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Vail Resorts today reported results for the second quarter of fiscal 2020 ended January 31, 2020, provided the Company’s ski season-to-date metrics through March 1, 2020 and withdrew its guidance for fiscal 2020 due to the uncertain impact of coronavirus on results for the remainder of fiscal 2020.
Highlights
Net income attributable to Vail Resorts, Inc. was $206.4 million for the second fiscal quarter of 2020 compared to net income attributable to Vail Resorts, Inc. of $206.3 million in the same period in the prior year. Fiscal 2020 second quarter net income included the after-tax effect of acquisition and integration related expenses of approximately $1.4 million. Fiscal 2019 second quarter net income included the after-tax effect of acquisition and integration related expenses of approximately $2.2 million.
Resort Reported EBITDA was $378.3 million for the second fiscal quarter of 2020, which included $1.9 million of acquisition and integration related expenses and approximately $1 million of favorable foreign exchange as a result of the U.S. dollar weakening over the prior year compared to the Canadian dollar. In the same period in the prior year, Resort Reported EBITDA was $358.0 million, which included $2.9 million of acquisition and integration related expenses.
Based on results through March 1, 2020 and indicators for the remainder of the year as of that date, and excluding any identified impact from coronavirus, the Company estimated that Resort Reported EBITDA for fiscal 2020 was expected to be approximately $20 million below the midpoint of the guidance range previously issued on January 17, 2020.
Given the uncertainty surrounding the impact of the coronavirus on the broader U.S. travel market and any specific impact to the performance of the Company, the Company is not issuing guidance at this time for fiscal 2020 and is withdrawing its previous guidance issued on January 17, 2020. In the week ended March 8, 2020, the Company saw a marked negative change in performance from the prior week, with destination skier visits modestly below expectations. The Company expects this trend to continue and potentially worsen in upcoming weeks. The Company intends to provide updated commentary on its results by March 18, 2020.
Unless otherwise noted, the commentary on results for the three months ended January 31, 2020 includes a full quarter of results from our recent acquisitions of Peak Resorts (acquired in September 2019) and Falls Creek and Hotham (acquired in April 2019).
Commenting on the Company’s fiscal 2020 second quarter results, Rob Katz, Chief Executive Officer, said, “Overall we feel good about the season so far, but have had both areas of challenge and areas of strong performance. Our Pacific Northwest resorts (Whistler Blackcomb and Stevens Pass) experienced the lowest snowfall in over 30 years through December 31, 2019, resulting in very poor results through the early season and critical holiday period. Visitation at those resorts continued to be challenging and below our expectations in January, with Whistler Blackcomb experiencing a weaker than expected recovery in North American and international destination visitation. In total, visitation across our Pacific Northwest resorts was down 14% compared to the prior year for the second quarter. After a challenging start in the early season, destination guest visitation at our western U.S. resorts improved significantly during the holiday period and was in line with our expectations. The improvement continued through January though Colorado was modestly below our expectations for the post-holiday period, partially offset by strong performance at our Park City resort. Our Northeast resorts are off to a great start to the season, supported by the continued benefit from our expanded Northeast network which has been partially offset by challenging weather variability across the Midwest resorts.
“Including results from Peak Resorts, total lift revenue increased 8.2%, driven by an 8.8% growth in skier visitation. Total effective ticket price (“ETP”) decreased 0.5% in the second quarter compared to the prior year, with price increases in both our lift ticket and season pass products offset by the inclusion of results from Peak Resorts which generates lower ETP. Excluding season pass holders and Peak Resorts, ETP increased 4.0% compared to the prior year. Ski school, dining and retail/rental revenues increased 11.4%, 15.8% and 4.1% compared to the prior year, respectively, primarily driven by the inclusion of Peak Resorts.”
Regarding the Company’s Lodging segment, Katz said, “Our lodging business experienced mixed results during the quarter, with revenue (excluding payroll cost reimbursements) increasing 8.4% compared to the prior year, primarily due to the incremental operations of Peak Resorts, partially offset by softer results at our Colorado properties, in part due to weaker group demand in comparison to the prior year period.”
