Six Flags Entertainment Corporation/NEW Q1 FY2023 Earnings Call

Thank you for standing by. My name is Sydney, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cedar Fair Entertainment Company 2023 First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Cedar Fair, you may begin your conference.

Thank you, Sydney and good morning to everyone. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to today's earnings call to review our 2023 first quarter results for the period ended March 26th. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is available under the News tab of our investors website at ir.cedarfair.com. On the call with me this morning are Richard Zimmerman, Cedar Fair President and CEO; and Brian Witherow, our Executive Vice President and CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC's Regulation FD, this webcast is being made available to the media and general public as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. With that, I'd like to introduce our CEO, Richard Zimmerman. Richard?

Thanks, Michael. Good morning, and thanks to everyone for joining us today. Despite the adverse impact that the very unusual weather conditions have had on our results, we remain confident in what we believe will be another strong year at Cedar Fair. I want to highlight a few specific factors regarding our business that reinforce my confidence in our ability to deliver another robust performance, particularly as we approach full seven-day week operations at all of our parks. First, our full year results are almost entirely driven by our performance in the second half of the year when we generate two-thirds of full year attendance and net revenues and more than 80% of our adjusted EBITDA. Our first quarter typically accounts for 5% of our full year attendance and net revenues. Second, consumers have shown no sign of slowing down their spending for high-quality experiential entertainment, as demonstrated through increasing levels of per capita spending last year and continuing in the early part of our 2023 season. Third, early season bookings within our group sales channel are increasing, especially among school and youth groups as our advanced bookings at our resort properties, both of which should create a solid tailwind for attendance through the remainder of the year. Fourth, we are confident the new rides and attractions scheduled to debut this season will generate higher demand and more frequent visits among passholders and single-day visitors alike. And finally, although unit sales of season passes are down due to the impact of weather during the first quarter as well as last fall, the average season pass price is up 7% as we head into the busiest sales cycle of the season. Having watched our team successfully navigate the recovery from the pandemic to deliver record results in 2022, I have the highest confidence in our team's ability to effectively manage through early season challenges to build on the momentum we achieved last year. So, let me address our first quarter from a macro level, then Brian can review our financial results in more detail. While our first quarter results did not meet expectations, the shortfalls are directly attributable to the worst period of weather we've experienced in several decades at our California parks. Cold, wet, and even snowy days at Knott's Berry Farm, our park with the most meaningful first quarter operations, prevented the park from opening at all on seven days, and adverse weather conditions significantly disrupted operations on 30% of total planned operating days during the period, meaningfully impacting our topline. The impact was magnified by all-season costs at several of our other parks as crews of maintenance personnel and seasonal associates were preparing for spring park openings. Given the slow start to the year, we have implemented additional initiatives to identify cost efficiencies throughout our system while maintaining our ability to generate topline revenue growth and deliver the high-quality guest experience for which our parks are known. This includes leveraging the expertise and purchasing power of our centralized procurement group to tightly manage non-labor-related operating costs and minimize the impact of inflation. Additionally, through learnings and new tools, our park operators continue to improve our alignment between daily staffing levels and demand. Our advancements in workforce management truly came to fruition in last year's second half when we reduced seasonal labor hours per operating day by 7% compared to 2019, and in an environment of high inflation, reduced our average labor rate by 2% compared to the second half of 2021. We are looking forward to building upon that success this year. The actions we've taken over the last several years have also created a more resilient business model, which enables Cedar Fair to perform well regardless of the economic landscape. The strong business fundamentals and compelling collection of new attractions provide us with confidence in our ability to deliver stronger full-year results even if a recession were to occur this year as some expect. Since the Great Recession some 15 years ago, we have significantly grown our recurring revenue streams with many of our most loyal guests purchasing tickets well in advance of their visits using payment plans to package season passes with other all-season products and taking advantage of our resorts and premium experiences to customize and enhance their park visits. For more than a decade, our team has refined its marketing outreach and two-way dialogue with our guests through our CRM system that gets more robust and sophisticated with each season. Our enhanced capabilities to gather and analyze guest data, much of it in real-time, has improved our effectiveness in key operational areas ranging from yield management and labor utilization to food services and guest safety. These steady advancements have helped maximize operating leverage, especially when demand is at its historical peak in the months of July, August, and October. In short, we remain very excited about Cedar Fair's prospects for continued growth and value creation in 2023. Let me stop here and ask Brian to review the details of our results. Brian?

