Good day and thank you for standing by. Welcome to the Cedar Fair Entertainment Company 2021 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. Please be advised that today's conference is being recorded. Thank you. I would now like to hand the conference over to your host, Mr. Michael Russell, Corporate Director, Investor Relations. Sir, the floor is yours.

Thank you, Lara. Good morning and welcome to our 2021 first quarter earnings conference call. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is available under the News tab of our Investors' 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 thanks to everyone for joining us on the call this morning. We trust that you're well and hope that springtime has brought a sense of renewal and optimism to your businesses, colleagues, families, and friends. On today's earnings call, we will cover two main topics. As usual, we will discuss our quarterly results in near-term financial outlook, as well as update you on park operations. Additionally, we want to start today's call with a discussion of the key components of our business optimization program, which is already well underway. As I mentioned on our last earnings call, we've used the past year as an opportunity to take a step back and reassess nearly every aspect of our company, something I've been referring to internally as the great reset. The pandemic, while enormously challenging to our business, has allowed us to rethink our long-term strategy with the ultimate goal of driving profitable and sustainable growth in our business. The outcome of our efforts was the development of our business optimization program, which was designed to streamline our business processes, realize efficiencies that improve our financial performance, and bring new ways of thinking to how we entertain our guests. Ultimately, the initiatives within the business optimization program will ensure that we can not only meet, but exceed the expectation of our guests and associates now and for many years to come. To ensure the success of our optimization efforts and maximize returns, we engaged outside consultants to assist with design and implementation and to provide added bandwidth and a fresh perspective. It's a dynamic process that we expect will evolve over time, but it currently consists of multiple initiatives focused on high-value areas to produce a better guest experience and improve profitability. Implementation of these initiatives will occur over the next six to 12 months, while maximum returns may take two to three years to fully realize. Brian will provide details on the financial implications of our business optimization program in a moment, but for now, let me provide some color on the key aspects of the plan. Strategically, we've broken our efforts into two core components, revenue enhancements and cost efficiencies. On the revenue front, we are focused on continuing much of the work started pre-pandemic to enhance the guest experience and meet changing consumer behaviors and preferences. On the cost front, we are focused on ensuring we are operating as efficiently as possible at both the corporate and park levels and that we have the appropriate organizational structure in place to maximize results. Looking more closely at the cost side, our efforts can be broken down into three productivity areas; organizational redesign, reduced non-headcount operating costs, and optimized park-level labor. On the org design work, our outside consultants are assisting us with a comprehensive review of organizational structures throughout the company. The main objectives are to identify cost efficiencies, expand our capabilities, and improve our decision-making. The first step in the process will be consolidating certain administrative functions and work streams into a more centralized shared service center. This will create operational efficiencies and allow park leadership teams the opportunity to focus on what is most important: delivering the best possible experience to both our guests and our associates. The efforts to expand the shared services centers are underway and will continue over the next 12 months as we take a deliberate, but disciplined approach to ensure a smooth and seamless transition. Next, centralized resources will be added to support robust business intelligence and financial planning and analysis functions, with a focus on improving capabilities to help our teams make better data-driven decisions and drive greater returns. The build-out of our business intelligence and FP&A teams is well underway, and I believe both groups will make a meaningful contribution to our performance. The second productivity initiative is the reduction of non-headcount operating costs, which incorporates spending in nearly every aspect of our business. Everything from how much we pay for maintenance materials and office supplies to the contracts we negotiate on major ride purchases is in scope and the upside is meaningful. Capitalizing fully on this initiative won't happen overnight, but based on what I have seen thus far, it promises to produce meaningful cost savings and systematic improvements. In other words, I am confident that this is a high-return initiative that will create substantial value. We are also focused on reviewing our strategic approach for each key cost area, including big dollar items like advertising. With our parks reopening shortly, our marketing teams have implemented more cost-efficient and flexible advertising programs for the 2021 season, actions that will result in significant savings without sacrificing the impact and effectiveness of the overall program. The third and final productivity initiative is the optimization of park-level labor. As we have noted, seasonal labor represents close to 30% of our total operating costs and is an area that has seen significant pressure in both availability and affordability. To address these challenges, several years ago, we established a workforce optimization committee tasked with tightening up our labor models. We also began a gradual implementation of a new Kronos-based workforce management solution, which will be operational on opening day at all but our two Schlitterbahn Waterparks, both of which will be up and running on the new system at the start of the 2022 season. The Kronos platform provides our park teams with better tools for managing their labor force in real-time, as well as improved data analytics that will help us better align staffing with guest demand. Optimizing seasonal labor will be even more important going forward as we confront the growing challenges with labor availability. We believe maximizing labor hour efficiencies will be key to offsetting some portion of the pressures we're seeing on seasonal wage rates. Moving to the revenue side, many of the near-term initiatives within our business optimization program can be summed up under one key strategy: providing guests with compelling experiences and conveniences in an evolving consumer landscape. To that end, we are ramping up our efforts around the introduction of new consumer-facing technologies aimed at eliminating pain points for our guests and improving customer satisfaction, ultimately, leading to higher demand for what we offer. Our efforts will feature a continued rollout and use of guest convenient technologies such as advanced reservation systems, mobile food ordering, expanded online retail, and contactless payment options, including a move by several of our parks to full cashless operations later this year. We have also kicked off a complete strategic review of our park mobile apps with a goal of adding enhanced functionality, better park information, and other general improvements that simplify the park visit and provide more opportunities for our guests to have fun. Over the last several years, we have also seen how optimizing pricing and promotions can drive attendance and admissions revenue growth. The revenue management team we built to address this has done an outstanding job. The expansion of these resources coupled with advanced business intelligence capabilities will enable us to dynamically price more broadly across the business and drive real revenue growth through increased transaction counts and better pricing decisions throughout the season. While it will take time to fully implement and mature all these initiatives, we are confident they will have a meaningful impact on our operating results. We look forward to updating you on our continued progress over the coming quarters. I'll pause here to allow Brian to review our first quarter results and the impact of our business optimization efforts. Brian?

