Q1 2022 Hilton Grand Vacations Inc Earnings Call
Good morning, and welcome to the Hilton Grand Vacations first quarter 2022 earnings Conference call.
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I would now like to turn the call over to Mark Melnyk Senior Vice President of IR G&A and productivity. Please go ahead Sir.
Thank you operator, and welcome to the Hilton Grand Vacations first quarter 'twenty two earnings call.
Before we get started please note that we've prepared slides that are available to download from a link on our webcast and also on the main page of our website and investors start HCV Dot com. We've made a refer to these slides during the course of our call or question and answer session.
As a reminder, our discussions. This morning will include forward looking statements actual results could differ materially from those indicated by those forward looking statements and these statements are effective only as of today, we undertake no obligation to publicly update or revise these statements.
For a discussion of some of the factors that could cause actual results to differ please refer to the risk factors section of our 10-Q and any other applicable SEC filings.
It will be referring to certain non-GAAP financial measures you can find definitions and components of such non-GAAP numbers as well as reconciliations of non-GAAP and GAAP financial measures discussed today in our earnings press release and on our website at investors studies should be dot com.
Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018.
Under ASC 606, we are required to defer certain revenues and expenses related to sales made in the period. When a project is under construction and then hold off on recognizing those revenues and expenses until the period when construction is completed.
To help you make more meaningful period to period comparisons you can find details of our current and historical deferrals and recognitions in table T. One of our earnings release.
Freezing comparability and to simplify our discussion today, our comments on adjusted EBITDA in our real estate results will refer to results. Excluding the net impact of construction related deferrals and recognitions for all reporting periods.
<unk> accounting of our historical deferral and recognition activity can be found in excel format on the financial reporting section of our Investor Relations website.
Finally, unless otherwise noted results discussed today refer to first quarter 2022 and all comparisons are currently against the first quarter of 2021.
Mark Wang our President and Chief Executive Officer will provide highlights from the quarter. In addition to an update of our current operations and company strategy.
After Mark's comments, our Chief Financial Officer, Dan Mathews will go through the financial details of the quarter.
Mark and Dan will then make themselves available for your questions with that let me turn the call over to our President and CEO Mark Wang Mark.
Good morning, everyone glad youre able to join US today to discuss our first quarter earnings results. We finish off Q1 with an exceptional two months to produce a really strong result for the quarter. Despite getting off to a slow start in January due to the omni kron disruption.
In fact, we produced a number of records this quarter, including record V. P. G driven by record close rates record sales to domestic U S buyers in Hawaii.
And the biggest March contract sales ever at both H V in Diamond.
All of which supported another quarter of EBITDA above 2019, combined levels with very impressive margin gains.
This is a testament to the hard work that the teams have put in throughout this integration process.
Which is beginning to pay off.
And there's other positive news to share with you today.
In early April we officially launched our new integrated membership program and we also opened our first set of rebranded Diamond properties.
In addition, the team's diligent work has enabled us to identify another $25 million in cost synergies to improve our long term efficiencies.
Taking these factors together gave us the confidence to raise our EBITDA and cash flow guidance for the year.
And I'm very happy to announce that the board approved a 500 million dollar share repurchase plan, which was earlier than expected.
We're conscious of the macroeconomic factors impacting certain parts of the consumer environment, but our direct to consumer model loyal member base and value propositions are built to provide a hedge against inflation, which gives us a competitive advantage in these changing.
Thanks.
Our targeted owners are higher income consumers for whom travel occupies a special place in their list of spending priorities.
And we're seeing some of the positive travel behaviors that emerged during the pandemic become the new normal including longer vacations or demand for larger family oriented spaces and more people rely on the flexibility to work remotely from vacation destinations.
So overall I think the timing of our diamond acquisition couldn't have been better.
With our new membership rebranded resort and recent inventory additions I think we're in a really great position to capitalize on the environment.
Before we jump into the integration and quarterly results, Let me talk a little about HCV Max our newly launched a membership program and what it means for us.
H V. Max is a key to unlocking and evolving our membership into an immersive platform of experiences where owners can choose their own adventure.
