Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: Second quarter and six months of fiscal 2023, ended January 31, 2023; comparisons are with the corresponding 2022 periods. The company operates Mountain, Lodging and Real Estate businesses. Results are highly seasonal, and interim results are not necessarily indicative of full-year performance.
Key financial metrics
| Metric | Three months ended Jan. 31, 2023 | Three months ended Jan. 31, 2022 | Six months ended Jan. 31, 2023 | Six months ended Jan. 31, 2022 |
|---|---|---|---|---|
| Total revenue | $1,101.7 million | $906.5 million | $1,381.2 million | $1,082.1 million |
| Net income attributable to Vail Resorts | $208.7 million | $223.4 million | $71.7 million | $84.1 million |
| Diluted earnings per share | $5.16 | $5.47 | $1.77 | $2.06 |
| Total Reported EBITDA, a non-GAAP measure | $396.9 million | $397.5 million | $299.2 million | $287.9 million |
| Net cash provided by operating activities | Not presented for the quarter | Not presented for the quarter | $605.5 million | $611.3 million |
| Capital expenditures | Not presented for the quarter | Not presented for the quarter | $206.6 million | $128.9 million |
For the quarter, revenue increased 21.5%, while total Reported EBITDA was nearly flat. The implied Reported EBITDA margin was approximately 36.0%, compared with 43.8% a year earlier; this is a non-GAAP calculation from reported figures. Quarterly net income attributable to Vail Resorts fell 6.6%, and diluted EPS declined from $5.47 to $5.16. For the six-month period, revenue increased 27.6%, Reported EBITDA rose 3.9%, and attributable net income declined 14.7%.
- Mountain: Quarterly revenue rose 21.5% to $1.013 billion and Reported EBITDA increased 2.7% to $398.9 million. Skier visits rose 12.9% and effective ticket price increased 0.6%. Year-to-date Mountain Reported EBITDA rose 10.5% to $306.7 million.
- Lodging: Quarterly revenue increased 11.9% to $80.6 million, but Reported EBITDA moved to a $4.1 million loss from $9.4 million of income. Year-to-date Lodging Reported EBITDA was a loss of $8.4 million versus income of $11.9 million.
- Real Estate: Quarterly revenue was $7.7 million, principally from a Keystone land sale; segment Reported EBITDA was $2.1 million.
Financial position, debt and liquidity
- At January 31, 2023, cash and cash equivalents were $1.295 billion; total debt, including current maturities, was $2.859 billion. Net Debt, as defined by the company, was $1.564 billion, up from $1.352 billion a year earlier.
- Total assets were $6.565 billion and total liabilities were $4.788 billion. Current liabilities included $619.5 million of deferred revenue, principally advance sales and other customer receipts.
- Available revolving credit was reported as $414.6 million under the Vail Holdings facility and $211.7 million under the Whistler facility. Management said cash, credit availability and expected operating cash flows should be sufficient for liquidity needs.
- Variable-rate debt was approximately $0.7 billion after interest-rate swaps; a 100-basis-point rate change would alter annual interest payments by approximately $7.1 million. The company reported compliance with debt covenants.
- Operating cash flow was $605.5 million for the first six months, slightly below $611.3 million a year earlier. Cash used in investing was $206.0 million and cash used in financing was $201.4 million. Dividends paid totaled $154.0 million, compared with $71.3 million in the prior-year period.
Material changes and management commentary
- Revenue growth reflected increased visitation and ancillary spending, improved staffing and operating capacity versus the prior year, Australian operations recovering from COVID-related closures, and the acquisition of Andermatt-Sedrun. The company also cited increased 2022/2023 North American pass sales.
- Management said approximately $40 million of quarterly pass-revenue growth reflected timing: some resorts opened later in the prior-year season and earlier in the current season. It expected much of this timing benefit to reverse in the third fiscal quarter.
- Costs rose materially, particularly labor and labor-related benefits, reflecting wage investment, increased staffing, inflation and variable operating costs. Severe weather and added snowmaking, grooming and labor expenses weighed on Eastern U.S. resorts; Tahoe resort access and operations were also disrupted by snowstorms. Airline disruptions affected western U.S. holiday visitation.
- On August 3, 2022, the company acquired a 55% controlling interest in Andermatt-Sedrun for consideration with a reported fair value of $155.4 million. Purchase accounting remained preliminary. Andermatt-Sedrun contributed to Mountain results from the acquisition date.
- The company adopted convertible-debt accounting guidance in August 2022, increasing reported debt carrying value and eliminating future non-cash interest expense related to the former debt discount. The filing notes prior periods were not retrospectively adjusted.
Outlook, risks and contingencies
- No full-year revenue, earnings or EBITDA guidance is provided in the supplied filing text. Management estimated calendar 2023 capital expenditures of $180–$185 million for resort spending, or $206–$211 million including specified one-time and growth items; estimated maintenance capital was $112–$117 million, excluding Andermatt-Sedrun.
- The board approved a $2.06-per-share dividend payable April 11, 2023. It also authorized an additional 2.5 million shares for repurchase, bringing available authorization to 3,534,292 shares. No shares were repurchased during the reported six-month period.
- Principal risks include weather and snowfall variability, seasonality and the business’s high fixed-cost structure, inflation and labor availability, economic weakness affecting discretionary travel, airline disruptions, COVID-19 impacts, foreign-exchange movements, and interest-rate and debt-service exposure. Management also cited integration and performance uncertainty relating to acquisitions.
- Park City contingent consideration was valued at $25.2 million at January 31, 2023. The estimate depends on unobservable assumptions; management said future adjustments could be material as the ski season progresses. The company also disclosed ordinary-course litigation, letters of credit, surety bonds and other indemnifications; it said recorded legal loss contingencies were not material.
- The six-month tax provision was $21.0 million, versus a $7.8 million tax benefit in the prior-year period. Management attributed the change in effective tax rates principally to higher expected full-year pre-tax income and fewer favorable tax items, including excess tax benefits from employee share awards.
Important facts for investors to verify
- Whether reported pass-sales growth and the early-season revenue timing benefit are sustained or reverse as management expects.
- How weather, resort access and operating days affect the remainder of the ski season, particularly at Eastern U.S. and Tahoe resorts.
- Whether labor, utility and other inflation-driven costs continue to outpace revenue growth, including the impact on Lodging profitability.
- Progress integrating Andermatt-Sedrun and final purchase-price allocation, as well as its contribution to results and capital needs.
- Debt, liquidity and covenant headroom under changing interest rates, alongside planned capital spending, dividends and potential share repurchases.
- Potential changes to Park City contingent consideration, foreign-currency effects and other material estimates or contingencies.