Hilton Grand Vacations Inc

Good morning and welcome to the Hilton Grand Vacations third quarter 2023 earnings and acquisition announcement conference call. The telephone replay will be available for seven days following the call. The dial-in number is 844-512-2921 and enter the PIN 13735181. 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'd like to ask a question, please press star 1 on your touchstone 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 your equipment. Please limit yourself to one question and one follow-up to allow the opportunity for everyone to ask questions. You may then re-enter the queue to ask additional questions. I would now like to turn the call over to Mark Melnick, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Hilton Grand Vacations third quarter 2023 and acquisition announcement call. Please note that we've uploaded slides to our Investor Relations website that are available for you to follow along. 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. These statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For discussion of some of the factors that could cause actual results to differ, please see the risk factors section of our SEC filing. 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.huv.com. Our reported results for all periods reflect accounting rules under AC-606, which we adopted in 2018. Under AAC 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 are 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 and Executive Officer, will provide highlights from the quarter in addition to an update of our current operations and company strategy and today's acquisition announcements. 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? Well, morning, everyone, and thanks for being flexible and joining our earlier call this morning. As you've seen from our announcement today, we have a lot of things to go through. The first is that I'm happy to announce our definitive agreement to acquire Blue Green Resorts along with a 10-year exclusive marketing and JV agreement with the nation's premier outdoor and conservation company, Bass Pro Shops. We're really excited about this transaction and think that it will open up new avenues for growth while also enhancing the resilience of our business and building long-term value. We'll get into those details shortly after I walk through our third quarter earnings. Before we get started, I'd like to extend my best wishes to our team members and the people of Maui as they continue their recovery efforts from the devastating wildfires in August. We're committed to providing our support to the local community during the rebuilding process, including our many team members who live and work on the island. Turning to our results, contract sales in the third quarter were $603 million, and EBITDA was $276 million with margins of 27%. Tours grew 15% for the quarter, and our VPG was 10% ahead of 2019's levels within our target range despite some of the unique challenges we saw in the quarter. The first was the devastating wildfires that impacted our Maui business directly. Additionally, we believe that the macroeconomic crosscurrents played more of a role in our Q3 results than they have in prior quarters. In the face of these challenges, our owner business was resilient during the quarter and has remained a source of strength for our business. HCV MAX has continued to resonate with our owners and our MAX membership growth has exceeded our overall member growth as we attract more owners to upgrade into the program and deepen our member engagement. On the new buyer side, our performance for the quarter was solid in absolute terms, with mid-teens growth in tours driving positive growth in transaction and contract sales. But after a solid start in July, we saw softening in the segment as we moved through the quarter, resulting in tours, VPG, and contract sales coming in short of our expectations. We believe the compounding effects of inflation and interest rates affected the mentality of our new buyers more than owners. However, the good news is that we still grew transactions as we saw more people touring and previewing our offerings. We remain committed to growing our new buyer channel and believe that it's the right thing to do for the long-term health of the business. That said, given some of these near-term headwinds, along with some ongoing Maui impact in Q4. We've updated our guidance to better align our expectations with the trends we're seeing. Dan will share more details on our outlook in here in a few minutes. Now let's take a look at our performance in the third quarter. Contract sales in the quarter were driven by growth in tours, which offset the expected declines in VPG. Our new buyer tours again grew faster than our owner tours, with year-over-year growth of more than 17%. And I'm really pleased with how our owner channels remain resilient despite the unforeseen headwinds from losing tours in Maui for most of the quarter. Owner tours showed an acceleration in growth versus Q2 on a year-over-year basis, as well as further exceeding our pace against 2019. As I mentioned earlier, we saw softening of our tour trends as we moved through the quarter particularly in August, although trends stabilized in September. VPG for the quarter was just over $3,600, which was within our expected range despite the loss of high VPG Maui sales. And our close rates were roughly in line with Q2 levels and remained nicely ahead of 2019. Turning to our demand indicators, occupancy for the quarter was 81%. Our arrivals in the fourth quarter are ahead of the prior year and are currently indicating a step up in growth in the first half of next year that will support occupancy levels. And I'm also encouraged that our marketing pipeline and activations remain near record highs to build a solid base of tour flow growth going forward. Moving to our non-real estate segments, our rental club finance business showed solid growth in the quarter. Rental revenues were nearly on par with the seasonally stronger second quarter, and we maintained double-digit margins. Club profits continued to benefit from both improved revenue and margins, along with new member growth, and our financing team executed on an oversubscribed securitization with great pricing. And finally, during the quarter, we repurchased $64 million worth of shares demonstrating our ongoing commitment to returning capital to our shareholders. With that, I'll turn it over to Dan to talk you through the numbers.