Q3 2022 Vail Resorts Inc Earnings Call

June 9, 2022

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Yes.

Please standby.

Good day and welcome to the Vail Resorts third quarter earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Mr. Lynch Chief Executive Officer. Please go ahead.

Thank you good afternoon, everyone welcome to our fiscal 2022 third quarter earnings conference call.

Joining me on the call. This afternoon is Michael Barkin, our Chief Financial Officer.

Before we begin let me remind you that some information provided during this call may include forward looking statements that are based on certain assumptions.

And are subject to a number of risks and uncertainties as described in our SEC filings and actual future results may vary materially.

Looking statements in our press release issued this afternoon, along with our remarks on this call are made as of today June nine 2022, and we undertake no duty to update them as actual events unfold.

Today's remarks also include certain non-GAAP financial measures reconciliations of these measures are provided in the tables included with our press release.

Along with our quarterly report on Form 10-Q were filed this afternoon with the SEC and are also available on the Investor Relations section of our website at Www Dot Vail resorts dotcom.

Let's turn to our fiscal 2022 third quarter results. We are pleased with our overall results for the quarter and for the <unk> 2021 2022 north American ski season.

As expected results for the quarter significantly outperformed results from the prior year, primarily due to the greater impact of COVID-19, and related limitations and restrictions on results in the prior year period.

This year challenging early season conditions persisted through the holiday period, but our results were strong from January through the remainder of the season.

Our strong season pass.

Sales heading into the 2021 2022 season are the foundation of our advanced commitment strategy, creating stability for the company through variable weather and other challenges.

We had particularly strong destination visitation this year, which was further supported by lift ticket sales at our Colorado, and Utah resorts that exceeded our expectations through the spring.

Our recent results at risks Whistler Blackcomb were also stronger than expected due to the easing of travel restrictions in Canada in late February .

Recent performance at our Eastern U S ski areas was in line with our expectations, while our Tahoe resort adult resorts were impacted by challenging spring conditions, resulting in performance below our expectations.

The season, our ancillary businesses continued to be capacity constrained by staffing and in the case of dining by operational restrictions associated with COVID-19.

Overall, our results throughout the <unk> 2021 2022 north American ski season.

Like the stability, resulting from our advanced commitment pass products and a season with challenging early season conditions staffing challenges and COVID-19 impacts and demonstrate our strong operational execution. Following the holiday period through the end of the season.

Now I would like to turn the call over to Michael to further discuss our financial results, our fiscal 2022 outlook and the undermine transaction.

Thanks, Kirsten and good afternoon, everyone.

As Jim mentioned, we are pleased with our overall results for the quarter.

Saw continued strength in performance from January through the remainder of the ski season net.

Net income attributable to Vail resorts was $372 $6 million or $9 16 per diluted share for the third quarter of fiscal 2022 compared to net income.

Tribute volt to Vail resorts of $274 6 million.

$6 72 per diluted share in the prior year.

Resort reported EBITDA was $610 $5 million in the third quarter of fiscal 2022, an increase of $148 3 million or.

32, 1% compared to the same period in the prior year.

Increase was primarily due to the greater impact of COVID-19, and related limitations and restrictions on results in the prior year.

Now turning to our outlook for fiscal 2022.

Just on the strong finish to the season, particularly driven by destination guest visitation and lift ticket sales in Colorado, Utah, and Whistler Blackcomb, but exceeded our expectations. We now expect net income attributable to Vail resorts for fiscal 2022 to be between $314 million and 348.

And resort reported EBITDA for fiscal 2022 to be between $828 million and $842 million.

The guidance range includes an estimated $16 million of resort reported EBITDA for the seven springs resorts for the period from the transaction closing on December 31, 2021 through the end of the fiscal year, partially offset by $7 million of acquisition and integration related expenses associated with the seven springs.

<unk> transaction and the expected acquisition of <unk>.

Our balance sheet and liquidity position remains strong our total cash and revolver availability as of April 32022 was approximately $2 billion with $1 4 billion of cash on hand $417 million of U S revolver availability under the veil holdings credit agreement and $212 million of rigs.

All of our availability under the Whistler credit agreement.

As of April 32022, our net debt was one seven times trailing 12 months total reported EBITDA.

The company declared a quarterly cash dividend of $1 91 per share of Vail resorts common stock that will be payable on July 12 2022.

To shareholders of record as of June 27, 2022.

Additionally from the beginning of the company's third quarter of fiscal 2022 through June eight 2022, the company repurchased 303143 shares at an average price of $246 33.

For a total of approximately $74 $7 million.

We intend to maintain an opportunistic approach to share repurchases.

We will continue to be disciplined stewards of our capital and we remain committed to continuous investment in our people strategic high return capital projects strategic acquisition opportunities and returning capital to our shareholders through our quarterly dividend and share repurchase programs.

We were excited to share our announcement in March that we entered into an agreement to purchase a majority stake in <unk> in Switzerland.

The company's first strategic investment in and opportunity to operate a ski resort in Europe .

<unk> is a renowned destination ski resort in central Switzerland, located less than 90 minutes from Zurich, Lucerne and Lugano in approximately two hours from Milan, Italy.

Upon the closing of the acquisition the company will acquire a 55% ownership stake in <unk> drilling, which controls and operates all of the resorts mountain and ski related assets, including lifts most of the restaurants and the ski school operation.

Our partners Andre <unk> with <unk> Suisse.

We will retain a 40% ownership stake in <unk> with a group of existing shareholders comprising the remaining 5% ownership.

Importantly, all of Vail resorts 149 million Swiss franc investment will be reinvested in the resort and the base area.

110 million Swiss francs will be invested into Andre marks a dream for capital investments to enhance the guest experience on the mountain and 39 million Swiss francs will be paid to Esa and fully reinvested into the real estate developments in the base area.

Vail resorts will assume operating and marketing responsibility for <unk> syndrome, with ASI and local stakeholders continuing as key members of the board of directors.

The transaction is expected to close prior to the 2022 2023 ski season subject to certain certain third party consents Bell.

Bell resorts plans to include unlimited unrestricted access to under marks of drilling on the 2022 2023 epic pass.

Dave Householders with all resort access will be able to use any of their days at <unk> and epic local pass holders will receive five days have unrestricted access to the resort.

All pass access is subject to the timing of the transaction closing.

I'll now turn the call back over to Kirsten.

Thank you Michael following a rapid acceleration of growth in our advanced commitment strategy over the last two years that nearly doubled the number of guests in advanced commitment products.

We're very pleased with the results for our spring season pass sales to date with strong unit growth over the record pass sales results, we had last spring.

<unk> product sales through May 31, 2022 for the upcoming 2022 2023, North American ski season increased approximately 9% in units and approximately 11% in sales dollars as compared to the period in the prior year through June <unk> 2021.

<unk> product sales our adjusted to include pass sales for the seven Springs resorts in both periods until eliminate the impact of foreign currency by applying an exchange rate of 79 between the Canadian dollar and the U S. Dollar in both periods for Whistler Blackcomb pass sales.

Relative to season to date past product sales for the 2021 22 2022 season through June 1st 2021, we saw strong unit growth with our renewing pass holders are strongest unit growth was in our destination markets as travel continues to rebound following the impact.

From COVID-19, and we saw more moderated unit sales across our local markets where pass penetration is already higher.

Our epic day pass product continue to drive our strongest product growth as we attract lower frequency guests into advanced commitment products as first time pass holders.

And with the 2000 2003 to 2023 launch of our new tariff products with access to select regional and local resorts.

Pass sales dollars are benefiting from the seven 5% price increase relative to the 2021 'twenty two 'twenty two season, largely offset by the impact of the growth of epic day pass product, including our new lower priced epic day pass offering.

Following the strong trade up results last year. We are pleased that we have achieved neutral net migration among renewing pass holders in our spring pass sales.

It is important to highlight that our goal and largest opportunity is to bring low frequency guests and guests that visit resorts with lower price lift ticket into advanced commitment products.

These lower frequency guests are more likely to purchase epic day pass product, which has driven significant advance commitment growth over the last seven years.

Given that epic day pass products provide fewer days the per unit price of these products is lower than our unlimited epic and epic local products and the strong growth in epic day pass products results in a reduction in the blended effective pass price.

