Parks! America, Inc. (PRKA) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to Parks America's Second Quarter Fiscal Year 2025 Earnings Call. My name is Ralph Molina, and I will be your operator for today's call. [Operator Instructions] Before we begin, I'd like to remind everyone that our comments today 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 Securities and Exchange Commission. In addition, we may reference non-GAAP financial measures and other financial metrics on the call. More information regarding our forward-looking statements, 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 our 10-Q with the SEC. In our quarterly earnings release, you will find summary information related to our segment financial results. We encourage all of our shareholders to read our complete 10-Q. In a few moments, I'll turn the call over to our President Geoff Gannon to answer any questions. First, we will begin by responding to questions previously submitted via e-mail. Then we will take any follow-up questions from live participants on today's call. [Operator Instructions] I will now turn the call over to Geoff Gannon for opening remarks.

Thanks, Ralph. I just wanted to go over 2 different things. One, corporate events going on. We had a reverse split. Ticker Symbol is temporarily PRKAD, and we listed on OTCQX. So for details on all that go to the 10-Q. And then the other point that I wanted to get into was Aggieland. So in previous calls, I mentioned that I was serving as the General Manager of Aggieland temporarily, that has changed now. We brought in a permanent General Manager there, however, that is not reflected in any of the results you see in this 10-Q. So basically, the start date for the new General Manager is pretty much beginning of April, I believe it was April 2, actually, but then this period is through March 30. So basically, you're seeing the results while I was there and not yet reflected for the results of the new General Manager. And then that means that results in April will start to reflect the new General Manager and in May will start to reflect new pricing, which will be higher pricing basically. And those things are not things that are captured by this quarterly results. The final thing I want to talk about Aggieland that way is we do talk a little bit about in the 10-Q that the increased sales year-over-year was due to a better spring break. And so what we're really saying there is that January and February, which are part of the month of capture by this quarterly result, we're not seeing the same trends as we saw in March. And so the trends that you see in terms of increase in sales year-over-year is purely a result of March being better than the previous quarter. It is not a result of January and February being better, and that's why we included that language. And that is basically it. So Ralph, we can go to questions.

[Operator Instructions] Okay, Geoff, first question. Per the Focused Compounding podcast on May 10, 2024, communicated that the phase 1 plan for the company is to sell parks in Texas and Missouri. Is the plan still on track to sell these parks and have we made progress on that front? Similar question here is from another shareholder. I am an investor in Parks! America and I have a question about things I'm seeing on the website. In past podcast discussions, I've heard Geoff and Andrew focus a lot of attention on the potential sale of Aggieland property in the future if it does not meet certain financial goals. I'm not suggesting that the website is in conflict with this item, but the website sets a different growth -- or growth oriented tone. Would you say there has been any change to the company strategy? Any commentary you could provide would be appreciated.

Sure. So the website has Investor Relations portion to it and then it also has a portion that is basically targeted towards people who might be interested in selling attractions, not just animal attractions but other things to the company. It's not necessarily inconsistent that the company might sell something and buy something at some point. That is, that if the decision was made to sell a park, that probably would be because the return on capital of that park was not good. And if the decision was to buy a park, it would be probably because the projection would be that the return on capital of the acquired asset would be good. It is not necessarily the case that the company will be deciding to either shrink regardless or to grow regardless. I think that's kind of unlikely. So I think that it would be 2 separate decisions. If a park is retained, it would be because there's a belief that the return on capital will, in sometime in the near future, be adequate. And if a park was acquired, it would be for the same reason that sometime in the near future, the return on capital will be adequate. It won't just be a general blanket decision to shrink or to grow. It would have to be that the asset being acquired or retained has a likelihood of having a good return on capital in fairly near-term...

Okay. And related to that, Geoff. An investor mentioned that Texas revenues are up 14% and gross profit more than doubled to $67,000 at the park level. Is there potential for the park to do well enough financially, not sell it?

Can you repeat the last part of that, Ralph? Was it just, is there potential for the park to do well enough?

Yes, to not sell it.

