Q4 2023 Hilton Grand Vacations Inc Earnings Call

Operator: Good morning, and welcome to the Hilton Grand Vacations fourth quarter 2023 earnings conference. A telephone replay will be available for seven days following the call. The dial number is 844-512-2921, and enter pin number 13743185.

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Speaker Change: Good morning, and welcome to the Hilton Grand Vacations fourth quarter 2023 earnings Conference call.

Speaker Change: A telephone replay will be available for seven days following the call. The dial in number is 84451 to two nine to one and enter pin number 1374318 for.

Operator: At this time, all participants have been placed on a list, and the floor will be open for your questions following the presentation. If you would like to ask a question, please press star 1 on your touch-tone phone to enter the queue. If at any point your question has been answered, you may remove your question from the queue by pressing star 2.

Speaker Change: At this time, all participants have been placed in a listen only mode and the floor will be open for your questions. Following the presentation.

Speaker Change: He would like to ask a question. Please press star one on your Touchtone phone to enter the queue. If at any point. Your question has been answered you may remove your question from the queue by pressing star two.

Operator: If you should require operator assistance, please press star zero. If using a speakerphone, please lift your handset to allow the signal to reach our equipment. Please limit yourself to one question and one follow-up to allow the opportunity for everyone to ask. You may re-enter the queue to ask additional questions. I would now like to turn the call over to Mark Melnyk, Senior Vice President of IR. Please go ahead.

Speaker Change: Should require operator assistance, please press star zero.

Speaker Change: Using a speaker phone please lift your handset to allow the signal to reach our equipment.

Please limit yourself to one question and one follow up to allow the opportunity for everyone to ask questions.

Speaker Change: Reenter the queue to ask additional questions I would now like to turn the call over to Mark Baum Senior Vice President of IR. Please go ahead Sir.

Mark Melnyk: Thank you, operator, and welcome to Hilton Grand Vacation's fourth quarter 2023 earnings call. As a reminder, our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements, and these statements are effective only as of today.

Mark Baum: Thank you operator, and welcome to the Hilton Grand Vacations fourth quarter 2023 earnings call.

Mark Baum: 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 revise these statements for a discussion of some of the factors that could cause actual results to differ please see the risk factors section of our SEC filings.

Mark Melnyk: We undertake no obligation to publicly update or revise these forward-looking statements. For a discussion of some of the factors that could cause actual results to differ, please see the risk factors section of our SEC filings. We'll also 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.com. Our reported results for all periods reflected counting rules under ASC-606, which we adopted in 2018. Under ASC 606, we're 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.

Mark Baum: Also 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.

Mark Baum: Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018.

Mark Baum: 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 for ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results were for our results excluding the net impact of construction related deferrals and.

Mark Melnyk: For ease of comparison and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results were further results excluding the net impact of construction-related deferrals and recognitions for all reporting periods. To help you make more meaningful comparisons, you can find details of our current and historical deferrals and recognitions in Table T-1 in our earnings release. Any completed accounting of our historical deferral and recognition activity can also be found in Excel format on the financial reporting section of our investor relations website. In a 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.

Mark Baum: Recognitions, all reporting periods to help you make more meaningful comparisons you can find details of our current and historical their frozen rocker initiatives and tables T. One in our earnings release and complete accounting.

Mark Baum: All of our historical deferral and recognition activity can also be found in excel format on the financial reporting section of our Investor Relations website.

Mark Baum: 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 Mathews 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 and CEO Mark Wang Barclays.

Mark D. Wang: With that, let me turn the call over to our President and CEO, Mark Wang. Morning, everyone, and welcome to our fourth quarter earnings call. Contract sales in the quarter were $572 million, and EBIT grew 12% to $282 million with margins of 27%, improving 200 basis points from the prior year. For the year, EBITDA of $1,026,000,000 was slightly ahead of our revised guidance of $1,000,000,000 to $1,020,000,000 with margins of 26%. Tor flow grew 7% for the quarter with growth in arrivals and improved occupancy levels.

Mark D. Wang: Good morning, everyone and welcome to our fourth quarter earnings call contract sales in the quarter were $572 million.

Daniel J. Mathewes: EBIT grew 12% to 282 million with margins of 27% improving 200 basis points from the prior year.

Daniel J. Mathewes: For the year EBITDA of 1 billion 26 was slightly ahead of our revised guidance of $1 billion 2 billion 'twenty with margins of 26%.

Daniel J. Mathewes: Tour flow grew 7% for the quarter with growth in arrivals and improved occupancy levels are.

Mark D. Wang: Our owner channels again proved to be resilient, with tours remaining above 2019's levels. But while tour flow was solid overall, it nevertheless came in modestly below our expectations, reflecting some lingering hesitancy in consumer behavior, particularly on the new buyer side, which we also saw in the early part of this quarter. That said, we're entering 24 with a strong pipeline of booked vacation packages, giving us confidence that the willingness to travel remains steady. BPG's declined 14% in a quarter, roughly on the same trend of mid-teen declines that we've seen all year as we lap tough comparisons from 22. But it also reflects the effects of continued disruption in our Maui market along with a temporary system outage that impacted our legacy deeded sales system early in the quarter. The issue was fully remedied, and we subsequently enhanced our backup systems to mitigate any future risks.

Daniel J. Mathewes: Our owner channels again proved to be resilient with tours remaining above 2019 levels.

While tour flow was solid overall it nevertheless came in modestly below our expectations.

Daniel J. Mathewes: Reflecting some lingering hesitancy in consumer behavior, particularly on the new buyer side, which we also saw in the early part of this quarter.

Daniel J. Mathewes: We're entering 24 with a strong pipeline of booked vacation packages, giving us confidence that the willingness of the travel remained steady.

Daniel J. Mathewes: Ppg's declined 14% in the quarter roughly on the same trend of mid teen declines that we've seen all year as we lap tough comparisons from 'twenty two.

Daniel J. Mathewes: But it also reflects the effects of continued disruption in our Maui market along with a temporary system outage that impacted our legacy do you did sell system early in the quarter.

Daniel J. Mathewes: The issue was fully remedied and we subsequently enhanced start backup systems to mitigate any future risk.

Mark D. Wang: But it did create a modest drag on our sales and BPG results in the quarter, which Dan will get into in a minute. In that context, I'm happy with our underlying EBITDA performance despite these issues, which highlighted the adaptability of our business along with the benefit of our recurring EBITDA. On the cost front, we have a natural hedge due to our largely variable expense base, and we have also implemented additional short-term cost-saving measures to protect our margins.

Daniel J. Mathewes: But it did create a modest drag on our sales and B P. G results in the quarter, which Dan will get into in a minute.

Daniel J. Mathewes: In that context, I'm happy with our underlying EBITDA performance. Despite these issues, which highlighted the adaptability of our business along with the benefit of our recurring EBITDA.

Daniel J. Mathewes: On the cost front, we have a natural hedge due to our largely variable expense base and we also implemented additional short term cost saving measures to protect our margins.

Mark D. Wang: Looking at sales, we adjusted the use of some of our more expensive marketing channels to improve our efficiency, and we made changes to some sales processes and new sales incentives to focus on our highest quality tours and help improve our tour outcomes and VPGs. So, we have a lot of levers to pull in this business to support our margins and, ultimately, our free cash flow generation. Our confidence in our business model is reflected in our guidance we issued today, which shows growth in our EBITDA supporting even faster growth in our cash flow per share. While our current expectations are that the consumer's softness will persist through the first half of the year, our costs and our tour efficiency initiatives will still enable us to grow our EBITDA.

Daniel J. Mathewes: Looking at sales, we adjusted the use of some of our more expensive marketing channels to improve our efficiency and we made changes to some sales processes and new sales incentives to focus on our highest quality tours and help improve our tour outcomes V. P. G <unk>.

Daniel J. Mathewes: So we have a lot of levers to pull in this business to support our margins and ultimately our free cash flow generation.

Daniel J. Mathewes: Our confidence in our business model is reflected in our 24 guidance, we issued today, which shows growth in our EBITDA supporting even faster growth in our cash flow per share.

Daniel J. Mathewes: Well, our current expectation is that the consumers softness will persist through the first half of the year, our costs and our tour efficiency initiatives will still enable us to grow our EBITDA. In addition, we're also expecting EBITDA growth at Blue Green This coming year, along with the recognition of some initial cost synergies.

Mark D. Wang: In addition, we're also expecting EBITDA growth at Blue Green this coming year, along with the recognition of some initial cost synergies. Regarding the acquisition of Blue Green, after a smooth review process and great execution on our financing, I'm happy to announce we officially closed the transaction on January 17th, much earlier than our initial expectations. We're really excited about this transaction, and we think BlueGreen will be a great complement to HEB, enabling us to reinforce our position as the premier vacation ownership and experience company.

Daniel J. Mathewes: Regarding the acquisition of Blue Green after a smooth review process and great execution on our financing I'm happy to announce we officially closed the transaction on January 17th much earlier than our initial expectations were.

