Earnings Call Transcript - MTN Q4 2025

Operator, Operator

Good afternoon, and welcome to the Vail Resorts Fiscal 2025 Year-End Earnings Conference Call. Today's conference is being recorded. 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 fourth quarter earnings conference call. Joining me on the call today 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 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 29, 2025 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 with 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. I would now like to turn the call over to Rob for some opening remarks.

Robert Katz, CEO

Thank you, Angela. Good afternoon, everyone. Thanks for joining us. Before we discuss our results and fiscal 2026 guidance, I want to share my perspective on where the business stands today and where I see opportunities for future growth after being back in the CEO role for the past 4 months. I want to start by acknowledging that results from the past season were below expectations, and our season-to-date pass sales growth has been limited. We recognize that we are not yet delivering on the full growth potential that we expect from this business, in particular, on revenue growth in both this past season and in our projected guidance for next year. That said, I am confident that we are well positioned to return to higher growth in fiscal year 2027 and beyond. At the heart of our underperformance is that the way we are connecting with guests has not kept pace with the rapidly evolving consumer landscape. We have not fully capitalized on our competitive advantages, nor have we adapted our execution to meet shifting dynamics. For years, email has been our most effective channel for reaching and converting guests, leveraging data to deliver efficient and targeted communications. However, as consumer preferences have changed, particularly over the last few years, email effectiveness has significantly declined, but we did not make enough progress in shifting to new and emerging marketing channels. Compounding this, we historically have prioritized transactional call-to-action messaging with our guests and missed the opportunity to tap into the strong emotional connection our guests have with the Epic brand and our individual resorts. This approach was successful during a time period when we were rapidly adding resorts and innovating our pass product portfolio. But over the last few years, where we have not benefited from those types of positive news events and instead have dealt with moments where we did not deliver on the operational front, our approach has not been reaching a broader array of guests in order to amplify brand awareness, attract new guests, and increase guest loyalty. We've also not had enough focus on our lift ticket business. Again, this made sense as we were rapidly growing our pass business, but as we dramatically increased pass penetration, we have not pivoted to bring the same level of focus, creativity, and resources to engaging with guests who, for whatever reason, were not yet ready to purchase a pass before the season. Finally, while we have made great strides in developing and improving our My Epic app, the app does not have native commerce and we have not been set up to accept either Google Pay or Apple Pay. However, we are seeing guest engagement dramatically increase in the app and on mobile, yet purchase conversion within both are significantly lower than what we would see on our websites and below its potential. I'm fully committed to course correcting and executing a multiyear strategy that unlocks the full potential of our business. The strategy is rooted in leveraging our strong competitive advantages to drive sustained and profitable growth. We own and operate 42 resorts across almost all regions in North America and Australia, and we have the strongest brands and most popular resorts. By owning and operating our resorts, we are able to collect extensive data from our guests across all our lines of business throughout the entire network, giving us tools we can leverage in every marketing channel, and use to inform mountain and technology investments in the highest return areas across all our resorts. We can also leverage our integrated model and data to optimize every aspect of our product and pricing approach across all lift access products, passes, and lift tickets at each resort as well as ancillary revenue, which will continue to be a larger focus for the company going forward. Finally, we are well positioned to leverage the new technologies that are defining the current market environment. However, our immediate priority is increasing guest visitation to our resorts, an essential driver of revenue and ultimately free cash flow. We will continue to invest in our resorts and our employees consistent with our longstanding focus on delivering exceptional guest experiences. At the same time, we are taking decisive steps that we believe will rebuild lift ticket visitation, evolve our guest engagement approach to better reach and convert guests, and reaccelerate growth of our pass program, all of which are critical to strengthening our long-term financial performance. On the first item, we are focused on rebuilding lift ticket visitation, an essential driver of revenue and long-term growth. We are strategically enhancing lift ticket offerings, pricing strategies, and our marketing approach aimed at bringing in new guests to our resorts in ways that complement our pass program. In August, we introduced Epic Friend Tickets, a new benefit for