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Edited Transcript of MTN earnings conference call or presentation 7-Dec-18 4:30pm GMT

Q1 2019 Vail Resorts Inc Earnings Call

BROOMFIELD Dec 8, 2018 (Thomson StreetEvents) -- Edited Transcript of Vail Resorts Inc earnings conference call or presentation Friday, December 7, 2018 at 4:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Michael Z. Barkin

Vail Resorts, Inc. - Executive VP & CFO

* Robert A. Katz

Vail Resorts, Inc. - Chairman & CEO

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Conference Call Participants

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* Brennan James Matthews

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Chris Jon Woronka

Deutsche Bank AG, Research Division - Research Analyst

* Felicia Rae Kantor Hendrix

Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst

* Ryan Ingemar Sundby

William Blair & Company L.L.C., Research Division - Research Analyst

* Shaun Clisby Kelley

BofA Merrill Lynch, Research Division - MD

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Presentation

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Operator [1]

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Good day, and welcome to the Vail Resorts First Quarter Fiscal 2019 Earnings Call. Today's call is being recorded.

At this time, I would like to turn the call over to Rob Katz. Please go ahead, sir.

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [2]

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Thank you. Good morning, everyone. Welcome to our fiscal first quarter 2019 earnings conference call. Joining me on the call this morning is Michael Barkan, our Chief Financial Officer.

Before we begin, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties, as described in our SEC filings, and actual future results may vary materially. Forward-looking statements in our press release issued this morning, along with our remarks on this call, are made as of today, December 7, 2018, 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 quarterly report on Form 10-Q, were filed this morning with the SEC and are also available on the Investor Relations section of our website at www.vailresorts.com.

So with that said, let's turn to our first quarter fiscal 2019 results. Overall, we were pleased with our results in the first fiscal quarter. Perisher performed very well, with outstanding conditions generating record results for the Australian winter season, with strong visitation and revenue growth across the business. Our consolidated results from Perisher were negatively impacted by the strong U.S. dollar, which created an approximate $2 million Resort Reported EBITDA headwind from currency translation in the quarter on a constant currency basis as compared the prior year's results.

Whistler Blackcomb's summer business performed well with strong results from its world-class mountain biking operations and summer activities, including the new Cloudraker Skybridge, which was very popular with sightseers.

Our U.S. Epic Discovery business continues to grow and generate strong financial returns on the capital we invested and performed in line with our expectations for the quarter.

Our Lodging business produced another strong first fiscal quarter, with continued success from our properties at Grand Teton Lodge Company and at our Colorado and Utah resorts.

Turning now to our 2018/2019 North American pass sales for our resorts and early season indicators. As we approach the end of our selling period, season pass sales for the North American ski season are up approximately 21% in units and approximately 13% in sales dollars due December 2, 2018, compared to the prior year period ended December 3, 2017. These results include all military pass sales and pass sales from Stevens Pass and Triple Peaks in both periods and are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.77 between the Canadian dollar and the U.S. dollar to the current period and prior period for Whistler Blackcomb pass sales.

Growth in our total season pass sales dollars was lower than our unit growth, given the inclusion of the new Military Epic Pass, which is available at a substantial discount to our Epic Pass. The average price increase on all nonmilitary passes was approximately 3.3%. Excluding sales of military passes to new purchasers who were not pass holders last year, season pass sales increased approximately 8% in units and 10% in sales dollars over the comparable period in the prior year.

We're very pleased to see double-digit revenue growth in our season pass program after a very strong, record performance last year. For the year, and excluding sales of military passes to new purchasers who were not pass holders last year, we achieved solid growth in our Colorado destination and Whistler Blackcomb markets while experiencing declines in both the Northern California and Utah markets.

Excluding sales to the Northern California and Utah markets and sales to new military pass holders who were not pass holders last year, our season pass unit growth was up 11%.

We are pleased to see very strong growth in our Northeast market, benefiting from the impact of the inclusion of Stowe, Okemo and Mount Sunapee on our passes.

Overall, we achieved solid growth in new pass holders this year, even excluding the significant number of new military pass holders. This growth in new pass holders is particularly notable, following the record new pass holder growth we achieved in the prior 2 years.

We also saw solid growth in our renewing pass holders and a stable renewal rate outside of our Tahoe and Utah markets, which saw a modest decline. Excluding sales to new military pass holders, our revenue growth as compared to unit growth was slightly lower than in previous years as we continue to broaden the penetration of our pass program to products designed for lower-frequency guests.

