Q4 2020 Vail Resorts Inc Earnings Call
Good day and welcome to the Vale Rio.
Resort fourth quarter fiscal 2020 earnings call.
This conference is being recorded.
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At this time I would like to turn the conference over to see Oh, Rob Katz. Please go ahead Sir.
Thank you good afternoon, everyone welcome to our fiscal 2020 yearend 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 are 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 September 24th 2020, 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, which along with our annual.
Report on form 10-K filed this afternoon with the FCC and are also available on the Investor Relations section of our website at Www Dot Vail resorts Dot com.
That said, let's turn to our fiscal 2020 and fourth quarter results. Our results for the full year were negatively impacted by cobot 19, and the resulting closure of our North American destination Mountain resorts and regional ski areas. Beginning on March 15, 2020, a decision we made for the safety of our guests employees and resort community.
In addition resort reported EBITDA for the year was negatively impacted by the deferral of approximately $118 million of past product revenue and related deferred costs to fiscal 2021 as a result of Passholder credits offered to 2019 2020, North American pass holders to encourage run.
New all for the 2020 2021 season.
I mean, the resort closures and throughout the remainder of the year, we implemented a number of actions to enhance our liquidity and reduce costs, including raising $600 million to the issuance of unsecured senior notes suspending our dividend for a cost savings of over $70 million per quarter, reducing our capital plan for calendar year 2020 by approximately 80.
To $85 million and executing significant reductions in our operating expenses our results for the fourth quarter continued to be negatively impacted by cobot 19, with the majority of our North American Summer and Australian ski season operations not opening until late June and early July in Australia, We opened Perisher on June 20.
For 2020, and Hoffman false Greek on July six 2020, and decided to subsequently close Hoffman false Creek on July nine 2020, following the issuance of stayed home orders by the Victorian government on July 8th 2020.
At Perisher operations were negatively impacted by poor snowfall, resulting in limited to rained and as a result limited gas capacity for a portion of July.
In North America, our U.S. resort communities experienced increasing demand from leisure travelers throughout the month of July with group demand negatively impacted by cobot 19 related disruptions.
For Black home demand in July was below our expectations due in part to travel restrictions with the Canadian border close to international guests, including gas from the U.S. we.
We maintained rigorous cost and liquidity controls throughout the quarter resort.
Net revenue for the fourth quarter declined $167 million compared to the prior year, while resort reported EBITDA declined $43 million over the same time period, reflecting $124 million in net cost reductions driven by a combination of reduced seasonal labor and expenses as well as significant overhead cost saving.
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Turning to our operating plans for the upcoming North American ski season.
We were pleased with the visitation we saw this summer at our U.S. resort communities from leisure travelers. We believe this speaks to the current preference of travelers for outdoor experiences locations. They are familiar with and for many the option to drive to our resorts as we approach. The 2020 2021, North American ski season, we are coming.
It to providing a comprehensive on mountain experience that is consistent with our historical practice of opening as many left and as much to reign as soon as possible.
We'll be focused on the guest experience, while also prioritizing the health and safety of Argos employees and resort communities on August.
On August 27, 2020, we announced an operating plan that we believe will enable us to operate safely and consistently across our 34, North American ski resort throughout the season, including the implementation of a reservation system for our guests that give preference to our pass holders limitations on lift ticket sales.
Limitations on our dining facilities and other changes to our operations we.
We expect these operating plans will help enable a safe and successful ski season, but will also negatively impact our fiscal 21 financial results.
It is difficult at this time to fully assess the financial impact we may experience related to our operational and capacity plans given continued uncertainty regarding the ultimate visitation to our resorts and any positive or negative changes, which may be required to our operations based on new information and potential impact.
From Cobot 19.
Turning now to our 2020 2021 season pass sales given the challenging circumstances surrounding the impacts of Cobot 19, we're very pleased with the results of our season pass sales to date.
Season pass sales through September 18th 2020 for the upcoming 2020 2021, North American ski season increased approximately 18% and units and decreased approximately 4% in sales dollars as compared to the period in the prior year through September Twentyth 2019 with sales dollars for this year reduced.
But the value of the redeemed credits provided to 2019 2020, North American Passholders without deducting for the value of the redeemed credits sales dollars increased approximately 24% compared to the prior year.
September 18th we have sold a total of approximately 850000 passes for the upcoming North American ski season, which compares to approximately 1.14 million total passes sold for the North American season last year through December 2nd 2019.
We remain committed to providing the best value for all skiers and riders through our epic pass and epic day past advance commitment products as previously disclosed we offered our 2019 2020 pass holders credits for the 2020 2021 season, ranging from a minimum of 20% to a maximum of 80% for season pass holders with no me.
In a moment, but up to 80% credit from multi day pass products, such as the epic day pass and deferred approximately $121 million of season pass revenue from fiscal 2020 to fiscal 2021, we.
