Hilton Grand Vacations Inc. · NYSE:HGV

Hilton Grand Vacations — Investor Presentation (May 2017)

26 slides from Hilton Grand Vacations's investor presentation, May 12, 2017

  1. Slide 1: Hilton Grand Vacations Investor Presentation Q1 2017

    HILTON GRAND VACATIONS Investor Presentation Q1 2017 © Hilton Grand Vacations Proprietary

  2. Slide 2: Disclaimer

    DISCLAIMER This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to our expectations r

  3. Slide 3: Company Overview

    Company Overview 3 © Hilton Grand Vacations Proprietary

  4. Slide 4: The New Paradigm in Vacation Ownership

    THE NEW PARADIGM IN VACATION OWNERSHIP Exceptional Vacation Offerings 48 UPSCALE ASSETS IN HIGH-DEMAND LOCATIONS2 14K EXCHANGE OPTIONS 94 OUT OF 100 QUALITY ASSURANCE (AVERAGE SCORE) Strong Net Owner Growth 8% 2007–2016 CONTRACT SALES CAGR 269K 12/31/2016 CLUB MEMBERS 8% CAGR 212 230 250 269 2013 20

  5. Slide 5: Customer Life Cycle

    CUSTOMER LIFE CYCLE Real Estate First Time Buyer • Deeded timeshare • Real Estate margin 27.6% YE 2016 Financing Credit • Loans to high-quality customers • Interest income • Origination and servicing fees Club & Resort Dues & Fees • Manage resort HOAs – HOA management fees • Operate HGV Club –Club e

  6. Slide 6: Revenue Life Cycle

    REVENUE LIFE CYCLE We expect to generate 60% of a customer’s lifetime value after the initial purchase. Initial VOI Purchase ~$25K Purchase of home resort stay and points Follow-on VOI Spend Point reloads for nicer rooms and locations 37% ~60% 10% 13% 39% 1% Financing1 Financing of some or all of th

  7. Slide 7: Vacation Ownership Is Flexible

    VACATION OWNERSHIP IS FLEXIBLE Home Resort HGV Club Points Hilton Hotels Other Uses 14,000+ Vacation Options 90% in Hilton Ecosystem Lagoon Tower 48 HGV Resorts 5,000 Hilton Hotels Cruise Exchange, RCI & Airline Source: Company reports 7 © Hilton Grand Vacations Proprietary

  8. Slide 8: Consistent Growth

    CONSISTENT GROWTH Timeshare Industry Sales ($b) $12.0b WYNDHAM** VACATION OWNERSHIP $2.0b $10.0b vistana SIGNATURE EXPERIENCE $1.6b $8.0b H Holiday inn Club Vacations* MARRIOTT VACATIONS WORLDWIDE $1.2b $6.0b DISNEY Vacation Club HILTON GRAND VACATIONS $0.8b HYATT VACATION OWNERSHIP $4.0b MARKET VOL

  9. Slide 9: Strong Market Positioning

    STRONG MARKET POSITIONING Trailing 12-Month Sales Relative to Calendar Year 2007 HGV Market Share: 5%12% (‘07-‘15) 200% 175% 150% 125% 100% 75% 50% 25% 0% HGV WYN INDUSTRY VAC SVO1 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15 Q4-16 2016 HGV VAC ILG1 2 WYN Contract Sales ($ millions) 1,172 7

  10. Slide 10: Strategic Priorities

    STRATEGIC PRIORITIES Grow Sales and Member Base Maximize Customer Engagement & Experience Optimize our Sales Mix of Capital Efficient Inventory Pursue Opportunistic Business Ventures Focus on Talent and Operating Efficiency Grow contract sales with balanced mix of new and existing owners Expand prod

  11. Slide 11: High-Quality, Loyal Customers

    HIGH-QUALITY, LOYAL CUSTOMERS We consider our ~273,000 members to be among the highest quality in the industry with: $113,000 92% 25 743 Average Household Income (Owners as of 12/31/16) Homeowners (Owners as of 12/31/16) Leisure Travel Days Per Year Weighted Average Fico Score1 (3 months ended 3/31/

  12. Slide 12: Highly Effective Customer Engagement Model

    HIGHLY EFFECTIVE CUSTOMER ENGAGEMENT MODEL 300 200 100 0 Tours (000s) ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 Non-Owner Owner 12 © Hilton Grand Vacations Proprietary

  13. Slide 13: Marketing Channels

    MARKETING CHANNELS 2016 Marketing Mix In House 27% Non-Hilton Affiliate 9% Hilton Hotel Marketing 9% Club Direct 6% Direct Marketing 49% 13 © Hilton Grand Vacations Proprietary

  14. Slide 14: Net Owner Growth

    NET OWNER GROWTH Member Growth (1999 – 2016) 300,000 200,000 100,000 0 16% CAGR 269K ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 US Japan Other Int’l 14 © Hilton Grand Vacations Proprietary

  15. Slide 15: Industry-Leading Net Owner Growth

    INDUSTRY-LEADING NET OWNER GROWTH Net Owner Growth HILTON GRAND VACATIONS Ilg WYNDHAM VACATION OWNERSHIP MARRIOTT VACATIONS WORLDWIDE CAGR 2011–2016 9% 2%1 2% (1)% (1) Reflects 2014-2016 growth in members for Vistana Signature Experiences and Hyatt Vacation Ownership Source: Company analysis 15 © Hi

  16. Slide 16: Capital-Efficient Business Model

    CAPITAL-EFFICIENT BUSINESS MODEL 26% 56% 18% Fee-for-Service Capital: • Third Party Capital Revenue Streams: • Commissions & Brand Fees • Club & Resort Management • Rental & Ancillary Margin: • vs. Developed - lower • vs. JIT - lower Return: • vs. Developed - higher • vs. JIT - higher 26% 56% 18% Ju

  17. Slide 17: Capital-Efficient Model Allows Us to Develop Inventory Rapidly

    THE CAPITAL-EFFICIENT MODEL ALLOWS US TO DEVELOP INVENTORY RAPIDLY AND SUPPORT HIGHER SALES HGV Contract Sales (2011-2016) (Millions of Dollars) 12.5% ROIC 1,200 1,000 800 600 400 200 0 688 52 52 550 86 2011 796 134 546 116 2012 829 258 319 252 2013 905 351 235 319 2014 1,068 611 246 211 2015 35.4%

  18. Slide 18: Key Development Partners

    KEY DEVELOPMENT PARTNERS 3rd Party Developers Property Names (dates) # of units HGV Investment ($ millions) Estimated Gross Volume ($ millions) Since 2010 LANTERN ASSET MANAGEMENT • Elara – 2012 (Conversion) 1,200 $21 $1,540 – 1,880 2,690 units added Centerbridge • Sunrise Lodge – 2012 (Conversion)

  19. Slide 19: Financial Strengths

    Financial Strengths

  20. Slide 20: Key Business Drivers

    KEY BUSINESS DRIVERS Real estate revenues driven by tours and closings Real estate margin driven by inventory, sales and marketing efficiency We finance 2/3 of our owned inventory sales and scale and low cost of funds drives financing margin Net owner growth focus expands member base Growing members

  21. Slide 21: Key Business Drivers

    KEY BUSINESS DRIVERS Tours (thousands) 288 306 246 262 2013 2014 2015 2016 Contract Sales ($ millions) $1,172 $1,068 $905 $829 2013 2014 2015 2016 Financing Propensity1 63.6% 65.3% 55.1% 46.9% 2013 2014 2015 2016 Default Rate 3.67% 3.22% 2.99% 2.84% 2013 2014 2015 2016 # of Members (thousands) 269 2

  22. Slide 22: Resilient Business Model

    RESILIENT BUSINESS MODEL Contribution to Segment Adjusted EBITDA 2016 39% Contractual and Recurring Financing 19% Real Estate 45% Club & Resort 20% Rental & Ancillary 16% 38% One-Year Visibility 22 © Hilton Grand Vacations Proprietary

  23. Slide 23: Outlook and Adjusted EBITDA Reconciliation

    OUTLOOK AND ADJUSTED EBITDA RECONCILIATION 2017E (In millions) Low Case High Case Adjusted EBITDA1 372 397 Share based comp 16 14 Other items2 11 11 EBITDA1 345 372 Corporate debt interest expense 27 27 Depreciation and amortization 27 27 Income tax expense 121 132 Net income 170 186 Cash flow from

  24. Slide 24: Historical Adjusted EBITDA Reconciliation

    HISTORICAL ADJUSTED EBITDA RECONCILIATION Year Ended December 31, 2013 2014 2015 2016 Total Revenues $1,224 $1,317 $1,475 $1,583 Net income 128 167 174 168 Recourse debt interest expense 48 36 29 29 Income tax expense 90 113 118 125 Depreciation and amortization 16 18 22 24 EBITDA1 $282 $334 $343 $3

  25. Slide 25: LTM Sales and Segment Adjusted EBITDA Reconciliation

    LTM SALES AND SEGMENT ADJUSTED EBITDA RECONCILIATION Year Ended December 31, 2015 2016 Contract Sales 1,068 1,172 Fee-for-Service Sales 611 657 Owned Sales 457 515 Business Lines Real Estate Revenues Sales of VOIs, net 492 508 Sales, marketing, brand and other fees 457 499 Expenses Cost of VOI sales

  26. Slide 26: Hilton Grand Vacations

    Hilton Grand Vacations 26 © Hilton Grand Vacations Proprietary

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