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Hilton Grand Vacations Reports Fourth Quarter and Full Year 2023 Results

Hilton Grand Vacations Inc. (NYSE: HGV) (“HGV” or “the Company”) today reports its fourth quarter and full year 2023 results.

Fourth quarter of 2023 highlights1

  • Total contract sales were $572 million.
    • Contract sales were affected by approximately $40 million due to the ongoing impact of the Maui wildfires, along with a temporary outage impacting our sales system early in the quarter.
  • Member count was 529,000. Consolidated Net Owner Growth (NOG) for the year ended Dec. 31, 2023, was 2.0%.
  • Total revenues for the fourth quarter were $1,019 million compared to $992 million for the same period in 2022.
    • Total revenues were affected by a net deferral of $21 million in the current period compared to a net deferral of $3 million in the same period in 2022.
  • Net income for the fourth quarter was $68 million compared to $78 million for the same period in 2022.
    • Adjusted net income for the fourth quarter was $111 million compared to $118 million for the same period in 2022.
    • Net income and adjusted net income were affected by a net deferral of $12 million in the current period compared to a net deferral of $1 million in the same period in 2022.
  • Diluted EPS for the fourth quarter was $0.62 compared to $0.67 for the same period in 2022.
    • Adjusted diluted EPS for the fourth quarter was $1.01 compared to $1.01 for the same period in 2022.
    • Diluted EPS and adjusted diluted EPS were affected by a net deferral of $12 million in the current period compared to a net deferral of $1 million in the same period in 2022, or $(0.11) and $(0.01) per share in the current period and the same period in 2022, respectively.
  • Adjusted EBITDA for the fourth quarter was $270 million compared to $252 million for the same period in 2022.
    • Adjusted EBITDA was affected by a net deferral of $12 million in the current period compared to a net deferral of $1 million in the same period in 2022.
    • Adjusted EBITDA was also affected by approximately $21 million due to the ongoing impact of the Maui wildfires, along with a temporary outage impacting our sales system early in the quarter.
  • During the quarter, the Company repurchased 2.7 million shares of common stock for $99 million.
    • Through Feb. 23, 2024, the Company has repurchased approximately 1.7 million shares for $71 million, and currently has $289 million of remaining availability under the 2023 Repurchase Plan.

Full Year 2024 Outlook

  • The Company expects full-year 2024 Adjusted EBITDA excluding deferrals and recognitions to be in a range of $1.2 billion to $1.26 billion, inclusive of the operations of Bluegreen Vacations and expected synergies.

“We closed out the year on a positive note, with a solid margin performance enabling us to deliver annual adjusted EBITDA slightly ahead of our revised guidance,” said Mark Wang, president and CEO of Hilton Grand Vacations. “Looking back at 2023, we generated strong tour growth and navigated several challenges through the year to deliver solid adjusted free cash flow, enabling us to return significant cash to shareholders as well as to capitalize on the opportunity to acquire Bluegreen Vacations. We’re very excited about this transaction, which will enhance our cash flow and recurring EBITDA through increased scale and diversification, while providing us new avenues for growth with our strategic partners and reinforcing our position as the premier vacation ownership and experiences company. Our focus for the coming year will be on engaging with our teams, members, and partners to ensure a smooth integration of Bluegreen, along with enhancing the efficiency of our tour flow to deliver EBITDA and cash flow growth.”

(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

For the quarter ended Dec. 31, 2023, diluted EPS was $0.62 compared to $0.67 for the quarter ended Dec. 31, 2022. Net income and Adjusted EBITDA were $68 million and $270 million, respectively, for the quarter ended Dec. 31, 2023, compared to net income and Adjusted EBITDA of $78 million and $252 million, respectively, for the quarter ended Dec. 31, 2022. Total revenues for the quarter ended Dec. 31, 2023, were $1,019 million compared to $992 million for the quarter ended Dec. 31, 2022.

Net income and Adjusted EBITDA for the quarter ended Dec. 31, 2023, included a net deferral of $12 million relating to the sales of intervals of projects under construction in Japan and Hawaii during the period. The Company anticipates recognizing these revenues and related expenses in 2024 when it expects to complete these projects.

Consolidated Segment Highlights – Fourth quarter of 2023

Real Estate Sales and Financing

For the quarter ended Dec. 31, 2023, Real Estate Sales and Financing segment revenues were $591 million, a decrease of $4 million compared to the quarter ended Dec. 31, 2022. Real Estate Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA profit margin were $191 million and 32.3%, respectively, for the quarter ended Dec. 31, 2023, compared to $199 million and 33.4%, respectively, for the quarter ended Dec. 31, 2022. Results in the fourth quarter of 2023 declined due to lower contract sales and lower fee-for-services commissions partially offset by reduced cost of product coupled with growth in interest income driven by an increase in the loan portfolio and the weighted-average interest rate.

Real Estate Sales and Financing segment Adjusted EBITDA reflects a reduction of $12 million due to the net deferral of sales and related expenses of VOIs under construction in the fourth quarter of 2023. These deferrals were related to sales of intervals of projects under construction in Japan and Hawaii for the quarter ended Dec. 31, 2023. This compares with a net deferral of $1 million due to the sales and related VOI expenses associated with a project under construction in Hawaii during the quarter ended Dec. 31, 2022.

Contract sales for the quarter ended Dec. 31, 2023, decreased $62 million to $572 million compared to the quarter ended Dec. 31, 2022. For the quarter ended Dec. 31, 2023, tours increased by 7.3% and VPG decreased by 14.3% compared to the quarter ended Dec. 31, 2022. For the quarter ended Dec. 31, 2023, fee-for-service contract sales represented 20.3% of contract sales compared to 32.3% for the quarter ended Dec. 31, 2022.

