Vail Resorts Inc Q4 FY2023 Earnings Call

Good afternoon, and welcome to the Vail Resorts Fiscal 2023 Fourth Quarter Earnings Call. Today's conference is being recorded. Currently, all callers are in a listen-only mode, and after management's prepared remarks, the call will be opened for your questions. I will now turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts. You may begin.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2023 year-end earnings conference call. Joining me on the call this afternoon is Angela Korch, our Chief Financial Officer. Before we begin, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties as described in our SEC filings and actual future results may vary materially. Forward-looking statements in our press release issued this afternoon along with our remarks on this call are made as of today, September 28, 2023, and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non-GAAP financial measures. Reconciliations of these measures are provided in the tables included in our press release, which along with our Annual Report on Form 10-K were filed this afternoon with the SEC and are also available on the Investor Relations section of our website at www.vailresorts.com. Let's turn to our fiscal 2023 and fourth-quarter results. Given the significant weather-related challenges this past season, we are pleased with our overall results for this year, with strong growth in 2022-2023 North American ski season visitation and spending compared to the prior year, further supported by the stability created by our advanced commitment products. The return to normal staffing levels enabled our mountain resorts to deliver a strong guest experience, resulting in a significant improvement in guest satisfaction scores, which exceeded our pre-COVID levels at our destination mountain resorts. Visitation growth was achieved through strong growth in pass sales, the addition of Andermatt-Sedrun in Switzerland, the full-year impact of Seven Springs Mountain Resorts, Hidden Valley Resort, and Laurel Mountain Ski Area acquired on December 31, 2021, and record visitation and resort net revenue in March and April. Ancillary businesses, including ski school dining and retail rental experienced strong growth compared to the prior period, when those businesses were impacted by capacity constraints driven by staffing, and in the case of dining by operational restrictions associated with COVID-19. Our dining business rebounded strongly from the prior year though underperformed expectations for the year, as guest dining behavior did not fully return to pre-COVID levels following two years of significant operational restrictions associated with COVID-19. Our overall results through the 2022-2023 North American ski season highlight the stability of the advance commitment from season pass products in a season with challenging conditions, including travel disruptions during the peak holiday period, abnormal weather conditions, which significantly reduced operating days, terrain availability, and activity offerings across our 26 Midwest, Mid-Atlantic, and Northeast resorts and severe weather disruptions at our Tahoe resorts. This past season, approximately 75% of skier visitation at our North American resorts, excluding complementary visits, was from pass holders, who committed in advance of the season, which compares to approximately 72% for the 2021-2022 North American ski season. Results in our fourth quarter declined from the prior year, primarily driven by the company's fiscal 2023 investments in employees as well as below-average snowfall and snowmaking temperatures that limited terrain availability during the Australian winter season. North American summer operations also underperformed expectations, driven by a combination of lower demand for destination mountain travel, which we believe was primarily driven by a broader shift in summer travel behavior associated with a wider variety of vacation offerings available following various travel restrictions in the prior two years and weather-related operational disruptions. Turning now to our 2023/2024 season pass sales. Our strategy continues to focus on advancing commitments, encouraging guests to shift from short-term refundable lift ticket purchases to a non-refundable commitment before the season begins in exchange for better value. We are satisfied with the results of our season pass sales so far, which showcase the strong value of our pass offerings, our network of mountain resorts, and our ongoing commitment to enhancing the guest experience. As of September 22, 2023, North American ski season pass sales have risen by approximately 7% in units and 11% in sales dollars compared to the same period last year, ending September 23, 2022. Sales figures have been adjusted to account for foreign currency fluctuations using an exchange rate of $0.74 between the Canadian dollar and the US dollar for Whistler Blackcomb pass sales. Compared to the 2022-2023 season, we saw strong loyalty from our pass holders, highlighted by significant growth in sales from renewing customers, as well as an increase in new pass holder sales. We successfully increased units across different regions, especially in destination markets like the Northeast, and in all major pass product categories, with particularly notable growth in regional pass products and the Epic Day Pass. These products continue to attract lower frequency and local Northeast guests due to their strong value proposition. We also experienced positive growth in the Midwest and Mid-Atlantic, which, after a challenging previous season, underscores the resilience of our advance commitment program, the loyalty of our guests, and the substantial opportunity to increase pass penetration in the Midwest, Mid-Atlantic, and Northeast. Pass sales revenue continues to benefit from an 8% price increase compared to the 2022-2023 season, although this has been partially offset by the mixed impact of growth in Epic Day Pass products. As we enter the final period for season pass sales, we expect our December 2023 growth rate may moderate relative to our September 2023 growth rate, given the impact of moving purchasers earlier in the selling cycle. We continue to prioritize advance commitment as the best way for guests to access our mountain resorts. Similar to previous seasons, lift ticket sales will be limited during the 2023-2024 season in order to prioritize guests committing in advance with season passes and to preserve the guest experience at each resort. We expect these lift ticket limitations will further support our resorts and communities on peak days, and we do not anticipate that the limitations will have a significant impact on our financial results, consistent with prior seasons. As a reminder, no reservations are required at any of the resorts on the Epic Pass for pass holders, other than at our partner resort Telluride. Now, I would like to turn the call over to Angela to further discuss our financial results and fiscal 2024 outlook.

Thank you. As Kirsten mentioned, given the significant weather-related challenges this past season, we are pleased with our results for the fiscal year 2023. Net income attributable to Vail Resorts was $268.1 million or $6.74 per diluted share for fiscal year 2023, compared to net income attributable to Vail Resorts of $347.9 million or $8.55 per diluted share for fiscal 2022. The decrease in net income attributable to Vail Resorts compared to the prior year was primarily due to the large gain on disposal of fixed assets in fiscal 2022, and an increase in fiscal 2023 expense associated with a change in the estimated fair value of the contingent consideration liability related to our Park City resort lease. Resort reported EBITDA was $834.8 million in fiscal year 2023, compared to resort reported EBITDA of $836.9 million in the prior year. Now, turning to our outlook for fiscal 2024. As we head into our fiscal year, we are encouraged by the strength in advance commitment product sales and remain committed to delivering a strong guest experience, while maintaining cost discipline. We expect meaningful growth for fiscal 2024 relative to fiscal 2023, with strong resort EBITDA margin. Our guidance for net income attributable to Vail Resorts is estimated to be between $316 million and $394 million for fiscal 2024. We estimate resort reported EBITDA for fiscal 2024 will be between $912 million and $968 million. We estimate resort EBITDA Margin for fiscal 2024 to be approximately 31%, using the midpoint of the guidance range. Fiscal 2024 guidance includes an expectation that the first quarter of fiscal 2024 will generate net loss attributable to Vail Resorts between $191 million and $168 million, and resort reported EBITDA between negative $154 million and negative $104 million. At the midpoint of the guidance range, first quarter fiscal 2024 resort reported EBITDA assumes a negative impact of approximately $46 million compared to the first quarter of fiscal 2023, excluding exchange rate impacts, primarily driven by cost inflation, which includes a $7 million impact of our fiscal 2023 employee investment, which went into effect in October of 2022, lower results from our Australian resorts, from the continuation of the weather-related challenges that impacted terrain in the fourth quarter of fiscal 2023, and lower results from North American summer operations from the continuation of the lower demand for destination mountain travel experienced in the prior fiscal quarter. Relative to fiscal 2023, fiscal 2024 full-year guidance also reflects a negative resort reported EBITDA impact of approximately $3 million, as a result of the company's exit of its retail and rental locations in Telluride and Aspen in fiscal 2023. The guidance assumes a continuation of the current economic environment and normal weather conditions for 2023-2024 North American and European ski season, and the 2024 Australian ski season. The guidance assumes an exchange rate of $0.74 between the Canadian dollar and the US dollar, related to the operations of Whistler Blackcomb in Canada, an exchange rate of $0.64 between the Australian dollar and US dollar, related to the operations of Perisher, Falls Creek and Hotham in Australia, and an exchange rate of $1.10 between the Swiss franc and US dollar, related to the operations of Andermatt-Sedrun in Switzerland. The current fiscal 2024 exchange rate assumptions result in an expected $5 million negative impact, relative to fiscal 2023 results, and an expected $10 million negative impact relative to our original fiscal 2023 guidance provided in September of 2022. While we are cognizant of the broader macroeconomic outlook remains uncertain, which we will continue to monitor heading into the upcoming season, we believe that we will continue to benefit from the stability and resilience of the business model, particularly with the strength, scale, and affordability of our advanced commitment products and the diversification of our resort network. Our balance sheet remains strong and the business continues to generate robust cash flow. Our total cash and revolver availability as of July 31, 2023, was approximately $1.2 billion, with $563 million of cash on hand and $646 million of combined revolver availability across our credit agreements. As of July 31, 2023, our net debt was 2.7 times trailing 12 months total reported EBITDA. The company declared a quarterly cash dividend of $2.06 per share of Vail Resorts' common stock that will be payable on October 26, 2023, to shareholders of record as of October 10, 2023. During the quarter, the company repurchased approximately 400,000 shares of common stock at an average price of $247, for a total of approximately $100 million. Including the shares repurchased during the fourth quarter, the company repurchased a total of approximately 2.2 million shares of common stock during the fiscal 2023 at an average price of approximately $229 for a total of $500 million, leveraging the capital we raised opportunistically over the past few years at a low cost of debt to capitalize on an opportunity to repurchase shares at an attractive valuation. We remain committed to returning capital to shareholders and intend to maintain an opportunistic approach to future share repurchases. We will continue to be disciplined stewards of our capital and remain committed to prioritizing investments in our guest and employee experience, high-return capital projects, strategic acquisition opportunities, and returning capital to our shareholders through our quarterly dividend and share repurchase program. Now, I will turn the call back to Kirsten.

Thank you, Angela. We remain dedicated to delivering an exceptional guest experience and will continue to prioritize reinvesting in the experience at our resorts, including consistently increasing capacity through lift, terrain, and food and beverage expansion projects. As previously announced, the company expects to invest approximately $180 million to $185 million in the calendar year 2023, excluding one-time investments related to integration activities, deferred capital associated with previously delayed projects, reimbursable investments associated with insurance recoveries, and growth capital investments at Andermatt-Sedrun. At Keystone, we plan to complete the transformational lift-served terrain expansion project in Bergman Bowl, increasing lift-served terrain by 550 acres with the addition of a new six-person high-speed lift. At Breckenridge, we plan to upgrade the Peak 8 base area to enhance the beginner and children's experience and increase uphill capacity from this popular base area. The investment plan includes a new four-person high-speed, five-chair to replace the existing two-person, fixed-grip lift, as well as significant improvements, including new teaching terrain and a transport carpet from the base, to make the beginner experience more accessible. At Whistler Blackcomb, we plan to replace the four-person, high-speed Fitzsimmons lift with a new eight-person, high-speed lift. At Stevens Pass, we are planning to replace the two-person, fixed-grip Kehr's Chair lift with a new four-person lift, which is designed to improve out-of-base capacity and guest experience. At Attitash, we plan to replace the three-person fixed-grip Summit Triple lift with a new four-person high-speed lift to increase uphill capacity and reduce guests' time on the longest lift at the resort. We currently plan to complete these lift projects in time for the 2023-2024 North American winter season. The Company is planning to pilot My Epic Gear at Vail, Beaver Creek, Breckenridge, and Keystone for a limited number of pass holders during the 2023-2024 North American ski season, which will introduce a new membership program that provides the best benefits of gear ownership with more choice, lower cost, and no hassle. My Epic Gear provides its members with the ability to choose the gear they want for the full season or for the day, from a selection of the most popular and latest ski and snowboard models, and have it delivered to them when and where they want it, guaranteed with free slopeside pick up and drop off every day. In addition to offering the best skis and snowboards, My Epic Gear will also offer name-brand, high-quality ski and snowboard boots with customized insoles and boot fit scanning technology. The entire My Epic Gear membership, from gear selection, to boot fit, to personalized recommendations, to delivery, will be at the members' fingertips through the new My Epic app. My Epic Gear will officially launch for the 2024/2025 winter season at Vail, Beaver Creek, Breckenridge, Keystone, Whistler Blackcomb, Park City Mountain, Crested Butte, Heavenly, Northstar, Stowe, Okemo, and Mount Snow, and further expansions are expected in future years. The Company is also planning to introduce new technology for the 2023/2024 ski season at its US resorts that will allow guests to store their pass product or lift ticket directly on their phone and eliminate the need for carrying plastic cards, visiting the ticket window, or waiting to receive a pass or lift ticket in the mail. Once loaded on their phones, guests can store their phone in their pocket and get scanned hands-free in the lift line using Bluetooth low energy technology, which is designed for low energy usage to minimize the impact on a phone's battery life. In addition to the significant enhancement of the guest experience, this technology will also ultimately reduce waste from printing plastic cards for pass products and lift tickets and RFID chips, as a part of the company’s Commitment to Zero. For the first year of launch, to ensure a smooth transition, the Company will provide plastic cards for passes and lift tickets to all guests, and in future years, plastic cards will be available to any guests who cannot or do not want to use their phone to store their pass product or lift ticket. We are also excited to announce the launch of our new My Epic app, which will include Mobile Pass and Mobile Lift Tickets, interactive trail maps, real-time and predictive lift line wait times, personalized stats, My Epic Gear, and other relevant information to support the guest experience. The Company is also investing in network-wide scalable technology that will enhance our analytics, e-commerce and guest engagement tools to improve our ability to target our guest outreach, personalize messages and improve conversion. Including $10 million of deferred capital associated with previously delayed projects, $4 million of reimbursable investments associated with insurance recoveries, $1 million of one-time investments related to integration activities, and $9 million of growth capital investments at under month-to June, our total capital plan for calendar year 2023 is expected to be approximately $204 million to $209 million. In addition to this year's significant investments across lift, expanded terrain, and enhanced guest-facing technology, we are pleased to announce some select projects for the calendar year 2024 capital plan with the full capital investment announcement planned for December 2023. At Whistler Blackcomb, we plan to replace the four-person high-speed Jersey Cream lift with a new six-person high-speed lift. This lift is expected to provide a meaningful increase to uphill capacity and better distribute guests at a central part of the resort. At Hunter Mountain, we plan to replace the four-person fixed-grip Broadway lift with a new six-person high-speed lift and plan to relocate the existing Broadway lift to replace the two-person fixed-grip E lift, providing a meaningful increase in uphill capacity and improved access to terrain that is key to the progressive learning experience for our guests. At Park City Mountain, we expect to engage in the planning process to support the replacement of the Sunrise lift with a new 10-person gondola in partnership with the Canyons Village Management Association in calendar year 2025, which will provide improved access and enhanced guest experience for existing and future developments within Canyons village. These projects are subject to approval. In closing, we greatly appreciate the loyalty of our guests this past season and the continued loyalty of our pass holders that have already committed to next season. With our Australia winter season coming to a close, I would like to thank our frontline employees for their passion and dedication to delivering an experience of a lifetime to our guests. And we all look forward to a great upcoming winter season in the US, Canada, and Europe. At this time, Angela and I will be happy to answer your questions. Operator, we are now ready for questions.

We'll take our first question from Shaun Kelley with Bank of America. Your line is open.

Hi, good afternoon, Kirsten and Angela. Thanks for taking my question. Maybe just to lead off, we've gotten a lot of requests to get a little bit more color on sort of the breakdown of what's happening in the fiscal first quarter here. So the question here is just, could you give us a little bit more color on the $46 million? Specifically how much of that contribution is sort of from Australia and how much is a little bit more recurring possibly on the US resort disruption there as it relates to just changing visitation patterns? Thank you.

Thank you, Shaun, for the question. Regarding fiscal year 2024 and the first quarter, we are experiencing some unique factors affecting us. In the first quarter, inflation plays a role, including the effect of our employee investments, the winter conditions in Australia, and to a lesser extent, the summer impacts in North America. Overall, these factors significantly affect us for the fiscal year. However, if we exclude the first quarter impact and analyze the remainder of the year regarding winter, we feel optimistic about our fiscal year plan and the margins we expect to achieve.

Okay, and for my follow-up, I would like to ask for more details about the remainder of the year. Kirsten, we've discussed this before. You've dealt with some weather fluctuations over the past few years, and you usually guide based on normal seasonal conditions. Would you say that your approach is similar to the past, or is there any additional caution included this time given the recent weather volatility, particularly following this past season which was quite challenging?

Yes, you're absolutely right, Shaun. We faced numerous disruptions this past season, and we are planning for a return to normal. Weather disruptions are difficult to forecast. Our guidance range assumes normal conditions across our resorts, allowing for potential benefits from favorable weather and risks from adverse weather. While there are typical disruptions like wind holds, something unusual, like what occurred in the East, is an example of unpredictability. We are setting our guidance range based on normal conditions, and our business model focuses on mitigating these impacts through geographic diversity, advanced bookings, maximizing guest commitments ahead of the season, investing in snowmaking, and our commitment to sustainability initiatives.

Thank you very much.

Thank you. Our next question will come from Laurent Vasilescu with BNP Paribas. Your line is open.

Good afternoon. Thank you for taking my question. I wanted to inquire about ancillary services, which have faced challenges over the past few years. While I know you don't provide guidance on this, how are you approaching the recovery of that business? Do you see any potential benefits from inflation, such as food or beverage inflation, as we consider this year?

Yeah, we are expecting, Laurent, strong growth across our ancillary businesses with particular focus on F&B, as I highlighted in the remarks. F&B grew significantly last year but did not return all the way to pre-COVID. We know that we delivered a strong guest experience and that we are recovering from significant restrictions that were put on our dining business in the years following COVID, including a requirement for reservations, a requirement for vaccines, and reduced menu options. So as we think about that business, we expect to continue on a strong growth trajectory for that dining business and we're very focused on building awareness of all of the unique food variety offerings we have, building awareness among our more than 2 million pass holders that we had last year, about the 20% discount that's a part of the loyalty benefits that they have as pass holders, which certainly helps mitigate some of those inflationary prices. And we have the new My Epic app that we'll be launching where we can start to talk to our guests one-to-one about our ancillary businesses through the app, which we also hope will give us the opportunity to have some personalized communication to help build awareness and bring people back into our restaurants and continue that growth trajectory that we've been on.

Thank you for the information. I'd like to follow up on Shaun's question regarding the $46 million. The comments indicate that this is primarily due to cost inflation, and I'm wondering if "primarily" suggests that it's over half. Is that the correct way to interpret it? It seems you prefer not to provide a specific range, but should we take that into account as we plan for the upcoming quarters?

Hi Laurent, it's Angela Korch. Regarding Q1, we typically make investments in this quarter. We often see costs accumulating for the entire season before the revenues start coming in. If you examine our expense structure, you should factor in the inflation affecting those costs. We specifically mentioned the wage investment from last year, which took effect in October; this accounts for $7 million that will carry over into this year. Additionally, in Australia, we continue to feel the effects of the challenging conditions we experienced in the fourth quarter. Last year, Australia had a very strong performance, but now we have shifted to a period of warmer weather, leading to fewer open terrains and earlier closures than usual. In North America, we are also experiencing some changes in demand patterns, although to a lesser degree.

Okay, very helpful. Thank you so much.

Thank you. Our next question will come from Jeff Stantial with Stifel. Your line is open.

Hey, good afternoon, everyone. Thanks for taking our questions. Maybe starting off here, I wanted to drill in a bit more on some of your commentary and the headwinds that you discussed for the North America summer operations. It does seem to fit some of the narrative we've heard from the airlines and some other leisure businesses, but I'm curious, how do you think about this headwind and what you're seeing over the summer as it relates to more of the upcoming ski season? And I guess what I mean by that is, is there anything that you can see in your bookings data or otherwise that sort of gives conviction that this unwinding of kind of consumer wallet share gains you saw is mostly just an off-season impact as opposed to also potentially bleeding into a ski season? Let me know if that makes sense. Thanks.

Thank you, Jeff. We are noticing a shift in summer travel behavior in North America, reflecting broader trends in the marketplace. Market data shows that lodging occupancy at Western mountain resorts has declined over the summer compared to 2019. We believe our business has been affected by these changing consumer behaviors. However, as we look ahead to winter, we feel summer and winter businesses draw different guests. A key indicator of demand for the upcoming winter season is our season pass business, which is performing exceptionally well with robust unit growth and strong dollar sales increases, driven primarily by renewals. We are also seeing incremental growth with new pass holders across all regions and product segments. Therefore, I consider our pass sales to be the strongest indicator for winter, distinct from summer, which attracts a different type of guest and behavior.

Great. That's really helpful. Thank you. And then for my follow-up, maybe kind of adding on to some of the questions earlier but focusing more, so the cost inflation piece, that first bucket within the $46 million, I know you quantified $7 million from annualizing the employee investment that you made last year. I guess, it sounds like there's more to that bucket than just the $7 million. So if that is the case, can you just provide some color on, I guess, what that is and, I guess, kind of why you're, I guess, quantifying it or spelling it out? Is it something above and beyond just more kind of normal, typical wage inflation or cost inflation? Or just, could you just frame that out or provide some color on kind of what that $7 million sits within the cost inflation that you cited?

Hi, Jeff. Yeah, on the cost inflation there, in Q1, right, we always have inflation before the revenues, as I was mentioning. And so I think what you should think about is, you can see from inflation data that's out there, what a normal inflation would be on our expense structure. And then for us, right, there are some investments that we always typically make in Q1 ahead of the season. And so I would point you toward the full year margin guidance of 31% where you can see how those impacts are really playing out in terms of some of the demand pieces and things we're quantifying for Q1 specifically, but then how that is expected to kind of level out throughout the season.

Okay, so in other words, it's more of just a timing mismatch as opposed to kind of, say, anything structurally out of the norm. Is that fair to say?

Correct, and that's something that we normally see in our Q1 ahead of the winter season in North America.

Okay, great, that's very helpful. Thank you, both. I'll pass it on.

Thank you, Jeff.

Thank you. Our next question will come from Matthew Boss with JP Morgan. Your line is open.

Hey, great. This is John from Matt. Your resort EBITDA margin forecast for next year is roughly in line with pre-pandemic levels. Can you provide details on the inflation included in the cost side for that or any investments aimed at expanding ancillary revenue streams this year? In other words, are there any structural obstacles to margin expansion over the next few years?

On our margin expectations for fiscal year 2024, we experienced an unusual margin expansion in fiscal year 2022 due to the labor shortage. As we enter fiscal year 2024, we anticipate a strong margin of 31% at the midpoint. Overall, winter margins appear robust and encouraging. However, we are experiencing some pressure due to the first-quarter assumptions that we recently discussed. There are opportunities ahead regarding resource efficiencies. A key aspect of our strategies and priorities for fiscal year 2024 is effective workforce management, which we will implement across all 37 of our resorts. Additionally, we will continue to invest in guest self-service initiatives that enhance efficiencies, along with automation. I am confident in achieving the 31% margin and believe there are opportunities moving forward, considering the scale of our business and the investments we've made in an integrated network, which should allow for additional margin expansion in the future.

Great, thank you.

Thank you. Next, we have a question from Patrick Scholes with Truist. Your line is open.

Good afternoon.

Hi, Patrick.

I'm sort of beating this one-two guide to death here, but is it fair to say that $40 million to $46 million, one-third of that was just weakness in Australia around $15 million, just trying to get some better granularity on that one? Thank you.

Hi, Patrick. Yeah, we do not look for the exact drivers of all three pieces, I think. The point for giving out the Q1 guidance is just to also showcase, right, there are some just normal headwinds we have in Q1. The midpoint in total, the one piece we haven't talked about is, where the midpoint is about $50 million off of prior year, right? There is an FX component which we've pulled out of the $46 million. And then in addition, right, cost inflation and the investment in wages. I would say Australia and North American demand, you can look to kind of some of the trends we were seeing in Q4 and continuation of some of those pieces. The other thing I would point you to, just for the full year margin, and I think this is just the important point of, right, like in the guidance in the 31%, right, the revenue flow-through on the fixed cost business, we are absorbing these cost pressures despite the Q1 headwinds.

Okay, just one or two other questions here. Last year, between when you did the first half and unit update, you lost about 3 to 4 points of growth. And then on the most recent earnings call, you had sort of a high level noted, you expected a deceleration between the June, which with the numbers you gave in June and now, but we haven't seen that. Is this to be taken as, hey, things are actually better than expected or maybe there's something in the sales program this year versus last year that will sort of delay that deceleration? How do we think about that?

I think that I feel very good about where we are on pass sales right now, and we are guiding that they may moderate for the full year because it is pretty typical for our growth rates to moderate as we go through the sales cycle. And that guidance that we provided wasn't specific to this September time period, but as it relates to the full year and what our expectations are for the full year. We are, as you know, constantly working to pull our guest decision-making earlier and earlier in the sales cycle, which can impact the sales that occur and the growth rates that occur later in the selling cycle. Also, as we move through the selling period, later in the selling period tends to be focused on more new pass holders making decisions versus our loyal renewing pass holders. And so, there can be more variability in the forecasting around our new product sales, which we generally see those growth rates decline the later we get in that selling cycle. But nothing structurally that is concerning about our pass sales, actually feel like we're in a great spot given we see incredibly strong loyalty and renewals and that's really driving the growth where we are right now, growth across all the geographies and growth across all of the product segments.

Okay. And then just one last very high-level question here. How much conservatism do you think is built into your earnings forecast? I know you mention normal weather conditions, but with such a geographically diverse range of resorts, it doesn't seem like anything is ever truly normal. I relate this to the cruise lines, which I cover. They typically incorporate a significant amount of conservatism in their forecasts, as they anticipate that something will go wrong in some markets. How much conservatism, if any, is included in your forecast? It seems that every year, if it's not the Northeast, it's Utah, and if it's not Utah, it's Canada. How much conservatism is there for unexpected events? Because those will happen; they always do. So, your thoughts on this?

We aim to provide guidance and forecasts that offer a balanced perspective with potential for both upside and downside. I agree that weather impacts are unpredictable. Although we consider various factors, we cannot account for extreme anomalies, like the unusual conditions we experienced this past year when some ski areas had grass in January. Such events are impossible to predict, so they are not included in our forecasts. Nonetheless, we always strive to maintain a balance, knowing there will always be some variability.

Okay. Okay. Fair enough. That's it for me. Thank you.

Thank you, Patrick.

Our next question will come from someone with Jefferies. Your line is open.

Hey all, good afternoon and thank you for taking my question. I know you touched on this a little, but could we get some further color on how you're thinking about labor outlook? Like, is there more pressure on cost per employee than the recent past?

I'm feeling very positive about our labor situation and our current wage levels. Last year, we made a significant investment in our employees' wages, benefits, affordable housing, and leadership development. Right now, we are beginning to ramp up our staffing for this season, and I feel confident about our ability to retain employees and attract new, highly qualified frontline talent. From a wage standpoint, I believe our starting wages are competitive enough to draw in the strong frontline talent we need for the upcoming season. This outlook is reflected in our budget, and I am optimistic about our capacity to meet our staffing and wage goals.

Okay, great. Thank you very much.

Thank you.

Our next question will come from Chris Woronka with Deutsche Bank. Your line is open.

Good afternoon everyone. Thank you for the information provided so far. Without requesting any insider tips about the model, how are you approaching the expected increase in skier visits for this upcoming season? I’m asking in relation to our current season pass sales and the recent price increase, which we believe will impact lift ticket revenue. Additionally, considering you had 12% growth last fiscal year, what kind of growth are you anticipating this year? Are you expecting something in the range of low single digits, mid-single digits, or high single digits? Any insights would be appreciated. Thank you.

Hi, Chris. We don't really give out specific guidance on the skier visit forecast for the guidance. And so what I will just tell you though is you should think about, right, the pass sales growth, which is our best indicator right now of our expectations for this year. You've seen over time how that, right, has translated into kind of visitation growth. Last year, I would just call out, I think, just to point out what you're quoting, right, does have some changes year-over-year with Seven Springs acquisition and the acquisition of Andermatt-Sedrun. So you'd want to normalize for those types of items. But generally, the ski industry has been relatively low growth in terms of the visitation. And I think where you've seen us really deliver for our guidance is you'll see the revenue translation from our growth in ancillary and our growth in capture with our advanced commitment strategies.

Okay, that's helpful. I had to try. Just revisiting this as a longer-term question, since you've already covered your margin expectations for the upcoming year. Regarding employee housing, there are many variables in your local markets. Has anything changed since last year about your plans to assist employees in finding more available housing in the coming years? Thanks.

I would not say that there is a material change in our focus and that this is a priority for us. Affordable housing is a crisis in so many geographies as you know, and in our mountain community, continues to be challenging and a crisis in many places. It is not an easy problem to solve. We are committed to making investments. We made some great progress last year. We've also run into obstacles. And we continue to stay diligent and focused on investing in this. I would say, when you look at our staffing this past year, we did get fully staffed despite a tight labor market and despite the challenges of affordable housing. That does not mean that we're going to let up our intense focus on continuing to make progress, but it's also important to note that it is possible for us to get fully staffed as we work through these challenges in partnership with our communities, in partnership with other developers and partners, but I'd say, yeah, we're in the same spot and suspect we will be for a while because it's a significant challenge.

Okay, fair enough. Thanks, Kirsten.

Thank you. Our next question will come from Brandt Montour with Barclays. Your line is open.

Hey, good evening, everybody. Thanks for taking my questions. Nice pass results, by the way. My first question is housekeeping, and then I have another question. The first one is the $7 million employee investment you called out, I know we kind of talked about. I just want to make sure I understand that that's not one time, right, since that is sort of the tail end of the $175 million for last year, that was also not one time, right? Is that the right way to think about it?

That's correct, Brandt. The impact of the employee investment this year reflects the timing of when it was implemented last year. We are seeing two months of incremental impact this year, and that investment will be part of our cost structure moving forward.

Okay, perfect. I won't ask you about Australia since several others have already done that. The interest in that number seems to stem from a desire to incorporate it into your guidance to assess the company's earnings potential on a stabilized basis. Instead, I’ll rephrase my question. If I consider last year's original guidance, adjust it for foreign exchange, account for the other modifications you mentioned, and then examine the midpoint of this year's guidance with what I believe is a reasonable adjustment for Australia, it leads me to a 5% same-store EBITDA growth estimate. So, my question is whether you think this reflects the growth profile of the business or if you anticipate it to be higher, and what are your thoughts on this?

Hi, Brant. I completely agree with your thoughts on the adjustments from last year's foreign exchange impact related to the sale of the retail rental outlets. Looking ahead at the business growth for Q1, there are three main factors to consider. First is cost inflation, which you can estimate within our cost structure for Q1. The second factor is demand, which I believe is worth normalizing and assessing. Last year, during this time in Australia, we had seen strong momentum that carried from Q4 into Q1 when we provided our guidance. There was considerable pent-up demand following the COVID restrictions, and we also experienced favorable weather during the previous winter season. This year, however, we are observing a reversal of that trend, which is affecting our growth. Additionally, the demand patterns in North America are shifting, as many competitors in the leisure sector are reporting a move toward urban, international, and cruise alternatives over the summer. This behavior contrasts with what we typically see from our winter customers and has impacted our Q4 results and continues into Q1. We believe this is not a permanent shift and anticipate a return to normalcy over time.

Okay, thanks for all that extra color, Angela.

Thank you. Our last question will come from Megan Alexander with Morgan Stanley. Your line is open.

Hi, thanks very much. Most of mine have been answered at this point, but you talked about strong pass sales growth from renewing holders. Could you maybe just give us some color on what you saw with year one renewals versus multi-year pass holders?

We are currently experiencing growth primarily driven by the loyalty of our pass holders, with strong renewals across all levels compared to the previous year. This loyalty and the resulting renewals are crucial for the success of our pass program, even as we also seek to attract new pass holders. Additionally, when we analyze new pass holders, we consider individuals who are new to Vail Resorts, those who are transitioning from lift tickets, and people who were previously pass holders, referred to as lapsed pass holders from previous years. We are seeing substantial growth in this latter group, as many former pass holders are returning to us.

Awesome. Super helpful. And then maybe just one clarification on your answer to Brandt's question. Is the impact that you're seeing in Australia, is there an impact from lapping the pent-up demand, or was that more of a last-year impact? And so we would get all of it back next year, I don't know if that makes sense, but just want to understand if there is an impact from the lap that you're seeing, or it's really just the weather this year?

Hi, Megan. I think we're experiencing some normalization. Last year, we had significant pent-up demand and excellent conditions, culminating in a strong finish to the season. This quarter, however, we're facing the opposite, with unusually warm temperatures resulting in terrain closures. So it's a mix of both factors, with very different extreme conditions from last year to this year.

Okay, that's helpful. Thank you.

Thank you, Megan. This concludes our fiscal 2023 year-end earnings call. Thank you to everyone who joined us today. Please feel free to contact me or Angela directly, should you have further questions. Thank you for your time this afternoon. Goodbye.

Thank you, ladies and gentlemen. This concludes today's Vail Resorts fiscal 2023 fourth quarter earnings call and webcast. You may disconnect your line at this time and have a wonderful day.