Good day. Thank you for standing by. And welcome to the Cedar Fair Entertainment Company 2021 Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question-and-answer session [Operator Instructions. Please note that today's call is being recorded [Operator Instructions. I would now like to hand the conference over to your speaker today, Mr. Michael Russell, Corporate Director of Investor Relations. Thank you, sir. Please go ahead.

Thank you, Stacy, and good morning to everyone. Welcome to our 2021 second 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 Web site 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 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?

Thank you, Michael, and good morning, everyone. We appreciate all of you being with us today. On the call today, we will focus our remarks in three specific areas. As usual, we will review our year-to-date 2021 operating results, including the performance of our parks during the quarter, as well as a more recent look at operating trends in July. Second, we will provide an update on our business optimization program, which is well underway. And lastly, I will conclude with some comments on our outlook for the business and why I'm so confident in the future of Cedar Fair and our ability to emerge from this crisis stronger and better positioned for growth and value creation. Let me begin by saying I'm very pleased to report all our parks are now open and the 2021 season is off to an excellent start. We came into this season focused on the same strategies that drove our record performance in 2019. We are delivering a high quality guest experience, while offering more immersive events to complement our world class attractions. The continued execution of our strategy has produced strong results, highlighted by the following performance trends. First, we are generating strong volume at all our properties, confirming pent-up consumer demand for travel and leisure activities, especially outdoor entertainment. Second, we are seeing new highs for in-park per capita spending with our guests showing a strong propensity not only to spend but to spend more across all product categories. Third, we are driving sustained sales of advanced purchase products, such as season passes and all-season products, with our total number of season passes valid for the 2021 season now exceeding the record number purchased for the 2019 season. And finally, guest satisfaction scores continue to trend towards historical norms at most of…

Thanks, Richard, and good morning to everyone. I'll begin with a discussion of our results for the second quarter before moving on to an update of our July performance trends. But first, I need to remind you that given the effects of the pandemic and operating calendars and park operations in both 2021 and 2020, results for the second quarter and six month periods are not directly comparable. Because we suspended park operations in mid-March last year and had very limited operations during the second quarter of 2020, I will also provide more relevant comparisons to 2019. In the second quarter this year, we had 393 total operating days compared with 39 operating days in the second quarter of 2020 and compared to 726 total operating days in the second quarter of 2019. For the six month period, our parks had 393 total operating days compared to 129 operating days in 2020 and 827 operating days in 2019. As reported in our earnings release this morning, net revenues for the second quarter totaled $224 million versus $7 million in the same period a year ago. The increase in net revenues was attributable to an increase of 354 operating days in the period, resulting in $3.4 million visit increase in attendance and $35 million increase in out-of-park revenues. Attendance in the quarter represented approximately 70% of comparable same day 2019 levels with much of the shortfall the direct result of early season capacity limitations, as well as the expected slower recovery of the group sales channel. Excluding pre-booked group business, attendance from the general admissions and season pass channels during the quarter approximated 80% of comparable same day 2019 attendance levels, indicative of the pent-up demand we anticipated on reopening. Meanwhile, in-park per capita spending in the quarter totaled $55.94, which…

Thanks, Brian. Looking forward, let me echo the confidence and optimism Brian just expressed about our business over the remainder of the 2021 season as well as long term. We are confident that our team is up to the task of continuing to successfully execute our initiatives and build upon our momentum, ensuring we are delivering the high quality guest experience our parks are known for and offsetting the effects of current macro factors that weigh on the performance of our business, such as inflationary pressures and labor constraints. Next, let me address our outlook around capital allocation. I want to reemphasize that our near-term capital allocation strategy remains unchanged. We are focused on responsibly investing in our parks, reestablishing growth in the core business and paying down debt to return our net leverage ratio back inside 5 times adjusted EBITDA as quickly and responsibly as possible. Longer term, we are committed to getting net leverage back down within our historical range of 3 to 4 times adjusted EBITDA. As Brian mentioned, although our distribution currently remains suspended due to covenant related restrictions, our Board is committed to reinstating a growing sustainable distribution. With the effects of the worldwide pandemic aside, our company has shown over the decades that competent execution of our flexible and resilient business model can generate the excess levels of free cash flow needed to consistently invest in our business, while at the same time returning capital to unitholders. Underlying the sustainability of that success is our commitment to investing in and continually enhancing the overall guest experience, which has become the hallmark of Cedar Fair's regional parks. It is the primary driver behind our continued growth in season pass sales and overall attendance, and the reason why guests visit our parks multiple times throughout the…

Your first question comes from James Hardiman from Wedbush Securities.