Financing revenues for the quarter ended Dec. 31, 2023, increased by $11 million compared to the quarter ended Dec. 31, 2022. This was driven primarily by the increase related to interest income on the timeshare financing receivables. The Company experienced an increase in the timeshare financing receivables balance along with a 55 basis point increase in the weighted average interest rate for the originated portfolio as of Dec. 31, 2023, compared to Dec. 31, 2022.

Resort Operations and Club Management

For the quarter ended Dec. 31, 2023, Resort Operations and Club Management segment revenue was $347 million, an increase of $20 million compared to the quarter ended Dec. 31, 2022. Resort Operations and Club Management segment Adjusted EBITDA and Adjusted EBITDA profit margin were $146 million and 42.1%, respectively, for the quarter ended Dec. 31, 2023, compared to $131 million and 40.1%, respectively, for the quarter ended Dec. 31, 2022. Revenue increased in the fourth quarter of 2023 compared to the prior-year period due to an increase in the Company’s member base and increased activity, coupled with strong rental performance.

Inventory

The estimated value of the Company’s total contract sales pipeline is approximately $11.3 billion at current pricing.

The total pipeline includes $7.1 billion of sales relating to inventory that is currently available for sale at open or soon-to-open projects. The remaining $4.2 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 88.3% of the Company’s total pipeline. Approximately 63.9% of the owned inventory pipeline is currently available for sale.

Fee-for-service inventory represents 11.7% of the Company’s total pipeline. Approximately 54.5% of the fee-for-service inventory pipeline is currently available for sale.

With 23.7% of the pipeline consisting of just-in-time inventory and 11.7% consisting of fee-for-service inventory, capital-efficient inventory represents 35.4% of the Company’s total contract sales pipeline.

Balance Sheet and Liquidity

Total cash and cash equivalents were $589 million and total restricted cash was $296 million as of Dec. 31, 2023.

As of Dec. 31, 2023, the Company had $3,049 million of corporate debt, net outstanding with a weighted average interest rate of 6.65% and $1,466 million of non-recourse debt, net outstanding with a weighted average interest rate of 5.10%.

As of Dec. 31, 2023, the Company’s liquidity position consisted of $589 million of unrestricted cash and restricted cash of $296 million. Restricted cash primarily consists of escrow deposits received on VOI sales and reserves related to non-recourse debt.

As of Dec. 31, 2023, the Company had $553 million remaining borrowing capacity under the revolver facility.

As of Dec. 31, 2023, HGV has $350 million remaining borrowing capacity in total under the Timeshare Facility and an additional $1 million remaining borrowing capacity under the acquired Grand Islander, a Hilton Grand Vacations Club timeshare facility. Of this amount, HGV has $155 million of mortgage notes that are available to be securitized and another $317 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 $(28) million for the quarter ended Dec. 31, 2023, compared to $(62) million for the same period in the prior year. Adjusted free cash flow was $255 million for the quarter ended Dec. 31, 2023, compared to $(92) million for the same period in the prior year. Adjusted free cash flow for the quarter ended Dec. 31, 2023, and 2022, includes add-backs of $49 million and $38 million, respectively for acquisition and integration related costs.

In October 2023, HGV amended its Term loan under the Senior secured credit facility. Under the amendment, the new interest rate is SOFR plus a spread adjustment of 0.11% plus 2.75%, down from SOFR plus a spread adjustment of 0.11% plus 3.00%. Additionally, the interest rate floor for the Term loan was lowered from 0.50% to 0.00%.

As of Dec. 31, 2023, the Company’s total net leverage on a trailing 12-month basis was approximately 2.44x.

Subsequent Events

On Jan. 17, 2024, HGV completed the Bluegreen Vacations acquisition in an all-cash transaction for 100% of the outstanding voting equity interests of Bluegreen Vacations, with total consideration of approximately $1.6 billion, inclusive of net debt assumed. The Bluegreen Vacations acquisition will be considered a business combination and accounted for using the acquisition method. Due to the close proximity of the Bluegreen Vacations acquisition date and the Company's filing of its Annual Report on Form 10-K for the year ended Dec. 31, 2023, the initial accounting for the business combination is incomplete, and therefore the Company is unable to disclose the information required by ASC 805, Business Combinations. HGV will include relevant disclosures as required in the first quarter of 2024.

In connection with the Bluegreen acquisition, HGV executed the following transactions:

  • Completed an offering of $900 million aggregate principal amount of the escrow issuers’ 6.625% senior secured notes due 2032 issued by our wholly-owned subsidiaries, Hilton Grand Vacations Borrower Escrow, LLC and Hilton Grand Vacations Borrower Escrow, Inc. The proceeds were used to finance the Bluegreen Vacations acquisition, repay certain outstanding indebtedness and pay related fees, costs, premiums and expenses in connection with these transactions.
  • Entered into Amendment No. 4, dated Jan. 17, 2024, to the Credit Agreement, dated as of Aug. 2 2021 (the “Amendment”) and incurred $900 million of new term loans that will mature on Jan. 17, 2031. Under the Amendment, the related interest rate is SOFR plus 2.75%. Proceeds were used to pay the Bluegreen Vacations acquisition consideration, fees and expenses incurred in connection with the Amendment and to refinance the repayment of certain indebtedness of Bluegreen Vacations and its subsidiaries.

