Q3 2025 Hilton Grand Vacations Inc Earnings Call

Good morning and welcome to Hilton Grand Vacations. Third quarter 2025 earnings conference call.

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I would now like to turn the call over to Mark Melnick. Senior vice president.

Welcome to the Hilton Grand Vacations. Third quarter 2025 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, any statements are effective only as of today. We undertake no obligation to publicly update or revise, these statements, for discussion of some of the factors that could cause actual results to differ. Please see the risk factor 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 and investors,

Our reporter results for all periods, reflect accounting rules under ASC 606 which she 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.

And recognitions on table T1 of our earnings release and a complete accounting of our historical deferral recognition. Activity can also be found in Excel format on the financial reporting section, our investor relations website with that. Let me turn the call over to our CEO Mark Wang mark.

Morning everyone and Welcome to our third quarter earnings call, we have strong operational and financial execution. This quarter with 17% growth in our contract sales, driving material improvements, and our real estate business profitability versus the prior year. Those results enabled and near double-digit growth in our ebit, for the period, along with, maintaining our commitment to returning substantial cash back to shareholders,

I was particularly pleased with how broad-based our sales performance was we grew our tour flow and vpg and both owner and new buyer channels, all of our domestic geographic regions produced double digit gains in vpg and we delivered mid teens contract sales growth at both our Legacy and Bluegreen businesses

Our teams have been working hard on executing against our strategic initiatives to grow, improve our lead flow, demonstrate our execution, and enhance our value proposition. Those efforts are continuing to produce results.

the consumer environment has remained stable overall and travel demand continues to be healthy when looking at forward, indicators and member surveys

While recent events have highlighted, the continued volatility in the policy landscape. Our focus on our strategic priorities has not changed.

We're controlling the things we can control by executing against identified initiatives and highlighting our value proposition in the short term, while continuing to invest in building our capabilities for the long term.

We still have work to do around growing our new buyer mix, and improving our cost efficiencies. But our results reinforce my confidence that we're making progress toward achieving those objectives, and that the Investments we're making, today will drive sustainable value, Creation in the business.

Looking ahead. We're carrying good momentum into the year end.

And we're reiterating our existing ibida guidance for the year along with our expectation of achieving High single-digit contract sales growth.

Turning to the results for the quarter with corded contract. Sales were up 17% to 907 million, which was a record for the business on a proforma basis.

Adjusted ibida was 302 million with margins. Excluding re reimbursements of 24%.

And as I mentioned, I'm encouraged by the composition of our sales in the quarter.

Consolidated tour growth at 2% continued to consistent trend of improvement. We've seen this year with both owner and new buyer channels contributing to the growth.

We grew new by our tours at our Legacy and blue green businesses. And we achieved that growth while executing on our tour, efficiency initiatives and improving the overall quality of the tour pipeline.

Vpg was up 15% against the prior year with our performance also reflecting broad strength.

Both owners and new buyers, contributed to the growth. The gains were also relatively well balanced between our Legacy and Bluegreen businesses and geographically. We saw double-digit growth across every 1 of our Mainland regions.

Looking at our forward demand indicators, which also remain healthy occupancy in the quarter was equal to the prior year at 83%.

Consolidated arrivals in the fourth quarter are ahead of the prior year, and our marketing and rental arrivals continue to be our strongest channels.

Our package sales initiatives. Also continue to be successful with another quarter, of double digit package, sales growth, and a pipeline, that remains near 750,000 packages.

Moving on to our other business units, Our member count was nearly 722,000 at the end of the quarter and reflected The increased rate of recapture. We discussed last quarter which will support both embedded, value, creation, and improved, long-term cash flow generation.

Our h2v, Max members are our most engaged and active members. And we're maintaining a very steady pace of Max additions with both new buyers and owner upgrades.

we added 70,000 members to Hugh Max over the past 12 months,

And in doing. So, we achieved an important. Milestone surpassing a quarter million, hcv Max members including nearly 30,000 Legacy, Bluegreen members now enrolled in the program.