the 2025, 2026 Epic Pass holders giving them the ability to share discounted lift tickets with family and friends. This not only celebrates the social side of skiing and riding, but it also drives lift ticket sales for new guests that would be attracted to visiting our resorts with their friends and family. Importantly, the full value of the ticket can be applied towards a future pass purchase, making it a powerful tool for future pass conversion. At the same time, we're evolving our lift ticket pricing strategy with more targeted adjustments by resort and by time period. This allows us to balance guest access and value while optimizing demand, particularly in off-peak periods without compromising the strength of our pass program. We are also increasing our media investment with a focus on top-of-funnel awareness of our resorts to help us reach new audiences and drive incremental visitation throughout the winter and intend to continue to innovate our lift ticket product offering as we get into the upcoming ski season. Beyond the expected immediate impact on visitation, lift ticket guests represent a high conversion population for future pass sales, which supports our pass growth in fiscal '27 and beyond. Second, we're evolving our guest engagement strategy to better connect with skiers and riders and drive stronger performance. Our focus is on broadening our reach and modernizing how we engage across channels. We plan to increase our exposure within digital and social platforms and expand our influencer partnerships. We believe this shift will allow us to reach guests where they are and to fully utilize our guest data to create content that resonates with our guests and drives action. We're also aiming to elevate the individual brands of our resorts by tapping into the emotional connection guests have with each destination. We believe this is an important differentiator in a competitive landscape. Third, we continue to see meaningful opportunities to expand advanced commitment and grow our pass business. The pass price reset ahead of the 2021, 2022 season exceeded our expectations in the initial years. And despite some modest declines recently, pass units are expected to be up over 50% in fiscal 2026 compared to fiscal 2021. The same is true for our Epic and Epic Local Pass products, which despite recent modest declines, we expect to be up approximately 20% in units since the 2020/2021 season. Importantly, we have delivered this strong growth in those products despite significantly expanding other pass options for guests, including our Epic Day Pass products. This growth in our pass program has significantly strengthened our financial resilience and stability. We're focused on driving long-term guest loyalty, which means ensuring we're optimizing the pass offering and continue to drive retention and conversion of new guests to the program. Toward that end, while driving lift ticket sales, Epic Friend Tickets is also a new benefit for unlimited pass holders. We're also investing in personalized media and influencer channels to better target and convert prospective pass buyers. Because passes were already on sale during the CEO transition, our ability to influence fiscal 2026 pass results was limited. Looking ahead to fiscal 2027, we will be evaluating all aspects of our pass portfolio, including the product offering, pricing, and benefits in conjunction with our lift ticket products and pricing, focusing on driving conversion to our highest value, highest frequency products and optimizing our overall lift access revenue growth. We are also actively searching for a new leader of our marketing organization and have retitled the role as Chief Revenue Officer, reflecting the clear focus for this leader on driving all aspects of revenue for the company and are looking for an executive with strong P&L ownership and overall leadership experience. Finally, we will continue to invest in our people and our resorts to ensure we are delivering an experience of a lifetime. We are uniquely positioned to capitalize on investments in new technologies and processes that make it easier for our guests to engage with each aspect of the physical and digital experience we provide, driving both more value for our guests and revenue opportunities for the company. Vail Resorts has delivered incredible stability and has an extraordinary foundation to execute on these opportunities and generate stronger long-term sustainable growth. We have irreplaceable resorts, an owned and operated business model, and a robust data infrastructure that enables a sophisticated approach to product and pricing decisions across our resorts. We continue to execute against our growth strategies of growing the subscription model, unlocking ancillary, transforming resource efficiency, differentiating the guest experience, and expanding the resort network. In addition, we have a resilient business model with demonstrated financial stability, strong free cash flow generation, and a track record of disciplined capital allocation and consistent innovation. Coupled with our passionate and talented teams, we believe we are well positioned to succeed in the future. These actions taken together with the continued success of our Resource Efficiency Transformation Plan gives me confidence in our ability to deliver long-term sustainable growth and long-term value for our shareholders, our guests, our communities, and our employees in the years ahead. With that, I will turn it over to Angela to further discuss our financial results and fiscal 2026 outlook.

Angela Korch, CFO

Thank you. As Rob mentioned, while our financial results in fiscal 2025 do not reflect the full potential of the company, the results do highlight the stability of the business model and early success of the Resource Efficiency Transformation plan. The company generated $844 million of resort reported EBITDA in fiscal 2025, which represents 2% growth compared to the prior year, despite total skier visits declining 3% across our North American resorts. The results were within the original guidance range for fiscal 2025 per resort reported EBITDA provided in September 2024. And excluding the CEO transition costs and changes in foreign exchange rates, the result was within 1% of the midpoint of the original resort reported EBITDA guidance range. Results for our fourth quarter, fiscal quarter 2025 were slightly ahead of our expectations with strong cost management, solid demand for our North American summer operations, and improved visitation in Australia relative to the prior year. Now turning to our outlook for fiscal 2026. In fiscal year 2026, we expect net income attributable to Vail Resorts to be between $201 million and $276 million, and resort reported EBITDA to be between $842 million and $898 million. The guidance includes an estimated $14 million in one-time costs related to the Resource Efficiency Transformation Plan. We anticipate growth in fiscal 2026 to be driven by price increases, ancillary capture, incremental efficiencies related to the resource efficiency transformation plan, and normalized weather conditions in Australia in the first fiscal quarter of 2026, partially offset by lower pass unit sales, which are expected to have a negative impact on skier visits relative to the prior year, and cost inflation. Season pass sales through September 19, 2025, for the upcoming North American ski season decreased approximately 3% in units and increased approximately 1% in sales dollars as compared to the prior-year period through September 20, 2024. The season-to-date trends through September 19, 2025, were generally consistent with the spring selling period, with the decline in units driven by less tenured renewing guests, those that had a pass for just 1 year, and fewer new pass holders. Renewals are up for our more loyal pass holders, those that have had a pass for more than 1 year. As we enter the final period for season pass sales, we expect our December 2025 season-to-date growth rates to be relatively consistent with our September 2025 season-to-date growth rates. The Resource Efficiency Transformation Plan continues to generate strong results for the company, and we expect to exceed the $100 million in annualized cost efficiencies by the end of fiscal year 2026. Our fiscal 2026 guidance assumes that we will deliver $38 million of incremental efficiencies before one-time costs, contributing to the achievement of an expected $75 million of cumulative efficiencies since we announced the plan in September 2024. Finally, in fiscal 2026, we anticipate cash tax payments to be between $125 million to $135 million. As Rob noted, while our guidance for fiscal 2026 reflects growth over the prior year, it does not reflect the full potential of the company. We are committed to positioning the company to unlock stronger and sustainable long-term growth moving forward. Turning to our capital allocation priorities. We remain committed to a disciplined and balanced approach as stewards of our shareholders' capital. Our capital allocation priorities remain consistent: First, prioritize investments that enhance our guest and employee experience and generate strong returns; and second, maintain flexibility to pursue strategic acquisition opportunities. After those top priorities, we return excess capital to shareholders. In support of reinvestment in our resorts, in calendar year 2025, we expect to spend approximately $198 million to $203 million in core capital before $46 million of growth capital investments at our European resorts and $5 million of real estate-related capital projects. In addition to this year's significant investments, we are pleased to announce some select projects from our calendar year 2026 capital plan with the full capital investment announcement planned for December of 2025, including a core capital plan consistent with the company's long-term capital guidance. At Park City, we are continuing the multiyear transformation of the Canyons Village to support a world-class luxury-based village experience. Vail Resorts, in partnership with the Canyons Village Management Association, is replacing the open-air Cabriolet transport lift with a modern 10-passenger gondola, which will improve the guest experience, reduce weather-related disruptions, and complement the Canyons Village parking garage, a new covered parking structure with over 1,800 spaces being developed by the developer of the Canyons Village. In addition, we plan to resubmit for permits to replace the Eagle and Silver load lift at Park City Mountain to continue our investment in the on-mountain experience, which if approved, would be upgraded for the 2027, 2028 North American ski season. Planning of additional investments at Park City Mountain across the Mountain is underway, and additional projects will be announced in the future. The company also remains committed to the multiyear transformation of Vail Mountain, and in calendar year 2026, we will continue to invest in real estate planning to develop the West Lionshead area into the fourth best village in partnership with the Town of Vail and developer, East West Partners. In addition, the company plans to build on the success of its calendar year 2025 lodging investment at the Arrabelle at Vail Square, with plans to renovate guest rooms at the Lodge at Vail in calendar year 2026. In addition to further enhance the guest experience across our resorts, the company will be investing in technology enhancements and new functionality for the My Epic App, including new in-app commerce functionality and payment platform integrations to improve mobile conversion enhanced by My Epic assistant functionality and expansion of the new ski and ride school technology experience. In addition, the company will make technology investments to enhance the integration of My Epic Gear guest experience. Turning to the second priority. Our balance sheet remains strong and is positioned to enable future strategic acquisition opportunities. As of July 31, 2025, the company's total liquidity as measured by total cash plus revolver availability and delayed draw term loan availability was approximately $1.4 billion and the company's net debt was 3.2 times its trailing 12 months total reported EBITDA. On July 2, 2025, the company completed its offering of $500 million aggregate principal amount of 5.5% notes due in 2030. We used a portion of the proceeds from the offering to repay seasonal borrowings under our revolving credit facility in addition to the $200 million of share repurchases completed during the quarter. We intend to use the excess proceeds from the bond issuance, together with the $275 million delayed draw term loan for the repurchase or repayment of our outstanding 0% convertible senior notes due 2026 at or prior to their maturity on January 1, 2026. After these priorities, we focus on returning excess capital to shareholders. In the current environment, we look to balance our approach between share repurchases and dividends. The company declared a quarterly cash dividend on Vail Resorts common stock of $2.22 per share. The dividend will be payable on October 27, 2025, to shareholders of record as of October 9, 2025. The current dividend level reflects the strong cash flow generation of business with any future growth in the dividend dependent on material increases in future cash flows. We also maintain an opportunistic approach to share repurchases based on the value of the shares. As mentioned in the quarter, we repurchased approximately 1.29 million shares, or 3% of outstanding shares, at an average price of approximately $156 per share for a total of $200 million. We continue to evaluate the highest return opportunities for capital allocation. Now I'd like to turn the call over to Rob.

Robert Katz, CEO

Thanks, Angela. 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 team members for their passion and dedication to delivering an incredible experience to our guests. I would also like to thank all of our team members that are working to welcome skiers and riders back to the mountain this coming winter season. We are looking forward to a great upcoming winter season in the U.S., Canada, and Switzerland. At this time, Angela and I would be happy to answer your questions. Operator, we are now ready for questions.

Operator, Operator

We'll take our first question from Shaun Kelley with Bank of America.

Shaun Kelley, Analyst

Rob or Angela, I'd like to begin by discussing the overall situation regarding visitation for the upcoming season. Rob, in your prepared remarks, you mentioned some interesting initiatives aimed at addressing visitation challenges and opportunities, particularly the Epic Friend Tickets. I assume you expect their utilization to be quite strong. Could you help us understand the context for visitation this season and explain what you're doing with marketing and the Epic Friends initiative? Additionally, based on the financial information shared, it seems like the decrease in pass units might indicate that visits are down, but I could be misunderstanding that. I'm curious about your expectations for this season’s visitation, considering the initiatives you have in place.

Robert Katz, CEO

Yes. Thanks, John. Yes, that's true. We do expect visitation in total for this year to be down slightly. I think that is primarily driven by the decline in pass sales to this point. And while we do think that we're going to make a portion of that up with lift ticket sales, it's not going to be enough to overcome, in our view, the decline in pass sales to this point. What I would say is that a lot of the things that I mentioned about what we need to do to correct how we engage with guests are things that are multiyear efforts. None of those things are things that happen right away. Even the Epic Friend piece will take time for our guests to understand what they have, for us to communicate with our guests for them to then increase their utilization to understand the change in terms for that and how they can use it and how they could turn it into a ticket the following year. So we expect to see some benefit from it this year, but obviously, additional benefit from it in future years. The same is true with our paid media investments. Again, I think if you're looking for top-of-funnel brand-building effort, that's not something that's going to happen in a month or two. That's something that takes more time. The same is true for getting deeper and more skilled and more sophisticated in all the other marketing channels that we have. So what I would say is I think in the end of the day, we are starting to prepare for the fiscal 2027 season now, right? So we have work going on. We're obviously working on pass sales, but also working on other initiatives. So if you kind of back that up, you realize like, yes, from the time that some of this started, right, not possible to have a full impact on fiscal 2026.

Shaun Kelley, Analyst

Got it. Makes complete sense. And then just as my follow-up, and you kind of already touched on a little bit of it, just for the 2027 and beyond plan, some of the outline for maybe the Chief Revenue Officer and some of the opportunity. But just how big of a change is on the table here, Rob, just in terms of like, look, the big initiative done was to push for volume to push pass utilization up at the expense a little bit of price, right? That was sort of the compromise made back during the pandemic. Is something as fundamental as that shift on the table here as we think about moving forward, whether it be raising the pass price in its entirety to balance out that ecosystem differently? Or maybe think about it differently, just the possibly charging an add-on, which has been proposed at a major kind of high-value resort like Vail, like just to change the composition of price versus volume? Just how are you thinking about sort of that very fundamental idea as we turn the page to next year?

Robert Katz, CEO

I think we approached the price reset as a necessary adjustment across the board because we realized our pricing was generally too high to achieve the penetration we wanted in pass sales. This decision proved to be correct, and we've seen positive results since. We are still performing significantly better than before the reset. However, we have not yet fully explored our many pass products. Beyond just the Epic and Epic Local passes, we offer a variety of products including child, college, teen, and regional passes, all of which are layered on top of our lift ticket offerings. What we are communicating now is the potential to tailor our approach not uniformly across the board, but more specifically by resort or by pass product. With new technology and the data at our disposal, we can make informed individual adjustments confidently. We have over 200 pass products and thousands of lift ticket options, which have been largely synchronized in their pricing. We believe there is an opportunity to adopt a more strategic perspective, leveraging available tools and resources. Ultimately, we aren't necessarily focused on increasing or decreasing prices; rather, we're looking to break the longstanding connection between each product's pricing that has existed for the past 15 years.

Operator, Operator

We'll move next to David Katz with Jefferies.

David Katz, Analyst

With respect to the sort of single-day visitation or the walk-up window, one of the debates, I'm guessed you're having is on sort of that price, right? And whether any of the strategies around improving walk-up visitation includes adjusting some of the price schedules that are out there or some of the pricing strategies.

Robert Katz, CEO

We are taking a broader view of our sales strategy. At the highest level, we are considering pass sales, which include all nonrefundable products sold before the season starts, alongside lift ticket sales. We offer various lift tickets, primarily advanced ones that can be purchased three to seven days ahead. A significant portion of our business comes from these advanced purchases, but we also cater to customers who buy tickets on the day of their visit. We are reviewing all these pricing options. The Epic Friend Ticket, for example, offers a 50% discount off the walk-up price, making it an appealing choice for same-day decision makers. However, we see potential for more creative pricing strategies, especially for advanced purchases, based on when customers begin planning their trips. Ultimately, we aim to align our pricing adjustments with the decision-making timelines of our customers, recognizing that not many people decide to visit Vail on the same day they arrive. Our goal is to identify when pricing changes can most effectively increase visitation.

