Vail Resorts Inc (MTN) 2016 Q4 法說會逐字稿

Good day and welcome to the Vail Resorts fourth-quarter and FY16 earnings results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to your host, Rob Katz, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to our FY16 year-end earnings conference call. Joining me on today's call 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. 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, September 26, 2016, and we undertake no duty to update them as actual events unfold.

Today's remarks will 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 annual report on Form 10-K, 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 FY16 results. We achieved another year of record-breaking results with significant growth across our Business. We are very pleased to complete the year with resort-reported EBITDA of $452.6 million, which included $1.4 million of transaction expenses related to the pending Whistler Blackcomb acquisition. This represents 29.5% growth in resort-reported EBITDA in FY16, excluding the $16.4 million non-cash gain on the Park City litigation settlement in the prior fiscal year.

Our results were driven by the strength of our network and excellent performance across all of our resort locations. Our season pass program continued to drive both growth and stability, with season pass revenue increasing 21.5% compared to the prior year, which includes a full season of Perisher season pass revenue in FY16 versus a partial year in FY15.

We experienced another outstanding year in Colorado, with visitation and guest spending outperforming last year's results. In Park City, we met our very high expectations following our capital transformation last summer that combined Park City and Canyons into the largest mountain resort in the United States. In Tahoe, our results rebounded strongly, as favorable weather conditions helped to reactivate visitation in the region.

We officially launched Epic Discovery at Vail and Heavenly this summer, driving significant increases in visitation and revenue in the fourth quarter of FY16. Our summer business will continue to grow, as we further build out activities at Vail and Heavenly, and officially launch Epic Discovery at Breckenridge next summer. Finally, we continue to execute our strategy with a focus on disciplined cost management, which played a critical part in achieving resort EBITDA margins for the year of 28.7%, a 300-basis-point expansion compared to FY15, excluding the non-cash gain on the Park City litigation settlement in FY15.

In early August, we announced the pending acquisition of Whistler Blackcomb, the largest and most visited mountain resort in North America. We are pleased to report that the Canadian Competition Bureau has issued a no-action letter for the transaction, and we continue to expect that the deal will close this fall, pending Whistler Blackcomb shareholder and remaining Canadian regulatory approvals. We plan to share more details about the transaction, our integration plans, and expectations for FY17 during our December earnings call.

Turning now to our 2016/2017 season pass sales for our US resorts, we are extremely pleased with our season pass sales to date. Through September 18, 2016, US ski-season pass sales increased approximately 24% in units and 29% in sales dollars compared to the prior-year period ended September 20, 2015. Our growth continues to be driven by our increasingly sophisticated and targeted marketing efforts to move destination guests into our season pass products, with this segment representing over half of this year's growth.

As always, we do expect our season pass growth rates to decline through the end of our selling season, given that some of the increase is driven by our efforts to encourage guests to purchase their passes earlier in the year. Last year at this point in the year, we had sold approximately 60% of our season passes for the upcoming ski season, though we believe that figure may be higher this year, given we are moving guests to purchase earlier in the selling cycle.

Finally, I'm very pleased to announce that our Board of Directors has 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 October 25, 2016, to shareholders of record on October 7, 2016. Now I would like to turn the call over to Michael to further discuss our financial results and our FY17 outlook.

Thanks, Rob, and good morning, everyone. As Rob mentioned, we are very pleased with the results from FY16. With the strong high-end US consumer, we are continuing to leverage our growing network of resorts and sophisticated marketing strategies to drive higher visitation and yields across our Business.

For FY16, resort net revenue was $1.6 billion, an increase of 16.2% compared to the prior fiscal year, and resort-reported EBITDA increased to $452.6 million. Total mountain net revenue increased 18.2% to $1.3 billion.

Total skier visits, including a full year of Perisher results, surpassed 10 million annual visits for the first time and increased 18.5% in FY16. Total US skier visits increased 13.2%.

Total effective ticket price increased 3.5%, driven by season pass and lift ticket price increases across our resorts, partially offset by higher visitation per pass. ETP, excluding season pass holders at our US resorts, increased 9.8%. Our ancillary businesses also experienced growth with ski school, dining, and retail revenue up 13.5%, 19.8%, and 10%, respectively, compared to the prior year.

