Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hilton Grand Vacations Inc (NYSE:HGV) reported a 10% increase in contract sales, reaching $721 million, indicating strong sales performance.
• Adjusted EBITDA was $248 million with margins excluding reimbursements of 22%, showcasing solid profitability.
• BPG (Bookings Per Guest) grew 15% to more than $4,100, reflecting improved sales efficiency and customer engagement.
• The company successfully repurchased $150 million worth of stock during the quarter, demonstrating strong cash flow and shareholder returns.
• HGV's diversified business model and direct marketing approach provide a buffer against macroeconomic volatility, creating its own demand and maintaining a strong member base.

Negative Points

• The macroeconomic environment has become more volatile and unpredictable, potentially impacting consumer confidence and spending.
• Tour growth was down 4% due to efficiency programs and sales center closures related to hurricanes, affecting overall sales volume.
• Real estate profit margins decreased by 200 basis points, partly due to an uptick in the cost of products and sales and marketing expenses.
• The provision for bad debt remains a concern, with a 12% rate of owned contract sales, indicating potential credit risk.
• Some Bluegreen sales centers impacted by hurricanes are taking longer to reopen, affecting tour flow and sales opportunities.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with HGV.

Q: Can you explain why Hilton Grand Vacations is not experiencing the same consumer choppiness in bookings as other leisure businesses? A: Mark Wang, CEO: We have a distinct advantage due to our business model. About 50% of our occupancy comes from owners who have prepaid, and another 15-20% from marketing packages. Our booking windows are significantly longer than traditional leisure travel, giving us better visibility into future demand. This, combined with our prepaid model, provides us with a stable and predictable occupancy rate.

Q: How does the mix of new owner sales versus existing owner sales affect your VPG (Volume Per Guest) results? A: Mark Wang, CEO: The mix is closer to 25-30% for new buyers, not 15%. The strong performance in VPG is driven by significant growth in owner transactions and improved close rates. While new buyer VPG growth was driven by a 5% increase in average transaction price, owner VPG saw a 500 basis point improvement in close rates.

Q: Regarding the balance sheet optimization, what is the status of the $951 million in notes that are current on payments? A: Dan, CFO: The $200 million of these notes are not immediately securitizable due to factors like lack of FICO scores or heavy loan balances. However, the vast majority of the $951 million is securitizable, and we plan to term out our warehouse borrowings by accessing the ABS markets in the near term.

Q: Can you provide more details on the strategic initiatives, particularly around flexible financing and new features to drive engagement? A: Mark Wang, CEO: We are standardizing our financing programs across the company to simplify the process and make it more attractive to new customers. This includes generating additional cash at the point of sale and incentivizing customers based on product type. We are also focusing on improving tour quality and enhancing our value proposition to drive engagement.

Q: Have you noticed any geographic differences in consumer behavior or signs of trade-down between different products? A: Mark Wang, CEO: We have seen strong performance across various markets, including Hawaii, New York, and Orlando. There hasn't been a significant geographic focus, and our strategy has been to maneuver around any potential consumer challenges by tightening qualifications and focusing on higher-quality customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.