Hilton Grand Vacations Inc. (NYSE: HGV) (“HGV” or “the Company”)
today reports its third quarter of 2022 results.
Third quarter highlights1
- Total contract sales were $621 million.
- Member count was 515,000. Net Owner Growth (NOG) for the
Legacy-HGV business for the 12 months ended Sept. 30, 2022, was
3.8%, and Diamond added over 1,900 net new members in the
quarter.
- Total revenues for the third quarter were $1,116 million
compared to $928 million for the same period in 2021.
- Total revenues were affected by a net recognition of $86 million in the current period
compared to a recognition of $241
million in the same period in 2021.
- Net income for the third quarter was $150 million compared to
$99 million net income for the same period in 2021.
- Net income and adjusted net income were affected by a net
recognition of $43 million in the
current period compared to a net recognition of $133 million in the same period in
2021.
- Adjusted EBITDA for the third quarter was $338 million compared
to $340 million for the same period in 2021.
- Adjusted EBITDA was affected by a net recognition of $43 million in the current period
compared to a net recognition of $133
million in the same period in 2021.
- During the quarter, the Company repurchased 2.3 million shares
of common stock for $89 million. Through Nov. 9, the Company has
repurchased an additional 1.1 million shares for $38 million, and
currently has $290 million remaining of the $500 million repurchase
plan approved by the Board in May 2022.
- The Company has achieved a targeted $150 million of run-rate
cost synergies in only 14 months following the completion of the
Diamond Acquisition versus its initial goal of $125 million within
24 months laid out at acquisition close.
Full Year 2022 Outlook
- The Company is raising its 2022 guidance for Adjusted EBITDA
excluding deferrals and recognitions to be in a range of $1,025
million to $1,045 million.
“We delivered another solid quarter of performance, underpinned
by the strengths of our business and the continued momentum in
leisure travel,” said Mark Wang, president and CEO of Hilton Grand
Vacations. “Our direct-sales model enables us to engage prospective
owners through every environment, and we’ve received a great
response from our members as we continue to roll out our HGV Max
membership program, new properties, and experiential offerings. We
produced record EBITDA and achieved our cost synergy target well
ahead of schedule, generating strong free cash flow to support
growth and a significant amount of capital returned to shareholders
during the quarter.”
1.
The Company’s current period results and prior year results
include impacts related to deferrals of revenues and direct
expenses related to the Sales of VOIs under construction that are
recognized when construction is complete. These impacts are
reflected in the sub-bullets.
Diamond Acquisition
On Aug. 2, 2021 (The “Acquisition Date”), HGV completed the
acquisition of Dakota Holdings, Inc., the parent of Diamond Resorts
International (“Diamond”) (the “Diamond Acquisition”). HGV
completed the acquisition by exchanging 100% of the outstanding
equity interests of Diamond for shares of HGV common stock.
Pre-existing HGV shareholders owned approximately 72% of the
combined company after giving effect of the Diamond Acquisition,
with certain funds controlled by Apollo Global Management Inc. (the
“Apollo Funds” or, “Apollo”) and other minority shareholders, who
previously owned 100% of Diamond, holding approximately 28% at the
time the Diamond Acquisition was completed.
Diamond also operates in the hospitality and VOI industry, with
a worldwide resort network of global vacation destinations.
Diamond’s portfolio consists of resort properties that the Company
manages, which are included in one of Diamond’s single- and
multi-use trusts (collectively, the “Diamond Collections” or
“Collections”), or are Diamond-branded resorts in which the Company
owns inventory. It also includes affiliated resorts and hotels,
which the Company does not manage, and which do not carry the
Diamond brand but are a part of Diamond’s network and, through THE
Club® and other Club offerings (the “Diamond Clubs”), are available
for its members to use as vacation destinations.
The financial results in this report include Diamond’s results
of operations beginning on the Acquisition Date. The Company refers
to Diamond’s business and operations that were acquired as
“Legacy-Diamond” or “Diamond,” and HGV’s operations as
“Legacy-HGV,” which is inclusive of operations that existed both
prior to and following the Diamond Acquisition.
Overview
For the quarter ended Sept. 30, 2022, diluted EPS was $1.24
compared to $0.90 for the quarter ended Sept. 30, 2021. Net income
and Adjusted EBITDA were $150 million and $338 million,
respectively, for the quarter ended Sept. 30, 2022, compared to net
income and Adjusted EBITDA of $99 million and $340 million,
respectively, for the quarter ended Sept. 30, 2021. Total revenues
for the quarter ended Sept. 30, 2022, were $1,116 million compared
to $928 million for the quarter ended Sept. 30, 2021.
Net income and Adjusted EBITDA for the quarter ended Sept. 30,
2022, included a net recognition of
$43 million relating to the opening of Maui Bay Villas Phase
IB.
