Vail Resorts, Inc. — Q3 FY2021 Form 10-Q
Reporting period: Three and nine months ended April 30, 2021. The company operates Mountain, Lodging and Real Estate businesses; results are highly seasonal. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Three months 2021 | Three months 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $889.1M | $694.1M | $1,705.5M | $1,886.5M |
| Operating income | $387.7M | $218.2M | $431.5M | $393.4M |
| Net income attributable to Vail Resorts | $274.6M | $152.5M | $268.7M | $252.4M |
| Diluted EPS | $6.72 | $3.74 | $6.58 | $6.17 |
| Total Reported EBITDA* | $461.2M | $303.6M | $640.0M | $603.0M |
Revenue rose 28% in the quarter but fell 10% year to date. Vail-attributable net income rose 80% in the quarter and 6% year to date. Analyst-calculated net margins were approximately 30.9% versus 22.0% for the quarter and 15.8% versus 13.4% year to date; these comparisons reflect seasonality and unusual pandemic-related effects. The filing does not present a consolidated GAAP margin measure.
- Segment EBITDA: Mountain was $458.0M for the quarter and $654.2M year to date; Lodging was $4.2M and negative $10.7M, respectively; Real Estate was negative $1.0M and negative $3.5M.
- Cash flow: Nine-month operating cash flow was $551.1M, compared with $467.0M. Investing used $75.0M, versus $466.5M, including $327.6M of prior-year Peak Resorts acquisition spending. Capital expenditures were $85.6M versus $145.8M.
- Cash and debt: April 30 cash and equivalents were $1,344.7M. Total debt principal was $2,958.2M; balance-sheet debt, including current maturities and net of discounts, was $2,853.4M. Net debt was $1,508.7M, down from $1,946.3M a year earlier.
- Available liquidity: The company reported $418.6M available on its Vail Holdings revolver and C$249.1M (about $202.7M) available on the Whistler revolver. Current assets were $1,684.8M and current liabilities $717.1M.
- Interest and distributions: Nine-month net interest expense increased to $112.3M from $73.3M. No cash dividends were paid in the 2021 periods; dividends were suspended in response to COVID-19 and are subject to credit-agreement restrictions.
*Reported EBITDA is a company-defined, non-GAAP measure and should not be treated as a substitute for GAAP income or cash flow.
Changes versus the prior comparable period
- The quarter’s improvement chiefly reflects resorts operating for most of the North American season in 2021, compared with early closures beginning March 15, 2020. The company also recognized pass revenue deferred from the prior year under its customer credit offer, including approximately $120.9M deferred from FY2020.
- Quarterly Mountain revenue increased 30% and Mountain Reported EBITDA increased 52%. Lift revenue increased 54%, supported by pass revenue; skier visits increased 36% and effective ticket price increased 14%.
- Year-to-date revenue and Mountain revenue declined despite Mountain Reported EBITDA increasing 10%. COVID-related capacity limits, lower destination visitation, weak snowfall at certain resorts, and restrictions and closures affected ancillary businesses. Year-to-date Lodging Reported EBITDA moved to a $10.7M loss from $11.5M income.
- The prior-year comparison included a $28.4M impairment of the Colorado resort ground transportation business; no impairment was recorded in 2021. Conversely, 2021 results included a $12.2M year-to-date loss from revaluing Park City contingent consideration, versus a $5.3M gain in 2020. Higher interest expense also weighed on 2021 results.
Outlook, commentary and risks
- The company gave no full-year earnings guidance in the provided filing. It expected calendar-year 2021 resort capital expenditures of $115M–$120M, excluding specified integration and reimbursable items; including those and real-estate-related capital, the total capital plan was estimated at $135M–$140M.
- For the 2021/2022 North American season, pass prices were reduced 20%. Pass sales through June 1, 2021 were approximately 50% higher in units and 33% higher in sales dollars than through June 4, 2019; management cautioned that this trend might not continue through the fall sales campaign or predict season revenue.
- Management said cash, revolver availability and expected operating cash flow should provide sufficient liquidity. The company had approximately $0.8B of variable-rate debt; a 100-basis-point rate change would alter annual interest payments by about $8.5M.
- COVID-19 remained a material uncertainty, including travel restrictions, operating-capacity limits, consumer demand, staffing, and potential resort closures. Epic Coverage may require refunds to pass holders for qualifying events, creating potential financial exposure. Whistler Blackcomb closed March 30, 2021 following a British Columbia health order.
- Vail Holdings’ financial maintenance covenants were waived through January 31, 2022, subject to specified conditions and a monthly minimum-liquidity test. Dividends and repurchases are restricted during the waiver period unless conditions are met. The company reported compliance with required debt covenants as of April 30, 2021.
- Other items to monitor include weather and snowfall, foreign-exchange movements, labor availability and costs, permit approvals, and the company’s seasonal fixed-cost structure. Ordinary-course litigation accruals were not material; outstanding letters of credit totaled $75.8M and surety bonds $14.3M.
Key facts for investors to verify
- How much of the year-over-year earnings improvement reflects the prior-year resort closures and the $120.9M pass-revenue deferral, rather than underlying demand growth.
- Whether pass-sales momentum carries into the fall and translates into visitation, ancillary spending and cash generation.
- Ongoing COVID-related restrictions, Epic Coverage refund estimates, and the operating outlook for Whistler Blackcomb and lodging properties.
- Liquidity and covenant requirements, the effect of higher interest rates, and the timing and cost of planned capital expenditures.
- The effect of Park City contingent consideration remeasurement, foreign-exchange changes and other significant non-cash or unusual items on reported earnings.