Okay. There's potential. So the park is overcapitalized in the sense that it operates on more land than is necessary to have a park there, obviously. We use like maybe 200, 250 acres or 450 acres. And then the land is more expensive, right? So those are the issues. The park certainly has the potential to generate positive EBITDA. The question is like how high is that positive EBITDA versus how much capital you have invested in the business? That kind of gets to the issue of the market versus other things. So ultimately, it's the local market that determines whether certain level of capital investment in park can be justified. Operationally, we could improve it. Marketing-wise, we could improve it. This is true for any of the parks. And so if you're talking about potential versus what we're capable of right now, is there potential for it? There is as long as the market is sufficient. And so then just gets to the question of, is the market in Aggieland a lot worse than the market in Pine Mountain? And different people might have different opinions on that. It's hard to tell until we see results of better marketing and stuff in there. So far, not a lot of the results that you've seen from Aggieland reflect the kind of changes that we intended to make at Aggieland, that's kind of what I was hinting at in the start of the call is to say like, you know this is for a period which includes January, February and March. What you're seeing is mostly things that started in March and are likely to -- changes are likely to happen in the March, April, May period, basically. And so you're starting to see some of that captured there. But that's also kind of what I was trying to say in previous earnings calls where I kept mentioning, look, we've kind of shut off advertising. We're retooling that and everything. You won't start to see things until our season starts up. Our season for the parks really does not start until March. Aggieland kind of has the earliest season. But still, we're only now at the -- end of this quarter was the first part of the season that you could see that reflected. So you know, obviously you're starting from a very low base. So that's why percentage wise you could see good results for a period of time. But once you lap those results, you can't expect that you'll keep seeing good sales results on top of a good year. You're seeing good sales results on top of a bad year, which is a lot easier to achieve. So -- but I mean, the potential is unclear that way. It's just an issue of people's opinions about the market size and what it can handle and also opinions about whether there's any way to release capital from the park too, of course.

All right, Geoff, we have quite a few questions related to our Georgia Park. One shareholder asks, any guesses on why Georgia Park revenue is slightly down in Q2 than in first half of 2025 fiscal year. Another shareholder asked a similar question. Is it possible to add color regarding the decline in attendance for the Georgia Park, specifically around increased competition in the Greater Atlanta area. Any comments on the outlook for nearby Callaway Gardens Resort and how that may effect the number of guests to our Georgia Park in the summer months?

Well, Callaway Gardens does -- I mean Pine Mountain in general, Callaway Gardens, there's other things that people might want to see in the area, too. There's including not for profit things, and then there's also Great Wolf Lodge and there's other things in the area. But yes, it would have an impact just -- and to some extent, we would have an impact on them too of tourist flows in the area, sure. I don't have any predictions about what will be future attendance at Callaway Gardens, that would be even harder for us to predict than our own future attendance. In terms of why attendance is down, we talked about a little bit in the 10-Q and that language has basically been kept mostly from previous management and what we said in other 10-Qs, too. There is increased competition in the State of Georgia. That's been going on for -- I mean, different levels of intensity, but that's been going on for like 5 or more years. So yes, that's true. My own feeling is that the primary reason is poor marketing, especially paid advertising in both Missouri and Georgia. And my explanation for why things are going better sales-wise in Aggieland is the improvement in the effectiveness of paid advertising, especially. But that's difficult to prove for any one period. But I think it's the most likely explanation is just marketing effectiveness has not been good lately, not just this year, but in recent few years, either Missouri or Georgia and it hadn't been good at Aggieland, but I think it's gotten better now.

Okay, thanks, Geoff. We have a question on Georgia's EBITDA. You mentioned that Georgia's EBITDA in 2017 is a good figure to use for current normalized EBITDA for the park. To get to a normalized EBITDA for Georgia today, should Georgia's 2017 EBITDA be adjusted upward to account for inflation that has occurred since then?

Okay. Well, not necessarily -- so I would say for the potential EBITDA, yes, that would make sense, what the market potential is, what the attendance levels that the company -- that Georgia could do and what it would be capable of pricing, that would be correct that way. But yes, that is -- yes, I would say that yes, I was talking mainly in like real terms, people were saying, "What is the number that Georgia could do?" I would say I don't think that it will do more than it did back then. I think that was kind of the high watermark, I would say. The inflation thing is a little complicated because we have increased prices over time, but certain other costs have increased even faster than that. However, like sales increases are much more significant for us than, say, labor increases. I don't think we'll get rid of labor costs at any of the parks, including benefits and things like that, anywhere near the levels that they were back then. But a dollar of sales increase is a lot more important than a dollar of labor costs. So, yeah, I think that in broad strokes, that's about right. That real potential for the business is about the same as it was 8 years ago of that park, yes.

Okay, great. Geoff, we have a question on the CapEx for Georgia. Capital expenditures are $138,000 this year, up from $275,000 during the same time last year. What has this extra CapEx been spent on and what's your rough estimate of Georgia Park annual maintenance CapEx needs? Just trying to understand that some CapEx have been both maintenance and growth.

