Vail Resorts, Inc.

Good day and welcome to the Vail Resorts second quarter 2021 earnings call. During today's call, we will have a question and answer session. If you would like to join the queue at any time, please press the star key followed by the digit one on your telephone keypad. Today's conference is being recorded. At this time, I would like to turn the conference over to CEO Robert Katz. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2021 second 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, and 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, March 11, 2021, 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 table concluded with our press release, which along with our quarterly report on 410Q were filed this afternoon with the SEC and are also available on the investor relations section of our website at www.dalresorts.com. With that said, let's turn to our fiscal 2021 second quarter results. Given the challenging operating environment as a result of COVID-19, We are very pleased with our results through this point in the 2020-2021 ski season across our 34 North American resorts. We have welcomed guests to each of our resorts with no major ongoing disruptions, which has been enabled by our focus on the health and safety of our guests, employees, and communities. While our results for the second quarter continue to be negatively impacted by COVID-19, total visitation across our North American destination mountain resorts and regional ski areas was down approximately 5% compared to the same period in the prior year. The strong visitation for the quarter highlights the underlying resiliency of our business, the loyalty of our guests, and the strong appeal of skiing in guest leisure travel plans. As we moved past the peak holiday period, which was constrained by capacity limitations driven by both COVID-19 and below average snow conditions, we saw improved results in January, particularly with lift ticket sales. While visitation trends improved throughout the quarter, our ancillary lines of business continue to be negatively impacted by COVID-19-related capacity constraints and limitations, particularly in food and beverage and ski school. We experienced strong results in the quarter from both our local and destination guests, with local visitation up slightly compared to the same period in the prior year and destination visitation proving more stable than we expected. Destination guests, including international visitors, modestly declined to comprise 53% of our U.S. destination mountain resort skier visits, excluding complimentary access. Despite the travel challenges associated with COVID-19, which compares to 57% in the same period in the prior year, international visitation, as expected, decreased significantly due to COVID-19-related travel restrictions. Results at Whistler Black Home were disproportionately impacted throughout the second fiscal quarter, due to the Canadian border remaining closed to international guests, including guests from the U.S., with destination guests, including international visitors, declining to 15% of Whistler Black Home visits, excluding complimentary access, which compares to 48% in the same period in the prior year. Our season pass unit sales growth of 20% for fiscal year 2021 created a strong baseline of demand heading into the season across our local and destination audience, and will be one of the most important drivers of our performance and relative stability for the season. For the fiscal 2021 second quarter, 71% of our visitation came from season pass holders compared to 59% of visitation in the same period in the prior year. Our growth in pass holders this past year also positions us well as we head into the 2021-2022 season. We remain even more committed to the benefits Advanced Commitment offers our company and intend to remain aggressive in providing the best value to skiers and riders who purchase in advance of the season and continuing our strategy to move lift ticket purchases into our past program. We are excited to launch our 2021-2022 lineup of Epic Pass products on March 23rd, 2021. We maintain disciplined cost controls throughout the quarter as we operated the business at reduced capacity. Resort reported EBITDA margins for the fiscal 2021 second quarter was 40.3% compared to the prior year period of 40.9%, while resort net revenue decreased $240.1 million over the same period. These results reflect our rigorous approach to cost management, and we exceeded our expectations for profitability at these revenue levels relative to the illustrative model previously outlined in our September 2020 earnings release. Now I would like to turn the call over to Michael to further discuss our financial results season-to-date metrics, and fiscal 2021 outlook. Thanks, Rob, and good afternoon, everyone. As Rob mentioned, our results for the second quarter were impacted by COVID-19 and the resulting impacts to our North American mountain resorts. Net income attributable to Vail Resorts was $147.8 million, $3.62 per deleted share for the second quarter of fiscal 2021. Compared to net income attributable to Vail Resorts, of $206.4 million, or $5.04 per deleted share in the prior year. Resort reported EBITDA was $276.1 million in the second fiscal quarter, which compares to resort reported EBITDA of $378.3 million in the same period in the prior year, and the decrease was primarily a result of the negative impacts of COVID-19. Turning to our season-to-date metrics for the period from the beginning of the ski season, through Sunday, March 7, 2021 and for the prior year period through Sunday, March 8, 2020. The reported ski season metrics are for our North American destination mountain resorts and regional ski areas and exclude the results of our Australian ski resorts in both periods. The reported ski season metrics include growth for season pass revenue based on estimated fiscal year 2021 North American season pass revenue compared to fiscal year 2020 North American season pass revenue. Fiscal year 2020 season pass revenue was adjusted to exclude the impact of the deferral of past product revenue as a result of passholder credits offered to 2019-2020 North American passholders. Fiscal year 2021 season pass revenue does not include the past product revenue recognized in the first quarter of fiscal year 2021 as a result of unutilized passholder credits. This approach results in a year-over-year comparison of season pass revenue exclusive of the impact of discounts provided to our 2019-2020 pass holders. The metrics include all North American destination mountain resorts and regional ski areas and are adjusted to eliminate the impact of foreign currency by applying current period exchange rates to the prior period for Whistler Blackhounds results. The data mentioned in this release is interim period data and is subject to fiscal quarter end review and adjustments. We continue to be pleased with the positive momentum we are seeing in demand as we begin the third quarter, with visitation continuing to improve throughout the North American ski season. Season to