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)

 

 

 

2023

NET CONSTRUCTION DEFERRAL ACTIVITY

 

First

Quarter

 

Second

Quarter

 

Third

Quarter

 

Fourth

Quarter

 

Full

Year

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

 

$

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

 

T-1

NET CONSTRUCTION DEFERRAL ACTIVITY

(CONTINUED, in millions)

 

 

 

2022

NET CONSTRUCTION DEFERRAL ACTIVITY

 

First

Quarter

 

Second

Quarter

 

Third

Quarter

 

Fourth

Quarter

 

Full

Year

Sales of VOIs (deferrals) recognitions

 

$

(42

)

 

$

(10

)

 

$

86

 

 

$

(3

)

 

$

31

Cost of VOI sales (deferrals) recognitions(1)

 

 

(13

)

 

 

(5

)

 

 

30

 

 

 

(1

)

 

 

11

Sales and marketing expense (deferrals) recognitions

 

 

(7

)

 

 

(1

)

 

 

13

 

 

 

(1

)

 

 

4

Net construction (deferrals) recognitions(2)

 

$

(22

)

 

$

(4

)

 

$

43

 

 

$

(1

)

 

$

16

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

51

 

 

$

73

 

 

$

150

 

 

$

78

 

 

$

352

Interest expense

 

 

33

 

 

 

35

 

 

 

37

 

 

 

37

 

 

 

142

Income tax expense

 

 

20

 

 

 

41

 

 

 

54

 

 

 

14

 

 

 

129

Depreciation and amortization

 

 

60

 

 

 

64

 

 

 

57

 

 

 

63

 

 

 

244

Interest expense and depreciation and amortization included in equity in earnings from unconsolidated affiliates

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

EBITDA

 

 

164

 

 

 

213

 

 

 

300

 

 

 

192

 

 

 

869

Other (gain) loss, net

 

 

(1

)

 

 

2

 

 

 

(2

)

 

 

2

 

 

 

1

Share-based compensation expense

 

 

11

 

 

 

15

 

 

 

14

 

 

 

6

 

 

 

46

Acquisition and integration-related expense

 

 

13

 

 

 

17

 

 

 

19

 

 

 

18

 

 

 

67

Impairment expense (reversal)

 

 

3

 

 

 

(3

)

 

 

 

 

 

17

 

 

 

17

Other adjustment items(3)

 

 

12

 

 

 

29

 

 

 

7

 

 

 

17

 

 

 

65

Adjusted EBITDA

 

$

202

 

 

$

273

 

 

$

338

 

 

$

252

 

 

$

1,065

(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.

Conference Call

Hilton Grand Vacations will host a conference call on Feb. 29, 2024, at 11 a.m. (ET) to discuss fourth quarter and full year 2023 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 March 7, 2024. To access the replay, please dial 1-844-512-2921 in the U.S. (+1-412-317-6671 internationally) using ID#13743184. 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 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, 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.

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 700,000 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 and Adjusted EBITDA

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.

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 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, 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.

Adjusted Net Income or Loss and Adjusted Diluted EPS

Adjusted Net Income or Loss, presented herein, is calculated as net income further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with costs associated with acquisitions, restructuring, amortization of premiums and discounts resulting from purchase accounting, and other non-cash and one-time charges. Adjusted Diluted EPS, presented herein, is calculated as Adjusted Net Income, as defined above, divided by diluted weighted average shares outstanding.

Adjusted Net Income or Loss and Adjusted Diluted EPS 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 definition may not be comparable to similarly titled measures of other companies.

Adjusted Net Income or Loss and Adjusted Diluted EPS are useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods.

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.

Non-GAAP Measures within Our Segments

Sales revenue represents sales of VOIs, net, and Fee-for-service commissions and brand fees earned from the sale of fee-for-service VOIs. Fee-for-service commissions and brand fees represents sales, marketing, brand and other fees, which corresponds to the applicable line item from our condensed consolidated statements of operations, adjusted by marketing revenue and other fees earned primarily from discounted marketing related packages which encompass a sales tour to prospective owners. Real estate expense represents Costs of VOI sales and Sales and marketing expense, net. Sales and marketing expense, net represents sales and marketing expense, which corresponds to the applicable line item from our condensed consolidated statements of operations, adjusted by marketing revenue and other fees earned primarily from discounted marketing related packages which encompass a sales tour to prospective owners. Both fee-for-service commissions and brand fees and sales and marketing expense, net, represent non-GAAP measures. HGV presents these items net because it provides a meaningful measure of our underlying real estate profit related to our primary real estate activities which focus on the sales and costs associated with our VOIs.

Real estate profit represents sales revenue less real estate expense. Real estate margin is calculated as a percentage by dividing real estate profit by sales revenue. HGV considers real estate profit margin to be an important non-GAAP operating measure because it measures the efficiency of sales and marketing spending, management of inventory costs, and initiatives intended to improve profitability.

Financing profit represents financing revenue, net of financing expense, both of which correspond to the applicable line items from the Company's consolidated statements of operations. Financing profit margin is calculated as a percentage by dividing financing profit by financing revenue. HGV considers this to be an important non-GAAP operating measure because it measures the efficiency and profitability of our financing business in connection with our VOI sales.

Resort and club management profit represents resort and club management revenue, net of resort and club management expense, both of which correspond to the applicable line items from our condensed consolidated statements of operations. Resort and club management profit margin is calculated as a percentage by dividing resort and club management profit by resort and club management revenue. HGV considers this to be an important non-GAAP operating measure because it measures the efficiency and profitability of our resort and club management business that support our VOI sales business.

Rental and ancillary services profit represents rental and ancillary services revenues, net of rental and ancillary services expenses, both of which correspond to the applicable line items from our condensed consolidated statements of operations. Rental and ancillary services profit margin is calculated as a percentage by dividing rental and ancillary services profit by rental and ancillary services revenue. HGV considers this to be an important non-GAAP operating measure because it measures our ability to convert available inventory and unoccupied rooms into revenue and profit by transient rentals, as well as profitability of other services, such as food and beverage, retail, spa offerings and other guest services.

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% 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. While we do not record the purchase price of sales of VOI products developed by fee-for-service partners as revenue in our condensed consolidated financial statements, rather recording the commission earned as revenue in accordance with U.S. GAAP, we believe contract sales to be an important operational metric, reflective of the overall volume and pace of sales in our business and believe it provides meaningful comparability of HGV’s results the results of our competitors which may source their VOI products differently. HGV believes that 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 HGV's consolidated financial statements included in Item 8 in the Annual Report on form 10-K for the year ended December 31, 2023, 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.

