Executive Summary / Key Takeaways

• Hilton Grand Vacations is transforming into a larger, more diversified leader in the timeshare industry through strategic acquisitions, notably Diamond Resorts and Bluegreen Vacations, significantly expanding its portfolio and member base.
• The company's business model leverages the strong Hilton brand, a diversified product offering across various price points and destinations, and a growing, dedicated member base to drive predictable fee streams and recurring EBITDA.
• Recent performance, including Q1 2025 results, demonstrates solid operational execution with strong VPG growth (+14.4% in Q1 2025) and momentum carrying into Q2, despite a volatile macroeconomic environment and consumer hesitancy impacting certain buyer segments.
• HGV is actively pursuing integration synergies ($100M cost target), enhancing its technology platform (HGV Max, integrated sales tools), and optimizing its financing business to unlock substantial cash flow ($700M additional cash targeted at full optimization run rate) for increased shareholder returns, targeting $600 million in annual share repurchases.
• While facing risks from macroeconomic sensitivity, integration complexities, and credit normalization, HGV's strategic initiatives, diversified model, and commitment to capital returns position it for continued growth and value creation, supported by a 2025 adjusted EBITDA guidance range of $1.125 billion to $1.165 billion.

A Transformed Leader in the Experience Economy

Hilton Grand Vacations Inc. stands as a prominent global timeshare company, strategically positioned within the broader leisure and hospitality sector. Its core business revolves around developing, marketing, selling, managing, and operating timeshare resorts and related services under the esteemed Hilton Grand Vacations brand. The company's model is multifaceted, encompassing the sale of vacation ownership intervals (VOIs) – both from its owned inventory and on behalf of third parties via fee-for-service agreements – alongside providing consumer financing for these purchases, managing resort operations, and overseeing comprehensive club and exchange programs. This integrated approach allows HGV to capture value across the entire vacation ownership lifecycle, generating revenue from initial sales, predictable fee streams from management and club operations, and interest income from its financing portfolio.

The industry landscape, while subject to macroeconomic cycles, benefits from the secular trend towards prioritizing experiences over material goods. HGV operates alongside major competitors such as Marriott Vacations Worldwide (VAC), Travel + Leisure Co. (TNL), and Hyatt Hotels Corporation (H), each vying for market share through distinct strategies and brand affiliations. HGV has rapidly scaled its operations through significant acquisitions, notably Diamond Resorts and, more recently, Bluegreen Vacations, completed in January 2024. This expansion has dramatically increased HGV's footprint to over 200 properties across diverse geographies, including key concentrations in Florida, Europe, Hawaii, and popular drive-to markets, and expanded its member base to over 725,000. This scale and geographic diversification represent a key competitive advantage, offering members a wider array of vacation options and providing HGV with multiple channels for lead generation and sales.

Central to HGV's competitive strategy is its leveraging of the powerful Hilton brand and its investment in technology. The HGV Max membership program, launched in 2022 and now being rolled out to the acquired Bluegreen member base, serves as a significant technological differentiator. HGV Max enhances the value proposition by offering members expanded access across the HGV portfolio, the broader Hilton system (approximately 8400 properties), and various experiential options. The program has seen strong uptake, with over 215,000 Max members as of Q1 2025, including nearly 13,000 Bluegreen members shortly after launch, and is associated with the highest member satisfaction scores. Beyond member-facing platforms, HGV has integrated sales tools and unified customer websites, aiming to streamline the sales process, improve operational efficiency, and enhance the customer experience. While precise, directly comparable quantitative metrics on the technological edge over all competitors are not publicly detailed, management commentary suggests these tools contribute to improved close rates, VPG, and member engagement, providing a competitive moat, particularly against rivals with less integrated digital ecosystems or more basic product offerings like TNL. Future technological enhancements to the Max product are planned, with the stated goal of driving incremental engagement and encouraging additional member stays.

Strategic Evolution and Performance Dynamics

HGV's history is marked by strategic moves aimed at building scale and enhancing its value proposition. The acquisitions of Diamond and Bluegreen have been transformative, fundamentally reshaping the company's size, market reach, and operational complexity. The integration of these businesses is a key strategic focus, targeting $100 million in cost synergies, with significant progress already made ($75 million annualized run rate achieved by Q4 2024, $11 million recognized in Q1 2025). This integration also involves the physical rebranding of properties (over 70% of targeted Diamond properties expected by end of 2024, with plans for 10-12 Bluegreen rebrands annually over the next three years) and the crucial technological and operational alignment necessary to fully leverage the combined network and introduce HGV Max benefits across the expanded member base.

The company's inventory strategy balances developed properties, fee-for-service arrangements, and just-in-time sourcing. Fee-for-service and just-in-time inventory, representing approximately 28% of the estimated $13.2 billion in contract sales value from currently available and future inventory, are crucial for capital efficiency, allowing HGV to accelerate sales growth with less upfront investment compared to traditional development. While owned inventory sales typically yield higher Adjusted EBITDA contributions, both models contribute to the long-term, predictable fee streams from club membership and property management.

Recent financial performance reflects the ongoing integration and the prevailing macroeconomic environment. In Q1 2025, HGV reported total revenues of $1.15 billion and a net loss attributable to stockholders of $17 million. Adjusted EBITDA, excluding the net impact of construction-related deferrals and recognitions, was $248 million with margins of 22%. This compares to Q1 2024 reported total revenues of $1.16 billion and a net loss attributable to stockholders of $4 million, with adjusted EBITDA of $276 million and margins of 24%. The decrease in Adjusted EBITDA year-over-year was primarily driven by the Real Estate Sales and Financing segment, where Adjusted EBITDA decreased by $73 million. This was largely due to lower Sales of VOIs, net ($378M in Q1 2025 vs $438M in Q1 2024), and increased Sales and marketing expense ($425M vs $401M), partially offset by lower Cost of VOI Sales ($25M vs $48M) and an increase in Financing profit ($70M vs $65M). The Resort Operations and Club Management segment Adjusted EBITDA remained consistent year-over-year, with profit increasing by $17 million ($129M vs $112M) driven by higher revenues ($183M vs $166M) from increased member count and activity. However, the Rental and Ancillary Services segment saw a profit decrease of $27 million, resulting in a loss of $19 million in Q1 2025, mainly due to higher rental expenses ($206M vs $173M), partially offset by increased rental revenues ($187M vs $181M).

Operational metrics in Q1 2025 showed positive momentum, with contract sales increasing 14.3% to $721 million, driven by a 14.4% increase in VPG to $4,111. This VPG growth was notable across both owner and new buyer channels, with particularly strong performance from owner VPGs benefiting from HGV Max and new inventory like Ka Haku. Tour flow remained relatively flat year-over-year at 174,525, reflecting the company's focus on tour efficiency and quality over volume, though management expects tour flow growth for the remainder of 2025. Financing propensity remained stable at 64% in Q1 2025, with a weighted-average FICO score of 736 for originated loans to US/Canadian borrowers. The provision for financing receivables losses was $79 million in Q1 2025, up from $64 million in Q1 2024, reflecting normalizing credit trends, particularly in acquired portfolios. The annualized default rate for the consolidated portfolio was 10.2% in Q1 2025.

Financial Strength and Capital Allocation

HGV's financial health is characterized by a significant debt load, largely a result of its acquisition strategy, but also robust cash flow generation and a clear capital allocation framework focused on shareholder returns. As of March 31, 2025, the company held $259 million in cash and cash equivalents, with total debt (net) of $4.49 billion and non-recourse debt (net) of $2.45 billion. Total net leverage stood at 3.9 times on a TTM basis inclusive of anticipated cost synergies, with a long-term target range of 2 to 3 times.

The company's cash flow dynamics are significantly influenced by its financing business and securitization activities. Net cash provided by operating activities was $38 million in Q1 2025. Net cash used in investing activities was $32 million, a substantial decrease from $1.47 billion used in Q1 2024, primarily due to the Bluegreen acquisition occurring in the prior year. Net cash used in financing activities was $201 million in Q1 2025, compared to $1.27 billion provided in Q1 2024, reflecting lower net proceeds from debt and non-recourse debt and increased share repurchases.

HGV is implementing a financing business optimization program, ramping up over 18 months, to increase its non-recourse borrowing activity to a target range of 70%-80% of current receivables, up from historical levels in the mid-50s. This initiative is expected to unlock approximately $700 million in additional cash at its full run rate. While this will increase consumer financing interest expense (an estimated $25 million headwind to Adjusted EBITDA in 2025), the company believes it will have minimal impact on underlying cash flow and be highly accretive to equity value. This incremental cash is earmarked for increased capital returns.

Shareholder returns are a stated priority. HGV repurchased 4.0 million shares for $150 million in Q1 2025 and an additional 1.8 million shares for $60 million through April 24, 2025. The company has a $500 million share repurchase program authorized and is committed to repurchasing approximately $150 million per quarter, increasing its annual target to $600 million. Inventory spending, including purchases and development of real estate for future conversion to inventory, totaled $110 million in Q1 2025, with commitments totaling $120 million over the next 11 years. Elevated inventory spend, circa $450 million in 2025 and 2026, is primarily focused on completing pre-COVID projects like Ka Haku in Hawaii.

Outlook and Strategic Horizon

HGV is maintaining its adjusted EBITDA guidance for the full year 2025 in the range of $1.125 billion to $1.165 billion. This outlook assumes the current macroeconomic environment remains consistent and is underpinned by expectations for continued VPG growth (mid-to-higher single digits for the remainder of the year), anticipated tour flow growth, realization of integration synergies, and the benefits from strategic initiatives.

Key drivers for the outlook include the continued rollout and adoption of HGV Max, particularly among the Bluegreen member base, which is expected to drive upgrade sales and member engagement. Leveraging new partnerships with entities like Bass Pro Shops, Choice Hotels (CHH), and Great Wolf Lodge is anticipated to provide diversified and high-quality lead flow, supporting new buyer sales. The financing optimization program is expected to enhance cash flow, providing flexibility for capital allocation.

However, the outlook is not without risks. The macroeconomic environment remains volatile, and potential policy changes could introduce further consumer uncertainty. Consumer hesitancy, particularly among lower net worth new buyers, continues to be a challenge. While delinquency rates for HGV and legacy Diamond portfolios are running below last year, the acquired Bluegreen portfolio has shown higher losses from pre-integration originations, contributing to the expected normalization of the all-in provision rate to the mid-teens for the full year. Integration execution, while progressing well, carries inherent complexities. Litigation contingencies, such as the matter related to The Manhattan Club property, also present potential risks.

In response to these challenges, HGV is implementing additional initiatives focused on enhanced lead generation (e.g., packaged sales, digital marketing integration), execution refinement (e.g., scoring models, flexible financing options), and product enhancements. These actions are designed to improve tour quality, close rates, and overall sales efficiency, mitigating potential macro headwinds and supporting the achievement of financial targets.

Conclusion

Hilton Grand Vacations has undergone a significant transformation, emerging as a larger, more geographically diversified, and strategically integrated player in the timeshare industry. By successfully integrating the Diamond and Bluegreen acquisitions, leveraging the powerful Hilton brand, and enhancing its technological capabilities through platforms like HGV Max, the company is building a robust ecosystem designed to capture growth in the experience economy. While the macroeconomic environment presents ongoing challenges, particularly impacting certain new buyer segments and requiring diligent management of credit quality, HGV's focus on operational efficiency, strategic partnerships, and a clear commitment to enhancing shareholder returns through its financing optimization and increased share repurchase program provides a compelling investment narrative. The company's ability to execute on its integration plans, navigate market volatility, and continue driving VPG growth will be critical factors for investors to monitor as HGV works towards its 2025 guidance and long-term leverage targets, positioning itself for sustained value creation.