Six Flags Entertainment - Q2 2020

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by, and welcome to the Cedar Fair Entertainment Company 2022 second quarter earnings call. At this time, all lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during the session, please press star followed by the number one on your telephone keypad. If you need operator assistance during the call, please press star and then zero. I'd now like to turn the call over to Michael Russell, Corporate Director of Investor Relations. Please go ahead, sir.

Michael Russell (Corporate Director of Investor Relations)

Thank you, James, and good morning, everybody. Welcome to our 2022 second quarter earnings conference call. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is available under the News tab of our investors' website at ir.cedarfair.com. On the call with me this morning are Richard Zimmerman, Cedar Fair President and CEO, and Brian Witherow, our Executive Vice President and CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC.

In compliance with the SEC's Regulation FD, this webcast is being made available to the media and the general public, as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. With that, I would like to hand it over to our CEO, Richard Zimmerman. Richard?

Richard Zimmerman (CEO)

Thank you, Michael, and thanks to everyone for joining us this morning. I want to start this call by wishing all of you well, and I hope that you and your families are safe and adjusting to what feels like a new normal. We are now more than five months into the pandemic, and while none of us have a crystal ball to know where and when this will end, I couldn't be prouder of how our teams have come together and adapted to the challenges at hand. Seeing how we have responded over the past several months gives me confidence that Cedar Fair will emerge from this crisis an even stronger company than before. On the call today, I will focus my remarks and provide more details on three specific areas.

First, the progress we have made to date, including the reopening of parks and the ability of our team to adapt to an uncertain environment and a shifting marketplace. Second, the learnings and insights we've gathered to date that will better position us to address the effects of the pandemic moving forward, including trends we are seeing in our business. And finally, our near-term outlook for the business, including a discussion around the strategies and initiatives we are working on to ensure we emerge from this crisis stronger and better positioned for growth. Like others in our space and in adjacent industries, Cedar Fair has managed through this unprecedented period with little visibility for what comes next. This has challenged our teams to react quickly and responsibly and to develop contingency plans under multiple scenarios.

To put things in perspective and to acknowledge our teams for their outstanding work, recall that in January, we kicked off the year with a strategy to build upon the momentum and successes of a record 2019 season. That all changed before the close of the first quarter, when we found ourselves facing unforeseen challenges that, although we were well equipped to handle, quickly caused us to shift our focus from playing offense and executing our long-term growth initiatives, to playing defense and implementing near-term countermeasures. These efforts included closing or suspending the opening of our parks on March 14th in response to the pandemic and government mandates. Immediately addressing liquidity and cash flow concerns, which we accomplished through our April bond financing and the implementation of extensive cost-saving measures aimed at minimizing our cash burn rate.

Most importantly, maintaining a strong connection to our guests during this period of disruption, including our highly valued season pass holders, which we've successfully accomplished through ongoing proactive communication and the extension of 2020 season pass benefits and privileges through the 2021 season. These efforts have been successful in minimizing our cash burn rate from operations. After unwinding operations and a large portion of our capital projects in April, we have limited our average cash burn rate since May to approximately $35 million per month, in line with the average $30 million-$40 million per month that we projected on our last earnings call.

Since our last earnings call in early May, our teams have identified and assessed the pandemic's ongoing impact on our business, developed plans to reopen parks where restrictions have been lifted, and provided guests in those markets with the best entertainment product possible within the recommended guidelines. We have worked closely with state and local officials, health experts, and others in our industry to develop and implement best-in-class health and safety procedures and protocols to protect the well-being of our associates and our guests. We have also developed strategies and implemented new procedures to address COVID-related risks, including the use of contactless temperature and security screening, expanded use of mobile food ordering and cashless transactions, and the temporary use of a reservation system to manage initial demand issues upon reopening.

While pleased we have been able to reopen seven of our thirteen properties thus far, including two of our four largest parks, Cedar Point and Kings Island. Late yesterday, we announced four parks, California's Great America, Carowinds, Kings Dominion, and Valleyfair, will remain closed for the 2020 season. We had previously announced that our separately gated water parks, Cedar Point Shores and Knott's Soak City, would remain closed in 2020 as well. While disappointed that we have had to make these decisions, the lack of visibility into when restrictions would be lifted in those markets, combined with the diminishing number of potential operating days remaining, has eliminated our ability to reopen and profitably operate these four parks in 2020.

We continue to monitor and evaluate conditions related to Canada's Wonderland and Knott's Berry Farm, our other major parks that, with a little, yeah, luck, could be open yet this year. Before I ask Brian to review second quarter results, I wanna share briefly what we've seen and learned through this difficult period, and how those takeaways will benefit us moving forward. First, while our parks were met with solid demand upon reopening, the ongoing uncertainty around the pandemic and recent spikes in coronavirus cases across the country, has had a more negative impact on attendance than we originally anticipated. Forecasting future attendance in such a dynamic and uncertain environment is very difficult. However, based on current trends, we expect daily attendance to be approximately 20%-25% of historical levels for the balance of the year.