We believe our results through our September deadline demonstrate the loyalty of our guests base to the experience we offered our resorts. Despite the travel challenges presented by covert 19.
The success of Passholder credits offered to 2019 2020 pass holders to Incent renewal the introduction of epic coverage. The introduction of epic Mountain rewards. The additional time provided to gas to make their purchase decision and our operating plans demonstrating our commitment to the safety of our guess most.
Most importantly, we saw very strong unit growth in our destination markets with particular strength in our northeast markets benefiting from our continued momentum from those guests and the first full year of peak resorts in our season pass network we.
We saw solid unit growth in our Colorado, Utah in Northern California, and with four markets.
The primary driver of our unit growth was from renewing pass holders and we believe the deadline for utilizing credits clearly drove an earlier season pass purchase for many of our renewing guess.
Total units renewed to date are in excess of the total amount of renewals we saw last year.
We were also pleased with past sales to new pass holders, which represent a substantial portion of our sales through the September deadline, and while lower than last year. It is encouraging to see gas move into the program. This year given the current circumstances he said.
Through September 18th 2020 pass holders have used a total of $106 million of the aggregate credits. We made available in comparison to the deferral of pass revenue from fiscal 2020 $121 million.
As we enter the final period for season pass sales, we expect unit sales from September 19th 2020 through our December 2020 deadline will be lower than unit sales in the comparable period last year and we expect our total unit sales will finish at or around last year sales setting a very strong foundation a powerful there.
To drive revenue and the upcoming season.
The decline in growth rate for the final period of sales is expected to be primarily driven by the pull forward of renewals to our September 17, 2020 deadline, given the expiration of the renewal credits.
On potential declines in new pass holders with the continued uncertainty related to covert 19 and its impact on the travel market.
It is important to remember that Weve expanded epic coverage. This year and we will see an increase in full or partial refunds based on Passholders, who do not get their preferred priority reservations guest who suffered an injury or other qualifying personal claim or if we close one or more versus one or more of our ski resort due to events such as Coca 19.
Our reported season pass growth rates do not include pending unprocessed transactions associated with approximately 71000 online forms submitted around the deadline from guests that include transactions that could not be processed online such as using your credit to purchase a lower price path from what the guest had in 2000 1922.
Additionally, we received approximately 4000 online forms requesting refunds of an earlier purchase of a 2020 2021 pass which have not yet been process and are not reflected in our reported pass growth rates.
Collectively these unprocessed forms could increase the growth rates, we are reporting as we complete their requested transactions.
Estimates of how these pending transactions will translate to sales are included in the full year expectations. We have for the past program mentioned above pass sales results are adjusted to eliminate the impact of foreign currency by applying an exchange rate of 76 cents between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb sells the season pass.
<unk> revenue deferral is an estimate and the actual amount of Passholder redemptions will differ from the amount of past credit deferred revenue recognized during fiscal 2021.
Now I would like to turn the call over to Michael to further discuss our financial results liquidity and fiscal 2021 outlook.
Thanks, Rob and good afternoon, everyone as.
As Rob mentioned our results for the fiscal year were significantly impacted by Cobot bank team and the resulting closure of our North American Mountain resorts.
Net income attributable to Vail resorts was $98.8 million or $2.42 per diluted share for the fiscal year 2020, compared to net income of $301.2 million or $7.32 per diluted share in the prior fiscal year.
Resort reported EBITDA was $503.3 million for fiscal year 2020, compared to resort reported EBITDA of $706.7 million in the prior fiscal year, primarily as a result of the negative impacts of cobot 19, partially offset by the cost actions implemented.
Our liquidity position remains strong with total cash and revolver availability as of August 31st 2020 of approximately $953 million with $360 million of cash on hand $419 million of U.S. revolver availability under the bail holdings credit agreement and one.
And $174 million of revolver availability under the Whistler credit agreement.
As of July 31st 2020, our net debt was 4.1 times trailing 12 months total reported EBITDA.
As previously disclosed on May four 2020, we completed an offering of $600 million in aggregate principal amount of 6.25% unsecured senior notes due 2025, a portion of which was utilized to pay down the outstanding balance of our U.S. revolver under the belt holdings credit agreement in its entirety.
Additionally on April 28, 2020, we entered into an amendment to the buildings credit agreement, providing among other terms that we will be exempt from complying with the agreements financial maintenance covenants for each of the fiscal quarters ending July 30, Onest 2023 joke January 30, Onest 2022.
Yes, we make a one time your vocal election to terminate such exemption period prior to such date, we can.
We continue to expect to have sufficient liquidity to fund operations through at least the 2021 22 ski season, even in the event of extended resort shutdowns.
Moving now to our fiscal 2021 outlook given the.
