Vail Resorts Inc. on Thursday reported earnings per share of $7.12 for the third quarter of fiscal 2019 ended April 30, beating Wall Street’s estimates by 4 cents a share. Revenue of $958 million was in line with expectations.

Meanwhile, season pass sales through May 28 for the upcoming 2019/20 North American ski season increased approximately 9 percent in units and 13 percent in dollars compared to the year-ago period through May 29, 2018, excluding sales of all military pass products in both periods.

Third-Quarter Highlights

  • Net income attributable to Vail Resorts, Inc. was $292.1 million for the third fiscal quarter of 2019 compared to net income attributable to Vail Resorts, Inc. of $256.3 million in the same period in the prior year.
  • Resort Reported EBITDA was $480.7 million for the third fiscal quarter of 2019, which includes the operations for acquisitions completed during the fiscal year (Falls Creek, Hotham, Triple Peaks and Stevens Pass) prospectively from each acquisition date, and $4.9 million of acquisition and integration related expenses. In the same period in the prior year, Resort Reported EBITDA was $419.7 million, which included $3.5 million of acquisition and integration related expenses.
  • The Company updated its fiscal 2019 guidance range and is now expecting Resort Reported EBITDA, on a comparable basis with its prior guidance issued on March 8, 2019 which excluded the expected Resort Reported EBITDA contribution from the Falls Creek and Hotham resorts, to be between $700 million and $710 million. For fiscal 2019, Falls Creek and Hotham resorts are expected to contribute $2 million of Resort Reported EBITDA, including a $3 million stamp duty payment and $1 million of integration expenses. Including the impact of Falls Creek and Hotham, the Company expects Resort Reported EBITDA to be between $702 million and $712 million, which includes an estimated $16 million of acquisition, stamp duty and integration related expenses and $4 million of unfavorable foreign exchange as a result of the U.S. Dollar strengthening relative to the time of initial guidance issued in September 2018.
  • Season pass sales through May 28, 2019 for the upcoming 2019/2020 North American ski season increased approximately 9% in units and 13% in sales dollars as compared to the period in the prior year through May 29, 2018, excluding sales of all military pass products in both periods. Pass sales include Stevens Pass and Triple Peaks pass sales in both periods and are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.74 between the Canadian dollar and U.S. dollar to the current period and the prior period for Whistler Blackcomb pass sales.

Unless otherwise noted, the commentary on results for the quarter ended April 30, 2019and guidance for the fiscal year ending July 31, 2019 include the results of acquisitions completed during the fiscal year prospectively from the acquisition date, which include Falls Creek and Hotham (acquired April 2019), Triple Peaks (acquired September 2018) and Stevens Pass (acquired August 2018).

Commenting on the Company’s fiscal 2019 third quarter results, Rob Katz, Chief Executive Officer, said, “We are pleased with our overall results for the quarter and for the full 2018/2019 North American ski season, with strong growth in visitation and spending compared to the prior year, including a strong finish to the season with good conditions across our western U.S. destination resorts. After the challenging early season period for destination visitation, our results for the remainder of the season were largely in line with our original expectations. Our results throughout the 2018/2019 North American ski season highlight the growth and stability resulting from our season pass, the benefit of our geographic diversification, the investments we make in our resorts and the success of our sophisticated, data-driven marketing efforts.

“Our Colorado, Utah and Tahoe resorts experienced strong local and destination visitation throughout the third fiscal quarter, supported by favorable conditions across the western U.S. which also allowed for an extension of the ski season for select resorts in Coloradoand Tahoe. The Company continued experiencing relative weakness in international visitation compared to the prior year, particularly at Whistler Blackcomb.

“Total lift revenue increased 16.4%, driven by a 14.3% growth in skier visitation primarily from Triple Peaks and Stevens Pass. Total effective ticket price (“ETP”) increased 1.8% in the third quarter compared to the prior year, primarily due to price increases in both our lift ticket and season pass products, partially offset by higher skier visitation by season pass holders, lower ETP from the acquired Triple Peaks and Stevens Pass resorts and the new Military Epic Pass. Excluding season pass holders, ETP increased 5.5% compared to the prior year. The growth in visitation and spending compared to the prior year, along with the addition of Triple Peaks and Stevens Pass, drove a 9.4% increase in ski school revenue, an 11.7% increase in dining revenue and a 9.5% increase in retail/rental revenue compared to the prior year.”

Regarding the Company’s Lodging segment, Katz said, “Our lodging results for the third fiscal quarter were positive, with revenue (excluding payroll cost reimbursements) increasing 16.8% compared to the prior year primarily due to the incremental operations of Triple Peaks. The average daily rate (“ADR”) decreased compared to the prior year primarily as a result of the inclusion of the Triple Peaks resorts, as well as incremental managed Tahoe lodging properties that we did not manage in the prior year, all of which generate a lower ADR as compared to our broader Lodging segment.”

Regarding the Company’s outlook, Katz said, “Given the strong finish to the season, our successful season extensions and our continued focus on cost discipline, we now expect Resort Reported EBITDA, on a comparable basis with our prior guidance issued March 8, 2019 which excluded the expected Resort Reported EBITDA contribution from the Falls Creek and Hotham resorts, to be between $700 million and $710 million. For fiscal 2019, Falls Creek and Hotham resorts are expected to contribute approximately $2 million of Resort Reported EBITDA, including a $3 million stamp duty payment and $1 million of integration expenses. Including the impact of Falls Creek and Hotham, the Company expects net income attributable to Vail Resorts, Inc. for fiscal 2019 to be between $277 million and $297 million and Resort Reported EBITDA to be between $702 million and $712 million, which includes an estimated $16 million of acquisition, stamp duty and integration related expenses and $4 million of unfavorable foreign exchange as a result of the U.S. Dollar strengthening relative to the time of our initial guidance issued in September 2018.”

Katz continued, “Our balance sheet remains strong and the business continues to generate robust cash flow. We ended the third quarter with $59.6 million of cash on hand and our Net Debt was 1.8 times trailing twelve months Total Reported EBITDA. I am also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts common stock. The quarterly dividend will be $1.76 per share of common stock and will be payable on July 11, 2019, to shareholders of record on June 26, 2019.”

Operating Results

A more complete discussion of operating results can be found within the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Form 10-Q for the third quarter ended April 30, 2019, which was filed today with the Securities and Exchange Commission. The discussion of operating results below compares the results for the quarter ended April 30, 2019 to the comparable quarter ended April 30, 2018 unless otherwise noted. The following are segment highlights:

Mountain Segment

  • Total lift revenue increased $74.2 million, or 16.4%, to $526.9 million primarily due to strong North American pass sales growth for the 2018/2019 North American ski season, increased non-pass skier visitation at western U.S. resorts and incremental revenue from Triple Peaks and Stevens Pass.
  • Ski school revenue increased $9.5 million, or 9.4%, and dining revenue increased $8.3 million, or 11.7%, primarily as a result of incremental revenue from Triple Peaks and Stevens Pass and increased revenue at western U.S. resorts as a result of higher skier visitation.
  • Retail/rental revenue increased $9.9 million, or 9.5%, primarily due to higher sales volumes at stores proximate to western U.S. resorts, as well as incremental revenue from Triple Peaks and Stevens Pass.
  • Operating expense increased $46.4 million, or 12.7%, primarily due to incremental operating expenses from Triple Peaks, Stevens Pass, Falls Creek and Hotham, including acquisition, stamp duty and integration related expenses.
  • Mountain Reported EBITDA increased $58.8 million, or 14.4%, primarily due to strong North American pass sales growth for the 2018/2019 North American ski season, the incremental operations of Triple Peaks and Stevens Pass, and strong growth in visitation and spending at western U.S. resorts. Mountain Reported EBITDA includes $4.0 million of stock-based compensation expense for the three months ended April 30, 2019 compared to $3.8 million in the same period in the prior year.

Lodging Segment

  • Lodging segment net revenue (excluding payroll cost reimbursements) increased $10.9 million, or 16.8%, primarily due to incremental revenue from the Triple Peaks resorts, incremental managed Tahoe lodging properties that we did not manage in the prior year and an increase in revenue at lodging properties in Park City.
  • ADR decreased 3.4% at the Company’s owned hotels and managed condominiums compared to the same period in the prior year, primarily as a result of the inclusion of Triple Peaks resorts as well as incremental managed Tahoe lodging properties that we did not manage in the prior year, all of which generate a lower ADR as compared to broader Lodging segment.
  • Lodging Reported EBITDA increased $2.2 million, or 20.5%, which includes $0.8 million of stock-based compensation expense for the both the three months ended April 30, 2019 and 2018.
  • During the third quarter of fiscal 2019, the Company sold the Village at Breckenridge Hotel for proceeds of $6.2 million, which resulted in a gain of $0.6 million, and did not impact Lodging Reported EBITDA.

Resort – Combination of Mountain and Lodging Segments

  • Resort net revenue increased $116.4 million, or 13.8%, to $957.7 million primarily due to increased visitation and spending at U.S. resorts, strong North American pass sales growth for the 2018/2019 North American ski season and incremental revenue from Triple Peaks and Stevens Pass.
  • Resort Reported EBITDA was $480.7 million for the three months ended April 30, 2019, an increase of $61.0 million, or 14.5%, compared to the same period in the prior year, which includes $4.9 million of acquisition and integration related expenses and approximately $3 million of unfavorability from currency translation primarily related to operations at Whistler Blackcomb, which the Company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results.

Real Estate

  • The Company closed on two land sales during the third quarter of fiscal 2019 with third party developers at Keystone (One River Run site) and Breckenridge (East Peak 8 site) for proceeds of approximately $16.0 million (received during the quarter), including $4.8 million associated with the sale of density for the Breckenridge property. The land parcel sales were accounted for as financing arrangements as a result of the Company’s continuing involvement with the underlying assets that were sold, including but not limited to, the obligation to repurchase finished commercial space from the development projects upon completion. As a result, the estimated gain of $3.6 million associated with the East Peak 8 site and the estimated $3.2 million loss associated with the One River Run site will be deferred until the Company no longer maintains continuing involvement. Both transactions will be recorded as long-term financings until the gain or loss is recognized. Additionally, the Company’s future obligation to repurchase finished commercial space in the two completed projects, as well as other related capital spending, will result in total estimated capital expenditures of up to approximately $9.5 million in future fiscal years.
  • Net Real Estate Cash Flow for the quarter was $15.4 million, an increase of $12.7 million compared to the prior year period, primarily due to the cash flows generated from the sales transactions discussed above.

Total Performance

  • Total net revenue increased $113.5 million, or 13.4%, to $958.0 million.
  • Net income attributable to Vail Resorts, Inc. was $292.1 million, or $7.12 per diluted share, for the third quarter of fiscal 2019 compared to net income attributable to Vail Resorts, Inc. of $256.3 million, or $6.17 per diluted share, in the third fiscal quarter of the prior year. Additionally, fiscal 2019 third quarter net income included the after-tax effect of acquisition and integration related expenses of approximately $4.1 million and approximately $1 million of unfavorability from currency translation primarily related to operations at Whistler Blackcomb, which the Company calculated by applying current period foreign exchange rates to the prior period results.

Return of Capital

The Company declared a quarterly cash dividend of $1.76 per share of Vail Resortscommon stock that will be payable on July 11, 2019 to shareholders of record on June 26, 2019. Additionally, a Canadian dollar equivalent dividend on the exchangeable shares of Whistler Blackcomb Holdings Inc. will be payable on July 11, 2019 to shareholders of record on June 26, 2019. The exchangeable shares were issued to certain Canadian persons in connection with the acquisition of Whistler Blackcomb Holdings Inc.

Season Pass Sales

Commenting on the Company’s season pass sales for the upcoming 2019/2020 North American ski season, Katz said, “We are very pleased with the results for our season pass sales to date, which showed strong growth over the record pass sales results we saw last spring, with particular strength over the Memorial Day deadline. Pass sales through May 28, 2019 for the upcoming 2019/2020 North American ski season increased approximately 9% in units and 13% in sales dollars, as compared to the prior year period through May 29, 2018, excluding sales of all military pass products in both periods, including Stevens Passand Triple Peaks pass sales in both periods and adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.74 between the Canadian dollar and U.S. dollar to the current period and the prior period for Whistler Blackcomb pass sales. Military pass sales are off to a strong start but remain in our verification period and we will plan to provide further updates on sales trends as the selling season progresses.”

Katz continued, “Our pass sales growth was primarily driven by strong results in our destination markets.  In particular, we have very strong growth in our Northeast markets, which are benefiting from the first full year of pass sales with Stowe, Okemo and Mount Sunapee included with unlimited access on the Epic and Epic Local pass products. Our broader destination markets continue to perform well as we expand the resorts available in our network, including the addition of Sun Valley and Rusutsu, Japan this year, and through our enhanced ability to reach destination guests with our data-driven marketing. Our local markets continue to show solid growth, driven by favorable results among our local guests in the Whistler Blackcomb region, with particular strength in Seattle with the first full pass sales season with access to Stevens Pass. We are also seeing strong results from our Northern California and Utah guests, partially offset by more modest sales growth in our Colorado local market. We have seen good growth from our new Epic Day Pass, though it was not material to our overall pass sales dollar growth in the spring and we anticipate that sales of this new product will be primarily concentrated in the fall. It is important to note that as we drive more guests to purchase passes in the spring, we believe the full year pass sales dollar growth rate, excluding military pass sales, will be lower than our spring growth rate with stronger relative performance in late fall versus Labor Day due to the introduction of Epic Day Pass.”

Regarding Epic Australia Pass sales, Katz commented, “The 2019 Australia ski season kicked off early at Perisher, and we are very pleased with ongoing sales of the Epic Australia Pass, which end on June 18, 2019 and are up approximately 19% in units through June 2, 2019, as compared to the prior year period through June 3, 2018, representing another significant year of growth and over 65% growth in the past three years. This year, Epic Australia Pass sales have benefited from the addition of Rusutsu in Japan. Given the timing of the Falls Creek and Hotham transaction closing in April, we won’t see the full benefit of the Falls Creek and Hotham acquisitions until next year.”

Updated Outlook

  • Net income attributable to Vail Resorts, Inc., including the impact of Falls Creek and Hotham, is expected to be between $277 million and $297 million for fiscal 2019.
  • Resort Reported EBITDA, including the impact of Falls Creek and Hotham, is expected to be between $702 million and $712 million, which includes an estimated $16 million of acquisition, stamp duty and integration related expenses and $4 million of unfavorable foreign exchange as a result of the U.S. Dollar strengthening relative to the time of initial guidance issued in September 2018. For fiscal 2019, Falls Creek and Hotham resorts are expected to contribute approximately $2 million of Resort Reported EBITDA, including a $3 million stamp duty payment and $1 million of integration expenses. The updated outlook for fiscal year 2019 is predicated on current Canadian and Australian foreign exchange rates of $0.74 and $0.69, respectively, for each currency to the U.S. dollar for the remainder of the fiscal year.
  • Resort EBITDA Margin is expected to be approximately 31.1% in fiscal 2019 at the midpoint of guidance range.
  • Fiscal 2019 Real Estate Reported EBITDA is expected to be between negative $5 million and negative $4 million.

Photo courtesy Vail Resorts Inc.