May 4, 2017 – Hilton Grand Vacations Inc. (NYSE:HGV) (“HGV” or the “Company”) yesterday reported its first-quarter 2017 results. Highlights include:
- EPS was $0.51 for the first quarter, a 6.3 percent increase from the same period in 2016.
- Net income for the first quarter was $50 million, a 4.2 percent increase from the same period in 2016.
- Adjusted EBITDA for the first quarter declined 2.1 percent from the same period in 2016 to $94 million.
- Contract sales for the first quarter increased 9.5 percent from the same period in 2016.
- Net Owner Growth for the 12 months ending March 31, 2017 was 7.2 percent.
- During the first quarter the Company completed a securitization transaction for gross proceeds of $350 million.
- During the first quarter the Company completed its separation from Hilton and began trading on the New York Stock Exchange under the ticker “HGV.”
For the three months ended March 31, 2017, EPS was $0.51 compared to $0.48 for the three months ended March 31, 2016. Net income was $50 million for the three months ended March 31, 2017, compared to $48 million for the three months ended March 31, 2016, and Adjusted EBITDA was $94 million for the three months ended March 31, 2017, compared to $96 million for the three months ended March 31, 2016.
(Please note that during the three months ended March 31, 2017, HGV revised its Adjusted EBITDA calculation to exclude the adjustment of interest expense related to non-recourse debt in order to conform to timeshare industry convention – see Definitions section for more details.)
President and Chief Executive Officer of Hilton Grand Vacations Mark Wang said, “Our first quarter results were driven by strong net owner growth, increased contract sales and our ability to efficiently maximize capital. As we continue to expand our member base and enhance member experience, while furthering additional strategic initiatives, we will continue exploring new capital deployment strategies with the goal of generating growth and maximizing shareholder value.”
Segment Highlights – First Quarter
Real Estate Sales and Financing
Real estate sales and financing segment revenue was $283 million in the first quarter of 2017, an increase of 6.4 percent compared to the same period in 2016. Real estate and financing segment Adjusted EBITDA was $83 million in the first quarter of 2017, compared to $81 million in the same period in 2016. Real estate and financing segment Adjusted EBITDA margin as a percentage of real estate and financing segment revenues was 29.3 percent in the first quarter of 2017 compared to 30.5 percent for the same period in 2016.
Contract sales were $287 million in the first quarter of 2017, an increase of 9.5 percent compared to the same period in 2016. Fee-for-service contract sales represented 60.3 percent of total contract sales in the first quarter of 2017, compared to 61.1 percent in the same period in 2016. Tours increased 2.0 percent to 72,405 in the first quarter compared to the same period in 2016. VPG for the first quarter of 2017 was $3,737, an increase of 8.1 percent compared to the same period in 2016.
Financing revenues were $35 million in the first quarter of 2017, an increase of 9.4 percent compared to the same period in 2016.
The weighted average FICO score of new loans made to U.S. and Canadian borrowers at the time of origination was 743 for the three months ended March 31, 2017, compared to 741 for the three months ended March 31, 2016. In the first quarter of 2017, 65 percent of HGV’s sales were to customers who financed part of their purchase.
As of March 31, 2017, gross timeshare financing receivables were $1.1 billion with a weighted average interest rate of 12 percent and a weighted average remaining term of 7.6 years. As of March 31, 2017, 2.2 percent of HGV’s financing receivables were over 30 days past due and not in default.
Resort Operations and Club Management
Resort operations and club management segment revenue was $88 million in the first quarter of 2017, an increase of 8.6 percent compared to the same period in 2016. Resort operations and club management segment Adjusted EBITDA was $51 million in the first quarter of 2017, compared to $46 million in the same period in 2016. Resort operations and club management segment Adjusted EBITDA margin as a percentage of resort operations and club management segment revenues was 58.0 percent in the first quarter of 2017, compared to 56.8 percent for the same period in 2016.
At March 31, 2017, the estimated contract sales value of HGV’s pipeline of available inventory was approximately $6.3 billion at current pricing, or approximately 5.3 years of sales at the current trailing 12-month sales pace. At March 31, 2017, the estimated contract sales value of HGV’s pipeline of available owned inventory was approximately $3.2 billion or approximately 2.7 years of sales. At March 31, 2017, the estimated contract sales value of HGV’s pipeline of available fee-for-service inventory was approximately $3.1 billion or approximately 2.6 years of sales.
Of the current pipeline of available inventory, 39 percent is considered just-in-time and 50 percent is considered fee-for-service. As such, the Company considers 89 percent of the pipeline of available inventory as of March 31, 2017, to be from capital-efficient sources.
(Please note that during the three months ended March 31, 2017, HGV revised its inventory classification system and now reports its pipeline on a future contract sales basis. Previously, inventory was reported on a number of intervals basis. As such, current pipeline pace of sales information may not be directly comparable to previously reported information.)
Balance Sheet and Liquidity
As of March 31, 2017, Hilton Grand Vacations had $488 million of corporate debt with a weighted average interest rate of 5.0 percent and $695 million of non-recourse debt outstanding with a weighted average interest rate of 2.4 percent.
During the quarter, the Company completed a securitization transaction of approximately $357 million of gross timeshare receivables and issued approximately $291 million of 2.66 percent notes and $59 million of 2.96 percent. Proceeds of the offering were used to reduce outstanding balances on our nonrecourse timeshare facility.
Total cash was $274 million as of March 31, 2017, including $78 million of restricted cash.
Free cash flow, which the Company defines as cash from operating activities, less non-inventory capital spending, was $125 million for the three months ending March 31, 2017, compared to $28 million for the three months ending March 31, 2016.
- Net income is projected to be between $170 million and $186 million.
- EPS is projected to be between $1.72 and $1.88.
- Adjusted EBITDA is projected to be between $372 million and $397 million.
- Full-year contract sales are expected to increase between 5.0 percent and 7.0 percent.
- Fee-for-service contract sales are expected to be between 52 percent and 57 percent of fullyear contract sales.
- Free cash flow is projected to be between $140 million and $160 million.
(Please note that during the three months ended March 31, 2017, HGV revised its Adjusted EBITDA calculation to exclude the adjustment of interest expense related to non-recourse debt in order to conform to timeshare industry convention. Guidance ranges have been updated accordingly.)
Spin-Off Transactions and Other Events
On January 3, 2017, Hilton Worldwide Holdings, Inc. (“Hilton”) executed a tax-free spin-off of Hilton Grand Vacations. The spin-off was completed by way of a pro-rata distribution of HGV common stock to Hilton stockholders of record as of 5 p.m. EST on December 15, 2016, the spin-off record date. Each Hilton stockholder received one share of HGV common stock for every 10 shares of Hilton common stock held by such stockholder on the record date. On January 3, 2017, Hilton Grand Vacations became a separate, publicly traded company, and Hilton did not retain any ownership interest in HGV. On June 2, 2016 HGV filed a Registration Statement on Form 10 describing the transaction with the U.S. Securities and Exchange Commission (the “SEC”) and was declared effective on December 2, 2016 (as amended through the time of such effectiveness, the “Registration Statement on Form 10”). In connection with the completion of the spin-off, HGV entered into agreements with Hilton and other third parties, including a license agreement to use the HGV brand that did not exist historically.
On March 15, 2017, Blackstone completed the previously announced sale of 24.8 million shares of HGV common stock to HNA Tourism Group, Ltd., representing approximately 25 percent of the outstanding shares of HGV’s common stock.
Hilton Grand Vacations will host a conference call on May 4, 2017, at 11 a.m. EDT to discuss firstquarter 2017 results. Participants may listen to the live webcast by logging onto the Hilton Grand Vacations’ Investor Relations website at http://investors.hgv.com/events-and-presentations. A replay and transcript of the webcast will be available on HGV’s Investor Relations website within 24 hours after the live event.
Alternatively, participants may listen to the live call by dialing 1-866-490-1886 in the U.S. or 1-719785-1747 internationally. Please use conference ID 5550864. Participants are encouraged to dial into the call or link to the webcast at least 20 minutes prior to the scheduled start time. A telephone replay will be available for seven days following the call. To access the telephone replay, dial 1-888-203-1112 or 1-719-457-0820 and use conference ID 5550864.
This document 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. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other nonhistorical statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words.
Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the timeshare industry, market trends and developments, macroeconomic factors beyond our control, competition for timeshare sales, risks related to doing business with third-party developers, performance of our information technology systems, risks of doing business outside of the U.S. and our indebtedness. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC, as such disclosures may be updated from time to time in our periodic filings with the SEC, including in our Quarterly Report on Form 10-Q for the period ended March 31, 2017, which is expected to be filed on or about the date of the press release. These documents are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Non-GAAP Financial Measures
The Company refers to certain non-GAAP financial measures in this press release, including EBITDA, Adjusted EBITDA, Adjusted EBITDA margins and Free Cash Flow. Please see the schedules in this press release and “Definitions” for additional information and reconciliations of such non-GAAP financial measures.
About Hilton Grand Vacations Inc.
Hilton Grand Vacations Inc. (NYSE:HGV) is recognized as a leading global timeshare company. With headquarters in Orlando, Fla., Hilton Grand Vacations develops, markets and operates a system of brandname, high-quality vacation ownership resorts in select vacation destinations. The Company also manages and operates two innovative club membership programs: Hilton Grand Vacations Club® and The Hilton Club®, providing exclusive exchange, leisure travel and reservation services for more than 270,000 Club Members. For more information, visit www.hgv.com and www.hiltongrandvacations.com