Vail Resorts, Inc. — Fiscal 2023 Third-Quarter 10-Q
Reporting period: Quarter and nine months ended April 30, 2023; comparisons are to the same periods in 2022. Vail operates Mountain, Lodging and Real Estate businesses. Results are highly seasonal, with North American and European ski operations generally peaking from mid-December through mid-April. Unless otherwise noted, amounts below are in U.S. dollars.
Financial results
| Metric | Three months ended April 30 | Nine months ended April 30 |
|---|---|---|
| Total revenue | $1,238.4 million, up 5.2% from $1,176.7 million | $2,619.6 million, up 16.0% from $2,258.8 million |
| Income from operations | $500.5 million, down from $540.4 million | $665.2 million, down from $699.8 million |
| Net income attributable to Vail Resorts | $325.0 million, down 12.8% from $372.6 million | $396.7 million, down 13.1% from $456.6 million |
| Diluted EPS | $8.18, versus $9.16 | $9.87, versus $11.20 |
| Resort Reported EBITDA | $623.3 million, up 2.1% from $610.5 million | $921.6 million, up 2.4% from $900.0 million |
| Total Reported EBITDA | $621.9 million, versus $609.2 million | $921.1 million, versus $897.2 million |
Reported EBITDA is a company-defined non-GAAP measure. Mountain revenue increased 5.5% for the quarter and 16.3% year to date; Mountain Reported EBITDA rose 1.8% and 4.6%, respectively. Quarterly skier visits increased 6.2%, while effective ticket price fell 6.5%. Lodging Reported EBITDA rose 12.8% in the quarter but fell 69.8% year to date, to $8.0 million. Real Estate Reported EBITDA was negative in both periods.
For the nine months, operating cash flow was $726.9 million, down from $773.0 million. Investing cash outflow was $221.3 million; capital expenditures were $261.3 million, up from $161.8 million. Financing cash outflow was $703.2 million, including $400.0 million of share repurchases and $235.7 million of dividends. Cash, cash equivalents and restricted cash declined by $207.5 million during the period.
At April 30, cash and cash equivalents were $896.1 million, versus $1,401.2 million a year earlier. Total debt was $2,842.7 million, including current maturities; company-defined Net Debt was $1,946.6 million, up from $1,350.1 million a year earlier. The company reported $420.4 million available on its Vail Holdings revolver and $207.9 million on the Whistler revolver. It was in compliance with debt covenants.
Material changes and notable items
- Quarterly growth in Mountain ancillary revenue—particularly ski school and dining—was partly offset by higher labor, inflation and other operating costs. Lift revenue decreased 0.7%, partly reflecting the timing of pass revenue recognition and early-season opening comparisons.
- Year-to-date Mountain results benefited from improved Australian visitation and conditions, higher pass revenue, and acquired operations, including Andermatt-Sedrun. These gains were partly offset by increased staffing and wage costs, inflation, weather-related costs and other operating expenses.
- Income was affected by a $45.9 million quarterly and $47.6 million year-to-date expense from remeasuring Park City contingent consideration, reflecting higher expected long-term resort EBITDA and the expected fiscal 2023 payment. The liability was $71.1 million at April 30; management disclosed that a 100-basis-point discount-rate change or a 5% change in estimated subsequent-year performance could change fair value by about $10.1 million to $14.0 million.
- The effective tax rate increased to 26.6% for the quarter and 25.7% year to date, from 23.4% and 18.8%, respectively, primarily due to income shifting to higher-tax jurisdictions and fewer favorable discrete items.
- Vail repurchased 1.78 million shares for approximately $400 million during the nine months. The board added 2.5 million shares to the authorization in March; 1.76 million remained available at April 30. The company also accrued approximately $3.9 million of share-repurchase excise tax.
- The company acquired a 55% controlling interest in Andermatt-Sedrun in August 2022 for consideration valued at $155.4 million. Its preliminary purchase-price allocation remains subject to change. On May 1, 2023, it sold five Telluride retail and rental stores after classifying them as held for sale and recording a $5.9 million loss in the reported period.
Outlook, management commentary and risks
- Management reported record visitation, resort net revenue and Resort Reported EBITDA for the 2022/2023 North American ski season despite holiday travel disruptions, variable weather at Eastern U.S. resorts and storm-related disruption in Tahoe. It cited a strong spring finish, improved staffing and guest satisfaction above pre-pandemic levels at destination resorts.
- Pass sales through May 30, 2023 for the 2023/2024 North American season were up approximately 6% in units and 11% in sales dollars year over year, currency-adjusted for Whistler. Management cautioned that this trend may not continue through the sales campaign and did not provide earnings guidance in the supplied filing text.
- Expected calendar 2023 resort capital expenditures are $180 million to $185 million, excluding specified one-time items and $10 million of Andermatt-Sedrun growth capital. Including those items, the total capital plan is $206 million to $211 million; estimated maintenance capital is $112 million to $117 million, excluding Andermatt-Sedrun.
- Management expects cash, operating cash flow and credit availability to meet near-term liquidity needs. It expects to meet applicable financial maintenance covenants over the next 12 months, while noting there can be no assurance. A 100-basis-point change in borrowing rates would change annual interest payments by approximately $6.9 million; approximately $0.7 billion of variable-rate debt was outstanding after swaps.
- Key risks include weather and snowfall variability, travel disruption, inflation and higher interest rates, discretionary consumer spending, labor availability and cost, seasonality, foreign-exchange movements, integration of acquisitions, cybersecurity and information-technology disruptions, and reliance on permits and public lands. The company said there were no material changes to risk factors in its prior Form 10-K. Ordinary-course lawsuits were not expected to have a material adverse effect; the company reported no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether reported pass-sales growth for the 2023/2024 season continues and translates into revenue and visitation.
- How much of the decline in year-to-date net income reflects the Park City contingent-consideration remeasurement, higher costs and tax-rate changes, and how those items may evolve.
- Whether lodging profitability recovers after the substantial year-to-date EBITDA decline and cost increases.
- Execution and final purchase accounting for Andermatt-Sedrun, plus performance and integration costs from acquired resorts.
- Capital spending, dividends and repurchases relative to operating cash generation, liquidity and the increase in Net Debt.
- Sensitivity to interest rates, currency movements, snowfall and travel conditions, and the assumptions underlying the $71.1 million contingent-consideration liability.