Earnings Call Transcript - MTN Q3 2025

Operator, Operator

Good afternoon, and welcome to the Vail Resorts Fiscal Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. Currently, all callers have been placed in a listen-only mode. Following management's prepared remarks, the call will be opened for your questions. If you need to remove yourself from the queue, press 2. To get to as many questions as time permits, we ask that you please limit yourself to one question and one follow-up. At any time, if you should need operator assistance, please press 0. I will now turn the call over to Angela Korch, Chief Financial Officer of Vail Resorts. You may begin.

Angela Korch, CFO

Thank you, operator. Good afternoon, and welcome to our fiscal 2025 third quarter earnings conference call. Joining me on the call is Rob Katz, our Chief Executive 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. 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, 06/05/2025. 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 with our press release, which, along with our quarterly report on Form 10-Q, filed this afternoon with the SEC, are also available on the Investor Relations section of our website at www.vailresorts.com. Before we discuss our results, I would like to turn the call over to Rob for some opening remarks.

Rob Katz, CEO

Thank you, Angela. Good afternoon, everyone. I am humbled, grateful, and super excited to be back in the CEO role at Vail Resorts. It’s good to be on this call with all of you again. First, I want to start out by thanking Kirsten Lynch, our former CEO, for the incredible career she has had with Vail Resorts, including the past 3.5 years as CEO. Huge progress was made on so many fronts, from investments in our frontline talent, new guest experience innovations, to much more, which will all absolutely be things we will be leveraging as we go forward. And I have immense gratitude for her for all of that work. So why did I choose to be back in this role? First and foremost, I love this company because of the incredible people we have working here and the amazing resorts we get to operate. I remain as passionate about this company, the sport, and our industry as I was when I first worked with Vail Resorts at least three decades ago. But most importantly, I see a terrific opportunity ahead of us to drive value with the incredible foundation that's already been set. Given how much time I've spent around this company, it's natural to assume that I arrived here with a fully thought-out detailed action plan. But that's not the case. Because there is a big difference between serving on the board and being an executive here every day with our teams driving change. And that is where real change happens, on the ground. That was true in 2006 when I first took over as CEO, and that is still true today. So while I'm not a brand new CEO for this company, I'm still new, as so many things are different at the company and different in our industry and in the macro environment. And it will be important for me to take the time to listen and learn from everyone here and for all of you to give me the space to do that as well. That said, of course, I'm not starting at ground zero. And we'll have much more to share on our future plans during upcoming earnings calls and at our investor conference next spring. With that in mind, I am starting this next chapter with some fundamental points of view. The foundation of our success as a company remains our unique portfolio of owned and operated resorts and our strong business model that drives stability in an industry that is uniquely exposed to weather volatility. Advanced commitment remains central to the guest experience and our own thesis on how we drive value. Equally as important is that the guest and employee experience is paramount and is at the center of everything we do. And we need to always remember that while we also drive our financial success. When I look back on this past year, I see so much to be proud of and strong performance in so many areas. However, I also see areas where we can and will do better. Because we have high expectations for ourselves. And we are driving strong guest satisfaction scores. However, we need a more consistent guest and employee experience throughout the season and across all of our resorts. We can also do a better job communicating with our guests. We have incredible data and insights on our guests and very sophisticated tools and talent to drive demand, but we need to continue to innovate our marketing efforts as the environment around us has continued to evolve and ensure that our strategies and tactics are meeting guests where it's most impactful. Missing the mark here has clearly contributed to softer results than we expected this past season. It also needs to be clear to our guests what our company stands for. I recognize that the very existence of Vail Resorts as the industry leader and a large publicly owned company can sometimes seem at odds with the essence of the ski industry. But that's not how I see it. We are a company filled with passionate people and so many avid skiers and riders who have worked for decades to innovate this industry for the better. And we can do a better job showcasing how we benefit our guests and employees and the industry overall and, most importantly, do a better job avoiding the moments that often set us backwards. Driving guest engagement and loyalty and stronger revenue growth are among my top priorities as CEO. I also understand that there's a narrative that the industry is mature, that there are not many strategies left to drive growth in our company. It's important to remember that that is exactly the same narrative I walked into when I became CEO in 02/2006. Of course, we can't just replay the approach and success we had back then. But it means I'm not daunted by the challenges of how to drive growth. I remain incredibly optimistic about what's possible because we are a much stronger and more innovative company than we were in 02/2006. With team members and leaders who are more thoughtful and sophisticated in their approach. And that is a powerful combination to drive change. We need to recognize that change takes time, especially in an industry where the majority of our earnings occur over only four months each year. But the extra time it takes us to drive change also means that as we build our competitive differentiation, those advantages can drive revenue growth for years to come. Through it all, my primary job as CEO is ensuring we align with all of our stakeholders to deliver an experience of a lifetime for our guests and employees while driving financial success for our company as well. And that is what fuels my excitement to be back as CEO. With that, I'll turn it over to Angela to cover our fiscal 2025 third quarter results.

