Financial Data and Key Metrics - Q1 2024 net revenues increased to 102million,upfrom85 million in Q1 2023, driven by a 290,000 visit increase in attendance and a 4millionincreaseinout−of−parkrevenues[118]−In−parkpercapitaspendingdecreasedby63.94, partially offsetting the revenue growth [118] - Operating costs and expenses totaled 215million,up25 million compared to Q1 2023, with 15 million attributed to SG&A expenses related to the proposed merger with Six Flags [30] - Excluding merger-related costs, operating costs and expenses were flat year-over-year despite a 125,000 increase in guest visits [124] - Deferred revenue balance at the end of Q1 2024 was 233 million, up 10% compared to the same period last year, driven by strong season pass sales [112] Business Line Data and Key Metrics - Season pass sales increased by 8% or 15million,drivenbya1713 million or 27%, reflecting higher unit sales and average pricing [9] - Knott's Berry Farm improved EBITDA margins by more than 200 basis points in Q1 2024, driven by higher demand and tight management of variable costs [21] - The company introduced next-gen mobile apps with features like Fast Lane wait times and improved park mapping, enhancing the guest experience [34] Market Data and Key Metrics - Attendance in Q1 2024 increased by 10% or 125,000 visits compared to the same period last year, despite 62 fewer operating days [35] - Out-of-park revenues increased by 8% or 2million,drivenbytheextracalendarweekandimprovedperformanceoftheKnott′sHotel[30]−ThecompanystrategicallyreducedoperatingdaysatseasonalparkslikeCarowinds,KingsDominion,andCalifornia′sGreatAmericatoeliminatelower−value,higher−riskdays[20]CompanyStrategyandIndustryCompetition−Thecompanyisfocusedonimprovingmarginsbyincreasingdemandanddrivingoperationalefficiencies,particularlyaroundvariablecostslikeseasonallabor[5]−Investmentsindigitaltechnologyaimtoenhancetheguestexperience,driverevenuegrowth,andimproveoperationalefficiencies[4]−Thecompanyisdeployingnext−gen6G−enabledWiFicoverageatitsparks,withplanstoexpandthistechnologytosixmajorparksbytheendof2024[34]−TheproposedmergerwithSixFlagsisexpectedtoclosebeforetheendofQ22024,withbothcompaniesworkingconstructivelywiththeDOJonthereviewprocess[116]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Managementremainsoptimisticaboutconsumerhealthandthestrengthofcoremarkets,citingrecordperformanceinthesecondhalfof2023andstrongmomentumin2024[32]−Thecompanyisfocusedondrivinghigherattendanceandactivatingcost−savingmeasures,particularlyaroundlabor,whichrepresentsmorethanhalfoftheoverallcoststructure[31]−Managementisconfidentinthelong−termgrowthpotentialofthebusiness,drivenbystrongseasonpasssales,operationalefficiencies,andarobustcapitalprogram[33]OtherImportantInformation−Thecompanyspent57 million on capital investments in Q1 2024, in line with full-year guidance of 210millionto220 million [36] - The company fully redeemed its 2025 notes using proceeds from a new 1billiontermloanandsecuredanew300 million revolving credit facility [21] - Net debt at the end of Q1 2024 totaled 2.4billion,withtotalliquidityof157 million, including 35millionincashand122 million in available borrowings [121] Q&A Session Summary Question: Cost growth and inflationary pressures [123] - Management acknowledged inflationary pressures but noted that the outlook for 2024 is better than in previous years, with a focus on managing variable costs like seasonal labor [11] - The company has successfully optimized seasonal labor rates and staffing levels, achieving healthier staffing levels heading into the 2024 summer season [23] Question: Impact of Easter timing on Q1 results [52] - The timing of Easter had minimal impact on Q1 results, as Knott's Berry Farm, the only park with substantial Q1 operations, was not significantly affected [14] Question: Season pass pricing strategy at Knott's Berry Farm [24] - Management explained that the decision to lower season pass pricing at Knott's was a strategic move to drive demand in a competitive Southern California market [25] - Despite the price adjustment, season pass sales have continued to grow, with unit sales and pricing trending up mid-single digits in recent weeks [26] Question: Group demand trends [44] - The company is seeing strong demand in both youth and corporate group channels, with youth group visits trending back to or surpassing 2019 levels [56] - Investments in CRM systems and technology are supporting the growth in group sales [82] Question: Operating expense trends in Q1 [67] - Management clarified that operating expenses per day can be misleading in Q1 due to the small number of operating days and the concentration of operations at Knott's Berry Farm [16] - Excluding merger-related costs, operating expenses were flat year-over-year despite higher attendance [71] Question: Digital transformation and app revenue opportunities [76] - The company views its mobile app as a key tool for enhancing guest experience and driving incremental revenue, with early success in push offers and loyalty programs [96] - The app is part of a broader digital transformation strategy aimed at improving operational efficiencies and guest engagement [99] Question: Minimum wage increases and labor costs [85] - Management is confident in its ability to manage labor costs despite minimum wage increases, citing tools like dynamic pricing and operational efficiencies [85] - The company has successfully managed seasonal labor rates and hours, achieving cost efficiencies while maintaining staffing levels [86] Question: Capital expenditure allocation and ROI [103] - Approximately 60-70% of the 210millionto220 million capital expenditure budget is allocated to ROI-driving projects like new rides and digital initiatives [103] - Marquee attractions like Top Thrill 2 and Iron Menace have historically generated cash-on-cash returns well above 20% [104]
Cedar Fair(FUN)2024-05-09 18:48