What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 146 added, 129 removed, 432 unchanged (39% of the section changed)

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and managing our clubs and exchange programs that include HGV Max, Hilton Grand Vacations Club, Hilton Club, Diamond clubs and Bluegreen Vacation Club (collectively referred to as “Clubs”).

As of June 30, 2024, we have approximately 200 properties located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada and Asia.

A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada, South Carolina and Virginia, inclusive of the new locations we have expanded into through the Bluegreen Acquisition.

As of September 30, 2024, we have approximately 200 properties located in the United States (“U.S.”), Europe, the Caribbean, Mexico, Canada, and Asia.

A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, South Carolina, Arizona, Virginia, and Nevada, inclusive of the new locations we have expanded into through the Bluegreen Acquisition.

Our properties feature spacious, condominium-style accommodations with superior amenities and quality service.

We are in the process of rebranding many of the Diamond properties and anticipate rebranding the majority of Bluegreen properties.

We expect to begin rebranding of certain Bluegreen properties during the fourth quarter of 2024 to the Hilton Grand Vacations brands and Hilton standards.

As of June 30, 2024, we had approximately 720,000 members across our Club offerings.

We expect to begin rebranding of certain Bluegreen properties in 2025 to the Hilton Grand Vacations brands and Hilton standards.

As of September 30, 2024, we had approximately 722,000 members across our Club offerings.

Based on the type of Club membership, certain members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations resort, any property in the Hilton system of 24 industry-leading brands across approximately 8,000 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, including travel services options.

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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.

For the six months ended June 30, 2024, sales from fee-for-service and just-in-time inventory were 18%, and 23% of contract sales, respectively.

For the nine months ended September 30, 2024, sales from fee-for-service and just-in-time inventory were 18%, and 21% of contract sales, respectively.

See “ Key Business and Financial Metrics — Real Estate Sales Operating Metrics ” for additional discussion of contract sales.

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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.

With the Bluegreen Acquisition, our marketing and sales activities also include marketing relationships with nationally-recognized consumer brands, such as Bass Pro, a nationally-recognized retailer of fishing, marine, hunting, camping and sports gear, and Choice Hotels.

With the Bluegreen Acquisition, our marketing and sales activities also include marketing relationships with nationally-recognized consumer brands such as Bass Pro, a fishing, marine, hunting, camping and sports gear retailer, and Choice Hotels.

In November 2023, HGV signed a 10-year exclusive marketing agreement with Bass Pro that provides HGV with the right to market and sell vacation packages at kiosks in Bass Pro’s and Cabela’s retail locations and through other means.

This agreement became effective on the Bluegreen Acquisition Date.

As of June 30, 2024, HGV had sales and marketing operations at a total of 132 Bass Pro Shops and Cabela’s Stores, including 12 virtual kiosks.

As of September 30, 2024, HGV had sales and marketing operations at a total of 132 Bass Pro Shops and Cabela’s Stores, including 9 virtual kiosks.

Additionally, the joint venture between HGV and Bass Pro includes four high-end wilderness resorts under the Big Cedar Lodge brand.

Through the Bluegreen Acquisition, we also gained access to an exclusive strategic relationship with Choice Hotels that involves several areas of its business, including a sales and marketing alliance that enables us to leverage Choice Hotels’ brands, customer relationships and marketing channels to sell vacation packages.

We also assumed an exclusive strategic relationship with Choice Hotels that involves several areas of its business, including a sales and marketing alliance that enables us to leverage Choice Hotels’ brands, customer relationships and marketing channels to sell vacation packages.

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 six months ended June 30, 2024, 71% of our contract sales were to our existing owners, compared to 69% for the six months ended June 30, 2023.

For the nine months ended September 30, 2024, 70% of our contract sales were to our existing owners, compared to 69% for the nine months ended September 30, 2023.

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 65% and 61% for the six months ended June 30, 2024 and 2023, 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.

Financing propensity was 69% and 62% for the nine months ended September 30, 2024 and 2023, respectively.

We calculate financing propensity as contract sales volume of financed contracts originated in the period divided by all contract sales volume 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.

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and Canadian borrowers at the time of origination were as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

Weighted-average FICO score 740 734

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Because of these limitations, EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders 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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders to net income, our most comparable U.S.

GAAP financial measure.

