Vail Resorts, Inc. (MTN) Q2 2021 Earnings Report, Transcript and Summary

Please standby, we're about to begin. Good day, and welcome to the Vail Resorts Second Quarter 2021 Earnings Call. During today’s call, we will have a question-and-answer session. [Operator Instructions] Today's conference is being recorded. At this time, I would like to turn the conference over to CEO, Robert Katz. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to our fiscal 2021 second quarter earnings conference call. Joining me on the call this afternoon is Michael Barkin, 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 that 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 afternoon, along with our remarks on this call are made as of today, March 11, 2021, 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 in our press release, which along with our quarterly report on Form 10-Q, were filed this afternoon 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 fiscal 2021 second quarter results. Given the challenging operating environment as a result of COVID-19, we are very pleased with our results to this point in the 2020-2021 ski season across our 34 North American resorts. We have welcomed guests to each of our resorts with no major ongoing disruptions, which has been enabled by our focus on the health and safety of our guests, employees and communities. While our results for the second quarter continued to be negatively impacted by COVID-19, total visitation across our North American destination mountain resorts and regional ski areas were down approximately 5% compared to the same period in the prior year. The strong visitation for the quarter highlights the underlying resiliency of our business, the loyalty of our guests and the strong appeal of skiing in guests leisure travel plan. As we moved past the peak holiday period, which was constrained by capacity limitations driven by both COVID-19 and below average snow conditions, we saw improved results in January, particularly with lift ticket sales. While visitation trends improved throughout the quarter, our ancillary lines of business continue to be negatively impacted by COVID-19-related capacity constraints and limitation, particularly in food and beverage and ski school. We experienced strong results in the quarter from both our local and destination guests with local visitation up slightly compared to the same period in the prior year and destination visitation proving more stable than we expected. Destination guests, including international visitors, modestly declined, comprised 53% of our U.S. destination Mountain Resorts skier visit, excluding complimentary access. Despite the travel challenges associated with COVID-19, which compares to 57% in the same period in the prior year. International visitation, as expected, decreased significantly due to COVID-19-related travel situation. Results at Whistler Blackcomb were disproportionately impacted throughout the second fiscal quarter due to the Canadian border remain close to international guests, including guests from the U.S. with destination guests, including international visitors, declining to 15% of Whistler Blackcomb visits, excluding complimentary access, which compares to 48% in the same period in the prior year. Our season pass unit sales growth of 20% for fiscal year 2021, created a strong baseline demand heading into the season across our local and destination audience and will be one of the most important drivers of our performance and relative stability for the season. For the fiscal 2021 second quarter, 71% of our visitation came from season pass-holders compared to 59% of visitation in the same period in the prior year. Our growth in pass-holders this past year also positions us well as we head into the 2021/2022 season. We remain even more committed to the benefits advanced commitment offers our company and intend to remain aggressive in providing the best value to skiers and riders who purchase in advance of the season and continuing our strategy to move lift ticket purchases into our Pass program. We are excited to launch our 2021/2022 lineup of Epic Pass products on March 23, 2021. We maintained disciplined cost control throughout the quarter as we operated the business at reduced capacity. Resort reported EBITDA margin for the fiscal 2021 second quarter was 40.3% compared to the prior year period of 40.9%, while resort net revenue decreased $240.1 million over the same period. These results reflect our rigorous approach to cost management, and we exceeded our expectations for profitability at these revenue levels relative to the illustrative model previously outlined in our September 2020 earnings release. Now, I would like to turn the call over to Michael to further discuss our financial results, season-to-date metrics and fiscal 2021 outlook.

