Parks! America, Inc. (PNK:PRKA) Q1 2025 Earnings Call Transcript

Parks! America, Inc. (PNK:PRKA) Q1 2025 Earnings Call Transcript February 10, 2025

Ralph Molina: Good afternoon, everyone. Welcome to Parks! America’s First Quarter Fiscal Year 2025 Earnings Call. My name is Ralph Molina, and I will be your operator for today’s call. Today’s call is being webcast and recorded. Before we begin, I’d like to remind everyone that, our comments today will contain 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 forward-looking statements. For a more detailed discussion of those risks, you may refer to the company’s filings with the SEC. In addition, we may reference non-GAAP financial measures and other financial metrics on the call. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our Form 10-Q.

Last Friday, we filed our quarterly earnings release and 10-Q with the SEC. In our quarterly earnings release, you will find summary information related to year-to-date fiscal 2025 segment financial results. We encourage all of our shareholders to read our complete 10-Q. In a few moments I will turn the call over to our President, Geoff Gannon, to answer any questions. First, we will begin by responding to questions previously submitted via email. Then we will take any follow up questions from live participants on today’s call. [Operator Instructions] That concludes my instructions. I will now turn the call over to Geoff Gannon for opening remarks.

Geoff Gannon: So, I just wanted to update, same as I did in other quarters, that you know we’re a highly seasonal business and since I’ve come in, both advertising and sales have probably been lower than they might normally be just because our advertising expense has been lower than normal and that will probably change soon. But the quarter that we’re talking about here is earlier for reporting that than that change would happen. Our season really starts in March and so you should expect that once we start reporting March type numbers, and from then on, you’ll maybe see seasonally higher advertising and all of that. So just keep that in mind when looking at it both advertising expense and possibly sales to the extent they’re driven by advertising, might be a bit lower over this off season than is normal and that this should be the last quarter. I tell you that basically. That’s it. Ralph, we can go to the questions.

Q – Ralph Molina: All right. At this time, we will proceed to respond to questions previously submitted via email. If you have a follow up question, please raise your hand and we will get back to you. First question. With extra time managing the parks, can you comment on any meaningful trends, either confirming prior issues or possibly pointing to pathways to higher revenues moving into this 2025 season?

Geoff Gannon: I can comment on some things. I think, marketing was a really big issue and maybe even a bigger issue than I thought. We have a new agency and that I think is really terrific and going to do a great job for us. But because of seasonal issues, has, done their research and everything, but hasn’t done a lot of implementing what we have because it doesn’t really make sense to do that outside of the season when people would come. I think in the, real soon, next few weeks or something, you’re going to see probably new websites for some things, you might start to see within the next month after that, advertisements and things. If you happen to look for those things where the Parks are, most of our shareholders would be in places where they’re not going to be served up ads.

Q&A Session

But if you are — then you might see new advertising campaigns and all that. I think that’s important. And then the other trend is just Missouri. I think there’s a lot of positive momentum in Missouri, which is purely due to who we have managing that Patty, who’s doing an amazing job there. And before coming in, I think that it would be hard to know from the outside what has caused that change. And assuming that it’s more external factors than just having a real big improvement in management. So those are the two things that I’d say are different than what I expected is that the marketing situation was a lot worse than I thought. And then Patty in Missouri was a lot more responsible for that turning around in a big way. Those are the two things.

Ralph Molina: All right, next question. You previously noted the appraisal of the Texas property. Do the asset values for Georgia and Missouri also reflect a current appraisal? If not, can you indicate what those values are based on?

Geoff Gannon: Sure. So, what you see on the balance sheet and that we break out in the release for the — the press release that we put out quarterly that does like a calculation of the assets at each segment, and each segment is basically a park less the cash that we have. Those are based on accounting values. So, no, those are not based on the appraisals. You don’t under GAAP reappraise land. I’m sorry, you don’t change the value of the land that you carried on the books for just because you’ve had an appraisal. That’s different. We have appraised all three properties recently. That’s just because of mostly purposes for financing and to some extent purposes for accounting, purposes for impairment testing, but mainly for considering different financing options.

And so, with those, I’d say by — I don’t want to say by far, but the biggest difference, certainly in dollar terms, let’s not talk about percentage terms, but in dollar terms, Texas would be the one where the biggest difference is between the carrying value that we have it on the books at and probably land would be worth the appraisal value. In terms of Georgia and Missouri, the answer there would just be COVID. There’s been a lot of inflation since COVID in some things. And so, like, for example, we actually have a ton of paved road in Missouri. And so that would affect the appraised value a lot. I wouldn’t say that should affect the economic value that someone’s going to pay a ton more for road just because it’s a lot more expensive to pave a road now than it was before COVID.

But — so there are things like that, like actual physical property has gone up a lot in some cases purely due to inflation. I think in real terms it hasn’t really changed radically since 2020 or something. I think that it’s just nominal terms that it’s changed. But no, the relationship between what you see listed on the books and the appraised value, there’s no relationship between those two things. Under GAAP, we don’t restate those things just because they appraise different lanes. So things you own for a really long time eventually end up at values that are — their economic value, their appraisal value are way different than they’re carried on the books for.

Ralph Molina: Thanks, Geoff. Relating to assets and capital, we have a question here asking if you could talk about the status in CapEx, particularly for the Georgia park, also any anticipated CapEx for the other parks.

Geoff Gannon: Okay. Well, I have to be careful about that one exactly because of what we were — so quarterly, what we’re reporting to you, most of those things are GAAP on an accrual basis. But for the CapEx, what you’re seeing is the cash flow. So, a project has often been approved a long time before. Like if you look at the big spend in Georgia this quarter, like the final approval for that was given the week I came in. The week actually was the week between when the annual meeting was and when I came in. So, we’re talking like before mid-June, even early to mid-June. That was the final approval for something that you’re only now seeing reported to you in capital spending. And that project’s not over in terms of the capital spending that you’ll see.

So big projects can be a really long lag. I think I kind of suggested this a little bit. I don’t want to get more exact on threading the needle on this, but I would say you’re going to see a lot of CapEx at Georgia for this fiscal year, and I would say at least 50% of that is due to one project. I don’t want to get more precise on exactly. So, if you see $1 million of CapEx, if you see $1.5 million, if it’s $1 million, probably $500,000 of that is one single project; it’s $1.5 million, it’s probably $750,000. Let’s get — not get more precise than that, but I would say, because any more precise than that, we’re basically giving you guidance. But let’s put it this way, it will drop probably 50% from what this year’s CapEx is going to be to what, like a maintenance level CapEx or normal level or whatever you want to say, because we’re not going to repeat that project.

We’ve said it before. It’s a restroom project. And once you build that, you will not need to repeat that. We have porta patties right now in Georgia and have for a while that’s being replaced by a permanent restroom to replace that for the first time since the tornado and all that. And that’s not something that needs to replace every year. It’s a really big project and I don’t envision any project like that happening anytime soon in any of the parks. But I can’t know exactly if something happens that we’re not expecting. They weren’t expecting there to be a tornado, right, so you don’t know. There’s no other project that I could think of that’s unusual, that’s more than even rises to 100,000 or something. The other stuff is normal that you’re seeing there.

It’s not normal. Like, it’s an every year thing. Some of it is in every five or 10 years thing, but yeah, it’s normal. So, the other stuff you’re seeing I would say you should just take as pretty normal CapEx and then Georgia, you should probably be seeing at like double, what you’re seeing right now might be double what is kind of normal, but that’s about as far as I want to go with exactly what it should look like normally.

Ralph Molina: Great. And Geoff, moving over to corporate level items, we have a shareholder that asks, have you assessed the maximum expense to the company for the stock split assuming the small shareholders ownership interests are retiring?

Geoff Gannon: We’ve done a lot of work. Ralph has done a lot of work and there have been other calculations done too of all different possible scenarios for what could happen in terms of what ranges of outcomes you could have, what it could cost, all of that, and that’s based on the number of shareholders and what the price would be and all those kinds of things. I want to be a little careful because I don’t want to give anything away about like details on that that isn’t for the annual meeting. So, basically, like, we’ve assessed it, thought about it, thought about that in relationship to cash things, how much would be spent on it and all of that thoroughly. But if I give any more details on that, it kind of suggest things about what we expect to happen basically like how many shareholders we expect to be cashed out and things like that and just more details on that than I want to get into.

But we’ve assessed a range of different outcomes and are comfortable that we would go through with them only if we had sufficient cash and under probabilities that things were more — a lot more people ended up cashed out than you would expect based on the numbers and stuff. We built in a margin of safety on that stuff.

Ralph Molina: Great. Geoff, we have a question on liquidity. Do you anticipate any need to further enhance liquidity with any type of credit facility?

Geoff Gannon: That’s a really good question. It depends on like the word need and all that. Will we explore the possibility of credit facilities? Yeah, that’s something we might explore instead of just term loans at times. Right now, we have some cash and if things get turned out enough then you can be holding enough cash. Really, it’s the low point for cash, should probably be the first week of March. It could get about that low, like starting around now till March, be pretty flat. I don’t have an exact prediction on that. But let’s say we’re getting close to what the low point will be for cash and then it kind of builds through there through September. So, we have projections on that. We’re looking at that. Historically, the company except for when it was in a much worse position, didn’t really need to draw on credit lines except during the off season.

Normally we would want to run things such that we have cash on hand without having to cap any credit facility or anything that would be sufficient anyway. So, we plan to hold some cash, whether that’s borrowed money or money that just isn’t paid out or used to do buybacks or done whatever, you have a cushion for that in terms of cash. So, we’re not going to run it down until it’s close to zero or something ever on the off season. And — but yeah, it is — we will look at the possibility of some revolving credit stuff sometimes, but I don’t know that that means that there’s a need for it so much as just like it’s a good thing to have as a backup in the sort of an emergency case and stuff, in case something happened. Mainly it’s looking at it like, okay, what if you had something like what happened with the tornado or something?

It takes a while to get insurance proceeds and things like that. We kind of stress test it that way and look like, is this something that we need to consider? So, yeah, it’s something I thought about, but we’re not close to actually doing anything with that that I can think of right now.

Ralph Molina: Okay. And we have one last written question. Before I move on to the written question at this time, I would like to invite all participants on today’s call to ask a question. If you have a question, please use the raise hand feature at the bottom of your screen and that will call on you after the question is addressed. The last question that we have here is a longer one, Geoff.

Geoff Gannon: Okay.

Ralph Molina: Given the investing background of Focus Compounding and their knowledge of Markel, Berkshire Hathaway, Fairfax Financial and other companies have successfully used an operating company as a platform to build assets. Are there any plans or might they consider doing the same at Parks! America once things settle down? So instead of paying dividends and buying back stock, the only forms of capital allocation, might Parks! America use the future free cash flows, if any, to buy equities or parts of businesses or complete private businesses? So basically, what are the odds of using Parks! America’s free cash flow as a long-term investing vehicle for other items.

Geoff Gannon: So — okay, I’ll start with like the timing. Right? So, there’s something about that in there. Basically, we don’t have a lot of cash lying around right now. Obviously, you can see what the cash is, what the debt is. Even going through the season, that wouldn’t be something that we can be feeling any pressure to okay, we have to decide what to do about cash. Right? So that’s the first thing. There’s no immediate needs to be determining what to do with cash right now. There’s other things. Annual meeting, reverse split things, getting through the current season that we have then and then considering what the capital budget is for next winter. And then you’d be thinking, okay, do we have excess capital and that kind of thing.

So, we’re not at a point where we’d even be considering that anyway. There was a bunch of different items in that list like buying other private business, buying private businesses, sorry. That is a normal thing that public companies do. Sure, we look at acquisition targets. That’s something that we might do. The other ones, I guess I should get a little bit into why you would or wouldn’t do that. The efficiency of it and everything. So, public company like we are is not optimally efficient for doing some of the things that you’re talking about there, that the companies you mentioned, the three companies there, do some of those have — well, actually all of those have insurance operations. But in addition to that, there’s just — I mean, one, there’s a, there’s a balance sheet test, I mean, for the SEC for — you wouldn’t have more than probably, 40% or something of your balance sheet ever in investment type things before.

The SEC will probably be asking questions about are you an investment company or something. There’s some leeway, I think on that while you’re in a big transition period. But basically, you don’t. There’d be limits on that before you turn into a different kind of company. I don’t think we would get near that. I think the, if you look at the history of the company, right, it is true that if the company had instead like bought stock in, other entertainment type companies instead of, Cedar Fair and Disney’s and whatever, instead of directly buying these other parks. Yes, they would have done better. The stock would — have a much better long-term result by doing that. Okay, that’s one way of looking at it. But the opposite side I want to look at it is you do have to consider that you would just as a shareholder be better off buying these things yourself than having a company like Parks! buy it for you and you hold through them.

Right? So, it’s just inefficient from that perspective. So I just — it’s something to think about that it’s usually much more efficient to do the things we talked about, the buybacks, the dividends, all of that. What you want to do is something that’s both smart and efficient. And sometimes there’s a trade-off on those things. Like it would be great to buy private businesses that are aligned with what we already do, but the multiples on that might be high or something sure. So, we will try to do something, I think, as much as possible that’s both intelligent on the numbers, but also efficient in that there’s not a lot of leakage for tax things and all that stuff for you, the shareholder, we’ll consider both of those things always. We’ll consider kind of what the after tax, whatever things look like for you.

That’s kind of the way that we want to think about it. And some of the things that you mentioned there might work for some of those companies, but for your average public company, there’s serious inefficiencies there that you would want to take into account and we would take them into account. So, we’ll try to do the things that for the end shareholder makes the most sense on an after tax basis. That’s how we would consider it. And then finally, none of these things have been talked about and stuff at the board level and discussed really at all, except for, we’ve kind of mentioned to you in these calls that obviously we’re all aware of, Aggieland and that it hasn’t been performing, the way that it should versus appraisal and all that. And so that’s the only like, asset thing that we’ve talked about really in depth for a while.

So, there’s no talk about pivoting to taking the company a totally different direction like that.

End of Q&A:

Ralph Molina: All right. Geoff, I think that’s a great point to end the call. At this time, there are no more questions in queue. That concludes today’s call. A transcript of the call will be available on the company’s website. Thank you for joining us today. You may now disconnect.