Our military pass program delivered nearly 100,000 new pass holders to our program, representing an incredible opportunity for our company to make our resorts more accessible to those who have served their countries in the armed forces as well as their families. This significant expansion of our pass holder base creates a meaningful business opportunity for our company while building tremendous loyalty with these new guests. Including military and Epic Australia passes, we expect our total season pass holders this year will exceed 925,000, representing an incredible group of highly loyal and passionate guests.

We were also very pleased to announce earlier this week a long-term pass partnership with Rusutsu Resort in Japan. Rusutsu is one of Japan's largest and most well-renowned resorts, located in Hokkaido, the legendary destination for Japan's famous powder skiing. Beginning with the 2019/2020 season, the Epic Pass, Epic Local Pass and Epic Australia pass will offer 5 consecutive complimentary days with no blackout dates. This long-term partnership, combined with our existing partnership with Hakuba Valley, creates an unparalleled connection between the best resorts in Japan, Australia and North America.

Overall, lodging bookings for the season ahead are trending in line with prior year bookings. Based on historical averages, around half of the bookings for the winter season have been made by this time. Our early season results have been encouraging, with strong conditions across our Western U.S. and Northeastern U.S. resorts.

Our Colorado resorts have had a particularly strong start to the season, with early snow and cold temperatures conducive to snowmaking, which allowed each resort to open several days earlier than initially expected with significantly improved conditions relative to last year. As of today, our Colorado resorts are experiencing the best early season conditions for open terrain since the 2010/2011 season, and Vail Mountain has over 5,000 acres or over 90% of the terrain open.

Our resorts in Tahoe and Utah have opened with typical conditions for this time of year, while Whistler Blackcomb's early season has been more challenging with limited snowfall to date.

Our northeast resorts have started strong, with Stowe and Okemo opening earlier than in prior years. Importantly, we were able to complete the core systems integrations across our acquired resorts on their respective opening days to further enhance the guest experience in our first year of operating these resorts.

We are thrilled to welcome guests to all of our resorts for the 2018/2019 ski season as it kicks off with several transformational enhancements to the guest experience. Our $42 million transformational investment at Whistler Blackcomb is nearly complete, bringing a 43% increased capacity collectively across the New Blackcomb gondola and Emerald and Catskinner chairs.

At Park City, we have continued to enhance the family food and service experience for our guests. In the Canyons area of Park City, we created a world-class beginner area with improved grading, snowmaking and lift service. We also completed 2 significant dining experience enhancements with the expansion of Cloud Dine and the renovation of the Park City Mid-Mountain Lodge.

At Heavenly, we upgraded the Galaxy lift, allowing us to reopen 400 acres of high-quality intermediate terrain this season.

At Perisher, we recently began work on upgrading the Leichhardt chairlift as well as surrounding snowmaking improvements for the 2019 Australian ski season.

Now I would like to turn the call over to Michael to further discuss our financial results and our fiscal 2019 outlook.

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Michael Z. Barkin, Vail Resorts, Inc. - Executive VP & CFO [3]

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Thanks Rob, and good morning, everyone. As Rob mentioned, we are pleased with our first quarter performance. Resort net revenue was $219.9 million in the first fiscal quarter, a decrease of $0.3 million compared the prior year. Resort Reported EBITDA was a loss of $72.5 million in the first fiscal quarter, which compares to a Resort Reported EBITDA loss of $54.1 million compared to the prior year.

Fiscal 2019 first quarter Resort Reported EBITDA includes $6.6 million of acquisition and integration related expenses and an incremental loss of $2.6 million from off-season operations at the resorts acquired during the quarter as well as approximately $2 million of headwind from currency translation related to operations at Perisher, which the company calculated on a constant currency basis by applying current-period foreign exchange rates to the prior-period results.

Net loss attributable to Vail Resorts was $107.8 million for the first quarter of fiscal 2019 or a loss of $2.60 per diluted share as compared to a net loss of $28.4 million or a loss of $0.71 per diluted share for the same period in the prior year.

Net loss for the first quarter of fiscal 2019 includes the after-tax effect of acquisition and integration related expenses of $4.9 million and an incremental loss of $3.6 million from off-season operations at the resorts acquired during the quarter as well as approximately $1 million of headwind from currency translation related to operations at Perisher, calculated on a constant currency basis as compared to the prior year's results.

