Hilton Grand Vacations Inc. (HGV) Earnings

Management highlights

Good morning and welcome to the Hilton Grand Vacations first quarter 2026 earnings conference call. Discussions include forward-looking statements. Reported results for the quarter do not reflect $25 million of net contract sales deferrals under ASC 606. CEO Mark Wang notes strong start to the year, contract sales met expectations, adjusted EBITDA exceeded expectations growing 8% with margin expansion. Consumer environment: leisure travel demand healthy, arrivals strong in first quarter, trends improving through fall. Raising adjusted EBITDA guidance for the full year. Operational excellence drove strong execution, tours outpaced VPG, higher mix of new owners. Added new buyers, investments in marketing pipeline supported new buyer tour growth. Reached agreement to purchase development rights of Alara, taking full control of the project. Making progress with inventory optimization initiative, identified eight properties for disposition. Continuing to expand HEV MAX and HEV Ultimate Access offerings to enhance value proposition and drive member engagement. Ultimate Access teams expanding experiential platform with various events.

Guidance

Raising adjusted EBITDA guidance for the full year from prior $1.185 to $1.225 billion to $1.225 and $1.265 billion. Prior full-year 2026 top-line targets remain in place: low single-digit contract sales growth with low to mid-single-digit tour growth and VPG down slightly. Expect adjusted EBITDA on a dollar basis to increase sequentially each quarter. For the second quarter, expect to grow adjusted EBITDA in the low to mid single digit range versus the prior year, which includes approximately $3 million contribution from ALARA. Expect 2026 conversion rate to be in the lower half of the target 55 to 65% range. Expect BPG to be down slightly for the full year with Q2 and Q3 seeing low to mid single digit declines and returning to solid growth in the fourth quarter as we fully lap Blue Green's max launch period.

Segment performance

Total revenue before cost reimbursements in the quarter grew 2% to $1.2 billion. Adjusted EBITDA to shareholders grew 8% to $267 million, with margins excluding reimbursements of 23%, up 130 basis points over the prior year. Contract sales of $719 million were down slightly, with new buyer contract sales over 26% of the total, an increase of approximately 160 basis points from the prior year. Tours grew 8.5% during the quarter. BPG was nearly $3,800 for the quarter, declining 8%. Cost of product in the period was 10%. Real estate sales and marketing expense for the quarter was $352 million, or 49% of contract sales, 260 basis points lower than the prior year. Real estate profit for the quarter was 152 million with margins of 28%, up 350 basis points versus the prior year. First quarter revenue in financing business was 138 million and profit was $87 million. Excluding amortization items, Financing margins were 65%, up 510 basis points from the prior year. Consolidated member count was just over 720,000. Revenue grew 1% to $185 million for the quarter, and profit was $126 million with margins of 68%. Rental and ancillary revenues were up 5% versus the prior year to $197 million. Developer maintenance fees were the largest driver of rental and ancillary business profitability trends and were responsible for the $19 million loss in the period.

Risks & headwinds

Monitoring impact of conflict in the Middle East on leisure travel landscape. Weather in Hawaii late in 1Q and early 2Q could have some impact on arrivals and sales, but teams managed to minimize impact. Portfolio performance and loan loss provision dependent on mix of product sold, with more trust sales leading to slightly higher provision but lower cost of product. Securitization markets affected by geopolitical noise, but remain open and healthy with deals completed and planned.

Analyst Q&A

• Q: Patrick Schulz from Truist Securities asked about loan loss provision trends and tour growth vs VPG.

  A: Dan mentioned portfolio performance with increased balance, decreased default rates, stable early-stage delinquencies, and provision in line with expectations. Mark mentioned teams driving new buyer sales and transactions, expecting balance to improve as year progresses.

• Q: Ben Chaikin from Mizuho asked about Inventory Optimization Initiative and ALARA.

  A: Mark and Dan discussed inventory optimization with eight properties identified for disposition, expecting benefits to adjusted EBITDA. ALARA is a flagship property with expected $20 million contribution to 2026 guidance, picking up consumer note portfolio net of impaired.

• Q: David Katz from Jefferies asked about weather impact in Hawaii.

  A: Mark said weather impacts were about $5 million of revenue, minimal and not material, teams managed through challenges.

• Q: Trey Bowers from Wells Fargo asked about new owner performance and NOG.

  A: Mark and Dan mentioned strong new owner performance driven by tour quality and value proposition, NOG mechanical outcome of recapture but trends on new buyers positive.

• Q: Stephen Grambling from Morgan's Family asked about club dispositions.

  A: Mark and Dan said dispositions are not one-off, based on property age, rebranding, and market overlap, expecting more in future but not annual.

• Q: Chris Waranka from Deutsche Bank asked about margins, staffing, and LLP.

  A: Dan said margin expansion due to efficiency initiatives, financing side impacted by interest rate conflict, personnel in good spot. Mark and Dan discussed LLP with mix of product sold affecting provision and cost of product, portfolio performing well with strong investor demand in securitization.