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 speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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 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 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 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. Second, 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 our 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 attraction scheduled to debut this season will generate higher demand and more frequent visits among passholders 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…

Thanks Richard and good morning. I'll start by discussing our first quarter results before wrapping up my remarks with updates on our balance sheet and the current state of our long lead indicators. As Richard mentioned, due to the highly seasonal nature of our business, first quarter operations represent only 5% to full year attendance and net revenues. And as such, results in the period are not indicative of performance for the remainder of the year. With more than 80% of our adjusted EBITDA generated during the third and fourth quarters, full year performance is much more dependent on attendance during the peak summer months and during our high-demand events in the fourth quarter, such as FUN [ph] and WinterFest. For comparison purposes, operating days in the first quarter totaled 161 versus 130 days in the first quarter of 2022. The increase in operating days reflects the strategic initiative to expand the first quarter operating calendars at three of our seasonal parks, Carowinds, Kings Dominion and California's Great America. These incremental operating days were offset in part by the effects of the highly unusual weather at our California parks, which led to park closures on multiple days during the period. During the first quarter, we entertained 1.1 million guests and generated net revenues of $85 million compared with attendance of 1.5 million guests and net revenues of $99 million in the first quarter of 2022. The decreases in attendance and net revenues are attributable to the weather challenges during the quarter, particularly at our California parks, Knott's Berry Farm and California's Great America. Unseasonably cool temperatures, and record precipitation impacted demand at our two California parks and 30% of planned operating days in the quarter, including seven days when Knott's was unable to open. The weather impacted days resulted in…

Thanks Brian. Today, we announced two strategic actions authorized by our Board and consistent with our long-term capital allocation strategy. First, we declared a quarterly cash distribution of $0.30 per unit to be paid in the second quarter, continuing our focus of paying an attractive and sustainable distribution. Second, having recently exhausted our initial $250 million unit repurchase program authorized last August, the Board has approved a new authorization to repurchase units in the open market or through privately negotiated transactions up to an additional $250 million. We believe units of Cedar Fair represent an attractive investment opportunity, and we will continue to be opportunistic with repurchases going forward. The new unit buyback authorization, combined with quarterly distribution payments, gives us increased flexibility in returning capital to unitholders and driving sustainable value creation. Our quarterly cash distribution and renewed repurchase authorization underscore the Board's confidence in the company's long-term growth prospects and the resiliency of our business model, which has generated significant free cash flow over a long period of time. These actions also reflect the Board's recognition of the steady, measurable progress we are making towards reducing net leverage to our target of three to four times adjusted EBITDA, while fulfilling our objective of consistently investing in our properties in order to generate incremental organic growth. Near-term, our strategic goals are simple; one, drive annual attendance back closer to pre-pandemic levels with a specific near-term focus on restoring demand within the group channel. Two, continue to grow guest spending through a combination of pricing, premiumization and technology enhancements designed to extend length of stay, increase transaction counts per guest and improve average transaction values. Three, create a sense of urgency to visit among our guests through targeted messaging that increases consumer awareness about our parks' broad collection of rides,…

Thank you. Your first question comes from James Hardiman from Citi.

Hey, good morning. Thanks for taking my question. So, I think the weakness in the first quarter, I mean, it was just a brutal run of weather that you guys had. I think it's pretty well understood. I know you're sort of easing back from post-quarter updates to a degree. But is there anything you can tell us about April? Did weather get any better during the month of April? And did you see any sort of commensurate pickup in visitation that tells you -- helps answer the question that I think everybody is trying to figure out, which is excluding the weather impact, is the consumer ultimately going to show up this year?

So, James, good morning. Thanks for the question. Yes, I think the weather in the West Coast in particular was well telegraphed. I agree with you. In April, I would tell you that California dried out, the East Coast got a little wetter. But what we did see during April is that return of -- the start of the return of the group channel and in particular the youth group. We saw youth come back in April. Largely, the trends remain the same. We continue to see strong per caps. We continue to see mid, high single-digit increase in our season pass sales price. And in particular, what I'm pleased with, Brian mentioned in his remarks, the add-on products. We continue to see strength in All-Season Dining, in particular, within the add-on channel. So, Brian, anything you want to add?

