HGV 2024 Q3 Investors Report

[dayooper]

2024 Q3 Earnings Report

Previous Investor Calls/Reports

2024 Q2 Earnings Call
2024 Q1 Investor Call
2023 Q4/Annual Earnings Call
2023 Q3 Earnings Call
2023 Q2 Earnings Call
2023 Q1 Earnings Call
2022 Q3 Earnings Call
2022 Q1 Earnings Call
2021 Q3 Earnings Call

HGV announced their 3rd quarter financials today and they were sort of a mixed bag. Here are the highlights that HGV released:

ORLANDO, Fla. (Nov. 7, 2024) – Hilton Grand Vacations Inc. (NYSE: HGV) (“HGV” or “the Company”) today reports its third quarter 2024 results. Third quarter of 2024 highlights

• Total contract sales were $777 million.
• Member count was 722,000. Net Owner Growth (NOG) for the legacy HGV-DRI business for the 12 months ended Sept. 30, 2024, was 1.2%.
• Total revenues for the third quarter of 2024 were $1.306 billion compared to $1.018 billion for the same period in 2023.
  • Total revenues were affected by a net recognition of $49 million in the current period compared to a net deferral of $12 million in the same period in 2023.
• Net income attributable to stockholders for the third quarter was $29 million compared to $92 million for the same period in 2023.
  • Adjusted net income attributable to stockholders for the third quarter was $68 million compared to $109 million for the same period in 2023.
  • Net income attributable to stockholders and adjusted net income attributable to stockholders were affected by a net recognition of $27 million in the current period compared to a net deferral of $7 million in the same period in 2023.
• Diluted EPS for the third quarter was $0.28 compared to $0.83 for the same period in 2023.
  • Adjusted diluted EPS for the third quarter was $0.67 compared to $0.98 for the same period in 2023.
  • Diluted EPS and adjusted diluted EPS were affected by a net recognition of $27 million in the current period compared to a net deferral of $7 million in the same period in 2023, or $0.26 and $(0.06) per share in the current period and the same period in 2023, respectively.
• Adjusted EBITDA attributable to stockholders for the third quarter was $303 million compared to $269 million for the same period in 2023.
  • Adjusted EBITDA attributable to stockholders was affected by a net recognition of $27 million in the current period compared to a net deferral of $7 million in the same period in 2023.
• During the third quarter, the Company repurchased 2.8 million shares of common stock for $108 million.
• On Aug. 7, 2024, HGV’s Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period (the “2024 Repurchase Plan”), which is in addition to the prior repurchase authorization.
• Through Oct. 31, 2024, the Company has repurchased approximately 1.4 million shares for $50 million and currently has $503 million of remaining availability under the share repurchase programs, of which $500 million was under the 2024 Repurchase Plan.
• The Company is reiterating its guidance for the full year 2024. Adjusted EBITDA, excluding deferrals and recognitions, of $1.075 billion to $1.135 billion.

“We’re pleased with our third quarter results, which were in line with our expectations,” said Mark Wang, CEO of Hilton Grand Vacations. “I’m encouraged by the early positive signs we’ve seen in our operating metrics following the strategic regionalization and staffing changes we announced last quarter. We’re optimistic about further improvement ahead from these strategic initiatives, coupled with the benefit of the upcoming introduction of HGV Max to the Bluegreen system. Above all, we remain confident in our strategy – we have the right scale, the right inventory, and the right product offering. With our reorganization work largely behind us, our focus turns to driving execution to maximize value creation for our shareholders.”

Here are my thoughts (some of them are from the entire report linked below). I’ll have the highlights from the investors call after it’s released.

• Contract sales keep rising. They were $777 million in this quarter alone. Last quarter was $757 million and 3rd quarter 2023 was $603 million. This is the highest I’ve seen in quite a while.
• Total revenues were $1.306 Billion and EBITDA was higher than expected.
• Tours increased ~39% but the VPG (Volume Per Guest) declined about 7.2%. This means that the people taking tours are buying less or cheaper contracts.
• Fee-For-Service contract sales (properties that another company owns but HGV sells and manages) dropped to ~17% of the total sales. These are properties like the South Carolina resorts. This one surprised me a bit. The SC resorts sell like hotcakes. Could this be that the owned properties are being sold at a better rate? Besides Maui and bHC Elara, are there any more properties that are new to the market? Did they increase the BlueGreen sales? Did the South Carolina and/or other Fee-For-Service properties (Grand Islander, Las Palmeras, Elara, Park City) slip?
• Looks like they spent their first $500 million in share buybacks and have allocated another $500 million to buy back even more.
• They have a lot of debt, which is to be expected as the BlueGreen deal was a pure debt transaction.