Based on their leisure needs and life stage through a simplified and flexible customer engagement model and under the unified promise of the Hilton Grand Vacations service excellence with H C V. Max members will be able to access a broader range of experiences and services through our <unk>.
New Max point system.
Including the entire network of destinations and more than 150 properties across North America, Japan and Europe .
Our ultimate access portfolio of curated experiences selected and offered to our members based on their preferences and use occasions.
And our ecosystem of partners ranging from complementary travel providers to a lifestyle brand where owners can use their points and enjoy exclusive benefits.
<unk> helped launch status and a new set of it exclusive benefits for states that felt the hotels, which is our owners preferred travel accommodation options after our properties.
The customer experience is designed with feedback from our owners in mind, keeping the best of legacy HCV and diamond programs and enhancing the whole value proposition by creating more flexibility in point usage, adding compelling new ownership chairs to unsatisfied more engagement at key points in yet.
Our lifecycle.
And simplifying the transaction process by bundling annual fees.
This new program provides compelling and differentiated value and were confident that in addition to new buyers. Many existing owners will decide to become Max members.
The enhanced value proposition will also allow us to meet the needs of a broader set of customers.
We started offering Max on April 4th and all of our HCV sales centers and 13 rebranded diamond sales centers.
For reference those locations generated nearly $2 billion in contract sales in 2019 or 85% of the pro forma combined contract sales produce that year.
Well continue making progress through the second quarter, adding new markets like Lake Tahoe in Palm Desert, California, and Kitty Hawk North Carolina.
And going forward, all new buyers and owners purchases and rebranded sales centers will automatically become Max members.
We expect to have full program usage available for members by later this summer.
And by year end.
We will have all of our sales centers rebranded to have Max available across our entire distribution network, which is well ahead of the schedule that we contemplated in our acquisition proxy materials.
I'm proud of our team for their efforts, particularly in light of the tight supply chain environment.
Recall that rebranding the diamond sales centers is the primary driver to unlock in our revenue synergies because it enables us to sell both HCV Max across all three of our brand collections.
Turning to the rebranding of our properties in April we opened our first five Hilton vacation club collection resorts in new markets of Scottsdale, Sedona, Williamsburg, and Virginia Beach as well as in our existing Orlando market.
We've heard great feedback from our guest and we've seen a nice pickup in our Ford ADR and booking activities after re branded locations.
Those resorts are also now part of this Hilton honors network and are available to book through Hilton Dot Com.
We're already capturing some of the synergies from the rebranding efforts as we move away from Diamond <unk> third party centric platform and onto Hilton Dot com.
We expect to see similar benefits with several more properties plan for rebrand in the second quarter and we remain on track to meet our goal of having over one third of our identified cheese rebrand it by the end of this year.
We've also made solid progress on our cost synergies ending the quarter at a run rate of $120 million in savings versus the $74 million run rate last quarter, and we've identified an additional 25 million of synergies, bringing our total cost synergy target to one.
$150 million.
And finally.
As you recall from last quarter, we've seen success out of the gate with our ultimate access experiential platform.
We've continued to receive positive feedback and inbound requests from our members about the offering.
As we rollout ultimate access to our entire member base, we think it will not only enhance our overall on our experience, but it will provide us with additional consumer data that will allow us to further tailor the events, we offer and the tour guests we select.
So overall I'm very pleased with how our integration has progressed and the work our teams have been doing in a relatively short period of time.
Now, let's take a look at this quarter's performance contract sales for the quarter were $509 million or 96% of 2019 pro forma combined sales.
Legacy H C V showed further recovery in contract sales for the fourth quarter and Diamond finished with contract sales a couple of points ahead of 2019 levels a marked improvement from Q4.
Last quarter I mentioned that we had a lot of heavy lifting from a personal perspective at diamond and today's results show, how well they've adapted to those integration changes as well as how quickly they've come together as part of H T V's team.
Looking at demand indicators, we finished the quarter with occupancy levels of 75%.