Just some additional color, James, on April. As Richard said, trends largely the same from first quarter, not only the positive trends Richard noted, but weather still was a factor as he mentioned, less in California, now more in the Midwest and the East. And in total, I would tell you, again, about a third of our operating days were impacted by weather in April. What remains, I think, the most important thing is the fact that even after April, you're still looking at probably a little more than 90% of full year attendance of revenues is in front of us. So, nobody would like to get off to a slow start, but it's really what we're going to do over the balance of the year that's going to drive the full year results.

Got it. And then secondly, as we think about pricing, maybe if you could just take a few seconds. There's a lot of chatter about price reduction that's, to your point, the walk-up pricing, which I know is a minuscule piece of the mix. But maybe just contextualize that for us. And more broadly, it sounds like single-day ticket pricing is up mid-plus, season passes are up mid to high. It seems like this is setting up for a year where per caps will be up nicely. I know what we oftentimes can't see are the impact of mix, right, a number of different types of mix. But maybe walk us through how to think about mix. And is there anything that would prevent what appears to be significant pricing increases in the individual types of tickets that would prevent that from meaningful per cap growth for the year? Thanks.

Thanks James. Let me jump in here and say -- I'll let Brian comment on the specifics. But very broadly, we've encouraged our business intelligence team to really lean into dynamic pricing. So they're trying things all the time. We move prices and we encourage them to move prices, hundreds, if not thousands of times during the year across our 13 sites. So, part of what you're seeing is the testing of where the edge of how we can drive as much as possible. And as we've shown in the recovery of the pandemic, our ability to really drive pricing and yield that into per capita gains along with increase in attendance, weather excluded, has been the key to our driving topline revenue growth.

Yes, James, just maybe on some more specific level, to your question about Cedar Point, the park did pull back its front gate price from $85 to $80. As you noted, very small -- less than 2% of Cedar Point's tickets are sold through that. And the move was done more from a marketing and promotional perspective to get to a cleaner price for some of the promotions that we typically run in the spring time. We do a lot of cross-promoting between the sister parks, Michigan's Adventure to the North, King's Island to the South and the $80 price fit a little bit better for that. So, it's not an effort to pull back pricing. In fact, as you noted, we're leaning in on pricing, and as Richard mentioned, dynamically pricing the web price. And that's where the majority of tickets are sold. So, I think to your comment on mix, that always plays out. And specifically what we've seen so far year-to-date as we've commented, season pass is up 7%. But if you look at the individual park level, you're going to see increases that are probably closer to double digits. It's just right now with Knott's being a little slow, that's one of our higher-priced passes in the system. So, that's dragging that average down. But we're really pleased with what we're seeing out of the market's reaction to the price increases in each one of the markets.

Got it. Just to clarify, is there any reason to think that there would be a significant shift either in the direction of season passes or in the direction of single-day ticket as we think about 2023? It's way too early to know for sure. But anything that you're pushing in one direction or the other?

No, I would say that our approach on pricing is very consistent with what we had last year in both of those. Some of the single day ticket increase that we were able to generate last year was the outcome of unplugging some of the discount channels that we had in place. That's gone now. So, now we're looking at really pure increases. I wouldn't say there's anything that's a demonstrative shift. Ultimately, at the end of the day, the -- as you know, the percent of season pass of the overall attendance can play a bit into that admissions per cap. But as you know, it's way too early in the season to know where that's going to land. We've got a window of time here still in front of us where we sell a lot of season passes, and so we're focused on that first and foremost.

Makes sense. Thanks guys and good luck.

Thanks James.

Your next question comes from Thomas Yeh.

Thanks so much. I wanted to dig a little bit into the record per cap this quarter and follow up on James' question on pricing. It sounds like, Brian, from your last comment that whether or not only impacted the season pass unit sales but the mix of past pricing because California trends higher. Could you maybe just put into context how any of the new initiatives around past years that you've introduced, how that is seeing adoption? And what are you seeing there in terms of the early changes on potential per cap uplift from there?

Yes, sure. So, you're correct, Thomas. As I just mentioned to James' question, when we talk about things at the monolith level and we talk about these averages, some of the underlying truth get a little bit lost. And what we're pleased with is the push in each one of our markets to get high single-digit increase in season pass, pricing is being received well, as are some of the other evolving changes in season pass, which would be things like the new prestige pass. Very limited, it's only in three of our properties right now, but the guests' reaction and reception to that new product has been very strong. What pulls down, as I mentioned, not only Knott's Berry Farm being soft, one of our highest pass prices; but Canada's Wonderland is having a fantastic year to start in terms of season pass sales. And it's one -- it would sit towards the lower end of the pass spectrum. And so that's impacting the average price a bit. But the recovery in terms of units, we're very pleased with what we're seeing out of Canada in their response to pass sales.