We're really excited about this transaction and we think blue Green will be a great complement to HEB, enabling us to reinforce our position as the premier vacation ownership an experienced company.

Mark D. Wang: We're adding scale and diversity to our existing offerings through BlueGreen's member base and additional geographies. We're also expanding and diversifying our lead flow with the addition of new world-class strategic partners and lead flow channels, and we'll also explore new avenues for growth through our joint venture relationship with one of those partners, Bass Pro Shots. In addition, we'll de-risk the integration process by leveraging the infrastructure and experience we developed with the Diamond Acquisition, will realize material synergies, and importantly, will further strengthen the resiliency of our business with additional recurring EBITDA and free cash flow. Along with today's release, we've provided some additional financial details for Blue Green on our Investor Relations website, but I'm happy to say they finished out 23 with solid momentum, growing Our teams have already begun the integration process, and working groups have been formed throughout the organization to collaborate with our new blue-green team members, as well as our new strategic partners.

Daniel J. Mathewes: We're adding scale and diversity to our existing offerings through great really great member base and additional geographies. We're also expanding and diversifying our lead flow with the addition of new World class strategic partners and lead flow channels.

Daniel J. Mathewes: We will also explore new avenues for growth through our joint venture relationship with one of those partners bass pro shops.

Daniel J. Mathewes: In addition, we will derisk the integration process by leveraging the infrastructure and experience we developed with the Diamond acquisition.

Daniel J. Mathewes: Well realize material synergies and importantly will further strengthen the resiliency of our business with additional recurring EBIT and free cash flow.

Daniel J. Mathewes: Along with today's release, we've provided some additional financial details for Blue Green.

Daniel J. Mathewes: That's the relations website.

Daniel J. Mathewes: Happy to say they finished out twenty-three with solid momentum growing contract sales, 4% in the quarter to $193 million and generating EBITDA of 46 million with margins of 17%, improving nearly 500 basis points year over year.

Daniel J. Mathewes: Our teams have already begun the integration process and we formed a working groups throughout the organization to collaborate with our new Blue Green team members as well as our new strategic partners.

Mark D. Wang: We intend to support Blue Green's momentum during the integration by operating their sales organization in parallel with HEV over the course of the coming month. At the same time, we'll also be working closely with Bass Pro and our other strategic partners to develop a roadmap for successful integration and expansion of our marketing efforts. And we're excited to share our progress with you over the coming quarters. Now, let's take a look at our operational performance. Remember that these fourth-quarter results refer to a standalone HEV. We just closed the blue-green acquisition here in the first quarter, and we'll report operations as a combined entity beginning in Q1-24. As has been the case throughout the year, contract sales in the quarter were driven by growth in tours, offset by a decline in BPG.

Daniel J. Mathewes: We intend to support Blue Greensboro met him during the integration by operating their sales organization in parallel with H C V over the course of the coming months.

Daniel J. Mathewes: At the same time, we'll also be working closely with bass pro and our other strategic partners.

Daniel J. Mathewes: Our road map for successful integration and expansion of our marketing efforts.

Daniel J. Mathewes: So we're hitting the ground running with our integration efforts on the heels of the Diamond integration. Our teams are well versed in the processes and procedures that we need to ensure a smooth transition.

Daniel J. Mathewes: And we're excited to share our progress with you over the coming quarters.

Daniel J. Mathewes: Now, let's take a look at our operational performance remember that these fourth quarter results refer to a standalone HGV, we just close the Blue Green acquisition here in the first quarter and will report operations as a combined entity beginning in Q1 'twenty four results.

Daniel J. Mathewes: As has been the case throughout the year contract sales in the quarter were driven by growth in tours offset by a decline in V. P. G.

Mark D. Wang: The 152,000 tours generated in Q4 were up 7% and maintained the trend of tour growth with new bar tours growing slightly faster than our owner channel. BPG for the quarter was $3,730, continuing the pace of normalization we've seen through the year. Those rates also remain ahead of 2019's levels, led by the strength of the owner channel, which is still above 2019 by several hundred basis points. And as we've now left the tough BPG comparisons from last year, our expectations are to return to a more normal pace of BPG growth in 24. Turning to our demand indicators, our package pipeline remains robust at well over 500,000 packages, and we've entered 24 with a record number of those packages dated for travel, which should support additional tour flow growth this year.

Daniel J. Mathewes: The 152000 tours generated in Q4 were up 7% and maintain the trend of tour growth with new buyer tours growing slightly faster than our own or channel.

P. P G for the quarter was $3730 continuing the pace of normalization, we've seen through the year.

Daniel J. Mathewes: Those rates also remained ahead of 2019 levels led by the strength of owner channel, which are still above 2019 by several hundred basis points.

And as we've now lapped the tough <unk> comparisons from last year, our expectation is to return to a more normal pace of V. P G growth and 24.

Daniel J. Mathewes: Turning to our demand indicators, our package pipeline remains robust at well over 500000 packages and we've entered 24 with a record number of those packages data for travel, which should support additional tour flow growth this year.

Mark D. Wang: Fourth quarter occupancy of 82% was 300 basis points ahead of last year, with strong improvements in November and December. And we continue to see arrivals this year trending ahead of last year, pointing to additional gains in 2024. We also capped off a strong year for our experiential platform, HGV Ultimate Access. We hosted over 3,600 events during the year for more than 120,000 members and guests, and we're already off to a strong start in 24. Our marquee Ultimate Access event, the Hilton Grand Vacation Tournament of Champions, built upon last year's strength with attendance and media exposure setting new records, and our teams have put together a rich list of programming for the year ahead that will surpass last year's performance.

Daniel J. Mathewes: Fourth quarter occupancy of 82% was 300 basis points ahead of last year with strong improvements in November and December.

Daniel J. Mathewes: And we continue to see a rivals this year trending ahead of last year's pointing to additional gains in 'twenty four.

Daniel J. Mathewes: We also capped off a strong year for our experiential platform H T V Ultimate access we.

Daniel J. Mathewes: We hosted over 3600 events during the year for more than 220000 members in gas and we're already off to a strong start in 'twenty four our marquee ultimate access event Hilton Grand vacation tournament of champions built upon last year's strength with attendance and media exposure steadying.

Daniel J. Mathewes: New records.

Daniel J. Mathewes: And our teams have put together a rich list of programming for the year ahead that will surpass last year's performance.

Mark D. Wang: We believe that differentiated offers like ultimate access drive increased owner engagement and loyalty, strengthening the value proposition of HEV's ownership. Moving to our non-real estate segments, transient travel demand remains strong in the quarter, leading to gains in both occupancy and rate and driving growth in our rental business, despite having more room nights allocated toward owner stays and fewer available nights in Maui, and our recurring club and finance business. Nod grew 2% and capped off another year of member growth. We ended the year with nearly 529,000 members, including more than 144,000 MAX members.

Daniel J. Mathewes: We believe that differentiated offers.

Daniel J. Mathewes: Ultimate access drive increased owner engagement and loyalty strengthening the value proposition of H <unk> visa ownership.

Daniel J. Mathewes: Moving to our non real estate segments transient travel demand remains strong in the quarter.

Daniel J. Mathewes: Leading to gains in both occupancy and rate and driving growth in our rental business.

Daniel J. Mathewes: By having more room nights allocated toward owner stage and fewer available nights in Maui.

Daniel J. Mathewes: Our recurring club and finance business.

Daniel J. Mathewes: <unk> grew 2% and capped off another year of member growth.

Daniel J. Mathewes: We ended the year with nearly 529000 members, including more than 144000, Max members that means we added 70000 Max members. This year, both through new member additions and upgrades from existing owners, which nearly equal the number of matched members. We added during last year's strong launch period.

Mark D. Wang: That means we added 70,000 MAX members this year, both through new member additions and upgrades from existing members, which nearly equals the number of MAX members we added during last year's strong launch period. Our financing business also continued to perform well, even after controlling for a one-time expense adjustment made in the fourth quarter of last year. During the quarter, we repurchased 2.6 million shares of stock, bringing the total to 8.7 million shares for the year. And since we spun out as an independent public company in 2017, we've repurchased over a billion dollars of stock for 30 million shares. We remain committed to returning capital to enhance our total shareholder returns, and with the addition of Blue Green, we're on a path to enhance that commitment as we further improve our cash flow generation.

Daniel J. Mathewes: Our financing business also continued to perform well even after controlling for a one time expense adjustment made in the fourth quarter of last year.

Daniel J. Mathewes: During the quarter, we repurchased two 6 million shares of stock, bringing the total to $8 7 million shares for the year.

Daniel J. Mathewes: And since we spun out as an independent public company in 2017, we've repurchased over a billion dollars of stock for 30 million shares.

Daniel J. Mathewes: We remain committed to returning capital to enhance our total shareholder returns.

Daniel J. Mathewes: And with the addition of Blue Green, we're on a path to enhance that commitment as we further improve our cash flow generation.

