Vail Resorts: Major EPS Miss in Q4

Vail Resorts (MTN -3.91%)the owner of numerous world-renowned mountain resorts, reported fiscal fourth-quarter 2024 earnings on Thursday that were mixed compared to analysts’ estimates but were broadly disappointing. An earnings per share (EPS) loss of $4.67 came in as a substantial miss of the expected loss of $4.23. Revenue for the quarter came in well ahead of expectations, but was down year-over-year.

Overall, the quarter presented challenges for Vail Resorts, marked by a decline in skier visits and lower-than-expected financial performance.

Source: Vail Resorts. Analyst consensus estimates provided by FactSet. YOY = Year Over Year.

Vail Resorts Overview

Vail Resorts specializes in owning and operating several premier mountain resorts in various locations around the world. Its main revenues are lift tickets, ski school, meals, retail/rental operations and pass products. The mountain segment is the main revenue contributor, followed by the accommodation segment. The company works to stabilize revenue through its early engagement strategy, primarily through sales of season passes such as the Epic Pass.

Significant investments in the resort’s infrastructure, including high-speed ski lifts and snowmaking systems, were crucial to improving the guest experience and maintaining competitive positioning.

Quarterly performance review

The quarter featured some major setbacks primarily attributable to adverse weather conditions and poor performance in the Australian ski segment. Here’s a detailed look at the financial and operational performance of the elements and events that shaped the quarter:

Mountain segment: Revenue of $175.9 million was down 2.8% year over year. Operating expenses of $292.9 million were up 7.6%. As a result, EBITDA for the mountain segment fell nearly 29% to $117.3 million.

Accommodation segment: Revenue for this segment was up a slight 0.9% to $89.4 million. However, EBITDA fell 35.4% to $2.8 million due to higher operating costs. In particular, revenue from owned hotel rooms increased 8.1% year over year, signaling some positive momentum in certain revenue streams.

Real estate segment: The real estate segment had a minimal impact on the overall financial position, reporting a small decrease in EBITDA, resulting in a negative $1.313 million.

Season Pass Strategy: Season sales through Sept. 20 revealed a 3 percent decline in units, but a simultaneous 3 percent increase in dollar sales, attributed to an 8 percent price increase. That strategy continues to stabilize revenue, but raises concerns over declining new pass sales amid increased loyalty from renewing customers.

Operational challenges: The company’s Australian resorts faced significant headwinds, with skier visits down 18% in the fourth quarter. This, combined with a 28% reduction in snowfall compared to the previous year and 44% below the 10-year average, negatively impacted EBITDA in the mountain segment.

Spending analysis: Operating expenses increased due to increases in general and administrative expenses, property taxes and repair and maintenance costs. Net income suffered a decline, falling $37.7 million from the prior year to $230.4 million.

Capital investments: Vail Resorts has announced substantial capital investment plans that focus on high-speed lifts and technology enhancements such as My Epic Gear and My Epic App. The company also launched a multi-year $100 million resource efficiency transformation plan that is expected to deliver $27 million in savings in fiscal 2025, before $15 million in one-off costs.

Management’s outlook and future plans

With a new fiscal year underway, Vail Resorts provided fiscal 2025 guidance for the year ending July 31, 2025, expecting net income to be between $224 million and $300 million . The resort’s reported EBITDA projection is between $838 million and $894 million. These estimates are based on the assumption of normal weather conditions and a stable economic environment, while anticipating continued challenges in the Australian segment.

Going forward, Vail Resorts will remain focused on stabilizing revenue through forward commitment strategies and capital investments to improve infrastructure. Key areas to watch include the impact of planned infrastructure upgrades and the effectiveness of the new My Epic Gear and My Epic App offerings. Investors should also pay attention to any changes in the anticipated outlook and performance of Australian resorts in the upcoming ski season.