Rob Katz - CEO Michael Barkin - CFO.

Felicia Hendrix - Barclays Cameron McKnight - Wells Fargo Tyler Batory - Janney Capital Markets Ben Chaiken - Credit Suisse Chris Agnew - MKM Partners.

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

Thank you. Good morning, everyone. Welcome to our fiscal first 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 December 9, 2016, 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, which 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 Web site at www.vailresorts.com. So with that said, let's turn to our first quarter fiscal 2011 results.

We were very pleased with our results in the quarter with strong summer visitation at our U.S. mountain resorts driving increased revenue and profitability with the official launch of Epic Discovery at Vail and Heavenly and continued strong summer results at Breckenridge and Park City.

Additionally, we had strong results at Perisher where visitation was steady compared to the prior year and growth was driven by yield improvements across the business. Our lodging results for the first fiscal quarter were very encouraging with the average daily rate increasing 8.9% compared to the prior year.

In particular, our properties in Colorado benefited from increased visitation to our resort communities and Grand Teton Lodge Company benefited from increased park visitation. Turning now to our 2016-2017 season pass sales for our resorts and early season indicators, our sales of season passes continue to deliver outstanding results.

As we approach the end of our selling period, season pass sales are up approximately 16% in units and approximately 20% in sales dollar through December 4, 2016, compared to the prior year period ending December 6, 2015. This excludes the Epic Australia Pass and Whistler Blackcomb pass sales in both periods.

We expect to exceed 650,000 total season pass holders this year, including Whistler Blackcomb products and the Epic Australia Pass, representing an incredible group of highly loyal and passionate guests.

This year, we have continued to drive significant growth in our destination markets, which represent nearly three quarters of our sales increase and now represent approximately 48% of our total pass holders. In Chicago, one of our most important destination markets, we have seen pass sales growth that is well ahead of our other U.S.

destination markets due to our acquisition of Wilmot Mountain and subsequent transformational investment at the resort. We have seen continued growth in Colorado and benefited from a strong rebound in Northern California. Lodging bookings for the rest of the season are trending slightly ahead of last year at our U.S. resorts.

Based on historical averages, less than 50% of the bookings for the winter season have been made by this time. While November was a fairly warm month for our U.S. resorts, colder temperatures and snowfall returned during Thanksgiving and all of our destination resorts are now offering a terrific early season experience.

We closed on the acquisition of Whistler Blackcomb in October and are thrilled about this transformative addition to Vail Resorts. We are looking forward to the full integration of the resort into our network over the coming year and offering access to Whistler Blackcomb in addition to our other resorts to pass holders for the 2017/18 ski season.

We are very pleased with the sales of season pass and frequency card products at Whistler Blackcomb, which are trending well ahead of the prior year.

Whistler Blackcomb's lodging bookings are also trending well ahead of last year, with the resort benefiting from strong momentum from last season, outstanding early season conditions, and an attractive Canadian dollar exchange rate relative to the U.S. dollar.

In addition, we are excited for our Chicago area skiers to experience the transformed Wilmot Mountain which opens next week with new base area facilities and dramatically improved on mountain infrastructure.

Our guests at Vail Mountain will have the opportunity to experience the enhanced lift service in the legendary Back Bowls with the new Sun Up chair, and guests at Breckenridge will be able to enjoy our new restaurant at the top of Peak 7, providing additional dining capacity serving the Peak 6 terrain.

I am also very pleased to announce that our Board of Directors have declared a quarterly cash dividend on Vail Resorts common stock. The quarterly dividend will be $0.81 per share of common stock and will be payable on January 12, 2017 to shareholders of record on December 28, 2016.

Additionally, an equivalent dividend on the exchangeable shares of Whistler Blackcomb Holdings Inc. will also be payable on January 12, 2017 to the shareholders of record on December 28, 2016. Now I would like to turn the call over to Michael to further discuss our financial results and our fiscal 2017 outlook..