Daniel J. Mathewes: Looking back at 2023, I'm proud of the progress we made and I'm excited about the year ahead as we continue our integration of diamond assets and turn our attention towards blue-green. This year. Our goal is to solidify our position as a premier vacation ownership and experienced company.

Mark D. Wang: We have the widest offering of products and price points in the industry, the most accessible and featured PAC member club with HCV Max, and the largest experience platform with HCV Ultimate Access. With the addition of Blue Green and our new partners, we'll also be able to reach a wider audience than we've ever had before. Our goal this year will be to ensure a smooth integration of Blue-Green and engagement with our new club members, team members, and partners.

Daniel J. Mathewes: We have the widest offering of products and price points in the industry the.

Daniel J. Mathewes: The most accessible and featured pack member club with H C V Max and the largest experience platform with H C V. Ultimate access with the addition of Blue Green and our new partners will also be able to reach a wider audience than we ever have before.

Daniel J. Mathewes: Our goal this year will be to ensure a smooth integration of blue Green and engagement with our new club members team members and partners.

Daniel J. Mathewes: And we'll maintain our focus on driving long-term value creation and free cash flow generation, along with capital returns. With that, I'll turn it over to Dan to talk to you through the numbers.

Daniel J. Mathewes: And we'll maintain our focus on driving long term value creation of free cash flow generation, along with capital returns.

Daniel J. Mathewes: I'll turn it over to Dan to talk you through the numbers.

Daniel J. Mathewes: Thank you, Mark, and good morning everyone. Before we start, note that our reported results for this quarter included $21 million of sales deferrals, which reduced reported GAAP revenue, and are related to pre-sales of the latest phases of our Ocean Tower and Sosoko projects. We also recorded $9 million of associated direct expense deferrals. Adjusting for these two items would increase the EBSA reported in our press release by $12 million to $282 million. In my prepared remarks, I'll only refer to metrics excluding net deferrals, which more accurately reflect the cash flow dynamics of our financial performance during the period. To begin, our team did a great job this year adapting to a number of headwinds, including the normalization of VPGs from the all-time highs of 2022, elevated interest rates, a more tenuous macroeconomic environment, and the devastating wildfires in Maui

Daniel J. Mathewes: Thank you Mark and good morning, everyone before we start note that our reported results for this quarter included 21 million of sales deferrals, which reduced reported GAAP revenues and were related to pre sales of the latest phases of our ocean tower and successful projects.

Daniel J. Mathewes: We also recorded $9 million of associated direct expense deferrals.

Daniel J. Mathewes: For these two items would increase these are reported in our press release by $12 million $282 million.

Daniel J. Mathewes: In my prepared remarks, only refer to metrics, excluding net deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period.

Daniel J. Mathewes: To begin our team did a great job this year in adapting to a number of headwinds, including the normalization of V. P. G from the all time highs of 2020 to elevated interest rates and more tenuous macroeconomic environment and the devastating wildfires in Maui. Despite.

Daniel J. Mathewes: Despite that, we produced results that were near the record levels of last year, with contract sales of $2.3 billion and adjusted EBITDA of $1.26 billion. Importantly, we converted 52% of adjusted EBITDA into over $530 million of cash flow. We used that cash flow effectively to support shareholder returns by repurchasing over $365 million of shares this year. In addition, when combined with our balance sheet discipline and low leverage, that cash flow helped put us in a position to capitalize on the opportunity to acquire Blue Green Resorts and provide us with another avenue to add long-term value to the business. As Mark mentioned, our integration process with Blue Green is underway, and we have a robust plan in place that we will be executing against over the coming months. Moving on to our results for the quarter. Total revenue, excluding cost reimbursements for the quarter, grew 3% to $943 million.

Daniel J. Mathewes: Despite that we produced results that were near the record levels of last year with contract sales of $2 3 billion and adjusted EBITDA of $1 26.

Daniel J. Mathewes: Importantly, we converted 52% of the EBITDA into over $530 million of cash flow.

Daniel J. Mathewes: We use that cash flow effectively to support shareholder returns by repurchasing over $365 million of shares this year in.

Daniel J. Mathewes: In addition, when combined with our balance sheet discipline and low leverage that cash flow helped to put us in a position to capitalize on the opportunity to acquire blue Green resorts and provide us with another avenue to add long term value to the business.

Daniel J. Mathewes: As Mark mentioned, our integration process with blueprint is underway and we have a robust plan in place and we will be executing against over the coming months.

Daniel J. Mathewes: Moving to our results for the quarter.

Daniel J. Mathewes: Total revenue excluding cost reimbursements for the quarter grew 3% to 943 million growth was led by our financing and resort and club and rental and ancillary businesses more than offsetting a decline in the real estate revenue.

Daniel J. Mathewes: Growth was led by our financing of resort and club and rent on ancillary businesses, more than offsetting a decline in real estate revenue. Q4 reported adjusted EBITDA was $282 million, with a margin of 30% excluding cost reimbursement. Our margins in the quarter improved by over 200 basis points versus the prior year. And compared to the first half of 2023, margins in the back half improved by 300 basis points to 30% as we improved efficiency and lashed some of the investment spending from the second half of last year. For the full year of 2023, we generated EBITDA of $1,026,000,000 versus our guidance of $1,000,000,000 to $1,020,000, with margins of 28% excluding reimbursement. As Mark mentioned, our sales this quarter were impacted by the ongoing effects of the Maui wildfires, combined with a temporary outage at one of our third-party data center providers that impacted our sales systems for a number of days early in the quarter.

Daniel J. Mathewes: Q4 reported adjusted EBITDA was $282 million with a margin of 30% excluding cost reimbursements.

Daniel J. Mathewes: Our margins in the quarter improved over 200 basis points versus the prior year.

Daniel J. Mathewes: And compared to the first half of 2023 margins in the back half improved by 300 basis points to 30% as we improve the efficiency and lap some of the investment spending from the second half of last year for the full year of 2023, we generated EBITDA of $1 26 versus our guidance of 1 billion to $1 20 with margins of 28.

Daniel J. Mathewes: <unk> excluding reimbursements.

Daniel J. Mathewes: As Mark mentioned, our sales this quarter were impacted by the ongoing effects of the Maui wildfires combined with a temporary outage at one of our third party data center providers that impacted our sales systems over a number of days early in the quarter. We believe that the combination of these two items wasn't it was an impact of roughly $40 million of contact sales $21 million of adjusted.

Daniel J. Mathewes: We believe that the combination of these two items had an impact of roughly $40 million of contract sales and $21 million of adjusted EBITDA during the quarter. Turning to our segments, within real estate, total contract sales of $572 million were down 10% versus the prior year, with new buyers comprising 26% of contract sales in the quarter. Tours grew by 7% in the quarter to 152,000 tours, with both our owner and new buyer channels showing similar levels of growth.

Daniel J. Mathewes: EBITDA during the quarter.

Daniel J. Mathewes: Turning to our segments within real estate total contract sales of $572 million were down 10% versus the prior year with new virus, comprising 46% of contract sales in the quarter.

Daniel J. Mathewes: Tours grew by 7% in the quarter to 152000 tourists with both our owner in new buyer channels showing similar levels of growth.

Daniel J. Mathewes: VPGE of $3,730 in the quarter was 5% ahead of 2019 levels. So, excluding those two one-time items, we believe we would have achieved the low end of our expectations to be 10% to 15% ahead of 2019. For the full year, our reported VPG was 11% ahead of 2019, and looking out to 2024, we believe that VPG growth will return to a more normal level of a low single-digit annual growth. Cost of product was 15% of net VOI sales for the quarter. Real estate S&M expense was $248 million for the quarter, or 43% of contract sales, improving nearly 200 basis points sequentially as we improved efficiency and lagged some of the marketing investments made beginning in the back half of last year. Real estate profit for the quarter was $158 million, with margins of 34%, improving 70 basis points from the fourth quarter of last year.

Daniel J. Mathewes: CPG of $3730 in the quarter was 5% ahead of 2019 levels. Excluding those two one time items. We believe we would have achieved the low end of our expectations to be 10% to 15% ahead of 2019.

Daniel J. Mathewes: For the full year, our reported <unk> was 11% ahead of 2019 and looking out to 2024, we believe that the V. P. G growth will return to more normal level of a low single digit annual growth.

Daniel J. Mathewes: Cost of product was 15% of net VOI sales for the quarter real estate as an M expense was 248 million for the quarter or 43% of contract sales improving nearly 200 basis points sequentially as we improved efficiency and lap some of the marketing investments made beginning in the back half of last year.

Daniel J. Mathewes: Real estate profit for the quarter was $158 million with margins of 34% improving 70 basis points from the fourth quarter of last year.

Daniel J. Mathewes: In our financing business fourth quarter revenue was $82 million and segment profit was 56 million with margins of 68% versus margins of 48% in the prior year or 61%. If he if you exclude the onetime expense true up that we made during Q4 of last year.

