Vail Resorts, Inc.

Good day and welcome to the Vail Resort Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Kirsten Lynch, Chief Executive Officer. Please go ahead, ma'am.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2022 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 14, 2022, 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 the Form 10-Q were filed this afternoon with the SEC and are also available on the investor relations section of our website at www.valeresorts.com. So with that said, let's turn to our fiscal 2022 second quarter results. We are pleased with our financial performance for the quarter. Visitation trends and demand for the experience at our resorts remains encouraging, particularly with destination guests, with results improving post-holidays as conditions improved, more terrain was opened, and the impact of the COVID-19 Omicron variant receded. As expected, results for the quarter significantly outperformed the results from the prior year, due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year period. The 2021-2022 North American ski season got off to a slow start. The confluence of storm cycles, staffing challenges, and the spike in Omicron variant cases created challenges through the holiday period, impacting our resort's ability to fully open terrain as planned and negatively impacting the guest experience during that time. Despite numerous measures taken ahead of the season, including an investment in wages, available staffing was below targeted levels heading into the holidays, consistent with challenges faced by the broader travel and leisure industry at that time. During the holidays, COVID-19 cases associated with the Omicron variant dramatically accelerated, impacting both travel plans and staffing exclusion despite having a vaccinated workforce. At some resorts, more than 10% of our employees were unable to work due to COVID-19 at one time. To address these challenges, the company increased hourly compensation during the holidays and for the remainder of the ski season at a cost of $20 million in fiscal 2022. Following the holiday period, the experience across our resorts improved markedly with better snowfall, a stabilization, and ultimately reduction in cases of COVID-19 and overall better staffing, allowing us to open terrain across our resorts that was close to normal levels for that time period. Throughout the quarter, we experienced relative strength in destination visitation and lift ticket sales, particularly at our Western U.S. ski resorts, which exceeded our expectations in January in particular. Whistler Black Home was, as anticipated, disproportionately impacted by COVID-19-related travel restrictions, creating challenging results for U.S. destination and international visitation to the resort. Excluding the Seven Springs Resorts, total visitation for the quarter increased 2% compared to the second fiscal quarter of 2020. Relative to the second fiscal quarter of 2020, our ancillary lines of business experienced revenue declines, particularly in food and beverage, which was disproportionately impacted by numerous operational restrictions associated with COVID-19 and overall staffing challenges. Resort net revenue for the second fiscal quarter of 2022 decreased 2% relative to the comparable period in fiscal year 2020, primarily as a result of the headwinds in our ancillary lines of business and approximately $33 million of past revenue that would have been recognized in the second fiscal quarter of 2022, but was deferred to the third quarter as a result of delayed openings for a number of our resorts. Our lodging business experienced strong results during the quarter with average daily rates exceeding our expectations partially offset by lower than expected occupancy rates during the early season. Relative to the second fiscal quarter of 2020, resort reported EBITDA increased 5% despite the challenging early season conditions and COVID-19 related dynamics. Resort reported EBITDA margin for the second quarter was 43.9%, an increase from 40.9% in the second quarter of fiscal 2020. Now I would like to turn the call over to Michael to further discuss our financial results, season-to-date metrics, and fiscal 2022 outlook.

Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, we're pleased with our performance for the quarter, particularly given the slow start to the season. Net income attributable to Vail Resorts was $223.4 million in or $5.47 per diluted share for the second quarter of fiscal 2022, compared to net income attributable to Vail Resorts of $147.8 million, or $3.62 per diluted share in the prior year. Resort reported EBITDA was $397.9 million in the second fiscal quarter, which compares to resort reported EBITDA of $276.1 million in the same period in the prior year. The increase was primarily due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year. Resort reported EBITDA for the second quarter of fiscal year 2020 was $378.3 million. Turning now to our season-to-date metrics for the period from the beginning of the ski season through Sunday, March 6, 2022, compared to each of the two prior year periods through March 7, 2021 and March 8, 2020. Given the significant impacts of COVID-19 in the prior year period, including significant capacity restrictions that limited skier visits and ancillary revenue, we're also providing metrics relative to the comparable fiscal year 2020 season to date period, which was prior to our announcement to close our resorts on March 15th, 2020 for the remainder of the 2019-2020 season. The reported ski season metrics are for our North American destination mountain resorts and regional ski areas. and exclude the results of our recently acquired seven springs resorts and our Australian ski areas in all periods. The reported ski season metrics include growth for season pass revenue based on estimated fiscal year 2022 North American season pass revenue compared to both fiscal 2021 and fiscal 2020 North American season pass revenue. The data mentioned in this release is interim period data and is subject to fiscal quarter end review and adjustments. We are pleased with the positive momentum we have seen throughout the post-Christmas period. Season-to-date total skier visits were up 2.8% compared to the fiscal year 2020 season-to-date period. Season-to-date total lift ticket revenue, including an allocated portion of season pass revenue for each applicable period, was up 10.3% compared to the fiscal year 2020 season-to-date period. Compared to the fiscal year 2020 season-to-date period, season-to-date ski school revenue was down 8.9%, dining revenue was down 27%, and retail rental for North American resort and ski area store locations was down 2.8%. Company performance has continued to improve throughout the post-Christmas period, with particular strength in destination visitation and lift ticket sales. Despite significant growth of our past program this year, Visitation for the season-to-date period was modestly up 2.8% compared to fiscal 2020, given the company's strategy to shift lift ticket guests into an advanced commitment pass product. Whistler Blackcomb was negatively impacted by COVID-19-related travel restrictions, creating challenging results for U.S. destination and international visitation to the resort. The ancillary lines of business continue to experience revenue declines, particularly in food and beverage. which is disproportionately impacted by numerous operational restrictions associated with staffing and COVID-19. It is important to highlight that our season pass unit growth of 47% for fiscal year 2022 created significant revenue stability in a period with challenging early season conditions and COVID-19 impacts. The growth in pass units did not drive dramatic increases in visitation, as the company is shifting lift ticket guests into advanced commitment products. In fact, the growth we saw in visitation in the period ending March 6, 2022, compared to fiscal 2020, occurred on weekdays and non-holiday periods, which were up approximately 9% in visits compared to weekend and holiday periods, which were approximately flat in visits. We also saw peak daily visitation at our resorts during the period that were very consistent with prior with previous years. For the season to date period ending March 6, 2022, 69% of our visits came from season pass holders compared to 56% of visits for the same period in fiscal year 2020. We remain committed to our strategy to move lift ticket purchasers into advanced commitment products, which offers benefits to our guests and stability to our employees, our communities, and our company. Now turning to our outlook for fiscal 2022. Despite the challenging start to the season through the holidays, we have increased the midpoint of our resort-reported EBITDA guidance as compared to our original guidance provided in September, demonstrating the resilience of our business model and the benefits of our advanced commitment strategy. The update to guidance is primarily driven by the strong demand from destination guests at our western U.S. resorts, particularly with regard to lift ticket sales, which we expect will continue through the remainder of the season, as well as the contribution from the Seven Springs Resorts. Additionally, our lodging business is expected to significantly outperform our original expectations in the remainder of the year, with strong results on both occupancy and ADR across our properties and the addition of the Seven Springs Resorts. The outperformance is partially offset by the challenging U.S. destination and international visitation trends at Whistler Blackcomb, the $20 million investment in frontline staff bonuses, increased wages for our summer operations, and the inclusion of an estimated $6 million in acquisition and integration-related expenses specific to the Seven Springs Resorts. We now expect net income attributable to Vail Resorts for fiscal 2022, to be between $304 million and $350 million and resort reported EBITDA to be between $813 million and $837 million. We estimate resort EBITDA margin for fiscal 2022 to be approximately 32.9% using the midpoint of the guidance range. The updated outlook for fiscal year 2022 assumes normal conditions and operations across our resorts for the remainder of the ski season and no incremental travel or operating restrictions associated with COVID-19 that could negatively impact our results, including for our Australian resorts in the fourth quarter. The guidance assumes an exchange rate of 79 cents between the Canadian dollar and US dollar related to the operations of Whistler Blackcomb in Canada, and an exchange rate of 72 cents between the Australian dollar and US dollar related to the operations of Parisher Falls Creek and Hotham in Australia. Our liquidity position remains strong. Our total cash and revolver availability as of January 31st, 2022 was approximately $2 billion, with $1.4 billion of cash on hand, $417 million of U.S. revolver availability under the Bail Holdings Credit Agreement, and $214 million of revolver availability under the Whistler Credit Agreement. As of January 31st, 2022, our net debt was 2.1 times trailing 12 months total reported EBITDA. We are pleased to announce that our Board of Directors has declared a quarterly cash dividend on Bell Resorts common stock of $1.91 per share. The dividend will be payable on April 14th, 2022 to shareholders of record as of March 30th, 2022. We will continue to be disciplined stewards of our capital and remain committed to prioritizing investments in our guest and employee experience, high return capacity expanding capital projects, strategic acquisition opportunities, and returning capital to our shareholders through our quarterly dividend and share repurchase programs. I'll now turn the call back over to Kirsten.