Good day, and welcome to the Vail Resorts Third Quarter Fiscal 2015 Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Rob Katz, CEO. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to our fiscal third quarter 2015 earnings conference call. Joining me on today's call is Michael Barkin, our Chief Financial Officer. Before we start, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and 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 the press release that we issued this morning, along with our remarks today, are made as of today, June 8, 2015, and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non-GAAP financial measures. A reconciliation of these measures is provided in the tables included with our press release and in our quarterly report on Form 10-Q filed this morning with the Securities and Exchange Commission and is also available on the Investor Relations section of our Web site at www.vailresorts.com. So with that said, let's turn to our third quarter fiscal 2015 results. We are pleased with our performance in the third quarter of fiscal 2015. Our results reflect the continued momentum from our growing season pass products, our ability to attract high-end destination guests to our collection of world class resorts and the profitable growth that we are driving across our business. This season highlighted the importance of the stability and growth that is generated by our season pass program. The strong value proposition of our season pass products continues to drive significant growth in the number of destination guests purchasing season passes and maintains the loyalty of our more weather and value sensitive local guests. In addition to our season pass success, we have also seen the benefits of driving pricing on lift…

Thanks, Rob, and good morning, everyone. For the third quarter, resort net revenue was $566.9 million, up 7.6% from the prior year period. And resort reported EBITDA was $267.3 million, an increase of 10.9% over the prior year. These increases were driven by the addition of Park City Mountain Resort and strong guest spending on lift products and in our ancillary businesses that Rob previously mentioned. The third quarter results include $0.9 million of transaction-related costs for Perisher and integration-related costs for Park City. Our results reflect particularly strong demand from destination guests at our Colorado Resorts. In addition to our mountain guest spending, we also drove strong performance at our owned hotels and managed condominiums where we saw a 9.8% increase in revenue per available room for the quarter compared to the prior year, primarily driven by rate enhancement during the ski season. Our success in driving top line growth by attracting high-end customers is continuing to support our focus on profitable growth and leveraging our cost structure to drive margin expansion. In the third quarter, our resort-reported EBITDA margin was 47.2%, an increase of 140 basis points compared to the prior year. Momentum in our resort real estate markets remains strong with solid demand for our remaining condominium inventory and interest in our development parcels. During the third quarter, we closed on three One Ski Hill Place units and the sale of a land parcel in Breckenridge that will be developed into a Marriott Residence Inn, which we announced on the last earnings call. During the quarter, we also closed on the sale of a development land parcel in Vail, which generated $8.2 million of cash proceeds. Net real estate cash flow for the third quarter of fiscal 2015 was $12.7 million. Subsequent to the end of the…

Thanks, Michael. While we have closed out the 2014-2015 ski season, we are already looking ahead to next year. Our capital plan for 2015 is well underway. In Park City, our $50 million upgrade is one of the most transformational efforts ever taken on in the ski industry and will result in a combined resort for the upcoming season that will provide guests with the chance to ski at the largest mountain resort by acreage in the United States. We are also hard at work on replacing Chair 2, the Avanti Chair at Vail Mountain with a high-speed six-pack and on a number of other efforts in our marketing and guest-facing systems to continue to drive a more sophisticated and analytical approach to how we communicate with our guests. Finally, a quick update on Epic Discovery. We are happy to announce that we have received all necessary approvals to commence construction of activities at Heavenly during the summer of 2015. With the addition of these projects at Heavenly, we now expect to spend a total of $17 million in calendar year 2015 on Epic Discovery build out. The new activities at Heavenly along with the previously announced projects at Vail and Breckenridge are expected to generate approximately $6 million to $8 million of incremental resort reported EBITDA in calendar year 2016. As we look ahead towards fiscal 2016, we remain incredibly optimistic with a great start on season pass sales, new upgrades to our resorts and an economic environment that remains particularly strong for upper income vacation travel. We do think in the current climate, we will need to remain competitive on wages and benefits for our employees, which while certainly putting pressure on costs is something we can accomplish and stay on track with our long-term growth objectives. Everyone who works at Vail Resorts is at the core of how we deliver an experience of a lifetime to our guests, which is at the core of how we deliver our business success. Once again, I want to thank all of our employees and guests for making the 2014-2015 ski season a memorable one on all levels. At this time, we are happy to answer questions. Operator, we are now ready for questions.

Thank you. [Operator Instructions]. We’ll take our first question from Felicia Hendrix with Barclays.

Hi. Good morning, everybody. Thank you for taking my question. Rob, at the beginning of your prepared remarks you gave us some statistics regarding the impressive season pass sales that you reported this morning. I was just wondering, can you talk a bit more granularly about how much of that growth is attributable to Utah, and aside from Utah where you’re seeing the most growth coming from?

