Vail Resorts (NYSE: MTN) reported Q3 EPS of $3.74, $0.46 better than the analyst estimate of $3.28. Revenue for the quarter came in at $582.89 million versus the consensus estimate of $678.3 million.

Highlights

• As a result of the disruptions caused by COVID-19, we took the following strategic actions to address the public health situation and strengthen the Company's financial and liquidity position to navigate through the current circumstances and position the business for long-term success:
  • Closed operations at all North American resorts and rental/retail stores from March 15, 2020 through the remainder of the 2019/2020 winter ski season;
  • Reduced our capital plan for calendar year 2020 by $80-$85 million;
  • Suspended our cash dividend for a minimum of two quarters (preserving approximately $142 million);
  • Furloughed the majority of year-round hourly and certain salaried employees in the U.S.;
  • Implemented a six month salary reduction for all salaried employees in the U.S.;
  • Eliminated full salary for CEO and 100% of cash compensation of Board of Directors for six months;
  • Suspended our 401(k) match for six months;
  • Raised $600 million in 6.250% unsecured senior notes due May 2025; and
  • Obtained financial covenant maintenance waivers under the Vail Holdings, Inc. ("Vail Holdings") revolving credit facility through January 2022.
• Net income attributable to Vail Resorts, Inc. was $152.5 million for the third fiscal quarter of 2020 compared to net income attributable to Vail Resorts, Inc. of $292.1 million in the same period in the prior year, primarily as a result of the negative impacts of COVID-19 as outlined further in the details below.
• Resort Reported EBITDA was $304.4 million for the third fiscal quarter of 2020, compared to Resort Reported EBITDA of $480.7 million for the same period in the prior year, primarily as a result of the negative impacts of COVID-19 offset by cost actions implemented, as described above.

Commenting on the Company's fiscal 2020 third quarter results, Rob Katz, Chief Executive Officer, said, "Our results for the quarter and for the full 2019/2020 North American ski season were significantly impacted by COVID-19 and the resulting closure of our North American mountain resorts beginning March 15, 2020 for the safety of our guests, employees and resort communities. In addition, even before the closure and during the first two weeks of March, we experienced a negative change in performance that we believe was due to the impact of COVID-19 on traveler behavior. As of March 18, 2020, we anticipated that our operating results in March and April would be negatively impacted by $180 million to $200 million compared to the Resort Reported EBITDA expectation we had on March 1, 2020. Relative to these expectations, our results were favorable by approximately $40 million, primarily driven by cost actions implemented in April 2020. In addition, Resort Reported EBITDA for the quarter was negatively impacted by the deferral of approximately $113 million of pass product revenue and related deferred costs to fiscal 2021 as a result of pass holder credits offered to 2019/2020 North American pass holders to encourage renewal for next season."

Regarding the Company's summer operations, Katz said, "We are planning to be operational for the North American summer and Australian ski season in late June or early July, which could vary by resort, and opening dates for each business are subject to new information and public health guidance with regard to COVID-19. We expect that our results in the fourth quarter of fiscal 2020 will be materially negatively impacted by the travel environment and we will see lower visitation to our resort properties. However, we are not able to fully assess that impact at this time and will not be issuing guidance for the fourth quarter or fiscal year. We believe we have developed efficient operating plans to deliver a safe and enjoyable guest experience at our resorts this summer in North America and for the Australian ski season, with the ability to adjust as consumer demand and local guidelines and practices shift."

Season Pass Sales

Commenting on the Company's season pass program, Katz said, "As announced on April 27, 2020, to address the difficult decision to close our North American mountain resorts as a result of the unprecedented circumstances surrounding COVID-19, we have rolled out a comprehensive plan to address our pass holders' concerns about the early closure this past season and provide improved coverage for the future.

"We are providing credits to 2019/2020 North American pass holders to apply toward the purchase of a 2020/2021 pass product. Season pass holders will receive a minimum credit of 20% toward next season's pass. For season pass holders who used their pass less than five days, they will be eligible for higher credits up to a maximum of 80% for season pass holders who did not use their season pass at all. For Epic Day Pass, Edge Card and other frequency based products with unused days remaining, we will be offering credits for each unused day up to a maximum of an 80% credit. The credits will be available for our pass holders who purchase 2020/2021 pass products by September 7, 2020.

"As a result of the early closure this season and the meaningful credits we are offering to 2019/2020 North American pass holders, we will be delaying the recognition of approximately $121 million of our deferred pass revenue, as well as approximately $3 million of related deferred costs (a net Resort Reported EBITDA impact of approximately $118 million), that would have been recognized in the remainder of fiscal 2020 and will now be recognized primarily in the second and third quarters of fiscal 2021. This shift in recognition timing will partially or fully offset the negative impact of the credits being offered to pass holders, depending upon the final usage of such credits towards the purchase of 2020/2021 North American pass products.

"We are redefining how we will protect season passes through the launch of 'Epic Coverage.' Epic Coverage is free for all North American pass holders and completely replaces the need to purchase pass insurance. Epic Coverage provides refunds in the unlikely event of certain resort closures (e.g., for COVID-19), giving pass holders a refund for any portion of the season that is lost. Additionally, Epic Coverage provides a refund for personal circumstances covered by our pass insurance for eligible injuries, job losses and many other personal events. In addition to these changes, in order to give our pass holders the time they need to make decisions regarding next season, we are extending the deadline for pass holders to receive spring benefits (including Buddy Tickets) until September 7, 2020, and we are extending the period for pass holders to lock in their purchase with only $49 down for the next few months. We will not be providing an update on the results of season pass sales until our fourth quarter earnings conference call in late September.

"We continue to be confident in the long-term prospects of our business model that is built on the loyalty of our guests, the strong lineup of season pass products that provide access to our irreplaceable network of world-class resorts and the sophisticated marketing approach we use to communicate with and attract our guests. As we head into this summer and next ski season, we will be providing an exceptional experience for our guests through our passionate employees and the investments we've made in our resorts and technology, supported by our strong capitalization and liquidity that positions us well to pursue our growth goals over time."

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