FY16 was another strong year for our lodging segment, with net revenue increasing 7.9% and lodging-reported EBITDA increasing 30% compared to FY15, which includes $3.5 million of lodging-reported EBITDA associated with the termination of the Company's management agreement with Half Moon Resort in Jamaica in FY16. These improvements were primarily driven by a 210-basis-point improvement in occupancy and a 3.5% growth in average daily rate, resulting in an 8.8% improvement in revenue per available room compared to the prior year. Our lodging segment benefited from increased visitation at our mountain resorts during the ski season, as well as continued growth in summer visitation, particularly at our Tetons properties.

Moving on to real estate, we generated $22 million of net real estate cash flow in FY16. For the full fiscal year, we closed on five units at Ritz-Carlton Residences Vail, three Crystal Peak lodge units in Breckenridge, and two One Ski Hill Place units in Breckenridge. During the fourth quarter, we closed on two units at Ritz-Carlton Residences Vail and one unit at Crystal Peak Lodge.

Subsequent to the end of FY16, we closed on the sale of a land parcel at the base of Peak 8 in Breckenridge for $9.25 million to the same developer that purchased a Peak 8 parcel in 2012 to build time-share product. As of September 23, 2016, we have four units at Ritz-Carlton Residences Vail and two units at One Ski Hill Place remaining to be sold, and we have approximately $94.7 million of real estate held for sale and investment associated with land parcels at our resorts.

Net income attributable to Vail Resorts was $149.8 million, or $4.01 per diluted share, for FY16, compared to net income attributable to Vail Resorts of $114.8 million, or $3.07 per diluted share, in the prior fiscal year. During FY16, the Company repurchased 485,866 shares for a total of $53.8 million, and we currently have an authorization to purchase up to approximately 2.1 million additional shares.

Finally, our balance sheet continues to be very strong. We ended the fiscal year with $67.9 million of cash on hand and $75 million of borrowings under the revolver portion of our senior credit facility. As of July 31, 2016, we had available borrowing capacity under the revolver component of our credit facility of $252.8 million, and our net debt was 1.4 times trailing 12 months total reported EBITDA, which includes $323.1 million of long-term capital lease obligations associated with the Canyons transaction.

Now turning to our outlook for FY17, we are pleased to enter FY17 with an expectation for strong growth across our Business. Our guidance figures exclude any impact from the pending acquisition of Whistler Blackcomb, including associated transaction-related and integration costs.

For FY17, we expect resort-reported EBITDA will be between $480 million and $510 million, or 6.1% to 12.7% growth over FY16. The mid-point of our FY17 resort-reported EBITDA guidance represents growth of approximately $146 million, or 19% compound annual growth from our FY15 results, excluding the non-cash gain on Park City litigation in FY15.

We expect our growth will be driven by the continued success of our core strategy of increasing guest loyalty by moving skiers and riders into our season pass products, creating a more personalized and relevant conversation with each of our guests, and using sophisticated approaches to drive yield increases. We also expect to be able to drive continued growth in our ancillary businesses, based on continued increases in guest spending.

Our guidance anticipates normal weather conditions across our resorts and a continuation of the current economic environment. It also assumes a continuation of existing currency exchange rates, which we expect will continue to impact bookings from international markets.

FY17 will include results from Wilmot Mountain, which we expect will generate incremental EBITDA of at least $4 million. FY17 will also benefit from the launch of Epic Discovery at Breckenridge, and the second year of our full summer program at Vail and Heavenly.

We will continue to focus on disciplined cost management, and leveraging the fixed-cost nature of our resorts and the operating efficiencies we have created through our centralized infrastructure. We expect FY17 resort EBITDA margin to be 29.7%, at the mid-point of our guidance range, a 100-basis-point increase from FY16 and a 400-basis-point increase from FY15, excluding the non-cash gain on the Park City litigation settlement in FY15.

We expect to achieve these margin improvements after making continued investments in increased wages and expanding our employee housing offerings. One of our top priorities will remain improving the employee experience at our resorts.

