Cedar Fair (FUN) Q2 2022 Earnings Call Transcript

Cedar Fair (FUN 0.60%)
Q2 2022 Earnings Call
Aug 03, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Rex and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. All lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question-and-answer session. [Operator instructions] Thank you. You may begin your conference.

Michael Russell -- Corporate Director, Investor Relations

Thank you, Rex, 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 reveal our 2022 second quarter results ended June 26, as well as trends we are seeing through this past Sunday, July 31st. Earlier this morning, we distributed via wire service our earnings press release.

A copy of which is under the news tab of our investors website at ir.cedarfair.com. On the call for me this morning, our 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 Regulation F.D., 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 selectively disseminated, all content on this call will be considered fully disclosed. With that, I'd like to introduce our CEO, Richard Zimmerman. Richard,

Richard Zimmerman -- President and Chief Executive Officer

 Thank you, Michael, and good morning, everyone. Let me start today's call by saying I am extremely proud of our team and all that we've accomplished so far this season. Our team's commitment to delighting guests and operating the best parks in the industry has allowed us to achieve record performance coming out of the pandemic. Based on our results over the first half of the year and the strength of long lead indicators, I've never had more confidence in our business than I do right now, and I'm excited to see how much fun we can create for our guests and our associates over the balance of the season and into next year.

My confidence in the business is driven by several factors. First, and most importantly, our guest satisfaction scores. Guest satisfaction ratings at our parks this season have been among our highest ever validating the investments we've made and the initiatives we've implemented to broaden and improve the guest experience. The quality of the guest experience is a direct driver of guest spending, which remains at record levels and continues to grow.

Second, our overall financial performance. On a trailing 12 month basis through the end of the second quarter, we have generated $509 million of adjusted EBITDA, which surpasses our record performance of 2019. Third, our long lead indicators have never looked better. For the 2022 season, we sold $3.2 million season passes, surpassing $3 million units sold for the first time in the company's history.

This year's total units sold is up more than 20% from our prior record of $2.6 million units sold back in 2019 and at much higher prices. Resort bookings are also pacing well ahead of pre-pandemic levels, allowing us to reap the benefits of the investments we've made to refresh and expand our resort offerings. These strong trends positioned as well for the balance of the year, particularly considering that we produce roughly 80% of the company's adjusted EBITDA in the third and fourth quarter. Finally, the strength and pace of our performance over the first half of the year, combined with our recent monetization of Cedar Fair's valuable real estate in Santa Clara, California, has enabled us to deliver on several key priorities, including reducing net leverage, and establishing a well-defined capital allocation policy to return capital to our unit-holders.

I'll share more about the importance of these initiatives prior to taking your questions, but I want to emphasize that we have successfully paid off the equivalent of 75% of the pandemic related debt we took on when our parks were forced to close in 2020. As we continue working toward our net debt target of 2 billion, we believe we are well-positioned to achieve net leverage of less than four times adjusted EBITDA by year end. Before I turn things over to Brian to review our financial results in more detail, let me share some additional thoughts on Cedar Fair and why we're so excited about the remainder of the 2022 season and beyond. As we work to get back to pre-pandemic levels, we sharpened our focus to ensure we are meeting or exceeding our most important business objectives.

It's especially rewarding to see how the decisions we've made, the capital we've invested, and the initiatives we've deployed over the last few years have resulted in better experiences for our guests and better results for all Cedar Fair unit-holders. The breadth and scale of our properties continued to lead the industry. Our extensive offering of unique, high quality dining options and premium experiences are being wholly embraced by our guests. And our resort properties remain popular destinations for the family's staycation, which appears to be which appears to be in full swing once again in 2022.

While it's rewarding to see our revenue channels performing well, I'm equally pleased with how our park teams have responded to the additional challenge of managing costs in such an inflationary environment. Labor costs are more than half of our operating cost structure, so driving EBITDA growth requires a more efficient utilization of labor, something our teams have successfully executed against this year. I'll wrap up my opening remarks with a few comments about our recent real estate transaction. Just after the close of the second quarter, we sold approximately 117 acres of land located in Santa Clara, California.

The land upon which our Great America Park is located was sold for approximately 2.7 million per acre, a significant premium compared to our cost to purchase the land three years ago. While a difficult decision, selling the Land of Great America was a generational opportunity to capitalize on a very attractive real estate market, while at the same time allowing us to continue to operate the park for the foreseeable future. The monetization of the real estate also enables us to strategically accelerate our capital allocation priorities returning capital to all unit holders and making Cedar Fair a much stronger company going forward. I'll pause here so that Brian can review our financial results in more detail, Brian.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Thanks, Richard, and good morning, everyone. I'll start by discussing our second quarter operating results before providing an overview of preliminary results through July 31st. I'll wrap up my remarks with an update on our balance sheet and free cash flow outlook. But first, I need to remind everyone that because of the impact of the pandemic on park operations in 2020 and 2021, there was a lack of meaningful data comparisons for the second quarter of this year to the second quarter, the last two years, which is why we have used comparisons to 2019 instead.

During the quarter, our parks had 708 total operating days, compared with 726 total operating days in the second quarter of 2019. The 708 operating days in the most recently completed quarter included 96 days at our two schlitterbahn water parks, which we acquired on July 1st of 2019. Excluding the schlitterbahn park, second quarter operating days at our legacy properties decreased 114 days compared to the second quarter of 2019 due to a four day calendar shift and the planned removal of certain early season operating days at several of our parks. In the Second quarter, we entertained 7.8 million guests and generated net revenues of $509 million, representing a 17% or $73 million increase compared to the second quarter of 2019.

The record net revenue was primarily driven by a 26% increase in in-park per capita spending and a 21% increase in out of park revenues, as well as the inclusion of the schlitterbahn parks in this year's second quarter. These increases were offset in part by an 8% decline in attendance during the recently completed quarter. The decline in second quarter attendance was the result of fewer operating days at our legacy parks, and expected slower recovery within the group sales channel, and the strategic elimination of several low value ticket programs as we use the disruption of the pandemic as an opportunity to review all aspects of our business model. Despite these headwinds, attendance per operating day.

In the second quarter, our legacy parks was approximately 12,100 guests, up 3% versus the comparable period in 2019, reflecting the impact of strong demand within the season pass channel. In the quarter,season pass visits represented 62% of our attendance mix, which compares to 56% during the second quarter of 2019. Meanwhile, as Richard noted, our pricing strategies and initiatives to enhance the guest experience continue to resonate and drive guest spending. Resulting in an in-park for.

Capita in the quarter of $59.52, compared to $47.22 in the second quarter of 2019. We are extremely pleased with the stickiness and sustained momentum in per guest, particularly coming off the second half performance last year when we achieved a step function improvement in guest spending from pre-pandemic levels. The per capita increase reflects higher levels of guest spending across all key revenue categories on which we are keenly focused. In the quarter, admissions per capita increased to $32.27, up 20% from the second quarter of 2019.

While combined, spending on food and beverage, merchandising games and extra charge attractions increased to $27.25, up 35% from 2019 levels. The improved levels of in-park guest spending were driven by an increase in transaction counts, as well as higher average value per transaction. The increase in admissions per cap was the realization of both higher pricing and better yield management resulting from our strategic pricing efforts. As we've invested in delivering great experiences to our guests, we've been able to effectively increase admission pricing without negatively impacting demand.

The increase in single day ticket prices has also amplified the value represented by our season passes, contributing to the record number of passes sold this year. Our park revenues in the quarter increased to $60 million compared to $49 million in the second quarter of 2019. The increase reflects higher online customer transaction fees, and increased revenues from our resort properties, most notably from the inclusion of the resort at Schlitterbahn by New Braunfels ad revenue growth at our Cedar Point Resorts.The improvement in the performance of our resort properties reflects the value of the investments we've made in recent years to refresh and expand that side of our business, and is even more impressive considering our castaway Bay and Sawmill Creek properties didn't reopen until late in the second quarter. Moving on to the costs front.

Operating costs and expenses in the second quarter increased to $347 million, up 70 million compared with the second quarter of 2019. The increase was the result of a $9 million increase in cost of goods, sold a $55 million increase in operating expenses, and a $6 million increase in SG& expense. Despite, inflationary cost pressures, cost of goods sold as a percentage of food and merchandising games revenue only increased 128 basis points from 2019 levels. The increase in operating costs was largely attributable to an increase in seasonal labor costs driven by higher rates, higher full time wages primarily related to planned increases in headcount, its like parks and the inclusion of the operations of the Schlitterbahn Parks.

Looking at more recent comparisons, our average seasonal labor rate in the second quarter was only up 3% over the second quarter of 2021, reflecting the successful efforts to revamp our seasonal pay structure last year. The increase in the most recent quarters and  SG&A expense was primarily due to an increase in full time wages, including higher incentive plan expense as well as higher transaction fees driven in part by this year's initiative to convert all our properties to cashless. These increases were somewhat offset by a reduction in advertising costs, the result of a strategic pivot to more efficient and flexible digital advertising. Adjusted EBITDA for the quarter, which management believes is a meaningful measure of the company's park level operating results totaled $171 million, representing an increase of $7 million or 5% compared with the second quarter of 2019.

Shifting the focus to our preliminary results for the last five weeks and operating trends for the first seven months of the year. Over the past five weeks, our parks have entertained 6.1 million guest, and generated $421 million of net revenues. Based on preliminary results for the five week period, which had 524 total operating days in park, per capita spending was a record $62.80. And out of park revenue, revenues totaled a record $48 million.

For the comparable five week period in 2021, which had 471 total operating days, net revenues totaled $354 million, reflecting attendance of 5.2 million guests, in part per capita spending of $61.99 and out of park revenues of $41 million. The July attendance trends are consistent with what we've seen over the first half of the year, with much of the variance again due the expected slower recovery of the group channel and the elimination of certain ticket programs and any short window attendance can also be impacted by macro factors such as extreme heat or rainy weekends. However, broadly speaking, July demand remained in line with expectations. Based on our preliminary July results through the first seven months of the year, we've entertained 15.4 million gas and generated net revenues of $1.03 billion, representing an increase of 17% or $152 million compared to the first seven months of 2019.

Over this seven month period, same seven month period in part for capital spending was a record $60.76, up 25% from 2019 levels. And out of park revenues totaled a record $125 million, up $20 million or 19% from the same period in 2019. For reference, operating days for the first seven months of 2022 and 2029 totaled 1362 days and 1352 days, respectively. After we released our interim updates for the Memorial Day in July 4th weekend, some investors asked, Why do we reduce the number of operating days for 2022? Let me assure you, our decision to do so was purposeful and strategic.

While labor availability has improved, it remains challenging. More so in certain markets. Our adjustments to the park operating calendars reflect those challenges. Channeling demand into fewer operating days not only improves labor utilization and reduces operating costs, but it also enhances the guest experience.

We'll continue to adjust operating calendars as necessary, both adding and reducing days when appropriate. As part calendars currently stand, we project the balance of the season. We'll have approximately 80 additional days compared to the same period in 2019, driven in large part by the labor timing of Labor Day this year. These incremental operating days provide us with an opportunity to recoup a meaningful portion of the early season attendance variance.

As our park teams remain focused on driving demand and maximizing operating efficiencies, access to market intelligence, and better analytics inform when it's beneficial to adjust the operating calendars. It's just one example of how our company is now using data and analytics to be smarter and more proactive in decision making to drive value creation. Now turning to our balance sheet. As Richard mentioned, for the 2022 season, we established a new record high for season pass sales through the end of July, total sales were $3.2 million units, while sales of related all season products, including all season dining, and all season beverage, were 56% ahead of the previous sales record for Add-on products.

These record results, combined with strong reserve bookings, drove deferred revenues to $307 million at the end of the second quarter, representing an increase of $73 million or 31% from the end of the first quarter of 2022 and an increase of $15 million or 5% when compared to deferred revenues at the end of the second quarter of 2021. As we end the quarter, Cedar for his balance sheet is in solid financial condition. We had cash on hand of $125 million, and $194 million available under our revolving credit facility. Net of $16 million of letters of credit.

Representing total liquidity at the end of the quarter of $319 million. This compares to $284 million of total liquidity at the end of the first quarter. Net debt at the end of the second quarter total $2.5 billion calculated as total debt of $2.6 billion less cash and cash equivalents of 125 million. None of these figures reflects the proceeds from the sale of our California real estate, as that transaction did not close until the first week of the third quarter.

During the second quarter, we spent $62 million on capital investments, bringing the total spend on CapEx through the first half of the year to $96 million. Looking ahead to the full year, we anticipate spending $116, $170, $75 million on core CapEx in 2022, with another $40 million of investments on resort and renovations, including the recently reopened Castaway Bay and Sawmill Creek Resort properties in Cedar Point. The projected total investment for 2022 is comparable to our planned capital program of $200 million for the upcoming 2023 season. With that, I'll turn the call back over to Richard to share some final thoughts.

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Brian. I want to take a few minutes to discuss our updated capital allocation strategy, which we announced earlier this morning. Fundamentally, our priorities remain the same. That is, we intend to invest in Cedar Fair's core business, strengthen the balance sheet, and return capital to unit-holders.

The difference now is we have all the levers available to us, and we can adjust our emphasis on each of these elements as market conditions evolve. Certainly the headline of today's announcement is the reinstatement of the quarterly cash distribution, reflecting an annualized rate of $1.20 per unit or approximately one third of our pre-pandemic distribution rate. The size of the distribution reflects our board's confidence that Cedar Fair's business outlook is strong and its financial position is stable and improving. Setting aside the disruption of the pandemic.

Cedar Fair has a proven long term track record of successfully balancing the capital allocation needs of the business to support an attractive, reliable, and steadily growing distribution, a priority on which we remain laser focused. Today, we also expanded our ability to return capital to unit-holders with the board's authorization of a 250 million unit unit repurchase plan, which further strengthens our capital return policy. When combined with a growing and sustainable quarterly distribution. We believe opportunistic, well-timed unit repurchases will serve as a very effective means to enhance total return over time.

This is especially true at current price levels. We believe units of Cedar Fair represent a very attractive investment opportunity. The current unit price does not reflect the underlying value of the business, as demonstrated by Cedar Fair's rapid recovery since the pandemic, including the company's stronger balance sheet and the record results we've delivered since reopening the park last season. Moreover, the company's current market valuation does not reflect the value of long lead indicators, nor the consistent growth and sustainability of our recurring revenue streams, such as season pass sales, which continue to substantially outpace pre-pandemic levels, and position us well to post another record performance in 2022.

Cedar Fair's generation of significant free cash flow is the primary strength of our business model and fuels our capital allocation strategy, including our priorities of paying down debt and reinvesting in our properties to drive growth and value creation. Our commitment to investing in the guest experience improved the pace of our recovery and is the primary driver of the record levels of in-park guest spending, and out of park revenues we've achieved this year. As I previously mentioned, thanks to our outstanding performance over the past 12 months and disciplined approach to cash management, we've greatly strengthened the company's balance sheet. Based on our outlook for the full year, we're on pace to finish this year with a net leverage ratio well inside four times adjusted EBITDA, and approaching pre-pandemic levels.

Achieving that milestone will give us added flexibility to afford to deploy free cash flow, whether investing in capital projects with compelling returns, increasing our distribution over time, or buying back equity when we believe it is undervalued. Along with our board, our management team remains focused on driving growth and delivering upon the commitment of creating value for our unit-holders. Finally, while we're proud of what we've accomplished so far this year, by no means are we resting on our walls. Next Thursday, we will be unveiling our 2023 capital investment program.

Sharing with our guest communities and associates a first look at what exciting new rides, attractions, and immersive entertainment are coming to our parks and resort properties, some of which are already under construction. While continuously improving our properties as a Cedar Fair tradition, we also never lose sight of what matters most making people happy. Having emerged from the pandemic and more flexible as a business and more cohesive as a team, we're thrilled to be in a position to continue to fully deliver on that purpose. Rex That's the end of our prepared remarks.

Please open the call for questions.

Questions & Answers:

Operator

[Operator instruction] Your first question comes from the line of Steven Wieczynski. Your line is open.

Steven Wieczynski -- Stifel Financial Corp. -- Analyst

Yeah. Hey, guys. Good morning. So, I want to dig into the change in capital allocation here a little bit more.

Just look, I understand your business seems like it's in a pretty good spot at this point, but I guess the question is going to be more about trying to understand why you decided to put the buyback in there or why the board decided to put the buyback in there now versus, you know, maybe going down the path of a higher distribution.

Richard Zimmerman -- President and Chief Executive Officer

Morning, Steve. Great question. Thank you. We think, as I said in my prepared remarks, both the board and our management team, Cedar Fair, represents a really attractive investment opportunity.

And as we've looked at it, we think there's an ability to boost our total return over time. The distribution has always been the core focus of our company and certainly with our MLP entity structure been very tax efficient way to return capital. But we also believe when there are dislocations in what we believe the market values our company, that we've got an opportunity to opportunistically go in, and buy units at a really attractive valuation level that will improve the return to all of our unit-holders over time.

Steven Wieczynski -- Stifel Financial Corp. -- Analyst

OK. Great. Thanks, Rich. I really appreciate that.

And then I want to ask Brian, I know you got into this a little bit in your prepared remarks, but I want to ask about July. I guess it'll be kind of back into the the attendance number. It looks like there was a drop of, let's say, kind of upper single digits relative to 2019. And look, I understand there obviously are shifts in the calendar, the shifts in the operating days.

But I guess the real question is here, I'm just trying to figure out how material it is, taking away those low value ticket programs. And at the same time, you know, the group side of things, I'm just trying to figure out, you know, what the real kind of year of a year ends in July really looks like, you know, if that kind of make sense.

Brian Witherow -- Executive Vice President and Chief Financial Officer

I'll try and hit that, and you can tell me if I have an answer to directly. But you know, as I said in my prepared remarks, I would characterize July as generally consistent with the results we've seen through the first six months of the year. The high points are certainly the stickiness and sustained momentum that we're seeing in guest spending levels. While the law of big numbers kicks in and maybe on a percentage, July has pared back a little bit per cap growth more toward 24% versus 26% in Q2.

You know, that's in terms of absolute dollars, we're still seeing very consistent trends in gas spending out of park revenues, very strong. And then on the attendance perspective, as I said, you know, short periods like a five week period often have a macro factor of effects that you have to take into account a lot of record temperatures on the East Coast, hurt us from time to time at the parks there. A little bit of rain. But broadly speaking, the demand trends have been consistent with our expectation.

And the delta to 2019 levels is tied back to your point, group is still a bit disconnected, but that was expected coming into the year, and we knew that was going to take a couple of years to fully recover. And the unplugging of those programs is a strategic decision that we made. There are some very low margin legacy ticket programs that we felt had less value, and using the pandemic as an opportunity to hit the reset button, if you will, and push us forward on a better path, we thought that was the right direction to go. Um, what I would add is, as you look at the [inaudible] of July, I think the other metric that we look very closely at is some of those longer lead indicators.

Hotel bookings continue to pace significantly ahead of 2019 levels during the month of July, much like we saw over the first half of the year, and season pass sales as well. We saw season pass sales for the five week period compared to 19, more than 50%. which is a better indicator to us of where the consumer is, where the health of the business is, and maybe strips out some of those macro short-term factors that I just mentioned.

OK. Got you. Thanks for its thanks Brian. I really appreciate the color.

Operator

Your next question comes from the line of James Hardiman. Your line is open.

James Hardiman -- Wedbush Securities -- Analyst

Hey. Good morning. Thanks for taking my call. So I wanted to pick up where Steve maybe left off there.

Brian, when you talk sort of macro factors, I know that you're talking in a lot of ways sort of short term, maybe weather related things. One, to try to figure out what impact, if any, the sort of macro economic environment is having on the consumer. Sort of an open ended question. I'm curious what consumer trends or how how you're able to sort of slice and dice the trends of the consumer.

Obviously, gas prices have been a big concern. Are you seeing deltas between short distance versus long distance? Are there particular parks or geographies that are that are doing better than others and then, you know, low end versus high end. So sort of open ended based on whatever data you guys might have available to you.

Brian Witherow -- Executive Vice President and Chief Financial Officer

James, certainly something that we're very focused on as everyone else is. As we analyze the data that we have to date, and it's difficult sometimes mid-season to reach definitive conclusions until you have the, the totality of the year. Um, and you sort of strip out some of the timing differences that, that, that may exist mid-season or in these interim period. We're not seeing anything at this point that's meaningful in terms of that downshift.

We are certainly focused on looking at aspects of our business where maybe we might see a, uh, a, a pullback in the behavior of the lower end consumer. So as we look at our accommodations, group, looking at the Express Hotel as an example booking, the booking curve there versus the Sarno Creek and the Breakers Hotel, you know, that sometimes would show, as the discount hotel, maybe a little bit of pull pullback sooner. We're not seeing that yet. And as I mentioned, the per capita spending is still very strong, as are those other long lead indicators.

Guests are continuing to migrate up to our most expensive ticket, which is the season pass. You know, as Richard said and I commented, you know, the record, uh, sales for 2022 extremely encouraging. And we have not seen that slowing down. As a follow up, Steve's question, that only accelerated on a percentage basis through the month of July leading up to the final break point before we shipped here this week actually into our 2023 sales cycle at some of the parks.

Richard Zimmerman -- President and Chief Executive Officer

Yeah, James. Good morning, it's Richard. Let me jump in here and emphasize what Brian just talked about. As I look at the health, it's really the long lead indicators and how they relate to our approach to the business, that loyal customer base.

You know, when we came into the year, we knew we were carrying over season pass privileges at Knott's through early May and Canada through the summer. The fact that Knott's has had a record season pass here in spite of that, and Canada has been extremely strong in their performance and their sales, the season passes. You know, when I look at some of the comparable industries that are out there, notably the ski resorts continuing to sell more season passes up more than 20%. I don't want to step over that.

At higher prices, we continue to see a migration of our most loyal customers up the scale to season pass where they it's our most expensive ticket, but they see the most value that's really, really healthy for our business, not just in the month of July, but as I think about the longer term trends and how we build our our revenue model going forward. I'm really encouraged by the choices that our consumers are making.

James Hardiman -- Wedbush Securities -- Analyst

Got it. And then sort of a follow up here. I mean, that sounds like you're generally pleased with where we are certainly versus 2019, you think nice growth? I think the EBITDA  numbers may have come in a little bit light of of where the street was. I guess I'm curious if that was also ersus where you thought you would be three months ago.

How is this compared? And then sort of connect that to the distribution question. You pointed out the fact that this is a third of the pre-pandemic distribution despite, you know, EBITDA is going to come in better than it was in 2019. Right. And so you guys, obviously, both of you guys were here back then.

You know, walk us through sort of the change in thinking clearly you weren't getting credit for it didn't seem like in 2019. But maybe walk us through the thinking and then how that connects to the performance.

Richard Zimmerman -- President and Chief Executive Officer

Yeah, James. Listen, it's Richard, again. We've been very clear laying out our priorities on the capital allocation front. We've set our net net debt target again down to about 2.0.

As we evaluate what we saw the whole of this year. You know, we looked back and increasingly and we've seen this over the last several years, pre-pandemic, we're becoming more back half so heavy in terms of our results. That really reflects the strength of July and August, the huge appeal of our Halloween event and the revenues we generate in October. But increasingly it was in revenues and the eEBITDA we can generate in November and December along with season pass sales with our winter fest event.

So that back half have a you know, and as I said in my prepared remarks, more than 80% of our EBITD driven in the last six months. We think that trend continues as we look at it. We're about where we thought we'd be, again season pass. The $73 million increase in deferred revenue is notable.

It's significant. So as we look at the back half of the year and beyond, we've got an opportunity now to do a higher base of season pass holders to renew. And as we start building our plans for 23 with the capital, we'll announce next week. We're really excited about the demand we think we can drive in the health of the business to turn it all the way through.

We think there's an opportunity to take a balanced view of capital allocation, make sure we invest enough to keep the business healthy, start at a rate where we can grow the distribution and reward the all of our unit-holders, but also take advantage of what, as I said earlier, what the market gives us.We're not really getting credit for the distribution or credit for the free cash flow we're generating over time, which has been the strength of our both our approach to the business, and the strength of our business model. So we we, myself, and the board like having all the levers available to us, and we just thought it was prudent to have some flexibility in how we return capital to unit-holders.

James Hardiman -- Wedbush Securities -- Analyst

Makes a lot of sense. Thanks, guys.

Operator

Your next question comes from the line of Benjamin Chaiken. Your line is open.

Benjamin Chaiken -- Credit Suisse -- Analyst

Hey. Just just to clarify kind of some of the earlier discussion group and the removal of the lower end ticket programs. That's not something new in July, is it? So does that just kind of isolate whether, or are those lower end ticket programs you mentioned and group kind of a larger portion of the mix in the last five or six weeks? I guess what I'm getting at is like, why wouldn't those changes, which I think we're already at play, have impacted the year to date period? In the same way? Because I think the last, Steve was kind of alluding to, I think the last five or six weeks on attendance are down about 9% versus 19. Um, and I guess like part two of that is you're kind of suggesting the trend in the last five or six weeks are in line with what you'd expect in, in line with one.

So, should we expect the back half of the year to be down nine on attendance?

Brian Witherow -- Executive Vice President and Chief Financial Officer

Sure, Benj, it's Brian. You know, so as we think about to the first part of your question, group, and those lower value ticket programs, I wouldn't say that they over index in July any more than the first half of the year. Just to put it into perspective a little bit, group has been improving slowly. The gap to 2019 has been closing, but generally speaking, it's still been down about a third from pre-pandemic levels.

And as you can appreciate, that's a tough channel to make up inside a year because a lot of times those those groups are very date specific or period of year specific. So think, you know, youth and school in the spring. Once you've missed that, you've missed it. You don't get a chance to make it up till next year.

Those lower value ticket programs are sort of spread throughout the season. As I said earlier, any time you look at a short window of time you can create some comparability anomalies. It's always better to look at the totality of the year. And I, you know, I think Steve called it on his update note this morning that you really to have a good feel for how 2022 is trending.

Yeah, I'm going to almost have to look at the second and third quarters collectively, or on a combined basis to sort of see how this calendar shifts, end up playing out once that later Labor Day plays in. The comment earlier about in line with expectation was our own analysis as to how much we thought the weather may have impacted the five week period as well as as you can appreciate we go through a lot of analysis around demand trends in the various channels and try and estimate what we think the impact of macro factors like weather are on a rainy weekend or uh, during a heat wave. Um, and so that was the, uh, included in sort of the genesis of that, that comment.

Benjamin Chaiken -- Credit Suisse -- Analyst

OK. That's helpful. From I guess from moving all sequel moving forward, do you think so from August onward to the end of the season, is it a fair expectation that attendance would be up versus 19, excluding weather? Or are there things we need to keep an eye out for, whether it's grouper or the low end ticket that would skew things one way or the other. Just trying to level that.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Sure. Well, we're not going to provide guidance. But I do think that you will still see some headwinds from group. And we fully expect that, and we'll see, uh, you know, still some of those ticketing, those lower value ticketing programs that have yet to happen, you know, or we're going to continue to unplug those.

We're not changing our strategy around that so there still can be some headwind. I think what's most encouraging though, as Richard said, when you look at the long lead indicator and you think about record number of season passes, record number, amount of deferred revenue on the books, and then think about 80, approximately 80 incremental operating days, you know, from here forward. That's, that's a very compelling set of facts that can lead toward, as I said in my prepared remarks, a meaningful pick up from some of the variance that we've seen here today.

Benjamin Chaiken -- Credit Suisse -- Analyst

OK. That's helpful. Yeah. Just trying to see how those things translate into attendance.

Me. But I appreciate it. Thank you very much.

Operator

Your next question comes from the line of Michael Swartz, Your line is open.

Michael Swartz -- Truist Securities -- Analyst

 Hey. Good morning, guys. Maybe just to start with the distribution and understanding, it's about a third of what it was prior to the pandemic, which obviously giving you some flexibility there. But maybe how do we think about the growth in the distribution longer term? Should we just be thinking about the growth kind of in line with anticipated, you know, EBITDA growth over the next several years? Or should we expect it to grow a little faster in the near term?

Richard Zimmerman -- President and Chief Executive Officer

Good question, understand the question. But as we think about it, we constantly review with the board kind of our outlook for the next few years, we'll go through our planning process, not just establishing 23 budgets, but looking at our long range models. You know, I'll go back to that flexibility that we talked about. We've got capital allocation priorities that we want to hit, and the use of the cash, much like you saw back in 2010, 2011, 2012, the last time that we did the distribution was was disrupted and then we put it back in.

As we saw growth, we were able to grow that significantly over time. We do understand how important the distribution is to our unit-holders, and that is how the tax advantaged nature of our entity structure makes it really attractive for those who are long term unit-holders. So, as we think about that, we're not going to give guidance on it. But I'll tell you that if it weighs heavily in our discussions about how to return capital unit-holders and make sure that we don't sacrifice the opportunity to invest in our core business and go to see a growth, which ultimately is how we'll both sustain the distribution, but grow it over time.

Michael Swartz -- Truist Securities -- Analyst

OK. Thank you. That's helpful. And then maybe on the sale of the California property, you give us a little more color on what was driving that decision.

And help us think about are there additional costs that these costs that we should be thinking about as we model out the rest of the year and beyond?

Richard Zimmerman -- President and Chief Executive Officer

Good question, Mike. And as I look at it, this really was, as I said in my prepared remarks, a once in a generation opportunity, as we've all seen the real estate markets extremely strong and healthy. Silicon Valley has its own dynamics in play. This was really an opportunity for us to take a look at where we got capital invested and how we deploy that capital.

Still give us an opportunity to do both, do other things with the capital that we generate from the sale, which we've talked about this morning. But also as we think about that market where we get to continue to operate that property for a number of years, maintain our relationship with the community, maintain our relationship with our customers. So we just thought that it was a very unique moment in time in terms of real estate values within Silicon Valley. And that when you think about how what we've been generating gave us more flexibility on capital deployment, both in the moment and going forward.

Brian, you want to take the comment about lease?

Brian Witherow -- Executive Vice President and Chief Financial Officer

Yeah. Mike, in terms of impact to the business, this gets back to a scenario where much like it was prior to our acquiring the land in 2019 will now be, you know, making a lease, a rent payment for that land going forward on full year basis. You know, it'll be somewhere in the $12 to $13 million a year. But as we, we think about great America and the trajectory for growth for that park, even that's been throwing up, we still see that that property is being cash flow accretive even after lease payments.

Michael Swartz -- Truist Securities -- Analyst

OK. That's very helpful. Thank you, guys.

Operator

Your next question comes from the line of Christopher Prykull. Your line is open.

Christopher Prykull -- Citadel Global Equities -- Analyst

Hey, good morning, guys. Appreciate all the details so far. I was hoping we could revisit the comments about the shifts in the operating days that you have planned, I guess partially on account of labor challenges. Can you give us a little more color on is that a specific geography? And also, does it make you think about, you know, more permanent changes to the park operating hours or the way you staff outlets or things like that? Right.

We've seen restaurants close dining rooms and things like that. Just trying to get a sense for whether there's a longer term aspect we need to think about here.

Brian Witherow -- Executive Vice President and Chief Financial Officer

In terms of the changes, to this point.As I mentioned in my prepared remarks, the motivating factor, the biggest motivating factor behind that was, you know, some challenges around staffing. Certainly is not a broad issue across the company, and it was more largely confined to some of our smaller or mid-tier properties in the early season and that it's always been a challenge or more challenging I should say, to find staffing in the shoulder periods of the year. Like spring and fall. When we lose access to a lot of high school and college age, folks that are associates.

And so I would say as we think forward, our focus is, and on making adjustments and relinquishing operating days and just, you know, taking it as it's, as it's, uh, as it happened this year, but really focused on, on writing the staffing model. it's part of what's been a motivating factor behind you may recall us talking about over the last year or so in certain markets, a little bit of a pivot away from more seasonal positions to more year round, part time, or full time positions in the company that drove a little bit of some of our operating cost increase, that we've talked about the last couple of quarters. But it really at those smaller mid-tier parks is going to help us going forward with ensuring that we don't have to take days out of the operating season during those shoulder periods.

Christopher Prykull -- Citadel Global Equities -- Analyst

OK. That's helpful. Thanks, Brian. And then as a follow up, you've talked about more people upgrading to the season pass, which is your highest priced offering, which is great.

When they go into the park, are you seeing them generate same level of of the ancillary spend as they would have if they were on a, you know, a lower price point pass?

Richard Zimmerman -- President and Chief Executive Officer

You know, good question, Chris. You know, when we look at it, we continue to see the same behavior in terms of in-park spending that we would expect to see from our season pass holders, whether they're new people that have upgraded or potentially they were one day tickets before. You know, when you look at the health of up more than 50% in our add-on all season dining, all season beverage, we continue to see healthy spends from both. One day, you know, our unique visitors, the one day ticket purchasers, and the season pass holders.

So we're encouraged, and go back to our capital program this year. Well, let me elevate back up and say, you know, we made a significant investment in a number of facilities. We've put culinary talent throughout our system, and we're we're reaping the benefits of that. So we're seeing higher average transaction values and we're seeing increased number of transactions.

And we monitor that, you know, daily and weekly. So we're really diving into the data to make sure that we understand how we're driving. But, you know, coming into the year, there was a lot of question about the stickiness of the per caps. And I think what we're seeing, even with season pass holder percentage going to 62%, we're showing that we can drive the in-park spending even at higher season pass levels.

I'm not sure pre-pandemic we would have thought that, but we're seeing that in spades right now.

Christopher Prykull -- Citadel Global Equities -- Analyst

OK. Very helpful. Thanks, Richard.

Operator

[Operator instruction] Next question comes from [inaudible]. Your line is.

Unknown Speaker

Attendance property. Dave's been up. Your yielding record per caps, I guess. Are you doing anything to bring group back? Is his group maybe even something that's worth forcefully bringing back or just waiting for organic attendance to flow back in, given how well you're yielding on the current product mix? I guess just any thoughts around how we should think about group, especially since I would expect that it is dilutive to to per cap overall.

Thanks.

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Paul. It's Richard, let me jump in here. As we look toward '23 and beyond, we think group can as we saw back in '08, '09 follow can return to prior levels. We've met Brian.

I've met with our group sales team and they're really excited about next year. One of the things that's unique to group business is we do a lot of youth groups and those are heavily focused on the spring and early summer. So, once you miss that part of the calendar, but as we look forward to next year, there are some very encouraging signs in terms of demand through that channel. And we're really focused on how to make sure we're ready to tap into that demand and that we can work through with youth organizations, school systems, things like that.

Getting the dates on the calendar and making sure that we've got what we need.

Unknown Speaker

And so would you say that group that serves more of a top of funnel function, given that it is likely not a pricing that's comparable to your single day or your your season pass level?

Richard Zimmerman -- President and Chief Executive Officer

Yeah, I think the group is particularly youth groups, corporate customers in particular, you know, those catered outings. Those are unique elements. We might absorb some of the folks in that channel through different ticketing channels if they don't come on those days. But what we have found over the course of years, which is why we've opened up so many weekdays in the spring, is if we can do youth performance days, you know, math, physics, science, those sorts of days, we've found it to be wholly incremental.

So getting those groups back. Take us back to the level and that we've been at before. It's just making sure that, you know, we set the calendar right. Those get booked well in advance.

So we're in the process of doing that now. So we'll have a good look at that by the time we get into the winter months.

Unknown Speaker

Great. And then if I could just ask a quick one on the unit buyback program, I know that there is no particular time limit on that, but I was wondering if you could give any color around how you or the board are viewing. Opportunistic timing given where the market is right now and whether we should consider that in terms of our our projections for for overall flows. Thanks

Brian Witherow -- Executive Vice President and Chief Financial Officer

Paul, It's Brian. Know we're not going to give any specific, nor can we, in terms of what and when we think we're going to buyback units. You know, as Richard said during the call, we believe that where units of Cedar Fair trading right now on does not reflect the strength ofthe business or our outlook for growth going forward. Um, so we'll be, you know, as aggressive as we can be, given a number of factors for consideration, market considerations, our own liquidity considerations, as we noted, there are competing priorities right now.

We still do want to continue to pay down debt, but we're generating a lot of free cash flow. And this is another lever that we have at our disposal to pull for returning capital to investors when we feel like there's a disconnect in value.

Unknown Speaker

Thanks, Brian. 

Operator

Your next question comes from the line of Ben Chaikin or Barton Crockett. Your line is open. 

Barton Crockett -- FBR Capital Markets

[Inaudible] I wanted to drill down a little bit more on the sustainability question of these caps. And I know you guys talked about your transaction prices. The spend per transaction is going up. But I wanted to explore a little bit more on the units versus pricing.

So, are people buying more things? Is that the principal driver of the growth in per caps or is the cost per thing that they're buying or cost for a service that they're buying? How would you describe kind of the unit versus price mix? And just stepping back, I mean, you guys are in the parks every day. Does this feel like a big we're out of a pandemic splurge that maybe is a bit unsustainable or does this really feel sustainable to you?

Brian Witherow -- Executive Vice President and Chief Financial Officer

You know, I think this is one that everybody part in better. Your question is trying to figure out what the consumer's doing, not just their health, but how they behave when they're in our park. When we look at this, I see this year as yet another year where we're seeing the fruits of what we've invested in over several years, not just this year. And we had a heavy emphasis on food and beverage.

So to answer your question, we're doing significantly more volume of transactions, because we built higher volume facilities that are serving higher quality food. We haven't so much taken price as much as the we've seen the consumer buy up as we give them more quality food options at higher prices. They're going up the menu and choosing you know, they're choosing the brisket rather than the burger. So we're seeing that mix shift, which leads to a higher average transaction value.

But the the sheer volume of transactions we're doing is way up. And that's in part because the investments we continue to make, we are renovating older facilities to make them higher volume, higher quality. We are building new facilities that are built for speed and an ability to do really satisfied the dining experience that our guests want. So we're going to continue to lean into food and beverage in particular and I won't I.

I will also say we've also seen increase merchandise sales, and you'll see an emphasis on that as we go forward. So the ability to generate in park spend, I think continues to be rooted in our ability to service our guests better, provide a higher quality experience, and have the ability to do more volume.

Barton Crockett -- FBR Capital Markets

OK. Thanks for that, that's helpful. You know, the share repurchase authorization, you guys are a master limited partnership that creates some constraints. That was one of you could just review for us again what your constraints are as an MLP on your ability to do share repurchase versus allocating excess kind of cash to the dividend per unit?

Brian Witherow -- Executive Vice President and Chief Financial Officer

Uh, yeah, it's Brian.  Within the partnership agreement, there's a lot of flexibility for the board in terms of how excess cash flow is returned to investors. So our MLP structure doesn't really create any structural barriers or any difference than it would if we were a C Corp. So the flexibility that we have, and as Richard noted before, use this as a as a tool historically the last time was in the early 2000. But, we certainly see the value in having another lever for returning capital to investors that is more flexible on that when we don't believe there's value being given for the distribution, we're paying out a rising interest rate environment, maybe a time where that would be the case.

We have this now as a tool in our tool belt that we can turn on or off a little bit easier than the distribution itself.

Barton Crockett -- FBR Capital Markets

Okay. That's helpful. Thank you.

Operator

Our final question comes from the line of Benjamin Chaiken. Your line is open.

Benjamin Chaiken -- Credit Suisse -- Analyst

Hey. Thanks for letting me squeeze back in here. With one more. I just thought the one part that I don't say I'm struggling with, but is just maybe a little bit confusing is revenues are up versus 19.

But the mix in theory has changed to something that's just a lot higher flow through with you, perhaps up, you know, 20%. So the offset just all labor because when you look at your margins and took you there below. Took Q 19. And then, you know, is there an opportunity to dial back labor until you see signs of group coming back? And I guess part two would be, I think you said labor is up 3% versus 21.

So as we look to the Q 22, should we assume that the apex on mean maybe like an OpEx per operating day is up 3%? Or would that be the wrong way to look at it? Thanks.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Yeah. Benj, its'. Brian, I'll take the latter part first. So the 3% increase that we commented on is the average seasonal labor rate so far in 22 versus where we finished 21.

That's being offset significantly by fewer hours in the system, not compared to 21. Keep in mind, again, 21 was still a disrupted year. And that's what makes a lot of these comparisons hard, right, when we try to compare to 21. It's really difficult on the cost side to compare because you have significantly less operating days and hours because we were still, you know, shuttered or operationally constrained due to the past, the limitations, etc.

in some markets.  and attendance is hard to compare, but when you go back to 19, you know, it's difficult because it's a whole different world. Whether we're looking at the cost structure three years later or we're looking at the level of guest spending three years later. As we think about, you know, costs going forward, ours in the system are labor hours in the system compared to 21 are probably going to get a little bit more comparable than they've been at this point, because now forward is probably about as close to an apples to apples basis that we have. And as I said, rate is been up. What we're really pleased about are the decisions we made last year to structurally change how we approached seasonal labor rate.

We took a step function increase. It was painful in the moment. But while others are seeing big lifts this year and a lot of different industries, including our own, you know, we're seeing very modest rate pressure because of those decisions we make, those difficult decisions we made last year. So as we look forward, there is certainly cost pressure in this inflationary environment, not even just strictly labor.

You know, we're seeing it in other areas. We mentioned the cost of goods is up a little bit. But, you know, we're doing a good job of trying to flatten that curve as best as possible. There is more work to be done.

Our procurement team, our centralized procurement team that we've built out over the last year plus, they've got their work cut out for them. They came in thinking we were looking to mine savings and a lot of it is now really just trying to offset headwinds around cost because this is such an inflationary environment. But we feel good about where we're at. It will take a little bit of time to continue to improve margin,and flow through.

But we think we are on the right path and can get there over the balance of 2022 and 2023.

Richard Zimmerman -- President and Chief Executive Officer

Let me just jump in and say, listen, our success is rooted in the quality of our guest experiences we keep saying, we continue to want to put and make sure we've got the right amount of labor in the things that our guests value. We're trying to find ways to take the inefficient labor, like going cashless out of our system. You know, we talk to the GM and talk to our food beverage team. They tell you and a lot of parks, we get our hands on a little more labor.

We can drive more revenue. So we're trying to be really efficient. I don't want to step over again back to our most loyal customer is buying the season pass and at 20% increases they value the experience. So as we think about making sure that we get the renewals, we want to make sure we're providing the experience that bring them back next year.

Benjamin Chaiken -- Credit Suisse -- Analyst

Got it. I appreciate it. Thank you very much.

Operator

There are no further questions at this time. Mr. Zimmerman, I turn the call back over to you.

Richard Zimmerman -- President and Chief Executive Officer

All right. Thank you, Rex. And thanks to everyone for your continued interest in Cedar Fair. We look forward to seeing many of your [inaudible] incoming conference next year.

We look forward to keep you [inaudible] of our progress as the summer season winds down. Until then, be well. Thanks again everybody [inaudible] question feel free to contact our investor relation department at 4196272233. Our next performance update will be after labor day, followed by our third quarter earnings recording call at early November, Thanks, everyone.

Rex, that conclude our call for today.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Michael Russell -- Corporate Director, Investor Relations

Richard Zimmerman -- President and Chief Executive Officer

Brian Witherow -- Executive Vice President and Chief Financial Officer

Steven Wieczynski -- Stifel Financial Corp. -- Analyst

James Hardiman -- Wedbush Securities -- Analyst

Benjamin Chaiken -- Credit Suisse -- Analyst

Michael Swartz -- Truist Securities -- Analyst

Christopher Prykull -- Citadel Global Equities -- Analyst

Unknown Speaker

Barton Crockett -- FBR Capital Markets

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