Angela Korch, CFO

Thanks, Rob. Results in the quarter reflect the stability provided by our season pass program as resort net revenue, excluding Cremontana, remained consistent with the prior year even as visitation declined 7%. In March and April, destination visitation among pre-committed past guests improved as expected. However, visitation from uncommitted lift ticket guests was below expectations. Ancillary spend per destination guest visit was strong across our ski school and dining businesses throughout the quarter. Overall revenue in our ancillary business was impacted by the lower visitation. When looking at our performance throughout this past North American ski season, our results reflect the strength of our advanced commitment strategy, strong destination guest spending, and the impact of our Resource Efficiency Transformation Plan. The company achieved 3% growth in resort reported EBITDA year to date, despite total skier visits declining 3% across our North American resorts. From the beginning of the ski season through 04/30/2025, North American visitation reflects the benefit of improved conditions in the second quarter, relative to the prior year, offset by the expected decline in visitation from selling fewer pass units this season. For the year-to-date period, resort net revenue increased 3%, driven by a 4% increase in season pass revenue and increased ancillary spend per guest across our ski school and dining businesses. Resort reported EBITDA year to date also reflects strong cost discipline, including savings from the Resource Efficiency Transformation Plan. The company's full-year resort reported EBITDA growth is partially offset by $15 million in expected increased costs from company-wide performance-based management incentive plan expense that was not earned in the prior year, of which $12 million has been incurred through the fiscal third quarter, and $6 million of expected unfavorable reserve reported EBITDA impact from changes in foreign exchange rates, of which $4 million has been incurred through the fiscal third quarter. Overall, the results demonstrate the strength and resilience of the company's business model supported by its expansive resort network and loyal guest base, even as the company's Western North American destination resorts experienced a decline in visitation, with outsized impacts from fewer lift ticket guests. Through the 2024-2025 North American ski season, guest satisfaction scores across our destination mountain resorts and regional ski areas were strong and consistent with the prior year, excluding Park City Mountain. As a result of the investments we continue to make in our teams, the company achieved record frontline return rates and strong employee engagement scores across our mountain resorts during the winter season. In addition, we are on track to our two-year Resource Efficiency Transformation Plan which was announced in September 2024. The plan is designed to improve organizational effectiveness and scale for operating leverage as the company grows. Through the three pillars of scaled operations, global shared services, and expanded workforce management, the company expects $100 million in annualized cost efficiencies by the end of its fiscal 2026 year. The company now expects to deliver approximately $35 million of efficiencies before one-time operating expenses in the fiscal year 2025, which includes $8 million of efficiencies the company is accelerating into the current fiscal year from its original fiscal year 2026 plan. The company remains on track to deliver the $100 million in annualized cost efficiencies by the end of its fiscal year 2026. Now turning to our outlook for fiscal 2025. As a result of the lower than expected lift ticket visitation during the spring period, announced on April 2025 and one-time costs related to the CEO transition announced on 05/27/2025, the company is updating its fiscal guidance for fiscal 2025. The company now expects net income attributable to Vail Resorts to be between $264 million and $298 million and Resort reported EBITDA for fiscal 2025 to be between $831 million and $851 million. The guidance reflects the lower than expected lift ticket visitation in the spring period that was partially mitigated by the company's focus on its Resource Efficiency Transformation Plan and strong overall cost discipline. The updated guidance now includes an estimated $9 million in one-time costs related to the CEO transition, in addition to the estimated $15 million in one-time costs related to the multi-year Resource Efficiency Transformation Plan and the estimated $1 million of acquisition and integration-related expenses specific to Cremontana. Compared to the original fiscal 2025 guidance, the updated guidance includes an estimated $7 million impact from foreign exchange rates. At the midpoint, the guidance implies an estimated resort EBITDA margin for fiscal 2025 to be approximately 28.4% or 29.2% before one-time costs from the Resource Efficiency Transformation Plan and CEO transition. Turning to our balance sheet and capital allocation priorities. As of 04/30/2025, the company's total liquidity, measured by total cash plus revolver availability and delayed draw term loan availability, was approximately $1.6 billion. This includes $467 million of cash on hand, $508 million of US revolver availability, $450 million of US delayed draw term loan availability, and $215 million of revolver availability under the Whistler credit agreement. As of 04/30/2025, the company's net debt was 2.6 times its trailing twelve months total reported EBITDA. The company declared a quarterly cash dividend on Vail Resorts' common stock of $2.22 per share. The dividend will be payable on 07/09/2025, to shareholders of record as of 06/24/2025. During the quarter, the company repurchased approximately 200,000 shares at an average price of approximately $161 per share for a total of $30 million. Additionally, the Board of Directors increased the company's authorization for share repurchases by 1.5 million shares to approximately 2.8 million shares. We remain committed to a disciplined and balanced approach as stewards of our shareholders' capital. We continue to prioritize investments that enhance our guest and employee experience, provide high-return capital projects, and enable strategic acquisition opportunities. After these priorities, we focus on returning excess capital to shareholders. In the current environment, the company looks to balance its approach between share repurchases and dividends. The current dividend level reflects the strong cash flow generation of the business, with any growth in the dividend dependent on a material increase in future cash flows. The company also maintains an opportunistic approach to share repurchases based on the value of the shares. As it relates to the investments that enhance the guest experience, we remain committed to consistently increasing capacity at our resorts through lift, terrain, and food and beverage expansion projects, along with investments in technology to further elevate the guests and employee experience at our resort. The company expects to invest approximately $249 million to $254 million of total capital in calendar year 2025. Key capital investments include the multi-year transformational investments plans at Park City Mountain, which include the new Sunrise Gondola, out of the Canyon's base area, along with beginner terrain improvements and restaurant upgrades, in addition to investments at Andermott Citroen, a new six-pack lift at Perisher, new functionality for the MyEpic app, more advanced AI capabilities for MyEpic Assistant, and technology investments across the companies and for our businesses. Now I'll turn the call back to Rob to discuss the spring test results.