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 our first quarter of fiscal 2017 ended October 31, 2016 in 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 Web site at www.vailresorts.com. For the first fiscal quarter, resort net revenue was $178.2 million, an increase of 7.8% compared to the prior year quarter. Resort reported EBITDA was a loss of $53.3 million.

The Whistler Blackcomb transaction closed on October 17, 2016 and resulted in a $5.4 million resort reported EBITDA loss for the quarter, which includes the $2.6 million EBITDA loss from off-season operations after closing and we incurred $2.8 million of transaction and integration-related expenses during the quarter.

Excluding the Whistler Blackcomb loss, our resort reported EBITDA would have been a loss of $47.9 million, a $1.4 million increase loss compared to the prior year.

Turning to real estate, as previously announced, we closed on the sale of a land parcel at the base of Peak 8 in Breckenridge for $9.3 million during the first fiscal quarter, which contributed $6.5 million to Real Estate Reported EBITDA.

Real Estate Reported EBITDA was $5.1 million for the first fiscal quarter, as compared to $1.2 million in the same period the prior year. For the quarter, net real estate cash flow totaled $6.6 million. Finally net loss attributable to Vail Resorts, Inc. was $62.6 million, or a loss of $1.70 per diluted share, for the first quarter of fiscal.

Our balance sheet at quarter end and after completing the Whistler Blackcomb acquisition remains very strong. We ended the quarter with $106.8 million of cash on hand and $1.3 billion of Net Debt.

To fund the cash portion of the acquisition, we expanded our existing term loan facility by $509.4 million to $750 million and extended the maturity date of that facility to October 2021.

Additionally, we assumed Whistler Blackcomb's existing Canadian dollar denominated revolver totaling C$300.0 million, of which approximately C$190.5 million was outstanding as of October 31, 2016 and we also extended the maturity date of the facility to November 2021.

Our net debt was 2.9 times trailing twelve months total Reported EBITDA at October 31, 2016, though it is important to note that this ratio only includes Whistler Blackcomb's results for the two week period between closing and quarter end. While November results at our U.S.

resorts were below expectations, they represent a relatively small portion of our revenue for the ski season and based on improved conditions during December we are reiterating our guidance for fiscal 2017, excluding the results and impact of Whistler Blackcomb.

Including the results and impact of Whistler Blackcomb, we now estimate Resort reported EBITDA for fiscal 2017 will be between $567 million and $597 million. Our updated estimate for fiscal 2017 Resort reported EBITDA incorporates $87 million of estimated incremental resort reported EBITDA from the impact of the Whistler Blackcomb transaction.

This assumes full year Whistler Blackcomb resort reported EBITDA of $91 million or C$126 million with $95 million and C$126 million estimated from October 17, 2016 the date of closing of the transaction through the remainder of fiscal 2017. This also assumes $8 million of estimated transaction and integration related costs in fiscal 2017.

The expectations for Whistler Blackcomb's full year operating results are in line with the resort's performance in fiscal 2016. We now expect resort EBITDA margin to be approximately 30.5% in fiscal 2017, using the midpoint of the guidance range. All of these estimates are predicated on an exchange rate of $0.75 between the Canadian dollar and U.S.

dollar, related to the operations of Whistler Blackcomb in Canada and an exchange rate of $0.77 between the Australian dollar and U.S. dollar, related to the operations of Perisher in Australia. These estimates are also predicated on normal conditions at our resorts and a continuation of the current economic environment.

Now I will now turn the call back over to Rob..

Thanks, Michael. We remain committed to reinvesting in our resorts, creating an experience of a lifetime for our guests and generating strong returns for our shareholders.

While we will announce our complete capital plan for calendar year 2017 in March 2017, we are pleased to announce several signature projects that we intend to construct in 2017 for the 2017 for the 2018 ski season.