We saw occupancy gap against 2019 grow in January around Omicron and its various challenges followed by a sharp narrowing of the gap in February and March as the wave passed in travel trends rebounded.
Our consolidated owner arrivals on the books through the rest of the year are in line with 2019 and a rental arrivals are pacing ahead of where we were in 2019 with particular strength in the back half.
As it relates to our new buyer demand our Q1, new buyer package pipeline saw a sharp acceleration in year over year growth and was up 23% versus the prior year.
The heavily subsidized nature of our vacation packages makes the value proposition is stronger than ever and this high ADR environment and.
<unk> is a good forward indicator of future new buyer demand.
Importantly, our mix of packages with a set toward eight was at its highest level since 2019.
And then number of these data packages and our pipeline is up 42% from December which was double the rate from when we last reported.
We're very focused on converting our package pipeline into tour flow and we're making investments in our marketing channels to build that tour pipeline to support growth in the back half and into next year.
<unk> for the quarter was nearly $4900 a record level that increase both sequentially and year over year.
Average transaction price again increased year over year due in part to the contribution of our new projects.
But the improvement in close rate was the largest driver of V. P. G gains we saw in the quarter.
I think theres a few factors that contributed to this outsized V. P. G growth consumer balance sheets remained strong and spending continues to shift from goods to experiences.
New resort product and anticipation of the improvements from our Diamond acquisition has drawn a lot of interest.
The loyalty of our owners has continued to show throughout the pandemic.
And the enhancements, we made to our customer scoring models is optimize the quality of their tour flow that we're seeing through our sales centers.
The high flow through from our V. P. G gains underpinned our strong EBITDA results for the quarter with margins 500 basis points ahead of both 2019 and 2021, along with strong free cash flow conversion.
Our new buyer tour flow mix improved to the highest level, we've seen since the pandemic began and we expect that the investments, we're making to activate our package pipeline will further improve in the back half of the year.
For the quarter, our legacy H C V NOG improved to two 1% and Diamond also added nearly 1600 new members.
That growth in new owners supported the strong trend in our finance and resort and club business with EBITDA from those two recurring segments, making up half of our segment EBITDA in the quarter.
And finally, our rental business topline continues to benefit from improved occupancy and strong industry a D r's.
Driven by the robust travel environment.
So to sum things up.
After a slow start we had a really impressive finish to our quarter and we see this momentum continuing.
This performance along with gaining line of sight into additional cost synergies underpins our confidence in the increased EBITDA guidance for the year.
With the launch of HCV, Max and our first wave of property rebrand we pass some of the biggest milestones our integration journey.
And our focus for the rest of this year is to execute on our rebranding plans and capture the revenue synergies that we see ahead.
I'll now turn the call over to Dan to take you through our financial details Dan.
Thank you Mark and good morning, everyone before we start note that our reported results for this quarter included $42 million of sales deferrals impacting reported GAAP revenue related to pre opening sales of the second phases of our Maui in Okinawa projects.
We also recorded an associated $20 million of deferred direct expenses from those sales, resulting in a net deferral impact to ASC 606, EBITDA of $22 million.
In my prepared remarks, only refer to metrics, excluding the impact of deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period.
Let's review the results for the quarter.
Total revenue in the first quarter was $821 million, excluding the aforementioned deferrals as Mark mentioned after a challenging start to the quarter in January related to the Omicron variant. We produced very strong results in February and March that led to us exceeding our pro forma combined revenue from Q1 2019.
<unk> reported adjusted EBITDA was $224 million, which was 43% ahead of our 2019 pro forma combined level.
EBITDA margins of 27% or over 800 basis points better than pro forma 2019, as we benefited from several positive drivers in the quarter.
We made solid progress on our synergy initiatives in the first quarter with a run rate cost synergy captured now in $120 million versus $74 million that we reported in Q4.
And as you saw in our release today, we have identified additional initiatives, allowing us to raise our cost synergy target to $150 million from our prior estimate of $125 million plus.
We also generated contract sales and a more efficient way than expected with stronger V. P. G outpacing the recovery in tourism, which produced high flow through and drove the strongest Q1 margin performance in our history as a public company overall.
