Vail Resorts, Inc.

Good day and welcome to the Vail Resort's fourth quarter earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kirsten Lynch, Chief Executive Officer. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2022 year-end 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 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, September 28, 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 annual report on Form 10-K, are filed this afternoon with the SEC and are also available on the Investor Relations section of our website at www.valeresorts.com. Let's turn to our fiscal 2022 and fourth quarter results. We are pleased with our overall results for the year, which highlight the stability and strength of our business model. As expected, results for the year 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. Despite the challenging early season conditions through the holiday period, staffing challenges, and impacts related to COVID-19, results exceeded our original expectations for the year with fiscal 2022 resort reported EBITDA of approximately $837 million. The strong performance was driven by the stability from our advanced commitment pass products with approximately 72% of skier visitation at our North American resorts coming from pass holders who committed in advance of the season strong destination guest visitation, including demand for lift tickets, and an improved guest experience from January through the remainder of the season, demonstrating strong underlying demand for the experience at our resorts. Growth in visitation primarily occurred during off-peak periods, including weekdays and non-holidays. Throughout the North American sea season, our ancillary businesses continued to be capacity constrained by staffing, and in the case of dining, by operational restrictions associated with COVID-19. Performance in the fourth quarter of fiscal 2022 improved significantly from the prior year, driven by strong demand and visitation at our Australian resorts and the continued recovery in our North American summer operations following the start of the COVID-19 pandemic. Our Australian resorts experienced record visitation driven by strong demand following two years of COVID-19 related disruption, continued momentum and advanced commitment past sales following the addition of Hotham and Falls Creek in April of 2019, and favorable early season conditions that continued throughout the quarter. Turning now to our 2022-2023 season pass sales. Advanced commitment continues to be the foundation of our strategy, shifting guests from short-term refundable lift ticket purchases to a non-refundable pass commitment before the season starts in exchange for value. We are very pleased with the results of our season pass sales to date, which demonstrate the strength of the guest experience, our network of mountain resorts, and our commitment to continually investing in the guest experience. Through September 23rd, 2022, North American ski season pass sales increased approximately 6% in units and 7% in sales dollars as compared to the period in the prior year through September 24th, 2021, including sales for the Seven Springs Resorts in both periods and adjusted to eliminate the impact of foreign currency by applying an exchange rate of 76 cents between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass sales. These results are particularly strong considering the company achieved growth of approximately 42% in units and 17% in sales dollars last year through September 17, 2021, compared to the prior year through September 18, 2020, excluding sales to the Seven Springs Resorts in both periods. Pass sales growth was driven by our renewing pass holders with particular strength in renewing pass product holders that were new to advanced commitment products last year. And we saw strong growth, particularly in destination markets. The strongest product growth was from Epic Day Pass products attracting new pass holders who are lower frequency guests into advanced commitment products, including the new tier of products launched in 2022-2023, with access to select regional and local resorts. Epic and Epic Local Pass products continue to represent the largest portion of our pass products, with these products orienting to more higher frequency skiers and riders. As we expected, Epic and Epic Local Pass products were down approximately 10% in units versus the prior year period after seeing growth of over 50%. in the comparable prior year period. We expect the majority of our future growth and past sales will continue to come from our Epic Day Pass products as we convert lower frequency lift ticket purchasers to our advanced commitment products. Past sales dollars continue to benefit from the 7.5% initial price increase and subsequent incremental price increases relative to the 2021-2022 season. largely offset by the mixed impact of the growth of new pass holders into 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 net migration among renewing pass product holders remains near neutral, with minimal degradation relative to our spring pass sales. As we enter the final period for season pass sales, we expect our December 2022 growth rates to be relatively consistent with our September 2022 growth rates. We continue to prioritize advanced commitment as the best way for guests to access our resorts. Similar to last year, lift ticket sales will be limited during the 2022-2023 season in order to prioritize guests committing in advance and preserve the guest experience at each resort. We expect these lift ticket limitations will further support our resorts and communities on peak days, and we do not anticipate that the limitations will have a significant impact on our financial results. Now I would like to turn the call over to Michael to further discuss our financial results and fiscal 2023 outlook.

Thanks, Kirsten, and good afternoon. As Kirsten mentioned, we are pleased with our results for fiscal year 2022. Net income attributable to Vail Resorts was $347.9 million, or $8.55 per diluted share, for fiscal year 2022 compared to net income attributable to Vail Resorts of $127.9 million, or $3.13 per diluted share in the prior year. Resort reported EBITDA was $836.9 million in fiscal year 2022 compared to resort reported EBITDA $544.7 million 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. Moving now to our fiscal 2023 outlook. As we head into fiscal year 2023, we are encouraged by the strength and advanced commitment product sales and our continued focus on enhancing the guest and employee experience while maintaining cost discipline. Our employee investment of approximately $175 million to return to full staffing levels and operational footprints, along with our expected capital investment of over $300 million in calendar year 2022, are expected to further elevate the guest experience this season and increase the capacity of our resorts. Despite facing broad cost inflation and after incorporating our industry-leading wage investment, we expect meaningful growth for fiscal 2023 relative to fiscal 2022 and strong resort EBITDA margins. Our guidance for net income attributable to Vail Resorts is estimated to be between $321 million and $396 million for fiscal 2023. We estimate Resort Reported EBITDA for fiscal 2023 will be between $893 million and $947 million. We expect the operations of the Seven Springs Resorts and Andermatt-Sedroon to contribute approximately $22 million of Resort Reported EBITDA on fiscal year 2023, which is an incremental $4 million of Resort Reported EBITDA compared to fiscal year 2022, excluding acquisition and integration related expenses. Acquisition and integration related expenses are expected to be an estimated $4 million in fiscal year 2023 associated with the resort acquisitions. We estimate the resort EBITDA margin for fiscal 2023 will be approximately 31% using the midpoint of the guidance range. The guidance assumes a continuation of the current economic environment, normal weather conditions, and no material impacts associated with COVID-19 for the 2022-23 North American and European ski season or the 2022 and 2023 Australian ski seasons. The guidance also assumes a return to full staffing levels and operational footprints consistent with the expectations shared in the company's March 2022 investor conference presentation. The guidance assumes an exchange rate of 77 cents between the Canadian dollar and the US dollar related to the operations of Whistler Blackcomb in Canada an exchange rate of 70 cents between the Australian dollar and U.S. dollar related to the operations of Parisher, Falls Creek, and Hotham in Australia, and an exchange rate of $1.02 between the Swiss franc and U.S. dollar related to the operations of Andermatt Cedroon in Switzerland. While we are cognizant that the broader economic outlook remains uncertain and there are challenging headwinds, including inflation, monetary policy, and segments of the economy showing signs of slowdown, We remain encouraged by our season-to-date advanced commitment sales results, which demonstrate continued strength in demand for the experience at our resorts and the loyalty of our past product holders. We will monitor the macroeconomic environment as we head into the upcoming season and believe that we will continue to benefit from the stability and resilience of the business model, particularly with the strength, scale, and affordability of our advanced commitment products and the diversification of our resort network. Our balance sheet and liquidity position remains strong. Our total cash and revolver availability as of July 31st, 2022 was approximately $1.7 billion, with $1.1 billion of cash on hand, $417 million of U.S. revolver availability under the Vale Holdings Credit Agreement, and $220 million of revolver availability under the Whistler Credit Agreement. As of July 31st, 2022, our net debt was two times trailing 12 months total reported EBITDA. On August 31st, 2022, the company entered into an amendment of the Bail Holdings Credit Agreement to extend the maturity date by two years to September 2026. The company declared a quarterly cash dividend of $1.91 per share of Bail Resorts common stock that will be payable on October 24th, 2022 to shareholders of record as of October 5th, 2022. including shares repurchased during the fourth quarter for the year ended July 31st, 2022. The company has repurchased 304,567 shares of common stock at an average price of $246.27 for a total of approximately $75 million. We intend to maintain an opportunistic approach to share repurchases. We will continue to be disciplined stewards of our capital and remain committed to continuous investment in our people, strategic high return capital projects, strategic acquisition opportunities, such as the recent additions of Andermatt Cedroon and the Seven Springs Resorts, and returning capital to our shareholders through our quarterly dividend and share repurchase program. As previously announced on August 3rd, 2022, the company closed on its purchase of a majority stake in Andermatt Cedroon, marking the company's first strategic investment in an 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 three of Switzerland's major metropolitan areas of Zurich, Lucerne, and Lugano, and approximately two hours from Milan, Italy. The company acquired 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. Vail Resort's 149 million Swiss francs investment is comprised of 110 million Swiss francs investment into Andermatt Cedroon directly for use in capital investments to enhance the guest experience on the mountain, and 39 million Swiss francs paid to Andermatt Swiss Alts AG, which will be fully reinvested into the real estate developments in the base area. For the 2022-2023 season, Epic Pass holders will receive unlimited and unrestricted access to Andermatt Cedroon. Epic local pass holders will receive five days at the resort, and Epic day pass holders with all resorts access will be able to visit during any of their days. I'll now turn the call back over to Kirsten.