Hilton Grand Vacations Inc. · NYSE:HGV
Hilton Grand Vacations — Debt Investor Presentation (May 2021)
51 slides from Hilton Grand Vacations's debt investor presentation, May 10, 2021
Slide 1: Lender Presentation May 10, 2021
Lender Presentation May 10, 2021 Exhibit 99.1
Slide 2: Confidentiality and forward-looking statements
This slide 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 in whole or in part with
Slide 3: Agenda
Agenda Transaction overview Combined company overview Key credit highlights Segment overview and update Historical financial performance Syndication Overview Appendix
Slide 4: Transaction Overview
Transaction Overview
Slide 5: Executive Summary
Executive Summary On March 10, 2021, Hilton Grand Vacations Inc. (“HGV” or the “Company”) announced it had entered into a definitive agreement to acquire Diamond Resorts International, Inc. (“Diamond”) from funds managed by affiliates of Apollo Global Management, Inc. (“Apollo”), funds managed by af
Slide 6: Sources and uses & pro forma capitalization
Sources and uses & pro forma capitalization Excludes non-recourse, securitized timeshare debt of $611 million. 34.5 million HGV common shares issued at $40.32. EBITDA adjusted to exclude the impact of net deferrals of revenue and direct expenses related to the Sales of VOIs under construction. Diamo
Slide 7: Combined Company Overview
Combined Company Overview
Slide 8: The acquisition of Diamond Resorts presents a transformational opportunity
The acquisition of Diamond Resorts presents a transformational opportunity 1 Significant value creation from scale benefits of combining the largest independent timeshare company with the strength of Hilton Grand Vacations’ brand and culture 4 Diversifies HGV portfolio, adding additional drive-to de
Slide 9: Combined Company Overview
Combined Company Overview Adjusted for net deferrals of revenue and direct expenses related to the Sales of VOIs under construction. Hilton Grand Vacations is a global timeshare company focused on marketing and selling VOIs, managing vacation resorts in top leisure and urban destinations and operati
Slide 10: A powerful combination of diversified and complementary portfolio
A powerful combination of diversified and complementary portfolio accelerates growth via… World-class hospitality with the strength of the trusted Hilton brand 62 upper upscale and luxury properties in premier resort destinations Proven track record of positive Net Owner Growth (NOG) Points-based de
Slide 11: Broadest chain scale offering in the industry
… Broadest chain scale offering in the industry Midscale Upper Midscale Upscale Upper Upscale Luxury Hilton Vacation Club Former Diamond Club Competitors1 Hilton Vacation Club Former Diamond Properties Enhances alignment with Hilton system and their 112 million Hilton Honors members Illustrative cha
Slide 12: And more properties in more places
…And more properties in more places Benefits of expanded geographic portfolio 34 8 17 18 DRI Beach Ski Urban 18 HGV 911 9 27 18 Higher tour flow, with more locations to access and offer Higher conversion, with broader appeal to new customers 38 9 16 54 15 9 29 32 24 38 US + Canada Only Common market
Slide 13: New branded trust offers additional benefits
New branded trust offers additional benefits Advantages for combined entity Premium pricing for certainty of availability in high demand real estate markets Inventory sourcing flexibility and efficiency allows us to employ a fee-for-service model with multiple partners Ability to pre-sell new develo
Slide 14: Key Credit Highlights
Key Credit Highlights
Slide 15: Summary Credit Highlights
Summary Credit Highlights Industry leading diverse portfolio and owner network 1 Diversified earnings profile Significant synergies from strategic combination Broadened addressable market Attractive free cash flow profile Strong and flexible balance sheet Experienced management team 2 3 4 5 6 7
Slide 16: Industry Leading Diverse Portfolio and Owner Network
Industry Leading Diverse Portfolio and Owner Network 731K 660K 405K 326K 220K Owners 878K 150 110 91 59 45 Resorts 230 663K 383K 280K 236K Tours 945K $1,524 $1,410 $932 $619 $3,439 $3,403 $3,331 $2,642 $2,381 VPG $3,518 $991 $885 2 $758 $453 $305 $122 Contract Sales $ in millions $2,355 $2,342 448K
Slide 17: Diversified earnings profile with increased recurring and fee-based earnings
Diversified earnings profile with increased contribution from recurring and fee-based earnings Adjusted for net deferrals of revenue and direct expenses related to the Sales of VOIs under construction. 2 New buyers and owner upgrades further grow these fee streams and create a multiplier effect NOG
Slide 18: Acquisition unlocks significant synergies
Acquisition unlocks significant synergies 1 Cost synergies Revenue levers More products Branded trust product Expanded chain scale Broader price coverage Experiential offerings More places Expanded regional network Higher NOG Additional HGV owner sales More owners Diamond owner base activated by Hil
Slide 19: Broadened addressable market via wider range of price points
Broadened addressable market via wider range of price points List price per week for HGV vs. Diamond inventory… Diamond's 75th percentile price point sits just below HGV's lowest 25th percentile1 …enhances value proposition for more demographics, expanding Company’s core market # US householders age
Slide 20: Focus on efficiency will drive free cash flow conversion
Focus on efficiency will drive free cash flow conversion Tap significant developed inventory pipeline to reduce near-term spending needs Reduce long-term inventory spending with increased rate of inventory recapture driven by Diamond’s capital efficient points-based system Maintain industry-leading
Slide 21: Strong and flexible balance sheet to support the business
Acquisition results in a strong and flexible balance sheet to support the business Pro-forma liquidity of $1.0 billion at year-end 2020 Nearly $300 million of receivables eligible for securitization Capital market efficiencies from increased scale of combined ABS platform Cash flow generation will d
Slide 22: Experienced Management Team
Experienced Management Team 7 Mark Wang President CEO Years with HGV: 22 Gordon Gurnik EVP, COO Years with HGV: 3 Dan Mathewes EVP, CFO Years with HGV: 3 Served as Executive Vice President and President, Hilton Grand Vacations for Hilton Worldwide since March 2008 First joined the company in 1999 as
Slide 23: Segment Overview & Update
Segment Overview & Update
Slide 24: HGV Is Well-positioned Despite COVID-19 Disruptions
HGV Is Well-positioned Despite COVID-19 Disruptions Properties conducive to social distancing generally feature in-room full kitchen, washer/dryer and more square footage, reducing reliance on common areas Limited exposure to volatility in asset values focus on selling out projects vs. long-term ass
Slide 25: HGV has Experienced Consistent Growth Despite Market Downturn
HGV has Experienced Consistent Growth Despite Unprecedented Market Downturn 1993 – 2019 Timeshare Industry Sales CAGR: +8% HGV net VOI sales ($B)1 Timeshares industry sales ($B) Source: ARDA, public financials, Company reports, industry reports, and HGV Internal Data. Unless otherwise noted, HGV Net
Slide 26: Business Segments Overview
Business Segments Overview Source: Public filings. Real Estate Sales & Financing Real Estate Sales Market and sell fee-simple VOIs developed both by HGV or by third parties, and source VOIs through fee-for-service agreements with third-party developers. HGV will also sell point-based VOI, permitting
Slide 27: Combination of HGV's and Diamond's flexible products
The combination of HGV’s and Diamond’s unique and flexible products garner larger share of wallet, drive net owner growth and promote customer retention Broad Product Offerings Maximize Owner Choice and Flexibility HGV’s Points-Based Deeded Timeshare Product Diamond’s Points-Based Trust Timeshare Pr
Slide 28: Balanced Sales Mix to Owners and New Buyers Drives NOG
Balanced Sales Mix to Owners and New Buyers Drives NOG Owners Sales Tours to New and Existing Members In-House Tours Tours (000’s) Contract Sales ($ millions) Owners (000’s) Strong focus on Net Owner Growth (“NOG”) and embedded value Extensive marketing platform and new customer pipeline from Hilton
Slide 29: High Quality, Loyal Customer Base
High Quality, Loyal Customer Base Source: Public filings, HGV and Diamond management provided data. Note: As of Q1 2021. 1)Weighted average FICO score of the loan portfolio since FY 2020.
Slide 30: Significant In-Place Inventory and Pipeline Projects to Support Growth
Significant In-Place Inventory and Pipeline Projects to Support Growth Recent Developments Sequel 207 Units Sales Start: January 2020 Resort Open: March 2021 The Quin by Hilton Club 140 Units Sales Start: October 2020 Resort Open: October 2021 The Beach Resort Sesoko by Hilton Club 161 Units Sales S
Slide 31: Capital-lite inventory strategy supports growth
Significant In-Place Inventory and Pipeline Projects to Support Growth Diamond’s capital-lite inventory strategy provides a relatively low-cost, consistent stream of timeshare inventory – Diamond does not need to spend capital on inventory development to maintain sales Existing pool of unsold invent
Slide 32: Consumer Financing Segment Generates Consistent, High Margins
Consumer Financing Segment Generates Consistent, High Margins Attractive net interest margin2 Core functions Consumer finance highlights Underwriting Credit underwriting Contract origination Price compliance Escrow processing Controls Sales / inventory Quality assurance Loan & HOA servicing Collater
Slide 33: Loan Portfolio Overview
Loan Portfolio Overview Source: Public filings, HGV and Diamond management provided data. Note: As of Q1 2021. 1)Weighted average FICO score of the loan portfolio since FY 2020.
Slide 34: Resort and Club Management provide recurring revenue streams
Management of resorts in the HGV and Diamond networks, Diamond collections and properties developed by third parties Services provided span operations, hospitality, and finance Platform scale, systems and inventory management benefit HOAs Resort management Resort & Club Management Provide Predictabl
Slide 35: Transient Rentals Offer Ability to Monetize Unsold Inventory
Transient Rentals Offer Ability to Monetize Unsold Inventory Diamond Ocean Beach Club Virginia Beach, Virginia Las Palmeras, a Hilton Grand Vacations Club Orlando, FL Rental inventory offered through proprietary, branded channels (Hilton.com) and third party channels (e.g. OTAs) Revenue from rentals
Slide 36: Historical Financial Performance
Historical Financial Performance
Slide 37: HGV Q1 2021 Financial Results Highlights
HGV Q1 2021 Financial Results Highlights Consistent with Q1 2021 HGV 10Q filing Includes charges to real estate sales and financing segment from the resort operations and club management segment for fulfillment of discounted marketing package stays at resorts. These charges totals $3 million and $8
Slide 38: Diamond Q1 2021 Financial Results Highlights
Diamond Q1 2021 Financial Results Highlights Q1 2021 recent developments Similar to HGV, Diamond Q1 2021 showed improvement for a third straight quarter since the onset of COVID-19 and represents continuation of quarterly revenue trajectory Q1 2021 revenue declined by $13 million or 4% y-o-y. Althou
Slide 39: Summary of Standalone HGV Historical Financials
Summary of Standalone HGV Historical Financials Total Revenue 1 ($ in millions) Contract Sales ($ in millions) Adj. EBITDA (excl. deferrals) 2 ($ in millions) 2018 Revenue as filed by Hilton Grand Vacations. Based on economic Adj. EBITDA, excluding the impact of construction deferrals. Calculated as
Slide 40: Summary of HGV Key Performance Indicators
Summary of HGV Key Performance Indicators Tours (000s) Owners (000s) Volume Per Guest (“VPG”) Default Rate
Slide 41: Summary of Standalone Diamond Resorts Historical Financials
Summary of Standalone Diamond Resorts Historical Financials Revenue as filed by Dakota Holdings, Inc (“Diamond Resorts”). Revenue does not include reclassifications as presented in the proxy filings. Diamond EBITDA derived from Diamond Resorts financial statements, further adjusted to conform to HGV
Slide 42: Summary of Diamond Resorts Key Performance Indicators
Summary of Diamond Resorts Key Performance Indicators Tours (000s) Owners (000s) Volume Per Guest (“VPG”) Default Rate
Slide 43: Sequential Improvement in Quarterly Financial Performance
Sequential Improvement in Quarterly Financial Performance Contract Sales ($ in millions) Adjusted EBITDA (excl. deferrals) 2 ($ in millions) Total Revenue 1 ($ in millions) Contract Sales ($ in millions) Adjusted EBITDA (excl. deferrals) 2 ($ in millions) Total Revenue 1 ($ in millions) HGV revenue
Slide 44: Pro Forma Combined Annual Historical Financials
Contract Sales ($ in millions) Pro Forma Combined Annual Historical Financials Based on economic Adj. EBITDA, excluding the impact of construction deferrals. Diamond EBITDA derived from Diamond Resorts financial statements, further adjusted to conform to HGV’s definition of Adjusted EBITDA. Calculat
Slide 45: Syndication Overview
Syndication Overview
Slide 46: Questions & Answers
Questions & Answers
Slide 47: Appendix
Appendix
Slide 48: 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 HGV Securitization Subsidiaries PF Ownersh
Slide 49: 2019 Net income to Adjusted EBITDA reconciliation
2019 Net income to Adjusted EBITDA reconciliation Derived from HGV’s 2019 Annual Report on Form 10-K. Derived from Dakota Holdings, Inc (“Diamond Resorts”) 2019 financial statements, further adjusted to conform to HGV’s definition of Adjusted EBITDA. For Diamond Resorts, other adjustment items inclu
Slide 50: TTM March 2021 Net income to Adjusted EBITDA reconciliation
TTM March 2021 Net income to Adjusted EBITDA reconciliation Derived from HGV's Quarterly and Annual Reports on Form 10-Q and Form 10-K. Derived from Dakota Holdings, Inc ("Diamond Resorts") 2020 and 2021 financial statements, further adjusted to conform to HGV's definition of Adjusted EBITDA. Repres
Slide 51: TTM March 2021 Adjusted Free Cash Flow reconciliation
TTM March 2021 Adjusted Free Cash Flow reconciliation For the last twelve months ended March 31, 2021, this amount includes $15 million of acquisition costs associated with the recently announced acquisition of Diamond Resorts.
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