After the poor report last quarter, HGV seems to have bounced back a bit. The EBITDA bouncing back and the company exceeding their expected revenue was a plus. We will see what Mark Wang and Company say during the call. I'll have an overview of they say when the transcript is released.


Complete HGV Quarter 3 report

https://s27.q4cdn.com/757306400/files/doc_financials/2024/q3/HGV-Q3-2024-Earnings-Release-11-6_FINAL.pdf

 

[GT75]

Thanks @dayooper for the report.

Fee-For-Service contract sales (properties that another company owns but HGV sells and manages) dropped to ~17% of the total sales. These are properties like the South Carolina resorts. This one surprised me a bit. The SC resorts sell like hotcakes. Could this be that the owned properties are being sold at a better rate?

My guess is that the SC properties have less available inventory. I know that phase I of Ocean Oak started selling around 2016. Just my guess. Sales tours at the SC are probably pushing other properties.

 

[WaikikiFirst]

Fee-For-Service contract sales (properties that another company owns but HGV sells and manages) dropped to ~17% of the total sales. These are properties like the South Carolina resorts. This one surprised me a bit.

well, BG is in the 3q24 #s but not in 3q23 #s, right? So, BG adds to the denominator more than it adds to the numerator, if it adds to numerator at all. Does it?

 

[WaikikiFirst]

Contract sales keep rising. They were $777 million in this quarter alone. Last quarter was $757 million and 3rd quarter 2023 was $603 million. This is the highest I’ve seen in quite a while

what about "organic" #s? these are apples v oranges for including BG. Revs up 30% but EPS stink. per share & interest on NEW DEBT to acq BG must be the reason?
Too busy to look at it this wk, but it seems to me everything has to be looked at as apples v oranges a yr ago

 

[WaikikiFirst]

Net Owner Growth (NOG) for the legacy HGV-DRI business for the 12 months ended Sept. 30, 2024, was 1.2%

one of the few (only?) "organic" aka "legacy" #s I see. So, organically growing 1.2% Y/y in owner base. They need those owners to open their wallets much wider

The more obvious hope is using Good, Better, Best product segmentation, they can trick more people who wanted Better to buy Good and then "upgrade" them to Better in the future. Ditto with Better vs Best.

 

[WaikikiFirst]

Adjusted EBITDA $303 million compared to $269 mi

Adj Ebitda up $34 M. x4 = $136 M. Divide $136 M by whatever they paid for BG. that is a more important # than most (all) of this other fine-tooth apples v oranges

 

[jp10558]

I'm not a business person, but I always wondered about the actual value of these "aggregation of companies" sorts of things where there's little to no real integration of the purchased company.

The only value to sales is Max which anyone "in the know" generally scoffs at.

I wonder if they're upselling DRI members to HGVC cause all the sales stuff I've seen so far is DRI DRI DRI - which I think makes sense cause there were a lot of unsold DRI from what I recall reading. But if HGVs own marketing view here is that Blugreen is "cheaper" than Diamond which is cheaper than HGVC - maybe those pushed sales are lower amounts because of the lower end of the market target OR DRI anyway isn't actually cheaper but they're targetting a lower end of the market so the entire plan doesn't actually work out.

 

[dayooper]

Extra info from the transcript:

• Occupancy up 2 points to 83%
• 722,000 total members with 181,000 being Max members (Max members 40% higher than this time last year)
• Repurchased 2.8 million shares of stock back ($108 million)
• HGVC opened up 4 new sales departments in Great Wolf Lodge resorts with 4 more in Q4
• On track to have 80% of DRI keys rebranded by the end of the year
• BlueGreen keys should be all rebranded by the end of 2027
• Most BlueGreen properties will be put into HVC with a handful of “unique properties” will become HGVC properties
• In Japan, the Sesko property is almost sold out (ahead of schedule) and the Kyoto property will start being sold the middle of next year
• Kyoto brings in 75 million visitors each year so they are very excited about that
• VPG (Volume Per Guest) is up to $3392, up 9% from 2019
• Launching Max sales for BlueGreen next week (Week of Mon, Nov 11)
• Question was asked about the core markets, Mark Wang answered Vegas is doing very well, Orlando is soft on arrivals, sales and rental rates, Hawaii is still rebounding. Japanese owners are coming back at about 90%. The strike provided some issues as well.
• They have their corporate and regional sales leadership in place, hired 10 new recruiters and 1200 new sales rep

First of all, they saw issues with their sales and changed leadership and hire a bunch of new sales reps. Not sure how good that will be for owners and guests, but they saw and issue and fixed it. I didn't say this before, but they expect a drop in packages and in the 4th quarter due to the hurricanes. Most of HVC is rebranded and Bluegreen has a timeframe of 2027. I think the big news in this section is how they will be dealing with the BlueGreen acquisition. Most being placed into HVC while some unique properties being placed into HGVC. I also like they are not creating a new system, just integrated them into the existing 2. Whether legacy owners get access to those remains to be seen.

Call Transcript:

https://finance.yahoo.com/news/q3-2024-hilton-grand-vacations-113921232.html

 

[GT75]

Launching Max sales for BlueGreen next week (Week of Mon, Nov 11)

Wow, I am excited. NOT

 

[GT75]

I also like they are not creating a new system, just integrated them into the existing 2. Whether legacy owners get access to those remains to be seen.

Even more confusion. There will have to be 3 separate TS systems.

 

[WaikikiFirst]

Most BlueGreen properties will be put into HVC with a handful of “unique properties” will become HGVC properties

anybody know what BG sites deserve HGVC? Does add variety. But would BG owners who are not in Max lose access to those?

722,000 total members with 181,000 being Max members (Max members 40% higher than this time last year)

if they give MAx to every new retail buyer, totally predictable. Q/Q #s are more interesting. At some point it will reach a limit unless they give it to more resale owners.
Does Max get transferred when a Max owner sells via resale mkt?

Kyoto start being sold the middle of next year. Kyoto brings in 75 million visitors each year so they are very excited about that

Having been in that building 2 yrs ago, and knowing my way around Kyoto pretty well, I'd say that should be a big winner for them. Great location for 1 wk or less stays. We'd rather stay in other areas of Kyoto, but that is us. I wonder how many foreigners spend an entire week in Kyoto.

 

[WaikikiFirst]

VPG (Volume Per Guest) is up to $3392, up 9% from 2019

Is that Sales $s per Presentation? What is the denominator? Up 9% is much lower than the 5 yrs of INFLATION since 2019

 

[Reddart]

722,000 total members with 181,000 being Max members (Max members 40% higher than this time last year)

I wonder if the surprise free Max owners are included in the numbers

 

[WaikikiFirst]

Occupancy up 2 points to 83%

I assume this incl Packages?

 

[dayooper]

anybody know what BG sites deserve HGVC? Does add variety. But would BG owners who are not in Max lose access to those?

If we Legacy HGVC owners get access (like @GT75 I am leery of Mark Wang's statement), my guess is they will be premium places that HGVC is not. Here are the different collections within their whole system:

Resort Collections | Bluegreen Vacations

Our Resort Collections categorized by the primary theme of their location. These groupings are designed to help you create the kind of vacation you and your family want to experience next.

www.bluegreenvacations.com

 

[jp10558]

I think the big news in this section is how they will be dealing with the BlueGreen acquisition. Most being placed into HVC while some unique properties being placed into HGVC. I also like they are not creating a new system, just integrated them into the existing 2. Whether legacy owners get access to those remains to be seen.

Interesting as I'm pretty sure we figured it would be a 4th minisystem just in MAX. I hope they don't Embarc the BlueGreen HGVC - it's one thing to HVC vs HGVC vs BlueGreen, another if it's a name rebrand that's even more confusing that you cannot access via legacy / resale. I.e., if we end up with
HVC(DRI), HVC(BG), HGVC, HGVC(Embarc),HGVC(BG) and they're all actually separate - ooofff. Bad for owner satisfaction and resales, good for confusing the heck out of people in developer sales.

 

[dayooper]

Is that Sales $s per Presentation? What is the denominator? Up 9% is much lower than the 5 yrs of INFLATION since 2019

How much each guest is spending on their stay. From what I understand, it includes everything. Contract sales, rental charges, store sales, bar/restaurant sales and any other fees or purchases a guest makes.

 

[dayooper]

I assume this incl Packages?

All occupancy from owners, exchanger and renters. If the number is up, they are trying to say there's more guests to sell contracts to.

 

[dayooper]

Interesting as I'm pretty sure we figured it would be a 4th minisystem just in MAX. I hope they don't Embarc the BlueGreen HGVC - it's one thing to HVC vs HGVC vs BlueGreen, another if it's a name rebrand that's even more confusing that you cannot access via legacy / resale. I.e., if we end up with
HVC(DRI), HVC(BG), HGVC, HGVC(Embarc),HGVC(BG) and they're all actually separate - ooofff. Bad for owner satisfaction and resales, good for confusing the heck out of people in developer sales.

I think that's the question. Will the legacy owners get access to these properties? I can see it both ways, but my gut tells me to follow the easy money (need Max to have access).

 

[jp10558]

I think that's the question. Will the legacy owners get access to these properties? I can see it both ways, but my gut tells me to follow the easy money (need Max to have access).

I think it's actually (maybe I overrate this) worse for new Developer purchases in that 6 months out seems really unlikely to find availability if I bought DRI and want to book in HGVC say, and I would bet the other way round too. From the reviews TimeShareTraveller gave, it works "fine" for real off season stuff, but I feel like so does RCI/II for that so people are going to buy at Ocean Enclave and get sold DRI points and then wonder why they can't go back where they bought (that's what they tried to sell me there at the presentation). Hey, none of it really matters to me or TUGers exactly, but I'm still amazed how much the TS companies want to set up the sales for disappointment down the road.

 

[GT75]

Does Max get transferred when a Max owner sells via resale mkt?

No

I hope they don't Embarc the BlueGreen HGVC - it's one thing to HVC vs HGVC vs BlueGreen, another if it's a name rebrand that's even more confusing that you cannot access via legacy / resale. I.e., if we end up with
HVC(DRI), HVC(BG), HGVC, HGVC(Embarc),HGVC(BG) and they're all actually separate - ooofff. Bad for owner satisfaction and resales, good for confusing the heck out of people in developer sales.

That is exactly what is going to happen. It will be just like HGVC Embarc and Legacy HGVC. Now there will be BG HGVC and BG HVC members. They have to maintain the clubs separately. And I believe we want them to. So HgvMax will be the crossover platform to the other clubs but at the 6 month mark.

 

[GT75]

but I'm still amazed how much the TS companies want to set up the sales for disappointment down the road.

But then back to sales to "fix" the problem (well probably will take a few more developer purchases in order to fix it). That seems to be the strategy.

 

[WaikikiFirst]

my guess is they will be premium places

I guess Aspen & Vail would cause a blizzard of interest. Maybe even North Miami Bch, though it is very far north and most people seem to like being around the drunks in So Bch. keep fingers crossed

 

[WaikikiFirst]

includes everything

OK, so if an owner stays for a wk, and doesn't even attend a presentation or spend much at the resort, they go in the denominator and tiny $ value goes in numerator?
If it is Everything divided by Everyone, I will try later to calc it just using revs vs total guests (stays

 

[WaikikiFirst]

Does Max get transferred when a Max owner sells via resale mkt?

No ... OK, so there should be a hard limit to Max penetration as disgruntled new owners who were given Max begin to resell there weeks. Til then
EndOfQtr Max# = BeginOfQtr Max# + all those New Owners
Eventually, and maybe not far off,
EndOfQtr Max# = BeginOfQtr Max# + all those New Owners - Max Owners Who Resell or Deedback