Good day, and welcome to the Cedar Fair Third Quarter 2019 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Michael Russell, Corporate Director, Investor Relations. Please go ahead, sir..

Thanks, Coley. Good morning, everyone, and welcome to our third quarter earnings conference call. I'm Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Earlier this morning, we issued our 2019 third quarter earnings release.

A copy of that release is available on our Investor Relations website at ir.cedarfair.com under the News tab. On the call with me this morning are Richard Zimmerman, Cedar Fair President and CEO; and Brian Witherow, our Executive Vice President and CFO.

Before I 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 Securities and Exchange Commission. In compliance with the SEC's regulation FD, this webcast is being made available to the media and the general public as well as analysts and investors.

Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. Now I'd like to turn the call over to Cedar Fair's CEO, Richard Zimmerman.

Richard?.

Thank you, Michael, and good morning, everyone. I am very pleased to report that Cedar Fair not only achieved its best ever post Labor Day performance, but our strong results year-to-date have us well on our way to making 2019 the best year in the company's history.

Throughout the year, I've spoken to you about the strategies that underlie our new long-range plan, and our results to date are proof of the progress and early success of those strategies.

As a matter of course, each year, we work with our Board to update our long-range plan, which establishes our strategic areas of focus and confirms our capital allocation priorities.

This annual exercise is invaluable as it helps to reinforce the importance of 2 primary objectives, delivering positive near-term results while also remaining committed to long-term value creation. Our Halloween events, which kicked off in mid-September, once, again, have produced some of our biggest days of the season.

Through this past Sunday, November 3, record demand increased year-to-date attendance 4%, net revenues by 6%, in-park per capita spending by 1% and out-of-park revenues 7%. All reported on the same-park/same-week basis, which excludes any contribution from the 2 newly acquired Schlitterbahn Waterparks in Texas.

Most significant in our year-to-date results was our ability to generate solid revenue through higher attendance, while continuing to grow in-park per capita spending, reflecting our sound revenue and yield management practices.

Optimizing attendance and increasing per capita spending have been and will continue to be the key drivers of our ability to generate long-term revenue growth going forward. The macro environment thus far in 2019 has provided us with an operational tailwind of sorts.

Unemployment is at record lows, consumer spending has remained healthy and weather patterns during critical portions of the season have been favorable compared to last year, especially during the month of July. With this backdrop, our team superbly executed our long-range plan strategies, including introducing more immersive entertainment offerings.

Broadening the appeal of our parks through the successful execution of these initiatives has directly contributed to the record numbers I referenced earlier. I'm also pleased to say our strategies and the momentum retained throughout this season have translated into an outstanding start for our 2020 season pass sales program.

Not only are we well ahead of last year's record pace but we are also seeing solid increases in the sales of related all-season products, such as all-season dining and all-season beverage. This has helped push deferred revenues through the end of October, up approximately $40 million over this same time last year.

Brian will provide more details on this later, but it's safe to say the ongoing success of our efforts in the critical season pass channel gives us confidence that our approach is the right one.

Our limited duration experiential events, such as Grand Carnivale, Monster jam and a host of regional celebrations like Boysenberry Festival and Knott's Berry Farm, create a sense of urgency coaxing guests to visit our parks multiple times throughout the season.

In 2019, our event strategy has also proven particularly successful at attracting unique visitors. Many of whom get a first chance to experience highly immersive entertainment at a size and scale simply unmatched by others.

For the second season in a row, we produced a solid increase in the number of unique visitors to our parks, a critical metric as we look to attract new customers to plug into our CRM database. The quality and scale of our rides and immersive attractions make our parks unique.

It is why guests recognize our parks as being among the very best parks in the world. It's also what helps drive our ever-expanding season pass programs, and our average season pass visitation rate of more than 5x per pass holder. The bottom line, we are very pleased with our record results for the quarter and the first 10 months of the year.