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 number 11 with 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 more 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 the mountain, and we will be renovating and expanding Labonte's restaurant by 150 indoor seats to increase mountain dining capacity at the fourth most visited resort in the U.S.

all of these projects are subject to regulatory approval. Consistent with our long-term capital guidance, we expect our calendar year 2017 capital plan will total approximately $103 million, excluding investments in summer activities and Whistler Blackcomb.

Including Whistler Blackcomb, we will be increasing our long-term capital guidance by approximately C$25 million or $19 million, excluding certain non-mountain components of the Renaissance project such as the Watershed and any integration capital associated with the transaction.

We will be providing further detail on our calendar year 2017 capital plan, including expected summer investments and integration capital associated with Whistler Blackcomb, in March 2017.

As we close, I am pleased to report that we have good conditions across our resorts as we head into the holiday period and we are particularly happy to note that early season conditions at Whistler Blackcomb are very good. With over 10.5 feet of snowfall already recorded this season.

I want to take this opportunity to extend a special welcome to our colleagues at Whistler Blackcomb, who have created an incredible resort for guest from around the world, I want to thank the team at Whistler Blackcomb and all of our employees for their passion, hard work and dedication it is their commitment that allows us to deliver and experience of a lifetime to our guest.

We look forward to a great 2016/2017 season ahead. At this time Michael and I will be happy to answer your questions. Operator, we are now ready for questions..

Thank you. [Operator Instructions] We will go first to Felicia Hendrix with Barclays..

Hi, good morning. Thank you.

So Rob, you just ended talking about some of the improvement in your conditions, and I was just wondering, you know, with the conditions generally improving in December versus what you saw in November, have you seen any traffic pick-up at your resorts in real time both not only in terms of your local or more drive through visitors, which I would think would be kind of turn on a dime better, easier weather changes, but also in terms of increased call volume or accelerated reservations from your destination guests?.

Yes, I would say we have. I think it's pretty common that when we get a big storm or the temperature shifts, obviously, we have been getting some pretty consistent snowfall over the last week or so, obviously very low -- I am talking about mostly Colorado and Utah, where we are particularly warm in November.

Once it turns cold, and obviously we have been running snow making pretty consistently now for the last couple of weeks, the weather forecast looks better, yes, that certainly helps to drive call volume.

I think any dip in call volume from November is also somewhat to be expected not hugely concerning though again just given the overall patterns, but there is no doubt that it's nice to get snowfall to kind of remind people to book that vacation and to just get in the thinking mode about skiing and ski resorts..

All right, thanks. And then just you know, look, regarding FX, the dollar continues to strengthen.

So I was just wondering if you could talk about any impacts or any kind of accelerated or change in impact in international demand, and is there any advantage at all with that, having Whistler you might be able to capture those skiers at Whistler even though the Canadian dollar has also been strengthening, maybe you could -- now that you have Whistler you are not so vulnerable to just people saying, "Oh well, you know, the dollar is stronger now, we are not going to come at all.".

No, absolutely. I think we feel, I mean I think we talked about this when we announced the Whistler transaction that we felt like having Whistler provided a kind of sort of hedge as it relates to especially that international traveler and where they are going. I do think our resorts last year were negatively impacted by the strong U.S. dollar.

Obviously it's still early, but I think we would expect that impact to continue through this year in the U.S. And the other side of it is, I think Whistler absolutely benefited last year, and we are seeing signs that they are benefiting again this year from extra traffic and booking visitations that we believe are impart due to a strong U.S.

dollar and a more attractive Canadian dollar. So, obviously -- I am not sure, if that will –- we have not studied, and hard to tell that's a perfect hedge, but there is no doubt that where we were last year, I think going into this year, we have an opportunity to benefit from the strong U.S. dollar where last year we really did not..

All right, thank you, and my final, and this is kind of in the spirit of what's next.

Your season pass sales growth in Chicago definitely demonstrates the success of your urban ski mountain acquisition strategy, so I'm just wondering what the opportunities to expand that are maybe acquiring smaller resorts in other, you know, regions outside the Midwest such as the Northeast, specific Northwest California or even Canada?.

So, yes, we think that, you know, the strategy of acquiring resorts that we think strengthen the network, it still remains a high priority.

We feel like the Midwest offered this unique combination in terms of the capital costs for the resort versus the importance of those markets, but yes, no doubt, some of the other areas within North America we feel are -- you know, may not have been our top priority, but our strong second priority, and we feel especially given with -- now with Whistler and with Park City we think they can be that much more impactful.

So we are going to be continuing hard at work at identifying those. And in the ski industry, it is not that easy to put together a transaction. It takes typically a lot of time and a lot of work, and so, knowing exactly when those will happen is difficult, but it certainly remains a key part of our strategy..

Thank you so much..

Great. Thanks, Felicia..

And we will take our next question from Cameron McKnight with Wells Fargo..

Good morning. Thanks very much.

So, with respect to Whistler, the season is obviously off to a good start, any surprises, positive or negative since you closed the acquisition?.

I would say that we've been in a very positively -- we wouldn't say surprised, we're just pleased that with enthusiasm of everyone who works at the resort that and the local community and the broader British Columbia Province, for working collaboratively there, how to -- continue to drive the success of the resort going forward also, how do we address all of the issues that come with growth, and we just have been so pleased with that dialog.

I think that has been -- it's just been terrific, and no surprise at all that the passion that we feel for all of our resorts across Vail Resorts is exactly in passion that everyone at Whistler field. So we feel like that it just gives a great foundation for this combination.

And I know, I think it is -- it truly is a world-class resort that has just done an amazing job of building it's brand, building it's connection to guests, and we also feel that many of the opportunities that we thought would be available by bringing them together with the rest of our resorts, yes, we're certainly as confident -- more confident that that's a significant opportunity as we look to the future..

Great, thanks. And season pass sales are clearly strong as well. I mean historically, they have paced roundabout 40% of lift revenues.

Is there any reason that we should expect that mix this year to increase or decrease?.

I don't think.

Obviously, there is always going to be -- that percentage will be somewhat dependent on the success of the program, which obviously we're seeing nice growth in, but then also the success of the day ticket purchaser, and it's little hard to tell exactly where that will come out right now, but we feel very good about that, the trends in both of those areas.

And then in particular, how that will continue to play out, and we think over time we will be able to increase obviously the percentage of folks who are on some of their frequency and in pass cards, just given everything else that we can offer in terms of new resort access to those people..

Okay, got it, thanks.

And then one last question, United Airlines recently called out an extra week between Thanksgiving and Christmas this year as a boost to leisure spending year-on-year, is that material for you guys or not of consequence?.

Yes, it's a good question. I think it's something -- let us look back on that, I actually really have not focused on the extra number of days, because for us the season actually -- every holiday has it, right, is moving around, and it has its own impact, where Easter is, where President's Week is, where Spring breaks, fall out.

So we actually incorporate all of that together.

I would say one and two, this year because of the warm weather that led into Thanksgiving, you know, more of the trends that we're seeing are from -- the ramp up from the cold weather that hit Thanksgiving, where those days this year versus last year, there is no doubt last year were better days and those days that might have gotten added in the early part of that time period..

Got it. Thanks very much..

And we will take our next question from Tyler Batory with Janney Capital Markets..

Hey, thanks. Good morning, guys. So I know that Whistler is part of the Mountain Collective pass product, and I assume that potentially that won't be the case next season.

So, just wondering if maybe you comment on the extent to which the Mountain Collective has driven, recent pass sales at Whistler, and then also not sure that if there is any color you can give on how you're thinking about customers you could potentially lose by ending that pass affiliation compared with what you might be able to pick-up by offering the full benefits of the Epic Pass?.

Great. Yes, so we will -- for the 2017-2018 ski season, Whistler Blackcomb will not be part of the Mountain Collective, and it will definitely be part of the Epic Pass program. For 2016-2017, anyone who has purchased a Mountain Collective Pass can use it at Whistler Blackcomb, and they will be fully honored, you know, as they would've expected.

The pass sales for the Mountain Collective are not included in the pass sales results that we're commenting on for Whistler Blackcomb. So when we say that Whistler Blackcomb's pass sales were -- I had it last year that is just their own pass sales and does not include any information on the Mountain Collective.

We do feel that Whistler Blackcomb was a compelling resort for Mountain Collective, and we feel it will be a compelling resort for our season pass efforts.

So, we are not concerned that somehow we would go backwards in terms of the resort's performance because of that transition, and obviously if anything we think that it will provide a boost not only to Whistler Blackcomb into all of our other resorts, you know, to be in that network, and I would say obviously we feel quite proud of the resorts we've in our network, but really as much beyond that just the type of personalized effort that we make through our season pass efforts, a very focused data-driven marketing effort, right, to reach out to people not only within the U.S.

and in Canada but around the world, and we feel like now including Whistler Blackcomb in that effort will really provide just add to the momentum that we're already having with our season passes..

Okay, great. And this is a follow-up, I'm wondering if you have any thoughts on Airbnb in some of your markets.

It doesn't really seem to be impacting the Lodging segment, but just curious if that's something that's growing, potentially driving more visitation, and also curious if you're maybe seeing any apartments that can be used by your employees which are not being rented out by Airbnb instead?.

I'd say yes, we are seeing -- I don't know that we have exact numbers on this, but we're certainly anecdotally seeing that Airbnb and the whole RBO channel is growing within our resorts. We think that's a trend that is certainly helpful to bringing more guests to the resort.

It is a channel of competition for our lodging business, though our lodging business, the property management side of it in particular uses the RBO channel and Airbnb as one of its channels.

So, when we manage somebody's property, we are able to put it on our own channels, other third parties like Expedia and Airbnb, and so, we feel like we actually can provide our homeowners actually the best of all worlds, and we think that's been a great service. That has helped to continue our performance in lodging business.

No doubt, your last point is true that we do feel like the expansion of the RBO effort has taken affordable units out of the market that could be there for employees of our resort or employees that work for other businesses in the community, and that is a serious concern and something that is actually one of top priorities is working on efforts to come together with other businesses and communities, and actually build more affordable housing to make up for some of the inventory that might be lost from the RBO channel.

Last year, we dedicated $30 million towards those efforts, have a project we've announced in Keystone that we think will go a long way towards helping in Summit County and we had discussions going on in all of our resorts. So, it is a bit of a mixed blessing this and with many different impacts of Airbnb dynamic..

Okay, that's great. Thank you, guys..

And we will take our next question from Ben Chaiken with Credit Suisse..

Hey, guys. It seems as a huge opportunity in Australia and 650 pass number you called out seem to support that.

Is there anything different you're doing in this geography to market your pass, especially following the integration of Whistler Blackcomb, and furthermore, have seen a pronounced pick-up in this Australian market, or is that something you're more targeting for next year once Whistler is fully integrated the pass and the marketing message surrounding that?.

Yes. So, thanks. Yes, we -- I'd say, we -- the selling season for passes in Australia is very different than the seasons in the winters that they correspond to.

So, in the spring of 2016 in Australia, which is August through October that is a big portion of the time that we sell the Epic Australia pass, and we announced Whistler at the very, very end of that selling period. So we actually did see some initial very positive signs, but again it was at the very end of it.

We will then really be doing another promotion of those pass sales in the fall of 2017, meaning April to June in Australia for the winter of 2017 in Australia which is June through -- just trying to make sure we all remember, June through September.

