Q4 2023 Vail Resorts Inc Earnings Call
Your program will begin approximately one minute.
[music].
Okay.
Good afternoon, and welcome to the Vail resorts fiscal of 2023 fourth quarter earnings call.
Today's conference is being recorded.
Currently all callers have been placed in a listen only mode and following management's prepared remarks, the call will be opened up for your questions.
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I will now turn the call over Q searched in Lynch, Chief Executive Officer of Vail Resorts you may begin.
Thank you good afternoon, everyone welcome to our fiscal 2023 year end earnings conference call.
Joining me on the call. This afternoon is Angela Clark, 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.
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 September 28, 2023, 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 in our press release, which along with our annual report on Form 10-K were filed this afternoon with the SEC and are also available on the Investor Relations section of our website at Www dot salaries.
Dot com.
Let's turn to our fiscal 2023 and fourth quarter results given the significant weather related challenges. This past season, we are pleased with our overall results for this year with strong growth in 2022 2023 north American ski season, visitation and spending compared to the prior year.
They're supported by the stability created by our advanced commitment products.
The return to normal staffing levels enabled our mountain resorts to deliver a strong guest experience, resulting in a significant improvement in guest satisfaction scores, which exceeded our pre COVID-19 levels at our destination Mountain resorts.
Visitation growth was achieved through strong growth in pass sales. The addition of underlying the drone in Switzerland. The full year impact of seven Springs Mountain Resort hidden Valley resort and Laurel Mountain Ski area acquired December 31st 2021, and record visitation and resort net revenue in <unk>.
March and April .
Ancillary businesses, including ski school dining and retail rental experienced strong growth compared to the prior period. When those businesses were impacted by capacity constraints driven by staffing and in the case of dining by operational restrictions associated with COVID-19.
Our dining business rebounded strongly from the prior year, though underperformed expectations for the year as guests dining behavior did not fully returned to pre COVID-19 level. Following two years of significant operational restrictions associated with COVID-19.
Our overall results through the 2022 2023 north American ski season highlight the stability of the advanced commitment from season pass products and a season with challenging condition.
Including travel disruptions during the peak holiday period, abnormal weather conditions, which significantly reduced operating days terrain availability and activity offering across our 26 Midwest mid Atlantic and northeast resorts and severe weather disruptions at our Tahoe resorts.
This past season, approximately 75% of skier visitation at our North American resorts, excluding complimentary visits.
From pass holders, who committed in advance of the season, which compares to approximately 72% for the 2021 2022 north American ski season.
Results in our fourth quarter declined from the prior year, primarily driven by the company's fiscal 2023 investments in employees as well as below average snowfall and snowmaking temperatures that limited terrain availability during the Australian winter season.
North American Summer operations also underperformed expectations, driven by a combination of lower demand for destination Mountain travel, which we believe was primarily driven by a broader shift in summer travel behavior associated with a wider variety of vacation offerings available following various travel restrictions in the prior.
Two years.
And weather related operational disruptions.
Turning now to our 2023 2000 Twenty's for season pass sales.
Advanced commitment continues to be the foundation of our strategy shifting guests from short term refundable lift ticket purchases to a nonrefundable commitment before the season starts in exchange for a greater value.
We are pleased with the results of our season pass sales to date, which demonstrate the compelling value proposition of our past products, our network of mountain resorts and our commitment to continually investing in and delivering a strong guest experience.
Through September 22023, North American ski season pass sales increased approximately 7% in units and 11% in sales dollars as compared to the period in the prior year through September 20, <unk> 2022.
Cost of product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of 74 sense between the Canadian dollar and the U S. Dollar in both periods for Whistler Blackcomb pass sales.
Relative to the 2022 2023 season, the company achieved strong loyalty among its pass holders with particularly strong pass sales growth from renewing pass holders.
While also growing pass fail.
Among new pass holders.
The company successfully grew units across destination international and local geographies, the strongest unit growth in destination markets, including the northeast and across all major pass product segments with the strongest growth product growth in regional pass products and the epic day pass product as.
As lower frequency guests and local northeast gas continue to be attracted by the strong value proposition of these products.
The business also achieved positive growth in the mid west and mid Atlantic, which after a challenging conditions last season highlights the stability of our advanced commitment program loyalty of our guests and significant opportunity to drive past penetration in the Midwest mid Atlantic and the northeast.
Yeah.
Pass sales dollars continue to benefit from the 8% price increase relative to the 2022 2023 season.
Particularly offset partially offset by the mix impact from the growth of epic day pass products.
As we enter the final period for season pass sales, we expect our December 2023 growth rate may moderate relative to our September 2023 growth rate given the impact of moving purchasers earlier in the selling cycle.
We continue to prioritize advanced commitment is the best way for guests to access our mountain resorts.
<unk> to prior seasons lift ticket sales will be limited during the 2023 'twenty 'twenty four season in order to prioritize gas committing in advance with season passes and to preserve the guest experience at each resort.
We expect peak, let's kicked it limitations will further support our resorts and communities on peak days and we do not anticipate that the limitations will have a significant impact on our financial results consistent with prior seasons.
As a reminder, no reservations are required at any of the resorts on the epic pass for pass holders other than at our partner resorts tell you're right.
Now I would like to turn the call over to Angela to further discuss our financial results and fiscal 2020 for outlook.
Thank you Kirsten mentioned given the significant weather related challenges. This past season, we are pleased with our results for the fiscal year of 2023.
Net income attributable to Vail resorts was $268 $1 million or $6.74 per diluted share for fiscal year 2023.
Compared to net income attributable to Vail resorts of $347 $9 million or $8 55 per diluted share for fiscal 2022.
The decrease in net income attributable to Vail resorts compared to the prior year was primarily due to the large game on.
On disposal of fixed assets in fiscal 2022, and an increase in fiscal 2023 expense associated with a change in the estimated fair value of the contingent consideration liability related to our park city resort lease.
Resort reported EBITDA was $834 $8 million in fiscal year 2023, compared to resort reported EBITDA of $836 $9 million in the prior year.
Now turning to our outlook for fiscal 2024.
As we head into our fiscal year, we are encouraged by the strength in advanced commitment products sales and remain committed to delivering a strong guest experience while maintaining cost discipline.
We expect meaningful growth for fiscal 2024 relative to fiscal 2023 restaurant resort EBITDA margin.
Our guidance for net income attributable to Vail resorts is estimated to be between $316 million and $394 million for fiscal 2024.
We estimate resort reported EBITDA for fiscal 2024 will be between $912 million and $968 million.
We estimate resort EBITDA margin for fiscal 'twenty to 'twenty four to be approximately 31% using the midpoint of the guidance range.
Fiscal 2024 guidance includes an expectation that the first quarter of fiscal 2024 will generate net loss attributable to vail resorts between $191 million and $168 million.
And resort reported EBITDA between negative $154 million and negative $104 million.
At the midpoint of the guidance range first quarter of fiscal 2020 for resort reported EBITDA assumes a negative impact of approximately $46 million.
<unk> to the first quarter of fiscal 2023.
Excluding exchange rate impacts.
Primarily driven by cost inflation.
It includes $7 million impact of our fiscal 2023 employee investment which went into effect in October of 2022.
Lower results from our Australian resort from the continuation of the weather related challenges that impacted terrain in the fourth quarter of fiscal 2023.
And lower results from North American summer operations from the continuation of the lower demand for destination mountain travel experienced in the prior fiscal quarter.
Relative to fiscal 2023.
2024, our full year guidance also reflects a negative resort reported EBITDA impact of approximately $3 million as a result of the company's exit of its retail and rental locations in telluride and Aspen in fiscal 2023.
The guidance assumes a continuation of the current economic environment and normal weather conditions for 2023, 2020 for our North American and European skew Susan.
And the 2020 for Australian ski season.
The guidance assumes an exchange rate of 74 sons between the Canadian dollar and U S dollar related to the operations of Whistler Blackcomb in Canada and exchange rate of 64 cents.
Between the Australian dollar and U S dollar related to the operations of parish or Falls Creek and <unk> in Australia.
And an exchange rate of $1.10 between the Swiss franc and the U S dollar related to the operations of undermine such room in Switzerland.
The current fiscal 2024 exchange rate assumptions, Brazil.
The result in an expected $5 million negative impact relative to fiscal 2023 results.
And an expected $10 million negative impact relative to our original fiscal 2023 guidance provided in September of 2022.
Yeah.
While we are cognizant of the broader macro economic outlook remains uncertain.
Which we will continue to monitor heading into the upcoming season, we believe that we will continue to benefit from the stability and resilience of the business model, particularly with the strength.
Scale and affordability of our advanced commitment products and the diversification of our resort network.
Our balance sheet remains strong and the business continues to generate robust cash flow.
Our total cash and revolver availability as of July 31st 2023 was approximately $1 $2 billion.
$563 million of cash on hand, and $646 million of combined revolver availability.
Our credit agreements.
As of July 31, 2023, our net debt was two seven times trailing 12 months total reported EBITDA.
The company declared a quarterly cash dividend of $2.06 per share avail, resorts' common stock that will be payable on October 26, 2023 to shareholders of record as of October 10th 2023.
