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Hilton Grand Vacations (HGV) - 2025 Q2 - Earnings Call Transcript
2025-07-31 16:02
Financial Data and Key Metrics Changes - Reported contract sales increased by 10% to $834 million, with adjusted EBITDA at $278 million and margins excluding reimbursements at 23% [10][26] - Total revenue excluding cost reimbursement grew by 9% to $1.2 billion, with adjusted EBITDA margins at 23% [26][34] - Adjusted free cash flow for the quarter was $135 million, with inventory spending of $77 million [32] Business Line Data and Key Metrics Changes - The owner business outperformed, contributing to double-digit contract sales growth driven by strong volume per guest (VPG) expansion [8][10] - The member count reached nearly 725,000, with over 233,000 HEV Max members, including nearly 21,000 legacy Bluegreen members [12][31] - Financing business revenue was $126 million with segment profit at $72 million, resulting in margins of 57% [29] Market Data and Key Metrics Changes - Occupancy remained stable at 83%, with consolidated arrivals in the third quarter matching the prior year [11] - Demand indicators showed strength in marketing and rental arrivals, indicating favorable travel demand [11] - Las Vegas market experienced softness due to lower international and convention business, leading to increased promotional activity [14][62] Company Strategy and Development Direction - The company is focused on enhancing the value proposition of the HEV Max membership and expanding its lead flow [8][21] - Strategic inventory recapture is expected to support long-term cash flow growth and improve the embedded value of the owner base [13] - The integration of Bluegreen is on track, with nearly achieved cost-saving targets and the rollout of new sales technology [20][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business performance and reiterated guidance for the year, citing stable consumer environment and strong demand indicators [9][22] - The company anticipates high single-digit contract sales growth for the year, with flat tour growth expected [28] - Management noted that while the policy landscape remains volatile, they are focused on executing initiatives to mitigate macroeconomic noise [9] Other Important Information - The company successfully closed a JPY 9.5 billion timeshare securitization in Japan, marking a significant milestone [15][16] - The company returned $300 million to shareholders this year, with a goal of $600 million in total for the year [18][34] - The company has $98 million remaining under its share repurchase plan and received authorization for an additional $600 million [33] Q&A Session Summary Question: Impact of higher fee-for-service mix on EBITDA - Management acknowledged that the fee-for-service mix was higher in Q2 compared to Q1, which could have a drag on EBITDA [39][41] Question: Demand side for Bluegreen upgrade sales to MAX - Management reported strong performance in upgrade sales, with a 20% increase since the launch of MAX, and noted stable consumer demand [45][47] Question: Performance of loan book and delinquency rates - Management indicated that the loan book is in good shape, with stable to improving delinquency rates across brands [68][69] Question: VPG growth expectations for the back half of the year - Management expects strong VPG growth in Q3 but anticipates a decline in Q4 due to tough comparisons from the previous year [70][71] Question: Flow-through rates on VPG versus tour flow - Management stated that flow-through for every dollar of VPG is anticipated to be in the 50% range, while core flow is materially less [76][78]