Six Flags Entertainment Corporation (FUN) Q4 2022 Earnings Report, Transcript and Summary

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cedar Fair Entertainment Company Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Cedar Fair.

Thank you, Rob, and good morning to everyone. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to today's earnings call to review our 2022 Fourth Quarter and Full Year Results 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 investor's 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 everybody for joining us. Earlier this morning, we announced record performance for fiscal 2022, which reflects the significant progress we are making on our strategic initiatives and the incredible work of our team to continue to deliver exceptional experiences for our guests. These record operating results allowed us to return approximately $220 million of capital to unitholders through the reinstatement of our quarterly cash distributions and the implementation of a new unit buyback program. These results also demonstrate that the strong performance trends that we provided updates on during our quarterly and interim reports throughout the 2022 season came to fruition in the second half of the year. The result was the second highest attendance year in the company's history, near historical highs for in-park per capita spending and record out-of-park revenues, driven in large part by the outstanding performance of our resort properties. We produced record revenues and adjusted EBITDA for the year despite continued headwinds, including labor availability, the impact of inflation and a group business channel that was still recovering. We also delivered 30%-plus margins, a marked improvement over last year with achievable upside as we work back to pre-pandemic demand levels. Much of the credit goes to our park GMs and their team's disciplined cost management practices, including efficiently managing seasonal labor to align with demand, while also actively managing down other variable operating costs to offset general inflationary pressure. The improvements they are making will ensure the long-term vitality of our parks and the growth of our business for years to come. Before I ask Brian to review our financial results in more detail, I want to take just a couple of minutes to walk through some key elements of our strategy and business that led to our success in 2022 and the strong momentum we have heading into 2023. First, reinvesting in our properties is essential to driving long-term growth. At the heart of attracting millions of guests to our parks and resort properties each year, has been the company's commitment to consistently reinvest in the business to improve the guest experience. While M&A activity has certainly played a major role in our historical growth, the limited number of opportunities to acquire strategic high-quality properties, emphasizes the central importance of investing in our own assets to produce steady organic growth. Second, prioritizing top line growth was the right recovery strategy. Our strong revenue growth in 2022 was a direct result of our ability to attract more guests to our parks, provide guests with more exciting and engaging options to drive in-park spending and keep guests coming back time and again. Given the uncertainty of the macro environment at the start of the year, we believe strongly that focusing on the guest experience and top line revenue growth would be the most effective way to create the operating leverage necessary to propel our business over the long term and through whatever economic challenges were ahead. I believe our strong 2022 results show this was the right strategy. Third, our business is underpinned by reliable, recurring and growing revenue streams. More than two thirds of our annual attendance comes through ticketing channels with prepurchase commitments that are well in advance of the guest visit, including season passes, group bookings and tickets associated with overnight stays at our resort properties. These long-lead recurring revenue streams also produce predictable levels of cash flow that allow us to fine-tune our capital allocation priorities and make informed decisions about our future direction. We view the consistent growth of recurring revenues to be a valuable cornerstone of our business model and believe it remains the most unrecognized and underappreciated strength of our company. Fourth, we are a second half company, generating two thirds of our attendance and revenues and 80% of our adjusted EBITDA over the third and fourth quarters. As with most seasonally weighted businesses, we enjoy peak demand in very narrow windows of the calendar, in our case from July through October when we fully leverage our cost structure and maximize flow-through on incremental revenues. Finally, our balance sheet is strong and getting stronger. To date, we have reduced total net leverage back to pre-pandemic levels, while progressing with purpose towards our net debt target of $2 billion. Our rapid recovery and strong results have positioned us well to move quickly towards achieving our goals while pursuing opportunities to add flexibility and capacity to our capital structure for the longer term. I'll pause here so that Brian can review our results in more detail before I provide some more color on our outlook going forward. Brian?

Thanks, Richard, and good morning. I'll start off with a review of our fourth quarter performance compared to last year before providing a more detailed recap of our full year results compared to 2019, our last full season of operations. During the fourth quarter, our [indiscernible] had 376 total operating days or eight fewer days compared with the fourth quarter of 2021. The decrease was related to plan changes to park operating calendars in 2022 as well as weather-related closures at several parks during the period. For the quarter, we generated record net revenues of $366 million, up $15 million or 4% compared to the fourth quarter of 2021. On a per operating day basis, our fourth quarter revenue performance was even stronger, up more than 6% year-over-year. Our improved performance was driven by a 3% increase in in-park per capita spending an 18% increase in out-of-park revenues and a 2% increase in the average daily attendance during the period. To compare our performance to prepandemic levels, average daily attendance was up 1% compared to the fourth quarter of 2019. The increase in out-of-park revenues was primarily driven by higher ADRs across most of our resort portfolio, reflecting our ability to price into strong consumer demand. Results also benefited from inclusion of the newly renovated Castaway Bay Indoor Water Park and the Sawmill Creek Resort, 2 Cedar Point properties that were closed for renovations during the fourth quarter of 2021. Meanwhile, in-park per capita spending in the quarter totaled a record $63.33, fueled by higher levels of guest spending on F&B and merchandise along with higher ticket pricing particularly during our high-demand Halloween events in October. For the quarter, the improvement in guest spending was within the food and beverage channel, up 10% over the prior year, reflecting the success of the meaningful capital investments we have made in that area for the 2022 season. Moving to the cost front; operating costs and expenses in the fourth quarter totaled $286 million, up $5 million compared to the fourth quarter of 2021. The increase was the result of a $4 million increase of cost of goods sold and a $15 million increase in SG&A expense, offset in large part by a $14 million decrease in operating costs. The increase in cost of goods sold reflects higher sales in the quarter as well as the impact of rising product costs. Despite these cost pressures, cost of goods sold as a percentage of food, merch and games revenue only increased 140 basis points from the fourth quarter of 2021. The increase in fourth quarter SG&A expense reflects higher full-time wages and related benefit and incentive plan costs, ongoing investments in technology upgrades, higher spend on park advertising in the period and increased transaction and credit card fees. The latter was driven by this year's conversion of all our parks to cashless, which helped reduce labor costs by eliminating the need for cash handling positions at the properties. During the period, we reduced our operating costs by 7% compared to the fourth quarter of 2021 by tightly managing operating and maintenance supplies as well as moderating spending on entertainment and amusement fees. These savings were somewhat offset by planned increases in headcount at select parks, higher maintenance wages and the incremental land lease and property tax costs associated with the sale leaseback of the land at California's Great America. Excluding the impact of the sale leaseback transaction, operating costs in the quarter would have been down 9% compared to the first -- to the fourth quarter of 2021 or 7% on a per operating day basis, a key performance metric we are closely monitoring as we continue to better manage costs and improve operating margins going forward. Adjusted EBITDA, which management believes is a meaningful measure of the company's park level operating results increased $15 million year-over-year to a record $88 million in the fourth quarter. Meanwhile, our fourth quarter margin improved to 24%, up from 20.9% for the fourth quarter in 2021 and up from 21.2% for the fourth quarter of 2019. Operating margin improvement during the period reflects the leverage that comes with a return to more historical attendance levels as well as the impact of our successful efforts during the quarter to moderate cost growth. Shifting our focus to full year 2022 results compared with 2019. Operating days in 2022 totaled 2,302 compared with 2,224 operating days in 2019. The 78 incremental days were the result of 85 additional operating days at our two [indiscernible] water parks acquired in July of 2019, offset by a net seven fewer days due to normal year-over-year operating calendar differences at the parks. For the full year, net revenues were a record $1.82 billion, up 23% or $342 million compared to 2019. Our revenue growth was driven by a 28% increase in in-park per capita spending, a 26% increase in out-of-park revenues to a record $230 million. Meanwhile, attendance totaled 26.9 million visits in 2022, down 4% compared to 2019. As we've previously noted, the anticipated slower recovery of our group channel which was down roughly 1.4 million visits compared to prepandemic levels, accounted for the entirety of the attendance gap. Helping to somewhat offset the shortfall in group attendance was the performance of our season pass channel. With a record 3.2 million season passes sold for the 2022 season, season pass attendance was up 10% over 2019 levels and comprised 59% of our total 2022 attendance mix. By comparison, season pass visitation represented 52% of the attendance mix back in 2019. Moving on to the cost front; for the full year, operating costs and expenses this past year totaled $1.29 billion, up $298 million compared to 2019, including increases in cost of goods sold, operating costs and SG&A expense. The increases in operating costs and SG&A were primarily due to the impact of general cost inflation over the 3-year period particularly around labor costs as well as the full year inclusion of the Schlitterbahn parks, which weren't acquired until mid-year 2019. Looking a little more deeply at labor costs; although the labor markets in 2022 remain challenging, we are very pleased with the progress made around improving staffing levels and controlling costs. With better line of sight into operating calendars and less uncertainty around operating protocols, we were able to more proactively plan for our staffing needs. This helped our recruiting efforts and allowed us to return to a more traditional tiered seasonal pay rate model, only paying up for harder to fill positions and associates in supervisory roles. The changes we made to our seasonal pay structure helped flatten the growth curve around seasonal labor rates, which is particularly important given that seasonal labor represents our single largest operating cost. For the year, our average seasonal labor rate was down 1% from 2021 with trends continuing to improve in the second half of the year when rates were down 2% year-over-year. Based on the success of our strategies this past year, we are optimistic that we can again maintain our average seasonal wage rate to within 1% to 2% of 2022 levels although we will continue to manage rates as needed in order to ensure we have adequate staffing levels throughout the season. Adjusted EBITDA for 2022 was a record $552 million, an increase of 9% or $47 million compared to $505 million for 2019. Meanwhile, our full year margin this past year improved to 30.4% compared to 24.3% in 2021, reflecting the benefit of a recovering attendance base and the strong performance of in-park per capita spending and out-of-park revenues. Due to the remaining gap to historical tenancy levels and general inflationary cost pressure, margins still trail pre-pandemic levels, something we believe can be addressed as we look to better optimize park operating structures and as our parks return to historical attendance levels over time. Now turning to the balance sheet; as Richard noted earlier, we are pleased to say we have built a robust balance sheet, which we intend to strengthen even further as we deliver on our strategic initiatives and seek to optimize our capital structure. We ended the year with $101 million in cash on hand, no outstanding borrowings under our revolving credit facility and total net leverage of 4x adjusted EBITDA, back in line with pre-pandemic levels. During the year, we used $264 million to fully repay the company's term loan, we used $33 million to pay cash distributions to unitholders and we used $185 million to repurchase units under our new unit repurchase program. By the end of January, we had repurchased roughly five million units at a total cost of approximately $208 million. As Richard noted, the reintroduction of our quarterly cash distributions and the implementation of a unit repurchase plan were significant milestones in our recovery this past year. Going forward, we will continue to focus on unitholder returns as one of the pillars of our capital allocation strategy. This will include in the third quarter determining what level of increase in the distribution is appropriate as we get better visibility into our 2023 performance. We also intend to continue to be active in our unit repurchases, anticipating completing our existing buyback program early in the second quarter, at which time we will assess the appropriateness of implementing a follow-up program. Looking at long lead business indicators for a moment, the early trends in sales of season pass products, group bookings and reservations at our resort properties are solid and in line with expectations. Our total deferred revenue balance at the end of the year was $173 million, representing a decrease of $25 million when compared to deferred revenues at the end of 2021. It's important to note that included in the 2021 year-end balance was approximately $30 million of COVID-related product extensions at Knott's Berry Farm in Canada's Wonderland into the 2022 season. Excluding these extensions, deferred revenues would have been up approximately $5 million or 3% year-over-year, including results from early sales of 2023 season passes and related all-season products. Through this past weekend, sales of new 2023 season passes were up 5% or approximately $8 million, driven by a 9% increase in the average pass price, which is in line with plan. Somewhat offsetting the higher pricing is a 4% shortfall in season pass units sold compared with the same time last year. The year-over-year unit decrease reflects a slow start to the sales program due to poor fall weather as well as a return to normal purchasing patterns coming out of the pandemic, with more than half of our season pass sales cycle remaining, including the spring window that accounts for more than 40% of total sales, we remain focused on maintaining pricing, driving increased unit sales and matching or exceeding the record sales performance of our 2022 season pass program. Regarding CapEx. This past year, we spent $183 million on CapEx, including investments in new rides and attractions, upgraded and expanded F&B facilities and renovations to several of our resort properties. By comparison, we project investing approximately $185 million to $200 million in capital projects in 2023. Lastly, for modeling purposes, for full year 2023, we are projecting cash interest payments of $130 million to $140 million and cash taxes of $50 million to $60 million. Finally, I want to provide an update on how we will be reporting operating results in the coming year. Given the strength of our 2022 performance and the stage of our recovery, we believe there is no longer a need to offer the number of interim update reports we provided last year. As such, we will be returning to our normal cadence of providing results on a quarterly basis moving forward. While we will continue to provide updates on our performance through July with second quarter earnings and our performance through October with our third quarter earnings, we will no longer provide interim updates relative to Memorial Day, the fourth of July or Labor Day. With that, I'd like to turn the call back over to Richard.

Thanks, Brian. We are extremely pleased with our performance this past year and equally excited about the opportunities we see to build on that momentum in 2023. One important area that has more room to grow is our season pass channel. Its recurring strength reflects 2 things about our customer base. One, the universe of our most loyal guests continue to grow propelled in part by the benefits offered through our season pass programs, including our Pass Perks loyalty program as well as the continuous improvements we have made to the overall guest experience. And two, more of our most loyal guests are purchasing our highest-priced ticket, in many cases, buying up to obtain the perks and benefits of season pass ownership. . Improvements to our food and beverage program continue to resonate well with our guests, helping to drive in-park per capita spending higher. While pricing is part of that equation, most of our F&B per cap -- for capita growth can be traced to investments made over multiple years to elevate the quality of our culinary offerings, including the opening last year of new high-throughput upscale dining facilities at Knott's Berry Farm, Cedar Point, Kings Dominion and Canada's Wonderland. Consumer response on our guest satisfaction ratings have been overwhelmingly positive for our higher quality, more diverse culinary choices, faster turnaround times and comfortable climate control dining facilities. We will continue to upgrade and expand upon our menu offerings and food facilities as we look to drive incremental growth in guest spending. We have seen a similar guest response to our premium experiences, an evolving program that we think is in its early innings and that we believe has considerable potential to drive incremental guest spending even higher. In addition to continuing to market premium offerings such as Fast Lane, Water Park Cabanas and exclusive VIP areas to our daily guests, we are actively testing a new prestige pass at select parks in 2023, a product aimed at our season pass guests who are looking for premium experiences throughout the season. As we take stock of our progress, we believe there is room for improvement and more work to be done in several areas of our business, including within our cost structure. Initiatives are well underway for the current year to again manage seasonal labor rates, keep seasonal labor hours consistent with demand and ensure the effectiveness of other variable operating costs. These are important initiatives as we work to restore attendance back to our previous highs and dynamically price into demand, particularly at our smaller parks that lack the same level of operating leverage as our larger parks. A return to prepandemic attendance levels, along with our ability to optimize operations and maintain cost increases inside our targeted revenue growth rate will be critical to achieving our margin goals. Along the same lines, we are actively working to further improve our parks digital infrastructure, connecting guests with applications that speed up e-commerce transactions, reduce the need for labor and improve our dynamic pricing and analytical capabilities. We are also working on an improved mobile app for the 2024 season to provide our guests with improved visibility of in-park entertainment and dining options and enhanced transaction control through their smartphones when purchasing goods and services. Much like the cost-saving benefits we have realized through cashless operations, measures to improve technology that also improve the guest experience will make park operations more efficient, reduce our operating costs over the long term and help increase margin performance and flow through. Going into 2023, we will continue to prioritize revenue growth, which will be driven by demand from marketable capital and continued investment in food and beverage highlighted by big new anchor restaurants at our 2 largest parks, Cedar Point and Knott's Berry Farm, recovery of the group channel, which will be led by youth and school bookings in the spring and corporate business throughout the balance of the year and expanded park operating calendars over the first half of the year. While operating calendars may need to be adjusted for macro factors such as weather, for the full year, we project adding as many as 70 days to 80 operating days this year compared to 2022. We are focusing the lion's share of our investable capital on the areas of the business that produced the highest return. We do so with the full appreciation that more than 80% of our adjusted EBITDA is produced by our five largest parks that also have the highest operating leverage. With that in mind, for the 2023 season, we are making investments of scale at each of these parks, investments that transform whole sections of the parks, where increases in demand and guest spending should be imminent and remain sticky. We are also planning to invest in new marketable attractions at 2 of our mid-tier parts, namely Worlds of Fun in California's Great America in 2023. History shows that adding major new rides and attractions at our smaller market parks has an immediate impact with increases in attendance, guest spending and season pass sales. Our investment strategy for the foreseeable future should look much the same, keeping the high-capacity engines of our larger parks running at peak performance while rotating investments in major marketable tractions among our smaller market parks for immediate impact and incremental long-term growth and improved profitability. 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 strategic initiatives drove performance throughout the pandemic and more importantly, through the recovery this past year. While we continue to exercise a degree of caution given the current uncertainty of the macroeconomic environment, we believe we are well positioned to deliver another year of record results in 2023, and we remain laser-focused on delivering solid returns for our investors. Rob, that's the end of our prepared remarks. Please open up the call for questions.

[Operator Instructions] Your first question comes from the line of Chris Woronka from Deutsche Bank.

Congratulations on a very good quarter. I wanted to drill down a little bit if we could on margins. And I know you had a lot of commentary there already. But is there a way to think about -- when we look back to 2019, and there's an impact from Schlitterbahn when we comp that to today, is there just a way to think about your longer-term target? And what's the cadence to get there? Is there a step-up function? And how reliant on it is attendance versus some of the operational changes that you're making?

Chris, I appreciate you being with us. Let me just say the start by saying, once again, 2022 was a remarkable year. And I've got to thank everybody in the organization, all the teams out there. They did a tremendous job managing through the pandemic. So hats off to them. In terms of margins, margin is really something we pay a lot of attention to. As we said, a return to historical demand levels, it really will help drive pushing further and getting margins back to those pre-pandemic levels. But in addition, we continue to price into demand particularly in the fourth quarter. It's -- the big attendance month of October really showed what we could do in terms of demand, pricing and driving high-margin revenue -- incremental revenue. We spent the pandemic, Chris, implementing and building technologies that really allowed us to optimize the recovery. Our business intelligence function is really doing a great job on 2 fronts: first, revenue management and really pricing dynamically into demand but also working with our operators in the field on workforce management, getting a lot more disciplined on that side. We built a centralized procurement to really make sure that we were doing everything we could to take cost out of the system and be as efficient as possible on all the things that we buy. So when I look back over the arc of where we've been, I think you're now starting to see the impact of a lot of the decisions that we made over the last two or three years to strategic initiatives and the -- that we chose and how they can deliver as you look at our results. Brian, anything you would add?

No. I think just to emphasize, Richard, what you said, which is getting there, Chris, is hinges on both our ability to continue to drive top line revenue as well as manage costs. I think as Richard said in the call, coming into this year, the focus was on driving revenue and returning to historical demand levels as quickly as possible, think we saw that the benefit of that in the fourth quarter when we did get back to historical levels. And so as we think about our business, we are certainly a second half business. As we -- as Richard noted, two thirds of the attendance and revenues come in the second half, but 80% of the EBITDA. That speaks to the amount of leverage that exists in Q3 and Q4. And so I think as we work towards getting back to those 2019 levels, it will be critical not only to manage costs better, but to continue to drive top line revenue.

Very helpful. And a quick follow-up, if I could. On capital allocation, you guys had a pretty significant buyback in Q4. In this year, no matter where we think EBITDA may fall, you're still going to generate a lot of free cash flow, you've got leverage back to where you want it. How do you prioritize getting that distribution back closer to historical levels versus potentially more buyback at this level?

Yes, Chris, it's Brian. As we said when we implemented the buyback program, the Board felt that it was an excellent tool to add to the tool belt in terms of another means of returning capital to our investors that was a little bit more discretionary and flexible than the distribution. That said, the distribution remains at the forefront of our capital allocation strategies and priorities. As I said in the call, we'll wait until the third quarter and get a better line of sight into how the 2023 season is developing. We certainly expect to have an outstanding 2023, as Richard noted, and that will give us a lot of options as it relates to capital allocation, both reinvesting in the business as well as returning capital to the investors through distributions and potentially future buybacks. The size of the distribution increase will depend not only on performance, but also on what are we getting rewarded for from the market. Is the market seeing value in the distribution is that reflected in the stock price. And so I think there's a lot of factors that will go into that decision, but we're in a really good place based on all the efforts that we've undertaken over the last 12 to 18 months coming out of the pandemic.

Your next question comes from the line of Steve Wieczynski from Stifel.

So I'm going to ask a question. I don't know if you're going give me an answer, but I'm going to try it anyway. So look, we -- I fully understand you guys don't give annual guidance. But if we look at the $550 million you did in EBITDA this year, and let's say we're sitting here this time next year, would you be disappointed if you didn't exceed what you put up this year? And if you didn't exceed that level, what are some of the factors that we need to be watching? Obviously, I understand the potential macro headwinds, but anything else out there that we would need to watch to not have you exceed that level?

Steve, it's Richard. I appreciate the question. While I won't answer hypothetical and we don't give guidance, what I would tell you is I'll take you back to how we look at our business, and we've said this forever a day. We're an easy business to model. There's three things that we look at for leading indicators. Season passes, we've laid out where those are. We feel good about where they are, and we think we likely are now far enough past the pandemic that we're going to probably revert back to what I call a more normal historical purchasing pattern, which means springs are our biggest sales period. So we're stepping into the spring sales period, we have lots of excitement around our new capital with a much higher season pass base to look at. So I'll be watching retention really closely. How many renewals are there within our season pass program. That's a number that's very meaningful to us. The other couple of leading indicators, resort bookings, still look very positive at this point. I'm encouraged by that. But the big thing, and we touched on it, the gap between our tenants now and 2019, really rest in the group channel. I have to tell you, over the last several weeks, I've had really encouraging meetings with the leadership of our sales teams. And we're seeing really strong response to everything that we're doing. We're out in the market sourcing leads, we've got everybody out there talking to our old business, and there's going to be a real focus on new business. So we'll have more to say as we get through this year, but I think our year this year will always come back to driving demand with new marketable product, we invest to do that, enhancing the guest experience, making sure we're capturing that demand through the season pass in the group and the resort channel. And then once we get them in the park, have the ability to drive that in-park per capita spending once they get inside the front gate. And I'm really pleased and proud of what our food and beverage operation has done. But we keep driving that with higher average transaction values, and we keep doing more transactions per hour. So we're building capacity to drive that sustainable in-park per capita spending. So those are the things that I'm going to be watching as to look at 2023. And right now, those are all encouraging.

Okay. That's great color. And then the second question, I don't know if I misunderstood, Brian, but Brian, I think you sounded like you got a little bit aggressive with marketing in the fourth quarter. And just wondering, a, if I heard you correctly, and then b, maybe how we should be thinking about your marketing spend heading into this year, given the potential for the additional 70 to 80 operating days that you guys might be layering in?

Yes, Steve. So as it relates to marketing, I think what we saw play out in 2022 was really still just the -- I'll use the same term recovery or return to maybe sort of more historical levels. I don't know that we'll get all the way back to where we were prepandemic because the methods for marketing, the tools that the teams are using today are a lot more efficient, but spend in '20 and '21 was very disruptive, as you may recall, because of the pandemic, we pulled marketing down significantly as operations were impacted. '22 getting back to more of a normal operating calendar, more of a full operating calendar for the most part across the system required us to start pushing more dollars into -- back into the system around marketing. And I think it's important to note as we get into '23, as Richard noted, a lot of compelling marketable capital going in across the system. The last thing that we would want to do is undermine its full potential by not spending enough on marketing. That doesn't mean, as I said, that we're going to get back to marketing levels or spend levels that are in line with 2019. I think there's still some more efficiencies there. But certainly spending more to drive that top line revenue is a critical part of the guest acquisition formula.

Your next question comes from the line of James Hardiman from Citi.

So wanted to connect the dots or not? Maybe I shouldn't be connecting the dots between some of the trends that we saw in the fourth quarter and how we should think about the setup for 2023. Maybe let's just start with attendance. Obviously, the last we spoke, October was a gangbusters month, right, from a revenues overall, but attendance in particular. It doesn't seem like November and December were nearly as good. Maybe walk us through sort of the dichotomy within the quarter based on the implied results there? And what, if anything, we should roll forward into 2023. .

Yes, James, this is Brian. I think you summarized it well, right? I mean we already disclosed as part of our third quarter earnings call, the strength in October, the Haunt or the Halloween events, certainly are one of, if not, our most popular event across the system, and it's basically offered at the lion's share of our properties, only two or three of the properties in the system, two Schlitterbahn parks and Michigan venture don't offer those Halloween events. So it's got scale and it's got huge demand. And as Richard noted, we priced into it, and that did not slow down that demand at all. So that was very encouraging. You roll into November and December, most of the -- more than half of the properties go dark. We only have events, WinterFest events at six of our properties. And so your opportunity isn't nearly as high. And you also start to get into the time of the year that weather becomes even more of a factor, right? So if I was characterizing the quarter, outstanding five weeks of October, slow and weather impacted November. Really good start to December, particularly on the West Coast and the East Coast. But then when we got to the week of Christmas, extreme cold temperatures, took some wind out of our sale in the third week in the East, in Midwest, and we lost the fourth week at Kos with rainy season. So it was great, sort of bumpy middle and a mixed end to the quarter.

Got it. And then same -- basically, the same question on per caps. I mean looking at the numbers, it seems like your per cap has accelerated in a pretty meaningful way. By my math, up 36% now versus 2019 after being down year-over-year in 3Q, it was up again year-over-year in the fourth quarter. I know the fourth quarter is a small quarter, and the mix of properties plays a big role. But I don't know, is that a sustainable sort of growth rate in per cap as we think about '23?

Yes. I think as it relates to per caps, James, as Richard said, we feel very good about the interactions we're having with our guests. Their willingness to pay up for a quality experience, quality product, and it's one of the reasons why we continue to invest in the guest experience and maybe put a little bit of pressure on margins go back to one of the earlier questions because we're investing behind that experience, and that's a little bit more expensive venture. When you look at the quarter, I think you hit on a couple of good points. One, it's a smaller quarter. So sometimes percentages can get a little a little distorted because of that. And you also have a number of the smaller parts, the lower per cap parks, not really in operation. That said, I think what we saw in the fourth quarter was consistent with what we've seen throughout 2022. When the guests are here, they're spending. And we continue to see strong spend in areas that we would expect to see strong spend. Food and beverage, most notably improving in merch. And as we noted on the call, we priced into the fourth quarter. October has got such high demand. We were -- we are not shy about pricing into that demand, particularly on the highest demand days like Saturdays and Friday nights for the Halloween events. And so that's a big part of the equation. I think as we roll into '23, we continue to feel confident that we can keep pushing per caps. As we've been saying, it's not all about pricing. We certainly will take price in an inflationary environment where we have to, but Richard noted, it's about more throughput and it's about higher average transaction value. So providing guests with higher-quality product that they're willing to pay up for and providing it in manner that's efficient and doesn't create long waits and long lines to get the product is key.

That's great. And then lastly, Same question. On the margin front, this is maybe the best margin quarter I've seen you guys have in quite some time, most notably OpEx, right? You got a lot of leverage out of OpEx. On an operating day basis, OpEx was down materially after being up in the third quarter. I guess thoughts on -- is that -- can you pull that trick again in 2023? Maybe if I think about the 70 to 80-day increase in your calendar is the goal to grow operating costs less than that sort of growth in operating days? How should we think about it?

I'll take that question, James. I'll go back to my prepared remarks. Our plans are to try and keep that expense increase inside our targeted revenue growth rate. We've talked at length about how we can drive the revenue. We have also talked about, and I'll say from a qualitative perspective, James, I thought this was the first quarter. It takes a while to build things and then roll them out. We really put tools in the hands of the operators that they're now starting to use. So we're getting far more fluent workforce management. We continue to focus on how we can best utilize the labor. That takes time to train and domino through the system. But our challenge is to continue to give every member of our management team, the tools they need, so they can help us drive this business forward. At some levels, that's about focusing on revenue and on a lot of levels, that's about focusing on how efficient we can be on the cost side. The more tools we give them, the better we're going to perform.

Your next question comes from the line of Ben Chaiken from Credit Suisse.

Your flow-through was particularly -- another one on margins, we'll just cut to the chase. It was a little bit towards the end of the last kind of question and answer. It sounds like there's a little bit of a renewed focus on costs that kind of manifested itself in the quarter. You mentioned several cost-saving initiatives. It's all awesome and impressive. I'm just trying to understand like the stark contrast between results year-to-date and last quarter and then this quarter, and even 4Q '22 versus 4Q '19. I'm just wondering to trying to understand what changed. Is it stuff that was already in process? It just took a couple of months or a couple of quarters to show up. That's kind of what it sounded like in the previous answer, but I'd like to just kind of dive in there more. That didn't make sense. I can rephrase it.

Yes. No, Ben. Not as fine. It's Brian. Yes, I think to your last point there and the point Richard made to James' final comment, I think some of this is the outcome of some initiatives taking longer to take root, particularly some of the things around labor. It's -- labor is, as we talked about before, it's our largest single cost item close to 60% of our cost structure, total labor with seasonal labor representing maybe close to half of that. And so it's -- those initiatives sometimes don't -- you don't get the full benefit right away. So I think there's a little bit of that. But I don't -- I want to reemphasize again, when it comes to optimizing costs, as Richard alluded to, there's 2 sides to it, optimizing the cost structure in some cases. And we saw this a little bit in the first and second quarter. I mean spending a little bit more to make sure that we're prepared to deliver the best guest experience possible because suboptimizing that area to not have the right staffing, the right systems, et cetera, would put per caps in demand at risk. On the other hand, we do know we have to optimize the cost structure around labor and other variable costs to make sure that those costs are best aligned with demand levels. And that's where those tools that Richard was alluding to, come into play, our workforce management tools, the software and the staffing tools that our teams in the field use to change in real-time staffing levels as demand levels fluctuate because of things like weather, et cetera. We need to continue to actively work in those areas, and that's where the BI team comes into play. And the other variable cost that's where the procurement team comes into play. So I think when I look back at '22, I think the thing that plays out for me is that the second half company that we are, the real opportunity for more margin expansion is always the best in the third and fourth quarter. I think that's even a little more exaggerated right now because we still are light in Q2 because of some of the disruption or the slower recovery of the group channel. Group is a bigger part of the business in Q2 than it is in Q3 and Q4. And -- so not having group put a little bit more margin pressure on that first half of the year than it did in the second half of the year.

That's really helpful. And just to be clear, some of the workforce management processes, are those -- were those not in place earlier in the year, more of...

Those tools have been -- yes. No, those tools, we began rolling those tools out, Ben, during the pandemic in '21. I think some of it is just the fact that as we go through the implementation of those things, there's best practices to get established, right? Our business every month and every quarter is a little different than the previous. And so you almost have to go through a full cycle. So learnings of '21 and the learnings of '22 educate going forward. And we see what parts do what things past. And then we push those learnings, those best practices down. So when we look back at '22, we have a couple of parks in our system that did things better around staffing. We're more efficient around staffing, and we're taking those learnings and we're pushing those things down. So I think you saw some of that playing out in '22 that you just -- you get better, the longer you're working with these tools and the longer the teams have been together.

My understanding is that a lot of the group bookings, and please correct me if I'm off on this, occur in the first couple of months of the year. Is there any way you can kind of directionally tell us how you're pacing if that's an appropriate kind of like vernacular versus 2019?

Yes, Ben, it's Richard. Again, I've met consistently with our sales team. I'm very encouraged at the pacing that I'm seeing. What is different in the pandemic accelerated, people -- our corporate bookings are coming in later. Typically, we'll get through the first quarter on the youth and school group, those happen in a lot in the second quarter. Those get booked through the first quarter into the second quarter. But corporate bookings are very robust right now. And I would say that the booking cycle is more compressed than it was if you go back a decade ago, where it was a much longer booking cycle, people booked earlier. We're booking buyouts, we're bulking big groups, small groups, but I do think the booking window has tightened considerably post pandemic.

Moved earlier or later? Sorry to [indiscernible] the point .

When the event is going to happen. So we had an event that Knott's Berry Farm in late January, early February that was only booked in December. It was a sizable event. So companies and larger groups are coming to us much closer to the date that they want to actually come. We do have visibility on some long lead, but I would say we're returning more to a pre-pandemic pacing with a tighter booking window, and that was the trend that we saw pre-pandemic year-by-year.

Your next question comes from the line of Mike Schwartz from Truist Securities.

Just maybe wanted to touch quickly on the additional -- I think the additional operating days, you said 70 to 80 days for the full year. I guess, one, how do we think about the cadence of those days more heavier weight into the first half of the year, the second half of the year? And maybe just how accretive or additive are those days that you are putting in the calendar?

Yes, Mike, it's Brian. So I would tell you that the majority of those days probably as much as maybe 80%, 90% of those days are going to be in the first half of the year, Q1 and Q2. As we announced late in the fourth quarter last -- this past year, we were adding days in markets like Richmond, with our Kings Dominion Park, in Charlotte with our Park in January and February. Those days are already going on. So they're in that number that I -- that we mentioned on the call. So it's more Q1, Q2. Q3 should be about flat. There'll be a little bit of calendar shift in there, but pretty comparable operating days. And then Q4 may have a few incremental days, but probably close to 90% of those days in the first half of the year. In terms of accretive, the days that we're looking to add are expected to be additive to cash flow. There's always tests that we run. I would characterize what we're doing right now in Richmond and Charlotte, a little bit of that. We'll give it a couple of years and see if we like the results that come out of it. But we're always looking to add days, right? As we look to push top line revenue and attendance higher much like we did some years ago when we started adding days in late September and October with Halloween events and then November and December with WinterFest events, at some point, it's about finding more opportunities for guests to visit and finding more opportunities for us to sell season passes and the all-season products that go along with those things. So we fully expect the days we're adding will be accretive. Some of those days in Q2, as Richard just noted, are going to be tied back to our expectation of returning youth and school bookings. That side of the group business is heavy in the spring, and we took days out of the system in 2022 because we knew that business wasn't there. Some of this is about putting those days back in.

Okay. That's helpful. And then just a second question. I think, Richard, you referenced to admissions product, the prestige pass, I think is what you called it. Maybe just give us a general overview of what maybe some of the benefits of that past entail? And how should we think about the pricing of that? I know it's in the test phase, but just generally speaking, is it 20% premium to your highest pass right now? Or how should we think about that?

From a value perspective, we've done a lot of research. We've layered in access to VIP lounges, special benefits, some limited product of FastLane, things like that on a daily basis. So we've layered in the things that our research has told us the consumers really value. We're pricing that if our -- and again, it varies part by part because the demand levels are different. But what we're trying to test is if you've got a 200-ish price point, low 200s on the platinum, can we -- our new prestige pass is priced somewhere in the 300s, the low 300s. So really -- it really is a premium product and a premium set of experiences, and we're testing different concepts, as Brian just said, both in terms of what the benefits are, but what our guests value. So I think you'll continue to see us test different things as we go through. But the early response has been very encouraging. This is really -- as we look to segment our audience, this is really the benefit-oriented customer. And what we found, and you've seen that over the past several years, as we said, I think it's the early innings. As we continue to find ways to design and create different benefits, there's a ready market there.

Your next question comes from the line of Eric Wold from B. Riley Securities.

The question have been asked. Just kind of 2 hopefully quick ones. I guess, one, just back on the prior question around operating days. I understand that some of that is adding back days that we're going to remove from the system last year. Are there any parks that will actually have day this year removed? Or will every park either be flat or up in terms of operating days from last year?

Eric, it's Brian. I would say, as I look at it, for the most part, it will be flat to up in terms of operating days, but let me caveat that with that's planned. And to the extent that weather plays into it, we could see some parks go back. Great example, right? When it rains in California, is open every day to save costs, we'll shut the park down. And so we may end up where a park might have several fewer days in '23 than '22 but for the most part, that would be an unplanned change and more responsive to macro events.

Got it. And then just last question on margins. I know you talked about really watching pricing and taking pricing where you need to where you're hitting inflationary pressures. Are there any cases where you actually willing to eat margin maybe in the short run or longer to maybe keep pricing from going up too fast in the front of consumers? Or will you always look to price above the inflationary pressure?

Good question, Eric. I think I'll answer it this way, see if helps. I think the scenario that you just laid out is exactly one of the challenges that we've had when we look at the portfolio the parks, right? From the standpoint of being able to price into this level of inflation is very difficult. Our bigger parks are able to absorb that because they've got such high demand levels or attendance levels, right? So when you're entertaining three million people or four million people or even the case of not 60-plus million people. You don't have to take as much price because you got the leverage of that attendance base. It's been hard. We have eaten a lot of the inflation, particularly at the mid-tier parks because we couldn't take the kind of price increases we would need to fully offset it without eroding our attendance base. So I think we're already doing that. That's why I think we've said on previous calls that these mid-tier parks, it might take two years or three years of price increasing in order to push through the kind of inflation that we've seen. So again, for us, we don't want to underscore the importance of margin. It's a critical metric for us. Hopefully, that's come across on this call and the efforts that we've been undertaking to improve it are very real. With that said, the scenario you just outlined, we have to be careful to not do everything just about margin at the detriment of ultimately that attendance number and top line revenue.

[Operator Instructions] Your next question comes from the line of Paul Golding from Macquarie Capital.

Congrats on the quarter and the year. I wanted to ask about just in parsing where we can go with per cap growth here. I wanted to ask about extra charge. I noticed in the press release, you noted lower levels throughout the year of extra charge impacting per caps are offsetting to some extent. But we're now talking about some higher-tier products. Is it a matter of bundling, should we continue to expect that some extra charge will actually reflect and help per caps going forward? And how should we think about the language used for the full year basis versus what you're testing right now? And then I have a follow-up.

Yes, certain, Paul, it's Brian. So the comment about the shortfall in extra charge is really focused probably on one core primary -- core premium experience that is Fastlane. Fastlane has been negatively impacted this past year by a couple of factors. The most notable is just the fact that attendance is still down, right? We're down about 4%. And Fast Lane, as you can appreciate, is a product that's sold most on the busiest days, right? So when we've got 35,000 people in the park, there's a higher demand for Fast lane because the lines are longer and people want to avoid those lines. With group being disrupted in some situations, more so at certain parks, those lines in those 35,000 days might have only been 29,000. And so the demand was a little bit impacted there. . We were able to still price into Fast Lane, which was encouraging. So we would fully expect that as we get back to historical attendance levels, those that demand for Fastlane will continue to increase and return to its historical levels as well. The other piece that impacted it a little bit, and this is more part specific. We had a couple of parks in the system that had key Fast lane driver type tractions out of service. So it takes some capacity out, and it also takes some demand out. Maybe most notably, was it to your point, not having total drags for an operation in '22. That's a lot of capacity, and it's a lot of demand. It's one of our highest demand rides in that park. So a couple of things working against us there. But broadly speaking, I don't think that, that's reflective of the fact, as Richard noted, guests want premium experiences. And so we continue to find different ways to introduce those, whether they are front of the line experience, whether they're a VIP tour, whether they're cabanas in the water parks or VIP lounges in the parks. Those continue to be in high demand and some of the fastest-growing revenue sources for in-park spending.

Got it. So all else equal from a product offering perspective, maybe qualitatively, so we're not guiding. You would say that you would expect Fast line an extra charge of the category to improve in '23 versus '22 as a function of just attendance and congestion?

I would say that's a fair statement, yes.

Great. And then as a follow-up on the operating day, 70 to 80 more operating days in '23 expected. As we normalize here for group and days that were taken out, I'm wondering, just on a maybe longer-term basis, how we should think about operating days now that you've made the pivot to more of a full year calendar and you've added the group days back. Are there any more days that you think that the calendar may have that you can squeeze out beyond '23? How are -- how is sort of the capacity versus weather and timing laid out relative to sort of a fully employed asset base?

Yes. I would say, Paul, we will continue to evaluate opportunities to add operating days. I don't want to give the impression that once -- with these days in the system that we're sort of done. As I mentioned before, we only have, as an example, six of our parks with WinterFest events, there's still opportunities to potentially find other parts in the system to introduce that event, too. So we will continue to evaluate those opportunities and where they make financial economic sense, we'll consider adding those days or piloting and testing, expanding the calendar.

Your next question comes from the line of Barton Crockett from Rosenblatt Securities.

I wanted to ask you about real estate that's come to the fore in the industry with fires and land and buildings. You guys have done, obviously, a little bit of a version of kind of monetizing real estate with your Northern California park. To what degree do you think there are more opportunities to look at things with your land, obviously not shutting down parks necessarily, but in other ways. How much opportunity do you think or not really -- do you think you're differently positioned or similarly positioned than some of the other regional theme park peers?

Barton, it's Richard. Thanks for the question. When I think back, the transaction in Great America really was a unique set of circumstances. That's what we said at the time, not indicative of a shift in strategy from us. We really think there's great synergistic value in maintaining ownership of all the properties we operate. We call controllership economics. We marry the capital investment we put in with our ability to drive returns. Great America was such a unique case of such a high value given it's in the middle Silicon Valley of the real estate versus what we -- versus the cash flow we thought we could generate that over the long term and the cost to do that. So we'll look at the -- if there are things in our portfolio, there may be small pieces. But by and large, as I said in my remarks, we believe in investing in our parks and driving and marrying that investment and driving demand. And we've got our five big parks that are most -- that drive 80% of our EBITDA. Obviously, we want to capture as much of that as possible. We don't want to partner in that. And then as we rotate through the mid-tier parks we've talked about, we think we can continue to drive their long-term success. So no significant change in our outlook on real estate.

Okay. And then I was curious because before the pandemic, you guys had a 2024 EBITDA ambition, I think around $60 million that was withdrawn. Where do things stand now with that? Any thoughts about that number, that level, that type of ambition at this point?

At this point, we don't want to -- we're not planning to reinstate guidance at this time. We'll continue to review the appropriateness of providing any guidance in the future. But given the current uncertainties and the concerns around the macroeconomic environment, we're not sure that -- I don't believe the market is going to give us credit right now. So for the moment, we're going to continue to relay everything we're seeing, give an update on our indicators about the health of the business, but -- which is encouraging at this point, as we said throughout this call, but no plans to reinstate guidance at this time.

Okay. And then just one final thing. Just as I look at your fourth quarter with the tenants kind of flat year-over-year per caps a source of strength. I think a lot of people are just wondering if the consumers may be getting fatigued. A little bit price sensitive about Theme Parks with some of the talk out of Disney and concerned that inflation may be causing people to shut down some of the things or maybe the big party after the pandemic is kind of fading in people going back to normal lives and maybe not doing the fun things like they were. Do you just have any sense of anything like that? How do you feel about the attendance opportunity going into 2023?

So Barton, great question. And it was such a focus on the health of the consumer throughout all of 2022. And what we kept saying is while we understand -- we operate in different markets in each region economically is different. We saw substantial strength. We continue to see the sustainability of the spending in our parks as a key plank of our program and our strategy to drive value, ultimately drive free cash flow. We haven't seen it. We continue to see, as I mentioned in my earlier remarks, our leading indicators are encouraging. So as we look at it, and I'll go back to -- I don't want you to mistake my answer to guidance, we're very optimistic and have a lot of confidence in our business model and our ability to continue to drive revenues, EBITDA and free cash flow going forward. So we're not seeing a -- we're not seeing the health of the consumer, the consumer not willing to be spending, if anything, as you track resale sales and other things. We continue to see that the consumer is spending. So we haven't seen any change in behavior broadly throughout our park, even though we're in limited operations. So we're watching like everybody else, but it seems like the consumer is healthy and is pending.

And there are no further questions at this time. Mr. Richard Zimmerman, I turn the call back over to you for some final closing remarks.

Thanks, Rob, and thank you all for your interest in Cedar Fair. For the analyst community, in March, we will be participating in three banking conferences hosted by JP Morgan at Loews, Miami City at Turnberry, Miami and Macquarie in New York City. If you're attending, we look forward to seeing you there. Otherwise, we hope you will have a chance to visit one of our parks this season, and we will keep you apprised of our progress. Michael?

Thanks again, everybody. Please feel free to contact our Investor Relations Department at (419) 627 2233. Our next call will be held in May after the release of our first quarter '23 results. Rob, that concludes today's call. .

This concludes today's conference call. Thank you for your participation. You may now disconnect.