Six Flags Entertainment Corp (FUN) 2018 Q3 法說會逐字稿

Good day, and welcome to the Cedar Fair Third Quarter 2018 Earnings Conference Call.

Today's conference is being recorded.

And now at this time, I'd like to turn the conference over to Ms. Stacy Frole, Vice President of Investor Relations.

Please go ahead, ma'am.

Thank you, Cody.

And good morning, and welcome to our third quarter earnings conference call.

I'm Stacy Frole, Cedar Fair's Vice President of Investor Relations.

Earlier today, we issued our 2018 third quarter earnings release.

A copy of that release can be obtained on our website at www.cedarfair.com under the Investors tab or by contacting our Investor Relations offices at (419) 627-2233.

Joining me on the call this morning is Richard Zimmerman, our President and Chief Executive Officer; and Brian Witherow, our Executive Vice President and Chief Financial Officer.

Before we will begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal security laws.

These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements.

For a more detailed discussion of these risks, you can refer to filings made by the company with the SEC.

In addition, in accordance with Regulation G, non-GAAP financial measures used on the conference call today are required to be reconciled to the most directly comparable GAAP measures.

During today's call, we will make reference to adjusted EBITDA as defined in our earnings release.

The required reconciliation of adjusted EBITDA is in the earnings release and is also available to investors on our website via the conference call access page.

In compliance with the SEC's Regulation FD, this message 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 of the call will be considered fully disclosed.

Now I will turn the call over to our CEO, Richard Zimmerman.

Thank you, Stacy, and good morning, everyone.

I would like to start this call by saying how proud I am of our entire Cedar Fair team for their hard work throughout the 2018 operating season.

Our team has remained focused on executing our strategic plan and delivering a compelling park experience for audiences of all ages on each and every visit.

Because of our ongoing commitment to delighting our guests, we are on track to achieve our 8th consecutive year of record revenues.

We're also on pace to produce another outstanding year in attendance, driven by anticipated higher demand in November and December, while continuing to produce record guest spending and out-of-park revenues.

On today's call, we will focus our prepared remarks on 3 key areas: Our third quarter results and October performance; our capital plans -- our capital investment plans for 2019; and finally, our long-term outlook for the company.

We will then answer any questions you may have.

Our third quarter results reflect the successful execution of a number of aggressive targeted promotional activities that not only drove volume but protected the integrity of our mission pricing structure and drove increases in in-park spending.

These initiatives include the continued expansion of multiweek special events, such as Cedar Point Nights on the park's mile-long beach, Christian music concerts and dollar days promotions, where value-oriented guests can buy hotdogs, pizza and other food items for $1.

During the quarter, we also activated incremental distribution channels, such as Groupon, and introduced new promotional products, such as a park-and-play ticket and a discounted senior ticket.

Additionally, we offered our loyal season passholders a number of compelling promotions to encourage them to bring their friends and family to our parks.

These efforts resulted in a solid lift in attendance as well as increased guest spending within our parks over the last 3 months.

As a result of the increased park visits, we have seen robust demand for our resort and hotel accommodations, an asset class we are actively developing to generate additional and attractive returns over the long term.

Over the past few years, we have made investments to increase group sales, including hiring an incentivized sales force and building out new and improved catering facilities.

While these kinds of investments may not be visible -- as visible as a world-class roller coaster, they underpin our initiatives that bring people through the gates to enjoy experiences that cannot be replicated elsewhere.

For example, the relationships our sales teams have built with corporate partners have helped us mitigate the impact of short-term disruptive weather patterns.

When Hurricane Florence caused Kings Dominion to close for 2 days during the third quarter, our sales team quickly reached out to the 2 corporate buyouts scheduled for that weekend to determine when we could reschedule events.

I am pleased to say that both companies will have visited the park by this upcoming weekend, and we look forward to continuing and building upon the strong relationships we have with each of them.

As I mentioned in August, our marketing team has been expanding its research efforts carefully analyzing our guest data in the markets we serve and how our business is serving them.

Based on the key demographics of our park attendees as well as the purchasing behavior, our extensive analysis supports the underlying strength and appeal of our offerings and our multiyear strategy.

Turning now to our year-to-date performance through October.

With approximately 90% of our operating days behind us as of this past Sunday, October 28, our net revenues were up 1% to $1.25 billion when compared with the same period a year ago.

Our ability to provide a broader array of entertainment offerings for audiences of all ages, combined with pent-up consumer demand following the bad weather earlier this summer, resulted in strong attendance and in-park guest per capita spending since the end of third quarter.

This solid performance has reaffirmed our confidence in the strength and resiliency of our business model along with the stability and loyalty of our customer base.

Following our strong October, we are reaffirming our previously announced full year net revenue forecast of $1.32 billion to $1.34 billion and our full year adjusted EBITDA forecast of $460 million to $470 million.

As we strategically invest in long-term growth, we are committed to returning an attractive and sustainable distribution to our unitholders.

This has long been a pillar of Cedar Fair's value proposition.

We are very proud of our history of steadily increasing the distribution and believe we are well positioned to continue doing so for many years to come.

Based on our consistent cash flow generation, our healthy balance sheet and proven strategy, we are pleased to announce a 4% increase in our 2018 fourth quarter cash distribution.

This is consistent with our long-term targeted distribution growth rate.

The increase represents the highest quarterly distribution paid in the company's history, representing a more than 7% yield at our current market price.

In January, I came into the CEO role with the highest degree of confidence in our executive team.

After overcoming certain short-term challenges earlier this year, I am more confident than ever in the strength and determination of the Cedar Fair team.

Our team has nimbly and flawlessly executed the steps necessary for a strong recovery.

I couldn't be more proud of their outstanding ability and passion as well as their dedication to creating long-term value for our unitholders.

And I am excited that with the company on solid footing following a successful season, we can now turn our attention to putting in place a new multiyear plan to take Cedar Fair to the next level and extend our long track record of superior value creation.

Now I would like to turn the call over to Brian to discuss in more detail our third quarter and year-to-date results.

Brian?

Thanks, Richard, and good morning, everyone.

As Richard mentioned, we are very pleased with our operating performance in the third quarter and through this past Sunday, October 28, which puts us on track for our eighth consecutive year of record revenues.

For the third quarter of 2018, we reported an $11 million increase in net revenues to a record $664 million.

This was the direct result of a 2% increase in average in-park guest per capita spending to $49.47 as well as an 8% increase in out-of-park revenues to $70 million compared with the same period a year ago.

The increased guest spending in the third quarter when compared with the same period last year came primarily from higher pure in-park spending, which was up 4%.

Our food and beverage category, driven by the continued growth of our All Season Dining and beverage programs combined with spending on extra-charge extractions, like Fast Lane, led to this increase.

Meanwhile, admissions revenue per capita was comparable with the third quarter last year.

Excluding the impact of the new Pre-K season pass program where children ages 3 to 5 receive a free pass, admissions revenue per capita would have been up 1% compared with the same period a year ago.

As a reminder, disruptive weather patterns in July made it difficult for our parks to sustain momentum during that peak vacation month.

As weather normalized in August and September, however, we drove higher guest traffic, while maintaining the integrity of our pricing structure.

As a result, our parks reported a solid lift in attendance and increased guest spending inside our parks during the last 2 months of the quarter.

Overall, for the third quarter, we observed a slight decrease in attendance to 12.4 million guests compared with the third quarter last year.

Turning to costs.

Operating cost and expenses for the third quarter were comparable to the prior year third quarter at $328 million.

Our operating expenses increased by approximately $4 million, primarily due to anticipated market and minimum wage increases.

These increases were offset by a decrease in SG&A expense attributable to a prior year reserve established for an employment practice claim.

Adjusted EBITDA, which we believe is a meaningful measure of our park-level operating results, was $338 million for the third quarter, up $4 million or 1% year-over-year.

This increase was the direct result of the solid revenue and guest spending that we generated in August and September combined with our disciplined cost control.

Our park GMs and their teams have done an excellent job of driving higher Net Promotor Score ratings while at the same time keeping actual cost increases below budget in response to the shortfalls in attendance during June and July.

I want to assure you that we remain highly focused on maintaining the superior guest service levels our parks are known for, while at the same time, managing operating costs as we pursue the long-term growth of our business.

As an example, we're in the process of implementing a new workforce management system that will help us to better define our labor requirements and utilize labor more efficiently throughout the operating season.

Consistent with our commitment to transparency, based on our preliminary results, net revenues for the first 10 months of the year through October 28 were up 1% or $9 million, to $1.25 billion.

This year-over-year increase was the result of a 1% or $0.50 increase in average in-park guest per capita spending and a 5% or $6 million increase in out-of-park revenues to $140 million.

These increases were slightly offset by a 1% or 185,000 visit decrease in attendance.

Now let me highlight a few items on the balance sheet.

Our liquidity and cash flow remain healthy, and we ended the third quarter in solid financial position, with $190 million in cash on hand.

At the end of the third quarter, our consolidated leverage ratio was 3.6x, well within our targeted range in the current environment.

Near-term, we expect our average cost of debt to be approximately 5% and annual cash interest cost to be approximately $85 million.

Deferred revenues at the end of the third quarter were $102 million, up $19 million or more than 20% from the same time last year.

Our record season pass, All-season dining and all-season beverage sales for 2018 and the recognition of revenue on incremental visits over a longer period of time accounted for approximately 40% of the year-over-year increase.

The remainder of the increase was primarily associated with the solid start to our 2019 advance sales programs.

Finally, as Richard mentioned earlier, the board has declared a 4% increase to our quarterly cash distribution to an annualized rate of $3.70 per limited partner unit.

The $0.925 per limited partner unit quarterly distribution is payable on December 17 to unitholders of record on December 4, 2018.

We remain committed to rewarding our unitholders with a sustainable and growing distribution that reflects the ongoing strength of our business model and long-term strategy.

We believe modest, near-term variations in adjusted EBITDA growth should not impact the expected long-term growth in the distribution.

As such, we will remain committed to our long-term target of 4% growth in the distribution going forward.

As always, we will continue to prudently manage our cash flow to maximize value for our unitholders, both in the near and long term.

And with that, I would like to pass the call back to Richard.

Thank you, Brian.

Before we take questions, let me comment on our near-term outlook.

The positive trends we have seen over the past 3 months support our business model and our strategic vision.

We expect this momentum to continue through the remainder of this year and into 2019, as we introduce new rides and other enhancements to enrich the guest experience and expand our season pass program.

We issued a news release last week summarizing our capital plans for 2019.

So I will not go into detail about them on today's call.

However, based on the strong early trends in the sales of season passes and related all-season products, I am confident that our capital allocation strategy will once again produce solid returns in 2019.

Highlights include 2 signature roller coasters coming online at Canada's Wonderland and Carowinds, along with the addition of immersive summer events, family attractions, lodging and dining venues across all of our parks.

We offer a comprehensive entertainment experience at a quality and scale that no other regional entertainment venue can match.

And we are confident we are taking the right steps to maintain and increase this important competitive advantage.

In 2019, we will further broaden the guest experience with more immersive, multiweek special events, including nighttime spectacular celebrations in the first half of the year.

We will also expand our popular WinterFest holiday celebration to a 6th park, Canada's Wonderland.

These events will enhance our unique regional brands, drive urgency, increase the value proposition for our season passholders and increase our guest length of stay at our parks.

Season pass attendance has grown over the past 5 years from roughly 1/3 to more than 1/2 of our total attendance today in part due to the evolution of the program and also because of our expansive marketing and CRM efforts.

As an example, we have included unlimited visits for the remainder of 2018 for all new 2019 season passes purchased at most of our parks.

We have also introduced a 12-month payment option for a number of our parks that will remain in effect through December.

As we continue to evolve our season pass program, we will explore new ways to build year-round lasting consumer relationships, rather than the traditional season-to-season or single-visit transactions.

Focusing on relationships rather than transactions will inform our marketing, capital and pricing decisions and bring more predictability to the business over the long term.

Looking beyond our parks, we have previously discussed our plans to utilize our 1,400 acres of undeveloped land through the construction of resort hotels and amateur sports venues adjacent to our parks.

These initiatives are transformative in nature and require multiple years to develop.

Within the next 12 to 18 months, several of our initiatives will be coming online, including a new indoor sports facility near Cedar Point and new year-round hotels in Charlotte and Toronto.

As you can see, we're looking at a variety of ways to further elevate the guest experience and pursue our mission to be the place to be for fun for many years to come.

We look forward to sharing the evolution of our long-term strategy with you at an Analyst Day event in January.

Detailed information for this event will be sent out in the very near future.

Now we'll open the call for any questions you may have.

(Operator Instructions) We'll take our first question from Steve Wieczynski with Stifel.

So a question around the distribution increase.

What you guys just mentioned has you're hovering around a 7% yield.

And with a yield that high, I mean, you're almost approaching kind of REIT territory, I guess, at this point.

There's clearly a disconnect between how investors view your business versus where that yield is.

So I guess the question we get is, what would have to happen, either around attendants or EBITDA, where you guys would have to cut that distribution?

And I'm guessing after your announcement today, you don't see anything over the near term that would concern you about the current business environment that you're operating in.

Great question.

Let me attack that one head-on.

We have seen in the last few months with our record attendance and revenues in August and the comeback in consumer demand during September and October the strength and resiliency in our business model in total.

Based on that confidence in our business model, based upon what we see in meaningful pickup in season pass sales heading into the 2019 year, we think we've got the ability to generate the cash flow that will cover that 4% increase, which is our long-term target.

And it's that confidence in the business model by management and the board that's evidenced by our increase in the distribution today.

Okay, got you.

And then secondly, we would like to get your current thoughts on your core customer base and the health of your core customer.

And I guess what I'm getting at here is the days that you saw there wasn't a weather impact.

Is your core customer still as strong as where you would've expected that person to be in?

And then secondly, can you also help us think about the wage-inflation part of the expense line?

And has that kind of remained the same since your last call?

Has that intensified?

Has it gotten better there?

Any help around that would be very helpful.

Steve, I'll take the consumer question.

I'll let Brian talk to the labor pressure.

We've seen no change in our core customer.

Everything we've looked through and the strength in the demand we've seen this fall, the fall weather has been, what I call, normalized, but not, I wouldn't call, great.

But we've seen strength in attendance.

We've seen strength in length of stay.

We've seen strength in in-park spending.

And as we look at the -- as we mentioned in our prepared remarks, the deferred revenue being up and see 2019 sales being strong, we're up in units and we're up in price.

So across a wide front, everything we see says that the consumer is still feeling good about theirselves, and it points towards the quality and the appeal of our products.

So based upon that, we see the same thing.

Brian?

And, Steve, as it relates to the wage inflation, I would tell you the -- in terms of the pressures around rate, our average rate has remained up in the high single digits most of the season, 8%, 9% increase in average wage rate.

The teams, I have to give credit to the operating teams, the general managers and their teams, Tim Fisher, our COO, have done an outstanding job of managing hours throughout the season where appropriate.

Taking hours out of the system when attendance isn't there without sacrificing the guest experience.

One of the things that we pay close attention to and we alluded to in our prepared remarks is Net Promoter Score range have remained at their highest levels in quite some time.

So the teams have done a very good job.

We've managed more than 350,000 hours out of the system over prior year.

And so we're doing an outstanding job of taking hours out.

But wage rates continue to be up year-over-year, and that's been the case throughout the season.

And finally, last question to add on to that, Brian.

I guess, as we look to '19 -- I know you're not going to give guidance or anything like that -- but can you maybe help us think about how you guys are thinking about kind of wage inflation heading into '19?

Yes, Steve, so I'm not going to give specific guidance.

But what I will tell you is as we look towards '19, there's again going to be some pressure in statutory increases in some of the markets we operate in.

That was similar to '18.

We were very aggressive in taking up some market adjustments heading into '18 in order to be more competitive in our markets and attract a higher quality of employee.

And I think that has played out throughout the season.

As evidenced by the higher Net Promoter Scores, et cetera, I think we are getting better employees.

I think some of those moves on the market adjustments are going to work in our favor into '19, where I don't anticipate us having to make as many adjustments in that area.

That said, we probably won't have the ability to take out as many hours.

And so I would expect that the overall pressure on labor costs -- seasonal labor costs, when you push hours and rate together, will probably be something in those mid-single digits like they were in '16 -- or I'm sorry, '17 and '18.

But we still got a lot of work ahead of us.

And as I mentioned, the workforce management system that we're implementing is going to bear fruit beginning in '19, particularly at our 2 California parks, which are the first to rollout under the new platform.

We'll now move on to our next question from Barton Crockett with B. Riley FBR.

Congratulations on the improved trends here of late.

Yes, I was interested in a couple of things.

One is, you were talking about some strength in advanced sales.

But I was wondering if you could give us a little bit more detail what, in your mind, constitutes strength any numbers or anything behind that.

And you also talked about the free days in '18 for those who buy '19 passes.

Is that a repeat of a program you've had before?

Or is that kind of a new perk that you're offering this year?

Barton, I'll ask Brian to jump in here in just a second.

But when we talk about strength in advance sales and the upfront sales of 2019, one of the things that I always watch is, is that concentrated to one park or is it concentrated across a broad front.

I will tell you what we see is encouraging and that it is broad based.

Every park is up in season pass sales.

I think it speaks to the strength in our guest experience.

Brian touched on the NPS scores.

What I'm really proud about is the meaningful advancement in our NPS scores this year.

It says we're offering a high-quality guest experience.

As you know, that leads to our industry-leading per caps.

So what we're happy about is, I think, it shows the strength of our business model.

Brian?

Yes.

And so, Barton, we don't have a lot of long lead indicators.

And typically, about this time of the year, the one that we're talking the most about is, of course, season pass.

We're not going to get into the specific percentage of year-over-year lift other than to say it is meaningful.

We're only about 1/5 of our way through the full program of '19.

And so as you can imagine sort of the law of percentage of small numbers is playing out a little bit there.

So the percentage is very impressive, but maybe a little misleading and that it will be hard to maintain that percentage as we dive deeper into the program and get further through.

As it relates to the changes of the evolution and enhancements that we've made to the program, unlimited visits in 12-month payment program, not rolled out broadly either of those across the system.

It's -- and 12-month payment is new at the parks where it was introduced.

Unlimited visits is new to a number of our parks.

We have had parks in the past that have had that.

So I would consider it more of -- and characterize it as more of a natural evolution of the program.

The consumer is responding very well to it, which is encouraging to us, particularly the 12-month program as we look to the ultimate evolution of our season pass program to potentially someday a membership program.

So we're very pleased with the response we've seen.

But as I said, it's only about 1/5 of the season pass sales entire program, and so we've got to maintain the momentum going forward.

Barton, let me jump in here.

Brian talked about the evolution of our program.

We thought 12 months was the natural evolution.

We are very encouraged by the response we have seen.

So certainly, we'll have more to speak in terms of that continued evolution when we will get to our Analyst Day event in January.

Yes, I mean, I think that's a great opportunity to lessen weather volatility, the growth in membership and season pass that the industry and you guys are moving towards.

Now on the topic of weather, are you able to give us any quantification of things like bad weather day change this year versus last year or how much of that impacted attendance?

I know you've spoken qualitatively, but can you give us any substance underneath that?

Barton, you heard us say that over time we think weather will average out over the course of year, over the course of couple seasons.

I will tell you as we came into 2018, we thought there was -- we told we'd be challenged in the springtime because we were up against some healthy numbers.

We thought there was opportunity in July and August.

Clearly, you've seen the numbers and saw the attendance as we reported in our early August update and then Labor Day.

We did -- have seen the recovery in the demand.

I will tell you it's always difficult to get a sense of what happens throughout the full year until we're through the full season.

We're not yet done.

So I don't think we can give you anything in terms of a number, because it's difficult to quantify.

We've seen the catch-up in events.

When we were in the middle of July, we were slightly down in our average visits from passholders.

We've now seen that catch-up and move beyond, and we anticipate November and December, especially with our new WinterFest coming on board in Richmond, that our average visits will continue to trend up.

That's one of the important metrics that I watch for, is that increase in the visits.

But I can't give you an exact number, but we do think there was impact.

You saw it in the numbers.

And as we look at '19, we think there's going to be, as we go into '19, well, I can't tell you when and where the weather will hit.

Certainly, it makes a difference whether it's a Tuesday in June or Saturday in July.

But I can guarantee you in our business, weather is going to hit sometime.

It's just a question of when and where.

We'll hear now from Tim Conder with Wells Fargo Securities.

Richard, could you maybe go on a little bit more on that line of the conversation there?

Your frequency of visits, maybe last year, what was it?

What are you seeing year-to-date from the season passholder?

And then also your unique visitors, how was that trending on a year-over-year basis?

Yes, Tim.

When we are thinking about average visits, we've gone from just around 4 visits per pass a few years ago to now a little over 5 and trending up.

We continue to see as we add events, such as Halloween, expand our calendar into the December time frame with WinterFest, more appeal to the events, and that drives a lot more season pass visits.

Our perspective is we continue to add both events at the end of the year.

That's why we've had a strong third and fourth quarter.

But more importantly, focus earlier in the year with springtime and early summer events to drive urgency to that time frame.

We think we're going to give you -- we're going to give our consumers more reasons to come.

So we would anticipate that it goes a little bit further.

Brian?

And, Tim, as it relates to unique visits, as you know, we've talked about in the past, a very important metric for us.

We monitor it very closely to make sure broader trends in other areas like season pass aren't masking erosion and uniques because that is such a critical thing for the health of the business long term.

Tough to -- we're not going to give specifics about where they are at right now, and it's hard in the middle of the season to ever evaluate uniques.

You've got to get to the end of the year.

What I can tell you is as you think about unique visitation during 2018, it tends to trend with the broader attendance numbers, and it's definitely influenced by those macro factors.

So our unique visitation was soft in the first half of the year for 7 months as was overall attendance.

We've seen great strength out of unique visits as well as overall attendance lift in the months of August, September and October.

So we feel good about where that's trending at this point in time, but we'll have a better feel for and be able to evaluate a lot more -- in a lot more detail at the end of the year when we see the -- where the number sorts out.

Okay, and then on the October specific, can you comment -- if I remember correctly, October last year, actually, was the month for yourselves and for the industry as a whole that I think had pretty good weather.

So you have kind of a difficult weather comparison.

So how is October, I guess, any color you can give?

Attendance, you said was up nicely, attendance in the month specifically, and maybe that specific -- in-park specific spend during the month?.

Just any additional color on October that you could provide?

Yes, Tim, you are correct.

We had a really good October last year.

When I look at the 5-week period following the end of Q3, we're up 3% in attendance.

And I would tell you from my perspective I thought the weather was a little bit better last year, so really pleased with the pickup in demand in October.

I think it does show you the strength of our events strategy.

You've heard me talk a lot about how we're going to lean into events going forward.

Events drive a sustainable increase in our demand.

And it takes a few years.

We've seen that with WinterFest.

It takes a few years to reach, what I call, maturity of appeal.

But once you get to the third, fourth, fifth year of an event, it becomes a tradition, and people come back year-after-year.

It really does drive the urgency in our calendar.

Okay.

And then lastly, if I may, the pricing, Brian, any color on the season passes?

I know units you said -- you said both units and pricing are up.

You both made that commentary.

And then it's a little skewed by the law of small numbers, as you said, as you're only 20% into the selling season for the season passes.

But any comment on pricing that you can give?

And then with the 12-month program here, is that now going to be permanently offered, as I understood it like going forward?

And help us with the account, will that still be accounted for the same way that you do the traditional season pass?

Or at what point would you start accounting for that revenue every month?

Let me jump in here, Tim, and I'll let Brian get to the specifics of your question.

But as we think about pricing, certainly as I think about pricing, I've always challenged our team and my focus has been on the price value equation.

We always try to increase the value attached to our guest experience, give our guest more.

And my firm belief is we can keep doing that going forward, add value to the experience.

We've got an ability to increase pricing over the long term.

Brian?

Yes, Tim.

So I'll just add on to what Richard said.

As we look at '19, I would say that we're heading into next season with a similar approach as to the last several years in terms of our pricing strategies.

And those have produced mid-single-digit increases on average.

And so definitely, average price of season pass is up, as is the number of units sold so far.

So we feel very good about both of those facts.

As it relates to the 12-month payment plan, you are correct in your initial comment that the accounting will follow a similar approach to the way it has been, which is working off of more of a draw than just a straight amortization over 12 months.

I think that potential accounting treatment may be a consideration if and when we migrate to membership and more of the subscription type of model.

But for the time being, it will be a draw that would be comparable to the accounting treatment that you've historically seen under our season pass program.

We'll now hear from James Hardiman with Wedbush Securities.

So I want to circle back to the distribution.

Obviously, this year in terms of -- operating results hadn't exactly been where we would have hoped or expected.

I think the guidance is maybe down 2% to 4% in terms of where EBITDA will end up.

Last year was pretty flat, but you've got a distribution growth target of 4%.

I think it was Steve that asked about sort of your comfort with keeping the distribution.

But I wanted to ask about staying on this path of 4% growth.

I guess, given -- well, first, maybe walk us through sort of how you're able to bridge that gap between EBITDA and the distribution increase this year.

And then as I look to 2019 and the potential increase towards 2020, what's the range of outcomes in terms of EBITDA growth that you would feel comfortable with, with another 4% increase?

I guess put another way, have you sort of eaten up that buffer that you had, whether it was from tax -- a deduction in taxes or whatever else that we should expect the distribution to be sort of in line with the EBITDA growth going forward?

Sure, James.

It's Brian.

So as far as the mechanics go, what I would say is that when we look back over the last 6 or 7 years, we built the balance sheet with the flexibility to withstand these types of short-term disruptions in the EBITDA growth rate that you outlined for '17 and '18.

There's enough dry powder on the balance sheet, and that was put there intentionally not only to potentially activate incremental growth opportunities, potential M&A opportunities that may exist, but also to weather a year like 2018.

So we're going to utilize that flexibility to support the distribution here in the near term.

There's no doubt that we have to get back to that distribution growing -- or, I'm sorry, that EBITDA growing just to sustain the distribution growth.

I think Richard's comments earlier about our confidence in not only the way the 2018 season has ended but the advanced sales and the bit of long lead indicator we have for '19, we and the board feel very good about the outlook for the company and the growth in front of us.

And so I think that's the rationale and the thought process that went behind the distribution increase.

As it relates to guidance, so we're not going to get into giving guidance for '19 or '20 or beyond, but know that there definitely has to be growth in EBITDA as you articulated to sustain this kind of growth in the distribution going forward.

Got it, that's helpful.

And then maybe just talk about the fourth quarter a little bit.

It seems like October off to a decent start.

It sounds like there's some weather headwinds.

Certainly where I am in Northeast Ohio, weather definitely seemed like it was negative versus last year.

But if we're thinking about 3% growth in attendance and it seems like implied revenues for October, the Street's at about 7% growth for the fourth quarter.

Obviously, you've got that incremental WinterFest in Richmond.

But does that seem reasonable?

Or how much of what's left is sort of incremental operating days?

Maybe you could help us with that number.

But Street's almost would require pretty significant acceleration over the course of November and December.

Maybe talk us through whether or not you think that's reasonable or not?

Yes, James, I'll take a stab at this one.

As we look at November and December and our WinterFest operations, I'll remind you we debuted first one in 2016 -- 2017 at Great America -- 2016 in Great America, 2017 we added 3 more.

We saw, as we expected, second year growth at Great America.

We expect growth both at Great America and the 3 that debuted last year.

So you'll see incremental growth out of the 4 parks that had WinterFest last year.

If you remember, we had really good weather leading up into the Christmas week, and we got the Arctic freeze the Christmas week.

So we think there's opportunity.

When you look at our Richmond park debuting this year, that will add 20 to 25 days to the operating calendar.

Last year -- and we haven't commented specifically on what attendance we attached to that.

I will say last year when we added the 3, when we factored in incremental growth at the first one and the 3 last year, we talked about $500,000 lift.

So you can kind of do the math on where that will shake out, but we think everything is there to support the attendance growth in the fourth quarter, and I'm actually pretty encouraged by what I think we can do with the appeal of the event in its second and third and fourth years.

Great.

And then just maybe lastly from me.

I'm getting questions on Planet Oasis in Columbus.

I don't know -- I don't think you guys have commented on that publicly, maybe handicap the likelihood that, that gets done.

Obviously, there have been projects over the years that get a lot of hype but don't never make it to the finish line.

And then if it were to get done, what kind of an impact do you think it will have on your business, given that you have 2 pretty significant parks in the states?

Yes, James, I'll take that.

Listen, we're not going to comment on any specific project that may be out there.

I will tell you over the course of the 3 decades I've been doing this, there've been lots of projects out there.

What we focus on is the strength in our consumer offering.

And I think we've shown, with the way attendance has grown and revenues have grown over the arc of the history of Cedar Fair, that our compelling guest experience will create the demand that will drive the sustainable increase in our business.

So there's always compression out there.

We need to get better at what we do every day.

Our teams come to the park and try and create, as I said before, create more value for our customers.

That's our focus.

But just so we're clear, the 3 decades you've been doing this, Richard, how many of those big projects have actually come to fruition?

There's been very few.

There've been -- the larger scale attempted development of a theme park or something large scale in the country with the Hard Rock Park in Myrtle Beach back in the early 2000s, which -- and that one did not last long.

So there have been a few of them, not many, but they are always out there.

And I will tell you there's always opportunity to take a look at what's out on the landscape and try and corporate some of those elements into our guest experience.

So I keep bringing this back to making sure we focus on getting better at what we do and providing more value to our guest.

(Operator Instructions) We'll hear now from Brett Andress with KeyBanc Capital.

Richard, I wanted to talk about the incremental distribution channels that you mentioned.

Groupon was one, and that traditionally is a, I guess, lower price channel, and it just seems to me like a change in philosophy.

And so how do you manage your pricing in some of these new channels?

And I guess, how should we expect you to leverage these channels as we get into 2019?

James -- Brett, sorry, we really looked at all of our distribution channels differently this year.

And I will tell you what we have found out specific to Groupon -- and then I'll ask Brian to comment on different channels.

Specific to Groupon, that's a channel where Gen-Z and some different demographics start to pay attention to.

So we think of it less as a discount channel, which it used to be in years past, and more as a channel where we can go reach a different demographic.

So we're trying to re-sort and make sure that we understand the reach of each of our channels, and we're not using them so much in a promotional manner as much as to reach additional demographic.

Yes, Brett, just to add on to Richard's point, I think, our focus has been really as we think about these incremental channels, whether they be Groupon for the individual guest or something like EBG, employee benefit group, for our B2B or as another channel for reaching more B2B customers, we're trying to go to where the consumer is today, and that's clearly one of the evolutions, specifically going back to Groupon that.

I would tell you it originally started for us a couple of years ago as probably more of a discount-oriented place, but it is definitely, as Richard said, sort of taken a little bit of a different turn.

Now we're utilizing it in a way that doesn't undermine our overall pricing structure.

We used it pretty aggressively in 2018.

And as we said in our prepared remarks, we were still very pleased with the pricing lift that we got throughout the season.

And so I think it's going to be a focus of when we use it and how we use it.

But it's definitely a channel where different demos are going to find ideas for things to do.

And so we can't ignore that.

Understood.

And the last question more of a modeling question, but probably to your ability to hit the full year numbers.

I just want to confirm that, that no hotels will be closed in 4Q or 1Q this year, because I'm pretty sure that impacted the accommodations revenue line last year?

Yes, so as we look at on the accommodations front, last year, at the end of the '17 season, we took down the Sandcastle Suites property in Sandusky and opened up the new tower at the Hotel Breakers.

So I will tell you, very pleased with the results out of the resort side of the business globally, particularly at Cedar Point.

And despite her having maybe about 30 to 40 net less rooms between those 2 moves, our out-of-park revenue, our accommodations revenue, up meaningfully at Cedar Point, north of $5 million increase year-over-year.

As we look towards going forward, the only change that we really have coming, Brett, is we should be seeing coming online late in 2019 the SpringHill Suites hotel down in Charlotte, adjacent to our Carowinds property.

That is under construction currently.

We're excited about that coming online.

Bigger contribution from it will be realized in 2020, but it should come online sometime late 2019.

And then the Toronto hotel, adjacent to Canada's Wonderland, the dual-branded Hyatt House, Hyatt Place hotel, that will be coming on -- I'm going to say just based on some a little bit of challenges out of the block there, but that probably comes on more like first quarter of 2020.

But if we make some good progress, there's a chance it could be at the end of '19, but those are the only 2 hotel changes that I would call out.

None of them really impacting negatively or overly positively results for '19.

And that does conclude today's question-and-answer session.

I'd like to turn the conference back over to management for any additional closing remarks.

Thank you all for your interest and ongoing support of Cedar Fair.

We are fortunate to be stewards of a business that has produced growth through the years and in all economic cycles.

We have taken measures to protect the long-term strength of our balance sheet and have a very reasonable degree of leverage.

We are committed to continuing to grow our distribution which is currently yielding more than 7%.

The barriers to entry for our industry are real, and we continue to invest capital to enhance the quality of our parks, protect our industry-leading per caps and drive greater returns from our installed asset base.

I am very fortunate to have a talented leadership team along with the Board of Directors that serves as a valuable partner for all of us.

This is what has served us and our unitholders so well for a long time and what we plan to keep delivering.

Stacy?

Thank you, everyone, for joining us on the call today.

Should you have any follow-up questions, please feel free to contact our Investor Relations department at (419) 627-2233.

We look forward to speaking with you again in about 3 months to discuss our fourth quarter and year-end results.

Thank you.

And that does conclude today's conference.

Thank you all for your participation.

You may now disconnect.