See below under “Segment Results” for reconciliation of our EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders to net income attributable to stockholders and net income, our most comparable U.S.

GAAP financial measures.

Non-GAAP Measures within Our Segments

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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.

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.

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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders.” 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.

In addition, our calculation of such measures may not be comparable to similarly titled measures of other

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 financial measures.

Results of Operations

Three and Six Months Ended June 30, 2024 Compared with the Three and Six Months Ended June 30, 2023

Three and Nine Months Ended September 30, 2024 Compared with the Three and Nine Months Ended September 30, 2023

Segment Results

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We do not include equity in earnings from unconsolidated affiliates in our measures of segment operating performance.

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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Business Segments in our unaudited 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, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders:

Three Months Ended June 30, Variance (1)

Six Months Ended June 30, Variance (1)

The following table reconciles net income attributable to stockholders and net income, our most comparable U.S.

GAAP financial measures, to EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders:

Three Months Ended September 30, Variance (1)

Nine Months Ended September 30, Variance (1)

($ in millions) 2024 2023 $ % 2024 2023 $ %

Net income (loss) attributable to stockholders $ 2 $ 80 $ (78) (97.5) $ (2) $ 153 $ (155) NM

Net income attributable to stockholders $ 29 $ 92 $ (63) (68.5) $ 27 $ 245 $ (218) (89.0)

Net income attributable to noncontrolling interest

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Interest expense 84 45 39 86.7 250 133 117 88.0

Income tax expense (benefit)

3 35 (32) (91.4) (8) 52 (60) NM

Income tax expense

61 44 17 38.6 53 96 (43) (44.8)

Depreciation and amortization 68 53 15 28.3 198 156 42 26.9

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates 2 1 1 100.0 3 1 2 NM

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates (1) — (1) 100.0 2 1 1 100.0

EBITDA 244 234 10 4.3 537 631 (94) (14.9)

Other loss (gain), net

3 (3) 6 NM 8 (4) 12 NM

Other (gain) loss, net

(9) 1 (10) NM (1) (3) 2 (66.7)

Share-based compensation expense 11 12 (1) (8.3) 38 38 — —

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For a discussion of our definition of EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key Business and Financial Metrics—EBITDA, Adjusted EBITDA and Adjusted EBITDA Attributable to Stockholders.” The following table reconciles our segment Adjusted EBITDA to Adjusted EBITDA to Adjusted EBITDA Attributable to Stockholders:

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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(2) Adjusts for segment related share-based compensation, depreciation and other adjustment items.

Real estate sales and financing Adjusted EBITDA increased by $4 million and $41 million, respectively, for the three and six months ended June 30, 2024, compared to the same period in 2023.

For the same periods, Real estate sales and financing Adjusted EBITDA decreased $43 million and $42 million, respectively, excluding the $47 million and $83 million impact related to the Bluegreen Acquisition, primarily due to decreases in Sales, marketing, brand and other fees revenue, partially offset by increases in financing revenue and increases in financing expense.

Real estate sales and financing Adjusted EBITDA increased by $28 million for the three months ended September 30, 2024, compared to the same period in 2023.

For the same period, Real estate sales and financing Adjusted EBITDA decreased $24 million excluding the $52 million impact related to the Bluegreen Acquisition, primarily due to decreases in fee-for-service commissions, brand and other fees and marketing revenue and increases in overall real estate expenses, partially offset by an increase in Sales of VOI, net.

Real estate sales and financing Adjusted EBITDA increased $69 million for the nine months ended September 30, 2024, compared to the same period in 2023.

For the same period, Real estate sales and financing Adjusted EBITDA decreased $66 million, excluding the $135 million impact related to the Bluegreen Acquisition, primarily due to decreases in Sales, marketing, brand and other fees revenue and overall real estate expenses partially offset by increases in financing profit.

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 segment adjusted EBITDA increased by $29 million for the three months ended June 30, 2024, compared to the same period in 2023.

For the same period, Resort operations and club management segment Adjusted EBITDA remained relatively consistent, excluding the $25 million impact related to the Bluegreen Acquisition.

Resort operations and club management segment adjusted EBITDA increased by $54 million for the six months ended June 30, 2024, compared to the same period in 2023.

Resort operations and club management segment adjusted EBITDA increased by $30 million for the three months ended September 30, 2024, compared to the same period in 2023.

