Hilton Grand Vacations Inc. (NYSE: HGV) (“HGV” or “the Company”)
today reports its third quarter 2023 results.
Third quarter of 2023 highlights1
- Total contract sales were $603 million.
- Member count was 526,000. Consolidated Net Owner Growth (NOG)
for the 12 months ended Sept. 30, 2023, was 2.1%.
- Total revenues for the third quarter were $1,018 million
compared to $1,116 million for the same period in 2022.
- Total revenues were affected by a net deferral of $12 million
in the current period compared to a net recognition of $86 million
in the same period in 2022.
- Net income for the third quarter was $92 million compared to
$150 million for the same period in 2022.
- Adjusted net income for the third quarter was $109 million
compared to $168 million for the same period in 2022.
- Net income and adjusted net income were affected by a net
deferral of $7 million in the current period compared to a net
recognition of $43 million in the same period in 2022.
- Diluted EPS for the third quarter was $0.83 compared to $1.24
for the same period in 2022.
- Adjusted diluted EPS for the third quarter was $0.98 compared
to $1.40 for the same period in 2022.
- Diluted EPS and adjusted diluted EPS were affected by a net
deferral of $7 million in the current period compared to a net
recognition of $43 million in the same period in 2022, or $(0.06)
and $0.36 per share in the current period and the same period in
2022, respectively.
- Adjusted EBITDA for the third quarter was $269 million compared
to $338 million for the same period in 2022.
- Adjusted EBITDA was affected by a net deferral of $7 million in
the current period compared to a net recognition of $43 million in
the same period in 2022.
- Adjusted EBITDA was affected by approximately $10 million due
to the impact of the Maui wildfires.
- During the third quarter, the Company repurchased 1.5 million
shares of common stock for $64 million.
- Through Oct. 30, 2023, the Company has repurchased
approximately 690,000 shares for $26 million and currently has $432
million of remaining availability under the 2023 Share Repurchase
Plan.
- The Company is updating its guidance for the full year 2023
Adjusted EBITDA excluding deferrals and recognitions to a range of
$1,000 million to $1,020 million, from the prior $1,090 million to
$1,120 million, which includes a reduction of approximately $17
million to $20 million due to the impact of the Maui wildfires in
Q3 and Q4.
“I’m proud of the team’s resilience as we navigated several
unique challenges this quarter, including the devastating wildfires
in Maui and a modestly softer consumer macroeconomic environment,”
said Mark Wang, president and CEO of Hilton Grand Vacations. “We
started the quarter with a strong July, although growth decelerated
as we moved through the quarter – particularly in August.
Accordingly, we’re updating our full-year outlook to reflect a more
moderate improvement in contract sales for the remainder of the
year, along with the ongoing impact of limited Maui operations. We
remain confident in our long-term strategy of driving tour flow and
net owner growth to embed future value into the business and
generate sustainable free cash flow.”
- 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.
Overview
For the quarter ended Sept. 30, 2023, diluted EPS was $0.83
compared to $1.24 for the quarter ended Sept. 30, 2022. Net income
and Adjusted EBITDA were $92 million and $269 million,
respectively, for the quarter ended Sept. 30, 2023, compared to net
income and Adjusted EBITDA of $150 million and $338 million,
respectively, for the quarter ended Sept. 30, 2022. Total revenues
for the quarter ended Sept. 30, 2023, were $1,018 million compared
to $1,116 million for the quarter ended Sept. 30, 2022.
Net income and Adjusted EBITDA for the quarter ended Sept. 30,
2023, included a net deferral of $7 million relating to the sales
of intervals of a project under construction in Japan during the
period. The Company anticipates recognizing these revenues and
related expenses in 2024 when it expects to complete this project
and recognize the net deferral impacts.
Consolidated Segment Highlights – Third quarter of
2023
Real Estate Sales and Financing
For the quarter ended Sept. 30, 2023, Real Estate Sales and
Financing segment revenues were $612 million, a decrease of $133
million compared to the quarter ended Sept. 30, 2022. Real Estate
Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA
profit margin were $205 million and 33.5%, respectively, for the
quarter ended Sept. 30, 2023, compared to $295 million and 39.6%,
respectively, for the quarter ended Sept. 30, 2022. Results in the
third quarter of 2023 declined due to lower sales of VOIs, lower
fee-for-services commissions, and increase in provision partially
offset by a reduction in cost of product and growth in interest
income.
