ORLANDO, FL (August 3, 2017)
ilton Grand Vacations Inc. (NYSE:HGV) (“HGV” or the “Company”) has reported its second-quarter and six-months 2017 results. Highlights include:
- EPS was $0.51 for the second quarter, a 6.3 percent increase from the same period in 2016.
- Net income for the second quarter was $51 million, an 8.5 percent increase from the same period in 2016.
- Adjusted EBITDA for the second quarter increased 2.9 percent from the same period in 2016 to $106 million.
- Contract sales for the second quarter increased 11.0 percent from the same period in 2016.
- Net Owner Growth (NOG) for the 12 months ending June 30, 2017, was 7.2 percent.
- Subsequent to the second quarter, the Company entered into a joint venture agreement with affiliates of Blackstone Real Estate Partners VIII L.P. to purchase Elara, a Hilton Grand Vacations Club, located in Las Vegas.
For the three months ended June 30, 2017, EPS was $0.51 compared to $0.48 for the three months ended June 30, 2016. Net income was $51 million for the three months ended June 30, 2017, compared to $47 million for the three months ended June 30, 2016, and adjusted EBITDA was $106 million for the three months ended June 30, 2017, compared to $103 million for the three months ended June 30, 2016.
“During the second quarter, we reported increased contract sales and strong net owner growth (NOG), while executing against our five strategic priorities,” says Mark Wang, president and CEO of Hilton Grand Vacations. “More recently, we announced a joint venture with Blackstone to acquire Elara, a Hilton Grand Vacations Club, located in Las Vegas. This opportunistic business venture allows us to remain capital efficient, while honoring our commitment toward enhancing member experiences. Collectively, we believe these achievements position us to continue unlocking new profit streams and maximizing shareholder value.”
Segment Highlights – Second Quarter
Real Estate Sales and Financing
Real estate sales and financing segment revenue was $323 million in the second quarter of 2017, an increase of 17.0 percent compared to the same period in 2016. Real estate and financing segment adjusted EBITDA was $99 million in the second quarter of 2017, compared to $84 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 30.7 percent in the second quarter of 2017 compared to 30.4 percent for the same period in 2016.
Contract sales were $323 million in the second quarter of 2017, an increase of 11.0 percent compared to the same period in 2016. Fee-for-service contract sales represented 51.4 percent of total contract sales in the second quarter of 2017, compared to 58.8 percent in the same period in 2016. Tours increased 9.5 percent to 87,114 in the second quarter compared to the same period in 2016. VPG for the second quarter of 2017 was $3,503, an increase of 1.6 percent compared to the same period in 2016.
Financing revenues were $36 million in the second quarter of 2017, an increase of 5.9 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 745 for the six months ended June 30, 2017, compared to 742 for the six months ended June 30, 2016. For the six months ended June 30, 2017, 66.0 percent of HGV’s sales were to customers who financed part of their purchase.
As of June 30, 2017, gross timeshare financing receivables were $1.2 billion with a weighted average interest rate of 12.0 percent and a weighted average remaining term of 7.6 years. As of June 30, 2017, 2.1 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 $92 million in the second quarter of 2017, an increase of 3.4 percent compared to the same period in 2016. Resort operations and club management segment adjusted EBITDA was $52 million in the second quarter of 2017, compared to $51 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 56.5 percent in the second quarter of 2017, compared to 57.3 percent for the same period in 2016.
At June 30, 2017, the estimated contract sales value of HGV’s pipeline of available inventory was approximately $6.1 billion at current pricing, or approximately 5.1 years of sales at the current trailing 12-month sales pace. At June 30, 2017, the estimated contract sales value of HGV’s pipeline of available owned inventory was approximately $3.1 billion or approximately 2.6 years of sales. At June 30, 2017, the estimated contract sales value of HGV’s pipeline of available fee-for-service inventory was approximately $3.0 billion or approximately 2.5 years of sales.
Of the current pipeline of available inventory, 39.0 percent is considered just-in-time and 49.0 percent is considered fee-for-service. As such, the Company considers 88.0 percent of the pipeline of available inventory as of June 30, 2017, to be from capital-efficient sources.
Balance Sheet and Liquidity
As of June 30, 2017, HGV had $486 million of corporate debt with a weighted average interest rate of 5.1 percent and $645 million of non-recourse debt outstanding with a weighted average interest rate of 2.4 percent.
Total cash was $253 million as of June 30, 2017, including $62 million of restricted cash.
Free cash flow, which the Company defines as cash from operating activities, less non-inventory capital spending, was $156 million for the six months ending June 30, 2017, compared to $74 million for the six months ending June 30, 2016.
- Net income is projected to be between $180 million and $198 million.
- EPS is projected to be between $1.80 and $1.98.
- Adjusted EBITDA is projected to be between $380 million and $410 million.
- Full-year contract sales are expected to increase between 6.5 percent and 8.5 percent.
- Fee-for-service contract sales are expected to be between 52 percent and 57 percent of full-year contract sales.
- Free cash flow is projected to be between $180 million and $200 million.
Transactions and Other Events
On May 25, 2017, The Blackstone Group L.P. filed a Registration Statement on Form S-1 and registered 15,008,689 shares of HGV’s common stock held by them. On June 14, 2017, Blackstone entered into an underwriting agreement with J.P. Morgan Securities LLC pursuant to which J.P. Morgan Securities LLC agreed to purchase from Blackstone 9,650,000 shares of HGV’s common stock at a price of $35.40 per share. The sale was completed on June 20, 2017, and HGV did not receive any proceeds from the sale. As of June 30, 2017, Blackstone holds approximately 5.4 percent of the outstanding shares of HGV’s common stock.
Subsequent to the end of the second quarter, HGV entered into a joint venture agreement with affiliates of Blackstone Real Estate Partners VIII L.P. to purchase Elara, a Hilton Grand Vacations Club. Elara, located in Las Vegas, is one of the world’s largest timeshare resorts. HGV invested approximately $40 million for a 25 percent stake in the joint venture. The joint venture will be accounted for under the equity method of accounting and will be considered an unconsolidated entity as HGV is not the primary beneficiary. HGV will continue to market, sell and manage the resort under existing fee-for-service agreements. The Elara joint venture is expected to contribute approximately $5 million of adjusted EBITDA to HGV in the second half of 2017.
Hilton Grand Vacations will host a conference call on Aug. 3, 2017, at 11 a.m. (EDT) to discuss second-quarter and six-months ended 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 1-719-785-1747 internationally. Please use conference ID# 5231524. 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# 5231524.
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 non-historical 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, 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 Dec. 31, 2016, and our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, filed with the Securities and Exchange Commission (“SEC”), as such disclosures may be updated from time to time in our periodic filings with the SEC. 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 disclosures 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. We undertake 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 brand-name, 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 275,000 Club Members. For more information, visit www.hgv.com and www.hiltongrandvacations.com
PRESS RELEASE SOURCE: Hilton Grand Vacations