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.