Vail Resorts, Inc. reported earnings and sales for its fiscal third quarter ended April 30, missed Wall Street expectations due to a “combination of unfavorable conditions and broader industry normalization post-COVID following record visitation” at U.S. ski resorts during the 2022/23 ski season.” Skier visits slid 3.2 percent in the quarter. Earnings guidance was lowered for the year.

Highlights

  • Net income attributable to Vail Resorts, Inc. was $362.0 million for the third fiscal quarter of 2024 compared to net income attributable to Vail Resorts, Inc. of $325.0 million in the same period in the prior year.
  • Resort Reported EBITDA was $654.4 million for the third quarter of fiscal 2024, which included $1.3 million of acquisition-related expenses. In the same period in the prior year, Resort Reported EBITDA was $623.3 million, which included $0.1 million of acquisition and integration-related expenses.
  • The company updated its fiscal 2024 guidance range. Compared with its prior guidance issued on March 11, 2024, Vail Resort reported EBITDA to be between $833 million and $851 million. With the closing of the acquisition of Crans-Montana Mountain Resort, the company now expects net income attributable to Vail Resorts, Inc. to be between $224 million and $256 million and reported EBITDA to be between $825 million and $843 million.
  • Pass product sales through May 28, 2024, for the upcoming 2024/25 North American ski season decreased approximately 5 percent in units and increased roughly 1 percent in sales dollars compared to the prior year period through May 30, 2023. Pass product sales were adjusted to eliminate the impact of changes in foreign currency exchange rates by applying current U.S. dollar exchange rates to both the current period and prior period sales for Whistler Blackcomb.
  • The company declared a quarterly cash dividend of $2.22 per share of Vail Resorts common stock, payable on July 10, 2024, to shareholders of record as of June 25, 2024, and repurchased approximately 0.3 million shares during the quarter at an average price of approximately $217 million for a total of approximately $75 million. This amount brings the company’s total fiscal year-to-date repurchases to $125 million for a total of 0.6 million shares.
  • On May 2, 2024, the company closed on its acquisition of Crans-Montana Mountain Resort in Switzerland, the company’s second ski resort in Europe.
  • On May 8, 2024, the company completed an offering of $600 million aggregate principal amount of 6.50 percent Senior Notes due 2032. The company used the net proceeds from the Notes issuance to fund the redemption of the  $600 million, or 6.25 percent of the Senior Notes due 2025 on May 15, 2024 at par. Additionally, the company completed an amendment of its Vail Holdings Credit Agreement to extend the maturity of the $969 million term loan and $500 million revolver from 2026 to 2029.

Earnings of $9.54 per share missed Wall Street’s consensus estimate of $9.94. Quarterly revenues amounted to $1.28 billion, missing the consensus mark of $1.31 billion.

Discussing the company’s fiscal 2024 third-quarter results, Kirsten Lynch, CEO, stated, “Given the unfavorable conditions across our North American resorts for a large portion of the 2023/24 North American ski season, we were pleased to see improved results in March and April, with visitation across our western North American resorts, in particular benefiting from improved conditions. While pass product visitation returned as expected, as we communicated in April, lift ticket visitation did not return to typical historical guest behavior for the spring, primarily at Whistler Blackcomb, which was down significantly relative to the prior year period. Despite these challenges, the company grew resort net revenue, and Resort Reported EBITDA to record levels in the third quarter, supported by the stability created from our advance commitment strategy, operations executional excellence, and continued strong growth in ancillary spending per skier visit across our ski school, dining, and rental businesses at our resorts.

“Our results throughout the 2023/24 North American ski season highlight both the stability provided by our season pass program and the investments we have made in our resorts and employees. The winter season included significant weather-related challenges, with approximately 28 percent lower snowfall for the full winter season across our western North American resorts compared to the same period in the prior year and limited natural snow and variable temperatures at our Eastern U.S. resorts (comprising the Midwest, Mid-Atlantic, and Northeast). For the 2023/24 North American and European ski season, total skier visits declined 7.7 percent as compared to the prior year period, which we believe was driven by a combination of unfavorable conditions and broader industry normalization post-COVID following record visitation in the U.S. during the 2022/23 ski season. Skier visitation from lift ticket guests was particularly impacted, declining 17 percent compared to the prior year period. Despite the decline in visitation, ancillary spending was strong across our ski school, dining, and rental businesses at our resorts. Resort net revenue for the second and third quarter combined period increased 1 percent, and Resort Reported EBITDA increased 6 percent over the prior year, supported by our advance commitment strategy, strong growth in guest ancillary spending per visit, and continued cost discipline.”