Rob Katz, CEO

Thank you, Angela. Test product sales through May 27, 2025, for the upcoming North American ski season decreased approximately 1% in units and increased approximately 2% in sales dollars as compared to the period in the prior year through 05/28/2024. Given elevated levels of macroeconomic volatility that occurred throughout the spring selling period, it is currently unknown what, if any, impact that had on early pass decision-making. Pass sales dollars are benefiting from the 7% price increase relative to the 2024-2025 season, partially offset by the mix impact from the growth of Epic Day Pass products. Pass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.73 between the Canadian dollar and U.S. Dollar in both periods for Whistler Blackcomb pass sales. The slight decline in units relative to the prior year season to date is primarily driven by new pass holders and lower tenured renewing pass holders, which may reflect delayed decision-making by the macro due to the macroeconomic environment. Epic Day Pass products experienced strong unit growth driven by the strength in renewing pass holders. Overall, renewing passholder product net migration was relatively consistent with the prior three years. The majority of our pass selling season is ahead of us and we believe the full-year pass unit and sales dollar trends will be relatively stable with the spring results. We will provide more information about our pass sales results in our September 2025 earnings release. EPIC Australia pass sales through 05/28/2025 increased approximately 20% in units and approximately 8% in sales dollars as compared to the period in the prior year through 05/29/2024. EPIC Australia Pass sales are benefiting from the successful introduction of the Epic Australia four-day pass, which is resonating with lower frequency skiers and riders in Australia. In closing, with the North American and European ski seasons coming to an end, I want to especially thank our frontline employees for their passion and dedication to delivering an experience of a lifetime to our guests. Our employees are the core of Vail Resorts' mission. And I'm looking forward to seeing all of our employees and all of you up on the hill. At this time, Angela and I would be happy to answer your questions. Operator, we are now ready for questions.

Operator, Operator

Thank you. We will take our first question from Shaun Kelley with Bank of America. Hi, good afternoon everyone. Thanks for taking my questions.

Shaun Kelley, Analyst

Rob, welcome back. It's great to hear your voice again. I appreciate you doing this. So I'd love to lead off with kind of where you started on some of the priorities that you highlighted. I think if I caught it, the prepared remarks said customer experience and stronger revenue growth. So just what could some of the key levers be in both those areas? I appreciate it it's super early, but kind of maybe walk us through the about what you're exploring and what could be on the table in those areas, if that's the top two that come to mind. Thank you.