For the same period, Resort operations and club management segment Adjusted EBITDA increased by $4 million, excluding the $26 million impact related to the Bluegreen Acquisition, primarily due to increases in resort and club management revenue and rental and ancillary services revenue partially offset by increases in resort and club management and rental expenses.

Resort operations and club management segment adjusted EBITDA increased by $84 million for the nine months ended September 30, 2024, compared to the same period in 2023.

For the same period, Resort operations and club management segment Adjusted EBITDA increased by $23 million, excluding the $61 million impact related to the Bluegreen Acquisition, primarily due to increases in resort and club management revenue and rental and ancillary services revenue partially offset by increases in resort and club management and rental expenses.

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.

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 June 30, Variance (1)

Six Months Ended June 30, Variance (1)

The following table reconciles net income attributable to stockholders and net income, our most comparable U.S.

GAAP financial measures, 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) 2024 2023 $ % 2024 2023 $ %

Net income (loss) attributable to stockholders $ 2 $ 80 $ (78) (97.5) $ (2) $ 153 $ (155) NM

Net income attributable to stockholders $ 29 $ 92 $ (63) (68.5) $ 27 $ 245 $ (218) (89.0)

Net income attributable to noncontrolling interest

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Interest expense 84 45 39 86.7 250 133 117 88.0

Income tax expense (benefit)

3 35 (32) (91.4) (8) 52 (60) NM

Income tax expense

61 44 17 38.6 53 96 (43) (44.8)

Depreciation and amortization 68 53 15 28.3 198 156 42 26.9

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates 2 1 1 100.0 3 1 2 NM

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates (1) — (1) 100.0 2 1 1 100.0

EBITDA 244 234 10 4.3 537 631 (94) (14.9)

Other loss (gain), net

3 (3) 6 NM 8 (4) 12 NM

Other (gain) loss, net

(9) 1 (10) NM (1) (3) 2 (66.7)

Equity in earnings from unconsolidated affiliates (2)

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(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 $2 million and $3 million, respectively, for the three and six months ended June 30, 2024 and $1 million for both the three and six months ended June 30, 2023.

(2) Excludes impact of interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates of $(1) million and $2 million, respectively, for the three and nine months ended September 30, 2024 and $1 million for the nine months ended September 30, 2023.

Reconciliation of Non-GAAP Real Estate Measures to GAAP Measures

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See “Real Estate Sales and Financing Segment—Real Estate” below.

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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The following table represents deferrals and recognitions of Sales of VOI revenue and direct costs for properties under construction:

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ 2024 2023 $

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Sales of VOIs recognitions 58 — 58 106 4 102

Net Sales of VOIs (deferrals)

Net Sales of VOIs recognitions (deferrals)

49 (12) 61 38 (14) 52

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Cost of VOI sales recognitions 18 — 18 30 1 29

Net Cost of VOI sales (deferrals)

Net Cost of VOI sales recognitions (deferrals)

15 (3) 18 10 (3) 13

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Sales and marketing expense recognitions 8 — 8 15 1 14

Net Sales and marketing expense (deferrals)

Net Sales and marketing expense recognitions (deferrals)

7 (2) 9 6 (2) 8

Net construction (deferrals)

Net construction recognitions (deferrals)

$ 27 $ (7) $ 34 $ 22 $ (9) $ 31

See “Reconciliation of Profit Measures to GAAP Measure” above.

Three Months Ended June 30, Variance (1)

Six Months Ended June 30, Variance (1)

Three Months Ended September 30, Variance (1)

Nine Months Ended September 30, Variance (1)

($ in millions, except Tour flow and VPG) 2024 2023 $ % 2024 2023 $ %

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Reportability and other:

Net (deferral) of sales of VOIs under construction (3)

Net recognition (deferral) of sales of VOIs under construction (3)

49 (12) 61 NM 38 (14) 52 NM

Fee-for-service sale upgrades, net — 6 (6) (100.0) — 18 (18) (100.0)

(31) (37) 6 (16.2) (62) (47) (15) 31.9

(23) (10) (13) NM (85) (57) (28) 49.1

Sales of VOIs, net $ 550 $ 367 $ 183 49.9 $ 1,459 $ 1,040 $ 419 40.3

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(4) Includes adjustments for revenue recognition, including amounts in rescission and sales incentives.

