Good afternoon, and welcome to the Vail Resorts' Fiscal First Quarter 2024 Earnings Call. Today's conference is being recorded. Currently, all callers have been placed in a listen-only mode, and following management prepare remarks, the call will be opened up for your questions. [Operator Instructions] I will now like to turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts. You may begin.

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 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 7, 2023, and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non-GAAP financial measures. Reconciliation 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. With that said, let's turn to our fiscal 2024 first quarter 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. As we expected, resort-reported EBITDA declined compared to the prior-year period, primarily driven by cost inflation, $14 million 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 million lower EBITDA from our North America summer operations due to lower demand for summer mountain travel and weather-related challenges, and $4 million negative impact from foreign exchange rates. Turning now to our 2023/2024 North American season pass sales and early season indicators. We are pleased with the…

Thanks, Kirsten, and good afternoon, everyone. As Kirsten mentioned, we are pleased with our first quarter 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 $175.5 million for the first quarter of fiscal 2024 compared to a net loss attributable to Vail Resorts of $137 million in the prior year. Resort reported EBITDA was a loss of $139.8 million for the first quarter of fiscal 2024 compared to resort EBITDA loss of $96.5 million in the prior year. Our balance sheet remains strong and the business continues to generate robust cash flow. Our total cash and revolver availability as of October 31, 2023 was approximately $1.4 billion, with $729 million of cash on hand and $634 million 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 Vail 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 0.2 million shares of common stock at an average price of approximately $211 for a total of $50 million. 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 guests and employee experience, 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 attributable to Vail…

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 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. As announced in September, 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 in uphill capacity and better distribute guests at a central part of the resort. At Hunter Mountain, 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 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 Canyons Village.…

Yes, ma'am. [Operator Instructions] Our first question comes from Shaun Kelley, Bank of America.

Hi, good afternoon, everyone. Thanks for taking my question. Kirsten or Angela, if I can start, I mean, obviously, very encouraging that you were able to maintain double-digit dollar growth on the pass side. But 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 in the Northeast regional area were pretty strong. And on the other side, I think those are slightly lower-value products that would probably drag down that spread a little bit. So, if you just -- can you just talk a little bit about that mix and how that evolved that you can maintain such a widespread between dollars and units?

Yes. We are very pleased with the price pass-through, Shaun, 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 segments, including Epic and Epic Local. We also saw that our net migration among renewing pass 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 that drove significant acquisition of new pass holders late in the selling cycle last year, which was the version of our Epic Day Pass that was targeted towards more local geographies.

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 a handful of questions is on just the terrain and snow package as you kind of -- we tilt into the actual season. So again, give 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?

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 the forecast, which is encouraging. Whistler Blackcomb is experiencing what I would call typical variability for this early season time period. Andermatt-Sedrun 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. They've had a slower start with limited 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.

Very encouraging. Thank you very much.

Thanks, Shaun.

Our next question comes from Laurent Vasilescu, BNP Paribas.

Good afternoon. Thank you very much for taking my question. Last quarter, there was a lot of questions regarding the anticipated $46 million 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 million per rough math. Just curious to know if -- is that the number that actually materialize? Or are there other parts that were too small to call out would be about $15 million in total? And then, as we think about 2Q, 3Q, are there any other one-time EBITDA impact that we should consider?

Thanks, Laurent. This is Angela. Yeah, we called out certain pieces of the Q1 variance. And I think 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 you're walking. So, there's a $7 million wage investment as part of that cost inflation. And in total, that remaining $21 million variance relates to cost inflation. Also like typical, we always invest ahead of the season, right? And so that's the part that also we noted in-line with our expectations for the full season. There was some timing within their that will move into Q2 and Q3. And that really is typical as we invest ahead of the core winter season that some of those things move around between Q1 and Q2.

Very helpful, Angela. And then I wanted to follow up on Crans-Montana. In the press release last week, you expect for the resort to drive about $5 million of EBITDA in fiscal year '25 and eventually over five years to get to $15 million of EBITDA. What's driving that? Is that [increase in visitations] (ph)? Or are there higher efficiencies in the business that you think you can execute on? And I know the ownership of Andermatt is early innings, but are there any learnings that you could apply to Crans-Montana from Andermatt?

Thanks for the questions. We are very excited about Crans-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 the 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. We've had our first year at Andermatt-Sedrun. I would say that was a -- we're very pleased with our first year of operations there and we learned a lot, I'd say, primarily about operations and operating in the resort. Our first 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 Andermatt-Sedrun. It's a really special and unique ski resort that has a lot of growth potential, and we feel the same way about Crans-Montana.

Very helpful. Thank you for all the color.

Our next question comes from Jeff Stantial, Stifel.

Kirsten and Angela, thanks for taking our questions. Starting off here, I was hoping just to follow up on Shaun's question earlier. So, it sounds like two 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 anniversarying 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 lift ticket buyers? Just do you have any sort of sense on these customers and their sort of characteristics?

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. I mean 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 -- really speaks to the strength and the compelling value proposition of the pass, but also 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 lapsed pass holders, meaning they might have been pass holders last -- prior years, five years ago, seven years ago, and they were not a pass holder yet last year and then coming back to us. 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. So, these are people who were pass holders with us in the past, but 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…

Great. That is both really helpful commentary as well as encouraging as it relates to forward indicators heading into the 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 that's fine as well, but any thoughts there would be helpful. Thanks.

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

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

Okay. Thanks, Jeff.

Our next question comes from Matthew Boss, JPMorgan.