Daniel J. Mathewes: In our financing business, fourth-quarter revenue was $82 million, and segment profit was $56 million, with margins of 68% versus margins of 48% in the prior year, or 61% if you exclude the one-time expense true-up that we made during Q4 of last year. Combined gross receivables for the quarter were $2.9 billion, or $2.1 billion net of allowance, and our interest income was $74 million. Our originated portfolio weighted average interest rate was 14.85%, while our acquired portfolio had a weighted average interest rate of 14.66% and included a $3.4 million contra revenue for the amortization of a non-cash premium associated with the portfolio of receivables that we acquired from Diamond during the acquisition. Our allowance for bad debt was $779 million on that $2.9 billion receivables balance.

Daniel J. Mathewes: Bond gross receivables for the quarter were $2 9 billion or $2 1 billion net of allowance and our interest income was $74 million.

Daniel J. Mathewes: Our originated portfolio the weighted average interest rate was 14, 85%, while our acquired portfolio had a weighted average interest rate of $14 six 6% and includes a $3 $4 million Contra revenue for the amortization of a noncash premium associated with the portfolio of receivables that we acquired from diamond during the acquisition.

Daniel J. Mathewes: Our allowance for bad debt was $779 million on that $2 9 billion receivables balance.

Daniel J. Mathewes: Of these amounts, the acquired portfolio, which used Diamond's underwriting standards, was $249 million on a portfolio balance of $499 million. Our annualized default rate for our consolidated portfolios, including the diamond-acquired and underwritten portfolios, was 8.56%. As previously discussed, we continue to see normalizing credit trends with the termination of certain government stimulus plans. But we believe our current loan loss provision is adequate.

Daniel J. Mathewes: Of these amounts the acquired portfolio, which was which you use diamonds underwriting standards was $249 million on a portfolio of balance of $499 million.

Daniel J. Mathewes: Our annualized default rate for our consolidated portfolio, including the Diamond acquired an underwritten portfolios was 856%.

Daniel J. Mathewes: Our provision for bad debt was $54 million or 12% of owned contract sales.

Daniel J. Mathewes: Previously discussed we continue to see normalizing credit trends with it with the termination of certain government stimulus stimulus plans, but we believe our current loan loss provision is adequate going forward, we expect our provision to migrate towards the low to mid teens percentage of contract sales on a normalized basis not accounting for the Blue Green acquisition.

Daniel J. Mathewes: Going forward, we expect our provision to migrate towards the low to mid-teens percentage of contract sales on a normalized basis, not accounting for the blue-green acquisition. We continue to evaluate Blue Ribs provision and allowance through our Opening Balance Sheet and Purchase Accounting Workstreams. We will share more on the portfolio during our first quarter results. In our resort and club business, our consolidated member count was 529,000, and our consolidated NOG was 2% at the end of the fourth quarter. Revenue of $167 million was up 8% for the quarter, and segment profit was $119 million, driven by the typical seasonal uptick in revenues and expenses in our club business, with margins of 71%. Rental and ancillary revenues grew 2% to $164 million in the quarter, with segment profit of $12 million and margins of 7% versus 4% last year. Revenue growth was driven by ADR gains in most markets, partially offset by lower available rental room nights.

Daniel J. Mathewes: Continue to evaluate risk provision and allowance through our opening balance sheet and purchase accounting work streams, we will share more on the portfolio during our first quarter results.

In our resort and club business, our consolidated member Count was 529000.

Daniel J. Mathewes: Consolidated <unk> was 2% at the end of the fourth quarter.

Daniel J. Mathewes: Revenue of $167 million was up 8% for the quarter and segment profit was $119 million driven by the typical seasonal uptick in revenues and expenses in our club business with margins of 71%.

Daniel J. Mathewes: Rental and ancillary revenues grew 2% to $164 million in the quarter with segment profit of $12 million and margins of 7% versus 4% last year.

Daniel J. Mathewes: Revenue growth was driven by ADR gains in most markets, partially offset by lower available rental room nights.

Daniel J. Mathewes: Tori owing to increased member stays along with fewer available room nights from the affected properties in Maui.

Daniel J. Mathewes: During the fourth quarter, the timing shifts from adjusted Diamond member benefit recognition resulted in a $3 million year over year benefit to the fourth quarter expenses, which was in line with our expectations.

Daniel J. Mathewes: With those timing adjustments made this year, if they won't create issues with comparability in 2024 or beyond.

Daniel J. Mathewes: inventory, owing to increased member stays along with fewer available room nights from the affected properties in Maui. Additionally, during the fourth quarter, the timing shift from adjusted diamond member benefit recognition resulted in a $3 million year-over-year benefit to fourth quarter expenses, which was in line with our expectations. With those timing adjustments made this year, they won't create issues with comparability in 2024 or beyond. Bridging the gap between segment-adjusted EBITDA and total-adjusted EBITDA, Corporate G&A was $36 million, license fees were $37 million, and JV-adjusted EBITDA was $6 million. Our adjusted free cash flow in the quarter was $255 million, which included inventory spending of $88 million. The adjusted free cash flow conversion rate for the quarter was 88%.

Daniel J. Mathewes: Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA corporate G&A was $36 million license fees were $37 million in JV adjusted EBITDA was $6 million.

Daniel J. Mathewes: Our adjusted free cash flow in the quarter was 255 million, which included inventory spending of $88 million. The adjusted free cash flow conversion rate for the quarter was 88% and.

Daniel J. Mathewes: And for the year, we had a conversion ratio of 52%, which was nicely inside our 50% to 60% target range.

Daniel J. Mathewes: During the quarter the company repurchased two 7 million shares of common stock for $99 million and through February 23rd we repurchased an additional $1 7 million shares for $71 million, leaving us with $289 million of remaining availability under the 2023 repurchase plan.

Daniel J. Mathewes: In 2023, we repurchased an average of $92 million per quarter, which is in line with our goal of roughly $100 million per quarter.

Daniel J. Mathewes: Turning to our outlook, we expect adjusted EBITDA in the coming year of one two to 1.26 billion.

Daniel J. Mathewes: And for the year, we had a conversion ratio of 52%, which was nicely inside our 50% to 60% target range. During the quarter, the company repurchased 2.7 million shares of common stock for $99 million, and through February 23rd, we repurchased an additional 1.7 million shares for $71 million, leaving us with $289 million of remaining availability under the 2023 repurchase program. In 2023, we repurchased an average of $92 million per quarter, which is in line with our goal of roughly $100 million per quarter. Turning to our outlook, we expect adjusted EBITDA in the coming year of $1.2 to $1.26 billion. I'd note that our guidance includes the assumption that BADDAD and COP will approach their long-term run rate levels of mid and high teens, respectively, which collectively would represent a headwind to EBITDA of roughly $100 million.

Daniel J. Mathewes: I would note that our guidance includes the assumption that bad debt in Cfd will approach their long term run rate levels of mid and high teens, respectively, which collectively represent a headwind to EBITDA of roughly $100 million.

Daniel J. Mathewes: It also includes an estimated $150 million to $160 million of pre synergize Ebitdas contributed from our acquisition of <unk>, which was completed in mid January.

Daniel J. Mathewes: In addition, we're also expecting to achieve actual cost synergies for the year of $50 million, which puts us nicely down the path of achieving $100 million of run rate cost synergies within 24 months of acquisition close.

Daniel J. Mathewes: As of December 31st our liquidity position consisted of $589 million of unrestricted cash and $553 million of availability under our revolving credit facility our debt balance at the quarter end was comprised of corporate debt is 3 billion and a noncore nonrecourse debt balance was approximately $1 5 billion.

Daniel J. Mathewes: It also includes an estimated $150 to $160 million of pre-synergized EBITDA contributed from our acquisition of Blue Green, which was completed in mid-January. In addition, we're also expecting to achieve actual cost synergies for the year of $50 million, which puts us nicely down the path of achieving $100 million of run-rate cost synergies within 24 months of acquisition close. As of December 31st, our liquidity position consisted of $589 million of unrestricted cash and $553 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $3 billion and a non-recourse debt balance of approximately $1.5 billion.

Daniel J. Mathewes: Quarter end, we had $351 million remaining capacity in our warehouse facilities of which we had $155 million of notes available to securitize and another $317 million of mortgage notes, we anticipate being eligible following certain customary milestones such as the first payment date and recording.

Daniel J. Mathewes: Turning to our credit metrics at the end of Q4, the company's total net leverage on a TTM basis was 2.44 times.

Daniel J. Mathewes: Again, these liquidity and leverage calculations reflect HED legacy operations and do not contemplate the bluegrass acquisition. We did have a very successful permanent debt financing for the Blue Green transaction in early January successfully placing $900 million of secured debt at six and five eighths and an incremental term loan C of $900 million etcetera plus too.

Daniel J. Mathewes: <unk> hundred 75.

Daniel J. Mathewes: We're also recommitting to our long term leverage target of two to three times total net leverage on a pro forma basis, not taking into consideration account any purchase accounting adjustments.

