Earnings Call Transcript - FUN Q4 2023

Operator, Operator

Thank you for standing by. My name is Danica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cedar Fair Entertainment Company 2023 Fourth Quarter Earnings Call. Thank you. I would now like to turn the call over to Michael Russell. Please go ahead.

Michael Russell, Introduction

Thanks, Danica. Good morning to everyone. Welcome to today's earnings call to review our 2023 fourth quarter and full year results for the period ended December 31. 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 Cedar Fair's CEO, Richard Zimmerman; and Brian Witherow, our Chief Financial Officer. 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 those 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. Before I begin, I want to reiterate that the purpose of today's call is to discuss 2023 fourth quarter and full year results and answer related questions. During Q&A today, management will not be taking questions about the proposed merger with Six Flags. With that, I'd like to introduce our CEO, Richard Zimmerman. Richard?

Richard Zimmerman, CEO

Thank you, Michael. Good morning, and thanks to everyone for joining us today. We're excited to be here today to discuss another very solid performance by Cedar Fair in 2023, including a record performance over the second half of the year. But before we review our results, let me briefly bring everyone up to speed regarding where we stand in terms of the proposed merger with Six Flags. I am pleased to say that we passed a key milestone at the end of January when the S-4 was declared effective, and the related definitive documents were subsequently filed, including the Six Flags proxy statement and prospectus. Meanwhile, we continue to work through the antitrust approval process after receiving a second request from the Department of Justice on January 22. This was an anticipated part of the process that our respective teams have prepared for. And we continue to expect the transaction to close within the first half of the year as originally contemplated. Since announcing the proposed merger in early November, we have engaged in many conversations with Cedar Fair unitholders as well as the broader investment community. And we are encouraged by the strong support we've heard from many investors. We look forward to closing the transaction in the coming months and unlocking the compelling value creation opportunities ahead for our combined company, which we are confident are greater than either company could have achieved independently. Naturally, as this process moves forward, we will keep the market apprised of other material events. Now let's move on to 2023 results and our outlook for the year ahead. I am pleased to report that Cedar Fair capped off an outstanding second half of the year with a record fourth quarter performance, including new fourth quarter highs in attendance, net revenues, and adjusted EBITDA. As we have seen before, the 2023 operating season was a tale of two halves. By mid-season, the effects created by anomalous macro factors, namely unprecedented rainfall in California and uncontrolled wildfires in Canada, resulted in shortfalls in early season attendance and spring season pass sales, which posed a challenge to our potential full year results. Consequently, we modestly adjusted ticket pricing at several key parks while also investing more in our advertising and promotional campaigns. Along with a return to more normal weather conditions, these mid-season adjustments were successful in generating incremental demand and led to a 3% increase in attendance over the balance of the season, recouping a meaningful portion of our early season deficit. In an effort to drive greater flow-through from the revenues we generated, we also remain laser-focused on identifying new cost efficiencies. While there is still more work to be done in this area, we were pleased that we achieved our goal of reducing second half operating costs and expenses from 2022 levels and improving adjusted EBITDA margins over the last six months of the year. As we have previously stated, our best opportunity to streamline costs and drive margin expansion resides in each year's second half, when operating costs are the most variable and attendance and revenues are at their peak. Before I ask Brian to review our financial results in more detail, I want to take just a few minutes to elaborate on the value of several intangibles of our business model that are often overlooked yet extremely important to our ongoing success. First is resiliency. Our historical track record of quickly recovering from macro disruptions is a testament to the resiliency of our business model. Cedar Fair's resiliency is grounded in our ability to dynamically manage resources, market our unique brand of entertainment, and deliver a diversity of engaging experiences that drive demand through market cycles. This has allowed us to navigate downturns in our industry as evidenced by our recoveries from the Great Recession and the recent pandemic. This past season is just the most recent example of how our resiliency played a key role in driving record second half performance after macro factors weighed on first half results and our plans to produce another record year. Second is our ability to sustain performance. For more than a century and a half, Cedar Fair and its iconic collection of parks have delivered sustained performance. This resides in the irresistible consumer appeal created by our unique outdoor attractions that draw millions of guests to our parks each year as they have for decades. We leverage our expertise and the economic value produced by the resilient demand for our parks to generate exceptional amounts of free cash flow, much of which is invested back into our properties to drive future growth. Executed well, this time-tested approach is at the heart of Cedar Fair's sustained durability. The appeal of our parks and all they have to offer has withstood the test of time. Since the founding of our flagship park, Cedar Point, in 1870, our company has built upon a rich history of delivering happiness and excitement to multiple generations of families. Our parks are woven into the fabric of their local communities, providing tens of thousands of good-paying jobs as well as economic prosperity for neighboring businesses and local governments. Therefore, we take seriously our role as custodians of a unique collection of historic parks and our obligation to preserve their integrity for the generations to come. And third is stability. Our culture is rooted in stability, supported by the most experienced senior leadership team among the regional amusement park operators. Industry experience also runs deep among our regional VPs and general managers, responsible for overseeing and managing the day-to-day operations at our parks. Fundamentally, we also have a healthy, stable business. Our balance sheet is solid. We can fund the company's capital needs. And if we see attractive opportunities, we have the capacity and financial flexibility to pursue them. Helping to drive that economic stability is the growth of our recurring, predictable revenue streams, the existence of which instills confidence in our long-term strategic plan and capital allocation strategies. With that, I'll turn the call over to Brian, after which I'll return with a few closing thoughts around our outlook for the business. Brian?