So hopefully, this won't go off the rails. I know it's always a little bit dicey when we try to do math in real time here. But I wanted to run through a couple of the numbers. Obviously, significant that July was, I think, 85% on a same-park basis. You gave us that number excluding group sales, which was 95% I believe. Both of those numbers included Canada's Wonderland, and I think you know where I'm going with this. So Canada's Wonderland, excluding that, it was 90%. I'm assuming that still includes a group sales number. So I guess what I'm getting at is if we wanted to adjust for the group sales piece is at that same 10% and we're basically comparable to 2019, excluding both Canada's Wonderland and the group sales piece.

Yes, I would say your math is directionally correct. The group business, we said early on, just like in prior macro events, the most disruptive is the slowest to recover. And as we evaluate how we're trending this year, we know it's hard to make up for lost business in group in the spring in earlier season. So a lot of those outings are just that time of the year and while we can shift some of it -- and we have seen some positive momentum in that channel. We're looking at the business as we said sort of group to evaluate how we're doing within season pass and general admission. And that's about right, it's about 10% gap from that group business.

And then the other big topic is obviously what's going on with respect to labor. I thought the number you gave us is really helpful that the seasonal labor rate is 40% higher versus 2019. I guess a couple of questions on that. As we think about -- I mean, obviously, that's sort of a gross number before we factor in, offset in terms of labor hours. I guess is there any way to think about total labor inflation, whether on a percentage basis or even better on a dollar basis versus 2019, given those two offsetting factors and whether you want to do it? I guess it would be helpful if we could think about both this year, the remainder of this year but then also 2022 where I think, correct me if I'm wrong, the way you set up some of these bonuses, maybe the gross number is a little bit less than that 40% as we look to next year.

James, it's Richard. Let me first start, and then Brian can weigh in on the specifics of your question around the numbers. On the labor front, listen, we're very pleased that with the -- as I said in my remarks, with the reaction in each of our regional markets to being the market leader, we generated the kind of staffing levels that we needed to be able to return to a more normalized operating schedule. So we're really pleased with the quick response. So I'd start there. Second, again, I'll reiterate part of the reason we created the business intelligence function was really focused on workforce management. I'm really excited by the tools that we're putting in place and the way the teams -- the park operating teams are using them. So it's good to see that we can provide more tools when you see an element of our cost structure that seems to be escalating. And lastly, on the staffing front, I'll just reiterate how proud I am of the team and all the good work they're doing, providing a high-quality guest experience with increasing NPS scores week over week in one of the toughest challenging -- most challenging environments I've seen in the over 30 years I've been doing this. So my hat's off to Tim Fisher, our Chief Operating Officer and the teams in the field who are, I think, are really doing tremendous work. Brian, on the specifics of the numbers?

James, just to provide a little bit more color around those numbers. That 40% is reflective of the rate adjustments we've taken as well as the anticipated impact of those incentives for associates to stay on. There are definitely, as you alluded to, some offsets that aren't reflected in that, whether that be subsidies we're receiving in a market like Toronto or the labor hour reductions. So that overall rate impact is not flowing all the way to the bottom line. In terms of hours, as you would imagine, part of the reason why we're paying the rates we're paying is because it's been challenging, as Richard said in the call to get the numbers of associates and fill all the seasonal positions. So we're down in hours in part because of that. So we're also down in hours because of efficiencies the operators are mining and identifying throughout the season and as well as changes that we're making to operating calendars. As you may recall, we have five parks within the system right now that aren't operating five days a week as we try and maximize attendance up against those staffing challenges. And so parks like Valley Fair, Worlds of Fun, Dorney Park to name just a few, are operating four or five days a week versus seven. So all of those things net down to a much less of an impact percentage-wise at least our outlook for the balance of the year. However, at the end of the day, it's very dynamic and where the balance of the year goes rate wise, staffing availability wise, we still have to continue to manage.

Let me ask it this way, if I may. In the context of the $50 million of EBITDA enhancement, I think the last time we spoke you thought about $15 million of upside to revenue and call it, 300 basis points of margin expansion. Has that algorithm changed? Should we think about -- and obviously, you're sticking to the $50 million. So should we think about maybe more on the top line and less margin expansion to still get us to that same $50 million number?

