Cedar Fair, L.P. (NYSE:FUN) Q1 2022 Results Earnings Conference Call May 4, 2022 10:00 AM ET
Michael Russell - Corporate Director, IR
Richard Zimmerman - President and CEO
Brian Witherow - EVP and CFO
Conference Call Participants
Eric Wold - B. Riley Securities
Ben Chaiken - Credit Suisse
Chris Woronka - Deutsche Bank
Stephen Grambling - Goldman Sachs
Steve Wieczynski - Stifel
Paul Golding - Macquarie Capital
James Hardiman - Citi
Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Cedar Fair Entertainment Company 2022 First Quarter Earnings Call. Today's conference is being recorded. All lines have been placed on mote to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]
I'll now turn the call over to management. Please, begin.
Thank you, David, and good morning, everyone. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to today's earnings call to review our first quarter results ended March 27, 2022. 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 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 you joining us for today's call. Our prepared remarks this morning will be focused on the following three areas. First, I'll provide an overview of our operating results and early season performance trends through May 1. Second, Brian will review our quarterly financial results in more detail and provide additional color on drivers of our revenue growth and the steps we are taking to manage operating costs and expenses and expand our margins. Finally, with the remainder of our parks opening over the next few weeks, I will close with a summary of our outlook for the 2022 season.
Let me say at the outset, we are very pleased with our strong early season performance, which included establishing a new record high for first quarter revenues. We are also encouraged by the strong trends in our key long lead indicators, such as resort bookings, season pass sales, advanced sales of other all-season products and tournament bookings at the Cedar Point Sports Center.
Heading into the second quarter, reservations at our resort properties are trending well ahead of pre-pandemic levels, while event bookings at our sports center remain very strong. Meanwhile, sales of season passes and related add-on products, such as all-season dining and beverage, are up meaningfully over 2019 levels at the same time.
Historically, early season strength within these revenue categories has served as a reliable indicator of full year performance and the effectiveness of our sales and marketing efforts, something we see as critical as we enter the most important stage of our season pass sales life cycle.
For the first quarter, we had five parks that had opened for the 2022 season. Positive early season results, led by Knott's Berry Farm, our only year-round park generated strong momentum in the first quarter. Let me share a few highlights.
First, net revenues of $99 million set a new high for the first quarter, representing a 48% increase versus the first quarter of 2019. The Second, demand remained strong with park attendance up 24% compared to the same period in 2019.
Third, in-park per capita spending increased 28% over the same quarter in 2019, reflecting a continuation of the strong levels of guest spending we generated across all key revenue channels over the second half of 2021. And finally, total out-of-park revenues were up 12% compared to the first quarter of 2019.
After reporting record revenues in the back half of 2021, we are focused on evaluating every important revenue metric in our business, while also studying consumer trends in the broader market to ensure that we build on the momentum and achieve record results in 2022.
At this early stage, we are very encouraged by the solid first quarter results and are confident that the positive trends through the first four months of the year indicate we are well positioned for another outstanding year in 2022.
Updating our performance through this past Sunday, May 1, net revenues versus the comparable period of 2019 increased 33% or approximately $48 million to a record $193 million. This record four month performance was driven by continued strength in demand and guest spending across all key revenue channels. These are encouraging signs heading into the busy summer season when all 13 of our properties will be open and operating without restrictions for the first time since 2019.
I want to shift gears for a moment and provide more context around the labor environment we are operating in this year, given labor supply shortages and upward wage pressures.
First, I'm pleased to report our recruiting and hiring of seasonal associates this year is improving when compared to the challenging labor market we faced during the 2021 season. Last year, we made the decision to immediately embrace the market structural shift and offer top dollar rates in each of our markets. This pay philosophy was not only vital to our strong second half performance, but it has also enabled us to recruit and staff parks this year from a position of relative strength.
While average hourly rates remain at historic highs, we have been successful in flattening the pay growth curve by reintroducing a wage scale based on seniority, responsibility and job specialization.
We are also, once again, fully participating in the J-1 Visa Exchange program, an avenue to supplement our domestic recruiting efforts that has proven to be very effective over the years.
As we noted on our last call, we anticipate any meaningful increase in labor cost will come less from pressure on rates and more from a higher number of labor hours as our parks returned to full operating calendars in 2022.
Looking at operating costs more broadly. With the rate of inflation at its highest levels in recent memory, we anticipate already elevated labor and materials cost to trend higher for some time, in our opinion, reflecting a more structural shift in the cost environment than a transient one. Therefore, we have redoubled our efforts to mitigate pressures on the company's cost structure.
In addition to the new pay scale, we are taking full advantage of the tools provided by our Kronos workforce management system in an effort to optimize staffing. With improved real-time visibility, we have empowered our park operators to implement incremental labor hour reductions where appropriate, aimed at lowering costs without disrupting the guest experience.
At the same time, our procurement team continues to identify efficiencies through its centralization efforts and cost saving strategies aimed at eliminating non-essential costs throughout the company.
Consistent with our cost management efforts, our business intelligence team is aggressively applying its revenue management and dynamic data-driven pricing strategies, particularly during periods of peak demand.
Last season, these efforts proved to be quite effective in optimizing admissions pricing without materially impacting demand, particularly over the last several months of the year. Since then, the BI team has improved its data gathering and analytical capabilities, while also expanding its focus beyond just our admission products.
Today, our BI team is highly focused on optimizing the performance of our in-park revenue centers, measuring everything from guest spending patterns related to average transaction value to the number of transactions per guest and per operating hour, intelligence that is routinely informing and driving our pricing decisions.
