Vail Resorts, Inc.

Good afternoon, everyone. Welcome to the Vail Resorts Fiscal 2024 Year-End Earnings Conference 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, and if you need to remove yourself from the queue, you can press star 2. To get to as many questions as time permits, we ask that you please limit yourself to one question and and one follow-up. At any time, if you should need operator assistance, please press star zero. And I will now turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts. Please go ahead, ma'am.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2024 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 26, 2024, 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 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 2024 full year and fourth quarter results. Our overall results for the year highlight the stability and resilience of our advanced commitment strategy. Skier visitation declined 9.5% compared to the prior year across our resorts in North America and Australia, driven by unfavorable conditions combined with the impact of broader industry normalization post-COVID following record visitation in North America during the 2022-2023 ski season. In North America, snowfall across our western resorts was down 28% from the prior year, and our eastern U.S. resorts experienced limited natural snow and variable temperatures. The conditions and industry normalization contributed to an 8% decline in skier visitation at our North American resorts for the winter season relative to the prior year period, versus the North American industry skier visitation decline of approximately 9%. Despite the industry normalization and challenging conditions, Resort reported EBITDA, excluding the impact of the Crown Montana acquisition, remained consistent with the prior year results. Performance was supported by strong growth in ancillary spending per visit across ski school, dining, and rental businesses at our resorts and by strong delivery of the guest experience and cost discipline across our operations. Fourth quarter, Resort Reported EBITDA declined from the prior year and expectations, primarily driven by the underperformance in our Australian winter business. During the fourth quarter, snowfall at our Australian resorts declined 28% from the prior year and was 44% below the 10-year average. The challenging conditions, combined with softer demand heading into the winter season, negatively impacted Australian skier visitation, which declined 18% in the quarter relative to the prior year period. In our North America summer mountain business, while results underperformed our expectations, we were pleased to see 15% revenue growth versus prior year from fewer weather-related and construction-related disruptions. Turning now to our 2024-2025 past results. Past product sales through September 20th, 2024 for the upcoming 2024-2025 North American ski season decreased approximately 3% in units and increased approximately 3% in sales dollars as compared to the period in the prior year through September 22nd, 2023. Pass sales dollars are benefiting from an 8% price increase relative to the 2023-2024 season, partially offset by the mixed impact from the growth of Epic Day Pass products. Pass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of 74 cents between the Canadian dollar and U.S. dollar in both periods for Whistler Black Home Pass sales. For the period between May 29, 2024 and September 20, 2024, past product sales trends improved relative to spring past product sales through May 28, 2024, with unit growth approximately flat and sales dollars growth of approximately 5% as compared to the period in the prior year, May 31, 2023, through September 22, 2023, due to the expected renewal strength following the Memorial Day deadline, which we believe reflects delayed decision-making. Season-to-date, through September 20, 2024, the PATH business achieved growth among renewing PATH holders, particularly among our most tenured PATH holders who have had a PATH for three years or more. demonstrating strong loyalty to the guest experience at our mountain resorts and the compelling value proposition of our pass products. The decline in total units versus last year was driven by a decline in new pass holders. Within new pass holders, we saw growth from lapsed pass holders, guests who previously purchased passes but did not buy a pass in the previous season, offset by a decline in new past purchases from guests in our database who purchased lift tickets in the past season, as well as a decline from guests who are completely new to our database. The decline in lift ticket visitation in the past season, driven by challenging weather and industry normalization, reduced the audience size of guests who purchased lift tickets in the past season to drive conversion into pass holders. And the weather may have delayed the decision-making timing for new guests. Overall, unit performance is consistent across destination and local guest segments, and Epic Day Pass products achieve modest unit growth driven by strength and renewing pass holders. As we enter the final period for season pass sales, we expect our December 2024 season-to-date growth rates to be relatively consistent with our September 2024 season-to-date growth rates. Now I would like to turn the call over to Angela to further discuss our financial results, resource efficiency transformation plan, and fiscal 2025 outlook.

Thank you. As Kirsten mentioned, our overall results for the year highlight the stability and resilience for advanced commitment strategies. Net income attributable to Vail Resorts for fiscal 2024 was $230.4 million, or $6.07 per diluted share. compared to net income attributable to Vail Resorts of $268.1 million, or $6.74 per diluted share in fiscal 2023. The decrease in net income attributable to Vail Resorts was primarily due to an increase in our provision for income taxes, decreased resort reported EBITDA, an increase in interest expense, and an increase in depreciation and amortization expense, primarily due to capital projects recently completed at our resorts, and assets acquired at Crown Montana. Turning to our Resource Efficiency Transformation Plan. Over the past decade, Vail Resorts has expanded significantly, growing from 10 to 42 owned and operated mountain resorts in four countries, more than doubling our workforce. During that expansion, the company captured initial acquisition synergies in corporate support functions and through technology integration. However, as we have shared publicly over the past two years, the company has a unique opportunity to further transform resource efficiency, given the scale of our 42 owned and operated mountain resorts, a common enterprise-wide technology ecosystem, and robust data and analytics capabilities. The company is implementing a two-year resource efficiency transformation plan to create organizational effectiveness and scale for operating leverage as the company expands and grows globally. The transformation plan is focused on three pillars, scaled operations, a best-in-class global shared services model, and an expansion of workforce management. We expect that the transformation plan will achieve $100 million in annualized cost efficiencies by the end of fiscal 2026, with approximately $27 million to be realized in fiscal 2025, and approximately $67 million realized in fiscal 2026. all before one-time costs. We expect the efficiencies to be partially offset by one-time operating expenses of approximately $15 million in fiscal 2025 and approximately $14 million in fiscal 2026. In addition, we expect capital investments of approximately $6 million in calendar year 2025 and approximately $12 million in calendar year 2026. The company's mission is to create an experience of a lifetime for our guests. The transformation plan is designed to prioritize delivering the company's mission while also providing scale and operating leverage for future growth. Now turning to our outlook for fiscal 2025. The company is providing its initial guidance for the year ending July 31st, 2025 and expects net income attributable to Vail Resorts to be between $224 million and $300 million for fiscal 2025. The company expects Resort reported EBITDA for fiscal 2025 to be between $838 million and $894 million, including an estimated $15 million in one-time costs related to the multi-year resource efficiency transformation plan and an estimated $1 million of integration-related expenses specific to Kron Montana. As compared to fiscal 2024, Fiscal 2025 guidance includes the assumed benefit of a return to normal weather conditions after the challenging conditions in fiscal 2024, more than offset by a return to normal operating costs and the impact of the continued industry normalization impacting demand. Additionally, the guidance reflects the negative impact from the record low snowfall and related shortened season in Australia in the first quarter of fiscal 2025, which is expected to result in a $10 million decline of resort reported EBITDA compared to the prior year period. After considering those items, we expect resort reported EBITDA to grow from price increases, ancillary spending, the resource efficiency transformation plan, and the addition of Crown Montana for the full year. At the midpoint, the guidance implies an estimated resort EBITDA margin for fiscal 2025 to be approximately 28.6% or 29.1% before one-time costs from the Resource Efficiency Transformation Plan and integration expenses. The guidance is based on certain assumptions, including a continuation of the current economic environment, normal weather conditions for the 2024-2025 North American and European ski season, and the 2025 Australian ski season and reflects the challenging conditions in Australia for the end of the 2024 winter ski season. Guidance assumes an exchange rate of $0.74 between the Canadian dollar and U.S. dollar related to the operations of Worcester Block Home in Canada, an exchange rate of $0.67 between the Australian dollar and the U.S. dollar related to the operations of Parisher, Falls Creek, and Hotham in Australia, and an exchange rate of $1.18 between the CIS rank and the U.S. dollar related to the operations of Andermatt Citroen in Crown Montana in Switzerland. Our balance sheet remains strong and the business continues to generate robust cash flow. As of July 31st, 2024, the company's total liquidity as measured by total cash plus revolver availability was approximately $946 million. Total liquidity is comprised of $323 million of cash on hand and $623 million of combined revolver availability across our credit agreements. As of July 31st, 2024, the company's net debt was 3.0 times its trailing 12 months total reported EBITDA. Regarding the return of capital to shareholders, the company declared a quarterly cash dividend of $2.22 per share of Vail Resorts common stock that will be paid on October 24th, 2024 to shareholders of record as of October 8th, 2024. In addition, during the quarter, the company repurchased approximately 0.1 million shares of common stock at an average price of approximately $180 for a total of $25 million. For the full fiscal year, the company repurchased a total of approximately 0.7 million shares of common stock during the fiscal of 2024 at an average price of approximately $208 for a total of $150 million. Additionally, the Board of Directors increased the company's authorization for share repurchases by 1.1 million shares to approximately 1.7 million shares. We will continue to be disciplined stewards of our shareholders' capital, prioritizing investments in our guest and employee experience, high return capital projects, strategic acquisition opportunities, and returning capital to our shareholders, while always prioritizing the long-term value of our shares.