Sales revenue represents Sale of VOIs, net and fee-for-service commissions and brand fees earned from the sale of fee-for-service VOIs.

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

   

CONSOLIDATED BALANCE SHEETS

T-2

 

CONSOLIDATED STATEMENTS OF OPERATIONS

T-3

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

T-4

 

FREE CASH FLOW RECONCILIATION

T-5

 

SEGMENT REVENUE RECONCILIATION

T-6

 

SEGMENT EBITDA AND ADJUSTED EBITDA TO NET INCOME

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

 

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE - DILUTED (Non-GAAP)

T-15

 

RECONCILIATION OF NON-GAAP PROFIT MEASURES TO GAAP MEASURE

T-16

 

T-2

HILTON GRAND VACATIONS INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

 

 

December 31,

 

2023

 

2022

ASSETS

 

 

 

Cash and cash equivalents

$

589

 

$

223

Restricted cash

 

296

 

 

332

Accounts receivable, net

 

507

 

 

511

Timeshare financing receivables, net

 

2,113

 

 

1,767

Inventory

 

1,400

 

 

1,159

Property and equipment, net

 

758

 

 

798

Operating lease right-of-use assets, net

 

61

 

 

76

Investments in unconsolidated affiliates

 

71

 

 

72

Goodwill

 

1,418

 

 

1,416

Intangible assets, net

 

1,158

 

 

1,277

Other assets

 

314

 

 

373

TOTAL ASSETS

$

8,685

 

$

8,004

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Accounts payable, accrued expenses and other

$

952

 

$

1,007

Advanced deposits

 

179

 

 

150

Debt, net

 

3,049

 

 

2,651

Non-recourse debt, net

 

1,466

 

 

1,102

Operating lease liabilities

 

78

 

 

94

Deferred revenues

 

215

 

 

190

Deferred income tax liabilities

 

631

 

 

659

Total liabilities

 

6,570

 

 

5,853

 

 

 

 

Stockholders' Equity:

 

 

 

Preferred stock, $0.01 par value; 300,000,000 authorized shares, none issued or outstanding as of December 31, 2023 and 2022

 

 

 

Common stock, $0.01 par value; 3,000,000,000 authorized shares, 105,961,160 shares issued and outstanding as of December 31, 2023, and 113,628,706 shares issued and outstanding as of December 31, 2022

 

1

 

 

1

Additional paid-in capital

 

1,504

 

 

1,582

Accumulated retained earnings

 

593

 

 

529

Accumulated other comprehensive income

 

17

 

 

39

Total stockholders' equity:

 

2,115

 

 

2,151

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

8,685

 

$

8,004

T-3

HILTON GRAND VACATIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

 

 

 

 

 

 

Sales of VOIs, net

$

376

 

 

$

361

 

 

$

1,416

 

 

$

1,491

 

Sales, marketing, brand and other fees

 

133

 

 

 

163

 

 

 

634

 

 

 

620

 

Financing

 

82

 

 

 

71

 

 

 

307

 

 

 

267

 

Resort and club management

 

167

 

 

 

155

 

 

 

569

 

 

 

534

 

Rental and ancillary services

 

164

 

 

 

160

 

 

 

666

 

 

 

626

 

Cost reimbursements

 

97

 

 

 

82

 

 

 

386

 

 

 

297

 

Total revenues

 

1,019

 

 

 

992

 

 

 

3,978

 

 

 

3,835

 

Expenses

 

 

 

 

 

 

 

Cost of VOI sales

 

53

 

 

 

67

 

 

 

194

 

 

 

274

 

Sales and marketing

 

310

 

 

 

297

 

 

 

1,281

 

 

 

1,146

 

Financing

 

26

 

 

 

37

 

 

 

99

 

 

 

103

 

Resort and club management

 

48

 

 

 

43

 

 

 

177

 

 

 

161

 

Rental and ancillary services

 

152

 

 

 

153

 

 

 

612

 

 

 

579

 

General and administrative

 

64

 

 

 

54

 

 

 

194

 

 

 

212

 

Acquisition and integration-related expense

 

26

 

 

 

18

 

 

 

68

 

 

 

67

 

Depreciation and amortization

 

57

 

 

 

63

 

 

 

213

 

 

 

244

 

License fee expense

 

37

 

 

 

34

 

 

 

138

 

 

 

124

 

Impairment expense

 

 

 

 

17

 

 

 

3

 

 

 

17

 

Cost reimbursements

 

97

 

 

 

82

 

 

 

386

 

 

 

297

 

Total operating expenses

 

870

 

 

 

865

 

 

 

3,365

 

 

 

3,224

 

Interest expense

 

(45

)

 

 

(37

)

 

 

(178

)

 

 

(142

)

Equity in earnings from unconsolidated affiliates

 

5

 

 

 

4

 

 

 

12

 

 

 

13

 

Other (loss) gain, net

 

(1

)

 

 

(2

)

 

 

2

 

 

 

(1

)

Income before income taxes

 

108

 

 

 

92

 

 

 

449

 

 

 

481

 

Income tax expense

 

(40

)

 

 

(14

)

 

 

(136

)

 

 

(129

)

Net income

$

68

 

 

$

78

 

 

$

313

 

 

$

352

 

Earnings per share(1):

 

 

 

 

 

 

 

Basic

$

0.63

 

 

$

0.68

 

 

$

2.84

 

 

$

2.98

 

Diluted

$

0.62

 

 

$

0.67

 

 

$

2.80

 

 

$

2.93

 

(1)

Earnings per share is calculated using whole numbers.