Robust demand for the MAX program and the compelling value proposition it offers.

In our rental business, continue travel demand supported growth in much of our portfolio.

While the Las Vegas fit rental market remains slow due to visitations and competitive dynamics.

Our Vegas sales teams did a tremendous job in our sales centers during the quarter, driving near double-digit contract sales growth despite market challenges.

And in our financing business, we continue to execute on our business optimization program that will enhance our cash flow over the long term during the quarter. We've repurchased 3.3 million shares of stock for 150 million.

We're on track to hit our goal of returning, 600 million, to shareholders, through our repurchase this year.

And we remain committed to returning excess Capital to shareholders.

Very next to an update on our initiatives and integration.

We continue to make progress with our lead generation and initiatives to drive package sales and activations.

The packages we sold in the first six months of the year are starting to convert into tours.

And we're a key contributor to our return, deposit of new buyer tours, growth, this past quarter.

We also generated double-digit growth in the number of packages, sold in Q3 exceeding, our internal forecast for the second quarter in a row.

Those packages will in turn help us to build out our tour pipeline into 2026.

so while stronger than expected performance, resulted in proportionately elevated marketing, spend in the period and weighed on our flow through

We view this investment as an important driver of future growth.

As as packages, convert into tours, and ultimately, in the contract sales, we'll see the benefit of new buyers entering the system and adding additional lifetime value.

Regarding our product enhancement, initiatives, hcv and hvc Resorts began. Receiving Max members from blue green this month.

With those members now able to easily use their points for stays at a Resorts or cross all of our brands.

And we plan to launch additional Hilton benefits.

For our newest, Max members from from Bluegreen along with access to travel, concierge service, to help with the planning and making the most out of their next getaway.

Turning to the blue green integration. We continue to make good progress.

We reach 94 million in our run rate cost synergies, this quarter and remain on track with the targeted hundred million dollars in savings.

We fully rebranded, our Bluegreen sales centers and rolled out our Envision sales technology in each of them.

And with the recent completion of our Bass Pro kiosk rebrands,

We have great brand Synergy across our marketing channels, highlighting Hilton ramifications quality of product and service backed by the Hilton brand.

On the property front, we've rebranded our first seven Blue Green properties, with the goal of having our targeted rebrands completed over the next three years.

Our technology teams also continue to make great progress on our digital transformation, path, rolling out additional tools to our teams. While also introducing new enhancements to improve our member experience.

This quarter, we've upgraded our proprietary, my Explorer chat box to provide our members, a personalized, AI powered tool, tailored to their membership profile to help them with their booking and vacation needs.

From a partnership perspective, we've been focused on executing and deepening our existing relationships.

Through strategic alliances with Hilton, Bass Pro Shops, and Grey Wolf.

We reach a broad diverse and growing audience.

And we're constantly working with those partners to test new marketing programs and increase the efficiency of our funnel to convert leads to new member transactions and drive lifetime value.

So to sum it up, I'm proud of our performance this quarter, and I'm especially pleased with how broad-based our performance was across our KPIs, channels, and geographies.

Our teams have done a great job, executing against the initiatives, we laid out and their hard work is producing resolves.

We're focused on further, improving our cost structure and flow through along with driving additional new buyer growth. And I believe that the Investments we're making in the business are setting us up for long-term value creation.

Numbers.

Thank you, Mark, and good morning everyone. Before we start, note that our reported results for this quarter include $99 million of sales deferrals, which reduce reported GAAP revenue, and were related to pre-sales of our Kahaku and Kyoto projects.

We also recorded 42 million of associated, direct expense deferrals.

Adjusting for these 2. Items would increase the adjusted Eva to shareholders. We reported in our press release by a net, 57 million to 302 million.

And my prepared remarks are only refer to metrics, excluding net deferrals, which more accurately reflects the cash flow dynamics of our financial performance During the period.

