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A series of storms have left large swaths of the Western part of the United States with significant snow much to the delight of skiers. The Southern Sierra snow pack in California is the largest on record at 247% of average levels at this time of the year. This late season snow will hopefully make for great Spring skiing conditions. One of the largest mountain resort companies in the world is going to benefit from these conditions and it is not surprising that they recently announced a buyback.
Vail Resorts (MTN) which operates 41 destination mountain resorts and regional ski areas has expanded its share repurchase by an additional 2.5 million shares to approximately 3.5 million shares, representing around 6% of its market cap at announcement.
Source: Vail Resorts Inc.
As we are at the end of earnings season, buyback activity dropped significantly last week with only 8 buyback announcements compared to 16 in the prior week. Insider buying activity on the other hand has picked up significantly because insiders are trying to make use of a window of opportunity before earnings-related quiet periods begin.
Besides mountain resorts, Vail also owns or manages a bunch of elegant hotels under the Rock Resorts brand, as well as the Grand Teton Lodge Company in Jackson Hole, Wyoming. Vail Resorts Development Company is the real estate planning and development subsidiary of Vail Resorts, Inc.
Vail has performed well during the past decade, with shares up over 250% during the period despite facing significant disruption from the pandemic in 2020.
Acquisitions:
Vail has been a consistent acquirer of resorts. It has a broad portfolio of key resorts which gives it an edge in the leisure industry. The company, besides its operations in North America, has 3 resorts in Australia. In June 2017, Vail Resorts acquired Stowe for $41 million, marking the company’s first East Coast purchase. In April 2022, Vail went on to acquire Alterra, the owner of 15 ski resorts and one of its chief competitors, making it the largest ski resort company. To top that, on August 3, 2022, Vail acquired a majority stake in Andermatt-Sedrun, a renowned destination ski resort in Central Switzerland. This acquisition represents Vail Resorts’ first strategic investment in Europe.
Focus on Season Passes:
Vail has shifted its focus from selling lift tickets to season passes which improves revenue stability and customer commitment. The company is offering passes at discounted rates which tempt customers to make purchases in advance of their travel dates. Customers thus tend to spend more time at the resorts as they have already paid in advance, which results in higher spending on lodging and food. The introduction of passes has been a strong success in recent years. Pass revenue grew from just $78 million in FY08 to $795 million in FY22, representing an impressive CAGR of 18.1%.
Source: Investor Presentation – Vail Resorts
Q2 F2023 Results:
Commenting on the Company’s fiscal 2023 second-quarter results, Kirsten Lynch, Chief Executive Officer, said,
“Overall we are pleased with the strong guest experience being delivered at our resorts, supported by the investments we made in our resorts and in our employees, which enabled greatly improved staffing levels and employee satisfaction scores, a return to normal operations, and strong guest satisfaction scores. Our ancillary businesses, including ski school, dining, and retail/rental, experienced strong growth compared to the prior year period when staffing shortages constrained capacity of ancillary businesses. We believe these investments in staffing and our commitment to enhancing the guest experience establish a strong foundation for future growth.“
Dividend Growth & Share Repurchases:
Vail Resorts is a good dividend growth company. Besides the dividend cut in 2020 & 2021 because of the pandemic, the company has increased its payout every year. The increase has also been generous. The first annual payout in 2011 was $0.45 and has grown to $7.64 in 2022. With a forward dividend yield of 3.8% and a forward annual payout of $8.24, Vail looks quite attractive.
On the buyback front, the company in fiscal 2022 repurchased 304,567 shares of common stock at an average price of $246.27 for a total of approximately $75 million.
The company seems to prefer dividends over buybacks to return capital to shareholders as it has not made huge repurchases in its history thus far.
Source: Investor Presentation – Vail Resorts
Valuation:
Its current valuation seems appealing as the company is currently trading at an EV/EBITDA ratio of under 13. This might be one of the reasons management announced a buyback.
Strong Balance Sheet & Profitability:
Vail’s balance sheet remains strong. As of January 31, 2023, the company had approximately $1.3 billion in cash & short-term investments. Net debt of $1.87 billion was driven in part by a large number of acquisitions by the company. Profitability is decent with gross margin of over 45% and a net margin approaching 12%.
Source: Investor Presentation – Vail Resorts
Innovations:
The company is planning to introduce new technology for the 2023/2024 ski season at its U.S. resorts. This will allow guests to store their pass product or lift ticket directly on their phone and scan them at lifts, eliminating the need for carrying plastic cards, visiting the ticket window, or waiting to receive a pass or lift ticket in the mail. This technology will also ultimately reduce the waste of printing plastic cards for pass products and lift tickets, and RFID chips, as a part of the company’s commitment to zero waste.
The Bottom Line:
Not only is there organic growth, but the company is also expanding its operational and geographic footprint. As the company continues to grow in size, it also continues to invest in other services such as lodging and dining which improves the overall experience for customers.
Source: Investor Presentation – Vail Resorts
Since weather conditions have a large impact on operations, the future of such companies is unpredictable and volatile. Moreover, skiing, snowboarding, travel, and luxury tourism are recreational activities that could slow down if the economy slips into a recession.
The stock trades at a forward P/E of 28.5 and a forward EV/EBITDA of 12.76.
Welcome to edition 50 of Buyback Wednesdays, a weekly series that tracks the top stock buyback announcements during the prior week. The companies in the list below are the ones that announced the most significant buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low-volume small-cap or micro-cap stocks with a market cap below $2 billion.
1. BEST Inc. (BEST): $0.7651
On March 8, 2023, the Board of Directors of this supply chain service provider, authorized a new $20 million share repurchase program, equal to 39.2% of its market cap at announcement.
| Market Cap: $60.27M | Avg. Daily Volume (30 days): 138,174 | Revenue (TTM): $1.12B |
| Net Income Margin (TTM): -18.90% | ROE (TTM): -96.99% | Net Debt: $408.57M |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA (TTM): -2.7 |
2. American Express Company (AXP): $163.91
On March 8, 2023, the Board of Directors of this payments company, authorized a new share repurchase of 120 million shares of the company’s Class A common stock, equal to 16% of its market cap at announcement.
| Market Cap: $121.98B | Avg. Daily Volume (30 days): 2,443,383 | Revenue (TTM): $50.68B |
| Net Income Margin (TTM): 14.83% | ROE (TTM): 32.05% | Net Debt: $11.60B |
| P/E: 18.18 | Forward P/E: 16.05 | Price/Tang. Book (TTM): 5.86 |
3. Hippo Holdings Inc. (HIPO): $14.28
On March 13, 2023, the Board of Directors of this home insurance company, approved a new $50 million share repurchase program equal to 15% of its market cap at announcement.
| Market Cap: $332.80M | Avg. Daily Volume (30 days): 53,546 | Revenue (TTM): $119.70M |
| Net Income Margin (TTM): -278.53% | ROE (TTM): -44.87% | Net Cash: $165.60M |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA (TTM): -0.64 |
4. Applied Materials, Inc. (AMAT): $120.34
On March 13, 2023, the Board of Directors of this semiconductor equipment manufacturing company, authorized an additional $10 billion share repurchase program, equal to 10.3% of its market cap at announcement.
| Market Cap: $97.90B | Avg. Daily Volume (30 days): 6,503,442 | Revenue (TTM): $26.25B |
| Net Income Margin (TTM): 24.57% | ROE (TTM): 50.97% | Net Debt: $2.07B |
| P/E: 15.6 | Forward P/E: 15.85 | EV/EBITDA (TTM): 12.07 |
5. OptimizeRx Corporation (OPRX): $13.44
On March 14, 2023, the Board of Directors of this digital health company authorized a new $15 million stock buyback program, representing around 7% of its market cap at announcement.
| Market Cap: $214.44M | Avg. Daily Volume (30 days): 120,940 | Revenue (TTM): $62.45M |
| Net Income Margin (TTM): -18.32% | ROE (TTM): -8.88% | Net Cash: $73.91M |
| P/E: N/A | Forward P/E: 30.4 | EV/EBITDA (TTM): -13.69 |
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