Regarding the outlook for fiscal 2024, Lynch said, “While late season results improved, we now expect Resort Reported EBITDA to be between $833 million and $851 million on a comparable basis with our prior guidance issued March 11, 2024, which included $4 million of acquisition-related expenses specific to Crans-Montana, but excluded closing costs, operating results, and integration expenses associated with Crans-Montana. The reduction relative to the guidance provided on March 11, 2024, is primarily from lift ticket visitation not returning to typical historical spring behavior as expected in the March and April period, primarily at Whistler Blackcomb, along with lowered expectations for the fourth quarter of $9 million primarily related to the demand outlook for our Australian resorts. In addition, with the closing of the acquisition, we now expect Crans-Montana to contribute negative $12 million of Resort Reported EBITDA for fiscal 2024, including negative $9 million from acquisition, closing, and integration expenses and negative $3 million from operating results in the fourth quarter. Including the full impact of Crans-Montana, the company now expects net income attributable to Vail Resorts, Inc. to be between $224 million and $256 million, and Resort Reported EBITDA to be between $825 million and $843 million.”

 Operating Results

Mountain Segment

  • Total lift revenue increased $35.6 million, or 5.0 percent compared to the same period in the prior year, to $745.7 million for the three months ended April 30, 2024, primarily due to an increase in pass product revenue of 13.7 percent, which was primarily driven by an increase in pass product sales for the 2023/2024 North American ski season, partially offset by a decrease in non-pass product lift revenue of 5.7 percent. The decrease in non-pass product lift revenue was driven by a decrease in skier visitation across all regions, which was impacted by challenging conditions at its North American resorts for a large portion of the season and broader industry normalization post-COVID following record visitation in the U.S. during the 2022/2023 ski season, partially offset by an increase in non-pass Effective Ticket Price (“ETP”) of 9.9 percent.
  • Ski school revenue increased $16.1 million, or 11.1 percent and dining revenue increased $7.8 million, or 7.7 percent, which each benefited from an increase in guest spending per visit across its North American resorts.
  • Retail/rental revenue decreased $11.7 million, or 8.7 percent, for which retail sales decreased $6.6 million, or 10.0 percent, and rental sales decreased $5.1 million, or 7.5 percent. The decrease in both retail and rental revenue was primarily driven by its exit of certain leased store operations which Vail Resorts operated in the prior year, which resulted in a reduction in revenue of approximately $7.8 million, as well as a decrease in skier visitation which impacted sales at its on-mountain retail outlets.
  • Operating expense increased $20.7 million, or 3.8 percent, which was primarily attributable to an increase in general and administrative expenses and increased variable expenses associated with increased revenue.
  • Mountain Reported EBITDA increased $31.7 million, or 5.2 percent, for the third quarter compared to the same period in the prior year, which includes $5.4 million of stock based compensation expense for the three months ended April 30, 2024 compared to $4.9 million in the same period in the prior year.

Lodging Segment

  • Lodging segment net revenue (excluding payroll cost reimbursements) for the three months ended April 30, 2024 decreased $6.0 million, or 6.8 percent, as compared to the same period in the prior year, primarily due to a decrease in revenue from managed condominium rooms of $3.0 million or 7.9 percent, as a result of a reduction in its inventory of available managed condominium rooms proximate to its mountain resorts, as well as decreased demand, including the impact of decreased skier visitation driven by challenging weather conditions at its North American resorts for a large portion of the season compared to the prior year. Other revenue also decreased $2.2 million or 17.4 percent, primarily due to decreases in ancillary and other revenues.
  • Operating expense (excluding payroll cost reimbursements) decreased $5.4 million, or 7.5 percent, which was primarily attributable to lower staffing required to support a reduced inventory of managed condominium rooms and a reduction in labor hours as a result of decreased demand.
  • Lodging Reported EBITDA for the three months ended April 30, 2024 decreased $0.6 million, or 3.7 percent, for the third quarter compared to the same period in the prior year, which includes $0.7 million of stock-based compensation expense for the three months ended April 30, 2024 compared to $0.9 million in the same period in the prior year.

Resort
(combination of Mountain and Lodging Segments)

  • Resort net revenue increased $44.8 million, or 3.6 percent, compared to the same period in the prior year, to $1,283.1 million for the three months ended April 30, 2024.
  • Resort Reported EBITDA was $654.4 million for the three months ended April 30, 2024, an increase of $31.0 million, or 5.0 percent, compared to the same period in the prior year.

Total Performance

  • Total net revenue increased $44.9 million, or 3.6 percent, to $1,283.3 million for the three months ended April 30, 2024 as compared to the same period in the prior year.
  • Net income attributable to Vail Resorts, Inc. was $362.0 million, or $9.54 per diluted share, for the third quarter of fiscal 2024 compared to the net income attributable to Vail Resorts, Inc. of $325.0 million, or $8.18 per diluted share, in the third quarter of the prior year. Net income for the third quarter of fiscal 2024 includes approximately $37 million of pre-tax expense associated with a change in the estimated fair value of the contingent consideration liability related to its Park City resort lease, compared to approximately $46 million of pre-tax expense in the third quarter of the prior year. Additionally, net income for the third quarter of fiscal 2024 includes the after-tax effect of acquisition related expenses of approximately $1.0 million, compared to $0.1 million of acquisition and integration related expenses in the third quarter of the prior year.

Liquidity and Capital Structure Update
Commenting on capital allocation, Lynch said, “Our balance sheet remains strong, including total cash and revolver availability as of April 30, 2024 of approximately $1.3 billion, with $705 million of cash on hand, $409 million of U.S. revolver availability under the Vail Holdings Credit Agreement and $216 million of revolver availability under the Whistler Credit Agreement. As of April 30, 2024, our Net Debt was 2.4 times trailing twelve months Total Reported EBITDA. On May 8, 2024, we completed an offering of $600 million aggregate principal amount of 6.50 percent Senior Notes due 2032, and used the net proceeds from these notes to fund the redemption of the entire amount of $600 million 6.25 percent Senior Notes due 2025 on May 15, 2024. Additionally, the company completed an amendment of its Vail Holdings Credit Agreement to extend the maturity of the $969 million term loan and $500 million revolver from 2026 to 2029. The company repurchased approximately 0.3 million shares at an average price of approximately $217 for a total of $75.0 million during the quarter. For the nine months ended April 30, 2024, the company repurchased 0.6 million shares for approximately $125 million. We have approximately 0.8 million shares remaining under our authorization for share repurchases and remain focused on returning capital to shareholders while always prioritizing the long-term value of our shares. Additionally, the company declared a quarterly cash dividend on Vail Resorts’ common stock of $2.22 per share. The dividend will be payable on July 10, 2024 to shareholders of record as of June 25, 2024. We will continue to be disciplined stewards of our capital and remain committed to prioritizing investments in our guest and employee experience, high-return capital projects, strategic acquisition opportunities such as the recent addition of Crans-Montana, and returning capital to our shareholders through our quarterly dividend and share repurchase program.”

Crans-Montana Mountain Resort
As previously announced, on May 2, 2024, the company closed on the purchase of its second European resort acquisition, Crans-Montana, for a purchase price of CHF 97.2 million ($106.8 million), after adjustments for certain agreed-upon items, including a CHF 4 million reduction in the purchase price to account for timing of closing after the winter season. The company acquired an 84 percent ownership stake in Remontées Mécaniques Crans Montana Aminona (CMA) SA, which controls and operates all the resort’s lifts and supporting mountain operations, including four retail and rental locations. The company also acquired full ownership of SportLife AG (increased from the previously announced 80 percent ownership stake), which operates one of the ski schools located at the resort, and full ownership of 11 restaurants located on and around the mountain. This world-class resort spans over approximately 4,593 feet of skiable vertical terrain and approximately 87 miles of trails. Located in the Valais canton of Switzerland, Crans-Montana is approximately two and a half hours from Geneva and less than four hours from Milan and Zurich. The valuation for the entirety of the resort operations was CHF 118.5 million, including approximately CHF 7 million of debt that will remain in place and adjusted for purchase price adjustments to account for seasonality and closing timing. Vail Resorts anticipates that the resort will generate approximately CHF 5 million of Resort Reported EBITDA in its fiscal year ending July 31, 2025, the first full year of operations under the company’s ownership. Vail Resorts said it expects significant EBITDA growth over time from the inclusion of the resort on the Epic Pass products, network synergy, and investments in the guest experience. Subject to the timing of capital project approvals and completion, Vail Resorts is planning to invest approximately CHF 30 million over the next five years in one-time capital spending to elevate the guest experience. Normal annual maintenance capital spending is expected to be approximately CHF 3 million.

Capital Investments
Regarding calendar year 2024 capital expenditures, Lynch said, “As previously announced, we expect its 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 2024/25 winter season at 12 destination and regional resorts across North America, $11 million of growth capital investments at Andermatt-Sedrun, $1 million of reimbursable capital, and investments at Crans-Montana, which we expect will include $3 million of maintenance capital expenditures and $2 million associated with integration activities at Crans-Montana. Including My Epic Gear premium fleet, fulfillment infrastructure capital, one-time investments, and investments at Crans-Montana, its total capital plan for calendar year 2024 is now expected to be approximately $219 million to $224 million.”

Season Pass Sales
Commenting on the company’s season pass sales for the upcoming 2024/25 North American ski season, Lynch said, “Pass product sales through May 28, 2024 for the upcoming North American ski season decreased approximately 5 percent in units and increased approximately 1 percent in sales dollars as compared to the period in the prior year through May 30, 2023. Pass sales dollars are benefiting from the 8 percent price increase relative to the 2023/24 season, partially offset by the mix impact from the growth of Epic Day Pass products. Pass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.73 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass sales.”

Lynch continued, “Pass product sales for this past season, the 2023/24 North American ski season, had grown 62 percent in units and 43 percent in sales dollars over the past three years. Since the pass price reset in the spring of 2021, we have increased pass product pricing 25 percent through spring 2024. We believe the spring pass results for guests committing for winter 2024/2025 were impacted by the industry decline in visitation following a record 2022/23 U.S. ski season. The decline in units relative to the prior year season to date results was primarily driven by a decline in new pass holders. The primary source of new pass holders in the spring are lift ticket guests that visited in the prior winter season. This past season, lift ticket visitation declined due to weather, and did not fully return to typical behavior after conditions improved, creating a smaller audience as the primary source of new pass holders in the spring. For renewing pass holders, the company achieved strong unit growth among the company’s most loyal, tenured renewing pass holders (those who have had a pass for three years or more). Spring renewals for lower tenured pass holders (first time and second year pass holders) demonstrated lower renewal rates in the spring, which may reflect delayed decision making to the fall. Overall renewing pass holder product net migration was positive, and Epic Day Pass products experienced modest unit growth driven by the strength in renewing pass holders.

“The majority of our pass selling season is ahead of us, and we believe the full year pass unit and sales dollar trends will be relatively stable with the spring results. We will provide more information about our pass sales results in our September 2024 earnings release.”

Regarding Epic Australia Pass sales, Lynch commented, “Epic Australia Pass sales end on June 12, 2024 and are down approximately 22 percent in units through May 29, 2024, which we believe is primarily a result of the historically poor conditions during the 2023 ski season in Australia. The Epic Australia Pass has grown 43 percent in units over the past three years.”

Updated Outlook

  • Resort Reported EBITDA, on a comparable basis with its prior guidance issued on March 11, 2024 which included $4 million of acquisition related expenses specific to Crans-Montana but excluded closing costs, operating results, and integration expenses associated with Crans-Montana, is expected to be between $833 million and $851 million for fiscal 2024. With the closing of the acquisition, Crans-Montana is now expected to contribute negative $12 million of Resort Reported EBITDA for fiscal 2024, including negative $3 million from operating results and negative $9 million from acquisition, closing, and integration expenses. Including the full impact of Crans-Montana, the company expects net income attributable to Vail Resorts, Inc. to be between $224 million and $256 million and Resort Reported EBITDA to be between $825 million and $843 million. Previously, net income was expected to range between $270 million and $325 million, and Resort Reported EBITDA for fiscal 2024 to be between $849 million and $885 million. 
  • For the fiscal year to date period, the company reported an increase of $37 million in expense associated with a change in the estimated fair value of the contingent consideration liability related to its Park City resort lease.
  • Resort EBITDA Margin is expected to be approximately 28.9 percent in fiscal 2024 at the midpoint of its guidance range. Excluding the impact from Crans-Montana, Resort EBITDA Margin would be 29.2 percent in fiscal 2024 at the midpoint of its guidance range.
  • The updated outlook for fiscal year 2024 assumes a continuation of the current economic environment and normal weather conditions and operations throughout the Australian ski season and North America summer season, both of which begin in its fourth quarter.

Image courtesy Crans-Montana Mountain Resort