As I stated at the beginning, our record performance to date provides early validation of our long-range plan and demonstrates the strength and upside potential of our business model.

Finally, based on our results to date and our confidence going forward, it is my pleasure to also report that our Board of Directors has increased our quarterly cash distribution to $0.935 per limited partner unit, lifting our annual rate to $3.74, more than a 6.5% yield at today's prices.

As we have previously stated, we are committed to the sustainability of our distribution, and today's distribution declaration reflects our intent to moderate its growth rate in the near term, while we work to reduce our debt-to-adjusted EBITDA ratio to inside 4x, which we believe is very achievable in the near term.

With that, I would like to turn the call over to Brian to review our financial results in more detail.

Brian?.

Galaxy's Edge at Disneyland, Knott's once again is on pace to deliver its best year ever. As Richard mentioned, the increase in attendance also reflect solid growth in the number of unique visitors to our parks.

Through the end of October, unique visitation was up 5% on a same-park basis, a critical metric when evaluating the success of our new strategic initiatives geared at broadening the guest experience.

Looking ahead to full year results and the impact of October's strong performance on the fourth quarter, while our park teams have done an excellent job of managing operating costs throughout the season, there are a number of incremental items that will put pressure on fourth quarter costs and margins, most notably is the addition of downtime expenses at the Schlitterbahn parks.

During the third quarter, Schlitterbahn contributed $23 million of EBITDA since the July 1 acquisition. However, after off-season fourth quarter costs, that EBITDA contribution will be reduced to $12 million to $14 million for the full year.

Also pressuring fourth quarter margins, our first year costs associated with the introduction of WinterFest at Canada's Wonderland, start-up costs for the openings of the Springhill Suites Hotel at Carowinds and the indoor sports center at Cedar Point and the initial cost to kick off our targeted marketing project in Knott's Berry Farm.

All in all, each 1 of these projects presents great revenue upside potential over the long term, but near-term pressure on operating costs. Looking at longer-lead indicators, the positive trends remain very strong. At the end of October, deferred revenues were up approximately $40 million or 40% from the same time last year.

Of the increase, approximately 85% is associated with the outstanding start to our 2020 advanced sales programs, including 2020 season pass sales, which are up more than 350,000 units or 50% in the first few months. Now let me highlight a few additional items on the balance sheet.

At the end of the quarter, our balance sheet remains healthy and in sound condition, with $258 million of cash on hand and approximately $2.2 billion of debt, a majority of which is fixed through long-term notes or interest rate swaps.

Of our debt outstanding, we have no significant maturities before 2024, with our nearest term maturity being our revolver in April of 2022. At the end of the third quarter, our total leverage ratio stood at 4.2x debt-to-adjusted EBITDA or 3.7x on a net leverage basis.

As we said on our last call, our priority is to reduce total leverage back down inside 4x as quickly as possible.

For modeling purposes and from a free cash flow perspective, for the full year, we expect to invest approximately $190 million in capital expenditures, excluding our purchase of the Great America land and we expect to pay approximately $100 million in cash interest costs and approximately $45 million in cash taxes.

With that, I'll turn the call back over to Richard..

First, many of our analysts and investors have inquired about the recent marketplace rumors regarding M&A. Our response has been consistent throughout. As a matter of policy, we don't comment on rumors or speculation in the marketplace, particularly around M&A.

What I would like to emphasize, however, is my belief that we have continued to create long-term unitholder value through the strength of our business model, our disciplined execution in all areas of our business and the attractive growth potential of our strategic initiatives.

Cedar Fair has always been committed to achieving current year results, while at the same time, making investments that ensure the long-term success of the company.

And finally, as we prepare to celebrate the 150th anniversary at Cedar Point and the 100th year at Knott's Berry Farm, we find ourselves not only reflecting on the company's rich history and many accomplishments, but also acknowledging the importance our parks have played in people's lives.