Given the uncertainty across the economy and the challenge coded 19 has created for travel demand and specifically our assessment of the ultimate visitation to our resorts with evolving demand and capacity dynamics. The company will not be providing full year guidance for fiscal 2021 at this time.
With that said, we're very pleased with the results of our season pass sales to date and the indication that may provide on the loyalty and commitment of our guests to our resorts even in the current environment.
Given the broader dynamics in the travel industry, we do expect to see material declines in visitation to our resorts and associated revenue declines in fiscal 2021 relative to our original visitation expectations for fiscal 2020, primarily as a result of expected declines in visitation from non pass lift ticket.
Purchases.
On a relative basis, we do expect stronger visitation from local and drive to guess the season, then guests who traditionally fly to our resorts. We also.
We also expect stronger visitation from repeat guests versus new guests and infrequent skiers and riders.
We expect more significant declines in international travel, which will have a particularly challenging impact at Whistler Blackcomb were approximately 50% of visits typically come from outside of Canada.
Given the expected outsized impact the destination visitation, we expect material declines for our ancillary lines of business, including ski school food and beverage and retail rental that tend to rely more heavily on our destination guests.
Food and beverage is also expected to be negatively impacted by capacity constraints on our dining operations.
We are focused on disciplined cost management to efficiently operated the business as.
As previously mentioned, we plan to operate all of our North American resorts with a full drain footprint consists.
Consistent with historical practices and conditions permitting in order to ensure a comprehensive guest experience to maximize our on mountain capacity and to invest in the long term loyalty of our pass holders and lift ticket guess.
However, given our lower expected visitation and revenue for the upcoming year. We've continued to actively manage our cost structure, including but not limited to the implementation of cost reductions totaling over $70 million on an annualized basis as compared to our original operating expense expectations for fiscal 2020.
We are also actively managing our expenses in the short term, where it aligns with our business levels and does not materially impact the guest experience with savings, resulting from these efforts are expected to be realized in the first quarter of fiscal 2021.
In addition, there are unique headwinds this year relative to the midpoint of our original fiscal 2020 resort reported EBITDA guidance range provided on September 26, 2019, including an estimated 13 million dollar impact from additional expenses in fiscal 2021 to address cobot related to operational challenges.
An estimated $6 million of incremental off season, EBITDA losses from peak resorts from August Onest 2020 to September 24, 2020, as a result of the transaction closing on September 24th 2019, and the avoidance of those losses in the prior year and an estimated 20 million dollar impact from the end.
Losing about big coverage in the price of every pass products based on the estimated personal injury claims paid administrative expenses the elimination of premiums for that coverage and any associated renewable credits for claims that would be deferred into the 2021 2022 season.
The company expects to incur approximately $2 million of acquisition and integration related expenses in fiscal 2021, representing an approximate 12 million dollar reduction in those expenses relative to fiscal 2020.
Even with a more efficient approach to our operations the nature of our business and our approach to guest service creates a high level of fixed costs in any material revenue declines experienced in fiscal 2021, we'll have a large percentage decline in our resort reported EBITDA and will also reduce our resort reported EBITDA margins.
As an illustrative example relative to our original resort net revenue guidance provided for fiscal 2020.
If our resort net revenue declined by 30% for fiscal 2021 to approximately $1.8 billion. We would expect resort reported EBITDA of approximately $400 million.
We would expect that didn't increase or decrease in revenue within a reasonable range. From this example would result in increases or decreases to resort reported EBITDA of approximately 75% of the change in revenue for fiscal 2021.
This example is specific to this fiscal 2021 and is intended to provide a better understanding of the reduced cost structure under our adjusted operating plan, reflecting our expectations for significant declines in visitation and revenue compared to prior year guidance and excludes any material disruptions or closures of our operations.
As a result of cobot 19.
He example provided is illustrative in nature, only and is not intended to be guidance for interpret it as such.
As noted previously we will not be providing full year guidance for fiscal 2021 at this time, given the significant uncertainty across the economy and the challenge Cobot 19 has created for travel demand operational constraints and our ability to predict visitation to our resorts we.
We will look to provide an update in December as we gained additional clarity on past sales and an updated view on demand and capacity.
I'll now turn the call back over to Rob.
Thanks, Michael.
We continue to be confident in the long term prospects of our business model that is built on the loyalty of our guests. The strong lineup a season pass products that provide access to our era place of all network of World class resorts and the sophisticated data driven marketing approach, we use to communicate with and attract our gas.
Our strong capitalization positions us to continue to invest in our people our resorts and the guest experience while remaining flexible to manage through the evolving circumstances caused by covert 19 as we.
As we head into this ski season, we are grateful to our passionate committed employees, who we know are looking forward to providing an exceptional experience for our guests as we prepare for the upcoming season.
