Hilton Grand Vacations Reports Second Quarter 2024 Results
ORLANDO, Fla.–(BUSINESS WIRE)–Hilton Grand Vacations Inc. (NYSE: HGV) (“HGV” or “the Company”) today reports its second quarter 2024 results.
Second quarter of 2024 highlights1
- Total contract sales were $757 million.
- Member count was 720,000. Net Owner Growth (NOG) for the legacy HGV-DRI business for the 12 months ended June 30, 2024, was 1.7%.
- Total revenues for the second quarter of 2024 were $1.235 billion compared to $1.007 billion for the same period in 2023.
- Total revenues were affected by a net deferral of $13 million in the current period compared to a net deferral of $6 million in the same period in 2023.
- Net income attributable to stockholders for the second quarter was $2 million compared to $80 million net income attributable to stockholders for the same period in 2023.
- Adjusted net income attributable to stockholders for the second quarter was $65 million compared to $95 million for the same period in 2023.
- Net income attributable to stockholders and adjusted net income attributable to stockholders were affected by a net deferral of $8 million in the current period compared to a net deferral of $4 million in the same period in 2023.
- Diluted EPS for the second quarter was $0.02 compared to $0.71 for the same period in 2023.
- Adjusted diluted EPS for the second quarter was $0.62 compared to $0.85 for the same period in 2023.
- Diluted EPS and adjusted diluted EPS were affected by a net deferral of $8 million in the current period compared to a net deferral of $4 million in the same period in 2023, or $(0.08) and $(0.04) per share in the current period and the same period in 2023, respectively.
- Adjusted EBITDA attributable to stockholders for the second quarter was $262 million compared to $248 million for the same period in 2023.
- Adjusted EBITDA attributable to stockholders was affected by a net deferral of $8 million in the current period compared to a net deferral of $4 million in the same period in 2023.
- During the second quarter, the Company repurchased 2.3 million shares of common stock for $100 million.
- Through July 31, 2024, the Company has repurchased approximately 1.1 million shares for $46 million and currently has $114 million of remaining availability under the 2023 Share Repurchase Plan.
- On Aug. 7, 2024, HGV’s Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period (the “2024 Repurchase Plan”), which is in addition to the amount remaining under the 2023 Share Repurchase Plan.
- The Company is updating its guidance for the full year 2024 Adjusted EBITDA, excluding deferrals and recognitions, to a range of $1.075 billion to $1.135 billion, or a reduction of $125 million from its prior guidance range.
“Our results were below expectations this quarter, as we experienced some sales challenges along with a pullback in consumer spending behavior late in the quarter,” said Mark Wang, CEO of Hilton Grand Vacations. “While we aren’t satisfied with our performance, we’ve identified and are addressing those challenges, and I remain confident in our business and our long-term path. Our integration remains on track, and our underlying business fundamentals are solid – with more members, more geographic diversity, and more free cash flow than we’ve ever had.”
| 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. |
Overview
On Jan. 17, 2024, HGV completed the acquisition of Bluegreen Vacations Holding Corporation (“Bluegreen” or “Bluegreen Vacations”).
For the quarter ended June 30, 2024, diluted EPS was $0.02 compared to $0.71 for the quarter ended June 30, 2023. Net income attributable to stockholders and Adjusted EBITDA attributable to stockholders were $2 million and $262 million, respectively, for the quarter ended June 30, 2024, compared to net income attributable to stockholders and Adjusted EBITDA attributable to stockholders of $80 million and $248 million, respectively, for the quarter ended June 30, 2023. Total revenues for the quarter ended June 30, 2024, were $1,235 million compared to $1,007 million for the quarter ended June 30, 2023.
Net income attributable to stockholders and Adjusted EBITDA attributable to stockholders for the quarter ended June 30, 2024, included a net deferral of $8 million relating to the sales of intervals of a project under construction in Hawaii during the period. The Company anticipates recognizing revenues and related expenses for projects in Hawaii in 2024 when it expects to complete these projects and recognize the net deferral impacts.
Consolidated Segment Highlights – Second quarter of 2024
Real Estate Sales and Financing
For the quarter ended June 30, 2024, Real Estate Sales and Financing segment revenues were $740 million, an increase of $136 million compared to the quarter ended June 30, 2023. Real Estate Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA profit margin were $193 million and 26.1%, respectively, for the quarter ended June 30, 2024, compared to $189 million and 31.3%, respectively, for the quarter ended June 30, 2023. Real Estate Sales and Financing segment revenues results in the second quarter of 2024 increased primarily due to a $93 million increase in sales revenue and a $26 million increase in financing revenue.
Real Estate Sales and Financing segment Adjusted EBITDA reflects a net construction deferral of $8 million for the quarter ended June 30, 2024, compared to $4 million net construction deferrals for the quarter ended June 30, 2023, both of which decreased reported Adjusted EBITDA attributable to stockholders.
Contract sales for the quarter ended June 30, 2024, increased $145 million to $757 million compared to the quarter ended June 30, 2023. For the quarter ended June 30, 2024, tours increased by 39.4% and VPG decreased by 10.9% compared to the quarter ended June 30, 2023. For the quarter ended June 30, 2024, fee-for-service contract sales represented 19.5% of contract sales compared to 29.5% for the quarter ended June 30, 2023.
Financing revenues for the quarter ended June 30, 2024, increased by $26 million compared to the quarter ended June 30, 2023. This was driven primarily by an increase in the weighted average interest rate of 50 basis points for the originated portfolio and an increase in the carrying balance of the timeshare financing receivables portfolio as of June 30, 2024, compared to June 30, 2023.
Resort Operations and Club Management
For the quarter ended June 30, 2024, Resort Operations and Club Management segment revenue was $386 million, an increase of $66 million compared to the quarter ended June 30, 2023. Resort Operations and Club Management segment Adjusted EBITDA and Adjusted EBITDA profit margin were $152 million and 39.4%, respectively, for the quarter ended June 30, 2024, compared to $123 million and 38.4%, respectively, for the quarter ended June 30, 2023, primarily due to an increase in management fees and higher average daily rates, partially offset by an increase in development and maintenance fees compared to the same period in 2023.
Inventory
The estimated value of the Company’s total contract sales pipeline is $12.8 billion at current pricing.
The total pipeline includes $8.7 billion of sales relating to inventory that is currently available for sale at open or soon-to-open projects. The remaining $4.1 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 90.0% of the Company’s total pipeline. Approximately 68.7% of the owned inventory pipeline is currently available for sale.
Fee-for-service inventory represents 10.0% of the Company’s total pipeline. Approximately 61.5% of the fee-for-service inventory pipeline is currently available for sale.
Balance Sheet and Liquidity
Total cash and cash equivalents were $328 million and total restricted cash was $273 million as of June 30, 2024.
As of June 30, 2024, the Company had $4,885 million of corporate debt, net outstanding with a weighted average interest rate of 6.850% and $1,725 million of non-recourse debt, net outstanding with a weighted average interest rate of 5.075%.
As of June 30, 2024, the Company’s liquidity position consisted of $328 million of unrestricted cash and $446 million remaining borrowing capacity under the revolver facility.
As of June 30, 2024, HGV has $750 million remaining borrowing capacity in total under the Timeshare Facility. Of this amount, HGV has $647 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 it meets typical milestones, including receipt of first payment, deeding or recording.
Free cash flow was $95 million for the quarter ended June 30, 2024, compared to $180 million for the same period in the prior year. Adjusted free cash flow was $370 million for the quarter ended June 30, 2024, compared to $(13) million for the same period in the prior year. Adjusted free cash flow for the quarter ended June 30, 2024, and 2023 includes add-backs of $62 million and $22 million, respectively for acquisition and integration related costs and $13 million related to litigation settlement payment for the quarter ended June 30, 2024.
As of June 30, 2024, the Company’s total net leverage on a trailing 12-month basis, inclusive of all anticipated cost synergies, was approximately 3.67x.
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) | ||||||||||||||||||
|
|
| 2024 | ||||||||||||||||
| NET CONSTRUCTION DEFERRAL ACTIVITY |
| First |
| Second |
| Third |
| Fourth |
| Full | ||||||||
| Sales of VOIs recognitions (deferrals) |
| $ | 2 |
|
| $ | (13 | ) |
| $ | — |
| $ | — |
| $ | (11 | ) |
| Cost of VOI sales (deferrals)(1) |
|
| (1 | ) |
|
| (4 | ) |
|
| — |
|
| — |
|
| (5 | ) |
| Sales and marketing expense (deferrals) |
|
| — |
|
|
| (1 | ) |
|
| — |
|
| — |
|
| (1 | ) |
| Net construction recognitions (deferrals)(2) |
| $ | 3 |
|
| $ | (8 | ) |
| $ | — |
| $ | — |
| $ | (5 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Net (loss) income attributable to stockholders |
| $ | (4 | ) |
| $ | 2 |
|
| $ | — |
| $ | — |
| $ | (2 | ) |
| Net income attributable to noncontrolling interest |
|
| 2 |
|
|
| 2 |
|
|
| — |
|
| — |
|
| 4 |
|
| Net (loss) income |
|
| (2 | ) |
|
| 4 |
|
|
| — |
|
| — |
|
| 2 |
|
| Interest expense |
|
| 79 |
|
|
| 87 |
|
|
| — |
|
| — |
|
| 166 |
|
| Income tax (benefit) expense |
|
| (11 | ) |
|
| 3 |
|
|
| — |
|
| — |
|
| (8 | ) |
| Depreciation and amortization |
|
| 62 |
|
|
| 68 |
|
|
| — |
|
| — |
|
| 130 |
|
| Interest expense and depreciation and amortization included in equity in earnings from unconsolidated affiliates |
|
| 1 |
|
|
| 2 |
|
|
| — |
|
| — |
|
| 3 |
|
| EBITDA |
|
| 129 |
|
|
| 164 |
|
|
| — |
|
| — |
|
| 293 |
|
| Other loss, net |
|
| 5 |
|
|
| 3 |
|
|
| — |
|
| — |
|
| 8 |
|
| Share-based compensation expense |
|
| 9 |
|
|
| 18 |
|
|
| — |
|
| — |
|
| 27 |
|
| Acquisition and integration-related expense |
|
| 109 |
|
|
| 48 |
|
|
| — |
|
| — |
|
| 157 |
|
| Impairment expense |
|
| 2 |
|
|
| — |
|
|
| — |
|
| — |
|
| 2 |
|
| Other adjustment items(3) |
|
| 22 |
|
|
| 33 |
|
|
| — |
|
| — |
|
| 55 |
|
| Adjusted EBITDA |
|
| 276 |
|
|
| 266 |
|
|
| — |
|
| — |
|
| 542 |
|
| Adjusted EBITDA attributable to noncontrolling interest |
|
| 3 |
|
|
| 4 |
|
|
| — |
|
| — |
|
| 7 |
|
| Adjusted EBITDA attributable to stockholders |
| $ | 273 |
|
| $ | 262 |
|
| $ | — |
| $ | — |
| $ | 535 |
|
| T-1 NET CONSTRUCTION DEFERRAL ACTIVITY (CONTINUED, in millions) | ||||||||||||||||||||
|
|
| 2023 | ||||||||||||||||||
| NET CONSTRUCTION DEFERRAL ACTIVITY |
| First |
| Second |
| Third |
| Fourth |
| Full | ||||||||||
| Sales of VOIs recognitions (deferrals) |
| $ | 4 |
|
| $ | (6 | ) |
| $ | (12 | ) |
| $ | (21 | ) |
| $ | (35 | ) |
| Cost of VOI sales recognitions (deferrals)(1) |
|
| 1 |
|
|
| (1 | ) |
|
| (3 | ) |
|
| (6 | ) |
|
| (9 | ) |
| Sales and marketing expense recognitions (deferrals) |
|
| 1 |
|
|
| (1 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (5 | ) |
| Net construction recognitions (deferrals)(2) |
| $ | 2 |
|
| $ | (4 | ) |
| $ | (7 | ) |
| $ | (12 | ) |
| $ | (21 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Net income attributable to stockholders |
| $ | 73 |
|
| $ | 80 |
|
| $ | 92 |
|
| $ | 68 |
|
| $ | 313 |
|
| Net income attributable to noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Net income |
|
| 73 |
|
|
| 80 |
|
|
| 92 |
|
|
| 68 |
|
|
| 313 |
|
| Interest expense |
|
| 44 |
|
|
| 44 |
|
|
| 45 |
|
|
| 45 |
|
|
| 178 |
|
| Income tax expense |
|
| 17 |
|
|
| 35 |
|
|
| 44 |
|
|
| 40 |
|
|
| 136 |
|
| Depreciation and amortization |
|
| 51 |
|
|
| 52 |
|
|
| 53 |
|
|
| 57 |
|
|
| 213 |
|
| Interest expense and depreciation and amortization included in equity in earnings from unconsolidated affiliates |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| 2 |
|
| EBITDA |
|
| 185 |
|
|
| 212 |
|
|
| 234 |
|
|
| 211 |
|
|
| 842 |
|
| Other (gain) loss, net |
|
| (1 | ) |
|
| (3 | ) |
|
| 1 |
|
|
| 1 |
|
|
| (2 | ) |
| Share-based compensation expense |
|
| 10 |
|
|
| 16 |
|
|
| 12 |
|
|
| 2 |
|
|
| 40 |
|
| Acquisition and integration-related expense |
|
| 17 |
|
|
| 13 |
|
|
| 12 |
|
|
| 26 |
|
|
| 68 |
|
| Impairment expense |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
| Other adjustment items(3) |
|
| 7 |
|
|
| 7 |
|
|
| 10 |
|
|
| 30 |
|
|
| 54 |
|
| Adjusted EBITDA |
|
| 218 |
|
|
| 248 |
|
|
| 269 |
|
|
| 270 |
|
|
| 1,005 |
|
| Adjusted EBITDA attributable to noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Adjusted EBITDA attributable to stockholders |
| $ | 218 |
|
| $ | 248 |
|
| $ | 269 |
|
| $ | 270 |
|
| $ | 1,005 |
|
| (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 and discounts resulting from purchase accounting. |
Conference Call
Hilton Grand Vacations will host a conference call on Aug. 8, 2024, at 11 a.m. (ET) to discuss second 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 Aug. 15, 2024. To access the replay, please dial 1-844-512-2921 in the U.S. (+1-412-317-6671 internationally) using ID#13743187. 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, including, related to the acquisition and integration of Bluegreen Vacations Holding Corporation (“Bluegreen”).
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, including those related to HGV’s acquisition and integration of Bluegreen, 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, Adjusted EBITDA Attributable to Stockholders, 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. We define Adjusted EBITDA Attributable to Stockholders as Adjusted EBITDA excluding amounts attributable to the noncontrolling interest in HGV/Big Cedar Vacations in which HGV owns a 51% interest (“Big Cedar”).
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 approximately 720,000 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. Follow us on Instagram, Facebook, LinkedIn, X (formerly Twitter), Pinterest and YouTube.
HILTON GRAND VACATIONS INC.
DEFINITIONS
EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders
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.
Adjusted EBITDA Attributable to Stockholders is calculated as Adjusted EBITDA, as previously defined, excluding amounts attributable to the noncontrolling interest in Big Cedar.
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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders 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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders may not be comparable to similarly titled measures of other companies.
HGV believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders 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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders 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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders do not reflect changes in, or cash requirements for, our working capital needs;
- EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders 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, Adjusted EBITDA and Adjusted EBITDA Attributable to
Contacts
Investor Contact:
Mark Melnyk
407-613-3327
[email protected]
Media Contact:
Lauren George
407-613-8431
[email protected]
