Vail Resorts Reports Fiscal 2019 Fourth Quarter & Full Year Results. Provides Fiscal 2020 Outlook

Vail Resorts, Inc. (NYSE: MTN) has reported results for the fourth quarter and fiscal year ended July 31, 2019 and provided its outlook for the fiscal year ending July 31, 2020.

Highlights 

• Net income attributable to Vail Resorts, Inc. was $301.2 million for fiscal 2019, a decrease of 20.7% compared to fiscal 2018, which was positively impacted by U.S. tax reform.
 
• Resort Reported EBITDA was $706.7 million for fiscal 2019, an increase of 14.6% compared to fiscal 2018. Fiscal 2019 Resort Reported EBITDA includes the operations of Triple Peaks, Stevens Pass, Falls Creek and Hotham (the "Acquired Resorts") from each respective acquisition date, $16.4 million of acquisition and integration related expenses, and approximately $8 million of unfavorable foreign exchange as a result of the U.S. Dollar strengthening relative to the prior year. We estimate that Fiscal 2019 results benefited by approximately $4 million in Resort Reported EBITDA from not owning Triple Peaks and Stevens Pass during a portion of the months of August and September, a period that these resorts operate at a loss. In the prior year, Resort Reported EBITDA was $616.6 million, which included $10.2 million of acquisition and integration related expenses.
 
• Season pass sales through September 22, 2019 for the upcoming 2019/2020 North American ski season increased approximately 14% in units and 15% in sales dollars as compared to the period in the prior year through September 23, 2018, including Military Pass sales in both periods. Pass sales exclude Peak Resorts pass sales in both periods and are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.75 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass sales.
 
• The Company issued its fiscal 2020 guidance range and expects Resort Reported EBITDA to be between $778 million and $818 million. The guidance includes an estimated contribution of $53 million for Peak Resorts operations, including an estimated $6 million benefit as a result of avoiding offseason losses from the period of August 1, 2019 through the closing of the transaction on September 24, 2019. The Company expects to incur approximately $20 million of acquisition and integration related expenses in fiscal 2020.
 
• Unless otherwise noted, the commentary on results for the year ended July 31, 2019 includes the results of acquisitions completed during the fiscal year prospectively from each respective acquisition date, including Falls Creek and Hotham (acquired April 2019), Triple Peaks (acquired September 2018) and Stevens Pass (acquired August 2018).

Commenting on the Company's fiscal 2019 results, Rob Katz, Chief Executive Officer, said, "We are pleased with our overall results for the year, with strong growth in visitation and spending compared to the prior year, including a strong finish to the season with good conditions across our U.S. resorts throughout the year. After the challenging early season period for destination visitation, our results for the remainder of the year were largely in line with our original expectations. Our results throughout fiscal 2019 highlight the growth and stability resulting from our season pass, the benefit of our geographic diversification, the investments we make in our resorts and the success of our sophisticated, data-driven marketing efforts.

"Our Colorado, Utah and Tahoe resorts experienced strong local and destination visitation, supported by favorable conditions across the western U.S. The Company experienced relative weakness in international visitation throughout the year compared to the prior year, particularly at Whistler Blackcomb. In Australia, fiscal 2019 results were strong, supported by the addition of Falls Creek and Hotham and continued pass sales momentum.

"With a strong base of high-end consumers, we are continuing to leverage our growing network of resorts and sophisticated marketing strategies to drive guest spending across our Mountain segment. For fiscal 2019, total Mountain net revenue increased 13.5% to approximately $2.0 billion and total skier visits increased 21.5% primarily as a result of the addition of the Acquired Resorts and the favorable conditions across our U.S. resorts. Total effective ticket price ("ETP") decreased 3.4% compared to the prior year, primarily due to higher skier visitation by season pass holders, lower ETP from the Acquired Resorts and the new Military Epic Pass, partially offset by price increases in both our lift ticket and season pass products. Excluding season pass holders, ETP increased 4.9% compared to the prior year. The growth in visitation and spending compared to the prior year, along with the addition of the Acquired Resorts, drove a 17.4% increase in lift revenue, a 13.2% increase in ski school revenue, a 12.7% increase in dining revenue and an 8.0% increase in retail/rental revenue compared to the prior year."

