Good day, and welcome to the Vail Resorts Third Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Lynch, Chief Officer. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2022 Third Quarter Earnings Conference Call. 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, June 9, 2022, 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, 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 to our fiscal 2022 third quarter results. We are pleased with our overall results for the quarter and for the 2021/2022 North American ski season. As expected, results for the quarter significantly outperformed results from the prior year, primarily due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year period. This year, challenging early season conditions persisted through the holiday period, but our results were strong from January through the remainder of the season. Our strong season pass sales, heading into the 2021, 2022 season are the foundation of our advanced commitment strategy, creating stability for the company through variable weather and other challenges. We had particularly strong destination visitation this year, which was further supported by lift ticket sales at our Colorado and Utah resorts that exceeded our expectations through the spring. Our recent results at Whistler Blackcomb were also stronger than expected due to the easing of travel restrictions in Canada in late February. Recent performance at our Eastern U.S. ski areas was in line with our expectations. While our Tahoe resorts were impacted by challenging spring conditions, resulting in performance below our expectations. Throughout the season, our ancillary businesses continued to be capacity constrained by staffing and in the case of dining by operational restrictions associated with COVID-19. Overall, our results throughout the 2021/2022 North American ski season highlight the stability resulting from our advanced commitment pass products in a season with challenging early season conditions, staffing challenges and COVID-19 impacts and demonstrate our strong operational execution following the holiday period through the end of the season. Now I would like to turn the call over to Michael to further discuss our financial results, our fiscal 2022 outlook and the Andermatt transaction.

Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, we are pleased with our overall results for the quarter and saw continued strength and performance from January through the remainder of the ski season. Net income attributable to Vail Resorts was $372.6 million or $9.16 per diluted share for the third quarter of fiscal 2022 compared to net income attributable to Vail Resorts of $274.6 million or $6.72 per diluted share in the prior year. Resort reported EBITDA was $610.5 million in the third quarter of fiscal 2022, an increase of $148.3 million or 32.1% compared to the same period in the prior year. This increase is primarily due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year. Now turning to our outlook for fiscal 2022. Based on the strong finish to the season, particularly driven by destination guest visitation and lift ticket sales in Colorado, Utah and Whistler Blackcomb that exceeded our expectations, we now expect net income attributable to Vail Resorts for fiscal 2022 to be between $314 million and $348 million and resort reported EBITDA for fiscal 2022 to be between $828 million and $842 million. The guidance range includes an estimated $16 million of resort reported EBITDA for the Seven Springs Resorts for the period from the transaction closing on December 31, 2021 through the end of the fiscal year, partially offset by $7 million of acquisition and integration-related expenses associated with the Seven Springs Resorts transaction and the expected acquisition of Andermatt-Sedrun. Our balance sheet and liquidity position remained strong. Our total cash and revolver availability as of April 30, 2022, was approximately $2 billion, with $1.4 billion of cash on hand, $417 million of U.S. revolver availability under the Vail Holdings Credit Agreement and $212 million…

Thank you, Michael. Following a rapid acceleration of growth in our advanced commitment strategy over the last two years that nearly doubled the number of guests in advanced commitment products, we are very pleased with the results for our spring season pass sales to date with strong unit growth over the record pass sales results we had last spring. Pass product sales through May 31, 2022, for the upcoming 2022/2023 North American ski season increased approximately 9% in units and approximately 11% in sales dollars as compared to the period in the prior year through June 1, 2021. Pass product sales are adjusted to include pass sales for the Seven Springs Resorts in both periods and to eliminate the impact of foreign currency by applying an exchange rate of $0.79 between the Canadian dollar and the U.S. dollar in both periods for Whistler Blackcomb pass sales. Relative to season-to-date pass product sales for the 2021/'22 -- 2022 season, through June 1, 2021, we saw strong unit growth with our renewing pass holders. Our strongest unit growth was in our destination markets, as travel continues to rebound following the impacts from COVID-19, and we saw more moderated unit sales across our local markets where pass penetration is already higher. Our Epic Day Pass products continue to drive our strongest product growth as we attract lower frequency guests into advanced commitment products as first-time pass holders. And with the 2022/2023 launch of our new tier of products with access to select regional and local resorts. Pass sales dollars are benefiting from the 7.5% price increase relative to the 2021/2022 season, largely offset by the impact of the growth of Epic Day Pass products, including our new lower-priced Epic Day Pass offering. Following the strong trade-up results last year, we are pleased that…

[Operator Instructions] And our first question will come from Shaun Kelley with Bank of America.