We could not be more proud of how they have shown up during this crisis.
At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.
Thank you.
As a reminder, if you do have a question. Please press star one now we will take our first question from Felicia Hendrix of Barclays.
Afternoon. Thank you so.
Now these comments, but you know Colgate has definitely it's getting a lot regarding your argument underlying fundamentals that said you did talk about strength in the northeast given the peak acquisition. So just wondering if you could talk a bit more about what you're seeing some peak resorts and maybe for example, how many.
Peak resort pass holders have converted at the you know clearly also having incremental traction resort should help mitigate the decline. This nation you expect heating season. So any data that you can give us on in terms of how peak is driving things would be helpful. Thanks sure.
Sure.
Yeah, I guess I'd say that number one I think what's maybe most important is that our destination markets in total including outside of the northeast or peak markets.
Performed very well and.
And definitely again was our strongest segment I think that was certainly something that was in question even outside markets, where we have a drive to option.
But I think within that within the destination kind of category or the northeast. Once again was our top performer and and I think absolutely peak is helping that I also think it's you know we've now had a couple of years of continuing to build.
On the acquisitions that started it all the way back with Stow.
I think you know many of our core EPIK products, our some of our strongest and so that was also quite heartening to us in terms of people.
In terms of people still I think looking to purchase a a product that provides access to all of our resorts I think that drive to option is a great nice to have but it isn't necessarily what everybody is focused on are necessarily buying too.
And I think yeah. This was a a perfect opportunity or the peak opportunity for US right now at this time, because clearly having a second option I think you know it is definitely a big positive in People's minds. So when we look across our peak resorts absolutely seeing a bump.
You know I can't provide specific details on that and honestly, probably tough to do that until we get to the end of the selling season anyway.
But I would say, yes, absolutely providing an extra bump over just strong performance broadly from the destination markets.
So like do the conversion at peak, so I think that surpass your internal expectations.
Yeah, I would say I would say broadly, yes, I think you know when we we obviously saw some of that last year as well right. So this is a phenomenon that started last year and I think we're starting to see this year and I think again, you know I I got I think the market.
It is.
The strong results that we're seeing in the northeast I think highlight the success we've had at converting people who are.
People, who have an interest in those resorts and I think you know at this point, we probably have three factors all driving that success want as broad destination strength. The second is just the three or four years that we've had to comp compound providing it people in north east more options and then absolutely peak this past year.
Great. Thanks, and then just as my follow up on can you just talk about the mix of season pass sales you're seeing in for this selling season. Just you know day passes versus traditional epic pass maybe like what it looks like now versus what it might have looked like in it in a normalized year and are you seeing a trade up or a trade down and then.
It's kind of the follow up on that second part of that you didn't give data in your prepared remarks and in the press release that said on the season pass out a Keystone is about 75% of last year's unit. You know we know there's a pull forward, but just so that we can have the pieces of understanding of the implications what percent of your passengers are usually.
So by this time.
So I would say.
I think yeah, we have not put out there on the second question, we've not necessarily you know put out that stat. So I can't comment on that but I, but I would say that the you know what we feel is that if you know the results. This year I think you know by somewhat triangulating into the overall kind of estimates that were giving for the full year.
Sure I think gives you a sense right of of how that's likely to play out for the rest of the selling season I think in terms.
I think in terms of mix what I would say is we're very pleased with the strength of the.
The the kind of epic an epic local season pass products.
I would say that you know, we don't cant really give exact commentary on any kind of downgrades at this point because a it's very possible.
It's very possible that once we get through the 70000 online forms that were sent in many ways where for a downgrade that.
That mix could shift, but I would say we at this point without even knowing what's in those forms because they haven't been fully process. There might have been able to go back to the guests yet you know that the performance of again epic in epic local has absolutely surpassed our expectations.
Great. Thank you so much.
Thank you we will now take our next question from Shaun Kelly of the Bank of America.
Hi, good afternoon, everyone [noise].
Just have a couple of like one or two quick clarifications I guess to start really appreciate all the additional color I know theres a lot easier to digest and clearly it's a lot more than.
Usually given to thank you for that.
My first question is on the illustrative range that you gave Michael in a kind of sensitivity.
Just to be Super clear on this on that range.
That range excludes the supposed to deferred sales and revenue impact from that carry over from the past from last year am I thinking about that right.
That would be on a reported basis for last year's guidance versus.
Well what the.
2021 numbers would be on an illustrative basis. So that would include the impact of the credits in 2021 and no adjustment to the guidance for last year.
Okay. So it's <unk>. So it does include we did not we did not tried to do like a same store for that adjustment in that example, if you will.
Okay.
That's okay.
