Hilton Grand Vacations (US:HGV)2020-04-30 21:11Financial Data and Key Metrics Changes - Total first quarter revenue declined by $52 million to $398 million, primarily due to COVID-19 impacts on consumer activity [38] - Q1 adjusted EBITDA was $60 million, down from $102 million in the previous year, affected by lost sales, bad debt accruals, and one-time payroll-related expenses [39] - Net income for Q1 was $35 million, with diluted earnings per share at $0.40, compared to $55 million and $0.58 in Q1 2019 [40] Business Line Data and Key Metrics Changes - Real estate contract sales decreased by 24.2%, driven by a reduction in tours and VPG, with tours declining by 19% in March [40] - The financing business reported a margin of $31 million with a margin percentage of 70.5%, an increase from the previous year [47] - Rental and ancillary revenues fell to $52 million from $59 million, impacted by lower room supply and occupancy levels [50] Market Data and Key Metrics Changes - Approximately 40% of segment EBITDA was generated from financing and resort divisions, with 90% of member fees for the year already collected [21] - The owner base has doubled over the past decade, with a significant increase in Hilton Honors loyalty program members [27] Company Strategy and Development Direction - The company has identified four strategic priorities: safeguarding health and safety, streamlining spending, protecting recurring revenue streams, and growing demand [28][30][31][32] - The timeshare industry is viewed as resilient, with a solid foundation of owners providing stable recurring EBITDA [20] - The company plans to leverage its owner base and enhance marketing offers to drive demand as travel restrictions ease [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by COVID-19 but expressed confidence in the recovery of leisure travel and the strength of the owner base [34] - The company entered the year with nearly $1 billion in liquidity and a conservative balance sheet, positioning it well to weather the crisis [23] - Management emphasized the importance of adapting to changing market conditions and maintaining operational flexibility [52] Other Important Information - The company has implemented cost-saving measures, including furloughing approximately 6,100 employees and reducing salaries across the organization [17][52] - A significant portion of operating costs are variable, providing a natural hedge against reduced business activity [16] Q&A Session Summary Question: How did the company decide on the new 15.9% allowance rate for bad debt? - The company based the estimate on historical data from the Great Recession, applying similar increases in defaults to current portfolios [67][68] Question: What percentage of people are late on their monthly loan payments? - Currently, delinquency rates have increased to 3.2%, with less than 2% of the portfolio requesting deferments [45][76] Question: What does the company expect regarding cash burn when reopening? - The company indicated that cash burn would depend on how operations are ramped back up, with a focus on maintaining flexibility [78] Question: How is the company evaluating the reopening of sales centers? - Sales centers are expected to reopen in alignment with resort openings, influenced by government mandates and consumer sentiment [83][84] Question: What percentage of the sales mix is drive-to business? - Approximately 65% of overall real estate revenue comes from drive-to markets, which are expected to recover faster [109] Question: What are the company's thoughts on opportunities for distressed acquisitions? - The company is considering potential opportunities for distressed acquisitions as the market evolves [121]