And just to clarify Brian's comment, Canada's Wonderland gets translated in foreign exchange. So in U.S. dollars, it lowers the mix, even though they're functional in Canadian dollars, they're priced appropriately and similar to our U.S. parks. But at $0.74 on the dollar we just get less credit for when we factor it in.

Got it. Makes sense. And then just to drill down a little bit more on the season pass revenues, I think you cited that there's been an increase in revenue recognition per season pass visits this quarter. Is that driven purely by the pricing, is it safe to assume? Or is there anything changing around the assumption you're making about the attendance for those passholders through the rest of the season?

No, it's a bit -- we're always moving and making the appropriate adjustments to draws on season passes and the related all-season products. So it is tied to both price, but also anticipated visitation patterns. So based on what we saw last year at each one of the parks, we'll adjust from time to time. But nothing significant, Thomas.

Okay, great. And if I could just squeeze one more on costs. On the planned higher headcount this quarter, I think we start to lap some of those increases in 2Q. Any color around expectations for just staffing levels compared to last year? It sounds like consumer health is still there. As we get into kind of the full operating season, how should we think about -- maybe as the operating days normalize, how we should expect the wage piece to kind of fit in?

Yes, I'll break it into two pieces. Our comments on the call about some of the cost increase in Q1 related to anticipated increases in some headcount or the benefits related to that, to your point, that's sort of a year-over-year Q1 incomparability that we'll start lapping here. Last year, if we flash back to where we were a year ago, and we were bringing back some of the positions, a great example, group sales, right? While group sales was unplugged during 2020 and 2021, and there wasn't much business. We saw a lot of attrition and a decline in those staff across our system. We began bringing those folks back on to the team, filling those open positions during the first half of 2022 to be prepared for going into 2023 and what we thought was going to be a very strong bounce-back year for group. So we're seeing that start to lap. The first half of the year still has some incomparability, but we'll see more of an apples-to-apples comparison as we get into the second half of the year, for that as an example of some of the full-time pressure. As it relates to seasonal, as we said on the call, very pleased with what our teams in the field have been able to do in terms of reducing hours on a per operating day. We continue to look for efficiencies. I thought we got much better at that over the course of the 2022 season as our teams got used to the new tools and just got smarter, right, I mean, as the season went on. As we go into 2023, we feel very confident in terms of where we're at from an early season staffing model. The pipeline for new hires and filling those seasonal positions has been very strong. We're going to continue to try and use that to our advantage to manage and keep rate -- average rate down. As we noted, 2% down in the second half of 2022 versus 2021. We'll see how the rest of this year develops, but we feel really good about where we're at on a seasonal staffing basis from the pipeline, but also our ability to manage the hours and the rate associated with seasonal labor.

Thank you so much.

Your next question is from Mike Swartz.

Hey, guys. Good morning.

Good morning, Mike.

Maybe just to point on that last question as we think about hours, and I guess just in terms of labor costs, how we think about hours in the system versus average wage rates for this year. Is there any general parameters to think about? And I know some of this hit in the first quarter harder because of the extended calendars in certain parks. But just on an annualized basis, how should we think about it?

Yes. So I'll take a step back for a second, and I want to hit a point that you referenced there. First quarter is a little bit of an odd quarter for us. While we look at our business and the operating cost structure is variable, and we have the ability to adjust labor up and down, as I was just mentioning in response to Thomas' question, particularly seasonal labor up and down to better meet or marry with the demand levels that we're seeing on a daily basis. First quarter is very different. First quarter is much more of a fixed cost structure for most of our parks. Setting Knott's Berry Farm aside, what we did, as we mentioned on the call, carve out a lot of variable costs as we weren't seeing the demand levels that we would normally have expected sans the weather. Most of the other properties are preparing to open. So all of those costs are fixed. The maintenance, labor, the seasonal labor, the kids in the park, cleaning the parks, getting ready to open. There's very little that you can pull out of that without putting at risk your ability to open. So, first quarter is a challenging quarter from the standpoint. When revenue wasn't there at a park like Knott's Berry Farm, there's little that we can do at the other properties to help offset that. As we look at the rest of the year, Mike, and we think about labor again, I'll just emphasize, we feel really good about where we're at from the flow of applicants and our hiring process that, that's going to allow us, we believe, to keep average rate really tied to where it was in 2022. We will -- if we have to flex up in some markets to feel hard to fill positions like security, or lifeguards, to name a couple, we'll do what we have to do with rates very surgically and specific job classifications. But we feel really good where we're at from a rate perspective. And then any hour pressure is going to be associated with more days in the system like we saw in the first quarter, right? We added days at those three seasonal parks. But with added cost comes added attendance and added revenue. And so when we're adding hours, it's going to be specifically to generate more revenue and not just adding hours for the sake of hours.