Yes. As Richard said, James, in his comments, we continue to adjust our program and look deeper as we've gotten further into areas like procurement. We're identifying some more cost savings, which has been very encouraging. And I think the team there that we're building out feels very optimistic. That by itself would be very hard to offset the kind of pressures we're seeing in terms of labor headwinds, rate headwinds. And so that's a piece of it. But I think you hit on it, right. Another big part is the advancements we're making around business intelligence. While that team will benefit us on both the cost and revenue side, I would say we are seeing some very quick wins out of them on the revenue side that may change the math behind our original $50 million slightly but we remain confident in our ability to deliver on that in the end.

Your next question is from Stephen Grambling from Goldman Sachs.

I may have missed this in the opening remarks, so apologies. But is there any sense as you think about the strength in per caps? How much of that do you feel like is underlying kind of consumer demand versus any kind of shifts you're seeing in the season passes? And how do you generally try to assess kind of the sustainability of that trend?

When we think about what we're seeing and trying to evaluate the strength of the consumer, we start going back to 2019, which is a record year for us and a record level of per cap at that time. We saw increasing over a really strong 2019 in 2020 even though our operations were disrupted and we're really pleased to get open at 10 of our properties. We saw strength in consumer spending last year in the midst of the disruption. So I think what we're seeing is that back to fundamentally what we believe about the business model, there's a lot of appeal to our product. We're an outdoor experience that can be sampled by and enjoyed by thousands of people on a day. So we see a lot of demand for our product. And I do think what we're seeing validates the pent-up demand but we are seeing a continued strength in spending that relates to some of the things that we put in place, be it the business intelligence function, revenue management function that has really ramped up this year improving. But we're also seeing the payoff, if it will, the benefit of some of the investments we made in 2017, 2018, 2019, particularly around food and beverage, which I hit on in my prepared remarks. This is the continuation of several years of a lot of impact in the food and beverage area, increasing per caps because of the high-quality menu items we're providing, the culinary talent we put into each of the respective parks, the facilities that we've built out over the last few years. So I think what we're seeing now is a continuation of strength that we saw before. Clearly, the pent-up demand, and we've heard the term advanced spending, there is some of that embedded in what we’re and others in the industry are seeing but we're also seeing the continuation of trends that existed prior to the pandemic.

And maybe as a quick follow-up on that. Are you seeing any differences across the parks or geographies? It sounds like it's broad-based. But then are you also seeing any change in the type of consumer, who's showing up in your park? I realize that attendance is quickly recovering, but are you finding that it's a different type of customer who is arriving?

We've not seen that it as a different customer. All of our consumer research shows we're getting -- absent the disruption of the group business, which Brian commented on which we expected and typically in the spring, there'd be a lot of use groups coming. But put that to the side, what we're seeing this summer is guests that look exactly like the guests who were coming in 2019 when we were ramped up at full speed. As I've been walking the midways, been up at Cedar Point, seeing their 150th anniversary celebration parade, the guests that I'm seeing are having a great time and, from a profile perspective, look a lot at who you would expect. Our target audience is mom with kids and families and where they're coming out in droves right now. So we've seen sustained strength. We've seen increasing not just spending, but we've seen strong and increasing tenants levels during the month of July. This is typically -- July and August are two of our biggest months of the year. So we're right in the middle of it. But we feel really, really good about the results that we put on the board and the performance in July.

Your next question is from Eric Wold.

A couple of questions. I guess, one, kind of going back to the last question a bit diving in there. You noted the season pass visitation mix is comparable to '19 at 55% versus 53%, but you got 8% more season pass holders this year versus '19. I guess that implies fewer average visits per pass over. I guess, can you confirm that? I guess, what would be the apples-to-apples increase in single day visitation to be able to drive versus '19?

