Vail Resorts, Inc.

Good afternoon, and welcome to the Vail Resorts Fiscal 2023 Second Quarter Earnings Call. Today's conference is being recorded. Currently, all callers have been placed in a listen-only mode, and following management's prepared remarks, the call will be opened up for your questions. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. If you need to remove yourself from the queue, press star 2. To get to as many questions as time permits, We ask that you please limit yourself to one question and one follow-up. At any time, if you should need operator assistance, press star zero. I will now turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts. You may begin.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2023 second quarter earnings conference call. I'm pleased to have Angela Korch joining me on the call today, who recently rejoined Vail Resorts as 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 FCC filings, an 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 9, 2023, 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 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 2023 second quarter results. Overall, we are pleased with the strong guest experience being delivered at our resorts, supported by the investments we made in our resorts and in our employees, which enabled greatly improved staffing levels and employee satisfaction scores, a return to normal operations, and strong guest satisfaction scores. Our ancillary businesses, including ski school dining and rental and retail, experienced strong growth compared to the prior year period when staffing shortages constrained capacity of ancillary businesses. We believe these investments in staffing and our commitment to enhancing the guest experience establish a strong foundation for future growth. Improved conditions at our Colorado, Utah, and Tahoe resorts enabled select early resort openings and drove strong early season local visitation. And the easing of travel restrictions in Canada contributed to a strong rebound in destination visitation at Whistler Black Home relative to the prior year period. As discussed in our January metrics release, Visitation at our western U.S. resorts was negatively impacted by airline travel disruptions during the peak holiday period, as well as severe weather disruptions at our Tahoe resorts. In Tahoe, significant snowstorms continued to impact resort access and limit our ability to fully open our resorts throughout the remainder of the quarter. Across our 26 Midwest, Mid-Atlantic, and Northeast resorts, collectively referred to as our Eastern US Resorts, results for the quarter were negatively impacted by abnormal weather conditions, which significantly reduced operating days, terrain availability, and activity offerings across the region. This impacted demand and increased operating costs, including snowmaking, grooming, and related labor costs. In particular, results at our Eastern US Resorts were significantly below expectations in the post-holiday period, as conditions did not return to normal after the holidays, as was incorporated in our guidance, with January having only 50 to 60% of lifts and terrain open during that period. Compared to the second quarter of fiscal 2022, resort met revenue increased approximately 21%, and we achieved record second quarter visitation and resort net revenue as our ancillary lines of business continued to significantly outperform the prior year. The recent significant investment in our employees helped drive increased staffing levels relative to the prior year, enabling our mountain resorts to deliver normal operations of important guest experiences, such as our restaurants, lodging, fee and ride schools, and rental and retail locations, which helped drive a return of ancillary spending. dining revenue rebounded strongly from the prior year period, though underperformed expectations for the quarter as guest dining behavior has not fully returned to pre-COVID-19 levels following two years of significant operational restrictions associated with COVID-19. Resort reported EBITDA decreased approximately 1% from the prior year as profitability was impacted by the investment in our employee and guest experience, early openings and expanded terrain at our western resorts, as well as increased operating costs from the abnormal weather conditions at our eastern U.S. resorts. We achieved normalized staffing levels this season to ensure we are delivering a strong guest experience and we are pleased with the significant improvement in guest satisfaction scores which have exceeded pre-COVID-19 levels at our destination resorts. Now I would like to turn the call over to Angela to further discuss our financial results, season-to-date metrics, and fiscal 2023 outlook.

Thanks, Kirsten, and good afternoon, everyone. It is great to be back with Vail Resorts and to be speaking with you today. For the second quarter of fiscal 2023, net income attributable to Vail Resorts was $208.7 million, or $5.16 for diluted share, compared to the prior year of $223.4 million, or $5.47 for diluted share. Resort reported EBITDA was $394.8 million in the second fiscal quarter, which compares to resort reported EBITDA of $397.9 million in the same period in the prior year. Turning to our season-to-date metrics, For the period from the beginning of the ski season through Sunday, March 5th, 2023, compared to the prior year period through March 6th, 2022, the reported ski season metrics are for the company's North American destination mountain resorts and regional ski areas, including the results of Seven Springs, Hidden Valley, and Laurel Mountain in both periods, and excluding the results of the Australian ski areas in Andermatt-Cedroon in both periods. The data mentioned in the releases interim period data, and is subject to fiscal quarter end review and adjustments. We are pleased with the continued growth in visitation and ancillary revenue growth throughout the season. Season to date, total skier visits were up 3.6% compared to the fiscal year 2022 season to date period. Season to date total lift ticket revenue, including an allocated portion of our season pass revenue for each applicable period, was up 2.5% compared to the fiscal year 2022 season-to-date period. For our ancillary results, season-to-date ski school revenue was up 27.6%. Dining revenue was up 37.2%. And retail and rental for North American resort and ski area store locations was up 21.2% compared to the prior year period. Season-to-date results at our Eastern US resorts continued to be negatively impacted by periods of both unseasonably warm and extreme cold weather, which disrupted operating days, impacted demand, and increased operating costs. Across our eastern U.S. resorts, over 25% of planned operating days for the 2022-2023 ski season were negatively impacted by extreme weather events, including many days with full or partial resort closures. At our Tahoe resorts, significant snowstorms continued to impact resort access and limited our ability to fully open our resorts. In the Rockies, destination visitation has continued to improve relative to expectations as the season has progressed past the peak holiday period. Whistler-Blackcomb continues to see a strong rebound in destination visitation, including international, relative to the prior year period driven by the easing of travel restrictions in Canada. Our ancillary businesses continued to see strong growth over the prior year period, driven by increased staffing levels that enabled our mountain resorts to deliver normal operations of important guest experiences, such as our restaurants, lodging, ski and ride school, and rental and retail locations, which helped drive a return of ancillary spending. Now turning to our outlook for fiscal 2023. While we continue to expect strong demand from our destination guests at our western North American resorts for the remainder of the season, we are lowering our guidance for fiscal 2023, primarily due to the significant weather disruptions at our eastern U.S. resorts throughout the season-to-date period as well as continued significant snowstorm disruptions at our Tahoe resorts. For fiscal 2023, we expect contribution margin from our 26 eastern U.S. resorts excluding an allocated portion of past product revenue, to underperform initial expectations provided in September 2022 by approximately $43 million, with a majority of the underperformance occurring after the peak holiday period. The weather disruptions in the east and in Tahoe impacted both operating days and visitations and also increased operating costs. Our eastern U.S. resorts have a significantly lower portion of skier visits in advanced commitment products relative to our Western destination resorts. And the financial results this year further strengthen our resolve to continue to drive guests into an advanced commitment product, particularly in our Northeast markets. While we are disappointed to be lowering guidance for the fiscal year, we know that the financial impact to the company of weather and travel disruptions was greatly mitigated by our advanced commitment products, which provide an incredible value to the customer and much greater stability to our company and our communities. We now expect net income attributable to Vail Resorts for fiscal 2023 to be between $282 million and $328 million, and Resort Reported EBITDA for fiscal 2023 to be between $831 million and $859 million. We estimate Resort EBITDA margin for fiscal 2023 to be approximately 29.4%, using the midpoint of the guidance range. The updated outlook for fiscal year 2023 assumes a continuation of the current economic environment, normal weather conditions, and no material impacts associated with COVID-19 for the remainder of the 2022-2023 North American and European ski season or the 2023 Australian ski season. It's important to note that there continues to be uncertainty around the economic outlook and the impact that may have on travel and consumer behavior. The guidance assumes current exchange rates as outlined in our earnings release. Relative to our original September 2022 guidance, we estimate the movements in exchange rates will result in a fiscal 2023 guidance impact of approximately negative $6 million for resort reported EBITDA. Our balance sheet remains strong. Our total cash and revolver availability as of January 31st, 2023 was approximately $1.9 billion With $1.3 billion of cash on hand, $415 million of U.S. revolver availability, and $212 million of revolver availability under our Canadian facility. As of January 31st, 2023, our net debt was 1.9 times trailing 12 months total reported EBITDA. We remain confident in the strong free cash flow generation and stability of the underlying business model. Given these dynamics, we are pleased to announce that our Board of Directors declared a quarterly cash dividend on Vail Resorts common stock of $2.06 per share, representing an 8% increase in our quarterly dividend. The dividend will be payable on April 11th, 2023 to shareholders of record as of March 27th, 2023. Additionally, our Board of Directors has increased our authorization for share repurchases by 2.5 million shares to approximately 3.5 million shares, and we intend to be aggressive in returning capital to shareholders while always focusing on the long-term value of our shares. 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 program. Now I'll turn the call back over to Kirsten.