Two second question, which is also a little bit technical but you know Rob you hit on a couple of times about the on the downgrades or the 71000, you know delayed forms, but just just to be more precise on that should we think about that as you know these are still I guess orders, but these have not been included in the units, but these are.
It still be units that are yet to be counted I guess, excluding the 4000 or so refunds.
Is that the right way to kind of Directionally think about yes. They may be at a different price point or they might be a for a lower products there might be some mix shift, but from a unit perspective, because it effectively additive to the unit base or what how should we think about that.
Oh I see what I would say is I think with all these forms I mean, I think we really you know unfortunately, just could not provide a pathway online given the short time frame that we had to you know essentially build the entire credit process. We couldn't provide a way on mine for people to downgrade their path, let's say from an epic to an epic local or an epic local to an epic for a day and.
Use their credit and so weve told people they have to call in to the call center or use this online form.
Just given the numbers that we got actually we see that we have been able to process them and these forms include kind of what the guest wants to do but we still need to circle back to the guests get their credit card and actually process. It. So at this point you know, we can't 100% say, what those forms will translate into and they could include.
You know again makes it certainly could include somebody going from an epic pass to an epic one day, but but more likely right aren't going to include things along along that continuum.
And you know I think we're putting it out there just to highlight that that it's a meaningful number but we what we can't be precise on that and the same thing is true with refunds. We've got these requests are for refunds Ah you know, but but until we actually go through the process of.
Assessing them you know we can't be sure exactly how they will come out I would say that it is it is actually not that surprising to us given the strength of our pass sales that we would see a significant number of people wanting to downgrade because every year, we have people upgrading on downgrading, but to do so with a credit. This year, you really had to do it through a form.
But just to be clear right. Just 71000 is not included in the 850 right show so even if a downgrading there's like there's no.
There's no there's no unit incorporated today and that would be a unit. It just hasn't been process correct. So we the growth rates that we announced the 850000 none of that includes anything with the 70000 forms of the 4000 farms.
Right, Okay, and then and this is sort of the maybe the bigger picture question and I know, it's just sort of any tough state.
You have some experience now operating with you know a little bit of the capacity constraints in terms of your actual amount performance I guess at Perisher in Australia. So could you just give us any color even if it's extraordinarily directional about what was some of that impact that you saw you know when you go to this feature where you move to more of an advanced booking reservation.
You know component and you're probably have some lift capacity constraints at higher than you would normally have like how did that impact just volumes on the mountain maybe get people and illustrate a sense of what we could expect in an environment like that you know because that's probably in the normal course for for this coming season.
Yeah. So what I'd say is I think two things one that's important to remember about Australia. One is that I'm actually Australia had record low snowfall and very very limited terrain and so what I would say is you know it gives US an example of that and I think one of them one of the things we took away from that experience is that the reservation system was critical.
For those type of moments, but in <unk>, you know I don't know that it gave us, especially for the first half of the season, you know really gave US a lot of insight into kind of a normal operating I think as the season went on a at Perisher, we saw better and better performance overall better performance financially better performance in terms of how we were able to allocate capacity.
I would say I think what you know, we we believe that actually the the insights that we've taken allow us to hone the operating plan for this year in North America, a much much to a much greater level of sophistication I. There's no doubt that the biggest impact right is lift capacity and so you know to the extent that.
At you know were not fully loading or less than that.
Then that is capacity that we lose some of that could be just brought down mountain capacity some of that could be upload capacity right at the start of the day and making sure that we're not creating you know a a bad guest experience where people are any kind of safety issue and so we think there could be some capacity impacts to that I would say as many of you know that.
There are very even though you know we tend to think about those peak days. The truth is right. Most of the season, you know would not be impacted by the most likely capacity constraints that we have.
Beyond lifts, though I think you know restaurant capacity is another limit her and we do think that's not necessarily not necessarily a limit or for the overall capacity on visitation for the mountain, but it is absolutely a limit or in terms of the revenue that we will see from FNB. This year and we think that that you know will both have a demand.
A constraint on FNB in terms of you know potentially less people buying food or less people coming to the mountain, but we.
But we will absolutely also have capacity constraints some of that somewhat related to local regulations, right and and obviously, we're going to be very much subject to those in terms of what guidance. We get in terms of you know what the number of people. We can put in our restaurants, both in terms of a percent of capacity on an absolute number.
[noise] [noise] that good John.
Thank you Mike.
We'll take our next question from Chris of Deutsche Bank.
Okay, Great Hey, good afternoon, guys. Thanks for taking the question wanted to ask you about.
I think historically this time, you're sometimes you've given out data points on you know hotel reservations in some of the Colorado resorts I mean, how relevant you know you will.
Only to share any of those data points with us today, but also how relevant you think they are right now given that there seems to be a shorter you know decision making booking window.