Included in the first quarter of fiscal 2018 was a tax benefit of approximately $51.8 million or $1.29 earnings per diluted share related to employee exercises of equity awards, primarily related to the CEO's exercise of expiring stock appreciation rights.

Our balance sheet at quarter-end remains very strong. We ended the quarter with $141 million of cash on hand, $120 million of borrowings under the revolver portion of our senior credit facility and total long-term debt, including long-term debt due within 1 year, of approximately $1.5 billion. As of October 31, 2018, we had available borrowing capacity of $206 million under the revolver component of our senior credit facility. In addition, we had $155.1 million available under the revolver component of our Whistler Blackcomb credit facility.

Our net debt was 2.3x trailing 12 months' total reported EBITDA, which is higher than the prior quarter, due primarily to the addition of $265.6 million of incremental term loan borrowings associated with the resort acquisitions during the quarter.

I am also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts' common stock of $1.47 per share, payable on January 10, 2019, to shareholders of record on December 27, 2018. Additionally, the company repurchased approximately $50 million of stock during the quarter at an average price of $252.66.

Now turning to our outlook for fiscal 2019. Given our first quarter results and the indicators we are seeing for the upcoming season, we are reiterating our Resort Reported EBITDA guidance for fiscal 2019 that was included in our September earnings release, based on the assumptions incorporated at that time, including foreign currency exchange rates. That said, the North American ski season has just begun with our primary earnings period still in front of us.

I'll now turn the call back to Rob.

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [4]

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Thanks, Michael. We remain committed to reinvesting in our resorts, creating an experience of a lifetime for our guests and generating strong returns for our shareholders. We will announce our complete capital plan for calendar year 2019 in March 2019, but we are pleased to announce our signature investments planned for the 2019/2020 ski season. We're excited to announce a significant investment in our snowmaking systems in Colorado that will transform the early season terrain experience at Vail, Keystone and Beaver Creek. Investments in state-of-the-art, energy-efficient snowmaking technology, combined with infrastructure upgrades and expansions, all subject to U.S. Forest Service approval, are planned to help drive an earlier, more predictable opening date and help mitigate high-quality conditions -- help maintain high-quality conditions throughout the season.

We are planning to upgrade and expand Vail Mountain's snowmaking system, with expectations for the mountain to open at least 1 week earlier each year and with a much better terrain package, which will enhance the consistency of the experience for Thanksgiving and the early season with more beginner and intermediate terrain available. The proposed project would significantly expand the snowmaking capacity on Vail Mountain with investments in pumping infrastructure and 387 new high-efficiency snowmaking guns. The investment would add 152 acres of new and enhanced snowmaking terrain, including bringing snowmaking to the Mid-Vail / Mountaintop Express chair 4 pod area, providing higher-elevation terrain that would consistently offer a superior early season experience.

We are also planning to upgrade Keystone's snowmaking system to a state-of-the-art, automated, energy-efficient system that we expect will allow the resort to make more snow during early season snowmaking windows, bringing forward Keystone's opening day by up to 3 weeks each year, enabling Keystone to be positioned to be the first resort to open in the United States each season and with the most skiable terrain.

At Beaver Creek, we are planning to expand the snowmaking system at Red Buffalo Park, the highly successful beginner terrain enhanced last year with a new detachable lift to ensure more reliable early season terrain in a key ski school area and creating the opportunity to target more than 3,300 vertical feet of top to bottom skiing and riding on opening day each year.

In addition to these snowmaking enhancements, we are highly focused on investments that will substantially improve the guest experience across our resorts, including company-wide technology and service enhancements that will move guests as quickly through the purchasing process as possible so they can be on the slopes faster. Among the most important technology investments we are making is our plan to increase lift ticket express fulfillment capacity by 40% through new mobile technology across our 17 North American resorts to allow skiers and snowboarders who purchase tickets in advance to bypass the ticket window entirely. With this new technology, guests will go directly to designated lines at our base area chairlifts where they will get their lift access media from our mobile ticket agents and head right into the lift line to start their ski day.

Also new for the 2019/2020 winter season, season pass holders will be able to prepurchase pass benefit tickets online, including Buddy and Ski With A Friend tickets, and leverage the new mobile expense fulfillment at the base of our lift, bypassing the ticket window. Eliminating guest wait times is a core commitment of our company and can offer a dramatic improvement to the guest experience.

