Hilton Grand Vacations Inc

Good morning and welcome to the Hilton Grand Vacations first quarter 2025 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 13751066. 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 touch-tone phone to enter the queue. If at any point your question has been answered, you may remove your question from the queue by pressing star 2. If you should require operator assistance, please press star 0. If you are 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 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's first quarter 2025 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. The statements are effective only as of today. We undertake no obligation to publicly update or revise the statements. 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 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 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. For ease of comparability and a simplified discussion today, our comments on adjusted EBITDA and our real estate results were reported 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? Good morning, everyone, and welcome to our first quarter earnings call. I'm happy to report another solid quarter of results today driven by the team's hard work in addition to the structural process improvements we carried out over the past several quarters. Those efforts have yielded positive results producing an acceleration in transactions, BPG growth, and sales growth in the quarter. I'm also pleased that we carried that momentum through April. On-the-book arrival trends and cancellation rates are generally consistent with the past several quarters, and vacation package sales have remained strong. But while we've generated positive performance thanks in large part to our initiatives, we also recognize that the macroeconomic environment has recently become more volatile and unpredictable. And although we have limited exposure to many of the recent policy announcements, such as tariffs, they have potential to create additional consumer uncertainty to which we're not immune. So, while it's still too early to know the impact of these policies and when that impact may be felt, we're taking deliberate actions in areas that we can control in order to insulate our business from this macroeconomic volatility. To that end, along with maintaining our disciplined approach to process and execution, We've redoubled our efforts on implementing additional programs that are visible, impactful, and readily achievable this year. While these actions are designed to produce results in the near term, they'll also serve as ongoing drivers that will benefit our business over the long term. In addition, our business model has several fundamental advantages that provide a buffer against macro volatility. Our direct marketing approach means that we create our own demand. We have the most diversified business in the industry with a variety of brands, price points, product types, and vacation destinations in both fly-to and drive-to markets. We have a dedicated member base who have prepaid their vacations, having paid their annual dues for the year, making them more likely to travel. In addition, we have a natural hedge from our highly variable cost structure, and we've demonstrated the ability to make further adjustments to our cost structure if the environment demands it. More than half of our EBITDA is contractually reoccurring in nature, and we convert 55 to 65 percent of our EBITDA into free cash flow, providing additional financial flexibility. These traits reinforce the strongest value proposition we've ever had with the benefit of HEV Max and the quality and scale of our portfolio backed by the power of the Hilton brand. So I'm pleased with our results for the quarter and with the momentum that we've carried into Q2. We're maintaining our EBITDA guidance for the year, which Dan will take you through shortly. While it's certainly harder today to predict the future than it has been in the past, our focus is on being proactive with the initiatives we've identified and continuing to control what we can control to navigate to any potential uncertainty. Looking at our results for the quarter, reported contract sales were up 10% to $721 million and adjusted EBITDA was $248 million with margins excluding reimbursements of 22%. As we've seen in prior quarters, tour growth was impacted due to our efficiency programs as we continue to utilize our scoring models to maximize the quality of the tours we bring in. Notably, our efficiency efforts are helping to drive improved close rates, transactions, and VPG. VPG grew 15% to more than $4,100, with growth in both our owners and new buyer channels. Owner VPGs were particularly strong in the quarter, as they also benefited from the continued success of Kahaku sales and the launch of HEV Max to BlueGreen members. Looking at our demand indicators, Occupancy in the quarter, which includes blue-green in both periods, was flat at 77%. Consolidated arrivals in the second quarter remain ahead of prior year, and they're in line with the prior year when looking at the next six months. And our rental channels continue to indicate solid booking growth over the next several quarters, reflecting continued demand from independent leisure travelers. Our industry-leading marketing package pipeline remains robust at over 725,000 packages, and our package sales trends have remained healthy. In addition, the portion of our pipeline with confirmed travel dates was up nicely from the fourth quarter to its highest level in a year. So, as I mentioned earlier, while we're cognizant of the broader environment and news flow, We haven't yet seen any material shifts in our forward demand indicators. Turning to our other business units, our member count was 725,000 at the end of the quarter, with NOG of just under 1%. HEV MAX growth continues to outperform as members appreciate the benefits that MAX membership brings. and our research shows that our max members have our highest satisfaction scores across every ownership tenure we're now over 215 000 max members with blue green contributing nearly 13 000 members to that total and only a handful of months since the launch our rental business has continued to show consistent top line growth And while trends have remained consistent, we're monitoring them closely for any signs of deterioration. And our financing business optimization continues to benefit our cash flow, enabling us to repurchase $150 million worth of stock during the quarter. Turning next to our update on our initiatives and integration progress, over the last few quarters, we've spoken about several key efforts. mainly optimizing our staffing levels in our sales centers and evolving our scoring models to help identify and prioritize tours with a higher likelihood of closing. When combined with our introduction of HEV Max into the Blue-Green System and the launch of Kahaku, these programs have helped produce positive results since implementation, supporting strong transaction, BPG growth, and contract sales. Building upon that success, we're implementing additional initiatives that we've bucketed into three main categories. The first is enhanced lead generation. This includes directing more resources toward package sales and activations, along with introducing new marketing campaigns, particularly for owners and guests that have previously toured with us before. And we're also accelerating our digital marketing integration efforts with our partners. The second bucket is execution-related. This includes further refinement of our scoring models along with new pre-tour qualifying to ensure that we're touring our highest propensity guests. In addition, we'll be offering more flexible financing options to allow members to enter and stay within the HEV system. And the last bucket is product enhancements. which includes the previously mentioned enhancements to our max product slated for later this year. And we're adding additional features aimed at driving incremental engagement and encouraging additional member stays at our property. Collectively, we believe these initiatives can support our EBITDA and cash flow goals regardless of their macro environment. And over the long term, they'll continue to generate a positive impact by improving the efficiency of the business strengthening our value proposition, and improving member engagement. Turning to the Blue-Green integration, we've reached $89 million of cost synergies and are confident in achieving our target of $100 million this year. And we're just ahead of launching Blue-Green property rebrand program with the expectation that we'll complete 10 to 12 rebrands in each of the next three years. On the partnership front, we added nine new Great Wolf locations and rebranded 79 Bass Pro locations, and we opened a number of sales centers dedicated to servicing our choice customers. So, to sum up, we've had another strong quarter, and that momentum has continued into Q2. The combination of our new offerings and our efficiency initiatives enabled us to drive an acceleration in transactions, BPG growth, and contract sales. While market volatility and uncertainty have increased in recent weeks, we continue to take a proactive approach with additional initiatives to ensure we sustain our momentum. We're focused on controlling the things that we can control but will continue to adapt as needed to protect and grow the long-term value of the business. So with that, I'd like to extend a warm welcome back to Dan, who will take you through the numbers. Dan?

Thank you, Mark, and good morning, everyone. Before we start, note that our reported results for this quarter included 126 million of sales deferrals, which reduced reported gap revenue, and were related to pre-sales of our newest project, Kahaku. We also recorded $58 million of associated direct expense deferrals. Adjusting for these two items would increase the adjusted EBITDA reported in our press release by a net $68 million to $248 million. In my prepared remarks, I'll only refer to metrics excluding net deferrals, which more accurately reflects cash flow dynamics of our financial performance during the period. As Mark discussed, Q1 was characterized by strong operating performance driven by a focus on tour efficiency combined with the continuation of HCD Max being offered to the Blue Green member base and the continued success of Kahaku. These items helped drive a 15% increase in pro forma VPGs, resulting in contract sales growing 10% year over year on a pro forma basis. In addition to strong operating performance made significant strides in advancing the optimization of our financing business, with approximately 70% of our current receivables securitized at the end of the quarter. This is within our target of securitizing 70% to 80% of current receivables on a steady state basis. The higher securitized position helped drive our adjusted free cash flow conversion rate of 75% of our adjusted EBITDA for Q1 2025. We anticipate being in the ABS markets this coming summer as we seek to term out our receivables securitized through the warehouse at quarter end. Early in the quarter, we also successfully recast our $1 billion revolver and repriced all of our outstanding term loans, resulting in reduced pricing spreads and expanded covenants. Maturities for these facilities and our senior notes have now been extended to 2028 through 2032. Turning to our results for the quarter, total revenue excluding cost reimbursements in the quarter grew 11% to $1.1 billion and adjusted EBITDA was $248 million with margins excluding reimbursements of 22%. EBITDA included approximately $23 million of blue-green cost synergies recognized during the quarter or a run rate of $91 million annualized, leaving us well on track to achieve our target of $100 million in cost synergies by the end of 2025. Within our real estate business, contract sales were $721 million, up 10% on a pro forma year-over-year basis, assuming a full quarter of blue-green ownership in both periods. Consistent with the fourth quarter, our new buyer mix in the quarter remained at 25%, owing to the continued strength of our owner channel after the launch of HCD Max to our blue-green members, along with the launch of Kahaku last fall. Tours were down 4% to 175,000, primarily reflecting the tour efficiency initiatives that Mark mentioned earlier, along with ongoing sales center closures related to the hurricanes this past fall. These initiatives improved close rates and were reflected in BPG, which grew 15% to more than $4,100. We saw growth in both our owner and new buyer channels, with particular strength in our owner channel, which grew 21% year-over-year. That growth was driven by a combination of our recent initiatives along with the continued contribution from HCV Max and Kahaku. Cost of product was 12% of net VOI sales for the quarter, up 100 basis points from the prior year, and our provision for VADET was roughly in line with the prior year at 12% of owned contract sales. Real estate sales and marketing expense was $372 million for the quarter, or 52% of contract sales. Real estate profit for the quarter was $138 million, with margins of 24%, down 200 basis points, with half of that coming from the uptick in cost of product and the other half coming from sales and marketing cost. In our financing business, first quarter revenue was $125 million and segment profit was $70 million, with margins of 56%. It is important to highlight that the provision statistics do not include $7 million of additional reserves related to our acquired portfolios. Due to the fact that the reserve was related to our acquired portfolios rather than our underwritten portfolios, it is booked in our financing expense rather than the real estate provision and accounted for the majority of the year-over-year decrease in our financing business margin in the quarter. Looking at our portfolio metrics, our originated weighted average interest rate was 15 percent. Combined gross receivables for the quarter were $4 billion or $3 billion net of allowance. Our total allowance for bad debt was $1.1 billion on that $4 billion receivables balance, or 27% of the portfolio. Our annualized default rate for our consolidated portfolios stood at 10.2% for the quarter, a slight decrease from the fourth quarter's levels of 10.8%. Our originated portfolio delinquencies continue to outperform a much more seasonal acquired portfolio, which is a testament to the strength of the HEV brand, increased value proposition from HEV Max, and continued rollout of the best-in-class sales and underwriting practices. We continue to believe that we are adequately reserved when considering the recent volatility in credit and equity markets. Notably, delinquency rates for HEV and legacy DRI portfolios are running 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 to be in the mid-teens for the full year. We also monitor our 31- to 60-day delinquency trends very closely as an early indicator, and we haven't seen any signs of increased stress within our portfolio in recent weeks, but continue to monitor the situation closely. In our resort and club business, our consolidated member count was approximately 725,000, and our NOG was just under 1% at the end of the quarter. Revenues grew 10% to 183 million for the quarter owing to our increased member count and solid member activity during the quarter. Segment profit was $129 million with margins of 71% as we maintained good expense controls. Rental and ancillary revenues were $187 million in the quarter with segment loss of $19 million. Revenue growth was driven by increased occupancy resulting in slight improvement in our rev bar Consistent with the fourth quarter, our expenses remain elevated due to higher developer maintenance fees along with higher expenses from point conversions for states at great wealth as we continue to see great traction with our new partnership program. Bridging the gap between segment-adjusted EBITDA and total-adjusted EBITDA, JV EBITDA was $5 million, corporate G&A was $37 million, license fees were $49 million, and EBITDA attributable to non-controlling interests was $5 million. Our adjusted free cash flow in the quarter was $185 million, which included inventory spending of $110 million. Our cash flow conversion of 75% was elevated owing to the timing of non-recourse activity under our financing business optimization. But for the full year, we still anticipate that the 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 3.9 million shares of Comisoc for $150 million. From April 1st through April 24th, we repurchased an additional 1.8 million shares for $60 million. Year-to-date 2025, we have repurchased 5.7 million or 6% of our shares outstanding for $210 million or an average of approximately $37 million. We remain committed to capital returns as a primary use of our free cash flow and believe our shares continue to represent a compelling value at current prices. We believe that our strong balance sheet provides us with the financial flexibility necessary to allow us to navigate the current macroeconomic volatility. Accordingly, we remain committed to our target of repurchasing on average of $150 million per quarter, assuming the current macro environment. We currently have $218 million of remaining availability under our purchase plans. Turning to our outlook, we are maintaining our 2025 adjusted EBITDA guidance to be in the range of 1.125 billion to 1.165 billion, which assumes the environment remains consistent with what we see today. As Mark mentioned, we had a solid quarter that was in line with our expectations, and that momentum carried into April. That said, while our direct exposure to tariffs is minimal, the volatility of the past few weeks has nevertheless made the consumer environment more uncertain and it's something that we continue to monitor very closely. Moving on to our liquidity, as of March 31st, our liquidity position consisted of $259 million of unrestricted cash and $870 million of availability under a revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.5 billion and a non-recourse debt balance of approximately $2.4 billion. At quarter end, we had $100 million of remaining capacity in our warehouse facility. We also had $951 million of notes that were current on payments but unsecuritized. Of that figure, approximately $519 million could be monetized through either warehouse borrowings or securitization, while another $210 million of mortgage notes would anticipate being eligible following certain customary milestones, such as first payment, deeding, and recording. Despite market volatility, ABS markets remain open and functioning. This fact, coupled with our $850 million warehouse, give us confidence we can execute on our previously discussed finance optimization strategy. Turning to our credit metrics, at the end of Q1, inclusive of all anticipated cost synergies, the company's total net leverage on a TTM basis was 3.9 times. We will turn the call over now to the operator and look forward to your questions. Operator?

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

One moment please while we poll for questions. Thank you. Our first question is from Brant Montour with Barclays.

Good morning, everybody. Thanks for taking my question. So maybe, Mark, if we could just start talking about the consumer. The commentary, I don't want to put words in your mouth, the commentary seems like you're not seeing any changes across preview package sales as well as forward bookings for rentals, things that we would think you'd start to see a little bit of choppiness. We've heard from most other leisure-facing businesses that there's some leisure choppiness in forward bookings. Can you just maybe talk about why you think you sort of define that trend? Is it the geographical exposure? Is it the consumer? What do you think it is?

Yeah, no, good question. And I think, you know, from a leading indicator standpoint, We do have a distinct advantage, and I think it's underappreciated around line of sight. When you think about it, Brad, 50% of our occupancy is from our owners, right? Another 15 to 20% is our marketing packages. And so that's a population we have data and we understand how we can activate on it, right? From a rental perspective, Your booking window is around 40 days. For an owner, it's 177 days. At least this year, it's 177 days. Last year, it was 178 days. So it's come down one day. So no material change at all. For marketing, it's 95 days out, right? So we have a distinct advantage of understanding who is going to be arriving at our properties well before your traditional leisure travel that's booked on Hilton.com or through an OTA, which typically averages 40 days. So, the other thing is, you know, our owners have paid, right? They've prepaid for this. And our package pipeline, those customers are prepaid, too. So, I think those give us line of sight and a distinct advantage over, you know, traditional demand that would come in through Neurology.

That's really helpful. Thanks for that. The second question I have is around new owner versus new owner mix versus owned mix. You guys did, I think, 85% owned mix in the first quarter. The full year, I believe, runs a little bit below that. And the summertime, I think, is seasonally a little bit higher for new owner sales. And so as we look at the first quarter's VPG, which was you know, a monster result, you know, for you guys. Does that, you know, do you, is it harder to maintain the strong VPGs as you move into a more new owner sales intensive season, that being the summer, or is that sort of a lever that's in your control and that's something you plan to pull?

Yeah, look, it is a lever that we can control, but first of all, I'd say that the number is closer to, you know, for new buyers is closer to 25 to 30%, so it's not 15%. So the other thing that's in a way skewing that number is the outperformance on the owner's side is really material. Now we had VPG growth both from owners and new buyers, right? From a new buyer standpoint, that BPG growth was really driven by average transaction price going up 5%. From an owner perspective, if you look at the owner's side, we saw great improvements, almost 500 bps of improvement in close rates. Part of the, you know, the mix there is driven by outsized owners and then still ramping up on new buyers. So we were really pleased to see the results. The teams did a great job executing. I think we're up 15% or just under 15% of VPG. So, you know, as we go through the balance of the year, the mix is going to be somewhat similar. So, you know, our expectations are that VPG you know, we'll continue to see strong performance and strong execution. You know, that being said, I think we've made plenty of disclosures out there that, you know, the narrative out there hasn't been positive around the consumer and its confidence. But again, we haven't yet seen that in our numbers.

Great. Thanks for all the color. Nice quarter. Thank you. Our next question is from Ben Chaiken with Mizuho Securities.

Hey, thanks for taking my questions, Dan. Nice to have you back. Regarding the balance sheet optimization, you gave some color on the prepared remarks and also in the press release regarding the 951 of notes that were current on payments, and there's the 519 that could be monetized, and then there's the 210 of additional notes. That still leaves kind of a balance of, you know, something around 200. I guess for a three-part question, number one, Where does that remaining 220 or so sit? Part two, do you view all of the 951 as receivables you could securitize in the near term, or is there a portion you would leave in the balance sheet for some reason or another? And then part three, I think the warehouse is full. Is the plan to securitize those, work in the warehouse down, and then use that 850 capacity to take down the 950? Hopefully that all makes sense. I can circle back if those two convoluted. Thanks.

Hey, Ben. Thanks. It's good to be back. With regards to your questions, I don't know where to begin. I think the last one you effectively answered, but let's jump back to the $200 million. The $200 million is a part of the current unsecuritized receivables. It really pertains to loans that either have no FICO scores for one reason or another, or they're loan balance heavy for another reason, i.e., just for lack of a better term, they're not immediately securitizable. That doesn't mean there's not a path. There is a path. This is more of your scratch and dent of nature. So there is a path to do that. We wouldn't focus on that. We haven't focused that in the past, just given the advance rate that's typically associated with the scratch and dent issuance. So that's out there. The other thing that taking into consideration is all these metrics are a point in time, right? So, to your point, the warehouse is drawn effectively, not completely drawn at this point in time, but majority drawn. What we will look to do is to term that out by going to the ABS markets, most likely as we approach the summer months. As you've seen, while the markets have been very choppy, the ABS markets are definitely open. A competitor went to the market recently and was successful. We anticipate going to the market in the short term. We would, you know, just given today, again, I pause because there's a lot of noise out there, but if we were to go out today, I would anticipate pricing in the range of five to five and a half. Obviously, that'll move with the macro, but that's where we would see it today. Let's see, I think I answered two of your three. Which one did I not answer completely?

Just overall, do you think about the, just as you think about the total balance of the 951, is there any portion, can we think about that as being all securitizable in the near to medium term, or is there a portion that you would want to leave on the balance sheet for some reason or another?

The vast majority would be, the vast majority we would look to securitize, but again, this is getting back to the point in time concept, because there's a certain amount that we would retain to make sure that we have No, it's available for replacements in the existing deals, et cetera. So there's some level that we wouldn't actively go out and securitize.

Okay, that's very helpful. And then on VPG, definitely stronger than expected. It sounds like partially Bluegreen HDB Max success, which makes sense. Are there any statistics you can share or anecdotal comments regarding the success of upgrading Bluegreen HDB? customers. Um, I know you gave the overall close rate customer, just the overall close rate on existing owners a moment ago, which was very helpful. Um, I don't know if maybe you have that for, for Bowling Green customers, if you'd feel comfortable sharing that. And then is there any Bowling Green sales centers that were, that you're still maybe upgrading or rebranding? Thanks.

Yeah, no, uh, good question. So what I would say is, um, First of all, BPGs were strong across the legacy business, and in particular, Blue Green owners. And so if you look at BPG growth in the legacy HEV DRI world, owners and new buyers were up 8%, right? So you can see that Blue Green owners really outperformed, and the growth there was pretty material. It was, you know, over 40% growth in BPG. So two times of what we saw in overall owner BPG. So good performance across the entire company and entire brands, but really strong outperformance on the blue-green side.

Thanks a lot. Appreciate it. Our next question is from Patrick Scholes with Truist Securities.

Great. Thank you. Good morning. Mark, on the previous earnings calls, you had given some outlines on several KPIs, specifically from my notes last time you had talked about low to mid single-digit for the year, low to mid single-digit margin correction of approximately 50 basis points.

Could you give us an update on those expectations?

Yeah, Patrick, you broke up a little bit there, but I think I caught the essence of the question. And so, you know, when you think about, you know, the cadence for the rest of the year, you know, we came out, we were down on tour flow for Q1, but we still expect to have tour flow growth for the remainder of the year. Part of the contraction on the tour flow side was really related to a number of initiatives we're doing around improving the quality of the tours. We're using and continue to tighten up our qualifications, focusing on higher quality customers. We've refined our modeling. We're trying to identify higher propensity buyers and those that have the ability to pay. So that's part of it. The other part of it is, unfortunately, a number of the blue-green sales centers that were impacted by the hurricane are going to take longer to reopen than we initially expected. And there's a lot of work that's going on with the teams around that to get those properties reopened, but you're dealing with insurance companies and so some of that timing is not necessarily in our control. What I'd say around the BPG front is we performed much better than we expected in the first quarter. Now, we've talked a lot about acknowledging that You know, there's a lot of noise around the consumer out there. And, you know, assuming, you know, the market conditions continue to be what they are today, you know, our expectations are that we will have that mid to higher single-digit BPG growth for the rest of the year.

Our next question is from Steven Grambling with Morgan Stanley.

Hey, thanks. Welcome back, Dan. Just to dig into a couple things in the opening remarks from you, Mark, I think you gave a couple of these strategic initiatives, and two of them, one was more flexible financing, one, I think you said, new features to drive engagement. I was hoping you could just maybe expand on each of those, on the flexible financing. Is that effectively improving the rate, is it improving the amount down? And then on the features to drive engagement, maybe if you can just elaborate on maybe the cadence of what you're doing and then the cadence of when we'll start to see that.

Yeah, no, great question. So on the financing side, and Dan, you can jump in here, we have essentially what we're doing is we're standardizing our financing program across the company. Blue Green had their financing program. Our legacy business had their financing program. And one of the things that I have to say, you know, over the years, it's gotten very, very complex around, you know, our financing grids. And so one of the things we've tried to do is just simplify it and create a financing grid that I think was attractive to, you know, to new customers coming in and really focus on generating additional cash. right, at point of sale. And so that's a big driver of it. And then incentivizing our customers around what product type they're acquiring. And we've got a lot of inventory. We're in a really good inventory position and obviously looking to move as much and balance out our inventory and utilizing our finance grid to focus buyers into certain types of inventory. As far as initiatives go, it has been really focused around the tour quality and also the value proposition. The tour quality, I think I talked about just a few minutes ago, on the value proposition, it's around what we can do to deliver even a better value proposition than we have today. There's really no silver bullet here. It's really a stacking of a number of initiatives that we're focused on and part of it is also driving investing and marketing up front to drive additional revenue going forward. I don't see a demand shock out there. I think our urgency and our sense of urgency right now given this environment to continue driving new buyers as well as driving the value proposition up for our owners. Those are super important. And, you know, as we think about the benefits of those, we're seeing the scoring benefits today. A number of the other initiatives we see to benefit us in the back half of the year. And taken together, we believe all of these things will help us, you know, insulate our business from any potential macro disruption out there.

Yeah, Mark, and I think I'd just add to that. I mean, Stephen, to Mark's point on the financing front, it is really about making the messaging and the conversation at the sales table a lot cleaner, a lot less friction. We're also unifying the underwriting, to Mark's point. Blue-green, I think we mentioned this a couple times last year, blue-green, which, and this is not unusual for the industry, but blue-green was offering the ability to upgrade with no additional cash down, things like that. which we are unifying with the underwriting process with HEV and the Legacy Diamond portfolio, where we require additional skin in the game to make sure people are motivated to, one, stay engaged with their mortgage, but two, and more importantly, stay engaged with the product itself. So the combination of those two, we're very optimistic, will help drive portfolio performance as we go throughout this year and into future years.

Great. Thank you. Our next question is from Lizzie Dove with Goldman Sachs.

Hi there. Thanks for taking the question. Just to kind of zoom in a bit on the consumer, I'm curious if you've seen any kind of divergence between, you know, different geographies within the U.S., like particular strength in areas versus others or any signs of a kind of

trade down between different products just any other color that would be will be helpful you know it's interesting because you know it's preparing for today's call I was really looking at market results right and you know we had outstanding performance in a number of markets and it's not really geographically you know focused in and when I look at for instance Hawaii The Hawaii team, again, delivered very strong. Maui grew 40%. We are now back to pre-fire numbers in Maui. We saw our Oahu domestic and Japan teams outperform as well as our big island teams in Waikoloa. So very strong there. New York was extremely strong and D.C. In fact, our east teams did a fantastic job And Orlando was a really good story for us, improved execution. And then when you look at kind of the mid to smaller markets, our JV with Bass Pro up in Big Cedar did well. The Carolinas were strong. Arizona was strong, and Texas was strong. So I'd say around the consumer, and we actually started signaling this the middle of last year. mainly around the bottom third of our new buyer wealth cohorts, that has stabilized, but it still hasn't improved, right? So our focus, Lizzie, has been to maneuver around it, right? Why continue to focus on those customers when they are having a tough time dealing with this cumulative inflation that's going out going on over the last couple of years and the uncertainty out there. So our focus has really been, what can we control? We can tighten up our qualifications, right? And so that's what we've been doing. And at the end of the day, it was really great to see how well our owners and members continue to perform. And it was nice to see VPG growth from our new buyers You know, it wasn't, you know, double digit growth for new buyers, but we did see a little growth. So I think all the work we're doing around our initiatives is starting to pay off.

Got it. Thank you.

Our next question is from Chris Veronica with Deutsche Bank.

Hey, good morning, guys. Thanks for taking the question. Yeah, Mark, just for a moment, returning to kind of a downside scenario in the economy that we're still thinking about. I know in prior cycles, none of which are exactly alike, but there was some discounting by the resort sector. And I think there's a perception that if that happens, it upends your value proposition a little bit in terms of getting folks on tour. So any Any thoughts there, any contingency plans, anything you're seeing in any markets yet that gives you pause for concern on that?

You know, I'd have to say we haven't seen any. Our package pipeline, which I think is a great indicator, and I actually think our package value proposition, because you remember the way our model works, we are subsidizing these guests to come visit our properties and go through a sales presentation. In this environment, this value proposition even stands out even greater, especially in a high rate environment. I would say we continue to see really strong execution there. In fact, our dated packages And dated means those that have agreed to a date and are planning to travel actually went up 22% from Q4 to Q1. Now, as far as a downturn scenario, I think we're in a really good position, right? Today, our business is in a better position than it was before because of some of the built-in advantages. 50% of our EBITDA is recurring. We have a strong balance sheet, great brand, strong value proposition. Our partners, having a partner like Hilton, a partner like Bass Pro, Choice, it's helped us build the largest pipeline of potential new buyers in the industry. Then you think about how loyal our members are. We have tens of thousands of our owners who've been staying with us for multiple decades. 70% of them have paid off their mortgage. 90% live within a four-hour drive to one of our resorts. So I think we're prepared for a wide range of outcomes. But at the end of the day, the one benefit we have in our business, and we talked about it before, is we go out and create the demand. We're not waiting for people to show up. We are out there reaching out, connecting, creating relationships with customers to drive that demand going forward. So look, it's hard to tell right now, and I'd say it's just too early to understand the full impact of what could occur with the policy changes out there. But I'm a big believer that the shift to moving to experiences away from goods is going to continue, and it could even accelerate in an environment like this. As you can tell, I'm very optimistic. That being said, anything could happen. There's a lot of zigzagging going on right now in the policy talks right now. Quite frankly, every day I wake up, I wonder what the news is going to be like today. All we can do is focus on what we can control, and that's what we're doing.

And Chris, I think the only thing I'd add to that, I mean, Mark obviously covered a lot of value additions that we've had, too. Well, we offer our product offering over the past few years, but even if you go back to 2019, before hotels had these substantial increases in ADRs, we had a great value proposition back then. And when you think about the average transaction price that we

over the past few years, it is more or less in line with the rate of inflation versus the outsized growth in ADRs. So there is not only are the elements of the product materially better, but just from the financial perspective, we still hold a great deal of value to the end consumer. So there would have to be a substantial, substantial, substantial decrease in what you see the hotels selling their FIT at.

uh to dent into what we believe is a great value for the consumer okay yeah fair enough thanks guys appreciate it thank you there are no further questions at this time before we end i would like to turn the call back over to mark wang for any closing comments well thanks everyone for joining us today and i want to thank all of our team members for going above and beyond to meet our owners' needs and deliver outstanding vacation experiences. And I also want to thank our owners who make vacation a priority and entrust us with creating those memorable experiences for themselves and their families.

Have a great day. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.