David Katz, Analyst

Understood. And interesting about the discussion around media channels. And historically, the company has always been particularly advanced at data gathering, how much of this strategy about sorting of reaching customers through the right channels is also about data gathering that builds intelligence for the future? Or is it just the right connection channel?

Robert Katz, CEO

I feel very positive about the data we have on our guests. We possess extensive information. Although we've primarily focused on email to present offers and communicate effectively with guests, this channel remains crucial for us. Over the last 10 to 15 years, we've invested a significant effort in collecting emails. Now, we can leverage that data with various tools to engage multiple paid media networks that offer personalization. We can also align our list with others to ensure we're delivering relevant ads to the right audience. Furthermore, we can utilize look-alike modeling for potential customers not in our database to ensure precise targeting. This applies not only to traditional digital media but also to TV, where ads can be customized for individuals, which is essential since our product isn't aimed at the mass market. In addition to traditional media, we aim to incorporate social media, influencer marketing, and even engage on platforms like TikTok, where we haven't been involved much before. While our communication strategies have been effective, we recognize the need to adapt as the landscape shifts, utilizing our sophisticated data in new and varied ways.

Operator, Operator

We'll take our next question from Jeff Stantial with Stifel.

Jeffrey Stantial, Analyst

Maybe just starting off on the initial fiscal '26 guidance, which is where we're getting the most questions this afternoon. Angela, you listed out some of the puts and takes that factored in. One that seems to be missing or at least that we didn't hear was sort of how you're thinking about lift ticket or window ticket sales this year. So is it your expectation that lift ticket unit sales are down year-on-year, again, similar to sort of what we saw this past season and 1 or 2 before that? Or is it your expectation that should stabilize on some of these efforts as quickly as fiscal '26? And then similarly, just how should we think about sort of the blended price growth or decline just given these changes to the Buddy Pass system and the more dynamic pricing strategy, maybe net of the typical price taking action that we've seen from you historically?

Angela Korch, CFO

Yes, thanks for the question. We discussed visitation, and we expect some offset to the pass visitation due to growth in lift ticket visitation. With our pricing initiatives, including the introduction of new products like Epic Friends, we anticipate a slight positive impact on lift ticket revenue. The midpoint of our guidance compared to last year shows an increase of about $26 million, primarily driven by our resource transformation plan contributing around $38 million and normalized conditions in Australia adding another $9 million. Additionally, we expect growth from the increase in both pass prices and lift ticket prices, along with improved ancillary revenue. However, these positives are being countered by a decline in our pass unit sales, which will negatively affect visitation, as well as regular expense and labor inflation.

Jeffrey Stantial, Analyst

That's great, Angela. And then turning over to the Epic Friends changes to the structure there, Rob or Angela, can you just maybe start off by helping frame for us the materiality of Buddy Passes historically, whether in terms of total units, revenue contribution, just any metrics that you could provide there? And then as we think about sort of the overall return on this change, is it your expectation that one-time sort of pricing hit in year 1 can be recouped by higher volume of lift ticket sales? Or should we really think about this more as a longer-term investment where the return manifests over time through sort of long-term replenishment of that funnel for new sport and lap skiers and ultimately conversion over to pass sales? Just any extra color there would be great.

Robert Katz, CEO

Yes, sure. I would say that Buddy tickets have historically been a significant portion of lift ticket sales. Angela, have we shared that information before?

Angela Korch, CFO

Yes. There's a pie chart in our investor presentation where you can see, right, it's about 7% of total lift revenue, but right, it is 20% of paid lift ticket revenue that comes from those benefit tickets.

Robert Katz, CEO

It is significant, and that gives you an idea of the scale. We believe it will be a positive contribution for the year. We do not anticipate any negative impact this year. Obviously, we expect it to grow over time. We particularly see this growth coming as we plan to offer a discount to more individuals already using the program, along with a broader promotion. The discount is now set at 50% for everyone, and we will extend it to pass holders in the fall, not just in the spring, making it clearer how they can apply it to the following year. Overall, we feel confident that this will lead to an increase in visits, which will contribute to the lift ticket growth we discussed earlier.

Operator, Operator

We'll move next to Stephen Grambling with Morgan Stanley.

Stephen Grambling, Analyst

A couple of follow-ups on the moving parts you ran through in the guidance for the year ahead. Do you generally anticipate that some of the efforts to communicate the new pricing and marketing will be incurred this year? Or is that more of a 2027 thing? So as we think about the potential for a recovery in visitation and top line in '27, will there also be a step-up in incremental costs?