Moving on to our real estate segment, it's important to remember that results are impacted in any given year by the timing and mix of real estate sold and closed. For FY17, we are expecting positive real estate reported EBITDA of between $2 million and $8 million. Net real estate cash flow is expected to be between $10 million and $20 million.

FY17 net income attributable to Vail Resorts, Inc. is expected to be between $165.5 million and $194.5 million. Our estimates are predicated on an exchange rate of $0.77 between the Australian dollar and US dollar related to the operations of Perisher in Australia. I'll now turn the call back to Rob.

Thanks, Michael. We are proud of our FY16 results and excited about the opportunities ahead in FY17, with our growing network of world-class mountain resorts. We are looking forward to completing the Whistler Blackcomb transaction, and beginning the integration to create the opportunity for guests in the US, Canada, and around the world to experience this incredible resort as part of the Vail Resorts network.

Over the summer we have been hard at work making further improvements to our resorts and the guest experience. For the upcoming ski season, we are particularly excited to welcome Chicago-area skiers to the transformed Wilmot Mountain, where we have made dramatic improvements to the base facilities, lifts, and snow-making infrastructure.

In addition, guests at Breckenridge will enjoy our new 500-seat restaurant at the top of Peak 7, and guests at Vail will have an enhanced experience in the famous Back Bowls, with the new Sun Up lift, or Chair 17, which we upgraded from a fixed grip triple to a high-speed four-passenger chair. Consistent with our overall strategy, we believe that reinvesting in our resorts is one of the key differentiators to our success.

I would like to close by thanking everyone who works at Vail Resorts and everybody who is part of our resort communities for making FY16 a great year, and delivering on our promise of providing an experience of a lifetime to all of our guests. At this time, Michael and I will be happy to answer your questions. Operator, we are now ready for questions.

Thank you, sir.

(Operator Instructions)

We'll take our first question from Shaun Kelley with Bank of America.

Hey, guys. Good morning. Can you hear me okay?

Yes, we can.

Great. So, obviously, the season pass metrics continue to be exceptional. So, the last two seasons, Rob, we haven't seen too much of a deceleration. Obviously, your language always remains pretty cautious here.

But could you just give us a sense, are you expecting things to slow pretty materially or do you think, again, given everything you're doing on a database marketing side, that actually a pretty healthy growth rate is going to be maintained here? Just any sense of magnitude without getting into specifics would be helpful.

I'd say that we -- one of our primary strategies around season pass is to get people to buy earlier. And so when you think about the growth rates, obviously, when we're both driving growth, moving people earlier in the season, you look at that growth and you take it over a smaller base. Even if we continue healthy continued absolute unit growth going forward, it's over a larger base and you don't have the benefit of moving people earlier into the cycle. So in our minds, when we look at those trends, we do feel like we're going to see those growth rates decline, but that's actually a success.

Now, is it possible, and we have seen this in other years, where we've had real strength toward the end of the selling season that's helped offset that? Yes, that's possible. But I think at this point, especially just given the level of growth rate in the 20%s that we're seeing earlier in the season, we think we're being fairly realistic about those growth rates coming down. Again, in our minds, that just means that we're doing a good job of moving people earlier in the cycle and locking them in.

And you guys have never really talked about renewal rate specifically for this group. But as you get better at everything you're doing on the database side, any sense of -- is there a standard renewal rate that you tend to see, and is that ratio beginning to change or likely improve?

So we are seeing improved renewal rates across the board. I think we've always talked about how with our season passes there is a chunk of folks who don't renew because of life-stage changes, moving, we have college kids who come and then leave. We have folks who have kids or different spots with their family, all of that. And then we have folks who are what we call the samplers, folks who are coming to our resorts, but these are not locals but destination skiers who like to try different things.

And so for us, right, our goal is really to move people from buying daily lift tickets to buying season passes because we know that the renewal rate or the return rate on a season pass is much higher than if they're just buying a lift ticket. And then our goal once they're in the season pass program is to get them to renew that first year and second year. One of our top priorities for this year has been to increase that first-year renewal rate, because, obviously, we're adding so many people to the program and we've been very successful with that. The key, obviously, is once you see a second year or a third year, all of the sudden the renewal rate goes way up.