Daniel J. Mathewes: At quarter end, we had $351 million of remaining capacity in our warehouse facility, of which we had $155 million of notes available to securitize, and another $317 million of mortgage notes we anticipate being eligible following certain customary milestones, such as first payment, deeding, and recording. According to our credit metrics, at the end of Q4, the company's total net leverage on a TTM basis was 2.44 times. Again, these liquidity and leverage calculations reflect HEV's legacy operations and do not contemplate the blue-green acquisition.

Daniel J. Mathewes: We're just above three times Levered at 12, 31 on a pro forma basis.

Daniel J. Mathewes: Coupled with our collateral available to securitize and expectations to realize approximately $100 million of synergies.

Daniel J. Mathewes: Confident in returning to our target leverage ratio without negatively impacting our expectations for approximately $100 million of share repurchases per quarter in 2024.

Daniel J. Mathewes: Before we turn to Q&A I'd like to note one additional item that will appear in our 10-K first I'm happy to say that we fully remediated the material weakness that diamond that was detailed in our annual filing last year and referenced in our quarterly filings during 2023.

Daniel J. Mathewes: Separately and unrelated to the system outage that we've previously talked about during the course of our audit. This year, we identified an issue with an IDE application having to deal with easier access that was classified as a material weakness.

Daniel J. Mathewes: We did have a very successful permanent debt financing for the Blue-Green Transaction in early January, successfully placing $900 million of secured debt at six and five-eighths and an incremental term loan fee of $900 million at SOFR plus $275. We are also recommitting to our long-term leverage target of two to three times total net leverage. On a pro forma basis, not taking into consideration any purchase accounting adjustments, we were just above three times levered at 1231 on a pro forma basis.

Daniel J. Mathewes: Just like the diamond related material weakness from last year.

Daniel J. Mathewes: This item did not impact our current or historical financial results.

Daniel J. Mathewes: It creates a need for a restatement of historical results nor did it impact our business operations in any way.

Daniel J. Mathewes: We've already begun a remediation plan and will provide updates on the process, but we expect that we'll be able to remediate. This new item. During 2024, we will now turn the call over to the operator and look forward to your questions operator.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask your question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

Daniel J. Mathewes: Coupled with our collateral available to securitize and expectations to realize approximately 100 million of synergies, we are very confident in returning to our target leverage ratio without negatively impacting our expectations for approximately 100 million share repurchases per quarter in 2024. Before we turn to Q&A, I'd like to note one additional item that will appear in our 10-K. First, I'm happy to say that we fully remediated the material weakness at Diamond that was detailed in our annual filing last year and referenced in our quarterly filings during 2023. Separately, and unrelated to the system outage that we previously talked about, during the course of our audit this year, we identified an issue with an IT application having to do with user access that was classified as a material weakness, just like the diamond-related material weakness from last year.

Speaker Change: You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing with Barclays.

Speaker Change: Another please while we poll for questions.

Speaker Change: Our first question is from Patrick <unk> with <unk> Securities. Please proceed with your question.

Patrick: Great. Thank you.

Patrick: A couple of questions here for you.

Patrick: With the full year guidance, how should we think about.

Speaker Change: And I apologize I hope I didn't mentioned this in the remarks.

Patrick: How should we think about the contribution from the legacy company and then the contribution from.

Patrick: Newly acquired Blue Green. Thank you.

Patrick: Hey, Patrick it's Dan here.

Daniel J. Mathewes: We gave a little bit of color in the prepared remarks, but just to repeat that when we think about blue Green, we're looking at EBITDA guidance of roughly $1 50 to 160.

Daniel J. Mathewes: Cost synergies where.

Daniel J. Mathewes: We're not.

Daniel J. Mathewes: We're not moving as quickly as we did with Diamond we're operating as separate operations for a little while but we.

Daniel J. Mathewes: We're still making some sizable traction on that front, we've already gone through track. One if you will from a cost synergy base, which is mostly on the G&A side, and we expect to realize $50 million in the current year. So that would put if you do the math that would put the range for legacy HCV guidance of between one.

Daniel J. Mathewes: This item did not impact our current or historical financial results or create the need for a restatement of historical results, nor did it impact our business operations in any way. We've already begun our remediation plan and will provide updates on the process, but we expect that we'll be able to remediate this new item during 2024. We will now turn the call over to the operator and look forward to your questions. Operator.

Daniel J. Mathewes: And $1 25, just given those dynamics.

Daniel J. Mathewes: <unk> relatively.

Daniel J. Mathewes: Relatively flat from our HCV perspective.

Daniel J. Mathewes: Low single digits on the Blue Green business and then the benefit of cost synergies that all gives you a midpoint in the guidance.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question area.

Daniel J. Mathewes: Just under 5% of range being between two and 7% growth on EBITDA.

Speaker Change: Okay. Thank you have a follow up question here.

Speaker Change: About a year or so ago, you had talked about this is.

Operator: You may press star two if you'd like to remove your question. For participant fees and speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Our first question is from Patrick Scholes with True Security. Please proceed with your question. (inaudible) I have a couple questions here for you. With the full year guidance, how should we think about the contribution from the legacy company and then the contribution from the newly acquired Blue Green Company? Hey Patrick, it's Dan here.

Speaker Change: Pre blue-green a capex of around $300 million run rate for 2020 for it going forward, how should we think about.

Speaker Change: The capex at this moment. Thank you, yes, no thats great question. So when it comes to capital allocation with regards to inventory in particular, we've talked about a long term run rate of between $2 50, and $3 50 that being the order of magnitude that you needed to support two 5 billion in contract sales now.

Speaker Change: What I would remind everyone and I think we talked I talked about this on our last earnings call with the announcement of Blue Green. Unlike Diamond Blue Green was not an inventory play from the standpoint of Diamond came with four years of excess inventories blue-green had a very efficient use of their balance sheets and maintain inventories levels very commensurate with what you would.

Speaker Change: Spect, yes between one and two year, so when we think about two.

Daniel J. Mathewes: So we gave a little bit of color in the prepared remarks, but just to repeat that when we think about blue-green, we're looking at EBITDA guidance of roughly 150 to 160. On cost synergies, we're not moving as quickly as we did with Diamond. We're operating as separate operations for a little while, but we're still making some sizable traction on that front. We've already gone through track one, if you will, from a cost synergy base, which is mostly on the G&A side, and we expect to realize $50 million in the current year. So that would put, if you do the math, that would put the range for legacy HEV guidance between $1 billion and $1.25 billion, just given those dynamics. So relatively flat from a HEV perspective up, low single digits on the blue-green business, and then the benefit of cost synergies. That all gives you a midpoint in the guidance of just under 5%, a range being between 2% and 7% growth. Okay, thank you.

Speaker Change: 2024.

Speaker Change: We actually spent a little less in inventory spend in 2023 than we originally anticipated that's really just a function of the timing of our own.

Speaker Change: Construction.

Speaker Change: Unfortunately as you can expect these these projects ebb and flow there not just straight line, but from a inventory spend in 2024, we would expect.

Speaker Change: A little bit north of $3 50 call. It $3 70 from a legacy HCV side, and then there would be an incremental $100 million associated with the Blue Green side. So you are talking about 470 ish give or take a million dollars in inventory spend for 2024.

Speaker Change: Just to break that down just to break that down a little bit on the legacy HEV side, that's driven by Maui Bay villas, which as you recall is a series of low rise buildings in Maui.

Speaker Change: Conversion of Ocean tower.

Speaker Change: And also we have started construction on to HOKA, which is in Oahu and that's a vertical build.

Speaker Change:

Speaker Change: And then we have one final payment for adjusting time project and Okay. Now that's a sector that is going to happen in Q1, and then I'll take care of all of our contractual payments.

Daniel J. Mathewes: And a follow-up question here. About a year or so ago, you had talked about this, Pre-Blue Green, a CapEx of around $300 million run rate for 2024 going forward. How should we think about the CapEx at this moment?

Speaker Change:

Speaker Change: That and one other smaller and it takes care of all of our contractual payments from a just in time perspective, Okay and just one last.

Daniel J. Mathewes: Thank you. Yeah, no, that's a great question. So when it comes to capital allocation with regard to inventory, in particular, we talked about a long-term run rate of between $250 and $350, that being the order of magnitude that you needed to support, you know, $2.5 billion in contract sales. Now, what I'd remind everyone, and I think we talked about this on our last earnings call with the announcement of BlueGreen, unlike Diamond, BlueGreen was not an inventory. From the standpoint that Diamond came with four years of excess inventory, Blue Green had a very efficient use of their balance sheet and maintained inventory levels very commensurate with what you would expect, you know, between one and two years.

Speaker Change: If I could sneak it in.

Speaker Change: Going into the year.

Speaker Change: I guess as of January 17th prior to this capex for this year how many.

Years of unsold inventory do you have fallen.

Speaker Change: Roughly.

Speaker Change: With Blue Green.