At Park City, we will continue to build on the momentum we have achieved at the largest resort in the U.S. A new permanent Tombstone BBQ restaurant will complete the suite of transformative dining improvements and the resort's commitment to culinary excellence. The new restaurant will include 50 indoor seats, a beer bar and a full kitchen at this critical intersection of the -- on the canyon side of the resort.

At Breckenridge, we are planning to make a onetime investment to transform the guest experience at the base of Peak 8 with new ski school and childcare facilities as well as an improved ticket and retail rental experience. We will be acquiring and building out space within the new Grand Colorado on Peak 8, which was built on a land parcel we sold in fiscal 2017. The improved facilities and layout will dramatically improve the experience of this popular base area at the most-visited mountain resort in the U.S. These onetime real estate investments will total approximately $7 million in calendar year 2019 and are the result of the $9.3 million land sale at Breckenridge in fiscal 2017.

At Beaver Creek, we plan to completely renovate the children's ski school to improve the experience for the entire family, from sales and registration to rental fitting to better serve our guests at one of the most successful ski schools in North America.

At Perisher, we will complete the new Leichhardt lift that is replacing a T-Bar and a snowmaking investment that will support terrain connections and improve the consistency of conditions for beginner and intermediate skiers.

We'll be investing and planning for strategic projects for the next several years to get the necessary regulatory approvals for major lift, restaurant and terrain-expansion opportunities. Among these planning projects is the signature McCoy Park terrain expansion at Beaver Creek, which was recently approved by the U.S. Forest Service and we hope to open for the 2020/2021 ski season. McCoy Park will provide guests with great beginner and intermediate skiers -- skiing in one of the most idyllic settings in Colorado.

Our capital plan includes several key investments for company-wide technology enhancements that will advance our scalability, guest service and marketing efforts. We will be completing the final stage of our point of sale modernization project, which will reduce transaction times and improve the guests' experience. We will also be investing in technology to automate our data-driven marketing efforts to more efficiently and effectively communicate with our guests and take advantage of the extensive data we aggregate and use across our business.

We also plan to make significant onetime investment across the recently acquired resorts of Crested Butte, Okemo, Mount Sunapee and Stevens Pass. We plan to spend approximately $7 million in the first phase of a 2-year $35 million investment program.

At Stevens Pass, we plan to replace and upgrade the Daisy and Brooks lifts, both of which serve critical terrain for beginner and intermediate skiers and snowboarders and renovate on-mountain restaurants to provide an updated experience.

At Okemo, we plan to upgrade 2 on-mountain restaurants, Sugar House and Summit Lodge, to offer new concepts and menus as well as an updated look and feel to interior finishes and furnishings.

The calendar 2019 capital plan includes $3 million of investment related to our sustainability commitment, focused on energy efficiency opportunities in snowmaking as well as other electrical and lighting applications. We plan to spend approximately $6 million on integration activities across recently acquired resorts. Investments in additional summer activities will be approximately $2 million in calendar 2019 as we complete work on a major zipline at Breckenridge.

Our capital plan for calendar 2019 will be approximately $139 million to $143 million, excluding onetime items associated with integrations, the onetime Triple Peaks and Stevens Pass transformational plan, summer capital, real estate-related capital and reimbursable investments. Our total capital plan will be approximately $175 million to $180 million, including items noted above, for integration and acquisitions, summer capital, real estate-related projects and approximately $13 million of reimbursable investments associated with insurance recoveries and tenant improvements. We will be providing further detail on our calendar year 2019 capital plan in March 2019.

Our attention to service and our commitment to delivering an outstanding guest experience across our network continue to be the focus of our company's efforts. I'd like to thank all of our employees for their passion, hard work and commitment to creating the experience of a lifetime for our guests, which, as always, lies at the center of our success. We hope that you all enjoy a fun and safe season ahead.

At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will take our first question from Shaun Kelley with Bank of America.