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 Gear? And then, Angela, on the margin front, could you maybe just speak to the multi-year opportunity you see from the workforce management initiative?

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 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. My Epic 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. But when you think about gear as part of the ancillary business, and 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 four to six 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 to the airport -- through the airport, up to the mountain, the cost of purchasing it are frustrations for an asset that sits in their garage, the majority of the skier -- obviously, we have local skiers and snowborders 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. So, this idea is a brand-new business model that we believe can completely transform the gear business for our guests…

And Matt, on workforce management, yeah, 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 two of our resorts at Whistler Blackcomb and at Park City and got a lot of good learnings. And of course, any new tool, takes some time to optimize. And so, this first year, we're going to be in rollout change management, but we're very excited about the multi-year opportunity. What it does is we've historically really managed all of these in various different ways and tools. So, to give those 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, right, keeping track of schedules on some of these systems, it will be a great enabler for both our managers and our employees. And so, we're really excited about rolling that out this year.

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

Great color. Best of luck.

Thank you.

Our next question comes from David Katz, Jefferies.

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, or your other mountains or the premier mountains in the U.S. And whether that aspirational earnings level is driven by pricing volumes, margin et cetera, 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 in to that.

Yeah, 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, yeah, we do think over time, there's an opportunity right here too, as we build out a network to get more into advanced commitment through creating a compelling guest-centric network there. But in terms of like the exact pricing strategy, we're not commenting on what we're doing moving forward within Crans-Montana at this point.

Understood. And just a 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?

David, the CHF30 million that we announced is going to be subject to what we get with regulatory approvals. So, you should expect that, that will come likely after this first year, right? We're still going to be in a learning mode as we close. 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.

Okey-doke. Thank you.

Thanks, David.

Our next question comes from Patrick Scholes, Truist Securities.

Thank you. Good evening everyone.

Hi, Patrick.

Hi. Going forward, in Europe, now that you've had, I guess, it's over the last two years or three years, two acquisitions, would you expect the pace of acquisitions to accelerate at this point?

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 has a big opportunity for growth for a long time. So, we're very encouraged to have Andermatt-Sedrun and Crans-Montana here over the last couple of years. And the market there is almost 3 times the size of the number of skier businesses in North America. 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.

Okay. Fair 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 alike? Thank you.

Yeah, 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 areas. And so, we continue to stay focused on that as well.

Okay. And may I just slip in one last question here? Do you have an EBITDA target first year for Epic Gear, or maybe I should say, do you expect that initiative to be EBITDA positive first year, if you can't give us a target?

No. We're going into the pilot this year, and I think we're going to learn a lot from the pilot, which is a very limited execution. And we have not yet gained 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 on this journey.

Okay, fair enough. Thank you.

Thanks, Patrick.

Our next question comes from Chris Woronka, Deutsche Bank.

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 pass sales to date as you expect to pull more people on to a pass product as opposed to a lift ticket product. 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 -- any kind of color you can give us as to how that might unfold?

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 pass 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 pass, we just want to make sure to acknowledge 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 reaffirmed our 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 could go back over a number of years and look at percentage of revenue or something like that, I'm mindful that you've done a bunch of acquisitions as well. Is there any way to think about -- is the level of capital intensity increasing over time, again, maybe it's relative to revenue or some other metric? Do you have an opinion on that?

Yeah, 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. And we just put forward our capital for the next year, in line with what we have 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 to kind of more and more efficiency over time.

Okay. Very good. Thank you.

Our next question comes from Brandt Montour, Barclays.

Hey, guys. It's [Chris Lee] (ph) 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 competitive landscape for passes and how that's evolved to impact your performance, either good or bad this year. And that's all for us. Thanks.

Thanks. Yeah, we think it's great. I mean, honestly, this industry, we view that the more of this industry that is in a pass and committed in advance the better. So, I think it's great to see the emergence of other passes out there. And pass decisions are often tied to the resorts that you love 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 in terms of renewals. But as I highlighted when -- earlier, the percentage growth of people who were pass holders in Epic but were not last year that came back was substantial, 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 pass last year and then came back to us. But part of our whole strategy is that we continue to reinvest in the guest experience that attracts our guests and keeps that loyalty, it brings people back who may have tried something else, things like Mobile Pass and My Epic Gear and the investments we make in lift, My Epic app are a whole part of driving those results. And we're incredibly pleased with our growth in pass for this upcoming season, and incredibly pleased to have over 2 million people that we know are coming to our resorts for this coming season. Thanks so much for the question.

Our next question comes from Megan Alexander, Morgan Stanley.

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 as $14 million, that's probably, I imagine, pretty transitory. So I guess, if we sit there -- sit here 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 My Gear or anything else, why you couldn't see margins above that level next year?

Thanks, Megan. Yeah, first part of your question just on the Australia impact, we really highlighted two pieces of that. One being the prior year, which, right, had a phenomenal finish to the season, had some pent-up demand dynamics from after two years of COVID versus this current year, right, which had one of the warmest seasons on record down there and was obviously impacted by very challenging weather conditions in the first quarter of this year. And so, the $14 million is kind of the combination of both of those factors and roughly equal between those two. So that's maybe how you should think about kind of the one-time versus ongoing type of impact. And then, to your question, long term on margins, yeah, 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.

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. 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?

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 Andermatt-Sedrun and with the closing of Crans-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.

Understood. Thanks very much.

Thanks, Megan.

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

Thank you, operator. This concludes our fiscal 2024 first quarter 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. Goodbye.

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