We had a strong sales performance, this quarter reflected across our channels kpis and geographies leading leading to contract sales growth of 17% that field in acceleration in both our Top Line and ibido growth with strength in our real estate, financing and club and resort businesses.

Real estate margins had their second consecutive quarter of meaningful expansion in our recurring finance and club and resort businesses. We continue to demonstrate consistent growth.

While we still have work to do on the rental business and our overall cost efficiency, I think we made solid progress in the quarter overall.

He finished the quarter with 69% of our current receivables, securitized as we continue to execute against our financing business optimization.

While our cash generation was lowered, this quarter due to the timing of securitization activity. We remain confident in our 65 to 70% cash flow conversion Target for the year.

Year to date, we've produced 342 million in adjusted free, cash flow. And we're expecting to generate a material amount of cash in the fourth quarter, along with our final securitization deal of the year.

Turning to the results for the quarter, total revenue before costs reimbursement in the quarter, grew 12% to 1.3 billion and adjusted. Even other shareholders was 302 million with margins, excluding reimbursements of 24%, roughly in line with the prior year.

We've recognized $94 million of run-rate cost synergies from our Bluegreen acquisition and are within sight of our goal of $100 million of run-rate savings within our real estate business. Contract sales were a record $900 million, up 17% versus the prior year. As Mark mentioned, the composition of our sales performance was encouraging with gains in both our owner and new buyer channels. The new buyer mix remains steady at 27% of contract sales during the quarter.

Tours were up 2% year-over-year to 232,000 with growth in owner and new buyer channels. We expect to see an acceleration in our fourth quarter tour. Growth supported in part by our package sales performance, in the first half of the year,

Starting to vpg our tour efficiency initiatives HV Max and kahaku launches, underpinned in acceleration and growth to 3900 up. 15% year-over-year.

As was the case with tours, both our owner and new buyer channels, saw a step up in growth from the second quarter rate.

Foster products was 12% of net, voi sales in the quarter in line with the prior year.

Real estate sales and marketing expense was 46% of contract sales at 300 basis, point improvement, from the prior year,

Similar to last quarter, we outperformed our packet sales estimates, which will help support future tour growth.

Due to the nature of time, share marketing, the expenses related to that outperformance are realized up front and we'll convert to Eva As We Tour those packaged guests in the coming, quarters in Q3 the additional marketing. Expense was roughly 7 million.

Despite the additional expense. However, real estate profit was 178 million in the quarter with margins of 27% up, 300 basis points over the prior year.

And our financing business. Third quarter Revenue was 128 million and profit was 75 million with margins of 59%.

Excluding the amortization items associated with our acquired receivable portfolios, financing margins were 62%.

looking at our portfolio metrics are originated weighted average interest rate was 14.7% combined gross receivables for the quarter were 4.2 billion or 3.1 billion. Net of allowance

Our total allowance for bad debt was $1.1 billion on that $4.2 billion receivable balance, or 27% of the portfolio.

Our annualized default rate. For the Consolidated portfolios was 10.1% for the quarter. Slightly better than our second quarter level.

Our third quarter provision was 17% of owned contract sales in the quarter 100 basis points improvement from the prior year.

Delinquency rates, across all portfolios are trending at or below last year.

We continue to monitor our 31 to 60 day delinquency Trends, very closely as an early indicator and have not seen any signs of increased stress within our portfolio in recent weeks.

Which is a great milestone.

Revenue grew 8% to $193 million for the quarter. Due to fee increases and stable member activity rates, segment profit was $135 million with margins of roughly 70%.

Rental and ancillary revenues were up 2% versus the prior year to 186 million. With a loss of 4 million driven by developer maintenance fees.

Revenue growth in the period was driven by higher available room, nights and relative stability, and revar across the portfolio as a whole, the Los Vegas rental market continues to remain soft, although recent Trends have shown signs of stabilization.

