Vail Resorts, Inc.

Good afternoon and welcome to the Vail Resorts fiscal 2023 fourth 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 would 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 two. 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 year-end earnings conference call. Joining me on the call this afternoon is Angela Korch, 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, September 28, 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 in our press release, which along with our annual report on Form 10-K, were 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 2023 and fourth quarter results. Given the significant weather related challenges this past season, we are pleased with our overall results for this year with strong growth in 2022-2023 North American ski season visitation and spending compared to the prior year. further supported by the stability created by our advanced commitment products. The return to normal staffing levels enabled our mountain resorts to deliver a strong guest experience, resulting in a significant improvement in guest satisfaction scores, which exceeded our pre-COVID levels at our destination mountain resorts. Visitation growth was achieved through strong growth in pass sales, The addition of Andermatt Cedroon in Switzerland, the full year impact of Seven Springs Mountain Resort, Hidden Valley Resort, and Laurel Mountain Ski Area acquired December 31st, 2021, and record visitation and resort net revenue in March and April. Ancillary businesses, including ski school, dining, and retail rental, experienced strong growth compared to the prior period, when those businesses were impacted by capacity constraints driven by staffing, and in the case of dining, by operational restrictions associated with COVID-19. Our dining business rebounded strongly from the prior year, though underperformed expectations for the year, as guest dining behavior did not fully return to pre-COVID levels following two years of significant operational restrictions associated with COVID-19. Our overall results through the 2022-2023 North American ski season highlight the stability of the advanced commitment from season pass products in a season with challenging conditions, including travel disruptions during the peak holiday period, abnormal weather conditions, which significantly reduced operating days, terrain availability, and activity offerings across our 26 Midwest, Mid-Atlantic, and Northeast resorts, and severe weather disruptions at our Tahoe resorts. This past season, approximately 75% of skier visitation at our North American resorts, excluding complimentary visits, was from pass holders who committed in advance of the season, which compares to approximately 72% for the 2021-2022 North American ski season. Results in our fourth quarter declined from the prior year, primarily driven by the company's fiscal 2023 investments in employees, as well as below average snowfall and snowmaking temperatures that limited terrain availability during the Australian winter season. North American summer operations also underperformed expectations, driven by a combination of lower demand for destination mountain travel which we believe was primarily driven by a broader shift in summer travel behavior associated with the wider variety of vacation offerings available following various travel restrictions in the prior two years and weather-related operational disruption. Turning now to our 2023-2024 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 commitment before the season starts in exchange for a greater value. We are pleased with the results of our season pass sales to date, which demonstrate the compelling value proposition of our past products, our network of mountain resorts, and our commitment to continually investing in, and delivering a strong guest experience. Through September 22nd, 2023, North American ski season past sales increased approximately 7% in units and 11% in sales dollars as compared to the period in the prior year through September 23rd, 2022. Past product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of 74 cents between the Canadian dollar and the U.S. dollar in both periods for Whistler Blackcomb pass sales. Relative to the 2022-2023 season, the company achieved strong loyalty among its pass holders with particularly strong pass sales growth from renewing pass holders while also growing pass sales among new pass holders. The company successfully grew units across destination, international, and local geographies with the strongest unit growth in destination markets including the Northeast, and across all major past product segments with the strongest product growth in regional past products and the Epic Day past product as lower frequency guests and local Northeast guests continue to be attracted by the strong value proposition of these products. The business also achieved positive growth in the Midwest and Mid-Atlantic, which, after challenging conditions last season, highlights the stability of our advanced commitment program, loyalty of our guests, and significant opportunity to drive past penetration in the Midwest, Mid-Atlantic, and the Northeast. Past sales dollars continue to benefit from the 8% price increase relative to the 2022-2023 season, particularly partially offset by the mixed impact from the growth of Epic DayPass products. As we enter the final period for season pass sales, we expect our December 2023 growth rates may moderate relative to our September 2023 growth rates, given the impact of moving purchasers earlier in the selling cycle. We continue to prioritize advanced commitment as the best way for guests to access our mountain resorts. Similar to prior seasons, lift ticket sales will be limited during the 2023-2024 season in order to prioritize guests committing in advance with season passes and to 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 consistent with prior seasons. As a reminder, No reservations are required at any of the resorts on the EPIC Pass for pass holders other than at our partner resort, Telluride. Now I would like to turn the call over to Angela to further discuss our financial results and fiscal 2024 outlook.

Thank you. As Kirsten mentioned, given the significant weather-related challenges this past season, we are pleased with our results for the fiscal year 2023. Net income attributable to Vail Resorts was $268.1 million or $6.74 per diluted share for fiscal year 2023 compared to net income attributable to Vail Resorts of $347.9 million or $8.55 per diluted share for fiscal 2022. The decrease in net income attributable to Vail Resorts compared to the prior year was primarily due to the large gain on disposal of fixed assets in fiscal 2022 and an increase in fiscal 2023 expense associated with a change in the estimated fair value of the contingent consideration liability related to our Park City resort lease. Resort reported EBITDA was $834.8 million in fiscal year 2023 compared to resort reported EBITDA of $836.9 million in the prior year. Now turning to our outlook for fiscal 2024. As we head into our fiscal year, we are encouraged by the strength in advanced commitment product sales and remain committed to delivering a strong guest experience while maintaining cost discipline. We expect meaningful growth for fiscal 2024 relative to fiscal 2023 with strong resort EBITDA margins. Our guidance for net income attributable to Vail Resorts is estimated to be between $316 million and $394 million for fiscal 2024. We estimate resort reported EBITDA for fiscal 2024 will be between $912 million and $968 million. We estimate resort EBITDA margin for fiscal 2024 to be approximately 31% using the midpoint of the guidance range. Fiscal 2024 guidance includes an expectation that the first quarter of fiscal 2024 will generate net loss attributable to Vail Resorts between $191 million and $168 million, and Resort Reported EBITDA between negative $154 million and negative $104 million. At the midpoint of the guidance range, first quarter fiscal 2024, Resort Reported EBITDA assumes a negative impact of approximately $46 million compared to the first quarter of fiscal 2023, excluding exchange rate impacts, primarily driven by cost inflation, which includes $7 million impact of our fiscal 2023 employee investment, which went into effect in October of 2022. Lower results from our Australian resorts, from the continuation of the weather-related challenges that impacted terrain in the fourth quarter of fiscal 2023, and lower results for North American summer operations from the continuation of the lower demand for destination mountain travel experienced in the prior fiscal quarter. Relative to fiscal 2023, fiscal 2024 full-year guidance also reflects a negative reported EBITDA impact of approximately $3 million as a result of the company's exit of its retail and rental locations in Telluride and Aspen in fiscal 2023. The guidance assumes a continuation of the current economic environment and normal weather conditions for 2023-2024 North American and European ski seasons and the 2024 Australian ski season. The guidance assumes an exchange rate of 74 cents between the Canadian dollar and U.S. dollar related to the operations of Worcester Blackcomb in Canada, an exchange rate of 64 between the Australian dollar and US dollar related to the operations of Parisher, Falls Creek, and Hotham in Australia, and an exchange rate of $1.10 between the Swiss franc and the US dollar related to the operations of Andermatt Citroen in Switzerland. The current fiscal 2024 exchange rate assumptions result in an expected $5 million negative impact relative to fiscal 2023 results. and an expected $10 million negative impact relative to our original fiscal 2023 guidance provided in September of 2022. While we are cognizant of the broader economic outlook remains uncertain, which we will continue to monitor heading into the upcoming season, we 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 remains strong and the business continues to generate robust cash flow. Our total cash and revolver availability as of July 31st, 2023 was approximately $1.2 billion with $563 million of cash on hand and $646 million of combined revolver availability across our credit agreements. As of July 31st, 2023, our net debt was 2.7 times trailing 12 months total reported EBITDA. The company declared a quarterly cash dividend of $2.06 per share at Vale Resorts Common Stock. It will be payable on October 26th, 2023 to shareholders of record as of October 10th, 2023. During the quarter, the company repurchased approximately 400,000 shares of common stock at an average price of $247 for a total of approximately $100 million. Including the shares repurchased during the fourth quarter, the company repurchased a total of approximately 2.2 million shares of common stock during the fiscal 2023 at an average price of approximately $229 for a total of $500 million. Leveraging the capital we've raised opportunistically over the past few years at a low cost of debt to capitalize on an opportunity to repurchase shares at an attractive valuation. We remain committed to returning capital to shareholders and intend to maintain an opportunistic approach to future share repurchases. We will continue to be disciplined stewards of our capital and remain committed to prioritizing investments in our guest and employee experience, high return 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 to Kirsten.