Good day and welcome to the Vail Resorts Second Quarter Fiscal 2017 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Rob Katz, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to our fiscal second quarter 2017 earnings conference call. Joining me on the call this morning 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 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 our press release issued this morning, along with our remarks on this call are made as of today, March 10, 2017 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 with our press release, along with our quarterly report on Form 10-Q were filed this morning 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 second quarter fiscal 2017 results. We are very pleased with our results for the quarter. Despite tough early season conditions at our U.S. resorts, we finished the quarter with strong performance. We benefited from our strong season pass sales, solid demand from our high-end consumers and good conditions during the holiday in the month of January. Including results from Whistler Blackcomb since the acquisition date, our total lift revenue increased 24.5%, driven by a 15.7% growth in visitation and a 7.7% increase in effective ticket price in the second quarter compared to the prior year. We continue to see robust destination guest spending trends which along with the addition of Whistler Blackcomb, to over 25.9% increase in ski school revenue and a 21.5% increase in food and beverage revenue…

Thanks, Rob and good morning everyone. Before discussing our results and fiscal 2017 guidance, I want to remind you that you can find a full discussion of our financial results for the second quarter and year-to-date periods of fiscal 2017 and our quarterly report on Form 10-Q which we filed this morning with the SEC. Our Form 10-Q and our earnings announcement can be found on our website at www.vailresorts.com. As Rob mentioned, we are pleased with our second quarter results. Including results from Whistler Blackcomb in the second quarter of fiscal 2017, resort net revenue was $720 million, an increase of 20.9% compared to the prior year. Resort reported EBITDA was $305.2 million, an increase of 26.1% compared to the prior year. Our resort EBITDA margin for the second fiscal quarter improved to 180 basis points over the prior year as we continue to drive strong flow-through from our revenue growth and leverage our scale. These results include $2.1 million of transaction, transition and integration costs associated with the Whistler Blackcomb acquisition. Excluding Whistler Blackcomb operations and transaction transition and integration costs, resort reported EBITDA increased 6.5% compared to the prior year. Including results from Whistler Blackcomb in the second quarter of fiscal 2017, mountain revenue was $654.1 million, up 22.7% from the prior year while mountain reported EBITDA was $299 million for the second quarter, up 26.4% from the prior year. Excluding Whistler Blackcomb operations and transaction, transition and integration expenses, mountain revenue increased 3.3% and mountain reported EBITDA increased 6.6%. Our second fiscal quarter lodging results were positive, but were adversely impacted by the poor early season conditions. Lodging segment net revenue, excluding payroll cost reimbursements, increased 4% compared to the prior year, primarily driven by the addition of Whistler Blackcomb. Regarding real estate, during the quarter,…

Thanks Michael. We remain confident in the strong cash flow generation and stability of our business model and we are committed to returning capital to our shareholders. I am happy to announce that our Board of Directors have approved a 30% increase to our quarterly dividend and declared a quarterly cash dividend on Vail Resorts common stock of $1.053 per share payable on April 13, 2017, to stockholders of record as of March 29, 2017. This increase highlights the strong and growing cash flow that we are generating which allows us to pursue disciplined reinvestments in the business, including pursuing strategic acquisitions to drive growth, while also increasing our return of capital to shareholders. Moving to our calendar year 2017 capital plan, consistent with prior estimates and our long-term capital guidance, we expect to invest approximately $103 million in capital during calendar year 2017, excluding anticipated investments at Whistler Blackcomb, capital expenditures for U.S. summer related activities and one-time integration capital expenditures at Whistler Blackcomb. The plan includes approximately $65 million of maintenance capital expenditures and a number of high impact, high ROI discretionary investments. At Vail Mountain, we will continue to improve lift capacity at one of the resort’s busiest chairlifts by upgrading the Northwoods high-speed four person chair, Chair 11, to a new high-speed six person chairlift. At Breckenridge, we will be upgrading the Peak 10 Falcon Chair from a four person high-speed chair to a six person high-speed chair, allowing guests to experience some of the best intermediate and advanced terrain on the mountain. At Keystone, we will be investing significant capital to continue to enhance the experience at this outstanding family focused resort. We will be upgrading the four person Montezuma chair to a six person high-speed chair to improve circulation on the front side of…

Thank you. [Operator Instructions] We will take our first question from Shaun Kelley with Bank of America/Merrill Lynch.

Hi guys, good morning, can you hear me, okay.

Yes.

Great. So Rob, maybe I just want to start with the kind of season-to-date results, so visitation has definitely improved from what you guys have announced before, but is still running down low to mid single-digit, could you just give us a little bit more color by region, it sounds like Colorado is probably where thing have been the choppiest given pass visitation, how you started out the season, but is that – could you give us a little bit more color on where that you are still kind of you are still behind last year. And then my second or a follow-up would just be, can you give us a little sense within Colorado, how your higher end resorts, the Beaver Creek and Vail are performing relative to Keystone and Breckenridge?

Sure. I would say that the primary driver of this decline is definitely pass usage and certainly the early season, I think some of the numbers in the early – we have resorts that were delayed in opening by a number of weeks and so all of those visits obviously are factoring into the numbers. I would say some – our Colorado resorts are typically the first resorts to open. Often opening in the beginning of November, middle of November, many of our other resorts don’t open until Thanksgiving or later more traditionally, so that’s where you are seeing the bigger decline. Last year, we obviously also had a fairly strong beginning. So I would say that Colorado is definitely a primary drag, I think around that visitation. But again, I think what’s been great to see is obviously our financial results have been able to outperform that because obviously, we have locked in that season pass revenue, providing the stability in the growth before we even began the season. I would say in terms of our four Colorado resorts, actually Keystone has been one of our best performing resorts of the four. I think a great testament to the team there building that – a family brand offering, a terrific experience at a more accessible value. And so that was true last year and it continues to be true this year. One of the driving reasons why one of our big focuses of our capital plan this year was on Keystone. Amongst the rest of the resorts, I think we are seeing pretty consistent performance with I think Vail probably lagging a little bit mainly because of two pretty significant hotel properties in Vail that actually have been closed this season because they are going through renovation. We are pretty confident that once those come back online for next season that, that will turn around pretty quickly. So I would say I think we are seeing and then obviously we talked about Park City which has really been the strongest U.S. resort that we have. And so I think what we are now seeing really is an ability to move people throughout our resort network for whether it’s based on price or value, experience. We can use our pass on our marketing efforts to deliver kind of more consistent stable results even during fluctuating times at any one of our resorts whether that’s because of internal dynamics, weather, economy, I think we are building that consistency.

Great. My second question would just be maybe a strategic one. So thinking through the Stowe acquisition, a two part question here, the first one would be, just as we see the kind of the $5 million full year contribution next year once you have this fully integrated, I think for most of us who are familiar with the Northeast, we probably would have thought that number was a little higher, so especially once we factor in some of the synergies you can bring to the table, so the first question is just sort of, why is that one maybe not a little bit more profitable right now or out of the box. And then the second question would just be the high level of – where do you sit right now in terms of the Northeast, is this all you need or is there more that you could do in that region?

I appreciate that. And I would say that I think that it is – it’s challenging I think for resorts that are smaller in size or don’t have the amount of volume to necessarily deliver consistent profitability. And very often, when we come into those resorts, we are starting from a place that’s actually fairly low and it may surprise some people but it is, I think it takes a certain number of visits to actually generate consistent profitability. So what I would say number one is that the $5 million does include our ability to more consistently drive profitability at the resorts from what they have been able to do before. I would also say we did talk about how it could be in excess of $5 million and we do think that there is opportunity beyond the $5 million and probably we will be talking more about that. We want to spend more time really analyzing what we see. Obviously, there are some consolidation opportunities for us with some duplication of effort between what we do and what they may do. But I think the bigger opportunity is obviously around season passes and driving that in the Northeast, particularly in Boston and New York. So we will be providing more color on that I think as we go forward. I would say for the Northeast, in general we think there – we would say that there are additional opportunities that we will continue to look at pursue. We think there is certainly the possibility of us creating multiple choices for our pass holders within the Northeast region. That said, as always, we are patient. We take a disciplined approach. We don’t feel like we are in a rush to do anything and honestly, I think Stowe, we felt was just a very unique situation where the power of that brand and the opportunity to use our pass at Stowe was going to be a big driver. I would also say Stowe actually has a fairly robust database and customer information for a resort of its size. I candidly and at a pretty high level, we think actually also gives us a unique amount of insight – further insight into that Northeast guests. So that was one of the other big drivers. But more to come on how we see Stowe playing out, we will probably share more over the next few months and quarters.

Thank you very much.

Thanks.

We will take our next question from Anthony Powell with Barclays.

Hi, good morning guys. Following-up on the Park City growth there, its gaining momentum, are you gaining share from either within the Park City market or do you believe that your investments have driven more visitation from the general Western U.S.?

I would say I think it’s a bit of both. There is not, within the ski industry, it’s not always easy to have perfect market share information, so it’s hard to exactly assess that, but we certainly – our guess would be that Park City is growing faster than most resorts in the U.S. So it’s I think clearly taking share. And I also think that by introducing the pass, which is such a great value, we do see that when people buy a pass, they actually ski more days in any particular season. So I think we are – it’s kind of a bit of both. I think we are able to bring people because of the new experience and really just as an elevated kind of vacation opportunity for people now. I think we are bringing them in for trial and obviously, we are now seeing that kind of repeat visitation at the resort, but also driving that incremental visit. And I would say that it’s happening at Park City, obviously probably to the largest degree this season, but it’s something that a pattern that we have seen I think consistently throughout the last decade as we have introduced the pass and kind of a more database targeted marketing effort.

Thanks. And you mentioned the decline in Mexico visitation for obvious reasons likely, were you able to accommodate those guests at Whistler and do you think that may be a one-time issue this year?

I would say Whistler’s business, it’s very robust across the board, including with Mexico and Latin America. Now Mexico and Latin America are much smaller business for Whistler than they are for our U.S. resorts. So I would not say that there was a perfect offset on that, but it is a big opportunity, I think obviously for all the reasons that are out there, that people may choose to go to Canada, including Canada has been pretty aggressive at opening up their visa process, making it easier I think for people from Mexico and Latin America. So that’s been helpful as well I think for the resort. And in terms of their bigger issues involved I think with some of this international visitation that it’s hard for us to say exactly how that will play out over time. Part of that is – a big part of it is going to be how the U.S. dollar performs. I would say that, we – I think, the company, as Michael talked about, we created this diversity and the currency piece of that diversity is quite compelling. And so we feel like we are able to, regardless of how things move on some of these geopolitical or economic factors, I think our company will simply be able to outperform those.

Thanks. And a couple of more housekeeping questions, given the bigger contribution of Whistler, did FX have an impact on your forward guidance and also interest expense came down a bit, I believe there is some limit partner interest at Whistler that we were modeling that didn’t occur so if you can go into those that would be great?

Sure. Yes. Currency had a modest impact on the quarter relative to guidance. So certainly not something to call out there. I can follow-up with you on specific interest question, I am not sure exactly what you are asking.

The interest guidance came down a bit, so we can follow-up that after the call. Thanks.

Operator, are there any additional questions?

[Operator Instructions] We will take our next question from Chris Agnew with MKM Partners.

Thanks very much. Good morning. A follow-up on the weakness in the international destination guests, is there a particular seasonality to that, essentially is it more impactful in third quarter or second quarter. And then also are – with these international guests, particularly from Mexico, is there disproportionally higher portion on season pass sales to these international guests? Thanks.

Yes. So I would say it’s different. So inbound visitation from Australia would be stronger in January, so therefore stronger in Q2, Mexican visitation is definitely stronger in Q3, primarily driven by Easter. So I would say, we will have to see how those dynamics, I think shake out over the next month or so. Again, we have factored that in to our thinking in terms of the updated guidance that we are providing. And the second question on Mexico was…?

Just is there any implications for season pass sales, I don’t know if they are disproportionally higher to international destination guests season pass sales?

It’s a good question. Again, we have just started season pass sales in the spring, so we will have to see how that plays out. We don’t see that as a huge driver to our overall result given the size and breadth of the program. Now, we had seen, even when the U.S. dollar had been increasing over the last 12 months, we still saw pretty strong growth on the international side into our pass programs. So obviously, our strategies and tactics is to really kind of continue to drive the value that, that provides is one of the best ways I think for our pass holders to be able to kind of do something about the stronger U.S. dollar. The other piece obviously is that with Whistler now on the Epic Pass and the Epic Local Pass, buying that our product now allows people to choose where they want to go and if they ultimately choose to go to Whistler or they want to choose to come to the U.S. depending on currencies at that time, they will have that optionality. We think that will be a big driver, obviously, in Australia as well. So in our mind, the pass really provides us a terrific way to help combat some of the challenges of inbound foreign visitation into the U.S.

Thanks. And then last question, you had strong flow-through in EBITDA margins in second quarter. Is fair to assume that given the slow start in 2Q that the flow-through should be stronger in the third quarter and looking for a little bit margin expansion year over year over and above 2Q? Thanks.

Yes. I mean, I think the best thing to point to is our full year guidance that we updated in the release which our original EBITDA margin guidance was for 30.5% and we have increased that to 31.2%. So certainly expecting full year flow-through to be better than where our original guidance was. I think certainly with the addition of Whistler Blackcomb and the strong profitability and the strong performance of the resort that certainly helps on our flow-through and continuing to leverage the scale that we are driving in the business. So, I think we feel really good about where we stand from both a flow-through and a cash flow generation perspective. And yes, we are certainly pleased to be able to increase our guidance on that by another 70 basis points for the full year.

Great, thank you.

We will take our next question from Brad Boyer with Stifel.

Hey, thanks for taking the question guys. Just a quick one on pass sales in Australia curious if you could comment to any degree on what you are seeing there now that you have in Whistler in the mix?

I would say by the time we actually introduced, had closed on the acquisition with Whistler, it was pretty much after their spring or fall, their spring pass sales. So I think it was definitely a positive, but hard to really assess the how big of a drivers and I think we will have more information on that as they go into their fall, our spring, but their fall pass sales leading into their current season coming up. Those pass sales really run from about right around now, little bit later actually to maybe close to Memorial Day. So, I think we will have more information probably on how that performed that we can give some color on during the June earnings call.

Okay, that’s great. And then second I am not sure to what degree you can comment but – and I know it’s early, but if you look at Whistler in the quarter and you look at – you said you are amongst Epic Pass holders, are you seeing that Whistler is actually driving incremental visits throughout the network or are you seeing that some of those visits are coming at the expense of visitation to other resorts?

Well, I guess what I would say is kind of a couple of components, but one is on the pass sale itself. Again, we I think again saw a modest benefit by announcing that there would be a few days on the Epic Pass if you purchased one last year, but again, we only closed the transaction in October. And so we really could not include Whistler really in our marketing efforts for this past year. Certainly, our expectation is that Whistler will have a very positive effect on pass sales going forward and we think that optionality will go a long way for our guests really from around the world. I think in terms of the visitation itself, we did see some visitation from our Epic Pass folks into Whistler this year. I mean, I think given how late in the process we actually announced it and introduced it and so therefore people didn’t really have time to plan for it. I think we were pretty pleased with the visitation that we saw. And I think we would expect that to increase dramatically as we go forward. What I would say that I think, I think it’s probably a little too early for us to even guess as whether or not adding Whistler will add more days to existing pass holders or not. I think there is no doubt that as we put more people into passes, they will ski more days, but whether people who are already in our program will ski more days because of Whistler, I think that’s something we will have to see. I think our gut would be the majority of those visits would be replacing visits that might have been at one of our other properties.

Okay, thanks a lot guys. Appreciate the color.

Thanks.

We will take our next question from Matthew Brooks with Macquarie.

Good morning, guys. Just a question, I guess you guys look at consensus expectations to different quarters. And I was just wondering if you have any thoughts about whether you think the cadence looks right, in particular the sort of off-season quarters, do you think they are correctly accounting for what you have done in the past at your old resorts plus Whistler which does pretty well in summer?

Yes. I mean, I think what I would say on that is that our orientation is to focusing on the full year guidance. And so clearly, folks have a year-to-date number that gets you halfway through the year. So I think that’s really our orientation. I think clearly one of the differences between Whistler Blackcomb and the contribution that it makes versus where we were before Whistler Blackcomb is that they have a bigger scale summer operation. And because of the way that we have integrated them, we have not had to add significant infrastructure in terms of bringing Whistler Blackcomb on. So that certainly is a difference in terms of Whistler’s business in the summer quarters than where we were before them. But I would orient to the full year guidance that we provide because we don’t break it out by quarter.

Okay, thanks for your time.

That concludes today’s question-and-answer session. At this time, I would like to turn the conference back to Rob Katz for additional and closing remarks.

Thank you, operator. This concludes our fiscal second quarter 2017 earnings call. Thanks everyone who joined us on the conference call today. Please feel free to contact Michael or myself directly should you have any further questions. Thank you for your time this morning and goodbye.

This concludes today’s conference. Thank you for your participation. You may now disconnect.