Consolidated Segment Highlights – Third Quarter of
2022
Real Estate Sales and Financing
For the quarter ended Sept. 30, 2022, Real Estate Sales and
Financing segment revenues were $745 million, an increase of $86
million compared to the quarter ended Sept. 30, 2021. Real Estate
Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA
profit margin were $295 million and 39.6%, respectively, for the
quarter ended Sept. 30, 2022, compared to $280 million and 42.5%,
respectively, for the quarter ended Sept. 30, 2021. Results in the
third quarter of 2022 improved due to an increase in tour flow
related to an improvement in travel demand versus the prior year
along with lower provision and reportability adjustments.
Real Estate Sales and Financing segment Adjusted EBITDA reflects
an increase of $43 million due to the net recognition of sales and related expenses of VOIs
associated with Maui Bay Villas Phase IB project for the quarter
ended Sept. 30, 2022. This compared to $133 million of net
recognition of sales related to the
Central at 5th, Ocean Tower Phase II, Maui Bay Villas Phase I and
The Beach Resort Sesoko Phase I projects for the quarter ended
Sept. 30, 2021.
Contract sales for the quarter ended Sept. 30, 2022, increased
$188 million to $621 million compared to the quarter ended Sept.
30, 2021. For the quarter ended Sept. 30, 2022, tours increased by
46.1% and VPG decreased by 0.6% compared to the quarter ended Sept.
30, 2021. For the quarter ended Sept. 30, 2022, fee-for-service
contract sales represented 28.2% of contract sales compared to
28.6% for the quarter ended Sept. 30, 2021.
Financing revenues for the quarter ended Sept. 30, 2022,
increased by $15 million compared to the quarter ended Sept. 30,
2021. This was driven primarily by the increase related to interest
income on the timeshare financing receivables. The Company
experienced an increase in the timeshare financing receivables
balance along with an increase in the weighted average interest
rate for the originated portfolio of 110 basis points as of Sept.
30, 2022, compared to Sept. 30, 2021.
Resort Operations and Club Management
For the quarter ended Sept. 30, 2022, Resort Operations and Club
Management segment revenue was $299 million, an increase of $83
million compared to the quarter ended Sept. 30, 2021. Resort
Operations and Club Management segment Adjusted EBITDA and Adjusted
EBITDA profit margin were $112 million and 37.5%, respectively, for
the quarter ended Sept. 30, 2022, compared to $109 million and
50.5%, respectively, for the quarter ended Sept. 30, 2021. Compared
to the prior-year period, results in the third quarter of 2022
increased due to the addition of Diamond’s resort network and
member base, along with an increase in the number of transactions
compared to the same period in 2021, which more than offset the
increases in segment operating expenses.
Inventory
The estimated value of the Company’s total contract sales
pipeline is approximately $12 billion at current pricing.
The total pipeline includes approximately $6 billion of sales
relating to inventory that is currently available for sale at open
or soon-to-open projects. The remaining approximately $6 billion of
sales is related to inventory at new or existing projects that will
become available for sale in the future upon registration, delivery
or construction.
Owned inventory represents 84% of the Company’s total pipeline.
Approximately 55% of the owned inventory pipeline is currently
available for sale.
Fee-for-service inventory represents 16% of the Company’s total
pipeline. Approximately 56% of the fee-for-service inventory
pipeline is currently available for sale.
With 24% of the pipeline consisting of just-in-time inventory
and 16% consisting of fee-for-service inventory, capital-efficient
inventory represents 40% of the Company’s total contract sales
pipeline.
Balance Sheet and Liquidity
Total cash and cash equivalents were $744 million as of Sept.
30, 2022, including $319 million of restricted cash.
As of Sept. 30, 2022, the Company had $2,612 million of
corporate debt, net outstanding with a weighted average interest
rate of 5.25% and $1,161 million of non-recourse debt, net
outstanding with a weighted average interest rate of 3.66%.
As of Sept. 30, 2022, the Company’s liquidity position consisted
of $425 million of unrestricted cash and $999 million remaining
borrowing capacity under the revolver facility.
As of Sept. 30, 2022, HGV has $750 million remaining borrowing
capacity in total under the Timeshare Facility. Of this amount, HGV
has $178 million of mortgage notes that are available to be
securitized and another $324 million of mortgage notes that the
Company expects will become eligible as soon as they meet typical
milestones including receipt of first payment, deeding, or
recording.
Free cash flow was $217 million for the quarter ended Sept. 30,
2022, compared to $68 million for the same period in the prior
year. Adjusted free cash flow was $393 million for the quarter
ended Sept. 30, 2022, compared to $33 million for the same period
in the prior year. Adjusted free cash flow for the quarter ended
Sept. 30, 2022, includes add-backs of $19 million related to the
Diamond Acquisition.
As of Sept. 30, 2022, the Company’s total net leverage on a
pro-forma trailing 12-month basis was approximately 2.08x, not
giving effect to anticipated synergies. Inclusive of anticipated
synergies, HGV was at 2.05x total net leverage on a pro-forma
trailing 12-month basis.
Total Construction Deferrals and/or Recognitions Included in
Results Reported Under Accounting Standards Codification Topic 606
(“ASC 606”)
The Company’s Adjusted EBITDA as reported under ASC 606 includes
construction-related recognitions and deferrals of revenues and
related expenses as detailed in Table T-1. Under ASC 606, the
Company defers revenues and related expenses pertaining to sales at
projects that occur during periods when that project is under
construction until the period when construction is completed.
T-1
NET CONSTRUCTION DEFERRAL
ACTIVITY
(in millions)
2022
NET CONSTRUCTION DEFERRAL
ACTIVITY
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
Sales of VOIs (deferrals) recognitions
$
(42
)
$
(10
)
$
86
$
—
$
34
Cost of VOI sales (deferrals)
recognitions(1)
(13
)
(5
)
30
—
12
Sales and marketing expense (deferrals)
recognitions
(7
)
(1
)
13
—
5
Net construction (deferrals)
recognitions(2)
$
(22
)
$
(4
)
$
43
$
—
$
17
Net income
$
51
$
73
$
150
$
—
$
274
Interest expense
33
35
37
—
105
Income tax expense
20
41
54
—
115
Depreciation and amortization
60
64
57
—
181
Interest expense and depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
—
2
—
2
EBITDA
164
213
300
—
677
Other loss (gain), net
(1
)
2
(2
)
—
(1
)
Share-based compensation expense
11
15
14
—
40
Acquisition and integration-related
expense
13
17
19
—
49
Impairment expense (reversal)
3
(3
)
—
—
—
Other adjustment items(3)
12
29
7
—
48
Adjusted EBITDA
$
202
$
273
$
338
$
—
$
813
T-1
NET CONSTRUCTION DEFERRAL
ACTIVITY
(CONTINUED, in
millions)
2021
NET CONSTRUCTION DEFERRAL
ACTIVITY
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
Sales of VOIs (deferrals) recognitions
$
(32
)
$
(42
)
$
241
$
(34
)
$
133
Cost of VOI sales (deferrals)
recognitions(1)
(10
)
(13
)
73
(12
)
38
Sales and marketing expense (deferrals)
recognitions
(4
)
(7
)
35
(5
)
19
Net construction (deferrals)
recognitions(2)
$
(18
)
$
(22
)
$
133
$
(17
)
$
76
Net income
$
(7
)
$
9
$
99
$
75
$
176
Interest expense
15
17
42
31
105
Income tax (benefit) expense
(6
)
3
49
47
93
Depreciation and amortization
11
12
48
55
126
Interest expense and depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
1
—
—
—
1
EBITDA
14
41
238
208
501
Other loss, net
1
1
20
4
26
Share-based compensation expense
4
14
14
16
48
Acquisition and integration-related
expense
15
14
54
23
106
Impairment expense
1
—
1
—
2
Other adjustment items(3)
7
—
13
13
33
Adjusted EBITDA
$
42
$
70
$
340
$
264
$
716
(1)
Includes anticipated Costs of VOI sales related to inventory
associated with Sales of VOIs under construction that will be
acquired once construction is complete.
(2)
The table represents deferrals and recognitions of Sales of VOIs
revenue and direct costs for properties under construction.
(3)
Includes costs associated with restructuring, one-time charges
and other non-cash items. This amount also includes the
amortization of premiums resulting from purchase accounting.
Conference Call
Hilton Grand Vacations will host a conference call on Nov. 9,
2022, at 11 a.m. (ET) to discuss third quarter results.
To access the live teleconference, please dial 1-877-407-0784 in
the U.S./Canada (or +1-201-689-8560 internationally) approximately
15 minutes prior to the teleconference’s start time. A live webcast
will also be available by logging onto the HGV Investor Relations
website at https://investors.hgv.com.
In the event of audio difficulties during the call on the
toll-free number, participants are advised that accessing the call
using the +1-201-689-8560 dial-in number may bypass the source of
audio difficulties.
A replay will be available within 24 hours after the
teleconference’s completion through Nov. 16, 2022. To access the
replay, please dial 1-844-512-2921 in the U.S. (+1-412-317-6671
internationally) using ID#13726011. A webcast replay and transcript
will also be available within 24 hours after the live event at
https://investors.hgv.com.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements convey management’s
expectations as to the future of HGV, and are based on management’s
beliefs, expectations, assumptions and such plans, estimates,
projections and other information available to management at the
time HGV makes such statements. Forward-looking statements include
all statements that are not historical facts, may be identified by
terminology such as the words “outlook,” “believe,” “expect,”
“potential,” “goal,” “continues,” “may,” “will,” “should,” “could,”
“seeks,” “approximately,” “projects,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates,” “future,” “guidance,”
“target,” or the negative version of these words or other
comparable words, although not all forward-looking statements may
contain such words. The forward-looking statements contained in
this press release include statements related to HGV’s revenues,
earnings, taxes, cash flow and related financial and operating
measures, and expectations with respect to future operating,
financial and business performance and other anticipated future
events and expectations that are not historical facts.
HGV cautions you that forward-looking statements involve known
and unknown risks, uncertainties and other factors, including those
that are beyond HGV’s control, that may cause its actual results,
performance or achievements to be materially different from the
future results. Any one or more of these risks or uncertainties
could adversely impact HGV’s operations, revenue, operating profits
and margins, key business operational metrics, financial condition
and/or credit rating.
For a more detailed discussion of these factors, see the
information under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in HGV’s most recent Annual Report on Form 10-K filed
with the SEC on March 1, 2022, as supplemented and updated by the
risk factors in HGV’s Quarterly Report on Form 10-Q for the
quarters and ending subsequent to the filing of HGV’s Annual Report
on Form 10-K, which may be further updated from time to time in
HGV’s quarterly reports, current reports and other filings HGV
makes with the SEC.
HGV’s forward-looking statements speak only as of the date of
this communication or as of the date they are made. HGV disclaims
any intent or obligation to update any “forward-looking statement”
made in this communication to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
results over time.
Non-GAAP Financial Measures
The Company refers to certain non-GAAP financial measures in
this press release, including EBITDA, Adjusted EBITDA, EBITDA
profit margin, Adjusted EBITDA profit margin, Free Cash Flow and
Adjusted Free Cash Flow. Please see the tables in this press
release and “Definitions” for additional information and
reconciliations of such non-GAAP financial measures.
The Company refers to Deferral Adjusted EBITDA guidance, which
does not take into account any future deferrals of revenues and
direct expenses related to the sales of VOIs under construction
that are recognized, only on a non-GAAP basis, as the
quantification of reconciling items to the most directly comparable
U.S. GAAP financial measure is not readily available without
unreasonable effort due to uncertainties associated with the timing
and amount of such items. These items may create a material
difference between the non-GAAP and comparable U.S. GAAP
results.
About Hilton Grand Vacations Inc.
Hilton Grand Vacations Inc. (NYSE:HGV) is recognized as a
leading global timeshare company. With headquarters in Orlando,
Florida, Hilton Grand Vacations develops, markets and operates a
system of brand-name, high-quality vacation ownership resorts in
select vacation destinations. As one of Hilton’s 18 premier brands,
Hilton Grand Vacations has a reputation for delivering a
consistently exceptional standard of service, and unforgettable
vacation experiences for guests and more than 725,000 owners.
Membership with the Company provides best-in-class programs,
exclusive services and maximum flexibility for our Members around
the world. For more information, visit
www.hiltongrandvacations.com.
HILTON GRAND VACATIONS INC.
DEFINITIONS
EBITDA and Adjusted EBITDA
EBITDA, presented herein, is a financial measure that is not
recognized under U.S. GAAP that reflects net income (loss), before
interest expense (excluding non-recourse debt), a provision for
income taxes and depreciation and amortization.
Adjusted EBITDA, presented herein, is calculated as EBITDA, as
previously defined, further adjusted to exclude certain items,
including, but not limited to, gains, losses and expenses in
connection with: (i) other gains, including asset dispositions and
foreign currency transactions; (ii) debt
restructurings/retirements; (iii) non-cash impairment losses; (iv)
share-based and other compensation expenses; and (v) other items,
including but not limited to costs associated with acquisitions,
restructuring, amortization of premiums and discounts resulting
from purchase accounting, and other non-cash and one-time
charges.
EBITDA profit margin, presented herein, represents EBITDA, as
previously defined, divided by total revenues. Adjusted EBITDA
profit margin, presented herein, represents Adjusted EBITDA, as
previously defined, divided by total revenues.
EBITDA and Adjusted EBITDA are not recognized terms under U.S.
GAAP and should not be considered as alternatives to net income
(loss) or other measures of financial performance or liquidity
derived in accordance with U.S. GAAP. In addition, our definitions
of EBITDA and Adjusted EBITDA may not be comparable to similarly
titled measures of other companies.
HGV believes that EBITDA and Adjusted EBITDA provide useful
information to investors about us and our financial condition and
results of operations for the following reasons: (i) EBITDA and
Adjusted EBITDA are among the measures used by our management team
to evaluate our operating performance and make day-to-day operating
decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used
by securities analysts, investors and other interested parties as a
common performance measure to compare results or estimate
valuations across companies in our industry. EBITDA and Adjusted
EBITDA have limitations as analytical tools and should not be
considered either in isolation or as a substitute for net income
(loss), cash flow or other methods of analyzing our results as
reported under U.S. GAAP. Some of these limitations are:
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital needs;
- EBITDA and Adjusted EBITDA do not reflect our interest expense
(excluding interest expense on non-recourse debt), or the cash
requirements necessary to service interest or principal payments on
our indebtedness;
- EBITDA and Adjusted EBITDA do not reflect our tax expense or
the cash requirements to pay our taxes;
- EBITDA and Adjusted EBITDA do not reflect historical cash
expenditures or future requirements for capital expenditures or
contractual commitments;
- EBITDA and Adjusted EBITDA do not reflect the effect on
earnings or changes resulting from matters that we consider not to
be indicative of our future operations;
- EBITDA and Adjusted EBITDA do not reflect any cash requirements
for future replacements of assets that are being depreciated and
amortized; and
- EBITDA and Adjusted EBITDA may be calculated differently from
other companies in our industry limiting their usefulness as
comparative measures.
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered as discretionary cash available to us to reinvest
in the growth of our business or as measures of cash that will be
available to us to meet our obligations.
Free Cash Flow and Adjusted Free Cash Flow
Free Cash Flow represents cash from operating activities less
non-inventory capital spending.
Adjusted Free Cash Flow represents free cash flow further
adjusted to exclude net non-recourse debt activities and other
one-time adjustment items including, but not limited to, costs
associated with acquisitions.
We consider Free Cash Flow and Adjusted Free Cash Flow to be
liquidity measures not recognized under U.S. GAAP that provides
useful information to both management and investors about the
amount of cash generated by operating activities that can be used
for investing and financing activities, including strategic
opportunities and debt service. We do not believe these non-GAAP
measures to be a representation of how we will use excess cash.
Real Estate Metrics
Contract sales represents the total amount of VOI
products (fee-for-service, just-in-time, developed, and
points-based) under purchase agreements signed during the period
where we have received a down payment of at least 10 percent of the
contract price. Contract sales differ from revenues from the Sales
of VOIs, net that we report in our condensed consolidated
statements of operations due to the requirements for revenue
recognition, as well as adjustments for incentives. We consider
contract sales to be an important operating measure because it
reflects the pace of sales in our business and is used to manage
the performance of the sales organization. While the presentation
of contract sales on a combined basis (fee-for-service,
just-in-time, developed, and points-based) is most appropriate for
the purpose of the operating metric, additional information
regarding the split of contract sales, included in “—Real Estate”
below, is useful for investors who are interested in the underlying
capital structures of the Company’s projects. See Note 2: Summary
of Significant Accounting Policies in our consolidated financial
statements included in Item 8 in our Annual Report on form 10-K for
the year ended December 31, 2021, for additional information on
Sales of VOIs, net.
Developed Inventory refers to VOI inventory that is
sourced from projects the Company develops.
Fee-for-Service Inventory refers to VOI inventory HGV
sells and manages on behalf of third-party developers.
Just-in-Time Inventory refers to VOI inventory primarily
sourced in transactions that are designed to closely correlate the
timing of the acquisition with HGV’s sale of that inventory to
purchasers.
Points-Based Inventory refers to VOI sales that are
backed by physical real estate that is contributed to a trust.
NOG or Net Owner Growth represents the year-over-year
change in membership.
Real estate profit represents sales revenue less the cost
of VOI sales and sales and marketing costs, net of marketing
revenue. Real estate profit margin is calculated by dividing real
estate profit by sales revenue. The Company considers this to be an
important operating measure because it measures the efficiency of
our sales and marketing spending and management of inventory
costs.
Sales revenue represents Sale of VOIs, net and
fee-for-service commissions and brand fees earned from the sale of
fee-for-service intervals.
Fee-for-service commissions and brand fees, net
represents commissions and brand fees earned from the sale of
fee-for-service intervals net of related reserves.
Tour flow represents the number of sales presentations
given at HGV’s sales centers during the period.
Volume per guest (“VPG”) represents the sales
attributable to tours at HGV’s sales locations and is calculated by
dividing contract sales, excluding telesales, by tour flow. The
Company considers VPG to be an important operating measure because
it measures the effectiveness of HGV’s sales process, combining the
average transaction price with closing rate.
HILTON GRAND VACATIONS
INC.
FINANCIAL TABLES
CONDENSED CONSOLIDATED BALANCE SHEETS
T-2
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
T-3
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
T-4
FREE CASH FLOWS RECONCILIATION
T-5
SEGMENT REVENUE RECONCILIATION
T-6
SEGMENT EBITDA AND ADJUSTED EBITDA TO NET
INCOME
T-7
REAL ESTATE SALES PROFIT DETAIL
SCHEDULE
T-8
CONTRACT SALES MIX BY TYPE SCHEDULE
T-9
FINANCING PROFIT DETAIL SCHEDULE
T-10
RESORT AND CLUB PROFIT DETAIL SCHEDULE
T-11
RENTAL AND ANCILLARY PROFIT DETAIL
SCHEDULE
T-12
REAL ESTATE SALES AND FINANCING SEGMENT
ADJUSTED EBITDA
T-13
RESORT AND CLUB MANAGEMENT SEGMENT
ADJUSTED EBITDA
T-14
T-2
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except share
data)
September 30,
2022
December 31,
2021
(unaudited)
ASSETS
Cash and cash equivalents
$
425
$
432
Restricted cash
319
263
Accounts receivable, net
398
302
Timeshare financing receivables, net
1,743
1,747
Inventory
1,145
1,240
Property and equipment, net
776
756
Operating lease right-of-use assets,
net
56
70
Investments in unconsolidated
affiliates
69
59
Goodwill
1,416
1,377
Intangible assets, net
1,318
1,441
Land and infrastructure held for sale
—
41
Other assets
381
280
TOTAL ASSETS
$
8,046
$
8,008
LIABILITIES AND EQUITY
Accounts payable, accrued expenses and
other
$
978
$
673
Advanced deposits
138
112
Debt, net
2,612
2,913
Non-recourse debt, net
1,161
1,328
Operating lease liabilities
74
87
Deferred revenues
223
237
Deferred income tax liabilities
703
670
Total liabilities
5,889
6,020
Equity:
Preferred stock, $0.01 par value;
300,000,000 authorized shares, none issued or outstanding as of
September 30, 2022 and December 31, 2021
—
—
Common stock, $0.01 par value;
3,000,000,000 authorized shares, 116,387,235 shares issued and
outstanding as of September 30, 2022 and 119,904,001 shares issued
and outstanding as of December 31, 2021
1
1
Additional paid-in capital
1,607
1,630
Accumulated retained earnings
517
357
Accumulated other comprehensive income
32
—
Total equity
2,157
1,988
TOTAL LIABILITIES AND EQUITY
$
8,046
$
8,008
T-3
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in millions, except per share
and share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues
Sales of VOIs, net
$
500
$
488
$
1,130
$
597
Sales, marketing, brand and other fees
177
118
457
252
Financing
68
53
196
127
Resort and club management
130
99
379
192
Rental and ancillary services
159
112
466
198
Cost reimbursements
82
58
215
131
Total revenues
$
1,116
$
928
$
2,843
$
1,497
Expenses
Cost of VOI sales
102
130
207
154
Sales and marketing
322
234
849
432
Financing
25
19
66
43
Resort and club management
45
26
118
45
Rental and ancillary services
144
84
426
151
General and administrative
50
41
158
92
Acquisition and integration-related
expense
19
54
49
83
Depreciation and amortization
57
48
181
71
License fee expense
33
24
90
57
Impairment expense
—
1
—
2
Cost reimbursements
82
58
215
131
Total operating expenses
879
719
2,359
1,261
Interest expense
(37
)
(42
)
(105
)
(74
)
Equity in earnings from unconsolidated
affiliates
2
1
9
7
Other gain (loss), net
2
(20
)
1
(22
)
Income before income taxes
204
148
389
147
Income tax expense
(54
)
(49
)
(115
)
(46
)
Net income
$
150
$
99
$
274
$
101
Earnings per share(1):
Basic
$
1.25
$
0.92
$
2.26
$
1.08
Diluted
$
1.24
$
0.90
$
2.23
$
1.07
Weighted average shares
outstanding(2)
Basic
119,565
107,688
121,309
92,945
Diluted
121,064
109,139
122,942
94,163
(1) Earnings per share is calculated based
on unrounded dollars.
(2) Presented in thousands.
T-4
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Operating Activities
Net income
$
150
$
99
$
274
$
101
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
57
48
181
71
Amortization of deferred financing costs,
acquisition premiums and other
9
9
34
19
Provision for financing receivables
losses
32
49
103
77
Impairment expense
—
1
—
2
Other loss, net
(1
)
5
1
7
Share-based compensation
14
14
40
32
Deferred income tax (benefit) expense
(1
)
—
(1
)
9
Equity in earnings from unconsolidated
affiliates
(2
)
(1
)
(9
)
(7
)
Return on investment in unconsolidated
affiliates
—
2
—
2
Net changes in assets and liabilities:
Accounts receivable, net
9
(1
)
(64
)
(102
)
Timeshare financing receivables, net
(89
)
(54
)
(141
)
(36
)
Inventory
81
18
101
(11
)
Purchases and development of real estate
for future conversion to inventory
(3
)
(8
)
(4
)
(25
)
Other assets
138
97
(21
)
62
Accounts payable, accrued expenses and
other
(33
)
(54
)
257
5
Advanced deposits
8
(5
)
25
(5
)
Deferred revenues
(136
)
(275
)
(13
)
(165
)
Net cash provided by (used in) operating
activities
233
(56
)
763
36
Investing Activities
Acquisition of Diamond, net of cash and
restricted cash acquired
—
(1,585
)
—
(1,585
)
Capital expenditures for property and
equipment
(6
)
(7
)
(25
)
(11
)
Software capitalization costs
(10
)
(5
)
(26
)
(14
)
Net cash used in investing activities
(16
)
(1,597
)
(51
)
(1,610
)
Financing Activities
Issuance of debt
—
1,300
—
2,650
Issuance of non-recourse debt
269
96
671
96
Repayment of debt
(178
)
(788
)
(310
)
(843
)
Repayment of non-recourse debt
(127
)
(116
)
(824
)
(234
)
Debt issuance costs and discounts
(5
)
(58
)
(12
)
(61
)
Repurchase and retirement of common
stock
(84
)
—
(162
)
—
Payment of withholding taxes on vesting of
restricted stock units
—
—
(8
)
(5
)
Proceeds from employee stock plan
purchases
—
—
2
1
Proceeds from stock option exercises
—
4
1
10
Other financing activity
(1
)
(1
)
(2
)
(2
)
Net cash (used in) provided by financing
activities
(126
)
437
(644
)
1,612
Effect of changes in exchange rates on
cash, cash equivalents & restricted cash
(13
)
—
(19
)
—
Net increase (decrease) in cash, cash
equivalents and restricted cash
78
(1,216
)
49
38
Cash, cash equivalents and restricted
cash, beginning of period
666
1,780
695
526
Cash, cash equivalents and restricted
cash, end of period
$
744
$
564
$
744
$
564
T-5
HILTON GRAND VACATIONS
INC.
FREE CASH FLOW
RECONCILIATION
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net cash provided by (used in)
operating activities
$
233
$
(56
)
$
763
$
36
Capital expenditures for property and
equipment
(6
)
(7
)
(25
)
(11
)
Software capitalization costs
(10
)
(5
)
(26
)
(14
)
Free Cash Flow
$
217
$
(68
)
$
712
$
11
Non-recourse debt activity, net
142
(20
)
(153
)
(138
)
Acquisition and integration-related
expense
19
54
49
83
Other adjustment items(1)
15
1
48
1
Adjusted Free Cash Flow
$
393
$
(33
)
$
656
$
(43
)
(1) Includes capitalized acquisition and integration-related
costs for the three and nine months ended September 30, 2022.
T-6
HILTON GRAND VACATIONS
INC.
SEGMENT REVENUE
RECONCILIATION
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues:
Real estate sales and financing
$
745
$
659
$
1,783
$
976
Resort operations and club management
299
216
870
403
Total segment revenues
1,044
875
2,653
1,379
Cost reimbursements
82
58
215
131
Intersegment eliminations
(10
)
(5
)
(25
)
(13
)
Total revenues
$
1,116
$
928
$
2,843
$
1,497
T-7
HILTON GRAND VACATIONS
INC.
SEGMENT EBITDA AND ADJUSTED
EBITDA TO NET INCOME
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income
$
150
$
99
$
274
$
101
Interest expense
37
42
105
74
Income tax expense
54
49
115
46
Depreciation and amortization
57
48
181
71
Interest expense, depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
2
—
2
1
EBITDA
300
238
677
293
Other gain (loss), net
(2
)
20
(1
)
22
Share-based compensation expense
14
14
40
32
Acquisition and integration-related
expense
19
54
49
83
Impairment expense
—
1
—
2
Other adjustment items(1)
7
13
48
20
Adjusted EBITDA
$
338
$
340
$
813
$
452
Segment Adjusted EBITDA:
Real estate sales and financing(2)
$
295
$
280
$
666
$
352
Resort operations and club
management(2)
112
109
332
212
Adjustments:
Adjusted EBITDA from
unconsolidated affiliates
5
1
12
8
License fee expense
(33
)
(24
)
(90
)
(57
)
General and administrative(3)
(41
)
(26
)
(107
)
(63
)
Adjusted EBITDA
$
338
$
340
$
813
$
452
Adjusted EBITDA profit margin
30.3
%
36.6
%
28.6
%
30.2
%
EBITDA profit margin
26.9
%
25.6
%
23.8
%
19.6
%
(1)
Includes costs associated with restructuring, one-time charges
and other non-cash items. For the three and nine months ended
September 30, 2022, this amount also includes the amortization of
premiums resulting from the Diamond Acquisition.
(2)
Includes intersegment transactions, share-based compensation,
depreciation and other adjustments attributable to the
segments.
(3)
Excludes segment related share-based compensation, depreciation
and other adjustment items.
T-8
HILTON GRAND VACATIONS
INC.
REAL ESTATE SALES PROFIT
DETAIL SCHEDULE
(in millions, except Tour Flow
and VPG)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Tour flow
142,647
97,628
375,507
181,921
VPG
4,229
4,255
4,463
4,356
Owned contract sales mix
71.8
%
71.4
%
72.1
%
65.2
%
Fee-for-service contract sales mix
28.2
%
28.6
%
27.9
%
34.8
%
Contract sales
$
621
$
433
$
1,747
$
831
Adjustments:
Fee-for-service sales(1)
(175
)
(124
)
(488
)
(289
)
Provision for financing receivables
losses
(32
)
(50
)
(103
)
(78
)
Reportability and other:
Net recognition of sales of VOIs under
construction(2)
86
241
34
167
Fee-for-service sale upgrades, net
5
3
14
8
Other(3)
(5
)
(15
)
(74
)
(42
)
Sales of VOIs, net
$
500
$
488
$
1,130
$
597
Plus:
Fee-for-service commissions and brand
fees, net
125
73
293
162
Sales revenue
625
561
1,423
759
Less:
Cost of VOI sales
102
130
207
154
Sales and marketing expense, net(4)
246
174
644
316
Real estate profit
$
277
$
257
$
572
$
289
Real estate profit margin
44.3
%
45.8
%
40.2
%
38.1
%
Reconciliation of fee-for-service
commissions:
Sales, marketing, brand and other fees
177
118
457
252
Less:
Marketing revenue and other fees
52
45
164
90
Fee-for-service commissions and brand
fees, net
$
125
$
73
$
293
$
162
(1)
Represents contract sales from
fee-for-service properties on which we earn commissions and brand
fees.
(2)
Represents the net recognition of revenues
related to the Sales of VOIs under construction that are recognized
when construction is complete.
(3)
Includes adjustments for revenue
recognition, including amounts in rescission and sales
incentives.
(4)
Includes revenue recognized through our
marketing programs for existing owners and prospective first-time
buyers and revenue associated with sales incentives, title service
and document compliance.
T-9
HILTON GRAND VACATIONS
INC.
CONTRACT SALES MIX BY TYPE
SCHEDULE
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Just-In-Time Contract Sales Mix
18
%
19
%
14
%
22
%
Fee-For-Service Contract Sales Mix
28
%
29
%
28
%
35
%
Total Capital-Efficient Contract Sales
Mix(1)
46
%
48
%
42
%
57
%
(1) Diamond contract sales are related to
developed properties and therefore are not included in capital
efficient contract sales.
T-10
HILTON GRAND VACATIONS
INC.
FINANCING PROFIT DETAIL
SCHEDULE
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Interest income(1)
$
61
$
46
$
170
$
108
Other financing revenue
7
7
26
19
Financing revenue
68
53
196
127
Consumer financing interest expense(2)
11
8
26
22
Other financing expense
14
11
40
21
Financing expense
25
19
66
43
Financing profit
$
43
$
34
$
130
$
84
Financing profit margin
63.2
%
64.2
%
66.3
%
66.1
%
(1)
For the three and nine months ended September 30, 2022, this
amount includes $7 million and $27 million, respectively, of
amortization of the premium related to the acquired timeshare
financing receivables resulting from the Diamond Acquisition.
(2)
For the three and nine months ended September 30, 2022, this
amount includes $2 million and $8 million, respectively, of
amortization of the premium related to the acquired non-recourse
debt resulting from the Diamond Acquisition.
T-11
HILTON GRAND VACATIONS
INC.
RESORT AND CLUB PROFIT DETAIL
SCHEDULE
(in millions, except for
Members and Net Owner Growth)
Twelve Months Ended September
30,
2022
2021
Total members
514,942
462,962
Legacy-HGV Net Owner Growth (NOG)(1)
12,433
3,927
Legacy-HGV Net Owner Growth % (NOG)(1)
3.8
%
1.2
%
(1) NOG is a twelve-trailing-month concept
and thus not calculated for Diamond under HGV’s ownership.
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Club management revenue
$
48
$
42
$
150
$
98
Resort management revenue
82
57
229
94
Resort and club management revenues
130
99
379
192
Club management expense
11
8
31
18
Resort management expense
34
18
87
27
Resort and club management expenses
45
26
118
45
Resort and club management profit
$
85
$
73
$
261
$
147
Resort and club management profit
margin
65.4
%
73.7
%
68.9
%
76.6
%
T-12
HILTON GRAND VACATIONS
INC.
RENTAL AND ANCILLARY PROFIT
DETAIL SCHEDULE
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Rental revenues
$
157
$
104
$
436
$
184
Ancillary services revenues
2
8
30
14
Rental and ancillary services revenues
159
112
466
198
Rental expenses
141
77
401
138
Ancillary services expense
3
7
25
13
Rental and ancillary services expenses
144
84
426
151
Rental and ancillary services profit
$
15
$
28
$
40
$
47
Rental and ancillary services profit
margin
9.4
%
25.0
%
8.6
%
23.7
%
T-13
HILTON GRAND VACATIONS
INC.
REAL ESTATE SALES AND
FINANCING SEGMENT ADJUSTED EBITDA
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Sales of VOIs, net
$
500
$
488
$
1,130
$
597
Sales, marketing, brand and other fees
177
118
457
252
Financing revenue
68
53
196
127
Real estate sales and financing segment
revenues
745
659
1,783
976
Cost of VOI sales
(102
)
(130
)
(207
)
(154
)
Sales and marketing expense, net
(322
)
(234
)
(849
)
(432
)
Financing expense
(25
)
(19
)
(66
)
(43
)
Marketing package stays
(10
)
(5
)
(25
)
(13
)
Share-based compensation
3
3
9
7
Other adjustment items
6
6
21
11
Real estate sales and financing segment
adjusted EBITDA
$
295
$
280
$
666
$
352
Real estate sales and financing segment
adjusted EBITDA profit margin
39.6
%
42.5
%
37.4
%
36.1
%
T-14
HILTON GRAND VACATIONS
INC.
RESORT AND CLUB MANAGEMENT
SEGMENT ADJUSTED EBITDA
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Resort and club management revenues
$
130
$
99
$
379
$
192
Rental and ancillary services
159
112
466
198
Marketing package stays
10
5
25
13
Resort and club management segment
revenue
299
216
870
403
Resort and club management expenses
(45
)
(26
)
(118
)
(45
)
Rental and ancillary services expenses
(144
)
(84
)
(426
)
(151
)
Share-based compensation
2
1
5
3
Other adjustment items
—
2
1
2
Resort and club segment adjusted
EBITDA
$
112
$
109
$
332
$
212
Resort and club management segment
adjusted EBITDA profit margin
37.5
%
50.5
%
38.2
%
52.6
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108006248/en/
Investor Contact: Mark Melnyk 407-613-3327
mark.melnyk@hgv.com
Media Contact: Lauren George 407-613-8431
lauren.george@hgv.com
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