Vail Resorts, Inc.

You're holding for the Vell Resorts at this time. There are still many additional participants. The conference should begin shortly. We do thank you for your patience. Please continue to stand by. Please stand by. Good day and welcome to the Vell Resorts third quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Lynch, Chief Executive Officer. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2022 third 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, June 9, 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, along with our quarterly report on Form 10-Q, were filed this afternoon with the SEC and are also available on the investor relations section of our website at www.vailresorts.com. Let's turn to our fiscal 2022 third quarter results. We are pleased with our overall results for the quarter and for the 2021-2022 North American ski season. As expected, Results for the quarter significantly outperformed results from the prior year, primarily due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year period. This year, challenging early season conditions persisted through the holiday period, but our results were strong from January through the remainder of the season. Our strong season paths sales heading into the 2021-2022 season are the foundation of our advanced commitment strategy, creating stability for the company through variable weather and other challenges. We had particularly strong destination visitation this year, which was further supported by lift ticket sales at our Colorado and Utah resorts that exceeded our expectations through the spring. Our recent results at Whistler Blackcomb were also stronger than expected due to the easing of travel restrictions in Canada in late February. Recent performance at our eastern U.S. ski areas was in line with our expectations, while our Tahoe resorts were impacted by challenging spring conditions, resulting in performance below our expectations. Throughout the season, our ancillary businesses continued to be capacity constrained by staffing, and in the case of dining, by operational restrictions associated with COVID-19. Overall, our results throughout the 2021-2022 North American ski season highlight the stability resulting from our advanced commitment past products in a season with challenging early season conditions, staffing challenges, and COVID-19 impacts, and demonstrate our strong operational execution following the holiday period through the end of the season. Now I would like to turn the call over to Michael to further discuss our financial results, our fiscal 2022 outlook, and the Andermatt transaction.

Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, we are pleased with our overall results for the quarter and saw continued strength and performance from January through the remainder of the ski season. Net income attributable to Vail Resorts was $372.6 million or $9.16 per diluted share for the third quarter of fiscal 2022 compared to net income attributable to Vail Resorts of $274.6 million or $6.72 per diluted share in the prior year. Resort reported EBITDA was $610.5 million in the third quarter of fiscal 2022 an increase of $148.3 million, or 32.1% compared to the same period in the prior year. This increase is primarily due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year. Now turning to our outlook for fiscal 2022. Based on the strong finish to the season, particularly driven by destination guest visitation and lift ticket sales in Colorado, Utah, and Whistler-Blackcomb that exceeded our expectations, we now expect net income attributable to Vail Resorts for fiscal 2022 to be between $314 million and $348 million, and Resort Reported EBITDA for fiscal 2022 to be between $828 million and $842 million. The guidance range includes an estimated $16 million of resort-reported EBITDA for the Seven Springs Resorts for the period from the transaction closing on December 31st, 2021 to the end of the fiscal year, partially offset by $7 million of acquisition and integration-related expenses associated with the Seven Springs Resorts transaction and the expected acquisition of Andermatt-Sedroon. Our balance sheet and liquidity position remain strong, Our total cash and revolver availability as of April 30, 2022, was approximately $2 billion, with $1.4 billion of cash on hand, $417 million of U.S. revolver availability under the Vale Holdings Credit Agreement, and $212 million of revolver availability under the Whistler Credit Agreement. As of April 30, 2022, our net debt was 1.7 times trailing 12 months total reported EBITDA. The company declared a quarterly cash dividend of $1.91 per share of Bail Resorts common stock that will be payable on July 12, 2022 to shareholders of record as of June 27, 2022. Additionally, from the beginning of the company's third quarter of fiscal 2022 through June 8, 2022, the company repurchased 303,143 shares at an average price of $246.33 for a total of approximately $74.7 million. We intend to maintain an opportunistic approach to share repurchases. We will continue to be disciplined stewards of our capital, and we remain committed to continuous investment in our people, strategic high return capital projects, strategic acquisition opportunities, and returning capital to our shareholders through our quarterly dividend and share repurchase programs. We were excited to share our announcement in March that we entered into an agreement to purchase a majority stake in Andermatt Cedroon in Switzerland, marking the company's first strategic investment in and opportunity to operate a ski resort in Europe. Andermatt Cedroon is a renowned destination ski resort in central Switzerland, located less than 90 minutes from Zurich, Lucerne, and Lugano, and approximately two hours from Milan, Italy. Upon the closing of the acquisition, the company will acquire a 55% ownership stake in Andermatt Cedroon, which controls and operates all of the resort's mountain and ski-related assets, including lifts, most of the restaurants, and a ski school operation. Our partners, Andermatt Swiss Alps, or ASA, will retain a 40% ownership stake in Andermatt Cedroon, with a group of existing shareholders comprising the remaining 5% ownership. Importantly, All of Vail Resort's 149 million Swiss franc investment will be reinvested in the resort and the base area. 110 million Swiss francs will be invested into Andermopp Sudrun for capital investments to enhance the guest experience on the mountain. And 39 million Swiss francs will be paid to ASA and fully reinvested into the real estate developments in the base area. Vail Resorts will assume operating and marketing responsibility for Andermatt-Cedroon, with ASA and local stakeholders continuing as key members of the Board of Directors. The transaction is expected to close prior to the 2022-2023 ski season, subject to certain third-party consents. Vail Resorts plans to include unlimited and unrestricted access to Andermatt-Cedroon on the 2022-2023 Epic Pass. EPIC day pass holders with all resort access will be able to use any of their days at Andermatt-Sedroon, and EPIC local pass holders will receive five days of unrestricted access to the resort. All pass access is subject to the timing of the transaction closing. I'll now turn the call back over to Kirsten.