One of the things that is driving our growth is increasing that renewal rate. And a big part of that is us being smarter and more sophisticated in terms of how we talk to people, the messages we send, and how we get them to come back into the program.

Perfect. Last question is just on real estate. This is a little bit of a delta to just how the model was coming through. Just for you or Michael, does that number include the $9 million from Breckenridge? Is that the big driver for what we know so far, or is there something else that's moving that number?

Yes, that is a big driver for the year is the Breckenridge (multiple speakers).

Okay. Great. Perfect. And that will flow through in fiscal Q1?

Yes.

Okay. Great. Thanks, guys.

Thanks.

Our next question will come from Felicia Hendrix with Barclays.

Good morning. Thank you. Just sticking on the topic of the season pass sales, I was just wondering if we could get a little granular and talk about what markets perhaps drove some of the strength. You said destination was strong, but I was wondering if you could get more specific. Just wondering if you saw any more attention or buzz around the season pass program after it was announced that you acquired Whistler?

So, yes, if you looked across the board, our destination markets were the strongest in terms of overall growth rate; that's been consistent with our trend over the last number of years. Within that, Chicago was the strongest performing major market. Again, no surprise there because of the acquisition that we did. We've seen very strong growth in Tahoe, again, not a big surprise there, given the better weather that we saw last year.

I think we also saw some real strength in the Colorado market. Obviously, that market's going to grow slower than the other two. It's a much bigger, more mature market, but we were very pleased with the results that we saw there. We actually saw continued growth, albeit on smaller numbers, in our international markets. So again, I would say really pretty good momentum across the board.

In terms of, after the Whistler announcement, we did not see any dramatic shift after that announcement. Obviously, there's so many trends going on with our deadlines that it's not clear that we would necessarily be able to detect it. But in our minds, we're seeing -- the growth that we were seeing before we made the Whistler announcement has continued and didn't seem to be changed one way or the other by the Whistler piece.

Obviously, we're pretty clear in our announcement that the Whistler transaction, just given the timing of closing, wasn't going to be a factor in access that we were going to be providing to people for this upcoming season. And so, obviously, at the moment, our focus is really around adding Whistler for the 2017-2018 season pass.

Okay. Great. Thanks. And then, Michael, your guidance, you talked about this assumes 100-basis-point growth in EBITDA margins and you talked a bit about that. I was just wondering what could be realistic drivers to upside of that number?

Yes, I think what you saw this year is how you see upside to our margin, which is that we try to budget a cost structure that, with our guidance, will deliver real operating leverage. And clearly in a year like this year where we came in well above our target range, the flow-through that we see on that is quite significant. And so, I think you saw that this year in terms of our ability to drive incremental operating leverage in a year where we have really strong results.

Okay. Great. And then just finally, just wondering if we could just get an update on your cash distribution policy? Is the 10% increase in your float after the Whistler deal, does that make you more likely to buy back shares in the future? Do you prefer dividend increases? Maybe if you could just give us an update on that.

I don't think we -- I think we feel like the transaction should, obviously, overall improve our free cash flow position and improve the stability, financial resources that we have. And so we absolutely intend to continue looking for ways that we can return capital to shareholders. And I think it will be about both buybacks and dividends.

And I think on the buyback front, I think we -- our goal was to be more consistent than we were in the past, although still opportunistic, meaning factoring in our stock price to some extent. I think we have every intention and our Board does of continuing that policy as we go forward, of course, always as external conditions warrant.

Okay. Great. Thanks.

Thanks.

We'll move on to Ben Chaiken with Credit Suisse.

Hey, guys. In terms of your season pass comments, are you seeing a larger change than usual with regards to your repeat customers buying earlier? Or is it more just comparing to a larger base year over year, as you mentioned?

No, I would say it's both. I think we are definitely seeing folks -- I'd say two things. One, we are definitely seeing folks who purchased last fall, buying in the spring this year, and we've seen that trend in previous years and we're seeing it this year. I think that's probably even more so in Tahoe than in our other regions, just given I think the enthusiasm that market has right now, given last year.