Regarding the Company's Lodging segment, Katz said, "Fiscal 2019 Lodging results were positive with revenue (excluding payroll cost reimbursements) increasing 10.9% compared to the prior year, primarily due to the incremental operations of Triple Peaks. The average daily rate ("ADR") decreased slightly compared to the prior year primarily as a result of the inclusion of the Triple Peaks resorts, as well as incremental managed Tahoe lodging properties that we did not manage in the prior year, all of which generate a lower ADR as compared to our broader Lodging segment."

Katz continued, "Our balance sheet remains strong and the business continues to generate robust cash flow. We ended the fiscal year with $108.9 million of cash on hand and our Net Debt was 2.1 times fiscal 2019 Total Reported EBITDA. On September 23, 2019, the Company entered into the Second Amendment to the Eighth Amended and Restated Credit Agreement. The amended agreement provides for a term loan facility in an aggregate principal amount of $1.25 billion, increased from the previous term loan facility of $914.4 million as of July 31, 2019. The incremental term loan proceeds were used to fund the Peak Resorts acquisition and to prepay certain portions of the debt assumed in connection with the acquisition. I am also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts' common stock. The quarterly dividend will be $1.76 per share of common stock and will be payable on October 25, 2019 to shareholders of record on October 8, 2019."

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-K for the fiscal year ended July 31, 2019, which was filed today with the Securities and Exchange Commission. The discussion of operating results below compares the results for the fiscal year ended July 31, 2019 to the fiscal year ended July 31, 2018, unless otherwise noted. The following are segment highlights:

Mountain Segment 

• Total lift revenue increased $152.9 million, or 17.4%, to $1,033.2 million primarily due to strong North American pass sales growth for the 2018/2019 North American ski season, increased non-pass skier visitation at our western U.S. resorts and incremental revenue from the Acquired Resorts.
 
• Ski school revenue increased $25.2 million, or 13.2%, and dining revenue increased $20.4 million, or 12.7%, primarily as a result of incremental revenue from the Acquired Resorts, and increased revenue at our other U.S. resorts as a result of higher skier visitation.
 
• Retail/rental revenue increased $23.8 million, or 8.0%, primarily due to higher sales volumes at stores proximate to our western U.S. resorts and other stores in Colorado, as well as incremental revenue from the Acquired Resorts.
 
• Operating expense increased $146.7 million, or 13.0%, primarily due to incremental operating expenses from the Acquired Resorts, including acquisition, stamp duty and integration related expenses.
 
• Mountain Reported EBITDA increased $87.0 million, or 14.7%, primarily as a result of strong North American pass sales growth for the 2018/2019 North American ski season, strong growth in visitation and spending at our western U.S. resorts and the incremental operations of the Acquired Resorts. Mountain Reported EBITDA includes $16.5 million of stock-based compensation expense and $16.4 million of acquisition and integration related expenses (including stamp duty) for fiscal 2019, compared to $15.7 million and $10.2 million for fiscal 2018, respectively.

Lodging Segment 

• Lodging segment net revenue (excluding payroll cost reimbursements) increased $29.5 million, or 10.9%, primarily due to incremental revenue from the Triple Peaks resorts, incremental managed Tahoe lodging properties that we did not manage in the prior year and an increase in revenue at our lodging properties in Park City.
 
• ADR decreased 0.1% at the Company's owned hotels and managed condominiums compared to the prior year, primarily as a result of the inclusion of Triple Peaks resorts as well as incremental managed Tahoe lodging properties that we did not manage in the prior year, all of which generate a lower ADR as compared to our broader Lodging segment.
 
• Lodging Reported EBITDA increased $3.1 million, or 12.4%, which includes $3.2 million of stock-based compensation expense in each of fiscal 2019 and fiscal 2018.
 