And so, we do think that we will have a nice impact out to those sales by including Whistler Blackcomb and then we think there will be another nice bump in the following spring in Australia, meaning August to October of 2017. So, yes, we didn't get a chance to really include Whistler Blackcomb in those messages.

I think the next -- I think that will be a nice opportunity. I also think a lot of the database analytic effort, the segmentation, the personalization that we put into our season pass program in the U.S. that is clearly driving a good portion of our strong results.

We are prioritizing, including Whistler in that effort for next year; not Perisher in Australia whether we can, you know, but that will be another opportunity for us in Australia may come in 2017, may have to wait till 2018, just based on our capacity, but yes, we still feel very good about the opportunity there..

Awesome. That's really helpful, and the monthly cadence is especially helpful.

One last one from me if you're able to, do you think that Whistler had a decent kind of CRM, I know it's not going to be to your level, but this season CRM with the Australian visitations that they were already getting, or is that something you kind of need to build out moving forward?.

Yes, I would say that they were not -- Whistler was not as active in -- with CRM efforts in their international sales effort.

And I think they also much like we were just a couple years ago, the data that they're collecting on individuals who are purchasing, who were not purchasing a frequency card or season pass, so on everyone else, yes, they are kind of like where we were a couple of years ago and obviously we were able to move from the kind of 40% type data capture to the 90% type data capture, and that's something that we are hopeful that we can do with Whistler as well.

That's probably will start with North American visitors, and then a second step as we move to doing that for international visitors. So, yes, I think we feel great about where we are with Whistler Blackcomb, and the opportunity to bring them into a lot of the programs and approaches that we use..

Awesome. Thanks, guys..

Thanks..

And we will take our next question from Chris Agnew with MKM Partners..

Thanks very much. Good morning.

Maybe wanted to follow-up on the Mountain Collective question and whether they were individual resorts are evolving their season pass products or pricing strategies in anyway to be more competitive with you? And I guess you mentioned that no one has the ability or the scale to compete with respect to targeted marketing that you do. Thanks..

Sure. I think it's -- I guess I'd say it's something you can't -- it's obviously harder, it's easier as a singular company, it's hard, candidly it's taken us many years to build the team, the approach, the practices, all the learnings that you have. So that's -- I think that's just sometimes hard to replicate as a consortium.

I certainly can't speak for the mountain collective. I would say that certainly every year we see many different resorts and some of the kind of consortiums of resorts introducing new products that are more competitive, new ideas, new concepts which we like.

We think it keeps us on our toes, as a company we also think that it constantly provides a better value for skiers and riders, and we think it continues to remind skiers and riders that the best way to purchase your skiing is through an advance product like a season pass.

And so, the more that all resorts can remind skiers and riders that "Hey, you should buy a pass," we are comfortable, there is so much more room to penetrate the destination market on passes in general, we are very comfortable we will get our share of that.

So we really welcome the competition and the increased intensity from everyone on broadening that message..

Okay, thank you. And then, I think if I am right, you were targeting EBITDA contribution from the summer program about $6 million to $8 million at this year, did you hit those goals and any update in general on progress with Epic Discovery? Thank you..

Yes, sure. So we had a terrific first summer on Epic Discovery.

We felt like we were -- this is a completely new thing for us, and many of the start-ups, right, obviously with construction and everything else really didn't get going until weeks into the season, but once we actually got up and running, the enthusiasm that we saw from our guests, the passion for it, the number of people coming up the hill, the increases in EBITDA, visitation and everything were outstanding, and candidly I think give us more confidence about the growth that we can have in this area.

I'd say for this summer, we are probably just a tad short of that range, again very modestly, but mostly because of the fact that many of our activities actually didn't get going until we hit July and a little later, and I think have we had them up and running for the very beginning, we are comfortable we would have hit that range..

Excellent, thank you..

And gentlemen, I will turn the call back to you for any additional or closing remarks..

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

Thank you. And that does conclude today's conference. Thank you for your participation. You may now disconnect..