And we're also, I think, getting better and better at actually bringing new pass holders into our spring and Labor Day sales efforts, where I think if you went back three or four years, five years, most of our new pass holders always came in the mid to late fall because they typically were procrastinating or weren't sure that they were going to buy because they were new and hadn't been in the program. And I think we've really -- the team's done a great job of moving folks who are considering a trip earlier in that sales cycle.

And so again, I think what you're seeing in our growth rates has a big component of that in it. And, again, though, bodes very well, of course, for the overall results for the year because we've had a chance to lock in a lot of these newer folks earlier.

Got it. That's helpful. Have you found with Epic Summer that offers you a chance to reach incremental customers for the Epic pass or is that unrelated?

Yes, so I would say on Epic Discovery, I think that the good news is we're introducing many people who have not necessarily been comfortable enjoying the mountains in the winter. They may not be good skiers. They may not be used to the mountain climate. They may not have grown up with family or friends who took ski trips. And so, Epic Discovery really gives us a chance to introduce these folks and hopefully start to convert them to taking winter trips as well to the mountains.

I would not say that the -- the folks who were new to our resorts in the summer or new to mountain resorts in general in the summer are not our best target for season pass sales, because obviously season pass buyers are typically folks who have a pretty consistent history of skiing. And so these are folks I think where we're just introducing them to the sport, which we think is a huge, great, long-term opportunity for us.

But not as much overlap, I would say, on summer and winter season pass-type purchaser. Obviously, the season pass buyer in the winter certainly comes in the summer as well. But the other way around, I think we're a little too early for that.

Got it. And then how should we think about the incremental EBITDA generated by Vail and Heavenly for Epic Discovery? Is it similar to what you guys have outlined in the past and what does that ramp look like?

I think it's on a trajectory that continues to give us confidence in the overall program and in the fact that this is going to deliver strong ROIs. We'll talk more about it when we introduce the capital plan for CY17. We'll talk more about our expectations for what that will do for the summer of 2017. But we feel like this is a -- it's just a great way for us to continue to drive growth at the resort in a whole different season.

Got it. Last one: Which quarter is stronger for summer, 1Q or 4Q?

They both -- July and August tend to be the strongest months. And so it actually winds up being split.

Got it. Okay. Thanks a lot.

Thank you.

We'll move on to Scott Hamann from KeyBanc Capital Markets.

Yes, thanks. Good morning. Just a clarification on your season pass commentary. You said the word decline for the balance of the selling season a few times. Do you mean moderate growth rates, not declines, correct?

Yes, that's right. I'm saying the growth rate will decline.

Got it. Okay. And then just on the international trends, can you give us a sense of where you ended up last year in terms of that? And then what you're seeing with -- whether it's season pass -- I know you mentioned a little bit's international, but bookings, any visibility you had there? And what's contemplated in your guidance for FY17?

I would say last year obviously was a challenging year on the international front. We had I think some real headwinds, I think particularly from the UK, from Canada, and from Australia. I think the UK and Canada were down pretty significantly, where Australia actually was up double digit for us because of Perisher and the season pass offering that we created there.

Mexico, I think, was a market that we had been seeing pretty good growth and last year about flat, up or down a little bit depending on how we looked at it. Brazil was down dramatically, I think partially currency, but a lot to do with their own economic challenges.

I think as we go into this year, I think we're seeing better stability. One, the currency hasn't -- the US dollar remains strong, but if you think about a year ago, it was really in the middle of -- especially we think about a year ago last summer or spring, the US dollar was strengthening dramatically, causing some instability there.

I think now with the currency having stabilized, we feel like that positions us pretty well going into this year in terms of really for those countries where we did see some declines to really moderate those declines, if not eliminate them in some cases. We're also quite hopeful to be able to continue to drive growth from Australia.

That said, with the strong US dollar, I don't think we can necessarily get back to where we were 2.5, 3 years ago, without seeing some shift in currency. Obviously, if we're fortunate enough to close the Whistler acquisition, that will change this dynamic quite a bit, because Whistler has benefited from the strong US dollar.

And so, one of the attractive components of that opportunity for us is the ability to really have a natural currency hedge where, if the US dollar strengthens, a lot of these countries can increase their visitation to Whistler. But if the rates go the other way, admittedly, we'll pick that up in the US, but obviously we think we'll probably lose some at Whistler. So we feel like this dynamic, post the Whistler acquisition, we'll be in a better position with it.