Sure. By far the biggest area of growth for this spring was what we call destination markets. So that’s basically anybody who lives outside of Colorado, Utah and the Bay Area in California, which are that we consider more local markets. It represented the vast majority of all of our growth. Obviously, that part of the program as we highlighted used to represent only four years ago 30% of the spring season pass sales, now 43%. Obviously, if you went back even further, right, we’ve seen even more growth since season passes used to be only a local product. In Utah, we did see very strong growth although if you looked at that versus the overall size of the program, right, it’s not anywhere near as material as Colorado, Bay Area or any of our destination markets but we did see very strong growth, which is somewhat to be expected with the addition of Park City and where folks in Utah can now ski both the resorts on one pass. And we also continued to see good momentum in Colorado. Again, I think we benefit there by continued upgrades to our resorts and quite frankly a good economy in Colorado with a net influx of new residents coming into the Front Range every year. In Tahoe, we saw a decline. I think its overall impact on our results was very modest but we did see a decline, again somewhat to be expected, given the weather trends there. Last year, we saw the decline in the spring actually moderate a bit in the fall. And again no surprise there having gone through a difficult season in the Tahoe resorts, you may ultimately want to defer your purchase potentially from the spring to the fall, so that might go counter a lot of the other trends that we see. Overall, I would say we’re very, very pleased. I mean given how strong season pass sales were last year, I think to be able to drive further growth on all levels and obviously further growth at Perisher again just couldn’t be more happy with how things came out.

Thanks for that clarity, and I guess – I apologize, I might have worded my question not as accurate as I would have liked. Really what I was getting to was do you think a lot of the growth was because you added – Utah is now part of the program?

Oh, I see what you’re saying. Yes, I think it’s a combination of things. I think that absolutely adding Park City I think created a bit of a tipping point, which is of course is why we felt it was such a strategic acquisition because now people feel like they can ski in Tahoe, Utah and Colorado all in the same pass. So I think it’s a combination of that and I think we have gotten much smarter, much more sophisticated, much more focused in terms of how we drive season pass sales. And so I think the combination of the broader acceptance of season passes in general, the Epic brand and then the tactics we’re using which are light years from where they were a few years ago, I think all of that has combined together to create the results we’re seeing.

Okay, great. And then just a follow-up question on Perisher. You also mentioned some positive statistics there. Just wondering and I know it’s early and it’s probably hard, but do you have any visibility into the magnitude of the incremental skier visits you could be getting from this new relationship?

Yes, I mean we really don’t. I mean I think that we feel – given how much of their growth occurred after we added access to our resorts, clearly that was a key driver. And so I think we feel like this connection, which we thought would be meaningful to the Australian skier clearly is meaningful. I would say though that as we know through all of our other pass programs, skiing is very aspirational and many people buy a pass, they feel – and that’s one of the benefits with our product, right. They can buy a pass, feel that they’re getting good value in Australia to ski at Perisher and then may be considering a trip to the U.S. What we don’t know in terms of answering the question though is ultimately how many of those people will actually take a trip. I think obviously we’ll have much better information on that as we go through this upcoming ski season in the U.S.

Great. Thanks so much.

Thanks.

We’ll take our next question from Shaun Kelley with Bank of America Merrill Lynch.

Hi. Good morning, guys. Thank you for taking my questions. I just wanted to follow up a little bit. I think in some of the remarks related to the season pass sales, you guys gave a little bit of additional color so I just wanted to go back to that. I think in the press release you had said that 44% – or the sales dollars at this point were 44% of last year’s levels. Could you just remind us of traditionally how much have you guys kind of sold in this early part or early window of pass sales, because I had kind of historically remembered that that number is probably a lot closer to a third?

Yes, I think that’s true. So what’s happening is right over the last couple of years, our spring season pass sales have grown so much and the overall program has grown so much that you’re right, that percentage goes up because we’re comparing this year’s spring to last year’s full year. Now, obviously, yes, that percentage we obviously now want that percentage to go down, because we are hoping to have strong pass sales in the fall, meaning that when we compare spring 2015 to the total program, yes, we would hope that would happen. But you’re right. If you go back a few years, it was a low to the third and I think that’s a combination of, like I said, these two dynamics. One, we are actually growing the percentage of passes being sold in the spring but because of the growth, right, if we compare spring to last year, we’re also kind of artificially inflating the number. But we’re just trying to still size it for everyone.

That’s helpful and I think it’s easy to understand. So the second question would be kind of similar on Perisher. So you talked about this 68% jump in pass sales but we don’t have a sense for is kind of the base of pass sales. Is this period you guys are selling passes in, is this a pretty small period so the base is pretty small in terms of the total number of passes sold or are you guys pretty encouraged by this as a pretty meaningful data point on the base?

