Vail Resorts Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
December 7, 2023

There are 10 speakers on the call.

Operator

Good afternoon, and welcome to the Vail Resorts Fiscal First Quarter 20 24 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. I would now like to turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts.

Operator

You may begin.

Speaker 1

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 And are subject to a number of risks and uncertainties as described in our SEC filings and actual future results may vary materially.

Speaker 1

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 in the section of our website at www.vailresorts.com. With that said, let's turn to our fiscal 2024 Q1 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.

Speaker 1

As we expected, resort reported EBITDA declined compared to the prior year period, primarily driven by cost inflation, $14,000,000 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. $4,000,000 lower EBITDA from our North America summer operations due to lower demand for summer mountain travel and weather related challenges and $4,000,000 negative impact from foreign exchange rates. Turning now to our 2023, 2024 North American season pass sales 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 4, 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 $0.74 Between the Canadian dollar and the U.

Speaker 1

S. Dollar in both periods for Whistler Blackcomb Pass sales, we expect to have 2,400,000 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 $900,000,000 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 Nation, 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 and significant opportunity to drive pass penetration in the East. Pass sales grew across all major product segment, Pass product segments with the strongest product growth in regional Pass 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.

Speaker 1

The past unit growth rate moderated relative to our September 2023 growth rate as we successfully moved purchasers earlier in the selling including guests who purchased our newer product offerings in the prior year period. Pass 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 mix impact from the growth of Regional and Epic Day Pass products. Heading into the 2023, 2020 North American and European ski season, our significant base of committed guests, which has approximately doubled over the past 4 years, Provides meaningful stability for our company, especially during economic uncertainty. Our Rockies Resorts and Whistler Blackcomb Have opened with typical conditions for this time of year and Andrzej Mansidrun 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.

Speaker 1

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 serve terrain by 5 55 Acres with the addition of a new 6 person high speed lift.

Speaker 1

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 4 person high speed 5 chair To replace the existing 2 person fixed grip lift, new teaching terrain and a transport carpet from the base to make the beginner experience more accessible. At Whistler Blackcomb, this includes the replacement of the 4 person high speed Fitzsimmons lift with a new 8 person high speed lift. At Stevens Pass, this includes replacing the 2 person fixed script CARES chairlift with a new 4 person lift, which is designed to improve out of base capacity and guest experience. At Attitash, this includes the replacement of the 3 person fixed grip Summit Triple Lift with a new 4 person high speed lift The company is also piloting My Epic Gear at Vail, Beavercreek, Breckenridge and Keystone for a limited number of pass holders during the 2023, 2024 North American SKU 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.

Speaker 1

My Epic Gear provides its members with the ability to choose the gear they want for the full season or for the day with a select 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 slopestyle 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 recommendation to delivery 2024, 2025 Winter Season at Vail, Beavercreek, Breckenridge, Keystone, Whistler, Blackcomb, Park City, Crested Butte, Heavenly, Northstar, 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.

Speaker 1

Resorts that will allow guests to store their pass product or lift ticket directly on their phone and scan it lift 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 Lyft line using Bluetooth Low Energy Technology, which is designed for low energy usage to minimize the impact on a phone's battery life. As a part of the company's sustainability effort The company will provide plastic cards for passengers and lift kits to all guests. And in future years, plastic cards will be available to any guest who use their phone to store their pass product or lift ticket.

Speaker 1

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

Speaker 2

that

Speaker 1

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.

Speaker 2

Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, we are pleased with our Q1 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 $175,500,000 for the Q1 of fiscal 2024 compared to a net loss attributable to Vail Resorts of $137,000,000 in the prior year. Resort reported EBITDA was a loss of $139,800,000 for the Q1 of fiscal 2024 Compared to resort EBITDA loss of $96,500,000 in the prior year. Our balance sheet remains strong and the business continues to generate robust cash Hello.

Speaker 2

Our total cash and revolver availability as of October 31, 2023 was approximately $1,400,000,000 With $729,000,000 of cash on hand and $634,000,000 of combined revolver availability across our credit agreements. As of October 31, 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 Avail Resorts common stock that will be payable on January 9, 2024 to shareholders of record as of December 26, 2023. During the quarter, the company repurchased approximately 0 point 2,000,000 shares of common stock at an average price of approximately $2.11 for a total of $50,000,000 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.

Speaker 2

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 EBITDA guidance of $912,000,000 to $968,000,000 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 Caron Montana, which remains subject to closing.

Speaker 2

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 pass sales. Though it is important to note that our Growth in pass sales is expected to be partially offset by reduced lift tickets as we continue to successfully convert guests from lift tickets to pass 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 Grand Montana Mountain Resort in Switzerland, the company's 2nd ski resort in Europe. Carne 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.

Speaker 2

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 Undermount's syndrome, the company believes Cro Montana has a unique opportunity for future growth. Upon the closing of acquisition, the company will acquire 84% ownership stake in the entity that controls and operates all the resorts' lifts and supporting mountain operations An 80% ownership stake in Sport Life, which operates 1 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 CHF118,500,000, including approximately CHF7 1,000,000 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.

Speaker 2

Vail Resorts anticipates that the resort will generate approximately CHF5 1,000,000 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 Pleasure. Vail Resorts is planning to invest approximately CHF 30,000,000 over the next 5 years in one time capital spending to elevate the guest experience And the resort is expected to generate over CHF 15,000,000 of annual EBITDA following these investments and inclusion on the Epic Pass. This initial phase of growth of the resort is expected to be primarily driven by operating and marketing initiatives along with capital investments focused After closing the transaction, Normal annual maintenance capital expenditures for Car Montana are expected to be approximately CHF 3,000,000.

Speaker 2

The transaction is expected to close during the 20 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 Now I'll turn the call back over to Kiersten.

Speaker 1

Thank you, Angela. We are pleased to announce additional details of our calendar year 2024 capital plan, which support the company's strategies to grow the subscription model, unlock ancillary growth, drive resource efficiency and further differentiate the guest experience. We expect our capital plan for calendar year 2024 to be approximately $189,000,000 to $194,000,000 Excluding $13,000,000 of incremental capital investments in premium fleet and fulfillment infrastructure to support the official launch of My Epic here for the 20242025 winter season, dollars 11,000,000 of Growth Capital Investments at Ondermatt Sudrun and $1,000,000 of reimbursable capital. Including Myopic Gear Premium Fleet and Fulfillment Infrastructure Capital and One Time Investments. Our total capital plan for calendar year 2024 Is expected to be approximately $214,000,000 to $219,000,000 This excludes any capital expenditures At Whistler Blackcomb, the company plans to replace the 4 person high speed jersey cream lift with a new 6 person high speed lift.

Speaker 1

This lift is expected to provide a meaningful increase in uphill capacity and better distribute guests at a central part of the resort. At Hunter Mountain, we plan to replace the 4 person fixed grip Broadway lift with a new 6 person high speed lift and plan to relocate the existing Broadway lift to replace the 2 person fixed grip e lift, providing a meaningful increase in uphill capacity And improved access to terrain that is key to the progressive learning experience for our guests. At Park City, we are in the planning process to support the replacement of the Sunrise Lift with a new 10 person gondola in partnership with the Canyons Village Management Association in calendar year 2025, which will provide improved access And enhanced guest experience for existing and future developments within Canyon Village. These projects remain subject to approval. In addition to the projects announced in September, at Park City and Hunter Mountain, beyond the planned lift investments, We plan to enhance snowmaking systems to improve the experience for key terrain, increase early season terrain consistency and improve the efficiency through the installation of automated and energy efficient snow guns.

Speaker 1

We also plan to further support the company's commitment to 0 by And we are now ready to take questions from the line of our results to achieve the goal of 0 waste to landfill by 2,030. At Afton Alps, we plan to install a 10 lane tubing experience and renovate the existing Alpine building to create a 200 seat restaurant At Perisher, in advance of the 2025 winter season in Australia, We plan to replace the Mount Perisher double and triple chairs with a new 6 person high speed lift, With capital spending commencing in calendar year 2024 and continuing into calendar year 2025. These projects remain subject to approval. In addition, we are continuing to invest in innovative technology to enhance the guest experience. In the coming year, we are investing in new functionality for the My Epic app To better communicate with and personalize the experience for our guests, across our resorts, we plan to pilot new technologies at select restaurants to make it both easier and faster for guests to dine at our resorts.

Speaker 1

In addition, in order to support the launch of Myopic Gear, We plan to invest in logistics and technology infrastructure to help deliver a transformational improvement to the gear rental experience for our guests. The company is planning to launch My Epic Gear for the 2024, 2025 winter season at 12 destination and regional resorts across North America, including Kids Gear, and we will be limiting membership to 60,000 to 80,000 members. To support the initial year of this new business, in calendar year 2024, the company plans to invest $13,000,000 beyond our typical annual capital plan, an incremental premium gear fleet and fulfillment infrastructure to support the anticipated growth of this business. We plan to provide additional updates on Myopic Gear and the ongoing capital needs of the business after the year 1 launch. At Andromat Sudrun, we are pleased to announce plans to invest approximately $11,000,000 in high impact growth capital projects as part of a multi year strategic growth investment plan to enhance the guest experience on the mountain, which will be funded by the CHF 110,000,000 francs of capital that was invested as part of the purchase of our majority stake in Andromat Sudrun.

Speaker 1

As part of the capital year We are planning to upgrade and replace snowmaking infrastructure at the Sedrun Millets area on the eastern side of the resort to enhance the guest experience for key beginner and intermediate terrain and significantly improve energy efficiency. In addition, we plan to invest in the on mountain dining experience with improvements to the Milet's and Nochen restaurants. These investments are expected to be completed ahead of the 2024, 2025 European ski season and remain subject to regulatory approvals. In 2017, Vail Resorts announced an ambitious plan to take action to address our direct impact on the environment with a commitment to achieve 0 net operating footprint by 2,030, including 0 net emissions, 0 waste to landfill, 0 net operating impact on Forest and Habitat. We continue to be on track to achieve our 0 net operating footprint by 2,030.

Speaker 1

In fiscal 2023, we achieved 100% renewable electricity across North American operations for the 2nd year in a row. And we achieved our 15% energy efficiency goal early, driven by over $10,000,000 in energy savings investments since fiscal 2018. Additionally, we achieved a 36% overall reduction in waste to landfill, diverting nearly £12,000,000 of waste from landfills. With this progress, the company is ahead of schedule to meet its emissions goals and is on track to reach 0 waste to landfill, 0 net operating impact on Forests and Habitats to achieve a 0 net operating footprint by 2,030. In addition to protecting the environment, we continue to expand our youth access program and promote diversity, equity and inclusion.

Speaker 1

During the 2022, 2023 winter season, Vail Resorts hosted more than 11,000 youth through our multi day Epic for Everyone Youth Access Program, which aims to remove barriers to entry and create a more inclusive sport by providing gear, lessons, mentorship and access for youth around our resorts. We remain dedicated to doing our part as responsible stewards of the great outdoors and the future of the ski industry and committed partners to our communities. More information about our commitment to 0 and efforts towards Sustainability can be found at epicpromise.com, and we expect our fiscal 2023 progress report to be released in the coming weeks. In closing, I would like to thank all of our team members, especially our frontline teams across all of our Mountain Resort for their passion, hard work and commitment to creating an experience of a lifetime for our guests. The guest experience that our employees create is our mission as a company and is core to our success.

Speaker 1

And I would like to extend a special welcome to the team members at Crown Montana in Switzerland. We all look forward to welcoming skiers and snowboarders to our Mountain Resorts this winter season. At this time, Angela and I will be happy to answer any of your questions. Operator, we are now ready for questions.

Operator

Our first question comes from Shaun Kelley, Bank of America.

Speaker 3

Hi, good afternoon everyone. Thanks for taking my question. Kirsten or Angelo, if I can start, I mean, obviously, very encouraging that you were able to maintain double digit dollar growth on the pass side. Just kind of wondering on the composition in terms of how this played out. And I know you did give a lot of color here, but I guess on the one side, you told us that the Epic Day Pass And the Northeast Regional area were pretty strong.

Speaker 3

And on the other side, I think those are slightly lower value products that would probably drag down that Spread a little bit. So you could just can you just talk a little bit about that mix and how that evolved that you could maintain such a widespread between dollars and units?

Speaker 1

Yes. We are very pleased with the price pass through, Sean, in part driven by we took an 8% price increase. We did see that renewals were very strong this year and we were able to grow across all major product We also saw that our net migration among renewing cash holders improved versus the prior year. And I think importantly, new pass holders coming into the program came in at higher priced Products relative to the prior year. And as a reminder, last year, we had launched a new product Last year, which was the a version of our Epic Day Pass that was targeted toward more local geographies.

Speaker 3

Got it. Okay. That last point I think is probably the most helpful. And then look, I think the other big area where we're getting handful of questions is on just the Rain and snow package as you kind of we tilted into the actual season. So again, I think you gave us some condition updates, but maybe give us a sense of When is kind of the point of no return in terms of sort of season loss and season launch and conditions, meaning When do we really need to have a pretty good terrain opening set for financial results as we get into closer to the holidays here?

Speaker 1

I mean, well, obviously, the Christmas holiday time period is really important for our guests and Important for our performance. I mean, right now, at this point in time, conditions vary across The geographies, I think in the Rockies currently, we're seeing fairly typical for this time of year and there's more snow in Forecast, which is encouraging. Whistler Blackcomb is experiencing what I would call typical variability for this early season time period. Andromat Sadrune is off to a very strong start with strong early snowfall and last year that was quite a challenge. Tahoe is probably the most challenging right now.

Speaker 1

They've had a slower start with the committed snowfall, the warm temps Making it hard for us to make snow. And then the East right now, I'd say, probably what we would call it's Typically variable and we're seeing that variability and the differences. So Yes, we're in a situation where it varies pretty significantly geography to geography and the season has just Begun ahead of us, but the hope would be that we're in a good spot as we head into the peak sort of Christmas time period.

Speaker 3

Very encouraging. Thank you very much.

Speaker 1

Thanks, Sean.

Operator

Our next question comes from Laurent Vasilescu, BNP Paribas.

Speaker 4

Good afternoon. Thank you very much for taking my question. Last quarter, there was a lot of questions regarding the anticipated $46,000,000 impact to 1Q EBITDA. I appreciate that you parsed it out in buckets in the press release and on the prepared remarks, but They add up to $29,000,000 for rough math. Just curious to know if is that the number that actually materialized or are there other parts That were too small to call out, which would be about $15,000,000 in total.

Speaker 4

And then as we think about 2Q, 3Q, are there any other one time EBITDA impacts that we should consider?

Speaker 2

Thanks, Lauren. This is Angela. Yes, we called out certain pieces of the Q1 variance. And I think that the key part in there is the cost inflation piece, which we didn't put the number in, but really is the balance of that variance that So there's the $7,000,000 wage investment as part of that cost inflation. And in total, that remaining $21,000,000 And as it relates to cost inflation, also like typical, we always invest ahead of the season, right?

Speaker 2

And so that's the part that also We noted in line with our expectations for the full season, there was some timing within there that will move into Q2 and Q3. And that really is Capital as we invest ahead of the core winter season that some of those things move around between Q1 and Q2.

Speaker 4

Very helpful, Angela. And then I wanted to follow-up on Kranz Montana. In the press release last week, you expect For the resort to drive about $5,000,000 of EBITDA in fiscal year 2025 and eventually over 5 years to get to $15,000,000 of EBITDA. What's driving that? Is that increasing visitations or are there higher efficiencies in the business that you think you can execute on?

Speaker 4

And I know ownership of Andromat is early innings. Are there any learnings that you could apply to Kranz Montana from Andromat?

Speaker 1

Thanks for the question. We are very excited about Grand Montana in Switzerland. This is a top Tier brand resort in Europe with expansive terrain, a large bed base, Strong base areas with lodging, dining, retail experience. When we think about the growth opportunity, Because of the strength of this brand and this ski resort, we believe part of it is returning it to its full Potential and that's investing in the guest experience and bringing our operations and marketing expertise and that there's future growth potential through Epic Pass and the network effect by being a part of our company. So that is really What's driving what we view as to be the growth potential?

Speaker 1

We've had our 1st year at Andromat Sudrun, I would say that was We're very pleased with our 1st year of operations there and we learned a lot, I'd say primarily about Operations and operating in the resort, our 1st year, we did have some unique challenges related to The conditions as well as some pressures regarding in Europe regarding energy costs, We learned about operating there and we are really excited about the transformational capital plan that we have for Andromand Sadrune. It's a really special and unique ski resort that has a lot of growth Potential and we feel the same way about Crown Montana.

Speaker 4

Very helpful. Thank you for all the color.

Operator

Our next question comes from Jeff Stanchal, Stifel.

Speaker 5

Thank you, Keirsha and Angela. Thanks for taking our questions. Starting off here, I was hoping just to follow-up on Sean's question Earlier, so it sounds like 2 things really sort of driving that expansion in the spread between units And dollars, that's new pass holders coming in and leaning into the higher priced products as well as you're now During the launch of the Epic Day Limited in the prior season, focusing on that first cohort, I recognize you're limited in the data available, but Is there anything you can add or any sense you have regarding the complexion of kind of these new pass holders that seem to be leaning into the full pass? Are they coming from other passes? Were they previously left ticket buyers?

Speaker 5

Just do you have any sort of sense on these customers and their sort of characteristics.

Speaker 1

Thanks, Jeff. I think there's a couple of dynamics to highlight overall and then we can talk Some more about the price pass through. And I think important to note that we grew in destination, local And international and really importantly that loyalty, which is renewals, were the driver of the growth, which is Really critical a critical part of our business model and great to see because the loyalty and the renewals driving the growth is So the experience we deliver at our resorts. Another interesting dynamic we saw on the new side, so when we think of new, it's composed of a couple of different segments. It's comprised of people that are last pass holders, meaning they might have been pass holders Last prior years, 5 years ago, 7 years ago, and they were not a pass holder yet last year and them coming back It also includes list ticket purchasers and then it includes people who are brand new to our database and so have not actually shown up at any of our resorts in the Past and one really strong dynamic that we saw in addition to the loyalty and the renewals is very Strong growth and return of prior pass holders, what I would call lapsed pass holders.

Speaker 1

So these are people who were pass holders with us in the past, Not last year, and we've gained them back again, which again, I think speaks to the strength of Our pass program and the experience at our resorts, so I was really pleased to see that. In terms of the New pass holders and that well, the price differential we can talk about, I think the strength of renewals versus This year and the fact that we grew across all the product segments, including Epic and Epic Global, certainly helped The price pass through and the net migration among our renewing pass holders improving year over year. And just a reminder, net migration is passholders. So some of the dynamics, the growth of renewals, the dynamics within renewals certainly contributed. And then when you look at new pass holders coming into the program at a higher price point relative to prior years, we're always striving To trade people up, but also acquire guests into the past product that is most suitable And I'm really encouraged to see that we were able to get pass holders coming into higher price products.

Speaker 1

And as I noted in Sean's question, important to note that we did have a new product launch last year That drove new acquisition late in the season, because that is typically when new people come in late in the selling cycle and that Was a product that was very specifically designed to increase our penetration in some of those eastern geographies, as the access is fenced very specifically to some of those local geographies. So I mean, overall, when I look at the underlying Dynamics, the health of the business, I'm very pleased as I think all of those movements within the business, Who's renewing, who we're acquiring are actually very strong indicators for the business. Great.

Speaker 5

That is both really helpful, John there as well as encouraging as it relates to forward indicators heading into this season. For my follow-up, I was hoping to turn to your commentary on lodging bookings, specifically just in the release. You used the term generally consistent With prior year levels, I was hoping you might just expand upon a bit what was meant by sort of the term generally. Were you trying to refer to perhaps some geographic dispersion more so than what you typically see? Just any thoughts there and if I'm reading into Verbiage too much as well, but any thoughts there would be helpful.

Speaker 5

Thanks.

Speaker 1

Sure. I think it's important just as a reminder, our lodging bookings represent a small portion of the overall lodging inventory around our resorts. And we see variance by month, by geography. I would say like overall when I look at the bookings right now, here's what I'm seeing at our properties is I'm seeing solid holiday and spring bookings and some softness in between holiday and spring break. And I would actually say also it's still relatively early and we will continue to monitor this as we go into the season.

Speaker 1

Pass sales is a critical indicator. And overall, when I look at the lodging booking trends, Yes, generally consistent with prior year levels with it looking pretty solid for holiday and spring. That's for our lodging bookings.

Speaker 5

Okay, great. That's really helpful. Thanks very much.

Speaker 1

Okay. Thanks, Jeff.

Operator

Our next question comes from Matthew Boss, JPMorgan?

Speaker 6

Great. Thanks. So Kirsten, on maybe real time customer behavior, Any notable trends to call out on the ancillary front so far this ski season? And can you elaborate on the opportunity you see from my Epic year? And then Angela, on the margin front, could you maybe just speak to the multi year opportunity you see from the workforce management initiative?

Speaker 1

So real time on other ancillary businesses, Matthew, I would say it's a bit too early to Really have any indicators. So lodging, I just gave an overview to Jeff on that. In In terms of other ancillary sales or bookings, it's a bit too early in the cycle. I think we'll have more insights once we get further into the season. Myopic gear, We are very excited about it is just a pilot in this coming season and we hope to learn a lot about the Sort of logistical delivery of the guest experience.

Speaker 1

But when you think about gear as part of the ancillary business, Obviously, we have a very strong gear business. Everyone needs gear to participate in this sport. There are a lot of people who ski and snowboard In North America, on average, their frequency of skiing is 4 to 6 days, and you have a Ton of people who own gear and a ton of people who rent gear and there's real barriers or frustrations, I'll call it, on both of those fronts, right? The people who Own Gear who live in destination markets, the hassle of transporting it Through the airport up to the mountain, the cost of purchasing at our frustrations for an asset that sits in their garage, The majority of the skier, obviously, we have local skiers and snowboarders that are using their gear much more, but I'm talking more about the destination guests. And then on the rental side, for the people who don't own gear, the hassle and the time of Standing in line in store to pick up or drop off.

Speaker 1

So this idea is a brand new business model That we believe can completely transform the gear business for our guests and offer an alternative that is Basically managing the gear experience on your app that you can select the gear you want, where you want it, when you want it, The best gear top brands and either delivered to you at your condo or Hotel in resort or slope side, so you don't have that hassle of transporting it. It's all ready to go. You can drop it off slope And you can manage the whole experience on your app without any of the hassle. And we think there's a real opportunity to convert our Existing renters over into this, which is a subscription, so the stickiness to our resorts is really important. We can convert owners who really don't have a need to own that asset to enjoy the mountains and can get whatever gear they're looking for wherever they Want it by being a part of this membership and create stickiness to our network of resorts as well.

Speaker 1

It is a pilot. We'll be learning a lot. And I would say, that the year 1 launch, which is next season, We'll have a lot more insights about the business and at the end of this season in terms of what we learned from the pilot as well.

Speaker 2

And Matt, on workforce management, yes, this is part of our resource efficiency strategy that we talked a lot about and we're Really excited to roll this out this season across all of our resorts. As you know, we did a pilot at 2 of our Resorts at Whistler Blackcomb and at Park City and got a lot of good learnings. And of course, any new tool Take some time to optimize. And so this 1st year, we're going to be in rollout change management, but we're very excited about the multi year Trinity, what it does is, we've historically really managed all of these in various different ways and tools. So to Give both employees and our managers a better tool that allows them to free up their time to do our guest service and So many other more important things than keeping track of schedules on some of these systems that will be a great enabler for both our managers And our employees, and so we're really excited about rolling that out this year.

Speaker 1

And just to build on what Angela said, we would expect the financial impact In year 1, which this is year 1, to be modest as we're focused on the change management, the training, the implementation of the tool. But we do believe over a multiyear period, for this to be a big benefit to the company over time in terms of efficiency.

Speaker 6

Great color. Best of luck.

Speaker 1

Thank you.

Operator

Our next question comes from David Katz, Jefferies.

Speaker 7

Hi, everyone. Good afternoon. Thanks for taking my questions. I wanted to ask about your latest acquisition And you did give some sort of longer term guidance on it. And what I'm wondering is, how that mountain is Pricing today relative to your other Swiss Mountain, your other mountains or the Premier Mountains in the U.

Speaker 7

S. And whether that aspirational earnings level is driven by pricing volumes, margin, etcetera, all of the above. Just putting it in a historical context that Europe has often had a lot more volume, a lot more skier days, But in many cases, its pricing has been lower, and I'm just wondering how this fits into that.

Speaker 2

Yes, David. I would say that Consistent with a lot of what you see across the European market, right? It looks a lot like from a pricing perspective, North American did before the launch of the Epic Pass. And so, yes, we do think over time there is an opportunity right here to as we build out a network To get more into advanced commitment through creating a compelling, gas centric network there. But in terms of like the exact pricing strategy, we're not commenting on what we're doing moving forward within Crown Montana at this point.

Speaker 7

Understood. And just to follow-up with respect to the capital plan there, assuming that you do close on time, Would we be thinking prospectively about including some CapEx in this fiscal year For that or how might we time some of the CapEx that you're planning out in the future post closing?

Speaker 2

Yes, David, the CHF 30,000,000 that we announced is going to be subject to what we get with regulatory approval. So You should expect that, that will come likely after this 1st year, right? We're still going to be in learning mode as we And so we will go through a full plan and get evaluating our approval process with our communities to build out that capital plan and it will occur over the following years.

Operator

Okeydoke. Thank you.

Speaker 1

Thanks, David.

Operator

Our next question comes from Patrick Scholes, Truist Securities.

Speaker 4

Thank you. Good evening, everyone. Hi, Patrick. Going forward, in Europe, now that you've had, I guess it's over the last 2 years or 3 years, 2 acquisitions. Would you expect the Chase, of acquisitions to accelerate at this point?

Speaker 1

So hard to predict in this industry, Patrick, obviously, we would hope so, but we really have no way of predicting this. It is So driven by the market dynamics and the owners of these assets and kind of where they are and what they're interested in Doing, but we certainly hope to see here that we will continue to make progress on Europe. As you know, we've been Focused on Europe and this market as a big opportunity for growth for a long time. So we're very encouraged to have Andromance and Crown Montana here over the last couple of years. And the market there is Almost three times the size of the number of SKUER businesses in North America.

Speaker 1

So we hope to continue to make progress With the aspiration to build a network there, but no idea how fast that pace is going to be. I wish I knew. Fair

Speaker 4

enough. A related follow-up question. Certainly, all the focus I think rightfully so at this point has been on international, specifically in Europe. But do you still see opportunities in North America for perhaps Tuck in acquisitions, say in Vermont or perhaps Northern Vermont or the like? Thank you.

Speaker 1

Yes, absolutely. We see opportunities in North America and Our acquisition focus has been on Europe. As you know, we also believe there's a big opportunity in Japan. And then we still believe that there are accretive acquisition opportunities in North America that Can really add to our network and connect our network to major markets in between our local ski areas, regional and Our destination is key areas, and so we continue to stay focused on that as well. Okay.

Speaker 4

And may I just slip in one last Question here. Do you have an EBITDA target 1st year for Epic Gear? Or maybe I should say, do you expect that initiative To be EBITDA positive 1st year, if you can't give us target?

Speaker 2

No, we're

Speaker 1

going into the pilot this And I think we're going to learn a lot from the pilot, which is a very limited execution. And we have not yet Gain those learnings and we have not yet disclosed exactly what the targets would be, but I believe we would have more information to share with you as we go along

Operator

Our next question comes from Chris Woronka, Deutsche Bank.

Speaker 8

Hi, Kirsten. Hi, Angela. I want to kind of go back to the I know you guys have mentioned you expect that the lift ticket Pace of lift ticket revenue could moderate or what's implied by the past sales to date as you expect to pull more people on to a past product as opposed to a lift I guess, is there anything you saw last year that gives you any kind of indication as to What that pace might look like, the pace of moderation this year or anything else you can any kind of color you can give us as to How that might unfold?

Speaker 1

Well, I mean, every year when we think about our pass business, Right. We're always striving to convert our lift ticket purchasers into a path because of the stability that creates The renewal, the retention, the frequency increase, the lifetime value. So we view that as a good thing. It's just when we Share our growth rates on past, we just want to make sure to acknowledge that so that everyone remembers that some of Those guests are coming from lift tickets and that they're factoring that in as to how they think about the upcoming season. We obviously track that very closely and those expectations that we have on total lift revenue and visitation are incorporated into our guidance and we just We affirmed our

Speaker 8

guidance. Okay. Fair enough. And then kind of a longer term question for you here. As we think about the level of investment over time, we can go back over a number of years and look at percentage of revenue or Something like that, mindful that you've done a bunch of acquisitions as well.

Speaker 8

Is there any way to think about is the level of capital intense Increasing over time, again, maybe it's relative to revenue or some other metric. Do you have an opinion on that?

Speaker 2

Yes, Chris, if you look back over time, actually, you'll see that we've become more and more efficient as a percent of revenue with our capital. We just put forward our capital for the next year in line with what we've put out there historically in terms of how we think about capital, which It typically will grow more with inflation and then we adjust it for any acquisitions. And so we've been very disciplined in that approach, which you can see has translated Kind of more and more efficiency over time.

Speaker 8

Okay, very good. Thank you.

Operator

Our next question comes from Brandt Montour, Barclays. Hey guys, it's Christy on for Brandt. Thanks for taking our question. We've been seeing some competing passes like the relatively new Indy Pass receive a lot of attention this year. I was wondering if you could talk about the And that's all for us.

Operator

Thanks.

Speaker 1

Thanks. Yes. We think it's great. I mean, honestly, this industry, we view that the more 3 that is in a path and committed in advance, the better. So I think it's great to see the emergence of other passes out there.

Speaker 1

And pass decisions are often tied to the resorts that you love and And that you want to go to. And so, while they you could view them as competitive dynamics, There's also a fierce amount of loyalty that people have to certain resorts. And We've been fortunate that we continue to bring more and more new people Back into our pass program and in terms of renewals that as I highlighted when earlier, the percentage growth Of people who were path holders in Epic, but were not last year that came back, was And we're really pleased to see those pass holders returning back to us. Can't say exactly What products they were in last year or what if they were on a path last year and then came back to us. But Part of the whole strategy is that we continue to reinvest in the guest experience that attracts our guests and keeps that loyalty or brings people back Who may have tried something else, things like MobilePASS and My Epic Gear and the investments we make in Lyft, My Epic app are a whole part of driving those results and we're incredibly pleased with our growth and path for this upcoming season and incredibly pleased to have over 2,000,000 people that we know are coming to our resorts for this coming season.

Speaker 1

Thanks so much for the question.

Operator

Our next question comes from Megan Alexander, Morgan Stanley.

Speaker 9

Hi, thanks for squeezing us in. Maybe kind of a shorter term question and then a longer term one from us. The Australian impact you quantified is $14,000,000 That's probably, I imagine, pretty transitory. So I guess if we sit there and add that back to kind of the midpoint of your EBITDA guide this year, All else equal in a normal environment that would imply kind of a resort EBITDA margin in the 31.5% range. As we think about going forward, again, all else equal in a normal environment, is there any reason whether it's OpEx investments related to MyGeer or anything else why you couldn't See margins above that level next year.

Speaker 2

Thanks, Megan. Yes, first part of your question just on the We really highlighted 2 pieces of that. 1 being the prior year, which right had a phenomenal finish to the season, had Some pent up demand dynamics from after 2 years of COVID versus this current year, right, which had one of the warmest Season is on record down there and was obviously impacted by very challenging weather conditions in the Q1 of this year. So the $14,000,000 is kind of a combination of both of those factors and roughly equal between those two. So that's maybe how you should think about kind of the Onetime versus ongoing type of impact.

Speaker 2

And then to your question long term on margins, Yes, we have talked a lot about how we intend to grow going forward. We've talked about our resource efficiency growth strategy as well, which Is how we're very focused on driving margin improvement moving forward, but we haven't given specific kind of forward guidance on that.

Speaker 9

Okay, fair enough. And then Kirsten, you talked about creating a network in Europe similar to what you've done in the U. S. To drive that pass penetration. How do you I know it's early, but think about the level of scale you might need, whether it's in a localized market like Switzerland Or Europe in general to be able to do that.

Speaker 9

When you think about kind of the differences between Europe and the U. S, what are some of the highlights In terms of how you think about what kind of scale you might need there?

Speaker 1

Well, we view Europe as A huge market and a big opportunity, and I would say a long term growth strategy that we will We have a lot to learn as being new operators in the market with Andromat Sudrune and with the closing of Crown Montana. And I think we have some initial thinking on what we think that network or that scale would need to be, but obviously being there In market and being an operator in the market will certainly refine and help us think about that and the evolution of that And what that means in terms of owned and operated resorts versus partner resorts. I would say that our business model is, I think structured in a way that can be very beneficial in Europe because our business model is structured in Such a way that is driven by advanced commitment and that stability that creates some Protection from the impacts of climate change. It also creates strong free cash flow that enables real reinvestment in these resorts. And we still have a lot to learn on how that business model may need to adjust or evolve In order for us to be successful in a market like Europe, so we view this as a long term growth strategy That we're very excited about, but I don't think I can give you a specific answer right now because the market dynamics are quite different than North America and we want to be very thoughtful and cognizant as we go new into this market.

Operator

This concludes the Q and A portion of today's call. I would now like to turn the call back over to Kirsten Lynch for closing remarks.

Speaker 1

Thank you, operator. This concludes our fiscal 2024 Q1 earnings call. Thanks to everyone who joined us today. Please feel free to contact me or Angela directly should you have further questions. Thank you for your time this afternoon.

Speaker 1

Goodbye.

Operator

This concludes today's Vail Resorts fiscal 1st quarter 2024 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.

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Earnings Conference Call
Vail Resorts Q1 2024
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