Hilton Grand Vacations Inc. Q1 FY2025 earnings call

• Strong quarter results driven by team efforts and structural process improvements. - Acknowledges macroeconomic volatility but taking proactive actions. - Bluegreen integration progress with $89 million of cost synergies achieved, targeting $100 million this year. - Initiatives in three categories: enhanced lead generation, execution related, and product enhancements. - Financing business optimization with ~70% of current receivables securitized, repurchased $150 million of stock during the quarter. - Member count at 725,000, HGV Max growth outperforming with over 215,000 members, rental businesses showing top-line growth.

Real Estate: Contract sales were $721 million, up 10% on a pro forma year-over-year basis. Tours were down 4% to 175,000, but VPG grew 15% to over $4,100. Cost of product was 12% of net VOI sales, up 100 basis points. Real estate profit was $138 million with margins of 24%. Financing: First quarter revenue was $125 million and segment profit was $70 million with margins of 56%. Resort and Club: Consolidated member count was approximately 725,000, NOG just under 1%. Revenues grew 10% to $183 million, segment profit $129 million with margins of 71%. Rental and Ancillary: Revenues $187 million, segment loss $19 million. Adjusted free cash flow in the quarter was $185 million, with cash flow conversion of 75%.

• Maintaining 2025 adjusted EBITDA guidance in the range of $1.125 billion to $1.165 billion, assuming the environment remains consistent with current conditions. - Direct exposure to tariffs is minimal, but consumer environment uncertainty is monitored closely.

• Macro-economic volatility and consumer uncertainty due to recent policy announcements like tariffs, even with minimal direct exposure to tariffs. - Potential impact of market volatility on the consumer environment, which is closely monitored.

Q: Good morning everybody. Thanks for taking my question. So maybe Mark, if we could just start talking about the consumer. The commentary -- I don't want to put words in your mouth, the commentary seems like you're not seeing any changes across preview package sales, as well as forward bookings for rentals things that we would think would you'd start to see a little bit of choppiness. We've heard from most other leisure facing businesses that there's some leisure choppiness in forward bookings. Can you just maybe talk about why you think you're sort of defying that trend? Is it the geographical exposure? Is it the consumer? What do you think it is?

A: Yeah. No, good question. And I think from a leading indicator standpoint, we do have a distinct advantage and I think it's underappreciated around line of sight. When you think about it Brandt, 50% of our occupancy is from our owners right? Another 15% to 20% is our marketing packages. And so that's a population we have data and we understand how we can activate on it. From a rental perspective, your booking window is around 40 days. For an owner it's 177 days. At least this year it's 177 days. Last year it was 178 days. So it's come down one day. So no material change at all. For marketing, it's 95 days out. So we have a distinct advantage of understanding who is going to be arriving at our properties well-before your traditional leisure travel that's booked on a hilton.com or through an OTA, which typically averages 40 days. The other thing is our owners have paid, right? They prepaid for this. And our package pipeline those customers have prepaid too. So I think those give us line of sight and a distinct advantage over traditional demand that would come in through [indiscernible].

Q: Hi. Thanks for taking my question. Dan, nice to have you back. Regarding the balance sheet optimization, you gave some color on the prepared remarks and also in the press release regarding the $951 million of notes that were current on payments then there's the $519 million that could be monetized and then there's the $210 million of additional notes. That still leaves kind of a balance of something around $200 million. I guess, for a three-part question, number one, where is that remaining $220 million or so sit? Part two, do you view all of the $951 million as receivables, you could securitize in the near term? Or is there a portion you would leave in the balance sheet for some reason or another? And then part three, I think the warehouse is full is the plan to securitize those working the warehouse down and then use that $850 million capacity to take down the $950 million? Hopefully, that all makes sense. I can circle back, if those two convoluted. Thanks.

A: Hi, Ben, thanks. And it's good to be back. With regards to your questions, I don't know where to begin. I think the last one, you effectively answered. But let's jump back to the $200 million. The $200 million is a part of the current unsecuritized receivables. It really pertains to loans that either have no FICO scores for one reason or another, or they're loan balance heavy for another reason i.e. just for lack of a better term, they're not immediately securitizable. That doesn't mean there's not a path. There is a path. This is more of your scratch and dent of nature. So, there is a path to do that. We wouldn't focus on that. We haven't focused on that in the past, just given the advance rate that's typically associated with the scratch and dent issuance. So, that's out there. The other thing to take into consideration is all these metrics are a point in time, right? So to your point the warehouse is drawn effectively not completely drawn at this point in time, but majority drawn. What we will look to do is to term that out by going to the ABS markets most likely as we approach the summer months. As you've seen, while the markets have been very choppy the ABS markets are definitely open. A competitor went to the market recently and was successful. We anticipate going to the market in the short term. We would just given today again I pause because there's a lot of noise out there, but if we were to go out today I would anticipate pricing in the range of five to 5.5. Obviously, that'll move with the macro, but that's where we would see it today. Let's see. I think I answered two of your three. Which one did I not answer completely?

Q: Overall, as you think about the -- just as you think about the total balance of the $951 million is there any -- can we think about that as being all securitizable in the near to medium term? Or is there a portion that you would want to leave on the balance sheet for some reason or another?

A: The vast majority would be -- the vast majority we would look to securitize. But again, this is getting back to the point-in-time concept, because there's a certain amount that we would retain to make sure that we have notes available for replacements in the existing deals et cetera. So there's some level that we wouldn't actively go out and securitize.