Let me pull that number.

Speaker Change:

Speaker Change: It's multiple years I mean, we could to put things in perspective, when I had mentioned diamond as being an inventory.

Speaker Change: Play to a certain degree.

Speaker Change: Since acquisition, we've actually invested with it with a minor exception of some conversion costs virtually zero dollars in any diamond inventory.

Speaker Change: Blue Green brings along with it an incremental year of inventory.

Daniel J. Mathewes: So when we think about 2024, we actually spent a little less on inventory spend in 2023 than we originally anticipated. That's really just a function of the timing of our construction. Unfortunately, as you can expect, these projects ebb and flow. They're not just straight lines.

Speaker Change: So I think when you think about contract sales, we would point you to our results in 2023.

Speaker Change: Add roughly 800 million in contract sales for Blue Green and.

Speaker Change: And that $12 billion in inventory.

Speaker Change: Well I hope you do the math there.

Speaker Change: Okay.

Daniel J. Mathewes: But from an inventory spend in 2024, we would expect a little bit north of $350,000, call it $370,000 from the legacy HGV side. And then there would be an incremental $100 million associated with it. So you're talking about $470-ish, give or take, million in inventory spend for 2020. Now, just to break that down a little bit. On the legacy HEV side, that's driven by Maui Bay Villas, which, as you recall, is a series of low-rise buildings. Maui, the conversion of Ocean Tower, and also we've started construction on Kahaku, which is in Oahu, and that's a vertical build. And then we have one final payment for a Just-In-Time project in Okinawa. That's Saseko, and that's going to happen in Q1, and I'll take care of all of our contractual pain. That and one other smaller item that takes care of all our contractual payments from a just-in-time perspective. Okay, and just one last one. I don't know if I could sneak it in.

Speaker Change: Question, So I'm going to hop back in the queue. Thank you.

Speaker Change: Okay great.

Speaker Change: Our next question is from Brent on tour with Barclays. Please proceed with your question.

Brent: Hey, good morning, everybody. Thanks for taking my questions.

Brent: So maybe on the first one for V. P G.

Brent: You know if youre looking for low single digit growth for the year that puts you sort of squarely back in the I'm, assuming you're talking about legacy H D. D. You're just really back in that 110% to 115% of 19 range, which is sort of you know on top of what you did in the third quarter and so I guess the question is Mark you gave some quality.

Brent: <unk> commentary about the soft consumer it sounds like things haven't gotten worse.

Brent: From three months ago. When you first started talking about this in late November could you just sort of bridge your comments with that guidance and tell me if I'm missing anything there.

Mark: Yeah. So.

Mark: So Brett I would say.

Speaker Change: We feel really good about.

Daniel J. Mathewes: Going into the year, or no, I guess as of January 17th, prior to this CapEx for this year, how many years of household inventory do you have? Hall, roughly, with Blue Green, let me pull that number.

Speaker Change: The business right now I think you know V P G.

Speaker Change: <unk> finished the year still up 11% over 19.

Speaker Change: And.

Daniel J. Mathewes: It's been multiple years. To put things in perspective, when I mentioned diamonds as being an inventory play to a certain degree, since acquisition, we've actually invested, with a minor exception of some conversion costs, virtually zero dollars in any diamond inventory. So blue-green brings along with it an incremental revenue. So, I think when you think about contract sales, we would point you to, you know, our results in 2023 add roughly $800 million in contract sales. And that $12 billion-ish in inventory will help you do that. Okay, I do have more questions, but I'm going to hop back in the queue. Thank you, and many more. Thank you. Have a great day!

Speaker Change: We talked about the system and Maui issues, so that obviously had an impact.

Speaker Change: But just taking a step back our goal when we put out that soft guidance, probably you know a couple of years ago. It was really to highlight that.

Speaker Change: That.

Speaker Change: Generated sustainable upside to the prior peak based on the investments we've made so.

Speaker Change: I did make a comment.

Speaker Change: In my prepared remarks around the consumer.

Speaker Change: And on the margin.

Speaker Change: We do see some more hesitancy, particularly with the new buyers and you.

Speaker Change: It's something that we actually started seeing.

Speaker Change: Third quarter, the second half of the third quarter and.

Operator: Our next question is from Brandt Montour with Barclays. Please proceed. Hey, good morning, everybody.

Speaker Change: Its persisted.

Through the fourth quarter and into early this year so.

Daniel J. Mathewes: Thanks for taking my questions. So maybe on the first one for VPG, you know, if you're looking for low single-digit growth for the year, that puts you sort of, Squarely back in the, I'm assuming you're talking about legacy HGV, you're just really back in that 110 to 115% of 19 range, which is sort of, you know, on top of what you did in the third quarter. And so I guess the question is, Mark, you gave some qualitative commentary about the soft consumer. It sounds like things haven't gotten worse from three months ago when you first started talking about this in late November. Could you just sort of bridge your comments with that guidance and tell me if I'm missing anything there? Yeah, so, so, Brad, I'd say.

Speaker Change: Look at the end of the day.

Speaker Change: I think from an execution standpoint, theres some areas for us for improvement, but clearly we are seeing a little bit more hesitancy from a buyer standpoint again more on the new buyer side than on the owner side.

Speaker Change: Okay, great. Thanks for that and then on the loan loss provisions.

Speaker Change: Dan It looks like you know.

Speaker Change: That $100 million mm is kind of right in there in that mid teens range, which you've been talking about I feel like for for a year now and you never we never have seen you get that high.

Daniel J. Mathewes: You know, we feel really good about, uh... The business right now, I think, you know, VPG, you know, finished the year still up 11% over 19. You know, we talked about the system in Maui issues, so that.., had an impact there, but just taking a step back, our goal, and when we put out that soft guidance probably a couple years ago, was really to highlight that we've generated a sustainable upside to the prior peak based on the investments we've made. So I did make a comment in my prepared remarks about the consumer, and on the margin, we do see some more hesitancy, particularly with new buyers. You know, it's something that we actually started seeing, you know, in the third quarter, the second half of the third quarter, and it's persisted, you know, through the fourth quarter and into early this year. So, you know, look, at the end of the day, I think, from an execution standpoint, there's some areas for us to improve on, but clearly, we are seeing a little bit more from a buyer's point of view. Again, more on the Neubauer side than on...

Speaker Change: But now you're baking into guidance and being a little bit more.

Speaker Change: Forthright there. So what are you seeing that suggests that you're going to see that step up of sort of several points here from the fourth quarter.

Speaker Change: I mean, I think it's similar to some of Mark's commentary on the macro environment I mean, obviously the interest rates where they are.

Speaker Change: Okay.

Speaker Change: Other avenues for spending are clearly squeezing their consumer to a certain extent from a delinquency rate what I would say is we did see a little bit of a sequential deterioration in our portfolio.

Speaker Change: Nothing.

Speaker Change: Overly material, but 20 basis points between both the legacy diamonds in the legacy <unk> side is something that we pay attention to now.

Speaker Change: From a annualized default rate, we still are performing from a legacy HEV side consistent with 2019 levels at the higher end of 2019 levels in the diamond.

Speaker Change: Portfolio continues to outperform significantly where they were in 2019, so we're optimistic but at the same time with normalization of credit trends, where we're not being overly optimistic and that's why we expect the bad debt provisioning too.

Daniel J. Mathewes: Okay. Great. And then on the loan loss provisions, Dan, it looks like, you know, that $100 million is kind of right in there in that mid-teens range, which, you know, you've been talking about for a year now, and we've never seen you get that high, but now you're baking it into guidance and being a little bit more forthright there. So what are you seeing that suggests that you're going to see that step up of Well, I mean, I think it's similar to some of Mark's commentary on the macro environment. I mean, obviously, interest rates, where they are associated with, You know, other avenues for spending are clearly squeezed.

Speaker Change: Creep up to creep up on us in 2024.

Speaker Change: Thanks, everyone.

Speaker Change: Our next question is from David Katz with Jefferies. Please proceed with your question.

David Brian Katz: Hi, everyone. Thanks.

David Brian Katz: Thanks for taking my question.

David Brian Katz: And in the release and then Dan I think in your comments, you mentioned $40 million of revenues in 'twenty, one of EBITDA from Maui and a third party.

David Brian Katz: Shell Centre I.

Speaker Change: I Wonder if you could maybe break that out you know for us in the nature of the question is at.

Daniel J. Mathewes: From a delinquency rate perspective, what I would say is we did see a little bit of sequential deterioration in our portfolio. Nothing overly material, but 20 basis points between both the legacy diamond and the legacy B-side is, you know, something that we pay attention to. Now, from an annualized default rate perspective, we still are performing from 11 o'clock. The B-side is consistent with 2019 levels, the higher end of

Speaker Change: At least for US our fee for service sales were lower than what we were looking for my sense as others too.

Yes, so just a couple of clarifications point there David.

Speaker Change: When we talk about the 40 million, that's a combination of the impact from Maui as well right.