Thanks, Rob, and good afternoon, everyone. As Rob mentioned, our results for the second quarter were impacted by COVID-19 and the resulting impacts to our North American mountain resorts. Net income attributable to Vail Resorts was $147.8 million, or $3.62 per diluted share for the second quarter of fiscal 2021, compared to net income attributable to Vail Resorts of $206.4 million, or $5.04 per diluted share in the prior year. Resort reported EBITDA was $276.1 million in the second fiscal quarter, which compares to resort reported EBITDA of $378.3 million in the same period in the prior year. And the decrease was primarily a result of the negative impacts of COVID-19. Turning to our season-to-date metrics for the period from the beginning of this ski season through Sunday, March 7, 2021, and for the prior year period through Sunday, March 8, 2020. The reported ski season metrics are for our North American destination mountain resorts in the most areas and exclude the results of our Australian ski resorts in both periods. The reported ski season metrics include growth for season pass revenue based on estimated fiscal year 2021 North American season pass revenue compared to fiscal year 2020 North American season pass revenue. Fiscal year 2020 season pass revenue was adjusted to exclude the impact of the deferral in Pass product revenue as a result of pass-holder credits offered to 2019/2020 North American pass-holders. Fiscal year 2021 season pass revenue does not include the Pass product revenue recognized in the first quarter of fiscal year 2021 as a result of unutilized pass-holder credits. This approach results in a year-over-year comparison of season pass revenue, exclusive of the impact of discounts provided to our 2019/2020 pass-holders. The metrics include all North American destination mountain resorts and regional ski areas and are adjusted to eliminate the impact of foreign currency by applying current period exchange rates to the prior period for Whistler Blackcomb results. The data mentioned in this release is interim period data and is subject to fiscal quarter-end review and adjustments. We continue to be pleased with the positive momentum we are seeing in demand as we begin the third quarter with visitation continuing to improve throughout the North American ski season. Season-to-date total skier visits were down 8.2% compared to the prior year season-to-date period. Season-to-date total lift revenue, including an allocated portion of season pass revenue for each applicable period, was down 8.9% compared to the prior year season-to-date period. Season-to-date ski school revenues decreased 43.2%, dining revenue decreased 56.9%, and resort retail and rental revenue decreased 31.6%, all compared to the prior year season-to-date period. Our results continued to improve in January and February as we expanded capacity with more open terrain as conditions improved and has certain COVID-19 related restrictions eased. Additionally, as more reservations became available following the peak holiday period, we've seen a significant improvement in lift ticket purchases. Our ski school, food and beverage and retail/rental businesses continue to be more significantly impacted than visitation due to the significant capacity and operating restrictions associated with COVID-19. While our U.S. resorts saw a material improvements in financial performance since the peak holiday period, Whistler Blackcomb's financial performance continues to be severely impacted by the continued closure of Canadian borders to international travel, a trend that will likely continue through the rest of the season. Now, turning to our outlook for fiscal 2021. As we approach the end of the North American ski season, we are providing guidance for the 9-month period ending April 30, 2021. We expect net income attributable to Vail Resorts to be between $204 million and $247 million, and Resort Reported EBITDA is expected to be between $560 million and $600 million, assuming current regulations, health and safety precautions and the levels of demand and normal conditions persist through the spring, consistent with current levels. Given the ongoing uncertainty of COVID-19, we will not be providing full year guidance for fiscal 2021 at this time as we continue to evaluate the potential economic and operational impacts of COVID-19 on our fiscal 2021 fourth quarter results, particularly for our 3 resorts in Australia and our primary summer operations in North America, which we currently anticipate fully opening around our typical opening dates with certain capacity constraints associated with COVID-19. We continue to maintain significant liquidity with total cash and revolver availability as of February 28, 2021, of approximately $2 billion, with $1.4 billion of cash-on-hand, $419 million of U.S. revolver availability under the Vail Holdings Credit Agreement and $179 million of revolver availability under the Whistler credit agreement. As of January 31, 2021, our net debt was 4.2x trailing 12 months total reported EBITDA. As previously announced, the company raised $575 million of 0% convertible notes in December 2020, which provides added flexibility in terms of our ability to pursue high-impact acquisitions as well as reinvest in our resort portfolio. We remain confident in the strong cash flow generation and stability of our business model, and we will continue to be disciplined stewards of our capital with a focus on high-return capital projects, continuous investment in our people and strategic acquisition opportunities. While we are not reinstating the dividend this quarter, we remain committed to returning capital to shareholders, and our Board of Directors will continue to closely monitor the economic and public health outlook on a quarterly basis to assess the appropriate time to reinstate the dividend. Now, I'll turn the call back over to Rob.

