and I think we're also doing Halloween so it might be eight days total that we're doing which will we want to have some of these things in place already to do that first so that would be the first trial run it's probably it'll be maybe 60 days faster like covering the September to October period in Aguiland and then all the things that we are changing up at Aguiland will also be changed over at the other parks which like I said is mainly billboard campaigns websites digital screens and then we do have social media coordinators in there and that's already doing some stuff in terms of more investment in social media and I would say we'll see either that there's strong results from this new agency which is a specialist in attractions similar to ours of doing this kind of marketing but if we don't have good results from this I think we'll definitely have a big change in terms of probably not doing a lot of paid advertising online at all after after this year. So we'll either have much better return on ad spend this year from paid advertising online or we will stop doing it. And the reason for that is that's by far the highest area of our spend and has the weakest results and is the thing that we do the most externally. It's very hard to manage that level of ad stuff internally at a company our size. So things like billboards and stuff, we pick the billboards and negotiate and do all the creative and all that stuff internally. But something like these ads, you know, have a much higher aspect of both an outside agency doing it and then also they just tend to have poor return on ad spend. That's been the case since I've been here and it was the case before then. It's actually gotten better each year, but it's not good. America Inc, Rebecca McGraw, Geoff Gannon, Geoff McDonough actual ad spend there. Advertising marketing really is not including internal things that we do. That's basically what we pay an agency and then what we pay for actual ads and media buys and things like that. So that you can see is a huge part of our overall spend. We're talking about margins and certainly we would have been better off this past quarter for instance if we basically didn't have that spend or at least we didn't have the digital part of that spend. The billboards are pretty effective but the billboards are a smaller part So the majority, I can tell you, of that number that you see for advertising and marketing, more than half of it has generally been meta. So Facebook and Instagram and to some extent Google. And it is the lowest return I had spent of what we do. And so that would have the biggest effect on margins, and that's most of what the business initiatives are. are focused on these changes. And so they're all tied together that way in that we would like to have redesign of website things at the same time we switch over agencies for all sorts of data reasons and stuff at the same time that we're launching new campaigns and things. But like I said, our season is kind of pretty much over around Labor Day. So... These things will start up at Aggieland first, and then we're not talking about really until November that they start up at the other parks. I think I'll see initial differences right away, but I doubt there'll be a lot for me to report. That will matter a lot in dollar terms because those are extremely slow months for us, November, December, January, even February. So I don't think you're going to see really big results from that that I can talk to you about in dollar terms until March.

And then finally, the last question I have here is in regards to capital allocation. As you continue to pay down debt and continue to have a strong cash position, it seems as though the low float makes buybacks of size pretty difficult. Are there any shifts that you plan on making to capital allocation as this debt structure continues to get paid down?

Yeah, so, I mean, we don't have a plan to pay down debt rapidly or anything, but we do, it is true that our cash will build up because the pay down of the debt, you know, now is going to obviously be slower than we'll be generating cash from that. So you've seen that in terms of, you won't see a lot, I know that our debt-to-equity ratio has technically dropped a little bit, but that kind of number won't drop a lot so much as you'll see higher current assets versus lower current liabilities more often, so a higher current ratio. greater liquidity rather than lower leverage overall. But, you know, if you're generating enough EBITDA and everything that, you know, it's appropriate to have some debt. And so I don't think it's a question of us doing something just because we don't have a lot of debt or that we have a lot of cash on hand. That wouldn't really be why we make the decision. You see that our cost for debt recently has been around 7%. Thanks. So, you know, you have, and that's pre-tax, and so after-tax is lower, obviously, and so we compare that to things like buying back the stock or something. At the moment, we have bought back stock at around this price, so we have, you can judge from that that we believe that if you take, you know, the after-tax cost of the debt at 7%, we think it's a better investment to buy back the stock than say pay down the debt at that level, okay? But that doesn't say a lot about things that drive a lot of shareholder value or something. It just means that that cost is not incredibly high. So it's not something that we would pay down debt instead of buying back the stock unless the stock was very expensive. In terms of the low float, that's true. We did switch transfer agents and that was in preparation for improving things around a bunch of things having to do with Increasing trading activity in the stock potentially for people, just ease of being able to do that, mainly by getting things over from physical things into digital formats and stuff. And on that, also executing some stock buyback things, right? But that's absolutely true that the float is a much lower percentage of our overall Market Captain is at most companies and then many holders or longer term holders. And so it's larger transactions when we get something. It's all wanting to sell half a percent of the entire company to us or something. It's the kind of transaction we normally see. So it's more that than being that we don't go out in the market and buy, for instance. That will continue to be the case, even though I think it'll be better with this new transfer agent. We'll work on that to improve those things. So the buyback shouldn't drop down to nothing. will still have that authorization, which would still carry out buybacks from time to time and are still interested in shareholders who are interested in selling meaningful amounts to the company as long as the price is right. In terms of capital allocation, we have been approached sometimes by possible sellers of parks Animal Attractions, essentially. And we've looked at those. And I would say prior to the beginning of this calendar year, let's say, so like the last seven, eight months or something, we never had situations where I would say the price and just basic initial things was enough to really interest us in looking into it deeper. In the last, since January, there have been a couple, like, you know, maybe literally two cases where, okay, it made sense on paper. And so then it's just a question of, all right, is management going to stay on or not? Is there other management that you can get? What's the structure of financing the deal? What is the overall sorts of things about the qualities of the business and things like that? But it made sense in a dollars and cents way. And we had not had any... Thank you very much. Thank you. Before this year, I'd say there was not even things coming to us that we were interested in just from a pure point of how much EBITDA they had and what kind of price they want and stuff. We could just say immediately, no, we're not really interested in looking at this. That's not been the case this year. so that is different I don't know why that is exactly if there's I mean it's a very small sample size so it could be pure luck it could be something in the economy and whatever just enough time has passed since COVID when these kinds of businesses were really flush with generating a lot of cash and people just looking at possibly selling or it could be you know very possibly just higher interest rates and things meaning that there's interesting deal possibilities and that has been the case there have been interesting possibilities in the last in this year and there weren't before so that's the only other thing that I would add and that is significant because there's sort of a minimum size of what would probably make a lot of sense and if you look at the cash that we have on our balance sheet it isn't necessarily a lot more than what you would than the kind of deal we would like to do so although it may look like now or pretty soon that we'll have hey we might look to shareholders like we have you know excess cash and everything That may be true if you don't do acquisitions at all, but one acquisition means you have no excess cash. You know what I mean? So that's the kind of deals that we would be looking at would be kinds of things where, you know, the question between a yes or no would be the difference between we've got cash and what do we do with it? And we don't have a need for anything other than this deal. That's a clear way of using the cash that we use up basically all of what we consider the cash we have available to use. So it really is a... The difference there is really just a size of one deal. I do think that we do look at that and we have seen more potential that way. It just can't be done at a dribble. We can buy back stock in a small way every quarter and not have a big effect on the cash, but we either do a deal or don't and it'll be several million dollars if we do one.

I think that's what you're going to see.

I wouldn't expect some big change in terms of us trying to America Inc, Rebecca McGraw, one deal sized amount of cash on the balance sheet. I think that would be appropriate.

Okay, terrific. At this time, I don't see any additional questions coming in, so I don't know, Geoff, if you have any final remarks that you'd like to close us out with? No, I think that's it for me. Thank you all for joining us this afternoon for today's earnings call. We hope that you all have a nice afternoon. Take care.