Rob Katz, CEO

Sure. I think on guest experience, it is building on the progress that we're already making. I think we've made a lot of investments in guest experience. If you look at Park City, it had a challenging experience, obviously, during a portion of this year. But you look at all of our other resorts, we actually had really good guest experience scores. That said, the Park City experience was obviously unacceptable. And so, yeah, one of my key priorities is ensuring that all of our resorts are consistently delivering that experience throughout the season. And I think that's literally a matter of building on track record and the investments that we've already made and just bringing them to life and executing it. I think on the marketing side, we've got incredible fundamentals and foundations in that group and terrific talent. I think there's an opportunity for us to take what we're doing in marketing and bring it to be a little bit more current. We've had a number of things that have been so successful for us when you look back over the last decade. But obviously, some new tools and approaches for us to make sure we're really connecting with guests in a way that's most impactful given the kind of changing environment that's out there. And I think that is a critical part of really returning to revenue growth.

Shaun Kelley, Analyst

Thank you. And then just as my follow-up, you also kind of reiterated that advanced commitment remains pretty much the core of the business and it obviously has revolutionized the stability of your earnings and cash flows over time. So zooming out as we kind of look at the mix as it's progressed here in a few years after the price cut, what's on the table in terms of adjusting or tweaking the pricing strategy? And is the 75% of lift ticket sales still the North Star in terms of what you're targeting? Would there be any opportunity to possibly readjust that mix and think about high-low strategies and things like that to possibly drive different levels of utilization? Just help us think kind of how you're thinking about ways to maybe further evolve something that obviously you basically transformed the industry with?

Rob Katz, CEO

Yeah. I think I would say that weather volatility is not going away. And so I think the core thesis that it’s important to get people to commit to their skiing in advance remains. I think one of our focus areas, though, is obviously how we get the pricing and product strategy right. And I think we've continued to innovate online. But I think there are opportunities for us to look at our product portfolio and see where there may be gaps that we could fill. It's important to also remember when you look at season pass growth overall over the last couple of years, that it grew dramatically. Right? When you look back at 02/2002, we added almost double, right, up 40%, the number of passes. Once you do that, of course, it’s true that you’re probably pulling some future growth in a couple of those years from future years, and that’s somewhat to be expected. That said, obviously, we're a much stronger company by having people commit in advance. I think that's true not just in the ski industry, but in almost all of travel where people are looking to get customers to commit in advance. I do think there are also opportunities for us to do a better job at driving lift ticket sales. Obviously, for this year, that was an area that didn’t perform to where we expected it to. It’s going to be our job to really innovate and come up with approaches where we feel we can drive lift ticket sales, particularly in off-peak periods, while at the same time not endangering the value that we're offering from our season pass.

Shaun Kelley, Analyst

Thank you very much.

Rob Katz, CEO

Yep. Thank you.

Operator, Operator

We'll go next to Jeff Stantial with Stifel. Hey, good afternoon, everyone.

Jeff Stantial, Analyst

Thanks for taking our questions and welcome back, Rob. Actually just sticking on that last point, that you just made on driving ticket lift ticket sales. You think about the decline you saw this season and for a couple of seasons now, obviously, part of this is sort of just post-COVID reversion in guest behavior, some of it was weather. But part of this does feel a little bit more structural in nature. So with that in mind, Rob, I'm just curious how you think about and frame this moderation in window ticket sales that you have seen in recent years? How much of this is sort of unavoidable? How much of it was more self-inflicted? And then strategically, does it feel like a trend that can be reversed with just some operational and marketing adjustments? Or does this really warrant a deeper discussion on the optimal pricing strategy?

Rob Katz, CEO

I think I guess when I look at it, what I would say is obviously, we want people to be on the mountain. We want people to visit our resorts. Our preference is that people buy in advance and come to the resort on a pass product of some sort. To the extent that there are people who are not doing that, it's still our hope to convert those lift ticket buyers or people who today may not be buying a pass to a pass product. But if we don't get them on a pass product, it's our job to provide avenues and paths for them to come to our resorts to try them out and ultimately get them into our primary loyalty product. I think that does require looking at new approaches to our pass product and pricing strategy. I don't think it actually goes to the core thesis that we would prefer to have people in advance commitment products. We're not about to do anything that calls into question the value proposition that we're offering to our pass holders.

Jeff Stantial, Analyst

That's great. Thank you for that. And then maybe just turning over to the current trade environment as this is our first time hearing from you since April 2. Rob or Angela, can you just sort of frame out for us where the exposure is in the model to potential payers just after the landscape looks today, keeping in mind it's dynamic? And then just sort of what sort of opportunity do you have to offset or derisk any potential exposure? Thanks.

