HGV Q1 2022 Earnings

Call Details

• Call Title: Hilton Grand Vacations Q1 2022 Earnings Call
• Date: May 9, 2022 at 3:00 PM UTC
• Management Team:
  • Mark Melnyk (Senior Vice President of IR, G&A and Productivity)
  • Mark Wang (Chief Executive Officer)
  • Dan Mathewes (Chief Financial Officer)

Call Summary

Financial Performance

• Total revenue for Q1 2022 was $821M excluding ASC 606 deferrals related to Maui and Okinawa pre-opening sales.
• Reported adjusted EBITDA for Q1 2022 was $224M, which the company stated was 43% ahead of pro forma combined Q1 2019 levels.
• Adjusted EBITDA margin for the quarter was 27%, which was described as over 800 basis points better than pro forma 2019 on a consolidated basis.
• Adjusted free cash flow for the quarter was $159M, which included inventory spending of $15M and excluded $25M of acquisition-related costs.
• Contract sales for the quarter were $509M, representing 96% of pro forma combined Q1 2019 contract sales.
• VPG (value per guest) was nearly $4,900 for the quarter, which the company called a record level and said was up 13% sequentially from Q4 2021.
• Consolidated occupancy levels finished the quarter at 75% and the company said consolidated on-arrivals for the year are in line with 2019.
• Rental and ancillary revenue for Q1 2022 was $136M and resort and club revenue was $125M, with club revenue of $51M for the quarter.

Guidance

• The company raised full-year adjusted EBITDA guidance to a range of $960M to $990M from a prior range of $915M to $935M.
• The increased EBITDA range was explained as driven by a $20M beat in Q1 plus the identification of additional cost synergies and continued VPG outperformance.
• The cost synergy target was raised to $150M from a prior estimate of $125M+, with the company expecting to realize approximately $15M of the incremental $25M synergies in 2022.
• The company expects adjusted EBITDA to adjusted free cash flow conversion to fall well within its long-term target range of 50% to 60% for the year.
• Pro forma trailing twelve-month net leverage was reported at 2.6x not giving effect to anticipated synergies, and 2.4x including anticipated synergies.
• The company expects to revert to consolidated reporting next quarter and stated that entity-level allocations have become difficult and somewhat unmeaningful following integration.
• The company stated an approximate 2022 cash tax assumption of about $150M during Q&A commentary on tax attributes.