Thanks Richard and good morning everyone on the call. I'll start with a recap of our first quarter results and our outlook around liquidity before discussing the expected financial impact of the business optimization program Richard outlined. But first, I need to remind you that due to the business disruption caused by the COVID-19 pandemic, financial results for the 2021 first quarter are not comparable to results for prior years. In response to the spread of the coronavirus and in compliance with California mandates, full park operations at Knott's Berry Farm, our only year-round park, remained suspended in the first quarter, and we were limited to hosting a culinary festival. Results for such festivals are included in out-of-park revenues and are not included in the company's attendance or in-park per capita spending data. As we announced last quarter, our 2021 operating strategy is designed to maximize results for our seasonally weighted second half by scheduling park openings beginning in May, taking advantage of what we anticipate will be a broad rollout of vaccines during the first half of the year and optimizing cash burn and liquidity when operating restrictions remain the tightest. As expected during the first quarter of 2021, we had zero operating days compared with 90 operating days in the same period last year. For the quarter ended March 28, 2021, net revenues totaled $10 million versus $54 million for the first quarter of 2020. Approximately 75% of first quarter net revenues were generated from the sale of food, merchandise, and games associated with a culinary event hosted by Knott's Berry Farm and amateur sports tournaments hosted at the Cedar Point Sports Center. The decrease in net revenues was the result of a 936,000 visit decrease in attendance and a $2 million decrease in out-of-park revenues, both due to COVID-19 related park closures and operating calendar changes, offset in part by proceeds generated from Knott's Berry Farm and Cedar Point. On the cost side, operating costs and expenses in the first quarter of 2021 totaled $99 million, a decrease of $39 million from $138 million in the first quarter last year. The overall decrease in operating costs and expenses included a 64% or $4 million decrease in cost of goods sold and a 38% or $40 million decrease in operating expenses. Both variances are reflective of having no parks opened in the period, as well as our cost containment efforts. Partially offsetting the declines in cost of goods sold and operating expenses was a $5 million increase in SG&A expense. This increase was primarily due to higher equity compensation in the quarter, as well as an increase in non-recurring consulting fees related to our business optimization program. Looking at the balance sheet for a moment, at the end of the first quarter, deferred revenues totaled $206 million, representing an increase of $12 million or 6%, compared with deferred revenues at the end of 2020. The increase was driven in large part by the ongoing sale of season passes and related all-season products during the quarter, as well as improving trends and reservations at our resort properties. We're pleased to report we now have 1.9 million valid season passes outstanding, which should provide solid momentum for attendance as our parks begin to reopen this month. Turning to liquidity, we continue to closely manage our cash burn rate while appropriately maintaining our properties. At the end of the quarter, we had total liquidity of $631 million inclusive of $359 million of undrawn capacity under the company's revolving credit facility. Cash on hand at the end of the first quarter was $272 million, compared with a cash balance of $377 million at the end of 2020, representing a cash burn of approximately $105 million or $35 million per month during the first quarter. The average cash burn of $35 million per month was better than our prior guidance of $40 million to $50 million per month, due in large part to improving season pass sales, higher than expected revenues from the Knott's Berry Farm culinary festival and the Cedar Point sports complex, and better than projected cost savings during the period. Based on the level of liquidity at the end of the first quarter, we have sufficient liquidity to satisfy our cash obligations and remain in compliance with debt covenants at least through the second quarter of 2022. Regarding capital expenditures, as we stated on our last call, with nearly half our parks unable to fully operate last year, many new rides and attractions planned for the 2020 season have yet to be introduced to our guests, reducing our capital investment needs for new attractions in the current year. To address other capital needs, we expect to invest approximately $100 million in capital expenditures during 