Q1 2023 Hilton Grand Vacations Inc Earnings Call
[music].
Good morning, and welcome to the Hilton Grand Vacations first quarter 2023 earnings Conference call.
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I'd now like to turn the call over to Mark Melnyk, Senior Vice President of IR and G&A.
Please go ahead Sir.
Thank you operator, and welcome to the Hilton Grand Vacations first quarter 2023 earnings call. As a reminder, our discussion. This morning will include forward looking statements actual results could differ materially from those indicated by these forward looking statements. These statements are effective only as of today, we undertake no obligation to publicly update or.
These statements.
A discussion of some of the factors that could cause actual results to differ please see the risk factors section of our SEC filings.
I'll 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 HGV Dot com.
Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018.
Under ASC 606 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 one of our earnings release for ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results will refer to results. Excluding the net impact of construction related deferrals and recognitions for all report.
Putting periods.
A complete accounting of our historical deferral and recognition activity can be found in excel format on the financial reporting section of our Investor Relations website.
Moment, 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 Matthews will go through the financial details for the quarter, Mark and Dan will then make themselves available for your questions with that let me turn the call over to our president.
CEO Mark Wang Mark.
Good morning, everyone and welcome to our first quarter earnings call.
Today, we announced another quarter of strong results and I'm pleased with our performance.
Particularly in light of the difficult comparisons with last year.
Contract sales grew to $523 million and EBITDA was $216 million with margins of 23%.
The key indicators of our business continue to demonstrate the resilience of travel related spending.
Rivals are on the books are ahead of last year and point to further occupancy strength going forward.
Year over year tour flow growth was the highest since the first quarter of last year with the number of tourists nearly returning to 2019 level.
We sold more premium packages this quarter that we've ever had and at the same time, we also activated more packages than ever before.
And our new buyer channel growth.
<unk> to outperform our own our channel.
Which is consistent with our strategic focus on long term value of the business.
Early in the pandemic, we focused on servicing our owner base and maintaining their strong commitment to traveling with HCV.
But our focus continues to be on restoring our historical mix.
Growing tours and new bar sales driving the long term health of the business.
And embedding future value.
While we're seeing positive trends among our consumer base. We're also continuing to monitor the macroeconomic environment closely.
For some time, we've been guiding to an expected moderation of some of our kpis as they return to more historical levels.
This is the natural result of growing our tour volumes and seen a wider variety of customers with more typical spending patterns.
It's also the result of our focus on new buyers, which creates a mix effect since they carry lower initial kpis that honors.
So while we anticipated this moderation in our kpis against a record highs over the past year.
Positive leading indicators I mentioned before gives us confidence that we're able to navigate through any macro headwinds.
Before we get into the details of the quarter, let's start with an update on the integration and initiatives.
It's been a year since we officially launched sales of HCV mats and we welcomed over 90000 members into the program in that tier.
Performing our expectations.
We had a great response, and we're pleased with how well the product is resonating with existing owners and legacy <unk> members showcasing the broad appeal of HCV Max.
And this year, we will continue to evolve the program by activating additional features and adding new benefits.
Turning to our experiential platform HCV ultimate access we continue to expand the popular program on the heels of a very successful launch here. This.
This year, we expect to host nearly 100000 members at ultimate access events, demonstrating considerable growth versus the prior year.
We're excited about the opportunity in front of us with ultimate access.
And I'm really proud of the team and the work they've done to build the platform.
And we're thrilled to have such a great set of brand ambassadors, whereby our members with unique culinary culture and event experiences.
Turning to our Diamond property rebranding, we're making good progress and remain on schedule.
Through the first quarter, we've rebranded 22 resorts to Hilton vacation club, representing over 6500 keys.
Over 40% of the acquired portfolio.
We've completed two conversion so far this year and will add another 11 properties by year end, bringing us to 33 resorts since acquisitions close.
On the rental side, though so vacation club properties are benefiting from the improved economics of being part of the Hilton network in.
In the first quarter alone, we booked over 60000 room nights at our rebrand and resorts to Hilton Dot com with higher <unk> and lower cost than before.
And we've also seen strong demand for those rebranding properties from our members in marketing guests with nearly 80000 preview packages sold they will generate marketing tour flow at those properties in the months ahead.
To more effectively engage those marketing guests.
We're continuing to enhance our use of data and analytics.
This scoring models we've been using at HGV continue to help us better segment, our marketing prospects.
We've recently rolled that predictive modeling to legacy diamond as well and expect to experience a similar positive resolved that should support sustainable improvements the close rates of APG.
Now let me take you through a more detailed look at our performance in the first quarter.
Contract sales growth was driven by strong improvement in tour flow, which more than offset the expected PPG declines.
<unk> were up 32% despite lapping a difficult comparison in the prior year.
Both owner tours and new buyer tours showed great growth in the quarter.
But new buyer tours were particularly strong growing over 40% from the prior year and representing the highest mix since the pandemic began in the first quarter of 2020.
In addition, our tour flow enabled us to drive robust transaction growth in the quarter.
TPG for the quarter was nearly $4 with both owner and new buyer declining against record Ppg's from last year.
Turning to our forward indicators as I mentioned in my opening remarks, we're seeing continued positive trends.
Occupancy in the quarter was 79% up 400 basis points versus last year and the strongest first quarter since 2019.
And our forward bookings suggest continued strength in occupancy through the rest of the year.
Our marketing pipeline grew to over 550000 packages. Despite the significant amount of convergence during the quarter, indicating that consumer's intention to travel remains strong.
And our mix of activated packages is now nearly a quarter of our pipeline.
The highest since 2017.
After total activated packages grew 65% versus the prior year.
So we're happy with the investments we made in our marketing channels that are helping provide additional visibility and confidence in our tour flow for the year.
Turning to our non real estate segments higher spending activity among our members and rental guests drove solid topline growth in our club resort rental and ancillary segment.
We ended the quarter with 519000 members and then August three 3% on a combined basis.
Our financing business also continues to perform well despite the recent shift toward higher cash purchases and prepayments.
And from a credit perspective, our portfolio continues to exceed expectations.
So as.
As we look at the remainder of the year, we're optimistic about the path that had we're moderating the strength of the consumer closely and we continue to see strong desire to travel as evidenced by our preview package pipeline and forward booking activity.
HCV Max provides a tremendous value proposition, that's really resonating with our consumers and we're activating more features and adding new benefits.
When you combine the strength of our offerings with the new technology tools were applying to our marketing we expect to generate additional tour and add new Max members.
These efforts have set the stage for sustainable efficiency improvements driving additional free cash flow and long term value creation for our shareholders. In addition to capital returns.
With that I'll turn it over to Dan who will walk you through the numbers.
Sure.
Thank you Mark and good morning, everyone before we start note that our reported results for this quarter included $4 million of sales Rep sale recognitions, which increase reported GAAP revenue associated with the opening of another phase of our Maui project.
We also recorded an associated a $2 million of associated direct expense recognitions, resulting in a net reduction of $2 million to our reported EBITDA for the quarter.
My prepared remarks, I'll only refer to metrics, excluding the impact of deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period.
Turning to our results for the quarter.
Total revenue in the first quarter was up 13% to $930 million all segments showed year over year topline gains led by strength in our financing and rental and ancillary segments.
Q1 reported adjusted EBITDA was $216 million with margins of 23%.
Turning to our segments within real estate total contract sales of $523 million were up 3%, which is really encouraging given that we are lapping record levels for a number of kpis in the first quarter of last year.
Very strong towards growth with total tours up 32% year over year, which is the highest store growth we've seen since the first quarter of 2022.
We saw a nice acceleration on a year over year owner tour growth, but I'm, particularly pleased with our new buyer tours, they were up over 40% versus prior year and the highest mix of total towards since the first quarter of 2020, when the pandemic first started.
Mark mentioned, we've seen very strong growth in both our number and mix of activated packages that drove robust new bio tour flow in the quarter as well as visibility into our upcoming tour flow pipeline.
CTG was just under 4000 for the quarter, which was down against the record <unk> of last year due to the expected moderation of our close rates along with a higher mix of new by our contract sales.
As we discussed we're expecting those year over year declines to persist in 2023 is our BTG continues to moderate, particularly as we lap the tough comparisons in the first half.
But we're still comfortable that our BTG will settle in the range of 10% to 15% ahead of 2019 before resuming a more normal pace of year over year growth.
<unk> was 16% of net VOI sales for the quarter real estate sales and marketing expense was $239 million for the quarter or 46% of gross contract sales are.
Our selling and marketing percentage remains elevated owing to the continued investments into growing our new buyer channel along with the flow through of lower <unk> during the quarter we.
We expect Q1 to be the peak of our sales and marketing percentage and as we move through the year and lap those channel investments, we should see improvement in this metric real estate profit was $133 million for the quarter with margins of 32%.
In our financing business first quarter revenue was $74 million of segment profit was $50 million with margin of 68%.
Combined gross receivables for the quarter were $2 5 billion or $1 8 billion net of allowance and our interest income was $66 million.
Our originated portfolio weighted average interest rate was 14, 5%, while our acquired portfolio had a weighted average interest rate of 15, 6% and includes a $3 6 million Contra revenue for the amortization of noncash premium associated with the portfolio of receivables that we acquired from Diamond during the acquisition of <unk>.
Lounged for bad debt was $743 million on that $2 5 billion receivable balance of these amounts the acquired diamond portfolio, which do use diamonds underwriting standards was $325 million on a portfolio balance of $663 million or annualized default rate for a consolidated portfolios, including the diamond acquired in <unk>.
Underwriting portfolios was eight 4%.
This is generally consistent with where we ended 2022, which was down over 100 basis points from 2021 with both the acquired and originated portfolios continuing to demonstrate solid performance relative to our initial underwriting assumptions.
Our provision for bad debt was $30 million or 9% of owned contract sales.
While we provided on new loans in the mid teens on a consolidated basis higher cash purchases and elevated prepayments coupled with generally did default performance continues to depressed provision as a percent of contract sales.
In our resort and club business, our consolidated member Count was 519000, and our consolidated NOG was three 3% at the end of the first quarter.
Revenue of $131 million was up 5% for the quarter and segment profit was $89 million with margins of 68%.
Our club expenses increased in the quarter as we ramp additional resources to further enhance our service levels are increased member activity.
Rental and ancillary revenues were $158 million in the quarter with segment profit of $6 million.
As we mentioned last quarter Q1 margins reflect the impact of a change in expense timing from member benefits at Diamond during the first quarter. This timing shift resulted in $7 million year over year impact to the first quarter expenses.
Looking at Q2, we expect the timing shift to cause a $3 million year over year impact of segment profit.
In the back half of the year, we expect that this timing shift will drive a $10 million year over year benefit to expenses, making the impact of the timing shift neutral to the full year.
Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA Corporate G&A was 33 million license fees were $30 million in JV income was $3 million.
Our adjusted free cash flow in the quarter was 33 million, which included inventory spending of 152 million and excludes acquisition related costs of $25 million.
This inventory spend included the final payment for the Central in New York that had been deferred since the pandemic, which drove the use of cash.
For the year, we still feel confident with an EBITDA to free cash flow conversion ratio that will be at the low end of our 50% to 60% target range.
During the quarter the company purchased $1 9 million shares of common stock for $85 million at an average price of $45 37.
And through April 21, we have repurchased an additional one 3 million shares for $60 million.
We currently have $83 million remaining of the $500 million repurchase plan approved by the board in May of 2022, and we remain committed to enhancing the total return for our shareholders by returning capital via share repurchases.
Turning to our outlook, we are reiterating our 2023 adjusted EBITDA guidance of $1 90 to $1 120.
As of March 31, <unk> liquidity position consisted of $389 million of unrestricted cash $671 million of availability under our revolving credit facility our.
Our debt balance at quarter end was comprised of corporate debt of $2 9 billion and nonrecourse debt balance of $1 1 billion.
At quarter end, we had $575 million of remaining capacity on our warehouse facility of which we had $312 million of notes receivable to securitize and another $279 million of mortgage notes, we anticipate being eligible following certain customary milestones such as first payment dealing and recording.
Turning to our credit metrics at the end of Q1, the company's total net leverage on a TTM basis was two five times.
I'll now turn the call over to the operator and look forward to your questions operator.
Thank you next time, we'll be conducting a question and answer session.
Again, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue.
So participants using speaker equipment, it may be necessary to pick up your handset before pressing to start Keith again.
Again, we ask to please limit yourself to one question and one follow up till now the opportunity for everyone to ask questions.
Our first question comes from the line of Patrick Scholes with <unk> Securities. Please proceed with your question.
Thank you operator.
Good morning, everyone. Good morning.
A couple questions here at.
It sounds like Youre doing exceptionally well with new buyer tours.
Without giving away the secret thoughts to your competitors.
From a high level where are you.
Where are you driving these new buyers from at this through the Hilton honors program or on site.
Marketing initiatives and then related to that do you see.
Most of these new buyer tours.
Going into sort of your legacy more higher price Hilton product or is this going to the more moderately priced guidance.
Type of product. Thank you.
Yes, Patrick.
So first of all really pleased with.
Our momentum in selling these preview packages and I think this is a this is an area where we've had a strong competitive advantage for years.
And part of that is just the relationship we have with Hilton.
And this goes back for well over a decade and our ability to source.
Customers through Hilton, So I would say the majority of our new buyer growth is coming through that relationship and.
Through a few other partnerships that we have out there, but still the majority is coming through.
The Hilton relationship and so our pipeline now sits at 550000.
But what's really important is while we were continuing to sell packages during the.
The period of the pandemic and when Covid was going on.
The activation of these packages that really picked up.
And we've seen a broader set of customers that are now willing to travel.
So.
Really pleased with that and.
There was some hesitancy.
T I take around.
Some of the travelers early on but those activations have been our top priority of ours and the result of that is as our activated packages ended up.
Q1 was up 65% versus prior year and that that really goes back to a period back to 2017, where we've had that level of activation. So really pleased with that and most importantly, it gives us a great line of sight into our future new buyer tour flow in it as we talked.
About.
In our prepared remarks, we were up 40%.
Year over year to <unk> of what we saw with one or.
Tour flow grow Asia owner tour flow was still healthy, but new buyer definitely.
Came in into play here and this is something we've been working on for.
Considerable amount of time, because we know it's extremely important to get new buyers into the system now as far as where these packages are going with <unk>.
Now sold approximately 80000 packages into.
What we would call our diamond legacy markets. So I think it's really benefiting us having this bigger platform and having new markets to offer the Hilton guest.
The opportunity to.
Q1 of our properties so.
All in all it is.
We are seeing a bit of a shift to the DRA properties, but <unk>.
You'll see in strong demand into our core HCV markets.
Thanks, and just start talking about lab I think that was probably part of the original intention with the Diamond acquisition because you had this huge.
Marketing base, and just needed needed more probably more mid scale type of product there to sell it to them.
Good to hear on that.
And then lastly, just give us an update on Hawaii I think.
Most recent comments, where you expected it to be.
Fully backed by hopefully by the end of this year is that is that still progressing. Thank you.
Yes look.
It definitely making progress in Hawaii in fact.
We've seen our tour flow recovery that was below 60%.
In Q1, 'twenty two to its nearly 85% of <unk> 19 in Q1 and 23 in all of the forward bookings look encouraging I think by the time, we get out to the fourth quarter, we're seeing about 90% of our Japanese owners back to Hawaii, That's what we're seeing on the books.
Tour flow.
<unk> is definitely recovering and it's nice that Japan is totally.
<unk> taken all the protocols around inbound travel or outbound travel away.
So.
All in all very encouraging what we're seeing in fact.
Approximately 25% of all Japanese rivals to Hawaii, right now our HGV related so.
Youre seen a our owners are coming back at a faster pace than youre seeing with the general.
Population Japanese coming back to Hawaii, So all in all pleased with the progress.
Our expectations are it will still probably be kind of mid next year before we get back to full recovery, but in.
In the meantime.
We're really benefiting with our new property in <unk>.
In Japan, if you recall, we opened that up.
Back in the end of 'twenty, one and we have a lot of Japanese traveling there in sales tusa soco has exceeded our expectations.
So we're really pleased with the way that timed out and the way it helped us.
During this period of time, where Japanese were more reluctant to travel to Hawaii.
Okay. Thank you very much.
Our next question comes from the line of Dani <unk> with Bank of America. Please proceed with your question.
Hi, Good morning, Mark and Dan and thank you for taking my question.
So just on <unk> like we understand that part of that slowdown year on year is mix related.
Are you able to parse out how much of that 18% decline.
The decline is mix.
And then.
And then are you able to.
Give us any more color Dan I know you in your prepared remarks, you talked about close rates.
Kind of give us any more.
Tidbits or data around that and kind of how that's been trending specifically.
Yes, Okay. Danielle this is mark I'll take the first part of it.
Dan jump in on the close rates so look.
We calculate about two thirds of the BTG change.
<unk> versus.
Versus Q4 was due to mix in.
Look we've.
We've been saying for a number of quarters that we expected <unk> to moderate given.
Really the record post pandemic performance.
Part of that was we had a lot of tailwind with the release of.
The strong pent up demand for travel that occurred.
Covet, obviously, a lot of excitement around the acquisition of Diamond.
And we also saw our most committed owners coming back first in.
So.
Yes, so at the end of the day, we've been expecting to get back our new owners and in fact.
Look we view PPG really as an outcome and and while it's important for us to try to manage the best CPG. We can at the end of the day, it's not how we manage the business.
Our focus is really on contract sales growth and the associated transaction growth that comes with it.
And obviously, we execute to the best we can based on what the market gives us but.
For Us historically tour flow has been the best predictor of growth for us in.
In fact, when you go back and you look at our business from 7% to 19, except for <unk> nine we had contract sales growth and.
And in all cases, but one year, we had tour flow growth during those years, where we had tour flow growth. We had five years, where we had the PG traction so.
The other day.
We're now focused very heavily to get back more new buyers because we know the lifetime value outweighs. The short term drag and then Dan I don't know if you want to connect on the closing percentage, yes, sure. So from a close rate perspective, still performing extremely well compared to.
Brickell levels in 2019, when you look at that just looking between new buyer and existing owner existing owner is.
Performing very strong.
Again relative to 19, new buyer.
As we would expect and as we've been talking about it seems like forever now for about eight quarters.
The increase in new buyers and having new buyers come through the system, we expected a bit of a contraction in new buyer close rate and we've seen that.
Both are performing very well and if you look at the pace through the quarter we saw.
Improved from January through March across both new buyers and existing owners.
Got it. Thank you very much for the color that's it for me.
Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi, Good morning, everyone I appreciate all the commentary on the detail.
When we start to think about the opportunities that may present, as a result of financial markets tightening I'm wondering what your thoughts are on potential M&A presuming that it's.
More tuck in oriented than been transformational.
Would there be opportunities out there and are you starting to see.
Any any.
Any of that May make sense for you.
Yeah.
Honestly, we valued.
The value of that.
Consolidation in the industry.
We just undertook a major strategic transaction with with diamonds. So.
And it's really allowed us to leverage our brand across.
A broader base of assets and accessing more owners and as such so look generally.
This is something that will continue.
To monitor clearly we believe it could be positive it is beneficial we've seen it play out very well.
With our acquisition.
But at the end of the day there is.
We've talked about this before.
There is a fair.
Fairly narrow.
A group of companies left out there.
Diamond actually was a roll up company their strategy was rollout we did 11 acquisitions over there.
History, and so theres not a lot of potential out there, but this is definitely an area. We'll continue to look at.
Got it perfect. Thank you very much.
Our next question comes from the line of Brian <unk> with Barclays Chief will see with your question.
Hey, guys. Thanks for taking my questions most of them most of them answered.
<unk>.
I just wanted to maybe ask about.
Maybe try and ask for some extra color on the quarterly cadence for PPG this year because.
I think you guys did a great job just sort of explaining to us the <unk> drawdown.
Got it right two thirds mix I'm, assuming that's both mix and from mix from both.
More diamond tourist versus Ht legacy HED tourist plus more new owners versus repeat owners.
That makes a lot of sense.
Third of it is.
As you can.
Mentioned close rates, Dan going down are obviously going down as you bring up a 40% growth in new orders were sorry, I know, it's a big windup I guess the point is you guys have really.
The comparison for PPG throughout the rest of the year.
Our sort of Eden, but obviously much different in the first quarter of last year and so anything you can help us on in terms of how we should think about.
There's different factors that we've always been talking about how they sort of change throughout the year that might be helpful.
Hey, Brian It's Dan So great question, when you think about the growth in new buyer tours it makes it.
Probably a difficult question to answer right.
In Q1, we had just over 80000, new buyer tours, and we're looking to ramp that up sequentially, but if you look at the historical seasonality for <unk> going from Q1 to Q2, you typically see a decline in <unk> and then ramping back up with Q4 actually being.
The strongest.
<unk> in the back half of the year.
So that's how I would think about it it's going to be an interesting mix. This year, just because of that ramp in new buyer tour flow yes.
I think.
Yes.
I think it's just more pronounced this year right because you know our pipeline is so bad the activation.
It's very <unk>.
Very strong as I mentioned now really excited about what's on the books. If you look at this summer were 10% above.
For owners arrivals on the books, but we're 30% above our marketing our rivals. So again I think it's just going to be more crowed out we're really ramping up new buyer tour flow this year, but as Dan said it does converge back in the fourth quarter.
There you see.
Where do you see that convergence and so well generate.
<unk> tailwind as we close out the year.
Alright.
If you're thinking about it just mathematically Q1 compared to Q1 of <unk> 19 came in over 11% higher on the <unk> front I would look for something similar when comparing Q2 to Q2 of 2019.
And then we've always said that we felt these thing that BTG.
Stabilized.
Somewhere in the range of 10% to 15% and we look for the back half of the year, probably slightly outperform what you expect in Q1 and Q2.
Or what I said for Q1.
Yeah. That's super helpful guys. Thanks for that and then just a quick follow up one of your competitors yesterday.
Called out a little bit of a wobble in the second half of March.
Coincided with the sort of <unk>.
<unk>.
Phebe failure and through the concerns maybe closer to people on the west coast regarding that event.
Sal you saw anything like that but do you have any thoughts on that did you see anything like that.
No.
We really didn't see I would consider any type of wobble or anything like that I think.
Look at the end of the day.
There is a backdrop continues to change right and.
At the end of the day I think.
Good part is we're seeing people want to travel and their desire to travel Super High end and we've talked about it you know in our forward looking pipeline.
So at the end of the day, we're really excited about.
What the rest of year looks like and.
We're just going to be.
Naturally we expect ppg's to moderate.
But ultimately I think the consumer is in that mindset to continue traveling and that.
For us in this environment.
It's about traffic through your sales centers right and you know I talked about earlier before for US we win if we can win with traffic through new sales centers youre going to have your ups and downs over the years and within quarters and within.
Given months, but at the end of the day. It's if we can win on the tour flow. That's one lever that we have more control over that gives us a lot more confidence in our ability to continue driving contract sales growth and transaction growth.
Perfect. Thanks, so much for all the color.
Okay.
And our next question comes from the line of Ben Chaiken with Credit Suisse. Please proceed with your question.
Hey, How's it going.
Okay.
Hey, maybe just adding somewhat to the first question, where I think you were mark, suggesting some very healthy trends from your Hilton honors.
Honors dates.
I guess related is there any color on the D. R I own a reception of Max.
The sales center, a rebrand is that a metric you can is that a metric you track like I E. The origin of ownership and if so how is the trend.
Yes so.
Ben I don't have the detail sitting in front of me, but.
I can tell you I think it's gone really well we had a record year I think we talked about our prepared remarks, we have 90000.
Max members today, and we launched in April of last year, we had a record year last year as far as owner transactions go.
And we saw very positive.
Response on Max from both the legacy HCV and Diamond members I don't have a breakdown of the differences.
But at the end of the day I think.
With the transformation of the sales centers and as we continue to evolve.
The.
The turnover of the properties I think we've got a.
22 converted over to HBC now and we've got another 10 or 11 are scheduled for the rest of this year, but as that continues to happen that should only improve.
That engagement, but all in all I think the engagement from both ownership groups have been very positive around the value proposition for HD maps.
Got it that's really helpful. And then just in the quarter you called out sales and marketing a little higher than normal I think that was expected is this related to the launch of HCV Max I guess just one.
A little more color on specifically what makes you comfortable this will come down through the year and then is it fair to say it'll normalize.
You know at your historical lever levels whenever that kind of low forty's. Thanks.
Thanks.
Yes, no absolutely.
So Q1 is a bit unusual in the sense that.
From a seasonality perspective from a contract sales perspective, it's typically the lowest that obviously from a percentage has an impact but it also is stemming from primarily.
Continued investment in that new buyer, so as we sell packages.
Engaging with employees and hiring individuals to do actually do that coupled with some unusual items that you see in Q1, just from a seasonality perspective, a lot of our ultimate access.
Some of our larger in particular, a golf tournament that we host in Q1.
Hasnt impact on that as well so as we play out through the year, we start to lap some of those initial investments and obviously ultimately access is not as heavily weighted that will help contract that sales and marketing expense as a percent of contract sales coupled with of course growth in contract sales.
Okay got it thank you.
Yeah.
And we have reached the end of the question and answer session and 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 give a special thanks to our team members.
For going above and beyond to deliver outstanding vacation experiences to our members and guests and we look forward to speaking with you soon again. Thank you.
Yeah.
And this concludes today's conference you may disconnect. Your line at this time thank.
Thank you for your participation.
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