Makes sense. And then just finally, if you do close the acquisition, will there be any ability for Epic pass holders to be able to ski Whistler at some point this season?

At the moment, we're really not trying to get ahead of ourselves. We want to make sure that the process with Whistler and all the regulatory approvals that we need happen first, and so we're really not focused on what happens after that. We want to make sure to give all of the various entities within the Canadian government the opportunity to review the transaction and make sure we're having a good dialogue with them. And then, we'll pick up after that what our plans are, depending on when the closing date is.

All right. Makes sense. Thanks, Rob.

Moving on to Matthew Brooks with Macquarie.

Hello, guys. I've got a couple of questions. First on the guidance, are you willing to say anything at all about what you're assuming for visits this season, excluding the contribution from Wilmot?

No, we're not putting out anything specific on that.

Okay.

I would just add that a lot of our visit guidance is -- a lot of it is driven by season pass and frequency. And so that tends -- doesn't always tend to be correlated with what's happening with our revenue, so we tend to focus more on revenue and EBITDA.

Okay. On the guidance as well, assuming you finish and close Whistler in the fall, do you think you'll have updated guidance after the close or it will be at the next results?

I think we're thinking, yes, in the December earnings call, just so we -- we need to make sure we sit with them and understand. Obviously, depending on when the closing happens, could be at, near, after the beginning of the season. Obviously, they've got expenses running through.

So we have to make sure we dial that in. And we feel like just given the timing of the closing and when our December call is, that will give us an opportunity, I think, to be a little more thoughtful as to whatever we put out for expectations for FY17.

Makes sense. And the destination, I think there was a previous question about this, it was pretty strong growth. Do you think that the weak weather in the northeast contributed to the growth in the destination visits at your resorts?

Yes, I think that's -- I think we do. I think we feel like the weak weather in the northeast and the good weather out west absolutely was a factor in boosting our results from last year. I think that the western part of the United States or western part of North America benefited from those trends.

That said, I think we feel the most important trends were our ability to drive guest loyalty and repeat visitation, getting more and more destination guests within our season pass program. And obviously, bringing more visitors last year maybe because of weather is one piece, but obviously, with the growth in our season pass program, we really have the opportunity to retain a lot of them. So we think it bodes well for our long-term growth to be able to create those extra visits.

And lastly, being at Macquarie, I've got to ask something about Australia. Can you give us any more color about Perisher and maybe how it performed against expectations when you bought it, in local currency?

I think we're very, very pleased with how Perisher's doing. I think the first two winters there, Australian winter of 2015 and Australian winter of 2016, had their challenges. Neither one was outstanding, start to finish. I think this past winter in 2016 was clearly had some tough dynamics, a more challenging snow earlier in the season, then they had some rain and other things.

We've been very impressed with how well the resort has performed. It has absolutely -- it exceeded our expectations last year, exceeded those expectations again this year. They've got a great guest relationship and connection.

And because the resort is a destination in terms of people booking their trips well in advance, really taking family and friends, holidays down there, we think that has created -- and the season pass growth up almost 70% after we bought it -- you look at that and I think that's created real stability and strength for the resort. And, yes, we've been very impressed so far in the first two seasons.

Thanks. Very useful. Well done, guys.

Thanks.

We'll move on to Chris Agnew with MKM Partners.

Thanks very much. Good morning.

Good morning.

What the thought process behind monetizing and the land parcels for sale? Is it just a question of valuation or are there other considerations? And any update for the base at Park City? Thank you.

So, yes, I think our approach on land sales actually starts with what do we think would really improve the resort and the community? And I think that was always true, even when we were building these projects by ourselves. But I think that's certainly even more true for us now.

Obviously, the projects, though, have to make economic sense, otherwise we would not be able to attract developers and investors to them. But we are very focused on what do we think the resort and the community needs, and that really shapes how we move forward. We've got a dialogue going on in a number of our resorts right now and are hopeful that over the next number of years we'll be able to announce a number of sales or partnerships where we can bring in people to help bring more residential, commercial, and community infrastructure as part of these projects.

