Hilton Grand Vacations Reports Mixed Earnings Call

Hilton Grand Vacations ((HGV)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Hilton Grand Vacations (HGV) presented a mixed sentiment, highlighting both significant achievements and notable challenges. The company celebrated the successful integration of Bluegreen and the launch of HGV Max, which drove strong membership growth and record free cash flow. However, the call also addressed challenges such as the impact of hurricanes on sales, increased consumer finance interest expenses, and ongoing issues with tour growth and bad debt provisions.

Bluegreen Acquisition and Integration

Hilton Grand Vacations successfully closed the acquisition of Bluegreen, adding nearly 200,000 members and expanding its portfolio to over 200 properties. The company reported substantial progress towards achieving $100 million in cost synergies, marking a significant milestone in its strategic growth initiatives.

HGV Max Launch and Membership Growth

The launch of HGV Max to Bluegreen members was met with strong enthusiasm, resulting in nearly 5,000 new members in less than two months. The HGV Max member base saw a remarkable 34% growth, reaching over 193,000 members, underscoring the program’s appeal and potential for future expansion.

Record Free Cash Flow

Hilton Grand Vacations achieved a record free cash flow of $837 million, allowing the company to return over $432 million to shareholders. This financial milestone reflects the company’s robust operational performance and commitment to shareholder value.

Strong VPG and Contract Sales Growth

The company reported contract sales of $837 million and an adjusted EBITDA of $289 million, with VPG (Volume Per Guest) exceeding 2019 levels by over 20%. This growth was driven by strong performance in both owner and new buyer channels, highlighting the effectiveness of HGV’s sales strategies.

APAC Region Performance

The APAC region demonstrated strong performance, particularly with high demand for the remaining inventory at the Okinawa project and the initial sales launch of the new Kohaku property in Waikiki. This regional success underscores the global appeal of HGV’s offerings.

Impact of Hurricanes on Sales

The earnings call addressed the impact of back-to-back hurricanes in the southern U.S., which resulted in nearly $23 million in lost contract sales and $11 million in EBITDA. This natural disaster posed a significant challenge to the company’s core growth.

Challenges with Tour Growth

Tour growth declined by roughly 1% after adjusting for one-time impacts, as the company focused on enhancing tour efficiency rather than volume growth. This strategic shift reflects HGV’s commitment to optimizing operational processes.

Increased Consumer Finance Interest Expense

Hilton Grand Vacations anticipates an additional $25 million in consumer finance interest expenses due to the optimization of its financing business. This increase highlights the financial challenges the company faces in its pursuit of growth.

Provision for Bad Debt

The provision for bad debt was reported at 13.3% of owned contract sales, with a reserve of $13 million primarily associated with the acquired Bluegreen portfolio. This provision underscores the ongoing financial management challenges following the acquisition.

Forward-Looking Guidance

Looking ahead, Hilton Grand Vacations provided comprehensive guidance for 2025, anticipating growth in contract sales and adjusted EBITDA despite macroeconomic pressures like inflation and elevated interest rates. The company expects tours to grow in the low to mid-single-digit range and VPG in the mid-single-digit range, with overall contract sales projected to be in the mid to high single-digit range. HGV plans to increase its nonrecourse borrowing rate to between 65% and 70% in 2025, aiming to enhance free cash flow generation and targeting a cash conversion rate of 65% to 75%. Additionally, the company aims to return a record $600 million to shareholders through share repurchases in 2025.

In conclusion, Hilton Grand Vacations’ earnings call highlighted a blend of achievements and challenges. The successful integration of Bluegreen and the launch of HGV Max were significant accomplishments, driving membership growth and financial performance. However, the company faces ongoing challenges, including the impact of natural disasters and financial pressures. Looking forward, HGV remains optimistic about its growth prospects, focusing on strategic initiatives and shareholder value.