Real Estate Sales and Financing segment Adjusted EBITDA reflects
a reduction of $7 million due to the net deferrals of sales and
related expenses of VOIs under construction in the third quarter of
2023. These deferrals were related to sales of intervals of a
project in Japan for the quarter ended Sept. 30, 2023, compared to
$43 million of net recognition of sales and related expenses of
VOIs associated with a project in Hawaii for the quarter ended
Sept. 30, 2022, which increased Adjusted EBITDA.
Contract sales for the quarter ended Sept. 30, 2023, decreased
$18 million to $603 million compared to the quarter ended Sept. 30,
2022. For the quarter ended Sept. 30, 2023, tours increased by
14.8% and VPG decreased by 13.5% compared to the quarter ended
Sept. 30, 2022. For the quarter ended Sept. 30, 2023,
fee-for-service contract sales represented 28.9% of contract sales
compared to 28.2% for the quarter ended Sept. 30, 2022.
Financing revenues for the quarter ended Sept. 30, 2023,
increased by $7 million compared to the quarter ended Sept. 30,
2022. This was driven primarily by the increase in interest income
from HGV's timeshare financing receivables portfolio. 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 52 basis points as of Sept.
30, 2023, compared to Sept. 30, 2022.
Resort Operations and Club Management
For the quarter ended Sept. 30, 2023, Resort Operations and Club
Management segment revenue was $322 million, an increase of $23
million compared to the quarter ended Sept. 30, 2022. Resort
Operations and Club Management segment Adjusted EBITDA and Adjusted
EBITDA profit margin were $126 million and 39.1%, respectively, for
the quarter ended Sept. 30, 2023, compared to $112 million and
37.5%, respectively, for the quarter ended Sept. 30, 2022. Compared
to the prior-year period revenue in the third quarter of 2023
increased due to growth in HGV's member base and strong rental
performance.
Inventory
The estimated value of the Company’s total contract sales
pipeline is $11.6 billion at current pricing.
The total pipeline includes $6.4 billion of sales relating to
inventory that is currently available for sale at open or
soon-to-open projects. The remaining $5.2 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 87.2% of the Company’s total
pipeline. Approximately 56.2% of the owned inventory pipeline is
currently available for sale.
Fee-for-service inventory represents 12.8% of the Company’s
total pipeline. Approximately 47.6% of the fee-for-service
inventory pipeline is currently available for sale.
With 23.4% of the pipeline consisting of just-in-time inventory
and 12.8% consisting of fee-for-service inventory,
capital-efficient inventory represents 36.2% of the Company’s total
contract sales pipeline.
Balance Sheet and Liquidity
Total cash and cash equivalents were $227 million and total
restricted cash was $308 million as of Sept. 30, 2023.
As of Sept. 30, 2023, the Company had $2,730 million of
corporate debt, net outstanding with a weighted average interest
rate of 6.67% and $1,038 million of non-recourse debt, net
outstanding with a weighted average interest rate of 4.30%.
As of Sept. 30, 2023, the Company’s liquidity position consisted
of $227 million of unrestricted cash and $866 million remaining
borrowing capacity under the revolver facility.
As of Sept. 30, 2023, HGV has $750 million remaining borrowing
capacity in total under the Timeshare Facility. Of this amount, HGV
has $395 million of mortgage notes that are available to be
securitized and another $359 million of mortgage notes that the
Company expects will become eligible as soon as it meets typical
milestones including receipt of first payment, deeding, or
recording.
Free cash flow was $70 million for the quarter ended Sept. 30,
2023, compared to $217 million for the same period in the prior
year. Adjusted free cash flow was $257 million for the quarter
ended Sept. 30, 2023, compared to $393 million for the same period
in the prior year. Adjusted free cash flow for the quarter ended
Sept. 30, 2023 and 2022 includes add-backs of $25 million and $34
million, respectively for acquisition and integration related
costs.
In October 2023, HGV amended its Term loan under the Senior
secured credit facility. Under the amendment, the new interest rate
is SOFR plus a spread adjustment of 0.11% plus 2.75%, down from
SOFR plus a spread adjustment of 0.11% plus 3.00%. Additionally,
the interest rate floor for the Term loan was lowered from 0.50% to
0.00%.