We'll continue to leverage our ability to reallocate room nights between marketing and Rental and Vegas to adjust to rental demand Dynamics.

And as Mark mentioned, our team did a great job in that market driving, strong contract sales with mid teens growth in our Vegas vgs.

Bridging the Gap between segments, adjusted Ava, and total adjusted evida JV, even though it was 5 million licensed, fees were 56 million and ibida attributable to noncontrolling. Interests was million dollars.

Corporate GNA was 43 million or 3% of pre- reimbursement, Revenue, roughly in line with Q2 and last year.

Our adjusted free cash flow in the quarter was 23 million which included inventory spending of 77 million.

Our cash flow was lower this year owing to the timing of our ABS deals.

For the full year, we still anticipate that our conversion rate of adjusted ibida into adjusted free. Cash flow will be in the range of 65 to 70% which would imply a material amount of adjusted free. Cash flow generation in the fourth quarter and a conversion rate that will be in excess of 100%.

Using our third quarter ending share count of just under 87 million shares, this implies we will generate $8 to $9 of adjusted free cash flow per share for the year and will continue to return the majority of that cash flow to shareholders.

During the quarter. The company. Repurchased, 3.3 million shares of Common Stocks for 150 million from October 1st through October 23rd, we repurchased an additional 1.1 million shares for 47 million.

Including these shares, we've repurchased. A total of 12.4 million shares of the date for 497. Million representing nearly 18% of our public float coming into the year.

We remain committed to Capital returns as a primary use of our free cash flow and believe our shares continue to represent a compel compelling value.

As of October 23rd, we had 531 million of remaining availability under our current share repurchase plan.

Starting with our outlook, we are maintaining our 2025 adjusted EBITDA guidance to be in the range of $1.125 billion to $1.165 billion, which assumes that the environment remains consistent with what we see today.

Moving on to our liquidity as of September 30th, our liquidity position, consisted of 215 million of unrestricted cash and 632 million of availability under a revolving credit facility. Our debt balance at quarter end, was comprised of corporate, debt of 4.7 billion and a non-recourse debt balance of approximately 2.5 billion. A quarter end. We had 300 million of remaining capacity in our warehouse facility.

We also had 1.1 billion of notes that were current on payments, but unsecured ties.

Of that figure approximately 586 million could be monetized through a combination of our warehouse borrowing and securitization.

While we anticipate, another $358 million will become available following certain customary milestones such as the first payment, deeding, and recording.

Volatility in some portions of the credit Market are ABS Market remains open and functioning. This fact coupled with our 850 million Warehouse gives us confidence, we can execute on our previously, discussed Finance optimization strategy,

Turning to our credit metrics at the end of Q3 and inclusive of all anticipated cost synergies. The company's total, net leverage on the ttn basis was 4.0 times.

We will now turn the call over to the operator and look forward to your questions. Operator.

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In our first question comes from Patrick, scholes with truist securities.

Hey, good morning, everyone.

Um, I wonder if it's possible you could.

Our thoughts for 2026, and then specifically within that, um, talk about, you know, expectations for financing profit. Certainly, we've seen the last couple of years given the unfavorable direction of interest rates and the net spreads, where that margin has been squeezed. Uh, given that, that seems to be going the other way. Uh, I'd like to hear just sort of high level um for financing as well. Thank you.

Sure. Yeah.

You know.

Of course we want. We're very focused on finishing the

And as usual, we'll provide guidance on our first call next year. But at a high level, we...

I think we're really well set up with momentum heading into 2026 and expect to get.

To grow a bit differently than we did this year from a topline standpoint.

we're continuing to see solid demand, uh, for leisure travel despite some of the noise out there and

Uh, we expect good tour flow growth next year. Uh, resulting from the Investments we made during the year and which is going to be the primary driver for contract sales growth next year. Uh, you have to remember, we're lapping, you know, the max launch with blue green and, and the kahaku property that we, we opened up for or launched in launch sales in Hawaii. So and then, of course, for the new new buyer tour flow growth is, is going to weigh a little bit on our vehicle.