Thank you, Michael. Following a rapid acceleration of growth in our advanced commitment strategy over the last two years that nearly doubled the number of guests in advanced commitment products, we are very pleased with the results for our spring season past sales to date with strong unit growth over the record past sales results we had last spring. Past product sales through May 31st, 2022 for the upcoming 2022-2023 North American ski season increased approximately 9% in units and approximately 11% in sales dollars as compared to the period in the prior year through June 1, 2021. Past product sales are adjusted to include past sales for the Seven Springs resorts in both periods and to eliminate the impact of foreign currency by applying an exchange rate of 79 cents between the Canadian dollar and the US dollar in both periods for Whistler Black Home Pass sales. Relative to season-to-date pass product sales for the 2021-2022 season through June 1st, 2021, we saw strong unit growth with our renewing pass holders. Our strongest unit growth was in our destination markets as travel continues to rebound following the impacts from COVID-19 And we saw more moderated unit sales across our local markets where pass penetration is already higher. Our Epic Day Pass products continue to drive our strongest product growth as we attract lower frequency guests into advanced commitment products as first-time pass holders. And with the 2022-2023 launch of our new tier of products with access to select regional and local resorts. Pass sales dollars are benefiting from the 7.5% price increase relative to the 2021-2022 season, largely offset by the impact of the growth of Epic Day Pass products, including our new lower price Epic Day Pass offering. Following the strong trade-up results last year, we are pleased that we achieved neutral net migration among renewing pass holders in our spring pass sales. It is important to highlight that our goal and largest opportunity is to bring low-frequency guests and guests that visit resorts with lower-priced lift tickets into advanced commitment products. These lower-frequency guests are more likely to purchase Epic Day Pass products, which has driven significant advanced commitment growth over the last seven years. Given that Epic Day Pass products provide fewer days, The per-unit price of these products is lower than our unlimited Epic and Epic Local products, and the strong growth in Epic Day Pass products results in a reduction in the blended effective pass price. That said, the per-day effective price of Epic Day Pass remains attractive for the company and delivers the long-term guest lifetime value benefits associated with moving lower-frequency guests into our advanced commitment products. As part of this strategy, we are focused on continuing to offer past products with access across our network of resorts, including our lower-priced resorts, to continue bringing more guests into our advanced commitment products, and ultimately to achieve our vision of securing commitments for 75% or more of our lift revenue before each season begins. We have the majority of our past selling season ahead of us. And as more guests purchase passes in the spring, we believe the full year unit and sales growth rate will be lower than our spring growth rate. We will provide more information about our past sales results in our September 2022 earnings release. We are very pleased with ongoing sales of the Epic Australia Pass, which ends on June 15th, 2022. Unit sales are up approximately 28% through May 31, 2022, relative to the comparable period through June 1, 2021, as we continue to benefit from the acquisition of Falls Creek and Hotham in 2019. It is important to highlight that the continued growth of our past sales creates significant stability for our business and validates the compelling network of resorts, guest experience, and value that our advanced commitment products provide for our guests. This past season, approximately 72% of all Vail Resorts 2021-2022 North American skier visitation was on a past product, excluding employee and complimentary visitation, which compares to approximately 60% and approximately 51% for the 2018-2019 and 2014-2015 North American ski seasons, respectively, creating stability through the company through variable weather, travel patterns, and other challenges. Our advanced commitment products provide our guests with a compelling alternative to in-season lift ticket products. That results in guests making a product choice and does not result in significant increases in visitation or crowding. We continue to find that pass holders tend to spread their visitation more across the season and into periods with significant excess capacity. We are very pleased that the growth in our visitation this season primarily occurred during off-peak periods. For the season-to-date period ended April 30, 2022, compared to the season-to-date period ended May 5, 2019, visitation on weekday and non-holiday periods increased approximately 8%, while visitation on weekend and holiday periods decreased approximately 3%, excluding peak resorts visitation in both periods. With the increase in flexible and remote work, we expect this trend to continue. Further, the growth in non-peak periods was broad-based across our resorts. Despite the growth in overall visits this past season, very few of our resorts even approached their historical maximum daily visitation, as our resorts averaged only one day this season, exceeding 95% of their historical peak daily visitation And only six resorts had more than one day above that level, excluding the recently acquired Seven Springs Resorts. All of this highlights that there is considerable opportunity to continue to grow the overall industry and skier visits outside of peak periods, and that it is critical that we continue to invest in people and infrastructure to continue to improve the employee and guest experience throughout the season. This growth in our business and in the industry is encouraging, and we remain committed to consistently reinvesting in our people and our resource in order to ensure we continue to deliver our company mission of an experience of a lifetime. As we turn our attention to the 2022-2023 ski season and beyond, the company is making its largest ever investment in both its employees and the capacity of our resorts. Our employees are the core of Vail Resort's mission to create an experience of a lifetime. We cannot create an experience of a lifetime for our guests without first creating an experience of a lifetime