Thanks Richard and good morning. I'll start by discussing our first quarter results before wrapping up my remarks with updates on our balance sheet and the current state of our long lead indicators. As Richard mentioned, due to the highly seasonal nature of our business, first quarter operations represent only 5% of full year attendance and net revenues. And as such, results in the period are not indicative of performance for the remainder of the year. With more than 80% of our adjusted EBITDA generated during the third and fourth quarters, full year performance is much more dependent on attendance during the peak summer months and during our high-demand events in the fourth quarter, such as FUN and WinterFest. For comparison purposes, operating days in the first quarter totaled 161 versus 130 days in the first quarter of 2022. The increase in operating days reflects the strategic initiative to expand the first quarter operating calendars at three of our seasonal parks, Carowinds, Kings Dominion and California's Great America. These incremental operating days were offset in part by the effects of the highly unusual weather at our California parks, which led to park closures on multiple days during the period. During the first quarter, we entertained 1.1 million guests and generated net revenues of $85 million compared with attendance of 1.5 million guests and net revenues of $99 million in the first quarter of 2022. The decreases in attendance and net revenues are attributable to the weather challenges during the quarter, particularly at our California parks, Knott's Berry Farm and California's Great America. Unseasonably cool temperatures, and record precipitation impacted demand at our two California parks and 30% of planned operating days in the quarter, including seven days when Knott's was unable to open. The weather impacted days resulted in the direct loss of at least 225,000 visits, offsetting the incremental attendance produced by this year's expanded park operating calendars. The year-over-year attendance comparison was also negatively impacted by approximately 140,000 season pass visits at Knott's Berry Farm in last year's first quarter, which were attributable to the extension of 2020 and 2021 season pass privileges into the 2022 season. While demand has been negatively impacted by weather, as Richard noted, early season trends in guest spending remain strong, reflecting the effectiveness of our pricing strategies and the stickiness of guest spending from year-to-year. For the first quarter, in-park per capita spending totaled $64.47, up 10% compared with first quarter last year. We are extremely pleased with the sustained momentum in per cap, particularly coming off the step function growth we've delivered over the past two years. The improved per cap was driven by higher guest spending on admissions, food and beverage and merchandise. The increase in admission spending, up 9% year-over-year, reflects the impact of our 2023 pricing strategies as well as a slight shift in the attendance mix away from season pass visits. Meanwhile, the higher guest spending on food and beverage and merchandise, both up more than 15% in the quarter, was primarily driven by an increase in average transaction counts, reflecting our guests' continued willingness to spend on the high-quality products and premium experiences our parks offer. Out-of-park revenues for the quarter were also strong, totaling $19 million, up 17% when compared with the first quarter last year. Driving the increase in out-of-park revenues was the reopening of our Castaway Bay and Sawmill Creek resorts at Cedar Point, two properties that were undergoing renovations at this time last year. The strong start to the year of these two resort properties was slightly offset by a small decrease in out-of-park revenues at Knott's due to the inclement weather. Moving on to the cost front. Operating costs and expenses in the first quarter totaled $190 million compared with $171 million for the first quarter of 2022. The $19 million increase reflected an increase in operating expenses of $13 million and an increase in SG&A expenses of $6 million. Slightly offsetting these increases was a small decrease in cost of goods sold related to the lower attendance in the period. The increase in operating costs was largely attributable to anticipated cost increases, including $4 million of incremental land lease and property tax expenses related to the sale leaseback of the land of California's Great America and $3 million of higher employee benefit costs resulting from increased headcount. The increase in first quarter operating costs also reflects a $5 million increase in preseason maintenance costs at several of our seasonal parks, the lion's share of which represents a timing difference. For the full year, we anticipate maintenance costs in 2023 will be in line with the amount incurred in 2022. The increase in first quarter SG&A expense reflects a $3 million increase in full-time wages and benefits, primarily related to higher headcount and a year-over-year increase in equity compensation expense and a $2 million increase in advertising costs to support the expanded park operating calendars in the first quarter. Incremental variable costs associated with the additional operating days in the quarter were offset by cost savings we were able to realize at Knott's Berry Farm as we tightly manage park operating costs in light of the weather challenges there. Turning to the balance sheet. At the end of the first quarter, Cedar Fair's balance sheet was in solid financial condition with sufficient liquidity to fund future cash obligations and no near-term debt maturities. We had total liquidity of approximately $144 million, including $34 million of cash on hand and $110 million of available borrowings under our revolving credit facility. And net debt at the end of the quarter totaled $2.4 billion. While we have no near-term debt maturities, we will continue to look for ways to improve our capital structure and enhance our financial flexibility. In early April, just after the first quarter closed, we exhausted our $250 million unit repurchase program, buying back a total of 6 million units since the program's inception or approximately 10% of total units outstanding at just inside an average price of $42 per unit. Regarding capital investments. During the first quarter, we spent $55 million on CapEx, which was in line with expectations for the three-month period and consistent with our plans to invest between $180 million and $200 million for the full year. This includes more than $135 million of investments in new rides and attractions, upgraded and expanded food and beverage locations and other revenue-generating projects for the 2023 season. Looking at long lead business indicators for a moment, we are encouraged by the strong start and solid long-term booking trends we are seeing within our group sales channel and at our resort properties, both of which are pacing ahead of the same time last year. While still early in the year, both demand channels are trending well and showing no signs of slowing. As it relates to our other long lead indicators, season passes, as Richard mentioned, due to the impact of weather through the end of the first quarter, unit sales of season passes were down 7% or approximately 118,000 units when compared to last year's record pace. Sales of season passes are often aligned with a guest's first visit. And given the shortfall in early season attendance due to weather, sales of season passes have also lagged expectations. This slower start in unit sales was offset by an increase in the average season pass price, up 7% year-over-year, and pacing in line with expectations. Also helping to offset the shortfall in pass sales were sales of related all-season add-on products, which were up $5 million collectively at the end of the first quarter on a higher average pricing and increased unit sales. Our deferred revenue balance at the end of the first quarter totaled $208 million. This compares to $234 million at the end of the first quarter last year, which included approximately $20 million of COVID-related product extensions at Knott's Berry Farm and Canada's Wonderland into 2022. Excluding the extension in the prior year quarter, deferred revenues would have been down approximately $6 million or 3% year-over-year. Of the $6 million variance, half relates to the later timing of sponsorship revenue billings in the current year, while the balance reflects the shortfall in early season pass sales. With approximately half of our season pass sales occurring after the first quarter, including the months of May and June which account for roughly 30% of full program sales, we remain laser-focused on driving unit sales higher and recouping as much of the early season shortfall as is possible while still maintaining the integrity of our season pass pricing structure. Finally, I want to remind everybody that in addition to not currently providing annual guidance, we have returned to our normal cadence of providing operating results on a quarterly basis only. As we mentioned on our last call, we will provide updates on our performance through July along with second quarter earnings and an update on our performance through October with our third quarter earnings. However, we are no longer providing interim updates relative to Memorial Day, the 4th of July, or Labor Day as those updates proved unhelpful last year due to the cyclicality of our business model. With that, I'd like to turn the call back over to Richard.

Thanks, Brian. Today, we announced two strategic actions authorized by our Board and consistent with our long-term capital allocation strategy. First, we declared a quarterly cash distribution of $0.30 per unit to be paid in the second quarter, continuing our focus of paying an attractive and sustainable distribution. Second, having recently exhausted our initial $250 million unit repurchase program authorized last August, the Board has approved a new authorization to repurchase units in the open market or through privately negotiated transactions up to an additional $250 million. We believe units of Cedar Fair represent an attractive investment opportunity, and we will continue to be opportunistic with repurchases going forward. The new unit buyback authorization, combined with quarterly distribution payments, gives us increased flexibility in returning capital to unitholders and driving sustainable value creation. Our quarterly cash distribution and renewed repurchase authorization underscore the Board's confidence in the company's long-term growth prospects and the resiliency of our business model, which has generated significant free cash flow over a long period of time. These actions also reflect the Board's recognition of the steady, measurable progress we are making towards reducing net leverage to our target of three to four times adjusted EBITDA, while fulfilling our objective of consistently investing in our properties in order to generate incremental organic growth. Near-term, our strategic goals are simple; one, drive annual attendance back closer to pre-pandemic levels with a specific near-term focus on restoring demand within the group channel. Two, continue to grow guest spending through a combination of pricing, premiumization and technology enhancements designed to extend length of stay, increase transaction counts per guest and improve average transaction values. Three, create a sense of urgency to visit among our guests through targeted messaging that increases consumer awareness about our parks' broad collection of rides, attractions and entertainment offerings, our unique food and beverage offerings in their limited duration events. And four, improve margin performance through disciplined management of operating costs, including seasonal labor without undermining the overall guest experience. As I mentioned earlier, this is an exciting time of year for us as most of our parks are just weeks away from ramping up to full seven-day-a-week operations. This includes Cedar Point, which tomorrow will kick off its 154th season. When the park opens, we will be debuting its newest expansion, The Boardwalk, a completely renovated area designed to pay homage to Cedar Point's beginning in the late 19th century. Anchoring The Boardwalk is the Park's newest roller coaster, the Wild Mouse as well as the Grand Pavilion, a modern-day version of the original land market served as the park's bustling centerpiece for entertainment. Serving culinary creations not found anywhere else in the park, Grand Pavilion is a dual-level restaurant and waterfront bar with outdoor terraces overlooking the park and Cedar Point's beautiful shoreline. Certain to be one of the industry's finest dining venues, the majestic Grand Pavilion will stand as a Cedar Point centerpiece once more. At our other properties, Fiesta Village at Knott's Berry Farm is being completely revitalized for the 2023 season, while Carowinds celebrates its 50th anniversary. As part of Carowinds' celebration this year, the park is introducing the all-new and exciting Aeronautica Landing. This new aviation-themed area features new rides and attractions, themed food and beverage locations, and reimagined classic carnival games. Meanwhile, guests at summer at Canada's Wonderland are set for a thrilling adventure with the addition of Tundra Twister, a giant 360-degree spinning swing ride, the only one of its kind in the world; and Snoopy's Racing Railway, an exciting launch coaster for children and families in the park's Planet Snoopy area. Also celebrating a golden anniversary this year is Worlds of Fun. Throughout the season, the park will entertain guests with special events and activities to commemorate its first 50 years, along with welcoming back Zambezi Zinger, one of the park's original roller coasters, which has been reimagined and ensured to delight our guests and associates alike. These are just a few examples from our capital program that we are confident will deliver another outstanding year for Cedar Fair in 2023 and entertain guests at our parks for seasons to come. I hope you have an opportunity to visit one of our parks and all they have to offer sometime this summer. Sydney, that concludes our prepared remarks. Please open the call for questions.

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

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

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

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

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

Thanks, James. I'll let Brian comment on the specifics, but broadly speaking, we've encouraged our business intelligence team to really focus on dynamic pricing. They are constantly experimenting with pricing, and we prompt them to adjust prices hundreds, if not thousands of times throughout the year across our 13 sites. What you're observing is part of the testing process to determine how far we can push pricing to maximize revenue. As demonstrated during the pandemic recovery, our ability to effectively manage pricing has contributed to per capita growth, alongside an increase in attendance, aside from weather impacts, which has been crucial for driving our overall revenue growth.

Yes, James, specifically regarding Cedar Point, the park reduced its front gate price from $85 to $80. As you mentioned, this affects a very small percentage of tickets sold. The change was primarily for marketing and promotional reasons to achieve a cleaner price for our spring promotions. We frequently cross-promote with our sister parks, such as Michigan's Adventure to the North and King's Island to the South, and the $80 price aligns better with that strategy. This is not an attempt to lower prices; rather, we are focusing on pricing strategies and dynamically adjusting the web prices where the majority of tickets are sold. Regarding the ticket mix, we've observed that season pass sales are up 7% year-to-date, and at the individual park level, increases are often close to double digits. Currently, the performance at Knott's has been a bit slow, affecting our overall averages since it has among the higher-priced passes in our system. Overall, we are very encouraged by the market's response to the price increases in all the different regions.

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

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

Makes sense. Thanks guys and good luck.

Thanks James.

Your next question comes from Thomas Yeh.

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

Yes, you're right, Thomas. As I mentioned in response to James' question, when discussing averages at the monolith level, some details can get overlooked. We're pleased with the progress in each of our markets towards achieving high single-digit increases in season pass sales. The pricing has been well received, along with some new developments in season passes, such as the prestige pass. This new offering is currently limited to three of our properties, but the response from guests has been very positive. As I noted, Knott's Berry Farm is experiencing some softness, particularly given its high pass prices, while Canada’s Wonderland is having an excellent start to the year in terms of season pass sales, despite being on the lower end of the pricing spectrum. This situation is affecting the average price somewhat. Overall, we are very satisfied with the recovery in unit sales, especially in Canada.

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

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

No, we're continuously adjusting our draws on season passes and related all-season products. This is influenced by both pricing and expected visitation patterns. Based on our observations from last year at each park, we will make adjustments as needed, but there is nothing significant to report, Thomas.

Okay, great. If I could ask one more question about costs. Regarding the planned increase in headcount this quarter, I believe we'll start to see some of those increases in the second quarter. Can you provide insights on what we should expect for staffing levels compared to last year? It seems like consumer health is still strong. As we enter the peak operating season, how should we anticipate the wage aspect to evolve as operating days return to normal?

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

Thank you so much.

Your next question is from Mike Swartz.

Hey, guys. Good morning.

Good morning, Mike.

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

I'll take a moment to address a point you brought up. The first quarter tends to be unusual for us. While our operating costs are generally variable, allowing us to adjust labor according to demand, the first quarter has a more fixed cost structure for most of our parks, excluding Knott's Berry Farm. As noted earlier, we minimized variable costs during this quarter because we did not see the expected demand, largely due to the weather. Most of our other properties are preparing to open, making their costs fixed, including maintenance, labor, and cleaning, all of which are essential for our operations. There’s limited flexibility to reduce these costs without jeopardizing our ability to open. The first quarter poses challenges because when parks like Knott's Berry Farm experience lower revenue, there's not much we can do to compensate at our other properties. Looking ahead to the rest of the year, we feel confident about our applicant flow and hiring process, which we believe will keep our average rate aligned with 2022. If necessary, we can adjust rates for specific positions like security or lifeguards. Overall, we are satisfied with our rate situation. Any pressure on hours will relate to adding operational days, as seen in the first quarter, where we increased days at three seasonal parks. However, we associate additional costs with increased attendance and revenue, ensuring that any increase in hours is aimed at generating more revenue rather than just for the sake of extending hours.

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

Yes, I can say that at the beginning of this year and in the first quarter, whenever the weather has been good, we have seen strong demand. We were very happy with the extended operating hours at the three parks this year. However, prolonged periods of bad weather can diminish attendance, and it often takes more than just a few nice days to recover. If people have experienced multiple days of rain, they may not prioritize visiting us even after a few pleasant days. A sustained period of good weather is necessary for a noticeable increase in attendance. Nevertheless, I can confirm that when the weather has been favorable, demand has been robust.

Yes, Mike, it's Richard. I'll go back to your point. When we introduced the extended days for WinterFest starting in 2016, it took some time for us to inform the markets that we were reopened. January and February usually aren’t times when parks like Charlotte or Richmond are operational. However, we are very pleased with the strong performance on the good weather days and believe this has become a tradition. As we attract season passholders and others to realize we’re open, one encouraging observation is that we have seen a good balance between season pass and general ticket buyers even in January and February. This indicates that not only were people aware, but season passholders were also bringing their friends, which is beneficial for us in those months in those markets.

Thank you.

The next question comes from Ricardo Chinchilla.

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

Yes, Ricardo, it's Brian. I want to mention that we are satisfied with our current balance sheet and capital structure, especially since there are no immediate maturities. We are mindful of the 2025 notes you brought up, and we plan to be opportunistic as we approach that time, but we have some runway with two more years remaining. Therefore, there's no urgent need to act right now. Our goal, as Richard stated, remains to lower our leverage back into the three to four times adjusted EBITDA range, and we believe we are making progress towards that, finishing 2022 with net leverage near the high end of that range. We aim to reduce it below four times, likely through a mix of business growth and possibly reducing debt. From a capital structure viewpoint, we feel confident about our position. Currently, the cost of debt is relatively low compared to the market, and we intend to take advantage of that while we can.

Thank you very much for taking my question.

You’re welcome.

The next question comes from Eric Wold.

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

Good morning, Eric. It's Richard. In terms of consumer health, we've received numerous inquiries about this over the past year as people try to make sense of the situation. I can confidently say that those who visit are spending well. We did experience some weather-related impacts. However, once guests arrive at the park, their spending habits remain strong and consistent across various categories. If we noticed that our revenue was highly concentrated in one area with a decline elsewhere, we would make the necessary adjustments. Our revenue management team closely monitors pricing both for parking and admissions. Overall, I want to emphasize that we are observing year-over-year growth in our All-Season Dining program, which has been robust. This suggests that consumers currently have a strong willingness to spend. Our primary target audience, particularly mothers with young children, tends to manage the household budget, and we continue to ensure a quality experience that attracts them to the park. Once they are there, we provide numerous opportunities for them to enjoy the experiences and offerings that they are willing to invest in. Ultimately, I believe this showcases the resilience of our business model once again.

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

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

Got it. Thank you.

Your next question comes from Barton Crockett.

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

Yes, it's Richard. Thank you for your question. We have a lot of historical data showing that once the main part of the season begins, there is a strong potential to recover. For instance, last year during the fourth quarter, we experienced excellent weather in October, which helped boost both ticket and season pass sales during that period. It's worth noting that in 2022, we faced a rainy Labor Day that impacted our season pass sales. To answer your question, there are many instances of slow starts that have turned into robust performance during the peak of summer. Our business operates differently in terms of cyclicality and seasonality compared to others in the industry. We have consistently emphasized that we perform better in the latter half of the year. With favorable weather conditions, we believe we can generate the necessary momentum to succeed throughout the remainder of the year. Additionally, when I look at historical trends, we are seeing a significant recovery in the group channel, with same-store sales on the group side remaining similar year-over-year. Therefore, I believe the rebound of group sales is a positive factor for us at this time.

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

Yes, all the parks are on track to operate seven days a week in the coming weeks. As I mentioned, we anticipate generating nearly one-third of our full program sales from season pass sales during May and June, which is important because season passholders usually purchase in advance of their first visit. It has been challenging, as Knotts has faced weather difficulties, and many of our other parks haven't been operational to start making those sales and welcoming visitors. However, this will change soon, with Cedar Point opening tomorrow and Canada's Wonderland set to open to the public after hosting some private events. There's a lot of excitement as we approach May, and our marketing teams are focused on maximizing season pass sales in the next eight weeks.

Okay. Great. Thank you very much.

Thanks, Barton.

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

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

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

Thank you. You may now disconnect.