So what I would say is no. I think this is – what we’re talking about is the entire year of their selling period for season passes. So the 68% that we’re referencing would be a comparison of the total number of season passes that Perisher sold for 2015 ski season in Australia, which is June 2015 to September-October 2015, right, so this upcoming few months. So the total number of passes they sold for this current Australian ski season versus the total number of passes they sold for the 2014 Australian ski season, so we are comparing full year to full year.

Okay. So you’re already up 68% on a full year basis at this point? It’s not pro rata?

They’re done selling. So they are not selling anymore passes, because the ski season in Australia has actually begun, which --

Okay.

So it gets a little – I know because it’s obviously 80 degrees here. So the ski season in Australia has already begun. Actually in fact they had one of the strongest conditions and snow kind of experiences that they’ve provided in their opening weekend, this past weekend. But yes, the Australian ski season has begun and they are done selling season passes for that season.

Got it. Well, maybe next year you’ll do the June conference call from Australia.

That’s true but it will be like 2 in the morning for you.

So the third question and this kind of completely changes subjects but you guys had sold a land parcel in the quarter I believe in Vail and you had already talked about I think another one you had done in Breckenridge. But the question is, was the Vail parcel in real estate held for sale or was that in kind of buried elsewhere in your balance sheet? Just any color on that would be helpful.

It was in real estate held for sale.

Okay. And just broadly – I mean clearly you guys are seeing pickup in the total number of units sold so – I mean how are you – one of your competitors did say that they’re looking to get a little bit more aggressive on the real estate side of the world. How do you guys feel about the secondary market right now in the Front Range and elsewhere around your portfolio?

Very good. I think that we are definitely seeing strength obviously. We provided a little bit more fulsome commentary on One Ski Hill Place and Ritz in terms of both closings and either units under contract and we are down – if the units that are under contract, for instance, in One Ski Hill Place all closed, we’re down to just truly a couple of units left to sell. And so obviously that does speak to the strength of the market. I’d say there’s a number of active discussions going on across all of our resorts for potential development. I would say though that we do not intend to change our approach, which is that we do not intend to take on significant development projects on our balance sheet. We intend to partner with third-party developers for those big projects. Is it possible we could use our land basis and roll some capital into a project? It is, but again, I’d say that we are going to be focused really on the resort side of the business to a much larger extent. But the way we drive the resort side of the business is being very active in making sure that these parcels get developed. And so we put a lot of time and effort into that because getting those projects developed is what helps drive the resorts.

Perfect. Thank you very much.

We’ll take our next question from Joel Simkins with Credit Suisse.

Hi, guys. It’s Ben on for Joel. With regard to the 15% ETP growth, was there any change in the cadence of ticket price increases from years past embedded in that number or is the year-over-year delta primarily a mix shift towards higher yielding resorts given the variable snowfall?

I would say that yes, the biggest change of our ETP growth was largely on the mix change, because obviously you can see that if you look at ETP in total versus ETP excluding season pass, right, there’s a big change. So obviously that increase in ETP including season pass had a lot to do with the fact that we had less skier visits on passes, so that increases the ETP. If you look at just ETP excluding season pass, I’d say yes it’s also a combination of a few factors, a little bit more aggressive on price I think given the economy and the significant investments we’ve made at the resorts, mix shift where we’ve taken more and more of our lift ticket sales into our own channels, so we’ve been able to rationalize and improve our yield there. And then broadly speaking the resorts that were most successful this year were Vail, Beaver Creek, Breckenridge, Keystone, right, which have a higher ETP than resorts in Tahoe and they didn’t perform well. So there was an addition in mix shift just from the geography as well.

Right, got it. Thank you. That’s helpful. And then in the Q released this morning, if I interpret it correctly, you mentioned a decline in skier visits in Colorado. If that was the case, do you mind sharing that decline and how much of this was the World Alpine Ski Championships that you guys highlighted?

Yes, we’re not going to go into the details around that but I would say, yes, there was a decline. For us, not very concerning. I think we feel when you factor out season pass visits and then factor out the impact of the World Alpine Ski Championships, we feel very good about the performance of Colorado this year. And so yes, the way the numbers played out, that was true but again we tend to look at kind of the revenue that we’re driving and kind of taking out some of these extraneous impacts, and the trends were all very strong.

Yes, totally guys, wanted just for modeling purposes. Thanks a lot.

Thanks.

We’ll take our next question from Joe Edelstein with Stephens.

Hi. Good morning. Joel Edelstein here.

Hi.

So I just wanted to come back to the Perisher season pass sales, I mean the growth there very impressive. I know it would be early but are you seeing any early lodging bookings to your U.S. resorts from that Australian guest?

I think it’s definitely too early. I would say we’re seeing very good enthusiasm and good momentum but we are – yes, even though they tend to book certainly well out ahead of our U.S. guests, we’re still too early to make any kind of more firm assessments. That’s something I think we’ll certainly talk a lot more about in September.