During the quarter the company repurchased approximately 400000 shares of common stock at an average price of $247 for a total of approximately $100 million.
Including the shares repurchased during the.
Fourth quarter, the company repurchased a total of approximately $2 2 million shares of common stock during the fiscal 2023, and an average price of approximately $229 for a total of $500 million.
Leveraging the capital we've raised opportunistically over the past few years at a low cost of debt to capitalize on an opportunity to repurchase shares at an attractive valuation.
We remain committed to returning capital to shareholders and intend to maintain an opportunistic approach to future share repurchases.
We will continue to be disciplined stewards of our capital and remain committed to prioritizing investments in our guest and employee experience high return capital projects.
Strategic acquisition opportunities.
And returning capital to our shareholders through our quarterly dividend and share repurchase program.
Now I'll turn the call back to Kirsten.
Thank you Angela.
We remain dedicated to delivering an exceptional guest experience and we will continue to prioritize reinvesting in the experience at our resorts, including consistently increasing capacity through lift terrain and food and beverage expansion projects.
As previously announced the company expects to invest approximately $180 million to $185 million in calendar year 2023, excluding.
Excluding one time investments related to integration activities deferred capital associated with previously delayed projects Reimbursable investments associated with insurance recoveries and growth capital investments at undermine syndrome.
At Keystone, we plan to complete the transformation I'll lift served terrain expansion project and Berkman ball, increasing lift served terrain by 550 acres with the addition of a new fixed person high speed lift.
At Breckenridge, we plan to upgrade the peak eight base area to enhance the beginner and children's experience and increase upheld capacity from this popular based area.
The investment plan includes a new four person high speed by chair to replace the existing two person fixed grip lift as well as significant improvements, including new teaching train and a transport carpet from the base to make the beginner experience more accessible.
At Whistler Blackcomb, we plan to replace the four person high speed fixed seven left with a new eight person high speed lift.
At Stevens pass we are planning to replace the two person fixed script cares chair lift with a new four person left which is designed to improve out of base capacity and guest experience.
And out of cash we plan to replace the three person fixed grip stomach triple left with a new four person high speed lift to increase our pellet capacity and reduced guests time on the longest left at the resort.
We currently plan to complete these lift projects in time for the 2023 2024, North American winter season.
The company is planning to pilot my epic here at Vail Beaver Creek Breckenridge Keystone for a limited number of pass holders during the 2023 'twenty 'twenty four North American ski season, which will introduce a new membership program that provides the best benefits of gear ownership with more choice lower.
Cost and no hassle Miami.
<unk> provides its members with the ability to choose the gear. They want for the fall season for the day from a selection of the most popular and latest ski and snowboard models and have it delivered to them when and where they want it guaranteed with free slopeside pick up and drop off everyday.
In addition to offering the best ski and snowboard myopic here will also offer name brand high quality ski and snowboard boots with customized insoles and boot fit scanning technology.
The entire myopic your membership from gear selection to boot fit to personalized recommendation to delivery will be after members' fingertips through the new my epic App.
My epic year will officially launch for the 'twenty 'twenty four 'twenty 'twenty five winter season.
Vail Beaver Creek, Breckenridge, Keystone Whistler, Blackcomb Park City Mountain crested Butte, Heavenly Northstar Stowe, Okemo and Mount Snow.
And further expansion are expected in future years.
The company is also planning to introduce new technology for the 2023 2024 ski season and its U S resorts that will allow guests to store their pass product or lift ticket directly on their phone and.
Okay.
I'm sorry.
The need for carrying plastic cards, visiting the ticket window or waiting to receive a pass or lift ticket in the mail.
Once loaded on their phones guests can store their phone in their pocket and get scanned hands free in the Lyft line using Bluetooth low energy technology.
It was designed for low energy usage to minimize the impact on our phones battery life.
In addition to the significant enhancement of the guest experience. This technology will also ultimately reduce waste of printing plastic cards for past products on lift tickets and RFID chips as part of the company's commitment to zero.
So the first year of launch to ensure a smooth transition the company will provide plastic cards for passive and lift tickets to all guests.
And in future years plastic cards will be available to any guests who cannot or do not want to use their phone to store their past product or lift ticket.
We are also excited to announce the launch of our new my epic App, which will include mobile path in mobile lift ticket interactive trail maps real time and predictive lift line wait time.
Personalized stack my epic gear and other relevant information to support the guest experience.
The company is also investing in network wide scale scalable technology that will enhance our analytics e-commerce and guest engagement tools to.
To improve our ability to target our guest outreach personalized messages and improve conversion.
Including $10 million of deferred capital associated with previously delayed projects $4 million of Reimbursable investments associated with insurance recoveries of $1 million of one time investments related to integration activities and $9 million of growth capital investments at under lots of drilling our total capital plan.
For calendar year, 2023 is expected to be approximately $204 million to $209 million.
In addition to this year's significant investments across lifts expanded train and enhanced guest facing technology. We are pleased to announce some select projects for our calendar year 2024 capital plan with the full capital investment announcements planned for December 2023.
At Whistler Blackcomb, we plan to replace the four person high speed Jersey cream left with a new six person high speed lift.
This lift is expected to provide a meaningful increase to our pellet capacity and better distribute guests at a central part of the resort.
At Hunter Mountain, we plan to replace the four person fixed script Broadway left with a new six person high speed lift in.
And plan to relocate the existing Broadway left to replace the two person fixed grip ellipse, providing a meaningful increase in I'll call capacity and improved access to terrain that is key to the progressive learning experience for our guests.
Yes.
At Park City Mountain, we expect to engage in a planning process to support the replacement of the Sunrise left with a new 10 person gondola in partnership with the canyons village Management Association in calendar year 2025.
Which will provide improved access and enhance guest experience for existing and future developments within canyons village.
These projects are subject to approval.
In closing.
We greatly appreciate the loyalty of our guests this past season, and the continued loyalty of our pass holders that have already committed to next season.
With our Australia winter season, coming to a close I would like to thank our frontline employees for their passion and dedication to delivering an experience of a lifetime to our guests and we all look forward to a great upcoming winter season in the U S, Canada and Europe .
At this time, Angela and I will be happy to answer your question opt.
Operator, we are now ready for questions.
At this time, if you wish to ask a question. Please press star one on your telephone keypad.
They remove yourself from the queue by pressing star two.
Again, please limit yourself to one question and one follow up.
We'll take our first question from Shaun Kelley with Bank of America. Your line is open.
Hi, good afternoon, Kirsten and Angela Thanks for taking my question.
Maybe just to lead off we've gotten a lot of request to get a little bit more color on sort of the breakdown of what's happening in the fiscal first quarter here. So the question here is just could you give us a little bit more color on the 46 million specifically how much of that contribution is sort of from Australia, and how much is a little bit more.
Recurring on possibly recurring on the U S resort disruption there as it relates to just changing.
Visitation patterns. Thank you.
Yeah. Thank you Shawn Thanks for the question related to fiscal year 'twenty four in Q1, we do have some unique items that are impacting us.
In Q1 that we have inflation and the impact of including the impact of our employee investments E. Australia winter conditions impact and then to a lesser extent, our north American summer impact.
As well when we look at that in total you know that is a a big impact for us on the fiscal year. When you take out that Q1 impact and look at the rest of the year for winter I think we feel quite good about the fiscal year plan and the margin that we.
We expect to deliver as a result.
Okay, and then my follow up would just be maybe a little bit more color on that remainder of the year and curious when you talk about this before you obviously you've experienced some weather volatility over the last number of years and I think you typically guide to normal season conditions is there would you consider this.
A similar policy to how you've approached us for is there any more conservatism baked in here just given the weather volatility we've experienced in especially coming off this past season, where things were particularly rocky.
Yeah, you're absolutely right, Shawn and we had a lot of disruptions. This past season, we are planning for normal again, obviously weather disruptions are very hard to predict.
I think the way we approach our guidance range is it assumes normal condition across our resorts, which lead.
Upside for strong weather conditions, and downside for challenging weather conditions, and you know there's normal conditions and normal disruptions like wind holds but an example of something abnormal would be like what happened to us in the east.
It is really so yes, we are guiding our guidance range to normal conditions and our business model. As you know is very focused on trying to mitigate those impacts with our geographic diversity advanced commitment you know getting as many guests as we can commit it in advance of.
The season investing in snowmaking and our commitment to zero on our sustainability action as well.
Thank you very much.
Thank you.
Our next question will come from Laurent <unk> with BNP Paribas. Your line is open.
Good afternoon. Thank you very much for taking my question I wanted to ask about ancillary services.
It has been impacted over the last few years I know you guys don't guide to it but.
How are you thinking about that business recovery.
Is there a benefit maybe from inflation from food inflation beverage inflation and other inflation on that as we think about this year.
Yeah, we are expecting Lauren strong growth across our ancillary businesses with particular focus on F&B as I highlighted in the remarks, you know F&B grew significantly last year, but did not return all the way to pre COVID-19.
We know that we delivered a strong guest experience and.
That we are recovering from significant restrictions that were put on our dining business in the years following COVID-19, including a requirement for reservations or requirement for vaccines reduced menu option.
So as we think about that business. Yeah, we expect to continue on a strong growth trajectory for that dining business and we're very focused on building awareness of all of them unique food variety offerings. We have building awareness among our more than 2 million pass holders that we had last year.
<unk> are about the 20% discount that's a part of the loyalty benefits that they have as pass holders, which certainly.
Helps mitigate some of those inflationary prices.
And we have the new my epic App that we'll be launching where we can start to talk to our guests one to one about our ancillary businesses or through the App, which we also hope will give us the opportunity to have some personalized communication to help build awareness and bringing people back in.
To our restaurants and continue that growth trajectory that we've been on.
Okay, very very helpful. And then Cory I'm going to follow up on Sean's question because.
It is a question that we're asking about $46 million.
So, it's primarily driven by cost inflation, it sounds like primarily Oh oberhaus.
Is that the right way to think about it doesn't feel like you want to qualify this is kind of in the ballpark over half.
Is that something that we should think about as we model the quarters out.
Hi, Lorraine, it's Angela arch just yeah on the Q1 piece of this.
You can think about it I think is one we always have investment in our in our Q1 rate. We're always seeing the kind of cost pieces for the whole season without as much of the revenue that comes through in the rest of the season. So if you look at the expense structure and what we pointed to you should assume right the inflation on that cost structure.
We called out specifically the wage investment from <unk>.
Prior year, because that went into effect in October . So there is a piece of that which is the 7 million that is from that wage investment that's continuing into this year and then on top of that right. There's the demand side, which for Australia, we're seeing kind of that continued impact from challenging conditions that we saw in our <unk>.
Quarter.
And if you recall last year, we had actually a very strong year in Australia and a very good conditions. So we kind of went from one extreme into you know a very warm weather period for Australia, which resulted in lost terrain open and earlier closures of terrain than we would normally see and then.
In North America to a lesser extent right. We are continuing to see some of that shifting demand patterns that we saw in the fourth quarter.
Okay very helpful. Thank you so much.
Thank you.
Our next question will come from Jeff substantial with Stifel. Your line is open.
Hey, good afternoon, everyone. Thanks for taking my questions.
Starting off here I wanted to drill in a bit more on some of your commentary and the headwinds that you discussed for the North America Summer operations, Yeah. It does.
Seem to fit some of the narrative we've heard.
From the airlines as some other leisure businesses, but I'm curious how do you think about this headwind and what youre seeing over the summer as it relates to more of the upcoming ski season, and I guess, what I mean by that is there anything that you can see in your bookings data or otherwise that sort of gives conviction that this is alright. This unwinding of kind of the consumer wallet share gains.
It's mostly just an off season impact as opposed to also potentially bleeding into the ski season and wanted to know if that makes sense.
Yes. Thank you Josh you know we are seeing in our North America summer demand some of that shift and summer travel behavior that.
You've heard about in the broader marketplace and certainly when you look at broad market data for Western Mountain resorts in the lodging occupancy does reflect over the summer declines versus 2019, as we think about so and so we do feel that our business.
It was in.
Impacted and are part of those shifting consumer behaviors as we look forward to winter though.
I think summer and winter businesses are very different attract very different gas and I think the key indicator for demand to look at for this upcoming winter season is our season pass business and our results are very strong on our season pass business with.
Our strong unit growth and a strong dollar sales growth strong renewals being the key driver of that also.
Incremental growth with new pass holders.
And seeing growth in every geography destination international all of our core local geographies as well and across all product segments. So when I look at indicators for winter I would take our pass sales as the strongest indicator for winter versus summer, which has.
Very different guest and behavior associated with it.
Great. That's that's really helpful. Thank you and then for my follow up maybe kind of adding on to some of the questions earlier, but focusing more so on the cost inflation piece that first bucket within the 46 million I know you quantified 7 million from Annualizing. The employee investment that you made last year I guess.
It sounds like there is more to that bucket than just the 7 million sorry. If that is the case can you just provide some color on I guess, what that is and I guess kind of why you're I guess quantify it or spelling. It out is it something above and beyond just more.
Kind of normal typical wage inflation or cost inflation or just could you could you could you just frame that out or provide some color on kind of what besides that 7 million sits within the cost inflation that you cited.
Hi, Jeff Yeah on the cost inflation. There you know in Q1 right. We always have inflation before the revenues as I was mentioning in and so I think what you should think about as you can see from.
Inflation data that's out there what a normal inflation would be on our expense structure and then for US right. There are some investments that we always typically make in Q1 ahead of the season and so I would point you toward the full year margin guidance of 31%, where you can see how those impacts are really playing out in terms of some of the demand.
Pieces and things were quantifying for Q1, specifically, but that is how that is expected to.
<unk> kind of level out throughout the season.
Oh, Okay. So in other words, it's more just a timing mismatch as opposed to kind of see anything structurally are enormous that is that fair to say.
Correct and Thats something that we normally see radar in our Q1 ahead of winter season in North America.
Okay, Great. That's very helpful. Thank you both I'll pass it on.
Thank you Jeff.
Thank you.
Our next question will come from Matthew Boss with J P. Morgan Your line is open.
Hey, Greg This is John on for Matt. So you resort EBITDA margin forecast for next year, it's more or less in line with the pre pandemic levels can you breakdown the inflation, but on the cost side for that or any investments to build out the ancillary revenue streams. This year like said another way is there any structural hurdle.
On to margin expansion multiyear.
So on the our margin expectations for FY 'twenty four we are in FY 'twenty. Two we had some anomaly margin expansion because of the labor shortage. This year coming into FY 'twenty four we're expecting a strong margin at 30.
1% at the midpoint.
And I think you know when we look at it I think we look at winter margin looks very strong and positive we are seeing feeling pressure because of the Q1 assumptions that we just walked through.
We see opportunities going forward in terms of resource efficiencies in one of the key assumptions that we have.
In our strategies and our priorities in FY 'twenty four is workforce management and rolling out workforce management across all 37 of our resorts beyond that also continuing doing baskin guests self service, which creates efficiencies as well as automation. So.
I feel very good about the 31% margin that we're going to achieve and believe that there is opportunity going forward given the scale of the business. The investments that we've made and an integrated network. It gives us the opportunity to unlock some additional.
Margin expansion in the future.
Great. Thank you.
Thank you.
Next we have a question from Patrick Schultz with Truest. Your line is open.
Good afternoon.
Hi, Patrick.
Alright sort of beating this.
Thank you guide to death here, but is it fair to say that $40 million to $46 million. One third of that was just weakness in Australia are around 15 million just trying to get some.
Granularity on that one thank you.
Hi, Patrick Yes, we are.
We did not put forward the exact drivers of all three pieces I think the point.
Point for government, giving out though the Q1 guidance is just to also showcase right. There are some just normal headwinds we have in Q1.
The mid point in total the one piece we haven't talked about is we're the midpoint is about 50 million off of prior year right. There is an FX component, which you know we pulled out of the $46 million and then in addition, right cost inflation and the investment in wages, I would say, Australia and north.
Demand you can look to kind of some of the trends we were seeing in Q4.
And continuation of some of those.
The other thing I would point you to just for the full year margin and I think this is just the.
The important point of rate like in the guidance and the 31% right one that revenue flow through on the fixed cost business. We are absorbing these cost pressures despite the Q1 headwinds.
Yeah.
Okay.
Just one or two other questions here.
Last year between when you did the first pass and unit upgrade you lost about three to four points of growth and then on the most recent earnings call.
Sort of at a high level noted you expected a deceleration between the June which with the numbers you gave in June and now, but we haven't seen that.
Mhm.
Is this is this could be taken out is hey, things are actually better than expected or.
Maybe there's something.
The sales program this year versus last year that sort of delay that deceleration.
How should we think about that.
Mhm.
I think that I feel very good about where we are on pass sales right now and we are guiding that they may moderate for the whole year because it is pretty typical for our growth rates to moderate as we go through the sales cycle and that guidance that we provided wasn't specific to this September time period, but.
As it relates to the full year and what our expectations are for the full year. We are as you know constantly working to pull our guests decision, making earlier and earlier in the sales cycle, which can impact.
Are the sales that occur and the growth rates would occur later in the selling cycle also as we move through the selling period later in the selling period tends to be focused on more new pass holders, making decisions versus our loyal renewing pass holders and so you know there can.
Be more variability and that the.
Forecasting around our new product sales, which we generally see those growth rates decline later lower later, we get in that selling cycle, but nothing structurally that is concerning about our pass sales actually feel like we're in a great spot given we've see incredibly.
Loyalty and renewals and that's really driving the growth where we are right now.
Growth across all the geographies and growth across all of our product segments.
Okay, and then just one last one.
High level question here.
Well how much conservatism do you think is baked into your earnings forecast and I know you call out here.
Sort of normal weather conditions.
I think you know you have such a geographic diverse.
Spectrum of resorts here does.
It doesn't seem as ever anything abnormal.
So I'll relate that to see the crews.
I cover the crews by then.
I always.
They get a pretty hefty degree in normal times degree of conservatism as they say, there's yeah, there's always something in some markets. It goes well I mean, they actually expect that to happen.
How much conservatism if any is isn't that the case.
It just seems like every year there you know if it's not the northeast.
Utah, Utah is Canada.
Hum how much conservative for something whether to happen because it will happen it always happens so.
Uh-huh balkhash.
Yeah.
You know, we strive to put out a guidance than a forecast that is very balanced with a reasonable opportunity for upside and downside on it and really striking a balance on that normal weather impact I agree with you there's always.
Some thing that happens and we factor that in the pieces that are.
No not assumed because we obviously can't predict them is one it is something so abnormal such as what happened. This past year, where we were down two graphs in January as some of our ski areas and that can that we cant predict that we are not assuming in our forecast.
We have no way to do that but we do try to strike a real balance on the fact that there will always be some variability.
Okay, Okay fair enough.
That's it for me thank you.
Thank you Patrick.
Okay.
Our next question will come from our muskets with Jefferies. Your line is open.
Yeah.
Hello, Good afternoon, and thank you for taking my question I know you touched on this a little but could we get some further color on how you're thinking about labor outlook like is there more pressure on cost per employee than the recent past.
I'm feeling very good about our labor situation and where we are in terms of wages last year are are we made a big investment in our employees wages benefits affordable housing leadership development.
And where we are right now as we are ramping up staffing is it's early but we're ramping up staffing for the season and feeling good about where we are in terms of retaining employees and attracting new.
Highly qualified top talent and frontline employees and I think from a wage perspective I feel good about our wages on our starting wages being competitive in order to attract a strong frontline talent that we need for this upcoming season. So that's what we've assumed in the.
Our budget is I feel good about and that we can deliver against it as it relates to staffing and where we are on our wages.
Okay, great. Thank you very much.
Yeah.
Thank you.
Our next question will come from Chris <unk> with Deutsche Bank. Your line is open.
Hey, good afternoon, everyone. Thanks for all the details so far.
So I guess without without asking for any <unk>.
T codes for the model.
How are you guys thinking about it.
The number of the.
Increase in SKU presumed increase in skier visits for this upcoming season, I'm asking it relative to kind of.
We kind of know where you are in season pass sales, we know what the price increase was if we add all that up and we.
I think we get to a lift ticket revenue I guess as we think about ancillary just trying to get a sense as to you obviously had 12% growth last fiscal year.
What.
Are you anticipating is it something in the range of low single mid single high single is there any way to get a sense. Thanks.
Hi, Chris.
Not really give out specific guidance on the skier visit forecast for the guidance and so what I will just tell you. Though is you should think about right. The pass sales growth, which is our best indicator right now of our expectations for this year you've seen over time, how that right is translated into kind of visitation growth last year I went to see.
Call out I think I'm disappointed out.
What you are quoting right does have some change.
Changes year over year with seven Springs acquisition, and the acquisition of undermine Citron so you'd want to normalize for those types of items, but generally the ski industry has been relatively low growth in terms of the visitation and I think where you've seen us really.
Deliver for our guidance as you will see the revenue translation from our growth in ancillary in our growth and capture with our advanced commitment strategies.
Yes.
Okay.
That's helpful.
Right.
And then just kind of revisiting this is really more of a longer term question right because you've covered your.
Our margin expectations for this upcoming year, but the employee housing front.
There's a lot of moving parts right some.
Some of your local local markets.
In terms of housing.
Is there anything kind of changed since last year in terms of how youre thinking about.
Essentially yes.
Trying to help folks get more refi find more available housing.
In future years. Thanks.
I would not say that there is a material change in our focus and that this is a priority for us affordable housing is a crisis and so many geographies as you know and in our mountain communities.
Can use to be challenging and a crisis in many places it is not an easy problem to solve but we are committed to making investments. We made some great project price progress last year. We've also run into obstacles and we continue to stay diligent on poker.
And focused on investing in that I would say.
Now when you look at our staffing this past year, we did get fully staffed despite a tight labor market and despite the challenges of affordable housing that does not mean that we're going to let.
Let up our intense focus on continuing to make progress, but it's also important to note that.
It is possible for us to get fully staffed.
As we work through these challenges and partnership with our communities and partnership with other developers and partners.
But I'd say, yeah, we're in the same spot and suspect we will be for a while because it's a significant challenge.
Okay fair enough. Thanks scarcity.
Thank you.
Our next question will come from Brent <unk> with Barclays. Your line is open.
Hey, good evening, everybody. Thanks for taking my questions nice past results by the way.
My first question is.
Housekeeping and then I have another question.
The first one is the $7 million.
Employee investment you called out I know, we kind of talked about I just want to make sure I understand that that's that's not one time rates as that is sort of the tail end of the $1 75 for last year that was also not one time right is that the right way to think about it.
That's correct Brent that is the employee investment impact in this year is the.
The impact of the timing of when the employee investment was implemented last year and so we've got two months.
Of impact incrementally hitting this year and that investment is in our cost structure going forward.
Okay, Perfect and then I think.
Now I'm going to ask you what Australia was because I think four or five people are asking and I think the reason why everyone wants to know that it's because they want to take that number and add it back on your <unk> guidance and say this is the this is the earnings power of the company and has stabilized basis, so I'm going to ask it a slightly different way and say if I look at your <unk>.
Last years.
Last year's original guidance right.
And I'd Rebased for FX and I think the other adjustments that you called out and then I look at the sort of midpoint of this year's guidance with a what I think is a fair adjusted for Australia, I get to I get to a sort of an even 5%.
But I would think as the same store EBITDA growth number and so I guess the question is that what you think the growth profile of the businesses or do you think it's better what do you what do you say to that.
Okay.
Hi, Brent so yeah, I would I would just comment on a couple of things there. So yes, the adjustments that we called out last year on FX with the sale of the retail rental outlets.
Completely agree with how youre thinking about that as it relates to adjustments from last year and then the go forward growth of the business really they are the three things that we're pointing to for Q1 that are you know one being cost inflation, which as you can estimate how much on our cost structure in Q1 not pieces and then the rest of it is is the <unk>.
M. P isn't it is I think.
Factored a normalize them to think about because last year right in Australia at this time as part of our guidance. We knew right. We have seen the strength going through the Q4 and then into the Q1, when we issued the guidance last year and we saw very strong.
There was some pent up demand in Australia that we commented on and talked about right. After the COVID-19 restrictions and we had a really favorable weather conditions in Australia in their prior winter season, and this year, we're seeing the opposite and some of that correcting and that is a piece that I think is very different year over year at impacting our growth and that's why we're call.
Going out this Q1 impact and then to a lesser extent I think the north American demand patterns right. We are seeing this shifting.
And of behavior.
<unk> heard from a lot of other competitors right and a lot of leisure companies shifting to urban and international and cruise type of alternative vague.
Vacations over the summer again that is very different travel behavior than what where we see in our winter customer in our winter basin. So that is just an impact that we've had that hit us in Q4, which you see in the results and also we're just pointing out that has continued into Q1, and we expect that to normalize over time.
We don't think that that's a permanent shift in behavior and that's another piece of.
That we expect to to return back to normal.
Okay. Thanks for all that extra color Angela.
Yes.
Yes.
Thank you.
Our last question will come from Megan Alexander with Morgan Stanley . Your line is open.
Hi, Thanks, very much most of mine have been answered at this point, but you know you talked about strong pass sales growth from a new wing holders could you maybe just give us some color on what you saw with your one renewals versus multiyear pass holders.
Yes, we are seeing that would be the primary driver of our growth right now that we're reporting is primarily driven by the loyalty of our passengers and we're seeing.
Strong renewals across all different levels of our pass holders versus prior year, which we are thrilled with because it's you know critical to success of the past program to have that loyalty and those renewals. While we're also going after new pass holders and bringing people and I will.
Sure also an interesting piece that is when we look at new pass holders May again, we look at people that are brand new coming to Vail resorts people converting from a lift ticket, but we also look at people who used to be pass holders, what we would call lapsed pass holders from any prior years and our past it could be.
From a year ago, two years ago, five years ago, eight years ago, and we are achieving strong growth significantly strong growth among that population people who used to be pass holders that are now coming back to us.
Awesome Super helpful. And then maybe just one clarification on your answer to <unk> question. It.
Is it is the impact that you're seeing in Australia is there an impact from lapping the pent up demand or was that you know more of it more of a lost year on Barton.
We would get all the dock next year I don't know if that makes sense, but just want to understand if there is an impact from from the lap that you're seeing or if it's really just the weather this year.
Okay.
Hi, Megan Yeah, I think it's a little bit of a normalization piece is what I would say right. So we did have some of that pent up demand in the prior year and very good conditions and just a really strong finish to the season in the prior year and in this Q1 right. We're seeing the opposite where we've had very warm temps that have led to the train closure.
And so right, it's a little bit of both I would say right very different extreme conditions that we're seeing.
From the prior year to this year.
Okay. That's helpful. Thank you.
Thank you Megan.
Thank you.
This concludes the Q&A portion of today's call I would now like to turn the call back over to Kirsten Lynch for closing remarks.
Thank you operator. This concludes our fiscal 2023 year end earnings call. Thank you to everyone who joined US today. Please feel free to contact me or Angela directly should you have further questions. Thank you for your time this afternoon and goodbye.
Thank you ladies and gentlemen, this concludes today's Vail resorts fiscal 2023 fourth quarter earnings call and webcast.
You may disconnect. Your line at this time and have a wonderful day.
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