Robert Katz, CEO

Yes. I think 2 things. One is, I think there are opportunities actually to offset as we use more sophisticated technology in our marketing department to actually get more efficient with our overall cost, which I think is kind of an overall view that we have about the business going forward that we believe that there are continued opportunities for us to drive resource efficiency, and marketing is one of those places. Our goal is to take those savings and obviously redeploy them into investments that we think can be more productive. So while we do see that there'll be additional investments that we have to make, both within our marketing group and of course, on the mountain in our employees as we look to take the experience up, we also feel like there are other opportunities for us to take cost out of the business. So the investments that we want to make are not ones that we think should pull down the margin at all.

Stephen Grambling, Analyst

That's helpful. One other follow-up. How are you thinking about the net impact from the disruption at Park City last year versus this year? Is that a tailwind in your expectations or a headwind?

Robert Katz, CEO

Yes, we definitely see it as a positive influence. While there may be some guests who had unsatisfactory experiences and are hesitant about returning, we believe that the difficulties faced last year will have lingering effects. This year, we feel prepared as our team has done an excellent job getting ready for the season. We are in a strong position to provide a high-quality experience throughout the season. We expect this will be evident, as we are already noticing positive trends in broader market bookings, including at Park City. Overall, we feel we are starting from a favorable position, which we consider a positive influence.

Operator, Operator

We'll move next to Laurent Vasilescu with BNP Paribas.

Laurent Vasilescu, Analyst

The March Investor Day laid out a vision, I think, on Slide 45 to have pass revenues go from 64% of the mix to over 75% over time. Rob, with the comments provided earlier on the lift tickets, where do you want that mix rate to go over time? Should it still go over to 75%? Or are you happy with that rate at 64% currently?

Robert Katz, CEO

Right now, my primary focus is on overall visitation to the resorts and total lift revenue. I believe some pullback is to be expected following the rapid growth we experienced over the past four years. However, I see continued opportunities, such as with Epic Friends tickets and increasing lift ticket sales, which can ultimately lead to more pass conversions. We are committed to drawing in new visitors from all sources to boost our pass business, which offers the best value in terms of cost per day. As individuals become more comfortable and willing to commit in advance, we believe we can transition them into these products. It all begins with growth in overall visitation.

Laurent Vasilescu, Analyst

Okay. Very helpful. And then tonight's press release outlines that you expect the December 2025 season day growth rate to be comparable to what you saw for the month of September. Can you maybe comment a bit more about this? What gives you the confidence that the trends remain consistent going forward for the next few months?

Robert Katz, CEO

What I would say is every time we put out some color commentary on that, we use the trends we're seeing, how they're shifting. And it is true that as we go into the last deadlines, it is more heavily weighted to new than renew. So there's always a little bit more uncertainty. At the same time, obviously, a lot of the selling season is behind you. So we take all of those things into, yes, an estimate, right? We use forecasting to come up with what we see going forward. And it doesn't mean we're going to be precisely accurate each time, but we try and give people kind of our best assessment of every piece of data that we have at the moment.

Operator, Operator

We'll take our next question from Patrick Scholes with Truist Securities.

Charles Scholes, Analyst

I'd like to talk about the dividend coverage. When I run some back of the envelope numbers, and certainly, I could be off in my assumptions here, at the low end of the guide, it looks like the dividend is not fully covered by the free cash flow. Assuming I'm not completely wrong in my calculations. My question is, how comfortable are you taking on some debt, assuming you come in at the lower end of the guide to maintain that dividend? And along that line, at what net leverage ratios are you comfortable with?

Robert Katz, CEO

Yes. We're very comfortable with the current leverage ratios that we have. We think they provide a lot of room for the company, especially given the stability of the business. So that has given us comfort on our dividend levels. And yes, we're certainly comfortable if it means that, yes, leverage goes up a little bit given where we're starting from. That said, I think we've been really clear that to show an increase in our current dividend, yes, we need to see a material improvement in free cash flow. But in terms of the current dividend, yes, we're comfortable with that.

Charles Scholes, Analyst

I would consider taking on a bit of leverage if needed. My follow-up question is about the trends for international guests in your recent sales. There are likely many factors at play when discussing international visitors, as it can vary greatly depending on which countries are currently interested in visiting. How do things look for Mexico compared to Europe or Canada? What trends are you observing? Additionally, has the negative rhetoric impacted you, especially since you've noticed a slowdown since your May update?

Robert Katz, CEO

Yes. I believe there isn't a trend significant enough to impact the overall results we're discussing. We haven't observed any specific indications of a change in future international visitation. However, if you look back over the past 5 to 8 years, international visitation has declined for various reasons, including currency issues and concerns related to visas and rhetoric from the past. That said, we currently don't see this as a major issue as we approach the next season.

Operator, Operator

We'll take our next question from Arpine Kocharyan with UBS.

Arpine Kocharyan, Analyst

I was wondering if you could give a little bit more color where you're seeing most weakness in your consumer base and maybe where you're seeing more of a resilient customer? And anything else you would highlight on destination versus regional resorts that you saw in past sales trends. You also talked about less tenured pass holders maybe not renewing at the same rate as last year. Anything else you would highlight that you saw in past purchase trends that we should be aware of getting into the season here? And then I have a quick follow-up.

