Hilton Grand Vacations Inc. (NYSE:HGV) (“HGV” or “the Company”)
today reports its first quarter 2022 results.
First Quarter 2022 Results1
- Total contract sales in the first quarter were $509 million,
96% of pro-forma combined Q1 2019 contract sales.
- Member count increased for the seventh straight quarter. Net
Owner Growth (NOG) for the Legacy-HGV business for the 12 months
ended March 31, 2022, was 2.1%, and Diamond added nearly 1,600 net
new members in the quarter.
- Total revenues for the first quarter were $779 million compared
to $235 million for the same period in 2021.
- Total revenues were affected by a deferral of $42 million in the current period
compared to a deferral of $32 million
in the same period in 2021.
- Net income for the first quarter was $51 million compared to
($7) million net loss for the same period in 2021.
- Net income was affected by a net deferral of $22 million in the current period
compared to a net deferral of $18
million in the same period in 2021.
- Diluted EPS for the first quarter was $0.42 compared to ($0.08)
for the same period in 2021.
- Diluted EPS was affected by a net deferral of $22 million in the current period
compared to a net deferral of $18
million in the same period in 2021, or $0.18 and $0.21 per share in
the current period and the same period in 2021, respectively.
- Adjusted EBITDA for the first quarter was $202 million compared
to $42 million for the same period in 2021.
- Adjusted EBITDA was affected by a net deferral of $22 million in the current period
compared to a net deferral of $18
million in the same period in 2021.
- Now expecting to achieve cost synergies of $150 million within
the 24-month period following the August 2021 close of the Diamond
transaction, up from the prior target of greater than $125 million
of cost synergies within 24 months of close.
- HGV’s Board of Directors approved a two-year share repurchase
program authorizing the Company to repurchase up to an aggregate of
$500 million of its outstanding shares of common stock.
Full Year 2022 Outlook
- The Company is raising its Deferral Adjusted EBITDA range to
$960 million to $990 million, from the prior range of $915 million
to $935 million.
“A strong pickup in momentum through the quarter propelled us to
another set of record results,” said Mark Wang, president and CEO
of Hilton Grand Vacations. “We delivered EBITDA, margins, and cash
flow well ahead of our 2019 pro-forma combined levels, and our
diligent integration efforts enabled us to identify additional cost
synergies from the Diamond acquisition. Taken together, these gave
us the confidence to increase our 2022 guidance range. In addition,
we unveiled our first set of rebranded Diamond properties under the
Hilton Vacation Club collection, and launched HGV Max our new
experiential membership program. These represent critical
milestones in our integration and increase the overall value
proposition of our offering through broader access and exciting new
benefits."
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.
Diamond Acquisition
On Aug. 2, 2021, HGV completed the acquisition of Dakota
Holdings, Inc., the parent of Diamond Resorts International (the
“Diamond Acquisition”). HGV completed the acquisition by exchanging
100% of the outstanding equity interests of Diamond for shares of
HGV common stock. Pre-existing HGV shareholders owned approximately
72% of the combined company immediately after giving effect of the
Diamond Acquisition, with certain funds controlled by Apollo Global
Management Inc. (the "Apollo Funds" or, "Apollo") and other
minority shareholders, who previously owned 100% of Diamond,
holding the remaining, approximately 28% at the time the Diamond
Acquisition was completed.
Diamond also operates in the hospitality and VOI industry, with
a worldwide resort network of global vacation destinations.
Diamond’s portfolio consists of resort properties that the Company
manages, which are included in one of Diamond's single- and
multi-use trusts (collectively, the "Diamond Collections" or
"Collections"), or are Diamond-branded resorts in which the Company
owns inventory. It also includes affiliated resorts and hotels,
which the Company does not manage, and which do not carry the
Diamond brand but are a part of Diamond's network and, through THE
Club® and other Club offerings (the “Diamond Clubs”), are available
for its members to use as vacation destinations.