Because of that, we recently adjusted park operating calendars, reducing the number of operating days and hours over the balance of the season to be more consistent with those trends. These changes will help us more efficiently manage our seasonal labor cost and resources and remain profitable, all while ensuring a best day experience for our guests. Second, we have seen silver linings emerge from every business disruption we've ever dealt with. This one, which we continue to battle daily, has proved to be deeper and more multidimensional in scope, given the manner with which it has affected every aspect of our company. Consequently, our efforts to counteract those effects have been far more extensive as well. The disruption in our business has forced a detailed review of our operating cost structure and organizational design that has already identified opportunities for efficiencies.

Not only will we benefit over the long term from the incremental cost savings and system efficiencies uncovered during our review, but our broad-based examination in many areas of the business affirmed the strength of our internal decision-making processes. Although the effects of the pandemic may be felt for some time to come, what we have discovered during its disruption gives us confidence we will return to normalized operations stronger and better prepared for growth than before. And finally, our pre-COVID success demonstrated that we have the strongest team of professionals in the industry running this business. Yet watching them manage through a crisis of this magnitude sheds a brighter light on just how talented they really are.

Over the last two quarters, our teams not only have demonstrated their competencies with analysis, foresight, and planning, but they have maintained a long-term perspective on the business while carrying out several difficult but necessary near-term decisions. While facing a complete shutdown of our parks, our teams pursued opportunities to open our adjacent properties where possible, including Hotel Breakers and our luxury RV park, Lighthouse Point, both welcoming guests to the Cedar Point Beach weeks before the gates opened at Cedar Point itself. At Knott's Berry Farm, we opened its California Marketplace, including Mrs. Knott's Chicken Dinner Restaurant, and introduced the Taste of Calico, a new limited-time special outdoor food and merchandise event, which we extended after quickly selling out its originally scheduled calendar. New events like the Taste of Calico reflect how we are adapting to this changing market.

Staying connected with our guests in new and creative ways is critical to the long-term success of the company and also creates opportunities to further strengthen our regional brands. As CEO, I'm quite proud of our entire organization for its steadfast determination and dedication, especially since we are potentially facing a lengthy recovery. I'll return in a few minutes to conclude my remarks, but first, I'll ask Brian to review our financial results. Brian?

Brian Witherow (EVP and CFO)

Thanks, Richard, and good morning to everyone. I'll start with our results for the second quarter before addressing other observations about the business. First, I need to remind you that due to the effects of the coronavirus pandemic on the company's operations, second quarter results ended June 28, 2020, include the partial operation of only three parks, Worlds of Fun in Kansas City, Missouri, and our two Schlitterbahn Waterparks in Texas. As such, results for the period are not directly comparable to results for the 2019 second quarter, which ended June 13th, 2019. This included the full operation of Legacy Parks, but excluded the two Schlitterbahn Waterparks acquired on July 1st, 2019.

Due to park closures in mid-March, the 2020 second quarter had a total of 39 operating days, 687 fewer operating days when compared to the second quarter last year, and 788 fewer operating days than what was budgeted in our 2020 second quarter operating plan. For our second quarter, ended June 28, 2020, net revenues totaled $7 million versus $436 million for the 2019 second quarter. The decrease in revenues was the direct result of the COVID-19 related park closures and reflects an 8 million-visit decrease in attendance and a $44 million decrease in out-of-park revenues.

In-park guest per capita spending in the quarter was not meaningfully comparable between years due to the mix of parks open in the period and the small number of operating days. I'll provide an update on more recent guest spending trends in a moment. On the cost side, operating costs and expenses for the second quarter totaled $93 million, compared with $277 million for the second quarter of 2019. Fewer operating days, combined with cost savings measures implemented in response to suspended park operations in the period, led to the year-over-year decline. These cost savings were partially offset by costs we incurred to reopen and operate parks beginning in mid-June, including costs associated with new health and safety protocols.

For the second quarter, we reported an operating loss of $142 million, compared with operating income of $102 million in the second quarter of 2019. The operating loss was the result of the 98% decline in net revenues, offset by the $185 million year-over-year decrease in operating costs and expenses. Adjusted EBITDA for the period was a loss of $85 million, compared with adjusted EBITDA of $163 million in the prior year period. As Richard mentioned, we now have seven of our 13 properties open, including two of our largest parks. These seven parks, which reopened in mid-June through mid-July, have historically represented approximately 40% of our full-year attendance and revenues.

Over the last two weeks, we are averaging between 20%-25% of historical attendance at the parks that are open, or roughly 15% of theoretical capacity. In spite of the soft attendance levels and other limitations on operations, including fewer operating hours, guest spending trends have been encouraging. Since reopening, guest spending on F&B, merchandise, and games at our legacy parks is up 5% year over year. Offsetting these gains was a decline in guest spending on extra charge attractions, including Fast Lane, which we're only offering in limited capacity at certain parks this year due to social distancing concerns. For the entire portfolio, through this past Sunday, year-to-date in-park per capita spending, including admissions per cap, was down 8% or $3.69 compared to the same time last year.

As Richard mentioned, to account for the lower demand levels, we've made changes to our park operating calendars for the balance of the year, with these changes designed to optimize operations and maximize profitability. To put things into perspective, our parks are able to generate cash flows in excess of their variable costs at attendance levels that are significantly less than 25% of theoretical capacity, although that's not a model we would prefer over the long term. Looking at deferred revenues for a moment. As of the end of the second quarter, deferred revenues totaled $201 million, down 11% compared to $227 million at the end of the second quarter last year. The year-over-year decline reflects the broad-based impact COVID-19 had on park operations and the sale of all-season products after mid-March.