As of Sept. 30, 2023, the Company’s total net leverage on a
trailing 12-month basis was approximately 2.56x.
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 below. 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)
2023
NET CONSTRUCTION DEFERRAL
ACTIVITY
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
Sales of VOIs recognitions (deferrals)
$
4
$
(6
)
$
(12
)
$
—
$
(14
)
Cost of VOI sales recognitions
(deferrals)(1)
1
(1
)
(3
)
—
(3
)
Sales and marketing expense recognitions
(deferrals)
1
(1
)
(2
)
—
(2
)
Net construction recognitions
(deferrals)(2)
$
2
$
(4
)
$
(7
)
$
—
$
(9
)
Net income
$
73
$
80
$
92
$
—
$
245
Interest expense
44
44
45
—
133
Income tax expense
17
35
44
—
96
Depreciation and amortization
51
52
53
—
156
Interest expense and depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
1
—
—
1
EBITDA
185
212
234
—
631
Other (gain) loss, net
(1
)
(3
)
1
—
(3
)
Share-based compensation expense
10
16
12
—
38
Acquisition and integration-related
expense
17
13
12
—
42
Impairment expense
—
3
—
—
3
Other adjustment items(3)
7
7
10
—
24
Adjusted EBITDA
$
218
$
248
$
269
$
—
$
735
T-1
NET CONSTRUCTION DEFERRAL
ACTIVITY
(CONTINUED, 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
$
(3
)
$
31
Cost of VOI sales (deferrals)
recognitions(1)
(13
)
(5
)
30
(1
)
11
Sales and marketing expense (deferrals)
recognitions
(7
)
(1
)
13
(1
)
4
Net construction (deferrals)
recognitions(2)
$
(22
)
$
(4
)
$
43
$
(1
)
$
16
Net income
$
51
$
73
$
150
$
78
$
352
Interest expense
33
35
37
37
142
Income tax expense
20
41
54
14
129
Depreciation and amortization
60
64
57
63
244
Interest expense and depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
—
2
—
2
EBITDA
164
213
300
192
869
Other (gain) loss, net
(1
)
2
(2
)
2
1
Share-based compensation expense
11
15
14
6
46
Acquisition and integration-related
expense
13
17
19
18
67
Impairment expense (reversal)
3
(3
)
—
17
17
Other adjustment items(3)
12
29
7
17
65
Adjusted EBITDA
$
202
$
273
$
338
$
252
$
1,065
(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. 6,
2023, at 9 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. 13, 2023. To access the
replay, please dial 1-844-512-2921 in the U.S. (+1-412-317-6671
internationally) using ID#13735181. 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, and may be identified
by terminology such as the words “outlook,” “believe,” “expect,”
“potential,” “goal,” “continues,” “may,” “will,” “should,” “could,”
“would,” “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 our forward-looking statements involve
known and unknown risks, uncertainties and other factors, including
those that are beyond HGV’s control, which may cause the 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 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, which
may be supplemented and updated by the risk factors 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 Adjusted Net Income or Loss, Adjusted
Diluted EPS, EBITDA, Adjusted EBITDA, EBITDA profit margin,
Adjusted EBITDA profit margin, Free Cash Flow and Adjusted Free
Cash Flow, profits and profit margins for HGV’s key activities -
real estate, financing, resort and club management, and rental and
ancillary services. Please see the tables in this press release and
“Definitions” for additional information and reconciliations of
such non-GAAP financial measures.
The Company believes these additional measures are also
important in helping investors understand the performance and
efficiency with which we are able to convert revenues for each of
these key activities into operating profit, both in dollars and as
margins, and are frequently used by securities analysts, investors
and other interested parties as one of common performance measures
to compare results or estimate valuations across companies in our
industry.
The Company refers to Adjusted EBITDA guidance excluding
deferrals and recognitions, 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 and is the exclusive vacation
ownership partner of Hilton. 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. Hilton Grand Vacations has a reputation for
delivering a consistently exceptional standard of service, and
unforgettable vacation experiences for guests and more than 525,000
Club Members. 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.corporate.hgv.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, 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 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,
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.
Adjusted Net Income or Loss and Adjusted Diluted EPS
Adjusted Net Income or Loss, presented herein, is calculated as
net income further adjusted to exclude certain items, including,
but not limited to, gains, losses and expenses in connection with
costs associated with acquisitions, restructuring, amortization of
premiums and discounts resulting from purchase accounting, and
other non-cash and one-time charges. Adjusted Diluted EPS,
presented herein, is calculated as Adjusted Net Income, as defined
above, divided by diluted weighted average shares outstanding.
Adjusted Net Income or Loss and Adjusted Diluted EPS 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 definition may not be comparable to similarly titled
measures of other companies.
Adjusted Net Income or Loss and Adjusted Diluted EPS are useful
to assist our investors in evaluating our ongoing operating
performance for the current reporting period and, where provided,
over different reporting periods.
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.
Non-GAAP Measures within Our Segments
Sales revenue represents sales of VOIs, net, and
Fee-for-service commissions and brand fees earned from the
sale of fee-for-service VOIs. Fee-for-service commissions and brand
fees represents sales, marketing, brand and other fees, which
corresponds to the applicable line item from our condensed
consolidated statements of operations, adjusted by marketing
revenue and other fees earned primarily from discounted marketing
related packages which encompass a sales tour to prospective
owners. Real estate expense represents costs of VOI sales
and Sales and marketing expense, net. Sales and marketing
expense, net represents sales and marketing expense, which
corresponds to the applicable line item from our condensed
consolidated statements of operations, adjusted by marketing
revenue and other fees earned primarily from discounted marketing
related packages which encompass a sales tour to prospective
owners. Both fee-for-service commissions and brand fees and sales
and marketing expense, net, represent non-GAAP measures. We present
these items net because it provides a meaningful measure of our
underlying real estate profit related to our primary real estate
activities which focus on the sales and costs associated with our
VOIs.
Real estate profit represents sales revenue less real
estate expense. Real estate margin is calculated as a percentage by
dividing real estate profit by sales revenue. We consider real
estate profit margin to be an important non-GAAP operating measure
because it measures the efficiency of our sales and marketing
spending, management of inventory costs, and initiatives intended
to improve profitability.
Financing profit represents financing revenue, net of
financing expense, both of which correspond to the applicable line
items from our condensed consolidated statements of operations.
Financing profit margin is calculated as a percentage by dividing
financing profit by financing revenue. We consider this to be an
important non-GAAP operating measure because it measures the
efficiency and profitability of our financing business in
connection with our VOI sales.
Resort and club management profit represents resort and
club management revenue, net of resort and club management expense,
both of which correspond to the applicable line items from our
condensed consolidated statements of operations. Resort and club
management profit margin is calculated as a percentage by dividing
resort and club management profit by resort and club management
revenue. We consider this to be an important non-GAAP operating
measure because it measures the efficiency and profitability of our
resort and club management business that support our VOI sales
business.
Rental and ancillary services profit represents rental
and ancillary services revenues, net of rental and ancillary
services expenses, both of which correspond to the applicable line
items from our condensed consolidated statements of operations.
Rental and ancillary services profit margin is calculated as a
percentage by dividing rental and ancillary services profit by
rental and ancillary services revenue. We consider this to be an
important non-GAAP operating measure because it measures our
ability to convert available inventory and unoccupied rooms into
revenue and profit by transient rentals, as well as profitability
of other services, such as food and beverage, retail, spa offerings
and other guest services.
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% 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. While we do not
record the purchase price of sales of VOI products developed by
fee-for-service partners as revenue in our condensed consolidated
financial statements, rather recording the commission earned as
revenue in accordance with U.S. GAAP, we believe contract sales to
be an important operational metric, reflective of the overall
volume and pace of sales in our business and believe it provides
meaningful comparability of HGV’s results the results of our
competitors which may source their VOI products differently. HGV
believes that 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, is
included in Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations in our most recent
Quarterly Report on form 10-Q for the period ended Sept. 30,
2023.
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.
Sales revenue represents Sale of VOIs, net and
fee-for-service commissions and brand fees earned from the sale of
fee-for-service VOIs.