Okay. And I know that you still need to close the Perisher deal but I just had a question on a broader M&A market. I’m curious just since the Perisher announcement, are you starting to receive any more calls from international players and just how big is that international market out there, just the number of resorts that you think could fit the characteristics of your network?

The ski industry outside of the U.S. is actually quite large and so there are many, many potential targets. I would say we’re very disciplined and very thoughtful about looking for the right opportunity. A lot of that comes down to the country that it’s in, the markets that it serves, its position plus how it impact overall all of our resorts here in the United States as well. I think obviously with the Perisher acquisition, it could make a little bit more interesting other opportunities in Asia. That said, I think the ski business is one where it takes a long time to put any kind of transaction together and we’re big believers in not rushing. And so I would say that we – the Perisher acquisition if anything has made other opportunities more interesting, that said, again, we don’t see ourselves in a rush whatsoever. Our goal really is to just keep making the guest network that we have that much stronger and more powerful in terms of driving revenue increases.

Okay. And would you be willing to maybe even just quantify in any magnitude 30, 40 resorts possibly that are out there that understanding it may take quite some time to put the deals together, but just could you quantify that for us with a hard number? I’d appreciate that. Thank you.

No, we don’t look at it that way. I think there is 500 ski resorts in the United States, for instance, but – we are incredibly pinpoint. So in other words, there are truly hundreds and hundreds of ski resorts, thousands around the world and so that’s – what I’d say is this kind of larger number is not as relevant and not the way we approach it. We’re very focused on what I’d call a handful, right, in each country of potential opportunities and then even within that, right, a primary opportunity that we think is the best. And our goal is to wait for even if it takes years truly to wait for that, because in the ski industry the good news is you can’t build any other resorts. It also takes a long time to reshape a resort. So waiting for the right one we think is what helped drive our success. And so yes, there’s – I won’t share a hard number because I don’t think that is relevant right now, but we are focused, as we said earlier, certainly in Asia, in North America and in Europe.

Okay. Thanks for taking the questions and good luck.

Thanks.

[Operator Instructions]. We’ll take our next question from Afua Ahwoi with Goldman Sachs.

Hello. Good morning. Just a couple from me. First, on the strong season pass sales from the destination markets, I think you mentioned a little bit how you changed some of your taxes. Could you give us any specifics on what exactly you’re doing to keep on attracting the destination customer? And what is the ceiling for that number? Is it 50%? How high do you think you could go without maybe having an impact on any other resorts? And then maybe following up a little on that, on the international customer, can you remind us again where you typically source your international guest from and in any of your advanced season pass sales, are you seeing any impact from the higher FX having an impact on the desire to ski in the U.S.? And then I have one follow up.

Sure. So on the season pass on the destination market, we used to go to market on our season passes with a fairly broad-brush approach to kind of if you live in Colorado we’d say one thing and if you live essentially anywhere in the world, we say another. And since then we’ve largely – we’ve started to segment who buys a season pass and who is our target for a potential season pass. And we’ve learnt a lot more through data capture and data analytics who is a potential new pass holder. And so I think we’ve been in the – I think we shared a couple of years ago that we’ve kind of broaden our segmentation to be in the 70 to 90 segments largely that move up and down a little bit depending on our strategy where we have customized the messages to each one of those people. Now we do that for people who are already season passes to get them to renew. We also do that and most importantly to people that we have in our data base who may have skied at our resorts, they may be a very frequent skier at our resort or maybe they came to our resort once last year. But we can take the data of what they look like and other metrics about where they live and customize the message for that person to get them to consider a season pass. And what I’d say is that takes years to build that competency, something that we’re now doing on our broader destination vacation marketing. So those would be the kind of tactics that we’re now using versus where we might have been just four years ago. In terms of a ceiling, what I would say is we are…

Great. And then just a last question. I think at the end of your prepared remarks, you just touched a little bit on wage inflation. Is there any number you can share with us how much it expects to go up just to help us with our modeling purposes? That’s it from me. Thanks.

At this point, no. I think we just want to highlight something that I think everybody knows, which is that the market for jobs is obviously getting more competitive and our own success obviously means that within our resorts and in our company, it is more competitive to get talent. And talent is the most critical thing to help drive our company and that’s something that we have to stay in touch with as well. And yes, we do think we can do that and stay within our long-term growth targets. I think when we talk in September, I think that’s certainly something that we can probably provide more color on.

Great. Thank you.

Thanks.

It appears there are no further questions in the queue. At this time, I’d like to turn the call over to Mr. Katz for any additional or closing remarks.

Thank you, operator. This concludes our fiscal third quarter 2015 earnings call. Thanks to everyone who joined us on the conference call today. Please feel free to contact myself or Michael directly should you have any further questions. Thank you for your time this morning. Good-bye.