Yeah, we don't think they're very relevant at this point you know I think this is typically pretty early in the cycle and even in the best years and clearly you know I think we saw this coming out of Oh, eight or nine recession. A you know I think were so good to see it today the booking window is obviously going to shrink quite a bit.
And obviously, we are telling people that they will need a reservation gift to get on the mountain and so you know we feel like we're probably not going to see you know the most substantial.
Booking interest until after we put out our reservation system in early November So I would say you know, we're not putting too much focus on on these early booking data points.
Okay Fair enough and then you know can you share with us given the reservation system. That's in place for the upcoming season if.
If that had been in place last season is it possible to kind of back into how many days you would have had to turn people away I mean, I assume it's a pretty pretty small number but wanted to wanted to ask yeah. We feel like it's it's tough to give precision around that so you know I think we've put out there publicly that we do believe.
You know certainly for our season pass holders, we feel like though you know absolutely be able to access the mountain you know on the on the vast majority of days during the year and it won't be an issue I think it's you know at this point on in terms of.
Lift ticket purchases daily lift ticket purchases I think that's more more unknown and I think we made clear in the release that we do think that we will see a material decline in that you know as as we limit those cells and potentially as you know impulse purchases.
You know you have to go down on the other hand, obviously some of that could ultimately help some of our sales on path sales right for the remainder of our past selling season. So you know we'll have to just see how that plays out but yeah. It very difficult for us to say exactly this year versus last year other than to say that you got for what we're talking about managing.
You know you know a handful of days throughout the year for each resort again, assuming normal weather conditions and I think we need to put that out there. Obviously, if we have very poor conditions. Then you know we may see that capacity restrictions to be be more frequent.
Great and just kind of housekeeping question, how the mechanics work for.
You mentioned you know what the reservation system, there could be people, who lead or request a refund I mean, how does it work who's eligible for that how do they requested I mean, what are the what are the mechanics behind that.
Yeah, So what we're saying to people as for our season pass holders they get up to seven priority reservation days. So obviously the maximum up the number of days they have on their product or seven and when we open our reservation system people will be able to go in and get the days that they want if they don't if somehow you know some day that they want to come is.
Doesn't have any capacity and they can't purchase that they can come back to us and asked for a refund.
And and you know for the whole product and that is.
And that is and that'll happen really at the end of the reservation period that priority reservation period, which ends at the beginning of December.
So you know we would have a pretty good sense, a you know of that probably going into final pass self reporting on our earnings call, but not 100%.
Okay very good very helpful. Thanks, guys.
Thank you.
Thank you we will now take our next question from David Katz of Jefferies.
Hi, good afternoon, everyone and thank you for the copious detail in the usual.
Transparency.
Number one I just want to go back to the illustrative model that you provided which I think Michael you said excludes any.
Any impact of carry over revenue shares right. If we were to hypothetically illustrate further adding I think you have 121 million of deferred past revenue on top of what's there what does that due to the.
Sure and that flows through at a much higher level right to the EBITDA and what does or David I, just want to yeah, I just want to I just want to clarify that a lot.
Illustrative model assumes that the deferred revenue for the.
For the credits is recognized in 2021.
As Mike outlined in our prior disclosures all we're doing is providing a reference point to the original guidance from 2020.
Right. So the 121.
21, Illustrative example includes.
An assumption of the odd deferred revenue being recognized this year.
Right.
And is it fair to assume that that you know that deferred revenue flows through at a very high level and razors the margin that would be in there or otherwise is that.
Is that a fair impression.
No because the deferred revenue largely mirrors.
The revenue, we would recognize in any year right.
Right would pass sales because the credits are largely a one time issue. So it's really a question of when the cash was received but from a financial statement perspective, you know we.
Our our perspective on it is that that largely mirrors, a normal right revenue profile for the business because it's essentially a grossing up to two normal right pricing levels.
Okay.
Helpful.
And my second question. If I may is the operating model that you you've laid out if we were to apply that you know to say last year or you know a hypothetical normal year is it a fair question to ask how many you know visitors.
May have been turned away under those circumstances, you know with this operating model just to sort of get a sense. So no. We're kind of impact you know I think I think to Rob's prior comment at this point, we really can't provide any more precision on you know kind of the capacity side I think largely what we're trying to.
I do with the Whit by providing the road map of the luxury of examples to really give you a sense of our cost structure, both fixed and variable and then yeah I give you a starting point that then people can adjust revenue based on on your assumptions and works.
You know certainly providing our our perspective that there will be material decline this year, but not providing any specificity on visitation or revenue around that.
I mean, I would just say onto that to say that the that that illustrative example is being driven by demand consumer demand not really being driven by capacity constraints. So other than for FNB, you know where that obviously that is factored in because we we have a pretty clear understanding of what that's going to be.
But as he said earlier you know in the release of the script, we really yeah, it's hard to quantify what the capacity impacts are going to be this year. So at this point when you look at that illustrative model, it's really driven on on demand you know that's how that that that was you know, but that said of course, whether we exclude people because of capacity limitations or there's no depend.
It's it's obviously you know similar revenue loss.
But that's that's fair I appreciate all of it. Thank you very much yeah. Thank you.
Thank you we'll take our next question from Patrick cells That's trust.
Hi, good afternoon, everyone.
My questions concern you know that the Oh.
Obviously, the logistical challenges with lift capacity and you know related to that.
You know how do you think about potential staffing issues going into the winter specifically.
With international visa restrictions and potential employee fear of coming to the U.S. due to Cove it.
How much of a challenge or will that be a this year.
Well you know I think we are assuming that we will not be you know in the U.S., we will not be bringing in any international these employees for the most part no material I'm out of them and there's no doubt that that is a real loss on the other hand, obviously the unemployment rate you know it is higher than it has been for the last.
Last number of years. So we do feel like there will be other people in the U.S., who would be interested in you know when working at our resorts. This year and obviously you know many of these folks might have.
Might have been active in the restaurant retail leisure industries elsewhere and of course, that's where we've seen the biggest reduction right in workforce and so we do feel like you know we will be able to make up for the loss of international employees with additional hiring in the U.S.
Okay sounds good and then any high level lesson, you know or takeaways that you learn from the Australian ski season, you know specifically cost structures or operational issues. You know that that you will be taking forward to the north American ski season.
I think we I think you know a key lesson was that it was critical for us to dial in the capacity of the resort or <unk> and we saw that in Australia. A key lesson was you know obviously how to manage the reservation system, which in Australia, we had to do very very quickly.
With limited opportunity to really create a custom system. It took us a while to kind of get that burned and where we feel like we've taken that and now we're going to be launching a a much more sophisticated approach to those pieces.
You know, we think we saw even though the restaurants at Perisher were limited in terms of visitation.
You know we saw a tremendous guest enthusiasm for the overall experience and people adjusted they understood that they you know they they may or may not get into the restaurant exactly when they want it and they brought food and did other things too you know give themselves a great experience Dick maybe as much as anything we've learned that even during covert there's tremendous demand and.
Excitement for getting out to ski at the resorts and that's a core experience is one because it's outdoors and naturally has a lot of spacing.
One that actually resonates with people and that the lift the limitations in terms of how many people. You know are loaded is one that they were able to execute on successfully and we feel like we can do the same.
Okay sounds good I look forward to the company sees it hopefully you'll have the cascade lift running early this year. So we can use that to a bypass the village where [laughter] and any potential lines. There. So thank you in advance for that absolutely well make sure to do that.
Thanks.
Thank you we will.
Take our next question from Alex Morocco, as barren Burke.
Hey, good afternoon guys.
The web sites explanation, Oh epic pass credits in circumstances for somebody chooses a cheaper cost makes it sound like the credit only applies to the price of the cheaper cash not the original plan can you just explain the mechanics of how this is gonna impacts deferred revenue and should we assume that the remaining 14 billion in deferred revenue wont be recognized in full.
So the credit took a couple of things one is the way the mechanics work is that the credit <unk> everybody got an individual unique credit and that credit could be used in full dollar amount for an equal or greater price pass. This year. If you wanted to reduce you know.
Your party downgrade essentially your pass on the credit was also reduced to can maintain the same percentage of the purchase price that you were paying just one of the reasons why we couldn't do it online the deferred revenue that was on the balance sheet. When we put that out last year was an estimate of what the total usage would be of deferred revenue. This.
Sure and we don't until we get through the rest of these forms we don't know what the final deferred revenue usage will be and I you know in some <unk>, we won't know that until you know be able to update everybody in our December release.
Okay understood and.
And then secondly are you expecting to change the timing of Capex in fiscal 21, given the potential refunds you might see without the coverage and then when you resumed normal capex, what's going to be prioritized.
So we're not at this point, yeah, we're not I'm, not really making any adjustments to capex in terms of capital spending which would really happen. After the season. This year. Obviously, we of course are going to be monitoring the season closely and you know before we come out with any plan for calendar year 2020.
And we'll make sure we're incorporating what happened this year I think we.
I think we we of course feel like will you know likely be and so you know conservative approach, though put though hopefully not as conservative as last year, because the environment around co bid and travel has all improved and yeah. We will definitely be prioritizing just as we always have a you know projects that we think will have a significant impact on the guest experience and answer.
Certainly some of the projects that we deferred from last year to the next year or this year to next year will be a top of the list in terms of what we're going to review.
Thank you.
Thank you.
We'll take our next question from Paul Golding ethnic Liar.
Hi, Thanks for taking my question. So in looking at that 70 million figure of cost reductions.
Over the expectations for fiscal 20, I'm curious to what amount of that if there's any breakdown you can give the that could indicate maybe.
Something around a lot.
Marketing savings or something that we might expect.
To come back and following years and then my second question is around capacity.
In the lodging segment.
Any limitations there on your capacity and any expectations around how the drive up or local predominance. This season.
Flow through to that segment. Thanks.
Sure on on the cost savings there is a component within that cost savings, which is marketing at this point, you're not going to give additional detail or granularity on that you know a lot of that was obviously related to feeling that the credits that we were offering to people you know, we're obviously, a very big marketing incentive and so probably not.
Less marketing external marketing expense than normal for that and.
And yes, we would assume that in a normal year, we would see you know that market. It can come back I would say that component of the 70 million is still on the smaller side right. It or the vast majority of this does relate to our operating structure I think for the resorts and on the lodging side Yeah. We're at this point not.
Anticipating any limitations on room capacity of course, that's always going to be subject to local regulations. So.
So we'll of course be following that but at this point, we're not planning on that I think some of the some of the activities within lodging. We think we'll certainly be last whether that's in the spa or food or other things. So like you know any any other operator, but but in terms of rooms were not at this point expecting a reduction because of capacity limitations.
Great. Thanks, so much appreciate the color. Thank you.
Thank you and we will take our last question from Ryan can be of William Blair.
Yeah, Hi, everyone. Thanks for taking my questions I, just want to follow up on the strength of the northeast could you maybe talk about how much the past the.
Maybe in terms of potential additional skier visits you could add in a normal year that the peak mountain could take on if we do see some of its destination visitation shipped out of the western resorts ended there because it does feel like maybe you're not going to see restrictions on bigger mountain bike Park city, but maybe you do see that something like that.
Snow.
Yeah, I I think I think that you know there is certainly a there is additional capacity we feel like we could add there, but it but you know in in relation to the overall visitation in our western resorts, obviously that that that's.
Far from a one for one opportunity and I think you know yeah that that that there could be capacity limitations on that front as well I'm again, most of the you know, but we're only talking about those handful of days, where where there could be an issue I'd say, we also feel good because again people there was an opportunity for people to buy a.
Regional product in the North East and again, we saw real strength in the epic and epic local which I think tells us that people are really planning to come out west.
You afford their vacation obviously of course, it's all going to be subject to co bid and what's going on with it at that time, but we do we feel good about that but I think the addition of peak and Mount Snow in a couple of smaller resorts is is you know great as an additional option, but not a capacity transfer opportunity of any material size.
From the west.
Got it that makes sense and then Rob just kind of curious from a past standpoint, you know cells I think holding up better than any of us are expected.
Do you think maybe you can kind of renewal of discount going forward. It is a good idea do you think that help people.
People in the past this year.
I you know there's no doubt I think you know we we obviously created the credit program a two to create loyalty and I think you know, we certainly saw the possibility that between people being disappointed with last season and the concerns about cobot coming into this season that there was you know a chance of course that the program.
I could take a material hit you know, even if our ultimate visitation for the year, you know came out down, but okay, but but if we lost a lot of people from our advanced commitment program. I think we were quite concerned about the loyalty piece and so I think we're quite proud of the sophistication that we used to put together this program and it of course did and sent.
You know a loyalty and some cases from the people who are most likely to churn right, obviously with a with low usage from last season I don't think you know as we go forward them no I don't we don't think that this is necessarily.
You know something we think this is more of a unique situation because of the odd dynamics of last year, and we think going forward. A you know we wouldn't see this again, even if even if there were resort closures. This year. We've got you know a a refund program in place that that's very clear on what people got a and so I think we would much.
We would assume that we're going to be moving much more back to the same approach that we had before but the good news for US is that we will be going into that returned to kind of normal with you know a very high level of loyal and committed skiers and riders.
And and riders and so that in our minds is a big win as we think about you know what life looks like post close it.
Excellent and then just lastly on the on the dividend are you still kind of thinking two quarters are conducted standout.
You know I think at this point, yeah, we're not making any decisions on that obviously, we you know there are certain.
There are certain restrictions in the notes that we raised but but I think we'll we'll you know we'll take it quarter by quarter, but obviously, we're going to be incredibly sensitive to the dynamics and environment around the company and and you know we'll make sure. One that you know we don't we don't jump too early if we don't feel like we've seen real stabilization on the other hand I think.
You know certainly before covered we are quite aggressive on returning capital.
To shareholders and I think we would obviously go back to that once we saw the environment.
Stabilized.
Great. Thanks.
Q.
Thank you.
No further questions in the questioning here.
Thank you operator. This concludes our fiscal 2020 year end earnings call. Thanks to everyone, who joined US on the conference call. Today. Please feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon and goodbye.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
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