Vail Resorts, Inc. (NYSE:MTN) Q2 2024 Earnings Call Transcript March 11, 2024
Vail Resorts, Inc. misses on earnings expectations. Reported EPS is $ EPS, expectations were $6.07. Vail Resorts, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, and welcome to the Vail Resorts Fiscal Second Quarter 2024 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. [Operator Instructions] I would now like to turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts. Please go ahead, ma’am.
Kirsten Lynch: Thank you. Good afternoon, everyone. Welcome to our fiscal 2024 second 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, March 11, 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 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.vailresorts.com. Let’s turn now to our fiscal 2024 second quarter results. Given the unfavorable conditions across our North American resorts, we are pleased that our results for the quarter demonstrate the resiliency of our strategic business model and our network of resorts and loyal guests. The results for the second quarter were negatively impacted by challenging conditions at all of our North American resorts through January with approximately 42% lower snowfall across our western North American resorts compared to the same period in the prior year and limited natural snow and variable temperatures at our Eastern U.S. resorts, which comprise our Midwest, Mid-Atlantic, and Northeast resorts.
“Despite the impacts of conditions, Resort reported EBITDA for the second quarter increased approximately 8% compared to the prior year, primarily driven by the stability created by our season pass results. Resort EBITDA margin also improved 3.3 points in the second quarter compared to the prior year driven by disciplined cost management. “While visitation declined, our ancillary businesses performed well, in particular our ski and ride school, dining and rental businesses experienced strong growth in spending per visit compared to the prior year. We are pleased with the strong execution across our mountain resorts, as well as the impact of the Company’s investments in our employees, technology, and on-mountain experience.” Now I would like to turn the call over to Angela to further discuss our financial results, season-to-date metrics and fiscal 2024 outlook.
Angela Korch: Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, the results for the second quarter were negatively impacted by unfavorable conditions across our North American resorts. Net income attributable to Vail Resorts was $219.3 million or $5.76 per diluted share for the second quarter of fiscal 2024 compared to net income attributable to Vail Resorts of $208.7 million or $5.16 per diluted share in the prior year. Resort reported EBITDA was $425 million in the second fiscal quarter, which compares to resort reported EBITDA of $394.8 million in the same period in the prior year. Turning to our season-to-date metrics. The reported ski season metrics are for the period from the beginning of the ski season through Sunday, March 3, 2024, compared to the prior year period through March 5, 2023.
And for our company’s North American destination mountain resorts and regional ski areas, excluding the results of the Australian ski areas and Andermatt-Sedrun in both periods. The data mentioned in this release is interim period data and is subject to fiscal quarter end review and adjustments. Unfavorable conditions negatively impacted season-to-date visitation, which was down 9.7% compared to the fiscal year 2023 season-to-date period. Season-to-date total lift ticket revenue, including an allocated portion of season pass revenue for each applicable period, was up 2.6% compared to the fiscal year 2023 season-to-date period. For our [inflow] business results, season-to-date ski school revenue was up 5.5%, dining revenue was down 0.5% and combined retail and rental revenue for North American resort and ski area locations was down 9.3% compared to the prior year period.
Across our North American resorts, unfavorable conditions negatively impacted season-to-date visitation, which was below both prior year levels and our expectations based on the number of guests visiting and their frequency. Following the Martin Luther King Jr. holiday weekend, challenging conditions persisted until early March at Whistler Blackcomb and our Tahoe resorts, and while conditions improved at our Rockies and Eastern resorts, visitation did not improve as quickly as expected. We expect a portion of the lower visitation is related to the challenging conditions in the first half of the season as well as a shift in visitation patterns. Despite the decline in season-to-date visitation relative to the prior year period, we are pleased with lift revenue growth driven by the stability created from our season pass program, the strength in our ancillary spending per skier visit across our ski school, dining, and rental businesses, and the improving trends as the season progresses.
Now turning to our outlook for fiscal 2024. Due to the season-to-date underperformance, we are lowering our guidance for fiscal 2024. For the remainder of the season, we are expecting improved performance compared to the season-to-date period, including an expected shift in visitation patterns into March and April. This is based on our significant base of pre-committed guests and their historical behavior patterns, the improvement in conditions across our western North American and Northeast resorts, and our lodging booking trends for the Spring Break period. While we are lowering guidance for the fiscal year, we know that the financial impact of the weather disruptions was greatly mitigated by our advance commitment products, which create stability for our Company, our shareholders, and our communities in exchange for an incredible value to the guest.
We now expect net income attributable to Vail Resorts for fiscal 2024 to be between $270 million and $325 million, and resort reported EBITDA for fiscal 2024 to be between $849 million and $885 million. We estimate resort EBITDA margin for fiscal 2024 to be approximately 29.6% using the midpoint of the guidance range. Our guidance includes an estimated $4 million of acquisition-related expenses specific to Crans-Montana, but does not include any estimates for the closing costs, operating results or integration expense associated with the Crans-Montana acquisition, which is expected to close this spring. The updated outlook for fiscal 2024 assumes a continuation of the current economic environment and normal weather conditions for the remainder of the 2023/2024 North American and European ski season and for the 2024 Australian ski season.
The guidance assumes an exchange rate of $0.74 between the Canadian dollar and U.S. dollar related to the operations of Whistler Blackcomb in Canada, an exchange rate of $0.65 between the Australian dollar and U.S. dollar related to the operations of Perisher, Falls Creek and Hotham in Australia, and an exchange rate of $1.13 between the Swiss Franc and the U.S. dollar related to the operations of Andermatt-Sedrun in Switzerland. Our balance sheet remains strong, including total cash and revolver availability as of January 31, 2024, of approximately $1.4 billion with $812 million of cash on hand and $630 million of combined revolver availability across our credit agreements. As of January 31, 2024, our net debt was 2.4x trailing 12 months total reported EBITDA.
We remain confident in the strong free cash flow generation and stability of the underlying business model. Given these dynamics, we are pleased to announce that our Board of Directors declared a quarterly cash dividend on Vail Resorts common stock of $2.22 per share, representing an 8% increase in our quarterly dividend. The dividend will be payable on April 11, 2024, to shareholders of record as of March 28, 2024. We remain committed to returning capital to shareholders and intend to maintain an opportunistic approach to 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.
As previously announced on November 30, 2023, the company entered into an agreement to acquire a majority stake in Crans-Montana Mountain Resort in Switzerland. The company’s second ski resort in Europe. Crans-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 Andermatt-Sedrun, the company believes Crans-Montana has a unique opportunity for future growth. The transaction is expected to close the spring, subject to third-party consents.
Now I’ll turn the call back over to Kirsten.
Kirsten Lynch: Thank you, Angela. We remain dedicated to delivering an exceptional guest experience, and we will continue to prioritize reinvesting in the experience at our resorts, including consistently increasing capacity through lift, terrain, and food and beverage expansion projects, along with investments in technology to further elevate the guest and employee experience at our resorts. As previously announced, we expect our capital plan for calendar year 2024 to be approximately $189 million to $194 million, excluding $13 million of incremental capital investments in premium fleet and fulfillment infrastructure to support the official launch of My Epic Gear for the 2024/2025 winter season, $11 million of growth capital investments at Andermatt-Sedrun and $1 million of reimbursable capital.
Including My Epic 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 million to $219 million. This excludes any capital expenditures associated with the Crans-Montana acquisition, which remains subject to closing. At Whistler Blackcomb, the company plans to replace the four-person high speed Jersey Cream lift with a new six-person high speed lift. This lift is expected to provide a meaningful increase to uphill capacity and better distribute guests at a central part of the resort. At Hunter Mountain, subject to approvals, we plan to replace the four-person fixed-grip Broadway lift with a new six-person high speed lift and plan to relocate the existing Broadway lift to replace the two-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 approved 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 the Canyons Village. 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 snowguns. We also plan to further support the company’s Commitment to Zero by investing in waste reduction projects across our resorts to achieve the goal of zero waste to landfill by 2030.
At Afton Alps, we plan to install a 10-lane tubing experience and renovate the existing Alpine Building to create a 200-seat restaurant experience. At Seven Springs, we plan to add 390 new parking spaces to increase capacity and improve the experience. 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 six-person high speed lift, with capital spending commencing in calendar year 2024 and continuing into calendar year 2025. These projects remain subject to approvals. 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 and expanding Mobile Pass and Mobile Lift Tickets to Whistler Blackcomb.
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. In addition, in order to support the launch of My Epic Gear, we plan to invest in logistics and technology infrastructure to help deliver a transformational and elevated gear access experience for our guests. The 2023/2024 My Epic Gear pilot at Vail, Beaver Creek, Breckenridge and Keystone is delivering a strong guest experience to pilot participants and valuable learnings for the business launch. 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 slopeside pick up and drop off every day.
In addition to offering the latest skis and snowboards, My Epic Gear will offer name brand, high-quality ski and snowboard boots, with personalized 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 in the new My Epic app. The company plans to launch My Epic Gear for the 2024/2025 winter season at 12 destination and regional resorts across North America, including kids gear, and will be limiting membership to 60,000 to 80,000 members in the first year launch as the business scales. To support the initial year of this new business in calendar year 2024, the company plans to invest $13 million beyond our typical annual capital plan in incremental premium gear fleet and fulfillment infrastructure to support the anticipated growth of this business.
We plan to provide additional updates on My Epic Gear and the ongoing capital needs of the business after the year one launch. At Andermatt-Sedrun, we are pleased to announce plans to invest approximately $11 million 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 CHF110 million of capital that was invested as part of the purchase of our majority stake in Andermatt-Sedrun. As part of the calendar year 2024 investments, we are planning to upgrade and replace snowmaking infrastructure at the Sedrun-Milez 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 Milez and Natschen restaurants. These investments are expected to be completed ahead of the 2024/2025 European ski season and remain subject to regulatory approvals. Turning to pass sales. We are pleased to launch pass sales for the 2024/2025 season, with a wide range of advanced commitment products including our Epic Day Pass, which provides one to seven days of access at our owned and operated resorts and our unlimited Epic Pass and Regional Pass products, which can provide unlimited access to 41 resorts every day of the season and access to additional partner resorts with no reservations required at any resort except Telluride. Subject to close, Vail Resorts plans to include access to Crans-Montana Mountain Resort on select Epic Pass products for the 2024/2025 ski and ride season.
Starting in the 2024/2025 North American ski season, when pass holders are skiing or riding with the guests utilizing Buddy Tickets or Ski with a Friend Tickets, they can now skip the ticket line and go directly to the lift. On average, pass prices have increased 8% over the prior season’s launch price and continue to represent tremendous value to our guests, further supporting our compelling network of mountain resorts, our strong guest experience created at each mountain resort, and our commitment to invest in the guest experience. We greatly appreciate the loyalty of our guests visiting across our entire network of resorts this season and the continued loyalty of our pass holders that have already committed to next season. In closing, I would like to thank all of our employees, especially our frontline teams for their passion, hard work and commitment and creating an experience of a lifetime for our guests.
The guest experience that our employees create is our mission as a company and lies at the center of our success. We all look forward to welcoming guests to our Mountain resorts this spring. At this time, Angela and I will be happy to answer your questions. Operator, we are ready for questions.
Operator: [Operator Instructions] Our first question comes from Shaun Kelley, Bank of America.
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