Thanks, Michael. Turning to our calendar year 2021 Capital plan, 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 plan to maintain a disciplined approach to capital investments, keeping our core capital at reduced level, given the continued uncertainty due to COVID-19. We have increased our core capital plan by approximately $5 million based on our updated outlook and now expect to invest approximately $115 million to $120 million, excluding onetime items associated with integration of $5 million and $12 million of reimbursable investments in real estate-related capital. As previously announced, the calendar year 2021 capital plan includes several signature investments which were previously deferred from calendar year 2020 as a result of COVID-19 and are subject to regulatory approvals. In Colorado, we are moving forward with the 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 4-person high-speed lift at Breckenridge to serve the popular Peak 7, replace the Peru lift at Keystone with a 6-person high-speed chairlift, and replace the Peachtree lift at Crested Butte, with a new 3-person fixed-grip lift. At Okemo, we plan to complete a transformational investment, including upgrading the Quantum lift from a 4-person to a 6-person high-speed chair lift and relocating the existing 4-person Quantum lift to replace the Green Ridge 3-person fixed-grip chairlift. These investments will greatly improve uphill capacity, further enhance the guest experience and complete our $35 million capital plan for Triple Peaks. We remain highly focused on investments that will further our company-wide technology enhancements to support our data driven approach, guest experience and corporate infrastructure. As part of these efforts, we are continuing to invest in resources and technology to improve our customer service experience including significant staffing increases in our call centers and self-service technology that will provide our guests the ability to better manage their own accounts. We will also continue to invest in ongoing maintenance capital to support our infrastructure across our resorts, including onetime items associated with integrations of $5 million and $12 million of reimbursable investments in real estate related capital we expect our total capital plan to be approximately $135 million to $140 million. In closing, I want to take a moment to thank all of our employees for their tireless dedication to deliver a safe exceptional experience for our guests this year despite the challenges of the COVID-19 pandemic. We have had stronger-than-expected financial results, and our employees have been a primary reason for this success. Through recognition of these efforts, we implemented a onetime end-of-season bonus totaling approximately $15 million to thank over 28,000 year-round and seasonal employees who are not part of our other annual bonus programs. I'm deeply grateful for the commitment our teams have demonstrated day in and day out to navigate a truly unusual season. At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.

Thank you. [Operator Instructions] We'll take our first question from Shaun Kelley with Bank of America.

Just wanted to dig in a little bit, Rob, I think you were pretty clear in the prepared remarks that the upside to what you saw really exceeded expectations on the cost side from kind of what you were expecting. I was just hoping you could help us dig in there a little bit more on what some of those levers were. Was mix a factor at all between either destination and local or lift tickets and ancillary, like or lift ticket versus ancillary? Or was it more about specific reductions in targeted areas? And if you could talk about that a little bit more?

Yes. I think we went into the season, obviously, preparing for a very challenging environment. And so I think as we prepared, we took a pretty thoughtful and disciplined approach in terms of where we would set our expense levels. And as we saw revenue kind of greater than expected, we were able to manage through that without necessarily adding a huge amount of expense, a material expense to the season. And I think that was an amazing job by all of our teams across the whole company and also was a challenge. So I mean, I guess, we shouldn't underestimate that. But I think we feel very good about that and knew that there could be some upside as we went in to our original expectations on the revenue side if things go well. Of course, we also knew there could be some downside. And given the volatility you're seeing in the overall COVID environment before the season, we tried to pick a spot that we thought could handle either one.

Are there learnings inefficiencies we can pull forward out of this? I mean, can you just do more with a different -- modestly or even significantly different cost structure? And just kind of how do you think about how much of this can be pull forward or extrapolated into what your operating plan for next season might look like?

Yes. I think it's probably a little bit early to take away any concrete learnings from the season. And we obviously want to see how the season ends up. I would say that this is a unique moment. And a unique season. And I don't -- it's certainly not something that we would replicate year after year. But there are definitely going to be takeaways that lead to -- can obviously add value as we go forward. And I think these are some of these things or things that we've been implementing over a number of years, but -- and many cases got accelerated this year because of necessity. So some of that, I think we can continue. But obviously, a lot of the way we operated this year is not something that we would repeat going forward. And especially, as you would expect, obviously, to bring visitation back on a much more consistent basis to where we were before the pandemic.

Thank you very much.

Okay. Thank you, Shaun.

We'll take our next question from Brandt Montour with JPMorgan. Go ahead.

Good afternoon, everyone. Thanks for taking my questions. I wanted to start with your new pass-holders that maybe you've learned a little bit more about in these last couple of months. Where are they coming from in terms of their history in skiings? Do you think any of them are new skiers? A lot of them are probably pulled forward or pulled over from buying tickets at the window prior to this, but maybe you could give us some of your learnings from that data set now?

Sure. Well, we -- in any given year, we have two types of new pass-holders. We have new pass-holders who are in our database and we're showing that previously typically looks at the buyers that could be that they owned a pass in the previous season. And then obviously, you have people who we don't know, who are not in our database, may have been at our -- one of our resorts in the past that somehow we didn't capture their information or they may be truly new. I think there's no doubt that when ticket buyers, the trend we're seeing is that they convert into pass-holders. We're seeing a bump in frequency. And typically, and I think we talked about this before we see a bump in renewal after we launched the Epic 4-Day. And certainly, as we've launched now, we're two years with the full Epic Day Pass product. And so I would say that those trends and plus -- our ability this year to bring a significant number of new people who were not previously in our database into our pass program this year. As -- further, it all revolves around the importance of this program that it adds tremendous stability to our business, that it does increase frequency and engagement by the guests. And obviously, the guests feel like they're getting a much better value and have higher satisfaction scores. So all of that has been positive. I think on the folks who are truly new to our database and an insight we have on them, I don't think we know the full story yet for this season. I think one of the things that has been interesting to us is that I think people are purchasing a pass and using it throughout the season. I think if you look back seven to 10 years, you might -- a lot of people were kind of initially buying passes, especially our Epic 7-Day and then our Epic 4-Day just to ski maybe at the holidays or in kind of early January. But I think over the last couple of years, we've really seen that people are buying these products because of the value they offer and the flexibility to really ski throughout the whole season. So, I think we obviously don't know their visitation patterns yet for all of March and Easter. But my guess is based on trends we're seeing today, it is a product that's now really available for the entirety of the season. So that's a huge positive. And I think we'll know a lot more when we finish the season in terms of some of these pass-holders. And I think the great news is, we do see, again, higher return rates from these pass-holders. After they convert from lift ticket buyers, and we then see even higher return rates when they come into the second or third year into the program. So we feel good about all that. And again, it's just reinforce the point to us that this is -- it's the core to our success and the core to our stability, and it's something that's critical for us as we go forward.

Okay, thanks. That's really helpful. And then my follow-up question is really sort of how you think about pricing heading into a period of potentially extreme pent-up travel demand where your product focuses on its value proposition, but we could be entering a period where your core customer maybe is going to pay a lot more for their vacation than they may have in a long while. So yes, I know you haven't rolled out the official pass price, but just how are you thinking about pricing in general, even on ancillary?

Yes. I think, Brandt, I would say that we've tried over time to take a more ratable approach to price and kind of a lot of -- some of the core mountain products. Obviously, our lodging business really moves with the rest of the market in terms of lodging market. But I would say in terms of a lot of our core products, we do try and take ratable increases over time. We try not to move too much. That said, I think I would say that we do feel differently about our advanced commitment products, where one of our critical strategies is to move people from lift ticket into advanced commitment products. And so we've always been focused on in good times or bad in providing more value to people in those products, so we can move more people. And I think that there may be some unique opportunities on that front as we look to the future in terms of both a better environment to travel and also that we've now proved through some of our newer products that we can really move people in there. So I think there's no doubt that in our mind, as we look to the future, there could be a healthier travel environment. But I would say, much more focused on our core kind of driving of advanced commitment that we are necessarily in driving price.

Thanks for the thought.

Sure.

We'll go ahead and take our next question from Jeff Stantial with Stifel.

I want to start by touching on Peak Resorts acquisition. We're starting off really on the first full normalized or as normalized if you can really get these days past selling period with those assets in the portfolio, I just wanted to get your updated thoughts on potential tailwinds there now that you've had some time to integrate the database there?

Yes. I think we feel really good about the contributions that Peak Resorts made towards our past selling season. I think we also feel good about their contribution they're making this season. And those resorts, generally speaking, have a much higher percentage of paid tickets than some of our larger destination resorts that have been in the portfolio and the programs for quite some time. So we definitely think that there is continued opportunity there to convert lift ticket buyers into pass-holders. And I think we're going to be focused on how to aggressively do that. And we think there's some unique opportunities that we're seeing and that we have experienced over the last couple of selling cycles. But I think there is no doubt they're having peak in our system, both our pass system, our company system, all of our infrastructure is critical this year because there was a lot of business that was done, like that was local, people driving rather than flying and we were able to pick up those folks in those visits. And I think when people were making a decision about buying the pass, last fall, and there was probably even more anxiety around potentially getting on a plane, knowing that they have the opportunity to also drive to a local resort, I think it's helpful in driving that conversion. And there's no doubt that there is a multiyear opportunity as we convert new guests to come with new resorts. And yes, the question I think for us is can we accelerate that? What can we do to really move that needle even corporate?

Okay, great. That's helpful. Taking a step back and thinking more thematically here. There's a narrative across a broader coverage of a compelling sort of pent-up demand thesis starting to unfold in the back half of the calendar year with folks fancy to get out of the house with more money in their wallet than they had kind of coming in. If you look at the forward indicators that you guys track, whether internal or looking at, call it, other luxury travel type offerings. Are you seeing any evidence of this narrative quite yet or is there too much noise?