Angela Korch, CFO

Yeah. Thanks, Jeff. As a service business, we don't have a lot of direct exposure to tariffs, right, because our main cost is labor. But there's obviously a larger impact that we're looking at from tariffs, which is how does that impact the consumer? And does that impact any shifting in their spending patterns? And of course, in this kind of macro environment, that just creates some uncertainty. So that's the side that we watch more. On the actual cost piece, we do have a lot of long-term agreements, and it's the largest purchaser with a lot of our suppliers, right? We do have ways to help mitigate on the expense side of the impacts.

Jeff Stantial, Analyst

Great. Thank you both.

David Katz, Analyst

Good afternoon. Good to talk to you. Rob, I wanted to talk about sort of labor broadly speaking. Right? Much has changed since we last had this conversation. One of which is just generally cost of living, costs in general. And the company has made some adjustments, etc. But that's a particular area of focus. And sort of an overall labor strategy, I know this is a general question, but I'd love to hear what high-level thoughts you may have so far.

Rob Katz, CEO

Yeah, I mean, I think I've said a couple of times, both in this call and obviously in my letter to all of our team members that, you know, everyone, talent in total, all of our employees, all of our team members, at this company, are core to everything we do. And we understand that that is the experience that people are coming for. It's not just the resorts; it is actually how they interact with the people who are here. The service that they get is all about all of our employees throughout every part of the business. And so it's critical for us to show up in a way that truly delivers that experience of a lifetime. And that only happens if we do that for them. And that includes our employees that may be part of a union. They are just as important as anyone else here. It is important for us to work through various processes that go on with our unionized employees in a way that brings those to a successful resolution. There's always going to be tension and challenges through that, of course. And obviously, even after the Park City negotiation and ultimately the impact that had on the resort, two other very successful union contracts were signed this year and many others in the years that preceded the Park City situation. So that is, of course, very top of mind for me. But again, as part of a broader commitment to ensuring that we are delivering and supporting our employees in delivering the right experience for our employees and supporting them, so that they can ultimately deliver the right experience for our guests. That is critical to driving revenue growth as we look ahead.

David Katz, Analyst

Understood. And one of the other sort of harder evolving challenges has been weather. It seems as though the weather presents a challenge almost all the time. I wonder to what degree you think about that in today's environment, and how you aside from the presold nature of the passes, are there other strategies, whether financial or otherwise, that you can deploy in just dealing with that complexity?

Rob Katz, CEO

I think that is one of the most important things we always are thinking in terms of the business, and it’s certainly a unique aspect about this industry versus some other parts of travel. But we do think that our advanced commitment strategy is critical for that. It’s a trade that we’re making with our guests, where we’re providing a more accessible price point to them and in return, we’re getting a commitment for the season. I don’t see us shifting away from that. Obviously, it’s critical for us to make our resorts a fulfilling experience. When our resort communities and the towns that we operate in are thriving and the businesses there and the experience they provide are thriving, that also provides a reason for people to come even if the snow isn’t as good. That’s also a component for us on how we ensure that even through lower snow years, we can still bring guests in and drive revenue.

Megan Clapp, Analyst

Hi, good evening. Thanks so much. Rob, you mentioned in your prepared remarks there's a lot that's different about the industry, macro, and companies since you were last in the seat. Maybe if we could talk about the industry a bit. There's been, you know, maybe not necessarily news since you left, but there's a lot of other multi-mountain pass players, many of which have grown their portfolios pretty significantly over the last couple of years. So how do you think about the company's position from a competitive perspective both from the pass offering as well as your network of reports, and how do you think about how that positions you to drive pass-through in the US, what's and just what seems like a more competitive environment than it maybe has been historically?

Rob Katz, CEO

Absolutely. I mean, there's no question that the Icon Pass, which debuted when I was still CEO, presented new competition to us. But I think it also helped build and secure the entire market for advanced commitment products. From the time that Icon has shown up until today, the consumer mindset has shifted from thinking about whether they should buy a pass at all to understanding that actually that’s probably the best way to access a mountain. Now it’s just a matter of which pass they buy. I think our company should welcome healthy good, thoughtful, innovative competition. There’s no doubt that the Icon Pass is absolutely been that. I feel like our pass offering is strong and compelling and tailored to the guests that we’re going after. True, we look at adding resorts or partners in a very disciplined, thoughtful way about what we think adds and is not duplicative to what we already have. To the extent that it brings in new guests, or really provides an experience that will broaden the experience that our guests are looking for and really moves that needle, that’s something we looked at before and will continue to look at as we go forward. It’s also true, though, that as competitors have continued to get better, we have to get better. That relates to some of the comments I made about our marketing effort in terms of thinking there are opportunities for us to innovate there and to bring some approaches that we’re using to be more current with the tools and communication channels available in today’s environment. There are many opportunities for us to do that again.

Megan Clapp, Analyst

That's helpful. And maybe just a follow-up on the European strategy. Bill's been pretty clear as recent as the Investor Day in March, and I think you even mentioned it in prepared remarks on the benefits of the owner-operator model. Europe is a place where you've had partnerships for years, and you recently added six new partners in Austria. Should investors look at that as a signal maybe about your willingness to explore the partnership model more broadly in Europe? Is there an opportunity in your mind to launch a pass through the partnership model in Europe versus the owner-operated model? And if I can just squeeze one in, just how are you thinking about M and A? I guess, is the use of capital broadly, particularly as you might need to reinvest to reinvigorate growth in the US?

Rob Katz, CEO

In Europe, not that different than the US or anywhere else. Our preference is always going to be to own and operate a resort. That is a completely different business than just having a partner. But it is the business that we’re in and where we think we add tremendous value on multiple fronts. One, we think we can operate the resorts better. Two, we believe we collected data from the resorts. We can be more flexible in the approach we are using in terms of price promotion and communication channels. All of that, we think, is a comprehensive opportunity. Now that said, especially internationally, we have been open to partnerships and we will continue to be open to partnerships because we do think it enhances the pass. Many of those resorts are not resorts that are interested in selling. We completely understand that. But we’ll still be disciplined in how we add either a partner or an owned resort. I think that’s true on the M and A front here as well. We need to be disciplined. It’s critical for us to ensure that we’re buying the right resort in the right location for the right price with the right upside both in terms of how the ski and guest experience can be expanded and, obviously, financially, the kind of returns we can drive from that investment. I don’t see that changing from the approach that we’ve taken over a fairly long period of time. That said, it’s also true that within Europe, we’re going to take a very disciplined approach. Given the opportunity we have, we think, to create a network. When the right opportunity presents itself, we will pursue it. But it is going to be a very targeted approach.

Megan Clapp, Analyst

Great. Thanks, Rob.

Rob Katz, CEO

Thanks.

Laurent Vasilescu, Analyst

Hi, guys. This is Dion on for Laurent. Maybe as you look to next season, do you foresee any issues in terms of getting visas for international workers? And maybe just talk about the environment for seasonal workers into next season regarding labor?

Angela Korch, CFO

Yeah. Thanks, Dion. We do use visas for some of our seasonal hiring, especially where we flex in the season. We've gone through a lot of different environments related to COVID times where there were a lot of restrictions on that. We've managed through those changing levels. We've really reduced our number of visas over time, as you’ve heard us talk about the high retention rates and return rates that we’ve had for seasonal employees, right? That also reduces the need for some of those programs. But we continue to evaluate where we will take advantage of those programs or not. But we don’t see that as something we couldn’t manage around at this point.

Laurent Vasilescu, Analyst

Okay, got it. And then you mentioned about $8 million worth of earlier cost savings from the transformation plan. Maybe you can talk a little bit more about how the transformation plan is going and some of the savings that you're getting?

Angela Korch, CFO

Yeah, we are really pleased that we were able to focus on accelerating some of our efforts that we had already planned for our Resource Efficiency Transformation Plan into the current year. That helped offset this year some of the visitation shortfalls that we had. The team has done an amazing job of really ensuring that we can deliver on all three pillars. You saw us more recently, maybe in May, see the announcement where we also kind of put out for our change in operating model for our division to realign some of those resorts but also some centers of excellence that we can do that can really unlock savings for us as well.

Patrick Scholes, Analyst

Hi. Good evening, everyone. Regarding the standing offer for Park City, is entertaining that just a nonstarter? Or, Rob, you know, given your reputation as a creative outside-the-box financial idea person, would you consider finding a way to sell that at an accretive multiple, but perhaps maintain a long-term agreement to keep Park City in the Epic Pass network?