BPG so uh, it'll be less of a driver.

On contract sales growth next year. But, uh,

That we're going to be, we're going to stay very focused on leveraging our fixed cost and expect some operational cost improvements. Uh, all of that said, you know, we we believe we're going to be able to continue to drive, strong free cash flow and, uh,

And we're still very committed to returning Capital to our shareholders. So,

We look forward to sharing more details on our next call. I think I'll let Dan jump in and talk about the, the financing, uh, profitability that, uh, that you asked on the second part of that question.

Thanks Mark. And Patrick. Yeah, absolutely. I mean as Mark uh, underscored I think we were well positioned for 2026 know when it comes to the financing business 1 element that we will see in 2026 is some headwinds on that front just as we continue to maximize our finance business Opera uh optimization program as you recall. We expected that to take about 18 months so that will run into next year. Now that'll be slightly offset by a growing portfolio and as you will recall last quarter we announced uh, the, uh, first securitization in the Japanese Market will be looking to attack that market again next year, too. So hopefully with the combination of all those things you'll see margin. Uh, hold, despite the headwind. Uh and uh,

Potentially grow, seeing how REITs play out. But you can expect us to take full advantage of all those opportunities.

Okay, uh, and if I could ask just a follow-up question here, uh, actually has to do with the vpg that the very strong vpg results, uh, in 3Q up. 15% certainly, uh, you know, I follow a lot of travel and Leisure companies and we don't see much of anything growing 15%, uh, at at the moment, if you had to, you know, any kind of did this in your prepared marks, but just boil it down and summarize, how you're doing, you know, something that's growing. 15% versus sort of the rest of the travel world, not growing much of anything. What, you know, what? Boil it down for me. Thank you.

Patrick, first of all, I'd say uh,

Our teams did a great job, great execution.

and you know, when you look at, you know, you look at where and how we accomplish this, uh, it's really a similar story from a geographic perspective, East West Mid-Atlantic South

Vegas was even up, you know, 10% uh in a market that's you know uh struggling from a, you know, fit standpoint Orlando, New York Hawaii, all double digit gains across the business. And and so why do we think we're seeing this? You know, I think it's it's really is a testament uh, to

You know, the new club that we launched, you know, we innovated and and launched a brand new club and and uh you know it was a a reinvention of of what uh we've done and and Max's performing extremely well. Uh and it's been a catalyst for both owners and and new buyers, you know, we reached 2500,000 members in just over 4 years.

Happening is and most importantly is our Max owners are reporting higher satisfaction rates and engagement scores.

And our sales advisors continue to deliver on great vacation Solutions. So you know owners are upgrading earlier and more frequent then we have in the past and driving record vpg

Um, so, and, and we're seeing that from our Legacy club members, upgrading into Max. And we're also seeing existing maximum numbers who've joined over the last 3, uh, to 4 years upgrade. And in fact, you know, I talked about the 250,000 Max members, we actually have 360,000 transactions in Max. So, um, so I really attribute a lot of to the, the performance to the great work. Our teams did rolling out uh, this new membership program. Uh, it really is improved our value proposition. Uh, We've added a lot more, uh, Hilton benefits to connect our members to the broader Hilton ecosystem.

And when you look at our our base and members in Max,

Just above 50% of our Max members have a 10 year in our system of less than 5 years. So what does that mean? That means that those members that are in our system for less than 5 years have 90% of their lifetime value sitting ahead of them and then nearly 70% of our Max members have a tenure of less than 10 years in our system. So those members have 50% of their lifetime value, sitting ahead of them. So, anyways, uh, the rapid growth in maths based really both.

Question comes from been taken with meizuo securities.

Hey, good morning, um, would love to touch on flow through. You kind of you touch on it in the in the uh, prepared remarks. But I want to dig in a little further. So Top Line was strong but it just feels like there's a, a couple things working against you. Um, you mentioned, the higher tour packages. I think you said this is worth 7 million. So essentially just to confirm these are expenses incurred in the quarter of which you get Revenue in the future and this 7 million would be the amount above the normal course of business. Um, I guess is that fair and then it also looks like you had higher rescission and reportability and other adjustments just anything you would flag in the p&l. Um and then to the extent, you could quantify it. That'd be great. Thanks.

Yeah, I uh let me uh, let me touch on some of that and then I'll let Dan jump into some more detail here. But, you know, there there's always a level of investment in the business for growth, right? And we continue

To invest in in high-tech and high-touch solutions, really to to reach a bigger audience. And and you know, 25 has been a year above average investment in the future customer acquisition and and that was by Design.

Um, you know, on the high touch side. We've got great Partners, right? We added 41, new marketing sites, across Hilton, Great Wolf, and basspro this year.

And we continue to invest in our D digital channel. So um these initiatives require upfront investment and Staffing technology. Um so the results uh have been great, 10% year-over-year package, sales growth for 2 consecutive quarters now. Um, you know as you alluded to that growth is still only partially reflected in our tour flow as it takes sometimes 9 to 12 months on average for a package, holder to actually travel to 1 of our properties. Um, and we're going to start seeing that that growth in Q4 and Beyond. So um anyways, we expect you know, the efront investment uh will bring us

There is a piece associated with reportability, uh, it's actually not a bad story, it's a good story. So during the last 10 days, if you look year over year just from a rescission perspective, we sold more contract sales, the last 10 days of, uh, this year compared to last year, that's roughly 8 million. So that's really effectively timing, just getting past that rescission period that, uh, consumers have. And then in addition to that and this is, you know, part of the investment as well. From an FDI perspective, we have rolled out, um, some of the higher cost FDI to the entire system that yielded uh, elevated level of FDI. In Q3. It's as you know, it's 1 of the tools, we use to close a transaction and it's a bit of a balancing act, but I would tell you that this quarter was elevated on an FDI perspective, by probably a point to a point and a half. So, all of those things, uh, yielded uh, you know, some compression on, uh, the flow through

Got it, that's helpful. And then the, the the the rescission that 8 million that basically drops straight to ibida is that fair or, or how do we think about that 8 in the flow through of this issue with it? There's some, there's some deferral but uh, we'll recognize all that as we flow into, uh,

Q4.

Got it and the 1 to 2 points on the FDI. Sorry. Is that 1 to 2 million? Or when you say points, I didn't totally follow that. So that's FBI as a percentage of uh own contract sales or contract sales call it uh that would it between 9 and uh on the higher end, 15 million for the quarter?

okay, that's

That's meaningful. Okay, got it. And then, Switching, gears a little bit as we think about free cash flow conversion in 26. Can you help us? Think about the puts and takes. Um, I think we've talked about in the past, maybe reducing some inventory spend, um, which obviously is a a good guy for a free cash flow conversion. And then I'm not sure if you have any um big beautiful Bill benefits but just again as a percentage of ibida. So ibida. Free cash flow conversion at 26. What's kind of like is there a good ballpark?

Look I I'll start with the tax is, you know, obviously like every other Operator, Operator out there who are trying to take full advantage of uh what's in the big beautiful bill but I think generally speaking I would look for cash taxes to be roughly in that mid teens level as a percentage of the even though. So I called you know, 13 to 16% somewhere in that realm uh you know, to the

To the degree. We can take advantage, we will, uh, from a cash flow and an investment perspective on inventory. Uh, last time I think we talked about this, it's worth highlighting again, you know, right after the blue green acquisition, we expected to be in a position where we would need to invest between 350 and 450 million in inventory, on an annualized basis. Uh, since then, we're obviously very capitalizing to a great degree on recaptured, inventory, and that's going to allow us to lower that pairs. Uh, that long-term level investment from 350 to 450 down to roughly 300 million. Now we've been talking about this for a few years because we did push off inventory Investments during Co. So we're still wrapping up some of those larger Investments and most notably kahaku and Maui um in Hawaii. Uh, so this year uh we will spend 400 just under 400 million uh, that will

Be a similar level next year, and then you'll get to that average run rate of roughly $300 million on an annual basis, which includes new projects as well as recaptured inventory.