Speaker Change: Sales outage from our system as you know the system issue with the sale of outage.

Speaker Change: One of those things that happens one of the $1 billion event I doubt, we could even could repeat itself not only with us or virtually any other organization.

Daniel J. Mathewes: The portfolio continues to outperform significantly where it was in 2019, so we're optimistic, but at the same time, with the normalization of credit trends, we're not being overly optimistic. And that's why we expect bad debt to creep up on us. Thanks, everyone.

Speaker Change: Human error with a third party vendor that was doing my hardware update at the same time, we were doing a software update.

What happened was it.

Speaker Change: Effectively knocked our deeded sale system offline and to bring those sales back up it <unk>. It was offline for almost a week. So mark as Mark mentioned, we've done a lot of work to make sure that the backup system replicase on a real time basis and that recovery would no longer take that much time, even if its very unusual event where.

Operator: Our next question is from David Katz with Jeffreys. Please proceed with your question. Hi, everyone.

Daniel J. Mathewes: Thanks for taking my question. And in the release, and then Dan, I think in your comments, you mentioned, you know, 40 million in revenues and 21 million in EBITDA from Maui and the third party sales center. I wonder if you could maybe break that out, you know, for us, and the nature of the question is, at least for us, our fee for service sales was lower than what we're looking for, my sense is others too. Yeah, so just a couple of clarification points there, David.

Speaker Change: It happened now to break that down just to quantify it for you out of the $40 million I'd say roughly two thirds was associated with.

Speaker Change: Uh huh.

Speaker Change: The system outage and the balance was with Maui and from an EBITDA perspective.

Speaker Change: The sales.

Speaker Change: System outage had.

Speaker Change: I had a high flow through because tours were still counting do.

Speaker Change: Our sales centers right, we still wanted to get in front of customers have that interaction.

Speaker Change: So when you look at an EBITDA impact, yes, Maui was roughly caught in the $6 million to $8 million range and the balance was associated with the system outage, so right around $14 million.

Daniel J. Mathewes: When we talk about the 40 million, that's a combination of the impact from Maui as well as the sales outage from a system issue. Now, the system issue with the sale outage, it's one of those things that happens, one of a million events. I doubt we could even, it could repeat itself not only with us or virtually any other organization. It was a human error with a third-party vendor that was doing a hardware update at the same, It effectively knocked our deeded sales system offline and to bring those sales back up it took, it was offline for almost, So, as Mark mentioned, we've done a lot of work to make sure that the backup system replicates on a real-time basis and that recovery would no longer take that much time, even if it's very unusual, were to happen.

Speaker Change: Yes, David.

David Brian Katz: Just to follow up on that real quick on on Maui, where.

Speaker Change: So our expected recovery.

Speaker Change: Really won't happen until.

Speaker Change: We're able to build back our sales teams and.

Speaker Change: Maui is kind of a tale of two different stories, the Southside and Maui Maui villas continues to operate as normal kind of Palm Beach, where we have the bulk of our units we have over 400 units up there on the website.

Speaker Change: That was near the epicenter.

Speaker Change: Worst damage and so so we committed to our team members, who we had close to 100 team members, who lost their homes out there.

Daniel J. Mathewes: Now to break that down, just to quantify it for you, out of the 40 million, I'd say roughly 2 3rds was associated with the... The system outage and the balance with Maui, and from an EBITDA perspective, the sales system outage had a high flow-through because tours were still coming to our sales centers, right? We still wanted to get in front of customers, and have that interaction. So when you look at an EBITDA impact, Maui was roughly caught in the $6 million to $8 million range, and the balance was associated with the system outage, so around. Yeah, David, just to follow up on that real quick on Mallet. So our expected recovery really won't happen until we're able to build back our... You know, Maui's kind of a tale of two different stories. The south side of Maui, Maui Bay, and Villas, continues to operate as normal.

Speaker Change: So we committed to keep.

Speaker Change: A roof over their head and are happy to say that 60 or found permanent housing we still have 40 that warehousing today, but what happened is we lost a lot of our sales teams.

Speaker Change: Left.

Speaker Change: To other islands or to other locations a lot of them transferring within our company and it's going to take a while to get them built back up so this maui.

Speaker Change: The impact is something that's got to continue throughout the rest of this year. It will continue it will get better as we move through the year, but there will be an impact.

Speaker Change: It is much more lasting in the system outage, which which Dan alluded to was really just around a week.

Speaker Change: Understood that that's that's precisely the nature of the question as you know one one's a moment and won one Lakers. Thank you very much.

Speaker Change: Sure.

Speaker Change: Hum.

Speaker Change: Thank you. Our next question is from Christopher <unk> with Deutsche Bank. Please proceed with your question.

Christopher: Hey, guys.

Mark D. Wang: Kaanapali Beach, where we have the bulk of our units, we have over... That was near the epicenter. We committed to our team members; we had close to 100 team members who lost their lives. [inaudible] I'm happy to say that 60 have found permanent housing, and we still have 40 that we're housing today. But, what happened is we lost a lot of our sales, left for other islands or to other locations, a lot of them transferred within our company, and it's going to take a while for them to get back up. So this Maui impact is something that we're going to be looking at to continue throughout the rest of this year. It will continue. It'll get better as we move through the year, but there will be an impact, and much more last. Understandable. That's precisely the nature of the question; you know, one's a moment and one lingers.

Christopher: Good morning, Thanks for taking the question.

Mark or Dan I guess, you guys mentioned, a little bit about you were seeing a little bit of hesitancy on the consumer front I think you've talked about that being a little bit more exogenous to the new owners is that comment for any specific region is that more about now a year or is that more of a general comment.

Christopher: Geographically.

Speaker Change: Yeah look at it.

Speaker Change: You know when you when you look at it it's really pretty.

Speaker Change: Pretty much related to the U S Mail Atlanta is where we're seeing more of the impact and it's more again with the new buyers a car owners are.

Speaker Change: We're really good shape with our owner base, we got a great base of owners.

Speaker Change: And are you and when you combine now with Blue Green Downers, we've got a strong.

Speaker Change: Base of recurring revenue that's coming through.

Speaker Change: That part of the business that we've seen a little bit of pullback that is still above our historical levels.

Daniel J. Mathewes: Thank you very much. Thank you. Our next question is from Chris Woronka with Deutsche Bank. Please proceed with your question. Hey guys, good morning.

Speaker Change: Where we're seeing most of it is around our new buyers and I have to say I talked about it I just mentioned that there was I think.

Mark D. Wang: Thanks for taking the question. Mark or Dan, I guess you guys mentioned a little bit of, you were seeing a little bit of hesitancy on the consumer front. I think you talked about that being a little bit more exogenous to the new owners. Is that comment for any specific region?

Speaker Change: Some execution.

Speaker Change: Execution opportunities on our side, but.

Speaker Change: You know Dan mentioned macro we've got inflationary pressures out there and rates that have moved in and essentially.

Mark D. Wang: Is that more about Maui, or is that more of a general comment, geographically? Yeah, look, it's, you know, when you look at it, it's really pretty much related to the US mainland where, [inaudible] We're in really good shape with our owner base. We've got a great base of owners, buying, you know, now the blue-green owners. We've got a strong base of recurring revenue that's coming through that part of the business. We've seen a little bit of a pullback, but it's still above our historical levels. We're seeing most of it around our new buyers, and I have to say, you know, I talked about it, I just mentioned that there was, you know, I think... some execution, better execution opportunities on our side. But, you know, Dan mentioned the macro we've got.

Speaker Change: That's put some pressure on people's ability to deal with their essential payments, but the other side of it as we grew our tour flow last year, our new buyer tour flow by 22%.

Speaker Change: And that put a lot of pressure on our new agents right.

Speaker Change: A lot to digest in a short period of time and so what we did is we actually.

Speaker Change: We started dialing back on a few of our lower producing channels are starting in the middle of the year and.

Speaker Change: Hence, we reduced the amount of new buyers coming through that through.

Speaker Change: Through the system as we as the year went on.

Speaker Change: Our expectations is now with some of those back up.

Speaker Change: We're still seeing up there is softness there, but long term, we still believe as Dan alluded to earlier, we're going to grow our contract sales of approximately six to seven.

Mark D. Wang: And that put a lot of pressure on our new agents, right? That's a lot to digest in a short period of time. And so what we did is we actually started dialing back on a few of our lower-producing channels starting in the middle of the year. Hence, we reduced the amount of new viruses coming through the system.

Speaker Change: Percent.

Speaker Change: Probably weighted.

Speaker Change: Weighted heavier towards V. P. G. Then.

Speaker Change: Then it will be to tour flow this year and in a lot of that is that we're lapping.

Mark D. Wang: [inaudible] probably weighted heavier toward BPG than it will be to tour flow this year, and a lot of that is due to the fact that we're lapping soccer on. Okay, that is helpful. And then, you know, as you look out with the package pipeline, you mentioned, I think over 500,000 tours on the book. Can you give us a sense of the cadence of that? Or is it more back and loaded

Speaker Change: Softer comps so.

