Vail Resorts Earnings Call NUGGETS: Season Pass Sales, Cash Balance Strategy
On Tuesday, Vail Resorts, Inc. (NYSE:MTN) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Season Pass Sales
Felicia Hendrix – Barclays Capital: My junior high school social studies teacher used to call me Felicia. Just talking about your, the mix of your season pass units and your price. So, I’m just wondering, what’s the percentage – in your forecast, what’s the percentage mix of season pass units and price and in terms of an effective ticket price in your forecast?
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Robert A. Katz – Chairman and CEO: I think maybe the best way to put it is, on average I think price has have gone up in the neighborhood of kind of 5% to 6%, but what drives a lot of this, right is ultimately the mix. So, depending on what proportion of various products we sell that drives the ultimate difference between the revenue and units. What I would say at this point, depending on the strength of various products that will determine, how it openly comes out when we end the selling season.
Felicia Hendrix – Barclays Capital: So, I guess, I was trying to get out is, when you think about what your optimal level of season pass sales versus just straight window ticket or other kind of ways you sell your tickets, I mean, do you have an optimal level or you’re just going to continue to drive season pass sales as far as long as you can in terms of units?
Robert A. Katz – Chairman and CEO: No, I mean, I think, no, I think, our goal is actually to continue to drive season pass sales, because I think at this point, right, most of the folks, right, who are our heaviest users have obviously already bought a season pass in March part. So, at this point, the more people that we convert from buying, let’s take us to buying season passes, the more consistent our revenue is obviously and more stable. But also, we tend to grab more of their skier visits, because many people will chose multiple resorts during a particular season and to the extent they buy a season pass with us, they are more likely to choose our resorts obviously for that season. So, I don’t think we feel like there is some kind of theoretical cap that would all the side we’d reach and then we’d stop trying to push season pass efforts.
Felicia Hendrix – Barclays Capital: So do you look at it on effective ticket price it may drive that down, but because you’re getting more of the visits that would help continue to grow your revenue?
Robert A. Katz – Chairman and CEO: Absolutely and we’ve done a fair amount of our own research obviously on the kind of revenue apart from lift tickets right, that we get from folks and what we try to show is that, when we convert somebody from paid tickets to season passes, even if the ultimate ticket revenue is a breakeven and sometimes it could be depending on the person, we typically will pick up lodging, food, rental and ski school, right, for every incremental day that, that person comes to our resort. So, even if they ultimately ski for free for three days or four days more than they might have in a prior year, we’re picking up extra revenue from each one of those exhibits.
Felicia Hendrix – Barclays Capital: Then, just also in your forecast. I’m just wondering if you can give some kind of major parameters to just help us understand what your expectation is for visitation increases for the next fiscal year and then also how you’re thinking about your effective ticket price changes for next year?
Robert A. Katz – Chairman and CEO: Probably the best way to put it – we don’t give specific guidance on those metrics. What I’d say is we obviously feel like we have good momentum and that will translate into certainly greater visits next year, but obviously one of our key targets is driving lift ticket revenue and then total revenue around that, but there’s no question, we feel good about the momentum we have, always understanding we’re in an industry that’s never going to see huge percentage gains in visit and especially given our size right now. On ETP, again what I would say is, we feel, if you look at effective ticket price excluding season passes, we are expecting to make additional gains next year, probably more moderate maybe than last year where we saw some mix shift, but again we’ve e not seen anything that takes away our confidence in our ability to drive total lift ticket revenue well in excess of our unit growth.
Felicia Hendrix – Barclays Capital: When we think about your single day lift tickets for this next ski season, obviously you’ve been increasing that. Do you think you’ll be able to continue to drive that higher, are you going to take a break? Obviously the bad snow last year, I’m wondering if that might have an impact on how you’re viewing your single day lift tickets or if you’re just going to continue to kind of test the elasticity of the market?
Robert A. Katz – Chairman and CEO: We feel like the single day price that you would pay if you just show up at the window for that, I think we’re still absolutely still going to continue to drive higher and we’re still going to give people great opportunity for value through our season pass program and through advance purchase. With that said, we certainly would see continued momentum in the absolute prices of all those products, but obviously it’s that kind of last minute purchase at the window that I think we certainly feel has the most room to continue to push.
Cash Balance Strategy
Will Marks – JMP Securities: I actually missed your prepared remarks so feel free to just tell me to read the transcript, but I think my question I’m hoping you’ll address. I guess the first one is I think I saw some filings recently from directors that maybe even Rob in terms of stock and I don’t know if they are related to options can you just run through anything that will be relevant?
