Cedar Fair LP (FUN) CEO Richard Zimmerman on Q2 2022 Results - Earnings Call Transcript

Aug. 03, 2022 4:36 PM ETCedar Fair, L.P. (FUN)
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Cedar Fair LP (NYSE:FUN) Q2 2022 Earnings Conference Call August 3, 2022 10:00 AM ET

Company Participants

Michael Russell - Corporate Director, IR

Richard Zimmerman - President, CEO & Director

Brian Witherow - EVP & CFO

Conference Call Participants

Steven Wieczynski - Stifel, Nicolaus & Company

James Hardiman - Citigroup

Benjamin Chaiken - Crédit Suisse

Chris Woronka - Deutsche Bank

Michael Swartz - Truist Securities

Paul Golding - Macquarie Research

Barton Crockett - Rosenblatt Securities

Operator

Good morning. My name is Rex, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. [Operator Instructions]. You may begin your conference.

Michael Russell

Thank you, Rex, 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 2022 second quarter results ended June 26 as well as trends we are seeing through this past Sunday, July 31.

Earlier this morning, we distributed via wire service our earnings press release, a copy of which is 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'd like to introduce our CEO, Richard Zimmerman. Richard?

Richard Zimmerman

Thank you, Michael, and good morning, everyone. Let me start today's call by saying I am extremely proud of our team and all that we've accomplished so far this season.

Our team's commitment to delighting guests and operating the best parks in the industry has allowed us to achieve record performance coming out of the pandemic. Based on our results over the first half of the year and the strength of long lead indicators, I've never had more confidence in our business than I do right now. And I'm excited to see how much fun we can create for our guests and our associates over the balance of the season and into next year.

My confidence in the business is driven by several factors. First and most importantly, are our guest satisfaction scores. Guest satisfaction ratings at our parks this season have been among our highest ever validating the investments we've made and the initiatives we've implemented to broaden and improve the guest experience.

The quality of the guest experience is a direct driver of guest spending which remains at record levels and continues to grow. Second is our overall financial performance. On a trailing 12-month basis through the end of the second quarter, we've generated $509 million of adjusted EBITDA, which adds -- surpasses our record performance in 2019.

Third, our long lead indicators have never looked better. For the 2022 season, we sold 3.2 million season passes, surpassing 3 million units sold for the first time in company history. This year's total units sold is up more than 20% from our prior record of 2.6 million units sold back in 2019 and at much higher prices.

Resort bookings are also pacing well ahead of pre-pandemic levels, allowing us to reap the benefits of the investments we've made to refresh and expand our resort offerings. These strong trends position us well for the balance of the year, particularly considering that we produce roughly 80% of the company's adjusted EBITDA in the third and fourth quarter.

Finally, the strength and pace of our performance over the first half of the year, combined with our recent monetization of Cedar Fair's valuable real estate in Santa Clara, California, has enabled us to deliver on several key priorities, including reducing net leverage and establishing a well-defined capital allocation policy to return capital to our unitholders.

I'll share more about the importance of these initiatives prior to taking your questions, but I want to emphasize that we have successfully paid off the equivalent of 75% of the pandemic-related debt we took on when our parks were forced to close in 2020.

As we continue working towards our net debt target of $2 billion, we believe we are well positioned to achieve net leverage of less than 4x adjusted EBITDA by year-end. Before I turn things over to Brian to review our financial results in more detail, let me share some additional thoughts on Cedar Fair and why we're so excited about the remainder of the 2022 season and beyond.

As we work to get back to pre-pandemic levels, we sharpened our focus to ensure we are meeting or exceeding our most important business objectives. It's especially rewarding to see how the decisions we've made, the capital we've invested and the initiatives we've deployed over the last few years have resulted in better experiences for our guests and better results for all Cedar Fair unitholders.

The breadth and scale of our properties continue to lead the industry. Our extensive offering of unique high-quality dining options and premium experiences are being wholly embraced by our guests, and our resort properties remain popular destinations for the family staycation, which appears to be -- which appears to be in full swing once again in 2022.

While it's rewarding to see our revenue channels performing well, I'm equally pleased with how our park GMs have responded to the additional challenge of managing cost in such an inflationary environment. Labor costs are more than half of our operating cost structure. So driving EBITDA growth requires a more efficient utilization of labor, something our teams have successfully executed against this year.

I'll wrap up my opening remarks with a few comments about our recent real estate transaction. Just after the close of the second quarter, we sold approximately 117 acres of land located in Santa Clara, California, the land upon which our Great America Park is located, was sold for approximately $2.7 million per acre, a significant premium compared to our cost to purchase the land 3 years ago.

While a difficult decision, selling the land at Great America was a generational opportunity to capitalize on a very attractive real estate market, while at the same time, allowing us to continue to operate the park for the foreseeable future. The monetization of the real estate also enables us to strategically accelerate our capital allocation priorities, returning capital to all unitholders and making Cedar Fair a much stronger company going forward.

I'll pause here so that Brian can review our financial results in more detail. Brian?

Brian Witherow

Thanks, Richard, and good morning, everyone. I'll start by discussing our second quarter operating results before providing an overview of preliminary results through July 31. I'll wrap up my remarks with an update on our balance sheet and free cash flow outlook.

But first, I need to remind everyone that because of the impact of the pandemic on park operations in 2020 and 2021, there is a lack of meaningful data comparisons for the second quarter of this year to the second quarter of the last 2 years which is why we have used comparisons to 2019 instead.

During the quarter, our parks had 708 total operating days compared with 726 total operating days in the second quarter of 2019. The 708 operating days in the most recently completed quarter included 96 days at our 2 Schlitterbahn water parks, which we acquired on July 1, 2019. Excluding the Schlitterbahn Park, second quarter operating days at our legacy properties decreased 114 days compared to the second quarter of 2019 due to a 4-day calendar shift and the planned removal of certain early season operating days at several of our parks.

In the second quarter, we entertained 7.8 million guests and generated net revenues of $509 million, representing a 17% or $73 million increase compared to the second quarter of 2019. The record net revenue was primarily driven by a 26% increase in in-park per capita spending and a 21% increase in out-of-park revenues as well as the inclusion of the Schlitterbahn parks in this year's second quarter.

These increases were offset in part by an 8% decline in attendance during the recently completed quarter. The decline in second quarter attendance was the result of fewer operating days at our legacy parks and expected slower recovery within the group sales channel and the strategic elimination of several low-value ticket programs as we use the disruption of the pandemic as an opportunity to review all aspects of our business model.

Despite these headwinds, attendance per operating day in the second quarter of legacy parks was approximately 12,100 guests, up 3% versus the comparable period in 2019, reflecting the impact of strong demand within the season pass channel.

In the quarter, season pass visits represented 62% of our attendance mix, which compares to 56% during the second quarter of 2019. Meanwhile, as Richard noted, our pricing strategies and initiatives to enhance the guest experience continue to resonate and drive guest spending resulting in an in-park per capita in the quarter of $59.52 compared to $47.22 in the second quarter of 2019.

We are extremely pleased with the stickiness and sustained momentum in per caps, particularly coming off the second half performance last year when we achieved a step function improvement and guest spending from pre-pandemic levels. The per capita increase reflects higher levels of guest spending across all key revenue categories on which we are keenly focused.

In the quarter, admissions per capita increased to $32.27, up 20% from the second quarter of 2019, while combined spending on food and beverage, merchandising gains and extra charge attractions increased to $27.25, up 35% from 2019 levels.

The improved levels of in-park guest spending were driven by an increase in transaction counts as well as higher average value per transaction. The increase in admissions per cap was the realization of both higher pricing and better yield management resulting from our strategic pricing efforts.

As we've invested in delivering great experiences to our guests, we have been able to effectively increase admission pricing without negatively impacting demand. The increase in single-day ticket prices has also amplified the value represented by our season passes contributing to the record number of passes sold this year.

Out-of-park revenues in the quarter increased to $60 million compared to $49 million in the second quarter of 2019. The increase reflects higher online customer transaction fees and increased revenues from our resort properties, most notably from the inclusion of the resort at Schlitterbahn's New Braunfels and revenue growth at our Cedar Point resorts.

The improvement in the performance of our resort properties reflects the value of the investments we've made in recent years to refresh and expand that side of our business and is even more impressive considering our Castaway Bay and Sawmill Creek properties didn't reopen until late in the second quarter.

Moving on to the cost front. Operating costs and expenses in the second quarter increased to $347 million, up $70 million compared with the second quarter of 2019. The increase was the result of a $9 million increase in cost of goods sold, a $55 million increase in operating expenses and a $6 million increase in SG&A expense.

Despite inflationary cost pressures, cost of goods sold as a percentage of food, merchandise and games revenue only increased 128 basis points from 2019 levels. The increase in operating costs was largely attributable to an increase in seasonal labor costs driven by higher rates, higher full-time wages primarily related to planned increases in headcount at select parks, and the inclusion of the operations of the Schlitterbahn parks.

Looking at more recent comparisons, our average seasonal labor rate in the second quarter was only up 3% over the second quarter of 2021 reflecting the successful efforts to revamp our seasonal pay structure last year. The increase in the most recent quarter's SG&A expense was primarily due to an increase in full-time wages, including higher incentive plan expense as well as higher transaction fees driven in part by this year's initiative to convert all our properties to cashless.

These increases were somewhat offset by a reduction in advertising costs, the result of a strategic pivot to more efficient and flexible digital advertising. Adjusted EBITDA for the quarter, which management believes is a meaningful measure of the company's park level operating results, totaled $171 million representing an increase of $7 million or 5% compared with the second quarter of 2019.

Shifting the focus to our preliminary results for the last 5 weeks and operating trends through the first 7 months of the year, over the past 5 weeks, our parks have entertained 6.1 million guests and generated $421 million of net revenues.

Based on preliminary results for the 5-week period, which had 524 total operating days, in-park per capita spending was a record $62.80 and out-of-park revenues totaled a record $48 million. For the comparable 5-week period in 2021, which had 471 total operating days, net revenues totaled $354 million, reflecting attendance of 5.2 million guests in-park per capita spending of $61.99 and out-of-park revenues of $41 million.

The July attendance trends are consistent with what we've seen over the first half of the year with much of the variance again due to the expected slower recovery of the group channel and the elimination of certain ticket programs.

In any short window, attendance can also be impacted by macro factors such as extreme heat or rainy weekends. However, broadly speaking, July demand remained in line with expectations. Based on our preliminary July results through the first 7 months of the year, we've entertained 15.4 million guests and generated net revenues of $1.03 billion, representing an increase of 17% or $152 million compared to the first 7 months of 2019.

Over this 7-month period -- same 7-month period, in-park per capita spending was a record $60.76, up 25% from 2019 levels and out-of-park revenues totaled a record $125 million, up $20 million or 19% from the same period in 2019. For reference, operating days for the first 7 months of 2022 and 2029 totaled 1,362 days and 1,352 days, respectively.

After we released our interim updates for the Memorial Day in July 4 weekend, some investors asked why we reduced the number of operating days for 2022. Let me assure you, our decision to do so was purposeful and strategic. While labor availability has improved, it remains challenging, more so in certain markets.

Our adjustments to the park operating calendars reflect those challenges. Channeling demand into fewer operating days not only improves labor utilization and reduces operating costs, but it also enhances the guest experience.

We'll continue to adjust operating calendars as necessary, both adding and reducing days when appropriate. As park calendars currently stand, we project the balance of the season will have approximately 80 additional days compared to the same period in 2019, driven in large part by the later timing of Labor Day this year.

These incremental operating days provide us with an opportunity to recoup a meaningful portion of the early season attendance variance. As our park teams remain focused on driving demand and maximizing operating efficiencies, access to market intelligence and better analytics in form when it's beneficial to adjust the operating calendars. It's just 1 example of how our company is now using data and analytics to be smarter and more proactive in decision-making to drive value creation.

Now turning to our balance sheet. As Richard mentioned, for the 2022 season, we established a new record high for season pass sales. Through the end of July, total sales were 3.2 million units while sales of related All-Season products, including All-Season Dining and All-Season Beverage were 56% ahead of the previous sales record for add-on products.

These record results, combined with strong resort bookings drove deferred revenues to $307 million at the end of the second quarter representing an increase of $73 million or 31% from the end of the first quarter of 2022 and an increase of $15 million or 5% when compared to deferred revenues at the end of the second quarter of 2021.

As of the end of the quarter, Cedar Fair's balance sheet is in solid financial condition. We had cash on hand of $125 million and $194 million available under our revolving credit facility, net of $16 million of letters of credit, representing total liquidity at the end of the quarter of $319 million. This compares to $284 million of total liquidity at the end of the first quarter.

Net debt at the end of the second quarter totaled $2.5 billion, calculated as total debt of $2.6 billion less cash and cash equivalents of $125 million. None of these figures reflect the proceeds from the sale of our California real estate as that transaction did not close until the first week of the third quarter.

During the second quarter, we spent $62 million on capital investments, bringing the total spend on CapEx for the first half of the year to $96 million. Looking ahead to the full year, we anticipate spending $160 million to $175 million on core CapEx in 2022 with another $40 million of investments on resort and renovations including the recently reopened Castaway Bay and Sawmill Creek resort properties at Cedar Point.

The projected total investment for 2022 is comparable to our planned capital program of $200 million for the upcoming 2023 season.

With that, I'll turn the call back over to Richard to share some final thoughts.

Richard Zimmerman

Thanks, Brian. I want to take a few minutes to discuss our updated capital allocation strategy, which we announced earlier this morning. Fundamentally, our priorities remain the same. That is, we intend to invest in Cedar Fair's core business, strengthen the balance sheet and return capital to unitholders. The difference now is we have all the levers available to us, and we can adjust our emphasis on each of these elements as market conditions evolve.

Certainly, the headline of today's announcement is the reinstatement of the quarterly cash distribution reflecting an annualized rate of $1.20 per unit or approximately 1/3 of our pre-pandemic distribution rate. The size of the distribution reflects our board's confidence that Cedar Fair's business outlook is strong and its financial position is stable and improving.

Setting aside the disruption of the pandemic, Cedar Fair has a proven long-term track record of successfully balancing the capital allocation needs of the business to support an attractive, reliable and steadily growing distribution, a priority on which we remain laser-focused.

Today, we also expanded our ability to return capital to unitholders with the board's authorization of a $250 million unit repurchase plan, which further strengthens our capital return policy. When combined with a growing and sustainable quarterly distribution, we believe opportunistic, well-timed unit repurchases will serve as a very effective means to enhance total return over time.

This is especially true at current price levels. We believe units of Cedar Fair represent a very attractive investment opportunity. The current unit price does not reflect the underlying value of the business, as demonstrated by Cedar Fair's rapid recovery since the pandemic, including the company's stronger balance sheet and the record results we've delivered since reopening the park last season.

Moreover, the company's current market valuation does not reflect the value of long lead indicators, nor the consistent growth and sustainability of our recurring revenue streams such as season pass sales, which continue to substantially outpace pre-pandemic levels and position us well to post another record performance in 2022.

Cedar Fair's generation of significant free cash flow is the primary strength of our business model and fuels our capital allocation strategy, including our priorities of paying down debt and reinvesting in our properties to drive growth and value creation.

Our commitment to investing in the guest experience improved the pace of our recovery and is the primary driver of the record levels of in-park guest spending and out-of-park revenues we've achieved this year. As I previously mentioned, thanks to our outstanding performance over the past 12 months and disciplined approach to cash management, we've greatly strengthened the company's balance sheet.

Based on our outlook for the full year, we're on pace to finish this year with a net leverage ratio well inside 4x adjusted EBITDA and approaching pre-pandemic levels. Achieving that milestone will give us added flexibility to deploy free cash flow, whether investing in capital projects with compelling returns, increasing our distribution over time or buying back equity when we believe it is undervalued.

Along with our board, our management team remains focused on driving growth and delivering upon the commitment of creating value for our unitholders. Finally, while we're proud of what we've accomplished so far this year, by no means are we resting on our walls. Next Thursday, we will be unveiling our 2023 capital investment program, sharing with our guests, communities and associates, the first look at what exciting new rides, attractions and immersive entertainment are coming to our parks and resort properties, some of which are already under construction. While continuously improving our properties as a Cedar Fair tradition, we also never lose sight of what matters most, making people happy.

Having emerged from the pandemic, a more flexible as a business and more cohesive as a team, we're thrilled to be in a position to continue to fully deliver on that purpose. Rex, that's the end of our prepared remarks.

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question comes from the line of Steve Wieczynski.

Steven Wieczynski

So I wanted to dig into the change in capital allocation here a little bit more. Just look, I understand your business seems like it's in a pretty good spot at this point.

But I guess the question is going to be more about trying to understand why you decided to put the buyback in there or why the board decided to put the buyback in there now versus maybe going down the path of a higher distribution?

Richard Zimmerman

Steve, great question. Thank you. We think, as I said in my prepared remarks, the board and our management team feel Cedar Fair represents a really attractive investment opportunity.

And as we've looked at it, we think there's ability to boost our total return over time. The distribution has always been the core focus of our company and certainly with our MLP entity structure been very tax efficient way to return capital.

But we also believe when there are dislocations in what we believe the market values our company at that we've got an opportunity to opportunistically go in. And buy units at a really attractive valuation level that will improve the return to all of our unitholders over time.

Steven Wieczynski

Okay. Great. I really appreciate that. And -- so then I want to ask, Brian, I know you got into this a little bit in your prepared remarks, but I wanted to ask about July.

I guess it'll be kind of back into the attendance number, it looks like there was a drop of, let's say, kind of upper single digits relative to 2019. And look, I understand there are -- obviously are shifts in the calendar, there's shifts in the operating days.

But I guess the real question is here, I'm just trying to figure out how material it is taking away those low-value ticket programs and at the same time, the group side of things. I'm just trying to figure out what the real kind of year-over-year as in July really looks like, if that kind of makes sense?

Brian Witherow

Yes, Steve, I'll try and hit that and you can tell me if I haven't answered it directly. But as I said in my prepared remarks, I would characterize July as generally consistent with the results we've seen through the first 6 months of the year.

The high points are certainly the stickiness and sustained momentum that we're seeing in guest spending levels, while the law of big numbers kicks in and maybe on a percentage, July has pared back a little bit per cap growth more towards 24% versus 26-ish percent in Q2, that's -- in terms of absolute dollars, we're still seeing very consistent trends in guest spending.

Out-of-park revenue is very strong. And then on the attendance perspective, as I said, short periods like a 5-week period often have macro factor effects that you have to take into account. A lot of record temperatures in the East Coast hurt us from time to time at the parks there, a little bit of rain. But broadly speaking, the demand trends have been consistent with our expectation and the delta to 2019 levels is tied back to your point, group is still a bit disconnected, but that was expected coming into the year, and we knew that was going to take a couple of years to fully recover.

And the unplugging of those programs is a strategic decision that we made. There is some very low-margin legacy ticket programs that we felt had less value in using the pandemic as an opportunity to hit the reset button, if you will, and push us forward on a better path. We thought that was the right direction to go. What I would add is as you look at the health of July, I think the other metric that we look very closely at is some of those longer lead indicators, hotel bookings continue to pace significantly ahead of 2019 levels during the month of July, much like we saw over the first half of the year and season pass sales as well.

We saw season pass sales for the 5-week period compared to '19, up more than 50% which is a better indicator to us of where the consumer is, where the health of the business is and maybe strip out some of those macro short-term factors that I just mentioned.

Operator

Your next question comes from the line of James Hardiman.

James Hardiman

So I wanted to pick up where Steve may be left off there. Brian, when you talk sort of macro factors, I know that you're talking in a lot of ways, sort of short-term, maybe weather-related things.

I want to try to figure out what impact, if any, the sort of macroeconomic environment is having on the consumer. It's sort of an open-ended question, I'm curious what consumer trends or how you're able to sort of slice and tight the trends of the consumer. Obviously, gas prices have been a big concern. Are you seeing deltas between short distance versus long distance? Are there particular parks or geographies that are doing better than others and then low end versus high end? So sort of open-ended based on whatever data you guys might have available to you?

Brian Witherow

Yes, James. Certainly, something that we're very focused on as everyone else is. As we analyze the data that we have to date, and it's difficult sometimes mid-season to reach definitive conclusions until you have the totality of the year and you sort of strip out some of the timing differences that may exist mid-season or in these interim periods. We are not seeing anything at this point that's meaningful in terms of that down shift. We are certainly focused on looking at aspects of our business where maybe we might see a pullback in the behavior of the lower end consumer.

So as we look at our accommodations group looking at the Express Hotel as an example, booking -- the booking curve there versus the Sawmill Creek and the Breakers Hotel, that sometimes would show as the discounted hotel maybe a little bit of pullback sooner. We're not seeing that yet.

And as I mentioned, the per capita spending is still very strong as are those other long lead indicators. Guests are continuing to migrate up to our most expensive ticket, which is the season pass. As Richard said and I commented, the record sales for 2022 extremely encouraging, and we have not seen that slowing down, as I just mentioned, as of Steve's question, that only accelerated on a percentage basis through the month of July leading up to the final breakpoint before we shift here this week actually into our 2023 sales cycle at some of the parks.

Richard Zimmerman

Yes, James, it's Richard. Let me jump in here and emphasize what Brian just talked about as I look at the health, it's really the long lead indicators and how they relate to our approach to the business, that loyal customer base. When we came into the year, we knew we were carrying over season pass privileges that not through early May and Canada through the summer.

The fact that Nos has had a record season pass year in spite of that. And Canada has been extremely strong in their performance and their sales of season passes. When I look at some of the comparable industries that are out there, notably the ski resorts, continuing to sell more season passes, up more than 20%.

I don't want to step over that at higher prices. We continue to see a migration of our most loyal customers up the scale to season pass where they -- it's our most expensive ticket, but they see the most value. That's really, really healthy for our business, not just in the month of July, but as I think about the longer-term trends and how we build our revenue model going forward, I'm really encouraged by the choices that our consumers are making.

James Hardiman

Got it. And then sort of a follow-up here. I mean the -- it sounds like you're generally pleased with where we are, certainly versus 2019, you've seen some nice growth. I think the EBITDA numbers may have come in a little bit light of where the Street was.

I guess I'm curious if that was also -- versus where you thought you would be 3 months ago, how is this compared and then sort of connect that to the distribution question? You pointed out the fact that this is 1/3 of the pre-pandemic distribution despite EBITDA is going to come in better than it was in 2019, right?

And so you guys, obviously, both of you guys were here back then. Walk us through sort of the change in thinking. Clearly, you weren't getting credit for it. It didn't seem like in 2019, but maybe walk us through the thinking and then how that connects to the performance.

Richard Zimmerman

Yes, James, this is Richard again. We've been very clear laying out our priorities on the capital allocation front. We've set our net debt target of getting down to about $2.0 billion. As we evaluate what we saw the whole of this year, we looked back and increasingly, and we've seen this over the last several years, pre-pandemic, we're becoming more back half heavy in terms of our results, that really reflects the strength of July and August, the huge appeal of our Halloween event and the revenues we generated in October.

But increasingly, the revenues and the EBITDA we can generate in November and December, along with season pass sales with our WinterFest event. So that back half heavy -- and as I said in my prepared remarks, more than 80% of our EBITDA driven in the last 6 months, we think that trend continues.

So as we look at it, we're about where we thought we'd be. Again, season pass, the $73 million increase in deferred revenue is notable. It's significant. So as we look at the back half of the year and beyond, we've got an opportunity now to higher base of season pass-holders to renew and as we start building our plans for '23 with the capital we'll announce next week, we're really excited about the demand we think we can drive in the health of the business. So turning it all the way through, we think there's an opportunity to take a balanced view of capital allocation, make sure we invest enough to keep the business healthy, start at a rate where we can grow the distribution and reward all of our unitholders, but also take advantage of what, as I said earlier, what the market gives us is we're not really getting credit for the distribution or credit for the free cash flow we're generating over time, which has been the strength of our -- both our approach to the business and the strength of our business model. So we, myself and the Board like having all the levers available to us. And we just thought it was prudent to have some flexibility in how we return capital to unitholders.

Operator

Your next question comes from the line of Ben Chaiken.

Benjamin Chaiken

Just to clarify kind of some of the earlier discussion. So group and the removal of the lower-end ticket programs, that's not something new in July. Is it -- so does that just kind of isolate weather or those lower-end ticket programs you mentioned and group kind of a larger portion of the mix in the last 5 or 6 weeks? I guess what I'm getting at is like, why wouldn't those changes, which I think were already at play have impacted the year-to-date period in the same way because I think the last -- Steve was kind of alluding to, I think, the last 5 or 6 weeks on attendance are down about 9% versus '19?

And I guess like part 2 of that is you're kind of suggesting the trend in the last 5 or 6 weeks are in line with what you'd expect and in line with 1H. So I guess, are you -- should we expect the back half of the year to be down 9% on attendance?

Brian Witherow

Sure, Ben. It's Brian. No. So as we think about -- to the first part of your question, group and those lower-value ticket programs, I wouldn't say that they over-index in July any more than the first half of the year.

Just to put it into perspective a little bit, group has been improving slowly. The gap to 2019 has been closing. But generally speaking, it's still been down about 1/3 from pre-pandemic levels. And as you can appreciate, that's a tough channel to make up inside a year because a lot of times those groups are very date specific or period-of-year specific.

So I think youth and school in the spring, once you've missed that, you've missed it, you don't get a chance to make it up until next year. Those lower-value ticket programs are sort of spread throughout the season. As I said earlier, any time you look at a short window of time, you can -- there -- you can create some comparability anomalies, it's always better to look at the totality of the year.

And I think Steve called it out in his update note this morning that you really to have a good feel for how 2022 is trending, yes, we're going to almost have to look at the second and third quarters collectively or on a combined basis to sort of see how those calendar shifts end up playing out once that later Labor Day plays in.

The comment earlier about in line with expectation was our own analysis as to how much we thought the weather may have impacted the 5-week period as well. As you can appreciate, we go through a lot of analysis around demand trends in the various channels and try and estimate what we think the impact of macro factors like weather are on a rainy weekend or during a heat wave. And so that was the -- included in sort of the genesis of that comment.

Benjamin Chaiken

Okay. That's helpful. From -- I guess, from moving all-else-equal moving forward, do you think -- so from, I guess, August onward through the end of the season, is it a fair expectation that attendance would be up versus '19, excluding weather? Or are there things we need to keep an eye up or whether it's group or the low-end ticket that would skew things one way or the other. Just trying to level that.

Brian Witherow

Sure. Well, we're not going to provide guidance, but I do think that you will still see some headwinds from group, and we fully expect that. And we'll see still some of those ticketing -- those lower value ticketing programs that have yet to happen. We're going to continue to unplug those.

We're not changing our strategy around that. So there still can be some headwind. I think what's most encouraging, though, as Richard said, when you look at the long lead indicator, and you think about record number of season passes, record amount of deferred revenue on the books and then think about 80 -- approximately 80 incremental operating days from here forward, that's a very compelling set of facts that can lead towards, as I said in my prepared remarks, a meaningful pickup from -- of the variance that we've seen year-to-date.

Benjamin Chaiken

Okay. That's helpful. Yes, just trying to see how those things translate into attendance and EBITDA. But I appreciate it.

Operator

Your next question comes from the line of Mike Swartz.

Michael Swartz

Maybe just to start with the distribution understanding it's about 1/3 of what it was prior to the pandemic which obviously giving you some flexibility there. But maybe how do we think about the growth in the distribution longer term? Should we just be thinking about the growth kind of in line with anticipated EBITDA growth over the next several years? Or is -- should we expect it to grow a little faster in the near term?

Richard Zimmerman

Steve, good question. I understand the question. But as we think about it, we constantly review with the board kind of our outlook for the next few years. We'll go through our planning process, not just establishing '23 budgets. But looking at our long-range models.

I'll go back to that flexibility that we talked about. We've got capital allocation priorities that we want to hit and the use of the cash, much like you saw back in 2010, 2011, 2012, the last time that we -- that the distribution was disrupted and then we put it back in.

As we saw growth, we were able to grow that significantly over time. We do understand how important the distribution is to our unitholders and the tax advantage nature of our entity structure makes it really attractive for those who are long-term unitholders.

So as we think about that, we're not going to give guidance on it, but I'll tell you that it weighs heavily in our discussions about how to return capital to unitholders and make sure that we don't sacrifice the opportunity to invest in our core business and go achieve growth, which ultimately is how will both sustain the distribution but grow it over time.

Michael Swartz

Okay. That's helpful. And then maybe on the sale of the California property, can you give us a little more color what was driving that decision -- and help us think about are there additional costs, i.e., lease costs that we should be thinking about as we model out the rest of the year and beyond?

Richard Zimmerman

Good question, Mike. And as I look at it, this really was, as I said in my prepared remarks, a once-in-a-generation opportunity as we've all seen, the real estate market is extremely strong and healthy. Silicon Valley has its own dynamics in play.

This was really an opportunity for us to take a look at where we got capital invested and how we deploy that capital, still give us an opportunity to both do other things with the capital that we generate from the sale, which we talked about this morning.

But also, as we think about that market, we get to continue to operate that property for a number of years, maintain our relationship with the community, maintain our relationship with our customers. So we just thought that it was very unique moment in time in terms of real estate values within Silicon Valley and that when you think about what we could generate, it gave us more flexibility on capital deployment both in the moment and going forward. Brian, do you want to take the comment about lease?

Brian Witherow

Yes, Mike, in terms of impact to the business, this gets back to a scenario where much like it was prior to our acquiring the land in 2019. We'll now be making lease -- rent payment for that land. Going forward, on a full year basis, it will be somewhere in the $12 million to $13 million a year.

But as we think about Great America and the trajectory for growth for that park, the EBITDA has been throwing off. We still see that property as being cash flow accretive even after lease payments.

Operator

Your next question comes from the line of Chris Woronka.

Chris Woronka

I appreciate all the details so far. I was hoping we could revisit the comments about the shifts in the operating days that you have planned on, I guess, partially on account of labor challenges? Can you give us a little more color on is that a specific geography? And also does it make you think about more permanent changes to park operating hours or the way you staff outlets or things like that, right?

We've seen restaurants, closed dining rooms and things like that. I'm just trying to get a sense for whether there's a longer-term aspect we need to think about here.

Brian Witherow

Yes. Chris, in terms of the changes to this point, as I mentioned in my prepared remarks, the motivating factor, the biggest motivating factor behind that was some challenges around staffing.

Certainly, it's not a broad issue across the company, and it was more largely confined to some of our smaller or mid-tier properties in the early season. And that has always been a challenge or more challenging, I should say, to find staffing in the shoulder periods of the year, right? Spring, fall, when we lose access to a lot of the high school and college age folks that are our associates.

And so I would say as we think forward, our focus is in on making adjustments and relinquishing operating days and just taking it as it happened this year, but really focused on writing the staffing model. It's part of what's been a motivating factor behind you, maybe recall us talking about over the last year or so in certain markets, a little bit of a pivot away from more seasonal positions to more year-round part-time or full-time positions in the company that drove a little bit of some of our operating cost increase that we've talked about the last couple of quarters.

But really at those smaller mid-tier parks is going to help us going forward with ensuring that we don't have to take days out of the operating season during those shoulder periods.

Chris Woronka

Okay. That's helpful. And then as a follow-up, you've talked about more people upgrading to the season pass, which is your highest priced offering, which is great. When they go into the park, are you seeing them generate the same level of ancillary spend as they would have if they were on a lower price point pass?

Richard Zimmerman

Good question, Chris. When we look at it, we continue to see the same behavior in terms of in-park spending that we would expect to see from our season pass holders, whether they're new people that have upgraded or potentially, they were 1-day tickets before.

When you look at the health up more than 50% in our add-on All-Season Dining, All-Season Beverage, we continue to see healthy spend from both 1 day, our unique visitors, the 1-day ticket purchasers and the season pass holders. So we're encouraged and go back to our capital program this year.

Let me elevate back up and say, we made a significant investment in a number of facilities. We put culinary talent throughout our system, and we're reaping the benefits of that. So we're seeing higher average transaction values, and we're seeing increased number of transactions and we monitor that daily and weekly.

So we're really diving into the data to make sure that we understand how we're driving. But coming into the year, there was a lot of question about the stickiness of the per caps. And I think what we're seeing, even with season pass holder percentage going to 62%, we're showing that we can drive the in-park spending even at higher season pass levels. I'm not sure pre-pandemic, we would have thought that, but we're seeing that in spades right now.

Operator

[Operator Instructions]. Next question comes from Paul Golding.

Paul Golding

Attendance property day has been up. You're yielding record per caps. I guess, are you doing anything to bring group back? Is group maybe even something that's worth forcefully bringing back or just waiting for organic attendance to flow back in, given how well you're yielding on the current product mix? I guess just any thoughts around how we should think about group, especially since I would expect that it is dilutive to per cap overall?

Richard Zimmerman

Thanks, Paul. It's Richard. Let me jump in here. Yes, as we look towards '23 and beyond, we think group can't, as we saw back in '08, '09, can return to prior levels. We've met -- Brian, I've met with our group sales team. And they're really excited about next year.

One of the things that's unique to group business is we do a lot of youth groups, and those are heavily focused on the spring and early summer. So once you miss that part of the calendar, but as we look forward to next year, there are some very encouraging signs in terms of demand through that channel, and we're really focused on how to make sure we're ready to tap into that demand and that we can work through with youth organizations, school systems, things like that, getting the dates on the calendar and making sure that we've got what we need.

Paul Golding

And so would you say the group that serves more of a top-of-funnel function given that is likely not at pricing that's comparable to your single day or your season pass level?

Richard Zimmerman

Yes. I think the group is -- particularly youth groups, corporate customers, in particular, those catered outings, those are unique elements. We might absorb some of the folks in that channel through different ticketing channels as they don't come on those days. But what we have found over the course of years, which is why we've opened up so many weekdays in the spring, is if we can do youth performance days, math, physics, science, those sorts of days, we found it to be wholly incremental.

So getting those groups back, take us back to the level. And that we've been at before. It's just making sure that we set the calendar right, those get booked well in advance. So we're in the process of doing that now. So we'll have a good look at that by the time we get into the winter months.

Paul Golding

Great. And then if I could just ask a quick 1 on the unit buyback program. I know that there's no particular time limit on that. But I was wondering if you could give any color around how you or the board are viewing opportunistic timing given where the market is right now and whether we should consider that in terms of our projections for overall flow?

Brian Witherow

Yes. Paul, it's Brian. We're not going to give any specific nor can we in terms of what and when we think we're going to buy back units. As Richard said during the call, we believe that where units of Cedar Fair are trading right now does not reflect the strength of the business or our outlook for growth going forward. So we'll be as aggressive as we can be, given a number of factors for consideration, market considerations, our own liquidity considerations.

As we noted, there are competing priorities right now. We still do want to continue to pay down debt, but we're generating a lot of free cash flow, and this is another lever that we have at our disposal to pull for returning capital to investors when we feel like there's a disconnect in value.

Operator

Your next question comes from the line of Ben Chaiken -- Barton Crockett.

Barton Crockett

I'm sorry, I think you turned in me. It's Barton, right, that you guys turned in me.

Richard Zimmerman

Yes, go ahead, Bart.

Barton Crockett

Okay. Yes. You heard both Ben and me. So I apologize then. But -- so yes, so I just -- I wanted to drill down a little bit more on the sustainability question of these per caps. And I know you guys talked about your transaction prices, spend per transactions going up.

But money to explore a little bit more on the units versus pricing. So are people buying more things? Is that the principal driver of the growth in per caps? Or is the cost per thing that they're buying or cost per service that they're buying. How would you describe kind of the unit versus price mix? And just stepping back, I mean, you guys are in the parks every day.

Does this feel like a big -- we're out of a pandemic splurge that maybe is a bit unsustainable? Or does this really feel sustainable to you?

Richard Zimmerman

I think this is one, and everybody part embedded in your question is trying to figure out what the consumer is doing not just their health, but how they behave when they're in our park.

When we look at this, I see this year as yet another year where we're seeing the fruits of what we've invested in over several years, not just this year, and we had a heavy emphasis on food and beverage. So to answer your question, we're doing significantly more volume of transactions because we built higher volume facilities that are serving higher quality food.

We haven't so much taken price as much as the -- we've seen the consumer buy up as we give them more quality food options at higher prices, they're going up the menu and choosing. They're choosing the brisket rather than the burger.

So we're seeing that mix shift which leads to a higher average transaction value. But the sheer volume of transactions we're doing is way up, and that's in part because of the investments we continue to make. We are renovating older facilities to make them higher volume, higher quality.

We are building new facilities that are built for speed and ability to really satisfy the dining experience that our guests want. So we're going to continue to lean into food and beverage, in particular. And I won't -- I will also say we've also seen increased merchandise sales, and you'll see an emphasis on that as we go forward.

So the ability to generate in-park spend, I think continues to be rooted in our ability to service our guests better, provide a higher quality experience and have the ability to do more volume.

Barton Crockett

Okay. That's helpful. The share repurchase authorization, you guys are a master limited partnership that creates some constraints. I was wondering if you could just review for us again what your constraints are as an MLP on your ability to do share repurchase versus allocating excess kind of cash to the dividend per unit?

Brian Witherow

Yes, Barton, it's Brian. Within the partnership agreement, there's a lot of flexibility for the Board in terms of how excess cash flow has returned to investors. So our MLP structure doesn't really create any structural barriers or any difference than it would if we were a C corp.

So the flexibility is there. We haven't, as Richard noted before, use this as a tool historically. The last time was in the early 2000s. But we certainly see the value in having another lever for returning capital to investors that is more flexible that when we don't believe there's value being given for the distribution we're paying out, rising interest rate environment, maybe a time where that would be the case. We have this now as a tool in our tool belt that we can turn on or off a little bit easier than the distribution itself.

Operator

Our final question comes from the line of Ben Chaiken.

Benjamin Chaiken

Let me squeeze back in here with 1 more. I guess the 1 part that I don't want to say I'm struggling with, but it's just maybe a little bit confusing is revenues are up versus '19, but the mix in theory has changed to something that's just a lot higher flow-through with your perhaps up 20%.

So is the offset just all labor? Because when you look at your margins in 2Q, they're below 2Q '19. And then is there an opportunity to dial back labor until you see signs of group coming back?

And I guess part 2 would be, I think you said labor is up 3% versus '21. So as we look to the 3Q '22, should we assume that the OpEx line, so maybe like an OpEx per operating day is up 3%? Or would that be the wrong way to look at it?

Brian Witherow

Yes, Ben, it's Brian. I'll take the latter part first. So the 3% increase that we commented on is the average seasonal labor rate so far in '22 versus where we finished '21. That's being offset significantly by fewer hours in the system not compared to '21. Keep in mind, again, '21 was still a disrupted year, and that's what makes a lot of these comparisons hard, right?

When we try and compare to '21, it's really difficult on the cost side to compare because you have significantly less operating days and hours because we were still shuttered or operationally constrained due to capacity limitations, et cetera, in some markets and attendance is hard to compare.

But when you go back to '19, it's difficult because it's a whole different world, whether we're looking at cost structure 3 years later, or we're looking at the level of guest spending 3 years later. As we think about cost going forward, hours in the system -- our labor hours in the system compared to '21 are probably going to get a little bit more comparable than they've been to this point because now forward is probably about as close to an apples-to-apples basis that we have.

And as I said, rate has been up. We're really pleased about are the decisions we made last year to structurally change how we approached seasonal labor rate. We took a step function increase. It was painful in the moment.

But while others are seeing big lifts this year in a lot of different industries, including our own, we're seeing very modest rate pressure because of those decisions -- those difficult decisions we made last year.

So as we look forward, there is certainly cost pressure in this inflationary environment, not even just strictly labor -- we're seeing it in other areas. We mentioned the cost of goods is up a little bit, but we're doing a good job of trying to flatten that curve as best as possible.

There is more work to be done. Our procurement team, our centralized procurement team that we built out over the last year plus, is -- they're working -- they've got their work cut out for them. They came in thinking we were looking to mine savings, and a lot of it is now really just trying to offset headwinds around cost because this is such an inflationary environment, but we feel good about where we're at.

It will take a little bit of time to continue to improve margin and flow-through, but we think we are on the right path and can get there over the balance of 2022 and into 2023.

Benjamin Chaiken

No, no, please go ahead, please.

Richard Zimmerman

Let me just jump in and say, listen, our success is rooted in the quality of our guest experience as we keep saying we continue to want to put and make sure we've got the right amount of labor and the things that our guests value. We're trying to find ways to take the inefficient labor, like going cashless, out of our system.

We talk to the GMs that talk to our food and beverage team, they tell you at a lot of parks, we get our hands a little more labor, we can drive more revenue. So we're trying to be really efficient. But I don't want to step over again back to our most loyal customer is buying the season pass and that 20% increase as they value the experience. So as we think about making sure that we get the renewals, and we want to make sure we're providing the experience that bring them back next year.

Operator

There are no further questions at this time. Mr. Zimmerman, I turn the call back over to you.

Richard Zimmerman

All right. Thank you, Rex, and thanks, everyone, for your continued interest in Cedar Fair. We look forward to seeing many of you city-led roadshow on an upcoming conference next year. We look forward to keeping you apprised of our progress as the summer season winds down. Until then, be well. Thanks again, everybody.

Michael Russell

If you have additional questions, please feel free to contact our Investor Relations department at 419-627-2233. Our next performance update will be after Labor Day, followed by our third quarter earnings report in early November. Thanks, everyone. Rex, that concludes our call for today.

Operator

This concludes today's conference call. You may now disconnect.

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