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Vail Resorts (MTN) Misses Q2 EPS by 42c, Revenues Miss; Withdraws Fiscal 2020 Guidance

March 9, 2020 4:03 PM EDT

(Updated - March 9, 2020 4:05 PM EDT)

Vail Resorts (NYSE: MTN) reported Q2 EPS of $5.04, $0.42 worse than the analyst estimate of $5.46. Revenue for the quarter came in at $924.64 million versus the consensus estimate of $953.65 million.

Given the uncertainty surrounding the impact of the coronavirus on the broader U.S. travel market and any specific impact to the performance of the Company, the Company is not issuing guidance at this time for fiscal 2020 and is withdrawing its previous guidance issued on January 17, 2020. In the week ended March 8, 2020, the Company saw a marked negative change in performance from the prior week, with destination skier visits modestly below expectations. The Company expects this trend to continue and potentially worsen in upcoming weeks. The Company intends to provide updated commentary on its results by March 18, 2020.

Commenting on the Company's fiscal 2020 second quarter results, Rob Katz, Chief Executive Officer, said, "Overall we feel good about the season so far, but have had both areas of challenge and areas of strong performance. Our Pacific Northwest resorts (Whistler Blackcomb and Stevens Pass) experienced the lowest snowfall in over 30 years through December 31, 2019, resulting in very poor results through the early season and critical holiday period. Visitation at those resorts continued to be challenging and below our expectations in January, with Whistler Blackcomb experiencing a weaker than expected recovery in North American and international destination visitation. In total, visitation across our Pacific Northwest resorts was down 14% compared to the prior year for the second quarter. After a challenging start in the early season, destination guest visitation at our western U.S. resorts improved significantly during the holiday period and was in line with our expectations. The improvement continued through January though Colorado was modestly below our expectations for the post-holiday period, partially offset by strong performance at our Park City resort. Our Northeast resorts are off to a great start to the season, supported by the continued benefit from our expanded Northeast network which has been partially offset by challenging weather variability across the Midwest resorts.

"Including results from Peak Resorts, total lift revenue increased 8.2%, driven by an 8.8% growth in skier visitation. Total effective ticket price ("ETP") decreased 0.5% in the second quarter compared to the prior year, with price increases in both our lift ticket and season pass products offset by the inclusion of results from Peak Resorts which generates lower ETP. Excluding season pass holders and Peak Resorts, ETP increased 4.0% compared to the prior year. Ski school, dining and retail/rental revenues increased 11.4%, 15.8% and 4.1% compared to the prior year, respectively, primarily driven by the inclusion of Peak Resorts."

Regarding the Company's Lodging segment, Katz said, "Our lodging business experienced mixed results during the quarter, with revenue (excluding payroll cost reimbursements) increasing 8.4% compared to the prior year, primarily due to the incremental operations of Peak Resorts, partially offset by softer results at our Colorado properties, in part due to weaker group demand in comparison to the prior year period."

Regarding the Company's outlook, Katz said, "Given the uncertainty surrounding the impact of the coronavirus on the broader U.S. travel market and any specific impact to the performance of our Company, we are not issuing guidance at this time for fiscal 2020 and are withdrawing our previous guidance issued on January 17, 2020. In the week ended March 8, 2020, we saw a marked negative change in performance from the prior week, with destination skier visits modestly below expectations. We expect this trend to continue and potentially worsen in upcoming weeks."

Regarding capital allocation, Katz said, "We remain confident in the strong cash flow generation and stability of our business model. We will continue to be disciplined stewards of our capital and remain committed to strategic, high-return capital projects, continuous investment in our people, strategic acquisition opportunities and returning capital to our shareholders through our quarterly dividend and share repurchase programs. We are pleased to announce that the Board of Directors declared a quarterly cash dividend on Vail Resorts' common stock of $1.76 per share, payable on April 9, 2020 to shareholders of record on March 26, 2020. Given the current market instability caused by the coronavirus, we are deferring our decision on a dividend increase until June." Katz added, "Our balance sheet remains very strong. We ended the second quarter with $126.8 million of cash on hand and our Net Debt was 2.4 times trailing twelve months Total Reported EBITDA, though it is important to note that this ratio only includes Peak Resorts' results for the period between closing and quarter end, and we expect that ratio to decline as we incorporate a full year of results from Peak Resorts."

Calendar Year 2020 Capital Expenditures

Regarding calendar year 2020 capital expenditures, Katz said, "We remain committed to reinvesting in our resorts, creating an experience of a lifetime for our guests and generating strong returns for our shareholders. The Company expects to invest approximately $155 million to $160 million, excluding one-time items associated with integrations, the one-time Triple Peaks and Stevens Pass transformation plan, one-time Peak Resorts capital improvements, real estate related capital and $4 million of reimbursable investments associated with insurance recoveries that we had originally expected to occur in calendar 2019.

"As previously announced, the calendar year 2020 capital plan includes a rare opportunity to expand with a 250 acre lift-served terrain expansion in the signature McCoy Park area of Beaver Creek, further differentiating the resort's high-end, family focused experience. We also plan to add a new four-person high speed lift at Breckenridge to serve the popular Peak 7, a replacement of the Peru lift at Keystone, subject to governmental approvals, with a six-person high speed chairlift, and a significant 250 seat increase in the seating capacity at the Rendezvous Lodge Restaurant on Blackcomb Mountain. We remain highly focused on investments that will further our company-wide data driven approach, including the second phase of implementing our automated digital marketing platform that will allow us to aggregate a more holistic view of the guest that will drive improvements in personalization and engagement across all lines of business, including ski school and rentals. We are also planning to completely revamp and upgrade our digital ski rental online platforms and our EpicMix mobile app, which will offer new functionality and an improved user experience. We plan to continue to invest in corporate infrastructure and technology to improve our scalability and efficiency, including the first phase of implementation of an automated workforce planning system to optimize our labor scheduling and improved financial systems to enhance business analytics.

"We are planning to complete the $3 million initial phase of a two-year, $15 million investment program across Peak Resorts. We are also planning to complete the second and final phase of a two-year, $35 million investment program for Crested Butte, Okemo and Stevens Pass and planning to spend approximately $24 million on integration activities primarily related to Peak Resorts.

"Including one-time items associated with integrations, the one-time Triple Peaks and Stevens Pass transformation plan, one-time Peak Resorts capital improvements, real estate related capital and $4 million of reimbursable investments associated with insurance recoveries that we had originally expected to occur in calendar 2019, we expect our total capital plan to be approximately $210 million to $215 million."

For earnings history and earnings-related data on Vail Resorts (MTN) click here.



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