2021; approximately one-third of these investments will be focused on completion of select unfinished 2020 projects, including the renovation of some of our resort properties; another third directed at essential compliance and infrastructure requirements for the current year; and the last third earmarked for the start of new attractions for the 2022 season, work on which will likely begin in the fourth quarter of this year. Depending on the strength of our results and operating conditions in this year's second half, as well as our outlook for the recovery of the business, we may choose to invest in additional capital projects with compelling returns above and beyond those currently planned. As we've noted in the past, over the longer term, our strategy is to return to annual capital expenditures within the core that are in line with historical investment levels of 9% to 10% of revenues. Regarding cash burn, based on our scheduled park openings and current trends, we expect cash burn during the second quarter to be approximately $60 million per month compared to $35 million per month spent during the first quarter. Included in the higher second quarter cash burn estimates are projected higher capital investment and incremental operating costs associated with preparing the parks to open in May, as well as interest payments on four of our five outstanding note issuances. As we mentioned on the last earnings call, our interest payments on outstanding notes are highest in the second and fourth quarters. Excluding interest payments, our cash burn in the first quarter was $30 million per month compared to a projected cash burn of approximately $35 million per month in the second quarter. Before I turn the call back over to Richard, I'd like to discuss the projected financial impact of our business optimization efforts. As Richard mentioned, implementation of various initiatives are underway and in most cases will take six to 12 months to complete. Meanwhile, fully realizing the anticipated returns could take as long as two to three years in some cases, as the business recovers to historical attendance levels and as each initiative matures. Fully executed, we project the optimization efforts will unlock $50 million of incremental annual run-rate benefit once we are able to operate under normal business conditions and attendance returns to historical levels. Of the $50 million lift, roughly a third or approximately $15 million is expected to come from incremental revenue initiatives, largely dependent on attendance, while the other two-thirds or $35 million is expected to come from cost efficiencies. Of the cost efficiencies, roughly half is projected to be realized through reduction in fixed costs that are totally independent of attendance and fully within our control. Of the reduction in fixed costs, we anticipate delivering $5 million to $10 million of improvement in 2021, with the balance anticipated to be realized in 2022 independent of attendance levels. The other half of cost efficiencies is projected to be realized through lower variable costs. Altogether, approximately $30 million of the total benefit is projected to be realized over the next two to three years from variable cost savings and incremental revenue opportunities, both largely dependent on attendance trends. Going forward, as our business optimization program takes hold and the business recovers, our capital allocation strategy will be focused on paying down debt to return our net leverage ratio to between three to four times adjusted EBITDA. At the same time, we will continue to appropriately reinvest behind our strategic plans to grow the core business. Reinstatement of the distribution to unit holders remains a priority. However, our ability to get back to a meaningful and sustainable distribution hinges on the pace of the business recovery and disciplined execution of reducing net leverage back to that historical range. The Board will continue to regularly reassess the potential re-initiation of the quarterly distribution. And finally, given how dynamic the current operating environment remains, we will continue to withhold current year or long-term financial guidance. While we remain very encouraged by the progress improvements we are seeing, our performance in 2021 will be highly dependent on the speed of the recovery and several other factors not directly in our control, including restrictions around park openings, imposed capacity limitations, and broad consumer sentiment around the pandemic. As we noted on the last call, in spite of the improvement we've seen, 2021 will not be a normal operating year and external limitations on park operations may delay achievement of full potential of our parks until later in the year or beyond. With that, I'll turn the call back over to Richard.