Contract sales increased by $145 million and $253 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

Contract sales increased by $174 million and $427 million, respectively, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

Excluding the impact of $194 million and $519 million related to the Bluegreen Acquisition, contract sales decreased $20 million and $92 million, respectively, primarily due to a decrease in tour flow and VPG, when compared to the same periods in 2023.

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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26.4 % 33.8 % 24.9 % 31.4 %

(1) Excluding the marketing revenue and other fees adjustment, Real estate profit margin was 18.8% and 27.3% for the three months ended June 30, 2024 and 2023, respectively, and 20.8% and 26.8% for the six months ended June 30, 2024 and 2023, respectively.

Real estate profit decreased by $24 million for the three months ended June 30, 2024, compared to the same period in 2023.

Real estate profit decreased $42 million excluding the impact of $18 million related to the Bluegreen Acquisition, primarily due to lower Fee-for-service commissions and brand fees compared to the same period in 2023.

Real estate profit decreased by $15 million for the six months ended June 30, 2024, compared to the same period in 2023.

Real estate profit decreased $47 million, excluding the impact of $32 million related to the Bluegreen Acquisition, primarily due to lower Fee-for-service commissions and brand fees, partially offset by an increase in Sales of VOIs, net and a decrease in sales and marketing expense, net compared to the same period in 2023.

Sales revenue increased $93 million and $170 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

Sales revenue decreased $47 million and $78 million, respectively, excluding the impact of $140 million and $248 million related to the Bluegreen Acquisition, primarily due to decreases in Fee-for-service commissions and brand fees revenues and lower contract sales, compared to the same periods in 2023.

Real estate expense increased $117 million and $185 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

Real estate expense decreased $5 million and $31 million, respectively, excluding the impact of $122 million and $216 million related to the Bluegreen Acquisition, in line with the decrease in revenues, compared to the same periods in 2023.

Three Months Ended June 30, Variance (1)

Six Months Ended June 30, Variance (1)

(1) Excluding the marketing revenue and other fees adjustment, Real estate profit margin was 23.6% and 29.8% for the three months ended September 30, 2024 and 2023, respectively, and 21.8% and 27.8% for the nine months ended September 30, 2024 and 2023, respectively.

Real estate profit increased $7 million for the three months ended September 30, 2024, compared to the same period in 2023.

Real estate profit decreased $19 million excluding the impact of $26 million related to the Bluegreen Acquisition, primarily due to a decrease in fee-for-service commissions and brand fees revenue and an increase in sales and marketing expense, net and cost of VOI sales, partially offset by an increase in Sales of VOI, net when compared to the same period in 2023.

Real estate profit decreased $8 million for the nine months ended September 30, 2024, compared to the same period in 2023.

Real estate profit decreased by $66 million, excluding the impact of $58 million related to the Bluegreen

Acquisition, primarily due to a decrease in fee-for-service commissions and brand fees and an increase in cost of VOI sales, partially offset by an increase in Sales of VOIs, net compared to the same period in 2023.

Sales revenue increased $159 million for the three months ended September 30, 2024, compared to the same period in 2023.

Sales revenue increased by $18 million excluding the impact of $141 million related to the Bluegreen Acquisition, primarily due to an increase in Sales of VOI, net partially offset by decreases in Fee-for-service commissions and brand fees revenues and lower contract sales, compared to the same period in 2023.

Sales revenue increased $329 million for the nine months ended September 30, 2024, compared to the same period in 2023.

Sales revenue decreased by $60 million excluding the impact of $389 million related to the Bluegreen Acquisition, primarily due to decreases in fee-for-service commissions and brand fees revenues and lower contract sales partially offset by an increase in sales of VOI, net, compared to the same period in 2023.

Real estate expense increased $152 million for the three months ended September 30, 2024, compared to the same periods in 2023.

Real estate expense increased by $37 million excluding the impact of $115 million related to the Bluegreen Acquisition, primarily due to increases in sales and marketing expense, net, compared to the same period in 2023.

Real estate expense increased $337 million for the nine months ended September 30, 2024, compared to the same periods in 2023.

Real estate expense increased by $6 million excluding the impact of $331 million related to the Bluegreen Acquisition, primarily due to increases in cost of VOI sales, compared to the same period in 2023.

