HGV Q3 2022 Earnings

Call Details

• Call Title: Hilton Grand Vacations Q3 2022 Earnings Call
• Date: November 9, 2022 at 4:00 PM UTC
• Management Team:
  • Mark Melnyk (Vice President of Investor Relations)
  • Mark Wang (Chief Executive Officer)
  • Dan Mathewes (Chief Financial Officer)

Call Summary

Financial Performance

• Total revenue for Q3 was just over $1 billion for the quarter.
• Reported adjusted EBITDA for Q3 was $295 million, representing margins of 29%.
• Reported results included an $86 million sales recognition and $43 million of related expense recognition that produced a $43 million net benefit to reported EBITDA.
• The company released $16 million of reserves in Q3 that management classified as a one-time benefit that flowed directly to EBITDA.
• Total contract sales were a record $621 million for the quarter.
• VPG was just over $4,200 for the quarter, which management stated was nearly 28% ahead of 2019.
• System occupancy improved to 83% for the quarter, with September occupancy equal to 2019 levels.
• Adjusted free cash flow for the quarter was $393 million, and year-to-date EBITDA to cash flow conversion was 82% while the company reiterated full-year conversion guidance of 50% to 60%.

Guidance

• The company raised full-year adjusted EBITDA guidance to a range of $1.25 billion to $1.45 billion.
• Management expects adjusted free cash flow conversion for the year to be in a 50% to 60% range despite Q4 seasonality and higher contracted inventory spend that will drive negative adjusted free cash flow in Q4.
• Management expects VPGs to stabilize roughly 10% to 15% ahead of 2019 levels as new buyer flow normalizes.
• The company expects rental and ancillary margins for the full year to be in the low double digits.
• Management expects the provision for bad debt to normalize toward mid-teens on a steady-state basis over time.
• The company indicated it does not plan another securitization deal in 2022 and anticipates the next ABS activity to fall into Q2 of 2023.