Robert Katz, CEO

Sure. I think the results we're observing are quite consistent across various demographics, regions, pass types, and new renewals. While it's true that we have lower renewal rates for pass holders who have been with us for a year or less, the key takeaway from the results is the broad consistency in performance. This is one reason why, when we see an issue at a particular resort, region, or with a specific guest group, it typically reflects in our overall results. However, the broad-based nature of this performance suggests two possibilities: either the market has experienced significant growth and is now reaching a stage of maturity or stability. According to the National Ski Areas Association data, it's notable that pass visits have declined over the past couple of years while lift ticket visits have increased. This indicates that the growth we experienced recently may now be leveling off. Additionally, our marketing efforts have been consistent across different guest groups, even though the content varies. This highlights an opportunity for us moving forward. However, I cannot point to any specific issues related to individual groups.

Angela Korch, CFO

One thing I'll just add on the consumer piece on renewals is we're not seeing any change in kind of that net migration behavior as well, right? We're continuing to see about the same amount of trade-up as trade down as we've seen over the last few years. So you're not seeing the renewal base be kind of a broad pullback because of pricing or trading down. We're not seeing that dynamic within our renewals.

Arpine Kocharyan, Analyst

Interesting. That's very helpful. Just to go back to the EBITDA bridge, you mostly covered this question earlier. But I was wondering what needs to happen for you to hit the upper end of your guidance range versus midpoint? You obviously talked about more nimble pricing in off-peak periods, maybe a more targeted approach to driving window traffic. It sounds like that has the potential to impact lift volume as soon as this season. Is it just a matter of sort of the strategies working for you to hit the upper end of the guidance range?

Angela Korch, CFO

Yes. I believe the main factor is always visitation, as it influences everything else significantly. It affects all of our additional revenue streams and has a strong impact. So, visitation is crucial for us at both ends of the guidance range.

Arpine Kocharyan, Analyst

Yes. So what needs to happen for you to hit the upper end of your visitation guidance?

Robert Katz, CEO

I believe there is definitely an opportunity for us to exceed expectations regarding both pass sales and lift ticket visitation. We have several assumptions that inform our guidance, and there will always be some fluctuations around those estimates. Sometimes things perform better than anticipated, but other times they do not meet expectations. This is why we provide a range, as we cannot predict with absolute certainty. We believe this range represents the most likely outcome for our business when considering all factors.

Operator, Operator

We'll take our next question from Ben Chaiken with Mizuho.

Benjamin Chaiken, Analyst

Rob, you mentioned evaluating the pass product offering in the release and the Q&A a few times. I guess just taking a different perspective, I guess, where do you see the largest holes with the pass? So I'm not asking like the strategy necessarily, which I think is where the conversation has been, but what are you trying to solve for? Like where do you think Vail is lacking to the extent that you do? And what are the largest areas to improve?

Robert Katz, CEO

Yes, I believe we have a fairly extensive product lineup. While I don’t think we are missing any specific product, I do feel that with so many offerings, we may not be pricing them in the most effective way, either in relation to one another or to the needs of each market segment. There are also opportunities for us to reevaluate the advantages offered by our passes, which have not changed significantly over the years regarding the distribution of benefits. This situation is somewhat parallel to what we mentioned about resource transformation for the company; we expanded our resorts in a relatively short timeframe and now have the chance to reassess and improve our processes compared to when we were solely focused on acquiring new properties. The same applies to our passes, as we've introduced numerous products over an extended period without revisiting how to optimize pricing and benefits associated with each one. We recognize this issue as a product and pricing concern, not necessarily because there is a glaring gap that needs addressing. One specific aspect we identified was the Buddy Tickets, which were complicated and unclear, and they weren't generating the impact we desired. We are actively looking to improve this for the upcoming season.

Benjamin Chaiken, Analyst

Got it. That's helpful. And then just one quick follow-up. You've mentioned kind of benefits a few times. I guess what's your thought process on adding like additional member benefits or perks to the pass in an attempt to increase the year-round utility? I think there's a few passes out there to provide these other ancillary benefits to pass holders. I mean it would be great to get your take on that strategy.

Robert Katz, CEO

Yes, I think we definitely need to consider that. I also want to ensure that any actions we take are meaningful and not just superficial. If we're committing resources and effort, especially if it benefits a third party, it needs to be a partnership we wholeheartedly support. Our main focus is skiing, but beyond that, we offer our Epic Mountain Rewards, providing a 20% discount on many of our additional services. If we pursue anything further, it should have a significant impact. I believe now is a good time to start exploring these possibilities.

Operator, Operator

We'll take our next question from Brandt Montour with Barclays.

