Hilton Grand Vacations Inc. · NYSE:HGV
Hilton Grand Vacations — Debt Investor Presentation (January 2024)
48 slides from Hilton Grand Vacations's debt investor presentation, Jan 4, 2024
Slide 1: Project Teal Lender Presentation
November 29, 2023 Project Teal Ratings Agency Overview DRAFT C Lender Presentation January 2024 Exhibit 99.1
Slide 2: Legal Disclaimer
1 Legal Disclaimer Disclaimer This presentation, the information contained herein and the materials accompanying it (i) constitute confidential information, (ii) are provided to you on the condition that you agree to hold it in strict confidence and not reproduce, disclose, forward or distribute it
Slide 3: Agenda
3 Agenda Transaction Overview Combined Company Overview Key Credit Highlights Segment Overview and Update Historical Financial Performance Appendix
Slide 4: Transaction Overview
Transaction Overview Hilton GRAND VACATIONS
Slide 5: Executive Summary
4 Executive Summary ____________________ (1)Pro Forma Adjusted EBITDA Attributable to Stockholders is a non-GAAP measure. See page 33 for a reconciliation to the nearest GAAP measure. On November 6, 2023, Hilton Grand Vacations Inc. (“HGV” or the “Company”) announced it had entered into a definitive
Slide 6: Sources and Uses & Pro Forma Capitalization
5 Sources and Uses & Pro Forma Capitalization ____________________ Note: Does not include effect of subsequent events on balance sheet. Pro forma cash balance doesn’t reflect the payment of certain fees and expenses associated with the Acquisition and Transaction and doesn’t reflect the expected use
Slide 7: Combined Company Overview
Combined Company Overview Hilton GRAND VACATIONS
Slide 8: The Bluegreen Acquisition is a Unique Opportunity to Create a Premier Vacation Ownership Company
8 The Bluegreen Acquisition is a Unique Opportunity to Create a Premier Vacation Ownership and Experiences Company Wilderness Club at Big Cedar Ridgedale, MO 4 Adds scale and diversity to HGV’s offering, with over 200,000 members and additional distribution in 14 new geographies across 8 new states
Slide 9: Bluegreen offers a large portfolio of drive-to locations and opens up new geographies
14 48 Bluegreen offers a large portfolio of drive-to locations and opens up geographies where HGV does not currently have a footprint New geographies and 8 new states added to HGV's existing footprint through the Bluegreen resort network High-quality, consistent properties that are readily able to b
Slide 10: Further Broadens HGV's Best-in-Class Offering and Price Points
10 Further Broadens HGV’s Best-in-Class Offering and Price Points ____________________ (1)Illustrative chain positioning. Competitors1 Extends HGV’s customer reach, expanding its relationship with the Hilton Honors program Midscale and below Upper Midscale Upscale Upper Upscale Luxury
Slide 11: Unlocks Additional Upside from Recent Business Evolution
11 Unlocks Additional Upside from Recent Business Evolution, Leveraging Strategic Investments Made Over the Last Two Years EXPERIENTIAL PLATFORM NEW MEMBERSHIP CLUB REBRANDED PROPERTIES INTEGRATED SYSTEMS Investment Made Provides exclusive experiences Links HGV’s three club collections Rebranded Dia
Slide 12: Key Credit Highlights
Key Credit Highlights Hilton GRAND VACATIONS
Slide 13: Summary Credit Highlights
12 Summary Credit Highlights Industry leading diverse portfolio and member network 1 Experienced management team 5 Attractive free cash flow profile bolsters strong balance sheet 4 Significant potential cost savings from strategic acquisitions 3 Expanded lead generation through world-class partnersh
Slide 14: Industry Leading Diverse Portfolio and Member Network
13 Industry Leading Diverse Portfolio and Member Network 1 ____________________ Source: Public SEC filings; does not include information about other industry participants not readily available from public SEC filings or their private company status. Note: Combined company financial information is pr
Slide 15: Expanded Lead Generation Through World-Class Partnerships
14 Expanded Lead Generation Through World-Class Partnerships 2 Strategic partnership with Bass Pro Shops has anchored Bluegreen's growth and is a new avenue for HGV’s expansion Expand and diversify lead generation, with Bass Pro marketing as a lead source that is not levered to the lodging cycle Dri
Slide 16: Significant Potential Cost Savings from Strategic Acquisitions: Diamond Integration
15 Systems and Workforce Integration Rebranding Commences Property Updates and Rebranding Ongoing Deal Close Close through YE’ 21 2022 2023 – 2025 Workforce integration IT systems integration Accounting and finance process integration Finalize rebrand plan Finalize membership plan Start IT work to c
Slide 17: Significant Potential Cost Savings from Strategic Acquisitions