And moving on to our next question. Chris warona with Deutsche Bank

Hey guys. Um

I was hoping we could, uh,

Maybe talk for a minute about your first time buyers and not sure if you want to maybe segment them across the different brands or some other way but just how they're performing. I know you said that the all the metrics are up for for the first time or is but you know is there any difference you see between maybe a you know a blue green Source first time buyer and hcv depending on how you Source them just think about in terms of close rate or um vpg or things like that. Is there any way to segment any kind of trends for first-time buyer versus an existing buyer? Thanks.

Yeah, so uh, I've got a few data points here. I'll share with you. But, you know, we're as you know, we're fully committed to new buyers, right? And uh, really pleased with the progress, the teams are making

Earlier about the Investments we've made this year to even bolster that uh, going into 26. And so uh, uh, what I'd say is number 1, on the uh, BPG front new buyer close rate reached its highest level, uh, since 22 of 23. And we're really pleased to see that that movement there. Um, from a generational standpoint, um, Gen X Millennials and gen Z made up, 70% of our tour flow and close rate, improved across all of those generations. And then when you look at it from an income, tier standpoint, uh, close rates, uh, were steady.

In the low, net worth tear and they increase in the middle and high tier net worth customers.

So, you know, is we're seeing it right now. The consumer is stable and we're very focused on execution, executing on all the things that we can control.

Okay. Um, thanks Mark very helpful and that follow-up question. How should we think about kind of getting that rental rental business back to zero from a from a or or better from a um, you know, Evo standpoint. I know some of the challenges and unsold inventory. Maybe you can give us a little bit of a walk through in terms of, you know, what has to happen and and timing and how we should think about that for next couple of years. It's a step function or more of a grind, thanks.

Yeah, I know. Absolutely. So a lot of the the a lot of the momentum that we need to do is really driven off of contract sales. So as we sell more and we get through the recapture bubble, that will allow us to, uh, lower the developer maintenance fee, that will contribute heavily to Improvement on the rental side. Now we talked about this last quarter, to some degree, you know from um from a recaptured inventory standpoint that is going to yield you know lower uh net owner growth over the next 20 40, even 306 months. Uh as you as you saw this quarter, It's relatively flat and it it will go negative. Uh, but that's that's a big component of it. Um, the other component that should help Drive margin Improvement, holding all else equal, which I know is a big, uh, big assumption, especially when you think about ADR rates but it's, uh, converting properties over to the Hilton. Uh, uh, brand. We do realize ADR benefits from that standpoint and we also realize cost benefits are

Otaa perspective, but it's really a combination of all those components. Uh, and it is a long-term process to get there. Yeah. And then I just, I just add on to that that, you know, I think our teams, uh, have done a really thorough job this year. Um,

Uh in the resort operations side really. Looking for improved efficiencies in our operations and I think uh, we're going to, we're going to see in our members are going to see that uh

Of the increases that we're looking for next year are, um,

by, you know,

Excuse me, by average standards, we are going to be below what we've historically seen, and then...

And then, uh, I'd also say, look, we picked up a lot of good inventory in the acquisition, but we do have some of that inventory that's non-branded and and quite frankly. Uh, there's just not a, a, a investment case of putting the dollars in to get them to the standard we want. And so there may be some inorganic options here. And and uh, what I mean by that, uh, where we have, you know, maybe oversupply or a product that doesn't really fit the portfolio where in the future, we can, uh, figure out a way to move that, uh, inventory off, our balance sheet and and move it along to somebody else that can better utilize it.