We are optimistic that the combination of these efforts and other planned initiatives give us the best opportunity to drive revenue growth, optimize our cost structure and improve operating margins.
Just as we saw in last year's second half, I'm confident that we are well positioned to maximize the full potential of our portfolio in 2022 and once again validate the strength and resiliency of our business model.
I'll pause here so that Brian can review our financial results in more detail. Brian?
Thanks, Richard, and good morning, everyone. I'll start by discussing first quarter 2022 results and more recent April operating trends before providing an update on the balance sheet and our outlook around capital allocation priorities going forward.
But first, I need to remind everyone that because of the impact of the pandemic on park operations in 2020 and 2021, there's a lack of meaningful data comparisons for the current year quarter to the first quarter of the last 2 years, which is why in some instances, we will use comparisons to 2019 instead.
As Richard noted, during the first quarter, 5 of our 13 properties opened as planned and without restrictions for the 2022 operating season. Operating days in the period totaled 130 compared with zero operating days in the first quarter of 2021 and 101 operating days in the first quarter of 2019, which was prior to our acquisition of the Schlitterbahn water parks on July 1, 2019.
As reported in our earnings release this morning, net revenues for the first quarter established a record for the period totaling $99 million. This represented an increase of $89 million over last year and an increase of $32 million or 48% when compared with the first quarter of 2019.
Our record revenues were driven by increases across all key performance metrics. Attendance in the quarter totaled 1.5 million guests, up 24% or 278,000 visits compared to 2019 levels and compared to no attendance in the first quarter of 2021 when our parks remain closed due to the pandemic.
Meanwhile, in-part per capita spending in the quarter totaled $58.86, a 28% increase compared to the first quarter of 2019. The increase reflects a continuation of very strong levels of guest spending across all key revenue categories, led in large part by spending on admissions and food and beverage.
Overall, guest spending on food and beverage, merchandise, gains and extra charge attractions was up more than 35% on a combined basis in the first quarter compared to the first quarter of 2019. Recall, there was no in-park per capita spending for the first quarter of 2021 due to the suspension of our park operations.
Finally, out-of-park revenues for the first quarter totaled $16.5 million, a $6 million increase from the first quarter last year and nearly $2 million or 12% increase compared with the first quarter of 2019. The improvement over 2019 was accomplished in spite of our indoor water park at Cedar Point, Castaway Bay remaining closed for renovations in the current year quarter. By comparison, Castaway Bay produced close to $3 million in revenues in the first quarter of 2019.
Moving on to the cost front. Operating costs and expenses in the current quarter totaled $171 million, up $73 million when compared with the first quarter last year. This increase reflects a $9 million increase in cost of goods sold, a $54 million increase in operating expenses and a $10 million increase in SG&A expense, all of which were largely the result of an increase of 130 operating days in the quarter.
In addition to the impact of the incremental operating days, the $54 million increase in operating expenses also reflects higher full-time wages related to planned increases in headcount as we slowly migrate to a more year-round staffing model at several parks.
The $10 million increase in SG&A expense was largely due to higher operating supplies, advertising expenses and transaction fees, all related to the increase in operating days in the period.
By comparison, operating costs and expenses in the current quarter were up $34 million when compared to the first quarter of 2019. Roughly 70% of this increase is related to higher labor costs, reflective of the meaningful increases in labor rates over the past 3 years.
For the quarter, adjusted EBITDA, which management believe is a meaningful measure of the company's park level operating results was a loss of $68 million, an improvement of $15 million or 18% when compared with an adjusted EBITDA loss of $84 million for the first quarter of 2021 and comparable with a $68 million adjusted EBITDA loss for the first quarter of 2019.
The smaller adjusted EBITDA loss in the current year period when compared with the first quarter of 2021 reflects the impact of COVID-19-related park closures on our 2021 first quarter results and the related improvement in attendance, in-park per capita spending and out-of-park revenues in early 2022.
The comparable adjusted EBITDA loss for the first quarter of 2019 is the result of higher operating costs and expenses in the current quarter offsetting the record revenue performance in this period.
Shifting focus for moments through April operating trends. As Richard noted, preliminary revenues for the first 4 months of the year totaled $193 million, a 33% increase over the comparable period in 2019. This record 4-month performance was driven by an 8% increase in attendance to 2.9 million visits, a 28% increase in in-park per capita spending to a record $60.42 and a 10% increase in out-of-park revenues to $27 million.
Demand continues to be strong with early season tenants pacing ahead of pre-pandemic levels in our most critical attendance channels. Meanwhile, guest spending patterns, particularly within food and beverage, also remained very strong. The result of our successful initiatives designed to drive incremental transactions and support higher levels of in-park spend.
Through the first 4 months of the year, our total F&B transaction count is up 6% or more than 150,000 transactions compared to 2019, our last full year of normal operations. Over that same time, the average F&B transaction value has improved by more than 25%. We will continue to focus on metrics such as these as we evaluate the effectiveness of our strategic initiatives and look to drive record revenues for the full year.
Turning to our balance sheet at the end of the first quarter. The strength of our performance since reopening our parks at this time last year has allowed us to advance our goal of reducing net debt to $2 billion or less. Last December, we took the first meaningful step in reaching that goal with the early redemption of our 2024 senior notes, which we represented close to half of the COVID-related debt we put on the books back in 2020. At the end of the first quarter, net debt totaled approximately $2.6 billion.