for our employees. Year-round and seasonal, hourly and salaried, at our mountain resorts and in corporate, As a result, we have announced an incremental annual $175 million investment in our employees. The investment includes increasing the minimum hourly wage offered to $20 per hour across all 37 of our North American resorts for all U.S. employees and $20 Canadian per hour for all Canadian employees and increases for hourly employees with adjustments for leadership and career stage differentials. The investment also includes $21 per hour minimum for patrol, maintenance technicians, and certified commercial drivers, all roles that have specific experiences or certification as prerequisites. Shipped employees will be guaranteed a minimum of $20 per hour. The wage investment represents an average wage increase of nearly 30% across hourly employees in North America. Additionally, the company will be launching a new seasonal frontline leadership development program with the goal of supporting our seasonal frontline team members' leadership development and ability to build a career at Vail Resorts. The company will be assessing targeted increases beyond inflation for our salaried employees, and we'll be making a significant investment in our human resources department to ensure the right level of employee support, development, and recruiting. We believe talent is our most important asset, and our employees are our strategic priority at all levels of the company. Our employee investments are intended to help us achieve normal staffing levels that in turn deliver an outstanding guest experience. Additional information on the employee investments and anticipated financial impacts are available in our March 2022 investor presentation available on our investor relations website. In addition, Vail Resorts has made a commitment to affordable housing in our mountain communities. Affordable housing is a national and a mountain community crisis. As previously announced, we are investing in four projects to provide accessible and affordable housing for our employees at Park City Mountain in Utah, Whistler Black Home in British Columbia, Vail Mountain in Colorado, and Okemo Mountain Resort in Vermont. Collectively, the four investments would provide new affordable housing to more than 875 Vail Resorts employees, marking a more than 10% increase in affordable employee housing offered by the company across its resorts. We believe it is time for us and our communities to make affordable housing a top priority and accelerate the processes to ensure we bring these affordable housing opportunities to fruition. We remain dedicated to delivering an exceptional guest experience and will continue to prioritize reinvesting in the experience at our resorts. We are committed to consistently increasing capacity through lift, terrain, and food and beverage expansion projects and are making a significant one-time incremental investment this year to accelerate that strategy with our ambitious capital investment plan for calendar 2022 of approximately $315 million to $325 million across our resorts, excluding one-time investments related to integration activities, employee housing development projects, and real estate-related projects. The plan includes approximately $180 million for the installation of 21 new or replacement lifts across 14 of our resorts and a transformational lift surf terrain expansion at Keystone. In addition to the two brand new lift configurations at Vail and Keystone, the replacement lifts will collectively increase lift capacity at those lift locations by more than 45%. Projects in the plan are subject to regulatory approvals and assuming timely approvals are currently expected to be completed in time for the 2022-2023 North American winter season. The core capital plan is approximately $150 million above our typical annual capital plan based on inflation and previous additions for acquisitions. We plan to spend approximately $9 million on integration activities, related to the recently acquired Seven Springs Resorts, including one-time investments related to integration activities and $3 million associated with real estate-related projects. Our total capital plan is expected to be approximately $327 million to $337 million. Including our calendar year 2022 capital plan, Vail Resorts will have invested over $2 billion in capital since launching the Epic Pass, increasing capacity, improving the guest experience, and creating an integrated resort network. In addition to this year's significant capacity-expanding investment, planning is already underway for our calendar year 2023 capital plan, and we are pleased to announce the first projects from that plan with additional calendar year 2023 investments and upgrades to be announced in the upcoming quarters. At Breckenridge, we plan to upgrade the Peak 8 base area to enhance the beginner and children's experience and increase uphill capacity from this popular base area. The investment plan will include a new four-person high-speed five-chair to replace the existing two-person fixed grip lift and will include significant improvements, including new teaching terrain and a transport carpet from the base to make the beginner experience more accessible. At Stevens Pass, we are planning to replace the two-person fixed-grip CARES chair lift with a new four-person lift, which will improve out-of-base capacity and guest experience. At Attitash, we plan to replace the three-person fixed-grip summit triple lift with a new four-person high-speed lift, increasing uphill capacity and reducing guest time on the longest lift at the resort. These lift projects are subject to regulatory approvals and are currently expected to be completed in time for the 2023-2024 North American winter season. In closing, we are thrilled to see the continued loyalty of our guests and the value proposition they see in our past products. Our advanced commitment strategy is core to the long-term growth and sustainability of our business. And our focus on continuing to invest in the guest experience and our employees could deliver that experience day in and day out. With the North American ski season coming to an end, I would like to thank our employees that worked so hard to deliver a great season, even amid challenges. While this certainly has been a challenging season, I have never felt more confident in the foundation of who we are, our values, our mission, and our path forward. At this time, Michael and I will be happy to answer your questions. Operator, we are ready for questions.