It would depend on exactly when the CapEx fell versus previous years. So if you're looking at quarterly, that's pretty lumpy. If you're looking at full year and stuff, I would say that we will comment with CapEx that it could be as high as $800,000 more than I would say normal CapEx would be at Georgia this year. And I would say that's due to a restroom project that had been conceived and kind of started at the time that I came in and then we just went through with it. So I'd say that the rest of the CapEx -- I could go through what all the rest of the CapEx has been spent on, but it's nothing interesting. There's just one big item and the rest doesn't even add up to probably that one big item. So the unusual spending is a restroom project. I don't think the other spending is unusual.

Okay. Perfect. And related to that, a shareholder asked, the Georgia Park facilities upgrade project, that has been completed and any immediate CapEx plans there at Georgia or at other 2 parks?

Well, there's always CapEx plans. We do try to spend the CapEx in the off-season. So when you see a lot of spending in the period where we're profitable, that's kind of probably either that project went slow, which can happen sometimes or more likely that was like immediate needs for some CapEx, like vehicles and things like that sometimes. The bigger CapEx things are things that are planned to take place sometime in the, let's say, the period of January, February, sure and a few months before that, so after the summer, but before the period of like, say, March or April, so in your 6-month offseason basically. I don't think there's unusual planning for CapEx at Missouri, Georgia or Aggieland. There is -- I mean there's some -- in dollar amounts, I don't think that there is -- like I said, if it wasn't for the restroom project, you just subtract that one thing, let's say in very rough terms, we're talking about subtracting around some number that's close to $800,000 from Georgia, if you were to go through the last 12 months or so and take that out. The number you're seeing is pretty normal across the whole company probably, but that doesn't mean there won't occasionally be spending on new things or some of the other parks, it can happen. I mean I am not breaking it out for you, but like when I was in Aggieland, we spent a good chunk on an unusual CapEx thing, which I wouldn't expected to be repeated. But it's just nothing like the restaurant thing, so no one would notice that it's some big CapEx, but we did it and I don't expect it to be repeated. So there will be things like that. But overall, I think all you're seeing is the restroom is the only unusual thing and there's no immediate unusual spending I think for the next year planned. It should look fairly normal, I think.

Great, Geoff. We have one question about all of the parks, related to its operating performance. How each park -- how has each park performed since the end of Q2 through today? In other words, the first few weeks of Q3, so April, then also May, can you comment on that?

No, I am not going to comment on that.

OK. Right. Moving on to corporate level items. How many shares are being purchased, retired and fractional shares being retired as a result of the reverse forward stock split? What is the price per share and what is the total amount you expect to pay out as a result of the stock split?

Ralph, do you think we're -- I don't think we're ready to give that exact amount. We could have an estimate of it, but I don't think we want to do on this call, what do you think?

We could save it for another call.

I mean, I think we want to have a completely finalized number for that, which would probably mean let's do it in following the quarter in which that actually occurred the event instead of as a subsequent event. So let's say that for the next quarter, but why don't we make sure that we say that in the call, okay?

Yes. And for investors and others listening in, the reverse forward stock split was included as a subsequent event in the 10-Q. The shares outstanding have been reflected through -- and adjusted to reflect the stock split in this 10-Q, however, more information and all adjustments will be made in the third 10-Q. That will be released in about August time frame, so we can add more.

Yes, I think that's a -- I think that's a good way of doing it. I mean we laid out how the price was determined so you can see that and that had to do with what the market price was leading up to it. And then we also have information there for you about the number of shares and everything. So we can give you final numbers on that next quarter because it'll cover the next earnings call because it will cover that as an event in the actual quarter. But honestly, there's already information out there to get very close to that number on your own if you really want to do that on just the 2 things I told you, but I don't want to announce finalized to the decimal numbers for something that wasn't -- didn't actually happen this quarter.

Do you want to comment on the price per share then since that is essentially public knowledge?

I think there's nothing unusual about the share price going into it, right? I mean I think it was extremely flat in the week that went up. It's the 5 days that was leading up to it, so. Yes, and it's trading about there, right? The last I saw the trades right around there. So it's close to the price that you've seen recently. I think it's basically the recent market price at the time that happened is very close to what the price would have been.

Yes, that is correct. All right. Moving on to insurance, are there any outstanding insurance payouts that may result from claims related to the proxy contest or does that matter finalized?

The matter is not finalized in, you know -- we still carry a liability of approximately $360,000. I could find the exact amount. Actually, it's in the 10-Q with the exact amount is so. As to my memory, it's about $360,000, which is shown as a payable of ours, related to the proxy.

Okay, great. And before we get to the final questions which deal with the outlook for the company and measure of the company, we just had some typical accounting questions here that could be helpful for all shareholders to hear. First question is related to depreciation. In the property and equipment breakdown in the 10-Q on page 9, animals are at a cost of about $1.2 million. Animals expensed through depreciation? If yes, does the rate of depreciation vary based on the type of animal and their age?

I'm sorry, is it based on the -- it's the estimated useful life of the asset, which in this case we're talking about park animals' the estimate useful life of the asset. So it's exactly what the note says, depreciation is computed on the straight line method over the estimated useful life of the asset. And yes, that includes estimates for annuals based on what we think their lifespan will be, it could be again, I mean it gets more highly technical than that because the animals that are on the books are not necessarily exactly the same as the animals that would have value in the market or something like that because of whether there's an event that's occurred like if we purchased an animal, then that would be one thing. If the animal was born, it would be something else, so I'm not saying it's a realistic number, but yes, it is based on the estimated useful life of the asset. So it's based on the estimate useful life of the animal, which is usually the same basically.

Okay, great. And last question on the accounting. In cash flow statement, there are increases in AP accounts payable and acquisition of property and equipment. Can you further detail -- can you provide further detail on these items and any further increases in these line items will be expected in the near future?

I'm not sure if I heard that correctly. The question was about accounts payable and acquisition of property and equipment.

Acquisition, yes.

Yeah, so in the sense that those are uses of cash, was that a cash flow question? I'm sorry, I really didn't hear what that was. Okay, yes.

Yes, it's related to the cash flow statement.

Sure. So if you're looking at cash flow statement, I think you're looking at the 26 weeks from March 31, let's see 26 weeks -- 26 weeks ended March 30, 2025. So that I think that's what probably what you're looking at. The acquisition of property and equipment is the restroom project. I mean it's not the full extent of it and stuff, but I laid that out and that's almost exactly what the difference is. Probably, I said it would be somewhat in the neighborhood of $800,000, let's say, and then you can compare those 2 numbers and decide if that's what's in there. Accounts payable, I'm not sure if I fully understood that question actually. I think the only major change that we had in the accounts payable was related to the proxy contest, the eventual insurance receipts on that. And for the full 6 months, there probably would have been 2 receipts that were meaningful in that way, but I'm not sure what else it would have had that would be a big change in that, but I would have to compare exactly what it was in the previous period to know that for sure. I wasn't here for that, so. I mean, we don't normally have huge accounts payable, so like if you're seeing big changes in the accounts payable, it is most likely related to insurance we'd have to go through like if it was anything else, but it dwarfs the other things that would be in accounts payable. And likewise the CapEx, yes, there's other things in CapEx -- at CapEx, but the restroom dwarfs it. So I would say if you're saying those are big items that are unusual changes, yes, it's insurance related to the proxy with the accounts payable. So that is like legal fees, basically and CapEx is the Georgia restroom. I mean that's not 100% of in either case, but that's what those -- by far that's what you're seeing in each case.

Okay, great. We have 2 final questions that have been previously submitted via email. [Operator Instructions] Our first question here is related to management of the company. You mentioned in the report, the focus on EBITDA and free cash flow per share by assessing the performance of each segment and the company as a whole. Can you speak to where these metrics stand now and what you believe would be a reasonable benchmark for these metrics based on industry standards for comparable organizations?

Well. I mean the easiest ones for comparison purposes for the industry is for margins on both of those. I don't know that that's the most useful number though because what we actually care about in the long run is return on capital. So you could have a sufficiently high margin and yet we feel that they're not necessarily doing that well. In terms of EBITDA or something, a very well performing park in the industry probably is capable of doing a 30% EBITDA margin. The question is how much capital it uses and some other factors like that. It is potentially possible to have a 30% EBITDA margin and yet for the park not to be doing well enough because it simply uses too much capital relative to the EBITDA. Free cash was closely related to EBITDA, there's some difference because it would depend on the normal level of CapEx as well as factors having to do with animal acquisition and sale basically. But a park could probably -- a successful park in the industry probably can, like I said, do something like 30% EBITDA margins or something and probably only requires about 1/3 of EBITDA to be used for let's say CapEx and the investment in animals and things like that. So you know, do the math on that, that's probably 30% EBITDA margin is a benchmark for what it is and then 20% after those things more like in terms of free cash flow, but that's before taxes. So then you have to apply taxes to that. But if you're talking about sort of cash flow absent the effects of cash, then the 20% margin and then you put a tax rate on that, that's probably what we're talking about in terms of margins of a successful park in the industry. But again, I would just say like in terms of what it does for shareholders over time, for owners over time, it's really, really important what the relationship between sales and capital invested in the businesses and not just the margins. There are parks that have good looking margins, but aren't really making their owners wealthy because they require too much capital to be laid out in like land and things like that. But they are cash flowing back to the owner. So there's not debt on it or something they can stay in business and they can look like they're doing pretty well. Those are rough things for the industry. They're not necessarily anything that has to do with our particular parks. I'm just trying to give you a guess. And then of course, there's many, many parks that are much more marginal and are hoping to achieve those results, but are nowhere near it. And that's just true in any industry that aren't that successful. But what are people targeting? Probably something like that, that's probably true, 30% EBITDA margins and then 20% pre tax with, then you apply, let's say 25% tax rate or whatever, and so your free cash flow is then in the teens or something. That's probably what they're looking for.

Great. Thanks, Geoff. And the last question that we have for today. In summary, where do you see the best opportunities going forward? What efforts are planned to further grow EBITDA and free cash flow per share?

The biggest things to grow EBITDA or free cash flow per share by far would be to improve marketing effectiveness, I mean -- so there's a couple ways to think about this, but at existing parks, the best thing that you can do is -- I mean the best thing you can do in terms of business wise would simply be an increase in price if you could do it. That would bring in the most profit, you know that way. The second best thing that you could do would be to have additional sales of other things per attendee that you already have during their visit. So let's say not necessarily a price increase, but an increase in per capita spending. Basically more spending at the park on other things while you're there. Somewhat less attractive than that would be increased frequency of business by the same people, but that would also be good. Somewhat less attractive than that is actually drawing in new attendees. The flip side of that is you can remove expenses. That's very, very hard to do from everything except for the corporate part of the business right now. I do think that there's room for improvement on that side at only Aggieland. I do not believe that at Missouri or Georgia, there's room for improvement in terms of cutting a fat or anything like that. So -- and of course, that's much less significant like I said. You take a dollar of labor costs out that is not the same -- sorry not dollar, but you cut labor cost by 5% or something that's not as helpful as increasing sales by 5%. And then other things are releasing capital like I said, which is shrinking the footprint of a park or lowering the amount of reinvestment that you're making all the time that has the effect of improving things over time, too. That's pretty significant. When I talked about like -- it varies by park, or when I talked about like taking out expense in terms of labor or something, actually capital expense economically is about as significant as say marketing effectiveness. And basically insurance would be the other big one. So I would say your biggest expenses are really how much capital is in the business, how effective your marketing is and how much your insurance costs. Those are actually -- those 3 are pretty comparable in terms of kind of their importance to how well a park does and whether we can get those numbers looking better over time. And that's just a question of how far you can go with each of them. I think the best room for continual improvement is increased marketing effectiveness. There may be some room for improvement in like, say, trying to get some lower insurance costs because some of the ways we buy insurance and stuff is not so good. And like I said, there is some room for improvements in terms of having not increasing capital, let's say. Overall, as quickly as you increase attendance, so reducing capital intensity. But those are like we might have improvement for a year or something, but they're not going to be improvement year after year. There might be a onetime opportunity in those things. The one that really adds the big opportunity is to spend similar amounts of advertising dollars and get bigger bang for your buck or to reduce advertising expenses while keeping sales levels the same. So better return on advertising is your biggest opportunity at the 3 existing parks. And then when we talk about other things, it gets a little bit more complicated. I think that is something that we can talk about in like probably next calendar year or something. I don't know that we have enough capital right now and liquidity and stuff that we would be looking at really good opportunities to acquire things or something like that. Meaning theoretically, there might be potential for that, but I don't see -- nothing that I've seen so far has the sort of payoffs of improving the existing parks right now, but that can change. I just mean that I've not seen any deals that look that exciting versus what you could get by improving existing parks at the moment. But if the economic climate was to change dramatically or finance has changed dramatically or whatever, you might see better deals coming across.

Thanks, Geoff. With that, that concludes today's call. The transcript of the call will be available on the company's website. Thank you for joining us today. You may now disconnect.