Hilton Grand Vacations Reports Fourth Quarter and Full Year 2022 Results
Hilton Grand Vacations Inc. (NYSE: HGV) (“HGV” or “the Company”) today reports its fourth quarter and full year 2022 results.
Fourth quarter highlights1
Total contract sales were $634 million. Member count was 519,000. Consolidated Net Owner Growth (NOG) for the 12 months ended Dec. 31, 2022, was 3.9%. Total revenues for the fourth quarter were $992 million compared to $838 million for the same period in 2021. Total revenues were affected by a net deferral of $3 million in the current period compared to a net deferral of $34 million in the same period in 2021. Net income for the fourth quarter was $78 million compared to $75 million for the same period in 2021. Adjusted net income for the fourth quarter was $118 million compared to $105 million for the same period in 2021. Net income and adjusted net income were affected by a net deferral of $1 million in the current period compared to a net deferral of $17 million in the same period in 2021. Diluted EPS for the fourth quarter was $0.67 compared to $0.62 for the same period in 2021. Adjusted diluted EPS for the fourth quarter was $1.01 compared to $0.86 for the same period in 2021. Diluted EPS and adjusted diluted EPS were affected by a net deferral of $1 million in the current period compared to a net deferral of $17 million in the same period in 2021, or $(0.01) and $(0.14) per share in the current period and the same period in 2021, respectively. Adjusted EBITDA for the fourth quarter was $252 million compared to $264 million for the same period in 2021. Adjusted EBITDA was affected by a net deferral of $1 million in the current period compared to a net deferral of $17 million in the same period in 2021. During the quarter, the Company repurchased 2.5 million shares of common stock for $100 million. Through Feb. 24, the Company has repurchased an additional 2 million shares for $80 million, and currently has $148 million remaining of the $500 million repurchase plan approved by the Board in May 2022.Full Year 2023 Outlook
The Company expects full-year 2023 Adjusted EBITDA excluding deferrals and recognitions to be in a range of $1,090 million to $1,120 million."We delivered a strong finish to what has been a transformational year for HGV,” said Mark Wang, president and CEO of Hilton Grand Vacations. “During 2022 we introduced innovative new programs, launched our new membership club, HGV Max, and made material progress in the integration of Diamond Resorts. In addition, for the year we generated record contract sales, EBITDA, and cash flow, while returning a significant amount of capital to shareholders. We’re excited about the year ahead and we’re focused on leveraging our progress to drive additional growth across our platform, further enhancing value for our members as well as our shareholders."
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.Diamond Acquisition
On Aug. 2, 2021 (The “Acquisition Date”), HGV completed the acquisition of Dakota Holdings, Inc., the parent of Diamond Resorts International (“Diamond”) (the “Diamond Acquisition”). HGV completed the acquisition by exchanging 100% of the outstanding equity interests of Diamond for shares of HGV common stock. Pre-existing HGV shareholders owned approximately 72% of the combined company after giving effect of the Diamond Acquisition, with certain funds controlled by Apollo Global Management Inc. (“Apollo”) and other minority shareholders, who previously owned 100% of Diamond, holding approximately 28% at the time the Diamond Acquisition was completed.
Diamond’s portfolio consists of resort properties that the Company manages, which are included in one of Diamond’s single- and multi-use trusts (collectively, the “Diamond Collections” or “Collections”), or are Diamond-branded resorts in which the Company owns inventory. It also includes affiliated resorts and hotels, which the Company does not manage, and which do not carry the Diamond brand but are a part of Diamond’s network and, through THE Club® and other Club offerings (the “Diamond Clubs”), are available for its members to use as vacation destinations.
The financial results in this report include Diamond’s results of operations beginning on the Acquisition Date. The Company refers to Diamond’s business and operations that were acquired as “Legacy-Diamond” or “Diamond,” and HGV’s operations as “Legacy-HGV,” which is inclusive of operations that existed both prior to and following the Diamond Acquisition.
Overview
For the quarter ended Dec. 31, 2022, diluted EPS was $0.67 compared to $0.62 for the quarter ended Dec. 31, 2021. Net income and Adjusted EBITDA were $78 million and $252 million, respectively, for the quarter ended Dec. 31, 2022, compared to net income and Adjusted EBITDA of $75 million and $264 million, respectively, for the quarter ended Dec. 31, 2021. Total revenues for the quarter ended Dec. 31, 2022, were $992 million compared to $838 million for the quarter ended Dec. 31, 2021.
Net income and Adjusted EBITDA for the quarter ended Dec. 31, 2022, included a net deferral of $1 million relating to the sales of intervals at Maui Bay Villas Phase III, which were under construction during the period. The Company anticipates recognizing these revenues and related expenses in 2023 when it expects to complete this project.
Consolidated Segment Highlights – Fourth quarter of 2022
Real Estate Sales and Financing
For the quarter ended Dec. 31, 2022, Real Estate Sales and Financing segment revenues were $595 million, an increase of $120 million compared to the quarter ended Dec. 31, 2021. Real Estate Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA profit margin were $199 million and 33.4%, respectively, for the quarter ended Dec. 31, 2022, compared to $185 million and 38.9%, respectively, for the quarter ended Dec. 31, 2021. Results in the fourth quarter of 2022 improved due to an increase in tour flow and VPG versus the prior year along with lower provision and reportability adjustments.
Real Estate Sales and Financing segment Adjusted EBITDA reflects a reduction of $1 million due to the net deferral of sales and related expenses of VOIs under construction at the Maui Bay Villas Phase III project for the quarter ended Dec. 31, 2022, compared to $17 million of net deferral of sales related to the Maui Bay Villas Phase IB and The Beach Resort Sesoko Phase II projects for the quarter ended Dec. 31, 2021.
Contract sales for the quarter ended Dec. 31, 2022, increased $113 million to $634 million compared to the quarter ended Dec. 31, 2021. For the quarter ended Dec. 31, 2022, tours increased by 21.9% and VPG increased by 1.3% compared to the quarter ended Dec. 31, 2021. For the quarter ended Dec. 31, 2022, fee-for-service contract sales represented 32.3% of contract sales compared to 25.9% for the quarter ended Dec. 31, 2021.
Financing revenues for the quarter ended Dec. 31, 2022, increased by $15 million compared to the quarter ended Dec. 31, 2021. 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 an increase in the weighted average interest rate for the originated portfolio of 100 basis points as of Dec. 31, 2022, compared to Dec. 31, 2021.
Resort Operations and Club Management
For the quarter ended Dec. 31, 2022, Resort Operations and Club Management segment revenue was $327 million, an increase of $30 million compared to the quarter ended Dec. 31, 2021. Resort Operations and Club Management segment Adjusted EBITDA and Adjusted EBITDA profit margin were $131 million and 40.1%, respectively, for the quarter ended Dec. 31, 2022, compared to $141 million and 47.5%, respectively, for the quarter ended Dec. 31, 2021. Compared to the prior-year period revenue in the fourth quarter of 2022 increased due to growth in our member base and strong rental performance. These improvements were more than offset by an increase in the Company's Rental and Ancillary segment operating expenses owing to an increase in member activity, along with elevated developer maintenance fees as HGV sells through recently opened inventory.
Inventory
The estimated value of the Company’s total contract sales pipeline is approximately $11 billion at current pricing.
The total pipeline includes approximately $6 billion of sales relating to inventory that is currently available for sale at open or soon-to-open projects. The remaining approximately $5 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 85% of the Company’s total pipeline. Approximately 54% of the owned inventory pipeline is currently available for sale.
Fee-for-service inventory represents 15% of the Company’s total pipeline. Approximately 55% of the fee-for-service inventory pipeline is currently available for sale.
With 24% of the pipeline consisting of just-in-time inventory and 15% consisting of fee-for-service inventory, capital-efficient inventory represents 39% of the Company’s total contract sales pipeline.
Balance Sheet and Liquidity
Total cash and cash equivalents were $555 million as of Dec. 31, 2022, including $332 million of restricted cash.
As of Dec. 31, 2022, the Company had $2,651 million of corporate debt, net outstanding with a weighted average interest rate of 6.14% and $1,102 million of non-recourse debt, net outstanding with a weighted average interest rate of 3.54%.
As of Dec. 31, 2022, the Company’s liquidity position consisted of $223 million of unrestricted cash and $959 million remaining borrowing capacity under the revolver facility.
As of Dec. 31, 2022, HGV has $652 million remaining borrowing capacity in total under the Timeshare Facility. Of this amount, HGV has $279 million of mortgage notes that are available to be securitized and another $338 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 $(62) million for the quarter ended Dec. 31, 2022, compared to $118 million for the same period in the prior year. Adjusted free cash flow was $(92) million for the quarter ended Dec. 31, 2022, compared to $193 million for the same period in the prior year. Adjusted free cash flow for the quarter ended Dec. 31, 2022, includes add-backs of $38 million for acquisition-related costs.
As of Dec. 31, 2022, the Company’s total net leverage on a trailing 12-month basis was approximately 2.36x.
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)
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 loss (gain), 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
T-1
NET CONSTRUCTION DEFERRAL ACTIVITY
(CONTINUED, in millions)
2021
NET CONSTRUCTION DEFERRAL ACTIVITY
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
Sales of VOIs (deferrals) recognitions
$
(32
)
$
(42
)
$
241
$
(34
)
$
133
Cost of VOI sales (deferrals) recognitions(1)
(10
)
(13
)
73
(12
)
38
Sales and marketing expense (deferrals) recognitions
(4
)
(7
)
35
(5
)
19
Net construction (deferrals) recognitions(2)
$
(18
)
$
(22
)
$
133
$
(17
)
$
76
Net income
$
(7
)
$
9
$
99
$
75
$
176
Interest expense
15
17
42
31
105
Income tax (benefit) expense
(6
)
3
49
47
93
Depreciation and amortization
11
12
48
55
126
Interest expense and depreciation and amortization included in equity in earnings from unconsolidated affiliates
1
—
—
—
1
EBITDA
14
41
238
208
501
Other loss, net
1
1
20
4
26
Share-based compensation expense
4
14
14
16
48
Acquisition and integration-related expense
15
14
54
23
106
Impairment expense
1
—
1
—
2
Other adjustment items(3)
7
—
13
13
33
Adjusted EBITDA
$
42
$
70
$
340
$
264
$
716
(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 March 1, 2023, at 11 a.m. (ET) to discuss fourth quarter 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 8, 2023. To access the replay, please dial 1-844-512-2921 in the U.S. (+1-412-317-6671 internationally) using ID#13735178. 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.
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 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. Please see the tables in this press release and “Definitions” for additional information and reconciliations of such non-GAAP financial measures.
The Company refers to Deferral Adjusted EBITDA guidance, 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. 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. As one of Hilton’s 19 premier brands, Hilton Grand Vacations has a reputation for delivering a consistently exceptional standard of service, and unforgettable vacation experiences for guests and more than 725,000 owners. 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.
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 (loss), 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 (loss) 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 (loss), 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 and Adjusted Diluted EPS, 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 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 is 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.
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 percent 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. We consider contract sales to be an important operating measure because it reflects the pace of sales in our business and is used to manage the performance of the sales organization. While 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 our consolidated financial statements included in Item 8 in our Annual Report on form 10-K for the year ended December 31, 2022, 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.
Real estate profit represents sales revenue less the cost of VOI sales and sales and marketing costs, net of marketing revenue. Real estate profit margin is calculated by dividing real estate profit by sales revenue. The Company considers this to be an important operating measure because it measures the efficiency of our sales and marketing spending and management of inventory costs.
Sales revenue represents Sale of VOIs, net and fee-for-service commissions and brand fees earned from the sale of fee-for-service intervals.
Fee-for-service commissions and brand fees, net represents commissions and brand fees earned from the sale of fee-for-service intervals net of related reserves.
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 FLOWS 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
T-2
HILTON GRAND VACATIONS INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
223
$
432
Restricted cash
332
263
Accounts receivable, net
511
302
Timeshare financing receivables, net
1,767
1,747
Inventory
1,159
1,240
Property and equipment, net
798
756
Operating lease right-of-use assets, net
76
70
Investments in unconsolidated affiliates
72
59
Goodwill
1,416
1,377
Intangible assets, net
1,277
1,441
Land and infrastructure held for sale
—
41
Other assets
373
280
TOTAL ASSETS
$
8,004
$
8,008
LIABILITIES AND EQUITY
Accounts payable, accrued expenses and other
$
1,007
$
673
Advanced deposits
150
112
Debt, net
2,651
2,913
Non-recourse debt, net
1,102
1,328
Operating lease liabilities
94
87
Deferred revenues
190
237
Deferred income tax liabilities
659
670
Total liabilities
5,853
6,020
Equity:
Preferred stock, $0.01 par value; 300,000,000 authorized shares, none
issued or outstanding as of December 31, 2022 and 2021
—
—
Common stock, $0.01 par value; 3,000,000,000 authorized shares,
113,628,706 shares issued and outstanding as of December 31, 2022 and
119,904,001 shares issued and outstanding as of December 31, 2021
1
1
Additional paid-in capital
1,582
1,630
Accumulated retained earnings
529
357
Accumulated other comprehensive income
39
—
Total equity
2,151
1,988
TOTAL LIABILITIES AND EQUITY
$
8,004
$
8,008
T-3
HILTON GRAND VACATIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share and share data)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Revenues
Sales of VOIs, net
$
361
$
286
$
1,491
$
883
Sales, marketing, brand and other fees
163
133
620
385
Financing
71
56
267
183
Resort and club management
155
148
534
340
Rental and ancillary services
160
144
626
342
Cost reimbursements
82
71
297
202
Total revenues
992
838
3,835
2,335
Expenses
Cost of VOI sales
67
59
274
213
Sales and marketing
297
221
1,146
653
Financing
37
22
103
65
Resort and club management
43
35
161
80
Rental and ancillary services
153
116
579
267
General and administrative
54
59
212
151
Acquisition and integration-related expense
18
23
67
106
Depreciation and amortization
63
55
244
126
License fee expense
34
23
124
80
Impairment expense
17
—
17
2
Cost reimbursements
82
71
297
202
Total operating expenses
865
684
3,224
1,945
Interest expense
(37
)
(31
)
(142
)
(105
)
Equity in earnings from unconsolidated affiliates
4
3
13
10
Other (loss) gain, net
(2
)
(4
)
(1
)
(26
)
Income before income taxes
92
122
481
269
Income tax expense
(14
)
(47
)
(129
)
(93
)
Net income
$
78
$
75
$
352
$
176
Earnings per share(1):
Basic
$
0.68
$
0.63
$
2.98
$
1.77
Diluted
$
0.67
$
0.62
$
2.93
$
1.75
(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,
2022
2021
2022
2021
Operating Activities
Net income
$
78
$
75
$
352
$
176
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
63
55
244
126
Amortization of deferred financing costs, acquisition premiums and other
18
20
52
39
Provision for financing receivables losses
39
44
142
121
Impairment expense
17
—
17
2
Other loss (gain), net
2
7
3
14
Share-based compensation
6
16
46
48
Deferred income tax (benefit) expense
(37
)
49
(38
)
58
Equity in earnings from unconsolidated affiliates
(4
)
(3
)
(13
)
(10
)
Return on investment in unconsolidated affiliates
—
—
—
2
Net changes in assets and liabilities, net of effects of acquisition:
Accounts receivable, net
(113
)
(22
)
(177
)
(124
)
Timeshare financing receivables, net
(83
)
(56
)
(224
)
(92
)
Inventory
(1
)
26
100
15
Purchases and development of real estate for future conversion to inventory
(4
)
(8
)
(8
)
(33
)
Other assets
(13
)
(14
)
(34
)
48
Accounts payable, accrued expenses and other
37
(53
)
294
(48
)
Advanced deposits
12
(3
)
37
(8
)
Deferred revenues
(33
)
(1
)
(46
)
(166
)
Net cash (used in) provided by operating activities
(16
)
132
747
168
Investing Activities
Acquisition of Diamond, net of cash and restricted cash acquired
—
(7
)
—
(1,592
)
Capital expenditures for property and equipment
(33
)
(7
)
(58
)
(18
)
Software capitalization costs
(13
)
(7
)
(39
)
(21
)
Net cash used in investing activities
(46
)
(21
)
(97
)
(1,631
)
Financing Activities
Issuance of debt
40
300
40
2,950
Issuance of non-recourse debt
98
168
769
264
Repayment of debt
(3
)
(311
)
(313
)
(1,154
)
Repayment of non-recourse debt
(166
)
(125
)
(990
)
(359
)
Debt issuance costs
(1
)
(9
)
(13
)
(70
)
Repurchase and retirement of common stock
(110
)
—
(272
)
—
Payment of withholding taxes on vesting of restricted stock units
—
(1
)
(8
)
(6
)
Proceeds from employee stock plan purchases
3
—
5
1
Proceeds from stock option exercises
—
3
2
13
Other
1
(1
)
(2
)
(3
)
Net cash (used in) provided by financing activities
(138
)
24
(782
)
1,636
Effect of changes in exchange rates on cash, cash equivalents & restricted cash
11
(4
)
(8
)
(4
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(189
)
131
(140
)
169
Cash, cash equivalents and restricted cash, beginning of period
744
564
695
526
Cash, cash equivalents and restricted cash, end of period
$
555
$
695
$
555
$
695
T-5
HILTON GRAND VACATIONS INC.
FREE CASH FLOW RECONCILIATION
(in millions)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Net cash (used in) provided by operating activities
$
(16
)
$
132
$
747
$
168
Capital expenditures for property and equipment
(33
)
(7
)
(58
)
(18
)
Software capitalization costs
(13
)
(7
)
(39
)
(21
)
Free Cash Flow
$
(62
)
$
118
$
650
$
129
Non-recourse debt activity, net
(68
)
43
(221
)
(95
)
Acquisition and integration-related expense
18
23
67
106
Other adjustment items(1)
20
9
67
10
Adjusted Free Cash Flow
$
(92
)
$
193
$
563
$
150
(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,
2022
2021
2022
2021
Revenues:
Real estate sales and financing
$
595
$
475
$
2,378
$
1,451
Resort operations and club management
327
297
1,197
700
Total segment revenues
922
772
3,575
2,151
Cost reimbursements
82
71
297
202
Intersegment eliminations
(12
)
(5
)
(37
)
(18
)
Total revenues
$
992
$
838
$
3,835
$
2,335
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,
2022
2021
2022
2021
Net income
$
78
$
75
$
352
$
176
Interest expense
37
31
142
105
Income tax expense
14
47
129
93
Depreciation and amortization
63
55
244
126
Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates
—
—
2
1
EBITDA
192
208
869
501
Other loss (gain), net
2
4
1
26
Share-based compensation expense
6
16
46
48
Acquisition and integration-related expense
18
23
67
106
Impairment expense
17
—
17
2
Other adjustment items(1)
17
13
65
33
Adjusted EBITDA
$
252
$
264
$
1,065
$
716
Segment Adjusted EBITDA:
Real estate sales and financing(2)
$
199
$
185
$
865
$
537
Resort operations and club
management(2)
131
141
463
353
Adjustments:
Adjusted EBITDA from
unconsolidated affiliates
3
3
15
11
License fee expense
(34
)
(23
)
(124
)
(80
)
General and administrative(3)
(47
)
(42
)
(154
)
(105
)
Adjusted EBITDA
$
252
$
264
$
1,065
$
716
Adjusted EBITDA profit margin
25.4
%
31.5
%
27.8
%
30.7
%
EBITDA profit margin
19.4
%
24.8
%
22.7
%
21.5
%
(1)
Includes costs associated with restructuring, one-time charges and other non-cash items. For the three and twelve months ended December 31, 2022, this amount also includes the amortization of premiums resulting from the Diamond Acquisition.
(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,
2022
2021
2022
2021
Tour flow
141,610
116,123
517,117
298,044
VPG
4,350
4,294
4,432
4,332
Owned contract sales mix
67.7
%
74.1
%
70.9
%
68.6
%
Fee-for-service contract sales mix
32.3
%
25.9
%
29.1
%
31.4
%
Contract sales
$
634
$
521
$
2,381
$
1,352
Adjustments:
Fee-for-service sales(1)
(205
)
(135
)
(693
)
(424
)
Provision for financing receivables losses
(39
)
(44
)
(142
)
(121
)
Reportability and other:
Net recognition of sales of VOIs under construction(2)
(3
)
(34
)
31
133
Fee-for-service sale upgrades, net
4
6
18
14
Other(3)
(30
)
(28
)
(104
)
(71
)
Sales of VOIs, net
$
361
$
286
$
1,491
$
883
Plus:
Fee-for-service commissions and brand fees, net
119
74
412
236
Sales revenue
480
360
1,903
1,119
Cost of VOI sales
67
59
274
213
Sales and marketing expense, net(4)
242
163
886
479
Real Estate expense
309
222
1,160
692
Real Estate profit
$
171
$
138
$
743
$
427
Real Estate profit margin
35.6
%
38.3
%
39.0
%
38.2
%
Reconciliation of fee-for-service commissions:
Sales, marketing, brand and other fees
163
133
620
385
Less:
Marketing revenue and other fees
44
59
208
149
Fee-for-service commissions and brand fees, net
$
119
$
74
$
412
$
236
(1)
Represents contract sales from fee-for-service properties on which we earn commissions and brand fees.
(2)
Represents the net recognition of revenues 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)
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,
2022
2021
2022
2021
Just-In-Time Contract Sales Mix
15
%
17
%
15
%
20
%
Fee-For-Service Contract Sales Mix
32
%
26
%
29
%
31
%
Total Capital-Efficient Contract Sales Mix(1)
47
%
43
%
44
%
51
%
(1)Diamond contract sales are related to developed properties and therefore are not included in capital efficient contract sales.
T-10
HILTON GRAND VACATIONS INC.
FINANCING PROFIT DETAIL SCHEDULE
(in millions)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Interest income(1)
$
65
$
49
$
235
$
157
Other financing revenue
6
7
32
26
Financing revenue
71
56
267
183
Consumer financing interest expense
21
8
47
30
Other financing expense
16
14
56
35
Financing expense
37
22
103
65
Financing profit
$
34
$
34
$
164
$
118
Financing profit margin
47.9
%
60.7
%
61.4
%
64.5
%
(1)
For the three and twelve months ended December 31, 2022, this amount includes $6 million and $33 million, respectively, of amortization of the premium related to the acquired timeshare financing receivables 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,
2022
2021
Total members
518,602
499,067
Consolidated Net Owner Growth (NOG)(1)
19,535
—
Consolidated Net Owner Growth % (NOG)(1)
3.9
%
—
(1)
Consolidated NOG is a trailing-twelve-month concept for which the twelve months ended in 2022 includes member count for Legacy-HGV, Legacy-DRI, and HGV Max members on a consolidated basis. This consolidated trailing-twelve-month concept is not applicable for the twelve months ended 2021.
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Club management revenue
$
77
$
70
$
227
$
168
Resort management revenue
78
78
307
172
Resort and club management revenues
155
148
534
340
Club management expense
11
10
42
28
Resort management expense
32
25
119
52
Resort and club management expenses
43
35
161
80
Resort and club management profit
$
112
$
113
$
373
$
260
Resort and club management profit margin
72.3
%
76.4
%
69.9
%
76.5
%
T-12
HILTON GRAND VACATIONS INC.
RENTAL AND ANCILLARY PROFIT DETAIL SCHEDULE
(in millions)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Rental revenues
$
150
$
131
$
586
$
315
Ancillary services revenues
10
13
40
27
Rental and ancillary services revenues
160
144
626
342
Rental expenses
143
104
544
242
Ancillary services expense
10
12
35
25
Rental and ancillary services expenses
153
116
579
267
Rental and ancillary services profit
$
7
$
28
$
47
$
75
Rental and ancillary services profit margin
4.4
%
19.4
%
7.5
%
21.9
%
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,
2022
2021
2022
2021
Sales of VOIs, net
$
361
$
286
$
1,491
$
883
Sales, marketing, brand and other fees
163
133
620
385
Financing revenue
71
56
267
183
Real estate sales and financing segment revenues
595
475
2,378
1,451
Cost of VOI sales
(67
)
(59
)
(274
)
(213
)
Sales and marketing expense, net
(297
)
(221
)
(1,146
)
(653
)
Financing expense
(37
)
(22
)
(103
)
(65
)
Marketing package stays
(12
)
(5
)
(37
)
(18
)
Share-based compensation
2
2
11
9
Other adjustment items
15
15
36
26
Real estate sales and financing segment adjusted EBITDA
$
199
$
185
$
865
$
537
Real estate sales and financing segment adjusted EBITDA profit margin
33.4
%
38.9
%
36.4
%
37.0
%
T-14
HILTON GRAND VACATIONS INC.
RESORT AND CLUB MANAGEMENT SEGMENT ADJUSTED EBITDA
(in millions)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Resort and club management revenues
$
155
$
148
$
534
$
340
Rental and ancillary services
160
144
626
342
Marketing package stays
12
5
37
18
Resort and club management segment revenue
327
297
1,197
700
Resort and club management expenses
(43
)
(35
)
(161
)
(80
)
Rental and ancillary services expenses
(153
)
(116
)
(579
)
(267
)
Share-based compensation
—
2
5
5
Other adjustment items
—
(7
)
1
(5
)
Resort and club segment adjusted EBITDA
$
131
$
141
$
463
$
353
Resort and club management segment adjusted EBITDA profit margin
40.1
%
47.5
%
38.7
%
50.4
%
T-15
HILTON GRAND VACATIONS INC.
ADJUSTED NET INCOME AND
ADJUSTED DILUTED EARNINGS PER SHARE - DILUTED (Non-GAAP)
(in millions except share data)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Net income
$
78
$
75
$
352
$
176
Income tax expense
14
47
129
93
Income before income taxes
92
122
481
269
Certain items:
Other loss (gain), net
2
4
1
26
Impairment expense
17
—
17
2
Acquisition and integration-related expense
18
23
67
106
Other adjustment items(1)
17
13
65
20
Adjusted income before income taxes
$
146
$
162
$
631
$
423
Income tax expense
(28
)
(57
)
(167
)
(132
)
Adjusted net income
$
118
$
105
$
464
$
291
Weighted average shares outstanding
Diluted (millions)
116
122
120
101
Earnings per share(2):
Diluted
$
0.68
$
0.62
$
2.93
$
1.75
Adjusted diluted
$
1.01
$
0.86
$
3.88
$
2.88
(1)
Includes costs associated with restructuring, one-time charges and other non-cash items. For the three and twelve months ended December 31, 2022, this amount also includes the amortization of premiums resulting from the Diamond Acquisition.
(2)Earnings per share amounts are calculated using whole numbers.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230228006492/en/