Hilton Grand Vacations Inc. (NYSE:HGV) (“HGV” or “the Company”) reported its first-quarter 2021 results.
First Quarter 2021 Results1
- Contract sales in the first quarter were $139 million.
- Net Owner Growth (NOG) for the 12 months ended March 31, 2021, was (0.1)%.
- Total revenues for the first quarter were $235 million compared to $351 million for the same period in 2020.
- Total revenues were affected by deferrals of $32 million and $47 million in the current period and the same period in 2020, respectively.
- Net loss for the first quarter was ($7) million compared to $8 million net income for the same period in 2020.
- Net (loss) income was affected by net deferrals of $18 million and $27 million for the current period and the same period in 2020, respectively.
- Diluted EPS for the first quarter was ($0.08) compared to $0.09 for the same period in 2020.
- Diluted EPS was affected by net deferrals of $18 million and $27 million, or $0.21 and $0.31 per share in the current period and the same period in 2020, respectively.
- Adjusted EBITDA for the first quarter was $42 million compared to $33 million for the same period in 2020.
- Adjusted EBITDA was affected by net deferrals of $18 million and $27 million in the current period and the same period in 2020, respectively.
- In addition to the adverse impact from the closure of HGV sales centers and resort operations, the COVID-19 pandemic had the following impacts on total revenues, net loss, diluted EPS and Adjusted EBITDA for the first quarter:
- $4 million or $0.05 per share benefit from government assistance from Japan and an employee retention credit granted under the CARES Act, primarily related to payments made to employees as a result of operational closures caused by the COVID-19 pandemic.
“2021 introduced a wave of optimism fueled by the rollout of vaccines and an increasingly positive outlook for leisure travel, which was reflected in another quarter of sequential improvement at HGV,” said Mark Wang, president and CEO of Hilton Grand Vacations. “Our performance ramped into a strong spring break travel season, and that trend has continued into April. This momentum makes us confident in the continued leisure travel recovery as we move through this year, and it underscores our confidence in our recently announced acquisition of Diamond Resorts, which remains on track for a summer transaction close.”
COVID-19 Update
The COVID-19 pandemic has created an unprecedented and challenging environment. The Company’s current focus is on taking critical actions that are aimed at keeping the Company in a sound position from an operational, liquidity, credit access, and compliance perspective for a strong recovery when the impact of COVID-19 subsides. Management will continue to assess the evolving COVID-19 pandemic, including the various government mandates and orders that impact the re-opening of its properties and any new recommended or required business practices, and will take additional actions as appropriate.
As of March 31, 2021, the Company has approximately 80% of its resorts and nearly all its sales centers open and operating. However, some of HGV’s resorts and sales centers are operating in markets with capacity constraints and subject to various safety measures, which are impacting consumer demand for resorts in those markets. As HGV responds to changes in tour flow, the Company intends to adjust its sales operations accordingly, while complying with all applicable social distancing rules and its own safety measures.
While HGV plans to continue to re-open its resorts and resume business as conditions permit, the pandemic continues to be unprecedented and rapidly changing, and has unknown duration and severity. Further, various state and local government officials may issue new or revised orders that are different than current ones under which the Company is operating.
Accordingly, there remains significant uncertainty as to the degree of impact and duration of the conditions stemming from the ongoing pandemic on the Company’s revenues, net income (loss) and other operating results, as well as its business and operations generally.
Overview
For the quarter ended March 31, 2021, diluted EPS was ($0.08) compared to $0.09 for the quarter ended March 31, 2020. Net loss and Adjusted EBITDA were ($7) million and $42 million, respectively, for the quarter ended March 31, 2021, compared to net income and Adjusted EBITDA of $8 million and $33 million, respectively, for the quarter ended March 31, 2020. Total revenues for the quarter ended March 31, 2021, were $235 million compared to $351 million for the quarter ended March 31, 2020.
Net loss and Adjusted EBITDA for the quarter ended March 31, 2021, included a net deferral of $18 million relating to sales made at Ocean Tower Phase II, Maui Bay Villas and The Beach Resort Sesoko projects, which were under construction during the period. The Company anticipates recognizing the revenues and expenses related to these deferrals as the associated projects are completed.
Segment Highlights – First Quarter 2021
Real Estate Sales and Financing
For the quarter ended March 31, 2021, Real Estate Sales and Financing segment revenues were $123 million, a decrease of 40.3% compared to the quarter ended March 31, 2020. Real Estate Sales and Financing segment Adjusted EBITDA and Adjusted EBITDA profit margin were $27 million and 22.0%, respectively, for the quarter ended March 31, 2021, compared to $15 million and 7.3%, respectively, for the quarter ended March 31, 2020. Real Estate Sales and Financing results in the first quarter of 2021 weakened due to a decrease in contract sales related to the ongoing impact of the COVID-19 pandemic on travel demand, along with ongoing related travel disruptions in several markets. As of March 31, 2021, the Company had re-opened approximately 80% of its resorts and nearly all its sales centers.
Real Estate Sales and Financing segment Adjusted EBITDA reflect the $18 million of net deferrals related to Ocean Tower Phase II, Maui Bay Villas and The Beach Resort Sesoko projects for the quarter ended March 31, 2021, and $27 million net deferrals related to The Central at 5th by Hilton Club and Ocean Tower Phase II projects for the quarter ended March 31, 2020.
Contract sales for the quarter ended March 31, 2021, decreased 43.0% to $139 million compared to the quarter ended March 31, 2020. For the quarter ended March 31, 2021, tours decreased 58.3% and VPG increased 32.5% compared to the quarter ended March 31, 2020. For the quarter ended March 31, 2021, fee-for-service contract sales represented 40.3% of contract sales compared to 53.3% for the quarter ended March 31, 2020.
Financing revenues for the quarter ended March 31, 2021 decreased by $7 million compared to the quarter ended March 31, 2020. This was driven by an 16.2% decrease in the net timeshare financing receivables portfolio offset by a 7 bps increase in the weighted average interest rate the Company receives on the portfolio compared to the same period in the prior year.
Resort Operations and Club Management
For the quarter ended March 31, 2021, Resort Operations and Club Management segment revenue was $80 million, a decrease of 23.1% compared to the quarter ended March 31, 2020. Resort Operations and Club Management segment Adjusted EBITDA and Adjusted EBITDA profit margin were $42 million and 52.5%, respectively, for the quarter ended March 31, 2021, compared to $55 million and 52.9%, respectively, for the quarter ended March 31, 2020. Compared to the prior-year period, Resort Operations and Club Management results in the first quarter of 2021 decreased primarily due to a decrease in rental and ancillary services revenue related to the ongoing impact of the COVID-19 pandemic on travel demand, driven primarily by a reduction in usage-related fees from Club Members.
About Hilton Grand Vacations
Hilton Grand Vacations is a global leader in vacation ownership, developing, marketing and operating a portfolio of high-quality, shared-ownership properties in highly desired vacation destinations. Our company also manages and operates two innovative club membership programs: Hilton Grand Vacations Club® and The Hilton Club®, providing exclusive exchange, leisure travel, and reservation services for more than 300,000 Club Members. At Hilton Grand Vacations, our culture of hospitality extends to our more than 8,500 Team Members who collectively play an important role in delivering exceptional service, quality accommodations, and memorable travel experiences. That’s why we’ve created a workplace that supports growth, opportunity, work-life balance, and respect throughout our Club affiliated properties, sales centers, and corporate offices around the globe.