Yes. I think at this point, we are -- I think it's a little early for us in terms of our own internal metrics to pick up what's going to happen at the back half of the calendar year. I think, obviously, a lot more of our focus is right now in finishing this season. And then on the summer season, where I do think it's probably our best opportunity and also probably the greatest uncertainty. And I would also say, look, there is no doubt that we outperformed I think many other aspects, other parts of travel and leisure. And so I think there'll definitely be pent-up demand for us. But obviously, compared to some others that have a more challenging time in the last 3 to 4 months, probably a bigger rebound that we might experience. But again, I think in our minds, look, I think what key through to us is just the loyalty and stability of our guests going into what was by far a season in the year with the most uncertainty, and particularly with our pass-holders. So obviously, in our mind, is like how do we continue to drive that. That is -- because we're thinking about next year, but we're also thinking about 3 to 5 years from now, right? How do we continue some of those secular changes that we've been making in our business model and use a strong travel environment to help accomplish that?

We'll go ahead and take our next question from David Katz with Jefferies.

Good afternoon, everyone. Congrats on your quarter. Well done. One of the topics that always comes up and has been sort of part of the company's DNA is acquisition targets because you have done so nicely with them. It seems natural that there could be some opportunities bubbling up, given some of the turmoil that we've gone through and your financial strength coming out of it. How do you look at that? Could we realistically see some of those things? And is that a fair assessment of what the market is?

Yes. I think I do think that there's -- obviously, we're always interested in always looking at opportunities to expand, I think, especially in select resorts where we think they really add value towards our existing portfolio and make a difference to our guests. I think no doubt, it was a little bit of head down over the last 9 months or so. The 12 months, I guess, now. And so for certainly a good portion of that, I think it was tough for us to pick our heads up and start focusing on acquisitions. But I don't think many people who own resorts are necessarily in a selling mode either. They were focused, I think, on what was going on in front of them. Typically, as we come out of these dislocations, there are opportunities. And I think we're hopeful that there will be, at the same time, as I always say on these calls, we're going to be disciplined. We're very cognizant that we have been successful with acquisitions over a long period of time, but that you have to always be disciplined otherwise, you can kind of lose focus. And so for us, it's about the right acquisition at the right time, including certainly opportunities in North America, but also opportunity globally, whether that's in Asia or Europe, some of which take longer, right, to create and actually the upside and opportunity may be longer. But we are -- remain just as committed as we were before to the benefit that strategic acquisitions that resorts can provide. And so we're certainly not backing mouthful there [ph].

Understood. And if I can just clarify one detail from your remarks about the capital plan. I think you said $135 million to $140 million. Is that a total number? Or is that excluding a maintenance budget?

No, that's total number, including maintenance.

We'll go ahead and take our next question from Ben Chaiken with Crédit Suisse.

Clearly a unique season and some strong results thus far passes up 20% and the pass program restarting March 23, as you mentioned. Just curious on your thought process on moving forward over the next 6 to 8 months, how to keep that pass number flat or even grow it? Is it the -- and less about the direction, but more about just like the play? Is it the traditional playbook that you use? Or is there a different strategy you used this year just given the unique situation that we're in and the strong growth over the last couple of months?

Yes. I think, again, I think some of what I said earlier, I think it's just worth repeating In terms of -- we saw -- we obviously went into this season which had more uncertainty than any time any of us could remember. And I think our pass program was at the cornerstone of the results that we delivered. And sure, of course, our lift ticket sales are also critical. But obviously, that's the most uncertain, right, and the hardest to predict. And in many respects, like the larger that we grow that pass program the greater opportunity we have to really move kind of a business that 10, 15 years ago was truly a day of decision based on snow and we really moved it much more towards kind of a subscription approach to how people are engaging and buying their skiing for a season, whether it's for an unlimited product or even if it surges in Epic 3-Day, right? Either way, you, I think, really started to make inroads. So, what I would say is that we feel like there's a unique opportunity to continue to be aggressive on that front and really move big numbers of people into the program. And it's something we've talked about for a couple of years. And I think we have more data now than ever before on all the different ways that we can do that. And I think we're -- no, we're not going to use a standard playbook. We never do, where every year, every season, we come at this with a lot of new information. And we're going to deploy that information in ways that we can help drive the program. And I think when you look back, obviously, the -- whether it was Epic Day Pass or even Epic Mountain Rewards this year, which, of course, was a little more challenging, offering 20% discounts on ski school on food, on rentals, on lodging, obviously, tougher this year, but still, we've seen enough engagement to understand that, that's also going to be a key driver as we go forward. So again, in total, yes, we just feel like every year is a little bit different. And this year, if anything, yes, has embolden us, I think, to really be aggressive as it relates to growing the number of people who are in the program.

Got you. That's helpful. I was kind of referring to how to reengage with the customers that bought. So that was helpful. And then on peak, I guess, does it make you think any differently about some of the feeder markets that historically may be viewed as maybe like nontraditional. So maybe I'm thinking of like the Mid-Atlantic, for example, I guess, post-peak and having that in the portfolio for the last 12 months, do you come at that with a different view? Or just any comment there?

I think the good news is I feel like we -- obviously, it was a little bit of a departure for us to purchase so many resorts at one time. A lot of the resorts were obviously smaller in markets that we historically, of course, haven't operated in. And no, I think we feel really good about the fact that we were able to integrate the resorts and have those resorts have a true impact on our results in this kind of first full year, a year that, of course, had so many challenges to it. So I think it speaks very well to the opportunity. And I think it's important to say that we were not -- we were dialed in this year mostly on safety. And then, of course, trying to do what we could on the guest service side. But of course, it was safety first. And as we go forward, we're going to be able to make a lot more changes to the guest experience taking, candidly, a lot of the learnings that we have from COVID and a lot of the approaches that actually kind of turning them a little bit. So it hopefully, right, it won't be the -- of course, we'll always be focused on safely, but not around a pandemic, and we'll be able to take that to. So, I think a lot of these urban resorts and the Mid-Atlantic resorts and really make differences, right, for the guests to come that over next year and the years after, right, will shift the experience, not just their ability to ski there on a season pass. It also gives them access to Vail and Whistler, but actually make differences in how they engage with the resort. Something that we're going to do with all of our resorts. So yes, we feel like it was -- on the one hand, you could obviously look at peak when we started to go through the pandemic as a problem in terms of trying to integrate an acquisition and having just done one right before we go through the pandemic. And candidly, it turned out quite the opposite in terms of it being a very significant contributor, which, again, I think, again, bodes well for the future now.

We'll go ahead and take our next question from Laurent Vasilescu with Exane BNP Paribas.

I appreciate that you gave us an implied third quarter total EBITDA dollar range. I think rough math to about $380 million to $420 million. Is the range of function of visitations or cost containment? Maybe asked another way, you delivered a 50% EBITDA margin in 3Q '19. I'm trying to think about 2 years back. Is there any reason why you can't get back to that EBITDA margin considering potential cost containment?

Yes. I think we're trying to set a range that incorporates the continued uncertainty for the remainder of this season and I think we're comfortable putting out a range at this point given that we largely have about a month of the season left. And so it incorporates what we think is a reasonable range of outcomes for the remainder of the season. I think as you saw in Q2, our margin was very consistent with last year, which we felt like demonstrated the cost discipline that we've shown and the great work by our teams throughout the season to manage the business at lower revenue levels. And we'll plan to continue to do that. So certainly anticipating continued strength on the margin side. But yes, consistent with the range that we put out.

Very helpful. And then forgive me if I missed this in the prepared remarks. But I think on the last call, you talked about $121 million of revenues -- deferred revenue that would be recognized in 2Q and 3Q. Did you recognize anything in 2Q? And then how do we think about 3Q? And I know it's probably still early, but do you have any deferred revenue that could trickle into 2022?

Yes. So the deferral of the revenue associated with the incentive credits is recognized primarily across Q2 and Q3 ratably with how we recognize season pass revenue across the quarters, which is roughly split between the 2 quarters. As it relates to any deferrals into 2022, nothing material that we would call out at this point. And so we are expecting to recognize that this year.

We'll go ahead and take our next question from Paul Golding with Macquarie Capital.

I think the first thing I wanted to ask was around just following on to David's question around acquisitions. Has the pandemic and sort of varying degrees of lockdown and just pickup of international visit. Has that change your perspective around what regions make most sense for acquisitions right now? And then I have a follow-up around cost.

Paul. No, I don't think it really has. I think, certainly, different parts of the world went through the pandemic with different dynamics. And in some cases, right, there were more significant closures. In other cases, resorts were able to be open. But certainly, a resort like with Whistler Blackcomb, which had a much tougher so far experience this season because of the border closures that wouldn't change our view, of course, as a long-term value and opportunity. And it's critical, why we think there's one of the benefits of actually having all of these resorts within our company is that some will do better than others at different moments in time. I don't think any of us had thought about a pandemic in that perspective. But obviously, it's played out during the pandemic as well. And so I think the diversity opportunity in terms of having resorts in different locations in different markets, different weather patterns, different economies, different governments. I think that speaks well to our company continuing to broaden. And so that's something that we're not going to back off of. And I don't think the experience of one resort versus another or one region versus another during the pandemic would change our view. I think that our hope, collective hope, is that we, yes, are not going to be going through a situation like this on an ongoing or recurring basis. But again, those are the types of shocks to the system that I think, again, reinforce our view that having a global footprint, having geographic diversity is critical.

Great. Around labor costs, I guess I'm trying to see if I can still tease out some of what might be extrapolated for next quarter or next year on the cost side. From labor, are you saying -- is the environment is the supply of seasonal labor impacted by the international restrictions? Is that driving cost up? Or are you seeing other leisure businesses have slack in their labor demand create a favorable labor environment for you?

I think there was -- it was a very unique labor environment, I think, for our resorts this year with -- yes, we didn't -- we're not able to access international folks who reside outside of the U.S. to come for a season. And so that was something that we couldn't do this year. On the other hand, obviously, there were given the closures across travel and leisure, there were maybe more folks who are interested in working within the U.S. at one of our resorts this season. So I think that -- but on the other hand, we obviously also operated all season long with health screens and a certain percentage of our employees that were -- had to stay home because of largely symptoms, not necessarily testing positive. But -- so that was another challenge on that front. I don't -- I think there's going to be a whole new set of dynamics as we look to the future for next year. And we do feel like it's going to be critical for us to ensure that we have a strong workforce that we have enough people to provide the experience that we need, that we have enough affordable housing for them to be able to live in. And so I think that all of those things will be in play exactly what the environment is next year, I'm not sure, but I think we are planning certainly for a return to a more normal environment and probably one where there'll be demand for very -- for quality individuals to work anywhere.

We'll go ahead and take our next question from Alex Maroccia with Berenberg.

I have 2 more near-term focused ones. But the first on the timing of Easter, we do have an earlier Easter this year versus the last good comparable period in 2019. How much has an early Easter weekend moved the needle in the past, especially at more snowmaking heavy resorts that might be closed in mid-April?

Yes. I don't think we have an exact assessment of that. I think, again, this year is likely to have just these unique dynamics around COVID and the travel system, I think there's no doubt that having an earlier Easter is better than having Easter later in April because we do think it keeps people more engaged in the sport. I think unclear what will happen this year, and it's one of the reasons for the uncertainty in our Q4, which is, on the one hand, obviously, more people are getting vaccinated, restrictions they're easing, more people, I think are, looking to travel. On the other hand, whether people decide that if the weather turns nice, they're going to pivot to longer weather opportunity. That's positive too. We're different obviously, during the winter our resorts were one of the only places that you could have a really unique outdoor experience, that will shift as we head into Spring. So I think that's still unclear, but I think that earlier Easter date is absolutely a positive relative to when its April '20 or '21.

Got you. That's helpful. And then the second one is on the Vermont resorts. It's only been 2 weeks, and it's getting late in the season, but can you give us a sense of how the lack of quarantine for vaccinated folks has benefited out-of-state visitation recently?

Yes. No comments on that at this point. I think it's a little too close and I don't have that data. I don't think we're typically giving specific data on out-of-state one particular region or another. But there's no doubt that any relaxing of the restrictions no matter where they are, I think, certainly gives people more confidence to come and -- which is good. And obviously, and I would say that our Eastern resorts have had a solid year, despite some of the challenges that have been out there, which has been good. And I think as mentioned earlier, the Peak acquisition will be an important contributor, I think, to our results for this season.

We'll go ahead and take our next question from Ryan Sundby with William Blair.

I know it's a tough year to draw conclusion, clearly, but just trying to follow-up on your comments on the Epic Mountain Rewards and how that loyalty program performed this year? I guess, did the discounts offered to the program help things like ski school, I don't know, maybe hold up better than you would have thought, just given the mix of skiers this year? And then any color on just how extensively guests are using the benefits and/or if there's any kind of usage increases that stand out so far that appear to be appealing to skiers this year?

Yes, I think a very tough year to make a lot of these assessments. I think we have absolutely seen engagement. I think though that in terms of whether it help drive business, it's tough to say because so much of the business in both ski school and dining was driven by capacity challenges, right, in terms of how many people we could really have in the lesson or length of the lesson. Obviously, on the dining side, just massive challenges. And I would say that when we look at Epic Mountain Rewards, I think the discount in dining was one that we thought would be a big driver because, obviously, certainly, everyone is on the mountain typically stops in for food and so I don't think we have those learnings. That said, I think we feel some of the data that we've been able to see, but no, we know that it matters to people, and people are using it. And we expect kind of almost a relaunch of it for next season when we'll have all of those businesses kind of able to fully market and leverage that not worried about kind of not having the capacity to live up to the demand. And I think we'll provide more information probably on our next quarterly call about some of our thoughts, and we have a full season of data to be able to look at exactly what happened. So yes, I think we still feel very committed to it. And feel like it will absolutely be a big driver. And yes, this is not the year to really test it out.

We'll go ahead and take our next question from Chris Woronka with Deutsche Bank.

So you had the Epic Day Pass around for a few years now and one of which is a very difficult year to draw any conclusions from, as you just said. But the question is, with what information you do have, and I know you haven't given us a ton of detail on numbers on how those various days break down. But you kind of view that path as something that has good pricing potential going forward? And are you more likely to maybe add certain things to it to make it kind of the bundling product that was talked about earlier? Or just how you think -- how you view that Day Pass a couple of years in?

Yes. I would say -- I think on Epic Day Pass, I think different than Epic Mountain Rewards. I think on Epic Day Pass we feel like, well, this was a good year to test it out, and it's kind of second year where we have the full line of products because I think it performed incredibly well, even in the face of COVID, we obviously converted a lot of people who were previously lift ticket buyers to the pass. And the path does come, obviously, with an advanced commitment. And so that requires people to have more confidence in their ability to ski for the season. So there's no doubt that I think there's a mix of things going on this year with COVID and the uncertainty around travel. Obviously, we did implement a reservation system, and that certainly could be some people who want to kind of get into a pass because of that. But largely, I think our reaction to watching what happens here with the product was that in its second year, it continued to make inroads. And I think the legs on that product are much bigger than we probably even imagined when we first launched it, largely because it is being used by people who are planning to travel throughout the season versus somebody who's just coming for Christmas buying it in late November, a few days and then getting the discount that way. We've really seen a much broader engagement with the product, which gives us, we think, the opportunity to, again, be aggressive with that and continue to drive forward on it. I think we -- Epic Mountain Rewards we have not put out anything on that. I think we -- in terms of changing it. But I would say that, yes, we absolutely would like to see that program go to a full season and so the bundling that you would see would be with kind of an Epic Mountain Rewards and all of our season pass products, not just Epic Day Pass. But there's no doubt that both of these things really help. In the end, there was -- we are essentially providing lift ticket buyers who are 1, 2, 3-day buyers with a product now at a substantial discount and substantial stability for us, right? They're increasing their frequency, which is, if you think about it, for us, a huge opportunity, right? If we can take lift tickets not only get them to a commitment now but actually have them commit to more days then that kind of shifts that pricing discount, right? That you look at, yes, it's at a discount to lift tickets. But ultimately, if they're giving us more days, then that can really balance out, especially in the business like ours, on the lift side, we're a fixed cost business. So yes, we view -- while Epic Mountain Rewards been -- couldn't perform, of course, this year and provide us insight. We think Epic Day Pass was critical to our success.

Okay. Very helpful. I appreciate all those thoughts. And then this would be a difficult question, probably just too early, but given how important California has been to your Western resorts in terms of customer origination, potential outflow from California to other states further away. Is that something you can think about at this point? Or is it just kind of wait and see that impact your initial marketing strategies at all?

I think at this point, no, I don't think we're seeing a big enough shift and that, that would -- is something that yes, that we would have a larger strategic objective around. However, I would say, right, obviously, we have resorts across North America. And to the extent that people are skiers and they are relocated away from California or away from a drive to one of our resorts. Obviously, we will continue to market to them to come to one of our other resorts. And so it's one of the benefits I think of having this broad array. So the key thing is that we need to keep them engaged in skiing, which again, goes back to the pass and Epic Day Pass, like how do we make sure that we increase their frequency, their engagement, their renewal rates and the sport and with our resorts. Whether they're -- regardless of where they live, I think we have the opportunity to -- yes, to try and activate that gap.

As there are no further questions, I'd like to turn the call back over to Mr. Katz for any additional or closing remarks.

Thank you, operator. This concludes our fiscal 2021 second quarter 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 afternoon, and goodbye.

Once again, that does conclude today's conference. We do appreciate your participation. You may now disconnect your phone lines.