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Edited Transcript: Thomson Reuters Streetevents
Edited Transcript: Thomson Reuters Streetevents
EDITED TRANSCRIPT
DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
CORPORATE PARTICIPANTS
Rob Katz Vail Resorts, Inc. - CEO
Michael Barkin Vail Resorts, Inc. - CFO
PRESENTATION
Operator
Good day, and welcome to the Vail Resorts first quarter FY15 earnings results conference call. Today's conference is being recorded. At this time,
I would like to turn the conference over to Rob Katz, CEO. Please go ahead.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
Net real estate cash flow totaled $5 million for the quarter. We continue to see positive momentum in our resort real estate markets and closed on
two additional One Ski Hill Place units subsequent to October 31, 2014.
I'm 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 $0.4150 per share of common stock and will be payable on January 12, 2015 to shareholders of record on December 29, 2014.
Now turning to season pass sales. Our season pass sales results continue to be very strong as sales including four packs are up approximately 13%
in units and 16% in sales dollars through December 4, 2014, compared with the similar period in the prior year and including results from Park City
in both periods.
The biggest driver of our growth was new pass sales in our US and international destination markets. These results were bolstered this fall by the
addition of Park City Mountain Resort to our pass products, driving significant interest from our destination markets as well as in Utah.
We continue to see very strong growth in Minneapolis and Detroit. In Colorado, we saw very healthy growth. In Tahoe, we experienced only a
modest decline, which was better than our expectations given the very challenging conditions in Tahoe last season.
Our season pass program now has over 400,000 pass holders and will generate more than $200 million in revenue in FY15, far surpassing any other
season pass program in the industry. Our growth in the program is a testament to our strategy of consistently adding benefits to our season passes,
primarily through our most recent resort acquisitions, and continuing to improve our personalized and data driven marketing efforts. As a reminder,
revenue from season pass sales is recognized over the course of the second and third fiscal quarters.
Apart from season pass sales, advanced lodging bookings for the season are also looking positive, with good momentum across our properties
with strong rate growth as well, particularly in the Colorado markets. Based on historical averages, approximately 50% of the bookings for the
winter season have been made by this time. Now I'd like to turn the call over to Michael to further discuss our financial results and our FY15 outlook.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
Resort reported EBITDA for the quarter included operating losses from Park City, and $3.1 million of litigation, integration and transaction related
costs. The non-cash gain on the Park City litigation settlement represents the estimated fair value of the foregone rent from PCMR that the Company
may have been entitled to and was forgiven as part of the acquisition and ultimate settlement of the litigation.
Our net real estate cash flow was $5 million for the three months ended October 31, 2014, a decrease of $2.5 million from the same period in the
prior year. Real estate reported EBITDA was a loss of $2.2 million for the three months ended October 31, 2014, an increase in the loss of $1.8 million
as compared to the same period in the prior year. Finally, net loss attributable to Vail Resorts Inc. was $64.3 million or a loss of $1.77 per diluted
share for the first quarter of FY15.
Our balance sheet remains very strong. We ended the quarter with $29.8 million of cash on hand and $183 million in borrowings under the revolver
portion of our Senior Credit Facility. Our net debt including the capitalized Canyons obligation was 3.1 times trailing 12-month total reported
EBITDA excluding the non-cash gain on Park City litigation settlement and does not include the contribution from a full year of Park City operations.
We are also pleased to reiterate our guidance for FY15. Our guidance originally issued in September 2014 remains unchanged. We expect FY15
resort reported EBITDA will be between $340 million and $360 million, which includes approximately $5 million of litigation, transaction, and
integration expense and excludes the $16.4 million non-cash gain on Park City litigation settlement. Now I will turn it back to Rob.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
We estimate the total cost of this transformational plan for calendar 2015 will be approximately $50 million, including normal annual maintenance,
and excluding any third party reimbursements. Based on our estimates for Park City and Canyons, we expect the two acquisitions will add $70
million in total EBITDA in FY16 and increase our ongoing annual capital target by $6 million.