16 Significant Potential Cost Savings from Strategic Acquisitions 3 Management & headcount overlap Legal, HR, IT systems savings Sales & marketing efficiencies Resort operations efficiencies Portfolio synergies Capital markets efficiencies Headcount and G&A Efficiencies Operational Efficiencies Fina
Slide 18: Attractive Free Cash Flow Profile Bolsters Strong Balance Sheet
17 Attractive Free Cash Flow Profile Bolsters Strong Balance Sheet 4 Pro forma liquidity of over $1 billion Capital market efficiencies from increased scale of combined ABS platform Cash flow generation will help drive deleveraging from pro forma net leverage1 of 3.4x, maintaining long-term target n
Slide 19: Experienced Management Team
18 Experienced Management Team 5 Mark Wang President & CEO Years with HGV: 24 Gordon Gurnik Senior EVP, COO Years with HGV: 5 Dan Mathewes Senior EVP, CFO Years with HGV: 5 Served as Executive Vice President and President, Hilton Grand Vacations for Hilton Worldwide since March 2008 First joined the
Slide 20: Segment Overview and Update
Segment Overview and Update Hilton GRAND VACATIONS
Slide 21: Business Segments Overview
19 Business Segments Overview The Combined Company will operate under two distinct business segments – Real Estate Sales & Financing and Resort Operations & Club Management Real Estate Sales & Financing Resort Management & Club Management Real Estate Sales Market and sell fee-simple VOIs developed b
Slide 22: Real Estate: the Sales and Marketing Business Model at the Core of HGV
20 Real Estate: the Sales and Marketing Business Model at the Core of HGV Rental & Ancillary Monetize unutilized inventory Generate additional tours from rental guests Club & Resort Manage member clubs Manage resort operations Recurring fee business Convert Trial Lead generation Combined 2022 tours
Slide 23: High Quality, Loyal Customer Base that Appeals to Younger Buyers
21 High Quality, Loyal Customer Base that Appeals to Younger Buyers 7341 $107k2 56%2 $1 million2 7392 $86k2 73%2 N/A ____________________ As of September 30, 2023. As of June 30, 2023. Weighted-Average FICO Score Average New Buyer HHI New Buyer Mix: Gen X and Younger % Average Member Net Worth
Slide 24: Significant In-place Inventory and Pipeline of Future Developments Support Growth
22 Significant In-place Inventory and Pipeline of Future Developments Support Growth HGV Existing markets HGV New markets Approximately $11.6 billion1 of potential future contract sales value in HGV’s pipeline at current pricing2 36% of those contract sales from capital efficient just-in-time or fee
Slide 25: Inventory Recapture Extends Sales Pipeline and Aids Cash Flow
23 Inventory Recapture Extends Sales Pipeline and Aids Cash Flow Existing pool of unsold inventory 1 Existing pool of active members 2 Recaptured inventory 3 Sell Points Natural Attrition Recycle Recaptured inventory from natural attrition returns to pool of inventory Natural attrition includes: Lif
Slide 26: Financing: Facilitates Purchases and Helps Generate Consistent, High Margin Fees
Financing: Facilitates Purchases and Helps Generate Consistent, High Margin Fees ____________________ Calculated as weighted average interest rate earned less weighted average interest rate paid. Reflects HGV originated portfolio only. Attractive Net Interest Margin (1) Consumer Finance Warehouses a
Slide 27: Resort & Club Management Provides Predictable & Recurring EBITDA
25 Resort & Club Management Provides Predictable & Recurring EBITDA Management of HGV, Diamond and BVH resorts and properties developed by third parties Services provided span operations, hospitality, and finance Platform scale, systems and inventory management benefit HOAs Resort Management Club Me
Slide 28: Transient Rentals Enable HGV to Monetize Unutilized Inventory
26 Transient Rentals Enable HGV to Monetize Unutilized Inventory Transient Rentals Optimize Use of Inventory and Lead to Incremental VOI Sales Offsets inventory carry costs while providing member flexibility Creates additional marketing opportunities to show HGV and BHV product to transient guests,
Slide 29: Historical Financial Performance
Historical Financial Performance
Slide 30: Summary of Standalone HGV Historical Financials
27 Summary of Standalone HGV Historical Financials ____________________ Total Revenue (excluding cost reimbursement and deferrals) is a non-GAAP measure. See pages 40-42 for a reconciliation to the nearest GAAP measure. Adjusted EBITDA (excluding deferrals) is a non-GAAP measure. See pages 34-36 for
Slide 31: Summary of HGV Key Performance Indicators
28 Summary of HGV Key Performance Indicators
Slide 32: Summary of Standalone BVH Historical Financials
29 Summary of Standalone BVH Historical Financials ($ in millions) ($ in millions) ($ in millions) ____________________ Total Revenue (excluding cost reimbursement) is a non-GAAP measure. See pages 40-42 for a reconciliation to the nearest GAAP measure. Adjusted EBITDA is a non-GAAP measure. See pag
Slide 33: Summary of BVH Key Performance Indicators
30 Summary of BVH Key Performance Indicators