Thanks, Brian. For our parks and our thousands of associates, it's now go time. There is tremendous excitement among our associates, guests, and communities as our parks prepare for their opening days. To put things in perspective, for several of our parks, including Great America, Michigan's Adventure, and Valley Fair, opening day will mark the first time since 2019 that the rides and attractions will be operating. Both of our California parks will debut long-awaited major attractions, including the return of Knott's Bear-y Tales, a 4-D interactive dark ride, and South Bay Shores Waterpark, designed for Great America to be the coolest place in the Bay Area to slide, splash, chill, and dine. These and similar attractions at our other parks, such as the 150th Anniversary Celebration at Cedar Point and the 100th Anniversary Celebration at Knott's Berry Farm, strengthen our legacy of connecting with guests in a meaningful and memorable way. We kicked things off this Saturday with the opening of both Schlitterbahn Waterparks in Texas. Within a month, all of our U.S. properties are scheduled to be fully open. Currently, only the opening of Canada's Wonderland is delayed due to COVID-19 restrictions affecting our Toronto Park. Until these restrictions are lifted, we will minimize park operating costs and maintain Canada's Wonderland in a state of readiness. While we are excited to be reopening, the health and safety of our guests and associates remains our highest priority. Therefore, our parks will continue to follow state and local guidelines, which focus on capacity limitations, mask wearing, and social distancing protocols. As the season progresses, we will closely monitor state and local requirements as well as CDC guidance and will adjust our park safety protocols accordingly. Besides addressing the lingering impacts of the pandemic, we are actively tackling staffing challenges this season. The availability of labor is a significant headwind, and the regional park industry is facing this issue head-on. While we have dealt with tight labor markets in the past, this is the most challenging labor environment I've seen in my more than 30 years in this business. To combat these challenges, our team is ramping up recruiting efforts and getting creative. We've strategically increased hourly wages in more challenged markets and for difficult-to-fill positions. We've introduced signing bonuses for specific jobs and expanded our use of retention bonuses for employees who stay for the duration of their contracts. Moreover, we're benefiting from our decision made several years ago to enhance employee housing facilities at some of our parks. This availability allows us to market our jobs to individuals well outside the park's core markets, improving our odds of fulfilling staffing needs effectively. Looking ahead, our goal is to find the right balance between our operating calendars, the availability of seasonal labor, and the expected demand from our consumers. Ensuring we deliver the kind of experience our guests expect from a Cedar Fair Park is vital to maximizing profits in both the short and long term. We are very encouraged by the strong industry demand reported in the early weeks of the season, especially at Knott's Berry Farm's Annual Boysenberry Festival, which concluded its six-week run with multiple weekend sellouts. Robust pent-up demand is further backed by customer surveys showing a strong desire to visit our parks in 2021. We have also seen a trend of growing season pass sales, which we anticipate as opening dates approach. This anticipated strong demand, combined with a large and active season pass base, means that guest reservations will initially be required at all of our parks, particularly on weekends and our traditionally busiest days. This will ensure our attendance remains within capacity limits, which we hope will be relaxed or removed as the COVID-19 situation improves. It will also guarantee our guests enjoy the best experience from check-in to departure. Most importantly, we can get back to the business of making people happy. I can assure you that our park teams are focused on delivering an entertainment experience that keeps our guests coming back. Laura, could you please open up the call for questions?