Overall, I'm pleased with how we closed out the quarter to produce impressive results.
Now, let's talk through our segment details within real estate total contract sales were $509 million or 96% of pro forma combined 2019 levels.
<unk> made up 73% of contract sales for the quarter, which is down slightly from last quarter, but still elevated from the two thirds mix of owners for the pro forma combined business prior to Covid we.
We remain focused on driving NOG as we continue to make investments in monetizing our package pipeline to drive new buyer tour flow for the quarter, New buyer tours were 59% of the total this is the highest new buyer mix for the combined company. We've seen since the start of the pandemic in the first quarter of 2020, but it remains roughly 10 points below our pro forma historical new buyer tour mix.
BTG was nearly $4900 for the quarter up 13% sequentially from the fourth quarter and at the highest level in Hcp's history as Mark mentioned after several quarters of seeing close rates normalize from the pandemic highs in Q1, we saw a gain of 110 basis points in our year over year close rate. This was led by.
Nearly 500 basis point gain in owner close rates, which rebounded sharply in February at both D. R. I N HBV and strengthened further in March.
Cost of product was 17% of net VOI sales and included a cumulative adjustment of $7 million.
On a go forward basis, we anticipate that <unk> as a percent of net VOI sales will trend in the low to mid 20% range, reflecting the higher mix of new premium product at HGV, along with the addition of diamonds lower inventory.
Real estate economic sense was $193 million for the quarter or 38% of gross contract sales versus our pro forma combined 41% in the first quarter of last year.
The improvement in S. NIM ratio is due to the combination of our cost synergies and mix of high flow through owner sales offset by some of our recent investments to build our new buyer tour pipeline.
Real estate segment profit was $134 million for the quarter with margins of 35%.
And our finance business first quarter segment profit was $45 million with margins of 70% combined gross receivables for the quarter with $2 4 billion or $1 7 billion net of allowance and our interest income was $55 million.
Our portfolio weighted average interest rate was 14, 4% I would note that this rate does not align with what she's calculate from our segment P&L.
This is because our financing interest income line also includes 9 million Contra revenue for the amortization of the premium associated with the portfolio of receivables that we acquired from Diamond during the acquisition.
This amortization will occur over a multiyear period and we've provided more disclosures in table 10 of our press release to help in your modeling.
Our allowance for bad debt was $763 million on that $2 4 billion receivable balance of these amounts the acquired diamond portfolio, which use their underwriting standards was $461 million on a portfolio of balance of just under $1 billion.
<unk> remained at very low levels, reflecting continued strength of the consumer which has benefited from stimulus and other government programs.
Our annualized default rate for the originated portfolio was 372%.
Our provision for bad debt was $31 million or 8% of owned contract sales.
Similar to trends last quarter, the provision was lower than our target provision rate of the mid to high teens or into better than expected consumer performance portfolio amortization, lower bankruptcies and lower impairments than anticipated. In addition during Q1. We also saw an uptick in the number of full cash transactions that didnt utilize our financing.
Which also lowers the provision for bad debt.
We expect that these trends to normalize and provision to begin working its way towards our mid to high teens target.
In our resort and club business, our consolidated member Count was just over 500000 looking at Hev's legacy businesses NOG was two 1% at the end of the first quarter Diamond also added nearly 600 net new members during the quarter.
Resort and club revenue was $125 million for the quarter.
Revenue was $51 million for the quarter lower than the 70 million that we reported in the fourth quarter of last year.
Recall that our club revenues get and materials seasonal bump in the fourth quarter of every year as that's when most numbers after all their points or convert them into Hilton honors points above.
Revenue during the first three quarters of each year tends to stay in a similar range.
Profit was $89 million in the quarter with margins of 71%.
Rental and ancillary revenues were $136 million in the quarter rental revenues were down slightly versus the fourth quarter due to the impact on the crown amplify.
Normal seasonal trends, although we did see material improved occupancy trends in February and March.
Segment profit was $4 million with margins of 3% as we've mentioned in the past higher developer maintenance fees at both Diamond NH TV will be a headwind to margins for the combined entity versus what HED Standalone had reported prior.
Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA corporate G&A was $30 million license fees were $25 million and JV income was $3 million.
I'd note due to our recent rebranding progress that Mark mentioned will be paying license fees on sales made through our rebranded centers and transient stay is made in re branded properties. According to the graduated schedule that we laid out during our announcement.
Our adjusted free cash flow in the quarter was 159 million, which included inventory spending of 15 million and excludes acquisition related costs of $25 million.
Turning to our outlook. This was a strong quarter, we've identified additional synergies and we're off to an encouraging start with our launch of HEV Max Accordingly, along with increasing our synergy target today, we're also raising our EBITDA range to $960 million to $990 million versus our prior expectation of $915 million to $935 million.
And we expect that for the year the conversion of EBITDA to adjusted free cash flow will fall well within our long term target range of 50% to 60%.
I'm also happy to say our performance in the quarter and better than expected deleverage coupled with our increased outlook on EBITDA and cash flow have enabled us to resume our share repurchase program earlier than anticipated with a $500 million authorization.
As of March 31, our liquidity position consisted of $514 million of unrestricted cash.
$699 million of availability under our revolving credit facility or.
Our debt balance at quarter end was comprised of corporate debt of $2 9 billion.
Nonrecourse debt balance of $1 2 billion.
At quarter end, we had $439 million of remaining capacity on our warehouse facilities of which we had 154 million of notes available to securitize and another $238 million of mortgage notes, we anticipate being eligible fund certain customary milestones such as first payment dealing and recording.
On April 21, we.
We completed our first securitization of the year of $246 million offering consisting entirely of diamond receivables going forward, we still expect to do another deal of legacy HEV collateral and then deals from there on will be a combination of ACD and D. R. I collateral underwritten to standards more in line with <unk> legacy practices.
Following quarter end, we were also able to consolidate the legs, the HEV and <unk> warehouses into a single $750 million facility with significantly better pricing on both used and unused basis.
We expect to wind down the remaining diamond warehouses and facilities, which will deliver sizable synergies for our financing business.
Turning to our credit metrics at the end of Q1, the company's total net leverage on a pro forma TTM basis was two six times, not giving effect to anticipated synergies.
Excluding all anticipated synergies our leverage is two four times on a pro forma TTM basis.
Finally, with the launch of Max unifying our sales function along with the integration of our back office and it systems has become difficult and somewhat on meaningful for us to continue allocating revenues and cost of specific entities.
In the release today, you saw us move back towards consolidated reporting and beginning next quarter will revert to reporting our metrics on a consolidated basis as we approach the one year anniversary of the acquisition close.
We will now turn the call over to the operator, and we look forward to your questions operator.
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Our first questions come from the line of Stephen Grambling with Goldman Sachs. Please proceed with your questions.
Hi, Thanks, obviously that the tape like that there's there's certainly a lot of questions around the macro so I'm curious how do you think about a consumer led recession, how that might impact the fundamentals of the business. If you look at how the company compares and contrasts with history due to the Diamond acquisition and also just looking at.
The pandemic environment, we just went through slash still around.
Yeah. Good morning, Steven sure look understand from.
From a macro geopolitical standpoint.
There is a lot of uncertainty and volatility out there thats being discussed but.
All I can talk about is really what we're seeing internally the internal indicators and some of the fact patterns over the years.
And I think we're really well positioned to continue to grow. Despite some of these challenges ahead and I think if you look at our business model today, 50% of our revenue is recurring.
So we have a significant amount of revenue visibility going into any given year and and <unk>.
<unk> seen from some of our data points are the portfolio has held up really well.
Haven't seen a significant significant drop off in member base.
So feel really good about.
The visibility we have around a good part of our revenue if you think about the rest of the business.
We've got a really high quality and a very large owner base.
And if you go back and just look at the you know the fact patterns Dave upgraded consistently through.
Throughout multiple cycles, so that.
Feel good about our owners in fact, we've B V. P. G. We're seeing right now are Ppg's I haven't seen in 20 years in our company. So owners are performing extremely well.
From a new customer acquisition standpoint, where we really benefit.
From access to Hilton loyalty base, and so and we talked about it in our prepared remarks, but you know we have a pipeline of over 400000 customers who've already made a deposit to visit one of our.
Visit and tour one of our properties so.
And I feel really good about that part of the business and that is building and we saw activations.
Jumped significantly quarter over quarter.
And then the other part of it it's always it's always to me, it's always been about customer acquisition, it's been about inventory and we're in a great inventory position today with a.
You know with the added inventory just put in the in the in the system and then you think about the Diamond acquisition, we've added diversity and priced geography and distribution. So.
And then Theres just as pent up demand there, we're seeing really play out in and I think it's more pent up demand I just think were seen.
Number of things that are kind of building off the back end of this pandemic just the blending of leisure and work trips together.
Larger unit types longer stays we have the larger units I saw a survey recently.
That suggested that are 80% of people, we're looking for units with kitchen. So we're in a really good position. There. So all in all I feel really confident with our team's ability to execute based on.
What we're seeing internally and some of the fact patterns from the past.
Thanks.
Way.
And to your guidance I guess, what type of consumer backdrop are you factoring in relative to what we're seeing today.
In your guidance and I think you alluded to this in your remarks, but can you remind us what is holding back I guess tours in North America and it teams diamond.
I have kind of plateaued versus 2019 levels.
Should we be assuming that those can or should fully recover.
Yeah.
I think let me let me just touch on on the guidance.
And I'll, let Dan jump in here and give you the puts and takes on how we see this guidance playing out but.
I talked about the visibility I talked about the pipeline for our you know our new buyers and what we're seeing with our owners so.
And the great performance, we're seeing so far as far as tour flow goes.
And our confidence that bringing tour flow back.
We just converted over five properties, we just started selling.
Packages about 45, 60 days ago, two diamond properties.
And thats to Hilton customers.
And so we've seen over 20000 packages sold over that period of time, so we're getting a bit good pick up there, but maybe I'll have Dan talk to you about some of the puts and takes here.
Hey, Steven with guidance, just walking through it mechanically our last range was 915 million to 935 million. So a midpoint of 995.
So when you take a step back and you look at Q1, you've got about a $20 million B. So that takes you your midpoint from nine five to $9 45, and then the increase in cost synergies that $25 million, we anticipate realizing about $15 million of that this year. So that will take you to the low end of the new range of $960 <unk>.
290, and then the balance of that range is really comprised of V. P. G. Continuing to outperform our expectation we don't anticipate that we will hold steady where it is today for the balance of the year. It will definitely come down and we planned for it to come down, but you will get some benefit there and then obviously rental is also outperforming so between the two.
Of those that fills out your range of 960 to 90 90 now with regards to tours and your question on diamond towards coming back to 2019 levels. The one thing I would highlight and I think we've talked about this a couple of times.
During the pandemic some of the inefficient towards really to towards driving losses were cut from the diamond.
[noise] tour flow. So we are looking to fill those back with the packages that mark alluded to earlier.
Makes sense. Thanks, so much I'll jump back in the queue.
Thank you. Our next question is coming from the line expand Jacobs with credit Suisse. Please proceed with your questions.
Hey, How's it going.
You recently introduced ECB, Max will existing HCV and diamond customers need to buy more points needed in order to gain access to that new program and I guess, if so what do you do you proactively reach out to them or how do you think about it.
Yeah, no. So first yes excited.
We're excited about HCV Max.
This is our first new membership program that we've.
We've launched in decades, so we really wanted this to be special and.
As it relates to the first part of your question.
Art I want to thank our owners, who continue to be very loyal to us and emphasize that all of the benefits that they have under their current membership under Hilton Grand vacations or the club, which is Diamond club they'll continue to have those benefits. So theres no value loss there.
That being said.
New membership is is going to require somebody to actually buy into that new membership either through an upgrade of reload or actually just buying a membership on its own and so again really excited about what we've done here I think.
We knew we had a real opportunity to create something meaningful.
Especially with this acquisition. So we designed Max to really expand access our benefits additional experiential value.
One obviously is when you have kind of a Max number you'll have access to the 150 properties across.
North America, Japan, and Europe , So and that was as we surveyed our owners that was the one.
They were looking at.
On top of that.
Hilton honors benefits and status, which to diamond members.
Previously Didnt have we also were able to work with Hilton and developed some really exclusive benefits within the Hilton Hotel system.
And add some new lifestyle brands in travel partners along the way so all in all I'm really pleased with what we've done with maxon.
Our expectations is.
We introduced HGV Max just on April 4th.
To our member base, we havent.
Fitted from any pre sell of that but we think the demand and we're getting a lot of questions coming in from our base around match and how it works, but the.
Of course of business will be as they come in through our property into another sales tour well, we'll update them.
And hopefully we'll.
We will see a nice lift in <unk> and performance based on just the added value.
Gotcha. That's helpful. And then just one follow up does that apply to when you make them when you make the incremental purchase.
Or it sounds like maybe there's also an option to just buy into the program does that.
Does that also convert your legacy ownership or is that only for the new purchase yes.
Yeah, Yeah that's.
Great question. So first of all maybe I should clarify that starting April one anybody that purchases any one of our collections, whether it's Hilton club vacation club, our Hilton Grand vacation club that comes with Max ownership.
And if you.
When you purchase if you are an existing owner either diamond or HCV that will convert all of your legacy.
Ownership or points into HGV Max so.
Yeah.
Got you and so presumably you already have that conversion rate those are all set and everything at this point.
That's correct, yes, Okay got it thank you very much.
Thank you our next questions come from the line of David Katz with Jefferies. Please proceed with your questions.
Hi.
Good morning.
Yeah.
With respect to the capital returns and the share repurchases in particular I know this is kind of a complex question, but.
Or are you thinking about increments and timing them you know in.
In the context of your capital structure, clearly, providing the resources to do it Dan can you just sort of help us think about your philosophical approach I know, it's a tough market, but that's partly why I'm asking the question.
I know David it's a good question and tough market, probably the understatement of the day rate.
We have not had an active share repurchase program since.
It was March of 2020, when we were we were probably the only ones buying the stuff around $11, if I remember correctly.
So looking at this new repurchase program that was announced what I would say is it's it's unlike our previous programs that were had a term base of one year. It's now term base of two years, So I'd look for us to be rather consistent quarter to quarter.
Sometimes.
Right now I'd say look you could probably just set it up and think to yourself hey divide by eight.
So youre looking at probably around $62 million in share repurchases a quarter. It will depend on activity and what's going on in the market some quarters it'll be less some quarters will be more but just for a placeholder as you think through it that's what I would look at it as of today.
That is super helpful. Thanks, very much.
Yeah.
Thank you. Our next question is coming from the line of Stephen Grambling with Goldman Sachs. Please proceed with your questions.
Hey, Thanks for getting me back on them. This is a bit of a nuanced question, but how should we be thinking through your tax loss carry forwards I think it was something like 400 million at year end.
As it relates to cash taxes or cash tax rate and how much is that coming from regular course of business versus what you may have received from the Diamond acquisition.
Great question. The vast majority of those Nols are coming from the acquisition of Diamond and nothing really to write home about with regards to continuing ops.
The way to think about those.
Going to be utilizing and to the extent Mccann as fast as we can cash taxes, just I think maybe an easier way to just sum. It up is when you think about cash taxes for 2022, I I would assume about a $150 million in cash taxes.
Awesome. Thank you so much.
Okay.
Thank you before we end I will turn the call back over to Mark Wang for any closing remarks, Mr. Wang.
Alright, well, thanks, everyone for joining us today I want to thank our team members for going above and beyond to meet our owners' needs and deliver outstanding vacation experiences and I want to thank our owners.
Who make vacation a priority and entrust us with creating those memorable experiences for themselves and their families. Thanks.
Thanks, again and have a great day.
Yeah.
This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.
Enjoy the rest of your day.
Okay.