Hilton Grand Vacations (US:HGV)2021-04-29 18:20Financial Data and Key Metrics Changes - Total first quarter revenue was $267 million, up 15% sequentially from the fourth quarter [24] - Reported adjusted EBITDA was $60 million, reflecting sequential top line improvement and a material improvement in EBITDA margins [24] - Net income for the quarter was $11 million [25] - The provision for bad debt was $16 million, with an overall allowance on the balance sheet of $270 million or 18% of gross financing receivables [26] Business Line Data and Key Metrics Changes - Total contract sales for the quarter were $139 million, or 57% of the prior year, with tour flow at 42% of the prior year [25] - VPG was up 33% year-over-year and improved sequentially by 8% [25] - Rental and ancillary revenues were $32 million, up 60% from Q4 due to improved travel activity [27] Market Data and Key Metrics Changes - Contract sales in regional markets were nearly 15% higher than 2019 levels [11] - Orlando saw a 16% sequential growth, while Las Vegas properties recovered to nearly 40% of their 2019 contract sales levels [11] - In Japan, contract sales were at 70% of 2019 levels due to lockdowns and travel restrictions [12] Company Strategy and Development Direction - The company is optimistic about the recently announced transaction with Diamond Resorts, which is expected to bring significant scale and product diversity [19] - The focus remains on domestic leisure travel, with expectations for continued recovery as vaccination rates increase [18] - The company plans to enhance its marketing strategies and improve performance through rebranding and cross-selling opportunities post-acquisition [69] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trends, particularly in Las Vegas and Orlando, while acknowledging risks in Hawaii due to ongoing travel restrictions [34] - The company expects a modestly better Q2, with a sharper ramp in Q3 and Q4, but does not anticipate returning to 2019 levels until 2022 [40] - The management highlighted the importance of monitoring international travel restrictions, particularly from Japan, which could impact future performance [34] Other Important Information - The company has filed its initial antitrust regulatory submission for the Diamond Resorts transaction and is in the process of arranging permanent financing [18] - The liquidity position as of March 31 included $400 million of unrestricted cash and $139 million available under the revolving credit facility [29] Q&A Session All Questions and Answers Question: How to model the back half of the year considering positive data points? - Management acknowledged the positive recovery but cautioned about high comparisons on VPG and the need to monitor international travel restrictions [33][34] Question: Is there a rule of thumb for how a point of conversion may correspond to margin improvement? - Management indicated that while there is considerable flow-through from VPG improvements, the current environment's volatility makes it difficult to provide a blanket rule [42][43] Question: What should be considered in the 5-year revenue and EBITDA outlook? - Management emphasized that 2021 is a recovery year, with expectations to return to 2019 levels in 2022, and highlighted the importance of inventory spend as a sensitivity factor [45][48] Question: How will the acquisition impact marketing channels? - Management expressed excitement about the potential for revenue synergies and improved performance through rebranding and innovative marketing strategies post-acquisition [51][69] Question: What percentage of Diamond customers fit into the HGV product profile? - Management noted that Diamond's customer quality is good, with FICO scores slightly below HGV's, and highlighted the potential for cross-selling opportunities [74]