date total skier visits were down 8.2% compared to the prior year season to date period. Season to date total lift revenue, including an allocated portion of season pass revenue for each applicable period, was down 8.9% compared to the prior year season to date period. Season-to-date ski school revenue decreased 43.2%, dining revenue decreased 56.9%, and resort retail and rental revenue decreased 31.6%, all compared to the prior year season-to-date period. Our results continued to improve in January and February as we expanded capacity with more open terrain as conditions improved and as certain COVID-19-related restrictions eased. Additionally, as more reservations became available following the peak holiday period, we've seen a significant improvement in lift ticket purchases. Our ski school, food and beverage, and retail rental businesses continue to be more significantly impacted than visitation due to the significant capacity and operating restrictions associated with COVID-19. While our US resorts saw material improvements in financial performance since the peak holiday period, Whistler-Blackcomb's financial performance continues to be severely impacted by the continued closure of Canadian borders to international travel, a trend that will likely continue through the rest of the season. Now turning to our outlook for fiscal 2021. As we approach the end of the North American ski season, we are providing guidance for the nine-month period ending April 30, 2021. We expect net income attributable to bail resorts to be between $204 million and $247 million. And resort reported EBITDA is expected to be between $560 million and $600 million, assuming current regulations, health and safety precautions, and that levels of demand in normal conditions persist through the spring, consistent with current levels. Given the ongoing uncertainty of COVID-19, we will not be providing full year guidance for fiscal 2021 at this time, as we continue to evaluate the potential economic and operational impacts of COVID-19 on our fiscal 2021 fourth quarter results, particularly for our three resorts in Australia and our primary summer operations in North America, which we currently anticipate fully opening around our typical opening dates with certain capacity constraints associated with COVID-19. We continue to maintain significant liquidity with total cash and revolver availability as of February 28, 2021, of approximately $2 billion, with $1.4 billion of cash on hand, $419 million of U.S. revolver availability under the Bail Holdings Credit Agreement, and $179 million of revolver availability under the Whistler Credit Agreement. As of January 31st, 2021, our net debt was 4.2 times trailing 12 months total reported EBITDA. As previously announced, the company raised $575 million of 0% convertible notes in December 2020, which provides added flexibility in terms of our ability to pursue high impact acquisitions as well as reinvest in our resort portfolio. We remain confident in the strong cash flow generation and stability of our business model, and we will continue to be disciplined stewards of our capital with a focus on high return capital projects, continuous investment in our people, and strategic acquisition opportunities. While we are not reinstating the dividend this quarter, we remain committed to returning capital to shareholders, and our Board of Directors will continue to closely monitor the economic and public health outlook on a quarterly basis to assess the appropriate time to reinstate the dividend. Now I'll turn the call back over to Rob. Thanks, Michael. Turning to our calendar year 2021 capital plan, 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 plan to maintain a disciplined approach to capital investments, keeping our core capital at reduced levels given the continued uncertainty due to COVID-19. We have increased our core capital plan by approximately $5 million based on our updated outlook and now expect to invest approximately $115 million to $120 million, excluding one-time items associated with integration, of $5 million and $12 million of reimbursable investments in real estate-related capital. As previously announced, the calendar year 2021 capital plan includes several signature investments which were previously deferred from calendar year 2020 as a result of COVID-19 and are subject to regulatory approvals. In Colorado, we are moving forward with a 250-acre lift-served terrain expansion in the signature McCoy Park area of Beaver Creek, further differentiating the resort's high end family-focused experience. We also plan to add a new four-person high-speed lift at Breckenridge to serve the popular Peak 7, replace the Peru lift at Keystone with a six-person high-speed chairlift, and replace the Peachtree lift at Crested Butte with a new three-person fixed-grip lift. At Okimo, we plan to complete a transformational investment, including upgrading the quantum lift from a four-person to a six-person high-speed chairlift and relocating the existing four-person quantum lift to replace the Green Ridge three-person six-grip chairlift. These investments will greatly improve uphill capacity, further enhance the guest experience, and complete our $35 million capital plan for Triple Peaks. We remain highly focused on investments that will further our company-wide technology enhancements to support our data-driven approach, guest experience, and corporate infrastructure. As part of these efforts, we are continuing to invest in resources and technology to improve our customer service experience including significant staffing increases in our call centers and self-service technology that will provide our guests the ability to better manage their own accounts. We will also continue to invest in ongoing maintenance capital to support our infrastructure across our resorts, including one-time items associated with integrations of $5 million and $12 million of reimbursable investments in real estate-related capital. We expect our total capital plan to be approximately $135 million to $140 million. In closing, I want to take a moment to thank all of our employees for their tireless dedication to deliver a safe, exceptional experience for our guests this year, despite the challenges of the COVID-19 pandemic. We have had stronger than expected financial results and our employees have been a primary reason for this success. In recognition of these efforts, we implemented a one-time end of season bonus totaling approximately $15 million to thank over 28,000 year-round and seasonal employees who are not part of our other annual bonus programs. I'm deeply grateful for the commitment our teams have demonstrated day in and day out to navigate a truly unusual season. At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. Please limit yourself to one initial question and one follow-up question. If you find your question has already been addressed, you may press star 2 to remove yourself from the queue. Once again, that's star 1 if you'd like to ask a question. We'll take our first question from Sean Kelly with Bank of America.