T-4

HILTON GRAND VACATIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Operating Activities

 

 

 

 

 

 

 

Net income

$

68

 

 

$

78

 

 

$

313

 

 

$

352

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

57

 

 

 

63

 

 

 

213

 

 

 

244

 

Amortization of deferred financing costs, acquisition premiums and other

 

11

 

 

 

18

 

 

 

33

 

 

 

52

 

Provision for financing receivables losses

 

54

 

 

 

39

 

 

 

171

 

 

 

142

 

Impairment expense

 

 

 

 

17

 

 

 

3

 

 

 

17

 

Other loss (gain), net

 

1

 

 

 

2

 

 

 

(2

)

 

 

3

 

Share-based compensation

 

2

 

 

 

6

 

 

 

40

 

 

 

46

 

Deferred income tax expense

 

(23

)

 

 

(37

)

 

 

(23

)

 

 

(38

)

Equity in earnings from unconsolidated affiliates

 

(5

)

 

 

(4

)

 

 

(12

)

 

 

(13

)

Return on investment in unconsolidated affiliates

 

10

 

 

 

 

 

 

16

 

 

 

 

Net changes in assets and liabilities, net of effects of acquisition:

 

 

 

 

 

 

 

Accounts receivable, net

 

(60

)

 

 

(113

)

 

 

10

 

 

 

(177

)

Timeshare financing receivables, net

 

(105

)

 

 

(83

)

 

 

(315

)

 

 

(224

)

Inventory

 

(27

)

 

 

(1

)

 

 

(64

)

 

 

100

 

Purchases and development of real estate for future conversion to inventory

 

(11

)

 

 

(4

)

 

 

(39

)

 

 

(8

)

Other assets

 

59

 

 

 

(13

)

 

 

(8

)

 

 

(34

)

Accounts payable, accrued expenses and other

 

(11

)

 

 

37

 

 

 

(86

)

 

 

294

 

Advanced deposits

 

(6

)

 

 

12

 

 

 

29

 

 

 

37

 

Deferred revenues

 

(14

)

 

 

(33

)

 

 

33

 

 

 

(46

)

Net cash (used in) provided by operating activities

 

 

 

 

(16

)

 

 

312

 

 

 

747

 

Investing Activities

 

 

 

 

 

 

 

Acquisition of a business, net of cash and restricted cash acquired

 

(74

)

 

 

 

 

 

(74

)

 

 

 

Capital expenditures for property and equipment (excluding inventory)

 

(13

)

 

 

(33

)

 

 

(31

)

 

 

(58

)

Software capitalization costs

 

(15

)

 

 

(13

)

 

 

(44

)

 

 

(39

)

Investments in unconsolidated affiliates

 

(1

)

 

 

 

 

 

(1

)

 

 

 

Other

 

(8

)

 

 

 

 

 

(8

)

 

 

 

Net cash used in investing activities

 

(111

)

 

 

(46

)

 

 

(158

)

 

 

(97

)

Financing Activities

 

 

 

 

 

 

 

Proceeds from debt

 

270

 

 

 

40

 

 

 

708

 

 

 

40

 

Proceeds from non-recourse debt

 

400

 

 

 

98

 

 

 

868

 

 

 

769

 

Repayment of debt

 

47

 

 

 

(3

)

 

 

(323

)

 

 

(313

)

Repayment of non-recourse debt

 

(166

)

 

 

(166

)

 

 

(694

)

 

 

(990

)

Payment of debt issuance costs

 

(1

)

 

 

(1

)

 

 

(7

)

 

 

(13

)

Repurchase and retirement of common stock

 

(100

)

 

 

(110

)

 

 

(368

)

 

 

(272

)

Payment of withholding taxes on vesting of restricted stock units

 

 

 

 

 

 

 

(14

)

 

 

(8

)

Proceeds from employee stock plan purchases

 

4

 

 

 

3

 

 

 

8

 

 

 

5

 

Proceeds from stock option exercises

 

 

 

 

 

 

 

9

 

 

 

2

 

Other

 

(1

)

 

 

1

 

 

 

(4

)

 

 

(2

)

Net cash provided (used in) by financing activities

 

453

 

 

 

(138

)

 

 

183

 

 

 

(782

)

Effect of changes in exchange rates on cash, cash equivalents and restricted cash

 

8

 

 

 

11

 

 

 

(7

)

 

 

(8

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

350

 

 

 

(189

)

 

 

330

 

 

 

(140

)

Cash, cash equivalents and restricted cash, beginning of period

 

535

 

 

 

744

 

 

 

555

 

 

 

695

 

Cash, cash equivalents and restricted cash, end of period

 

885

 

 

 

555

 

 

 

885

 

 

 

555

 

Less: Restricted Cash

 

296

 

 

 

332

 

 

 

296

 

 

 

332

 

Cash and cash equivalents

$

589

 

 

$

223

 

 

$

589

 

 

$

223

 

T-5

HILTON GRAND VACATIONS INC.

FREE CASH FLOW RECONCILIATION

(in millions)

 

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net cash provided (used in) by operating activities

 

$

 

 

$

(16

)

 

$

312

 

 

$

747

 

Capital expenditures for property and equipment

 

 

(13

)

 

 

(33

)

 

 

(31

)

 

 

(58

)

Software capitalization costs

 

 

(15

)

 

 

(13

)

 

 

(44

)

 

 

(39

)

Free Cash Flow

 

$

(28

)

 

$

(62

)

 

$

237

 

 

$

650

 

Non-recourse debt activity, net

 

 

234

 

 

 

(68

)

 

 

174

 

 

 

(221

)

Acquisition and integration-related expense

 

 

26

 

 

 

18

 

 

 

68

 

 

 

67

 

Other adjustment items(1)

 

 

23

 

 

 

20

 

 

 

53

 

 

 

67

 

Adjusted Free Cash Flow

 

$

255

 

 

$

(92

)

 

$

532

 

 

$

563

 

(1)

Includes capitalized acquisition and integration-related costs.

T-6

HILTON GRAND VACATIONS INC.