So as you can imagine, this year, much like last year, the disruption still on the operating calendar is probably playing with some of these metrics. That's why as we compare metrics like season pass mix in '21, we go back to '20, we go back to '19. There's no doubt we have slightly more passes outstanding right now, as I mentioned, about 8% higher than where we were at the same time in '19. Season pass visitation is trending roughly in line with where we would have expected. It is slightly below '19. Some of that related to just the fact that we have less operating days in the current year. As we get into more apples-to-apples, I guess, I'll say on operations, although, as I mentioned before, not all of our parks are open seven days a week as they normally would be in months like July and August, we'll see how that trend line goes. What I can say is we're really encouraged in spite of the disruption in the group channel, which we're confident we can recover the shift in growth in general admission has been significant. And so that's important to us. As you've heard us talk about in the past, things like unique visitor being an important metric for us, continuing to identify more guests that can ultimately get plugged into the season pass pipeline for ultimately conversion up to that higher, better product. We're very encouraged by what we've seen in demand in those other channels. So there's no doubt that some of the use numbers are down a little bit, but not to the point that has us concerned. And we'll reevaluate as we get through the year. We're still leading -- just heading into August and fall is such a huge demand time for our season pass also to come out and enjoy things like the Haunt events. And then for those parks that have the WinterFest events in November, December, those are high-demand season pass times as well.

I know that the push towards season at or towards the single day has been a big focus. So good to see that. I guess second question, obviously, with the goal of moving more parks towards year-round or at least increase the number of operating days at the parks, take advantage of demand. Any additional thoughts when you think about across the entire portfolio, what the total increase in operating days could be versus kind of the pre-pandemic baseline?

We're evaluating that right now. You saw us start to dip our toe into that last year when we opened up some of our parks in November and December. Looking at the Charlotte Park down here, we did a few extra days. We're evaluating what makes sense. I will tell you, go back to 2019, we're very encouraged by the strong first year performance of WinterFest at Canada's Wonderland. So it really said to us, there's a lot more opportunity than we think if we reconfigure how we deliver our product and what the guest experience is. That's the learning that I take away from last year's disrupted operation in 2020. We're able to put on limited duration festivals and events that really kept us connected and engaged with our customer but also had great appeal. So as we think about expanding the number of calendar days, what we're thinking about is what that product looks like on those days were open, how we can configure it and use events to make it special and continue to stay engaged through all four seasons of the year under our Seasons of FUN banner and give people more reason to use their season pass but also more reason to buy the season pass.

[Operator Instructions] Your next question comes from Michael Swartz of Truist.

Just wanted to touch on CapEx in some of your comments and your prepared remarks. I think you laid out about $175 million to $200 million in capital expenditures that you're planning for '22. So I'm guessing or trying to understand, is that a new baseline or does that have some catch-up spending embedded in it? And then with the whole year-round opportunity, would that necessitate a greater level of ongoing capital investment?

As it relates to CapEx, I think we're still committed to our long term goals as we previously noted of getting that investment in the core business back into the 9% to 10% range. It's a little difficult right now with the disruption to the business to look at some of those metrics in the same traditional sense as we had. The planned spend for the calendar year 2022 is still somewhat ahead of that base. And as Richard [Technical Difficulty], we're reactivating several key projects that will pause back in 2020, most notably the renovation of the two year round resorts, Cedar Point, Castaway Bay and Sawmill Creek, both of which we believe are going to play key roles in our strategy of expanding the operating calendar at that park and in that market. So I would say, yes, there is definitely some escalated spend for calendar year 2022 because of some deferred projects or paused projects.

And then just with the thought or maybe plan to go year-round operations, would that necessitate structurally higher spending or anything incremental above the 9% to 10%?

No, we think that 9% to 10% is a comfortable range for what we need to do as we look forward. So no, I don't think -- when you think about the extra days, it's certainly higher CapEx but it's CapEx light, if I could use that term. Obviously, we'll monitor and make sure that we keep the facilities up to their high quality conditions. But no, we think the opportunity to expand the operating calendar is one that we'll see great demand for and have a lot of appeal to our guests, but also something that really is capital efficiency.

And maybe a follow-up, if I may, on -- maybe provide us some color or granularity on what you're seeing with some of your forward-looking metrics, whether that's Sports Center bookings or we're talking about hotels or some of your resort properties. Anything you can give us a little more color on maybe for the back half of the year?

What we've always said, as two leading indicators, Mike, first season passes. We talked about the strength now and in mid-August, we'll go on sale shortly with our 2022 sales. So we'll be able to give you some color on that as we get deeper into the fall. Resort performance has been outstanding. We like what we see in terms of -- and are encouraged by the bookings, but also the asset performance. And that's not just the hotels we have in Sandusky, that's in Southern California, Knott's Berry Farm and even down here, down at Caroline. So we're performing well as we get deeper into the season. So group is something that I think will take some time to rebuild. We talked about that. Although I will tell you we've gotten call from some clients that traditionally come see us in the fall and they're coming back. So we're starting to see a little bit of momentum in the group channel as the phone rings and people think about what they're doing in the fall. Some of our traditional groups are coming back to us. So nothing significant enough yet that I would establish a trend, but I like the optics of what I'm seeing.