Good afternoon, everyone. Kirsten, thank you for all the prepared remarks. I just wanted to start with one of the comments that you made around sort of the expectations for pass sales going forward. So you hinted that your expectation is currently that pass sales growth relative to what was delivered here should slow as the season progresses. I mean historically, you've also, I think, talked pretty conservatively about that same thing. But there were some deadline changes this year. And a few other things that maybe were tweaked. So can you talk a little bit about pros and cons as we move through the summer in terms of the offerings. Again, I think the -- specifically the Buddy Pass deadline and the price increase were both taken a little earlier than they have in the past. So maybe just walk us through a couple of the puts and takes versus that on the one side versus maybe the fact that you do have tougher comps as the sales period progresses.

Yes. Shaun, thank you for the question. I just overall feel very good about our spring pass sales and the underlying dynamics with the unit growth up 9% after plus 50% last spring. Also feel very good that we have strong growth with our renewing pass holders and in destination markets. We did take a price increase in Memorial Day. And the purpose of that increase is really to keep up with inflation, and we have strong underlying business results that supported taking that action. If you think about what happened last year with the price reset, that was essentially a strong call to action in and of itself. And based on our own research, we know that many of our guests thought it was temporary. And really jumped in early to get their pass. So when you think about the comparable the price increase call to action this year on Memorial Day in some ways, balances out that call to action. I do think though that as you would expect, we did pull forward some pass holders. And as a result, we would expect that our growth rate in the fall and on a full year basis, to be lower than the growth rate that we experienced in spring.

And I guess as my follow-up, is it possible just given where we are with dollars and the magnitude of the price increase, the up 11% versus kind of a blended average product increase of around 7.5%. It seems possible that the unit number in terms of number of units you sell could actually go a little bit negative, would that be concerning to you in and of itself? And sort of what would you think about that? What are the trade-offs around that relative to kind of clearly the long-term objective, which is to just continue to grow the program and its relevance?

So obviously, last year was a big year for us, and it exceeded our expectations. So certainly agree and understand what you're raising about the comparable in terms of lapping that. I think the early indications that I'm seeing in spring is really all that I can comment on right now, which is that the fundamental dynamics of the business are very strong. And we do think the growth rate will moderate, but not going to comment on projecting whether or not we expect it to decline.

And our next question will come from Chris Woronka with Deutsche Bank.

Hi, good afternoon, everybody. The first question is on the employee housing investment. Can you -- I don't know if you put a lot of dollars around that. Can you kind of maybe give us some thoughts on how much of that's going to be kind of a CapEx-related investment versus how much is kind of operational in the next couple of years?

Yes, Chris, thanks for the question. It's a mix of capital and OpEx, in certain circumstances we'll actually enter into employee housing master leases. So as an example of that, at the base of Canyons, the big Park City project, that we entered into is actually a master lease from a development that's taking place there. And so we're taking a significant portion of the beds there in the form of a master lease. So in those circumstances that would come through as expense. And then in certain circumstances, we actually will develop a project. So an example of that would be the project in Vail that we're planning to actually develop and put our own capital behind that. And we anticipate that's at least a $17 million project.

Okay. And then second question, kind of shifting gears a little bit. You guys have obviously done a terrific job of getting advanced commitment from lift tickets over time. Is there any thought to kind of exploring that on the ancillary side, maybe on getting people to commit to a certain level of food and beverage and maybe giving them a slightly bigger discount than what they're already getting? Any thoughts on that to kind of lock in even more of the ancillary stuff?

Thanks, Chris. I -- right now, our pass holders, as we move to a subscription model, do get a discount on our ancillary businesses. While we have not made any announcement on anything else related to ancillary as a subscription model, I think it's certainly an idea that we would consider, but no immediate plans to do that.

And our next question will come from Laurent Vasilescu with BNP Paribas.

Good afternoon. Thank you very much for taking my questions. Congrats on the strong results. I wanted to follow up on Andermatt. I know it doesn't really move the P&L needle right now. But curious to get your thoughts if this is very much a strategic acquisition, meaning is Andermatt the beginning of an M&A chapter in Europe? And if so, what kind of mountain profiles would you look for? And would you target a specific mountain range, whether it's the Alps, the Pyrenees or another mountain range within Europe?

Thanks, Laurent. I think Michael and I can probably tackle different parts of this question. I think in terms of strategy, Yes. We do view Andermatt as a very much of a strategic acquisition. And as we have talked about in our investors conference for many years that we aspire to acquire resorts in Europe as well as Asia. We are unbelievably thrilled to have this first European acquisition and do view that it is a strategy for us to expand but slowly. And we have a lot to learn and a lot to do to actually ever get to the point where we have a network of resorts in Europe. And our first step is Andermatt and we're very excited about it. I'll turn it over to Michael to answer a portion of that question as well.

Yes. Thanks, Laurent. And yes, as Kirsten said, we're just thrilled with the opportunity to partner with ASA and the Sawiris family, who have really done an incredible job with the community in Andermatt and Sedrun of building, yes, what we think could become one of the premier destination resorts in Europe, a really remarkable high alpine experience, two great villages that are connected across almost 10 miles of terrain, kind of just, yes, incredible both ski and travel experience. And so we think that one of, the -- we've got a great foundation to work from great partners and a great community become a part of. And as Kirsten said, really going to take our time to make sure that we learn and integrate into the community there. I think that one of the things that was most attractive to us and I think a great area of alignment for us with our partners because we're taking a majority stake at 55%, but not a full acquisition. And that was really important to us because we have great partners who were really aligned with our ability to invest the proceeds from the transaction back into the resort in the base area, as I described in our comments. And so we think that's really going to be a great foundation for growth because we're going to be, yes, quite ambitious in reinvesting in the resort itself. And yes, we think that it will be a great start to a platform in Europe but really very focused on being successful with Andermatt as an important first step.

That's great to hear. And then, Michael, I know you're not guiding for FY '23 today, but I wanted to quickly follow up on the March Investor Day slides. I think Slide 62 shows an illustrative case -- an a illustrative for a 30% resort EBITDA margins after considering the $175 million of labor investments. Michael, is that still the right way to think about this illustrative case study? Or are there any other factors to consider in the three months later?

Yes. I think we're not providing anything additional to what we provided back in March at the investor meeting. We certainly wanted to highlight that what went along with the $175 million investment in our people, which is a critical step, as Kirsten described, in terms of the future success of our business, and our people really are so core to everything that we do as a company. And offsetting that investment, yes, there are some tailwinds that we expect to have next year, largely resulting from as we described the challenging early season this year and kind of a return to normal conditions, Whistler Blackcomb, which was quite impacted until the spring by COVID. Australia, similarly quite impacted in Q1, as well as the opportunity when we do return to normal staffing to have the full capacity of our ancillary businesses. And so we're not providing any updated information, but certainly, those trends are still the ones that we would call out.

And our next question today will come from Jeff Stantial with Stifel.

Good afternoon. Michael, thanks for taking our questions. Starting off, obviously, the hot topic these days is going to be the state of the consumer and any early data points suggesting softness really more towards the low income end. Just curious, is there anything in your data that would suggest any early warning signs for your business? And I'm guessing the answer is no. And if so, just generally, what would be the canary in the coal mine here? Is it lodging bookings? Is it trade down in pass types? Just curious what you guys monitor internally most closely for signs of softness.

Thanks, Jeff. Our -- the consumer demand trends are looking very positive right now, but obviously, we need to continue to monitor that closely given changing macro economy. The positive signs are, obviously, our pass sales, results for spring are strong. We do research among our own guests and their intent to ski as of now is looking very strong. And I would say that there's a lot of uncertainty with the economy right now. I do think important to note that when you look back to sort of the prior recession time period, our company is in a much more stable position today than it was then to navigate it. We have 40 resorts across three countries with a combination now of drive to and fly to destinations. Advanced commitment has increased from 26% of lift revenue in fiscal '08 to 62% expected this year. And our advanced commitment products are arguably the best value in skiing. So in terms of is the company in a good position to navigate this? I think there's a lot of strong indicators there. The travel demand indicators are strong, but we need to continue to monitor them. In terms of what we look at, yes, we look at pass sales, we look at bookings, and we constantly engage with our own guests via research to understand what their intent is to ski and to visit and to travel overall. So we'll be monitoring those closely.

Very helpful. And then just on some of the dynamic pricing that you guys are doing this year with passes. So the Memorial Day deadline, I think you highlighted about 2%. Historically, from early bird pricing to end of selling season, the gap there is typically about low to mid-teens percentage change. Is it fair to kind of think about that as a baseline, kind of add an annualized CPI and that's kind of a reasonable benchmark to think about where we can go from here? Or kind of how should we think about the price hikes, both in terms of final magnitude and as well as how dynamic do you intend to remain? Should we expect the rest of the selling season to follow historical hike cadence? Or should we expect more dynamic price taking?

Well, as you can imagine, I'm not going to comment on forward pricing decisions. What I will say though is the way to think about the decisions we've made thus far, which is we started the pass selling cycle with a 7.5% price increase with the goal of pricing with inflation. And looking at the Memorial Day, and we said at that time that we would use price -- continue to use price as a lever, but also continue to get track with inflation. What you see in Memorial Day is we took an additional price increase to keep up with inflation, also, we saw strong business results. And I would say, going forward, pricing continues to be a lever on this business, our lift tickets and all aspects of our ancillary businesses. We look at our data, we look at demand, we look at what's going on in the macro economy and then we make our pricing decisions but can't guide to what those pricing decisions will be, but at least give you that context on how we thought about it thus far.

And our next question comes from Patrick Scholes with Truist Securities.

Good afternoon, everyone. Question for you on the pass prices. It would seem to me that you're moving up that pass price increase deadline would be a pretty material fact and a mover to the impact on sales. And I know in the past, with such things you have called out clearly in press releases when there have been year-over-year comparisons, making results perhaps not as comparable as one might think. I'm curious why you did not include that in this press release this time?

Sorry, Patrick, can you clarify your question?

Yes. It would just seem that moving up the past deadline by three months would really help -- the pass price increase would help really give a nice bump to sales, and I didn't see any mention of that fact in there, where in the past, you have noted when things have maybe not been completely comparable. I'm just curious why you wouldn't mention what I would think is a material fact that the pass price deadline was moved up by three months -- or not deadline, but the price increase.

So what we -- from a business context perspective, what we did share when we launched passes is -- and in the investors conference is that we would continue to assess when and how much price increases we take on the business and that we have always believed that price is a lever even in the context of the price reset that we did last year. We priced right out of the launch, keeping up with inflation, and then we took a price increase Memorial Day also to keep up with inflation. I think when you think about the lapping factors, we have a unique dynamic last year in the spring where we announced the 20% price reset. And what was interesting about that, Patrick, is that the announcement was almost so good and so surprising that a lot of our guests actually thought it was temporary. They didn't fully understand that it was a true reset of our business based on price elasticity and the data we had. And so we saw that a lot of our guests thought it was temporary, and thought that it was going to go away. And so they jumped in early to get their passes in spring. So in some ways, when you think about the comparable, call to action this year versus last year, balances out to some extent as we had a price increase this Memorial Day as a call to action as well.

And moving on to Omer Sander with JPMorgan.

Hi, thanks for taking my questions. I'm hoping we could revisit the pass sales for next season, encouraging that units are up nicely. What are you seeing at the high and low end of your passes? Are you seeing a trade down in passes versus last year? Or is it just a mix shift towards day passes, maybe some of both? And is there any color on retention that you can give across your multiyear pass holders versus new pass buyers?

Yes, absolutely. So as you noted, I mean, units were quite strong, up 9%. Our sales dollars increased 11%. So we had a 7.5% price increase, which was largely offset by the impact of growth of Epic Day Pass products. And I'll share a little bit more context on that. In terms of trade up, trade down, we were really pleased to achieve neutral net migration among renewing pass holders. And the way to think about that, just to re-anchor to the investors conference. Net migration is the difference in the percent of renewing pass holders that trade up versus the percent of pass holders that trade down within our portfolio of pass products. Last year, our net migration was up dramatically as our guests spent the discount on higher-level passes and more excess. So this year, to be able to maintain that net migration neutral, we are very pleased to see that dynamic. Now when net neutral unit migration usually involves some level of degradation of the effective pass price because we have so many people in Epic Pass and Epic Local -- or sorry, Epic Pass and there's really nowhere to update from there. The primary driver overall, though, of the effective pass price is the growing portion of Epic Day Pass. So there's two pieces to that. We have more Epic Day Pass in the renewers from last year. And we have brought in new people into the lower frequency products as we convert guests that are lower frequency lift ticket skiers, guests from our lower-priced resorts into advanced commitment. And that usually happens through Epic Day Pass, which does have a mixed impact on our effective pass price. And I just want to clarify for everyone on the call that our ultimate vision is that 75% or more of our lift revenue is committed before each season begins. So we view the growth in Epic Day Pass is a real positive and believe that it delivers the long-term guest lifetime value benefits associated with our strategy of advanced commitment.

Awesome. That's helpful. And then maybe just one follow-up. The commentary around units and sales in future months lower than the spring. Is that sort of consistent with what you've seen historically? Is there anything specifically driving that commentary? Obviously, it's a small window since June 1, or is it sort of just maybe a little bit of conservatism in there? And then just lastly, as a follow-up to that, you just remind us what percentage of pass sales you typically have on the books for next season at this point in the spring?

So related to spring versus fall in our full year expectations, I think it's important to remember two things that impacts the dynamic. One is the majority of the selling period for pass is still to come. So we're very early in the selling cycle. And number two is, every year, we focus on pulling people forward. So not only are we actively trying to encourage people to commit before the season starts, but we're also trying to encourage people to buy even earlier buying in the spring before the season starts. So both of those dynamics impact the comments that we have about what we expect in the fall and on our full year growth rates. And then in terms of percent of passes on the books, I won't comment on that.

And moving on to Farshid Javar with Jefferies.

Congrats on the quarter. It looks like you're making progress on lift revenue advancement with the goal being 75%. Can you maybe discuss like what's driving results? Is it reconnecting with guests that maybe haven't shown up? Is it people recognizing the value proposition with just the collection of assets? Anything else?

Yes. I think that the results that we're seeing this spring are driven by three things. One is the -- on a strategic level, the compelling resort network that we have, incredible resorts. Second is the guest experience that we provided, especially post-holiday, post the challenges of Omicron and the low snow. Once we got through that time period, we delivered a very strong guest experience. And then third is the value proposition for guests. So we are asking lift-ticket guests to make a commitment that's nonrefundable before the season starts. That's a pretty big commitment to make and the value proposition and the price point that we're offering in exchange for that behavior is very -- at least as the early indicators, which show based on our results last year, and our spring results that, that is a very compelling proposition for our renewing pass holders and also as we acquire new pass holders, whether those new pass holders are moving from a lift ticket last year or they used to be a pass holder or they used to be a lift ticket holder they're brand new to our network of resorts.

Appreciate it. And then also, just given some higher travel prices and seems to be headaches. Is there any maybe an expectation for how regional versus destination places may perform, maybe some people aren't willing to fly or the case may be next?

I mean right now in terms of -- I'm assuming you're asking that question in the context of next winter and next season for our resorts, yes, all I can really share is what I shared earlier, which is the trends that we are seeing right now look positive. That said, there is a lot of uncertainty in terms of the economy and impacts on consumers and guests, and we plan to monitor that closely and adjust as needed. I think right now, the demand -- the positive demand that we see is our pass holders and the 9% unit growth on top of the almost 50% growth last year, as well as other indicators in terms of guest research and intent to travel. But yes, fully don't -- we don't intend to just anchor to that. We intend to monitor it and adjust as needed.

And we will go to Ryan Sundby with William Blair.

Hi Kirsten, hi Michael, thanks for the question. As starting -- season is starting to start to ramp up here. It sounds like pass sales have been strong. Could you maybe talk a little bit about where things stand there in terms of operating restrictions? And I guess if you're seeing a similar tight lever market as well? And then just as my follow-up, I know Hotham and Falls Creek closed back in 2019. But with COVID, it's been hard to get a read on how the integration has gone there and what kind of synergies you might maybe been able to capture. Can you just maybe give an update on those two mountains and that you're starting to see any network benefits or anything else there in terms of what stands out versus just heavy pressure as a stand-alone on that?

Sure. Thanks, Ryan. I think, yes, a couple of things on Australia. One, we're really excited to have all three resorts open as of this week actually with some good early season now. So that's always a good start. As we noted, in the release as well. We've had very, very strong pass sales results from our Australian guests as we headed into the season. And so Australia has had quite significant COVID restrictions. And so as those have opened up, which are largely loosened at this point, the outlook for Australia is quite strong, barring any changes in that. So we feel -- yes, I feel very good heading into the season with all three resorts. And yes, very grateful for the efforts of the team down there who have done a phenomenal job. And Kirsten, if you want to take the second piece on the network.

Yes. On the -- oh, I was going to address the -- I think you had a question on labor as well. But regarding the network effect, yes, I mean we have definitely seen the benefits and the impact of having a network of resorts in Australia and the connection that has to our North American resorts. And I think it's on a much bigger scale than the network effects that we see by owning local and regional resorts in the United States. And so that strategy, we absolutely believe is highly successful. In terms of labor and the labor market and what we're seeing there, I would say, too early to tell for winter season, given it's June right now. We are staffing up for our summer operations and certainly feeling good about tracking to normal staffing for summer. As we think ahead to winter, I think the investment we're making in our employees is absolutely essential to our success. It is that team that's critical to delivering the guest experience and then that drives the advanced commitment and the loyalty and then enables us to reinvest back in our business, expand the network and deliver returns to investors. So very much excited about the investment we're making in our employees, our team members and believe that, that is the right approach for us going forward.

Thank you. And that does conclude the question-and-answer session. I'll now turn the conference back over to Ms. Lynch.

Thank you. This concludes our fiscal 2022 third quarter earnings call. Thanks to everyone who joined us today. Feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon. Goodbye.

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.