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Shaun Clisby Kelley, BofA Merrill Lynch, Research Division - MD [2]

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Rob, maybe we could just start off with some of the details you gave. You gave a lot of color, and more than you typically do, about sort of the breakdown on the way the pass sales period came together. So I just wanted to start with maybe the softness on Utah and Tahoe. Could you just give us a little bit more about what you think might have driven some of that softness? Is it weather and just the fact that you had a couple of light seasons out there in snowfall, especially in Utah? Is it potentially any impact from the introduction of the competitive pass offering with Icon out there?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [3]

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Yes, I think on Utah, I think number one, obviously, Utah did have a very tough season last year. So local frequency on passes, obviously, was down. So I think that hurt us. I think there's no doubt that Icon has a strong product for that local Utah skier. So I would imagine that had an impact as well. I think, overall, Utah is not a huge market for us compared to most of the other markets.

I think at Tahoe, which is obviously a much bigger market for us. Important to note, last year, right, at this time, we disclosed very strong growth in Tahoe last year. So one, I think we were lapping very strong growth; two, last year, we had a very tough year in Tahoe. So again, on the frequency side, I think we were hurt by that as well. And then this year, I think, as we went into the end of the selling season in our -- especially our November deadline, very tough weather, including the fires, conditions were not great. I mean, they've now actually very recently improved. But I think through, certainly, most of that November time period, not great conditions out there as compared to, certainly, Colorado. And so I think that hurt us as well.

I think on the Icon side, when we look at our -- we sell primarily 4 different products out there. We actually saw our best performance on the Epic and Epic Local product in Tahoe, which would be the products that really compete with Icon. Where we saw most of the softness was is the Tahoe Value and Tahoe Local products, which are priced well below the Icon competing products. So it's always hard for us to know exactly what impact one thing is versus another. But right now at Tahoe, yes, we're not -- we're seeing this more of an endemic issue. A little bit of lapping and a little bit of the challenging weather at the end of the -- challenging weather last year and then some challenging weather and unique dynamics in the San Francisco market in November.

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Shaun Clisby Kelley, BofA Merrill Lynch, Research Division - MD [4]

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And just as we think about the magnitude of pass sales overall, so last quarter 9% to -- kind of 9% to 12% growth without the acquisitions. So 9% on -- I think on the core numbers. So 9% on units, 12% on dollars. This quarter, decelerating a little bit, but that now includes the acquisitions. Can you give us any sense on both, first of all, what you think was happening with the core ex the acquisitions? Did the acquisitions really contribute much? And then second of all, I mean, was this pretty much in line with your underwriting? Or when you guys said relatively consistent, were you surprised at anything in the just overall period, including maybe the weakness here that you called out or anything else that stuck out to you about the trends you saw?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [5]

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Yes, I think as we were going into the fall, I think we knew that we had a number of different trends that would be going. Our program has grown so much right now, over 900,000 passes across so many different markets, that we're always dealing with different dynamics, and we try and kind of factor all of those together to kind of come out with our overall color for the results. And I think, last time we felt like, yes, that we would be relatively stable, meaning could be up a little, could be down a little kind of from where we were. I think one of the things that is a positive, obviously, is the growth that we get from the acquisitions, which we saw. We also inherit, right, the preexisting season pass programs for all 4 of those resorts, which we then put into the base number for us. So that, obviously, drags down, right, for the prior year. So that, obviously, drags down growth as well. So we have those kind of competing dynamics. I think we felt that we were seeing, yes, good trends in the Northeast. And actually, that was, by far, our best-performing market, very much aligned with our expectations. So we feel very good about that.

The Colorado market was also -- we saw very solid growth in a mature market for us. So this, I would say, absolutely achieved our expectations on the partnership, certainly, with the Telluride and from having Crested Butte.

I think Whistler, we actually saw solid growth there, but we're really expecting more. So I would say that was a market that there is probably some disappointment in. I do think that just very challenging weather up there with poor conditions. We just lost some growth that I think we were hoping to get there.

And then overall, on destination, I think we feel -- we do feel good about the -- kind of the solid growth we had. And yes, we are lapping 2 years, especially last year, of very, very strong growth in destination. And as we -- given the size and scope of our program, the kind of penetration that we've been able to achieve, there's no doubt that as we continue to broaden the program, that next skier, that next marginal skier is a lower-frequency skier and probably a little less loyal. So a little bit tougher to get into the program, probably going to come into a product that's a little lower price. The other side of it, which is quite heartening for us, is the benefit of getting that skier into our program is actually so much higher than getting the very loyal 50- to 80-year skier. And so, actually, every time we keep kind of moving the program out, we actually feel like we are dramatically improving the stability, the security and the loyalty that we have in our guests.

