Hilton Grand Vacations Inc

Good morning and welcome to the Hilton Grand Vacations second 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 number 13751067. 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 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 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 second 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. 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 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 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 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?

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 memberships. Thanks to the efforts of our teams, we produced double-digit contracts sales growth driven by strong VPG expansion and Torflow trends that improved compared to the first quarter. We built momentum as we moved through the quarter, culminating in a strong June performance that carried into July. And our demand indicators remained encouraging, with on-the-book arrivals outpacing prior year, along with strong package pipelines. 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. Looking at the results for the quarter, recorded contract sales were up 10% to $834 million and adjusted EBITDA was $278 million with margins excluding reimbursements of 23%. As I mentioned, we built sales momentum as we move through the quarter with BPG, 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 strike, 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. Looking at our demand indicators, occupancy in the quarter was equal to the prior year, 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 Torflow pipelines. 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 HEV MAX members, including nearly 21,000 legacy Blue-Green 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. 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. 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, as you likely saw a few weeks back, our team successfully closed on a 9.5 billion yen 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. and is a significant milestone for HEV, so I'm very proud of the team. From a cash flow perspective, our financing optimization helped us generate over $135 million 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. And we remain committed to returning excess cash to our shareholders. We returned $300 million to our shareholders this year, including $150 million for the quarter, and we're confident in our goal of returning $600 million this year. Turning next to an update on our initiatives and integration progress, our initiatives help to support our solid operational performance during the quarter. First, regarding the top of the funnel, as I mentioned earlier, we have 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 TOR's in the second half of the year. Second, on the execution side, we implemented our newest pre-screening models and several more package 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 HEV MAX members, giving them the ability to easily use their points across the entire system of resorts. And we have several other enhancements slated 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 blue-green 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 million goal this year. We've rolled out our Envision sales technology to the majority of our Blue-Green sales centers, and we expect to be completed by the end of this quarter. And we're also in the process of integrating Ultimate Access into the Blue-Green Resort Network. In a few weeks, we'll begin our Blue-Green 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 HEV Max has continued to resonate with our owners and guests. and we built momentum over the course of the quarter as we executed on our initiatives. 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 pre-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.