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 FLOW 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
ADJUSTED NET INCOME AND ADJUSTED DILUTED
EARNINGS PER SHARE - DILUTED (Non-GAAP)
T-15
RECONCILIATION OF NON-GAAP PROFIT MEASURES
TO GAAP MEASURE
T-16
T-2
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except share and
per share data)
September 30,
2023
December 31, 2022
(unaudited)
ASSETS
Cash and cash equivalents
$
227
$
223
Restricted cash
308
332
Accounts receivable, net
441
511
Timeshare financing receivables, net
1,821
1,767
Inventory
1,308
1,159
Property and equipment, net
789
798
Operating lease right-of-use assets,
net
62
76
Investments in unconsolidated
affiliates
74
72
Goodwill
1,416
1,416
Intangible assets, net
1,186
1,277
Other assets
377
373
TOTAL ASSETS
$
8,009
$
8,004
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable, accrued expenses and
other
$
942
$
1,007
Advanced deposits
185
150
Debt, net
2,730
2,651
Non-recourse debt, net
1,038
1,102
Operating lease liabilities
80
94
Deferred revenues
229
190
Deferred income tax liabilities
657
659
Total liabilities
5,861
5,853
Stockholders' Equity:
Preferred stock, $0.01 par value;
300,000,000 authorized shares, none issued or outstanding as of
September 30, 2023 and December 31, 2022
—
—
Common stock, $0.01 par value;
3,000,000,000 authorized shares,
108,628,081 shares issued and outstanding
as of September 30, 2023 and
113,628,706 shares issued and outstanding
as of December 31, 2022
1
1
Additional paid-in capital
1,535
1,582
Accumulated retained earnings
588
529
Accumulated other comprehensive income
24
39
Total stockholders' equity:
2,148
2,151
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
8,009
$
8,004
T-3
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share
data)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenues
Sales of VOIs, net
$
367
$
500
$
1,040
$
1,130
Sales, marketing, brand and other fees
170
177
501
457
Financing
75
68
225
196
Resort and club management
138
130
402
379
Rental and ancillary services
171
159
502
466
Cost reimbursements
97
82
289
215
Total revenues
1,018
1,116
2,959
2,843
Expenses
Cost of VOI sales
43
102
141
207
Sales and marketing
334
322
971
849
Financing
25
25
73
66
Resort and club management
43
45
129
118
Rental and ancillary services
154
144
460
426
General and administrative
40
50
130
158
Acquisition and integration-related
expense
12
19
42
49
Depreciation and amortization
53
57
156
181
License fee expense
37
33
101
90
Impairment expense
—
—
3
—
Cost reimbursements
97
82
289
215
Total operating expenses
838
879
2,495
2,359
Interest expense
(45
)
(37
)
(133
)
(105
)
Equity in earnings from unconsolidated
affiliates
2
2
7
9
Other (loss) gain, net
(1
)
2
3
1
Income before income taxes
136
204
341
389
Income tax expense
(44
)
(54
)
(96
)
(115
)
Net income
$
92
$
150
$
245
$
274
Earnings per share(1):
Basic
$
0.84
$
1.25
$
2.21
$
2.26
Diluted
$
0.83
$
1.24
$
2.18
$
2.23
(1)
Earnings per share is calculated using
whole numbers.
T-4
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Operating Activities
Net income
$
92
$
150
$
245
$
274
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
53
57
156
181
Amortization of deferred financing costs,
acquisition premiums and other
8
9
22
34
Provision for financing receivables
losses
46
32
117
103
Impairment expense
—
—
3
—
Other loss (gain), net
1
(1
)
(3
)
1
Share-based compensation
12
14
38
40
Deferred income tax benefit
—
(1
)
—
(1
)
Equity in earnings from unconsolidated
affiliates
(2
)
(2
)
(7
)
(9
)
Return on investments in unconsolidated
affiliates
—
—
6
—
Net changes in assets and liabilities:
Accounts receivable, net
44
9
70
(64
)
Timeshare financing receivables, net
(114
)
(89
)
(210
)
(141
)
Inventory
30
81
(37
)
101
Purchases and development of real estate
for future conversion to inventory
(22
)
(3
)
(28
)
(4
)
Other assets
67
138
(67
)
(21
)
Accounts payable, accrued expenses and
other
(107
)
(33
)
(75
)
257
Advanced deposits
—
8
35
25
Deferred revenues
(16
)
(136
)
47
(13
)
Net cash provided by operating
activities
92
233
312
763
Investing Activities
Capital expenditures for property and
equipment (excluding inventory)
(9
)
(6
)
(18
)
(25
)
Software capitalization costs
(13
)
(10
)
(29
)
(26
)
Net cash used in investing activities
(22
)
(16
)
(47
)
(51
)
Financing Activities
Proceeds from debt
—
—
438
—
Proceeds from non-recourse debt
293
269
468
671
Repayment of debt
(213
)
(178
)
(370
)
(310
)
Repayment of non-recourse debt
(131
)
(127
)
(528
)
(824
)
Payment of debt issuance costs
(6
)
(5
)
(6
)
(12
)
Repurchase and retirement of common
stock
(62
)
(84
)
(268
)
(162
)
Payment of withholding taxes on vesting of
restricted stock units
—
—
(14
)
(8
)
Proceeds from employee stock plan
purchases
—
—
4
2
Proceeds from stock option exercises
2
—
9
1
Other
(1
)
(1
)
(3
)
(2
)
Net cash used in financing activities
(118
)
(126
)
(270
)
(644
)
Effect of changes in exchange rates on
cash, cash equivalents and restricted cash
(5
)
(13
)
(15
)
(19
)
Net (decrease) increase in cash, cash
equivalents and restricted cash
(53
)
78
(20
)
49
Cash, cash equivalents and restricted
cash, beginning of period
588
666
555
695
Cash, cash equivalents and restricted
cash, end of period
535
744
535
744
Less: Restricted cash
308
319
308
319
Cash and cash equivalents
$
227
$
425
$
227
$
425
T-5
HILTON GRAND VACATIONS
INC.
FREE CASH FLOW
RECONCILIATION
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net cash provided by operating
activities
$
92
$
233
$
312
$
763
Capital expenditures for property and
equipment
(9
)
(6
)
(18
)
(25
)
Software capitalization costs
(13
)
(10
)
(29
)
(26
)
Free Cash Flow
$
70
$
217
$
265
$
712
Non-recourse debt activity, net
162
142
(60
)
(153
)
Acquisition and integration-related
expense
12
19
42
49
Other adjustment items(1)
13
15
30
48
Adjusted Free Cash Flow
$
257
$
393
$
277
$
656
(1)
Includes capitalized acquisition and
integration-related costs.
T-6
HILTON GRAND VACATIONS
INC.
SEGMENT REVENUE
RECONCILIATION
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenues:
Real estate sales and financing
$
612
$
745
$
1,766
$
1,783
Resort operations and club management
322
299
944
870
Total segment revenues
934
1,044
2,710
2,653
Cost reimbursements
97
82
289
215
Intersegment eliminations
(13
)
(10
)
(40
)
(25
)
Total revenues
$
1,018
$
1,116
$
2,959
$
2,843
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,
2023
2022
2023
2022
Net income
$
92
$
150
$
245
$
274
Interest expense
45
37
133
105
Income tax expense
44
54
96
115
Depreciation and amortization
53
57
156
181
Interest expense, depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
2
1
2
EBITDA
234
300
631
677
Other loss (gain), net
1
(2
)
(3
)
(1
)
Share-based compensation expense
12
14
38
40
Acquisition and integration-related
expense
12
19
42
49
Impairment expense
—
—
3
—
Other adjustment items(1)
10
7
24
48
Adjusted EBITDA
$
269
$
338
$
735
$
813
Segment Adjusted EBITDA:
Real estate sales and financing(2)
$
205
$
295
$
563
$
666
Resort operations and club
management(2)
126
112
358
332
Adjustments:
Adjusted EBITDA from unconsolidated
affiliates
2
5
8
12
License fee expense
(37
)
(33
)
(101
)
(90
)
General and administrative(3)
(27
)
(41
)
(93
)
(107
)
Adjusted EBITDA
$
269
$
338
$
735
$
813
Adjusted EBITDA profit margin
26.4
%
30.3
%
24.8
%
28.6
%
EBITDA profit margin
23.0
%
26.9
%
21.3
%
23.8
%
(1)
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.