As of the end of the quarter, we had total liquidity of $284 million, including cash on hand of $50 million and $234 million available under our revolver, net of $125 million of outstanding borrowings and $16 million of letters of credit. This total does not reflect receipt of outstanding U.S. federal tax refunds totaling approximately $80 million, which we expect to collect yet this year. The $284 million of total liquidity at the end of the first quarter compares to $420 million of total liquidity at the end of calendar year 2021.
Looking ahead, our capital allocation priorities remain consistent with those we described on our February call. First, continue to reinvest in our core business to drive growth in attendance and guest spending.
Second, pay down debt until we reach our net debt target of $2 billion or less further enhancing the strength and financial flexibility of our balance sheet. And third, reinstate a quarterly cash distribution by the third quarter of this year, if not sooner.
We will also continue to look for additional ways to improve our capital structure and enhance our financial flexibility, including a potential refinancing of our credit agreement later this year.
The trends in our long lead indicators remain very encouraging as we look to the remainder of 2022. As Richard mentioned, sales of 2022 season passes and related all-season products remain strong. Through this past week, season pass sales are up $59 million compared to sales of 2019 season passes at the same time. The strong year-over-year performance has been driven by a 22% increase in units sold and a 10% increase in the average season pass price.
Meanwhile, sales of all season add-on products are up $17 million versus 2019 levels over the comparative time frame. These strong results, along with improved resort and group bookings and increases in advanced single-day ticket sales helped push deferred revenues up $36 million or 18% during the quarter.
As of the end of the first quarter, deferred revenues totaled $234 million compared to deferred revenues of $198 million at the end of 2021. In terms of labor, the early indicators have also been favorable. As Richard noted earlier, because of our decisive actions taken last year to establish market-leading pay rates at our properties, we believe this year's seasonal labor cost pressures will be due to planned increases in operating hours and less the result of incremental pressure on rates.
Planned operating days for 2022 are projected to total roughly 2,400 while planned operating hours will total more than 23,000 hours or nearly 60% higher than in 2021. While the increases in operating days and hours will result in higher labor costs in 2022, those incremental costs will be more than offset by higher levels of attendance and guest spending over the additional operating hours.
In 2021, our average seasonal labor rate was a little above $17 per hour. Through the first 4 months of 2022, our average seasonal library is trending 2% to 3% higher than last year's average, including the impact of strategic rate increases we've already taken to several parks due to early season staffing challenges.
We will continue to monitor and manage our labor situation closely, but we feel confident that we are in a better position at the majority of our parks heading into the peak season than we were at the same time last year.
Finally, we've decided to extend our practice of not providing formal short-term or long-term financial guidance. While we have the highest degree of confidence in our long-range strategic plan to grow and perform at peak levels in the post-pandemic period. Based on the seasonal nature of our business, we believe there is better value in updating the market more frequently on actual performance trends.
As such, we've opted to focus on transparency and to update the market on our progress throughout the busiest and most pivotal parts of our operating season. We will do this by reporting on the most recent performance trends as part of our quarterly earnings announcement, including updated information through the first 4 months of the season, as we did today, and through July and October, as part of our second and third quarter earnings announcements, respectively.
We will also issue interim releases containing updated performance trends that include the weekend celebrating Memorial Day, July 4 and Labor Day. Collectively, our more frequent reporting methodology will provide the market with an updated view on our business nearly as quickly as we can assess the significance of those results internally.
With that, I'll turn the call back to Richard.
Thanks, Brian. This is an exciting time of the year for us as most of our parks are only weeks away from ramping up to full 7-day operations. For those keeping track, all but 6 of our parks have already opened this season, and this Friday is opening day for 2 more parks in Cedar Point and Dorney Park. Meanwhile, reopening in 2 days is our freshly renovated Castaway Bay Hotel and Indoor Waterpark followed by the June 13 reopening of Sawmill Creek.
We believe our resort properties serve as demand multipliers for our parks, and we cannot wait for our guests to experience our fully renovated properties. Yet, our renovated resort properties at Cedar Point are just two of the many improvements planned for the 2022 season as part of our $200 million to $215 million capital program.
Headliners this year at some of our other properties include an expanded and upgraded Safari Village at Kings Dominion, featuring the addition of Tumbilli, Virginia's first 40 spin coaster and the Park's 14th roller coaster in total, more than $60 million in upgrades to our parks food and beverage offerings, including brand-new locations like the Farmhouse Kitchen and Grill at Cedar Point and the Lazy Bear Lodge at Canada's Wonderland, as well as updates to additional facilities and systems designed around meeting evolving guest expectations and driving incremental in-park spend.
We are also introducing an expanded events calendar across our portfolio of parks, highlighted by upgraded versions of our wildly popular Grand Carnival celebration our Halloween theme special events and our one-of-a-kind WinterFest events. And with great pride, it's our golden celebration at Kings Island with special summer long festivities designed to celebrate the park's first 50 years.
I would remind you that over the past several years, we have made significant capital investments by beyond the addition of traditional new rides and attractions. Meaningful investments in food and beverage and other in-park guest enhancements, as well as the adjacent developments such as our resort properties and the Cedar Point Sports Center, broaden the appeal of our parts and support incremental guest attendance and guest spending.
I am pleased to say that in all cases, these investments have produced strong near-term financial returns, as well as long-term strategic benefits. We are extending that same investment strategy to our newest assets, the two Schlitterbahn parks, which we see great potential for in 2022 and beyond.
It's truly impressive watching our park teams meticulously prepare our properties for opening day and then maintain those facilities all season long as if each day was opening day all over again. Thousands of ride operators, chefs, groundskeepers and performers serve important roles in their own special way, all to deliver the best day experience our guests have come to expect with each visit.
Through the commitment and dedication of our associates, we have maintained a strong connection to our customers as we recovered from the pandemic. Our record performance in the second half of last year's abbreviated season put us solidly on track to achieve our near-term strategic priorities. We are encouraged with our fast start this year and are optimistic that 2022 will be a continuation of the great progress we have made in the pandemics way.
The strength of our recent performance and our optimism for the upcoming season underscore our confidence in our long range strategic plan, which is aimed at producing record-breaking results and driving unit holder value. Along with our Board, our management team will continue to explore additional opportunities to create value and deliver upon our strategic commitments of improving our capital structure and reinstating a sustainable and growing cash distribution.
David, that's the end of our prepared remarks, please open the call for questions.
Thank you. [Operator Instructions] We'll take our first question from Eric Wold with B. Riley Securities. Your line is open.
Thank you. And good morning. I guess two quick questions. I guess, one, on the 130 operating days versus 101 on the comp over '19, was there any calendar shift there? Or is that all purely additional operating [ph] date that you added yourselves?
Hey, Eric, it's Brian. Yes, that actually is a - the incremental days is a combination of a few factors. It's incremental days in the period coming from the Schlitterbahn properties, which we didn't own in the first half of 2019. And it is some calendar shift, some of which are incremental days that we programmed into the system.
Got it. And then on the season pass trends that you're seeing, any way to kind of characterize the demographic profile shift that there isn't any kind of who is buying a season pass now versus what you saw pre-pandemic? Are you seeing stronger spending from that base? Are you reaching further distances away from the parks? Anything you can glean over by kind of optimism on the ability to monetize it and that base versus before?
Eric, it's Richard. Good morning and great question. What we're seeing, whether it's in the trends we're seeing, what we're seeing when we - when I walked the park last Friday, I was at Kings Island for their 50th anniversary celebration. And the guests that I see, everything that we see says we're attracting more of the similar type of guests that we've had in the past. We - as you know, we track season pass both the sales, but also the spending in park. We don't see anything that's not in keeping with our broader trends.
So we continue to see season pass as one of our pivotal programs. It's the foundation of both our tenants and revenue growth. When the season pass orders are coming, their spending is very healthy when they're in the park. And again, as Brian said and as I think I said in my prepared remarks, for us, we're doing everything we can to broaden the appeal of our product. That's bringing in all age ranges and all types of demographics, so...
Got it. Are you seeing any sense just in terms of the reach, which is the kind of maybe the distance from the parks getting wider than it has been in the past? Or is it staying the same? You're just kind of [indiscernible] it further?
A little early to tell for that, Eric. When you look at our spring attendance, it's heavily anchored by - on the group side, use groups, things like that. So it's not until you get to the summer that we draw a traditional leisure traveler, and that's where we really extend our reach. It's a little early to take a read on that given the limited number of parks that are in operation and what typical profile of our spring attendance looks like.
Perfect, helpful. Thank you, guys.
Thank you. Next, we'll go to Ben Chaiken with Credit Suisse. Your line is now open.
Hey. With the increase in operating days in the quarter versus '19, is there anything we should consider on the admission per cap side? I guess, for example, did that put any type of pressure either up or down? I guess what I'm considering is maybe more operating days, allowing more opportunities to first season pass customers or maybe a higher mix to Schlitterbahn, which presumably is a lower per cap, I would think. Just anything you would call out if there is something to?
Yeah, Ben, it's Brian. I don't know that necessarily the operating days increase will be - or was a big headwind in terms of per caps. I think your point on the Schlitterbahn days, Galveston is the smaller of the two parks, and that was the part that was opened in Q1 and added the more incremental days to the period. It has a lower per cap than maybe some of the other parks that we're operating like [indiscernible] as an example.
But generally speaking, I would say that as we said in our prepared remarks, we're extremely pleased by the guest spend trends that we're seeing, very consistent with and building off the momentum we established over the second half of last year. There are always going to be accounting wins, whether they tailwinds or headwinds in some of these interim periods, but nothing of material note to call out in Q1 of 2022.
Okay. Great. That's helpful. And then it sounded like from the release or is my interpretation, it sounds like you're going to be - you're thinking about bringing the dividend back sooner than maybe last quarter.
I guess how are you thinking about sizing? I know there's $100 mil - I think there's $100 million restricted payment basket limit above 5.25%. I guess I'm asking that question under the assumption that you're below that leverage level?
Yeah. So you're correct, Ben, in terms of the basket. There's a general basket that caps restricted payments, which distribution payments falls under at $100 million, as we said in our prepared remarks, the focus is on getting the distribution reinstated. I think if you look at the last time that we had a disruption in the distribution when we came back, we came back at an annualized rate of $1. That doesn't mean that will be the case necessarily this time we'll spend time with the Board over the next month or two discussing where we want to land ultimately. But I think the focus is on coming back out with the distribution that's sustainable and can grow from whatever that reinstated rate is.
Got you. And then just throw in one last one quickly. Within 2Q itself, just historically speaking, is April normally a higher per cap month versus May and June? Or is it in line? Or is there no discernible - how would you think about it?
You know, historically, what you see earlier in the season in terms of guest spending is honestly lower per cap relative to the peak season, shorter operating hours. As Richard mentioned, some of the earlier attendance is group. That could be school groups in the spring. You also lean a little bit more towards season pass, while a season pass holder definitely spends more over the duration of the season on each visit, probably a little bit less than what you see a single-day visitor spending on a long July, Saturday or June Saturday.
And so I think what you tend to see our per caps grow as you get deeper into the season. And then certainly, they're very strong per cap as we get into hunt [ph] in this late September, October operation. So spring tends to be lower than the core summer season.
That's super helpful. Thank you very much.
Next, we'll go to Chris Woronka with Deutsche Bank. Your line is open.
Hey. Good morning, guys.
Good morning. Follow-up question on kind of labor. What percentage do you think you have kind of locked in or accounted for peak summer? Just trying to get a sense as to visibility. It sounds like you're pretty confident in terms of the cadence of the wages and number of hours. But just how much of that do you think is kind of accounted for at this point?
Eric, I don't know that I'd give you a percentage, but I think as we get into a 7-day operation, we feel much better about this year versus last year. Two things that are really helping us. We talked about the wage rates that we - the market with last year. We've got a base of rehires that we didn't have going into last season because - 2020 was so disruptive.
So you've got the returning hires. They're already trained. They move up into supervisory roles. We feel really good about that. We've also got now the impact of a lot of what we did last year with the - what we're calling the full-time flip, where we're taking some seasonal positions and migrating them to more part-time year round, more full-time status.
But the other thing that will help us once we get into the summer, and we alluded to it in our prepared remarks, is our full complement of J1s coming in. That's a 90-day Visa program. Typically, it supports our Memorial Day to Labor Day operation at the parks where we most heavily invest in that, most notably here at Cedar Point.
So we've got a couple of markets that as Brian alluded to, that we're watching our couple of job classifications within certain markets. But all in all, compared to last year, we're in much better shape, and we're reasonably confident that we'll be able to put on the guest experience that we want at our parks as we get into 7-day operation.
Okay. Very helpful. And then I think you guys have already laid out the capital plan for this year. But can you maybe tell us what you're seeing in terms of inflationary pressure on the hard dollars in that in terms of some of the equipment and the rides going to that?
And is that - I know you're not going to talk about next year yet, but is that something that is substantial enough that we have to think about a bigger step increase next year?
No. Well, I think we'll provide more a look at that as we get into the summer in terms of what the dollars are. But as I think about what we're seeing, we've been able to manage through, and I think our design team, our construction guys in the field have done a really nice job, particularly in some of the renovation projects of substituting one material for another, do things that because of supply shortages had let us keep on to the schedule. We're no different than any other business. As we build things out, there's - everything has got a number of components in it, and we're grappling with the supply chain challenges just like everybody else.
I think when we look forward, most of the things that we've contracted for in the next year or two from the ride side from the attraction side, you've always got to be 24 months out or so. So we know what those look like and are working with the ride manufacturers.
Clearly, there's been an uptick as there's a certain number of slots and spots with ride and attraction manufacturers. Those are quickly being filled as the strength of the recovery becomes apparent.
But on the other projects, whether we're building a food and beverage stand, it is no different than being in the construction business in the general housing market. We've had to kind of work our way through.
But I'm excited about the plans we've got for '23 and '24 as well. We don't think - we think we've got an ability to manage through any cost pressures on that number. But I'd say what we have said before, it's more challenging to get the same value out of it, but we've got a way to manage through it.
Okay. Very helpful. Thanks, guys.
[Operator Instructions] Next we'll go to Barton Crockett with Rosen Black Securities [ph]
Okay. Great. Thank you. It's Barton Crockett. And thank you for taking the question. I wanted to ask two things. One, I'm curious about your view on the degree to which your ability to grow per caps can exceed inflationary cost pressures.
I mean, that's been kind of the classic question is to what degree can you pass on higher cost in the same park industry, and you had this impact per cap 28% above 2019, a lot of noise around kind of labor costs right now. How do you feel about that kind of generally looking over from what you can see over the course of this year?
It's always tough to answer that question in a very small window of time. But as I look at the broader landscape look not only just at '22, but '23 and beyond, we've always been able to pass along price increases that are at or exceed the level of inflation. That's why margins pre-pandemic or at historic levels.
We've always been able to make sure that we tap into the demand. I think the resiliency of our business model is what's showing through for us and others in the industry. So I have a lot of confidence in the appeal of our product, the NPS scores we're generating and what that allows us to do in terms of both maintaining the relationship with our customers, which I've characterized as a lifetime generational connection, but also be able to pass along increases. So over time, we think we can raise revenues and outpace the cost pressures.
Okay. And just, I guess, to follow up on that, 28% per cap growth, I mean, it seems like that might be a lot faster than your labor per unit kind of cost inflation. I mean is there a chance that maybe that relationship is larger than normal in terms of pricing leverage relative to costs at this juncture? Or is it just too noisy to even go there?
Hey, Barton, it's Brian. As we said in our prepared remarks, that per cap growth was fueled by a couple of things. As Richard noted, we are certainly taking price where we feel we can take price. But it's also a laser focus on transaction volume. A lot of the investments we've made over the last several years to improve capacity at our food locations to improve efficiency is all focused on driving more transactions.
So I'd say longer term, as we get deeper into the season, it's Q1. And so it's often tough to take the trends in such a short sample size and extrapolate those over the full season, but we're very confident and pleased with the trends we're seeing so far. And we will certainly continue to price behind the demand and try and outpace, as Richard noted, those cost growth curves.
Okay. And then if I could, just to switch to the dividend. The - I'm just curious if you can provide any markers on how we should think about your appetite for dividend payments as a percentage of free cash flow, which obviously is skewed by the environment, but there might be a normalized view that you can talk to, I think, historically, you guys have had of you and curious if there's any kind of update you can provide to that?
And then on top of that, just more broadly, to what degree structurally are you guys kind of required to pay out dividend even if maybe the environment is such that the value of that is less because of high inflation, decreasing the value of yield assets. Do you have any kind of ability to kind of use a judgment call on the value to shareholders around that? Or is it really just kind of a structural, if you have the cash, you have to pay it out because of MLP?
Barton, I'll take the second one first, which is, as an MLP, we're required to distribute all available cash flow as defined in the partnership agreement. So the distribution is one of the central tenets of the investment thesis and the entity being an MLP. So that's - we think about it more versus, as you put it, more like maybe a REIT thinks about it and your first question is, is there a percentage we're tied to. There's not. We're going to have that conversation with the Board as Brian indicated.
But I'll take you back up to our stated goals. We want to get down to $2 million net debt. That factors into how we look at the capital structure. And Brian and the team are looking heavily at what the next several months look like and when or if we may want to address our capital structure in terms of possible refinancing. On the backside of that, I think we'll have a clearer view of the path forward as to what is - what level gives us a sustainable and growing distribution.
Okay. All right, that’s great. Thank you very much.
Next, we'll go to Stephen Grambling with Goldman Sachs. Your line is open.
Hey, thanks. A few follow-ups here. I know you previously gave some targets on kind of permanent cost out through the pandemic and some of the learnings that I think you had kind of totaled a $50 million-ish. I guess any updated thoughts on what that looks like and any ability to quantify that any offsets from the labor inflation that you're alluding to?
Yeah, Stephen, it's Brian. So the $50 million target that we laid out at the outside of the pandemic was really an optimization target that was partially to be achieved through cost savings, but also some revenue enhancement to ultimately drive that $50 million EBITDA lift.
As we said on the last call, I think looking back, it was more heavily weighted, maybe as much as two thirds cost savings and about a third revenue. Now where we find ourselves in this inflationary environment, as you noted, the heavy pressure around labor, that may have pivoted significantly, all right? The inflationary environment has also given us a lot of opportunity to price into the product.
As Richard noted in his comments on the call, we've seen great traction out of the BI group there. And so I think how we - we get to the ultimate $50 million target is probably going to look very different than how we envision it out the shoe.
We continue to make great strides on the cost side, but a lot of those efforts at this point are really about trying to flatten the broader cost curve than they are, maybe the efficiencies we thought a couple of years back when we set that target originally.
Got it. So it's - the $50 million maybe is more strength in per caps in revenue less cost because of labor inflation, but still get into that 50%?
Yeah. We are certainly finding places to take costs out of the system. A great example, right, all of our parks going cashless this year. It's taken a lot of seasonal labor out. There's a lot of costs, as you would imagine, handling cash, preparing cash.
It's also been a big driver in the early going around per cap growth that's helping drive that per cap growth to a much more efficient transaction using credit cards and other digital forms of payment versus cash. So one example of an initiative that's benefiting us both on the cost savings, but also the revenue generation side.
So we're going to continue, as we noted in the call, to use our BI resources, as well as our centralized procurement team to mine more cost savings. There's a number of initiatives that the procurement team has in motion right now that are focused on those permanent cost savings, whether they be savings in areas like utilities or just centralizing supplies on the maintenance and operating side of the business.
That's helpful. And then as we look at the season pass strength year-over-year or even versus 2019, is there any way to split that out between price and volume, as we think about what that might mean for the season ahead?
Yes. We noted on the call, the - we're on pace for our target in terms of season pass price lift. You may recall in the last - our February call, we commented that we were targeting north of a 10% increase. And right now, we're pacing right towards that. We're at 10% as we go into this peak sales cycle and continue to use, again, those business intelligence capabilities to dynamically price even products like season pass.
So we're seeing price lift, but we're also seeing units up north of 20% through the - this past week in terms of season pass unit sales. Important, though, to maintain that momentum, right? As I mentioned, we're going into the window of a peak sales period here as we get into May and early June. So there is a lot of units that typically move over the next four to eight weeks. So it's going to be critical that we maintain the momentum that we've established in terms of season pass sales volume.
And one last one, which maybe you've alluded to in the past, but I just want to make sure I'm clear on this. On the Casavacay [ph] and Sawmill Creek, renovation expansion, how are you generally thinking about the ROI or incremental EBITDA from those investments?
Typically, for new rides and attractions, we're always targeting ROIs that are in that mid-teens to upper teens. When it comes to our resort properties, much like other hotel operators, that might be a slightly lower target. But these properties and their proximity to Cedar Point give them huge advantage over maybe a hotel like the SpringHill Suites at Carowinds for us.
They're both year-round properties. And so we're confident that as we get into a full year of operation this year's returns may be a little bit muted by the fact that it's only a partial season here in '22 with Casavacay opening here in a couple of days and Sawmill in a few weeks.
But we're excited about the potential to improve upon the pre-renovation, pre-pandemic operates [ph] and ADRs at both of those properties. We've seen significant lift in ADRs and operates at our other renovated properties like the hotel breakers or the Cedar Point Express Hotel in past renovation. So we're very confident in the potential and the returns on these investments for both of those properties.
And Stephen, one thing to note, and we touched on our prepared remarks, the increased bookings and trends at the Cedar Point Sports Center, one of the attractive features of having so many hotel rooms in the Sandusky marketplace around Cedar Point is that we get to tap into that demand.
Pre-pandemic, the Cedar Point hotels were the largest booker of rooms from the sports center, as you would expect. Sawmill Creek was second back in pre-pandemic. So we're really excited by the year-round nature of our resort portfolio here at Cedar Point, driven by the sports center, which, again, we invested in with our partners, Erie County and City Sandusky.
All helpful. Thank you so much.
Next, we'll go to Steve Wieczynski with Stifel. Your line is open.
Hey, guys. Good morning. So Richard, in the release, used what I would describe a very interesting adjective to describe your revenue growth this year, which was the word compelling. And I understand you aren't going to give guidance, but that adjective can mean a lot of different things to different people. If my wife came on and said, hey, I only spent 1% more of the grocery store, that's compelling to me, but 1% growth for your business probably wouldn't be compelling to a lot of investors. So I'm just wondering if you could help us think about what compelling means to you.
Yeah. Compelling to me means we are continuing to maintain that relationship to the customer. We're building upon our strength of drawing demand, which is both attendants driven, but also in park spending. We're building and broadening our appeal as we touched on. So we see and I see all good things in terms of the trends and the indicators now.
So I keep going back to the strength and resiliency of our business model for us and the industry. I don't think we've always gotten credit for it as a company or as an industry. There is other industries like the ski resort industry gets more credit for the recurring nature of their season pass program. I don't think the market has always given us credit in particular.
There's that base as we know, last year, season pass attendance was 55%. When you package in our advanced bookings and other sales on the web, we're close to two thirds to three quarters of our admissions revenue already sold before anybody walks in the gate.
And I think there's a compelling nature to the appeal of our product, and there's a compelling nature to the business model that I don't think we're always getting credit for. So that's how I think about compelling, Steve.
Okay. Appreciate that. And then the second question, maybe a bigger picture question around the economy, and there's clearly some fear out there at this point around the potential slowdown with the economy or consumer spending.
And I guess, wondering if you could maybe give us a little bit of a history lesson about how your business has performed in tougher times, whether that's around the overall economy, whether that's related to gas prices, inflation? Or however you want to answer that would be helpful.
So this is good question. Let me go back to what I was just saying about the strength and resiliency. We've never been able to - we've always had a great deal of appeal regardless of environment. And there's always been a view that for our company and our industry, when things get a little tougher, when we are in recessionary times, people won't take the longer trips. They may not go international, but they stay closer to home.
Go back to '08, '09, that's when the staycation term came into vogue. And I think when times are good and there's a lot of discretionary income in the market, people may have other choices, but some of our middle to lower end customers get to trade up even though we may lose the higher-end customer to a trip to Orlando or again an international trip or whatever they may do.
I do think that one of the trends we're watching, it was a question earlier, are people going to travel further for experiences that they want. That was what the research suggested was happening during COVID. We're going to watch that now.
But from a historical perspective, our industries, both pre-pandemic as we recover from the pandemic has posted higher revenue numbers, higher margin numbers. There's a trend line that over the course of time, almost unbroken in terms of the performance of us or others in the industry.
So that return to historical trend lines has always been something that I think has validated the performance of our company. And I think that in every slowdown, we've come out of it stronger and better and found ways to retool our business, make it stronger and more efficient.
So from our perspective, I don't see anything right now that says that there's not a great desire to go out and do experiential things. I think we're well positioned. I think the consumer has spent the better part of the pandemic buying goods. Now they're really booking and adjacent businesses are seeing the same thing. The other adjacencies be cruise lines, hotels, others. Bookings look strong this year, and it's not just our sector, I think it's the broader sector.
So I understand the concerns about a potential slowdown given the nature of who we are, the peak demand that we see, particularly in July and August, the traditional vacation months. And given the strength we always see in October with our Halloween events and then take that into Winterfest and the holiday appeal, the back half of the year is always really strong for us. I feel really good about our cycle for '22 and where we are.
And I think, once again, what we'll see is even if there is a slowdown, we have tremendous appeal and the recurring nature of our revenue stream, the loyal customers that come back generation after generation, I think, really fuels our growth.
That's great color. Really appreciate it, Richard. Thank you.
Next, we'll go to Paul Golding with Macquarie Capital. Your line is open.
Thanks so much and congrats on a strong start to the year. I wanted to dissect the single-day proportion of attendance a bit more. Just wondering if you could give any color on how single day is contributing, what kind of pricing power you're seeing there or expect to see there?
And anything you can say around how you're acquiring that customer? Is it costing you a bit more to acquire that single-day visit as we look at the SG&A line? Or how third-party channels may be abating. Just anything around that? Thanks so much.
Yeah, Paul, it's Brian. As we said on the call, we're seeing strength out of the most important channels for us. Richard noted season pass, always an extremely important channel because it represents more than half of our attendance. But that single-day guest is also critical.
And we're seeing good growth there, both in terms of early demand. Again, it's a small sample size, right? First quarter, 5% or so of the full operating days. So have to take that with a grain of salt.
Pricing, though, much like we saw last year, where we got very aggressive and started using some of the momentum that we had around demand and our BI capabilities to dynamically price. That's always a ticketing channel that provides great opportunity for dynamic pricing, and we're seeing that in the early going.
As we mentioned on, I guess, maybe the last couple of calls, how we're selling to those folks is definitely a lot more efficient these days. One of the silver linings of the disruption from the pandemic was the unplugging of a lot of the third-party ticketing channels, and that's given us more control over our pricing and our ticket distribution. It also gives us more data on the consumer, right? More of those ticket buying decisions and transactions are flowing through our e-commerce portal now versus third-party partners like grocery stores and fast food restaurant chains, et cetera. So having more of those folks come directly through us is a much more efficient and profitable transaction.
In terms of how we're reaching them. I think like we said last year, we got - the pandemic made us get a lot more aggressive around the digital marketing approach and move away from some of those traditional mainstream advertising channels. I don't think we're going to - they'll always play some role, but I don't think you'll see us go back to anywhere near the weighting that was the historic approach, maybe 75-25. I don't know that it's quite flipped to the inverse, but it's probably darn close. And so a lot more efficient, a lot more nimble in terms of how we're marketing to guests in '22 than how we marketed to them back in 2019.
Great. Thanks. And then just a question around in-park experience. You mentioned in terms of optimization, the going cashless across the footprint. But I was wondering if there was anything else in terms of in-park experience, whether digital or otherwise, that would be new or you may see as being more meaningful this season with a full roster versus last season as guests get ready to go back?
Paul, I will say - and I touched on my prepared remarks, the $60 million we were spending this year fully a third of our capital without - if you take the resort properties out is incredibly impactful. We see it both in the increased transaction counts. We see it in the ability to service more customers more and more the focus that we started several years ago on food and beverage, putting executive chefs and su-chefs [ph] a lot of culinary talent in all of our parks is paying off handsomely.
It's also meeting our guest expectations. The evolving guest expectation is that food and beverage is now a bigger part of the experience. They want better quality food. They want to be able to access it more quickly.
So from my perspective, I think I wouldn't underscore several years' worth of building facilities from a capital standpoint, streamlining menus, all that stuff. We are working on in several parts, the mobile ordering aspect from the digital. There's more for us to do there, but it's been well received, where we rolled it out on a test basis.
So we continue to look at all those things. But most notably, in park, I'd focus on food and beverage. There's other opportunities, but going cashless is one piece. We had done that in our games operation prior to that. But now going fully cashless really is speeding up transactions across the system.
Thanks so much.
Next, we'll go to James Hardiman with Citi. Your line is now open.
Hey, good morning. So most of my questions have been answered. I wanted to hone in on a little bit of the math here. I think we probably had a similar conversation after the fourth quarter. But attendance was up 24%, which is a great operating base up 29%. Obviously, some people want to do that sort of attendance per operating day, which would actually be down, but it seems like that's problematic as well, right, because all operating data are creative [ph].
So I guess the question is, do you think like-for-like or same-store attendance is up, down or flat versus '19? Or is there any way to think about the bump that you got from parts that didn't exist, which would be presumably 100% additive as opposed to days added to existing parks where there would probably be a lot of cannibalization.
Yeah. James, it's Brian. I understand the question, and you're exactly right. I mean, not all operating days are created equal and not all parts are created equal, right? So as I mentioned earlier, some of the incremental operating days in Q1 '22 relate to a park like Galveston, the Schlitterbahn part there, smaller park on a relative basis.
So the addition of those kind of operating days will certainly pull down an average that is largely driven in prior years, historical year numbers like 2019 by not Berry Farm, right, much bigger on a relative comparative basis.
In terms of the attendance, I think you need to sort of break it apart into the pieces. We're extremely pleased is what we're seeing out of season pass visitation. We're very pleased as well out of the single day, what we call the general admission channel. And the one channel that's recovering, and we've talked about this in the past, it's always the slowest to recover is group.
But we are seeing good momentum in group. It's recovering, I would say, faster than what we would typically see in an economic disruption, the pandemic, very different than an economic disruption where the motivations for visiting are more budget constrained driven than they are what we saw this past year around protocols, health protocols, et cetera. So I'd say on a comparative basis and the numbers I think sort of speak to this, the attendance trends in '22 are extremely strong relative to 2019.
Got it. And then last sort of follow-up for me. 24% attendance growth through March, 8% through April. In isolation, that seems like a deceleration, but it occurs to me that the calendar has probably also normalized to some degree.
So is there any way you could give us sort of the operating days through April versus '19? Or has attendance actually accelerated since the end of the quarter?
So your operating days in the month of April are generally consistent. We talked about 29 incremental operating day. In the first quarter, we pick up three in April. So you're up 32% through the first four months of the year. I agree with you the math, I think what you're going to start seeing, right, is it's a little bit of a law of big numbers.
As you get deeper into the season, the trends are, at least from a percentage perspective are going to start coming back down, right? I mean that incremental 29 days weighs much more heavily on first quarter than it does on four months and then, et cetera, right, as we continue it out.
But it's also - we're starting to get back to James, as you and I talked about over the years, you start to get in a month like April and a lot of our focus was on more traditional macro factors like weather. We certainly saw some weather in some of the early spring openings at parks beyond just not. And so that's frustrating in the moment. But after the last 2 years, I think we all will welcome worrying about rainy weekends versus pandemic disruptions.
Just to clarify, the 32 incremental days through the first 4 months, what's the base on that? I'm just trying to figure out a sort of percentage increase versus '18?
It's about a 15% increase. We had 221 operating days through the first 4 months of '19 versus $253 million through the first 4 months of this year. And that's May 1st. So when I say 4 months.
Perfect. Perfect. That really helps. Thanks.
There are no further questions at this time. I'll now turn the call back over to Richard Zimmerman for any additional or closing remarks.
Thank you, David, and thanks, everyone, for your interest in Cedar Fair. We look forward to visiting with you by phone or at an upcoming conference. If there was a chance this summer, please consider visiting one of our parks for the thrill of a lifetime or simply having fun with friends. Be well. Michael?
Thanks again, everybody. Should you have additional questions, feel free to contact our Investor Relations Department at (419) 627-2233, and we look forward to speaking with you again in August after releasing our 2022 second quarter earnings report. David, that's the end of our call today. Thanks.
This concludes today's conference call. You may now disconnect.