Brandt Montour, Analyst

So my first question is about the guidance. You included the typical weather assumptions in the guidance, but I was hoping, Rob, you could clarify that. Last year seemed to have great weather, but would you consider that normal or better than normal? I know the years before that were clearly worse than normal, so maybe you can shed some light on what you factored in there.

Angela Korch, CFO

Yes. Thanks, Brad. I would say last year, we had a pretty normal ramp across most of our regions where we were able to get terrain open kind of on a typical schedule. I actually finished for the year, right? Q3 actually had kind of a falloff on some of those conditions. But again, that doesn't usually drive as much of the overall impact as being able to get kind of open and terrain open ahead of some of those peak seasons. So we didn't see any unusual disruptions, I would say, like we've called out in some of the other 2 years. So it was much more of a typical pattern, though I wouldn't say it was like above-average snowpack or snowfall year by any means last year.

Brandt Montour, Analyst

Okay. Great. Regarding the lift ticket strategy, I think the message was quite clear. There is an optimization opportunity present. As I consider this, I don’t want to imply that it seems like discounting, but rather smarter marketing and pricing. Is there a risk that by making the lift tickets more appealing, you could undermine early commitment? I understand that this would take some time to manifest since you are marketing day tickets after the previous selling season, but the audience you’re targeting seems to overlap. Could this be a concern for the next year as you pursue this approach?

Robert Katz, CEO

I think it's a risk that we pay a lot of attention to. However, if you examine the differences between the walk-up window or advance lift ticket prices and the prices you pay when you buy in advance or purchase a pass before the season, that gap has increased significantly over the years, especially since we lowered pass pricing four years ago. In our view, there is ample opportunity to be more aggressive and innovative with lift ticket pricing without compromising past sales. Nevertheless, it is definitely something we are very aware of and monitor closely.

Operator, Operator

We'll take our next question from Chris Woronka with Deutsche Bank.

Chris Woronka, Analyst

I'm curious, Rob, about the strategy to pursue increased volume. You've mentioned efforts to make skiing more accessible to a broader audience. Is this initiative aimed at a specific age group or demographic? I'm trying to understand where these individuals are currently spending their time if they're not skiing. Additionally, how confident are you in the investment in pricing and other aspects of the experience to attract these people to your mountains instead of their current activities?

Robert Katz, CEO

Yes, we need to ensure that everyone planning to ski next year helps us secure a fair share that reflects the quality of our resorts and our engagement with them. It's essential to have the right pricing strategy to optimize our overall lift revenue. The ski industry is always changing, with many people exiting and entering each year, including those who might take breaks and then return. There's a significant opportunity to increase the frequency of skier visits among those who already know how to ski and could take a ski vacation, without needing to persuade completely new skiers. Our main focus is on reaching those who are less committed. To do this, we need to deliver the right message and create an emotional connection with them and their families, as well as offer a good value mix. Each year, many skiers fluctuate in their frequency of visits, and while we are not simply selling a standard product, we do believe there is a chance to enhance the overall frequency of trips. Although people have often claimed that the ski industry doesn't grow, we recently reached a record number of skiers, which demonstrates that there is enough interest within the U.S. market. Ultimately, our goal is to attract more visitors to the resorts and encourage them to spend more days skiing.

Chris Woronka, Analyst

Yes, it makes sense. It’s very helpful. I have a follow-up on capital expenditures. The question is about what you're aiming to achieve. I understand that over time, you've pinpointed specific projects, including maintenance. Do you believe there needs to be a significant increase in capital expenditures as part of your strategy to enhance offerings or expedite services? Or do you think that the capital plan will remain consistent year-over-year, constrained by our current EBITDA and similar factors? I'm trying to determine whether you believe a substantial increase in capital expenditures would be beneficial if necessary, or if you have plans to implement this in the near future.

Robert Katz, CEO

Yes, I believe we will continue to upgrade lifts, and we've announced a new lift for next year, which is important. However, we must recognize that our focus cannot solely be on lifts, as they are not the only aspect that matters to our guests. We are at the beginning of exploring the significant impact of technology on the overall experience. This includes how technology enhances the digital experience, making it easier to rent skis, connect with instructors, order food, navigate resorts, or book a vacation. These elements are crucial for the overall guest experience at our resorts. We have a unique advantage, as we own and operate all our resorts on a shared platform, allowing for investments that enhance experiences across the board rather than focusing on a single lift that primarily benefits some users. That said, we will continue to invest in lifts, and historically, we have spent considerable amounts on them in recent years. While we plan to keep proposing new lifts, our key focus will be on areas that are less capital intensive than replacing every lift on Vail Mountain. Currently, we are not changing our long-term capital guidance. If opportunities arise that make sense, we will communicate them, but at this time, we are not observing those opportunities.

Operator, Operator

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

Robert Katz, CEO

Thank you. This concludes our fiscal year-end 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

This concludes today's Vail Resorts Fiscal 2025 Year-end Conference Call and Webcast. You may now disconnect your line at this time. Have a wonderful day.