Vail Resorts, Inc.

Good afternoon, and welcome to the Vail Resorts Fiscal First Quarter 2024 Earnings Call. Today's conference is being recorded. Currently, all callers have been placed in a listen-only mode, and following management 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 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 would now like to 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 2024 first quarter 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, December 7, 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. With that said, let's turn to our fiscal 2024 first quarter results. We are pleased with our results for the quarter, which exceeded our expectations due to the timing of expenses primarily related to season ramp-up activities. As we expected, resort reported EBITDA declined compared to the prior year period, primarily driven by cost inflation, $14 million lower EBITDA from our Australian resorts due to normalized results following record demand and favorable conditions in the prior fiscal year, as well as from current year weather-related challenges that impacted terrain. $4 million lower EBITDA from our North America summer operations due to lower demand for summer mountain travel and weather-related challenges, and $4 million negative impact from foreign exchange rates. Turning now to our 2023-2024 North American season pass sales and early season indicators. we are pleased with the results of our season pass sales, which continue to demonstrate the compelling value proposition of our past products, our network of mountain resorts, the strong guest experience created at each mountain resort, and our commitment to continually invest in the guest experience. Past product sales for the North American ski season increased approximately 4% in units and approximately 11% in sales dollars. Through December 4th, 2023, as compared to the period in the prior year through December 5, 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 Black Home past sales. We expect to have approximately 2.4 million guests committed to our 41 North American, Australian, and European resorts in advance of the season in non-refundable advanced commitment products this year, which are expected to generate over $900 million of revenue and over 73% of all skier visits, excluding complimentary visits. The results of our North American pass sales demonstrate strong loyalty among our pass holders, with particularly strong pass sales growth from renewing pass holders, and also from guests in our database, who previously purchased passes but did not buy a pass in the previous season. The company successfully grew units across destination, international, and local geographies with the largest unit growth in destination markets, including in the Northeast. The business also achieved 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, significant opportunity to drive past penetration in the East. Past sales grew across all major product segment past product segments with the strongest product growth in regional past products and epic day products as lower frequency guests and local Northeast guests continue to be attracted by the strong value proposition of these products. The past unit growth rate moderated as relative to our September 2023 growth rate as we successfully moved purchasers earlier in the selling cycle, including guests who purchased our newer product offerings in the prior year period. Past sales dollars benefited from the 8% price increase relative to the 2022-2023 season and new pass holders coming into the program in higher priced products relative to the sales results in the prior year period partially offset by the mixed impact from the growth of regional and Epic Day Pass products. Heading into the 2023-2024 North American and European ski season, our significant base of committed guests, which has approximately doubled over the past four years, provides meaningful stability for our company, especially during economic uncertainty. Our Rockies Resorts and Whistler Black Home have opened with typical conditions for this time of year, and Anderdmont-Sedroon has had particularly strong conditions to start the season. Tahoe's early season has been more challenging with limited snowfall and warm temperatures to date, and our resorts in the east have experienced typical seasonal variability for this point in the season. Lodging booking trends for the upcoming season are generally consistent with the prior year levels, So it is important to note that our lodging bookings represent a small portion of the overall lodging inventory around our resorts. While our mountain resorts are continuing to hire for the winter season, we are on track with our staffing plans and encouraged by the strong return rate of employees from the prior season. We are pleased to welcome guests to all of our resorts. as the 2023-2024 North American and European ski seasons kick off with significant investments in the guest experience. At Keystone, this includes the transformational lift-served terrain expansion project in Bergman Bowl, increasing lift-served terrain by 555 acres with the addition of a new six-person high-speed lift. At Breckenridge, This includes upgrades to the Peak 8 base area, enhancing the beginner and children's experience, and increasing uphill capacity from this popular base area, including a new four-person high-speed five-chair to replace the existing two-person fixed-grip lift, new teaching terrain, and a transport carpet from the base to make the beginner experience more accessible. At Whistler Black Home, this includes the replacement of the four-person high-speed Fitzsimmons lift with a new eight-person high-speed lift. At Stevens Pass, this includes replacing the two-person fixed-grip Cares chairlift with a new four-person lift, which is designed to improve out-of-base capacity and guest experience. At Attitash, this includes the replacement of the three-person fixed-grip Summit triple lift with a new four-person high-speed lift to increase uphill capacity and reduce guest time on the longest lift at the resort. The company is also piloting My Epic Gear at Vail, Beaver Creek, Breckenridge, and Keystone for a limited number of pass holders during the 2023-2024 North American Ski Season, which will introduce a new gear membership program that provides the best benefits of gear ownership, but with more choice, lower cost, and no hassle. My Epic Gear provides its members with the ability to choose the gear they want for the full season or for the day from a selection of the most popular and latest ski and snowboard models and have it delivered to them when and where they want it, including slope-side pickup and drop-off every day. In addition to offering the best skis and snowboards, My Epic Gear will also offer name-brand high-quality ski and snowboard boots with customized insoles and boot fit scanning technology. The entire My Epic Gear membership, from gear selection to boot fit to personalized recommendations to delivery, will be at the members' fingertips through the new My Epic app. My Epic Gear is expected to officially launch for the 2024-2025 winter season at Vail Beaver Creek Breckenridge Keystone Whistler Blackcomb, Park City, Crested Butte, Heavenly, North Star, Stowe, Okemo, and Mount Snow, and further expansions are expected in future years. The company is also introducing new technology for the 2023-2024 ski season at its U.S. resorts that will allow guests to store their past product or lift ticket directly on their phone and scan at lifts hands-free, eliminating the need for carrying plastic cards visiting the ticket window, or waiting to receive a pass or lift ticket in the mail. Once loaded on their phones, guests can store their phone in their pocket and get scanned hands-free in the lift line using Bluetooth low-energy technology, which is designed for low-energy usage to minimize the impact on a phone's battery life. To enhance the guest experience, this technology will also ultimately reduce waste. As a part of the company's sustainability effort, the company will send plastic cards for passes and lift tickets to all guests. And in future years, plastic cards will be available to any guest who uses their phone to store their pass product or lift tickets. We are also excited to announce the launch of our new My Epic app, which includes mobile pass and mobile lift tickets, interactive trail maps, real-time and predictive lift line wait times, personalized stats, My Epic gear, and other relevant information to support the guest experience. The company is also investing in network-wide scalable technology that will enhance our analytics, e-commerce, and guest engagement tools to improve our ability to target our guest outreach, personalized messages, and improve conversion. Now I would like to turn the call over to Angela to further discuss our financial results, our fiscal 2024 outlook, and the Crown Montana acquisition announcement.

Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, we are pleased with our first quarter performance, which exceeded our expectations due to the timing of expenses primarily related to season ramp-up activities. Net loss attributable to Vail Resorts was $175.5 million for the first quarter of fiscal 2024, compared to a net loss attributable to Vail Resorts of $137 million in the prior year. Resort reported EBITDA with a loss of $139.8 million for the first quarter of fiscal 2024, compared to Resort EBITDA, loss of $96.5 million in the prior year. Our balance sheet remains strong and the business continues to generate robust cash flow. Our total cash and revolver availability as of October 31st, 2023 was approximately $1.4 billion with $729 million of cash on hand and $634 million of combined revolver availability across our credit agreements. As of October 31st, 2023, our net debt was 2.6 times trailing 12 months total reported EBITDA The company declared a quarterly cash dividend of $2.06 per share of Ale Resorts common stock that will be payable on January 9th, 2024 to shareholders of record as of December 26th, 2023. During the quarter, the company repurchased approximately 0.2 million shares of common stock at an average price of approximately $211 for a total of $50 million. 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 acquisitions, and returning capital to our shareholders through our quarterly dividend and share repurchase program. Moving now to fiscal 2024 outlook, given the indicators for the upcoming season, We are reaffirming our fiscal 2024 net income attributable to Vail Resort's guidance of $316 million to $394 million, and Resort reported EBITDA guidance of $912 million to $968 million that was included in our September earnings release, based on the assumptions incorporated at that time, including foreign currency exchange rates, a continuation of the current economic environment, and normal weather conditions. Our fiscal 2024 guidance excludes the impact associated with Crown Montana, which remains subject to closing. Heading into the 2023-2024 North American and European ski season, we encourage that staffing levels are on track to deliver an outstanding guest experience. And the strength of our past sales, though it is important to note that our growth in past sales is expected to be partially offset by reduced lift tickets as we continue to successfully convert guests from lift tickets to past products. In addition, there continues to be uncertainty around the economic outlook and the impact that may have on travel and consumer behaviors as we head into our primary operating season. We are pleased to share our announcement last week that we entered into an agreement to acquire a majority stake in Crown Montana Mountain Resort in Switzerland, the company's second ski resort in Europe. Crown Montana is an iconic ski destination in the heart of the Swiss Alps with a unique heritage, incredible terrain, passionate team, and a community dedicated to the success of the region. This acquisition aligns to the company's growth strategy of expanding its resort network in Europe, creating even more value for our pass holders and guests around the world. Much like Andromante Cedroon, the company believes Kramontana has a unique opportunity for future growth. Upon the closing of acquisition, the company will acquire an 84% ownership stake in the entity that controls and operates all the resort's lifts and supporting mountain operations, an 80% ownership stake in Sport Life, which operates one of the ski schools located at the resort, and 100% of 11 restaurants located on and around the mountain. Subject to closing adjustments, the enterprise value of the resort operations is expected to be 118.5 million Swiss francs, including approximately 7 million Swiss francs of debt that will remain in place. The company expects to fund the purchase price for the acquired ownership interest of the resort operations through cash on hand. Vail Resorts anticipates that the resort will generate approximately 5 million Swiss francs of EBITDA in its fiscal year ending July 31, 2025, the first full year of operations, following the expected closing later in fiscal 2024. Vail Resorts anticipates EBITDA growth over time from the inclusion of the resort on the Epic Pass products. and investments in the guest experience. Subject to the timing of capital project approvals and completion, Vail Resorts is planning to invest approximately 30 million Swiss francs over the next five years in one-time capital spending to elevate the guest experience. And the resort is expected to generate over 15 million Swiss francs of annual EBITDA following these investments and inclusion on the epic path. This initial phase of growth of the resort is expected to be primarily driven by operating and marketing initiatives, along with capital investments focused on maximizing gastronomy efficiencies and improving and expanding snowmaking capabilities. After closing the transaction, normal annual maintenance capital expenditures for Crown Montana are expected to be approximately 3 million Swiss francs. The transaction is expected to close during the 2023-2024 ski and ride season, subject to certain third-party consents. Operations at Crown Montana for the 2023-2024 winter season will continue in the ordinary course of business. Vail Resorts plans to include access to Crown Montana on select Epic Pass products for the 2024-2025 ski and ride season. The resort will not be included on the Epic Pass for any remaining part of the 2023-2024 season after the deal closes. Now I'll turn the call back over to Kirsten.