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Shaun Clisby Kelley, BofA Merrill Lynch, Research Division - MD [6]

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Last question for me. But you also gave the -- some incremental color around the impact or the overall experience on the blended average price increase. So at 3.3%, a little lower and then the spread, obviously, between units and dollars, both those numbers probably being a little lower than what we've seen in the past. Could you just walk us through the mix shifts on maybe some of the -- like, to your -- I think it's really kind of following up on that last point. But maybe the mix shift from some of the frequency car products that are not maybe the full Epic Pass? Is that what's impacting that price spread or what else? Was it the inclusion of the acquisitions? Just what were some of the key factors in the pricing -- blended average price numbers that we saw?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [7]

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Yes, I think a combination. So I'd say you have -- on the one hand, you've got -- I think we typically always see kind of compression on the spread between units and revenue as we get later into the selling season because we typically do sell a lower-frequency product as we get further out into the selling season because they are the least -- the most undecided, so to speak, of all the guests that we're trying to get. And I think this year, as we get further and further into that market, we

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dynamic, and I think we saw it again this year. Not a huge surprise. I mean, I think that -- we kind of knew that overall going in, but I think it's a trend that, yes, as we continue to grow the program, I guess, and we've talked about this in, I think, on a number of calls in the past, we really are focused on this overall revenue number. How much revenue are we moving to be committed before the season? And in that respect, right, we are -- we're going to kind of bring everything we can to bear to try to drive. And we felt really good about kind of 10% revenue growth, excluding military, and then 13% revenue growth including military, on this huge program in a market that -- we -- is not a high-growth market to begin with. So we feel like that's kind of the -- we're a little less focused on -- if we're taking a 3-day skier, what price they're paying to come into our program and much more focused on getting those skiers into our program.

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Operator [8]

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And we will take our next question from Felicia Hendrix with Barclays.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [9]

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Rob, I'm just wondering, is there any kind of silver lining in terms of the weaker sales that you're seeing in season passes, especially in Tahoe, since that was coming more from perhaps some of the base being distracted by the fires and also the challenging weather? Because I would think that as things improve, and particularly if Tahoe has a good season and if Utah has a good season, would you see an uptick in -- at the window ticket sales?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [10]

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Yes, I think we absolutely see a relationship. And I think if you look back historically, you see that relationship between as we move people into season passes, we are pulling them out of that lift ticket window. And so if we see lower growth, we can see those folks show up. A little bit of that depends upon what the conditions are like for the season. So certainly, in a market right now like Colorado, I think it certainly bodes well, right, for us to pick up incremental visitors and guests buying day lift tickets because the conditions are so strong. The reason why we do like moving people to season pass is, obviously, it takes some of that condition risk out of our results. But there is no doubt that I think if we see Colorado -- if we see Tahoe, which -- and there is some positive news if you look on the weather front right now, yes, there's no doubt that if it improves over Christmas, then that's, obviously, an opportunity for us to get those guests and still get them up on the mountain.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [11]

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Okay. And then if we just look at your season pass sales as a whole, right, it seems like most of the regions generally were strong, with the exception of the 2 that you called out. So like if you had to give us -- or if you could give us a big-picture perspective? And I know this is tough and you're not going to quantify it, so perhaps directionally, how much do you think just overall like you're bumping up against competition or Icon versus just the more fundamental factors, like you've mentioned like growing off of a higher base, bringing in lower-frequency skiers, that sort of thing?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [12]

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Yes, I would say -- I think, one is, I would say, we think Icon has got a great product for the resorts that they have in that network. And I think that their entry has really helped, actually, the overall market. I think there is no doubt that they've brought greater awareness. And I think, right, helped carry the message around, if you're going to ski, you should really consider a season pass. And I am sure there's no doubt that in certain spots that they may have an impact on us. But I guess, I would say, yes, that our results are much more a function of our own drivers than competitive dynamics. I mean, it's -- we don't have perfect information on that. So not -- that's not an assessment that we have a tremendous analytics on because we don't have all the data. But I would say, when I look at all the different pieces across all of our different markets, yes, this is much more about how we continue to broaden our program with that lower-frequency guest, how do we continue to get better at our marketing. All the things that have driven us in the past, I think, are -- ultimately lie at the center of how we drive results.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [13]

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Okay, that's helpful. And then just given your size now, should we look to season pass sales growth more in this range, kind of the mid-to high single-digit range on a go-forward basis?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [14]

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Yes, I don't -- I guess, we're not giving future guidance at this point and we haven't in the past. But I guess I would say that we feel very confident in our ability to continue to broaden the program, to continue to move material percentages of our revenue, right, from the lift ticket window to an advanced product to a season pass. And that -- this is -- we feel very confident in that. We felt confident in that going into this year. I think -- but it is -- there's no doubt that it's going to be -- we're going to be focused on how much revenue we're moving. The program will have to -- we'll have to continue to innovate and to continue to be more sophisticated and targeted in terms of how we bring in additional folks, but that's actually why we built kind of the marketing engine and approach that we have.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [15]

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Right. And then just final one for me just on Whistler. At what -- by what date or time do you need to see normal snow conditions there to meet your guidance?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [16]

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I don't know that we can give a level of specificity on that because in part, right, we've got multiple regions that'll all be moving on their own. So I don't know that we can isolate one region out and say how it will impact it. I think -- I do think there's plenty of opportunity still to -- for Whistler to have a strong season. And obviously, there's -- Whistler does have a good chunk of business that's coming from outside of Canada, and so a lot of those visit -- trips are booked already. And so I think there's a real opportunity for a late fill-in for them. At this point, I would say, yes, more of an issue on just their early season results, a little bit of an impact on pass sales. But at this point, we're not -- yes, we're not making any assessments on Christmas because there's still plenty of time for that.

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Operator [17]

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Our next question will come from Chris Woronka with Deutsche Bank.

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Chris Jon Woronka, Deutsche Bank AG, Research Division - Research Analyst [18]

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I want to ask you if you have any early indications or early reads on ancillary spend by some of the new military pass holders or the less frequent folks that are -- that you've been selling some of the new product passes to? So is there any kind of early indication of whether they're spending less -- more or less at the resorts when they get there?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [19]

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I guess, I'd say we don't really have -- I think as it relates to the lower-frequency destination guests that they spend in line with our other destination guest. So yes, a huge opportunity every time we bring somebody in to -- yes, in terms of the total revenue package that they would offer.

On military, I think it's a little too early for us to give any insight on exact spending. That said, we're seeing pretty good visitation early on and a lot of enthusiasm. And we think -- as we've identified, we believe this was a tremendous opportunity for our resorts to really make this strong connection with that group and a real business opportunity to bring so many new people and their families, right, to our resorts. And we are expecting, ultimately, we will see good spend from those groups.

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Chris Jon Woronka, Deutsche Bank AG, Research Division - Research Analyst [20]

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Okay, great. And then I know you mentioned overall hotel bookings are kind of in line with prior year for the season. I was wondering if you can maybe break that apart a little bit between, say, Christmas, New Year's, and then also think about Easter and spring break since we have the bigger calendar shift on Easter. We're a few months further along than when you last updated guidance. So I just want to see if there's any -- on the hotels side, if there's any discernible patterns between those 2 seasons?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [21]

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Yes, I don't think we're going to give more color by season because not only does it come out by season, but then it's by season, by resort. And kind of a -- we have enough resorts in enough markets that I think we're more comfortable at this point just giving overall direction. I would say, yes, we feel like bookings support, obviously, the guidance that we've put out. It's important to remember that last year, at this time, we actually had pretty good bookings, going into, especially, the Colorado and Utah markets. Obviously, the skier visits didn't pan out. So for us, as we look to have bookings in line, the big opportunity for us is now with good conditions, actually getting people who are at the resort and have already booked, actually getting a higher frequency from them during their trip.

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Chris Jon Woronka, Deutsche Bank AG, Research Division - Research Analyst [22]

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Okay, great. And then just want to ask what the capital plans you've laid out for 2019/'20 season. I guess, in terms of bigger picture on capital expenditures, do think it might tend to be more lumpy going forward or maybe better word is larger going forward? And what makes you decide to ramp up the investment further if you do decide to do that?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [23]

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I think this year, we -- I think a little bit of a culmination of things that all hit at the same time in terms of some of these like real estate investments, some of the -- these reimbursable investments, the integration capital. So from that standpoint, I think this is probably more unusual in terms of all of those things happening at the same moment, and we intend to still circle back to our core guidance for capital as we go forward and, certainly, we'll explain any kind of differences from that. That said, we do intend to be aggressive on making improvements at the resorts. I think on the snowmaking side, we really feel like this is not only an investment in the early season for those guests who go, but it's actually an investment in our season pass program. So we do see that having a better experience and a more comprehensive experience at our resorts earlier helps as we try and convince a lot of those late-deciding folks as to whether or not they want to come. And so we do see this as -- yes, as an opportunity to really move the needle on something that matters to our season pass program.