Three Months Ended September 30, Variance (1)

Nine Months Ended September 30, Variance (1)

($ in millions) 2024 2023 $ % 2024 2023 $ %

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Consumer financing interest expense

22 11 11 100.0 45 23 22 95.7

26 12 14 NM 71 35 36 NM

Other financing expense 18 13 5 38.5 52 39 13 33.3

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(1) NM - fluctuation in terms of percentage change is not meaningful.

Financing profit increased by $6 million and $21 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Financing profit increased $1 million and $7 million, respectively, excluding the $5 million and $14 million impact related to the Bluegreen Acquisition, primarily due to higher interest income revenues partially offset by increased financing expense.

Financing revenue increased by $26 million and $56 million, respectively, for three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Financing revenue increased $13 million and $26 million, respectively, excluding the $13 million and $30 million impact related to the Bluegreen Acquisition, primarily due to an increase in the weighted average interest rate and carrying balance of the timeshare financing receivables portfolio.

Financing expense increased by $20 million and $35 million, respectively, for three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Financing expense increased $12 million and $19 million, respectively, excluding the $8 million and $16 million impact related to the Bluegreen Acquisition, primarily due to an increase in the balance and weighted average interest rate on our non-recourse debt.

Financing profit increased by $10 million and $31 million, respectively, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Financing profit increased by $6 million and $13 million, respectively, excluding the $4 million and $18 million impact related to the Bluegreen Acquisition, primarily due to higher interest income revenues partially offset by increased financing expense.

Financing revenue increased by $30 million and $86 million, respectively, for three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Financing revenue increased by $14 million and $40 million, respectively, excluding the $16 million and $46 million impact related to the Bluegreen Acquisition, primarily due to an increase in the weighted average interest rate and carrying balance of the timeshare financing receivables portfolio.

Financing expense increased by $20 million and $55 million, respectively, for three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Financing expense increased by $8 million and $27 million, respectively, excluding the $12 million and $28 million impact related to the Bluegreen Acquisition, primarily due to an increase in the balance and weighted average interest rate on our non-recourse debt.

Resort Operations and Club Management Segment

Resort and Club Management

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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Resort and club management profit margin 72.1 % 68.8 % 70.5 % 67.9 %

Resort and club management profit increased by $34 million and $57 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Resort and club management profit increased $5 million and $12 million, respectively, excluding the $29 million and $45 million impact related to the Bluegreen Acquisition, largely driven by higher management fees partially offset by associated Resort and club management expense to support the higher revenues.

Resort and club management revenue increased $38 million and $73 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Resort and club management revenue increased $9 million and $20 million, excluding the $29 million and $53 million impact related to the Bluegreen Acquisition, primarily due to management fee revenue.

Resort and club management expenses increased by $4 million and $16 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Resort and club management expenses increased $4 million and $8 million, respectively, excluding no impact related to the Bluegreen Acquisition for the three months ended June 30, 2024 and $8 million impact related to the Bluegreen Acquisition for the six months ended June 30, 2024, primarily due to personnel related costs incurred to service the increased transactions for the period.

Resort and club management profit increased by $34 million and $91 million, respectively, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Resort and club management profit increased by $6 million and $18 million, respectively, excluding the $28 million and $73 million impact related to the Bluegreen Acquisition, largely driven by higher management fees partially offset by associated Resort and club management expense to support the higher revenues.

Resort and club management revenue increased $41 million and $114 million, respectively, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Resort and club management revenue increased by $10 million and $30 million, respectively, excluding the $31 million and $84 million impact related to the Bluegreen Acquisition, primarily due to management fee revenue.

Resort and club management expenses increased by $7 million and $23 million, respectively, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Resort and club management expenses increased by $4 million and $12 million, respectively, excluding the $3 million and $11 million impact related to the Bluegreen Acquisition, in line with the increases in revenues.

Rental and Ancillary Services

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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Rental and ancillary services profit margin 2.7 % 9.9 % 3.6 % 8.4 %

Rental and ancillary services profit decreased by $12 million for the three months ended June 30, 2024, compared to the same period in 2023.

Rental and ancillary services profit decreased by $7 million, excluding the $5 million

unfavorable impact related to the Bluegreen Acquisition, primarily due to increases in rental expenses partially offset by an increase in rental revenues when compared to the same period in 2023.

Rental and ancillary services profit decreased by $10 million for the six months ended June 30, 2024, compared to the same period in 2023.

Rental and ancillary services profit was consistent, excluding the $10 million unfavorable impact related to the Bluegreen Acquisition, when compared to the same period in 2023.

Rental and ancillary services revenue increased $22 million and $45 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

For the same periods, Rental and ancillary services revenue increased $7 million and $25 million, respectively, excluding the $15 million and $20 million impact related to the Bluegreen Acquisition, primarily due to an increase in occupied room nights and higher daily rates.

Rental and ancillary services expenses increased $34 million and $55 million, respectively, for the three and six months ended June 30, 2024, compared to the same periods in 2023.

Rental and ancillary services profit decreased by $12 million for the three months ended September 30, 2024, compared to the same period in 2023.

Rental and ancillary services profit decreased by $10 million, excluding the $2 million unfavorable impact related to the Bluegreen Acquisition, primarily due to increases in rental expenses when compared to the same period in 2023.

Rental and ancillary services profit decreased by $22 million for the nine months ended September 30, 2024, compared to the same period in 2023.

Rental and ancillary services profit decreased by $10 million, excluding the $12 million unfavorable impact related to the Bluegreen Acquisition, primarily due to increases in rental expenses partially offset by an increase in rental revenues when compared to the same period in 2023.

Rental and ancillary services revenue increased $12 million for the three months ended September 30, 2024, compared to the same period in 2023.

For the same period, Rental and ancillary services revenue remained relatively consistent excluding the $13 million impact related to the Bluegreen Acquisition.

Rental and ancillary services revenue increased $57 million for the nine months ended September 30, 2024, compared to the same period in 2023.

For the same period, Rental and ancillary services revenue increased by $24 million, excluding the $33 million impact related to the Bluegreen Acquisition, primarily due to an increase in occupied room nights and higher daily rates.

Rental and ancillary services expenses increased $24 million and $79 million, respectively, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the same periods, Rental and ancillary services expenses increased $9 million and $34 million, respectively, excluding the $15 million and $45 million impact related to the Bluegreen Acquisition, primarily due to an increase in development and maintenance fees.

Other Operating Expenses

Three Months Ended June 30, Variance Six Months Ended June 30, Variance

Three Months Ended September 30, Variance Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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— — — 100.0 2 3 (1) (33.3)

General and administrative expenses increased by $10 million and $13 million for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023.

Excluding $12 million and $19 million, respectively, related to the impact of the Bluegreen Acquisition, General and administrative expenses were relatively consistent when comparing the three and six months ended June 30, 2024 to the same periods in 2023.

Depreciation and amortization increased by $16 million and $27 million for the three and six months ended June 30, 2024, when compared to the same periods in 2023.

General and administrative expenses increased by $4 million and $17 million for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

Excluding $7 million and $26 million, respectively, related to the impact of the Bluegreen Acquisition, General and administrative expenses decreased by $3 million and $9 million when comparing the three and nine months ended September 30, 2024 to the same periods in 2023 primarily due to interest expense for a legal matter that was settled in early 2024.

Depreciation and amortization increased by $15 million and $42 million for the three and nine months ended September 30, 2024, when compared to the same periods in 2023.

The increases were due to certain assets acquired in connection with the Bluegreen Acquisition.

License fee expense increased by $6 million and $11 million for the three and six months ended June 30, 2024, when compared to the same periods in 2023.

License fee expense increased by $12 million and $23 million for the three and nine months ended September 30, 2024, when compared to the same periods in 2023.

The increase was primarily due to amendments to our License Agreement as a result of the Bluegreen Acquisition.

Acquisition and Integration-Related Expense

Three Months Ended June 30, Variance (1)

Six Months Ended June 30, Variance

Three Months Ended September 30, Variance (1)

Nine Months Ended September 30, Variance (1)

($ in millions) 2024 2023 $ % 2024 2023 $ %

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Integration costs include technology-related costs, fees paid to management consultants, rebranding fees and employee-related costs such as severance and retention.

For the three and six months ended June 30, 2024, acquisition and integration-related costs increased by $35 million and $127 million when compared to the same periods in 2023.

For the three and nine months ended September 30, 2024, acquisition and integration-related costs increased by $24 million and $151 million when compared to the same periods in 2023.

The increases were primarily driven by costs associated with the Bluegreen Acquisition.