And within the base of Park City, we're having a very good dialogue, both with the potential developers and with the local community, and are hopeful we can find a project that makes sense and really helps everyone. And we're happy to take whatever time is required to get there. It's a very critical project for the resort and the city, and so we really need to have something that everyone can feel good about before we move forward.

Thank you. And then, after a year in which labor costs increased, I think, 12% excluding Perisher, and you talked about wage adjustments driving that, is that really a 2016 event and, therefore -- or does some of that bleed through into 2017? Just trying to think about expectations in 2017. Thanks.

I would say some of the labor costs that you're looking at is volume-related labor costs. Obviously with -- when we do more business at the resorts, particularly in Tahoe, obviously there's a number of -- we add a lot of hours. We do have a component of our costs in general, and certainly labor costs, that represents that.

I think if you were just looking at compensation rates, wage rates, benefits, I think what you would see is that is absolutely growing more than inflation across the board. And we anticipate that's going to be the same in FY17, and that will probably -- we're going to need to continue to make investments in overall employee compensation, affordable housing, things like that, for the foreseeable future, unless there's some significant change in the overall marketplace.

Okay. Thank you.

Thanks.

We'll take our next question from Cameron McKnight with Wells Fargo.

Good morning. Thanks very much. A question for Rob: You cited the strong, high-end US consumer in the release. And between the lines, your comments sound perhaps a little more positive on the high end than perhaps 9 to 12 months ago. Can you offer us some thoughts on the high-end consumer and what you guys are seeing generally?

Sure. I don't know -- I'm not sure I feel -- maybe that was just the tone of my voice. I don't -- I think we -- what I'd say is that we have not seen a slowdown in the high-end consumer. I don't know that our confidence is any higher today than it was a year ago in the high-end guest and their discretionary spending.

I think, obviously, there have been some wobbles or whatever in the high-end consumer spending seen in some parts of travel, some parts of retail in particular. But I think what we're seeing is it feels like vacation spending in particular has so far been strong. And certainly, over the summer we didn't see any signs of some kind of slow down. I think people are still booking trips. There may be this trend towards buying experiences, spending money on experiences versus buying luxury goods. Obviously, that would help us.

I think we were just trying to make the point that we're not seeing that yet, doesn't mean it won't show up; obviously it could. But at this point, we are seeing good momentum consistent with what we saw a year ago.

Okay. Got it. Thanks. And then a question for Mike: The FY17 guidance implies cut-through of about 33%, 34% of revenue growth to EBITDA. Are the main variables there revenue growth and weather in terms of that cut-through potentially moving higher?

Yes, I think we are forecasting guidance with the standard operating model that we use, which is a normal year, as Rob said, continued strength in the consumer. And similar to Felicia's question, I think ultimately, yes, the upside opportunity is a bit of how you saw us achieve upside this year, which was outstanding conditions across all of our destination regions and then very strong spending. And certainly, we anticipate that in our guidance. But if there's better-than-normal or -average, then there's opportunity there.

Perfect. Thanks very much.

Thanks.

We'll move on to Felicia Hendrix with Barclays.

Hi, thanks for taking my follow-up. I just had a question on the Epic Discovery. I was wondering if there was any way you could help us understand how much revenues were generated in the quarter from Epic Discovery and also where are they falling in the income statement? We just saw a much larger increase, year-over-year increase, in other revenues than we had anticipated.

It is falling in other.

Okay.

We're not breaking out specifics at this point on Epic Discovery revenue in any particular quarter, but as Rob indicated, we'll try and provide some more specific guidance about outlook in December.

Okay. Thank you.

The other piece on that I'd just say is that the challenge for us a little bit is that Epic Discovery in the summer, as we talked about, goes in both July and in August. And at this point, we're only announcing results from July. So we feel like it's better for us to wait and then talk about the whole season.

Makes sense. Thanks.

Thanks.

We have no further questions at this time. Mr. Katz, I'll turn the conference back over to you for any additional or closing remarks.

Thank you, operator. This concludes our FY16 earnings call. Thanks to everyone who joined us 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.

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation.