Hilton Grand Vacations Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Solid Results: Produced solid results with contract sales up 10% to $834 million, adjusted EBITDA $278 million with 23% margins, led by HGV Max, owner business strength, and progress on initiatives.
• Initiatives: Strength in package sales, optimized package activations, implemented prescreening models in sales channels, expanded experience platform with Bluegreen hosted trips and cross-booking for Max members.
• Financing Milestone: Successfully closed JPY 9.5 billion timeshare securitization in Japan, first for a U.S. operator, providing low-cost funding.
• Integration Progress: Near achieving $100 million cost savings from Bluegreen acquisition, rolled out Envision sales technology, integrating Ultimate Access, and rebranding Bluegreen properties.
• Cash Flow: Generated over $135 million in adjusted free cash flow, returned $300 million to shareholders, aim to return $600 million this year.

Segment Performance

• Real Estate: Reported contract sales were $834 million, up 10% year-over-year. Volume per guest (VPG) was up 11% to nearly $3,700. Cost of product was 11% of net VOI sales, down nearly 100 basis points from prior year. Real estate profit was $162 million with margins of 26%, up 300 basis points.
• Financing: Second quarter revenue was $126 million, segment profit $72 million with margins of 57%. Originated weighted average interest rate was 15%. Combined gross receivables were $4 billion.
• Resort and Club: Consolidated member count was nearly 725,000. Revenue grew 7% to $183 million. Rental and ancillary revenues were flat, with segment loss of $8 million.

Guidance

• Maintained 2025 adjusted EBITDA guidance of $1.125 billion to $1.165 billion.
• Expect to convert 65% to 70% of EBITDA into cash flow.
• Anticipate flat tour growth and high-single-digit VPG growth driving contract sales.
• Remain committed to returning majority of free cash flow to shareholders via share repurchases.

Risks

• Policy landscape volatility could impact business.
• Las Vegas market softness due to lower international and convention business leading to competitive promotional activity.
• Delinquency rates and provision for bad debt could be affected by seasonal trends and operating environment.

Question and Answer

• Q: Ben Chaiken on fee-for-service mix and impact on EBITDA A: Fee-for-service mix was higher in Q2, expected to ratchet down. Pipeline has only one future fee-for-service project in Myrtle Beach.
• Q: Brandt Montour on new owner sales A: New owner sales have stabilized, pipeline up 10%, package sales and activation progress.
• Q: Patrick Scholes on loan book performance A: Delinquency rates stable to improving, 31-to 60-day delinquencies below 2024 levels.
• Q: Stephen Grambling on VPG flow-through and inventory spend A: VPG flow-through higher for owner sales, inventory spend expected to normalize to $300 million from prior higher estimates.