Our preliminary estimate for the remainder of our calendar year 2015 capital plan totaled between $60 million and $65 million, including estimates
of third party reimbursements but excluding investments in summer activities and the one time $50 million investment in Park City and Canyons
I just outlined. While we will provide additional details in March 2015, a signature part of the capital plan will be replacing the Avanti chair or Chair
2 at Vail Mountain, going from a four-person to a six-person high-speed chair lift, increasing capacity by approximately 30%, at one of the most
popular beginner and intermediate areas at the resort and a critical link as people make their way from Lion's Head to the Back Bowls and Blue Sky
Basin.
As you know, we set annual capital guidance last year at $85 million, and said that figure would be adjusted for inflation and increased as we added
new resorts. We also said that the $85 million would exclude any investments for summer activities and any one time improvements that we made
as part of an acquisition. With inflation and the impact of adding Park City, we would have expected normal capital spending to be about $93
million for calendar 2015.
While our guidance specifically excluded one-time capital programs, like the $50 million capital plan for Park City, we are very focused on maintaining
strong discipline and prioritization in our capital decisions and, therefore, made room for $30 million of the Park City plan from within our existing
capital target, with only $20 million of the Park City spending going above the guidance. Absent any new acquisitions, we would expect capital
spending excluding summer to be about $96 million in calendar 2016.
As we wrap up, I am pleased to report that the season is off to a strong start with all of our resorts open. Colorado conditions have been outstanding
with one of the best Thanksgiving ski experiences we have had for quite some time with the Back Bowls at Vail open for the holidays and Blue Sky
Basin opening last week.
Utah also has good early season conditions with more terrain open this year than last year. Tahoe's conditions have developed later than Colorado
or Utah, but a recent storm has brought good snow to all three of our resorts there. Of course it's still very early in the season for that market.
Finally, and most importantly, our attention to service and our commitment to delivering an outstanding guest experience will continue to be the
hallmarks of our Company and the focus of all of our efforts. I would like to thank all of our employees for their passion, hard work and commitment
to our organization, which as always lies at the center of our success, and we look forward to a great 2014-2015 season ahead. Operator, we are
ready for questions.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
Rob Katz - Vail Resorts, Inc. - CEO
Sure. Not our destination resorts, but it's being driven by our destination guests, meaning guests that live outside of Colorado, Utah or the Bay
area. And so that has been the big driver of our success over the last couple of years. It has really transformed our season pass program, of course
has been happening over the last seven to eight years, from primarily a local program to now obviously much more of a destination program.
And we saw terrific strength, both in the spring and then I think when we announced our results at the end of September, I think our expectation
was we might see a slowdown. Obviously as the numbers get bigger over the overall plan, to maintain that growth rate is usually more difficult.
But we saw tremendous enthusiasm following the announcement of the Park City acquisition and the fact that Park City Mountain Resort was now
going to be on the pass, so that really maintained our strength.
I'd say Detroit and Minneapolis continued to be some of our best performing markets, but we saw strength across all of our major markets and
across our international markets. I think the destination markets, both in the US and internationally, generated close to 65% to 70% of our total
growth that we actually reported for this year.
Operator
We will take our next question from Shaun Kelley with Bank of America-Merrill Lynch.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
Is there any risk? There's always risk. Obviously, that's why we always say that it is subject to those approvals. But at the moment, we feel pretty
good.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
Shaun Kelley - BofA Merrill Lynch - Analyst
Okay. Got it. And my last question would just be, you gave a little bit of color on bookings, not a ton.
Could you just help us understand if those are running ahead or below your general expectation? And that's it for me.
Operator
Our next question comes from Scott Hamann.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
And so I think we really feel like we're starting off on the right foot, and obviously that doesn't mean there won't be things that we will discuss and
debate and disagree over. We do that in every one of our resort communities, and obviously that's part of a healthy relationship. And so -- but
again, couldn't be happier about that as it stands right now.
I think on the season pass piece, we're very pleased. So yes, I think we've been absolutely reaching out, making a bigger effort across our international
markets, very happy with what we're seeing out of the UK right now.
The UK, because of their economic issues, has been a more challenging market over the last number of years, and this is really the first year, maybe
the second year -- last year we saw some of this. This is really the first more significant year where we're seeing real momentum, both in bookings
and in season pass sales.
The other market that I'd say we're very pleased with is Australia, seeing again some real engagement, some real momentum out of that market.
Obviously a critical market in terms of the level of outbound ski trips that are taken from that market.
Southern California, very good results there, but I'd say much more at the beginning. I think that's a market that will take a number of years to fully
bring into -- unfortunately, the Park City acquisition only closed toward the end of -- middle of September. So really didn't give us much time to
really attack that market as we would like to.
On the other side, I would say I think we do attribute on the Tahoe side we saw real pickup in sales in that market in the Bay area, once we added
the resort. I think probably the quick surprises that we've seen is how much adding Park City and Canyons to the pass helps our season pass sales
and engagement in the Bay area, San Francisco market.
So I think that's been a quick win right away. I would say broadly speaking, obviously very, very pleased with our overall numbers, and we think
the LA, Southern California market offers just another opportunity over the next couple of years.
Operator
We will take our next question from Chris Agnew with MKM Partners.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
What we see is an open rate on those e-mails that's twice as big, twice as high as the open rate on the e-mails that don't have the EpicMix information
in there. From that standpoint, again, very, very pleased.
In terms of other competitors, I think there are a number of resorts that have similar efforts, but nothing that's anywhere near as comprehensive.
And certainly in our mind the user experience, the design and as broad, particularly on the photo side.
I think one resort that has taken it up is Perisher in Australia. That I think is very clear that they took a lot of what we've done here and replicated it
down in Australia. I think it's going great for them there too. We're quite happy with it.
Operator
Our next question comes from Bob LaFleur with JMP Securities.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
Operator
(Operator Instructions)
We will take our next question from Afua Ahwoi with Goldman Sachs.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
We do see a combination of pricing, and I would say it's not necessarily price increases but yield. So I would say that as we bring in more destination
guests into the market, as destination guests buy season passes from outside markets and then come to Park City, we also see as our season pass
grows that a lot of these destination guests take longer trips, spend more time at the resort.
We have pretty clear data shows that season pass holders spend more on ski school, on retail, on rental, on F&B, lodging. We see this as a benefit
to the overall community. But yes, it's a combination of all those factors that I think will help drive things.
On Whistler, I would say we do think that this opportunity and this combination is certainly as significant and as impactful, in some ways maybe
more so than the combination of Whistler and was years ago. And we feel like now comparing the exact profitability structure of the two mountains,
many, many factors that would go into that, including the size of the town, international, inbound, local, all these different things, the position that
Whistler has in Canada. So I'd say this will be like Whistler, like Vail, like Breckenridge, like Beaver Creek, one of the top destination ski resorts certainly
in North America.
And then on acquisitions, we absolutely continue to look at opportunities. We're very focused that anything that we acquire is something that's
very much on our core strategy of either adding value to our season pass in terms of adding benefit that our guests would see, driving more people
like the urbans to our destination resorts.
But it's -- we're very disciplined and very discerning in terms of what we think makes sense, not just what a resort -- not just whether it's a good
resort or not but how does it fit within our core strategy. And to the extent that we find something that we think makes sense for that and obviously
the price and all the other factors can align, then yes, we intend to be as aggressive going forward as we have been in the past.
Operator
(Operator Instructions)
That concludes today's question-and-answer session. Mr. Rob Katz, I'd like to turn it back over to you for any additional or closing remarks.
Operator
That concludes today's conference. Thank you for your participation.
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DECEMBER 08, 2014 / 4:30PM, MTN - Q1 2015 Vail Resorts Inc Earnings Call
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