Hilton Grand Vacations Inc

Good morning and welcome to the Hilton Grand Vacations fourth quarter 2022 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 1373-5178. At this time, all participants have been placed in a listen-only mode. And the floor will be open for your questions following the presentation. If you would like to ask a question, please press star 1 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 star 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 question to allow the opportunity for everyone to ask questions. You may then reenter the queue to ask additional questions. I would now like to turn the call over to Mark Melnick, Senior Vice President of IR and GNA. Please go ahead, sir.

Thank you, Operator, and welcome to the Hilton Grand Vacation's fourth quarter 2022 earnings call. As a reminder, our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements, and these 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 10-K or other applicable SEC filings. We'll also be referring to certain non-GAAP financial measures. You can find definitions 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.htv.com. Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, 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. 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. For ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results were referred to results excluding the net impact of construction related deferrals and recognitions for all reporting periods. A complete accounting of our historical deferral and recognition activity can be found in Excel format on the financial reporting section of our investor relations website. In a moment, Mark Wang, our president and chief executive officer, will provide highlights from the quarter in addition to an update of our current operations and company strategy. After Mark's comments, our chief financial officer, Dan Matthews, will go through the financial details for the quarter. Mark and Dan will then make themselves available for your questions. With that, let me turn the call over to our president and CEO, Mark Wang. Mark?

Morning, everyone, and welcome to our fourth quarter earnings call. This past quarter was a great finish to a standout year. Contract sales of 634 million remained nicely ahead of 2019, and EBITDA of 253 million was nearly 25% higher than our pro forma 2019, with margins nearly 300 basis points higher. We had a solid contribution from new buyer channels, which has been a key area of focus and investment. With continued strength and leisure demand and good execution from our teams, we've been successful at activating our package sales pipeline to drive tour growth, which generates NOG and importantly embeds future value into the business. I'm extremely proud of our entire team and what they accomplished in the past year. We laid the groundwork for our combined organization through the launch of major programs and integration initiatives, And due to their efforts, we hit several milestones faster than we initially modeled, while outperforming our initial underwriting expectations. We've also continued to benefit from consumers' pivot toward experiences, and leisure travel in particular. And while we're monitoring the macro environment, our leisure focus and strong value proposition leaves us well-positioned for these ongoing shifts in consumer spending preferences. Earlier this quarter, we wrapped up another successful LPGA Tournament of Champions, which was the second held under the HDB brand. We had great attendance during the week, and our media exposure was up dramatically across all channels this year, with social media impressions tripling to over 750 million and active engagements up six-fold to 1.2 million on top of expanded international television and media coverage. The tournament also serves as our marquee ultimate access event of the year, and we kicked off this calendar with exclusive programming set up for our members throughout the week. As a result, we generated 40% more tours from the tournament this year, with new buyer tours more than doubling versus last year. During the tournament, I spent a lot of time with our owners and guests, and I can say that the energy around our brand and the engagement of our member base is really high, which leaves us optimistic about 23 and beyond. We're confident in our business as evidenced by our guidance, and we're committed to enhancing shareholder value through continued capital returns. Now, before I get into the details of the quarter, I'll start by taking a quick look at what we've accomplished over the past 12 months. It was around this time last year that I said 2022 would be a transformational year for HDV, and that certainly proved to be the case. We launched HDV Max, our new membership offering that links our resort collections and was also the first major club redesign in our history. We launched HDV Ultimate Access, our exclusive experiential platform, and hosted over 100,000 members and guests at over 3,000 events, including private concerts, culinary experiences, shows, excursions, and sporting events. We rebranded our sales center to provide a dramatically improved experience to our marketing guests and trained our sales staff to uphold HTV's rigorous standards of integrity. We also rebranded Diamond's largest properties, adding nearly 5,700 keys in new markets like Sedona, Lake Tahoe, Palm Desert, and Virginia Beach. And we also merged our financial and HR systems and integrated the former DRI teams to unify the organization under our HGV culture and values. From a financial perspective, we produced record cash flow and EBITDA exceeding our initial underwriting expectations we built the largest new buyer pipeline in our history which will provide a source of tour flow in coming years and embed additional value into the business for years to come and we achieved an upsized cost energy goal several quarters ahead of schedule but equally as important for our shareholders however is that the diamond acquisition has created real economic value. Dan will get into the details here in a minute, but our cash flow, returns on capital, and member base are all well ahead of pro forma combined entity pre-acquisition metrics. And these improvements were the results of longer-term value creation initiatives like cost efficiencies, process improvements, and enhancing our product offerings rather than just taking outside pricing. So, after a year of hard work, we've laid a strong foundation to continue growing the long-term value of the business. Looking forward, 2023 will be a year for further execution of our integration plans. And we'll build upon the successful launch of both Ultimate Access and HEV Max with new programming and features, we'll rebrand nearly a dozen additional diamond properties to add to the Hilton Vacation Club collection. And as we've done throughout our history, we'll maintain our focus on driving new buyer sales and net owner growth. Now let me take you through a more detailed look at our performance in the fourth quarter. Contract sales strength was driven by the continued improvement in tour flow, which more than offset the expected normalization of BPG. TORs were nearly 85% of 2019, demonstrating continued progress in our pace of recovery. New buyer TORs drove the improvement, showing the positive results from our investment efforts. Additionally, transaction volumes were exceptional this quarter, driven by the TOR flow improvements and a close rate that remains near all-time highs. That close rate drove VPGs of $4,350, which remains well ahead of 2019 and decelerated only modestly from the recovery pace we saw in Q3. Turning to the demand indicators, our system occupancy was 79%, seasonally lower than Q3 and in line with fourth quarter of last year. We saw some softening of occupancy at the end of the quarter that coincided with the holiday airline disruption and unusual storm activity in some markets, but believe that those were isolated issues. Looking forward, on-the-book arrivals are nicely ahead of 2019 through the entire first half of 23, with particular strength in our rental arrivals. I'm encouraged that our marketing package pipeline ticked up slightly from Q3 But more importantly, our number of packages with set travel dates also grew, which will drive additional new buyer tour flow in the months ahead and support net owner growth. We ended the year with 519,000 members and NOG at 3.9% on a combined basis, having grown our member base at both HCV and Diamond throughout the year. This is the highest NOG we've generated since we reopened our properties in mid-2020, and I'm really pleased with the results of the investments we've made to drive New Buyer Channel. This combination of new buyer growth and increased member activity drove club and resort revenue to a record $155 million. And finally, our rental business produced solid revenue results owing to the strong leisure travel environment. To summarize, we feel great about how we closed out a transformational year for HEV. The teams executed against an ambitious and complex plan that involved a lot of heavy lifting, and I'm proud to say we accomplished even more than we anticipated at the close of the acquisition. We've built a strong foundation to build upon in 2023 and beyond with our new membership, new programming, new destinations, and rebranded resorts, we think that our value proposition is the strongest that it's ever been, which is why we're seeing such a great response from our owners and new buyers. And we're continuously focused on creating value for our shareholders through operational improvements of the business, as well as a commitment to capital returns. With that, I'll turn it over to Dan to talk you through the numbers. Dan?