Okay, great. And maybe just splitting hairs, but if we kind of look at the operating days in the first quarter where weather was cooperative. Is there any way to think about how attendance trended during those days?

Yes, I will say that what we've seen the start of this year and the first quarter is that when weather has been good, demand has been solid. We were very pleased with the expanded operating calendars at the three parks this year. And when weather was good, the demand was there. What does happen sometimes, and we've seen this definitely in Knott's Berry Farm, long or prolonged bad weather sometimes takes more than just one or two days of nice weather to sort of overcome, right? People have seen it rain for the last three or four days, you finally get a couple -- or three or four weeks. You finally get a couple of nice days. We might not be the first thing they're going to come and do. So you really need a stretch of some nice weather to start seeing a new trend. But what I would tell you is when weather has been good, demand has been very solid.

Yes, Mike, it's Richard. I'll go back to -- take you back to on that point. When we added the days for WinterFest starting in 2016, 2017, 2018, it does take a while for us to train the markets that were back open. January, February is not a time that a park like Charlotte or Richmond was open. So we're really pleased with the solid performance on the decent weather days and think that this is sort of a tradition. And as we get season passholders and others to understand that will be open, one of the encouraging things I thought was that we saw a nice mix for the park between season pass and demand tickets even in January and February. And that tells me that both people knew, but the season passholders were bringing their friends. And that's a good thing for us in January and February in those markets.

Thank you.

[Operator Instructions] The next question comes from Ricardo Chinchilla.

Hey, guys. Thanks for taking the question. I was wondering if you could comment on your strategy towards the refinance of the first lien notes that it's currently outstanding. And maybe some commentary on, how you guys are envisioning the capital structure going forward?

Yes, Ricardo, it's Brian. What I would say, and as we said on the -- during the call, I mean, we're pleased with where the balance sheet stands right now, where the capital structure sits there's no near-term maturities. The 2025 notes that you referenced, those are on our radar. And we're going to look to be opportunistic but we have runway. There are still two more years on those. So we're not going to -- there isn't a sense of urgency that we have to do something right now. We want to remain opportunistic when the market conditions are right to address those. I would say, as Richard mentioned, the goal continues to be to work leverage down back into that three to four times adjusted EBITDA range. We think we're on the path towards that as we showed at the end of 2022, finishing the year with net leverage right around the high end of that. We want to continue to see that work its way south below four times. That will probably be done through a combination of both growth in the business and potentially taking out some more debt. But from a capital structure perspective, we feel good where we're at right now. The cost of debt is -- at least on a relative basis, is inexpensive compared to where the market is today. And so we're going to enjoy that while we can.

Thank you very much for taking my question.

You’re welcome.

The next question comes from Eric Wold.

Thank you. Good morning. B. Riley Securities. So I guess a follow-up question kind of on pricing. It doesn't -- from your comments around average pricing on season pass is kind of running up double-digits ex-Knott. It doesn't sound like park pricing and the whole is really a concern for consumers. But maybe as you've done some of these revenue management, both in and outside the park, are there any points where you found specific pushback or adverse reactions or maybe certain items or areas where consumers may be hitting their limit or hitting the wall on pricing? Or you don't think you're there really anywhere in the parks and still have room to go in to take prices higher?

