Hilton Grand Vacations (HGV) - 2024 Q1 - Quarterly Results

Executive Summary & Q1 2024 Highlights Overall Financial Performance Hilton Grand Vacations reported a mixed financial performance for Q1 2024, with significant revenue growth driven by the Bluegreen Vacations acquisition, but a net loss attributable to stockholders. Adjusted metrics, however, showed positive growth, indicating underlying operational strength despite acquisition-related impacts Q1 2024 Key Financial Highlights (YoY Comparison) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Total Contract Sales | $631M | - | +$108M (incl. Bluegreen) | | Member Count | 718,000 | - | - | | Net Owner Growth (NOG) (legacy HGV-DRI) | 2% | - | - | | Total Revenues | $1,156M | $934M | +23.8% | | Net Loss Attributable to Stockholders | $(4)M | $73M | -105.5% | | Adjusted Net Income Attributable to Stockholders | $99M | $90M | +10.0% | | Diluted EPS | $(0.04) | $0.64 | -106.3% | | Adjusted Diluted EPS | $0.95 | $0.79 | +20.3% | | Adjusted EBITDA Attributable to Stockholders | $273M | $218M | +25.2% | - The Company repurchased 2.3 million shares of common stock for $99 million during Q1 2024, with $213 million remaining under the 2023 Share Repurchase Plan as of April 30, 2024[3] - Full-year 2024 Adjusted EBITDA guidance (excluding deferrals and recognitions) is reiterated in the range of $1.2 billion to $1.26 billion[3] Strategic Developments & CEO Commentary The CEO highlighted positive momentum, strong owner business, and near-record package activations, indicating robust consumer travel intent. Key strategic initiatives include the integration of Bluegreen Vacations, rebranding efforts, exploring new growth avenues with partners, and expanding lead channels through partnerships like Great Wolf Lodge - Hilton Grand Vacations completed the acquisition of Bluegreen Vacations Holding Corporation on January 17, 2024[4] - The Company is focused on integrating Bluegreen Vacations, advancing rebranding plans, engaging with new partners for growth, and expanding lead channels and tour flow through partnerships like Great Wolf Lodge[3] Consolidated Segment Performance Real Estate Sales and Financing The Real Estate Sales and Financing segment experienced substantial growth in Q1 2024, primarily driven by the Bluegreen Vacations acquisition and increased sales and financing revenues. Despite a slight decrease in profit margin, contract sales and tours significantly increased Real Estate Sales and Financing Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Segment Revenues | $687M | $550M | +24.9% | | Segment Adjusted EBITDA | $206M | $169M | +21.9% | | Adjusted EBITDA Profit Margin | 30.0% | 30.7% | -0.7 pp | | Contract Sales | $631M | $523M | +20.6% | | Tours | 174,138 | 130,268 | +33.7% | | VPG (Volume per Guest) | $3,593 | $3,969 | -9.5% | - Bluegreen Vacations contributed $98 million to Sales of VOI, net, and $36 million to segment Adjusted EBITDA in Q1 2024[7] - Financing revenues increased by $30 million, driven by a 25 basis point increase in the weighted average interest rate and a larger timeshare financing receivables portfolio. Bluegreen Vacations contributed $17 million to financing revenue and $9 million to financing profit[10] Resort Operations and Club Management The Resort Operations and Club Management segment also saw increased revenues and Adjusted EBITDA in Q1 2024, benefiting from higher occupied room nights and daily rates, with Bluegreen Vacations contributing to this growth Resort Operations and Club Management Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Segment Revenue | $360M | $302M | +19.2% | | Segment Adjusted EBITDA | $134M | $109M | +22.9% | | Adjusted EBITDA Profit Margin | 37.2% | 36.1% | +1.1 pp | - Bluegreen Vacations contributed $29 million to revenue and $10 million to the total increase in segment Adjusted EBITDA for Q1 2024[11] Inventory Overview Hilton Grand Vacations maintains a robust contract sales pipeline valued at $12.7 billion, with a significant portion currently available for sale. The company emphasizes capital-efficient inventory strategies, with just-in-time and fee-for-service inventory comprising nearly a third of its total pipeline Inventory Pipeline Breakdown (as of March 31, 2024) | Category | Value | Percentage of Total Pipeline | | :-------------------------------- | :------ | :--------------------------- | | Total Contract Sales Pipeline | $12.7B | 100% | | Currently Available for Sale | $8.4B | 66.1% | | Future Availability | $4.3B | 33.9% | | Owned Inventory | - | 89.5% | | Owned Inventory (Currently Available) | - | 67.5% of owned | | Fee-for-Service Inventory | - | 10.5% | | Fee-for-Service Inventory (Currently Available) | - | 53.9% of fee-for-service | | Capital-Efficient Inventory (Just-in-Time & Fee-for-Service) | - | 31.2% | Financial Position & Liquidity Balance Sheet As of March 31, 2024, HGV's balance sheet reflects increased assets and liabilities, largely due to the Bluegreen acquisition. The company maintains a substantial cash position and significant debt, with a weighted average interest rate for corporate debt at 6.963% and non-recourse debt at 4.969% Key Balance Sheet Items (as of March 31, 2024) | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Cash and Cash Equivalents | $355 | | Restricted Cash | $323 | | Corporate Debt, net | $5,144 | | Non-Recourse Debt, net | $1,534 | | Weighted Average Interest Rate (Corporate Debt) | 6.963% | | Weighted Average Interest Rate (Non-Recourse Debt) | 4.969% | Cash Flow and Debt HGV reported negative free cash flow and adjusted free cash flow for Q1 2024, primarily due to acquisition and integration-related costs. The company maintains liquidity through unrestricted cash and borrowing capacity, with a total net leverage of approximately 3.74x Cash Flow Summary (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Free Cash Flow | $(19)M | $15M | -$34M | | Adjusted Free Cash Flow | $(374)M | $33M | -$407M | - Adjusted free cash flow for Q1 2024 included $121 million in add-backs for acquisition and integration-related costs, compared to $25 million in Q1 2023[18] - As of March 31, 2024, liquidity included $355 million of unrestricted cash and $293 million remaining borrowing capacity under the revolver facility. The total net leverage on a trailing 12-month basis was approximately 3.74x[16][19] Subsequent Events Subsequent to the quarter end, HGV completed a significant securitization of Bluegreen Vacations timeshare loans, enhancing liquidity and facilitating debt reduction - On April 25, 2024, HGV completed a $240 million securitization of legacy Bluegreen Vacations timeshare loans (Hilton Grand Vacations Trust 2024-1B) with a weighted average interest rate of 6.42% and an advance rate of 90.5%. Proceeds will primarily be used for debt reduction and general corporate purposes[20] Construction Deferrals and Recognitions (ASC 606) Under ASC 606, HGV defers revenues and related expenses for sales at projects under construction until completion. For Q1 2024, the company recognized a net positive impact of $3 million from construction deferral activity, primarily from the Sesoko project, a shift from a net recognition of $2 million in Q1 2023 Net Construction Deferral Activity (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :-------------------------------- | :----------------- | :----------------- | | Sales of VOIs recognitions (deferrals) | $2 | $4 | | Cost of VOI sales recognitions (deferrals) | $(1) | $1 | | Sales and marketing expense recognitions (deferrals) | — | $1 | | Net construction recognitions (deferrals) | $3 | $2 | - The net recognition of $3 million in Q1 2024 was related to the Sesoko project, while Q1 2023 included a $2 million net recognition from the Maui Bay Villas Phase III project[6][8] Non-GAAP Financial Measures Definitions This section provides definitions and reconciliations for various non-GAAP financial measures used by Hilton Grand Vacations, including Adjusted Net Income/Loss, Adjusted Diluted EPS, EBITDA, Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow, and segment-specific profit measures. These metrics are presented to offer additional insights into the company's operational performance and liquidity, complementing U.S. GAAP measures - Non-GAAP measures include Adjusted Net Income or Loss, Adjusted Diluted EPS, EBITDA, Adjusted EBITDA, Adjusted EBITDA Attributable to Stockholders, EBITDA profit margin, Adjusted EBITDA profit margin, Free Cash Flow, and Adjusted Free Cash Flow[34] - These measures are used by management and investors to evaluate operating performance, efficiency, and to compare results across companies in the industry, despite their limitations as analytical tools[35][43] - Key real estate metrics defined include Contract sales, Developed Inventory, Fee-for-Service Inventory, Just-in-Time Inventory, Points-Based Inventory, Net Owner Growth (NOG), Sales revenue, Tour flow, and Volume per guest (VPG)[56][57][58][59] Detailed Financial Tables This section contains a comprehensive set of financial tables, including condensed consolidated balance sheets, statements of operations, cash flows, and various reconciliations of non-GAAP measures to GAAP. It also provides detailed schedules for segment revenues, EBITDA, and profit breakdowns for real estate sales, financing, resort and club management, and rental and ancillary services - The report includes Condensed Consolidated Balance Sheets (T-2), Statements of Operations (T-3), and Statements of Cash Flows (T-4) for Q1 2024 and Q1 2023[62][63][65][66] - Reconciliations are provided for Free Cash Flow (T-5), Segment Revenue (T-6), Segment EBITDA and Adjusted EBITDA (T-7), and Adjusted Net Income and Diluted EPS (T-15)[62][68][70][72][91] - Detailed profit schedules are presented for Real Estate Sales (T-8), Financing (T-10), Resort and Club Management (T-11), and Rental and Ancillary Services (T-12), along with segment-specific Adjusted EBITDA tables (T-13, T-14)[62][74][78][81][83][86][88]