Please stand by. Good day and welcome to the Vail Resorts First Quarter 2022 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kirsten Lynch, Chief Executive Officer. Please go ahead ma'am.

Thank you, good afternoon, everyone. Welcome to our fiscal 2022 first quarter earnings conference call. I'm pleased to be with you today on my first earnings call as Chief Executive Officer. Joining me on the call this afternoon is Michael Barkin, 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 9, 2021 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 and along with our Annual 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. With that said, let's turn to our fiscal 2022 first quarter results. We are pleased with our results for the quarter, which exceeded our expectations, performance at our Australian resorts during the first quarter was negatively impacted by COVID-19 related limitations and restrictions, including stay-at-home orders and periodic resort closures throughout the quarter. We will able to re-open Australian resorts for the last few weeks of the ski season, resulting in favorability relative to our expectations. Our Tahoe resorts were negatively impacted by the Caldor fire, which resulted in the early closure of our summer operations in the region. Aside from these unique challenges, we continued to see strong demand throughout the quarter, which we believe highlights our guests continued…

Thanks, Kirsten, and good afternoon. As Kirsten mentioned, we are pleased with our first fiscal quarter -- with our first fiscal quarter performance. Net loss attributable to Vail Resorts was $139.3 million for the first quarter of fiscal 2022, compared to a net loss attributable to Vail Resorts of $153.8 million in the same period in the prior year. Resort reported EBITDA was a loss of $108.4 million in the first fiscal quarter, which compares to resort reported EBITDA loss of $94.8 million in the same period in the prior year. Both periods continued to be negatively impacted by COVID-19 and related limitations and restrictions. Additionally, the prior year period included the recognition of $15.4 million of lift revenue associated with the expiration of the credit offers that were made to 2019, 2020 pass product holders in connection with COVID-19-related closures. We remain focused on our disciplined approach to capital allocation. Our liquidity position remains strong and we are confident in the free cash flow generation Our stability of our business model. Our total cash and revolver availability as of October 31, 2021 was approximately $2.1 billion with $1.5 billion of cash on hand, $417 million of revolver availability under the Vail Holdings credit agreement and $220 million of revolver availability under the Whistler Blackcomb credit agreement. As of October 31, 2021, our net debt was 2.6 times trailing 12 months total reported EBITDA and we exited the temporary waiver period under the Vail Holdings Credit Agreement, effective October 31, 2021. I'm also pleased to announce that our board of directors has declared a cash dividend on Vail Resorts common stock. The dividend will be $0.88 per share of common stock and will be payable on January 11, 2022 to shareholders of record on December 28, 2021. This dividend payment…

Thank you, Michael. As announced in September, we are excited to be proceeding with our ambitious capital investment plan for calendar year 2022 of approximately $318 million to $328 million across our resorts to significantly increase lift capacity and enhance the guest experience as we drive increased loyalty from our guests and continuously improve the value proposition of our advanced commitment products. The plan includes the installation of 21 new or replacement lifts across 14 of our resorts and a transformational lift served terrain expansion at Keystone. The updated Lift Upgrade Plan includes two incremental replacement lifts at Jack Frost and Big Boulder in Pennsylvania to provide increased capacity and improved guest experience at the resorts. All of the projects in the plan are subject to regulatory approvals. In addition to these lift upgrade and terrain expansion projects, we are excited to announce additional details on our investment plans not previously highlighted in our September announcement. We continue to remain highly focused on developing and leveraging our data driven approach to marketing and operating the business. Our planned investments include 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. We will also be investing in broader self-service capabilities to improve guest online experience and engagement. In addition, we are excited to announce a $3.6 million capital investment plan and Vail Resorts commitment to zero initiative, including targeted investments in high efficiency snowmaking, heating and cooling infrastructure and lighting to further improve our energy efficiency and make meaningful progress toward our 2030 goal. We expect our capital plan for calendar 2022 to be approximately $315 million to $325 million excluding approximately $3 million of one-time items associated with real estate related capital…

[Operator Instructions] And with that, we take our first question from Shaun Kelley of Bank of America. Please go ahead.

Great. Thank you, and good afternoon. Kirsten, welcome. Glad to have you on board.

Thank you, Shaun.

Maybe to start off then I mean, I'm going to go with a strategic one. You know, the pass reaction was obviously exceptional and I think the results sort of speak for themselves that you were pretty clear that this outperformed your expectations. So my first question would just be can you talk about how maybe the reaction and what you're expecting for traffic you know and movement around the resorts through the season? You know, how does it impact a little bit your longer term you know investment planning? Obviously, you have a big capital initiative already outlined for the coming calendar year. But you know, even beyond that, are there things you think you need to do to now accommodate this just much bigger program and this much bigger level of demand? And just how do you think Much bigger program and it’s much bigger level of demand and just how do you think that plays out strategically?

Thanks Shaun. We’re yes incredibly pleased with the results of our season pass sales I think it's important to remember that while we exceeded our expectations, a portion of the pass holders are coming from people who are already coming to our resorts and that we're moving them into an advance commitment. Overall strategically we’re very focused on creating a scalable subscription model and just lifetime value. Moving people into a path as you know, creates stability, retention, frequency, ancillary capture and our ultimate vision long-term is to achieve 75% or more of our total lift revenue in advance commitment. When we think about, there are significant benefits to our business, our employees, our communities, as well as the value we provide to guests and doing that, the second part of your question about the guest experience is obviously key to enabling all of those pass holders to have an experience of a lifetime, what you saw us do this past year is make some deliberate steps and investments and decisions that will enable that experience and I do think what I would anticipate over the next few years is that you will continue to see us do that specifically on capital investments, this year we have new terrain and new list. We just announced a significant new investment for next year and it's incumbent on us to continually be looking at that experience and where the investments make sense, the other piece of it is, the operating plan that we announced earlier this season Which is how do we use data that we have about our operation to create the best experience on the mountain including the most efficient floating of our list how do we use technology to give transparency to our guests. All of those actions, I would anticipate that we will continue to be focused on looking at the data we have and investing our resources where we feel it's most appropriate to create the best experience.

Thank you. And then I guess as my follow-up, I just want to ask a little bit about retention, right. So obviously there's two variables here and you were very clear that the new passholder side was, you know, was a big upside surprise. But when you think about retention from repeat guests was that, you know, in line with your expectations and sort of how did that feel relative to what you saw last year?

It was in line with our expectation, Shaun, we saw strong performance from renewables, which we expected where we really over-delivered the expectations was in new and trade up new being gas that our laps that did not have a pass or come on a lift ticket last year, but came into the pass program this year and trade up, which is people basically spending a portion or all of the discount into a higher price pass or more frequency. But renewables were strong and right on our expectations.

Next, we go to the line of Laurent Vasilescu with BNP Paribas Exane. Please go ahead.

This is [indiscernible] on for Laurent. Thanks for taking the question. Maybe to expand a little bit more on the composition of the incremental cost sales, you know, you mentioned it's less converts, old tassels and maybe flaps in the new people to the system. I think you said the large part are the conversion from lift. But can you maybe help quantify -- give us kind of the ballpark estimate of the new -- those guest that are new to the database and how do you think that mix of incremental pass sales evolves? Do you think the new people kind of grow from here or how do you think about that?

Yes we saw an over - over delivery versus our expectations on new and it really is a combination of when we say new, some of those guests are new into our database. Some of them used to be on a lift ticket. So they’re new to being a pass holder, some are lap meaning they came in prior years on a pass or a lift ticket and came back to us. What we saw from a market perspective is real strength in every single one of our local geographies and really importantly, our destination passes over the past two years nearly doubled, so what you can see from that is the type of guest that is understanding the value proposition of being in a pass and is willing to actually commit in advance is exactly the mix of guests that we would want to have.

And then maybe as a follow-up, I think this move seemed like, you're tracking a lot of guest. So it feels like you should be gaining market share. Just wondering - what are your expectations for share is and do you think the competition has to kind of react to this and I think I know, one of the advantages that you own all the resorts where some of the other passes maybe don't have that maybe can't react the same way on price But just wondering how you’re thinking about market share and how that can evolve?

It is always difficult for us to tell if we're growing share because we really only have our own data. But clearly what we're seeing is more and more guests are willing to commit in advance. And I actually think that's good for the entire industry. We think that we are really well-positioned in the market because of what you just said are owned and operated network and the value proposition of our passes and actually also all the different the broad portfolio of pass products that enables people to opt in to advance commitment based on what fits their needs in terms of frequency and access. So while I can't say or really comment on market share, I can tell you where I feel we are. And I think we're in a good position and positioned really well in the market.

Next, we go to the line of Ben Chaiken with Credit Suisse. Please go ahead.

You know I might pass - I might try to the pass question a little differently. Is there a way to ballpark how much the trade up buyer contributed to the overall pass group? And then one more…

No. We don't disclose that. But I would -- what I would say is if you look at our what we already shared in the release on effective pass price, our effective pass price was down 17%, despite a 20% price reduction and an increasing mix of Epic Day Pass, which is a lower price pass product. So while I can't give you the exact amount they contributed I think you can infer that we had strong trade-up that would have enabled our effective path price to only be down 17% despite those two other factors.

Got you. That makes sense. And then on the Seven Springs transaction, it seems very logical from a like a personal perspective. But just curious if there's any, if you can share any historical data points around maybe destination visits from the Pittsburgh or Baltimore area or whatever might be appropriate? I guess just bottom line, like what data points you and team saw that made this group of assets fit well in the portfolio?

Yes, I'll start answering that, which is strategically our approach to acquisitions has really been to think about our business as a network of resorts, and you've seen us making acquisitions of ski resorts outside of major metropolitan areas specifically because that is where the population density resides. That is where there are significant skiers and riders currently, but also in the future for skiing and riding. And so Seven Springs for us strategically is a really important acquisition because it links to a major market of Pittsburgh and also serves guests and other major markets like Cleveland, Washington, DC and Baltimore. And this is very consistent with our strategy and approach for acquisitions.

Next, we go to the line of Chris Woronka with Deutsche Bank. Please go ahead.

Good afternoon, everyone. Welcome, Kirsten, we're happy to have you at the front of the company. I was just curious when I was going through -- thanks as I was going through the release. I think you guys did I was going through. Thanks. And as I was going through the release, I think you guys did not -- this quarter did not put the kind of the resort EBITDA margin at the bottom that you know if you go ahead on the last quarter would be initial guidance. So, even though your resort, your EBITDA guidance for fiscal 2022 is unchanged, I'm curious as to whether your -- you have made any changes in your kind of revenue assumption that was embedded in the guidance last quarter.

Yes. Hey, Chris. Thanks. Yes, no updates to the margin, which is why it's not included.

And then the follow-up is really going back to the, going back to the Seven Springs, and I know you've mentioned $15 million of EBITDA in fiscal 2023, and I think historically right when you make acquisitions and you bring the Epic Pass in there, it seems like it takes -- you get a bigger benefit a couple of seasons after that. Is that right? So, the $15 million probably does not include a full benefit of having the Epic Pass installed there?

Yes, I think that's the right way to think about it, which is that, you know, what we're trying to do is provide visibility into the first full year of operations under, you know, after the acquisition, which will be, which will be FY 2023 for us with Seven Springs. And we do think that, you know, even in year one, there will be benefits any time that we announce a deal like this and as Kirsten mentioned, certainly we think that the strength of the brand and experience that Seven Springs offers and the proximity to Pittsburgh, the fact that it's not just a Day Ski Resort, but actually offers, you know, a lodging options. So it's really a regional destination that, yes, that's going to be a -- this was a big announcement for that region. But as you suggested, yes, we will be, of course, looking to ramp that up over time. We tend not to provide, you know, specific forecasts on that, but certainly that would also be consistent with what we've seen with similar acquisitions in the East is that we do have a multiyear ramp up.

Next, we go to the line of Patrick Scholes with Truist Securities. Please go ahead.

Good evening, everyone. I have bit of a -- I guess, an operational type of question here. You talk about -- it sounds like you're going to be limiting lift ticket sales during holiday period. I'm on many of your marketing and distribution lists and I haven't seen that noted anywhere. How do you plan to communicate that to potential customers and families ahead of time? You know, I could imagine that could be a really -- that could go horribly wrong if people are expecting on their expensive ski vacation, staying at the four seasons and they expect to buy lift ticket and all of a sudden they can't. How logistically is that going to work? Thank you.

Thanks for the question. We announced the lift ticket…

If understand that correctly -- yes. Sorry.

Yes.

If I understand what you what -- how that’s going to be worked, thank you.

Yes. I think you understand that correctly. We announced a lift that we are limiting lift tickets for very select time periods December 25 through January 2; January 14 through the 17; and February 18 through the February 27 only on those very specific days. We did announce that via a press release, social media and we have also sent emails to all of the guests that are in our database to make them aware of it. It is also on our website and so if someone goes and by the way many of those days are still actually available and there is not inventory sold out. So if a guest goes on our website to buy a lift ticket, they will actually see on the calendar for that particular resort whether or not there is lift ticket inventory available on that day or not, and really ultimately what our broad message is that we really want our guests to purchase in advance whether that's on a pass or that's buying their lift tickets in advance online. And that is the best approach for all of our guests.

Next, we go to the line of David Katz with Jefferies. Please go ahead.

Good evening, everyone. Welcome Kirsten, and thanks for taking my question. With respect to the acquisition, congrats on that. But I just wondered, you know, one is there anything you can qualitative share in terms of a return opportunity with that mountain? And how many more like this would you say, you know, are notionally out there so that you can continue to execute on this rollout?

Sure. Thanks. Thanks for the question, David. Yes, I think, you know, we feel really good about the return profile of the acquisition of Seven Springs and its two social resorts. I think that, you know, I think the key to this acquisition is similar to what we've done in the past, which is that we're very selective and targeted in the in the resorts that we look at to acquire. And Seven Springs really hits all of the that we look at acquire and Seven Springs really hit all of the criteria we look for, particularly as it relates to our regional destinations, close to urban areas as I think Kirsten explain you know earlier and so I think you know when you look at it, from a scale perspective, you know it’s a sizeable resort, attracting guests from multiple major metropolitan areas, you know we think that just in year one, it'll generate $15 million I EBITDA which if you just do the multiple math on that is very attractive for us from the get go and as I described earlier, certainly with all of these deals, we certainly look to continue to expand the impact both from a guest experience perspective, but also financially and as you start to integrate resorts like this into the network. We've seen great success about in the past and we would expect to see that again with Seven Springs. So we're very excited about it, both from the network perspective and also financially, I think the - I think that the - the question as to you know other acquisitions in North America, we absolutely think that there's additional opportunities for us as I think we've been quite clear with our expansion, both in terms of destination resorts and regional and urban resorts over time, we certainly believe that we have to be very, very selective as we look at that. And so we'll continue to be targeted in that way, as it relates to the specific numbers, we're not going to obviously disclose any specific targets or what we see the universe being but I think Seven Springs is another example of our ability to find very attractive opportunities in North America and of course, we're also continuing to look internationally.

Understood and if I may as a quick follow-up with your accelerated CapEx program that's out there, the incremental $150 million, is it fair to assume that you know qualitatively speaking when you cancel that spend you know, your sort of year two, year three returns on that are you know at least consistent with what you've done in the past and I guess what I'm really getting at is probably better than what you would normally see on your normal cutbacks?

Yes, I mean, we're not providing specific guidance on returns relative to the capital. But I would say that, you know, as you've seen in the past, we’ve held ourselves to do a higher return on our capital. Certainly, I think that you know the capital on lift upgrades in particular that we're focused on with the incremental spend coming in the next year really ties in to the broader growth of the company. As you look at the expansion of the right pass holder, which we've talked about, you know, the success that we've had in growing our overall visitation and what we expect in terms of the demand outlook that I think Kirsten highlighted. And so we certainly see it as right. How do we -- how do we deliver the return holistically across the business and of course, we prioritize the projects that we think will deliver the highest return ultimately for the business. So, we're not providing specific financial outlooks relative to the capital itself, but certainly holding ourselves to similar return profiles that we've held ourselves to in the past.

Next, we go to the line of Jeff Stantial with Stifel. Your line is open.

Good afternoon, everyone. Thanks for taking our questions. Kirsten, I appreciate all the commentary on lodging bookings and for demand indicators. Just curious, if you can look at the past week or two weeks, have you noticed any volatility in the bookings specifically for the Christmas holidays, given all the news flow that's coming out Omicron.

Hi, thanks for the question, I can't report that we've seen any material changes right now, what we see is strong leisure travel demand, our pass sales being one of those indicators as well. But I have not seen any other changes at this time.

Okay, very helpful. And then as my follow-up, I wanted to drill on to the labor cost side of the equation. One of your peers did recently raise their minimum wage again after hiking it already back in September, the question $15 rate that you set back in July, the 10 destination resorts, does that still feel right given how the labor market trended into that peak October, November hiring period or should we expect them continued inflationary pressure into the season and if so, is that already baked into your guidance, that’s all for me, thanks.

Thanks. Yes, we did announce a significant wage increase in July, and we feel good about that wage increase. We are certainly not immune to the challenges that some of the industry and the travel and leisure sector overall are facing. Staffing is our top priority, we’re incredibly focused on our approach for hiring, retention, how we prioritize allocation of our labor and resources and at this point in time, we’re just very focused on the guest experience and delivering what is needed for this upcoming season.

Next, we go to the line of Ryan Sundby with William Blair. Please go ahead.

Hi thanks for taking my question. Going back to the comment on guest being back to discount this year and either higher price passes or increased frequency. What's the key takeaway from that? Or these just price points that would have otherwise been unattainable before the discount? You know, it's a guess kind of viewing this is playing with house money, just like to hear any thoughts on what's kind of driving that spend?

Well, I don't -- we don't have specific responses back from our guests on exactly why they decided to spend back the discount. We did assume that there would be some psychology associated with that and some trade up when we originally announced this back in March. I would say that it has exceeded our expectations in terms of the trade up. And I think there is -- there are multiple hypotheses you can have as to why. I don't think I could definitively say what was going on in our guest minds to get there. I think the thing I'm really pleased about is with the price discount, our absolute unit growth was led by core Epic and our Epic Local, which is, you know, those are the most expensive passes in our portfolio. So the absolute unit growth to occur in those products is really, I think, maybe a signal of the access and the frequency with which our guests want to come and enjoy the outdoors and skiing and riding the season. We saw a strong percentage growth in Epic Day Pass as well, which is a great sort of entry level into our advanced commitment and gives people some level of customization. But right now, I could not say definitively what the rationale was for the trade up other than an enthusiasm and excitement and a feeling maybe that the value proposition of the pass is so strong that they're willing to put some of their own discount back in to get more.

Got it. That's a great color. And then can you just help us understand how important the preholiday season or period here is in terms of the full year contribution of the year? Just trying to get a better understanding on kind of how our flow start committee put you behind your initial expectations?

Yes. As I mentioned in the earlier part of the call, your early season has been -- the conditions have resulted in some delayed openings in limited terrain. I'm very pleased today actually, we just announced that Heavenly and Kirkwood and Tahoe are opening this Saturday, which is a very good news. And this is not the first time we've experienced these kinds of early season conditions. It is a relatively small portion of our revenue for the ski season, and our primary earnings period is really still in front of us.

This concludes our question-and-answer session. We will return to Kirsten Lynch for closing remarks.

Thank you, operator. This concludes our fiscal 2022 first quarter earnings call. Thank you to everyone who joined us today. Please feel free to reach out to me or Michael directly should you have any further questions. Thank you for your time this afternoon and goodbye.

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