Diamond’s operations primarily consist of: VOI sales and
financing which includes marketing and sales of VOIs and consumer
financing for purchasers of the Company's VOIs; operations related
to the management of the homeowners associations (the “HOAs”) for
resort properties and the Diamond Collections, operating and
managing points-based vacation clubs, and operation of certain
resort amenities and management services.
The financial results in this report include Diamond’s results
of operations beginning on Aug. 2, 2021 (the "Acquisition Date").
The Company refers to Diamond's business and operations that were
acquired as “Legacy-Diamond” or “Diamond,” and HGV's operations as
“Legacy-HGV,” which is inclusive of operations that existed both
prior to and following the Diamond Acquisition.
Overview
For the quarter ended March 31, 2022, diluted EPS was $0.42
compared to ($0.08) for the quarter ended March 31, 2021. Net
income and Adjusted EBITDA were $51 million and $202 million,
respectively, for the quarter ended March 31, 2022, compared to net
loss and Adjusted EBITDA of ($7) million and $42 million,
respectively, for the quarter ended March 31, 2021. Total revenues
for the quarter ended March 31, 2022, were $779 million compared to
$235 million for the quarter ended March 31, 2021.
Net income and Adjusted EBITDA for the quarter ended March 31,
2022, included a net deferral of $22 million relating to sales of
intervals at Maui Bay Villas Phase IB and The Beach Resort Sesoko
Phase II, which were under construction during the period. The
Company anticipates recognizing these revenues and related expenses
in 2022 when it expects to complete these projects and recognize
the net deferral impacts.
Consolidated Segment Highlights – First Quarter 2022
Real Estate Sales and Financing
For the quarter ended March 31, 2022, Real Estate Sales and
Financing segment revenues were $452 million, an increase of $329
million compared to the quarter ended March 31, 2021. Real Estate
Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA
profit margin were $153 million and 33.8%, respectively, for the
quarter ended March 31, 2022, compared to $27 million and 22.0%,
respectively, for the quarter ended March 31, 2021. Results in the
first quarter of 2022 improved due to an increase in tour flow
related to an improvement in travel demand versus the prior year,
as well as an increase in volume per guest.
Real Estate Sales and Financing segment adjusted EBITDA reflects
a reduction of $22 million due to the deferral of sales and related
expenses of VOIs under construction in the first quarter of 2022.
These deferrals were related sales of intervals at Maui Bay Villas
Phase IB and The Beach Resort Sesoko Phase II projects for the
quarter ended March 31, 2022, and compare to $18 million net
deferrals related to Ocean Tower Phase II, Maui Bay Villas Phase I
and The Beach Resort Sesoko Phase I projects for the quarter ended
March 31, 2021.
Contract sales for the quarter ended March 31, 2022, increased
$370 million to $509 million compared to the quarter ended March
31, 2021. For the quarter ended March 31, 2022, tours increased by
253% and VPG increased by 4% compared to the quarter ended March
31, 2021. For the quarter ended March 31, 2022, fee-for-service
contract sales represented 25% of contract sales compared to 40%
for the quarter ended March 31, 2021.
Financing revenues for the quarter ended March 31, 2022,
increased by $27 million compared to the quarter ended March 31,
2021. This was driven primarily by a $24 million increase related
to interest income on the timeshare financing receivables. 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 100 basis points as
of March 31, 2022 compared to March 31, 2021.
Resort Operations and Club
Management
For the quarter ended March 31, 2022, Resort Operations and Club
Management segment revenue was $268 million, an increase of $188
million compared to the quarter ended March 31, 2021. Resort
Operations and Club Management segment Adjusted EBITDA and Adjusted
EBITDA profit margin were $101 million and 37.7%, respectively, for
the quarter ended March 31, 2022, compared to $42 million and
52.5%, respectively, for the quarter ended March 31, 2021. Compared
to the prior-year period, results in the first quarter of 2022
increased due to the addition of Diamond's resort network and
member base, along with an increase in the number of transactions
compared to the same period in 2021, which more than offset the
increases in segment operating expenses.
Inventory
The estimated value of the Company’s total contract sales
pipeline is approximately $13 billion at current pricing.
The total pipeline includes approximately $7 billion of sales
relating to inventory that is currently available for sale at open
or soon-to-open projects. The remaining approximately $6 billion of
sales is inventory at new or existing projects that will become
available for sale in the future upon registration, delivery or
construction.
Owned inventory represents 83% of the Company’s total pipeline.
Approximately 53% of the owned inventory pipeline is currently
available for sale.
Fee-for-service inventory represents 17% of the Company’s total
pipeline. Approximately 46% of the fee-for-service inventory
pipeline is currently available for sale.
With 23% of the pipeline consisting of just-in-time inventory
and 17% consisting of fee-for-service inventory, capital-efficient
inventory represents 40% of the Company’s total contract sales
pipeline.
Balance Sheet and Liquidity
Total cash and cash equivalents were $817 million as of March
31, 2022, including $303 million of restricted cash.
As of March 31, 2022, the Company had $2,913 million of
corporate debt, net outstanding with a weighted average interest
rate of 4.09% and $1,203 million of non-recourse debt, net
outstanding with a weighted average interest rate of 2.87%.
As of March 31, 2022, the Company’s liquidity position consisted
of $514 million of unrestricted cash and $699 million remaining
borrowing capacity under the revolver facility.
As of March 31, 2022, HGV has $439 million remaining borrowing
capacity in total under the Timeshare Facility, and conduit
facilities due in 2023 and 2024. Of this amount, HGV has $154
million of mortgage notes that are available to be securitized and
another $238 million of mortgage notes that the Company expects
will become eligible as soon as they meet typical milestones
including receipt of first payment, deeding, or recording.
Free cash flow was $256 million for the quarter ended March 31,
2022, compared to $57 million for the same period in the prior
year. Adjusted free cash flow was $159 million for the quarter
ended March 31, 2022, compared to $3 million for the same period in
the prior year. Adjusted free cash flow for the quarter ended March
31, 2022 includes add-backs of $25 million related to the Diamond
Acquisition.
As of March 31, 2022, the Company’s total net leverage on a
pro-forma trailing 12-month basis was approximately 2.62x, not
giving effect to anticipated synergies. Inclusive of anticipated
synergies, HGV was at 2.39x total net leverage on a pro-forma
trailing 12-month basis.
Subsequent Events
On April 21, 2022, HGV completed a $246 million securitization
of its gross timeshare financing receivables with an overall
weighted average interest rate of 4.30 percent and an overall
advance rate of 95%. The proceeds were primarily used to pay down
one of the Company's conduit facilities in full, which was a total
of $115 million, and for general corporate purposes.
On May 3, 2022, HGV amended the terms of the Timeshare Facility
to increase the borrowing capacity from $450 million to $750
million, allowing the Company to borrow up to the maximum amount
until May 2024 and requiring all amounts borrowed to be repaid in
2025. The Timeshare Facility is secured by certain timeshare
financing receivables in the Company's loan portfolio.
On May 4, 2022, HGV's Board of Directors approved a share
repurchase program authorizing the Company to repurchase up to an
aggregate of $500 million of its outstanding shares of common
stock.
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. 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
2022
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
NET CONSTRUCTION
DEFERRAL ACTIVITY
Sales of VOIs (deferrals) recognitions
$
(42
)
$
—
$
—
$
—
$
(42
)
Cost of VOI sales (deferrals)
recognitions(1)
(13
)
—
—
—
(13
)
Sales and marketing expense (deferrals)
recognitions
(7
)
—
—
—
(7
)
Net construction (deferrals)
recognitions(2)
$
(22
)
$
—
$
—
$
—
$
(22
)
Net income
$
51
$
—
$
—
$
—
$
51
Interest expense
33
—
—
—
33
Income tax expense
20
—
—
—
20
Depreciation and amortization
60
—
—
—
60
Interest expense and depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
—
—
—
—
EBITDA
164
—
—
—
164
Other gain, net
(1
)
—
—
—
(1
)
Share-based compensation expense
11
—
—
—
11
Impairment expense
3
—
—
—
3
Acquisition and integration-related
expense
13
—
—
—
13
Other adjustment items(3)
12
—
—
—
12
Adjusted EBITDA
$
202
$
—
$
—
$
—
$
202
T-1
NET CONSTRUCTION DEFERRAL
ACTIVITY
(CONTINUED)
2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
NET CONSTRUCTION
DEFERRAL ACTIVITY
Sales of VOIs (deferrals) recognitions
$
(32
)
$
(42
)
$
241
$
(34
)
$
133
Cost of VOI sales (deferrals)
recognitions(1)
(10
)
(13
)
73
(12
)
38
Sales and marketing expense (deferrals)
recognitions
(4
)
(7
)
35
(5
)
19
Net construction (deferrals)
recognitions(2)
$
(18
)
$
(22
)
$
133
$
(17
)
$
76
Net (loss) income
$
(7
)
$
9
$
99
$
75
$
176
Interest expense
15
17
42
31
105
Income tax (benefit) expense
(6
)
3
49
47
93
Depreciation and amortization
11
12
48
55
126
Interest expense and depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
1
—
—
—
1
EBITDA
14
41
238
208
501
Other loss, net
1
1
20
4
26
Share-based compensation expense
4
14
14
16
48
Impairment expense
1
—
1
—
2
Acquisition and integration-related
expense
15
14
54
23
106
Other adjustment items(3)
7
—
13
13
33
Adjusted EBITDA
$
42
$
70
$
340
$
264
$
716
(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 for the periods subsequent to the
Diamond acquisition.
Conference Call
Hilton Grand Vacations will host a conference call on May 9,
2022, at 11 a.m. (ET) to discuss first 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 May 16, 2022. To access the
replay, please dial 1-844-512-2921 in the U.S. (+1-412-317-6671
internationally) using ID# 13726009. 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, may be identified by
terminology such as the words “outlook,” “believe,” “expect,”
“potential,” “goal,” “continues,” “may,” “will,” “should,” “could,”
“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 forward-looking statements involve known
and unknown risks, uncertainties and other factors, including those
that are beyond HGV’s control, that may cause its actual results,
performance or achievements to be materially different from the
future results. Factors that could cause HGV’s actual results to
differ materially from those contemplated by its forward-looking
statements include: risks that HGV may not realize the expected
cost savings, synergies, growth and other benefits from the Diamond
Acquisition or that the costs related to the Diamond Acquisition
are greater than anticipated; risks that there may be significant
costs and expenses associated with liabilities related to the
Diamond business that were either unknown or are greater than those
anticipated at the time of the Diamond Acquisition; risks that HGV
may not be successful in integrating the Diamond business into all
aspects of HGV's business and operations, including the conversion
and rebranding of the Diamond properties, rooms and sales
facilities into HGV-branded assets, or that the integration will
take longer than anticipated; the potential magnification of HGV's
operational risks as a result of the Diamond Acquisition and
integration of the Diamond business; risks related to disruption of
management’s attention from HGV’s ongoing business operations due
to its efforts to integrate Diamond into HGV; any adverse effect of
the Diamond Acquisition on HGV’s reputation, relationships,
operating results and business generally; the continuing impact of
the COVID-19 pandemic on HGV’s business, operating results, and
financial condition; the extent and duration of the impact of the
COVID-19 pandemic on global economic conditions; HGV’s ability to
meet its liquidity needs; risks related to HGV’s indebtedness,
especially in light of the significant amount of indebtedness HGV
incurred to complete the Diamond Acquisition; inherent business
risks, market trends and competition within the timeshare and
hospitality industries; HGV’s ability to successfully source
inventory and market, sell and finance VOIs; default rates on HGV’s
financing receivables (including those financing receivables
related to the Diamond business); the reputation of and HGV’s
ability to access Hilton brands and programs, including the risk of
a breach or termination of HGV’s license agreement with Hilton; the
integration of Diamond’s operations as part of HGV’s overall brand
that is governed by the terms of HGV’s license agreement with
Hilton; compliance with and changes to United States and global
laws and regulations, including those related to anti-corruption
and privacy; risks related to HGV’s acquisitions, joint ventures,
and other partnerships; HGV’s dependence on third-party development
activities to secure just-in-time inventory; the performance of
HGV's information technology systems and HGV’s ability to maintain
data security; regulatory proceedings or litigation; adequacy of
HGV’s workforce to meet its business and operation needs; HGV’s
ability to attract and retain key executives and employees with
skills and capacity to meet its needs; and natural disasters or
adverse geo-political conditions. Any one or more of the foregoing
or other factors could adversely impact HGV’s operations, revenue,
operating profits and margins, key business operational metrics,
financial condition and/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 filed
with the SEC on March 1, 2022, which may be updated from time to
time 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 EBITDA, Adjusted EBITDA, EBITDA
profit margin, Adjusted EBITDA profit margin, free cash flow and
adjusted free cash flow. Please see the tables in this press
release and “Definitions” for additional information and
reconciliations of such non-GAAP financial measures.
About Hilton Grand Vacations Inc.
Hilton Grand Vacations Inc. (NYSE:HGV) is recognized as a
leading global timeshare company. 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. As one of Hilton’s 18 premier brands,
Hilton Grand Vacations has a reputation for delivering a
consistently exceptional standard of service, and unforgettable
vacation experiences for guests and more than 715,000 owners.
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.hiltongrandvacations.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 (loss), 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 translations; (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
(loss) 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
(loss), 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.
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.
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 percent 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. We consider
contract sales to be an important operating measure because it
reflects the pace of sales in our business and is used to manage
the performance of the sales organization. While 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, included in “—Real Estate”
below, is useful for investors who are interested in the underlying
capital structures of the Company’s projects. See Note 2: Summary
of Significant Accounting Policies in our consolidated financial
statements included in Item 8 in our Annual Report on form 10-K for
the year ended December 31, 2021, for additional information on
Sales of VOIs, net.
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.
Real estate profit represents sales revenue less the cost
of VOI sales and sales and marketing costs, net of marketing
revenue. Real estate profit margin is calculated by dividing real
estate profit by sales revenue. The Company considers this to be an
important operating measure because it measures the efficiency of
our sales and marketing spending and management of inventory
costs.
Sales revenue represents Sale of VOIs, net and
fee-for-service commissions and brand fees earned from the sale of
fee-for-service intervals.
Fee-for-service commissions and brand fees, net
represents commissions and brand fees earned from the sale of
fee-for-service intervals net of related reserves.
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 FLOWS RECONCILIATION
T-5
SEGMENT REVENUE RECONCILIATION
T-6
SEGMENT EBITDA AND ADJUSTED EBITDA TO NET
INCOME (LOSS)
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
T-2
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions, except share
data)
March 31,
December 31,
2022
2021
(unaudited)
ASSETS
Cash and cash equivalents
$
514
$
432
Restricted cash
303
263
Accounts receivable, net
447
302
Timeshare financing receivables, net
1,718
1,747
Inventory
1,215
1,240
Property and equipment, net
754
756
Operating lease right-of-use assets,
net
65
70
Investments in unconsolidated
affiliates
62
59
Goodwill
1,351
1,377
Intangible assets, net
1,400
1,441
Land and infrastructure held for sale
41
41
Other assets
572
280
TOTAL ASSETS
$
8,442
$
8,008
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and
other
$
964
$
673
Advanced deposits
126
112
Debt, net
2,913
2,913
Non-recourse debt, net
1,203
1,328
Operating lease liabilities
85
87
Deferred revenues
395
237
Deferred income tax liabilities
691
670
Total liabilities
6,377
6,020
Equity:
Preferred stock, $0.01 par value;
300,000,000 authorized shares, none issued or outstanding as of
March 31, 2022 and December 31, 2021
—
—
Common stock, $0.01 par value;
3,000,000,000 authorized shares, 120,258,347 and 119,904,001 shares
issued and outstanding as of March 31, 2022 and December 31, 2021,
respectively
1
1
Additional paid-in capital
1,634
1,630
Accumulated retained earnings
408
357
Accumulated other comprehensive income
22
—
Total equity
2,065
1,988
TOTAL LIABILITIES AND EQUITY
$
8,442
$
8,008
T-3
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in millions, except share
data)
Three Months Ended March
31,
2022
2021
Revenues
Sales of VOIs, net
$
269
$
33
Sales, marketing, brand and other fees
119
53
Financing
64
37
Resort and club management
125
45
Rental and ancillary services
136
32
Cost reimbursements
66
35
Total revenues
779
235
Expenses
Cost of VOI sales
40
3
Sales and marketing
243
82
Financing
19
13
Resort and club management
36
8
Rental and ancillary services
132
31
General and administrative
42
21
Acquisition and integration-related
expense
13
15
Depreciation and amortization
60
11
License fee expense
25
14
Impairment expense
3
1
Cost reimbursements
66
35
Total operating expenses
679
234
Interest expense
(33
)
(15
)
Equity in earnings from unconsolidated
affiliates
3
2
Other gain (loss), net
1
(1
)
Income (loss) before income
taxes
71
(13
)
Income tax (expense) benefit
(20
)
6
Net income (loss)
$
51
$
(7
)
Earnings (loss) per share(1):
Basic
$
0.42
$
(0.08
)
Diluted
$
0.42
$
(0.08
)
Weighted average shares
outstanding(2)
Basic
119,981
85,308
Diluted
121,845
85,308
(1) Earnings (loss) per share is
calculated based on unrounded dollars.
(2) Presented in thousands.
T-4
HILTON GRAND VACATIONS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
Three Months Ended March
31,
2022
2021
Operating Activities
Net income (loss)
$
51
$
(7
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
60
11
Amortization of deferred financing costs,
acquisition premiums and other
12
6
Provision for financing receivables
losses
31
16
Impairment expense
3
1
Other loss, net
—
1
Share-based compensation
11
4
Deferred income tax benefit
—
(21
)
Equity in earnings from unconsolidated
affiliates
(3
)
(2
)
Net changes in assets and liabilities:
Accounts receivable, net
(107
)
8
Timeshare financing receivables, net
(11
)
19
Inventory
26
(14
)
Purchases and development of real estate
for future conversion to inventory
(1
)
(6
)
Other assets
(264
)
(27
)
Accounts payable, accrued expenses and
other
290
2
Advanced deposits
14
(3
)
Deferred revenues
158
74
Net cash provided by operating
activities
270
62
Investing Activities
Capital expenditures for property and
equipment
(8
)
(1
)
Software capitalization costs
(6
)
(4
)
Net cash used in investing activities
(14
)
(5
)
Financing Activities
Issuance of non-recourse debt
155
—
Repayment of debt
(3
)
(2
)
Repayment of non-recourse debt
(277
)
(69
)
Debt issuance costs and discounts
—
(3
)
Payment of withholding taxes on vesting of
restricted stock units
(8
)
(5
)
Proceeds from stock option exercises
1
2
Other financing activity
(1
)
(1
)
Net cash used in financing activities
(133
)
(78
)
Effect of changes in exchange rates on
cash, cash equivalents & restricted cash
(1
)
—
Net increase (decrease) in cash, cash
equivalents and restricted cash
122
(21
)
Cash, cash equivalents and restricted
cash, beginning of period
695
526
Cash, cash equivalents and restricted
cash, end of period
$
817
$
505
T-5
HILTON GRAND VACATIONS
INC.
FREE CASH FLOW
RECONCILIATION
(in millions)
Three Months Ended March
31,
2022
2021
Net cash provided by operating
activities
$
270
$
62
Capital expenditures for property and
equipment
(8
)
(1
)
Software capitalization costs
(6
)
(4
)
Free Cash Flow
$
256
$
57
Non-recourse debt activity, net
(122
)
(69
)
Acquisition and integration-related
expense
12
15
Other adjustment items(1)
13
—
Adjusted Free Cash Flow
$
159
$
3
(1) Includes capitalized acquisition and
integration-related costs for the three months ended March 31,
2022.
T-6
HILTON GRAND VACATIONS
INC.
SEGMENT REVENUE
RECONCILIATION
(in millions)
Three Months Ended March
31,
2022
2021
Revenues:
Real estate sales and financing
$
452
$
123
Resort operations and club management
268
80
Total segment revenues
720
203
Cost reimbursements
66
35
Intersegment eliminations
(7
)
(3
)
Total revenues
$
779
$
235
T-7
HILTON GRAND VACATIONS
INC.
SEGMENT EBITDA AND ADJUSTED
EBITDA TO NET INCOME (LOSS)
(in millions)
Three Months Ended March
31,
2022
2021
Net income (loss)
$
51
$
(7
)
Interest expense
33
15
Income tax expense (benefit)
20
(6
)
Depreciation and amortization
60
11
Interest expense, depreciation and
amortization included in equity in earnings from unconsolidated
affiliates
—
1
EBITDA
164
14
Other (gain) loss, net
(1
)
1
Share-based compensation expense
11
4
Impairment expense
3
1
Acquisition and integration-related
expense
13
15
Other adjustment items(1)
12
7
Adjusted EBITDA
$
202
$
42
Segment Adjusted EBITDA:
Real estate sales and financing(2)
$
153
$
27
Resort operations and club
management(2)
101
42
Adjustments:
Adjusted EBITDA from unconsolidated
affiliates
3
3
License fee expense
(25
)
(14
)
General and administrative(3)
(30
)
(16
)
Adjusted EBITDA
$
202
$
42
Adjusted EBITDA profit margin
25.9
%
17.9
%
EBITDA profit margin
21.1
%
6.0
%
(1)
Includes costs associated with
restructuring, one-time charges and other non-cash items. For the
three months ended March 31, 2022, this amount also includes the
amortization of premiums resulting from the Diamond
Acquisition.
(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 March
31,
2022
2021
Tour flow
98,601
27,948
VPG
$
4,849
$
4,647
Owned contract sales mix
74.7
%
59.7
%
Fee-for-service contract sales mix
25.3
%
40.3
%
Contract sales
$
509
$
139
Adjustments:
Fee-for-service sales(1)
(129
)
(56
)
Provision for financing receivables
losses
(31
)
(16
)
Reportability and other:
Net (deferral) recognition of sales of
VOIs under construction(2)
(42
)
(32
)
Fee-for-service sale upgrades, net
4
2
Other(3)
(42
)
(4
)
Sales of VOIs, net
$
269
$
33
Plus:
Fee-for-service commissions and brand
fees, net
69
32
Sales revenue
338
65
Less:
Cost of VOI sales
40
3
Sales and marketing expense, net(4)
186
59
Real estate profit (loss)
$
112
$
3
Real estate profit margin
33.1
%
4.6
%
Reconciliation of fee-for-service
commissions:
Sales, marketing, brand and other fees
$
119
$
53
Less:
Marketing revenue and other fees
50
21
Fee-for-service commissions and brand
fees, net
69
32
(1)
Represents contract sales from
fee-for-service properties on which we earn commissions and brand
fees.
(2)
Represents the net impact of deferred
revenues 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)
Includes revenue recognized through our
marketing programs for existing owners and prospective first-time
buyers and revenue associated with sales incentives and document
compliance.
T-9
HILTON GRAND VACATIONS
INC.
CONTRACT SALES MIX BY TYPE
SCHEDULE
Three Months Ended March
31,
2022
2021
Just-In-Time Contract Sales Mix
14
%
28
%
Fee-For-Service Contract Sales Mix
25
%
40
%
Total Capital-Efficient Contract Sales
Mix(1)
39
%
68
%
(1) Diamond contract sales are related to
developed properties and therefore are not included in capital
efficient contract sales.
T-10
HILTON GRAND VACATIONS
INC.
FINANCING PROFIT DETAIL
SCHEDULE
(in millions)
Three Months Ended March
31,
2022
2021
Interest income(1)
$
55
$
31
Other financing revenue
9
6
Financing revenue
64
37
Consumer financing interest expense(2)
7
7
Other financing expense
12
6
Financing expense
19
13
Financing profit
$
45
$
24
Financing profit margin
70.3
%
64.9
%
(1)
For the three months ended March 31,
2022, this amount includes $9 million of amortization of the
premium related to the acquired timeshare financing receivables
resulting from the Diamond Acquisition.
(2)
For the three months ended March 31,
2022, this amount includes $3 million 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 March
31,
2022
2021
Total members
502,304
327,880
Legacy-HGV Net Owner Growth (NOG)(1)
6,728
(337
)
Legacy-HGV Net Owner Growth %
(NOG%)(1)
2.1
%
(0.1
)%
(1) NOG is a twelve-trailing-month concept
and thus not calculated for Diamond under HGV's ownership.
Three Months Ended March
31,
2022
2021
Club management revenue
$
51
$
27
Resort management revenue
74
18
Resort and club management revenues
125
45
Club management expense
10
5
Resort management expense
26
3
Resort and club management expenses
36
8
Resort and club management profit
$
89
$
37
Resort and club management profit
margin
71.2
%
82.2
%
T-12
HILTON GRAND VACATIONS
INC.
RENTAL AND ANCILLARY PROFIT
DETAIL SCHEDULE
(in millions)
Three Months Ended March
31,
2022
2021
Rental revenues
$
124
$
30
Ancillary services revenues
12
2
Rental and ancillary services revenues
136
32
Rental expenses
122
29
Ancillary services expense
10
2
Rental and ancillary services expenses
132
31
Rental and ancillary services profit
$
4
$
1
Rental and ancillary services profit
margin
2.9
%
3.1
%
T-13
HILTON GRAND VACATIONS
INC.
REAL ESTATE SALES AND
FINANCING SEGMENT ADJUSTED EBITDA
(in millions)
Three Months Ended March
31,
2022
2021
Sales of VOIs, net
$
269
$
33
Sales, marketing, brand and other fees
119
53
Financing revenue
64
37
Real estate sales and financing segment
revenues
452
123
Cost of VOI sales
(40
)
(3
)
Sales and marketing expense, net
(243
)
(82
)
Financing expense
(19
)
(13
)
Marketing package stays
(7
)
(3
)
Share-based compensation
3
2
Other adjustment items
7
3
Real estate sales and financing segment
adjusted EBITDA
$
153
$
27
Real estate sales and financing segment
adjusted EBITDA profit margin
33.8
%
22.0
%
T-14
HILTON GRAND VACATIONS
INC.
RESORT AND CLUB MANAGEMENT
SEGMENT ADJUSTED EBITDA
(in millions)
Three Months Ended March
31,
2022
2021
Resort and club management revenues
$
125
$
45
Rental and ancillary services
136
32
Marketing package stays
7
3
Resort and club management segment
revenue
268
80
Resort and club management expenses
(36
)
(8
)
Rental and ancillary services expenses
(132
)
(31
)
Share-based compensation
1
—
Other adjustment items
—
1
Resort and club segment adjusted
EBITDA
$
101
$
42
Resort and club management segment
adjusted EBITDA profit margin
37.7
%
52.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220506005540/en/
Investor Contact: Mark Melnyk 407-613-3327
mark.melnyk@hgv.com
Media Contact: Lauren George 407-613-8431
lauren.george@hgv.com
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