Hilton Grand Vacations Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2022. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements convey management’s expectations as to the future of HGV, and are based on management’s beliefs, expectations, assumptions and such plans, estimates, projections and other information available to management at the time HGV makes such statements. Forward-looking statements include all statements that are not historical facts and may be identified by terminology such as the words “outlook,” “believe,” “expect,” “potential,” “goal,” “continues,” “may,” “will,” “should,” “could,” “would,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “future,” “guidance,” “target,” or the negative version of these words or other comparable words, although not all forward-looking statements may contain such words. The forward-looking statements contained in this Quarterly Report on Form 10-Q include statements related to HGV’s revenues, earnings, taxes, cash flow and related financial and operating measures, and expectations with respect to future operating, financial and business performance, and other anticipated future events and expectations that are not historical facts, including, related to the proposed transaction between HGV and Bluegreen Vacations Holding Corporation (“Bluegreen”). HGV cautions you that our forward-looking statements involve known and unknown risks, uncertainties and other factors, including those that are beyond HGV’s control, which may cause the actual results, performance or achievements to be materially different from the future results. Any one or more of these risks or uncertainties, including those related to the proposed merger transaction between HGV and Bluegreen, could adversely impact HGV’s operations, revenue, operating profits and margins, key business operational metrics discussed under “—Operational Metrics” below, financial condition or credit rating. For additional information regarding factors that could cause HGV’s actual results to differ materially from those expressed or implied in the forward-looking statements in this Quarterly Report on Form 10-Q, please see the risk factors discussed in “Part I—Item 1A. Risk Factors” and the Summary of Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as supplemented and updated by the risk factors described from time to time in other periodic reports that we file with the SEC. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. Except for HGV’s ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, changes in management’s expectations, or otherwise. Terms Used in this Quarterly Report on Form 10-Q Except where the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Hilton Grand Vacations,” “HGV,” “the Company,” “we,” “us” and “our” refer to Hilton Grand Vacations Inc., together with its consolidated subsidiaries. Except where the context requires otherwise, references to our “properties” or “resorts” refer to the timeshare properties that we manage or own. Of these resorts and units, a portion is directly owned by us or joint ventures in which we have an interest; and the remaining resorts and units are owned by our third-party owners. “Developed” refers to VOI inventory that is sourced from projects developed by HGV. “Fee for service” refers to VOI inventory that we sell and manage on behalf of third-party developers. “Just-in-time” refers to VOI inventory that is primarily sourced in transactions that are designed to closely correlate the timing of the acquisition by us with our sale of that inventory to purchasers. “Points-based” refers to VOI sales that are backed by physical real estate that is contributed to a trust. “VOI” refers to vacation ownership intervals and interests. “Collections” refers to the acquired portfolio of resort properties included in Diamond's single- and multi-use trusts. Non-GAAP Financial Measures This Quarterly Report on Form 10-Q includes discussion of terms that are not recognized terms under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), and financial measures that are not calculated in accordance 26 Table of Contents with U.S. GAAP, including earnings before interest expense (excluding interest expense relating to our non-recourse debt), taxes and depreciation and amortization (“EBITDA”), Adjusted EBITDA, fee-for-service commissions and brand fees, sales and marketing expense, net, sales revenue, real estate expense, and profits and profit margins for our real estate, financing, resort and club management, and rental and ancillary services. Operational Metrics This Quarterly Report on Form 10-Q includes discussion of key business operational metrics, including contract sales, tour flow, and volume per guest (“VPG”). See “Key Business and Financial Metrics” and “Results of Operations” for a discussion of the meanings of these terms, the Company’s reasons for providing the applicable non-GAAP financial measures, and reconciliations of non-GAAP financial measures to measures calculated in accordance with U.S. GAAP. Overview Our Business We are a global timeshare company engaged in developing, marketing, selling, managing and operating timeshare resorts, timeshare plans and ancillary reservation services, primarily under the Hilton Grand Vacations brand. Our operations primarily consist of: selling vacation ownership intervals and vacation ownership interests (collectively, “VOIs” or “VOI”) for us and third parties; financing and servicing loans provided to consumers for their VOI purchases; operating resorts and timeshare plans; and managing our points-based Hilton Grand Vacations Club and Hilton Club exchange programs and the Diamond points-based multi-resort timeshare clubs and exchange programs. During 2022, we began offering a new club membership called HGV Max across certain of our sales centers. For any customer who purchases a VOI, this membership provides the ability to use points across all properties within our network. The membership provides new destinations for existing club owners and broader vacation opportunities for new buyers. It also combines the best benefits from our existing programs, new travel benefits, Hilton hotel discounts and benefits and alternative experiential options available to HGV Max owners. Our club offerings, including HGV Max, are collectively referred to as “Clubs”. As of September 30, 2023, we have over 150 properties located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada, and Japan. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia and feature spacious, condominium-style accommodations with superior amenities and quality service. As of September 30, 2023, we had approximately 526,000 members across our club offerings. Based on the type of Club membership, members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations resort, any property in the Hilton system of 22 industry-leading brands across approximately 7,300 properties, or affiliated properties, as well as numerous experiential vacation options, such as cruises and guided tours, or they have the option to exchange their VOI for various other timeshare resorts throughout the world through an external exchange program. In August 2023, a series of wildfires in Maui caused widespread property destruction, damage and loss of life. The fires resulted in resort closures and travel restrictions, adversely impacting travel, including in the surrounding Hawaiian Islands. We have 13 properties and six sales centers in the Hawaiian Islands, including two properties and sales centers in Maui. While neither of our Maui properties sustained physical damage, the decline in tourism throughout the region has negatively impacted our business and financial results, and there continues to be a level of uncertainty as to the extent of our continued business interruption. Therefore, we will continue to evaluate the overall impact of the wildfires on our operations through the remainder of the year and into 2024. Our Segments We operate our business across two segments: (1) Real estate sales and financing; and (2) Resort operations and club management. Real Estate Sales and Financing Our primary product includes the marketing and selling of fee-simple VOIs deeded in perpetuity and right to use real estate interests, developed either by us or by third parties. This ownership interest is an interest in real estate generally equivalent to one week on an annual or biennial basis, at the timeshare resort in which the VOI is located. Traditionally, timeshare operators have funded 100% of the investment necessary to acquire land and construct timeshare properties. We source VOIs through developed properties and fee-for-service and just-in-time agreements with third-party developers and have focused our inventory strategy on developing an optimal inventory mix. The fee-for-service agreements enable us to generate fees from the sales and marketing of the VOIs and Club memberships and from the management of the timeshare properties without requiring us to fund acquisition and construction costs. The just-in-time agreements enable us to source 27 Table of Contents VOI inventory in a manner that allows us to correlate the timing of acquisition of the inventory with the sale to purchasers. Sales of owned, including just-in-time, inventory generally result in greater Adjusted EBITDA contributions, while fee-for-service sales require less initial investment and allow us to accelerate our sales growth. Both sales of owned inventory and fee-for-service sales generate long-term, predictable fee streams, by adding to the Club membership base and properties under management, that generate strong returns on invested capital. Another one of our products is the marketing and selling of beneficial interests in one of our Collections, which are represented by an annual or biennial allotment of points that can be utilized for vacations at any of the resorts in that Collection. In general, purchasers of a VOI in a collection do not acquire a direct ownership interest in the resort properties in the Collection. Rather for each Collection, one or more trustees hold legal title to the deeded fee simple real estate interests or the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Collection’s association members in accordance with the applicable agreements. For the nine months ended September 30, 2023, sales from fee-for-service and just-in-time inventory were 30%, and 17% of contract sales, respectively. See “ Key Business and Financial Metrics — Real Estate Sales Operating Metrics ” for additional discussion of contract sales. The estimated contract sales value related to our inventory that is currently available for sale at open or soon-to-be open projects and inventory at new or existing projects that will become available for sale in the future upon registration, delivery or construction is $11.6 billion at current pricing. Capital efficient arrangements, comprised of our fee-for-service and just-in-time inventory, represented approximately 36% of that supply. We believe that the visibility into our long-term supply allows us to efficiently manage inventory to meet predicted sales, reduce capital investments, minimize our exposure to the cyclicality of the real estate market and mitigate the risks of entering into new markets. We sell our vacation ownership products primarily through our distribution network of both-in-market and off-site sales centers. Our products are currently marketed for sale throughout the United States, Mexico, Canada, Europe, and Japan. We operate sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership. We have over 60 sales distribution centers in various domestic and international locations. Our marketing and sales activities are based on targeted direct marketing and a highly personalized sales approach. We use targeted direct marketing to reach potential members who are identified as having the financial ability to pay for our products, are frequent leisure travelers, and have an affinity with our brands. Tour flow quality impacts key metrics such as close rate and VPG, defined in “ Key Business and Financial Metrics—Real Estate Sales Operating Metrics .” Additionally, the quality of tour flow impacts sales revenue and the collectability of our timeshare financing receivables. For the nine months ended September 30, 2023, 69% of our contract sales were to our existing owners, compared to 71% for the nine months ended September 30, 2022. We provide financing for members purchasing our developed and acquired inventory and generate interest income on the loans. Our timeshare financing receivables are collateralized by the underlying VOIs and are generally structured as 10-year , fully-amortizing loans that bear a fixed interest rate typically ranging from 2.5% to 25% per annum. Financing propensity was 62% and 63% for the nine months ended September 30, 2023 and 2022, respectively. We calculate financing propensity as contract sales volume of financed contracts originated in the period divided by contract sales volume of all contracts originated in the period. The interest rate on our loans is determined by, among other factors, the amount of the down payment, the borrower’s credit profile and the loan term. The weighted-average FICO score for loans to U.S. and Canadian borrowers at the time of origination were as follows: Nine Months Ended September 30, 2023 2022 Weighted-average FICO score 734 735 Prepayment is permitted without penalty. When a member defaults, we ultimately return their VOI to inventory for resale and that member no longer participates in our Clubs. Some of our timeshare financing receivables have been pledged as collateral in our securitization transactions, which have in the past and may in the future provide funding for our business activities. In these securitization transactions, special purpose entities are established to issue various classes of debt securities which are generally collateralized by a single pool of assets consisting of timeshare financing receivables that we service and related cash deposits. For additional information see Note 5: Timeshare Financing Receivables in our condensed consolidated financial statements. In addition, we earn fees from servicing our securitized timeshare financing receivables and the loans provided by third-party developers of our fee-for-service projects to purchasers of their VOIs. 28 Table of Contents Resort Operations and Club Management We enter into management agreements with the HOAs of the timeshare resorts developed by us or a third party. Each of the HOAs is governed by a board of directors comprised of owner and developer representatives that are charged with ensuring the resorts are well-maintained and financially stable. Our services include day-to-day operations of the resorts, maintenance of the resorts, preparation of books and financial records including reports, budgets and projections, arranging for annual audits and maintenance fee billing and collections and employment training and personnel oversight. Our HOA management agreements provide for a cost-plus management fee, which means we generally earn a fee equal to 10% to 15% of the costs to operate the applicable resort. As a result, the fees we earn are highly predictable due to the relatively fixed nature of resort operating expenses and our management fees are unaffected by changes in rental rate or occupancy. We are also reimbursed for the costs incurred to perform our services, principally related to personnel providing on-site services. The original terms of our management agreements typically range fro m three to five years and the agreements are subject to periodic renewal for one to three-year periods. Many of these agreements renew automatically unless either party provides advance notice of termination before the expiration of the term. We also manage and operate the Clubs and exchange programs. When owners purchase a VOI, they are generally enrolled in a Club which allows the member to exchange their points for a number of vacation options. In addition to an annual membership fee, Club members pay incremental fees depending on exchanges they choose within the Club system. We rent unsold VOI inventory, third-party inventory and inventory made available due to ownership exchanges through our Club programs. We earn a fee from rentals of third-party inventory. Additionally, we provide ancillary offerings including food and beverage, retail and spa offerings at these timeshare properties. Key Business and Financial Metrics Real Estate Sales Operating Metrics We measure our performance using the following key operating metrics: • Contract sales represents the total amount of VOI products (fee-for-service, just-in-time, developed, and points-based) under purchase agreements signed during the period where we have received a down payment of at least 10% of the contract price. Contract sales differ from revenues from the Sales of VOIs, net that we report in our condensed consolidated statements of operations due to the requirements for revenue recognition, as well as adjustments for incentives. While we do not record the purchase price of sales of VOI products developed by fee-for-service partners as revenue in our condensed consolidated financial statements, rather recording the commission earned as revenue in accordance with U.S. GAAP, we believe contract sales to be an important operational metric, reflective of the overall volume and pace of sales in our business and believe it provides meaningful comparability of our results to the results of our competitors which may source their VOI products differently. We believe that the presentation of contract sales on a combined basis (fee-for-service, just-in-time, developed and points-based) is most appropriate for the purpose of the operating metric; additional information regarding the split of contract sales, is included in “—Real Estate” below. • Tour flow represents the number of sales presentations given at our sales centers during the period. • Volume per guest (“VPG”) represents the sales attributable to tours at our sales locations and is calculated by dividing contract sales, excluding telesales, by tour flow. We consider VPG to be an important operating measure because it measures the effectiveness of our sales process, combining the average transaction price with the closing rate. EBITDA and Adjusted EBITDA EBITDA, presented herein, is a financial measure that is not recognized under U.S. GAAP that reflects net income, before interest expense (excluding non-recourse debt), a provision for income taxes and depreciation and amortization. Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) other gains, including asset dispositions and foreign currency transactions; (ii) debt restructurings/retirements; (iii) non-cash impairment losses; (iv) share-based and other compensation expenses; and (v) other items, including but not limited to costs associated with acquisitions, restructuring, amortization of premiums and discounts resulting from purchase accounting, and other non-cash and one-time charges. EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. 29 Table of Contents In addition, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income, cash flow or other methods of analyzing our results as reported under U.S. GAAP. Some of these limitations are: • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA and Adjusted EBITDA do not reflect our interest expense (excluding interest expense on non-recourse debt), or the cash requirements necessary to service interest or principal payments on our indebtedness; • EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; • EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; • EBITDA and Adjusted EBITDA do not reflect any cash requirements for future replacements of assets that are being depreciated and amortized; and • EBITDA and Adjusted EBITDA may be calculated differently from other companies in our industry limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations. See below under “Segment Results” for reconciliation of our EBITDA and Adjusted EBITDA to net income, our most comparable U.S. GAAP financial measure. Non-GAAP Measures within Our Segments Within each of our two reportable segments, we present additional profit and profit margin information for certain key activities—real estate, financing, resort and club management, and rental and ancillary services. These non-GAAP measures are used by our management team to evaluate the operating performance of each of our key activities, and to make day-to-day operating decisions. We believe these additional measures are also important in helping investors understand the performance and efficiency with which we are able to convert revenues for each of these primary activities into operating profit, both in dollars and as margins, and are frequently used by securities analysts, investors and other interested parties as one of common performance measures to compare results or estimate valuations across companies in our industry. Specifically— • Sales revenue represents sales of VOIs, net, and Fee-for-service commissions and brand fees earned from the sale of fee-for-service VOIs. Fee-for-service commissions and brand fees represents sales, marketing, brand and other fees, which corresponds to the applicable line item from our condensed consolidated statements of operations, adjusted by marketing revenue and other fees earned primarily from discounted marketing related packages which encompass a sales tour to prospective owners. Real estate expense represents costs of VOI sales and Sales and marketing expense, net . Sales and marketing expense, net represents sales and marketing expense, which corresponds to the applicable line item from our condensed consolidated statements of operations, adjusted by marketing revenue and other fees earned primarily from discounted marketing related packages which encompass a sales tour to prospective owners. Both fee-for-service commissions and brand fees and sales and marketing expense, net, represent non-GAAP measures. We present these items net because it provides a meaningful measure of our underlying real estate profit related to our primary real estate activities which focus on the sales and costs associated with our VOIs. 30 Table of Contents • Real estate profit represents sales revenue less real estate expense. Real estate margin is calculated as a percentage by dividing real estate profit by sales revenue. We consider real estate profit margin to be an important non-GAAP operating measure because it measures the efficiency of our sales and marketing spending, management of inventory costs, and initiatives intended to improve profitability. • Financing profit represents financing revenue, net of financing expense, both of which correspond to the applicable line items from our condensed consolidated statements of operations. Financing profit margin is calculated as a percentage by dividing financing profit by financing revenue. We consider this to be an important non-GAAP operating measure because it measures the efficiency and profitability of our financing business in connection with our VOI sales. • Resort and club management profit represents resort and club management revenue, net of resort and club management expense, both of which correspond to the applicable line items from our condensed consolidated statements of operations. Resort and club management profit margin is calculated as a percentage by dividing resort and club management profit by resort and club management revenue. We consider this to be an important non-GAAP operating measure because it measures the efficiency and profitability of our resort and club management business that support our VOI sales business. • Rental and ancillary services profit represents rental and ancillary services revenues, net of rental and ancillary services expenses, both of which correspond to the applicable line items from our condensed consolidated statements of operations. Rental and ancillary services profit margin is calculated as a percentage by dividing rental and ancillary services profit by rental and ancillary services revenue. We consider this to be an important non-GAAP operating measure because it measures our ability to convert available inventory and unoccupied rooms into revenue and profit by transient rentals, as well as profitability of other services, such as food and beverage, retail, spa offerings and other guest services. Each of the foregoing four profit measures is not a recognized term under U.S. GAAP and should not be considered as an alternative to net income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our calculation of such measures may not be comparable to similarly titled measures of other companies. Furthermore, these measures have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income or other methods of analyzing our results as reported under U.S. GAAP. Such limitations include the fact that these measures only include those revenues and expenses related to one of the four specified operating activities as opposed to on a consolidated basis, and other limitations that are similar to those discussed above under “EBITDA and Adjusted EBITDA.” See below under “ Reconciliation of Non-GAAP Profit Measures to GAAP Measure ” for reconciliation of these four profit measures to net income, our most comparable U.S. GAAP financial measure. 31 Table of Contents Results of Operations Three and Nine Months Ended September 30, 2023 Compared with the Three and Nine Months Ended September 30, 2022 Segment Results The following tables present our revenues by segment. We do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment operating performance. Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Revenues: Real estate sales and financing $ 612 $ 745 $ (133) (17.9) $ 1,766 $ 1,783 $ (17) (1.0) Resort operations and club management 322 299 23 7.7 944 870 74 8.5 Total segment revenues 934 1,044 (110) (10.5) 2,710 2,653 57 2.1 Cost reimbursements 97 82 15 18.3 289 215 74 34.4 Intersegment eliminations (1) (13) (10) (3) 30.0 (40) (25) (15) 60.0 Total revenues $ 1,018 $ 1,116 $ (98) (8.8) $ 2,959 $ 2,843 $ 116 4.1 (1) See Note 16: Business Segments in our condensed consolidated financial statements for details on the intersegment eliminations. The following table reconciles net income, our most comparable U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA: Three Months Ended September 30, Variance (1) Nine Months Ended September 30, Variance (1) ($ in millions) 2023 2022 $ % 2023 2022 $ % Net income $ 92 $ 150 $ (58) (38.7) $ 245 $ 274 $ (29) (10.6) Interest expense 45 37 8 21.6 133 105 28 26.7 Income tax expense 44 54 (10) (18.5) 96 115 (19) (16.5) Depreciation and amortization 53 57 (4) (7.0) 156 181 (25) (13.8) Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates — 2 (2) (100.0) 1 2 (1) (50.0) EBITDA 234 300 (66) (22.0) 631 677 (46) (6.8) Other loss (gain) , net 1 (2) 3 NM (3) (1) (2) NM Share-based compensation expense 12 14 (2) (14.3) 38 40 (2) (5.0) Impairment expense — — — NM 3 — 3 100% Acquisition and integration-related expense 12 19 (7) (36.8) 42 49 (7) (14.3) Other adjustment items (2) 10 7 3 42.9 24 48 (24) (50.0) Adjusted EBITDA $ 269 $ 338 $ (69) (20.4) $ 735 $ 813 $ (78) (9.6) (1) NM - fluctuation in terms of percentage change is not meaningful. (2) These amounts include costs associated with restructuring, one-time charges, the amortization of premiums resulting from purchase accounting and other non-cash items. 32 Table of Contents We evaluate our business segment operating performance using segment Adjusted EBITDA, as described in Note 16: Business Segments in our condensed consolidated financial statements. For a discussion of our definition of EBITDA and Adjusted EBITDA, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key Business and Financial Metrics—EBITDA and Adjusted EBITDA.” The following table reconciles our segment Adjusted EBITDA to Adjusted EBITDA: Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Adjusted EBITDA: Real estate sales and financing (1) $ 205 $ 295 $ (90) (30.5) $ 563 $ 666 $ (103) (15.5) Resort operations and club management (1) 126 112 14 12.5 358 332 26 7.8 Adjustments: Adjusted EBITDA from unconsolidated affiliates 2 5 (3) (60.0) 8 12 (4) (33.3) License fee expense (37) (33) (4) 12.1 (101) (90) (11) 12.2 General and administrative (2) (27) (41) 14 (34.1) (93) (107) 14 (13.1) Adjusted EBITDA $ 269 $ 338 $ (69) (20.4) $ 735 $ 813 $ (78) (9.6) (1) Includes intersegment transactions, share-based compensation, depreciation and other adjustments attributable to the segments. (2) Excludes segment related share-based compensation, depreciation and other adjustment items. 33 Table of Contents Reconciliation of Non-GAAP Profit Measures to GAAP Measure The following table reconciles net income, our most comparable U.S. GAAP financial measure, to EBITDA and the total of our real estate, financing, resort and club management, and rental and ancillary services profit measures. Three Months Ended September 30, Variance (1) Nine Months Ended September 30, Variance (1) ($ in millions) 2023 2022 $ % 2023 2022 $ % Net income $ 92 $ 150 $ (58) (38.7) $ 245 $ 274 $ (29) (10.6) Interest expense 45 37 8 21.6 133 105 28 26.7 Income tax expense 44 54 (10) (18.5) 96 115 (19) (16.5) Depreciation and amortization 53 57 (4) (7.0) 156 181 (25) (13.8) Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates — 2 (2) (100.0) 1 2 (1) (50.0) EBITDA 234 300 (66) (22.0) 631 677 (46) (6.8) Other loss (gain), net 1 (2) 3 NM (3) (1) (2) NM Equity in earnings from unconsolidated affiliates (2) (2) (4) 2 (50.0) (8) (11) 3 (27.3) Impairment expense — — — 100% 3 — 3 100% License fee expense 37 33 4 12.1 101 90 11 12.2 Acquisition and integration-related expense 12 19 (7) (36.8) 42 49 (7) (14.3) General and administrative 40 50 (10) (20.0) 130 158 (28) (17.7) Profit $ 322 $ 396 $ (74) (18.7) $ 896 $ 962 $ (66) (6.9) Real estate profit $ 160 $ 253 $ (93) (36.8) $ 429 $ 531 $ (102) (19.2) Financing profit 50 43 7 16.3 152 130 22 16.9 Resort and club management profit 95 85 10 11.8 273 261 12 4.6 Rental and ancillary services profit 17 15 2 13.3 42 40 2 5.0 Profit $ 322 $ 396 $ (74) (18.7) $ 896 $ 962 $ (66) (6.9) (1) NM - fluctuation in terms of percentage change is not meaningful. (2) Excludes impact of interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates of $1 million for the nine months ended September 30, 2023. Also excludes impact of aforementioned items of $2 million for both the three and nine months ended September 30, 2022. 34 Table of Contents Reconciliation of Non-GAAP Real Estate Measures to GAAP Measures The following table reconciles our Sales, marketing, brand and other fees revenue, our most comparable U.S. GAAP financial measure, to Fee-for-service commissions and brand fees, and Sales and marketing expense, our most comparable U.S. GAAP financial measure, to Sales and marketing expense, net. Fee-for-service commissions and brand fees and Sales and marketing, net, are used in calculating our real estate profit and real estate profit margin. See “Real Estate Sales and Financing Segment—Real Estate” below. Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Sales, marketing, brand and other fees $ 170 $ 177 $ (7) (4.0) $ 501 $ 457 $ 44 9.6 Less: Marketing revenue and other fees (1) (63) (52) (11) 21.2 (176) (164) (12) 7.3 Fee-for-service commissions and brand fees $ 107 $ 125 $ (18) (14.4) $ 325 $ 293 $ 32 10.9 Sales and marketing expense $ 334 $ 322 $ 12 3.7 $ 971 $ 849 $ 122 14.4 Less: Marketing revenue and other fees (1) (63) (52) (11) 21.2 (176) (164) (12) 7.3 Sales and marketing expense, net $ 271 $ 270 $ 1 0.4 $ 795 $ 685 $ 110 16.1 (1) Includes revenue recognized through our marketing programs for existing owners and prospective first-time buyers and revenue associated with sales incentives, title service and document compliance. Real Estate Sales and Financing In accordance with Accounting Standards Codification Topic 606, “ Revenue from Contracts with Customers” (“ASC 606”), revenue and the related costs to fulfill and acquire the contract (“direct costs”) from sales of VOIs under construction are deferred until the point in time when construction activities are deemed to be completed. The real estate sales and financing segment is impacted by construction related deferral and recognition activity. In periods where Sales of VOIs and related direct costs of projects under construction are deferred, margin percentages will generally contract as the indirect marketing and selling costs associated with these sales are recognized as incurred in the current period. In periods where previously deferred Sales of VOIs and related direct costs are recognized upon construction completion, margin percentages will generally expand as the indirect marketing and selling costs associated with these sales were recognized in prior periods. The following table represents deferrals and recognitions of Sales of VOI revenue and direct costs for properties under construction: Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ 2023 2022 $ Sales of VOIs (deferrals) $ (12) $ 10 $ (22) $ (18) $ (53) $ 35 Sales of VOIs recognitions — 76 (76) 4 87 (83) Net Sales of VOIs (deferrals) recognitions (12) 86 (98) (14) 34 (48) Cost of VOI sales (deferrals) (3) 3 (6) (4) (18) 14 Cost of VOI sales recognitions — 27 (27) 1 30 (29) Net Cost of VOI sales (deferrals) recognitions (3) 30 (33) (3) 12 (15) Sales and marketing expense (deferrals) (2) 2 (4) (3) (8) 5 Sales and marketing expense recognitions — 11 (11) 1 13 (12) Net Sales and marketing expense (deferrals) recognitions (2) 13 (15) (2) 5 (7) Net construction (deferrals) recognitions $ (7) $ 43 $ (50) $ (9) $ 17 $ (26) Real estate sales and financing segment revenues decreased by $133 million for the three months ended September 30, 2023, compared to the same period in 2022, primarily due to a $133 million decrease in Sales of VOI, net, resulting from a $98 million decrease in net deferrals of sales of VOIs under construction, $18 million decrease in contract sales driven by lower VPG and the impact of the Maui wildfires, and $14 million higher provision for financing receivable losses. Sales, marketing, brand and other fees decreased $7 million driven by lower commissions earned on sales of fee- 35 Table of Contents for-service properties. This was partially offset by a $7 million increase in financing revenue primarily related to an increase in our loan portfolio and an increase in the weighted average interest rate. Real estate sales and financing segment revenues decreased by $17 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to a $90 million decrease in Sales of VOI, net, driven by a $48 million increase in net deferrals of sales of VOIs under construction, a 15.5% decrease in VPG, the impact of Maui wildfires, and $14 million higher provision for financing receivable losses. Sales, marketing, brand and other fees increased $44 million driven by higher commissions earned on sales of fee-for-service properties. In addition, there was a $29 million increase in financing revenue primarily related to an increase in our loan portfolio and an increase in the weighted average interest rate. Real estate sales and financing Adjusted EBITDA decreased by $90 million and $103 million for the three and nine months ended September 30, 2023, compared to the same periods in 2022, primarily due to an increase in marketing costs due to our emphasis in adding new owners, which typically carry a higher cost per tour, in addition to the overall decrease in segment revenues described above. Refer to “—Real Estate” and “—Financing” for further discussion on the revenues and expenses of the Real estate sales and financing segment. Resort Operations and Club Management Resort operations and club management segment revenues increased by $23 million and $74 million for the three and nine months ended September 30, 2023, compared to the same periods in 2022, primarily due to an increase in rental revenue. The rental revenue increase was driven primarily by an increase in occupied room nights compared to the same periods in 2022. For the nine months ended September 30, 2023, the additional increase in Resort operations and club management revenue was due to an increase in resort management revenue, primarily driven by higher fees. Resort operations and club management segment adjusted EBITDA increased by $14 million and $26 million for the three and nine months ended September 30, 2023, compared to the same periods in 2022, primarily due to the increase in Resort and club management and rental revenues described above, partially offset by an increase in resort and club management expenses due to personnel-related costs incurred to service increased arrivals and transaction activity. Refer to “— Resort and Club Management” and “—Rental and Ancillary Services” for further discussion on the revenues and expenses of the Resort operations and club management segment. Real Estate Sales and Financing Segment See “Reconciliation of Profit Measures to GAAP Measure” above. Real Estate Three Months Ended September 30, Variance (1) Nine Months Ended September 30, Variance (1) ($ in millions, except Tour flow and VPG) 2023 2022 $ % 2023 2022 $ % Contract sales $ 603 $ 621 $ (18) (2.9) $ 1,738 $ 1,747 $ (9) (0.5) Adjustments: Fee-for-service sales (2) (174) (175) 1 (0.6) (528) (488) (40) 8.2 Provision for financing receivables losses (46) (32) (14) 43.8 (117) (103) (14) 13.6 Reportability and other: Net (deferral) recognition of sales of VOIs under construction (3) (12) 86 (98) NM (14) 34 (48) NM Fee-for-service sale upgrades, net 6 5 1 20.0 18 14 4 28.6 Other (4) (10) (5) (5) 100.0 (57) (74) 17 (23.0) Sales of VOIs, net $ 367 $ 500 $ (133) (26.6) $ 1,040 $ 1,130 $ (90) (8.0) Tour flow 163,699 142,647 21,052 456,411 375,507 80,904 VPG $ 3,656 $ 4,229 $ (573) $ 3,771 $ 4,463 $ (692) (1) NM - fluctuation in terms of percentage change is not meaningful. (2) Represents contract sales from fee-for-service properties on which we earn Fee-for-service commissions and brand fees. (3) Represents the net recognition of revenues related to the Sales of VOIs under construction that are recognized when construction is complete. (4) Includes adjustments for revenue recognition, including amounts in rescission and sales incentives. 36 Table of Contents Contract sales decreased by $18 million for the three months ended September 30, 2023, compared to the same period in 2022, primarily due to a 13.5% decrease in VPG, and impact of Maui wildfires, partially offset by a 14.8% increase in tour flow. Contract sales decreased by $9 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to a 15.5% decrease in VPG, and impact of Maui wildfires, partially offset by a 21.5% increase in tour flow. Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Sales of VOIs, net $ 367 $ 500 $ (133) (26.6) $ 1,040 $ 1,130 $ (90) (8.0) Fee-for-service commissions and brand fees 107 125 (18) (14.4) 325 293 32 10.9 Sales revenue 474 625 (151) (24.2) 1,365 1,423 (58) (4.1) Less: Cost of VOI sales 43 102 (59) (57.8) 141 207 (66) (31.9) Sales and marketing expense, net 271 270 1 0.4 795 685 110 16.1 Real estate expense $ 314 $ 372 $ (58) (15.6) $ 936 $ 892 $ 44 4.9 Real estate profit $ 160 $ 253 $ (93) (36.8) $ 429 $ 531 $ (102) (19.2) Real estate profit margin (1) 33.8 % 40.5 % 31.4 % 37.3 % (1) Excluding the marketing revenue and other fees adjustment, Real estate profit margin was 29.8% and 37.4% for the three months ended September 30, 2023 and 2022, respectively, and 27.8% and 33.5% for the nine months ended September 30, 2023 and 2022, respectively. Real estate profit decreased by $93 million for the three months ended September 30, 2023, compared to the same period in 2022, driven by a decrease in Sales revenue of $151 million due to lower Sales of VOIs, net of $133 million driven primarily by net deferrals of sales of VOIs under construction and lower Fee-for-service commissions and brand fees of $18 million, partially offset by a decrease in Real estate expense of $58 million due to a decrease in the Cost of VOI sales. Real estate profit decreased by $102 million for the nine months ended September 30, 2023, compared to the same period in 2022, driven by a decrease in Sales revenue of $58 million due to a decrease in Sales of VOIs, net, driven by a decrease in the net recognition of sales of VOIs under construction of $90 million. This was partially offset by an increase in Fee-for-service commissions and brand fees of $32 million. Additionally, there was a $44 million increase in Real estate expense due to an increase in marketing costs of $110 million, partially offset by a decrease in the Cost of VOI sales of $66 million. Financing Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Interest income $ 68 $ 61 $ 7 11.5 $ 199 $ 170 $ 29 17.1 Other financing revenue 7 7 — — 26 26 — — Financing revenue 75 68 7 10.3 225 196 29 14.8 Consumer financing interest expense 12 11 1 9.1 34 26 8 30.8 Other financing expense 13 14 (1) (7.1) 39 40 (1) (2.5) Financing expense 25 25 — — 73 66 7 10.6 Financing profit $ 50 $ 43 $ 7 16.3 $ 152 $ 130 $ 22 16.9 Financing profit margin 66.7 % 63.2 % 67.6 % 66.3 % Financing profit increased by $7 million and $22 million for the three and nine months ended September 30, 2023, compared to the same periods in 2022, driven by an increase of $7 million and $29 million in financing revenue. For the nine months ended September 30, 2023, this was partially offset by a $7 million increase in Financing expense, compared to the same periods in 2022. 37 Table of Contents Financing revenue increased primarily due to interest income driven by an increase in our loan portfolio and an increase in the weighted-average interest rate. Financing expense increased in line with the related revenues and due to the increase in the weighted-average interest rate on our non-recourse debt. Resort Operations and Club Management Segment Resort and Club Management Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Club management revenue $ 56 $ 48 $ 8 16.7 $ 160 $ 150 $ 10 6.7 Resort management revenue 82 82 — — 242 229 13 5.7 Resort and club management revenues 138 130 8 6.2 402 379 23 6.1 Club management expense 14 11 3 27.3 44 31 13 41.9 Resort management expense 29 34 (5) (14.7) 85 87 (2) (2.3) Resort and club management expenses 43 45 (2) (4.4) 129 118 11 9.3 Resort and club management profit $ 95 $ 85 $ 10 11.8 $ 273 $ 261 $ 12 4.6 Resort and club management profit margin 68.8 % 65.4 % 67.9 % 68.9 % Resort and club management profit increased by $10 million for the three months ended September 30, 2023, compared to the same period in 2022, largely driven by a $8 million increase in Club management revenue due to an increase in reservation and maintenance fees. Resort and club management expenses remained relatively consistent when compared to the three months ended September 30, 2022. Resort and club management profit increased by $12 million for the nine months ended September 30, 2023, compared to the same period in 2022, largely driven by a $23 million increase in Resort and club management revenue, as a result of an increase in fee revenue for the period. This was offset by a $11 million increase in Resort and club management expenses due to personnel related costs incurred to service the increased transactions for the period. Rental and Ancillary Services Three Months Ended September 30, Variance (1) Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Rental revenues $ 160 $ 157 $ 3 1.9 $ 469 $ 436 $ 33 7.6 Ancillary services revenues 11 2 9 NM 33 30 3 10.0 Rental and ancillary services revenues 171 159 12 7.5 502 466 36 7.7 Rental expenses 144 141 3 2.1 431 401 30 7.5 Ancillary services expense 10 3 7 NM 29 25 4 16.0 Rental and ancillary services expenses 154 144 10 6.9 460 426 34 8.0 Rental and ancillary services profit $ 17 $ 15 $ 2 13.3 $ 42 $ 40 $ 2 5.0 Rental and ancillary services profit margin 9.9 % 9.4 % 8.4 % 8.6 % (1) NM - fluctuation in terms of percentage change is not meaningful. Rental and ancillary services profit for the three and nine months ended September 30, 2023 remained consistent with the same periods in 2022. Rental revenues increased by $3 million and $33 million for the three and nine months ended September 30, 2023, respectively, primarily due to an increase in occupied room nights compared to the same periods in 2022. Rental and ancillary services expense increased consistently with the aforementioned increase in rental revenue. 38 Table of Contents Other Operating Expenses Three Months Ended September 30, Variance (1) Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % General and administrative $ 40 $ 50 $ (10) (20.0) $ 130 $ 158 $ (28) (17.7) Depreciation and amortization 53 57 (4) (7.0) 156 181 (25) (13.8) License fee expense 37 33 4 12.1 101 90 11 12.2 Impairment expense — — — 100% 3 — 3 100% General and administrative expenses decreased by $10 million and $28 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to lower legal and professional fees and lower personnel related costs. Depreciation and amortization decreased by $4 million and $25 million for the three and nine months ended September 30, 2023, respectively, primarily due to certain intangible assets being fully amortized. License fee expense increased by $4 million and $11 million, respectively, for the three and nine months ended September 30, 2023 when compared to the same periods in 2022. Acquisition and Integration-Related Expense Three Months Ended September 30, Variance Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ % 2023 2022 $ % Acquisition and integration-related expense $ 12 $ 19 $ (7) (36.8) $ 42 $ 49 $ (7) (14.3) Acquisition and integration-related costs include direct expenses related to the Diamond Acquisition including integration costs, legal and other professional fees. Integration costs include technology-related costs, fees paid to management consultants, rebranding fees and employee-related costs such as severance and retention. For both the three and nine months ended September 30, 2023, acquisition and integration-related costs decreased by $7 million when compared to the same period in 2022. The decrease was primarily driven by a decrease in professional fees. Non-Operating Expenses Three Months Ended September 30, Variance (1) Nine Months Ended September 30, Variance (1) ($ in millions) 2023 2022 $ % 2023 2022 $ % Interest expense $ 45 $ 37 $ 8 21.6 $ 133 $ 105 $ 28 26.7 Equity in earnings from unconsolidated affiliates (2) (2) — — (7) (9) 2 (22.2) Other loss (gain), net 1 (2) 3 NM (3) (1) (2) NM Income tax expense 44 54 (10) (18.5) 96 115 (19) (16.5) (1) NM - fluctuation in terms of percentage change is not meaningful The change in non-operating expenses for the three and nine months ended September 30, 2023, compared to the same periods in 2022, was primarily due to a decrease in income tax expense of $10 million and $19 million, partially offset by an increase in interest expense of $8 million and $28 million, respectively. For the three and nine months ended September 30, 2023, the increase in interest expense was driven by an increase in weighted-average interest rates and an increase in net proceeds from debt. For the three months ended September 30, 2023, the decrease in income tax expense was driven by the overall change in our earnings which was partially offset by discrete items, primarily unrecognized tax benefits. For the nine months ended September 30, 2023, the decrease in income tax expense was driven by a change in earnings mix of our worldwide income and discrete items, primarily unrecognized tax benefits. Liquidity and Capital Resources Overview Our cash management objectives are to maintain the availability of liquidity, minimize operational costs, make debt payments and fund future acquisitions and development projects. Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including payroll and related benefits, legal costs, operating costs associated with the operation of our resorts and sales centers, interest and scheduled 39 Table of Contents principal payments on our outstanding indebtedness, inventory-related purchase commitments, and capital expenditures for renovations and maintenance at our offices and sales centers. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, inventory-related purchase commitments and costs associated with potential acquisitions and development projects, including rebranding. We finance our short- and long-term liquidity needs primarily through cash and cash equivalents, cash generated from our operations, draws on our revolver credit facility, our non-recourse revolving timeshare credit facility (“Timeshare Facility”), and through periodic securitizations of our timeshare financing receivables. • During the nine months ended September 30, 2023, we acquired a property in New York for $136 million from a third-party developer for inventory. • During the nine months ended September 30, 2023, we repurchased $269 million of shares under our share repurchase programs. • In August 2023, we completed a securitization of approximately $293 million of gross timeshare financing receivables. The proceeds were used to pay down in part some of the existing debt and for other general corporate purposes. See Note 10: Debt and Non-Recourse Debt for additional information. • As of September 30, 2023, we had total cash and cash equivalents of $227 million and restricted cash of $308 million. Restricted cash primarily consists of escrow deposits received on VOI sales and reserves related to non-recourse debt. • As of September 30, 2023, we had $866 million remaining borrowing capacity under the revolver facility. • As of September 30, 2023, we had an aggregate of $750 million remaining borrowing capacity under our Timeshare Facility. Of this amount, we have $395 million of mortgage notes that are available to be securitized and another $359 million of mortgage notes that we expect will become eligible as soon as they meet typical milestones including receipt of first payment, deeding, or recording. We believe that our capital allocation strategy provides adequate funding for our operations, is flexible enough to fund our development pipeline, securitizes the optimal level of receivables, and provides the ability to be strategically opportunistic in the marketplace. We have made commitments with developers to purchase vacation ownership units at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of September 30, 2023, our inventory-related purchase commitments totaled $56 million over 2 years . Sources and Uses of Our Cash The following table summarizes our net cash flows and key metrics related to our liquidity: Nine Months Ended September 30, Variance ($ in millions) 2023 2022 $ Net cash provided by (used in): Operating activities $ 312 $ 763 $ (451) Investing activities (47) (51) 4 Financing activities (270) (644) 374 Operating Activities Cash flow provided by operating activities is primarily generated from (1) sales and financing of VOIs and (2) net cash generated from managing our resorts, Club operations and providing related rental and ancillary services. Cash flows provided by operating activities primarily include funding our working capital needs and purchase of VOI inventory, including the purchase and development of real estate for future conversion to inventory. Our cash flows from operations generally vary due to the following factors related to the sale of our VOIs; the degree to which our owners finance their purchase and our owners’ repayment of timeshare financing receivables; the timing of management and sales and marketing services provided; and cash outlays for VOI inventory acquisition and development. Additionally, cash flow from operations will also vary depending upon our sales mix of VOIs; over time, we generally receive more cash from the sale of an owned VOI as compared to that from a fee-for-service sale. Net cash provided by operating activities was $312 million for the nine months ended September 30, 2023, compared to $763 million in the same 2022 period in the prior year. The decrease was primarily due to purchase of inventory from a third party developer, increases in cash utilized for working capital, and a decrease in net income during the nine months ended September 30, 2023. 40 Table of Contents The following table summarizes our VOI inventory spending: Nine Months Ended September 30, ($ in millions) 2023 2022 VOI spending - owned properties (1) $ 167 $ 96 VOI spending - fee-for-service upgrades (2) 15 9 Purchases and development of real estate for future conversion to inventory 28 4 Total VOI inventory spending $ 210 $ 109 (1) For the nine months ended September 30, 2023 and 2022, our VOI inventory spending on owned properties relates to deeded properties that are classified as Inventory on our unaudited condensed consolidated balance sheets. (2) Includes expense related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects from developed projects of $11 million and $6 million recorded in Costs of VOI sales for the nine months ended September 30, 2023 and 2022, respectively. Investing Activities Our capital expenditures include spending related to technology and buildings and leasehold improvements used to support sales and marketing locations, resort operations and corporate activities. We believe the renovations of our existing assets are necessary to stay competitive in the markets in which we operate. Net cash used in investing activities was $47 million for the nine months ended September 30, 2023 compared to $51 million for the nine months ended September 30, 2022. The decrease was primarily due to decreased capital expenditures. Financing Activities Net cash used in financing activities for the nine months ended September 30, 2023 was $270 million compared to net cash used in financing activities of $644 million for the same period in 2022. The decrease was primarily due to net proceeds from debt of $378 million and lower net repayments of non-recourse debt of $93 million compared to 2022, partially offset by $106 million increase in share repurchases when compared to 2022. Contractual Obligations Our commitments primarily relate to agreements with developers to purchase or construct vacation ownership units, operating leases, and obligations associated with our debt, non-recourse debt and the related interest. As of September 30, 2023, we were committed to approximately $5,114 million in contractual obligations over 9 years, $167 million of which will be fulfilled in the remainder of 2023. The ultimate amount and timing of certain commitments is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances. See Note 17: Commitments and Contingencies and Note 10: Debt and Non-recourse Debt for additional information. We utilize surety bonds related to the sales of VOIs in order to meet regulatory requirements of certain states. The availability, terms and conditions and pricing of such bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity and our corporate credit rating. We have commitments from surety providers in the amount of $548 million as of September 30, 2023, which primarily consist of escrow, construction and subsidy related bonds. Guarantor Financial Information Certain subsidiaries, which are listed on Exhibit 22 of this Quarterly Report on Form 10-Q, have guaranteed our obligations related to our senior unsecured 2029 Notes and 2031 Notes (together, “the Notes”). The 2029 Notes were issued in June 2021 with an aggregate principal balance of $850 million , an interest rate of 5.000%, and maturity in June 2029. The 2031 Notes were issued in June 2021 with an aggregate principal balance of $500 million, an interest rate of 4.875% , and maturity in July 2031. The Notes were co-issued by Hilton Grand Vacations Borrower LLC and Hilton Grand Vacations Borrower Inc. (the “Issuers”) and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Hilton Grand Vacations Inc. (the “Parent”), Hilton Grand Vacations Parent LLC, the Issuers, and each of the Issuer’s existing and future wholly owned domestic restricted subsidiaries (all entities that guarantee the Notes, collectively, the “Obligor group”). The Notes rank equally in right of payment with all of the Issuers’ and each guarantor’s existing and future senior indebtedness, are subordinated to all of the Issuers’ and guarantors’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including the Senior Secured Credit Facilities, rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated indebtedness and other obligations that expressly 41 Table of Contents provide for their subordination to the notes and the related guarantees, and are structurally subordinated to all existing and future indebtedness claims of holders of preferred stock and other liabilities of the Issuer’s subsidiaries that do not guarantee the Notes. The guarantee of each guarantor subsidiary is limited to a maximum amount, subject to applicable U.S. and non-U.S. laws. The guarantees can also be released upon the sale or transfer of a guarantor subsidiary’s capital stock or substantially all of its assets, becoming designated as an unrestricted subsidiary, or upon its consolidation into a co-Issuer or another subsidiary Guarantor. The following tables provide summarized financial information of the Obligor group on a combined basis after elimination of (i) intercompany transactions and balances between the Parent and the subsidiary Guarantors and (ii) investments in and equity in the earnings of non-Guarantor subsidiaries and unconsolidated affiliates: Summarized Financial Information ($ in millions) September 30, 2023 Assets Cash and cash equivalents $ 138 Restricted cash 157 Accounts receivable, net - due from non-guarantor subsidiaries 76 Accounts receivable, net - due from related parties 14 Accounts receivable, net - other 348 Timeshare financing receivables, net 820 Inventory 1,186 Property and equipment, net 753 Operating lease right-of-use assets, net 61 Investments in unconsolidated affiliates 74 Goodwill 1,416 Intangible assets, net 1,186 Other assets 333 Total assets $ 6,562 Liabilities Accounts payable, accrued expenses and other - due from non-guarantor subsidiaries $ 76 Accounts payable, accrued expenses and other - other 788 Advanced deposits 181 Debt, net 2,730 Operating lease liabilities 79 Deferred revenues 169 Deferred income tax liabilities 591 Total liabilities $ 4,614 ($ in millions) Nine Months Ended September 30, 2023 Total revenues - transactions with non-guarantor subsidiaries $ 25 Total revenues - other 2,610 Operating income 319 Net income 132 Subsequent Events On November 5, 2023, we entered into a merger agreement with Bluegreen Vacations Holding Corporation (“Bluegreen”) to acquire Bluegreen. Subject to the terms and conditions of the merger agreement, upon the consummation 42 Table of Contents of the transaction, we will acquire all of the shares of Bluegreen for $75.00 per share in an all-cash transaction, representing total consideration of approximately $1.5 billion, inclusive of net debt. Consummation of this transaction is subject to customary conditions and receipt of regulatory approvals. The transaction is anticipated to close during the first half of 2024. Critical Accounting Policies and Estimates The preparation of our condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts and related disclosures. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year ended December 31, 2022.