• During fiscal 2019, the Company sold the Village at Breckenridge Hotel for proceeds of $6.2 million, which resulted in a gain of $0.6 million, and did not impact Lodging Reported EBITDA.

Resort - Combination of Mountain and Lodging Segments

• Resort net revenue increased $263.3 million, or 13.1%, to $2,270.9 million primarily due to increased visitation and spending at our U.S. resorts, strong North American pass sales growth for the 2018/2019 North American ski season and incremental revenue from the Acquired Resorts. Fiscal 2019 revenue included approximately $19 million of unfavorability from currency translation, which the Company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results.
 
• Resort Reported EBITDA was $706.7 million for fiscal 2019, an increase of $90.1 million, or 14.6%, compared to fiscal 2018. Fiscal 2019 includes acquisition and integration related expenses (including stamp duty) of $16.4 million and approximately $8 million of unfavorability from currency translation, which the Company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results.

Real Estate 

• The Company closed on two land sales during fiscal 2019 with third party developers at Keystone (One River Run site) and Breckenridge (East Peak 8 site) for proceeds of approximately $16.0 million (received during the fiscal year), including $4.8 million associated with the sale of density for the Breckenridge property.
 
• Net Real Estate Cash Flow for fiscal 2019 was $12.6 million, an increase of $12.5 million compared to fiscal 2018, primarily due to the cash flows generated from the sales transactions discussed above. 

Total Performance 

• Total net revenue increased $260.0 million, or 12.9%, to $2,271.6 million.
 
• Net income attributable to Vail Resorts, Inc. was $301.2 million, or $7.32 per diluted share, for fiscal 2019 compared to net income attributable to Vail Resorts, Inc. of $379.9 million, or $9.13 per diluted share, in fiscal 2018. Net income attributable to Vail Resorts, Inc. for fiscal 2019 and 2018 included tax benefits of approximately $12.9 million and $71.1 million, respectively, related to employee exercises of equity awards (primarily related to the CEO's exercise of SARs). Additionally, included in net income attributable to Vail Resorts, Inc. for fiscal 2018 was a one-time, net tax benefit related to U.S. tax reform legislation of $61.0 million, which was recognized as a discrete item and recorded within (provision) benefit from income taxes during fiscal 2018. Additionally, fiscal 2019 net income attributable to Vail Resorts, Inc. included the after-tax effect of acquisition and integration related expenses of approximately $12.1 million and approximately $4 million of unfavorability from currency translation, which the Company calculated by applying current period foreign exchange rates to the prior period results.

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 October 25, 2019 to shareholders of record on October 8, 2019. Additionally, a Canadian dollar equivalent dividend on the exchangeable shares of Whistler Blackcomb Holdings Inc. will be payable on October 25, 2019 to shareholders of record on October 8, 2019. The exchangeable shares were issued to certain Canadian persons in connection with our acquisition of Whistler Blackcomb Holdings Inc.

Peak Resorts Acquisition

On September 24, 2019, the Company announced the closing of the Peak Resorts acquisition. The aggregate purchase price for all Peak resorts common stock was approximately $265 million. The Company borrowed $335.6 million under the term loan component of its Eighth Amended and Restated Credit Agreement to fund the acquisition and prepay certain portions of debt assumed in the acquisition. The 2019/2020 Epic Pass, Epic Local Pass and Military Epic Pass now include unlimited and unrestricted access to the 17 Peak Resorts ski areas, and guests with an Epic Day Pass can access the new ski areas as a part of the total number of days purchased.

Season Pass Sales

Commenting on the Company's season pass sales for the upcoming 2019/2020 North American ski season, Katz said, "We are very pleased with the results for our season pass sales to date. Through September 22, 2019, North American ski season pass sales increased approximately 14% in units and 15% in sales dollars as compared to the period in the prior year through September 23, 2018, including Military Pass sales in both periods, excluding pass sales from Peak Resorts in both periods and adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.75 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass sales. Excluding sales of Military Passes, season pass sales increased approximately 13% in units and 14% in sales dollars over the comparable prior year period."

Katz continued, "Our pass sales growth was modestly ahead of our expectations through this point in the season, with strong results in our destination markets. In particular, we have seen very strong growth in our Northeast markets, which are benefiting from the first full year of pass sales with unlimited access at Stowe, Okemo and Mount Sunapee included on the Epic and Epic Local pass products, and the improved impact of the expanded guest data and insight we now have in that region. Our broader destination markets continue to perform well through our enhanced ability to reach destination guests with our data-driven marketing. Our local markets continue to show solid growth, driven by favorable results among our local guests in the Whistler Blackcomb region, with particular strength in Seattle from the first full pass sales season with access to Stevens Pass. We are also seeing strong results from our Northern California and Utah guests, partially offset by more modest sales growth in our Colorado local market. The vast majority of our growth came from our Epic and Epic Local products, and we are also driving material contributions from Epic Day Pass and Military Pass products. We anticipate that the majority of the sales of the new Epic Day Pass products will be concentrated in the remainder of the selling period. We are very pleased with the performance of our pass sales effort to date, especially given the increased size and scale of the program. As we enter the final period for season pass sales, we expect our December 2019 non-military season pass sales growth rate will be modestly lower than the growth rates reported today, primarily driven by the inclusion of Peak Resorts' passes in our current and prior year reporting and the impact of our success in moving purchasers earlier in the selling cycle, partially offset by the ramp up of Epic Day Pass sales."

Regarding Epic Australia Pass sales, Katz commented, "Our Epic Australia Pass sales launched on August 15, 2019 for next season and are off to a very strong start with growth of approximately 23% in sales dollars through September 22, 2019 compared to the prior year period ended September 23, 2018, though it is important to note that it remains early in the Australian sales cycle. We are pleased with our sales results in Victoria with the addition of Hotham and Falls Creek, which together with Perisher, offer a very compelling product for our Australian guests who can ski locally at our three Australian resorts in New South Wales and Victoria, as well as experience our growing network in North America and at Rusutsu and Hakuba Valley in Japan. Pass sales will continue through the Australian off-season leading up to the 2020 season."

Guidance

Commenting on guidance for fiscal 2020, Katz said, "Net income attributable to Vail Resorts, Inc. is expected to be between $293 million and $353 million for fiscal 2020. We estimate Resort Reported EBITDA for fiscal 2020 will be between $778 million and $818 million. Our Resort Reported EBITDA guidance includes an estimated contribution of $53 million for Peak Resorts operations, including an estimated $6 million benefit from not incurring offseason losses from August 1, 2019 through the closing date of September 24, 2019. The Company expects to incur approximately $20 million of acquisition and integration related expenses in fiscal 2020 related to the acquisitions of Peak Resorts, Falls Creek and Hotham. We expect Resort EBITDA Margin for fiscal 2020 to be approximately 31.0%, using the midpoint of the guidance range, which is an estimated 10 basis point decrease compared to fiscal 2019. We estimate Real Estate Reported EBITDA for fiscal 2020 will be between negative $2 million and positive $4 million.

"All of these estimates are predicated on the assumption of normal weather conditions throughout the ski season, a continuation of the current economic environment, an exchange rate of $0.75 between the Canadian Dollar and U.S. Dollar related to the operations of Whistler Blackcomb in Canada and an exchange rate of $0.68 between the Australian Dollar and U.S. Dollar related to the operations of Perisher, Falls Creek and Hotham in Australia. Fiscal 2020 guidance does not include any payroll tax impacts or income tax benefits related to the potential exercise of CEO stock appreciation awards."

The following table reflects the forecasted guidance range for the Company's fiscal year ending July 31, 2020, for Reported EBITDA (after stock-based compensation expense) and reconciles such Reported EBITDA guidance to net income attributable to Vail Resorts, Inc. guidance for fiscal 2020