Non-Operating Expenses

Three Months Ended June 30, Variance (1)

Six Months Ended June 30, Variance (1)

Three Months Ended September 30, Variance (1)

Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $ % 2024 2023 $ %

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Equity in earnings from unconsolidated affiliates (4) (2) (2) 100.0 (12) (7) (5) 71.4

Other loss (gain), net

3 (3) 6 NM 8 (4) 12 NM

Income tax expense (benefit)

Other (gain) loss, net

(9) 1 (10) NM (1) (3) 2 (66.7)

Income tax expense

61 44 17 38.6 53 96 (43) (44.8)

(1) NM - fluctuation in terms of percentage change is not meaningful

The changes in non-operating expenses for the three and six months ended June 30, 2024, compared to the same periods in 2023, were primarily due to increases in interest expense of $43 million and $78 million, respectively, partially offset by decreases in income tax expense of $32 million and $60 million, respectively.

For both the three and six months ended June 30, 2024, the increases in interest expense were primarily due to an increase in the debt balance outstanding used to fund the Bluegreen acquisition compared to the same periods in 2023.

For both the three and six months ended June 30, 2024, compared to the same period in 2023, the decrease in income tax expense was primarily driven by the impact due to discrete items in income before income taxes.

The change in non-operating expenses for the three months ended September 30, 2024, compared to the same period in 2023, was primarily due to an increase in interest expense of $39 million and an increase in income tax expense of $17 million.

The increase in interest expense was primarily due to an increase in the debt balance outstanding used to fund the Bluegreen acquisition compared to the same period in 2023.

The increase in income tax expense was primarily driven by a change in overall earnings compared to the same period in 2023.

The change in non-operating expenses for the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to an increase in interest expense of $117 million, partially offset by a decrease in income tax expense of $43 million.

The increase in interest expense was primarily due to an increase in the debt balance outstanding used to fund the Bluegreen acquisition compared to the same period in 2023.

The decrease in income tax expense was primarily driven by an overall change in earnings partially offset by discrete items relative to income before taxes compared to the same period in 2023.

Net income attributable to noncontrolling interest

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Net income attributable to noncontrolling interest is the portion of Big Cedar that is attributable to Big Cedar Vacations, LLC, which holds the remaining 49% equity interest.

Net income attributable to the noncontrolling interest in Big Cedar was $2 million and $4 million during the three and six months ended June 30, 2024.

Net income attributable to the noncontrolling interest in Big Cedar was $3 million and $7 million during the three and nine months ended September 30, 2024.

Liquidity and Capital Resources

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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 six months ended June 30, 2024, we repurchased 4.6 million of shares under our share repurchase programs.

• As of June 30, 2024, we had total cash and cash equivalents of $328 million and restricted cash of $273 million.

• During the nine months ended September 30, 2024, we repurchased 7.4 million shares for $307 million under our share repurchase programs.

Earnings Per Share for additional information.

• As of September 30, 2024, we had total cash and cash equivalents of $297 million and restricted cash of $244 million.

Restricted cash primarily consists of escrow deposits received on VOI sales and reserves related to non-recourse debt.

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Debt and Non-Recourse Debt for additional information.

• As of June 30, 2024, we had $446 million remaining borrowing capacity under the revolver facility.

• As of June 30, 2024, we had an aggregate of $750 million remaining borrowing capacity under our Timeshare Facility.

Of this amount, we have $647 million of mortgage notes that are available to be securitized and another $324 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.

The Grand Islander Timeshare Facility was terminated during the first quarter of 2024.

• As of June 30, 2024, we had fully paid down the $171 million in junior subordinated debentures outstanding.

• As of September 30, 2024, we had fully paid down the $171 million in junior subordinated debentures outstanding.

Debt & Non-recourse Debt for more information.

• As of September 30, 2024, we had $308 million remaining borrowing capacity under the revolver facility.

• As of September 30, 2024, we had an aggregate of $750 million remaining borrowing capacity under our Timeshare Facility.

As of September 30, 2024, we had $$1.7 billion of notes that were current on payments but not securitized.

Of that figure, approximately $1.3 billion could be monetized through either warehouse borrowing or securitization while another $294 million of mortgage notes we anticipate being eligible following certain customary milestones such as first payment, deeding and recording.

The Grand Islander and Bluegreen Timeshare Facilities were terminated in the first quarter of 2024.