Speaker Change: Okay.

Speaker Change: That is helpful and then.

Speaker Change: You look out with the.

Speaker Change: The package pipeline you mentioned I think over 500000 tours on the books can you give a sense.

Speaker Change: The cadence of that are you is it more will be more backend loaded is it more just trying to get a sense for the level of conviction.

Mark D. Wang: Is it more just trying to get a sense for the level of conviction and kind of what you're expecting to see on the tour flow and how that relates to what you've got on the books right now? Yeah, no, but you know, we've got great visibility. That's one of the benefits of our model and having this big pipeline is, of course, on the owner's side, arrivals on the books. It creates a lot of certainty in our expectations, and what we see right now is our owner, above the levels we saw last year. The new buyer pipeline is, you know, circa over half a million, then you add blue-green into it, and they bring another 160,000 packages. But as I mentioned, we've dialed back activations in the back half of last year, and that'll have a knock-on effect in the early part of this year, because as you ramp some of that down, it takes a while to ramp that up. So the cadence of tours will ramp up through the back half of the year, so it's definitely more back half weighted than front half. Okay, very helpful.

Speaker Change: And kind of what.

Speaker Change: What what Youre expecting this year on tour flow and how that relates to what you've got on the books right now.

Speaker Change: Yes, no yes.

Speaker Change: We've got great visibility and that's one of the benefits of our model of having this big pipeline of course on the owner side arrivals on the books.

Speaker Change: Credit to a lot of certainty in our expectations of what we see right now as our owners are above the levels, we saw last year.

Speaker Change: New Flyer pipeline is circa over half a million and then you add blue green into it and they bring another 160000 packages but.

Speaker Change: But as I as I mentioned, we dialed back Activations.

Speaker Change: The back half of last year and that will have a knock on effect at the early part of this year because as you ramp some of that down it takes a while to ramp that up so the cadence of tours.

Speaker Change: We'll wrap up through the back half of the year. So it's definitely more back half weighted.

Speaker Change: And front half weighted.

Speaker Change: Yes.

Speaker Change: Okay very helpful. Thanks, guys.

Mark D. Wang: Thanks, guys. Thank you. Our next question is from Patrick Scholes with Truman Securities. Please continue with your question.

Speaker Change: Thanks.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question is from Patrick <unk> with <unk> Securities. Please proceed with your question.

Mark D. Wang: Thank you. A follow-up question here. Mark, I'm kind of surprised you haven't talked about the Japanese customer coming back. I was on the Park Hotel's conference call, and they seemed very enthusiastic about the return. I'm wondering what your thoughts are on what you're seeing or not seeing in that regard.

Patrick: Thank you.

Patrick: A question here Mark I'm kind of surprised you haven't talked about Japanese customer coming back on the park hotels conference call and they were and they seem very enthusiastic about the return I'm wondering not.

Patrick: Your thoughts or what you're seeing or not seen.

Mark D. Wang: Thank you. Yeah, so look, I think when you look at our business today, the US mainland is basically fully recovered from 19, from new buyers, well over our number. Now, in Hawaii, you know, we have had a pretty good recovery of our owners coming back. In fact, you know, I've used, and I've said this data point a number of times, our owners who are very loyal to the brand. Maydab, and many more, to buying into Brandt and buying into Whyte have come back really strong, and so we're at the historical levels we had in 19. Where we're trailing off is we're really still trailing off on the new buyers coming back to Hawaii, and we're still about 25. 27% down there.

Speaker Change: In that regard thank you.

Mark: Yeah. So look I think when you look at our business today. The U S. Mainland is basically fully recovered from 19 from new buyers are more well over our number.

Mark: And for owners on the mainland.

All in Hawaii.

Mark: We have had pretty good recovery of our owners coming back in fact, I've used and I've said this data point a number of times, our owners who are very loyal to the brand.

Mark: Commitment.

Mark: To buying into brand and buying into Hawaii have come back really strong and so we're basically back to tea.

Mark: The historical levels, we had in 19.

Mark: There were trailing off as we're really still trailed off on the new buyers coming back to Hawaii.

Mark: And we're still about 25% to 27% down there now that's better than the market.

Mark D. Wang: Now, that's better than the market. When you look at the market, the recovery for the Japanese coming back to Hawaii is around 50% of its level. And when you look at our new buyer traffic in Japan, it's still down about 25%. And that's because we source a lot of tours from the international airports in Japan, and while the Japanese are traveling, they're traveling right now.

Mark: When you look at the market recovery for the Japanese coming back to why is around 50% of the 19 level and when you look at our new buyer.

Mark: Traffic in Japan, it's still down about 25% and Thats because we we source a lot of tours from the international airports in.

Mark: In Japan, and while the Japanese are traveling they're traveling mainly domestic Ah right now so.

Mark D. Wang: So look, we're optimistic that the Japan business will be a strong business for us over the long term. Our expectations, though, are that we won't get back to full recovery until you get the Japanese back into Hawaii. And this is less a pandemic issue. I think that is way past this now. It's more about the weakness of the yen.

Speaker Change: Look we are optimistic that our Japan business will be a strong business for us over the long term.

Speaker Change: Our expectations, though is that we won't get back to full recovery until you get the Japanese back into.

Speaker Change: Hawaii is this is less a pandemic issue I think that is way past. This now it's more about the weakness of the yen.

Mark D. Wang: And I think right now there's just better options for them to travel elsewhere, but they'll be back. And our expectations are probably, You know, we're probably looking more toward the latter part of 25, 26 than we are at any time this year. And then just a related last question here, you know, when we think about sort of pre-diamond acquisition, pre-blue-green acquisition, Hawaii was 20 or so percent of your business. What would be sort of that comparable number?

Speaker Change: And I think right now, there's just better options for them to travel elsewhere, but.

Speaker Change: There'll be back end and our expectation is probably.

Speaker Change: We're probably looking more towards the latter part of 'twenty five 'twenty six than we are.

Speaker Change: Anytime this year or early next year.

Speaker Change: Okay. Thank you and then just a related last question here.

Speaker Change: Yeah, when we think about sort of pre diamond acquisition pre blue-green acquisition.

Speaker Change: Why was <unk>.

Speaker Change: 20, or so percent of your business, what would be sort of that comparable number you know if you went back to 2018 and had you know both acquisitions yeah. It certainly sounds like Hawaii is less.

Mark D. Wang: You know, if you went back to 2018 and had, you know, both acquisitions, it certainly sounds like Hawaii is less. I hope that makes sense, thank you. Yeah, no, that makes sense, and actually, it was a bigger percentage before the two M&A deals we did. So today it's, you know, when you look at Hawaii, you look at Hawaii and Japan in total, it's right around 20% or just under 20%. But the Japanese part of that is about 10% of that.

Speaker Change: Relevant as far as your overall exposure how should we sort of think about how that percentage has decreased because these acquisitions I hope that makes sense. Thank you yeah, no that makes sense and actually it was it was it was a.

Speaker Change: Bigger percentage.

Speaker Change: <unk>.

Speaker Change: The two M&A deals we did so.

Speaker Change: Today, It's you know when you look at Hawaii.

Speaker Change: You look at Hawaii in Japan in total, it's still it's right around 20% or just under 20% with the Japanese part of that is about 10% of that so the Japan part of it itself is about a 10% are part of our business now so it has come down materially.

Mark D. Wang: So the Japan part of it itself is about 10% of our business now. So it's come down mature. That should do it. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mark Wang for any closing comments.

Speaker Change: Yes.

Speaker Change: That should do it thank you.

Speaker Change: Alright. Thanks.

Speaker Change: Thank you there are no further questions at this time I'd like to hand, the claw it back over to Mark Wong for any closing comments.

Mark D. Wang: Alright, well, thank you everyone for joining us today. Before I wrap up, I'd like to thank all of our team members for their hard work this year and their continued service and dedication to our owners and guests. When you think about what we've accomplished in the last 30 months, acquiring two new companies and setting the business at a whole new level, with the most offerings, experiences, and partners in the industry, I'm really proud of what we've achieved together. I'd also like to offer a special welcome to our new Blue-Green team members. Welcome to the HEV family. I'm really optimistic about the future of HGV and look forward to speaking with you again next time. Thank you, and many more. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Mark Wong: Alright, well. Thank you everyone for joining us today before I wrap up I'd like to thank all of our team members for their hard work this year.

Mark Wong: And their continued service and dedication to our owners and guests. When you think about what we've accomplished in the last 30 months acquiring two new companies and setting the business at a whole new level.

Mark Wong: With the most offerings experiences and partners in the industry I'm really proud of what we've achieved together.

Mark Wong: I'd also like to offer a special welcome to our new Blue Green team members are welcomed to the HCV family.

I'm really optimistic about the future of H C V and look forward to speaking with you again next time. Thank you.

Mark Wong: Okay.

Speaker Change: This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.