Hilton Grand Vacations Inc

Good morning and welcome to the Hilton Grand Vacations second quarter 2024 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 137-431-87. 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 one on your touch tone phone to enter the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. If you should require operator assistance, please press star zero. If using a speakerphone, please lift your handset to allow your 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 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 Vacation second quarter 2024 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 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.hgv.com. Our reported results for all periods reflect accounting rules under ASD 606, which we adopted in 2018. Under ASD 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. For ease of comparability and to simplify our discussion today, Our comments on adjusted EBITDA and real estate results will refer 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 on Table T1 of our earnings release and a complete accounting of our historical deferral and recognition activity. It can also be found in Excel format on the financial reporting section of our investor relations website. In a moment, our Chief Executive Officer, Mark Wang, will provide highlights from the quarter, in addition to an update of our current operations and company strategy. After Mark's comments, our President and 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 CEO, Mark Wang.

Mark? Morning, everyone, and welcome to our second quarter earnings call. Reported contract sales in the quarter were $757 million, and EBITDA was $270 million with margins of 22%, which were below our expectations. We had a solid start to the quarter, carrying in momentum we had built as we exited Q1 and saw trends in both April and May improve from the first quarter. As we moved into June, however, we experienced a broad-based pullback in consumer spending behavior This shift was evident across all our brands and customer segments, but it was particularly acute in our new buyer segment. We've noted on several prior calls a perception of increased consumer hesitancy, which continues to influence purchase decisions, and there's no question this played a role in our results. In addition, however, we also faced some execution challenges during the quarter. As part of the integration process with BlueGreen, we just completed an extensive restructuring of our sales and marketing organization to increase the flexibility with our new scale and improve our execution in two key areas, regionalization and staffing. Regarding the first area, while we'll continue using HCV's more centralized marketing approach to large destination markets hosting multiple HCV properties, We've also moved to empower those smaller regional markets with additional tools and resources to optimize their sales and marketing efforts at the local level, which we believe will generate both additional tours and improve VPGs. In addition, over the past year, we've been keenly focused on driving new buyer tour flow, which creates significant lifetime embedded value for HCV. As part of our recent organizational design efforts, We've also reevaluated optimal staffing levels to allocate additional resources to our new buyer sales lines, which should enable them to more effectively handle the current and future tour volume. So, while we can't control the macro spending environment, we've moved quickly to address those execution issues as part of our new organizational design we rolled out across the business in June. These changes will take some time to flow through our business, however, which, when combined with the quarter's results, a more challenging macro environment led to us lowering our guidance expectation for the year. Now let's turn to our operational performance during the quarter. Contract sales in the quarter were impacted by a year-over-year decline in both tours and VPG. Looking at our tours, our owner segment remained a relative bright spot with consistent positive low single-digit growth in each month of the quarter, supporting owner sales that remain 15% ahead of 2019 and demonstrating the resilience of our owner channels. Our new buyer tours remain lower as we rebuild our tour pipeline following the adjustments we made at the end of last year, in addition to seeing softer local marketing trends. New buyer tours from direct marketing packages will improve in the back half as the teams have done a great job rebuilding and activating the pipeline. but we also expect pressure on local marketing tours to continue in the back half as our recent operational adjustments work through the organization. BPG for the quarter was just over $3,300, or 10% ahead of 2019 levels. Both Legacy HCV and BlueGreen posted similar mid-single-digit declines versus the respective prior-year metrics. And on a consolidated basis, we also saw similar levels of year-over-year decline for both our new owners and new buyer channels owing to the combination of factors we talked about earlier. But with the operational changes we've made, we still expect to maintain the low end of our target range of 10% to 15% ahead of 2019's VPGs. Looking at our forward demand indicators, occupancy in the quarter was in line with last year at 83%. And our marketing and rental arrivals on the books look strong for the back half, particularly in the fourth quarter. So, as we've seen for a number of quarters, travel intentions remain strong among consumers, and we're focused on improving our ability to convert those tours into transactions. Moving to our non-real estate segments, our financing team continues to do a great job managing through the higher rate environment and meeting the strong ABS investor demand with several well-subscribed note offerings. Our rental segment also continues to see healthy demand from travelers. And in our recurring club and resort business, we ended the quarter with over 720,000 owners and NOG of 1.7%. I also think it's important to highlight our cash flow generation. This quarter, we produced $370 million of adjusted free cash flow. So despite some of the near-term challenges, our business is still able to produce a significant amount of cash. And we're using that cash to support our commitment to capital returns, repurchasing 2.3 million shares of stock during the quarter for $100 million. Turning next to our integration efforts, we'll start with an update on Diamond. Through the end of the second quarter, we rebranded 40 properties representing 9,800 keys, and we remain on track to rebrand another eight properties this year for an additional 1,300 keys, bringing us to 70% of our targeted total. We also continue to integrate and enhance our technology platform and have launched two major improvements this year benefiting our consumers and team members. We recently combined our legacy HTV and Diamond customer-facing member websites into a unified experience, simplifying the booking process and management of their member points across our brands. And we launched an integrated sales tool that is now being used across all of our sales sites, enabling our sales teams to more seamlessly sell both deeded and trust products from a single platform. On the partnership front, we've had strong traction with Gray Wolf out of the gate, We've already seen a number of our members using their points for stays with their families at Great Wolf Resorts. And on the marketing front, early signs indicate strong interest in our vacation packages by Great Wolf guests across call transfer, digital, and on-property ambassador programs. Turning to blue-green, we continue to make good progress. The teams have now integrated into our corporate workflow. and we're tracking ahead of our Schedule of Synergy realization, as Dan will cover shortly. There's a lot of anticipation among the Blue-Green member base and Salesforce about the launch of HEB Max, and we're working hard to get everything in place for the rollout. Recall that until the launch of Max, we'll continue to run Blue-Green sales organization in parallel with ours, which is also why we think that addressing these execution challenges now will be key to ensuring a smooth sales integration during our rebranding. While this has been a difficult quarter for us, we're maintaining our long-term perspective on the business while acting with a sense of urgency on what we can control in the near term. Despite these challenges, I'm confident that we've identified the issues and are working diligently to address them, and I'm optimistic that we'll improve from here. And above all, I remain confident in our future path. We have a much stronger business model than we've ever had. We have our best product offering. We've got more geographic diversity. We have a larger member base. And we're generating more free cash flow than ever before. So with that, I'll turn it over to Dan to walk you through the numbers.