Slide 34: Combined HGV and BVH Annual Historical Financials
HGV 31 Combined HGV and BVH Annual Historical Financials1 ($ in millions) ($ in millions) ($ in millions) ____________________ Combined company financial information is presented as the sum of corresponding financial information of HGV and BVH and does not reflect the adjustments included in the pre
Slide 35: Questions & Answers
Questions & Answers Hilton GRAND VACATIONS
Slide 36: Appendix
Appendix Hilton GRAND VACATIONS
Slide 37: Pro Forma Organizational Structure
Pro Forma Organizational Structure Public Equity Holders Hilton Grand Vacations Inc. Delaware Corporation Apollo Funds & Co-Investors Hilton Grand Vacations Borrower LLC Delaware LLC Hilton Resorts Corporation Delaware Corporation HGV Operating Subsidiaries $900 million New Incremental Term Loan B $
Slide 38: Pro Forma Net Income to Adjusted EBITDA Reconciliation
($ in millions) Twelve Months Ended September 30, 2023 (Unaudited) Pro Forma (Unaudited) Twelve Months Ended September 30, 2023 Net income attributable to its stockholders $323 $246 Net income attributable to noncontrolling interests - 18 Net income 323 264 Interest expense 170 349 Income tax expens
Slide 39: LTM Combined Net Income to Adjusted EBITDA Reconciliation
($ in millions) HGV Bluegreen1 Combined HGV and Bluegreen2 Net income attributable to its stockholders $323 $62 $385 Net income attributable to noncontrolling interests - 18 18 Net income 323 80 403 Interest expense 170 38 208 Income tax expense 110 25 135 Depreciation and amortization 219 16 235 In
Slide 40: 2022 Combined Net Income to Adjusted EBITDA Reconciliation
35 2022 Combined Net Income to Adjusted EBITDA Reconciliation ($ in millions) HGV Bluegreen1 Combined HGV and Bluegreen2 Net income attributable to its stockholders $352 $64 $416 Net income attributable to noncontrolling interests - 17 17 Net income 352 81 433 Interest expense 142 25 167 Income tax
Slide 41: 2021 Combined Net Income to Adjusted EBITDA Reconciliation
($ in millions) HGV Bluegreen1 Combined HGV and Bluegreen2 Net income attributable to its stockholders $176 $58 $234 Net income attributable to noncontrolling interests - 14 14 Net income 176 72 248 Interest expense 105 20 125 Income tax expense 93 27 120 Depreciation and amortization 126 16 142 Int
Slide 42: 9/30/2023 Combined LTM Net Cash from Operations to Adjusted Free Cash Flow
($ in millions) HGV Bluegreen Combined HGV and Bluegreen1 Net cash provided by operating activities $296 ($142) $154 Capital expenditures for property and equipment (51) (19) (70) Software capitalization costs (42) - (42) Free Cash Flow $203 ($161) $42 Non-recourse debt activity, net (128) 209 81 Ac
Slide 43: 2022 Combined Net Cash from Operations to Adjusted Free Cash Flow
($ in millions) HGV Bluegreen Combined HGV and Bluegreen1 Net cash provided by operating activities $747 ($13) $734 Capital expenditures for property and equipment (58) (15) (73) Software capitalization costs (39) - (39) Free Cash Flow $650 ($28) $622 Non-recourse debt activity, net (221) 100 (121)
Slide 44: 2021 Combined Net Cash from Operations to Adjusted Free Cash Flow
($ in millions) HGV Bluegreen Combined HGV and Bluegreen1 Net cash provided by operating activities $168 $77 $245 Capital expenditures for property and equipment (18) (14) (32) Software capitalization costs (21) - (21) Free Cash Flow $129 $63 $192 Non-recourse debt activity, net (95) (33) (128) Acqu
Slide 45: 9/30/23 LTM Combined GAAP Total Revenue Reconciliation
($ in millions) HGV Bluegreen Combined HGV and Bluegreen1 GAAP Total Revenue $3,952 $986 $4,938 Cost reimbursements (371) (93) (464) Net deferrals (recognitions)2 17 -- 17 Total Revenue (excl. cost reimb. & deferrals) $3,598 $892 $4,490 9/30/23 LTM Combined GAAP Total Revenue to Total Revenue (excl.
Slide 46: 2022 Combined GAAP Total Revenue Reconciliation
2022 Combined GAAP Total Revenue to Total Revenue (excl. cost reimb. & deferrals) Reconciliation 41 ($ in millions) HGV Bluegreen Combined HGV and Bluegreen1 GAAP Total Revenue $3,835 $919 $4,754 Cost reimbursements (296) (77) (373) Net deferrals (recognitions)2 (31) -- (31) Total Revenue (excl. cos
Slide 47: 2021 Combined GAAP Total Revenue Reconciliation
2021 Combined GAAP Total Revenue to Total Revenue (excl. cost reimb. & deferrals) Reconciliation 42 ($ in millions) HGV Bluegreen Combined HGV and Bluegreen1 GAAP Total Revenue $2,335 $757 $3,092 Cost reimbursements (202) (69) (271) Net deferrals (recognitions)2 (133) -- (133) Total Revenue (excl. c
Slide 48: The Mechanics of Deferrals – GAAP versus Economic Impact
43 The Mechanics of Deferrals – GAAP versus Economic Impact Construction projects in connection with the development of inventory can take several years. For deeded (Legacy HGV) product, HGV typically pre-sells inventory during this development phase to improve project cash flows and returns on inve
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