Throughout the decades, the entertainment we have provided along our midways has brought happiness to generations of families from around the world. What is most amazing of all is how powerful the memories are. People tell stores about their trips to our parks at the mere mention of places like Cedar Point or Knott's Berry Farm.

We service custodian to these wonderful parts, stewards of our company cherish legacy and its unique collection of historic brands. As today's leaders of Cedar Fair, we have an obligation to preserve the integrity of these parks for the enjoyment of future generations. Coley, that concludes our prepared remarks, and we're ready to take questions..

[Operator Instructions]. We will take our first question from Steve Wieczynski from Stifel..

So I guess, if we look at your attendance growth this quarter, it was really solid. Even if we look at it for -- on a like-for-like-type basis. And I think that's a little bit of a different story than we heard from one of your competitors.

I guess, the question is, is there anything we need to think about that drove that attendance growth so much? And I guess what I'm getting at here is, were you guys overly promotional in the quarter, if that makes sense?.

Steve, good question. I can tell you that we ran our existing plan in terms of promotions and things. Listen, when we generate, you've heard us talk about optimizing our revenue mix. When we create increased demand, we brought onboard a talented revenue management team, and we're always looking to optimize our admission revenue.

So I don't think we did anything unusual. We worked our plan. What we saw was great demand, particularly around our event strategy. We're very pleased with the first year traction we got from things like Monster Jam, Grand Carnivale. While attribution is hard, I will tell you that the event strategy we're in the very early innings.

And when we look at that, I think there's a long runway on how we roll these things out. And when we translate that demand into season pass channel, where you've heard us talk about the seasons of fun. I think what you saw this year was both a little bit better weather, particularly in July, but what you also saw was the seasons of fun message.

Our ability to give our guests reasons to visit the park during all 4 seasons of the year. That really resonated well with our -- within our particular markets, and we're very pleased with that..

Steve, this is Brian. I would just add that, as we said on the call, in our prepared remarks, the fact that the volume lift also came with growing per capita spending was maybe one of the things that we're most pleased with.

I did comment that admissions per cap was under a little bit of pressure, a little less than 1% decline for the quarter, driven by the shift in mix, to Richard's point, more towards season pass. When we strip that out, we're very pleased with what we're yielding in terms of the non-season pass admissions per capita.

And so it definitely was not a discount playbook or promotional effort that drove, but I think it was more, as Richard said, the broadening of the guest experience, and these initiatives are really resonating with the market..

Okay, got you. And then second question would be around your well-documented change in your capital spending plans going forward.

And I guess the question here is, how do you guys envision really being able to take price moving forward, I guess, with what we would call less impactful capital spending?.

Go ahead, Brian?.

Yes. I think, as we said, our shift in CapEx strategy is not being motivated or the result of any kind of cash flow management concerns or a shift in scope or impact, it really is being driven by our market research in and the fact that we're getting to fully realize the benefits of the investments we've made over the last 6 to 7 years.

In terms of pricing, we're still going into 2020 with a very similar approach to our pricing playbook as we have the last several years.

We don't really -- while coasters definitely give us cover around pricing, Richard has always commented on it, it's really the value perception and the expanded offerings, the broadening of the experience, these events are giving us just as much cover in terms of pricing as the coasters have in the past..

While driving urgency at the same time, most of these events are limited duration instead driving that urgency that allows us to create higher demand..

Okay, got you. And then one quick one, real fast, Brian, if I could. I think you said the deferred revenue was up $40 million, if I heard you correctly.

Is there anyway to know what that would look like if you stripped out Schlitterbahn?.

The Schlitterbahn impact is essentially null to that number. As we talked about, I think, on our last call, Schlitterbahn, that's one of the areas of opportunity for us.

While we have made some changes there, we haven't implemented all of our systems yet at this point in time to really go heavy after the season pass channel, That'll be -- though the rollout of those systems and the integration of those systems will be happening during the 2020 season.

