Hilton Grand Vacations (NYSE:HGV) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/662419070
Summary
Hilton Grand Vacations reported a strong start to 2026, with adjusted EBITDA exceeding expectations and contract sales meeting guidance.
The company repurchased $150 million in stock during the quarter and raised its full-year adjusted EBITDA guidance due to strong performance and the acquisition of the Alara JV.
Leisure travel demand remained robust, and the company is closely monitoring external risks, such as geopolitical conflicts, but remains confident in its strategic initiatives and cost control measures.
The acquisition of Alara in Las Vegas allows the company to fully control the project, enhancing inventory flexibility and offering notable financial benefits.
The company is undertaking an inventory optimization initiative, identifying properties for disposition to improve portfolio quality and reduce long-term costs.
Full Transcript
Sam
It’s Sam. Good morning and welcome to the Hilton Grand Vacations first quarter 2026 earnings conference call. At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions following the presentation. If you would like to ask a question, please press Star one on your touchtone phone to enter the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing Star 2. If you should require operator assistance, please press 0. If using a speakerphone, please lift your handset to allow the signal to reach our equipment. Please limit yourself to one question and one follow up to allow the opportunity for everyone to ask questions. You may reenter the queue to ask additional questions. I would now like to turn the call over to Mark Melnick. Thank you, Mark Melnick, Senior Vice President of Investor Relations. Please go ahead, sir.
Mark Melnick (Senior Vice President of Investor Relations)
Thank you, Operator, and welcome to the Hilton Grand Vacations first quarter 2026 earnings call. Our discussions this morning will include forward looking statements. Actual results could differ materially from those indicated by these forward looking statements. The statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our SEC filings. Our reported results for all periods reflect accounting rules under ASC606, which we adopted in 2018. Under ASC606, we’re required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses until the period when construction is completed. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals. Please note that in our prepared remarks today, we’ll only be referring to metrics that remove the impact of net deferrals which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we’ve uploaded slides to our Investor Relations site showing these metrics which we’ll be referring to on today’s call. I’d urge you to view these slides on our website and investors on slide 2 of these materials, you can see the deferral adjusted metrics that we’ll be referring to on today’s call. Reported results for the quarter do not reflect $25 million of net contract sales deferrals under ASC 606, which had the effect of reducing reported GAAP revenue and were related to pre sales of our Kohaku project, partially offset by a recognition associated with our Kyoto project, which opened in March. Also on slide two, we deferred a net $7 million of direct expenses associated with these revenues. Adjusting for both these items would increase the adjusted EBITDA to shareholders reported in our press release by a net of $18 million to $267 million. With that, let me turn the call over to our CEO Mark Wang.
Mark Wang (CEO)
Mark: Good morning everyone and welcome to our first quarter earnings call. We’re off to a strong start this year and overall we’re pleased with how the quarter came together. The results we delivered in Q1 reflect disciplined execution by our teams across the business and a consistent focus on our strategic initiatives. Contract sales met the expectations we laid out on our prior call and adjusted EBITDA exceeded expectations, growing 8% versus the prior year with 130 basis points of margin expense expansion. In addition, we drove great new buyer growth along with cost efficiencies that supported healthy EBITDA flow through. These results reinforce our confidence that we’re on track to achieve our long term algorithm of consistent growth in sales and EBITDA and strong free cash generation, along with a commitment to returning capital to our shareholders. We repurchased an additional $150 million of stock during the quarter, bringing the total to nearly 2.3 billion we’ve returned since becoming a standalone public company. Next taking a look at our consumer environment. Leisure travel demand among our members remained healthy, arrivals were strong in the first quarter, and we see trends improving through the fall and March was our strongest sales month of the quarter, with momentum carrying into April. At the same time, we’re carefully monitoring the impact of the conflict in the Middle east and the potential broader effects on the leisure travel landscape. But our business model carries several advantages that should help us to navigate the environment. Our members have prepaid their vacations for the year, making them less sensitive to travel costs, and new buyers are attracted by the value proposition of our marketing package offerings. In addition, the efficiency initiatives that we already have underway, combined with the variable nature of our cost structure leaves us well positioned. So while we keep a close eye on the external risks, our focus remains on executing our strategic initiatives and controlling what we can control. Given the results of the first quarter and our purchase of the remainder of the Alara JV to take full control of the project, which I’ll cover shortly, I’m pleased to report that we’re raising our adjusted EBITDA guidance for the full year. More broadly, the quarter and guidance reinforced the progress we’re making as an integrated business and the consistency of our execution against our strategic priorities which are operational excellence, attracting new customers, product evolution and innovation, and enhancing member lifetime value. Operational excellence drove strong execution in the quarter while tours outpaced VPG and we saw a higher mix of new owners. Our teams effectively manage costs to drive improved EBITDA contribution and we remain confident in our guidance to grow EBITDA for the full year. We also did a great job of adding new buyers. The investments we made in our marketing pipeline last year supported high single digit new buyer tour growth in Q1, maintaining the strong pace that we saw in the fourth quarter. In addition, solid conversion of those tours led to the highest level of first quarter new buyer transactions since 2023, up 8% versus the prior year, which is key to driving improved efficiency as well as growing our embedded value. Those new buyers helped to support 29% growth in our HCV Max member base over the prior year to 277,000 members. On the product front, I’m happy to announce that we reached an agreement to purchase the development rights of Alara, our flagship resort in Las Vegas, allowing us to take full control of the project by moving it from a fee for service JV to an owned property as part of the natural progression with our fee for service projects. It provides us several significant benefits including receiving the full economics of the real estate business as well as assuming the existing and future financing business associated with the project along with providing additional inventory flexibility. Alara has always been very popular with new buyers, but this transaction also unlocks our ability to better sell the project across our entire sales distribution network outside of Las Vegas, enabling owners to upgrade out of the project while simultaneously allowing any of our members to upgrade into Alara. We’re also making great progress with our inventory optimization initiative. We’ve identified a set of eight properties that no longer fit with our portfolio and we recently entered into an agreement with a third party for the disposition of our interest in these assets at high level. Dispositions allow us to proactively manage aging and non core inventory, reduce long term carry risk and ensure capital is continually recycled into higher performing opportunities. This discipline helps us to balance between growth, flexibility and profitability. From a strategic standpoint, dispositions support our broader goals by improving the mix and quality of inventory over time, creating capacity to reinvest into priority markets, products and experiences, and reinforcing a proactive rather than reactive approach to inventory management. Taken together with the financial benefits Dan will outline, these dispositions help us to optimize the portfolio and position the business for sustained growth. Turning to the Embedded value, we’re continuing to expand our industry leading HCV MAX and HCV Ultimate Access offerings to enhance our value proposition and drive member engagement. We recently introduced additional enhancements to Hilton honorpoints conversions within the MAX program to complement the suite of benefits that have proven so popular with our MAX members. Lastly, our Ultimate Access teams continue to to expand our Best in Class experiential platform. In just the past few months alone, our members have enjoyed private concerts with number one Billboard artist Ella Langley, the legendary Beach Boys and Grammy Award winner Kelly Clarkson. Our partnership with the LPGA provided members in person access to our Tournament of Champions to see this year’s winner Nellie Corder, which was televised on NBC and the Golf Channel. HGV will also continue as an official event partner of Formula One’s Heineken Las Vegas Grand Prix where members have access to exclusive trackside HCV clubhouse suites and entertainment at Alara. So HEV Ultimate Access is already the biggest and most comprehensive program of its kind and this year will be even bigger and better. We’ve got new events planned for new members including FIFA, World cup events, nascar, an expanded Summer Concert Series lineup, and we’ll also be announcing additional exciting programming to further enhance member experiences throughout the year. So to sum it up, I’m happy with the performance at the start of the year. Owners and new buyers continue to respond well to our value proposition. We delivered on our target that we laid out, which allowed us to increase our full year EBITDA guidance. We’re continuing to make incremental progress in our evolution as an integrated entity, and we’re focused on consistent execution against our strategic priorities as we move through the rest of the year. None of this would be possible without the dedication of our team members and leadership who have built such a strong, innovative and people first culture. With that, I’ll turn it to Dan for more details on the numbers.
Dan
Dan thank you Mark and good morning everyone. We had great results in the quarter, achieving our contract sales forecast while also exceeding our expectations for EBITDA growth through cost controls that drove margin expansion. As Mark mentioned, this strong performance along with the momentum that we’re carrying into the second quarter gave us the confidence to raise our full year. Adjusted EBITDA guidance Turning to our results for the quarter, total revenue before cost reimbursements in the quarter grew 2% to $1.2 billion. Adjusted EBITDA to shareholders grew 8% to $267 million with margins excluding reimbursements of 23%, up 130 basis points over the prior year within our real estate business, contract sales of 719 million were down slightly, performing in line with the expectations we laid out on our prior call. The decline was the result of tough comparisons for our blue green business as it normalized against a strong HCV Max launch period last year. New buyer contract sales were over 26% of the total for the quarter, an increase of approximately 160 basis points from the prior year as we benefited from continued strength in new buyer tours along with solid execution from our sales teams that drove new buyer transactions to their best first quarter performance since 2023. Stores grew 8.5% during the quarter to more than 189,000 with growth coming from both our new buyer and owner channels. Conversion of the package pipeline we built over the past year fueled new buyer growth while the strong value proposition of HEV Max continues to drive owner tour demand. BPG was nearly $3,800 for the quarter, declining 8% and in line with the expectations of a high single digit decline we discussed last quarter. As we indicated, the decline was driven by the normalization of owner close rates at bluegreen due to the lapping of the record HEV Max launch period comparisons along with higher mix of new buyer sales in the quarter which carry lower VPGs. Cost of product in the period was 10% which benefited from higher than expected sales mix of lower cost inventory during the quarter. Real estate sales and marketing expense for the quarter was 352 million or 49% of contract sales, 260 basis points lower than the prior year. The strong margin performance was primarily the result of our efficiency initiatives which the team did a great job executing against real estate. Profit for the quarter was 152 million with margins of 28% up 350 basis points versus the prior year. Overall, I’m very pleased with our performance this quarter as our focus on efficiency was able to more than offset the margin dilutive effects of lower VPG and higher new buyer mix in our financing business. First quarter revenue was 138 million and profit was $87 million. Excluding the amortization items associated with our acquired receivables portfolio financing margins were 65%, up 510 basis points from the prior year. Looking at our portfolio metrics, our weighted average interest rate for originated loans was 14.5%. Combined gross receivables for the quarter were 4.4 billion. Our total allowance for bad debt was 1.3 billion. On that 4.4 billion receivable balance or 29% of the portfolio the portfolio remains in great shape Overall. Our annualized default rate for our consolidated portfolios was 10.1% for the quarter, reflecting a slight improvement against the first quarter of the prior year and as …
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