Robert A. Katz – Chairman and CEO: Sure. I would love to tell you that to just read the prepared remarks, but I didn’t address that, so I’ll have to answer it. Yeah, that’s just vesting of RSUs, so we do make a filing. We grant our restricted stock units to directors and we also grant that to various people within management, when those vest, we make a filing regardless of whether or not the person has sold.
Will Marks – JMP Securities: Next question is can you tell me what your guidance implies in terms of cash flow that says the $260 million to $270 million what I think you would do in the fiscal year?
Jeffrey W. Jones – Co-President and CFO: This is Jeff. Again as you know we have a capital cycle on a calendar basis versus a fiscal year basis for our financial results so those two marry up exactly. Our capital guidance for calendar 2012 is $85 million to $95 million. For next year we will have – we’ll announce new guidance for our capital plan next year in March of 2013. But I think you can take that EBITDA and you can take what you want to assume as far as our capital our debt service is really consistent every year given we don’t have any change in debt. Again from a tax standpoint I think the most conservative view someone could take would be using the statutory rate on cash taxes, even though we haven’t to-date been paying out mush in cash taxes. So, I’m just saying you can go put out in your model obviously, we’re not going to guide to a net cash flow number and that could also be impacted by any of the things that we do as far as, you have your ongoing dividends, any kind of level of share repurchases things like that that we’re not going to guide too.
Will Marks – JMP Securities: On the real estate cash flow numbers and EBITDA numbers, can you tell us approximately how many units to assumes or mix or anything?
Jeffrey W. Jones – Co-President and CFO: I think it’s basically assuming a consistent level of sales that we saw in ’12, as we said that earlier, we see this is a multi-year process. I think we just set our targets this year to be consistent from our sales volume standpoint with what they were last year. What I would say is obviously, we mentioned, we already have three under contracts, so a good start and typically a seasonal low period for real estate sales to the year that that obviously helps us get that confidence when we set that guidance out there.
Robert A. Katz – Chairman and CEO: I think we’re going to remain very aggressive in looking for any and all opportunity within the ski industry where we feel we can add value and that brings value to our current collection of resort. We’re also going to remain incredibly discipline to make sure that we’re paying the right price for the right asset. Just to make sure there’s no confusion with Verbier, that certainly was not an acquisition, but an agreement with them to create a pass exchange, three days on our pass and three days on their pass. I think we will, on that piece also, be looking for other opportunities to enhance the value that we can offer to the Epic Pass which right now does offer free skiing or recently in the last two summers in Les Menuires now offers some opportunities to go to Verbier, I think you’ll see that continue as well into the future.
Will Marks – JMP Securities: Was there any exclusivity issues with Verbier, meaning that you cannot work with other European resorts?
Robert A. Katz – Chairman and CEO: No.
Will Marks – JMP Securities: On your pass sales, you’ve been saying, I think for at least a couple of years that you get to a point where you can’t really expect volumes to go up that much. So, where are these new pass holders coming from? You may have addressed that already.
Robert A. Katz – Chairman and CEO: I think when we talked about it, that in Colorado I think we’ve reached a point where it’s harder for us to make huge gains given the saturation point. I think what we said is that we definitely felt like there was more opportunity in Tahoe and I think we’re seeing that. I think we definitely feel like there’s more opportunity from international markets, we’re seeing that and we also believe that there’s more opportunity from, what we call kind of out of state or really out of the Colorado and Bay area region, and we’re seeing momentum there and I actually think we have a good opportunity to continue to make gains there for years to come. The other thing I might have said there was obviously we are looking to grow our overall lift ticket revenue as well and so, obviously our goal is – last year was a tougher year, where we saw season pass revenue grow as a percentage in part because it grew, but also in part because, non-season pass revenue, lift ticket revenue came down a bit and so what I’d say is that obviously our goal is to grow both of those pieces and really, again our overall goal with season passes really is to drive future growth in resort EBITDA and stabilize our performance in resort EBITDA, something that I think if you look over the last couple of years we’ve really been able to show some space.
Will Marks – JMP Securities: One final question, once again you may of address this, update on efforts to replace the irreplaceable Jeff?
Robert A. Katz – Chairman and CEO: That is, without question the toughest challenge for me this upcoming year. Now, I think we have launched a comprehensive search and we’ve actually seen tremendous interest and are quite confident that we’ll find somebody who clearly can’t replace Jeff, but we’ll do a pretty good job nonetheless.