That said the per day effective price of Epic day pass remains attractive for the company and delivers the long term guests lifetime value benefits associated with moving lower frequency guests into our advanced commitment products.

As part of this strategy, we are focused on continuing to offer pass products with access across our resort network of resorts, including our lower priced resorts to continue bringing more guests into our advanced commitment products.

And ultimately to achieve our vision of securing commitments for 75% or more of our lift revenue before each season begins.

We have the majority of our past selling season ahead of us and.

And as more guests purchase passes in the spring we believe the full year unit and sales growth rate will be lower than our spring growth rate. We will provide more information about our pass sales results in our September 2022 earnings release.

We are very pleased with ongoing sales of the epic Australia pass, which end on June 15th 2022 unit sales are up approximately 28% through May 31, 2022 relative to the comparable period through June one 2021, as we continue to bear.

<unk> from the acquisition of Falls Creek and have them in 2019.

It is important to highlight that the continued growth of our pass sales create significant stability for our business and validates the compelling network of resorts guest experience and value that our advanced commitment products provide for our guests.

This past season, approximately 72% of all Vail resorts 2021, 2022, North American skier visitation was on a path product, excluding employee and complementary visitation, which compares to approximately 60% and approximately 50.

1% for the 2018, 2019, and 2014 2015, North American ski seasons, respectively.

Creating stability through the company through variable weather travel patterns and other challenges.

Our advanced commitment products provide our guests with a compelling alternative to in season less ticket products.

That results in guests, making a product choice.

And does not result in significant increases in visitation or crowding.

We continue to find that pass holders tend to spread their visitation more across the season and into periods with significant excess capacity.

We are very pleased that the growth in our visitation. This season, primarily occurred during off peak periods.

For the season to date period ended April 32022, compared to the season to date period ended may five 2019 visitation on weekday and non holiday period increased approximately 8%, while visitation on weekend and holiday periods decreased approximately.

<unk>, 3%, excluding peak resorts visitation in both periods.

With the increase in flexible and remote work, we expect this trend to continue.

Further the growth in non peak periods was broad based across our resorts.

<unk> the growth in overall visits this past season very few of our resorts even approach their historical maximum daily visitation as our resorts averaged only one day this season exceeding 95% of their historical peak daily visitation.

And only six resorts had more than one day above that level, excluding the recently acquired seven springs resorts.

All of this highlights that there is considerable opportunity to continue to grow the overall industry and skier visits outside of peak periods.

And that it is critical that we continue to invest in people and infrastructure to continue to improve the employee and guest experience throughout the season.

This growth in our business and in the industry is encouraging and we remain committed to consistently reinvesting in our people and our resorts in order to ensure we continue to deliver our company mission of an experience of a lifetime.

As we turn our attention to the 2022 2023 ski season and beyond the company is making its largest ever investment in both its employees.

And the capacity of our resorts.

Our employees are the core of Vail resorts mission to create an experience of a lifetime.

We cannot create an experience of a lifetime for our guests without first creating an experience of a lifetime for our employees.

Year round and seasonal hourly and salaried at our mountain resorts and in corporate.

As a result, we have announced announced an incremental annual $175 million investment in our employees.

The investment includes increasing the minimum hourly wage offered $20 per hour across all 37 of our North American resorts for all U S employees.

And 'twenty Canadian dollars per hour for all Canadian employees and increases for hourly employees with adjustments for leadership and career stage differentials.

The investment also includes $21 per hour minimum for patrol maintenance technicians and certified commercial drivers all roles that have specific experiences or certification is a prerequisite.

Tipped employees will be guaranteed a minimum of $20 per hour.

The wage investment represents an average wage increase of nearly 30% across hourly employees in North America.

Additionally, the company will be launching a new seasonal frontline leadership development program with the goal of supporting our seasonal frontline team members leadership develop development and ability to build a career at Vail resorts.

The company will be assessing targeted increases beyond inflation for our salaried employees and we will be making a significant investment in our human resources department to ensure the right level of employee support development and recruiting.

We believe talent is our most important asset and our employees are our strategic priority at all levels of the company.

Our employee investments are intended to help us achieve normal staffing levels that in turn deliver an outstanding guest experience.

Additional information on the employee investments and anticipated financial impacts are available in our March 2022, investor presentation available R&R on our Investor Relations website.

In addition, Vail resorts has made a commitment to affordable housing and our mountain communities.

Affordable housing is a national and a mountain community crisis.

As previously announced we are investing in four projects to provide accessible and affordable housing for our employees at Park City Mountain in Utah Whistler Blackcomb in British Columbia, Vail Mountain in Colorado, and Okemo Mountain resort in Vermont collectively the four investments would provide new affordable.

Housing to more than 875, Vail resorts employees, marking a more than 10% increase in affordable employee housing offered by the company.

Crossover resort.

We believe it is time for us and our communities to make affordable housing a top priority and accelerate the processes to ensure we bring these affordable housing opportunities to fruition.

We remain dedicated to delivering an exceptional guest experience and we will continue to prioritize reinvesting in the experience at our resorts.

We are committed to consistently increasing capacity through lift to rain and food and beverage expansion projects and are making a significant onetime incremental investment this year to accelerate that strategy with our ambitious capital investment plan for calendar 2022 of approximately 300 <unk>.

$15 million to $325 million across our resorts, excluding one time investments related to integration activities employee housing development projects and real estate related projects.

Plan includes approximately $180 million for the installation of 21, new or replacement lift across 14 of our resorts.

And a transformational lift serve terrain expansion at Keystone.

In addition to the two brand new lift configurations at Vail and Keystone the replacement lift will collectively increase lift capacity at those lift locations by more than 45%.

Projects in the plan are subject to regulatory approvals and assuming timely approvals are currently expected to be completed in time for the 2022 2023, North American winter season.

The core capital plan is approximately $150 million above our typical annual capital plan based on inflation and previous additions for acquisitions with.

We plan to spend approximately $9 million on integration activities related to the recent recently acquired Southern Springs resorts.

Including one time investments related to integration activities and $3 million dollars associated with real estate related projects. Our total capital plan is expected to be approximately $327 million to $337 million.

Including our calendar year 2022 capital plan Vail resorts will have invested over $2 billion in capital since launching the epic pass.

Increasing capacity.

Improving the guest experience and creating an integrated resort network.

In addition to this year's significant capacity expanding investments planning is already underway for our calendar year 2023 capital plan and we are pleased to announce the first projects from that plan with additional calendar year, 2023 investments and upgrades to be announced in the upcoming.

Coming quarters.

At Breckenridge, we plan to upgrade the PK based area to enhance the beginner and children experienced an increase uphill capacity from this popular based area.

The investment plan will include a new four person high speed five chair to.

To replace the existing two person fixed grip grip lift and will include significant improvements, including new teaching train and a transport carpet from the base to make the beginner experience more accessible.

At Stevens pass we are planning to replace the two person fixed grip cares chair lift with a new four person lift.

Which will improve out of base capacity and guest experience.

And out of cash we plan to replace the three person fixed script summit triple lift with a new four person high speed lift.

Increasing uphill capacity and reducing guest time on the longest lift at the resort.

These lift projects are subject to regulatory approvals and are currently expected to be completed in time for the 2023 2024, North American winter season.

In closing we are thrilled to see the continued loyalty of our guests and the value proposition they see in our past products.

Our advanced commitment strategy is core to the long term growth and sustainability of our business and.

And our focus on continuing to invest in the guest experience and our employees could deliver that experience day in and day out.

With the North American ski season, coming to an end I would like to thank our employees that work so hard to deliver a great season, even amid challenges.

While this certainly has been a challenging season I have never felt more confident in the foundation of who we are R.

Our values.

Our mission and our path forward.

At this time, Michael and I will be happy to answer your questions.

Operator, we are ready for your questions.

Thank you if you would like to signal with questions. Please press star.

One on your Touchtone telephone.

If you are joining us today as a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Please limit yourself to one question and one follow up question.

Once again, please press star one if you would like to signal with questions Star one.

Our first question will come from Shaun Kelley with Bank of America.

Yeah.

Hi, good afternoon, everyone.

Christian Thank you for all the prepared remarks I just wanted to start with one of the comments that you made around sort of your expectations for pass sales going forward. So you hinted that your expectation is currently.

Pass sales growth relative to what was delivered here.

Should slow as the season progresses, I mean, historically, you've also I think talked.

<unk> talked pretty conservatively about that same thing, but there were some deadline changes this year and a few other things that maybe were tweets. So could you talk a little bit about.

Pros and cons as we move through the summer in terms of the offerings again, I think the specifically the Buddy pass deadline and the price increase for both taken a little earlier than they have in the past. So maybe just walk us through a couple of the puts and takes versus that on the one side versus maybe the fact that you do have tougher comps.

As the sales period progresses.

Yeah, Hi, Sean. Thank you for the question just overall feel very good about our spring pass sales and the underlying dynamics with the unit growth up 9% after plus 50% last spring.

I also feel very good that we have strong growth with our renewing pass holders and in destination markets.

We did take a price increase in memorial day, and the purpose of that increase is really to keep up with inflation and we have strong underlying business results that supported.

Taking that action if you think about what happened last year with the price reset that was essentially a strong call to action in and of itself and based on our own research. We know that many of our guests thought it was temporary and really jumped in early to get their path.

So when you think about the comparable the price increase call to action. This year on memorial day in some ways balances out that call to action.

I do think though that.

As you would expect we did pull forward some pass holders and as a result, we would expect that our growth rate in the fall.

On a full year basis to be lower than the growth rate that we experienced in spring.

And I guess as my follow up is is it possible you just given where we are with dollars and the magnitude of the price increase to the up 11 versus kind of a blended average product increase of around seven five.

It seems possible that the unit number.

In terms of number of units you sell could actually go a little bit negative would that be concerning to you in and of itself and sort of what would you. What would you think about what are the trade offs around that relative to kind of be.

Clearly the long term objective, which is to just continue to grow the program and it's relevant.

So obviously last year was a big year for us.

And it exceeded our expectation so certainly agree and understand what youre raising about.

The comparable in terms of lapping that I think the early indications that I'm seeing in spring is really all that I can comment on right now which is that the fundamental dynamics of the business.

Our very strong and we.

Do you think the growth rate will moderate, but not going to comment on projecting whether or not we expect it to decline.

Thank you very much.

And our next question will come from Chris <unk> with Deutsche Bank.

Hey, good afternoon everybody.

The first question is on the on the employee housing investment.

Don't know if you've put a lot of dollars around that could you kind of maybe give us.

Some thoughts on how much of that is going to be kind of a.

Capex related investment versus how much is kind of operational in the next couple of years.

Yes, Chris Thanks for the question.

It's a mix of capital and Opex in.

In certain circumstances will actually enter into employee housing master leases.

So as an example of that.

At the base of canyons, the Big Park City project that.

We entered into is actually a master lease from a development that's taking place there and so we're taking a significant portion of the beds. There in the form of a master lease.

In those circumstances Atwood.

Come through as an expense and then in certain circumstances, we actually will develop a project. So an example of that would be the project in Vale that we're planning to actually develop and put our own capital behind that.

Anticipate that at least the $17 million project.

Okay.

Thanks, Michael and then second question.

Shifting gears, a little bit you guys have obviously done a terrific job of getting.

Advanced commitment from from lift tickets overtime is there any thought to kind of exploring that on the on the ancillary side, maybe on getting getting people to commit to a certain level of.

Sweet and beverage and maybe giving them a slightly bigger discount than what they're already getting.

Any thoughts of that as kind of a walk in even more of the ancillary stuff.

Thanks, Chris I am right now our pass holders as we move to a subscription model do get a discount on our ancillary businesses, while we have not.

Made any announcement on anything else related to ancillary as a subscription model I think it's certainly an idea that we would consider but no immediate plans to do that.

Okay very good thanks.

Thank you and our next question will come from Lauren basketball rescue with BNP Paribas.

Good afternoon. Thank you very much for taking my question and congrats on the strong results I wanted to follow up on Andrew Marc.

I know it doesn't really move the P&L needle right now, but curious to get your thoughts. If this is very much a strategic acquisition, meaning as an amount at the beginning of a M&A chapter in Europe .

And if so what kind of mountain profiles would you look for and would you target a specific mountain range, whether it's the Alps, repairing aged or another mountain range within Europe .

Thanks, Laurent I think Michael and I can probably tackle different parts of this question I think in terms of strategy yes.

We do view undermined.

Much of a strategic acquisition and as we have talked about our investors conference for many years that we aspire to.

Acquire resorts in Europe , as well as Asia, we are unbelievably thrilled to have the first European acquisition and do view that it is a strategy for us to expand.

But slowly and we have a lot to learn.

And a lot to do to actually ever get to the point, where we have a network of resorts in Europe and our first step is undermined and we're we're very excited about it I'll turn it over to Michael to answer a portion of that question as well.

Yes, Thanks Laura.

And I was curious since Ed we're just thrilled with the opportunity to partner with with assay in the Suez family, who have really done an incredible job with the community.

<unk> and so driven of building, what we think could be could become one of the premier destination resorts and <unk>.

Europe really remarkable high alpine experience two great villages that are connected across almost 10 miles a drain.

Kind of just.

Incredible both ski and and travel experience and so we think that one of the.

We've got a great foundation to work from Great partners and a great community to become a part of.

And just curious since that's really going to take our time to make sure that we learn and integrate into the.

The community there I think that.

One of the things that was most attractive to us and I think a great area of alignment for us with our partners because we're taking a majority stake at 55%, but not a whole acquisition and that was really important to us because we have great partners, who were really aligned with our ability to invest the proceeds.

From the transaction back into the resort and the base area as I described in her comments and so we think thats really going to be a great foundation for growth because we're going to be quite.

Quite ambitious and reinvesting in the resort itself and.

Yes, we think that there'll be a great start to our platform in Europe , but really very focused on being successful with on demand.

As an important first step.

That's great to hear and then Michael I know, you're not guiding for FY 'twenty three today, but I wanted to quickly follow up on the March Investor Day slides I think slide 62 shows an illustrative case, unless you're a floor of 30% resort EBITDA margin after considering the $175 million of labor.

<unk> Michael is that still the right way to think about this illustrious case study or are there any other factors to consider in the three months later.

Yes, I think.

We're not providing anything additional to what we provided.

Back in March at the Investor meeting, we certainly.

I wanted to highlight that that went along with the $175 million investment in.

And our people, which is a critical step as curious and described in terms of the future success of our business and our people really are so core to everything that we do as a company and offsetting that investment.

Yes, there are some some tailwind so we expect to have next year, largely resulting from as we described the challenging early season.

This year.

Kind of a return to normal conditions Whistler, Blackcomb, which was was quite impacted until the spring by Covid.

Australia, Similarly quite impacted in Q1.

As well as the opportunity when we do return to normal staffing to have before.

Capacity of our ancillary businesses and so we're not providing any updated information, but certainly those those trends.

<unk> are still the ones that we would call out.

Very helpful. Thank you very much.

And our next question today will come from.

Jeff.

Stifel.

Hey, good afternoon curious if Michael thanks for taking our questions.

Youre starting off obviously, a hot topic. These days is going to be the state of the consumer and any early data points, suggesting softness really more towards the low income than just curious is there anything in your data that would suggest any early warning signs for your business.

And the answer is no and if so just generally what would be the Canary in the coal mine here is it lodging bookings as a trade down that path types. Just just curious what you guys monitor internally most closely for signs of softness.

Thanks Steph.

Our consumer demand trends are looking very positive right now, but obviously, we need to continue to monitor that closely given.

Changing macro economy. The positive signs are obviously our pass sales results for spring are strong.

We do do research among our own gas and their intent to ski as of now is looking very strong.

And you know I would say that there is a lot of.

Uncertainty with the economy right now I do think important to note that when you look back to.

The prior recession time period, our company is in a much more stable position today than it was then to navigate it we have 40 resorts across three countries with.

With a combination now of drive to and fly to destination advanced commitment is has increased from 26% of lift revenue in fiscal 2008% to 62% expected this year.

And our advanced commitment products are arguably the best value and skiing. So in terms of is the company in a good position to navigate this I think there's a lot of strong indicators there the travel demand.

Indicators are strong, but we need to continue to monitor them in terms of what we look at yes, we look at past sales we look at bookings.

And we constantly engage with our own gas via research to understand what their intent is to ski and to visit and to travel overall, so we'll be monitoring those closely.

Very helpful. Thank you and then just on the dynamic pricing.

You guys are doing this year with passes so the memorial day deadline, it looks like you've hiked about 2% historically from early bird pricing to end of selling season. The gap. There is typically about low to mid teens percentage change is it fair to kind of think about that as a baseline.

Kind of added annualized CPI, and that's kind of reasonable benchmark to think about where we can go from here or kind of how should we think about that.

The price hikes, both in terms of final magnitude and as well as how dynamic do you intend to remain should we expect the rest of the selling season to follow historical.

Cadence or should we expect more dynamic price taking thanks.

Well as you can imagine I'm not going to comment on forward pricing decisions, what I will say, though is the way to think about the decisions. We've made thus far which is we started the pass selling cycle with a seven and a half price increase with the goal of.

Yes pricing with inflation.

And looking at the Memorial day, and we said at that time that we would use price.

We continue to use price as a lever but also continue.

Continue to keep track with inflation, what you see in Memorial day, as we took an additional price increase to keep up with inflation also we saw strong business results.

And I would say going forward pricing continues to be a lever on this business, our lift ticket and all aspects of our ancillary businesses.

We look at our data we look at demand we look at what's going on in the macro economy, and then we make our pricing decisions, but can't guide to what those pricing decisions will be but at least give you that context on how we thought about it thus far.

Understood very helpful. Thank you I'll pass it on.

And our next phone question will.

Our next question will come from Patrick Scholes with <unk> Securities.

Yes, good afternoon, everyone.

A question for you on the past prices.

Seem to me that.

You're moving up that passed price increase deadline.

Would be a pretty material effect.

Mover to the impact on sales and I know in the past.

With such things you have called out.

Clearly in press releases, where there have been.

Year over year comparisons, making results, perhaps not as comparable as one might say I'm curious why you did not include that.

In this press release at this time.

<unk>.

Sorry, Patrick can you clarify your question.

Yes.

It would just seem that moving up the past deadline by three months would really help.

The past price increase would help really given those bumped to sales and I didn't see any mention of that in there where in the past you have noted.

When things have maybe not been completely comparable I'm just curious why you would mention.

You mentioned that would I would think it's a material fact that the past price deadline was moved up by three months.

But that deadline.

This increase.

So what we from a business context perspective, what we did share.

When we launched passes is and in the investors conference is that we would continue to SaaS.

When and how much price increases we take on the business and that we have always believed that price is a lever even in the context of the price reset that we did last year.

<unk> priced right out of the launch keeping up with inflation and then we took a price increase memorial day also to keep up with inflation.

I think when you think about the lapping factors, we have a unique dynamic last year in the spring, where we announced a 20% price reset.

And what was interesting about that Patrick is that.

The announcement was almost so good and so surprising that a lot of our gas.

Actually thought it was temporary they didn't fully understand that it was a true reset of our business based on price elasticity and the data we had.

So we saw that a lot of our guests thought it was temporary and thought that it was going to go away and so they jumped in early to get their passes in spring. So in some ways. When you think about the comparable.

A call to action this year versus last year balances out to some extent as we had a price increase that's memorial day is a call to action as well.

Okay.

We'll leave it at that thank you.

And moving onto Omer Sander with J P. Morgan.

Hi, everyone. Thanks for taking my question.

Or is it the pass sales for next season encouraging that units are up nicely. What are you seeing at the high and low end of your passes are you seeing a trade down in passes versus last year or is it just a mix shift towards day passes maybe some of both and is there any color on retention that you can give across.

Your multiyear pass holders versus new pacifiers.

Yeah, absolutely. So as you noted I mean units were quite strong up 9% our sales dollars increased 11%. So we had a seven 5% price increase.

Which was largely offset by the impact of growth of epic day pass products and I'll share a little bit more context on that in terms of trade up trade down.

We're really pleased to achieve neutral net migration among renewing pass holders and the way to think about that just to re anchor to the Investor Conference and that migration is the difference in the percent of renewing pass filters that trade up versus the percent of pass holders that trade down within our portfolio.

Past products last year, our net migration was up dramatically.

As our guests spent the discount on higher level passes and more access.

So this year to be able to maintain that and that Mike migration neutral. We are very pleased to see that dynamic now when net neutral unit migration usually involves some level of degradation of the effect of past price because we have so many people and epic pass and epic local or sorry.

Epic pass them, there's really nowhere to upgrade from there.

The primary driver overall, though of the effective pass price.

Is the growing portion of epic day pass so there's two pieces to that we have more epic day pass in the renewals from last year.

And we have brought in new people.

Into the lower frequency products as we convert gas that are lower frequency lift ticket skiers guests from our lower priced resorts into advanced commitment and that usually happens through epic day pass, which does have a mixed impact on our effective pass price.

And I just want to clarify for everyone on the call that.

Our ultimate vision is that 75% or more of our lift revenue is committed before each season begins so we view the growth in epic day pass pass as a real positive.

And believe that it delivers the long term guests lifetime value benefits associated with our strategy of advanced commitment.

Awesome. Thank you that's helpful. And then maybe just one follow up commentary around units and sales in future months slower than the spring is that sort of consistent with what you've seen historically is there anything specifically driving that commentary obviously.

Small window since June <unk>.

Or is it sort of just maybe a little bit of conservatism in there and then just lastly, as a follow up to that can you just remind us what percentage of pass sales you typically have on the books for next season at this point in the spring.

So related to spring versus fall in our full year expectations I think it's important to remember two things that impact. The dynamic one is the majority of the selling period for path is still to come. So we're very early in the selling cycle and number two is ever.

A year.

We focus on pulling people forward. So not only are we actively trying to encourage people to commit before the season starts but we're also trying to encourage people to buy even earlier buying in the spring before the season starts so both of those dynamics impact the.

The comments that we have about what we expect in the fall on our and on our full year growth rates and then in terms of percent of passes on the books.

Wont comment on that.

Thank you.

Thanks.

And moving on to <unk> <unk> with Jefferies.

Good evening guys congrats on the quarter.

Looks like we're making progress with revenue advancements with the goal of being 75% can you maybe discuss like whats driving resolved reconnecting with guests that maybe you havent shown up as people recognizing the value proposition.

Just the collection of assets or anything else.

Yeah, I think that the results that we're seeing this spring are driven by <unk>.

Three things one is the <unk>.

Strategic level, the compelling resort network that we have incredible resort.

Second is the guest experience that we provided especially post holidays post the challenges of OMA crime and the low snow once we got through that time period, we delivered a very strong guest experience.

And then third is the value proposition for guests.

So.

We are.

Asking lift ticket gas to make a commitment that is nonrefundable before the season starts that's a pretty big commitment to make.

And that value proposition and the price point that we're offering in exchange for that behavior is very at least as the early indicators would show based on our results last year and our spring result, but that is a very compelling proposition for our renewing pass holders.

And then also as we acquire new pass holders, whether those new pass holders are moving from Alif ticket last year or they used to be a pass holder or they used to be a lift ticket hold or they are brand new to our network of resorts.

I appreciate it and then also.

Just given some.

Travel prices and what seems to be headaches is there anything maybe expectation for how regional versus destination places may perform maybe some people aren't going to fly or whatever the case may be.

I mean right now in terms of I'm, assuming you're asking that question. The context of next winter and next season four.

For our resorts yeah.

All I can really share is what I shared earlier, which is.

The trends that we are seeing right now look positive.

That said there is a lot of uncertainty in terms of the economy and impacts on consumers and guests and we plan to monitor that closely and adjust as needed.

Right now the demand the positive demand that we see is our pass holders and the 9% unit growth on top of the almost 50% growth last year as well as other indicators in terms of guest research an intent to travel, but yeah fully don't.

We don't intend to just.

Anchor to that we then tend to monitor it and adjust as needed.

Understood. Thank you.

And we'll go to Ryan Sundby with William Blair.

Sure Hey, Chris Hey, Michael Thanks for the question.

As I'm starting to see if you can get ready to ramp up here. It sounds like it has also been strong could you maybe talk a little bit about where things stand there in terms of operating restrictions and I guess, if youre seeing that similar tight labor market as well and then just.

As my follow up.

Awesome and Fox Creek closed back in 2019, but with Covid, it's been hard to get a read on how the integration has gone there and what kind of synergies you've been able to capture can you just maybe give an update on those two mountains and if youre seeing starting to see any network benefit.

I was there in terms of what stands out versus just having parachute.

Staying with them.

Sure. Thanks, Thanks, Brian I think.

Yes, a couple of things on Australia, one were.

Really excited to have all three resorts open.

As of.

As of this week actually.

With some good early season snow. So that's always a good start as we noted.

In the release as well we've had very very strong pass sales results.

From our Australian gas as we headed into the season and so.

Australia has had quite significant COVID-19 restrictions and so as those have opened up which are largely loosened at this point.

The outlook for Australia is quite strong barring any changes in that so we feel I feel very good heading into.

Into the season with all three resorts.

Yes, Im very grateful for the efforts of the team down there who have done a phenomenal job.

And curious if you want to take the second piece on the network.

Yes.

Oh I was going to address the I think you had a question on labor as well.

But regarding that network effect, yes, and we have definitely seen the benefits and the impact of <unk>.

Having a network of resorts in Australia, and the connection that have to our North American resorts and I think it's on a much bigger scale than the network effects that we see by owning local and regional resort.

In the United States, and so that strategy, we absolutely believe is highly successful.

In terms of labor and the labor market and what we're seeing there I would say.

Too early to tell for winter season, given its June right now we are staffing up for our summer operations and certainly feeling good about tracking to normal staffing for summer as we think ahead to winter I think the investment we're making in our employees.

Is absolutely essential to our success.

It is that that team that is critical to delivering the guest experience and then that.

That drives the advanced commitment and the loyalty and then enables us to reinvest back in our business expand our network and deliver returns to investors. So.

Very much excited about the investment we're making in our employees our team members and believes that that is the right approach for us going forward.

Thank you and that does conclude the question and answer session I will now turn the conference back over to Mr. <unk>.

Thank you operator this concludes our fiscal 2022.

Third quarter earnings call. Thanks to everyone, who joined US today feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon and goodbye.

Thank you that does conclude today's conference. We do thank you for your participation and have an excellent day.

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Good day and welcome to the Vail Resorts third quarter earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Lynch Chief Executive Officer. Please go ahead.

Thank you good afternoon, everyone welcome to our fiscal 2022 third quarter earnings Conference call.

Joining me on the call. This afternoon is Michael Barkin, our Chief Financial Officer.

Before we begin let me remind you that some information provided during this call may include forward looking statements that are based on certain assumptions and.

And are subject to a number of risks and uncertainties as described in our SEC filings and actual future results may vary materially.

Days remarks also include certain non-GAAP financial measures reconciliations of these measures are provided in the tables included with our press release.

Along with our quarterly report on Form 10-Q were filed this afternoon with the SEC and are also available on the Investor Relations section of our website at Www Dot Vail resorts Dot com.

Let's turn to our fiscal 2022 third quarter results. We are pleased with our overall results for the quarter and for the 2021 2022, North American ski season.

This year challenging early season conditions persisted through the holiday period, but our results were strong from January through the remainder of the season.

Our strong season pass.

Sales heading into the 2021 2022 season are the foundation of our advanced commitment strategy, creating stability for the company through variable weather and other challenges.

We had particularly strong destination visitation this year, which was further supported by lift ticket sales at our Colorado, and Utah resorts that exceeded our expectations through the spring.

Our recent results at Whistler Blackcomb were also stronger than expected due to the easing of travel restrictions in Canada in late February .

The season, our ancillary businesses continued to be capacity constrained by staffing and in the case of dining by operational restrictions associated with COVID-19.

Overall, our results throughout the 2021 2022, North American ski season highlight the stability, resulting from our advanced commitment past products and a season with challenging early season conditions staffing challenges and COVID-19 impacts and demonstrate our strong operational.

Execution following the holiday period through the end of the season.

Now I would like to turn the call over to Michael to further discuss our financial results, our fiscal 2022 outlook and the undermine transaction.

Thanks, Kirsten and good afternoon, everyone.

As Jim mentioned, we are pleased with our overall results for the quarter.

<unk> continued strength in performance from January through the remainder of the ski season net.

Net income attributable to Vail resorts was $372 $6 million or $9 16 per diluted share for the third quarter of fiscal 2022 compared to net income.

Tribute Volta Vail resorts of $274 6 million or $6 72 per diluted share in the prior year.

Resort reported EBITDA was $610 $5 million in the third quarter of fiscal 2022, an increase of $148 3 million or 32, 1% compared to the same period in the prior year.

This increase was primarily due to the greater impact of COVID-19, and related limitations and restrictions on results in the prior year.

Now turning to our outlook for fiscal 2022.

Based on the strong finish to the season, particularly driven by destination guest visitation and lift ticket sales in Colorado, Utah, and Whistler Blackcomb that exceeded our expectations. We now expect net income attributable to Vail resorts for fiscal 2022 to be between $314 million and 340.

$8 million and resort reported EBITDA for fiscal 2022 to be between $828 million and $842 million.

Resorts transaction and the expected acquisition of <unk>.

Our balance sheet and liquidity position remains strong our total cash and revolver availability as of April 32022 was approximately $2 billion.

With $1 4 billion of cash on hand, $417 million of U S revolver availability under the Veil holdings credit agreement and $212 million of revolver availability under the Whistler credit agreement.

As of April 32022, our net debt was one seven times trailing 12 months total reported EBITDA.

The company declared a quarterly cash dividend of $1 91 per share of Vail resorts common stock that will be payable on July 12 2022.

To shareholders of record as of June 27, 2022.

Additionally from the beginning of the company's third quarter of fiscal 2022 through June eight 2022, the company repurchased 303143 shares at an average price of $246 33.

For a total of approximately $74 $7 million.

We intend to maintain an opportunistic approach to share repurchases.

We were excited to share our announcement in March that we entered into an agreement to purchase a majority stake in <unk> in Switzerland.

The Companys first strategic investment in and opportunity to operate a ski resort in Europe .

<unk> is a renowned destinations D resort in central Switzerland, located less than 90 minutes from Zurich, Lucerne and Lugano in approximately two hours from Milan, Italy.

Upon the closing of the acquisition the company will acquire a 55% ownership stake in <unk>, which controls and operates all of the resorts mountain and ski related assets, including list most of the restaurants and the <unk> operation.

Our partners <unk> switch Andre <unk> with <unk>.

We will retain a 40% ownership stake in on remarks a dream.

A group of existing shareholders, comprising the remaining 5% ownership.

Importantly, all of Vail resorts 149 million Swiss franc investment will be reinvested in the resort and the base area one.

110 million Swiss francs will be invested into <unk> dream for capital investments to enhance the guest experience on the mountain and 39 million Swiss francs will be paid to assay and fully reinvested into the real estate developments in the base area.

Vail resorts will assume operating and marketing responsibility for <unk> syndrome, with ASI and local stakeholders continuing as key members of the board of directors.

The transaction is expected to close prior to the 2022 2023 ski season subject to certain certain third party consents.

Vail resorts plans to include unlimited unrestricted access to under marks are driven on the 2022 2023 epic pass.

Dave Householders with all resort access will be able to use any of their days at <unk> and epic local pass holders will receive five days have unrestricted access to the resort.

All pass access is subject to the timing of the transaction closing.

I'll now turn the call back over to Jason.

Thank you Michael following a rapid acceleration of growth in our advanced commitment strategy over the last two years that nearly doubled the number of guests in advanced commitment products. We are very pleased with the results for our spring season pass sales to date with strong unit growth over the record pass sales result.

<unk>, we had last spring.

<unk> product sales through May 31, 2022 for the upcoming 2022 2023, North American ski season increased approximately 9% in units and.

And approximately 11% in sales dollars as compared to the period in the prior year through June <unk> 2021.

Relative to season to date past product sales for the <unk> 2021 'twenty two 2022 season through June <unk> 2021, we saw strong unit growth with our renewing pass holders are strongest unit growth was in our destination markets as travel continues to rebound following the <unk>.

<unk> from COVID-19, and we saw more moderated unit sales across our local markets. We're past penetration is already higher.

Our epic day pass product continue to drive our strongest product growth as we attract lower frequency guests into advanced commitment products as first time pass holders and with the 2000 2003 to 2023 launch of our new tier of products with access to select regional and local resorts.

Pass sales dollars are benefiting from the $7, 5% price increase relative to the 2021 2022 season, largely offset by the impact of the growth of epic day pass product, including our new lower priced epic day pass offering.

Following the strong tradeoff results last year, we are pleased that we achieved neutral net migration among renewing pass holders in our spring pass sales. It is important to highlight that our goal and largest opportunity is to bring low frequency guests and guests that visit.

<unk> with lower price lift ticket into advanced commitment products.

These lower frequency guests are more likely to purchase epic day pass product, which has driven significant advance commitment growth over the last seven years.

That said the <unk>.

Per day effective price of Epic day pass remains attractive for the company and delivers the long term guests lifetime value benefit associated with moving lower frequency guests into our advanced commitment products.

5% or more of our lift revenue before each season begins.

We have the majority of our past selling season ahead of us.

<unk> from the acquisition of Falls Creek and have them in 2019.

It is important to highlight that the continued growth of our pass sales create significant stability for our business and validates the compelling network of resorts.

<unk> experience and value that our advanced commitment products provide for our guests.

This past season, approximately 72% of all Vail resorts 2021, 2022, North American skier visitation was on a path product, excluding employee and complementary visitation, which.

Which compares to approximately 60% and approximately 51% for the <unk>.

2018, 2019, and 2014 2015, North American ski seasons, respectively.

<unk> stability through the company through variable weather travel patterns and other challenges.

Our advanced commitment products provide our guests with a compelling alternative to in season lift ticket products.

That results in guests, making a product choice.

And does not result in significant increases in visitation or crowding.

We continue to find that pass holders tend to spread their visitation more across the season and into periods with significant excess capacity.

We are very pleased that the growth in our visitation the season, primarily occurred during off peak period.

For the season to date period ended April 32022, compared to the season to date period ended may five 2019.

As a patient on weekday and non holiday period increased approximately 8%, while visitation on weekend and holiday periods decreased approximately 3% excluding peak resorts visitation in both periods.

With the increase in flexible and remote work, we expect this trend to continue.

Further the growth in non peak periods was broad based across our resorts.

<unk> the growth in overall visits this past season very few of our resorts even approached their historical maximum daily visitation as our resorts averaged only one day this season exceeding 95% of their historical peak daily visitation.

And only six resorts.

Had more than one day above that level.

<unk> the recently acquired seven Springs resorts.

All of this highlights that there is considerable opportunity to continue to grow the overall industry and skier visits outside of peak periods.

And that it is critical that we continue to invest in people and infrastructure to continue to improve the employee and guest experience throughout the season.

As we turn our attention to the 2022 2023 ski season and beyond the company is making its largest ever investment in both its employees.

And the capacity of our resorts.

Our employees are the core of Vail resorts mission to create an experience of a lifetime.

We cannot create an experience of a lifetime for our guests without first creating an experience of a lifetime for our employees.

Year round and seasonal hourly and salaried at our mountain resorts and in corporate.

As a result, we have announced announced an incremental annual $175 million investment in our employees.

<unk> includes increasing the minimum hourly wage offered $20 per hour across all 37 of our North American resorts for all U S employees.

And 'twenty Canadian dollars per hour for all Canadian employees and increases for hourly employees with adjustments for leadership and career stage differential.

The investment also includes $21 per hour minimum for patrol maintenance technicians and certified commercial drivers all roles that have specific experiences our certification is a prerequisite.

Tipped employees will be guaranteed a minimum of $20 per hour.

The wage investment represents an average wage increase of nearly 30% across hourly employees in North America.

We believe talent is our most important asset and our employees are our strategic priority at all levels of the company.

Our employee investments are intended to help us achieve normal staffing levels that in turn deliver.

Outstanding guest experience.

Additional information on the employee investments and anticipated financial impacts are available in our March 2022, investor presentation available R&R on our Investor Relations website.

In addition, Vail resorts has made a commitment to affordable housing and our mountain communities.

Affordable housing is a national and a mountain community crisis as.

As previously announced we are investing in four projects to provide accessible and affordable housing for our employees at Park City Mountain in Utah Whistler Blackcomb in British Columbia, Vail Mountain in Colorado, and El Chemo Mountain resort in Vermont collectively the four investments would provide new affordable.

Housing to more than 875, Vail resorts employees, marking a more than 10% increase in affordable employee housing offered by the company.

<unk> resort.

We believe it is time for us and our communities to make affordable housing a top priority and accelerate the processes to ensure we bring these affordable housing opportunities to fruition.

We remain dedicated to delivering an exceptional guest experience and we will continue to prioritize reinvesting in the experience at our resorts.

<unk> million dollars to $325 million across our resorts, excluding one time investments related to integration activities employee housing development projects and real estate related projects.

Plan includes approximately $180 million for the installation of 21, new or replacement lift across 14 of our resorts.

And a transformational lift serve terrain expansion at Keystone.

In addition to the two brand new lift configurations that balan Keystone the replacement lift will collectively increase lift capacity at those lift locations by more than 45%.

Projects in the plan are subject to regulatory approval and assuming timely approvals are currently expected to be completed in time for the 2022 2023, North American winter season.

The core capital plan is approximately $150 million above our typical annual capital plan based on inflation and previous additions per acquisition with.

We plan to spend approximately $9 million on integration activities related to the recent <unk>.

<unk> acquired seven Springs resorts.

Including one time investments related to integration activities and 3 million.

Dollars associated with real estate related projects. Our total capital plan is expected to be approximately $327 million.

The $337 million.

<unk>, our calendar year 2022 capital plant Vail resorts will have invested over $2 billion in capital since launching the epic pass.

Increasing capacity, improving the guest experience and creating an integrated resort network.

In addition to this year's significant capacity expanding investment planning is already underway for our calendar year 2023 capital plan and we are pleased to announce the first projects from that plan with additional calendar year, 2023 investments and upgrades to be announced in the upcoming.

Quarters.

At Breckenridge, we plan to upgrade the PK based area to enhance the beginner and children experienced an increase upheld capacity from this popular based area.

The investment plan will include a new four person high speed five chair.

At Stevens pass we are planning to replace the two person fixed grip cares chair lift with a new four person lift.

Which will improve out of base capacity and guest experience.

And out of cash we plan to replace the three person fixed script summit triple lift with a new four person high speed lift.

Increasing uphill capacity and reducing guest time on the longest lift at the resort.

These lift projects are subject to regulatory approvals and are currently expected to be completed in time for the 2023 2024, North American winter season.

In closing we are thrilled to see the continued loyalty of our guests and the value proposition they see in our past products are.

Our advanced commitment strategy is core to the long term growth and sustainability of our business.

And our focus on continuing to invest in the guest experience and our employees to deliver that experience day in and day out.

But the North American ski season coming to an end I would like to thank our employees that work so hard to deliver a great season, even amid challenges.

While this certainly has been a challenging season I have never felt more confident in the foundation of who we are our.

Our values, our mission and our path forward.

At this time, Michael and I will be happy to answer your questions.

Operator, we are ready for questions.

Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone.

If you are joining us today use a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Please limit yourself to one question and one follow up question.

Once again, please press star one if you would like to signal what questions Star one.

And our first question will come from Shaun Kelley with Bank of America.

Yeah.

Hi, good afternoon, everyone.

Thank you for all the prepared remarks I just wanted to start with one of the comments that you made around sort of the expectations for pass sales going forward. So you hinted that your expectation is currently.

Sales growth relative to what was delivered here.

Should slow as the season progresses, I mean, historically, you've also I think.

<unk> talked pretty conservatively about that same thing, but there were some deadline changes this year and a few other things that maybe.

So can you talk a little bit about.

Frozen cod as we move through the summer in terms of the offerings again, I think the specifically the Buddy pass deadline and the price increase for both taken a little earlier than they have in the past. So maybe just walk us through a couple of the puts and takes versus that on the one side versus maybe the fact that.

You do have tougher comps.

As the sales period progresses.

Yeah, Hi, Sean. Thank you for the question just overall feel very good about our spring pass sales and the underlying dynamics with the unit growth up 9% after plus 50% last spring.

Also feel very good that we have strong growth with our renewing pass holders and in destination markets.

We did take a price increase in memorial day, and the purpose of that increase is really to keep up with inflation and we have strong underlying business results that supported <unk>.

That action, if you think about what happened last year with the price reset that was essentially a strong call to action in and of itself and based on our own research. We know that many of our guests thought it was temporary and really jumped in early to get their path.

When you think about the comparable the price increase call to action. This year on memorial day in some ways balances out that call to action.

I do think though that as.

As you would expect we did pull forward some pass holders and as a result, we would expect that our growth rate in the fall.

On a full year basis to be lower than the growth rate that we experienced in spring.

And I guess as my follow up is is it possible you just given where we are with dollars and the magnitude of the price increase so the up 11 versus kind of a blended average product increase of around seven five.

It seems possible that the unit number.

In terms of number of units you sell could actually go a little bit negative would that be concerning to you in and of itself and sort of what would you. What would you think about that what are the trade offs around that relative to kind of be.

Clearly the long term objective, which is to just continue to grow the program and it's relevant.

So obviously last year was a big year for us.

And it exceeded our expectation so certainly agree and understand what you are raising about.

The comparable in terms of lapping that I think the early indications that I'm seeing in spring is really all that I can comment on right now which is that the fundamental dynamics of the business.

Our very strong and we are.

Do you think the growth rate will moderate, but not going to comment on projecting whether or not we expect it to decline.

Thank you very much.

And our next question will come from Chris <unk> with Deutsche Bank.

Hey, good afternoon everybody.

The first question is on the on the employee housing investment can you I don't know if you put a lot of dollars around that can you kind of maybe give us some.

Some thoughts on how much of that is going to be kind of a.

Capex related investment versus how much is kind of operational in the next couple of years.

Yes, Chris Thanks for the question.

It's a mix of capital and <unk>.

Opex in.

In certain circumstances will actually enter into employee housing master leases.

As an example of that at the at the base of canyons, The Big Park City project.

We entered into is actually a master lease from.

Development, that's taking place there and so we're taking a significant portion of the beds there in the form of a mass release.

In those circumstances Atwood.

Anticipate that at least a 17 million dollar project.

Okay.

Thanks, Michael and then second question kind of kind of shifting gears a little bit you guys have obviously done a terrific job of getting.

Advanced commitment from from lift tickets overtime is there any thought to kind of exploring that on the on the ancillary side maybe.

Getting getting people to commit to a certain level of people.

Food and beverage and maybe giving them slightly.

A slightly bigger discount than what they're already getting.

Any thoughts of that as kind of walk in even more of the ancillary stuff.

Thanks, Chris I am right now our pass holders as we move to a subscription model do get a discount on our ancillary businesses.

While we have not.

Made any announcement on anything else related to ancillary as a script subscription model I think it's certainly an idea that we would consider but no immediate plans to do that.

Okay very good thanks.

Thank you and our next question will come from Laurent <unk> with BNP Paribas.

Good afternoon. Thank you very much for taking my question and congrats on the strong results I wanted to follow up on Andrew Marc.

I know it doesn't really move the P&L needle right now, but curious to get your thoughts because this is very much a strategic acquisition, meaning is <unk> at the beginning of a M&A chapter in Europe .

And if so what kind of mountain profiles would you look for and would you target a specific mountain range, whether it's the Alps repairing as another mountain range within Europe .

Thanks, Laurent I think Michael and I can probably tackle different parts of this question I think in terms of strategy yes.

We do view on demand is a very much of a strategic acquisition as we have talked about our investors conference for many years that we aspire to.

Acquire resorts in Europe , as well as Asia, we are unbelievably thrilled to have this first European acquisition and do you view that.

It is a strategy for us to expand.

But slowly and we have a lot to learn.

Yes, Thanks, Brian .

I was curious since Ed we're just thrilled with the opportunity to partner with with assay in the Suez family, who have really done an incredible job with the community.

And so driven of building, what we think could be could become one of the premier destination resorts and <unk>.

Europe really remarkable high alpine experience two great villages that are connected across almost 10 miles of terrain.

Kind of just.

Credible both <unk> and <unk>.

Travel experience and so we think that one of the.

We've got a great foundation to work from Great partners and a great community to become a part of.

And as Kieran said really going to take our time to make sure that we learn and integrate into the community. There I think that one of the things that was most attractive to us and I think a great area of alignment for us with our partners because we're taking a majority stake in <unk>.

5%, but not a full acquisition and that was really important to us because we have great partners, who are really aligned with our ability to invest the proceeds from the transaction back into the resort and the base area as I described in her comments and so we think thats really going to be a great foundation for growth because.

We're going to be yes, quite ambitious and.

Reinvesting in.

In the resort itself and.

Yes, we think that there'll be a great start to our platform in Europe , but really very focused on being successful with <unk>.

As a as an important first step.

That's great to hear and then Michael I know youre not guiding for FY 'twenty three today, but I wanted to quickly follow up on the March Investor Day slides I think slide 62 shows an illustrative case.

To a floor of 30%.

<unk> EBITDA margin after considering the $175 million of labor investments Michael is that still the right way to think about this as a luxury of case studies or are there any other factors to consider in the three months later.

Yes, I think.

We're not providing anything additional to what we provided.

Back in March at the Investor meeting, we certainly.

Wanted to highlight that that went along with the $175 million investment in.

Yes, there are some some tailwind so we expect to have next year, largely resulting from as we described the challenging early season.

This year.

Kind of a return to normal conditions Whistler, Blackcomb, which was was quite impacted until the spring by Covid.

Australia, Similarly quite impacted in Q1.

As well as the opportunity when we do return to normal staffing to have before.

Capacity of our ancillary businesses and so we're not providing any updated information, but certainly those those trends.

<unk> are still the ones that we would call out.

Very helpful. Thank you very much.

And our next question today will come from.

Jeff.

With Stifel.

Hey, good afternoon curious if Michael thanks for taking our questions.

Youre starting off obviously, a hot topic. These days is going to be the state of the consumer and any early data points, suggesting softness really more towards the low AECOM and just curious is there anything in your data that would suggest any early warning signs for your business.

You can answer is no and if so just generally what would be the Canary in the coal mine here is it lodging bookings as a trade down that path.

Just curious what you guys monitor internally most closely for signs of softness.

Thanks Steph.

The consumer demand trends are looking very positive right now, but obviously, we need to continue to monitor that closely given <unk>.

<unk> macro economy.

Positive signs our obviously our pass sales results for spring are strong.

We do do research among our own gas and their intent to ski as of now is looking very strong.

And you know I would say that there's a lot of.

Uncertainty with the economy right now I do think important to note that when you look back to sort of the prior recession time period. Our company is in a much more stable position today than it was then to navigate it we have 40 resorts across three countries.

With a combination now of drive to and fly to destination.

Advanced commitment is has increased from 26% of lift revenue in fiscal 2008% to 62% expected this year.

Indicators are strong, but we need to continue to monitor that and in terms of what we look at yes, we look at past sales we look at bookings.

And we constantly engage with our own gas via research to understand what their intent is to ski and to visit and to travel overall, so we'll be monitoring those closely.

Very helpful. Thank you and then just on the dynamic pricing that you guys are doing this year with passes.

Moral day deadline, it looks like you've hiked about.

2% historically from early bird pricing to end of selling season. The gap. There is typically about low to mid teens percentage change is it fair to kind of think about that as a baseline kind of add in annualized CPI and that's kind of reasonable benchmark to think about where we can.

Go from here or kind of how should we think about.

The price hikes, both in terms of final magnitude and as well as how dynamic do you intend to remain should we expect the rest of the selling season to follow historical.

Cadence or should we expect more dynamic pricing.

Pricing with inflation.

And looking at the Memorial day, and we said at that time that we would use price.

Well continue to use price as a lever but also continue.

Continue to keep track with inflation, what you see in Memorial day, as we took an additional price increase to keep up with inflation also we saw strong business results.

And I would say going forward pricing continues to be a lever on this business, our lift ticket and all aspects of our ancillary businesses.

Understood very helpful. Thank you I'll pass it on.

And our next phone question will.

Our next question will come from Patrick Scholes with <unk> Securities.

Yes, good afternoon, everyone.

A question for you on the past prices.

Seem to me that.

Moving up that passed price increase deadline.

Would be a pretty material fact.

Mover to the impact on sales and I know in the past.

With such things you have called out.

Clearly in press releases, where there have been.

Year over year comparison, making results, perhaps not as comparable as one might think.

I'm curious why you did not include.

In this press release at this time thank.

Thank you.

Sorry, Patrick can you clarify your question.

Yes, it was.

Assume that moving up the past deadline by three months would really help.

The past price increase would help really given a bump to sales and I didn't see any mention of that back in there where in the past you have noted.

Things have maybe not been completely comparable I'm just curious why you wouldn't mention.

You mentioned that what I would think it's a material fact that the past price deadline was moved up by three months.

Not that one but the price increase.

So what we you know from a business context perspective, what we did share.

When we launched passes is and in the investors conference is that we would continue to SaaS.

And how much price increases we take on the business and that we have always believed that price is a lever even in the context of the price reset that we did last year.

We priced right out of the launch keeping up with inflation and then we took a price increase memorial day also to keep up with inflation.

I think when you think about the lapping factors, we have a unique dynamic last year in the spring, where we announced a 20% price reset.

And what was interesting about that Patrick is that.

The announcement was almost so good and so surprising that a lot of our gas.

I actually thought it was temporary they didn't fully understand that it was a true reset of our business based on price elasticity and the data we had.

So we saw that a lot of our guests thought it was temporary and thought that it was going to go away and so they jumped in early to get their passes in spring.

In some ways when you think about the comparable.

Call to action this year versus last year balances out to some extent as we had a price increase that's memorial day is a call to action as well.

Okay.

We'll leave it at that thank you.

And moving onto Omer Sander with J P. Morgan.

Hi, everyone. Thanks for taking my question.

Or is it the pass sales for next season encouraging that units are up nicely. What are you seeing at the high and low end of your passes.

Are you seeing a trade down in passes versus last year or is it just a mix shift towards day passes maybe some of both and is there any color on retention that you can give across your multiyear pass holders versus new past failures.

Yeah absolutely.

Absolutely. So as you noted I mean units were quite strong up 9%.

Our sales dollars increased 11%, so we had a seven 5% price increase.

Each was largely offset by the impact of growth of epic day pass products and I'll share a little bit more context on that in terms of trade up trade down and we were really pleased to achieve neutral net migration among renewing pass holders and the way to think about that just to re anchor to.

To the Investor's conference and that migration is the difference and the percent of renewing pass filters that trade up versus the percent of pass holders that trade down within our portfolio of past products.

Last year, our net migration was up dramatically.

As our guests spent the discount on higher level passes and more access. So this year to be able to maintain that and that might migration neutral. We are very pleased to see that dynamic now when net neutral unit migration usually involves some level.

A degradation of the effect of past price because we have so many people in epic pass and epic local or sorry epic pass them, there's really nowhere to upgrade from there.

The primary driver overall, though of the effective past price.

Is the growing portion of epic day pass so there's two pieces to that we have more epic day pass in the renewals from last year.

And.

We have brought in new people.

And I just want to clarify for everyone on the call that.

Our ultimate vision is that 75% or more of our lift revenue is committed before each season begins so we view the growth in epic day pass pass as a real positive.

And believe that it delivers the long term guests lifetime value benefits associated with our strategy of advanced commitment.

Awesome. Thank you that's helpful. And then maybe just one follow up the commentary around units and sales in future months slower than the spring is that sort of consistent with what <unk> seen historically is there anything specifically driving that commentary and obviously.

Small window since June <unk>.

A year.

The comments that we have about what we expect in the fall on our and on our full year growth rates and then in terms of percent of passes on the books.

Wont comment on that.

Thank you.

Thanks.

And moving on to <unk> <unk> with Jefferies.

Good evening guys congrats on the quarter.

Looks like we're making progress on both revenue advancement with the goal of being 75% can you maybe discuss like whats driving resolved reconnecting with guests that maybe you havent shown up as people recognizing the value proposition.

Just the collection of assets.

It helps.

Yes, I think that the results that we're seeing this spring are driven by <unk>.

Three things one is that on a strategic level the compelling resort network that we have incredible resort.

And then third is the value proposition for guests so.

We are.

Asking lift ticket gas to make a commitment that's nonrefundable before the season starts that's a pretty big commitment to make.

And the value proposition and the price point that we're offering in exchange for that behavior is very at least as the early indicators would show based on our results last year and our spring result, but that is a very compelling proposition for our renewing pass holders.

And then also as we acquire new pass holders, whether those new pass holders are moving from Alif ticket last year or they used to be a pass holder or they used to be a lift ticket holder or they're brand new to our network of resorts.

I appreciate it and then also.

Just given some.

Higher travel prices and what seems to be headaches is there anything maybe expectation for how regional versus destination places may perform maybe some people are going to fly or whatever the case may be.

I mean right now in terms of I'm, assuming you're asking that question. The context of next winter and next season for our resorts yeah.

All I can really share is what I shared earlier, which is.

The trends that we are seeing right now look positive.

That said there is a lot of uncertainty in terms of the economy and impacts on consumers and guests and we plan to monitor that closely and adjust as needed.

We don't intend to just.

Anchor to that we then tend to monitor it and adjust as needed.

Understood. Thank you.

And we'll go to Ryan Sundby with William Blair.

Hey, Kristen Hey, Michael Thanks for the question.

As I was starting to see if you can get for you to ramp up here. It sounds like it has also been strong.

Could you maybe talk a little bit about where things stand there in terms of operating restrictions and I guess, if youre seeing that similar tight labor market as well.

And then just as my follow up I know.

And Fox Creek.

It was back in 2019, but with Covid, it's been hard to get a read on how the integration has gone there and what kind of synergies you may begin.

<unk> been able to capture can you just maybe give an update on those two mountains and if youre seeing starting to see any network benefits or anything else. There in terms of what makes sense out versus just having parachute.

Staying with them.

Sure. Thanks, Thanks, Brian I think.

Yes, a couple of things on Australia, one were.

Really excited to have all three resorts open.

As of.

As of this week actually.

With some good early season snow, so thats always a good start as we noted.

In the release as well we've had very very strong pass sales results.

From our Australian gas as we headed into the season and so.

Australia has had quite significant COVID-19 restrictions and so as those have opened up which are largely loosened at this point.

The outlook for Australia is quite strong barring any changes in that so we feel.

I feel very good heading into.

Into the season with all three resorts and very grateful for the efforts of the team down there who have done a phenomenal job.

And curious if you want to take the second piece on the network.

Yes.

Oh I was going to address the I think you had a question on labor as well.

But regarding that network effect, yes, and we have definitely seen the benefits and the impact of.

Having a network of resorts in Australia, and the connection that have to our North American resorts and I think it's on a much bigger scale.

And the network effects that we see by owning local and regional resort in the United States and so that strategy. We absolutely believe is highly successful.

In terms of labor and the labor market and what we're seeing there I would say.

Too early to tell for winter season, given its June right now we are staffing up for our summer operations and certainly feeling good about tracking to normal staffing for summer.

We think ahead to winter I think the investment we're making in our employees is absolutely essential to our success.

It is that that team that is critical to delivering the guest experience and then that.

That drives the advanced commitment and the loyalty and then enables us to reinvest back in our business expand our network and deliver returns to investors. So.

Very much excited about the investment we're making in our employees our team members and believes that that is the right approach for us going forward.

Thank you and that does conclude the question and answer session I will now turn the conference back over to Mr. <unk>.

Thank you operator this concludes our fiscal 2022.

Third quarter earnings call. Thanks to everyone, who joined US today feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon Goodbye.

Thank you that does conclude today's conference. We do thank you for your participation and have an excellent day.

Q3 2022 Vail Resorts Inc Earnings Call

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