Regarding the Company’s outlook, Katz said, “Given the uncertainty surrounding the impact of the coronavirus on the broader U.S. travel market and any specific impact to the performance of our Company, we are not issuing guidance at this time for fiscal 2020 and are withdrawing our previous guidance issued on January 17, 2020. In the week ended March 8, 2020, we saw a marked negative change in performance from the prior week, with destination skier visits modestly below expectations. We expect this trend to continue and potentially worsen in upcoming weeks.”
Regarding capital allocation, Katz said, “We remain confident in the strong cash flow generation and stability of our business model. We will continue to be disciplined stewards of our capital and remain committed to strategic, high-return capital projects, continuous investment in our people, strategic acquisition opportunities and returning capital to our shareholders through our quarterly dividend and share repurchase programs. We are pleased to announce that the Board of Directors declared a quarterly cash dividend on Vail Resorts’ common stock of $1.76 per share, payable on April 9, 2020 to shareholders of record on March 26, 2020. Given the current market instability caused by the coronavirus, we are deferring our decision on a dividend increase until June.” Katz added, “Our balance sheet remains very strong. We ended the second quarter with $126.8 million of cash on hand and our Net Debt was 2.4 times trailing twelve months Total Reported EBITDA, though it is important to note that this ratio only includes Peak Resorts’ results for the period between closing and quarter end, and we expect that ratio to decline as we incorporate a full year of results from Peak Resorts.”
Season-to-Date Metrics through March 1, 2020 & Interim Results Commentary
The Company announced ski season-to-date metrics for the comparative periods from the beginning of the ski season through Sunday, March 1, 2020, and for the prior year period through Sunday, March 3, 2019. The reported ski season metrics are for our North American destination mountain resorts and regional ski areas, including the results of Peak Resorts in both periods and excluding the results of our Australian ski areas in both periods. The reported ski season metrics include growth for season pass revenue based on estimated fiscal 2020 North American season pass revenue compared to fiscal 2019 North American season pass revenue, and the metrics are adjusted to eliminate the impact of foreign currency by applying current period exchange rates to the prior period for Whistler Blackcomb’s results. The data mentioned in this release is interim period data and is subject to fiscal quarter end review and adjustments.
Season-to-date total lift ticket revenue, including an allocated portion of season pass revenue for each applicable period, was up 0.8% compared to the prior year season-to-date period.
Season-to-date ski school revenue was up 2.8% and dining revenue was down 1.4% compared to the prior year season-to-date period. Retail/rental revenue for North American resort and ski area store locations was down 0.6% compared to the prior year season-to-date period.
Season-to-date total skier visits were down 5.2% compared to the prior year season-to-date period.
Based on results through March 1, 2020 and indicators for the remainder of the year as of that date, and excluding any identified impact from coronavirus, the Company estimated that Resort Reported EBITDA for fiscal 2020 was expected to be approximately $20 million below the midpoint of the guidance range previously issued on January 17, 2020, driven primarily by the continuation of challenging visitation trends at our Pacific Northwest resorts throughout January and February and secondarily from results at our Colorado resorts that were modestly below our expectations in January and February, partially offset by strong performance at our Park City resort.
Epic Pass
Vail Resorts is committed to providing the best value in skiing for all skiers and riders through its transformational Epic Pass and Epic Day Pass advanced commitment products. Last year, we launched the Epic Day Pass, giving all skiers and riders the same value and flexibility available to season pass holders, even if they only plan to ski or ride one day. The Epic Day Pass provides unparalleled value to all skiers and riders through a discount of up to 50% off of lift ticket window prices by purchasing in advance of the ski season. We were very pleased with the success of the Epic Day Pass launch last year and expect to see continued growth in this product in its second season, as we convert existing lift ticket purchasers and new prospective guests into advanced commitment products.
This year, we are transforming the breadth of value offered with our pass products by providing our pass holders truly epic discounts on their mountain experience with the introduction of Epic Mountain Rewards. For the 2020/2021 North American ski season, pass holders will receive 20% off of food and beverage, lodging, group ski and ride school lessons, equipment rentals and more, creating incremental savings of potentially hundreds of dollars per day for a family of four. No other major pass product provides this level of across-the-board savings for skiers and riders, and, with no sign-up, no point tracking and no blackout dates, Epic Mountain Rewards is designed to be as simple as possible. Vail Resorts is uniquely positioned to offer this kind of across-the-board value to our guests through our integrated network of 37 owned and operated resorts. The Company expects the new offering will continue to drive conversion of our guests from purchasing lift tickets to purchasing an advanced commitment pass product, where we see higher guest return rates and guest satisfaction.
The Company is also delivering more value to our guests in key regional markets through the introduction of the Northeast Value Pass and Whistler Blackcomb Day Pass. The Northeast Value Pass offers unlimited skiing in the Northeast for $599 for adults and $419 for college students, with holiday restrictions at our Vermont and New York resorts and up to 10 days of access at Stowe. The Whistler Blackcomb Day Pass is a deeply discounted product, sold in Canadian dollars, that provides exclusive access to one of the world’s premier mountain destinations. This new customizable pass offers from one day to ten days of access and is ideal for skiers and riders who may not need the unlimited access offered on a traditional season pass but are interested in the value of this advanced commitment offering. By purchasing in advance of the ski season, Whistler Blackcomb guests can ski and ride for up to 50% off of lift ticket window prices, providing all guests with the value, flexibility and convenience that comes with being a pass holder. The Company expects both new passes will continue to drive conversion of our guests from purchasing lift tickets to purchasing an advanced commitment pass product.
Operating Results
A more complete discussion of our operating results can be found within the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Form 10-Q for the second fiscal quarter ended January 31, 2020, which was filed today with the Securities and Exchange Commission. The following are segment highlights:
Mountain Segment
Total lift revenue increased $36.8 million, or 8.2%, compared to the same period in the prior year, to $484.3 million for the three months ended January 31, 2020, primarily due to an increase in pass product revenue and incremental revenue from Peak Resorts. Pass product revenue, although primarily collected prior to the ski season, is recognized in the Consolidated Condensed Statements of Operations throughout the ski season primarily based on historical visitation. For the 2019/2020 North American ski season, our historical visitation trend has shifted the allocation of pass holder visitation to our fiscal third quarter as compared to our fiscal second quarter. As a result, our allocation of fiscal year 2020 pass revenue for the three months ended January 31, 2020 is approximately $11 million lower than it would have been under the prior year allocation.
Ski school revenue increased $10.5 million, or 11.4%, primarily as a result of incremental revenue from Peak Resorts of approximately $7.5 million, as well as increased revenue from our western U.S. resorts and Whistler Blackcomb.
Dining revenue increased $10.3 million, or 15.8%, primarily as a result of incremental revenue from Peak Resorts of approximately $11.7 million, partially offset by a decrease in revenue at our western U.S. resorts and Whistler Blackcomb.
Retail/rental revenue increased $5.3 million, or 4.1%, primarily as a result of incremental revenues from Peak Resorts of approximately $12.6 million, partially offset by a decrease in retail sales volumes primarily at our stores proximate to the San Francisco Bay Area.
Operating expense increased $48.7 million, or 11.5%, which was primarily attributable to incremental operating expenses from Peak Resorts.
Mountain Reported EBITDA increased $20.8 million, or 5.9%, for the second quarter compared to the same period in the prior year, which includes $4.6 million of stock-based compensation expense for the three months ended January 31, 2020 compared to $4.3 million in the same period in the prior year.
Lodging Segment
Lodging segment net revenue (excluding payroll cost reimbursements) for the three months ended January 31, 2020 increased $5.8 million, or 8.4%, as compared to the same period in the prior year, primarily due to incremental revenue from Peak Resorts.
Lodging Reported EBITDA for the three months ended January 31, 2020 decreased $0.5 million, or 8.0%, for the second quarter compared to the same period in the prior year, which includes $0.9 million of stock-based compensation expense for the three months ended January 31, 2020 compared to $0.8 million in the same period in the prior year.
Resort – Combination of Mountain and Lodging Segments
Resort net revenue increased $75.1 million, or 8.8%, compared to the same period in the prior year, to $924.4 million for the three months ended January 31, 2020, primarily due to strong North American pass sales growth for the 2019/2020 North American ski season and incremental revenue from Peak Resorts.
Resort Reported EBITDA was $378.3 million for the three months ended January 31, 2020, an increase of $20.3 million, or 5.7%, compared to the same period in the prior year, which includes $1.9 million of acquisition and integration related expenses and approximately $1 million of favorable foreign exchange primarily related to operations at Whistler Blackcomb, which the Company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results.
Total Performance
Total net revenue increased $75.1 million, or 8.8%, to $924.6 million for the three months ended January 31, 2020 as compared to the same period in the prior year.
Net income attributable to Vail Resorts, Inc. was $206.4 million, or $5.04 per diluted share, for the second quarter of fiscal 2020 compared to net income attributable to Vail Resorts, Inc. of $206.3 million, or $5.02 per diluted share, in the second fiscal quarter of the prior year. Additionally, fiscal 2020 second quarter net income included the after-tax effect of acquisition and integration related expenses of approximately $1.4 million.
Calendar Year 2020 Capital Expenditures
Regarding calendar year 2020 capital expenditures, Katz said, “We remain committed to reinvesting in our resorts, creating an experience of a lifetime for our guests and generating strong returns for our shareholders. The Company expects to invest approximately $155 million to $160 million, excluding one-time items associated with integrations, the one-time Triple Peaks and Stevens Pass transformation plan, one-time Peak Resorts capital improvements, real estate related capital and $4 million of reimbursable investments associated with insurance recoveries that we had originally expected to occur in calendar 2019.
“As previously announced, the calendar year 2020 capital plan includes a rare opportunity to expand with a 250 acre lift-served terrain expansion in the signature McCoy Park area of Beaver Creek, further differentiating the resort’s high-end, family focused experience. We also plan to add a new four-person high speed lift at Breckenridge to serve the popular Peak 7, a replacement of the Peru lift at Keystone, subject to governmental approvals, with a six-person high speed chairlift, and a significant 250 seat increase in the seating capacity at the Rendezvous Lodge Restaurant on Blackcomb Mountain. We remain highly focused on investments that will further our company-wide data driven approach, including the second phase of implementing our automated digital marketing platform that will allow us to aggregate a more holistic view of the guest that will drive improvements in personalization and engagement across all lines of business, including ski school and rentals. We are also planning to completely revamp and upgrade our digital ski rental online platforms and our EpicMix mobile app, which will offer new functionality and an improved user experience. We plan to continue to invest in corporate infrastructure and technology to improve our scalability and efficiency, including the first phase of implementation of an automated workforce planning system to optimize our labor scheduling and improved financial systems to enhance business analytics.
“We are planning to complete the $3 million initial phase of a two-year, $15 million investment program across Peak Resorts. We are also planning to complete the second and final phase of a two-year, $35 million investment program for Crested Butte, Okemo and Stevens Pass and planning to spend approximately $24 million on integration activities primarily related to Peak Resorts.
“Including one-time items associated with integrations, the one-time Triple Peaks and Stevens Pass transformation plan, one-time Peak Resorts capital improvements, real estate related capital and $4 million of reimbursable investments associated with insurance recoveries that we had originally expected to occur in calendar 2019, we expect our total capital plan to be approximately $210 million to $215 million.”
Return of Capital
The Company declared a quarterly cash dividend of $1.76 per share of Vail Resorts common stock that will be payable on April 9, 2020 to shareholders of record on March 26, 2020. Additionally, a Canadian dollar equivalent dividend on the exchangeable shares of Whistler Blackcomb Holdings Inc. will be payable on April 9, 2020 to shareholders of record on March 26, 2020. The exchangeable shares were issued to certain Canadian persons in connection with our acquisition of Whistler Blackcomb Holdings Inc.