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Operator [24]

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Our next question will come from Ryan Sundby with William Blair.

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Ryan Ingemar Sundby, William Blair & Company L.L.C., Research Division - Research Analyst [25]

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Just wanted to follow up on that last -- on the last question, actually. Do you see the investment in snowmaking -- is it more important to get that extra week or 3 weeks for Keystone open earlier? Or is it more about better consistency around the holidays for kind of the core visitor?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [26]

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Definitely more about earlier. So I would say that we really are making a push here, I think, with this investment to say that, yes, we're going to have a better product, open it earlier, and we do think that it's very much -- a lot of those skiers who come are season pass skiers. And so we do see the opportunity to really make a statement about almost like truly an investment in -- we've got now over 900,000 season pass holders, and this is an investment really in the loyalty in that program. And we think we will see a real benefit from that. I do think all of these things, though, of course, help Thanksgiving, too. And so I think this allows for a more robust Thanksgiving period, which can drive additional lift ticket business and ancillary business, which we think can allow these investments to have a pretty big payoff, especially if you're in a year like you were last year. On Christmas, certainly, it can help, but that's probably not where the focus is. Usually, Christmas is a pretty consistent offering for us across the network.

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Ryan Ingemar Sundby, William Blair & Company L.L.C., Research Division - Research Analyst [27]

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Okay. And is there a significant cost that goes with this? Or are they pretty efficient?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [28]

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They are very efficient. There is some cost, certainly, that comes with it, but I don't think material to the overall results for the company in terms of operating cost.

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Ryan Ingemar Sundby, William Blair & Company L.L.C., Research Division - Research Analyst [29]

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Got it. And then with the addition of Rusutsu in Japan, now you kind of have, I guess, a partner in each of the major kind of the 2 ski areas. Do you feel like that gives you enough in that region? Or would you like to add more kind of flags as you go forward? Any kind of color there would be great.

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [30]

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I think the -- I think we believe this is a -- we're always, of course, open and looking for new opportunities, and we will continue to do that. But we do feel that this is a very strong combination. And having, really, just a world-class resort, right, both on Honshu and in Hokkaido, really makes, as we said, a powerful connection and combination between Australia, Japan and North America. So we feel -- while we'll always be on the look for new opportunities, we feel like this is a great place to start.

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Operator [31]

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And our next question will come from Brennan Matthews with Berenberg.

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Brennan James Matthews, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [32]

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I just wanted to ask if you guys could maybe comment on the health of your core customer. And if you're seeing anything different between your destination guests and maybe some of the more local skiers?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [33]

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When you say the health of the customer, what do you mean?

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Brennan James Matthews, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [34]

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Like I mean, are they -- do they look -- I guess, do they seem pretty comfortable with their financial situation? Are you seeing just -- overall, just trying to gauge if there could be any potential slowdown on the horizon. Are they -- early guests, are they spending as much as they have on ancillary items?

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [35]

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I would say, it's a little early on the spending side to weigh in on that. But I would say that we're not seeing evidence of our core customer reducing their spend. I'm not sure we have the kind of breadth of data that we would need to have to make that determination, but I think when we look at certainly, right, a stable renewal rate on our passes across, again, such a huge program. When we see significant growth in revenue, double-digit growth in revenue, those are pretty good indicators to us that there's still good health in the consumer that we have and we see Lodging bookings in line with prior year, that's I think a strong statement. When we see strength in Perisher and their results, and strength in first quarter in Lodging. I mean, so -- with whatever data points we have, I think they're pointing in a positive direction. But I don't know that we could comment on the breadth of all the things that might be impacting people.

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Operator [36]

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And there are no further comments or questions at this time.

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Robert A. Katz, Vail Resorts, Inc. - Chairman & CEO [37]

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Thank you, operator. This concludes our fiscal first quarter 2019 earnings call. Thanks to everyone who joined us today. Please feel free to contact me or Michael directly, should you have any further questions. Thank you for your time this morning, and goodbye.

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Operator [38]

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Again, ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect.