Hilton Grand Vacations Q2 2025 Earnings Report

Hilton Grand Vacations EPS Results

• Actual EPS: $0.54
• Consensus EPS: $0.78
• Beat/Miss: Missed by -$0.24
• One Year Ago EPS: $0.62

Hilton Grand Vacations Revenue Results

• Actual Revenue: $1.27 billion
• Expected Revenue: $1.38 billion
• Beat/Miss: Missed by -$111.57 million
• YoY Revenue Growth: +2.50%

Hilton Grand Vacations Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 11:00AM ET

Hilton Grand Vacations (NYSE:HGV), a timeshare company, develops, markets, sells, manages, and operates the resorts, plans and ancillary reservation services under the Hilton Grand Vacations brand. It operates through Real Estate Sales and Financing, and Resort Operations and Club Management segments. Real Estate Sales and Financing segment market and sells the VOIs, and source VOIs through fee-for-service agreements with third-party developers; and provides consumer financing and services loans. Resort Operations and Club Management segment manages and operates the clubs which offers exchange, leisure travel, and reservation services, as well as engages in the rental of inventory made available due to ownership exchanges through its club programs, and provides ancillary services including food and beverage, retail and spa at timeshare properties. Hilton Grand Vacations Inc. was founded in 1992 and is headquartered in Orlando, Florida.

Hilton Grand Vacations Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Contract sales rose 10% to $834 million, and adjusted EBITDA reached $278 million with 23% margins, driven by strong owner and real estate performance.
• Positive Sentiment: Volume per guest grew 11% to $3,690, more than offsetting a slight drop in tour flow through improved guest pre-screening and tour prioritization.
• Positive Sentiment: MAX membership climbed to over 233,000 (including 21,000 former Bluegreen members) within a total owner base of 725,000, reflecting consistent monthly growth and upgrade momentum.
• Positive Sentiment: The company closed the first U.S. operator timeshare securitization in Japan—¥9.5 billion issued at a favorable cost—opening a new low-cost funding avenue.
• Negative Sentiment: Las Vegas rental performance softened as weaker international and convention travel spurred promotional competition, pressuring RevPAR in that market.

Presentation

[Operator]

Good morning, and welcome to the Hilton Grand Vacations Second Quarter twenty twenty five Earnings Conference Call. A telephone replay will be available for seven days following the call. The dial in number is (844) 512-2921 and enter PIN number thirteen million seven hundred fifty one thousand and sixty seven. 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 1 on your touch tone phone to enter the queue.

[Operator]

If at any point your question has been answered, you may remove yourself from the queue by pressing 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 then reenter the queue to ask additional questions.

[Operator]

I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir.

[Mark Melnyk, SVP - IR at Hilton Grand Vacations]

Thank you, operator, and welcome to the Hilton Grand Vacations second quarter twenty twenty five earnings call. As a reminder, our discussion this morning will include forward looking statements. Actual results could differ materially from those indicated by these forward looking statements. These statements are effective only as of today. We undertake no obligation to publicly update or revise these statements.

[Mark Melnyk, SVP - IR at Hilton Grand Vacations]

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. We'll also be referring to certain non GAAP financial measures. You can find the information and components of such non GAAP numbers as well as reconciliations of non GAAP and GAAP financial measures discussed today in our earnings press release and on our website at investors.hgv.com. Our reported results for all periods reflect accounting rules under ASC six zero six, which we adopted in 2018. Under ASC six zero six, 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.

[Mark Melnyk, SVP - IR at Hilton Grand Vacations]

For ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results will refer only to results excluding the net impact of construction related deferrals and recognitions for all reporting periods. To help you make more meaningful period to period comparisons, you can find details of our current and historical deferrals and recognitions in Table T1 of our earnings release and a complete accounting of our historical deferral and recognition activity can also be found in Excel format on the Financial Reporting section of our Investor Relations website. With that, let me turn the call over to our CEO, Mark Wang. Mark?

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Good morning, everyone, and welcome to our second quarter earnings call. We produced solid results for the quarter led by the continued strength of our HEV MAX offering, the outperformance of our owner business and progress on the initiatives we laid out on our prior call. Through those initiatives, we expanded our lead flow and grew the top of our sales funnel, improved our execution, which drove sustained transaction growth and rolled out additional features to further enhance the value proposition of Max membership. Thanks to the efforts of our teams, we produced double digit contracts sales growth driven by strong VPG expansion and tour flow trends that improved compared to the first quarter. We built momentum as we move through the quarter culminating in a strong June performance that carried into July.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And our demand indicators remain encouraging with on the book arrivals outpacing prior year along with strong package pipeline. While the policy landscape remains volatile, the consumer environment has been relatively stable. We're continuing to monitor those trends closely and we remain focused on executing against our initiatives to help insulate us from macro noise. Looking ahead, our performance in the second quarter gives us confidence in our business and I'm pleased to reiterate our guidance for the year. While I'm pleased with our progress thus far on our initiatives and integration work, we still see significant value creation opportunities ahead of us.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Looking at the results for the quarter, reported contract sales were up 10% to $834,000,000 and adjusted EBITDA was $278,000,000 with margins excluding reimbursements of 23%. As I mentioned, we built sales momentum as we move through the quarter with PPG, close rates and contract sales improving each month from April to June. Similar to last quarter, tours were slightly lower in Q2 as we continue to ramp our efficiency initiatives that prioritize our highest propensity tours. However, that decline was more than offset by the continued VPG strength, which is a favorable trade off in our view. Volume per guest was up 11% to $3,690 led by our owner business with our MAX offering and sales of Kahaku contributing to another double digit VPG quarter.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Looking at our demand indicators, occupancy in the quarter was equal to the prior year at 83%. Consolidated arrivals in the third quarter and back half are even with the prior year with particular strength in our marketing and rental arrivals indicating favorable travel demand. In addition, our efforts to grow the top of the funnel through increased package sales and activations have been successful. We added over 20,000 packages to our pipeline more than doubling the additions we had in the first quarter. And we also made great progress on our package activations to support our TorFlo pipeline.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Moving on to our other business, our member count was nearly 725,000 at the end of the quarter and we ended with over 233,000 H E B Max members, including nearly 21,000 legacy Bluegreen members who have joined the program. We've continued to see very consistent monthly growth in our Max membership driven by new member growth and owner upgrades. And we expect to retain this momentum as we introduce additional benefits that further enhance the value proposition of Max. Net owner growth for the quarter was 0.6%. This reflects our continued success in adding new members to MAX, but it also reflects the netting effect of increased activity from our inventory recapture program.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

We've spoken a number of times about the efficiency of our recapture model, which carries several key advantages. First, it provides a source of low cost inventory and reduces the need to spend on additional inventory in the future, supporting lower cost of product and future cash flow growth. And second, we embed additional value into our membership base, adding engaged active members with a high lifetime value while replacing members who are not actively vacationing at the same levels they used to. With the acquisition of Diamond and Bluegreen, our member base has grown substantially and our average ownership tenure across the system has also increased. Having a more mature system provides us additional opportunities for strategic inventory recapture as we continue to refine our inventory sourcing strategy.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

While we expect the effect of this recapture activity will continue to have an impact on NOG, it ultimately supports the embedded value of our owner base while also improving our free cash flow over the long term. Our MAX members are the most active, have the highest satisfaction rates and have the highest embedded value and will continue to focus on enhancing the value of that membership and driving the growth of our MAX members. Moving on, demand in our rental business has remained stable with higher RevPAR supporting results for the quarter. Solid rental performance across the broader portfolio was offset by softness in Las Vegas, where lower market wide international and convention business is creating increased competitive promotional activity. Turning to financing.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

As you likely saw a few weeks back, our team successfully closed on a JPY 9,500,000,000.0 timeshare securitization in Japan, the first of its kind for a U. S. Operator with a very favorable cost of capital. This deal not only supports our financing business optimization and capital return goals this year, but it opens up an entirely new market to provide a source of low cost funding to support our business and capital allocation goals as we grow this new platform. It's a testament to our decades of effort to develop our market leading position in Japan through our commitment of providing quality and service excellence to our 75,000 Japanese members.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And is a significant milestone for HEB. So I'm very proud of the team. From a cash flow perspective, our financing optimization helped us generate over $135,000,000 in adjusted free cash flow for the quarter. We expect to complete spending on our Kahaku project in 2026 marking the end of a major inventory investment cycle that we announced back in 2018. As we return to a normalized level of annual inventory spending and realize the benefits of the financing optimization program, we're transitioning toward a sustainable model of strong cash flow generation.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And we remain committed to returning excess cash to our shareholders. We returned $300,000,000 to our shareholders this year, including $150,000,000 for the quarter and we're confident in our goal of returning $600,000,000 this year. Turning next to an update on our initiatives and integration progress. Our initiatives helped to support our solid operational performance during the quarter. First, regarding the top of the funnel, as I mentioned earlier, we had strengthened our package sales during the quarter and the efforts that the teams put forward to optimize our package activations led to a considerable increase in our activation pace, which should support tours in the second half of the year.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Second on the execution side, we implemented our newest pre screening models in several more packaged sales channels and sales sites, which has allowed us to better prioritize our tour flow and support improved VPGs. Our third initiative was around product enhancements. We continue to expand our experience platform and recently made Bluegreen successful hosted trips program available to all of our members. This popular program has had high guest satisfaction scores and a high level of repeat business, and we think it will be a great addition to the services we offer our members and guests. In addition, earlier this month, we also rolled out cross booking capabilities to our HUB MAX members, giving them the ability to easily use their points across the entire system of resorts.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And we have several other enhancements slated for rollout later this year, which will continue to drive engagement and enhance the value proposition of MAX. On the project front, I'm also excited to announce that we held our topping off ceremony for our Kahaku property last week and we remain on track to begin welcoming guests in 2026. Turning to our Bluegreen integration, we remain on track with our goals. We've nearly achieved our stated cost saving target and remain confident in our ability to reach our $100,000,000 goal this year. We've rolled out our Envision sales technology to the majority of our Bluegreen sales centers and we expect to be completed by the end of this quarter.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And we're also in the process of integrating Ultimate Access into the Bluegreen resort network. In a few weeks, we'll begin our Bluegreen property rebrand program, which we expect to have completed over the next three years. On the partnership front, we've completed the rebranding of our Bass Pro locations and we continue to make great progress with our partners toward implementing digital marketing programs with them to further expand our lead flow. So to sum it up, I'm happy with our performance this quarter. The value of H E V Max has continued to resonate with our owners and guests, and we've built momentum over the course of the quarter as we executed on our initiatives.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

We're generating and returning significant cash flow with our financing business optimization and opening up the Japan securitization market should provide us with a new avenue of cost efficient adjusted free cash flow generation in the future. As we cross over the halfway point of the year, our focus remains on executing our initiatives as well as continuing our integration work. We've made steady progress and we still have significant opportunity ahead. So with that, I'll turn it over to Dan for more details on the numbers. Dan?

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Thank you, Mark, and good morning, everyone. Before we start, note that our reported results for the quarter included $82,000,000 of sales deferrals, which reduced reported GAAP revenue and were related to presales of our newest projects, Kahaku and Kyoto. We also recorded $37,000,000 of associated direct expense deferrals. Adjusting for these two items would increase the adjusted EBITDA to shareholders reported in our press release by a net $45,000,000 to $278,000,000 In my prepared remarks, I'll only refer to metrics excluding net deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period. As Mark mentioned, we had another solid quarter driven by gains in our VPG, which were aided by our initiatives and continued success of HGV Max.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

And it translated into 10% contract sales growth, an improvement in the real estate margins. Our financing business optimization has also continued to be a meaningful positive driver to cash flow. We finished the quarter with 73% of our current receivables securitized, remaining within our target range of 70% to 80% on a steady state basis. In addition, as part of our optimization, I am very pleased to announce that we executed on our first securitization of Japanese receivables with JPY9.5 billion issuance at an attractive 1.41 borrowing rate. This is a significant milestone for us and represents the first and only timeshare securitization in the Japanese market.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

And it builds off our decades of leadership in that market. And while this initial deal was relatively small, over time, we plan to scale our presence in that market to provide us with another option to generate additional adjusted free cash flow at an attractive cost of capital. You may have also noticed we filed a 15 gs earlier this week and expect to be in the market with an ABS deal of approximately $400,000,000 shortly as we continue to focus on efficiently monetizing our financing business. Turning to our results for the quarter. Total revenue excluding cost reimbursement in the quarter grew 9% to $1,200,000,000 and adjusted EBITDA to shareholders was $278,000,000 with margins excluding reimbursements of 23%.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

In addition, since the close of the Bluegreen acquisition, we've achieved $92,000,000 of run rate cost synergies, nearing our goal of $100,000,000 of run rate synergy savings. Within our real estate business, contract sales were $834,000,000 up 10% versus the prior year. New buyers represented 28% of our contract sales during the quarter, improving sequentially from the first quarter by 300 basis points. Stores were down about 50 basis points year over year to 225,000, which again reflected the tour efficiency initiatives that Mark mentioned earlier, along with ongoing sales center closures related to the hurricane this past fall. As Mark mentioned, during the quarter, we continued rolling out our prescreening and efficiency programs.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

This allowed us to tour higher propensity guests through our sales centers and along with continued success of ACV MAX helped to drive another quarter of strong VPGs, which were up 11% year over year to nearly $3,700 We still anticipate high single digit contract sales growth for the year. However, given the year to date trends, we now expect flat tour growth and high single digit VPG growth to be the driver that gets us to that sales target. Cost of product was 11% of our net VOI sales in the quarter, down nearly 100 basis points from the prior year. Real estate sales and marketing expense was $412,000,000 or 49% of contract sales, flat to the prior year. Real estate profit was $162,000,000 in the quarter with margins of 26%, up 300 basis points over the prior year.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

In our financing business, second quarter revenue was $126,000,000 and segment profit was $72,000,000 with margins of 57%. Excluding the amortization items associated with our acquired receivable portfolios, financing margins were 61%. Looking at our portfolio metrics, our originated weighted average interest rate was 15%. Combined gross receivables for the quarter were $4,000,000,000 or $3,000,000,000 net of allowance. Our total allowance for bad debt was $1,100,000,000 on that $4,000,000,000 receivable balance or 27 of the portfolio.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Our annualized default rate for the consolidated portfolio stood at 10.2% for the quarter, equal with the first quarter's levels. Our originated portfolio delinquencies continue to outperform a much more seasoned acquired portfolio, which is a testament to the strength of the HED brand, increased value proposition of HED MAX and the continued rollout of the best in class sales and underwriting practice. As a result, our second quarter provision was 14% of owned contract sales, down from 15% in the same quarter of the prior year. Delinquency rates for both the HEV and legacy DRI portfolios are running at or below last year. And while we expect the provision rate to build throughout the year given the current operating environment and seasonal trends, we still expect all in provision in the mid teens for the full year consistent with our previous guidance.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

We also monitor our thirty one to sixty day delinquency trends very closely as an early indicator and have not seen any signs of increased stress within our portfolio in recent weeks, but we continue to monitor the situation closely. In our resort and club business, our consolidated member count was nearly 725,000, and over the trailing twelve months, the MAX membership has grown by nearly 65,000 members. Revenue grew 7% to $183,000,000 for the quarter owing to our increased member count and solid member activity during the quarter. And segment profit was $127,000,000 with margins of 69%. Rental and ancillary revenues were flat to the prior year at $195,000,000 in the quarter with segment loss of $8,000,000 Revenue growth was driven by higher ADR with available room nights roughly the same as the prior year.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

On the whole, we saw improvements in both rate and occupancy across the portfolio, although Mark mentioned softer trends in the Las Vegas market. On the expense side, developer maintenance fees continue to be the largest driver of our rental and ancillary margins. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $7,000,000 license fees were $52,000,000 and EBITDA attributable to non controlling interest was $5,000,000 Corporate G and A was $42,000,000 or 3.4% of pre reimbursement revenue, which was 50 basis points better than last year's expense rate. Our adjusted free cash flow in the quarter was $135,000,000 which included inventory spending of $77,000,000 For the full year, we still anticipate that our conversion rate of adjusted EBITDA into adjusted free cash flow will be in the range of 65% to 70%. During the quarter, the company repurchased 4,100,000.0 shares of common stock for $150,000,000 From July 1 through July 24, we repurchased an additional 626,000 shares for $29,000,000 We remain committed to capital returns as the primary use of our free cash flow and believe our shares continue to represent a compelling value.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

We currently have $98,000,000 of remaining availability under our share repurchase plan. In addition, as you saw in our press release, we just obtained a new authorization from the Board of Directors for an additional $600,000,000 of share repurchases for a total of roughly $700,000,000 between the two programs. Turning to our outlook. We are maintaining our twenty twenty five adjusted EBITDA guidance to be in the range of $1,125,000,000 to $1,165,000,000 which assumes that the environment remains consistent with what we see today. As I mentioned earlier, we expect to convert 65% to 70% of that EBITDA into cash flow.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Using our second quarter ending share count of just under 90,000,000 shares, this implies we'll generate approximately $8 to $9 of adjusted free cash flow per share for the year. And we'll continue to return the majority of that cash flow to our shareholders. We remain committed to returning an average of $150,000,000 per quarter to shareholders this year through share repurchases or $600,000,000 in total, representing the vast majority of our adjusted free cash flow. Moving to our liquidity. As of June 30, our liquidity position consisted of $269,000,000 of unrestricted cash and $794,000,000 of availability under our revolving credit facility.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Our debt balance at quarter end was comprised of corporate debt of $4,600,000,000 and a non recourse debt balance of approximately 2,500,000,000.0 At quarter end, we had $120,000,000 remaining of remaining capacity on our warehouse facility. We also had nine thirty seven million dollars of notes that were current on payments but unsecured. Of that figure, approximately $429,000,000 could be monetized through either warehouse borrowings or securitizations, while we anticipate another $260,000,000 will become available following certain customary milestones such as first payment, deeding and recording. Despite market volatility, ABS markets remained open and functioning. This fact, coupled with our $850,000,000 warehouse, give us confidence we can execute on our previously discussed finance optimization strategy.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Turning to our credit metrics at the end of Q2 and inclusive of all anticipated cost synergies, the company's total net leverage on a TTM basis was 3.9 times. We will now turn the call over to the operator and look forward to your questions. Operator?

[Operator]

Thank you. We will now be conducting a question and answer session. Your first question comes from Ben Shakin with Mizuho Securities. Please go ahead.

[Ben Chaiken, Equity Analyst at Mizuho Financial Group]

Hey, good morning. Thanks for taking my questions. One thing that kind of stuck out as we're going through the release is the higher mix of fee for service in the quarter relative to 1Q and relative to what we were expecting in the especially in the context of your overall inventory on the balance sheet being above 90% owned. Is there any way to approximate I guess, a, did this have a drag on EBITDA? Would think that it would.

[Ben Chaiken, Equity Analyst at Mizuho Financial Group]

And then is there any way to approximate the impact of converting contract sales to fee for service versus traditional owned, if that question makes sense? If not, I can kind of rephrase it.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Hey, Ben. It's Dan. So to your point, yeah, fee for service mix was a little bit higher in q two than it was in q one. I think it was about 200 basis points higher, 17% versus 15%. For the full year, you know, there's a little ebb and flow here.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Right? The fee for service work is associated with our deeded product. So where demand is is where we'll, you know, obviously entertain the customer's point of view on what they they wanna buy. So it it really depends on who's coming through the door. And then there's some motivation on our side with different fee structures that we have in place to maximize what we can earn with our fee partners.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

I think to answer your question for the full year, if you think about that mix, I I think we're gonna end up right in the middle of q one and q two, right around 16%. But it's gonna be in that range, 15 to 17%. Shouldn't be a significant amount of movement. Now to your point, when you think about fee for service, we clearly only retain a commission for those sales. While the margin is good, from an absolute dollar perspective, the flow through the flow through is is less.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Yeah. Ben, I you know, I'd just say that, the the teams in in South Carolina, Myrtle Beach, Hilton Head, they really had a, they had a great quarter. They've been having a great year. So pretty much, you know, outperforming, most of the regions out there. So, you know, that's part of it.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

As Dan alluded to, look, if we've had people in Myrtle Beach and Hilton Head that are, you know, interested in the product, which we have extremely good product with our third party partner there, we're gonna continue, we're gonna continue, you know, enter entering them into our system there.

[Ben Chaiken, Equity Analyst at Mizuho Financial Group]

Got it. And then just as a quick follow-up, directionally, should it be go should your fee for service go to, you know, 10% or under 10%? I'm kind of just using what's implied on the on the press release today regarding your inventory balance. Or is there something else that would change that long term, I mean, next year, two years from now, etcetera?

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Yes. No, that makes sense. You should see it start to ratchet down. In fact, if we think about our pipeline, the only project that's fee for service in our pipeline is a subsequent project that we have in Myrtle Beach with our partners there, but that's a few years away.

[Ben Chaiken, Equity Analyst at Mizuho Financial Group]

Okay. Got it. And then just would love to hear more on what you're on the demand side from Bluegreen upgrade sales to MAX. Are these kind of like are these inbound sales? Are you reaching out to customers to upgrade?

[Ben Chaiken, Equity Analyst at Mizuho Financial Group]

And then any help with cadence as we move through the year, either on tours, VPG, contract sales, just whatever you want or whatever you can provide?

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Yeah. So, Max is, Max is really, taking hold. And and when you when you look at, our upgrade curve, for, you know, our members, it's up 20% since the launch of Max, and it's it's it's been strong. Even if you go back to our legacy HGB members, DRI members still four years out, we continue to see, really good activity there, and and the the program is is really resonated on a value proposition and and just a bigger network. As it relates to Bluegreen, great response from Bluegreen.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

So we expect that that's gonna continue on. And and, you know, I think we've we've got about 20 some thousand Bluegreen members who've joined Max since the November when we launched it. So, you know, again, you know, it's great to see what Max has done. The team's did a really good job designing this new program, you know, with people upgrading quicker and with greater frequency. So, you know, it's a it's a a testament to what what the teams have done, and it's a testament to our brand and our ability to, you know, take our brand and leverage that brand across the two acquisitions.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

So it's that's that's going well. And and, you know, as far as, you know, the rest of the year, you know, I think what we're seeing is a consumer environment that remains, I'd say, very stable. Right? And and so our expectations are, you know, very consistent, for the rest of the year is what we've seen at the beginning of the year. And then July, you know, as we went into July, we saw the same, kind of performance we saw as we exited q two, which, you know, that that quarter ramped up through the quarter with June being the best month.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

So pleased with pleased with what the teams are doing and the demand creation that's out there. And I I'd say a much more stable environment than we've we've seen a while. And and look, you know, obviously, still, you know, we we got a a policy environment that remains fluid, but, you know, we we feel pretty good based on just looking at our forward indicators that people continue to wanna travel.

[Ben Chaiken, Equity Analyst at Mizuho Financial Group]

Thank you very much.

[Operator]

Next question, Brent Montour with Barclays. Please go ahead.

[Brandt Montour, Director - Equity Research at Barclays]

Good morning, everybody. Thanks for taking my question. Mark, I want to dig in a little bit deeper on the new owner side. I think you guys said you leaned on where you had really good owner sales. And I know you're focusing on the owner side for Bluegreen.

[Brandt Montour, Director - Equity Research at Barclays]

But I think what we've kind of heard from peers and we're more worried about in this environment is new owner sales. And so if you could just talk about how the new owner sales effort has evolved throughout the year, especially on Diamond, where I know there was a big effort by you guys to push new owner sales in those sales centers last year.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Yes. So what I'd say, Brad, around new owners is, I think if if you recall back in '24, you know, we saw we saw some degradation, especially, you know, if you look at, you know, let's just say, six cohorts, the bottom cohort of that that group. And and but I I can tell you across the board, we've seen stabilization in all of our our cohorts. So so pleased with, you know, what's happening there, and we continue to build momentum. And, in we we talked about, in our prepared remarks, our our pipeline our new buyer pipeline was up 10%.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

We sold 200,000 packages in the quarter. And we also saw great progress around activation. So, the momentum really is is looking good around new buyers. And and so when you look at it from a transactional mix, you know, we had about 30% new buyers, from a transactional standpoint. But part of that is, you know, that mix, is is we're seeing very high performance on our owners.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And I and I mentioned that in the in the previous, answer that, you know, the upgrade curve has improved 20%. So from a mix perspective, part of the, you know, transactional mix being at 30% versus potentially 35 has just been the outperformance on the owner side. And and so but all in all, I think we're we're making great momentum. The teams did a great job executing. It did put some pressure, on cost, during the quarter.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

When you you think about when you think about the cost. Right? When we oversold, our budget, on package sales, just to remind everybody, it goes those guests typically don't travel until six to eighteen months out, but we take the majority of the expense in the quarter. So, it did put some pressure on on flow through. But, you know, we're not gonna not, we're not gonna we're not gonna not create the demand when it's there.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And I think that's another good indicator out there. When you think about the consumer, that we sold 200,000 packages, in what some may call a bit more uncertain time. But for us, we're seeing a lot of activity and the teams continue to do a great job. We've rebranded all our Bass Pro shop stores. We saw 20% increase of package sales there.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Our Hilton partners between Hilton, Bass Pro, and Choice percent of our tour source for new buyers other than what we do at the property level and our local marketing are coming through those three big big partners.

[Brandt Montour, Director - Equity Research at Barclays]

That's great to hear. Thanks for that. And then I I do wanna get your your thoughts on what's going on in Vegas. Obviously, you heard from from some of the strip up, gaming operators. But when you look out when you look at your sort of forward indicators for that market, do you see anything that would suggest this isn't just sort of summer leisure related softness, anything that concerns you maybe into the back end of the year when that market is supposed to be maybe a little bit more on a sounder footing from a seasonal perspective?

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Yes. So look, Visitations are down. Right? And in some of the pressure for for Amaz is just the promotional activity that's coming from, you know, the mainly, casino operators outside. So but, you know, in the interim, the, you know, soft so that that pressure has has put some pressure on our room rates, especially one is considered a seasonally low period to begin with.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Right? But one of the big advantages for us, Brad, is we don't have a a fixed rental night capacity. And what do I mean by that? It we're we can strategically allocate additional room nights to club, to marketing, to help drive additional sales. So we continue to make those adjustments to help insulate us from some of the recent softness in that particular market.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

And as it relates to contract sales in Las Vegas, we saw some softness relative to our other core markets, but the good news is on our VPGs in Vegas remain extremely strong.

[Brandt Montour, Director - Equity Research at Barclays]

Great. Thanks, everybody.

[Operator]

Next question, Patrick Scholes with Truist Securities. Please proceed.

[C. Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Hi. Good morning, Mark and Dan. Thank you. Good morning. Dan, can you talk to the performance of your loan book as the quarter progressed and into July? Thank you.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Yes. No, absolutely. The loan book is in good shape. I mean year over year, we're seeing delinquency rates across the three brands be stable to improve with the exception of Diamond. But I think, I'd say that's just a nominal move.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

I mean, we're talking about five to 10 basis points, nothing material. That's more of a depending on what time of the day you take it. Right? But if you look at year to date movement on delinquencies, in particular, the thirty one to sixty day delinquencies, which are we look to as being leading indicators across the three there. They going into July, they're below twenty twenty four levels.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

So I think we're we find ourselves in a good position.

[C. Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Okay. Good. One more question here on VPGs. Last quarter, you had noted an expectation for mid- to high single digit VPG growth for the remainder of the year. You did about 11% in 2Q.

[C. Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

For the back half of the year, would you still expect to do mid to high single digit growth for VPGs?

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

I think when you think about the back half of the year, there's two distinct stories there, right? When you think about VPGs in q three, we're still we still have not lapped the launch of HDD Max. So we should see strong VPG growth in q three. But when you think about q four, it is lapping the launch of HDD Max to the blue ring owners, which happened, I want to say, was 11/08/2024. So we would envision VPGs to be down in Q4 year over year because of that tough comp primarily.

[C. Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Okay. Understood. Thank you for the clarity by quarter. I'm all set.

[Operator]

Next question, Steven Gremling with Morgan Stanley. Please go

[Stephen Grambling, MD & Senior Equity Research Analyst at Morgan Stanley]

Hey, thank you. Just maybe another follow-up on VPG. I just want to make sure that I heard you correctly. It sounded like, Mark, you had said that you were pretty happy with the VPG performance in the quarter and you take VPG over maybe tour flow. Can you just remind us of what the typical flow through is on a point of VPG versus tour flow?

[Stephen Grambling, MD & Senior Equity Research Analyst at Morgan Stanley]

And then as you look at new owner you know, VPG, I know you touched on this a little bit, but are are you seeing any change in conversion rates for new owners coming through tours? Thanks.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Yeah. So, you know, Steven, first of all, I I'd say owner VPGs remain extremely strong year over year and even when you go back and you compare it to what where we were in '19. On the new buyer side, the new buyer side has has been very stable. We we saw very little movement, you know, between, over the last couple quarters. So it's it's remained very stable.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

So, you know, think, you know, again, the the rebranding efforts that we have going forward, with with Bluegreen, which is, will begin in earnest, in the next couple months here and will take about three years to rebrand the properties. That will be a a benefit for us going forward. I think, you know, the blue green launch of Max to new buyers is is taking place. And so we we have some opportunities there. And and we're still a ways away before we can really capture the opportunity around the, you know, the integration of the of our our product across sales centers as we wait for the technology to be built.

[Mark Wang, CEO & Director at Hilton Grand Vacations]

So so all in all, I'd say owner VPGs are extremely strong. I'd say new buyer VPGs are very stable.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Yeah. And just to tack on to that, Steven, you're probably gonna get more than you asked for here. But when you think about VPGs, the flow through for every dollar, we anticipate and there's a lot of moving pieces, which I'll get into in a minute. But, you know, the flow through should be somewhere in the 50 plus percent range. And on core flow, it's materially less because you have incremental costs.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Right? And that'd be closer to 30%. Now when I say there's a lot of moving parts, I mean, you saw in the second quarter that our real estate margin was up 300 basis points year over year. Where does bad debt go? Where does cost of product go?

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

Etcetera. And some of that is seasonal when it comes to the provision for bad debt. We were sub 14%, 13.7% in the second quarter. Due to seasonality, we and our expectations for the balance of the year, we see that provision increasing closer to in q three north of 16%, just around 17% and then coming back down in a seasonally stronger q four period, closer to 15.5%. On the cost of product front, it really depends on the mix of product you're selling.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

As you saw in q two, we had a favorable mix, and it came in around 11%. Q one was north of 12%. And for the full year, we think it's gonna be a little bit better, than we originally expected for the year, but still in that 12 to 13% range. But I think this also underscores the benefit that we're realizing from the acquisitions. And I know this is a long answer for VPGs, but I think it's worth reiterating.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

When you think about legacy ACV before any of the acquisitions, our cost of product was 25 plus percent. Following the acquisition of Diamond, we originally anticipated cost of product to fall in the low twenties. After working with Diamond Trust for a couple of years, we've lowered those expectations to the high teens. And with the acquisition of Bluegreen, more recaptured inventory at a very favorable cost levels, anticipate have us anticipating cost of product being in that 13 to 16% range, right, in that mid teen range. Now mix is gonna matter from quarter to quarter, but that's how we view it long term.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

But most notably, I think and this is very important that I I think we need to underscore probably more on our side is what does that mean for future development? What does that mean for future inventory spend? As you know, our inventory spend this year is gonna be roughly 450,000,000. It's gonna be of a similar nature next year. These are really associated with those commitments Mark alluded to earlier, Kahaku and Maui, some of the commitments we made in 2018.

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

But now with the Bluegreen Trust, the Diamond Trust, you know, we are you know, we look at our longer range inventory spend to be at 300,000,000. Now to put that in perspective, right after the acquisition of Bluegreen, our vision of inventory spend on a stabilized basis was closer to $350,000,000 to $450,000,000 So from a high point range, we brought that down fairly substantially from that $450,000,004 $50,000,000 down to $300,000,000 So I know that's beyond your VPG question, but I think all those components come into play and make a meaningful difference to the future of the business.

[Stephen Grambling, MD & Senior Equity Research Analyst at Morgan Stanley]

No. That's super helpful. It just also leads into one potentially quicker one, which is just as you think about that adjusted free cash flow at 65% to 70%, but then you have this longer term benefit to potentially cost of BOI and also inventory spend, could that drift higher as well?

[Dan Mathewes, President & CFO at Hilton Grand Vacations]

You know, my only hesitation on saying, hey, it could drift higher is because I can tell you where I anticipate having our inventory spend over the next five years. What I cannot tell you for even next year is what is what are what's the political rhetoric gonna do with tax rate. Right? That obviously comes into play. So holding everything else equal, you know you know, ideally, we'd be at the higher end of that range, but there's a a lot of nuances on puts and takes.

[Stephen Grambling, MD & Senior Equity Research Analyst at Morgan Stanley]

Fair enough. Thanks so much.

[Operator]

Thank you. Before we end, I will turn the call back over to Mark Wang for any closing remarks. Mister Wang?

[Mark Wang, CEO & Director at Hilton Grand Vacations]

Alright. Well, thanks everyone for joining us today. I wanna thank our team members for going above and beyond to meet our owners' needs and deliver outstanding vacation experiences. And I wanna thank our owners who make vacationing a priority and entrust us with creating those memorable experiences for themselves and their families. Have a great day. Thank you.

[Operator]

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.

Participants

Executives

• Mark Melnyk, SVP - IR
• Mark Wang, CEO & Director
• Dan Mathewes, President & CFO

Analysts

• Ben Chaiken, Equity Analyst at Mizuho Financial Group
• Brandt Montour, Director - Equity Research at Barclays
• C. Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities
• Stephen Grambling, MD & Senior Equity Research Analyst at Morgan Stanley