Eric, good morning, it's Richard. Regarding the health of the consumer and certainly, we've gotten those questions lots over the last year as people try and interpret. I would tell you that those who are coming are spending healthily. We obviously got impacted by weather. But once they get to the park, we've seen no slowdown in what they want to spend and what they want to spend on. It's broad-based. If we are highly concentrated in one area and we saw others trailing off, we certainly would make adjustments. But our revenue management team is watching both parking inside -- park -- pricing inside the park, but also with admissions. So we're watching it closely. But again, I'll go back to 1 point I mentioned before. We continue to see strength, and this is year-over-year strength for several years in the All-Season Dining, in particular. That's been a really solid program for us. It just shows that I think the consumer right now has a deep share of wallet. Our target customer, again, it's mom with young children, mom has the wallet. And we continue to focus on the quality and making sure we're providing the experience that gets them to the park that's appealing. But then once they get there, give them plenty of opportunity to enjoy what they've told us they're willing to spend money on. So I think all in all, I would go back to the resiliency of our business model at a high level. I think that's what we're proving out once again.

Got it. And then just a follow-up. Other than labor, I know I touched on earlier, any parts of the park or the operations you're still seeing inflationary pressures continue to move higher this year that you may need to kind of address or things starting to kind of level out versus last year ex-labor?

Yes, it's Brian. I would say that there's still inflationary pressure across much of the business. But much like we are seeing with seasonal labor, that pressure is moderating from where it was. So whether you're talking about something like utility costs or insurance costs, there still is some inflationary pressure but not nearly as much as it was in 2020 or 2021.

Got it. Thank you.

Your next question comes from Barton Crockett.

It's Barton Crockett from Rosenblatt, and thanks for taking the question. I was curious, just given this poll that you're starting in with the season pass sales units, there's ever a historical kind of precedent for season pass sales starting off unit-wise down like this and attendance able to shrug that off and season pass sales able to shrug that off and end up positive for the year? Is there any example of that happening?

Yes, Barton, it's Richard. Thanks for the question. Yes, we've got lots of history that would tell us that once you get into the meat of the season, you've got an ability to make this up. I'll go back to last year, even in the fourth quarter. Now, we had a spectacular weather October. But when we drove, we drove both demand tickets and season pass sales in that window. We heard -- I'll remind you, 2022 by a rainy Labor Day, which is where we lost a few season pass sales. But to your question, we've got lots of examples of having slow starts and then really coming on strong during the meat of the summer. This is where our cyclicality and the seasonality of our calendar is very different than maybe others in the space. we really are as we keep reiterating a back half company. And with some dry weather, we believe we can generate the momentum we need to really carry the day through the rest of the year. The other thing that, when I look at history, we're recovering in the group channel to a significant degree. We were able to recover in history with same-store sales on the group side being similar year-over-year. So I do think the comeback of groups is a great tailwind for us right now.

Okay. And then it seems likely that you guys would have a meaningful opportunity to kind of sell more season passes as the attendance wraps up for the Memorial Day holiday weekend. Just wanted to confirm, I mean, does that look like a next really big shot on goal for you guys? And do you expect all your parks to be up and fully operating for that weekend?

Yes, in terms of opening, Barton, I mean, all the parks are, as Richard noted in our prepared remarks, on pace to get to those seven-day a week operations over the next few weeks. Your point is a really good one, right? I mean, as I said on the call, we're going to do close to one-third of our full program sales around season pass in the months of May and June for the exact reason you just mentioned. Season passholders often are buying in advance of that first visit. And so what's been challenging is -- and one of the frustrations, quite honestly, is while Knotts has struggled weather-wise, we haven't had many of our other parks in operation to start making those sales and having those first visits and so that all starts to change over the next couple of weeks. Cedar Point opens tomorrow, as Richard noted, Canada's Wonderland, which has had a couple of weekends of private events, will be opening to the general public. So there's a lot of excitement and energy as we're going into May, and our marketing teams are laser-focused on selling as many passes as possible over the course of over the next, say, 8 weeks.

Okay. Great. Thank you very much.

Thanks, Barton.

There are no further questions at this time. I now turn the call back over to Richard Zimmerman for closing.

Thanks to everybody for joining us and for your continued interest in Cedar Fair. This is an exciting time of year for our team as we look forward to welcoming back our guests for another fun-filled season. For the analyst community, in early June, we will be participating in two conferences, Morgan Stanley Inaugural Travel & Leisure Conference on June 5 in New York and Stifel Cross Sector Insight Conference, June 6 and June 7 in Boston. If you are attending either of these events, we look forward to seeing you there. Michael?

Thanks again, everybody. Please feel free to contact our Investor Relations department at 419-627-2233. Our next call will be in August after we release our 2023 second quarter results. Sydney, that concludes our call today. Thanks, everyone.

Thank you. You may now disconnect.