Thank you. If you would like to signal with questions, please press star 1. on your touch tone telephone. If you're joining us today using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up question. Once again, please press star one if you would like to signal with questions. Star one. And our first question will come from Sean Kelly with Bank of America.

Hi, good afternoon everyone. Kirsten, thank you for all the prepared remarks. I just wanted to start with one of the comments that you made around sort of the expectations for past sales going forward. So you hinted that your expectation is currently that past sales growth relative to what was delivered here should slow as the season progresses. I mean, historically, you've also, I think, talked pretty conservatively about that same thing. But there were some deadline changes this year. and a few other things that maybe were tweaked. So can you talk a little bit about pros and cons as we move through the summer in terms of the offerings? Again, I think specifically the Buddy Pass deadline and the price increase were both taken a little earlier than they have in the past. So maybe just walk us through a couple of the puts and takes versus that on the one side versus maybe the fact that you do have tougher comps as the sales period progresses.

Yeah. Hi, Sean. Thank you for the question. I would just overall feel very good about our spring pass sales and the underlying dynamics with the unit growth up 9% after plus 50% last spring. Also feel very good that we have strong growth with our renewing pass holders and in destination markets. We did take a price increase in Memorial Day, and the purpose of that increase is really to keep up with inflation, and we had strong underlying business results that supported taking that action. If you think about what happened last year with the price reset, that was essentially a strong call to action in and of itself. And based on our own research, we know that many of our guests thought it was temporary and really jumped in early to get their pass. So when you think about the comparable, the price increase call to action this year on Memorial Day in some ways balances out that call to action. I do think, though, that as you would expect, we did pull forward some pass holders. And as a result, we would expect that our growth rate in the fall and on a full year basis to be lower than the growth rate that we experienced in spring.

I guess as my follow-up, is it possible, just given where we are with dollars and the magnitude of the price increase to the up 11 versus kind of a blended average product increase of around 7.5, it seems possible that the unit number, in terms of the number of units you sell, could actually go a little bit negative. Would that be concerning to you in and of itself, and sort of what would you – What would you think about that? What are the trade-offs around that relative to the long-term objective, which is to just continue to grow the program and its relevance?

So obviously last year was a big year for us, and it exceeded our expectations. So certainly agree and understand what you're raising about the comparable in terms of lapping that. I think the early indications that I'm seeing in spring is really all that I can comment on right now, which is that the fundamental dynamics of the business are very strong. And we do think the growth rate will moderate, but not going to comment on projecting whether or not we expect it to decline.

Thank you very much.

And our next question will come from Chris Ronca with Deutsche Bank.

Hey, good afternoon, everybody. The first question is on the employee housing investment. I don't know if you put a lot of dollars around that. Can you kind of maybe give us some thoughts on how much that's going to be kind of a CapEx related investment versus how much is kind of operational in the next couple of years?

Yeah, Chris, thanks for the question. You know, it's a mix of capital and OpEx, and in certain circumstances, we'll actually enter into employee housing master leases. So, as an example of that, at the base of Canyons, the big Park City project that we entered into is actually a master lease from a development that's taking place there, and so we're taking a significant portion of the beds there in the form of a master lease. So, In those circumstances, that would come through as an expense. And then in certain circumstances, we actually will develop a project. So an example of that would be the project in Vail that we're planning to actually develop and put our own capital behind that. And we anticipate that's at least a $17 million project.

Okay. Thanks, Michael. Second question, kind of shifting gears a little bit. You guys have obviously done a terrific job of getting advanced commitment from lift tickets over time. Is there any thought to kind of exploring that on the ancillary side, maybe on getting people to commit to a certain level of food and beverage and maybe giving them a slightly bigger discount than what they're already getting? Any thoughts of that to kind of lock in even more of the ancillary stuff?

Thanks, Chris. Right now, our pass holders, as we move to a subscription model, do get a discount on our ancillary businesses. While we have not made any announcement on anything else related to ancillary as a subscription model, I think it's certainly an idea that we would consider, but no immediate plan to do that.

Okay. Very good. Thanks.

Thank you, and our next question will come from Laurent Vaskelescu with BNP Paribas.

Good afternoon. Thank you very much for taking my question, and congrats on the strong results. I wanted to follow up on Andermatt. I know it doesn't really move the P&L needle right now, but curious to get your thoughts if this is very much a strategic acquisition, meaning is Andermatt the beginning of an M&A chapter in Europe? And if so, what kind of mountain profiles would you look for? And would you target a specific mountain range, whether it's the Alps, the Pyrenees, or another mountain range within Europe?

Thanks, Laurent. I think Michael and I can probably tackle different parts of this question. I think in terms of strategy, yes. You know, we do view Andermont as very much of a strategic acquisition. And as we have talked about in our investors conference for years, many years that we aspire to acquire resorts in Europe as well as Asia. We are unbelievably thrilled to have this first European acquisition and do view that it is a strategy for us to expand, but slowly. And we have a lot to learn and a lot to do to actually ever get to the point where we have a network of resorts in Europe, and our first step is Andermatt, and we're very excited about it. I'll turn it over to Michael to answer a portion of that question as well.

Yeah, thanks, Lauren. And, yeah, as Kirsten said, we're just thrilled with the opportunity to partner with ASA and the Suarez family, who have really done an incredible job with the community in Andermatt and Cedroon of building, yeah, what we think could become one of the premier destination resorts. um in europe a really remarkable high alpine experience two great villages that are connected across you know almost 10 miles of terrain um you know kind of just uh yeah incredible both ski and um and travel experience and so you know we think that one of the um you know we've got a great foundation to work from great partners and a great community to become a part of um And as Kirsten said, really going to take our time to make sure that we learn and integrate into the community there. I think that one of the things that was most attractive to us, and I think a great area of alignment for us with our partners, because we're taking a majority stake at 55%, but not a full acquisition. And that was really important to us because we have great partners there. who were really aligned with our ability to invest the proceeds from the transaction back into the resort in the base area, as I described in our comments. And so we think that's really going to be a great foundation for growth because we're going to be, yeah, quite ambitious in, you know, reinvesting in, in the resort itself. And yeah, we think that it'll be a great start to a platform in Europe, but really, very focused on being successful with Andermatt as an important first step.

That's great to hear. And then, Michael, I know you're not guiding for FY23 today, but I wanted to quickly follow up on the March Investor Day slides. I think slide 62 shows an illustrative case, an illustrative floor of 30% resort EBITDA margins after considering the $175 million of labor investments. Michael, is that still the right way to think about this illustrative case study, or are there any other factors to consider three months later?

Yeah, I think we're not providing anything additional to what we provided back in March at the investor meeting. We certainly wanted to highlight that what went along with the $175 million investment in our people which is a critical step, as Kirsten described, in terms of the future success of our business and our people really are so core to everything that we do as a company. And offsetting that investment, yeah, there are some tailwinds that we expect to have next year, largely resulting from, as we described, the challenging early season this year and kind of a return to normal conditions Whistler Blackcomb, which was quite impacted until the spring by COVID. Australia, similarly quite impacted in Q1, as well as the opportunity when we do return to normal staffing to have the full capacity of our ancillary businesses. And so we're not providing any updated information, but certainly those trends are still the ones that we would call out.

Very helpful. Thank you very much.

And our next question today will come from Jeff Stanchel with Stifel.

Hey, good afternoon, Kirsten, Michael. Thanks for taking our questions. Starting off, obviously the hot topic these days is going to be the state of the consumer and any early data points suggesting softness, you know, really more towards the low-income end. Just curious, you know, is there anything in your data that would suggest any early warning signs for your business? And, you know, I'm guessing the answer is no. And if so, just generally, what would be the canary in the coal mine here? Is it lodging bookings? Is it trade downs? Is it past types? Just curious what you guys monitor internally most closely for signs of softness. Thanks.

Thanks, Jeff. You know, the consumer demand trends are looking very positive right now, but obviously we need to continue to monitor that closely given changing macro economy. The positive signs are obviously our past sales results for spring are strong. We do do research among our own guests and their intent to ski as of now is looking very strong. And I would say that there's a lot of uncertainty with the economy right now. I do think important to note that when you look back to sort of the prior recession time period, our company is in a much more stable position today than it was then to navigate it. We have 40 resorts across three countries with a combination now of drive-to and fly-to destinations. Advanced commitment has increased from 26% of lift revenue in fiscal 08 to 62% expected this year. And our advanced commitment products are arguably the best value in skiing. So in terms of, you know, is the company in a good position to navigate this? I think there's a lot of strong indicators there. The travel demand is, indicators are strong, but we need to continue to monitor them. In terms of what we look at, yes, we look at pass sales, we look at bookings, and we constantly engage with our own guests via research to understand what their intent is to ski and to visit and to travel overall. So we'll be monitoring those closely.

Very helpful. Thank you. And then just on, on some of the dynamic pricing that you guys are doing this year with, with passes, you know, so the Memorial day deadline looks like you hiked about 2% historically from early bird pricing to end of selling season. You know, the gap there is typically about low to mid teens percentage change. You know, is it fair to kind of think about that as a baseline and, kind of add in annualized CPI and that's kind of, you know, reasonable benchmark to think about where we can go from here or kind of how should we think about the price hikes, both in terms of final magnitude and as well as, you know, how dynamic do you intend to remain? Should we expect the rest of the selling season to follow historical hike cadence or should we expect more dynamic price taking? Thanks.

Well, as you can imagine, I'm not going to comment on forward pricing decisions. What I will say, though, is the way to think about the decisions we've made thus far, which is we started the past selling cycle with a seven and a half price increase with the goal of pricing with inflation and looking at the Memorial Day. And we said at that time that we would use price continue to use price as a lever but also continue to keep track with inflation what you see in memorial day is we took an additional price increase to keep up with inflation also we saw strong business results and i would say going forward pricing continues to be a lever on this business our lift tickets and all aspects of our ancillary businesses we look at our data We look at demand. We look at what's going on in the macro economy. And then we make our pricing decisions, but can't guide to what those pricing decisions will be, but at least give you that context on how we thought about it thus far.

Understood. Very helpful. Thank you. I'll pass it on.

And our next question will come from Patrick Schultz with Truist Securities.

Good afternoon, everyone. Question for you on the past prices. It would seem to me that moving up that past price increase deadline would be a pretty material fact and a mover to the impact on sales. And I know in the past with such things you have called out clearly in press releases when there have been year-over-year comparison, making results perhaps not as comparable as one might think. I'm curious why you did not include that in this press release this time. Thank you.

Sorry, Patrick. Can you clarify your question?

Yeah. It would just seem that moving up the past deadline by three months would really help. The past price increase would help really give a nice bump to sales. And I didn't see any mention of that fact in there where in the past you have noted when things have maybe not been completely comparable. I'm just curious why you wouldn't mention that what I would think is a material fact that the past price deadline was moved up by three months. Or not deadline, but the price increases.

So what we, you know, from a business context perspective, what we did share when we launched Passes is, and in the investors conference, is that we would continue to assess when and how much price increases we take on the business and that we have always believed that price is a lever, even in the context of the price reset that we did last year. We priced right out of the launch, keeping up with inflation. And then we took a price increase Memorial Day also to keep up with inflation. I think when you think about the laughing factors, we have a unique dynamic last year in the spring where we announced the 20% price reset. And what was interesting about that, Patrick, is that the announcement was almost so good and so surprising that a lot of our guests actually thought it was temporary. They didn't fully understand that it was a true reset of our business based on price elasticity and the data we had. And so we saw that a lot of our guests thought it was temporary and thought that it was going to go away. And so they jumped in early to get their passes in spring. So in some ways, when you think about the comparable, the call to action this year versus last year balances out to some extent as we had a price increase this Memorial Day as a call to action as well.

Okay. Okay. We'll leave it at that. Thank you.

And moving on to Omir Sander with JP Morgan.

Hi, everyone. Thanks for taking my question. I'm hoping we could revisit the pass sales for next season, encouraging that units are up nicely. What are you seeing at the high and low end of your passes? Are you seeing a trade down in passes versus last year, or is it just a mixed shift towards day passes, maybe some of both? And is there any color on retention that you can give across your multi-year pass holders versus new pass buyers?

Yeah, absolutely. So as you noted, I mean, units were quite strong, up 9%. our sales dollars increased 11%. So we had a 7.5% price increase, which was largely offset by the impact of growth of Epic Day Pass products. And I'll share a little bit more context on that. In terms of trade up, trade down, we were really pleased to achieve neutral net migration among renewing pass holders. And the way to think about that, just to re-anchor to the investors conference. Net migration is the difference in the percent of renewing pass holders that trade up versus the percent of pass holders that trade down within our portfolio pass products. Last year, our net migration was up dramatically as our guests spent the discount on higher level passes and more access So this year, to be able to maintain that net migration neutral, we are very pleased to see that dynamic. Now, when net neutral unit migration usually involves some level of degradation of the effective pass price, because we have so many people in Epic Pass and Epic Local, or sorry, Epic Pass, and there's really nowhere to upgrade from there. The primary driver overall, though, of the effective pass price is the growing portion of Epic Day Pass. So there's two pieces to that. We have more Epic Day Pass in the renewers from last year. And we have brought in new people into the lower frequency products as we convert guests that are lower frequency lift ticket skiers, guests from our lower priced resorts into advanced commitments. And that usually happens through Epic Day Pass, which does have a mixed impact on our effective pass price. And I just want to clarify for everyone on the call that our ultimate vision is that 75% or more of our lift revenue is committed before each season begins. So we view the growth in Epic Day Pass as a real positive, and believe that it delivers the long-term guest lifetime value benefits associated with our strategy of advanced commitment.

Awesome. Thank you. That's helpful. And then maybe just one follow-up, the commentary around units and sales in future months slower than this spring. Is that sort of consistent with what you've seen historically? Is there anything specifically driving that commentary? And obviously, it's a small window since June 1st. or is it sort of just maybe a little bit of conservatism in there? And then just lastly, as a follow-up to that, can you just remind us what percentage of past sales you typically have on the books for next season at this point in the spring?

So related to spring versus fall and our full-year expectations, I think it's important to remember two things that impact the dynamic. One is the majority of the selling states period for pass is still to come so we're very early in the selling cycle and number two is every year we focus on pulling people forward so not only are we actively trying to encourage people to commit before the season starts but we're also trying to encourage people to buy even earlier buying in the spring before the season starts so both of those dynamics impact the comments that we have about what we expect in the fall and on our full-year growth rates. And then in terms of percent of passes on the books, we'll comment on that.

Thank you.

Thanks.

And moving on to Farshid Javar with Jefferies.

Good evening, guys. Congrats on the quarter. It looks like we're making progress on list revenue advancement with the goal being 75%. Can you maybe discuss what's driving the result? Is it reconnecting with guests that maybe haven't shown up? Is it people recognizing the value proposition with just the collection of assets? Anything else?

Yeah, I think that the results that we're seeing this spring are driven by Three things. One is on a strategic level, the compelling resort network that we have, incredible resorts. Second is the guest experience that we provided, especially post-holidays, post the challenges of Omicron and the low snow. Once we got through that time period, we delivered a very strong guest experience. And then third is the value proposition for guests. So we are asking lift ticket guests to make a commitment that's non-refundable before the season starts. That's a pretty big commitment to make. And the value proposition and the price point that we're offering in exchange for that behavior is very, at least as the early indicators would show, based on our results last year and our spring results, that that is a very compelling proposition for our renewing pass holders, and also as we acquire new pass holders, whether those new pass holders are moving from a lift ticket last year or they used to be a pass holder, or they used to be a lift ticket holder, or they're brand new to our network of resorts.

Appreciate it. And then also, you know, just given some, you know, higher travel prices and what seems to be headaches, is there any, maybe an expectation for how regional versus destination places may perform? Maybe some people aren't willing to fly or part of the case may be. Thanks.

I mean, right now, in terms of, I'm assuming you're asking that question in the context of next winter and next season for our resorts. Yeah, all I can really share is what I shared earlier, which is the trends that we are seeing right now look positive. That said, there is a lot of uncertainty in terms of the economy and impacts on consumers and guests, and we plan to monitor that closely and adjust as needed. I think right now the demand, the positive demand that we see is our pass holders and the 9% unit growth on top of the almost 50% growth last year, as well as other indicators in terms of guest research and intent to travel. But, yeah, fully don't – we don't intend to just anchor to that. We intend to monitor it and adjust as needed.

Understood. Thank you.

And we will go to Ryan Sunby with William Blair.

Hey, Kirsten. Hey, Michael. Thanks for the question. As Australian season gets ready to ramp up here, it sounds like pap cells have been strong. could you maybe talk a little bit about where things stand there in terms of operating restrictions? And I guess if you're seeing a similar tight liver market as well. And then just as my follow-up, I know Hawthorne and Falls Creek closed back in 2019, but with COVID it's been hard to get a read on how the integration has gone there and what kind of synergies you might maybe have been able to capture. Can you just maybe give an update on those two mountains and if you're starting to see any network benefits or or anything else there in terms of what stands out versus just heavy perisher as a standalone mountain?

Sure. Thanks, Ryan. I think, yeah, a couple of things on Australia. One, we're really excited to have all three resorts open as of this week, actually, with some good early season snow. So that's always a good start. As we noted in the release as well, we've had very, very strong past sales results from our Australian guests as we headed into the season. And so, you know, Australia has had quite significant COVID restrictions. And so as those have opened up, which are largely loosened at this point, you know, the outlook for Australia is, is, you know, quite strong barring any changes in that. So, you know, we feel, yeah, feel very good heading into, into the season with all three resorts and yeah, very grateful for the, efforts of the team down there who have done a phenomenal job. And Kirsten, if you want to take the second piece on the network.

Yeah, on the, oh, I was going to address the, I think you had a question on labor as well. But regarding the network effect, yes, and we have definitely seen the benefits and the impact of having a network of resorts in Australia and the connection that has to our North American resorts. And I think it's on a much bigger scale than the network effects that we see by owning local and regional resorts in the United States. And so that strategy we absolutely believe is highly successful. In terms of Labor and the labor market and what we're seeing there, I would say, you know, too early to tell for winter season, given it's June right now. We are staffing up for our summer operations and certainly feeling good about tracking to normal staffing for summer. As we think ahead to winter, you know, I think the investment we're making in our employees is absolutely essential to our success. It is that team that's critical to delivering the guest experience, and then that drives the advanced commitment and the loyalty, and then enables us to reinvest back in our business, expand the network, and deliver returns to investors. So very much excited about the investment we're making in our employees, our team members, and believe that that is the right approach for us going forward.

Thank you. And that does conclude the question and answer session. I'll now turn the conference back over to Ms. Lynch.

Thank you, Operator. This concludes our fiscal 2022 third quarter earnings call. Thanks to everyone who joined us today. Feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon. Goodbye.

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.