SEGMENT REVENUE RECONCILIATION

(in millions)

 

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

Real estate sales and financing

 

$

591

 

 

$

595

 

 

$

2,357

 

 

$

2,378

 

Resort operations and club management

 

 

347

 

 

 

327

 

 

 

1,291

 

 

 

1,197

 

Total segment revenues

 

 

938

 

 

 

922

 

 

 

3,648

 

 

 

3,575

 

Cost reimbursements

 

 

97

 

 

 

82

 

 

 

386

 

 

 

297

 

Intersegment eliminations

 

 

(16

)

 

 

(12

)

 

 

(56

)

 

 

(37

)

Total revenues

 

$

1,019

 

 

$

992

 

 

$

3,978

 

 

$

3,835

 

T-7

HILTON GRAND VACATIONS INC.

SEGMENT EBITDA AND ADJUSTED EBITDA TO NET INCOME

(in millions)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

$

68

 

 

$

78

 

 

$

313

 

 

$

352

 

Interest expense

 

45

 

 

 

37

 

 

 

178

 

 

 

142

 

Income tax expense

 

40

 

 

 

14

 

 

 

136

 

 

 

129

 

Depreciation and amortization

 

57

 

 

 

63

 

 

 

213

 

 

 

244

 

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates

 

1

 

 

 

 

 

 

2

 

 

 

2

 

EBITDA

 

211

 

 

 

192

 

 

 

842

 

 

 

869

 

Other loss (gain), net

 

1

 

 

 

2

 

 

 

(2

)

 

 

1

 

Share-based compensation expense

 

2

 

 

 

6

 

 

 

40

 

 

 

46

 

Acquisition and integration-related expense

 

26

 

 

 

18

 

 

 

68

 

 

 

67

 

Impairment (reversal) expense

 

 

 

 

17

 

 

 

3

 

 

 

17

 

Other adjustment items(1)

 

30

 

 

 

17

 

 

 

54

 

 

 

65

 

Adjusted EBITDA

$

270

 

 

$

252

 

 

$

1,005

 

 

$

1,065

 

 

 

 

 

 

 

 

 

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

Real estate sales and financing(2)

$

191

 

 

$

199

 

 

$

754

 

 

$

865

 

Resort operations and club management(2)

 

146

 

 

 

131

 

 

 

504

 

 

 

463

 

Adjustments:

 

 

 

 

 

 

 

Adjusted EBITDA from unconsolidated affiliates

 

6

 

 

 

3

 

 

 

14

 

 

 

15

 

License fee expense

 

(37

)

 

 

(34

)

 

 

(138

)

 

 

(124

)

General and administrative(3)

 

(36

)

 

 

(47

)

 

 

(129

)

 

 

(154

)

Adjusted EBITDA

$

270

 

 

$

252

 

 

$

1,005

 

 

$

1,065

 

Adjusted EBITDA profit margin

 

26.5

%

 

 

25.4

%

 

 

25.3

%

 

 

27.8

%

EBITDA profit margin

 

20.7

%

 

 

19.4

%

 

 

21.2

%

 

 

22.7

%

(1)

Includes costs associated with restructuring, one-time charges, other non-cash items and amortization of premiums resulting from purchase accounting.

(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

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Tour flow

 

151,956

 

 

 

141,610

 

 

 

608,367

 

 

 

517,117

 

VPG

 

3,730

 

 

 

4,350

 

 

 

3,760

 

 

 

4,432

 

Owned contract sales mix

 

79.7

%

 

 

67.7

%

 

 

72.1

%

 

 

70.9

%

Fee-for-service contract sales mix

 

20.3

%

 

 

32.3

%

 

 

27.9

%

 

 

29.1

%

 

 

 

 

 

 

 

 

Contract sales

$

572

 

 

$

634

 

 

$

2,310

 

 

$

2,381

 

Adjustments:

 

 

 

 

 

 

 

Fee-for-service sales(1)

 

(116

)

 

 

(205

)

 

 

(644

)

 

 

(693

)

Provision for financing receivables losses

 

(54

)

 

 

(39

)

 

 

(171

)

 

 

(142

)

Reportability and other:

 

 

 

 

 

 

 

Net (deferral) recognition of sales of VOIs under construction(2)

 

(21

)

 

 

(3

)

 

 

(35

)

 

 

31

 

Fee-for-service sale upgrades, net

 

1

 

 

 

4

 

 

 

19

 

 

 

18

 

Other(3)

 

(6

)

 

 

(30

)

 

 

(63

)

 

 

(104

)

Sales of VOIs, net

$

376

 

 

$

361

 

 

$

1,416

 

 

$

1,491

 

Plus:

 

 

 

 

 

 

 

Fee-for-service commissions and brand fees

 

68

 

 

 

119

 

 

 

393

 

 

 

412

 

Sales revenue

 

444

 

 

 

480

 

 

 

1,809

 

 

 

1,903

 

Cost of VOI sales

 

53

 

 

 

67

 

 

 

194

 

 

 

274

 

Sales and marketing expense, net

 

245

 

 

 

253

 

 

 

1,040

 

 

 

938

 

Real estate expense

 

298

 

 

 

320

 

 

 

1,234

 

 

 

1,212

 

Real estate profit

$

146

 

 

$

160

 

 

$

575

 

 

$

691

 

Real estate profit margin(4)

 

32.9

%

 

 

33.3

%

 

 

31.8

%

 

 

36.3

%

 

 

 

 

 

 

 

 

Reconciliation of fee-for-service commissions:

 

 

 

 

 

 

 

Sales, marketing, brand and other fees

 

133

 

 

 

163

 

 

 

634

 

 

 

620

 

Less: Marketing revenue and other fees(5)

 

(65

)

 

 

(44

)

 

 

(241

)

 

 

(208

)

Fee-for-service commissions and brand fees

$

68

 

 

$

119

 

 

$

393

 

 

$

412

 

 

 

 

 

 

 

 

 

Reconciliation of sales and marketing expense:

 

 

 

 

 

 

 

Sales and marketing expense

 

310

 

 

 

297

 

 

 

1,281

 

 

 

1,146

 

Less: Marketing revenue and other fees(5)

 

(65

)

 

 

(44

)

 

 

(241

)

 

 

(208

)

Sales and marketing expense, net

$

245

 

 

$

253

 

 

$

1,040

 

 

$

938

 

(1)

Represents contract sales from fee-for-service properties on which we earn commissions and brand fees.

(2)

Represents the net impact related to deferrals of revenues and direct expenses 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)

Excluding the marketing revenue and other fees adjustment, Real Estate profit margin was 28.7% and 30.5% for the three months ended December 31, 2023, and 2022, respectively and 28.0% and 32.7% for the year ended December 31, 2023 and 2022, respectively.

(5)

Includes revenue recognized through our marketing programs for existing owners and prospective first-time buyers and revenue associated with sales incentives, title service and document compliance.

 

T-9

HILTON GRAND VACATIONS INC.

CONTRACT SALES MIX BY TYPE SCHEDULE

 

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

2022

 

2023

 

2022

Just-In-Time Contract Sales Mix

 

26.9

%

 

15.3

%

 

19.4

%

 

14.7

%

Fee-For-Service Contract Sales Mix

 

20.0

%

 

32.2

%

 

27.8

%

 

29.1

%

Total Capital-Efficient Contract Sales Mix

 

46.9

%

 

47.5

%

 

47.2

%

 

43.8

%

T-10

HILTON GRAND VACATIONS INC.

FINANCING PROFIT DETAIL SCHEDULE

(in millions)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Interest income(1)

$

74

 

 

$

65

 

 

$

273

 

 

$

235

 

Other financing revenue

 

8

 

 

 

6

 

 

 

34

 

 

 

32

 

Financing revenue

 

82

 

 

 

71

 

 

 

307

 

 

 

267

 

Consumer financing interest expense(2)

 

14

 

 

 

21

 

 

 

48

 

 

 

47

 

Other financing expense

 

12

 

 

 

16

 

 

 

51

 

 

 

56

 

Financing expense

 

26

 

 

 

37

 

 

 

99

 

 

 

103

 

Financing profit

$

56

 

 

$

34

 

 

$

208

 

 

$

164

 

Financing profit margin

 

68.3

%

 

 

47.9

%

 

 

67.8

%

 

 

61.4

%

(1)

For the three and twelve months ended December 31, 2023, this amount includes $3 million and $14 million, respectively, of amortization of the premium related to the acquired timeshare financing receivables resulting from the Diamond Acquisition.

(2)

For the three and twelve months ended December 31, 2023, this amount includes less than $1 million and $2 million, respectively, 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)

 

 

Years Ended

December 31,

 

2023

 

2022

Total members

528,789

 

 

518,602

 

Consolidated Net Owner Growth (NOG)(1)

10,187

 

 

19,535

 

Consolidated Net Owner Growth % (NOG)(1)

2.0

%

 

3.9

%

(1)

Consolidated NOG is a trailing-twelve-month concept for which the twelve months includes member count for Legacy-HGV, Legacy-DRI, and HGV Max members on a consolidated basis.

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Club management revenue

$

80

 

 

$

77

 

 

$

240

 

 

$

227

 

Resort management revenue

 

87

 

 

 

78

 

 

 

329

 

 

 

307

 

Resort and club management revenues

 

167

 

 

 

155

 

 

 

569

 

 

 

534

 

Club management expense

 

16

 

 

 

11

 

 

 

60

 

 

 

42

 

Resort management expense

 

32

 

 

 

32

 

 

 

117

 

 

 

119

 

Resort and club management expenses

 

48

 

 

 

43

 

 

 

177

 

 

 

161

 

Resort and club management profit

$

119

 

 

$

112

 

 

$

392

 

 

$

373

 

Resort and club management profit margin

 

71.3

%

 

 

72.3

%

 

 

68.9

%

 

 

69.9

%

T-12

HILTON GRAND VACATIONS INC.

RENTAL AND ANCILLARY PROFIT DETAIL SCHEDULE

(in millions)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Rental revenues

$

154

 

 

$

150

 

 

$

623

 

 

$

586

 

Ancillary services revenues

 

10

 

 

 

10

 

 

 

43

 

 

 

40

 

Rental and ancillary services revenues

 

164

 

 

 

160

 

 

 

666

 

 

 

626

 

Rental expenses

 

142

 

 

 

143

 

 

 

573

 

 

 

544

 

Ancillary services expense

 

10

 

 

 

10

 

 

 

39

 

 

 

35

 

Rental and ancillary services expenses

 

152

 

 

 

153

 

 

 

612

 

 

 

579

 

Rental and ancillary services profit

$

12

 

 

$

7

 

 

$

54

 

 

$

47

 

Rental and ancillary services profit margin

 

7.3

%

 

 

4.4

%

 

 

8.1

%

 

 

7.5

%

T-13

HILTON GRAND VACATIONS INC.

REAL ESTATE SALES AND FINANCING SEGMENT ADJUSTED EBITDA

(in millions)

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Sales of VOIs, net

$

376

 

 

$

361

 

 

$

1,416

 

 

$

1,491

 

Sales, marketing, brand and other fees

 

133

 

 

 

163

 

 

 

634

 

 

 

620

 

Financing revenue

 

82

 

 

 

71

 

 

 

307

 

 

 

267

 

Real estate sales and financing segment revenues

 

591

 

 

 

595

 

 

 

2,357

 

 

 

2,378

 

Cost of VOI sales

 

(53

)

 

 

(67

)

 

 

(194

)

 

 

(274

)

Sales and marketing expense

 

(310

)

 

 

(297

)

 

 

(1,281

)

 

 

(1,146

)

Financing expense

 

(26

)

 

 

(37

)

 

 

(99

)

 

 

(103

)

Marketing package stays

 

(16

)

 

 

(12

)

 

 

(56

)

 

 

(37

)

Share-based compensation

 

2

 

 

 

2

 

 

 

12

 

 

 

11

 

Other adjustment items

 

3

 

 

 

15

 

 

 

15

 

 

 

36

 

Real estate sales and financing segment adjusted EBITDA

$

191

 

 

$

199

 

 

$

754

 

 

$

865

 

Real estate sales and financing segment adjusted EBITDA profit margin

 

32.3

%

 

 

33.4

%

 

 

32.0

%

 

 

36.4

%

T-14

HILTON GRAND VACATIONS INC.

RESORT AND CLUB MANAGEMENT SEGMENT ADJUSTED EBITDA

(in millions)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Resort and club management revenues

$

167

 

 

$

155

 

 

$

569

 

 

$

534

 

Rental and ancillary services

 

164

 

 

 

160

 

 

 

666

 

 

 

626

 

Marketing package stays

 

16

 

 

 

12

 

 

 

56

 

 

 

37

 

Resort and club management segment revenue

 

347

 

 

 

327

 

 

 

1,291

 

 

 

1,197

 

Resort and club management expenses

 

(48

)

 

 

(43

)

 

 

(177

)

 

 

(161

)

Rental and ancillary services expenses

 

(152

)

 

 

(153

)

 

 

(612

)

 

 

(579

)

Share-based compensation

 

 

 

 

 

 

 

3

 

 

 

5

 

Other adjustment items

 

(1

)

 

 

 

 

 

(1

)

 

 

1

 

Resort and club segment adjusted EBITDA

$

146

 

 

$

131

 

 

$

504

 

 

$

463

 

Resort and club management segment adjusted EBITDA profit margin

 

42.1

%

 

 

40.1

%

 

 

39.0

%

 

 

38.7

%

T-15

HILTON GRAND VACATIONS INC.

ADJUSTED NET INCOME AND

ADJUSTED DILUTED EARNINGS PER SHARE - DILUTED (Non-GAAP)

(in millions except per share data)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

$

68

 

 

$

78

 

 

$

313

 

 

$

352

 

Income tax expense

 

40

 

 

 

14

 

 

 

136

 

 

 

129

 

Income before income taxes

 

108

 

 

 

92

 

 

 

449

 

 

 

481

 

Certain items:

 

 

 

 

 

 

 

Other loss (gain), net

 

1

 

 

 

2

 

 

 

(2

)

 

 

1

 

Impairment expense

 

 

 

 

17

 

 

 

3

 

 

 

17

 

Acquisition and integration-related expense

 

26

 

 

 

18

 

 

 

68

 

 

 

67

 

Other adjustment items(1)

 

30

 

 

 

17

 

 

 

54

 

 

 

65

 

Adjusted income before income taxes

$

165

 

 

$

146

 

 

$

572

 

 

$

631

 

Income tax expense

 

(54

)

 

 

(28

)

 

 

(167

)

 

 

(167

)

Adjusted net income

$

111

 

 

$

118

 

 

$

405

 

 

$

464

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Diluted

 

110.0

 

 

 

116.4

 

 

 

111.6

 

 

 

119.6

 

Earnings per share(2):

 

 

 

 

 

 

 

Diluted

$

0.62

 

 

$

0.67

 

 

$

2.80

 

 

$

2.93

 

Adjusted diluted

$

1.01

 

 

$

1.01

 

 

$

3.63

 

 

$

3.88

 

(1)

Includes costs associated with restructuring, one-time charges, the amortization of premiums resulting from purchase accounting and other non-cash items.

(2)

Earnings per share amounts are calculated using whole numbers.

T-16

HILTON GRAND VACATIONS INC.

RECONCILIATION OF NON-GAAP PROFIT MEASURES TO GAAP MEASURE

(in millions)

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

($ in millions)

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

$

68

 

 

$

78

 

 

$

313

 

 

$

352

 

Interest expense

 

45

 

 

 

37

 

 

 

178

 

 

 

142

 

Income tax expense

 

40

 

 

 

14

 

 

 

136

 

 

 

129

 

Depreciation and amortization

 

57

 

 

 

63

 

 

 

213

 

 

 

244

 

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates

 

1

 

 

 

 

 

 

2

 

 

 

2

 

EBITDA

 

211

 

 

 

192

 

 

 

842

 

 

 

869

 

Other loss (gain), net

 

1

 

 

 

2

 

 

 

(2

)

 

 

1

 

Equity in earnings from unconsolidated affiliates(1)

 

(6

)

 

 

(4

)

 

 

(14

)

 

 

(15

)

Impairment expense

 

 

 

 

17

 

 

 

3

 

 

 

17

 

License fee expense

 

37

 

 

 

34

 

 

 

138

 

 

 

124

 

Acquisition and integration-related expense

 

26

 

 

 

18

 

 

 

68

 

 

 

67

 

General and administrative

 

64

 

 

 

54

 

 

 

194

 

 

 

212

 

Profit

$

333

 

 

$

313

 

 

$

1,229

 

 

$

1,275

 

 

 

 

 

 

 

 

 

Real estate profit

$

146

 

 

$

160

 

 

$

575

 

 

$

691

 

Financing profit

 

56

 

 

 

34

 

 

 

208

 

 

 

164

 

Resort and club management profit

 

119

 

 

 

112

 

 

 

392

 

 

 

373

 

Rental and ancillary services profit

 

12

 

 

 

7

 

 

 

54

 

 

 

47

 

Profit

$

333

 

 

$

313

 

 

$

1,229

 

 

$

1,275

 

(1)

Excludes impact of interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates of $1 million and none for the three months ended December 31, 2023, and 2022, respectively, and $2 million for the year ended December 31, 2023, and 2022, respectively.

 

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