Sean Kelly

Wanted to dig in a little bit, you know, Rob, I think you were pretty clear in the prepared remarks that the upside to what you saw really exceeded expectations on the cost side from kind of what you were expecting. We're just hoping you could help us dig in there a little bit more on what some of those levers were. You know, was mix a factor at all between either destination and local or, you know, lift tickets and ancillary, or lift tickets versus ancillary, or was it more about, you know, specific reductions in targeted areas. And if you could talk about that a little bit more.

Yeah, I think we went into the season, you know, obviously preparing for a very challenging environment. And so I think, you know, as we prepared, you know, we took a pretty thoughtful and disciplined approach in terms of where we would set our expense levels. And, you know, and as we saw revenue kind of greater than expected, You know, we were able to manage through that without necessarily adding a huge amount of expense or material expense to the season. And I think that, you know, that was an amazing job by all of our teams across the whole company. And also, yeah, it was a challenge. So, I mean, I think we shouldn't, you know, underestimate that. But I think we feel, you know, very good about that and knew that, you know, there could be some upside as we went in, you know, to our original expectations on the revenue side if things went well. Of course, we also knew there could be some downsides. And given the volatility we were seeing, you know, in the overall COVID environment before the season, you know, we tried to pick a spot that we thought could handle either one.

Are there learnings and efficiencies we can pull forward out of this? I mean, can you just do more with a different, you know, modestly or even, you know, significantly different cost structure? And just kind of how do you think about, you know, how much of this can be pulled forward or extrapolated into, you know, what your operating plan for next season might look like?

I think it's probably a little bit early to take away any concrete learning from the season. We obviously want to see how the season ends up. I would say that this is a unique moment and a unique season. It's certainly not something that we would replicate year after year, but there are definitely going to be takeaways that we feel can obviously add value as we go forward. I think some of these things are things that we've been implementing over a number of years that in many cases got accelerated this year because of necessity. And so some of that I think we can continue, but obviously a lot of, you know, the way we operated this year is not something that we would repeat going forward. And, you know, especially as we would expect, you know, obviously to bring visitation back on a much more consistent basis to, you know, where we were before the pandemic.

Thank you very much. Thank you, Sean.

Go ahead and take our next question from Rand Montour with JP Morgan.

Go ahead. Good afternoon, everyone. Thanks for taking my questions. I want to start with your new pass holders that maybe you've learned a little bit more about in these last couple of months. Where are they coming from in terms of their history in skiing? Do you think any of them are new skiers? A lot of them are probably pulled forward or pulled over from, you know, buying tickets at the window prior to this, but maybe you can give us some of your learnings from that data set now.

Sure. Well, we, you know, in any given year, we have two types of new pass holders. We have new pass holders who are in our database, and we're showing that previously as typically with ticket buyers, though it could be that they owned a pass in a previous season. And then obviously we have people who we, who don't know, who are not in our database, may have been at one of our resorts in the past, but somehow we didn't capture their information, or they may be truly new. I think, you know, there's no doubt that when, you know, ticket buyers, the trend we're seeing is that they convert into pass holders. We're seeing a bump in frequency, and typically, and I think we've talked about this before, we see a bump in renewal, you know, after we launch the Epic four-day, and certainly as we've launched now, we have two years with the full Epic day pass products. And so, you know, I would say that those trends and plus, you know, our ability this year to bring a significant number of new people who were not previously in our database into our pass program this year, you know, has furthered our resolve around the importance of this program, that it, you know, adds tremendous stability to our business, that it does, you know, increase frequency and engagement by the guests. And obviously the guests, you know, feel like they're getting, a much better value and have higher gift satisfaction scores. So all of that is positive. I think on the folks who are truly new to, you know, our database and any insight we have on them, I don't think we know the full story yet for this season. I think one of the things that, you know, has been interesting to us is that, you know, I think people are purchasing the pass and using it throughout the season. I think if you look back seven to 10 years, you might, you might, a lot of people were kind of initially buying passives especially our epic seven day and then our epic four day just to skew maybe at the holidays or kind of early January. But I think over the last couple of years, we've really seen that people are buying these products because of the value they offer and the flexibility to really skew throughout the whole season. So I think, you know, we obviously don't know their vegetation patterns yet for all of March and Easter, but, you know, my guess is based on trends we're seeing today is it is a product that's now really available for the entirety of the season. So that's a huge positive. And I think, you know, we'll know a lot more when we finally finish this season in terms of some of these pass holders. And I think the great news is, you know, we do see, again, higher return rates from these pass holders after they convert from lift ticket buyers. And we then see even higher return rates when they come into a second or third year into the program. So, you know, we feel good about all of that. And again, it's just reinforced the point to us that this is, It's the core to our success and the core to our stability, and it's something that's critical for us as we go forward.

Okay, thanks. That's really helpful. And then my follow-up question is really sort of how you think about pricing heading into a period of potentially extreme pent-up travel demand where your product focuses on its value proposition, but we could be entering a period where your core customer may be willing to pay a lot more for their vacations.

they may have in a long while so yeah i know you know yeah i know you haven't uh ruled out the official past price but just how are you thinking about pricing in general even on the ancillary yeah i think um one i i would say that you know we've tried you know uh over time to to take a more radical approach to price um and uh you know in and kind of a lot of some of the core mountain products obviously our lodging business really, you know, move with the rest of the market in terms of the lodging market. But I would say in terms of a lot of our core products, you know, we do try and take rateable increases over time. We try not to move too much. That said, I think, you know, I would say that we do feel differently about our advanced commitment products where, you know, one of our critical strategies is to move people from lift tickets into advanced commitment products. And so we've always been focused on In good times or bad, it's providing more value to people in those products so we can move more people. And I think that there may be some unique opportunities on that front as we look to the future in terms of both a better environment for travel and also that we've now proved through some of our newer products that we can really move people in there. So I think there's no doubt that in our mind, as we look to the future, there could be a healthier travel environment. But I would say, yeah, much more focused on our core kind of driving of advanced commitment than we are necessarily in driving price.

Thanks for the thoughts.

We'll go ahead and take our next question from Jev Estantio with Stiefel.

Please go ahead.

Hey, great. Thanks. Good afternoon, everyone. I want to start by touching on the Peak Resorts acquisition.

We're starting off really on the first full normalized, or as normalized as you can really get these days, past selling period with those assets in the portfolio. I just wanted to get your updated thoughts on potential tailwinds there now that you've had some time to integrate the database there.

Yeah, I think we feel really good about the contribution that Peak Resorts has made towards our past selling season. I think we also feel good about the contribution they're making this season. And those resorts, generally speaking, have a much higher percentage of paid tickets than some of our larger destination resorts that have been in the portfolio and the programs for quite some time. So we definitely think that there is continued opportunity there to convert Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, Alistair Cotterill, people driving rather than flying, and we were able to pick up those folks and those visits. And I think when people were making their decision about buying a pass last fall, and there was probably even more anxiety around potentially getting on a plane, knowing that they had the opportunity to also drive to a local resort, I think, you know, was helpful in driving that conversion. And, you know, there's no doubt that there was a multi-year opportunity as we convert new guests who come with new resorts And, yeah, the question I could press is can we accelerate that? You know, what can we do to really, you know, move that needle even quicker? Okay, great. That's helpful.

You know, taking a step back and thinking more thematically here, there's a narrative across our broader coverage of a compelling kind of pent-up demand thesis starting to unfold in the back half of the calendar year with folks antsy to get out of the house with more money in their wallets than they had kind of coming in. If you look at the forward indicators that you guys track, you know, whether internal or looking at, you know, call it other luxury travel type offerings, are you seeing any evidence of this narrative quite yet or too much noise?

Yeah, I think at this point, you know, we are, you know, I think it's a little early for us, you know, in terms of our own internal metrics to pick up what's going to happen, you know, at the back half of the calendar year. I think obviously a lot more of our focus is right now on finishing the season and then on the summer season, where I do think it's probably our best opportunity and also probably greatest uncertainty. And I would also say, look, there's no doubt that we outperformed, I think, many other aspects, other parts of travel and leisure. And so I think, you know, we'll definitely be pent up demand for us. But obviously, you know, compared to some others that have a more challenging time the last three to four months, you know, probably, you know, a bigger rebound that we might experience. But again, I think, in our minds, like, I think what came through to us is just the loyalty and stability, you know, of our guests going into what was by far though, a season and a year with the most uncertainty. And particularly, you know, with our pathholders. So, obviously, in our minds, it's like, how do we continue to drive that? That is, you know, because we're thinking about next year, but we're also thinking about three or five years from now, right? How do we continue some of those secular changes that we've been making in our business model and use a strong travel environment to help accomplish that?

Okay, great. Fair enough. Thanks for all the color and congrats on a strong quarter of execution. Absolutely.

We'll go ahead and take our next question from David Katz with Jefferies. Please go ahead.

Afternoon, everyone. Thanks for taking my question.

Congrats on your quarter. Well done. One of the topics that always comes up and has been sort of part of the company's DNA is acquisition targets because you have done so nicely with them. it seems natural that there could be some opportunities bubbling up, you know, given some of the turmoil that we've gone through and your financial strength coming out of it. How do you look at that? You know, could we realistically see some of those things? And, you know, is that a fair assessment of what the market is?

Yeah, I think, you know, I do think that there's, Obviously, we're always interested and always looking at opportunities to expand, I think, especially in select resorts where we think they really add value to our existing portfolio and make a difference to our guests. I think, no doubt, it was a little bit of a head down over the last nine months or so, or 12 months, I guess now. Um, and so for certainly a good portion of that, I think it was tough for us to pick our heads up and start focusing on acquisition, but I don't think many people who owned resorts were necessarily in a selling mode either. They were focused, I think on what was going on in front of them. Um, typically as we come out of these, you know, dislocations, there are opportunities and I think, you know, we're hopeful that there will be at the same time, you know, as I always say on these calls, you know, we're going to be disciplined. You know, we were very cognizant that we have been successful. with acquisitions over a long period of time, but that you have to always be disciplined. Otherwise, you know, you can kind of lose focus. And so for us, it's about the right acquisition at the right time, you know, including certainly opportunities in North America, but also opportunities globally, whether that's in Asia or Europe, some of which take longer, right, to create. And actually the upside and opportunity may be longer. But we remain just as committed as we were before to the benefit that, strategic acquisitions that resorts can provide. And so we're certainly not backing off on that.

Understood. And if I can just clarify one detail from your remarks about the capital plan, I think you said 135 to 140. Is that a total number or is that excluding a maintenance budget? No, that's total number including maintenance.

Got it. Okay. Thank you very much.

We'll go ahead and take our next question from Ben Scheichen with Credit Suisse. Please go ahead.

Hey, how's it going? You know, clearly a unique season and some strong results thus far, you know, passes up 20% and the pass program restarting March 23rd, as you mentioned. Just curious on your thought process on moving forward over the next, you know, six, eight months, how to keep that pass number flat or even grow it? Is it the – and less about the direction, but more about just like the – is it the traditional playbook that you use, or is there a different strategy you used this year just given the unique situation that we're in and the strong growth over the last couple months?

Yeah, I think, you know, again, I think some of what I said earlier, you know, I think it's, yeah, just worth repeating, you know, in terms of, you know, we saw – we obviously went into this season – which had more uncertainty than, you know, any time any of us can remember. And I think our past program, you know, was at the cornerstone of the results that we delivered. And sure, of course, you know, our lift ticket sales are also critical, but obviously that's the most uncertain, right, and the hardest to predict. And in many respects, right, the larger that we grow that past program, you know, the greater opportunity we have to, yeah, really move, you know, kind of a business that tends – 15 years ago was truly you know a day-off decision based on snow and we really moved it much more towards you know kind of a subscription approach to how people are are engaging and and buying their skiing you know for a season whether it's for you know an unlimited product or even if it's for just an epic three-day right either way we i think really started to make inroads so what i would say is And we feel like there's a unique opportunity to continue to be aggressive on that front and really move big numbers of people into the program. And it's something we've talked about for a couple of years. And I think we have more data now than ever before on all the different ways that we can do that. And I think, you know, we're no, we're not going to use a standard playbook. We never do, you know, where every, every year, every season we come at this with a lot of new information and, we're going to deploy that information in ways that we think you know help drive the program and i think when you look back obviously the you know whether it was epic day pass or even epic mountain rewards this year which of course was a little more challenging offering 20 discounts on on ski school on food on rentals on lodging obviously tougher this year but still you know we we've seen enough engagement to understand that that's also going to be a key driver as we go forward so You know, again, in total, yeah, we just feel like every year is a little bit different. And this year, if anything, yeah, has emboldened us, I think, to really be, you know, be aggressive as it relates to growing the number of people who are in the program.

Gotcha. That's helpful. Yeah, I was kind of referring to how to reengage with the customers that bought. So that was helpful. And then on peak, I guess, does it make you think any differently about some of the feeder markets that historically were maybe viewed as maybe non-traditional? So maybe I'm thinking of like the Mid-Atlantic, for example. I guess post-peak and having that in the portfolio for the last 12 months, do you come at that with a different view or just any comment there?

I think the good news is I feel like we obviously it was a little bit of a departure for us to purchase so many resorts at one time. A lot of the resorts were obviously smaller in markets that we historically, of course, hadn't operated in. And I think we feel really good about the fact that we were able to integrate the resorts and have those resorts have a true impact on our results in this kind of first full year. a year that, of course, had so many challenges to it. So I think it speaks really well to the opportunity. And I think it's important to say that, you know, we were dialed in this year mostly on safety and then, of course, trying to do what we could on the guest service side. But, of course, it was safety first. And, you know, as we go forward, we're going to be able to make a lot more changes to the guest experience, taking candidly a lot of the learnings that we have from COVID-19 and a lot of the approaches, but actually kind of turning them a little bit so it hopefully won't be the, of course, we'll always be focused on safety, but not around a pandemic. And we'll be able to take that to, I think, a lot of these urban resorts and the mid-Atlantic resorts and really make differences, right, for the guests that come that, you know, over next year and the years after, right, will shift the experience, not just their ability to be there on a student pass, it also gives them access to, you know, bail and whistler. but actually make differences in how they engage with the resort, you know, something that we're going to do with all of our resorts. So, yeah, we feel like it was, you know, on the one hand, you could obviously look at that peak, you know, when we started to go through the pandemic as a problem in terms of trying to integrate an acquisition and having just done one right before we go through the pandemic. And candidly, it turned out quite the opposite in terms of it being a very significant contributor, which, again, I think, again, bodes well for the future now.

I appreciate it. Thank you.

And we'll go ahead and take our next question from Lauren Vasilescu with Exane BNP Paribas. Please go ahead.

Good afternoon. Thank you for taking my question. I appreciate that you gave us an implied third quarter total EBITDA dollar range. I think, rough math here, about $380 to $420 million. Is the range a function of visitations or cost containment? Maybe ask another way. You delivered a 50% EBITDA margin in 3Q19. I'm trying to think about a two-year stack. Is there any reason why you can't get back to that EBITDA margin considering potential cost containment?

Yeah, I think we're trying to set a range that incorporates the continued uncertainty for the remainder of the season.

I think we're comfortable putting out a range at this point given that you know, we largely have about a month of the season left. And so, you know, it incorporates what we think is a reasonable range of outcomes for the remainder of the season.

I think, you know, as you saw in Q2, our margin was very consistent with last year, which we felt like demonstrated the cost discipline that we've shown and the great work by our teams throughout the season to manage the business at lower revenue levels. And And we'll plan to continue to do that.

So, you know, certainly anticipating, you know, continued strength on the margin side. But, yeah, consistent with the range that we put out.

Very helpful. Thank you. And then forgive me if I missed this in the prepared remarks, but I think on the last call you talked about about $121 million of revenues, you know, deferred revenues that would be recognized in 2Q and 3Q. Did you recognize anything in 2Q and then how do we think about 3Q? And I know it's probably still early, but did you have any deferred revenue that could trickle into 2022?

Yeah, so the deferral of the revenue associated with the incentive credits is recognized primarily across Q2 and Q3, radically with how we recognize season pass revenue across the quarters. which is roughly split between the two quarters.

As it relates to any deferrals into 2022, nothing material that we would call out at this point.

And so, yeah, expecting to recognize that this year.

Very helpful. Thank you very much and best of luck. Thanks.

We'll go ahead and take our next question from Paul Golding with Macquarie Capital. Please go ahead.

I appreciate you taking my question.

I think the first thing I wanted to ask was around just following on to David's question around acquisitions. Has the pandemic and sort of varying degrees of lockdown and just pickup of international visits, has that changed your perspective around what regions make most sense for acquisitions right now? And then I have a follow-up around cost. Thanks.

No, I don't think it really has. I think, you know, certainly different parts of the world went through the pandemic, you know, with different dynamics. And in some cases, right, there were more significant closures. In other cases, resorts were able to be open. You know, but certainly, you know, a resort like Whistler or Blackcomb, which had a much tougher so far, you know, experience this season, because of the border closures, that wouldn't change our view, of course, of the long-term value and opportunity. And it's, you know, critical of why we think there's one of the benefits of actually having all of these resorts within our company is that some will do better than others at different moments in time. I don't think any of us had thought about a pandemic in that perspective, but obviously it's played out, you know, during the pandemic as well. And so I think it's the diversity opportunity in terms of having resorts in different locations, in different markets, different weather patterns, different economies, different governments. I think that speaks well to our company continuing to broaden. And so that's something that we're not going to back off of. And I don't think the experience of one resort versus another or one region versus another during the pandemic would change our view. I think that Our collective hope is that we, yeah, are not going to be going through a situation like this on an ongoing or recurring basis. But again, those are the types of shocks to the system that I think, again, reinforce our view that having a global footprint, having geographic diversity is critical.

Great. Thanks so much for that, Rob. And around labor costs, I guess I'm trying to see if I can still tease out some of what might be extrapolated for next quarter, next year on the cost side. From labor, are you saying is the environment, is the supply of seasonal labor impacted by the international restrictions? Is that driving costs up? Or are you seeing other leisure businesses have slack in their

uh labor uh demand uh create a a favorable labor environment for you you know i i think um i think there was it was a very unique labor environment i think for for our resorts this year um with uh yes we didn't we're not able to access uh international um uh folks who who reside outside of the us to come you know for a season and so that was something that we couldn't do this year on the other hand um obviously there were given the closures across travel and leisure, there were maybe more folks who were interested in working, uh, within the U S at one of our resorts, uh, this season. So I think that that was helpful. On the other hand, you know, we obviously also operated all season long with, uh, uh, health screens, uh, and a certain percentage of our employees that were always, uh, have to stay home because of, uh, you know, largely symptoms, you know, not necessarily, you know, testing positive, but so that was, you know, another challenge on that front. Um, I think there's going to be a whole new set of dynamics as we look to the future for next year. And we do feel like it's going to be critical for us to ensure that we have a strong workforce, that we have enough people to provide the experience that we need, that we have enough affordable housing for them to be able to live in. And so I think that all of those things will be in play exactly what the environment is next year. I'm not sure, but I think we are planning certainly for a return to a more normal environment and probably one where there will be demand for quality individuals to work anywhere.

Great. Thanks so much. Thanks.

We'll go ahead and take our next question from Alex Morosia with Barenburg. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. I have two more near-term focused ones, but the first on the timing of Easter. We do have an earlier Easter this year versus the last good comparable period in 2019.

How much has an early Easter weekend moved the needle in the past, especially at more snowmaking-heavy resorts that might be closed in mid-April?

I don't think we have an exact assessment of that, I think, again, this year is likely to have just these unique dynamics around COVID and the travel, you know, system. I think there's no doubt that having an earlier Easter is better than having Easter later in April because we do think it keeps people more engaged in the sport. I think, you know, unclear what will happen this year, and it's one of the reasons, you know, for the uncertainty in our Q4, which is, on the one hand, obviously more people are getting vaccinated, restrictions are easing, more people, I think, are looking to travel. On the other hand, you know, whether people decide, you know, that if the weather turns nice, they're going to pivot to warmer weather opportunities, you know, that's positive, too, or, you know, different, you know, obviously, during the winter, our resorts were one of the only places that you could have, you know, a really, you know, unique outdoor experience that'll shift as we head into spring. So, I think that's still unclear, but I think the earlier Easter date is absolutely a positive relative to, you know, when it's, you know, April 20th or 24th.

Gotcha. That's helpful. And then the second one is on the Vermont resorts.

It's only been two weeks and it's getting late in the season, but can you give us a sense of how the lack of quarantine for vaccinated folks has benefited out of state visitation recently?

Yeah, no comments on that at this point. I think it's a little too close in and I don't have that data. I don't think we're typically giving specific data on how to state one particular region or another, but there's no doubt that any relaxing of those restrictions, no matter where they are, I think certainly gives people more confidence to come, which is good. And obviously, and I would say that our Eastern Resorts have I've had a solid year, you know, despite some of the challenges that have been out there, which has been good. And I think, you know, I've mentioned earlier the peak acquisition, you know, was an important contributor, I think, to our results this season.

Okay. Understood. Thank you. Thanks.

And we'll go ahead and take our next question from Ryan Sundby with William Blair. Please go ahead.

Hi, Rob. I'm Michael. Thanks for taking my question. Hi.

I know it's a tough year to draw conclusions, clearly, but just wanted to follow up on your comments on the Epic Mountain Rewards and how that Petzl loyalty program performed this year. I guess, did the discounts offered through the program help things like ski school rental maybe hold up better than you would have thought just given the mix of skiers this year? And then any color on just how extensively guests are using the benefits? and or if there's any kind of usage occasions that stand out so far that, you know, appear to be appealing to skiers this year.

Yeah, I think a very tough year to make a lot of these assessments. I think we have absolutely seen engagement. I think, though, that in terms of whether it helped drive business is tough to say because so much of the business in both ski school and dining, you know, was driven by capacity challenges, right, in terms of how many people we could really have in a lesson, the length of a lesson, obviously, you know, on the dining side, just massive, you know, challenges. And I would say that, you know, when we looked at Epic Mountain Rewards, I think the discount in dining was one that we thought would be a big driver because obviously, you know, certainly everyone who's on the mountain typically stops in for food. And so I don't think we have those learnings. That said, I think we feel, you know, by some of these Some of the data that we've been able to see that, no, we know that it matters to people and people are using it. And, you know, we expect kind of almost a relaunch of it for next season when we'll have all of those businesses kind of able to fully market and leverage that, not worried about, you know, kind of not having the capacity to live up to the demand. And I think we'll provide more information, you know, probably on our next quarterly call, you know, about some of our thoughts. And we have a full season of data to be able to look at, you know, exactly what happened. So, yeah, I think we still feel very committed to it and feel like it'll absolutely be a big driver. And, yeah, this is not the year to really test it out.

Great. Thanks. Thanks for calling in. I'll look forward to hearing more.

And we'll go ahead and take our next question from Chris Woronko with Deutsche Bank. Please go ahead.

Hey, good afternoon, guys. So you've had the epic day pass around for a few years now, and one of which is a very difficult year to draw many conclusions from, as you just said. But the question is, with what information you do have, and I know you've given us a ton of detail on numbers on how those various days break down. But, you know, you kind of view that path as something that has good pricing potential going forward. And are you more likely to maybe add certain things to it to make it kind of the bundling product that was talked about earlier? Or just, you know, how you view that day pass a couple years in?

Yeah, I would say I think on Epic Day Pass, I think different than Epic Mountain Rewards, I think on Epic Day Pass, we feel like this was a good year to test it out. And it's kind of second year, you know, where we have the full line of products because, you know, I think it performed incredibly well, even in the face of COVID. We obviously, you know, converted a lot of people who were previously lipstick buyers to the past. And the path does come, obviously, with an advanced commitment. And so, you know, that requires people to have more confidence in their ability to speed through the season. So there's no doubt that, you know, I think there's a mix of things going on this year with COVID and the uncertainty around travel. Obviously, we did implement a reservation system, and there certainly could be some people who want to kind of get into a path because of that. But largely, I think our reaction to watching what happens here with the product was that in its secondary, it continued to make inroads. And I think, you know, I think the legs on that product are much bigger than, you know, we probably even imagined when we first launched it, largely because it is being used by people who are planning to travel throughout the season, you know, versus somebody who's just coming for, you know, Christmas, buying it and, late november a few days and then you know getting the discount that way we've really seen a much broader uh engagement with the product which gives us yeah we think the opportunity to again be aggressive with that and continue to drive forward on it um i think we you know um epic mountain rewards um you know we have not put out anything on that i think um you know we in terms of changing it but i would say that yeah we absolutely would like to see that program go through a full season And so the bundling that we would see would be with kind of an Epic Mountain Rewards and all of our season pass products, not just Epic Day Pass. But both of these things really help. In the end, we are essentially providing lift ticket buyers who are one, two, three-day buyers with a part of the product now at a substantial discount and substantial stability for us. right, they're increasing their frequency, which is, you know, if you think about it for us, it's a huge opportunity, right? If we can take lift ticket buyers, not only get them to commit in advance, but actually have them commit to more days, then that kind of shifts that pricing discount, right, that you look at. Yes, it's at a discount to lift tickets, but ultimately if they're, you know, giving us more days, then that can really balance out production in a business like ours on the lift side where, you know, a fixed cost business. So, yeah, we view, while Epic Mountain Awards couldn't perform, of course, this year and provide us insights, we think Epic Day Pass was critical to our success this year.

Okay, very helpful. Appreciate all those thoughts. And then this could be a difficult question, probably just too early, but given how important California has been to your Western resorts in terms of customer origination, potential benefits, outflow from California to other states further away. Does that, is that something you, you, you even think about at this point, or is it just kind of wait and see that impact your initial marketing strategies at all?

I, you know, I, I think at this point, no, I don't think we're, we're, you know, seeing a big enough shift and, uh, you know, that that would, uh, you know, it's something that, yeah, that we would have a larger strategic objective around. However, I would say, right, obviously, we have resorts, you know, across North America, and to the extent that people are skiers, and they are relocating away from California or away from the drive to one of our resorts, obviously, we will continue to market to them to come to one of our other resorts. And so, you know, it's one of the benefits, I think, of having this broad array. And so the key thing is whether we, you know, we need to keep them engaged in skiing, which again, goes back to the path and Epic Day Pass. Like how do we make sure that we increase their frequency, their engagement, their renewal rates in the sport and with our resorts, whether they're, regardless of where they live, I think we have the opportunity to, yeah, to try and activate that gap.

Okay. Fair enough. Thanks very much. Thanks.

as there are no further questions, I'd like to turn the call back over to Mr. Katz for any additional or closing remarks.

Thank you, Operator. This concludes our fiscal 2021 second 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.

Once again, that does conclude today's conference. We do appreciate your participation. Now disconnect your phone lines.