(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,
2023
2022
2023
2022
Tour flow
163,699
142,647
456,411
375,507
VPG
$
3,656
$
4,229
$
3,771
$
4,463
Owned contract sales mix
71.1
%
71.8
%
69.6
%
72.1
%
Fee-for-service contract sales mix
28.9
%
28.2
%
30.4
%
27.9
%
Contract sales
$
603
$
621
$
1,738
$
1,747
Adjustments:
Fee-for-service sales(1)
(174
)
(175
)
(528
)
(488
)
Provision for financing receivables
losses
(46
)
(32
)
(117
)
(103
)
Reportability and other:
Net (deferral) recognition of sales of
VOIs under construction(2)
(12
)
86
(14
)
34
Fee-for-service sale upgrades, net
6
5
18
14
Other(3)
(10
)
(5
)
(57
)
(74
)
Sales of VOIs, net
$
367
$
500
$
1,040
$
1,130
Plus:
Fee-for-service commissions and brand
fees
107
125
325
293
Sales revenue
474
625
1,365
1,423
Cost of VOI sales
43
102
141
207
Sales and marketing expense, net
271
270
795
685
Real estate expense
314
372
936
892
Real estate profit
$
160
$
253
$
429
$
531
Real estate profit margin(4)
33.8
%
40.5
%
31.4
%
37.3
%
Reconciliation of fee-for-service
commissions:
Sales, marketing, brand and other fees
$
170
$
177
$
501
$
457
Less: Marketing revenue and other
fees(5)
(63
)
(52
)
(176
)
(164
)
Fee-for-service commissions and brand
fees
$
107
$
125
$
325
$
293
Reconciliation of sales and marketing
expense:
Sales and marketing expense
$
334
$
322
$
971
$
849
Less: Marketing revenue and other
fees(5)
(63
)
(52
)
(176
)
(164
)
Sales and marketing expense, net
$
271
$
270
$
795
$
685
(1)
Represents contract sales from
fee-for-service properties on which we earn commissions and brand
fees.
(2)
Represents the net impact related to
deferrals of revenues and direct expenses 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)
Excluding the marketing revenue and other
fees adjustment, Real Estate profit margin was 29.8% and 37.4% for
the three months ended September 30, 2023 and 2022, respectively
and 27.8% and 33.5% for the nine months ended September 30, 2023
and 2022, respectively.
(5)
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,
2023
2022
2023
2022
Just-In-Time Contract Sales Mix
20.3
%
17.5
%
16.9
%
14.5
%
Fee-For-Service Contract Sales Mix
28.9
%
28.1
%
30.4
%
27.9
%
Total Capital-Efficient Contract Sales
Mix
49.2
%
45.6
%
47.3
%
42.4
%
T-10
HILTON GRAND VACATIONS
INC.
FINANCING PROFIT DETAIL
SCHEDULE
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Interest income(1)
$
68
$
61
$
199
$
170
Other financing revenue
7
7
26
26
Financing revenue
75
68
225
196
Consumer financing interest expense(2)
12
11
34
26
Other financing expense
13
14
39
40
Financing expense
25
25
73
66
Financing profit
$
50
$
43
$
152
$
130
Financing profit margin
66.7
%
63.2
%
67.6
%
66.3
%
(1)
For the three and nine months ended
September 30, 2023, this amount includes $4 million and $11
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, 2023, this amount includes less than $1 million and
$1 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,
2023
2022
Total members
525,915
514,942
Consolidated Net Owner Growth (NOG)(1)
10,973
12,433
Consolidated Net Owner Growth %
(NOG)(1)
2.1
%
3.8
%
(1)
Consolidated NOG is a
trailing-twelve-month concept for which the twelve months includes
member count for Legacy-HGV, Legacy-DRI, and HGV Max members on a
consolidated basis.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Club management revenue
$
56
$
48
$
160
$
150
Resort management revenue
82
82
242
229
Resort and club management revenues
138
130
402
379
Club management expense
14
11
44
31
Resort management expense
29
34
85
87
Resort and club management expenses
43
45
129
118
Resort and club management profit
$
95
$
85
$
273
$
261
Resort and club management profit
margin
68.8
%
65.4
%
67.9
%
68.9
%
T-12
HILTON GRAND VACATIONS
INC.
RENTAL AND ANCILLARY PROFIT
DETAIL SCHEDULE
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Rental revenues
$
160
$
157
$
469
$
436
Ancillary services revenues
11
2
33
30
Rental and ancillary services revenues
171
159
502
466
Rental expenses
144
141
431
401
Ancillary services expense
10
3
29
25
Rental and ancillary services expenses
154
144
460
426
Rental and ancillary services profit
$
17
$
15
$
42
$
40
Rental and ancillary services profit
margin
9.9
%
9.4
%
8.4
%
8.6
%
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,
2023
2022
2023
2022
Sales of VOIs, net
$
367
$
500
$
1,040
$
1,130
Sales, marketing, brand and other fees
170
177
501
457
Financing revenue
75
68
225
196
Real estate sales and financing segment
revenues
612
745
1,766
1,783
Cost of VOI sales
(43
)
(102
)
(141
)
(207
)
Sales and marketing expense
(334
)
(322
)
(971
)
(849
)
Financing expense
(25
)
(25
)
(73
)
(66
)
Marketing package stays
(13
)
(10
)
(40
)
(25
)
Share-based compensation
4
3
10
9
Other adjustment items
4
6
12
21
Real estate sales and financing segment
adjusted EBITDA
$
205
$
295
$
563
$
666
Real estate sales and financing segment
adjusted EBITDA profit margin
33.5
%
39.6
%
31.9
%
37.4
%
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,
2023
2022
2023
2022
Resort and club management revenues
$
138
$
130
$
402
$
379
Rental and ancillary services
171
159
502
466
Marketing package stays
13
10
40
25
Resort and club management segment
revenue
322
299
944
870
Resort and club management expenses
(43
)
(45
)
(129
)
(118
)
Rental and ancillary services expenses
(154
)
(144
)
(460
)
(426
)
Share-based compensation
1
2
3
5
Other adjustment items
—
—
—
1
Resort and club segment adjusted
EBITDA
$
126
$
112
$
358
$
332
Resort and club management segment
adjusted EBITDA profit margin
39.1
%
37.5
%
37.9
%
38.2
%
T-15
HILTON GRAND VACATIONS
INC.
ADJUSTED NET INCOME
AND
ADJUSTED DILUTED EARNINGS PER
SHARE - DILUTED (Non-GAAP)
(in millions except per share
data)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net income
$
92
$
150
$
245
$
274
Income tax expense
44
54
96
115
Income before income taxes
136
204
341
389
Certain items:
Other loss (gain), net
1
(2
)
(3
)
(1
)
Impairment expense
—
—
3
—
Acquisition and integration-related
expense
12
19
42
49
Other adjustment items(1)
10
7
24
48
Adjusted income before income
taxes
$
159
$
228
$
407
$
485
Income tax expense
(50
)
(60
)
(113
)
(139
)
Adjusted net income
$
109
$
168
$
294
$
346
Weighted average shares
outstanding
Diluted
110.9
121.1
112.6
122.9
Earnings per share(2):
Diluted
$
0.83
$
1.24
$
2.18
$
2.23
Adjusted diluted
$
0.98
$
1.40
$
2.62
$
2.81
(1)
Includes costs associated with
restructuring, one-time charges, the amortization of premiums
resulting from purchase accounting and other non-cash items.
(2)
Earnings per share amounts are calculated
using whole numbers.
T-16
HILTON GRAND VACATIONS
INC.
RECONCILIATION OF NON-GAAP
PROFIT MEASURES TO GAAP MEASURE
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2023
2022
2023
2022
Net income
$
92
$
150
$
245
$
274
Interest expense
45
37
133
105
Income tax expense
44
54
96
115
Depreciation and amortization
53
57
156
181
Interest expense, depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
2
1
2
EBITDA
234
300
631
677
Other loss (gain), net
1
(2
)
(3
)
(1
)
Equity in earnings from unconsolidated
affiliates(1)
(2
)
(4
)
(8
)
(11
)
Impairment expense
—
—
3
—
License fee expense
37
33
101
90
Acquisition and integration-related
expense
12
19
42
49
General and administrative
40
50
130
158
Profit
$
322
$
396
$
896
$
962
Real estate profit
$
160
$
253
$
429
$
531
Financing profit
50
43
152
130
Resort and club management profit
95
85
273
261
Rental and ancillary services profit
17
15
42
40
Profit
$
322
$
396
$
896
$
962
(1)
Excludes impact of interest expense,
depreciation and amortization included in equity in earnings from
unconsolidated affiliates of $1 million for the nine months ended
September 30, 2023. Also excludes impact of aforementioned items of
$2 million for both the three and nine months ended September 30,
2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231105410084/en/
Investor Contact: Mark Melnyk 407-613-3327
mark.melnyk@hgv.com
Media Contact: Lauren George 407-613-8431
lauren.george@hgv.com
Hilton Grand Vacations (NYSE:HGV)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Hilton Grand Vacations (NYSE:HGV)
Historical Stock Chart
Von Mai 2023 bis Mai 2024