Absolutely sir. Thank you. Your first question will come from the line of Brett Andress, from KeyBanc. Your line is now live, go ahead please.

Hey, good morning, guys. So, I may be confusing myself here, but I just wanted to make sure I understand some of the language in the business optimization plan this quarter compared to last quarter. So, last quarter, there was 200 to 300 basis points in margin. That seemed predicated on a return to 2019 attendance. Today, it's $50 million over the next two to three years. So, you gave us some of the moving parts in the prepared remarks. But like if we get back to 2019 attendance over the next 12, 18 months, does that 200 to 300 basis points still hold?

Good morning, Brett. This is Brian. Taking a step back, as we mentioned in the last call, we are still in the early stages of the business optimization program. We believe that the potential for 200 to 300 basis points of margin expansion we previously discussed remains achievable. However, as we've delved deeper into the program, some aspects related to costs may take longer to develop. As I mentioned in my prepared remarks, certain significant components of this plan are closely tied to a return to historical attendance levels. The success of this plan depends on our ability to recover to attendance figures of 28 million or more, which is a major factor driving margins. As we progress with this process and further develop the program, we've discovered additional cost opportunities, and there is potential for margin expansion to exceed the initial range we provided.

Got it. Okay. And then you're removing the outdoor mask mandate at a few of your parks, which I think puts you at the leading edge compared to your peers. I guess maybe what drove that decision in those parks? What's the initial customer feedback or response been to that? And are you looking to do that in other parts this season?

Yes, good morning. First of all, we always emphasize that the health and safety of our guests and associates is our top priority. When we looked at last year as we entered the pandemic, we believed it was necessary to implement safety measures such as social distancing and mask wearing to keep everyone safe. I want to reiterate what I said on the last earnings call: none of the nearly 3 million visitors to our parks last year resulted in a case traced back to us, which we feel very positive about. This year, the situation varies greatly from region to region and state to state. We rely on the most current regional data and collaborate with our infectious disease team, outside medical experts, and local and state regulators who are well-informed about the conditions in their areas. We're encouraged by the improving trends and the protocols we have established reflect what we observe and consider appropriate based on these discussions with medical professionals and local partners. We're continuously monitoring the situation. As conditions improve, we are pleased to see a relaxation of restrictions, especially in the U.S., and we are keeping a close watch on Canada. The initial response has been positive, and we anticipate considerable pent-up demand. People are eager to return to not just normalcy but to enjoy this summer fully. Looking back at last summer, everyone was affected and could not have the experiences they desired; however, outdoor entertainment and regional attractions are key components of the regional theme park business and are particularly relevant at this time.

All right. Thank you.

Hey, guys, good morning. So I want to start on the labor side of things. You mentioned availability, and the cost of labor has moved against you guys. And I'm wondering, from here, how do you balance the labor side of things from an availability perspective relative to the guest experience? Meaning, how do you balance trying to lower the amount of labor in your parks versus not impacting the eventual customer experience?

Yes. Steve, good morning, it's Richard, I'll start and then Brian can weigh in. You know, when we go back to what we seen in terms of cost pressures, in the past several years, go back to 2016, 2017. We were seeing high single-digit kind of pressure on the wage rate and through efficiencies, and the focus of the park teams were able to bring that down to mid-single-digit. So, within our business model, we've always had an ability to find a way to both maintain that the quality of the guest experience, when I go back to those years, we saw improving guest satisfaction scores. So I think that's part of you having one of the most experienced teams in the business as part of what, you know, I certainly work with the teams in the field to make sure that we're accomplishing that high quality guest experience everybody's come to see, come to expect. But in terms of the actual numbers in the pressure, Brian, anything you want to add?

Yes, Steve, I would just say, similar to what we – how we approach this in any given year, while as Richard noted in his prepared remarks. This environment, labor environment may be unlike any we've ever seen, in terms of scale or magnitude, there are still some similarities, right? It's always a little more challenging to find labor in the shoulder seasons spring, before schools are out of session, fall, schools are getting back in session. And what we've done in the past, it is managed, our operating calendars are ours with that in mind, because as you noted, we always want to provide the best guest experience. And so we've made those kinds of adjustments that you have to make in the near-term, longer term, as we noted, in the call, and in previous calls, it puts more and more pressure on automation within the system, using more advanced technology, like our new workforce management system, to more actively and dynamically manage our staffing, sharing staffing around jobs in the park, adjusting staffing levels, based on attendance levels, etc. So, there's things that we need to do and are working on in near-term. But there are also things that we need to be focused on and are focused on more longer term, because we don't see this as just a 2021 issue. We think that, this is a longer-term issue that needs to be addressed.

Sure. My second question is about CapEx. You mentioned that if the conditions are right, you might consider investing in additional capital projects with good returns. Could you clarify what specific conditions you are looking for? Also, what kind of return profile are you aiming for at this stage?

Yes, I'd say, in terms of the broad conditions, at a high level, right now, what we're focused on is, is the projects within that $100 million that we spoke about in our prepared remarks, to the extent that, as we start getting towards the second half of this season, and demand is strong, and we're seeing, you know, better pacing and our fall sales, around 22 passes are solid and we feel better and better by liquidity. There may be an opportunity to start leaning into projects that have compelling returns as we've always done in the past, right? We've never been shy to spend money on projects that have compelling long-term returns. For us, that's usually projects that, are approaching that 10%-plus ROI, mid-teens maybe on the bigger more marketable rides and attractions, something a lower double digits. If it's ancillary revenue and EBITDA stream like the hotels and the incremental revenues, adjacent development type projects we've added in the past. But we're probably a little bit away from that at this point, Steve. I think it really, there's a lot to still be seen as a 2021 season develops, but we feel very confident and comfortable with the level of spend that we do our plan for calendar year 2021 at this point.

Okay, great. Thanks, guys. Appreciate it.

Hey, how's it going? I mentioned pent-up demand a few times in the release. Just any color you can provide on spring passes trends in April or May that may not be reflected in that 1.8 million number? And then kind of how are you handling spring pass sales selling period? With those parks closed, I have another segment.

Ben, good morning. It's Richard. As we examine season passes, I would like to highlight that we are approaching almost 1.9 million. Reaffirming what we mentioned in our previous earnings call, I want to emphasize that we've received less than half a percent of requests for refunds. We've actively engaged with our customers, and I believe our marketing teams have excelled in maintaining that engagement. This has helped us sustain customer loyalty into this season. Starting with this strong foundation, as I noted in our prepared comments, we've experienced a steady increase in sales week-over-week. Customer surveys indicate a high frequency of visits. Additionally, early last week, we began offering both ticket sales and reservations. On the first day, there was over an hour wait to purchase a ticket or secure a reservation, which meant we had to implement a virtual queue on our e-commerce site. The overwhelming response reflects the deep customer loyalty we’ve observed across all our parks in our regions.

Got you, that's helpful. I have one more question about the pass. You mentioned previously that 75% to 80% of pass revenue would be allocated to 2021 from passes sold the prior year. Since we didn't have a first quarter because of COVID, is it now comparable to what it normally would be? Typically, you would have recognized some pass revenue in the first quarter, so I'm wondering if there's a drag for the rest of the season regarding how to allocate pass revenue for visitation. Or is that allocation normalized due to the absence of the first quarter? If that didn't make sense, I can rephrase it.

Yes, Ben, let me address it this way. Based on what we mentioned earlier, we did not expect to release any significant deferred revenue for Q1 due to our outlook for the operating calendar. The situation remains quite dynamic. For example, as Richard pointed out regarding Canada's Wonderland, we are still experiencing some uncertainty related to reopening, which is a crucial aspect for our season pass sales. How this unfolds could potentially affect us and create some challenges. However, there are still unknowns at this time. I'm not sure if that provides the clarity you were seeking, but I hope it does.

Hey, good morning, guys. Just wanted to follow-up on the earlier question on – on labor inflation, I think you said back in the 2016, 2017 timeframe, that kind of the gross rate of inflation was something in the high single-digit range. Maybe give us a sense of a little bit of context of what maybe you're seeing right now, or how are you thinking about labor inflation going forward?

Yes, Mike, it's Brian. As Richard mentioned earlier, we were proactive in implementing market adjustments, while also adhering to some regulatory requirements in specific markets. During 2016 and 2017, we experienced rate pressures in the high single digits, around 8%, 9%, or even 10% in some areas. However, this began to ease somewhat due to the significant rate increases we implemented during that period, leading to mid-single-digit increases in the last couple of years. In 2020, seasonal labor rates increased by 5% to 6% compared to 2019, and we anticipated similar wage rate inflation in 2021. However, considering the strategic adjustments Richard highlighted, such as increases in hourly rates for certain roles and the introduction of retention and signing bonuses, we are now seeing inflationary pressures approaching 10%. Our focus remains on managing hours effectively, seeking efficiencies to alleviate some of the overall cost pressures driven by higher-than-expected inflation.

Yes. So Mike, I'd also add that one of the benefits we've observed from increasing our wage rates over the last few years is the improvement in the quality of applicants and employees. As I analyze this, it has allowed us to be much more productive. As Brian mentioned, we've consistently observed that when our core customers have more money, such as when wage rates rise for our key demographic of teens and young adults, we can implement price increases. This characteristic of our business model is distinctive—not only do we have customer loyalty, but we also enjoy high guest satisfaction. I often emphasize the importance of value, so we continue to raise prices. Considering all these factors over time, I believe we understand the levers we can pull to both manage and capitalize on the challenges associated with wages.

Okay, great. Thanks for all the color. And then just a second question, maybe a little different with the optimization plan. I'm just wondering from an organizational buying standpoint, will just how does the compensation structure for like park managers and corporate employees change at all, based on some of the targets that you've now outlined with cost savings and some of the revenue pickup opportunities?

Really good question, Mike. Let me just tell you that it's our firm belief and I know it's our board's belief that compensation structure and incentives need to follow strategy. So as we think about the strategy going forward, right now, everything that we've got in place really focuses on the recovery. But longer term, as we think about what incentive is appropriate, we're going to make sure that it lines up behind the strategies we've laid forward at all levels.

Hey, good morning. So I apologize, if you've already clarified this, but the $50 million, just want to understand if that is a gross or net benefit, I guess, particularly given the labor headwinds that we keep talking about here, some of the labor should we still expect an EBITDA number that $50 million better once we're through all of these initiatives?

Yes. James, it's Brian, good morning. Based on what we know, right now, yes, the target that we're aiming at that $50 million is reflective of headwinds within the labor category.

Okay. None of this is going to be perfect, but if I look at 2019 revenues and adjusted EBITDA, once we return to those levels of attendance, we should expect revenues that are $15 million higher and EBITDA that is $50 million higher, correct?

Based on the way you just summarized that, yes, I'd say that's a fair way to look at it. Yes, I would say that, as we continue to see the labor market and the labor environment globally evolve, our views around labor may change, but as of right now, that's where we stand.

Thank you, sir. Your next question will come from the line of Paul Golding with Macquarie Capital. Your line is now live. So go ahead please.

Great. Thanks so much for taking the question. I just wanted to clarify in the labor supply commentary, you have labor in place to meet your anticipated demand for the U.S. reopenings over the next month, is that correct?

Yes. When I look at where we are, based on the calendar we've put out there, we've got sufficient labor to meet that demand. But typically, as we've seen in the past, our early season needs, and I put, particularly the month of May, early June into the early season, very different than prime season. But what we've also seen, which we've seen in past years is as you get closer to opening and the noise around the park being open, that tends to help applicant flow as we get into it. Again, this is a really unique time because of the pandemic and its impact and all the programs around labor and supporting those on unemployment. So it's a unique time where there's a lot of crosscurrents in the labor market, particularly in the leisure and hospitality space. But right now, as I look at what we're doing, I think we have what we need to provide the high-quality guest experience our guests have come to expect. And as we build out, and we see the improvement in our labor availability to us, then we'll react accordingly on the operating calendar and operating hours.

Great. And then my follow up is around the interest commentary. You mentioned the $25 million per month in cash interest expenses expected for the second quarter. How are you thinking about pay down versus refinancing opportunities, any commentary around timeline and access there and how you're weighing those options, given the substantial interest cash outflow component that you're flagging for 2Q and future periods?

Yes, Paul. It's Brian. First, I want to emphasize that we feel very secure regarding our liquidity situation. However, as Richard mentioned earlier, reducing debt remains our top priority at this time. We currently have significant flexibility in our capital structure, with no imminent maturities. As we progress through the second half of 2021, we hope to see a return to normalcy as some of the restrictions and macro factors, such as capacity limitations that are beyond our control, begin to ease. This would allow us to feel more confident heading into the 2022 season and returning to what I would describe as normal cash flow generation for Cedar Fair, particularly strong performance in the second, third, and fourth quarters. Moving into 2022, we will start seriously considering debt repayment. For now, maintaining our liquidity and flexibility is likely more crucial than focusing on debt reduction for the remainder of this year.

Thank you, sir. Your next question will come from the line of Eric Wold from B. Riley Securities. Your line is now live. Go ahead, please.

Thank you. Good morning. It's a couple of questions. I guess, one, as the parks start to reopen and you got obviously the reservation systems in place. Can you talk about the initial mix that you're seeing on this reservation between single-day tickets and the season pass holders? And how does that compare maybe to 2019 and kind of what is your goal for that mix evolving as this kind of business optimization kicks in?

Good morning, Eric. It's Richard. We're observing a situation similar to last year, and our strategy reflects this. Just as we did during the reopenings last year, we're reserving certain days and time slots for season pass holders again this year. We have nearly 1.9 million season pass holders who continue to support us. For example, starting this weekend, season pass holders will have access to Knott's Berry Farm, and the response has been strong. The public will gain access a couple of weeks later, with early days specifically set aside for season pass holders. Looking back to 2019, 53% of our guests were season pass holders, and we reached about 62% last year. Given those figures, we anticipate seeing a similar pattern this year, particularly with a stronger emphasis initially. As we remain open longer and get closer to full capacity, we expect trends to stabilize towards what we've experienced in the past.

Got it. And then final question. As you think about the parks kind of reopening and moving into the stronger back half of the year, obviously, pent-up demand, obviously, the earlier question or comment around what Six Flags reported. What do you anticipate the actual headwinds from any kind of "official capacity limits actually being in the back half of the year versus kind of your realistic ability to get people into a park?

I'll let Brian provide his input shortly. Reflecting on our past discussions, we typically see 20% or 25% of our highest attendance days during the latter half of the year. The challenge in answering your question lies in the uncertainty surrounding the lifting of restrictions in our various markets. We're closely observing the situation in Canada as it unfolds. The effects of any capacity limits are particularly felt during those peak days. If there are no restrictions on those peak days, we can expect to achieve attendance levels similar to our historical performance, which significantly influences our profitability and revenue generation. Brian?

Yes, I believe the key point Richard made is that when we consider a typical operating season, particularly in the second half of the year, although there are more peak days such as Saturdays in July and August and popular Halloween events in the fall, there are still many days where we perform below the 50th percentile of theoretical capacity. This indicates potential for growth. However, those key days are essential. At several of our parks, they represent our highest margins and generate the most revenue and EBITDA. Therefore, easing capacity restrictions is our ultimate goal, but we will need to see how things unfold in 2021.

Hi. Thanks. In the opening remarks, you mentioned more efficient and flexible advertising programs, can you just go into a little bit more detail on how the programs have changed? And then potentially a related question on the per cap side. How are you thinking about potential flow-through if per caps actually hold improvements versus 2019 levels as we've heard from some of your peers? In other words, are your optimization strategies going to impact flow-through on per caps versus history?

Stephen, it's Richard. I'll take the first question, and then I'll let Brian address the second. Reflecting on 2021, one key takeaway was our ability to enhance our digital advertising efforts by utilizing digital and social media more effectively, which are significantly more cost-efficient and targeted. As we developed our plan for this year, we focused more heavily on this approach. The pandemic has accelerated existing trends, and we've noticed a consistent increase in the share of our advertising dedicated to digital and social channels over recent years, with this trend now moving even faster. This strategy allows us to be flexible and target different consumer groups while adapting to market changes. We were very encouraged by the results we saw in 2020, which is why our plan for 2021 places greater emphasis on digital and social media. We will continue to monitor its effectiveness. The engagement from our customers indicates that both our CRM platform and our media communications are resonating well. Now, Brian, you can address the second part.

Yes. Looking back at last year, despite it being a challenging and shortened season, we were very pleased with the guest spending trends in the park, particularly in food and beverage, merchandise, and games, which were up in the low to mid-teens. If we consider the attendance context of 2019, it's likely that attendance numbers will increase, potentially normalizing; however, the spending patterns we've observed are consistent with what others have reported over the years. Specifically, in food and beverage, we focused on upgrading and adding new facilities, implementing new technologies, and providing higher quality products through our executive chefs. From 2012 to 2019, our food and beverage revenues exceeded $125 million, reflecting a growth rate of over five percent annually. This trend has continued to improve in recent years due to the robust results driven by these enhancements. We believe there is still significant opportunity for growth, particularly in business optimization, which could further support spending in our parks. A primary area of focus for us is transaction counts. We are working to improve the in-park guest experience by speeding up transactions and providing conveniences that encourage guests to spend more. However, we need to acknowledge some potential challenges, particularly related to labor costs, as increased pay can impact our margins. We will seek to counterbalance this with efficiencies, such as optimizing labor hours and automating processes, including expanding mobile ordering. Overall, we are optimistic about the trends in per capita spending in the park and see further opportunities ahead.

Awesome. Thanks so much.

Thanks, Brian.

Thank you, sir. And that will be our last question. I would now like to turn the conference back to Mr. Richard Zimmerman for the closing remarks.

Thanks, Laura. And thanks to everybody for joining us on today's call and for your ongoing support of our company. Hopefully, you'll have a chance to visit one of our parks very soon with friends and families for a whole lot of fun. We will keep you updated on our progress and perhaps see you either virtually or in person at an upcoming investor conference or non-deal roadshow. In the meantime, please take care and everybody stay safe and healthy. Thank you again. Michael?

Thanks, Richard. And thanks to everyone. Please feel free to contact our Investor Relations department with any further questions at 419-627-2233. And we look forward to speaking with you again in August after releasing our 2021 second quarter report, Laura that ends our call today. Thanks, everyone.

Thank you, sir. Thank you so much presenters, and again, and thank you everyone for participating. This concludes today's conference. You may now disconnect. Stay safe and have a lovely day.