Rob Katz, CEO

No. That’s not something that we're looking at. We don't think that is ultimately in the right long-term interest of our company. We think it’s especially a resort like Park City, of course, is critical to our overall company and our network. It’s our job to continue to listen to the feedback from our guests; from our community partners and continue to drive improvement both in the way that we deliver an experience for our guests, the way that we deliver for our employees, and the way that we deliver for our community members. It’s true, one of my priorities is aligning all of our stakeholders. Not all of our stakeholders are going to agree with the things that we decide to do. They may not all agree amongst themselves about what is the right strategy and approach. Our job is to navigate that dynamic. In an environment where you’ve got a fair amount of passion and emotion, that can sometimes be tricky, and we may not always get it right. That’s our commitment.

Patrick Scholes, Analyst

Okay. Thank you for making that very clear. My follow-up question actually is on the dividend. How comfortable are you, Rob, with the current dividend policy or the payout levels? Could that possibly be up for review? Thank you.

Rob Katz, CEO

I'm very comfortable with our dividend, and I think our board is. Obviously, that’s why we announced and authorized the dividend again this quarter. At the same time, we wanted to make it clear in our remarks that the priority for us is always going to be the investments that we're making in our employees, in our resorts, and in acquisitions. That always comes first. We look at the funds that are left over after that in terms of what we're returning to shareholders. One of the comments we made is that, yes, we look at the dividend, we're comfortable with it. If we were going to increase it going forward, it would have to be after a real material increase in our free cash flow. In our mind, that of course would better align the payout ratio that you're talking about as we look over the next couple of years.

Arpine Kocharyan, Analyst

Hi, thank you so much for taking my question, and welcome back. To revisit Megan's question regarding the European strategy for a moment, could you talk a bit about your approach there? Do you think the playbook you had for North America could work for Europe where you have more proximity of mountains, and where maybe raising lift ticket prices to make the customer choose the pass product might not be as smooth as how that evolved in North America? Then I have a quick follow-up.

Rob Katz, CEO

No. We don't think that the same playbook we've used in North America would be the right playbook for Europe. To the extent that we launch a European based pass product, it would be different, and the approach would be different because we understand that all of the dynamics are very different there. That said, we believe that there is an opportunity to be more strategic about the approach being taken in Europe. Even more so, you think about the European ski industry going forward and the weather volatility that we talked about before. The same attractiveness of an advanced commitment product exists there as well. Just like in the United States, it took many years for our pass product to follow. It will take time for that to happen there. Looking out over the long haul, there is a compelling opportunity not only for us but for the industry as well.

Arpine Kocharyan, Analyst

Great, thank you. That's very helpful. In terms of your outlook for next season, how is that shaping up? What are you seeing in the business to give you confidence that trends that you saw in spring will remain steady for the year? Investors think of Vail's average consumer to be a bit higher end than the US average, maybe a little bit insulated from inflationary pressures. However, we are in a different macro environment today than three months ago. How does that factor into your overall calculations for the next ski season?

Rob Katz, CEO

I think the macroeconomic environment is definitely a risk. Our comments about continuing the trends on season pass sales depend upon the macroeconomic environment staying relatively stable. Obviously, if it got dramatically worse, that could change. If it got better, we could see the opposite. We also commented that it’s unclear yet whether the macroeconomic environment over spring pass sales that occurred before the April deadline had an impact on decision-making. Based on what we’re looking at right now and the data we have on our own guests, assuming a relatively consistent macro environment, we feel good about maintaining the trends we’re seeing right now.

Ben Chaiken, Analyst

Hey, thanks for taking my questions. Regarding Europe, the partnerships in Austria over the last few weeks were pretty notable. How do you think about the tipping point where there's momentum with a European pass or a regional pass within Europe? Do you think about the number of assets required to create this flywheel you've developed elsewhere? And can you achieve the desired network effect in Austria for example, owning the assets? Or is that just a precursor to eventually buying?

Rob Katz, CEO

I think that is, I would say that’s still an open question. I don’t think it’s necessary for us to own a certain amount of assets to put a product out. But the question is to have a product that would be compelling or impact the guest in some way. We believe owning additional assets might be critical for that. Where those come in the lifecycle of that potential product is something we need to feel confident enough to launch that product where we feel like it would be additive. We pursue a lot of different things and look to see where the openings are that drive value. Europe will absolutely be there when we think it’s the right time. Absolutely. Yeah. No. Absolutely. I think we have, you know, obviously, we these are guests that are already visiting our resort. Where we feel like there’s opportunity to deepen our relationship with them and broaden our capture rate. We think that is going to be some of the marketing improvement that we’re going to be focused on as we look ahead. Part of it is also innovating on the product we’re offering and how they engage with that product or service. We think MyEpic Gear and MyEpic Pro are both critical to that. Using technology and providing a better guest experience. Then we layer on top of that an improved marketing approach that we think will be one of the most important revenue drivers as we look to the future.

Brandt Montour, Analyst

Great, thanks for taking my question. Looking back at this past season and the visitation shortfall, what can you tell us about where you lost share, geographically or by source market? Who is the guest that you need to win back? Is it more mountain specific or source market specific?

Rob Katz, CEO

I would say, we did not achieve this year the results that we were looking for. It’s true that we underperformed the industry. Part of that is where the industry overperformed in some markets like the Midwest where we did perform well. But we have a tiny market share with only a couple of resorts there. Part of it is a geography balance, but part of it, even within geography, we feel like we didn’t hit our mark. The biggest area where we feel like we fell short was uncommitted lift ticket visitors. They are not committed in front of the season, and are not committed likely to skiing at our resort or another resort. That’s where we need to take a different marketing approach. Think there are also opportunities for us to drive pass sales. Yes, this is right in our wheelhouse to turn around.

Brandt Montour, Analyst

That’s really helpful color. Thank you for that. Second question, you alluded to opportunities for innovation around the pass. Some of your peers are notable in their tinkering and management of tiering. I know you're not going to announce your ideas here, but just to get your philosophy on the pros and cons of tiering. It might be more complicated but could unlock unique supply and demand dynamics across mountains.

Rob Katz, CEO

I think most people would say that we’ve done a lot of that already. Sometimes we can be criticized for having too many products and being too complex. But we’re constantly looking at whether there’s a new approach for us to get somebody to commit in advance. Over time, this becomes harder because the people who are easiest to convince, we’ve already converted them long ago. That’s our job. Innovation is critical. As I talk about potentially changing our pass product or portfolio, I don’t see some huge overhaul. But it’s to see where we can be more aggressive and continue to mine both types of guests and source markets. It’s not isolated to one market or one type of guest. It is the less committed skier that I think will be our focus.

Chris Woronka, Analyst

Good afternoon, everyone. Rob, it’s nice to have you back in the seat. I want to start with a different question, Rob. Looking at the cruise industry, they have ticket prices that are significantly higher than they were in 2019. You guys are not a lot higher on a like-for-like basis. Some of that is mix, and maybe some in the cruise industries is new hardware. The question is, do you think you can continue driving price? Do you have enough ways to re-energize the product without going off the rails spending wise? Is that possible? Do you think you need to do that?

Rob Katz, CEO

I absolutely believe that our opportunity to continue to drive price is there as it has been before. We’ve shown that in a lot of different ways. It’s a bit different than the cruise or hotel industry in that we’ve got this matrix around advanced commitment and lift tickets. We’re dialing both simultaneously. Even within lift tickets, we’re dialing people who want to buy in advance and those who show up the day of. It’s complex, but it’s where we’ve been successful. We’re continuing to invest in our resorts, adding new lifts, upgrading restaurants, new experiences, and using technology to improve guest experience. We think all of that justifies the opportunity for us to continue to charge. But we also understand that to encourage people to move to advanced commitment, that’s going to be something we have to evaluate long-term as we offer discounts.

Chris Woronka, Analyst

Thanks, Rob. On costs, there are many angles to it. I’m not trying to get a number, but do you think there needs to be a grand reset on operating expenses in terms of labor, housing, or whatever? Or do you think you just need to tweak certain things, while corporate expenses will counterbalance operating expenses?

Rob Katz, CEO

We don’t think there needs to be a grand reset. We need to stay competitive on how we attract employees to the company. The investment we made a couple of years ago was significant and has allowed us to deliver a much better experience. Our seasonal return and retention rates are the best they’ve ever been. We also think there are ways we can be smarter. In the resource transformation efforts, we're not pulling back on guest experience. We’ve grown quickly and can be more thoughtful in how we resource and oversee the same things. That goes for using technology and AI like everybody else.

Operator, Operator

This will conclude the Q&A portion of today's call. I would now like to turn the call back over to Rob Katz for closing remarks.

Rob Katz, CEO

Thank you, operator. This concludes our fiscal 2025 third quarter earnings call. Thanks to everyone who joined us today. Please feel free to contact Angela or me directly should you have any further questions. Thank you for your time this afternoon, and goodbye.

Operator, Operator

Thank you, sir. This concludes today's Vail Resorts fiscal third quarter 2025 Earnings Conference Call and Webcast. You may now disconnect your line at this time, and have a wonderful day.