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.

As of June 30, 2024, there are no future inventory commitments, and we have not entered into new arrangements with developers.

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, 2024, our inventory-related purchase commitments totaled $52 million to be fulfilled over 2 years.

Sources and Uses of Our Cash

The following table summarizes our net cash flows and key metrics related to our liquidity:

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

($ in millions) 2024 2023 $

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over time, we generally receive more cash from the sale of an owned VOI as compared to that from a fee-for-service sale.

The change in net cash provided by operating activities for the six months ended June 30, 2024, compared to the same period in 2023 was primarily due to a decrease in net income, an increase in purchases of inventory from a third-party developer, and an increase in cash utilized for working capital, partially offset by an increase in provision for financing receivable losses and increases in depreciation and amortization expenses.

The change in net cash provided by operating activities for the nine months ended September 30, 2024, compared to the same period in 2023 was primarily due to a decrease in net income, an increase in purchases of inventory from a third-party developer, and an increase in cash utilized for working capital, partially offset by an increase in provision for financing receivable losses and increases in depreciation and amortization expenses.

The following table summarizes our VOI inventory spending:

Six Months Ended June 30,

Nine Months Ended September 30,

($ in millions) 2024 2023

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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 $1,482 million for the six months ended June 30, 2024 compared to $25 million for the same period in 2023.

The increase was primarily due to the Bluegreen Acquisition and increased capital expenditures.

Net cash used in investing activities was $1,514 million for the nine months ended September 30, 2024 compared to $47 million for the same period in 2023.

The increase was primarily due to the Bluegreen Acquisition and increased software capitalization costs.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2024 was $1,101 million compared to net cash used in financing activities of $152 million for the same period in 2023.

The increase was primarily due to net proceeds from debt of $1,407 million, offset by net repayments of non-recourse debt of $104 million and payments of $51 million for other debt issuance costs when compared to 2023.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $971 million compared to net cash used in financing activities of $270 million for the same period in 2023.

The increase was primarily due to net proceeds from debt of $1,766 million, offset by net repayments of non-recourse debt of $428 million, an increase in payment for debt issuance costs of $46 million, and a $39 million increase in share repurchases when compared to 2023.

Contractual Obligations

Our commitments primarily relate to agreements with developers to purchase or construct vacation ownership units, operating leases, marketing and license fee agreements and obligations associated with our debt, non-recourse debt and the related interest.

As of June 30, 2024, we were committed to approximately $9,366 million in contractual obligations over 11 years, $474 million of which will be fulfilled in the remainder of 2024.

As of September 30, 2024, we were committed to approximately $9,289 million in contractual obligations over 10 years, $270 million of which will be fulfilled in the remainder of 2024.

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.

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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 $805 million as of June 30, 2024, which primarily consist of escrow, construction and subsidy related bonds.

We have commitments from surety providers in the amount of $732 million as of September 30, 2024, which primarily consist of escrow, subsidy and construction related bonds.

Subsequent Events

On August 7, 2024, our Board of Directors approved a new share repurchase program authorizing us to repurchase up to an aggregate of $500 million of our outstanding shares of common stock over a two-year period which is in addition to the amount remaining under the 2023 Share Repurchase Plan.

On November 6, 2024, we entered into the Second Amended and Restated License Agreement (the “Amended License Agreement”) with Hilton Worldwide Holdings Inc.

The Amended License Agreement amends, restates and supersedes the First Amended and Restated License Agreement, dated as of March 10, 2021, between HGV and Hilton, as amended by the First Amendment, dated as of April 4, 2022, the Second Amendment, dated as of November 5, 2023, and the Third Amendment, dated as of January 16, 2024.

The Amended License Agreement covers certain amendments relating to, among other things, our continued integration of the Bluegreen Acquisition, including a rebranding plan of the Bluegreen properties to the Hilton Grand Vacations brands and Hilton standards and certain matters related to Bluegreen’s marketing arrangement with Choice Hotels International, Inc., which we assumed in connection with the Bluegreen Acquisition.

On November 7, 2024, we completed a $500 million securitization of timeshare loans through Hilton Grand Vacations Trust 2024-3 with an overall weighted average interest rate of 5.18% and an overall advance rate of 98%.

The proceeds will primarily be used to pay down debt and for other general corporate purposes.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis