Vail Resorts, Inc.

Will you stand by? Good day and welcome to the Vail Resorts first quarter fiscal 2020 earnings conference call. Today's conference is being recorded. At this time, I turn the conference over to Mr. Katz. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2020 first quarter earnings conference call. Joining me on the call this afternoon is Michael Barkin, our chief financial officer. Before we begin, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties. As described in our SEC filings, the actual future results may vary materially. Forward-looking statements in our press release issued this afternoon along with our remarks on this call are made as of today, December 9, 2019, and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non-GAAP financial measures. Reconciliations of these measures are provided in the tables included with our press release. which along with our quarterly report on Form 10Q were filed this afternoon with the SEC and are also available on the investor relations section of our website, www.failresorts.com. So with that said, let's turn to our fiscal 2020 first quarter results. Overall, we are pleased with our results in the first fiscal quarter. Our Australian resorts delivered a strong performance with another record year at Parisher on an Australian dollar basis and very strong results in our first year of operations at Falls Creek in Hotham. Our strong EPIC Australia Pass sales, good conditions, and the addition of the Leichhardt chairlift at Parisher supported our continued momentum in the Australian market. Our consolidated results from Parisher were negatively impacted by the strong U.S. dollar, which created an approximate $2 million resort-reported EBITDA headwind from currency translation in the quarter relative to the prior year results. Whistler Blackhomes Summer Business performed very well with strong performance in its world-class mountain biking operations and sightseeing, supported by the addition of the new CloudRaker SkyBridge. Our U.S. Epic Discovery business continues to grow and generate strong financial returns. Our lodging business experienced mixed results, with continued success from our properties at Grand Teton Lodge Company, partially offset by softer results at our Colorado properties, in part due to weaker group demand in comparison to the prior year period. Turning now to our 2019-2020 North American past sales for our resorts and early season indicators. As we approach the end of our selling period, season past sales for the North American ski season are up approximately 17% in sales dollars and approximately 22% in units through December 2, 2019, compared to the prior year period ended December 3, 2018. The results include military pass sales and peak resorts pass sales in both periods and are adjusted to eliminate the impact of foreign currency by applying an exchange rate of 75 cents between the Canadian dollar and U.S. dollar in both periods for Whistler Black Home pass sales. Excluding sales of military passes, season pass sales increased approximately 16% in sales dollars and approximately 22% in units over the comparable prior year period. As we expected, growth in sales dollars was lower than our unit growth, primarily from the inclusion of our Epic Day Pass products. We are very pleased to see the strong sales growth in our Season Pass program that exceeded our expectations. We continue to see very strong growth in our Northeast markets, which are benefiting from the first full year of pass sales with unlimited access of Stowe, Okemo, and Mount Sunapee, the recent addition of Peak Resorts, and the improved impact of the expanded guest data and insight we now have in that region. Our destination markets outside of the Northeast also saw very strong growth and continue to perform well through our enhanced ability to reach destination guests with our data-driven marketing and the introduction of the Epic Day Pass. Our local markets continue to show solid overall growth driven by favorable results among our local guests in the Whistler-Blackcomb region with particular strength in Seattle from the first full pass sales season with access to Stevens Pass. We were also seeing strong results from our Northern California and Utah guests. Sales in our Colorado local market were softer with solid results in our Epic products offset with declines in certain regional products which was expected without Arapahoe Basin on those passes. Those declines will be more than offset by lower partnership payments. The majority of our sales growth came from our Epic and Epic Local products, where we saw solid growth in new pass holders and renewing pass holders, with less trade down to Epic Day Pass than we were expecting. Epic Day Pass was a strong success in its first year with an expanded product offering and was a significant contributor to our overall growth and exceeded our expectations, particularly in the Epic two and three day products. We believe this bodes very well for the long-term opportunity of Epic Day Pass as we begin to highlight the incredible value to lower frequency guests. Importantly, the vast majority of Epic Day Pass sales came from new pass holders with particular success in destination markets. Our military program delivered strong growth with the program continuing to generate strong renewal rates while also adding new pass holders. We expect that the total number of guests on all Advanced Purchase Passes this year will exceed 1.2 million including all US, Canadian, and Australian passes and Epic Day Pass representing an incredible group of highly loyal and passionate guests. Overall, lodging bookings for the season are largely in line with prior year bookings. Based on historical averages, around half of the bookings for the winter season have been made by this time. though it is important to note that our lodging bookings represent a small portion of the overall lodging inventory around our resorts. The early season experience at our resorts has been encouraging with strong conditions across our Colorado, Tahoe, and Northeastern resorts. Both Keystone and Vail have benefited from early snow and our recent snowmaking investments which allowed Keystone to open on October 12th and Vail to open on October 15th and deliver a much improved experience to guests over Thanksgiving. Our resorts in Tahoe and Utah have opened with typical conditions for this time of year, and our Northeast resorts have started strong with certain resorts opening weeks earlier than in prior years. We are thrilled to welcome guests to all of our resorts as the 2019-2020 North American ski season kicks off with several transformational enhancements to the guest experience at our resorts. In Colorado, we have made significant investments in our snowmaking systems that have transformed The early season terrain experience at Vail, Keystone, and Beaver Creek. As a result of these investments, Keystone experienced its earliest opening in more than 20 years, and Vail opened earlier than usual with an improved terrain offering available at opening, elevating the experience for our guests. At Park City, we transformed the Tombstone Express area with a new permanent Tombstone BBQ restaurant and the new four-person over-and-out lift that provides a quicker, more direct route for skiers and riders to access Canyons Village from the center of the resort. In addition, we completed a full renovation of the Beaver Creek Children's Ski School facilities and improvements to the Peak 8 base area at Breckenridge with new ski school and childcare facilities, as well as an improved ticket and retail and rental experience. We remain highly focused on investments that will substantially improve the guest experience across our resorts and implemented a new mobile lift ticket fulfillment technology that eliminates the ticket window for guests who purchase their tickets in advance. We also completed one of the final stages of our point-of-sale modernization project and invested in technology to automate our data-driven marketing efforts. We completed significant one-time investments across the acquired resorts of Crested Butte, Okemo and Stevens Pass, which included replacing and upgrading the Daisy and Brooks lifts at Stevens Pass and the Teocali lift at Crested Butte. as well as On Mountain Restaurant upgrades at Okemo. Now I would like to turn the call over to Michael to further discuss our financial results and our fiscal 2020 outlook.

Thanks, Rob, and good afternoon, everyone. As Rob mentioned, we are pleased with our first quarter performance. ResortNet revenue was $263.6 million in the first fiscal quarter, an increase of $43.7 million compared to the prior year. Resort reported EBITDA was a loss of $76.7 million in the first fiscal quarter, which compares to a Resort reported EBITDA loss of $72.5 million in the same period in the prior year. Fiscal 2020 first quarter Resort reported EBITDA included $9 million of acquisition and integration related expenses and approximately $2 million of unfavorability from currency translation, which the company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results. Net loss attributable to Vail Resorts was $106.5 million for the first quarter of fiscal 2020, or a loss of $2.64 per diluted share, as compared to a net loss of $107.8 million, or a loss of $2.66 per diluted share for the same period in the prior year. The net loss for the first quarter of fiscal 2020 included the after-tax effect of acquisition and integration related expenses of $6.8 million and approximately $1 million of unfavorability from currency translation, which the company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results. Our balance sheet at quarter end remains strong. We ended the quarter with $136.3 million of cash on hand and $1.9 billion of net debt. As part of the Peak Resorts acquisition, we expanded our existing term loan facility by approximately $336 million and assumed a portion of Peak Resorts debt. Our net debt was 2.8 times trailing 12 months total reported EBITDA, though it is important to note that this ratio only includes Peak Resorts results for the loss period between closing and quarter end, and we do expect that ratio to decline as we incorporate the full season of Peak Resorts results. I am also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts common stock of $1.76 per share, payable on January 9, 2020 to shareholders of record on December 26, 2019. Additionally, the company repurchased approximately $21.4 million of stock during the quarter at an average price of $224.28. Now turning to our outlook for fiscal 2020. Given our first quarter results and the indicators we are seeing for the upcoming season, we are reiterating our resort reported EBITDA guidance for fiscal 2020 that was included in our September earnings release. which is based on the assumptions incorporated at that time including foreign currency exchange rates. While past sales results to date have been encouraging, it is important to remember that the North American ski season has just begun with our primary earnings period still in front of us. As always, the upcoming holiday period is a key period of the ski season and we plan to publicly report certain season to date ski season metrics on January 17, 2020. I'll now turn the call back to Rob.

Thanks, Michael. We remain committed to reinvesting in our resorts, creating an experience of a lifetime for our guests and generating strong returns for our shareholders. We will announce our complete capital plan for calendar year 2020 in March 2020, but we are pleased to announce our signature investments plan for the 2020-2021 season. We are excited to announce a 250-acre lift-served terrain expansion in the signature McCoy Park area of Beaver Creek. This new lift access beginner and intermediate bowl experience is a rare opportunity to expand with highly accessible terrain in one of the most idyllic settings in Colorado and will further differentiate the high-end, family-focused experience at Beaver Creek. At Breckenridge, we plan to install a new four-person high-speed lift to serve the popular Peak 7. This additional lift will further enhance the guest experience at the most visited resort in the U.S. and will significantly increase guest access and circulation for the intermediate terrain on Peaks 6 and 7. Subject to government approvals, at Keystone, we plan to replace the four-person Peru lift with a six-person high-speed chairlift. in order to increase capacity out of a key base area of the resort and improve guest access, circulation, and the experience in one of the top performing resorts in the U.S. At Whistler Blackcomb, we intend to significantly increase the seating capacity at the Rendezvous Lodge restaurant on Blackcomb Mountain. The expansion will add 250 seats at a critical on-mountain restaurant, further enhancing the experience at North America's largest resort. Our capital plan includes several key investments that will continue to further our company-wide data-driven approach. We are now in the second phase of implementing our automated digital marketing platform that will allow us to aggregate a more holistic view of the guest that will drive improvements in personalization and engagement across all lines of business, including ski school and rentals. We will also be investing to completely revamp and upgrade our digital ski rental online platforms to provide a more seamless advanced purchasing process and to allow more dynamic pricing and discounting to broaden access during off-peak times. Finally, we will be launching a completely revamped Epic Mix mobile app that will offer new functionality and an improved user experience. We will continue to invest in corporate infrastructure and technology to improve our scalability and efficiency as we work to optimize our processes, business analytics, and cost discipline across our network. This will include the implementation of an automated workforce planning system to optimize our labor scheduling and improve financial systems to enhance business analytics. For the recently acquired resorts of Crested Butte, Okemo, and Stevens Pass, we are planning to complete the second and final phase of a two-year, $35 million investment program. Subject to government approvals, we plan to complete a transformational investment at Okemo, including upgrading the quantum lift from a four-person to a six-person high-speed chairlift relocating the existing four-person quantum lift to replace the Green Ridge three-person fixed-grip chairlift, and improving the base area experience through a renovation of the base 68 restaurant, expansion and renovation of the children's ski school facility, and enhancement of the guest arrival experience. We plan to spend approximately $24 million on integration activities, primarily related to Peak Resorts. Our capital plan for calendar 2020 includes one-time real estate investments of approximately $3 million, which are related to and funded by land sales completed in calendar 2019 with third-party developers at the Keystone One River Run site and Breckenridge East Peak Aid site. While we expect these projects to occur in calendar 2020, these investments remain subject to municipal approvals of those development projects, creating timing uncertainty. Our capital plan for calendar 2020 will be approximately $155 million to $160 million excluding one-time items associated with integrations, the one-time Triple Peaks and Stevens Pass transformation plan, one-time Peak Resorts capital improvements, real estate related capital, and $4 million of reimbursable investments associated with insurance recoveries that we had originally expected to occur in calendar 2019. Including these one-time items, our total capital plan will be approximately $210 million to $215 million. We will be providing further detail on our calendar year 2020 capital plan in March 2020. Our attention to service and our commitment to delivering an outstanding guest experience across our network continue to be the focus of our company's efforts, and we are thrilled to welcome our pass holders to the 17 Peak Resorts ski areas this year. I would like to thank all of our employees for their passion, hard work, and commitment to creating the experience of a lifetime for our guests, which, as always, lies at the center of our success. We hope that you all enjoy a fun and safe season ahead. At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow us to not reach our equipment. Again, press star 1 to ask a question. And we'll take our first question today from Felicia Hendricks with Barclays.

Hi, good afternoon and thank you. So your season pass sales were great. Congratulations on a strong year there. Wondering if by any chance you guys could help us understand what percentage of the peak folks converted to Epic and considering that I don't really think you're going to answer that question, maybe that you can kind of frame it in, you know, was it kind of better in line or worse than what you expected?

Yeah, I would say we're not sharing that, and for two reasons. One, we typically don't share that kind of detail, but also we're just in the process of actually bringing the two databases together, and so at this point we couldn't even say because we haven't had a chance to really fully look at the results that just ended a little while ago. I would say, yeah, I think we've been quite pleased with the results from PEAK, obviously, Peek's program, you know, obviously just because they have a base of passes that most of you could see in their public results from last year, obviously that depresses our growth rate modestly, but then obviously, you know, there's an incremental opportunity by having, you know, Peek in the program, both in terms of the people who, you know, might convert or upgrade over to our passes, but also obviously new people coming in from and the different destinations where Peak has a resort. So we feel very good about it. Again, in the first year, we haven't had a full opportunity yet to really market to those guests, to do all of our data collection and capture. So we believe there's still a very strong opportunity on that front for next year. And I think we were also quite pleased that a lot of the strong trends that we saw on the destination side in the Northeast, we saw across our network. So just, you know, just I think felt are very confident in everything that we laid out for the season pass effort this year and seeing it come to fruition, including PEAK.

That's really helpful. And then you did mention both in the press release and in your prepared remarks that you didn't see much trading down and you did see new entrants to the program. So I was just wondering why you didn't see as much trade down as you expected. Maybe you can give a little bit more color on that. Can you also tell if you were able to recapture folks who were on Epic in the past but left the program because it didn't fit their needs and now they're coming back?

Yeah, I think on the trade down, what I would say broadly, I think one, there's a lot of loyalty obviously to our Epic and Epic local pass holders into those products. A lot of loyalty from even the Epic 4 and Epic 7 customers. Holders in those higher volume products. And, you know, I think obviously as we offered, brought in kind of the number of options at lower price points, we assumed we might see a little bit more trade down, which didn't happen, which I think, you know, speaks very well for the kind of connection that we have to those guests. I think it's also, you know, it's a program that will take time, overtime to, you know, just like when we first introduced the Epic Pass, One of the things that was our biggest challenge was just convincing people who didn't live near the ski resort that a season pass was a potential option for them. Now I think we're really on a new journey, which is convincing these one, two, three, four-day skiers that actually a pass product is right for them, gives them a great discount. The economics make sense clearly, but obviously getting that message out takes a number of years and all the marketing effort that we put into it. So I think that, you know, in our minds is, you know, still kind of lies ahead, I think, for the overall program and the opportunity with Epic Day Pass. Yeah, I can't really comment on the specifics of that in terms of some of the trading, but we absolutely saw, I think, a benefit in terms of both bringing people back into the program, but most importantly, introducing new people to the program. So that was the predominant, I think, success that we saw with Epic Day Pass, both in terms of People who were previously on lift tickets and prospects, people who were not necessarily in our database before. So I think all of those are good signs for the future.

That is so helpful. Thank you. And then just my final question is just on Whistler. I think some folks are concerned that Whistler is getting a slow start. How are you thinking about the demand patterns that you're seeing there?

Yeah, I think, you know, conditions at Whistler are definitely more challenging than probably anywhere else in our network. And, you know, I think obviously we're hopeful that we're going to see that turn around, obviously, before the key Christmas holiday. I think, you know, certainly the data points on Whistler, I think, generally look fine, you know, again, largely in line with, you know, what we would expect. But obviously that, you know, in part that's going to – some of our results will depend, of course, upon – The actual conditions when people come, certainly for the holidays and beyond. I think one of the good things about Whistler, obviously, is that you have a lot of people who book with longer lead times. And so, you know, I think so long as, you know, kind of conditions come before the holidays, I think that still gives us a good opportunity, you know, to essentially have, I think, still a strong holiday period. But that said, obviously, yeah, some of this is still going to be dependent on what the conditions are at the time.

Great, thank you so much.

Yep, absolutely.

Next, we'll hear from Sean Kelly with Bank of America.

Hi, good afternoon, everyone. You know, Rob or Michael, maybe just to start, you know, in kind of talking about the day pass in a different variety, can you maybe help us just think about how the launch has gone off relative to some of the initial results you either saw from the Epic four-day product or the military product? from the outsider perspective, military was kind of huge adoption up front and pretty close to like 100,000 units. The four-day took, it was an introduction but probably more incremental and took some time to build. Maybe without giving specifics because I know you won't, maybe give us just some color about how relative those products, what kind of behaviors you saw with the day past.

Yeah, I would say definitely more in line with the four-day. I mean, just broadly, not specific by specific, but more broadly, definitely different than military. Obviously, military was a product that was discounted very, very significantly, and really changed kind of how we provided access to those who, you know, served in the armed forces. So I would say that that was obviously a much more quick adoption, but I certainly think, you know, we mentioned in our remarks we're quite pleased to see the results in the second year and seeing both the loyalty and, you know, and there's the improvement obviously in the revenue from the program. I think on Epic Day Pass, you know, my belief is that it'll take a number of years to continue to broaden. I think especially in those Lower Frequency, you know, past products. And that is where, you know, I think we said that it certainly exceeded our expectations in part because, you know, a little unclear to us when we launched and designed the product how long it would take us to begin to get adoption on that. And so we're very pleased that, you know, to start off on such a strong foot. But like Epic 4 and 7, it'll take a number of years, I'm sure, for us to come close to where the maturity could be for that product.

Great, thanks. And you noted both throughout, I think, a lot of the commentary of the strength in destination and then also obviously seeing new guests, and I think there was some skew towards destination markets even for new signups around the day pass. Why aren't we seeing a similar movement on the lodging side? I know the lodging business is going to depend probably more market to market and maybe a little bit lumpier, but I would think if you're seeing such great activity from destination, they're likely to have longer lead times that might be like what you see in lodging. So just any kind of observation on why that pattern may be a little different?

Well, I think you're looking at different dynamics that are going on. I think if we're talking about, quote, lodging bookings into the season, if that's what we're looking at, then I think Obviously, although we're making great strides on the Epic Day Pass, still obviously doesn't represent a huge percentage of the total in terms of how many people ultimately come to the resort. And I think we feel good about where we see lodging bookings and obviously feel like they support our overall guidance for the year. And the over-delivery on Epic Day Pass, I think, certainly builds confidence. But I don't know that it's yet enough that it would really change the total lodging drivers, you know, for any of our resorts. And, again, especially a lot of the lodging, you know, bookings that we're talking about in the release speak to our owned and operated managed properties. That, right, is also a smaller percentage, right, of the overall market.

Right. Okay. Thanks for that. And then last question for me would be, you know, just I think you may have alluded to this in the answer to Felicia's question, but just When we think about the contribution from peak overall, and again, I apologize if I missed it, what was the overall impact to growth rate now that we put it in the base? Was the core peak trend accretive to the total growth in line with? Did it move it at all, or did it dilute the total growth rate as you think about what you saw overall?

Yeah, I think, you know, again, it's hard for us to be precise around that because, you know, there are so many different things happening at the same time when you include peak, and we can't track any of them necessarily with precision. So, you know, obviously including peak in our program pulls down the growth rate because it increases the base. Then you have people who actually move from peak passes to epic passes, and as I mentioned, you know, we feel good about that, but we haven't been able to do all the analysis to kind of, you know, bump those two databases together. Peace by Peace. But then, you know, there's in every past program, certainly for Peak, certainly for us, there are people who come in and out every year. And so it's a little bit hard for us to fully understand, right, when we see pickup in markets around Peak, is that people who were going to Peak? Is it because of Peak? Is it, you know, were they on the verge of buying before and Peak just pushed them over the edge? I mean, all of those things, I think, you know, we try and assess. Now, overall, I think we feel like absolutely Peak was a positive. Not the primary driver of our results by any stretch, but absolutely a positive for this year, and I think a first step in the kind of impact that I think PEAK can make. And again, I think we'll see a bigger impact next year. So I think in line and kind of largely to what we expected, but it's unfortunately not possible to truly parse it out.

Thank you very much.

Thank you.

We'll now hear from David Barron with Barron Capital.

No, I didn't dial in, sorry.

I'm sorry, Mr. Barron, did you have a question?

No, I did not bring in a question, sorry.

Okay, thank you. We'll hear from Alex Morosia with Barron Berg.

Hey, good afternoon, guys. Just one for me. I'm looking at some of the political unrest down in South America right now and just wondering what you're seeing year over year in the early buys and season pass sales to some of those international customers.

Yeah, I don't, you know, I think at this point, you know, obviously Mexico is a very important market for us. I think, you know, outside of Mexico, the other markets in Latin America are a little bit less important, especially over the last couple of years because, you know, Brazil has become a little less important. Some of the other countries have receded a bit, both with the strong U.S. dollar and some of the challenges, I think, that we've seen in those economies over the last couple of years. I don't think outside of Mexico, I don't think we see some of those other countries as being overall material at this point to present a trend. So we're watching the same thing, but a little bit of a smaller impact probably to the company in the upcoming year.

Got it. All right, that was it for me. Thanks. We'll now hear from Brett Andrus with KeyBain Capital Markets.

Good afternoon. Just a quick question for me. You know, on the December period, you know, the one that caught most of us off guard last year, do you have any, you know, leading indicators that give you confidence that the early holiday period this year could improve, you know, if not stabilize versus last year?

Yeah, I think... Obviously, we stare at that and obviously include whatever indicators we have on that, certainly in the decision we make about reaffirming guidance. But at the same time, I would say we don't have perfect information, as we said. We have different logic indicators, but in some cases, they don't represent the totality by any stretch of the market. Obviously, the past sale piece, we certainly feel good about. and on conditions we feel good, but those are always going to be variables. So what I'd say is, yeah, we obviously have taken the experience from last year and incorporated that in our thinking as we put out reaffirmed guidance this year, but of course there's always going to be uncertainty no matter what.

All right. Thank you.

Thanks.

Next, we'll hear from Patrick Scholz with SunTrust.

Hi. Good evening, Rob and Michael.

Good evening.

Good evening. Just a question on clarification. You talked about overall lodging bookings for the season coming up are largely in line with prior year bookings. To be specific, is that just the occupancy on the books, and how does Room Raid ADR book for those bookings.

So, yeah, that comment is just about occupancy and room nights on the books and does not – we're not commenting on Raid.

Okay. Okay. I'll – okay. Thank you. That's it. Thanks.

Our next question will come from David Katz with Jefferies.

Good evening, everyone, and congrats on the quarter.

Thanks.

I wanted to ask about kind of a longer-term growth. You know, we have many discussions about, you know, what lies ahead on the M&A front in particular. And, you know, we've talked in the past about maybe Europe, maybe Asia, and, you know, we've seen the acquisitions that you've made very productively in the domestic markets. Where is your focus in terms of M&A going forward?

Yeah, well, one, I just would add, I think not only have we been successful with our acquisitions domestically in North America, but I think we've been very successful with the acquisitions in Australia that have been huge contributors, I think, to incremental growth certainly in the summer months and I think the past and many more. I think there are going to be select opportunities in North America where we feel like we can continue to bolster the network. And then I think we are focused in Asia, particularly in Japan and certainly in Europe. And I think we've been quite open that those are obviously tougher markets obviously to enter into and we'll probably have to ultimately be more flexible in terms of our approach. But we also feel like there are both short-term and long-term opportunities in those markets from passes, from using data in a better way, from the collaboration and partnership that I think we could bring to any of the resorts in those markets. So no doubt it takes longer, and no doubt also we've been Thank you for joining us.

and counted references to the economy. Irrespective and not asking you for a broad call on the economy, but what are your perceptions from what you're seeing in Vale's business in terms of just consumer appetite, strength, weakness versus where it was 90 days ago?

You know, I don't know. I think in the U.S., I'm not sure we're seeing a discernible change. I mean, I think that, you know, inside our business, obviously I'm reading the same stories and research reports that everybody is, but in terms of inside our business, I'm not sure that we've seen necessarily a discernible change. You know, and I still think we feel certainly quite good about the trends that we're seeing in the U.S., I think on the international front, it's a little tougher, obviously, with stronger U.S. dollar, with some instability in terms of what was mentioned earlier elsewhere in Europe. So on that front, I think a little bit more unclear, but certainly are not seeing, I think, a big enough change since the September call that it has affected our outlook for the season.

Got it. Thanks very much.

Thanks. Next we'll hear from Ryan Sunby with William Blair.

Yeah, hi. Thanks for taking my question and congrats on the quarter. Thanks. Rob, I guess as you've kind of doubled your pass base it feels like over the last handful of years or so, are you starting to see any kind of on-mountain or maybe it's even off-mountain capacity constraints that are kind of preventing you from selling more passes going forward? And then I guess second, when you look at kind of pass sales exceeding expectations for the year, Can you maybe just point out what you thought was maybe the biggest upside driver or maybe one or two biggest upside drivers for where that upside came from? That would be great. Thanks.

Sure. We're not seeing capacity constraints, I think. In terms of on-mountain, I think there are only a handful of days typically in any year where we feel like we run into true capacity issues. You know, and often, especially on the destination side, really the capacity limiter is lodging and places for people to stay. And so, you know, at the moment, I'm not, you know, we're not concerned about that being, you know, something that would constrict our growth in the short term on the capacity side. I do think, though, obviously that, you know, having dramatically grown, the PASS program has, you know, really added tremendous stability and loyalty, you know, to our company. And that's something that I think bodes quite well for the long term. On the biggest upside driver, you know, I would say probably two different pieces. One, I think we've already talked about, which is, you know, we certainly saw great strength on the Epic II and Epic III day, particularly obviously later in the selling cycle, which we knew was the potential opportunity. I think a lot of new people, both new to the PATH program, prospects coming into the program, all of that was quite positive. And I think the other piece was real strength in the Epic and Epic Local products. So the fact that we saw both of those do quite well this year, yeah, again, I think speaks volumes to both the experience we offer, the design of the product, and how we market it and communicate with our guests about it. Yeah, all of those were strong positives this year. Great, thanks. Thanks.

Our final question will come from Mark Torrente with Wells Fargo.

Hey, guys. Thanks for taking our questions. Congrats on the quarter. With Epic Day, any more detail you can provide on the makeup of those product sales, maybe days purchased, local versus destination, consumer type compared to your expectations originally? And then are you able to tell of those who previously purchased lift tickets, are they buying more days on that product since it's more affordable?

Yeah, I would say on Epic Day, mostly aligned with what I've been sharing earlier. I think that obviously in terms of versus our expectation, I would say pleasantly surprised by just the strength of the prospect market for that product. Obviously, you just don't know when you go out with a new product how many people will come in who you don't have currently in your database. So I think between that You know, people who are, again, just new to the PASS program, all of that was a real positive. The strength of Epic Day Pass is very much in the destination markets, much more so than in the local markets. You know, I think that that may represent an opportunity as we go forward and, again, as we, you know, continue to craft our marketing approach. But right now, it's very much a destination product, which is good because that's exactly where it was targeted towards. We are seeing increases, but hard to say. I think we'll probably have better insight on the overall frequency improvement as we see this season play out. But right now, again, feeling good about the opportunity that we've provided people and the opportunity that it's given the company.

Okay, great. And then just one more. Now that you've owned Peak for a few additional months, what have you learned in terms of their strengths, weaknesses, needs, their past program, data, etc.?

I think, you know, been, you know, one, really impressed with the people. You know, I think they've got a, you know, a terrific employee base, incredibly passionate, very committed. Obviously, you know, it's a big, big challenge to go through. A transition like this, and I think they've been totally committed to the experience on the mountain and the guests, so I think that was great to see. Their operations, their snowmaking expertise, also quite strong, obviously very critical for many of their resorts, and so no surprise they have a real strength there. and I think absolutely opportunities around data. I think they had a very good first couple of years with their new PATH program but obviously are still early in that effort and so I think that's an opportunity especially for us for next year as we can use a little bit of the tools that we have at our disposal and the team that we have here to use data, better capture data on a much more rigorous basis and really broaden the kind of impact that they can have in the local markets that they serve. So I think very much aligned with our expectations. Good resorts, run well. I think that they'll be a great addition to our broader mountain team and then a real opportunity for us to use a little bit more sophisticated approaches on the data marketing and many of the corporate functions. Obviously, we just have just a little bit more history right behind us that we think can help to drive value.

Okay, great.

Thank you.

Thank you.

That will conclude today's question and answer session. I will now turn the conference over to Mr. Katz for any additional closing remarks.

Thank you, Operator. This concludes our fiscal 2020 first quarter earnings call. Thanks to everyone who joined us today. Please feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon, and goodbye.

That does conclude today's conference. Thank you for your participation. You may now disconnect.