Brian Witherow, CFO

Thanks, Richard, and good morning. I'll start off with a review of our record fourth quarter performance before providing a more detailed recap of our full year results. During the quarter, our parks had 377 total operating days with one additional day compared with the fourth quarter of 2022. During the period, we generated record net revenues of $371 million, up $5 million or 1% compared to the fourth quarter of 2022. Our improved performance was driven by a 9% increase in attendance to 5.8 million guest visits and a 7% increase in out-of-park revenues. The increase in out-of-park revenues was the result of the continued strong performance of our resort properties, incremental sponsorship business, and higher revenues at the Knott's Marketplace. The increase in attendance reflects the robust demand for our extremely popular events, including Haunts and WinterFest, as well as increased season pass visitation tied to the strong early sales of 2024 passes. Partially offsetting the growth in attendance and out-of-park revenues was a 7% decrease in in-park per capita spending during the quarter. The decline in per capita spending was attributable to a decrease in admission spending, reflecting the mid-year pricing adjustments we made, as well as the recovery of lower-priced attendance channels in the quarter and a shift in attendance mix. Moving to the fourth quarter cost front. Operating costs and expenses in the period totaled $307 million, up $21 million compared to the fourth quarter of 2022. The period-over-period increase was primarily attributable to $17 million of transaction costs related to the proposed merger with Six Flags. These costs have been classified as SG&A expenses. Excluding the merger-related costs, total operating costs and expenses for the quarter increased $4 million or 1% due entirely to higher SG&A expense. The increase in SG&A expense reflects higher full-time wages as well as higher planned spending on advertising during the period. Adjusted EBITDA, which management believes is a meaningful measure of the company's park-level operating results, increased $1 million to a record $89 million in the fourth quarter, while fourth quarter margin remained essentially flat to the prior year at 24%. Shifting our focus to full year results. Operating days in 2023 totaled 2,365 compared with 2,302 operating days in 2022. The 63 incremental days were the result of 80 net planned days added to our park operating calendars in 2023, largely in the first half of the year. These planned incremental days were partially offset by 17 operating days that were canceled during the year due to inclement weather. For the full year, net revenues totaled $1.8 billion on attendance of 26.7 million guests, compared with net revenues of $1.82 billion on attendance of 26.9 million guests in 2022. The decrease in net revenues reflects the impact of a 1% or 247,000 visit decline in attendance and a 1% or $0.60 decrease in in-park per capita spending. These declines in attendance and per capita spending were offset in part by a 5% or $10 million increase in out-of-park revenues. The year-over-year decline in attendance reflects the impact of a decrease in season pass sales and lower demand during the first half of the year due to the extreme weather, particularly at our California parks. The decline in per capita spending was largely attributable to the previously discussed decrease in admission spending, which was partially offset by higher levels of guest spending on food and beverage. The improvement in guest spending on food and beverage was driven by increases in both the number of transactions per guest and the average transaction value, reflecting the impact of continued investments in our food and beverage offerings. Moving on to the cost front for the full year. In 2023, operating costs and expenses totaled $1.32 billion compared with $1.29 billion in 2022. The year-over-year increase was primarily attributable to $22 million of transaction costs related to the proposed merger with Six Flags. Excluding these merger-related costs, total operating costs and expenses for the year increased $5 million, up less than 1%. This year-over-year increase was the result of a $14 million increase in SG&A expense, which was partially offset by a $4 million decrease in cost of goods sold and a $4 million decrease in operating expenses. The decrease in operating expenses was primarily driven by cost savings initiatives that led to reductions in seasonal labor hours and in-park entertainment costs. These cost savings were somewhat offset by six incremental months of land lease expense at California's Great America, higher early season maintenance costs at several parks, and increased insurance-related costs. The increase in SG&A expense was primarily attributable to higher planned advertising during 2023. Looking a little more deeply at operating costs for a moment. As Richard mentioned, we remain focused on reducing operating costs and improving margins. This past year, these efforts included taking variable costs out of the system when attendance levels were below expectations, as well as setting the stage for reimagining how we program and staff our parks in order to capture more permanent savings. Over the second half of the year, these efforts led to a $22 million year-over-year reduction in operating expenses. We made these adjustments while still entertaining nearly 600,000 more guests during that time. Our cost-saving efforts, combined with record revenues, led to a 210 basis point expansion in adjusted EBITDA margin over the second half of the year. The reduction in second half operating costs was primarily driven by efficiencies in operating supplies and entertainment costs as well as reductions in both seasonal and full-time labor. Over the second half of the year, our park teams reduced total seasonal labor hours by more than 550,000 hours while our average seasonal labor rate was up a modest 1%. The changes we have made to our seasonal pay structure continued to help flatten the growth curve around labor rates, which is particularly important given that seasonal labor represents our single largest operating cost. For the full year, our average 2023 seasonal labor rate was up 2% from last year, in line with expectations coming into the year. The recent success of our cost-saving measures gives us confidence going forward that we have the right strategies in place to drive incremental operating efficiencies and expand margins while still delivering a park experience that meets the demands and expectations of our guests. On the adjusted EBITDA front, for the full year, adjusted EBITDA totaled $528 million compared to $552 million in 2022. The $24 million decrease was primarily attributable to the year-over-year decreases in attendance and net revenues and, to a lesser extent, by the higher advertising, land lease, and insurance-related costs in 2023. Now turning to the balance sheet. We ended the year with $65 million in cash on hand, no outstanding borrowings under our revolving credit facility, and total net leverage just above our stated goal of 4x. Including our cash on hand and the available capacity under our revolver, we ended 2023 with total liquidity of $345 million, an adequate level to cover near-term cash needs. I want to look at long lead business indicators for just a moment. As Richard previously mentioned, the early trends in sales of season pass products have been strong, while group bookings and reservations at our resort properties are pacing in line with expectations. Our total deferred revenue balance at the end of the year was $192 million, representing an increase of $19 million compared to deferred revenues at the end of 2022. Through the end of January, sales of 2024 season passes were up approximately $16 million, driven by a 20% increase in unit sales. The increase in unit sales was somewhat offset by a decline in the average pass price, which reflects our pricing strategy aimed at building unit volume in the early months of the program, as well as a shift in the mix of passes sold. With more than half of our season pass sales cycle remaining, including the spring window that accounts for close to 50% of total sales, we remain focused on maintaining the strong demand trends we've established to date. Regarding our CapEx program, this past year, we spent $220 million on CapEx, including investments in new rides and attractions, upgraded and expanded food and beverage facilities, and renovations to the Knott's Hotel. By comparison, we project investing between $210 million and $220 million on capital projects in calendar year 2024. Additionally, for modeling purposes, we are projecting full year 2024 cash interest payments of $140 million to $150 million and full year cash taxes of $50 million to $60 million. Finally, I want to provide an update on our planned operating days for 2024. After carefully evaluating demand levels and our performance this past year, we've made the strategic decision to condense our operating calendars at several parks as we look to concentrate attendance over fewer days and drive better operating efficiency. The changes that are being implemented will primarily reduce operating days in the first two quarters, most notably at our small to mid-tier parks. In total, we are currently planning for 2,253 operating days in 2024, or 112 fewer days than in 2023. For additional modeling purposes, the breakdown of planned operating days by quarter, which will be impacted by natural shifts in the timing of holidays as well as by shifts in the timing of our fiscal quarter ends, are as follows: 119 days in the first quarter, 803 days in the second quarter, 998 days in the third quarter, and 333 days in the fourth quarter. Despite the fewer operating days in 2024, we are confident we have the plans and initiatives in place to build on the momentum we established over the second half of 2023, pushing attendance at our parks back closer to 2019 pre-pandemic levels.

Richard Zimmerman, CEO

Thanks, Brian. While somewhat disappointed by the way 2023 began, as I hope you can tell from our comments this morning, we are extremely pleased with our performance over the second half of the year and even more excited about the opportunities we believe can build on that momentum in 2024. Our positive outlook continues to be shaped by several factors. First, consumer demand for amusement park entertainment remains strong and is pacing to soon surpass pre-pandemic attendance levels, an observation supported by our consumer research as well as our record second half performance in 2023 and the strong early trends in our long lead indicators, like 2024 season pass sales. Second, in 2024, we are set to unveil one of our most compelling and broadest-reaching capital programs ever. We are especially excited about the debut of Cedar Point's Top Thrill 2, a project several years in the making and one that is certain to be one of the industry's most unique and anticipated new rides of the year. Our investments in world-class assets like TT2 place Cedar Fair on the amusement industry's leading edge of roller coaster technology and continue to build on our heritage of delivering thrills unlike any other. Although TT2's massive presence at our flagship park will most certainly steal this year's headlines, we are also introducing an incredible lineup of new attractions, dining, and resort options across our entire portfolio of properties. Third, with each new season, we leverage more business intelligence and data analytics to inform our decision-making processes. As evidenced this past year by our agility, these expanded capabilities help set strategies that drive revenue growth and uncover operating efficiencies that reduce cost and increase profitability. And lastly, I would emphasize few reporting periods have been impacted by macro factors as much as the first half of 2023. Under normalized operating conditions, this should translate into a comparative tailwind and a stronger first half in 2024. With Mother Nature hopefully on our side, we are excited about our prospects for delivering a solid start to the year, coupled with an outstanding game plan for the peak season and the proven strength of our all-important second half. We are fortunate to have a business model that has demonstrated resiliency and strength in varying economic and market conditions. I am encouraged with how effectively our mid-season strategic decisions drove performance over the second half of the year. While we continue to work to get demand back to pre-pandemic levels and, at the same time, operate our parks more efficiently, we believe we are well positioned to deliver another outstanding year in 2024 and remain laser-focused on delivering solid returns for our investors. As a reminder, we have no further updates on the merger beyond what I shared at the beginning of the call today. We ask that you keep your questions focused on our performance and our results. Danica, that's the end of our prepared remarks. Please open up the call for questions.

Operator, Operator

Your first question comes from James Hardiman with Citi. Please go ahead.

James Hardiman, Analyst

Hi, good morning. My question is whether you believe you've seen an improvement in attendance since the fourth quarter. Richard, it seems like your final comments indicate that you think demand will soon exceed 2019 levels. When you mention demand, are we talking about attendance? Looking at the figures, it appears you were down about 5% compared to 2019 in 2023. Do you think achieving a 5% increase in attendance is feasible, depending on the weather?

Richard Zimmerman, CEO

I would say - James, good morning. Good to talk with you. Thanks for the question. When you look at what we did over the second half of the year and the strong demand, the ability to generate significant revenue in what is already our biggest period of the year and in particular, in the fourth quarter, we always talk about the strength of Halloween and we always talk about the strength we saw in WinterFest. And that showed through this year. The fact that we really were able to push through 2019's level, the highest attendance in the fourth quarter this year in 2023 says I think we have turned the corner. And I think while there's always been a great deal of focus from the sell-side community on the strength of the consumer, we're seeing really strong demand across all of our regions. We saw the recovery in Southern California, particularly in the second half of the year. We had an extremely strong year, which we commented on, in the Ohio Valley. And we commented on that throughout the last couple of calls. So we do think where there is no extraneous factor like weather, we're seeing really strong demand.

James Hardiman, Analyst

Got it. So it sounds like we're taking a wait and see, but you feel pretty good, fair?

Richard Zimmerman, CEO

We are confident in the demand that we're seeing, supported by our research and our leading indicators.

James Hardiman, Analyst

I'm trying to ask this question in a clear way. I can't recall if it was the second or third quarter when you first mentioned establishing a base layer of season pass sales before focusing on pricing. It seems that this approach played out in the second half of the year, especially in the fourth quarter. Considering the significant increase in attendance, which was countered by a notable decline in per caps, how much of this will affect what we observe in 2024? Specifically, with the current lower season pass prices, how will that influence per caps next year? Are we currently seeing season pass pricing returning to a flat year-over-year basis with the potential for growth, or will we continue with lower pricing into the new year?

Brian Witherow, CFO

Yes, James. First, it's important to note that while discussing our strategy of establishing a solid foundation for season passes and focusing on volume early, we did implement price adjustments, but only at a few parks. Unfortunately, this is influenced by our operating calendar, with some parks, notably Knott's Berry Farm, accounting for a significant part of the fourth quarter operations. Not all parks see as much significant activity in the fourth quarter. Therefore, these pricing adjustments might have a greater impact on the fourth quarter than they will as we transition into 2024 when we expect to have all parks operating. Despite that, in the parks where we did adjust prices to align with market conditions, we are now beginning to increase prices again in our season pass program. Pricing is adjusted on a market-by-market basis. In terms of season pass sales, the fall offers the lowest prices, which increase slightly for the winter sales cycle, with spring and summer being the most expensive. We will continue to assess the situation market-by-market. Looking ahead to next year, we need to consider where the consumer stands and how per capita spending will play out. We always differentiate between admissions and in-park spending. We are pleased with guest spending inside the park, especially in food and beverage. We plan to enhance other in-park channels, like merchandising for 2024. We also believe that areas such as guest spending on extras, particularly Fast Lane, will benefit from the higher attendance we anticipate for next year.

James Hardiman, Analyst

Got it. And so should I interpret all of that, I mean, if the positivity on attendance plays out in 2024, based on some of Richard's commentary, should we not assume that there's a significant giveback on the per cap front like we saw in the fourth quarter?

Brian Witherow, CFO

I think, ultimately, the answer to that, James, is going to depend a little bit on mix of channel, which channels does the majority of that lift come from? I mean, as you know, season pass and group are smaller admissions per cap or a less expensive ticket on a per cap basis than single day, and so depending on where that mix or if that mix shakes out in the incremental attendance as well as which parks, right? I mean, the higher per cap parks, if that's where more of the growth comes from, that could change that. But it's fair to say that as attendance gets back to those 2019 pre-pandemic levels and each of those channels recover, there's naturally some mathematical pressure on the admissions per cap. But there's a lot more revenue, and that's a type A problem we'd like to have.

James Hardiman, Analyst

Got it. Makes sense. Appreciate it, guys, and good luck.

Brian Witherow, CFO

Thanks, James.

Operator, Operator

We will go to our next question from Steve Wieczynski with Stifel. Please go ahead.

Steve Wieczynski, Analyst

Hi everyone. Good morning. Richard, I know you don't provide annual guidance. However, if we were to reconvene this time next year, would you be disappointed if you didn't surpass the EBITDA figures from 2023? While I understand that the weather comparisons in the first half of this year are more favorable, it might be more relevant to compare to 2022, which had EBITDA around $550 million. If you don't exceed that this year, what factors should we be monitoring or considering?

Richard Zimmerman, CEO

It's a great question, Steve. Our planning, whether for 2024 or any other year, involves closely examining our portfolio to identify opportunities. We continuously invest in our parks, focusing on capital projects, especially larger initiatives, which help drive demand in specific markets. We aim to time these investments effectively, although we cannot control external factors like the weather. We assess economic conditions around our parks on a market-by-market basis, looking for potential growth in each location annually. Some parks will have larger projects and are expected to see more growth, while others may be in markets experiencing economic challenges. We often discuss consumer health, as it's vital to our operations. We monitor this closely but feel our recurring revenue streams aren't always fully appreciated by the market. While we experience disappointment when uncontrollable factors impact us, such as weather, we recognize that these are part of operating in an outdoor business. When we build our plans, we evaluate how well we met each park's potential throughout the year, considering the factors we can control, like park programming and operational days. We adjust our strategies based on perceived opportunities. Additionally, we're committed to dynamic pricing and leveraging our business intelligence and data analytics for informed decision-making, not only for 2024 but also for 2025, 2026, and 2027, as we believe in the long-term sustainability of our business. While delivering results in the short term is our immediate focus, we are also planning for the future to ensure consistent performance over time.

Steve Wieczynski, Analyst

Thank you for that, Richard. I want to revisit a question that James raised, but from a slightly different angle. You mentioned that you adjusted ticket pricing and marketing expenditures in the second half of 2023 to help recover lost attendance, and it seems that strategy was effective. My question is whether you believe you may have raised prices too much. I understand this is a minor aspect of your parks, but do you think that readjusting prices now could prove to be more challenging? I hope that makes sense.

Richard Zimmerman, CEO

Yes. No, I think I understand the question. I go back to our broad thoughts on dynamic price and then I'll ask Brian to weigh in. We're looking to optimize volume and price. And you never get it quite right. You get as much as you can and then you evaluate where you are on the continuum and you continue to adjust. I think we did what we needed to do. And I would term our pricing adjustments modest. I'd also say as we look to the strength coming out of the fall season pass sales, we took our biggest price increases to the now winter price at those parks where we saw the strongest demand. So it's constantly watching the market and how our consumers are reacting and making sure we're trying to optimize that revenue stream. Brian?

Brian Witherow, CFO

Yes. I think, Steve, I would just add, as we go through any year, there's always going to be points in times, various ticket channels in various markets, where we might bump our head. And that's a lot easier to navigate on a day-by-day or week-by-week basis than things like single-day tickets. I think what we saw the most pressure in the past year was, as we said earlier, was in season pass in several markets. And you have to remember, that pricing strategy and those sales strategy around season pass are set in the summer leading to that late August launch of each year's or park's program. And so you put in place a pricing strategy that it's harder to adjust downward on season pass. And certainly, there were several markets in our portfolio that by the time we got to the first quarter of '23, the economies or maybe the consumer had changed a little bit from where they were back in July, August when we were setting those prices. So the way the program works is you just have to ride it out and then make those adjustments for the next year. That's a different story when it comes to single-day tickets that you can dynamically price up and down as the season progresses.

Steve Wieczynski, Analyst

Okay. And Brian, real quick, can you give the operating days by quarter again? You broke up a little bit. I think I got the third and the fourth quarter, but I couldn't hear the first and second quarters.

Brian Witherow, CFO

Yes, sure. It was 119 days in the first quarter, 803 in the second, 998 in the third, and 333 in the fourth.

Steve Wieczynski, Analyst

Okay, great. Thanks guys. Appreciate it.

Operator, Operator

We will go to our next question from Thomas Yeh with Morgan Stanley. Please go ahead.

Thomas Yeh, Analyst

Thanks so much. Good morning. I wanted to ask about the cost outlook on a stand-alone basis. Brian, you sounded pretty confident in the cost controls that you've been putting in place. And in the recent filing, you had identified $45 million of savings I think, baked into the stand-alone expectations. And I think implied that total company expenses would actually be down. Is it fair to say that fewer operating days are incorporated in that view and that's a net EBITDA positive contributor? And then maybe just beyond that on the core expenses, how you're managing to that outlook.

Brian Witherow, CFO

Yes, Thomas. I believe you captured it perfectly. A key element of our strategy to enhance efficiency is focusing our attendance into a shorter operating season, especially at our mid-tier parks. Additionally, we are rethinking how we program the parks, specifically to reduce our reliance on seasonal labor, which is our largest expense. You will notice some of these changes as we implement the removal of 112 operating days from our schedule this year. This is a significant part of our approach. Furthermore, it’s crucial for us to adjust and remain flexible regarding variable operating costs to align better with demand levels each year. Our teams were particularly effective this past year in adjusting staffing levels to reduce those variable costs when attendance did not meet our expectations due to macro factors. Conversely, when attendance is high, it’s essential to ensure adequate staffing. We closely monitor how our seasonal labor spending correlates with in-park revenue. There is a direct connection when staffing levels become problematic, especially during the lighter attendance months before summer vacation when hiring can be challenging. This can impact our per guest spending. Therefore, our teams must remain adaptable in adjusting staffing levels. The more permanent adjustments we’ve discussed involve changing our operating calendars and park programming to lower overhead costs structurally.

Thomas Yeh, Analyst

Great, makes sense. And then I wanted to revisit the bifurcation you were seeing earlier this year between Midwest strength and California weakness. And Richard, you talked about the recovery in Southern California in the second half. Is the postmortem on that and just some of the pricing strategies that you've enacted suggest that it was a weather-related problem primarily or more price sensitivity in some of the regions where you saw the most impact? And as a follow-up to that, I think that the logic of trying to start the season pass sales at a lower price and stimulating demand would be that it would drive in-park spending strength. And I did notice that the food and beverage per guest was also, I think, a little bit lower on a year-over-year basis. Any comments on how you're seeing that play out would be great.

Richard Zimmerman, CEO

Yes. Throughout 2023, we noticed some consumer weakness in California during the first half of the year, largely influenced by weather. However, by mid-summer, we began to see positive trends in consumer behavior regarding their time and spending. Historically, similar weaknesses emerged in 2007 in California before spreading eastward. We are now witnessing a stabilization of the consumer landscape in California. As Brian pointed out, when we generate significant attendance, it encourages many visitors to the park, allowing us to respond to that demand effectively. Increased attendance may slightly pressure our per capita spending due to higher foot traffic in the park, but we consider this a positive challenge. Our recent investments will help us enhance per capita spending once guests enter the park. Looking ahead to 2024, we have an exciting range of capital investments lined up, including Top Thrill 2, which will attract more visitors and boost revenue through premium offerings, like our Fast Lane program. We’re optimistic about our plans this year as they align more closely with our traditional strategies. The past few years were disrupted due to the pandemic, but now we are returning to a more conventional approach, utilizing top-notch investments to boost not only attendance but also pricing power and in-park experiences.

Thomas Yeh, Analyst

Got it. Last one for me, I might have missed it. But knowing things might change after the pending merger, do you have a sense of the CapEx outlook on a stand-alone basis just for modeling purposes?

Brian Witherow, CFO

Thomas, for next year, we are planning $210 million to $220 million of capital.

Thomas Yeh, Analyst

And for '23, what was the number for the full year?

Brian Witherow, CFO

The high end of that is right around - right at $220 million.

Thomas Yeh, Analyst

Okay, perfect. Thank you.

Brian Witherow, CFO

Thanks Thomas.

Operator, Operator

Our next question comes from Michael Swartz with Truist Securities. Please go ahead.

Michael Swartz, Analyst

Hi guys, good morning. I think I just wanted to kind of focus in on the first question on some of the commentary around channel mix. And as I recall, coming out of the pandemic, you guys have kind of cut back on some of the lower-value channel business. And it sounds like you brought some of that back. So how should we think about that going forward? Are we just kind of back to status quo pre-COVID? Or is that still a focus to limit some of that lower-value stuff going forward?

Brian Witherow, CFO

I would say that our approach is still to limit that. While we haven't completely returned to our previous strategy, we do need to pay attention to the results in certain markets and make adjustments as necessary. During some of the quieter months, when demand is slightly lower due to factors like school being in session, we've allowed a few programs to re-enter our marketing strategy on a market-by-market basis. However, I wouldn't classify this as a total return to our pre-pandemic approach.

Michael Swartz, Analyst

Okay, great. And just from a cost standpoint, I mean, you've talked about some of the variable costs you removed in the back half of the year, I guess, partially in reaction to the softer attendance we saw in the first half of the year. But I guess, as we go into '24 and with season pass sales where they are, with some of the momentum you talked about going into the year, I guess, how does that translate to how you think about some of the costs at least in the first half of the year? Are you adding back costs? Or do you think some of the changes you made in the second half of the year should be sustainable into the first part of '24?

Brian Witherow, CFO

Yes, it’s a bit of a mixed situation. We definitely identified some cost savings this past year in response to adjusting variable costs according to demand levels. If demand were to increase again, we would reinstate those costs to ensure we deliver the guest experience desired and drive the revenues we can achieve with higher attendance. We also have some permanent savings related to adjustments in park operating calendars and programming. It's important to highlight the differences between the first and second halves of the year, particularly in the third quarter where most of our variable costs are located, allowing for a larger impact. In the first quarter, and to some extent the second quarter, we have more fixed costs at the park level. If we act too aggressively in cutting costs, we risk being unprepared to open the parks in the typical spring timeframe of April and May. Consequently, we maintain a lean fixed off-season cost base at certain parks in the fourth quarter, like Cedar Point, which closes at the end of October, or for most seasonal parks that are not open year-round. Therefore, we expect that the ability to achieve savings will increase in the third and fourth quarters, with a greater emphasis on the third quarter.

Michael Swartz, Analyst

Okay, that's helpful. Thanks, Brian.

Operator, Operator

Our next question comes from Chris Woronka with Deutsche Bank. Please go ahead.

Chris Woronka, Analyst

Hi. Good morning, guys. Thanks for all details so far. I wanted to revisit the comments about adjusting the park operating days, and totally understand it certainly from an operational expense standpoint. But I guess, your plan or your goal is to get more attendance into fewer days. And the question is how much risk do you see to that? And also from an in-park spend standpoint, if the parks are going to be a little bit more crowded on certain days, particularly in shoulder seasons, is there any inhibitor then on an ability to spend in-park?

Richard Zimmerman, CEO

Yes, Chris, this is Richard. When I think about the days we are removing, many of those were from the first quarter when we kept certain markets like Charlotte, Richmond, and Great America open on weekends during January and February. Like WinterFest, these were shorter length-of-stay days, not the long summer days where stays are 6 to 8 hours. So, we are essentially removing days with shorter stays, resulting in fewer visits. As you consider the revenue impact, we are confident in our ability to drive attendance with our operating calendar, which we continuously refine year after year. There is ongoing discussion about whether to add or remove days and where the opportunities lie. When it comes to maximizing per capita spending, I would highlight that during peak times in July, August, or especially October, we have significant flexibility and scalability at each location. We achieve our highest per caps on our busiest days, which is influenced not only by admission pricing but also by per capita spending within the park due to longer stays. We've developed our parks to optimize revenue opportunities, even on less busy days, by configuring our facilities to operate efficiently. On low demand days, we can choose to open fewer service lines or parts of facilities. Our design allows us to capture as much revenue as possible while ensuring our guests receive the level of service they expect. I’m aware of the need to be prepared for this, but our parks are equipped to drive per capita spending even during peak times.

Chris Woronka, Analyst

Okay. Super helpful. Just as a follow-up to that, I mean, the number of park days, it looks like, that you haven't planned right now rounds to down 5% for the year, right? It's down 4.7%, 112 days. If we try to think about that in terms of hours, and maybe this is an exercise in splitting the atom, but it would certainly be less than that in hours, right, based on what you just said.

Brian Witherow, CFO

Yes, based on the calculations, it would be less than that. However, as you know, Chris, there are other factors to consider, including our anticipated calendar. Weather, as we observed in 2023, will significantly affect this, as will demand. If demand returns strongly, we are open to adding an extra day here and there to accommodate that need. This also applies to our operating hours. We may reduce hours throughout the year due to weather conditions; we might not close for the entire day but may close early or extend hours based on demand. The key takeaway is that we need to stay nimble and flexible in response to the evolving market conditions.

Chris Woronka, Analyst

Got you. Thanks, Brian. Just one last question from me if I can real quick. Do you think there has been any consideration given to possibly starting to offer some kind of additional presale for the season pass products? It would involve some form of discount, but it would provide built-in revenue for you guys, possibly $50, $75, or $100, encouraging customers to spend and come. Is that something that's being considered?

Brian Witherow, CFO

We've occasionally utilized season pass credits in various markets to test different strategies that resonate with our audience. Chris, I can assure you that we will continue to seek ways to enhance the season pass experience. It plays a vital role in our overall attendance, comprising more than 50% of our attendance mix. Therefore, engaging our season pass holders and creating loyalty is essential. While I don’t have any specific updates to share at this moment, we have definitely been experimenting and will keep looking for opportunities to boost demand for the season pass product.

Chris Woronka, Analyst

Okay, very good. Thanks, guys.

Operator, Operator

Our next question comes from Eric Wold with B. Riley Securities. Please go ahead.

Eric Wold, Analyst

Thanks. Good morning. Considering the season pass question in a broader context, you mentioned in the press release that the 20% increase in unit sales will positively impact this year throughout the season. Looking further ahead, do you have data to share on current unit sales compared to pre-pandemic levels? How has the demographic of buyers changed since then? Additionally, what is the average distance from a park now compared to before? I'm trying to understand what has changed regarding the total addressable market and the potential long-term benefits around these parks, especially in relation to short-term pricing fluctuations for a season.

Brian Witherow, CFO

Yes, Eric, it's Brian. I’d start by mentioning the demo of the season pass holder. We haven't seen a significant change in that area, but the radius around the park appears to be expanding gradually. This may have been amplified after the pandemic. We've noticed that people are more willing to drive from farther away instead of flying, which is more costly and complex. As a result, our season pass penetration may be reaching a bit further. I’m not sure if it's a material shift yet, but it is moving in that direction. Additionally, in comparing pre-pandemic and post-pandemic volume, even in 2023, despite a shortfall of a few hundred thousand units compared to the record level in 2022, our pass program still exceeded the total units sold in 2019. We have set a new benchmark and are striving to improve from there.

Eric Wold, Analyst

Helpful. Thanks very much.

Operator, Operator

We will go to our next question from Lizzie Dove with Goldman Sachs. Please go ahead.

Lizzie Dove, Analyst

Hi there. Good morning. Thanks for taking the question. I just wanted to dig a bit more into attendance on per capita. Like as I look to what you talked about in Q3 for October trends, you talked about a 2% increase in attendance and a 3% decrease in, in-park spending. So it feels like there was just a meaningful step-down in November and December to kind of end up where you did for the full quarter, especially as I would have thought October was the biggest contributor. So maybe if you can talk about that and just kind of anything that changed as you got through to the later months of the quarter.

Brian Witherow, CFO

Yes, Lizzie, it's Brian. It really dovetails back to my earlier comment that it's a little bit of mix. And the parks that are operating, particularly still in November and December, you're losing maybe one of your top two parks in terms of ticket pricing in Cedar Point as it shuts down at the end of October. Knott's is the other one, sort of one, two, typically in terms of pricing point on tickets and season passes, et cetera. And Knott's is the one park where we did roll prices back pretty significantly for that fall renewal because of how we felt the market had moved from where our '23 pricing was originally set. So because Knott's is a little bit more of a piece of that pie, it's really just a function of the mix play and the seasonality of our business. I think the other thing is, as it relates to the in-park spend, that's where a Cedar Point or even the Schlitterbahn Waterparks come into play, not being present in those as much in those fourth quarter numbers. Those are two of your biggest and your highest overall per capita parks. They have the longest length of stay of any parks in our system. So as they come out of the numbers, those variances get swung a little bit more mathematically, if I could say that, than overall. Now that's not to say that the pricing strategy or the pricing program that's in play right now is not going to have an impact on admissions per cap going into '24. There's certainly going to be some mathematical impact on pricing as we go into '24 on a park-by-park basis. So Knott's admission per cap is not going to be where it was in the first half of 2023 because of the changes we made there as an example. That said, we expect to see a lot more attendance and a lot more revenue. And that's ultimately for us what matters most is the revenue number. As Richard said earlier, it's about optimizing volume and pricing. It's not about maximizing either one of them independently.

Richard Zimmerman, CEO

And Lizzie, I'll go back to my comments, which were in November and December, that WinterFest has a much shorter length of stay. Particularly on the East Coast, we were pleased with the attendance. Toronto had a very strong WinterFest program. And there, when you look at U.S. reported, you lose on the foreign exchange piece of it. So we're driving a lot of volume up in Canada with a lower length of stay, there's just a mathematical impact on your per capita.

Lizzie Dove, Analyst

Got it. That makes sense. And just one follow-up, so I know last year in the first quarter, you had a couple of big headwinds from particularly the California weather, which was really bad. You had, I think, the impact of the season pass, which had previously been extended and was not in 2023. So I guess, any kind of early reads on what you're seeing so far in January and early February? I know it's a much lower volume quarter, but I see California has had some kind of weather issues, so just kind of any early reads there of what you're seeing.

Brian Witherow, CFO

Yes. I'd say, as we said in our prepared remarks, the best long lead indicators we have at this point are looking at those season pass and related all-season product sales, which are extremely strong, as well as early bookings around group events and reservations at our hotels. And those are pacing in line with our expectations. So from a long lead indicator, those feel really good at this point in time. As it relates to California weather, we certainly didn't want to see that week or so of extreme weather, but a very different scenario to what we experienced last year. I'd say what we've seen so far through the first 1.5 months or so of '24 is more comparable to a typical California winter, which is you'll get weaker rain, but it's not anywhere near the extreme anomalistic weather patterns we saw in 2023.

Lizzie Dove, Analyst

Okay, that's helpful. Thanks so much.

Richard Zimmerman, CEO

Lizzie, I would say I'd echo Brian's comments. And again, I'd just say on the days we're open and the weather is the same year-over-year, I'm encouraged by what I see. If we were down percentage-wise to last year, I'd be discouraged, but I'm encouraged.

Operator, Operator

We will go to our next question from Paul Golding with Macquarie Capital. Please go ahead.

Paul Golding, Analyst

Thanks so much. Richard, Brian, just had a question around the F&B comment. You noted that transaction count and transaction value were up. And that was a bright spot in the per cap mix. I was wondering how much of that is being driven by greater penetration of mobile food ordering and how far along we are in the rollout of that in order to see continued tailwinds potentially to help per caps relative to attendance. And then my second question is on the selling part of SG&A. Just as you see your pass count rise, this impressive 20% that you noted, how nimble are you to roll back some marketing if you feel that it's appropriate? Thank you so much.

Brian Witherow, CFO

Yes, I'll start with your F&B question, Paul. We continue to experiment with different ways to optimize those efficiencies using mobile for food and beverage ordering and other aspects of the park as well, including most recently this past year, starting to test some mobile purchasing capabilities around something like Fast Lane. So the challenge with all those things always within the park, the ability to scale it to days where you might have 40,000 or 50,000 people in the park. So I think it's helped in some of the parks on a modest level. But more of the benefit, I'd say, more of that lift in the average transaction count, the average transaction value is the outcome of the investments we've made to replace old, tired, inefficient facilities with higher throughput, better experienced facilities for our guests that we can scale our staffing levels up and down more easily within. That's what we're driving more efficiencies at this point in time. Not giving up on making an impact more around the mobile side of things, and we are actually rolling out our new mobile app as we speak, as we get into the '24 season at the various parks. I think Knott's is maybe next up on the schedule, which will have more functionality around that. But the challenge is always just how do you operationalize at an effective level on those big attendance days. So that's just a unique challenge to our business. As it relates to season pass, I'll let Richard provide some color on that.

Richard Zimmerman, CEO

Yes. Paul, do you want to restate your question, so I make sure I got that on season pass?

Paul Golding, Analyst

Sure. Well, you've seen this pop in season pass sales on a unit basis. And so I was just asking around how nimble you are with the marketing aspect of your SG&A in terms of your ability to throttle down if you find that to be useful from a cost savings perspective, given how much attendance you may have already sort of pulled forward or captured with the season pass sales.

Richard Zimmerman, CEO

I understand your question, Paul. I see this as part of a larger picture, as it's not solely about season pass advertising. When we promote season passes, especially in the spring when we traditionally sell 50% of our units, it also signals to people that our parks are open. Thus, our spring advertising serves a dual purpose compared to early summer. We continuously assess the effectiveness of our advertising spend. We have been flexible, adjusting our spending up or down. After the pandemic, we reduced our spending significantly due to the changing market conditions at that time. In each market, we aim to identify the optimal spending level that generates the desired demand. Each year presents its own unique opportunities and challenges. This year, with the introduction of TT2 at Cedar Point, we are focused on developing a marketing strategy that will enhance Cedar Point's appeal as a major destination. There are challenges associated with both underspending in markets with opportunities and overspending by pushing too aggressively. It's a constant balancing act, and we adapt our approach based on the specific opportunities in each market every year.

Paul Golding, Analyst

That's great color. Thanks so much.

Operator, Operator

Our next question comes from Ian Zaffino with Oppenheimer. Please go ahead.

Ian Zaffino, Analyst

Hi. Thank you very much. Just wanted to ask a question on the CapEx, I know you said, I think, $210 million to $220 million. Can you maybe give us an idea of the components of that as far as rides? Is there any intention to increase F&B spend? I know you've done that in the past. And any other kind of components you could give us would be helpful. Thanks.

Richard Zimmerman, CEO

Yes, Ian. This year, we're returning to our traditional spending profile. Following COVID, we had the chance to reduce our investments in rides and attractions, but now we are increasing that investment again. We are also continuing to invest in food and beverage, and you'll notice an uptick in our spending on rides and attractions, alongside ongoing investments in food and beverage and other guest amenities throughout the park. The spending this year will resemble what we spent last year, which was close to $220 million. However, part of last year's spending was related to the Knott's Hotel, which received a bit more investment. Knott's was one of the last renovations in our existing hotel portfolio. We have plans in place for future projects, including at Schlitterbahn, to enhance their resort component, which we were excited about when we acquired it back in 2019. Our aim is to invest wisely to drive demand, enhance guest amenities in food and beverage and other areas, and increasingly invest in technology to improve our parks. We're rolling out mobile apps across all our major parks this spring and upgrading Wi-Fi at all locations. We’re focused on initiatives that our guests highly value.

Ian Zaffino, Analyst

All right, great. Thank you very much.

Richard Zimmerman, CEO

Thanks Ian.

Operator, Operator

Our next question comes from Robert Aurand with KeyBanc Capital Markets.

Robert Aurand, Analyst

Hi, thank you. I wanted to ask about EBITDA margins. You talked in the past about being able to get back to the mid- to high 33s when you got attendance back to 2019 levels. And you're talking pretty positively about the attendance ramp here this morning. I guess, if I look at the deal filings, some of the stand-alone projections, the margins don't quite get back to those levels. So I'm just trying to understand some of the puts and takes, kind of your long-term margin outlook and kind of the ramp from here.

Brian Witherow, CFO

Yes, Robert, it's Brian. As we said in our prepared remarks, I mean, driving margin expansion is a core priority and remains that. As it relates to the model in the S-4 that was filed, I would say, again that's a working model that was reviewed with our Board back in the summer of 2023, not necessarily reflective of where we stand today on the plan that we have built for 2024. As we said, our greatest opportunity for margin expansion is in the second half of the year. And we've built a plan for 2024 that if we see the kind of weather that we would expect and that translates into the demand levels we would expect, we would certainly expect to see a margin expansion from where we're at right now. Getting all the way back to pre-pandemic levels is going to be a function of, ultimately, those attendance levels. And in this new cost environment, it's critical to get back to that 27-plus million attendance level to get there.

Robert Aurand, Analyst

Thank you. Just a quick one on group, I know coming into the year, you were missing 1.4 million group visits versus 2019. Any way you could frame up kind of where we exited the year and what you think you can get further back in 2024?

Richard Zimmerman, CEO

Yes, Robert, it's Richard. We're very encouraged by the progress we've seen over the last six months, particularly the strengthening in group channels. Looking ahead, we believe our expectations align with what we anticipated a year after the pandemic. Historically, it took us about three years to recover group bookings following the downturn in 2008 and 2009 since they are the slowest to return. However, we've noticed a positive trend with companies making bookings, including youth group bookings in the second half of the year, which appear strong. We anticipate this trend will continue as we emerge from macro disruptions. I'm quite optimistic about our group channel performance, keeping in mind that we have filtered out some lower-priced, demand-driven channels. When we analyze what's driven by representatives and specific dates in both the youth and corporate sectors, my outlook remains very positive.

Robert Aurand, Analyst

Thank you.

Operator, Operator

All right. That does conclude today's Q&A. I will turn the call back over to Richard Zimmerman for closing remarks.

Richard Zimmerman, CEO

Thanks to everybody for joining us and your continued interest in Cedar Fair. We hope you'll have a chance to visit one of our parks this season as we keep you apprised of our progress on the 2024 season. Michael?

Michael Russell, Introduction

Thanks again, everybody. For additional questions, I invite you to contact our Investor Relations department at (419) 627-2233. And our next call will be in early May after we release our 2024 first quarter results. Danica, that concludes our call today. Thanks, everyone.

Operator, Operator

Thank you all for joining. You may now disconnect.