Vail Resorts, Inc. (NYSE:MTN) - A Ski Resort Giant Navigating Challenging Conditions

Published on September 24, 2024 | Ticker: MTN

Vail Resorts, Inc. (NYSE:MTN) is a leading operator of ski resorts in North America and Australia. The company has a diversified portfolio of 42 destination mountain resorts and regional ski areas, including iconic destinations like Vail, Whistler Blackcomb, and Park City. Despite facing significant weather-related challenges during the 2023/2024 North American ski season, Vail Resorts has demonstrated its resilience, delivering strong financial results and continuing to invest in its guest experience.

Business Overview

Vail Resorts operates through three reportable segments: Mountain, Lodging, and Real Estate. The Mountain segment is the company's core business, encompassing the operation of its ski resorts, including ancillary services such as ski school, dining, and retail/rental operations. The Lodging segment includes the company's owned hotels, RockResorts properties, and other strategic lodging assets. The Real Estate segment focuses on the development and sale of real estate in and around the company's resort communities.

The company's mountain resorts and ski areas are highly seasonal, with the majority of revenue and earnings generated during the ski season, which typically runs from mid-December through mid-April in North America and Europe, and from June to early October in Australia. This seasonality is a key characteristic of Vail Resorts' business model.

Financials

For the fiscal year ended July 31, 2023, Vail Resorts reported annual net income of $268,148,000, annual revenue of $2,889,364,000, annual operating cash flow of $639,563,000, and annual free cash flow of $324,651,000.

In the third quarter of fiscal 2024, which ended on April 30, 2024, the company reported net income attributable to Vail Resorts of $361,995,000, or $9.54 per diluted share, compared to $325,006,000, or $8.18 per diluted share, in the prior-year period. Resort net revenue for the third quarter increased 3.6% to $1,283,282,000, while Resort Reported EBITDA increased 5.2% to $653,282,000.

The company's results for the third quarter of fiscal 2024 were impacted by several factors. While the company saw improved results in March and April, the 2023/2024 North American ski season was marked by significant weather-related challenges, with approximately 28% lower snowfall across the company's Western North American resorts compared to the prior year. This, combined with broader industry normalization following record visitation in the U.S. during the 2022/2023 ski season, led to a 7.7% decline in total skier visits for the 2023/2024 North American and European ski season.

Guidance and Outlook

For the full fiscal year 2024, the company now expects net income attributable to Vail Resorts to be between $224 million and $256 million, and Resort Reported EBITDA to be between $825 million and $843 million. This updated outlook includes the impact of the company's recent acquisition of Crans-Montana Mountain Resort in Switzerland, which is expected to contribute negative $12 million of Resort Reported EBITDA in fiscal 2024.

The company's guidance assumes a continuation of the current economic environment and normal weather conditions and operations throughout the Australian ski season and North American summer season. The guidance also assumes exchange rates of $0.73 between the Canadian dollar and U.S. dollar, $0.66 between the Australian dollar and U.S. dollar, and $1.10 between the Swiss franc and U.S. dollar.

Geographic Breakdown

Vail Resorts' operations are geographically diverse, with resorts located in the United States, Canada, Switzerland, and Australia. In the third quarter of fiscal 2024, the company's Mountain segment generated $1,196,058,000 in net revenue, with the majority of this revenue coming from the company's North American resorts. The Lodging segment contributed $87,055,000 in net revenue, with a significant portion of this revenue derived from the company's properties in proximity to its North American mountain resorts.

Revenue Breakdown and Trends

Vail Resorts' revenue is primarily generated from three main sources: lift tickets, ski school, and dining. In the third quarter of fiscal 2024, lift ticket revenue increased 5.0% to $745,677,000, driven by a 13.7% increase in pass revenue, partially offset by a 5.7% decrease in non-pass revenue. Ski school revenue increased 11.1% to $161,248,000, and dining revenue increased 7.7% to $109,471,000, both benefiting from increased guest spending per visit across the company's North American resorts.

The company's retail/rental revenue, however, decreased 8.7% to $123,262,000, primarily due to the company's exit of certain leased store operations and a decrease in skier visitation, which impacted sales at its on-mountain retail outlets.

Liquidity

As of April 30, 2024, Vail Resorts had $705.4 million in cash and cash equivalents, as well as $409.4 million available under the revolver component of its Ninth Amended and Restated Credit Agreement. Additionally, the company had C$296.6 million ($215.5 million) available under the revolver component of its Whistler Credit Agreement.

The company remains committed to its capital allocation priorities, which include reinvesting in its resorts and employee experience, pursuing strategic acquisition opportunities, and returning capital to shareholders through its quarterly dividend and share repurchase program. During the third quarter of fiscal 2024, the company repurchased approximately 345,732 shares for a total of $75.0 million.

On May 8, 2024, the company completed an offering of $600 million aggregate principal amount of 6.50% senior notes due 2032, which were used to fund the redemption of the company's $600 million 6.25% Notes due 2025. Additionally, the company extended the maturity of its Vail Holdings Credit Agreement term loan and revolver from 2026 to 2029.

Risks and Challenges

Vail Resorts faces several key risks and challenges, including the highly seasonal and weather-dependent nature of its business, intense competition in the ski resort industry, and the potential impact of economic conditions on consumer discretionary spending. The company is also subject to various regulatory requirements, including those related to environmental and land use permits, which could impact its operations.

The company's recent acquisition of Crans-Montana Mountain Resort in Switzerland also introduces integration and execution risks, as the company works to incorporate the resort into its operations and realize the anticipated synergies and growth opportunities.

Conclusion

Despite the challenges faced during the 2023/2024 ski season, Vail Resorts has demonstrated its ability to navigate difficult conditions and deliver strong financial results. The company's diversified portfolio of mountain resorts, commitment to the guest experience, and strategic capital allocation priorities position it well for long-term success. As the company continues to invest in its resorts, expand its pass program, and pursue strategic growth opportunities, Vail Resorts remains a leading player in the ski resort industry.

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