On a positive note, the reopening of parks has spurred the further sale of season passes and related all-season products. Over the last eight weeks, we've generated more than $11 million in sales of such products, while also reactivating billings under our installment sales program at the reopened parks. Looking ahead, our decision to extend the use privileges of our season passes and all-season products through the 2021 season means that revenue recognition of our deferred balance will be split between the second half of 2020 and fiscal year 2021.

Based on current year attendance trends for the parks that are open and our current expectations for season pass visitation next year, of the $201 million of total deferred revenue on the books at the end of the quarter, we expect to recognize approximately $42 million over the second half of 2020, and approximately $150 million in fiscal year 2021. The remaining deferred balance of $9 million relates to prepaid payments on a long-term lease arrangement that will be amortized into revenue over the life of the lease. Turning to our outlook around liquidity. At the end of the second quarter, our balance sheet was solid, with $301 million in cash on hand and $360 million available under our revolving credit facility.

Total liquidity at the end of the quarter was approximately $661 million, providing us with ample liquidity to meet our cash obligations through the end of 2021, even if another pandemic-related shutdown should occur. With our limited number of parks open and abbreviated operating calendars, we continue to take actions to manage our cash burn rate, which we anticipate will average $30 million-$40 million per month over the balance of 2020. This includes all operating expenses, capital expenditures, and interest payments. As we mentioned on our last call, the flexibility of our business model affords us the opportunity to quickly reduce expenditures across the board when needed, including costs we generally consider to be fixed during normal operations.

This includes a focus on identifying additional opportunities to reduce operating costs and defer or eliminate capital expenditures as we head into 2021. As we noted on our last earnings call, we took proactive measures to reduce 2020 capital spending by approximately $75 million-$100 million, which was a near-term initiative to improve our financial flexibility while all of our parks were shut down. As we begin to plan for next season, we are weighing reactivating certain capital projects to ensure that properties that should be fully operational for the 2021 season are prepared and ready to maximize revenue opportunities. We will be better positioned to provide more visibility into these plans, as well as our outlook around the 2021 capital program later in the year.

Regardless of our park operating model next year, we will continue to explore ways to reduce cash outflows and enhance our liquidity position going forward. As we indicated in our first quarter call, we have withdrawn financial guidance due to the uncertainty of the pandemic. As we look to the long term, we see little to no value for our investors in revisiting financial guidance until market visibility improves, and we have clear line of sight into the reopening of our entire portfolio of parks. In the meantime, our focus will be on delivering to our guests the safe, value-oriented experience they expect and deserve, while being efficient with our resources and prudent with our use of cash flows.

Our near-term capital allocation strategy is now focused on reestablishing growth from the core business and paying down debt to return our net leverage ratio back inside of five times Adjusted EBITDA as quickly and responsibly as possible. With that, I'll turn the call back over to Richard.

Richard Zimmerman (CEO)

Thanks, Brian. As I mentioned in my opening remarks, our goal is to emerge from this crisis an even stronger company than before. To effectively plan for what's ahead, we must acknowledge the headwinds we're up against. First, over the last six months, the world has fundamentally changed. It will require us to adapt to a changing marketplace, adjust our approach to running parts of our business, and renew our commitment to generating revenue and free cash flow in new and imaginative ways. Second, our parks' implementation of health and safety protocols, as recommended by the CDC and state and local officials, have been very well received, but they help improve consumer confidence only to a certain point. And third, consumer confidence may not improve measurably until there is broad availability and distribution of a vaccine or treatments to reduce the spread or effects of the coronavirus.

This may prove to be an attendance headwind for the foreseeable future and something we must account for. Collectively, as a team, we're much smarter today than we were a few months ago, and we are putting that knowledge to work each and every day our parks are open. It provides us with field-tested experience that will drive the specifics of next year's plan, configured to the unique characteristics of each property, with the overarching goal of generating positive free cash flow. What we do know from decades of experience is that our product has high consumer appeal and that people will always seek opportunities to socialize with others at venues of entertainment. We also know from experience that our business model is highly resilient, surviving macro disruptions of various magnitudes over the years.

Although this pandemic presents unique challenges versus economic disruptions of the past, over time, we believe guests will return to our parks as concerns around the coronavirus are addressed and minimized. Meanwhile, we must redouble our efforts to enhance the strong regional brands of our parks and reinforce our positioning as the preferred choice for safe, family-friendly entertainment. To accomplish these goals, we have begun a process of reviewing all aspects of our business, with the ultimate goal of reestablishing the top-line momentum we had coming out of 2019, while identifying incremental operating efficiencies and adding new capabilities aimed at capitalizing on emerging shifts in consumer preferences. Our efforts can be bucketed into several core elements. First, it is critically important that we stay closely engaged with our customers.

This is particularly important in our markets where parks were unable to open in 2020. That requires us to refresh our marketing approach and embrace our guests as pseudo insiders, offering them regular updates and progress reports on such things as new rides, attractions, and dining options, as well as technology-based improvements designed to enhance park safety and guest service. We must proactively seek guest feedback and welcome it, while developing interactive programming that seeks new levels of communication and engagement. It's fair to say that the disruption of COVID-19 has provided us the motivation and opportunity to rethink our overall approach to marketing, including where we advertise and how we engage with the consumer. The second element of our business review process is organizational design.

Our effort here is focused on identifying ways to centralize functionality, mine incremental cost efficiencies, eliminate redundancies across the portfolio, ensure that we have the right resources and capabilities in place to deliver on our strategies and growth targets. Third is operational efficiency. Going forward, it is vitally important that we look to maintain and improve our discipline around cash burn, including the search for incremental cost savings and system-wide efficiencies that will drive expenses lower. Standardizing processes and systems, both guest-facing and back of house, has been one of our priorities for several years now. Coming into this year, we had several system standardization initiatives well underway that we elected to pause once the pandemic hit. We have already reactivated several of these projects, including staffing-related system initiatives designed to capture cost savings and improve onboarding procedures.

Finally, our future investments, operating strategies, and entertainment programming must factor in the new normal as part of our decision-making process. This includes using our experiences and observations from this year's COVID-impacted park operations as a baseline for improving the guest experience for the 2021 season....The momentum we had coming out of 2019 and through the first few months of this year, tells us that our emphasis on events and more experiential entertainment truly resonates with our guests. While we believe this will remain a true differentiator for our parks, we are using this time to reevaluate how this strategy must adjust to account for new operating and safety protocols, and how we can use scalable technology-based solutions to enhance the guest experience and respond to changes in consumer preferences.

With so much uncertainty in the marketplace, we must not lose sight of why people come to our parks in the first place, to engage in something out of the ordinary. That is at the heart of our value proposition, offering guests an extraordinary place to go with friends and family to have fun that is carefree, thrilling, and memorable. Regardless of the hurdles we must clear to get there, it remains our job to deliver on that experience. That concludes our prepared remarks. James, please open the call for questions.

Operator (participant)

At this time, I'd like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad, and we'll pause for a moment while we compile the Q&A roster. Our first question comes from the line of Steve Wieczynski with Stifel. Go ahead, please. Your line is open.

Steve Wieczynski (Managing Director)

Yeah, good morning, guys. So you talked about visitation trends. You know, they've been below what, you know, you would have expected, and you're now expecting, I think you said, visitation to be kind of at 20%-25% of historical levels. I, you know, I guess the question is gonna be twofold here. I guess, first, can you, can you maybe help us think about where you thought visitation would be? And I guess I'm just trying to get a handle on how disappointing visitation has been. And then can you help us think about EBITDA, breakeven, free cash flow, breakeven metrics with visitation in that range? And, and I think, Brian, you said, you know, you could be profitable with visitation below that range, but I'm not sure if that's- if you're referring to, you know, real visitation or theoretical capacity.

Hope all that makes sense.

Brian Witherow (EVP and CFO)

Yeah, Steve, it's Brian. Good morning. Let me try and answer it this way. You know, out the shoot, I mean, we're not gonna get into, you know, specifics. I think coming into, you know, in terms of what our models were coming into this, because I think there was such uncertainty around it. What I can tell you is, you know, all the discussions that we had in each of our jurisdictions with state and local officials was modeling back to capacity limitations that were, you know, 50% of those theoretical numbers. You know, so as I said, I think on the last call, for some of our big parks, theoretical capacity is, you know, 50+ thousand guests.

And so, you know, keeping that cap somewhere in the mid-twenties was where the capacity limitations were going to be. I think we felt coming in to getting parks reopened, we would see an initial rush based on pent-up demand, and then that would sort of fall back into its new normal. I will say, as we said on the call, that the, you know, that the reality has been that those numbers are definitely inside of those capacity limits. And so, while disappointing, we are encouraged by the fact that it hasn't fallen off. It sort of just found its new level, and it's remained pretty steady. The visitation trends have been very consistent with what we've seen historically.

Guests are sorting to the weekends as they always have. Saturdays are the big demand days. Fridays and Sundays sort of sitting, you know, very close behind. And then weekdays are. It's a little bit harder to drive volume. And that's, as I said, all pretty consistent with historical levels or historical performance. The levels of attendance that we're at, we are still able to operate profitably. That's a little bit easier at the larger parks where there's more leverage, based on not only the size of the park, but also the revenue channels available. So parks like Kings Island and Cedar Point have more levers to pull than some of our smaller or mid-tier parks. And that's why we made the changes to the operating calendar.

As Richard said on the call, you know, adjusting the operating calendars to more mirror the demand, current demand trends we're seeing, was important in order to stay above those break-even levels, that, you know, that you were asking about. Our parks, as I said on the call, can be profitable and cover their variable costs at numbers well inside of 25% of theoretical capacity, and so we've made the necessary changes to the operating plan to try and maximize those profitability on numbers, and while disappointed that trends are a little bit softer than we'd like, we are encouraged by the fact that folks are still coming out to the parks once they got reopened.

Steve Wieczynski (Managing Director)

Okay, gotcha. And then second question would be just around the parks that, you know, that had been open for the last, whatever, four, six weeks or whatever you wanna look at it. But if we look at attendance mix, wondering if you've seen any kind of, you know, changes in who's coming to the parks? I mean, I guess what I'm trying to get at here, are you starting to see more unique visitors, or are you seeing an uptick in single-day ticket sales?

Richard Zimmerman (CEO)

You know, Steve, good morning, it's Richard. Let me take that one. You know, what we're seeing, Brian referenced the, you know, the initial reopening. We saw a good surge in season pass holders. As we get deeper into the parks being open, you know, we see what the crowd looks like. Everything's kind of sorting to what we had seen pre-COVID, whether that was the single day versus season pass mix, whether that's how people spend time in the park, even on reduced capacities. We're starting to see the. I'll put it this way, we're starting to see our business metrics start to revert to the norm that we would expect to see, just on a lower level of demand.

Steve Wieczynski (Managing Director)

... Okay, gotcha. Thanks, guys, really appreciate it.

Brian Witherow (EVP and CFO)

Thanks, Dave.

Operator (participant)

Our next question comes from the line of James Hardiman with Wedbush Securities. Go ahead, please. Your line is open.

James Hardiman (Managing Director, Leisure and Travel Analyst)

Hey, thanks for taking my call. Just a quick clarification on this idea that daily attendance will be 20%-25% of historical levels going forward. Just to be clear, obviously, that's only the parks that are open, but also is that only the parks on only the days that they're open? Meaning, as you've now adjusted the calendars to be closed on certain days of the week, do I also need to adjust that for, you know, the percentage of time that they're actually open to get to an actual attendance, overall sort of corporate attendance number?

Brian Witherow (EVP and CFO)

Yeah, James, good morning, it's Brian. Yeah, I think that, you know, the comment of attendance trends, you know, continuing along the path that we've seen to this point of 20%-25% is comparable to, you know, prior year on days open. The effort to compress the operating calendar at those parks where we have gone from seven days down to four or down to five, you know, is about trying to compress and push that attendance into fewer days and maybe push that percentage up, but we're talking about numbers that are so small that it still sort of really fits into that range. What I will say is, you know, just to be a little clearer, you know, that's been the average.

We have, without a doubt, certainly some weeks that we've been open and definitely on certain days, particularly at our larger parks, Cedar Point, Kings Island, seen attendance performance be in the 30+, in that 30%-40% range. But the same kind of macro factors like weather and whatnot that play in that maybe push other days down. When you put it all together, it's in that 20%-25% range. We are definitely seeing some outperformance in certain weeks based on, you know, favorable weather and other macro factors.

James Hardiman (Managing Director, Leisure and Travel Analyst)

Okay, that's helpful. And then, my bigger question is sort of what needs to happen for you to get back to breakeven EBITDA? And I guess sort of the sub-question there, I guess A, you've now said that you're closing four parks or that you're not gonna open those parks for the rest of the year. Does that bring sort of your baseline operating expenses down meaningfully as we look to the back half of the year? And I guess, is there a scenario in which the parks that are currently open, if you don't get anything else opened up, that we could get back to breakeven EBITDA, or is that, you know, at least, you know, pre-vaccine, is that sort of a pipe dream here?

Richard Zimmerman (CEO)

Yeah, well, James, it's Richard. You know, as we look at the rest of the year, we've got an ability, as we said on our last call, and Brian, as we said in our prepared remarks, to operate profitably at these sites that we're open, given the profile of how we've configured our operations. So as we think about what needs to happen over and above that, I would say that certainly, and this is what we said on the last call, we maintain some parks in a state of readiness. That's where Canada's Wonderland and Knott's Berry Farm are. You know, as we put more of our parks into deep hibernation, we've got an ability to mine some cost efficiencies and make sure we're being as disciplined as possible around the cash we are spending.

But all of that we have factored in as we think about that $30 million-$40 million cash burn rate on average. Brian, anything you wanna add to that?

Brian Witherow (EVP and CFO)

Yeah, and just to be clear, James, I wanna make sure, you know, as we think about break-even, you know, I would separate, you know, where we're at here in 2020, given the disruption and the inability to open up more than 50% of our gates, right? We've got seven of the 15 gates currently open, and we're not gonna get them all open as we just, you know, disclosed yesterday. So, you know, break-even in 2020 is really, you know, off the table. Right now, what we're evaluating, you know, for parks, the decision to either close parks or reopen parks is really around that break-even number or as close to it as possible on a park level basis. Our goal is to see that we can cover the variable costs.

You know, clearly, without the full portfolio open, it's very challenging to cover the corporate overhead costs that sit on top of the park operations. And that's only made more challenging by the fact that two of our four largest parks, including our largest revenue and EBITDA-contributing park, Knott's Berry Farm, the other being Canada's Wonderland, still remain closed. So, you know, now, as we look towards 2021, I think it's a different discussion. And, you know, as we said, we're not gonna forecast right now because of all the uncertainty around COVID and the outlook for 2021 could change dramatically in a very short period of time.

But we have more. The difference between 2020, when we've been reacting in the moment, and 2021, when we get to plan, allows us a lot more runway as we work towards

being, you know, north of that break- even point.

Richard Zimmerman (CEO)

James, the last thing that I'd also add, and we touched on in our prepared remarks, you know, we're confident in our liquidity. You know, we have made sure that we have all the resources we need to work through this and then, be ready and poised for growth on the other side.

James Hardiman (Managing Director, Leisure and Travel Analyst)

Great. One last question, if I could slip it in, and I apologize. You sort of opened the door that with a little bit of luck, maybe Canada's Wonderland and maybe more notably Knott's could open back up this year. Not specifically, you've taken Great America off the table. So help me understand why one park in California might open up and the other one won't. Obviously, there's different operating calendars there, but what would need to happen for really any park in California to open up, but specifically Knott's?

Richard Zimmerman (CEO)

Well, I'd say first, James, it's a good question. We evaluate each of our parks on a market-by-market basis. And even out in California, there was a market difference between Northern California and Southern California as we got into the coronavirus pandemic. Some of the counties around in the Bay Area were among the first in the country to shut down things and lock down. So the part of the answer lies in the unique conditions surrounding our parks. Secondly, as you look at Knott's, we've got an opportunity because the weather is favorable to run events like Taste of Calico, now morphing into the Taste of Knott's.

So to the extent that we've got an opportunity to create new ways to both stay engaged with our customers, strengthen our brand, and create, you know, whether it's food events, experiential events, that let us get some level of activity at our parks, we think that's extremely beneficial to us. So I would say, you know, from a Northern, Southern California, it, it's clearly the conditions in the marketplace and the economic potential and the size difference of the two parks factors in that as well.

James Hardiman (Managing Director, Leisure and Travel Analyst)

Got it. Perfect. Thanks, guys.

Brian Witherow (EVP and CFO)

Thanks, James.

Operator (participant)

Our next question comes from the line of Brett Andress with KeyBanc Capital Markets. Go ahead, please. Your line is open.

Brett Andress (Managing Director of Equity Research)

Hey, good morning.

Brian Witherow (EVP and CFO)

Hey, Brett.

Brett Andress (Managing Director of Equity Research)

So you answered - good morning. So you answered part of this already, but can you help us with the variability of attendance, depending on, I guess, the COVID status in that, in that region? I'm just trying to find a, you know, percent of last year number that is normalized for COVID spikes, if, I guess, if there's such a thing.

Brian Witherow (EVP and CFO)

Yeah, Brett, it's Brian. I would say that the experience that we've seen for the seven parks that are open has been relatively consistent. You know, again, the two big parks, Cedar Point and Kings Island, very, very loyal guest base. Big season pass bases probably help those two parks as well. And so, you know, from that standpoint, if there have been parks in the portfolio that maybe have outperformed the others a little bit, it would be those two parks. But broadly speaking, the trends have been, you know, pretty comparable.

You know, of our seven parks that are open, four of them, you know, are located in two states, Ohio and Texas, both, which are, you know, spike states, I guess, as, you know, as we think about it or we're hearing referenced. And so, unfortunately, we don't have parks operating all across the country in a variety of states where we see a big distinction between, you know, states where COVID cases are higher than others. It's really been, I think, more a function of the season pass base, the size of the season pass base, and the loyalty of the guest base at each of those parks.

Brett Andress (Managing Director of Equity Research)

Got it. Makes sense. And, the last one, can you give us some color on what a fall festival replacement means for the fourth quarter at Cedar Point, Kings Island? I guess I'm just trying to think about how to model same park attendance as we kind of comp, you know, the events that you would normally do.

Richard Zimmerman (CEO)

You know, I think if you think of something that's more family friendly than our traditional Halloween event, think of something that's got a lot more food elements, like we've seen in Taste of Knott's or Taste of Calico. It'll really be something that draws out and is more family oriented than we've done in the past. One of the learnings we've got out of all of our events in the record year we referenced in 2019 is that food and beverage plays a really important part in the appeal of our product. And then we'll adapt that with some entertainment that's focused on the family.

Brett Andress (Managing Director of Equity Research)

Got it. Thank you.

Operator (participant)

Our next question comes from the line of Tim Conder with Wells Fargo Securities. Go ahead, please. Your line is open.

Tim Conder (Managing Director of Equity Research)

Thank you, and good morning, gentlemen. Wanted to follow up on the ongoing line of questioning here a little bit. One, so just to, just to be clear, you didn't really see any changes in visitation trends? I know, again, you had Cedar Point and Kings Island open in July, but with the spikes in COVID and then maybe in some other states other than Ohio, those may be leveling off, you haven't really seen any discernible difference with the news flow there?

Richard Zimmerman (CEO)

No, at this point, again, we're trending towards what I would put is the type of visitation, particularly from season pass holders, that we would have expected pre-COVID. As Brian mentioned in his earlier remarks, when we opened up, we had a few days, some, you know, a few less at Cedar Point and Kings Island that were season pass holder only. We knew we had a big season pass base out there, so that was the initial launch. And then now that we've opened it up, it's really settled into a pattern that looks very similar to what we had pre-COVID, so.

Tim Conder (Managing Director of Equity Research)

Okay. Okay. And on the season passes, again, parks weren't open, so it makes it difficult to sell those. But a couple things there, could you sort of say where the units are at the end of Q2 on a year-over-year basis, and then maybe break that down between, you know, what's been extended versus have been new purchases for the season?

Brian Witherow (EVP and CFO)

... Yeah, Tim, it's Brian. So as it relates to season passes, you know, just to reset, you know, say, as we said it on the first quarter call, sales were up more than 30% at the end of Q1. We missed, unfortunately, because of the disruption from COVID, a very big, probably the largest three-month window of sales volume, typically a little more than 40% of our sales volume happening in Q2, between April and June. And so, you know, that definitely was a big blow. As I said in my prepared remarks, pleased by the fact that at the parks driven by the parks that got reopened over the last eight weeks, we've generated more than $11 million in sales of all season products, including season passes.

And so that, you know, that has definitely helped. When we look at where we're at year to date, and I'll take it beyond Q2, I'll take it basically through the end of July. Our year-to-date season pass units, because of missing out on that big window, went from being up more than 30% now to being down a little more than 30%, or roughly 900,000 units behind where we were at the same time last year. And so, you know, definitely, disappointing that we lost very strong momentum coming out of Q1, because of COVID. But, you know, that's the world we find ourselves in.

Tim Conder (Managing Director of Equity Research)

Okay. And then, Brian, I guess it'd be fair to say that what you still have on the books, a pretty significant percentage of those are the extensions. Is that correct?

Brian Witherow (EVP and CFO)

Yeah. Actually, Tim, all of the season passes and the related products, all season products that have been sold to date are products that have the extended privileges and benefits through the 2021 season. For the parks that we just announced, the four parks that we just announced would not be opening in 2020, their 2020 products have come down, and we will not be selling any more of those products. We will go on sale later this year with 2021 passes, and 2021 products at the, sort of in the normal cadence.

Tim Conder (Managing Director of Equity Research)

Mm-hmm.

Brian Witherow (EVP and CFO)

and so everything that I just referred to in terms of where the volumes are and the dollars we talked about in our prepared remarks around deferred revenue, that all will all of those dollars and products will have benefits in 2021.

Tim Conder (Managing Director of Equity Research)

Okay, okay. And then, lastly, again, you talked about the large four parks being Cedar Point, Kings Island, and Toronto. Can you just remind us either collectively or, or on an individual park basis, what those represent, represented in 2019 of your revenue and EBITDA?

Brian Witherow (EVP and CFO)

Yeah, the four big parks in the system are north of 80% of the combined company, whether we're talking about revenue or EBITDA. And so, you know, having two of those parks open is definitely, or reopened, has been beneficial. Getting Canada and Knott's open would be that much more beneficial, even for an abbreviated, you know, fall calendar.

Tim Conder (Managing Director of Equity Research)

Okay, thank you.

Operator (participant)

Our next question comes from the line of Michael Swartz with Truist Securities. Go ahead, please. Your line is open.

Michael Swartz (Director of Equity Research)

Good morning, guys. Maybe for Brian, just given the fluidity of the situation and some of the measures you've taken to condense operations over the balance of the year, can you maybe give us a sense of, you know, what your expectations are in terms of operating days in the back half of the year, whether that's, you know, 3Q or 4Q, however you want to look at it?

Brian Witherow (EVP and CFO)

Yeah, Mike, it's a challenging one. You know, given the ever dynamic nature of COVID, I'd hate to throw a number out there at this point in time, just based on the fact that at any point in time, parks like Cedar Point and Kings Island, if Governor DeWine in Ohio decided that he didn't like the way cases were trending, that we would get closed down. I think it's fair to say, I mean, based on the announcements we made yesterday, you know, we're shuttering all parks beyond those two properties after Labor Day. And so you're looking at weekend operations, really, at those two parks for, let's call it, you know, broad strokes, about eight weeks.

I can't make any speculation really on where Canada will sort to and if we'll be able to get Knott's open up, as Richard said a little bit earlier in response to one of the questions. It's really a very dynamic situation that's hard to put a specific number on it.

Michael Swartz (Director of Equity Research)

Okay, that's fair. Second question, just obviously we won't be having WinterFest at any of the parks this year. Can you give us a sense of the expense load that's typically associated with those events, either on a per park basis or I guess overall?

Brian Witherow (EVP and CFO)

Yeah. So, WinterFest, at this point, that's gonna be a decision yet to be made. It really is gonna come down to where we sort out with Knott's and Canada's Wonderland. Those are two of our most profitable parks when it comes to the winter or holiday event being hosted. You know, the answer to the question in terms of the cost, you know, varies park by park, but on average, across the system, in a normal year, when we're hosting the event, the annual operating cost of that may be somewhere in the mid- to high-single digits from an OpEx perspective...

Those dollars, of course, are gonna go away if we're not operating those events, but at the same time, so is the attendance and revenue. So the event's been very profitable for us at a number of our parks, so disappointing that we won't be able to host it at parks like Carowinds and Great America, to name a couple, again this year. But that's just, again, that's sort of the circumstances we find ourselves in.

Michael Swartz (Director of Equity Research)

Great. Great, thank you.

Operator (participant)

Our next question comes from the line of Sarah Murray with Credit Suisse. Go ahead, please. Your line is open.

Sarah Murray (Equity Research Associate)

Hey, guys, this is Sarah on for Ben. You guys have insinuated some potential future cost savings as you recalibrate the business. I know it's early, but can you guys ballpark how you think about the magnitude of those savings? And if not, should we expect more formal guidance at any point?

Brian Witherow (EVP and CFO)

Yeah, Sarah, it's Brian.

Richard Zimmerman (CEO)

Go ahead, Brian.

Brian Witherow (EVP and CFO)

We'll be working through that analysis. A lot of it is gonna depend on what our outlook is for the 2021 season. But I think it's fair to expect that we'll provide more guidance as we get towards third quarter or even towards the end of the year and have better visibility. Right now, as Richard said earlier, in our $30 million-$40 million, we've estimated where we think those dollars may be, and that's reflected in there. But clearly, with more runway behind us and more visibility into the upcoming season, those assumptions and estimates get refined, and so we'll provide more clarity around that, either with the third quarter or the year-end earnings call.

Sarah Murray (Equity Research Associate)

Got it. That's really helpful. Thank you.

Operator (participant)

Hey, again, as a reminder, if you'd like to ask a question, please press star then one on your telephone keypad. Our next question comes from the line of Stephen Grambling with Goldman Sachs. Go ahead, please. Your line is open.

Stephen Grambling (VP)

Morning. Thanks for taking the question. You touched on this in your intro, but clearly there's been mixed leisure trends by sub-sector. Some areas are coming back pretty strong, whereas uniformly, it seems parks have seen a little bit of a challenged environment. So as you reduce operating days and in many ways gear up for next year in the downtime, what are consumers telling you that they wanna see you do to feel more comfortable coming back? And how are you preparing for the possibility of a vaccine or treatment not acting as a panacea to the pandemic next year?

Richard Zimmerman (CEO)

You know, Steve, it's a great question. As we think about what, you know, when we try and listen to what our consumers are telling us, clearly, you know, there, there's the COVID pandemic and the coronavirus overhang on broader consumer sentiment. What they're telling us is it's less about us and more about the broader society. I can't give you any specifics in terms of whether or not or how, you know, the ramp up will happen, what the recovery will look like, whether that'll be like a light bulb that turns on, or whether or not, you know, people will dip their toe in the water and come back out. What I can tell you is that we're trying to plan for, as we have this year, plan for a very dynamic situation.

What I feel good about is we've seen an ability to flex our model up and flex our model down, both chase opportunities with events like Taste of Calico, as we've said, or opening some of our hotels at Cedar Point to maximize the beach, or carve up the operating calendar as we have to make sure that we condense the demand and make sure we're operating profitably. So regardless of what the consumers will see, we're prepared to react to the environment, and as Brian said, plan for. We've got a little bit more time to plan rather than just react.

Brian Witherow (EVP and CFO)

Yeah, the other thing, Steve, that I would just add to Richard's comment, our research, which is ongoing, and I think this is pretty consistent with what we're hearing in our conversations with our other industry partners and other operators in the industry is, you know, the top two concerns for the guests are around health and sanitization in the parks and social distancing. And so, you know, as I said earlier, 2020, we've all had to be very reactive in trying to respond to that.

What the opportunity is for us as we go into 2021 is to be a little bit more proactive in trying to address those concerns, assuming that they stay, you know, top of mind for the consumer, which, based on what we know today, I think that has to be the assumption. And so I think as we said in our prepared remarks, a lot of the initiatives we have, whether they be technology-based or other programmatic initiatives, for the 2021 season, they'll be focused on, you know, again, trying to address those top-of-mind concerns for the consumer based on the research that we're getting.

Stephen Grambling (VP)

As a quick follow-up, I mean, is there an opportunity to effectively, rather than kind of waiting and seeing, in some ways, how the consumer reacts and how the virus evolves, can you change the narrative in any way? Or and I think you referenced some marketing initiatives. Is there an opportunity there? Is there any expectation that you can ramp up marketing or otherwise to kind of tell a story of where, you know, parks fit in from a hygiene, cleanliness, et cetera, standpoint?

Richard Zimmerman (CEO)

Yeah, we've been, Steve, it's a great question. We've been, we've been heavily focused on engaging our customer through digital and social media channels. We've been very active in the communication, and clearly, as we look ahead, that's something that we're gonna lean hard into as we get into 2021. It allows us to be a little more nimble, a little more front foot leaning in a very dynamic environment. So we've got the in-house capability to manage a lot of that. We've built a state-of-the-art CRM system, so, particularly with our season pass holders, we've been very active, and it really is a two-way dialogue.

So as we think about the things that we can put out there to make sure that the guests are comfortable, those who are coming, and, you know, Brian hit on this, are giving us high marks for the experience we have, the procedures we've put in place. Many of the things that we're doing have been, the state and local officials have taken what we've put together as protocols and procedures and laying them over other industries. So I think the consumer, the feedback we're getting is that our guests really like the experience and are giving us credit for those things already.

Stephen Grambling (VP)

Got it. Thanks so much. Best of luck.

Brian Witherow (EVP and CFO)

Thanks, Steve.

Operator (participant)

There are no further questions in queue at this time. I'd like to turn the call back over to Richard Zimmerman for some closing remarks.

Richard Zimmerman (CEO)

Thank you, everybody, for joining us on the call today and for your interest and ongoing support of Cedar Fair. We will continue to focus on taking the steps necessary to emerge from this current crisis a stronger and better-positioned company. We look forward to keeping you apprised of that progress on upcoming calls. And in the meantime, please take care and stay safe. Thank you again. Michael?

Michael Russell (Corporate Director of Investor Relations)

Yeah, thanks for joining us, everyone. Should you have any follow-up questions, please give me a call at 419-627-2233, and we look forward to speaking with you again about three months from now to discuss our third quarter results. James, that's the end of our call today. Thank you.

Operator (participant)

Ladies and gentlemen, this does conclude today's conference call. We thank you for your participation. You may now disconnect.