Your next question is from Brett Andress from KeyBanc.

First, just a housekeeping. What capacity restrictions are currently in place at Canada's Wonderland,a nd then when do you think that could go full capacity?

They're in Tier 3, I think it is right now, and that's going to -- the government just extended that to August 26th. There's another tier that sits above that. Right now, they're doing numbers that I think you kind of work out the math that would say, they're not yet back to, I think, 75% or 80% of 2019's level. But as I think as we look forward, the trends there on the pandemic side, the vaccination Canada has made great progress on the vaccination front. So we think the health trends are working well as we look at the fall towards us being able to open up to a further degree. Obviously, we're staying close to the provincial government up there and we got a very strong relationship with the health and safety administration up there. And are in constant contact in terms of what we're doing and how we can keep in lockstep with what they're seeing as well. So we get the latest information on the health side.

And then it seems like the guest experience is getting better and better each week, but just to put a little more color on that. Are you back to 2019 levels at this point, and I guess, what kind of gap do you see that you still have to fill? And then last question, if you take a snapshot in the most recent week or the last few days, have you seen any noticeable impacts from delta? It doesn't sound like it, but I just wanted to check the box.

Let me take the first question on what we're seeing in terms of NPS. I will tell you, we've seen in some respects what I would expect to see. The parks where we've had Grand Carnivale, Kings Island in Cincinnati, here at Carowinds, saw a nice pickup in NPS, not just the guests really responded. And what makes us feel really good about our longer-term strategy is that the events are driving both our performance but also higher NPS scores as people come out and experience the event. So we're not yet back to 2019 but we're closing the gap. And then we think as we get into the fall with our traditional Halloween event, I think that's also another way that we can close the gap. Brian, do you want to take the second one?

Yes, Brett, in terms of the most recent performance, I can't say that we've seen anything demonstrative. I will tell you this last week in terms of when we look at like volume and demand, one of our probably top three or so in terms of the comparatives against those same-day 2019 attendance levels. So highly dynamic situation. A lot of the news that we're all seeing out there is maybe coming out of markets that we don't have parks in, and we're just going to -- as Richard said, we're going to have to wait and see how our markets in the state and local authorities in those markets react, and we'll have to adjust accordingly. But so far, there's been nothing demonstrative in terms of any impact to the business and the demand that we're seeing.

Your next question comes from Paul Golding from Macquarie Capital.

First, a housekeeping question. Are any of your parks currently on a reservation system still or have they all come off, I guess, except for Canada maybe?

Canada is on a reservation system. The rest, for the most part, are not on. We're going to continue to monitor the demand. But for the most part, Canada is the place where we've got the tightest restriction.

And then with respect to the 2022 CapEx plan and sort of guided expectation there, I guess, I'm trying to think about how much of that is locked in versus susceptible to fluctuations based on whether the supply of materials is available or the supply chain for some of the new attractions or maintenance CapEx just out there. Just trying to get a sense of how locked in that is versus maybe still early in the process, maybe gets pushed into '23 or could see some price inflation even from there? Any color on that would be great.

Yes, I would say that we're seeing like every other business, Paul, supply chain challenges. But as we think through our cycle and getting parks ready for opening next year, again, we will come out with our announcements around all of our new opening product. I won't steal the marketing team's thunder in a couple of weeks here. But when we look at the product lineup, when we look at our commitment to food and beverage, I think you'll see the spend start to concentrate in the spring and summer as we get into the 2022 capital. And then like we see every year, we'll start spending and we'll start constructing things for the '23 season in the second half of the year. So once we get down to weekend operations this year, we'll keep working on '22 product. But then as you get into the middle of '22 and we've opened up all that product, then we'll start working on '23 product.

There are no further questions in queue. I would now like to turn the call back over to Mr. Richard Zimmerman for closing remarks.

Thank you, everybody, for participating in today's call and especially for your interest in Cedar Fair. We hope to see you at one of our parks yet this season. In the meantime, please be well and have some fun. Michael?

Thanks again, everybody. Should you have any additional questions, please feel free to contact our Investor Relations department at (419) 627-2233, and we look forward to speaking to you again in November after releasing our 2021 third quarter report. Stacy, that wraps our call for today. Thanks again, everyone.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.