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HG

Hilton Grand Vacations Inc. (HGV)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 printed stable operating progress with double‑digit contract sales growth ($834M, +10.2% YoY) and stronger VPG, but reported profitability was dampened by ASC 606 construction deferrals; Adjusted EBITDA attributable to stockholders was $233M and adjusted diluted EPS was $0.54 .
  • On an ex‑deferral basis (the way management and most analysts evaluate operating performance), adjusted EBITDA to stockholders was approximately $278M (adding back a $45M net deferral), essentially in line with S&P Global consensus EBITDA* (~$276M); adjusted diluted EPS ex deferrals was ~$1.03 vs ~ $0.73 consensus*, a significant beat .
  • Revenue excluding cost reimbursements was $1.138B vs S&P consensus* ~$1.378B (differences in revenue definition are common in this space); total GAAP revenue was $1.266B .
  • FY25 guidance was reiterated: adjusted EBITDA ex deferrals $1.125B–$1.165B and 65–70% conversion to adjusted FCF; the Board approved a new $600M buyback authorization on top of ~$98M remaining under the 2024 plan, positioning capital returns as a key near‑term catalyst .

What Went Well and What Went Wrong

What Went Well

  • Contract sales momentum and sales efficiency: Contract sales +10.2% YoY to $834M on 11.1% VPG growth; management cited improved execution and HGV Max traction. “We built momentum through the quarter… the value proposition of HGV Max membership has continued to resonate” — CEO Mark Wang .
  • Financing optimization and liquidity actions: Adjusted FCF was $135M; 73% of receivables securitized; June $300M ABS at ~5.07% WAC and July JPY 9.5B securitization at 1.41% opened a new low‑cost market (Japan) .
  • Capital returns and synergy execution: $150M repurchased in Q2; new $600M authorization; run‑rate Bluegreen synergies reached $92M toward the $100M target — CFO .

What Went Wrong

  • Reported profitability pressure from construction deferrals and rental: $45M net deferral reduced adjusted EBITDA to stockholders by the same amount, and rental/ancillary posted a loss of $8M with LV softness noted .
  • Mix and margins: Real Estate Sales & Financing segment margin fell to 23.2% (26.1% prior year) and company adjusted EBITDA margin to 18.8% (21.5% prior year) amid deferrals, fee‑for‑service mix, and cost items .
  • Revenue vs consensus definition mismatch: S&P consensus* revenue exceeded reported ex‑reimbursement actuals, implying a miss on that basis; management and many analysts emphasize ex‑deferral/ex‑reimbursement measures, creating comparison noise this quarter .

Financial Results

Headline P&L (chronological across columns; $USD)

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Revenues$1.235B $1.284B $1.148B $1.266B
Revenues ex Cost Reimbursements$1.106B (1.235–0.129) $1.149B (1.284–0.135) $1.015B (1.148–0.133) $1.138B (1.266–0.128)
Adjusted EBITDA Attrib. to Stockholders$262M $240M $180M $233M
Adjusted EBITDA Profit Margin21.5% 19.1% 16.1% 18.8%
Diluted EPS (GAAP)$0.02 $0.19 $(0.17) $0.25
Adjusted Diluted EPS$0.62 $0.49 $0.09 $0.54

Notes:

  • Q2 2025 net deferral impact: $45M (≈$0.49 per share) .
  • Q2 2025 ex‑deferral adjusted EBITDA to stockholders ≈ $278M (233 + 45) .
  • Q2 2025 ex‑deferral adjusted diluted EPS ≈ $1.03 (0.54 + 0.49) .

Q2 2025 vs S&P Global Consensus

MetricActualConsensus*Beat/MissNotes
Adjusted Diluted EPS (ex deferrals proxy)~$1.03 (0.54 + 0.49) $0.73*Bold BeatDeferral headwind reversed for comparability with how many model HGV .
Primary EPS (as reported Adjusted Diluted EPS)$0.54 $0.73*MissReported includes deferral impacts.
Revenue ex Cost Reimbursements$1.138B $1.378B*MissConsensus/definition differences likely; mgmt highlights ex‑reimbursement revenue and ex‑deferral performance .
EBITDA (ex deferrals proxy)~$278M $275.9M*In‑line/BeatAdds back $45M net deferral to reported adjusted EBITDA to stockholders .

Values retrieved from S&P Global.*

Segment Detail (Q2 2025)

SegmentRevenuesSegment Adjusted EBITDAMargin
Real Estate Sales & Financing$760M $176M 23.2%
Resort Operations & Club Mgmt$405M $149M 36.8%
Rental & Ancillary (profit)$195M revenues $(8)M profit (4.1%)

Operating KPIs

KPIQ2 2024Q1 2025Q2 2025
Contract Sales$757M $721M $834M
Tours226,388 174,525 225,222
VPG$3,320 $4,111 $3,690
Fee‑for‑Service Mix19.5% 15.4% 17.0%
Just‑In‑Time Mix20.9% 9.9% 11.1%
Members (TTM)720,069 (TTM to 6/30/24) 724,617 (TTM to 3/31/25) 724,306 (TTM to 6/30/25)
NOG % (TTM)1.7% 0.9% 0.6%
Occupancy——83% (flat YoY)

Balance sheet and liquidity highlights (Q2 2025): Unrestricted cash $269M; revolver availability $794M; corporate debt $4.6B (WAL rate ~5.99%); non‑recourse debt $2.5B (WAL rate ~5.26%); adjusted FCF $135M; Net leverage ~3.9x TTM . Securitized receivables 73%; annualized default rate 10.2%; allowance ~27% of gross receivables; originated WA coupon ~15% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA (ex deferrals/recognitions)FY 2025$1.125B–$1.165B $1.125B–$1.165B Maintained
Adjusted FCF conversion (of Adj. EBITDA)FY 202565%–70% 65%–70% Maintained
Share RepurchasesFY 2025Target ~$150M/quarter ($600M FY) Reaffirmed; new $600M authorization (add’l to $98M remaining) Enhanced authorization
Contract Sales GrowthFY 2025High single‑digit (qualitative)High single‑digit (qualitative) Maintained
Provision RateFY 2025Mid‑teensMid‑teens Maintained

Earnings Call Themes & Trends

TopicPrior Mentions (Q4’24)Prior Mentions (Q1’25)Current (Q2’25)Trend
HGV Max traction / upgradesLaunched to Bluegreen; solid owner engagement Continued traction; pipeline steady >233k Max members; upgrade curve +20%; steady monthly growth Improving/expanding
Financing optimization (ABS)Strategy outlined; warehouse and ABS capacity Execution plan reiterated $300M ABS at ~5.07% WAC (June); first‑ever JPY 9.5B at 1.41% (July) Executing with lower cost options
Sales efficiency (VPG, prescreening)—Prescreening/efficiency launched VPG +11%; prescreening expanded; tours prioritized Positive mix/efficiency
Bluegreen synergy/integrationCost synergy target communicated Integration on track $92M run‑rate synergies; Envision roll‑out; rebrand program starting Near target/ongoing
Las Vegas / market soft spots——LV pressure on room rates; competition from casinos; VPG strong, capacity flexible Watchful
Package pipeline & activations—Initiatives to grow funnel >20k packages added; 200k sold in Q2; activation pace improved Stronger funnel
Credit performance—Stable to improving delinquencies 31–60 day delinquencies below 2024; default 10.2% Stable

Management Commentary

  • “We produced double‑digit contract sales growth driven by strong VPG expansion… We built momentum as we moved through the quarter, culminating in a strong June performance that carried into July.” — CEO Mark Wang .
  • “Adjusting for [construction deferrals], adjusted EBITDA to shareholders [would be] $278 million… We finished the quarter with 73% of current receivables securitized.” — CFO Dan Mathewes .
  • “We executed on our first securitization of Japanese receivables… at an attractive 1.41% borrowing rate… the first and only timeshare securitization in the Japanese market.” — CFO .
  • “We remain committed to returning an average of $150 million per quarter to shareholders this year… representing the vast majority of our adjusted free cash flow.” — CFO .

Q&A Highlights

  • Fee‑for‑service mix: Q2 mix 17% vs 15% in Q1; full‑year expected ~16% (15–17% range). Higher fee‑for‑service carries less flow‑through than owned; longer‑term mix should ratchet down as pipeline skews owned — CFO .
  • VPG vs tour flow economics: VPG flow‑through ~50%+ vs ~30% on incremental tours; provision seasonality expected (Q3 ~17% then easing in Q4); cost of product guided to 12–13% for FY on favorable mix — CFO .
  • New owner momentum and cost effects: New buyer pipeline +10%; ~30% new buyer mix; strong owner performance drove mix; oversold package budget (up‑front cost) pressured flow‑through this quarter — CEO .
  • Las Vegas: Market soft due to promotional activity and lower international/convention visitation; HGV reallocating room nights to club/marketing to support sales; VPG remains strong — CEO .
  • Inventory spend outlook: After 2026 completion of Ka Haku/Maui, longer‑range annual inventory spend targeted at ~$300M (down from prior $350–$450M), supportive of FCF — CFO .

Estimates Context

  • Using S&P Global consensus*, Q2 2025 adjusted EBITDA (ex‑deferral proxy) was essentially in line/slightly above (~$278M vs $276M*), while adjusted diluted EPS on an ex‑deferral basis ($1.03) would be a significant beat vs ~$0.73*. Reported adjusted EPS of $0.54 (with deferrals) was below consensus* .
  • Revenue comparisons are sensitive to definition (ex/including cost reimbursements). On S&P’s ex‑reimbursement basis, HGV’s $1.138B trailed consensus* ~$1.378B, despite total GAAP revenue of $1.266B .
  • Target price consensus mean stands near ~$53.11*, and the number of estimates for Q2 2025 included 7 on revenue and 5 on EPS*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core demand held up: double‑digit contract sales and VPG strength indicate healthy owner engagement and effective sales funnel execution (prescreening, activations) .
  • ASC 606 deferrals obscure the quarter; on a like‑for‑like (ex‑deferral) view, EBITDA tracked consensus and EPS likely beat materially, reinforcing the FY25 bridge to reiterated guidance .
  • Financing optimization is a differentiator: diversified ABS access (including Japan) at attractive costs supports FCF conversion, capital returns, and inventory spend normalization post‑2026 .
  • Mix and rental margin remain watch items: fee‑for‑service and LV rental softness pressured margins; management expects fee‑for‑service to drift lower over time and is flexing room‑night allocation .
  • Integration/synergies near goal with additional product/tech rollouts (Envision, cross‑booking, rebrands) extending the HGV Max ecosystem and upgrade path .
  • Capital returns are front‑and‑center: $600M new authorization plus reiterated $600M FY repurchase objective frame a shareholder yield‑driven setup .
  • Into 2H: management guides high single‑digit contract sales growth, mid‑teens provision, and 65–70% EBITDA‑to‑FCF conversion; watch VPG/deferral cadence and LV rental trends for near‑term stock moves .

Additional Relevant Items (Q2 context)

  • $300M term securitization (HGVT 2025‑1) at ~5.07% WAC; ~97% advance rate (June 18, 2025) .
  • July 11, 2025 JPY 9.5B securitization at 1.41%; July 29 new $600M buyback authorization .