So while Schlitterbahn is in that number, I would tell you, it's not a material effect. We're still up approximately $40 million and 40% sans Schlitterbahn..

[Operator Instructions]. We'll take our next question from Tim Conder from Wells Fargo Securities..

Brian or Richard, whoever wants to take this here. Just wanted to revisit the season pass outlook here ex Schlitterbahn.

I think maybe, Brian, you alluded to this here in response to Steve's question, but just wanted to check that on -- more on a unit basis? And then as it relates to Star Wars, the California fires, you seem to allude in the preamble that Star Wars really hasn't seen an impact, and we really haven't seen anything like that historically either.

But just to reaffirm that and any comments on the California fires, if you're seeing any impact from that?.

Tim, I'll take your second question first. Great question. In terms of impact, I'll go back to our prepared remarks, Knott’s is off to its best season start ever. So we're well on our way to a record year. I will also tell you that their Halloween Haunt was a record Halloween Haunt.

So we continue to see great, strong traction, as we have in the past several years, when other large-scale attractions have come online.

So we see continuing demand in that marketplace, and we're really pleased with -- we're not to that, Brian?.

Yes. Tim, in terms of season pass, we remain, as we said on the call, extremely pleased with the start to season pass sales, both at the legacy parks and at the Schlitterbahn parks.

While the opportunity really lies in the future for us at the Schlitterbahn parks, we did make some changes coming out of '19 for the 2020 season there, where we've introduced a payment plan. We are seeing similar percentage lifts in the Schlitterbahn year-to-date sales, but it's a much, much smaller base.

I think our real impact, our ability to impact that base and drive season pass more aggressively, as I said earlier, will be beginning with the 21 season when we have all of our systems, our ticketing systems, our e-commerce platforms, et cetera, installed.

As I mentioned on the call, they're being up north of 350,000 units year-to-date on the 2020 sales programs. That is also without Schlitterbahn in there. So the core or the legacy parks are really performing very well early on..

Okay, okay. No, great. And then, gentlemen, again, you've laid out, we're starting to see some lifts from the new programs. You spent quite a bit of time on that at the Analyst Day back in August.

Can you just maybe remind us, again, is -- should we see a little bit more in '20, and then obviously more in '21? But just remind us again sort of the cadence here that we should see that EBITDA flow-through accelerate, given the fact that your CapEx is going to be, I guess, more muted.

Is it the way to say it? And then you're going to be spending a little bit more on the immersive events.

But just, again, how that interplay goes in that translation and then the cadence of the flow-through drop down to EBITDA?.

Tim, really good question. We did touch on, on the Analyst Day. I'll go back to -- when we think about new events, which are evergreen which come back year-after-year, I think the best example we probably have is WinterFest. And we said at the beginning that WinterFest would take 3 to 5 years to fully mature.

We're well on track at those that are open multiple years. So we're pleased about where we are. But all these take a little while to seed in the marketplace. I'm actually quite encouraged by the first year traction I've seen us get on the events.

So we've talked about how we're looking at everything from Net Promoter Scores to -- in the case of Grand Carnivale, which is a nighttime event, the attendance that comes in late afternoon to early evening. We've seen the markets react in a significant way, and that's what these events are all about.

I think in terms of your question in terms of financial, when we talk about getting the maturity, you'll see higher flow-through, you'll see more impact as you get deeper into the run of all these events. I think Halloween is probably the ultimate example we have. That's 2 to 3 decades. In the case of Knott’s, almost 5 decades of experience.

And we keep -- as I just mentioned before, keep posting record numbers of Halloween. So it keeps growing. So I think it's a very long runway.

And I think I'll go back to the point that Brian made in his remarks, we're listening to the consumer research as we format these events as we talk about -- as we think about the components we design in, and we keep finding the more we listen to our customer, the more they respond. So I hope that answers your question..

We'll take our next question from James Hardiman from Wedbush Securities..

Obviously, a really good quarter, but I really wanted to focus on the post-quarter commentary. I guess, first question, did you say that the early season pass sales were up 50%? I know it's early, but that might have been one of the most bullish things I've heard you guys say in a decade-plus covering you.

And then secondly -- and how is that possible, I guess, is ultimately question there? And then secondly, maybe the second most bullish thing is there were reports in October that Cedar Point was closed for a period of time because it was full, which I didn't know as humanly possible.

So what happened there? Is it a good thing? And then maybe comment on the whole Gold Pass phenomenon to Cedar Point and Knott's? And how to think about that going forward?.

a Regular, a Gold Pass and a Platinum is working extremely well. So we think our -- I call it, fine-tuning our playbook. And when we fine-tune our playbook, we mine all the potential out of all of our markets that we operate in. And the other thing that I would -- just one more thing to add, we're seeing the strength across virtually all of our sites.

So it's not -- as we've talked about, we're not seeing strength just isolated in one region or one park, we're seeing strength across the chain. And I think that speaks to our strategies and how they're resonating..

That's all really helpful. And maybe just to clarify, the 50% early season, season pass growth, it doesn't seem like a number that's sustainable. I'm assuming that there's some shift in timing there such that you're convincing some subsegment to just buy those things earlier.

What do you think is a reasonable growth expectation for season pass this year? And should I think about some sort of offsetting per cap headwinds as we look to 2020?.

James, it's Brian. So first off, yes, I mean, you're right, the law of small and big numbers, right? The 50% is off -- is based on early sales of season passes. And by at this point in time, we might only be 20% or so through the full program. So I think your comments about being able to maintain that percentage is a very fair one.

With that said, as Richard said, we're seeing strength across all of the properties. The lion's share of the year-over-year increase at north of 350,000 is being driven by the performance of Gold at Cedar Point. So I'll separate the parks into CP and the non-CP parks.

The lift we're seeing at the non-Cedar Point parks in their past programs, much like we've seen in the last couple of years, is probably 3/4 of that, what we see -- at least if it plays out like we've seen in the last couple of years is pull forward.

We're getting consumers to make the decision and the commitment to buy a season pass in the fall or as we get into the winter -- WinterFest events here in November, December, and so that's a good thing, right? From the standpoint of it avoids disruption that might -- disruption events that might cause them to make a different decision in the spring.

At Cedar Point, our early data is telling us of the lift there, and it is extremely big. It is an extremely big lift. It's about a 7:1 new pass holder versus a renewal. And so we're getting a big lift in new pass holders. Now that will ultimately be a migration potentially from single day tickets.

But again, getting that commitment upfront, buying the most expensive ticket in the park, which is what a season pass represents, is a very good thing. And so I don't want to put a cap on where this can get to.

And what I can tell you is our marketing teams, led by Kelley Semmelroth, our CMO, and her group are going to keep their foot on the accelerator. We're going to continue to try and sell as many passes as we can. And so we're off to a very good start.

In terms of pressure on per cap, there's no doubt that having more season passes outstanding, in particular at a park like Cedar Point, is going to mathematically put pressure on the admissions per cap at the parks and to have that park in particular. But again, at the end of the day, we don't take per cap to the bank.

And we sure do like having a lot more season passes outstanding, and so we'll take that as a trade-off..

We will take our next question from Brett Andress from KeyBanc Capital Markets..

Congrats on a great quarter. And thank you for the clarity earlier on October. Can you maybe help put that October strength into numbers for us? That's one. And then following up on that, I mean, it does sound like some operating cost pressure in 4Q.

Is there anyway you can elaborate or size that up for our models this quarter?.

Yes. Sure, Brett, it's Brian. So let me tackle the attendance first, given that we put out the Labor Day numbers, you can start to sort of work your way back, so I'll give you a couple of data points. You can work your way back to see sort of post Labor Day, how the results have been.

And if you do that math, you'll see it over the 9-week period, it's been a very strong performance with attendance being up close to 13% or 14% and revenues pushing 10% lift. Month of October, those numbers are pretty comparable, which speaks to the strength, as Richard said earlier, for Haunt.

And these percentages and numbers are all -- that I'm speaking to are all on a same-park basis, stripping out any benefit or impact from Schlitterbahn. In the month of October, we're looking at about a 15% lift in attendance and close to a 12% lift in revenues.

So you do the math, you can see the -- there's a little bit of pressure in there on per caps, but that's understandable based on the season pass mix continuing to push north..

And Brett, one other point to make. When we talk about October, let's remember, we're up against a record October last year. So we're really pleased with the movement that we've seen..

Yes. I'd rather have you guys do the math than me.

And then, Brian, just following up on the operating costs in 4Q, just if you could elaborate on that?.

Yes. So much like we even started to see it creeping in a little bit to Q3 because some of these things -- we start activating some of the stuff after the parks go out of daily operations, right, post Labor Day.

As I said in my prepared remarks, the introduction of some new facilities like the Carowinds hotel, like the indoor sports complex at Cedar Point or new initiatives like the advertising, the targeted advertising. Right now, most of that being focused at Knott's Berry Farm. Those things are going to put a little bit of pressure on fourth quarter cost.

Some of that will -- the timing of how quickly we can activate some of that will ultimately impact the magnitude, but there's no doubt between those items like that and then the introduction or the inclusion, maybe I should say, of Schlitterbahn's offseason carrying costs, November, December, are going to put pressure on our fourth quarter operating costs and margins..

Got it. And then just my last one here. I was hoping you could elaborate on the Pass Perks program, obviously, the full rollout next year.

But I guess, what kind of incremental impact on either spend or visits did you see in the pilot program this season?.

Yes, Brett. So good question.

Definitely something that we're very excited about, but we piloted at four parks this year, introduced early to mid-June, testing a variety of different approaches and strategies around loyalty, trying to see what resonated with the consumer, what motivated behavior, maybe got the guests to come out to the park on a day that they normally wouldn't have.

So a lot of good learnings. We found it was -- just to give you a little inside baseball, one of the most motivating offerings was anything that seemed to include a food and beverage offer. That always seem to get the consumer to move. We were also very pleased with what we would call the click-through or the activation rate on the offers.

And so all of those learnings are going to go into the process for the broader rollout in 2020. As we said earlier, we still intend to roll this out across the system. Sans the Schlitterbahn parks, it might be a little bit of a phased rollout, given the fact that a park like Knott's Berry Farm is open year round, it really doesn't matter.

We don't have to make an opening day for them because there is no real opening day. So -- but we will roll out for 2020, and we're very encouraged. I'm sure there'll be incremental learnings as we go along.

But there's no doubt that we think we've got something here that has the potential to really not only drive more value for the season pass holder, but motivate them to visit more often..

We will take our next question from Paul Golding from Macquarie Capital..

Congrats on a great quarter. I just had a couple of questions around anything you can share on churn.

Is there any incremental churn on season pass now that you've been -- you had this pricing structure and product structure in there for a bit? Or is it just being overwhelmed by the new season pass acquisitions? Or is it stable? And then second part of my question is around the cost base, particularly around labor and how we should think about labor costs and labor management going forward after the step-up in planned costs here?.

Thanks, Paul. Good questions. Let me take the first one, I'll let Brian take the second. No, we keep seeing renewal rates trend higher. They've trended higher over the last several years. And as we continue to provide more value, and I'll go back to the seasons of fun message, more reasons to visit more often.

We continue to see higher renewal rates year-over-year. So we certainly saw that in 2019, and we anticipate seeing that in 2020.

Brian?.

Yes. Just one last thought on season pass, I think, in just connecting the dots the previous question around Pass Perks, our loyalty program, we really believe that the loyalty program and some of the aspects of it will continue to help what Richard alluded to in terms of the improving renewal or retention rates around season pass.

In terms of cost base, as we've talked about in prior quarters and in prior years, labor, particularly seasonal labor continues to be a big area of cost pressure.

Last year, we -- if you recall, at this time, I was talking to you about pressures on rate that were in the high single digits, 8%, 9%, and we're managing a lot of labor hours out of the system to try and keep that down to mid-single digits, which we were effective at. This year, the rate pressure has been more around 5%.

And so I think we're benefiting from a number of the market adjustments that we took in 2018. And so ours are down slightly to essentially flat, and we're keeping our overall costs right around that 5%. I think that's pretty fair to just -- at least, our expectation is we're going to plan for that.

We'd rather plan for the worst and hope for the best and try and manage to a better number.

But I think it's reasonable to expect that seasonal labor costs are going to see probably that -- around that mid-single digit, that 5% kind of pressure for the foreseeable future to why initiatives like our workforce management initiative, the rollout of the new Kronos platform is so important.

We've been testing that, running that sort of parallel and doing a lot of testing here in 2019 season. We will be in heavy implementation mode over the fourth quarter and early part of next year, as we roll that out across the system.

And so I think the real benefits of that initiative in terms of our ability to manage hours better, more efficiently manage seasonal labor hours is going to really start bearing fruits more in 2021, but I'm sure we'll get some winnings in 2020 as part of the rollout. It's just not at a full return quite in the first year..

Our next question comes from Chris Prykull from Goldman Sachs..

I think you said earlier that you expect roughly $12 million to $14 million EBITDA contribution from Schlitterbahn this year.

Can you maybe just quantify the expected synergies and how you're thinking about the ramp of that into 2020 and 2021? And then secondarily, but related just how much capital you think you wanted to put into that business?.

Yes, Chris, it's Brian. So Schlitterbahn, as we said when we made the acquisition, we really are excited about the long-term potential for the property. We think it's got upside in terms of where we can take the attendance and revenues.

But there's also efficiencies to be get -- to be mined on the cost side that will push towards better margins long term. I think we're -- so the integration, I would say, is going well. Not a lot that we could do to impact the 2019 season, given we bought it on July 1., it was really more a matter of run their playbook.

And as I said earlier in our prepared remarks and on some earlier questions, hard for us to make a lot of changes or all of the changes that we want to in just one-off season.

So a lot of our systems implementation, which will drive the revenue synergies, those are going to be -- those systems are going to be built up and implemented during the 2020 calendar year. So we'll be ready for 2021. So I think in terms of revenue synergies, probably a little bit longer to get to those than the cost synergies.

Ultimately, we're not looking for -- it was never about what Schlitterbahn could bring to the table for us in 2020, but more where we can take it to by 2022, 2023. And so I think we have modest expectations for 2020.

We definitely expect to see some growth, and we're already seeing very early signs of some of that impact, as I mentioned, just driving better season pass sales. And the teams are already down there, given those water parks wrapped up their core season in early to mid-September.

We've already begun a lot of the off-season work, both in terms of capital and noncapital. Some of the work that we're doing and that speaks to why we're seeing Schlitterbahn go from $23 million of EBITDA contribution in the third quarter to maybe something in the low to mid-teens by the end of the year.

Some of the work that we're going to be doing just isn't capitalizable under our accounting policies, and so that's going to weigh on us a little bit in terms of the '19 and the 2020 numbers, but it'll make for a much better product long term..

Great. That's helpful.

And then you touched on this in a variety of questions earlier, but just curious why do you think your results this year or year-to-date have just been so robust relative to peers? And maybe even relative to sort of the broader leisure backdrop and even relative to the prior two years results for yourselves? Like what -- has anything changed in the backdrop, whether related to the consumer, related to competition? Or is it really just better execution on your part?.

Chris, I think it's a great question. As we look at our business, you go back to the foundation, which is the consumer is very healthy. Right now, the macro backdrop, as I said in my remarks, say that the consumer is in a good place.

And historically, any time we've seen sustained movement in the average hour -- and increases in the average hourly rate, that's usually been pretty good for our business.

But I think if you look back over the last couple of years, and I'll be more specific to us and the rest of the industry, look back over the last couple of years, we did a number of things that -- it had a number of both initiatives and attractions that we added to our parks that resonated really well.

But '18 -- when I look at '18, it was really the anomaly in terms of weather. We clearly have gotten better weather this year, but bigger than that, we've really seen our strategy start to really increase our penetration in all our markets.

So I think it's our execution of our strategies, but I also think it's listening to our customers and it's on a daily basis. I got to go back to our management teams, really paying attention to the fundamentals and making sure we're delivering on the quality of the guest experience that is our consistent takeaway..

Got it. That's helpful. And then maybe if I could just squeeze one more in, maybe more modeling-related question, Brian. It looks like SG&A growth has been up pretty materially year-over-year, year-to-date and then in the third quarter, which I assume some of that's M&A related.

But what's the -- and maybe some of it's related to the operating day shift, too.

But what's the right way to think about that line item going forward? What's a more normalized growth rate?.

Yes, it's a fair question, Chris. I think if we try and strip out at least the costs that are in SG&A related to the acquisitions, whether it be Schlitterbahn or sawmill or even the land at Great America, you're looking at -- I think I saw this in your note, you're looking at maybe close to a 12% increase in SG&A costs.

About 3% to 4% of that -- and that's in the 9-month numbers, right, that are in the release and will be in the Q. You're looking at about 3% to 4% of that is related to the incremental SG&A at Schlitterbahn as well as the extra week. So we have to keep into account that the nine months of -- and 2019 ended 929 versus 923 last year.

So that incremental week and Schlitterbahn account for about 3% to 4% of that. So that pulls you down maybe even closer to that 8%. And then there are a number of items that are just wholly incremental.

Transaction fees associated with, and I called it out in my prepared remarks as one of the key variable costs that when you sell more tickets and you have more people in your parks, spending money and using credit cards, things like online transaction fees, credit card fees, all of those things go up.

Put that together with the huge lift in season pass sales for 2020, and you're looking at a little north of a 2% lift in our transaction fee cost, which all sit in that side of SG&A, the selling side. Advertising costs are up a couple of percentage points in there and labor costs that sit in SG&A.

So full-time labor, just 2% to 3% saying sort of with inflation. You work it all down.

I think when you look at the core, you're probably strip out those types of items and you're probably back more into that 3.5% to 4% kind of range, which is maybe the base, but I can't say that's what I would necessarily model because to the extent we keep selling more tickets and selling more season passes, we're going to keep seeing more pressure on those costs.

And as a trade-off, we'll take every day of the week..

It appears there are no further questions, and that ends our question-and-answer session for today. I'd like to turn the conference back over to you for any closing remarks. Thank you..

Thanks, Coley. To close, I want to, again, emphasize that we are delivering on all key metrics, attendance, per cap, unique individuals, revenue, EBITDA and deferred revenue have all met or exceeded our expectations this year. This is a credit to the hard work that every member of our team delivers on a daily basis.

Beyond our current performance success, the broader industry fundamentals remain attractive. The barriers to entry are real, the industry has proven to be resilient through economic downturns and consumers continue to prioritize experiences over possessions. The bottom line, Cedar Fair is well positioned headed into 2020 and beyond.

Michael?.

Thanks, Richard. Thanks, everyone, for joining us, and I invite you to call the Investor Relations Department with any questions you might have 419-627-2233. We look forward to reporting our full year results on our next earnings call in February of 2020. That concludes our call today, Coley. Thank you..

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