And moving next to Brant Montour with Barkley's.

Um, good morning everybody. Thanks for taking my question. So, you know, there's been a lot of um, Talk across consumer land this earning season, uh, as as well as in travel right about the high inverse low end and you're seeing it on the ship and you're seeing it and elsewhere in different travel. Travel Virgos, you know, Mark you gave some great stats and you kind of cut it up, a bunch of different ways, it didn't sound like you're seeing anything, but if you just look at close rates for new owner, um, new owner sales across your property and you look at the smaller properties. A lot of those were Legacy diamond versus. Maybe some of the the bigger ones and you know and and Orlando or other markets. Do you see any Divergence based that that would sort of track that theme at all?

Well, you know, I think, um, a brand—I think that Divergence really is more.

Our new buyer close rate reached its highest, you know, amounts.

Or highest rate since the quarter uh, second quarter of 23. So and and it's, you know, I talked about it a number of quarters ago around a low net worth tier, uh, customers that tier is really stabilized. It it really hasn't come back to the historical levels. But what we've seen Brad is that middle to higher net. Worth tier really improved

Um, so and and, you know, we have spent a lot of time this year on optimizing, our tour and we continue to evolve, you know, how we use our data and analytics, and our marketing to, to to drive new buyers and really sharpening our qualifications and then the discovery process to just gather better information early on. So, um, so at the end of the day, you know, we're we're trying to be much more effective and sourcing our customers. And so, you know, we're we're really focused on, you know, trying to steer our, our trying to, to put our money and our Focus to that mid to higher tier, uh, net worth uh, uh, customer than the lower tier right now. And like I said, they've stabilized, but they really haven't recovered to the levels. Uh, We've historically seen. So and you know, the only thing I would add to that. Just from a performance standpoint is when we look at our portfolio, as you can imagine 1 of the

Things. We look at on a almost. Daily basis is delinquency rates between 31 and 60 days as a leading indicator from a performance standpoint. And, you know, we like like that data to the nth degree, but just to oversimplify it to some extent. If we look at, uh, those with psycho scores greater than 6, 650 versus those with lower than 650. What I can tell you is sequentially. Uh, and generally speaking, uh, it's been trending actually positive greater than 650 and Below. 650 has been very stable. So even on that front, we see positive, uh, Trends in totality.

Okay, thank you very much.

David Capps with Jefferies has our next question.

Hi everybody. Thanks for taking my question. Um, I I appreciate all the detail around, you know, some of the, uh, what, you know, momentary or pedestrian Investments and growth as well as some of the timing issues. You know, that seemed a bit more momentary. Also, um, how do we think about in a general sense 2026? Right our our is that an investment year for some degree also or you know, should we think about, you know, modeling this as kind of a year to reap what you've invested here?

Yeah, um, David. I think, you know, as I, uh, yep, as I mentioned just a few minutes ago, I think what you're going to see, uh, next year is we're...

You know, the big lift in investment, uh, for, you know, really broadening and building out our new buyer, uh, marketing channels. And, and on the digital side, uh,

There'll be some investment there but there it won't be at the same level.

Uh,

and uh, that we we put into this year. And and so our expectations are next year, we're going to be looking at um, tour flow growth, uh, that exceeds what we have this year and uh, you know, we're, we're looking more in that kind of load in the mid. Uh,

Uh single digit tour flow growth and, and with a little bit more moderated uh BPG next year. And and so the Investments uh, on the package side,

Is going to really we're going to get into a Cadence, where the growth on the package side is going to align much better to the growth on the tour Flow side. So we we start seeing the revenue generation more closely, uh, matched up to the expense side. Uh, and so that's our expectation next year. And, and our goal. Uh, you know, for next year's is we're our goal is to see, uh, is

To, you know, is to be able to exceed bottom line growth rate, um, or grow the bottom line at a faster rate than our our Top Line.

A single growth in contract sales and then a focus on leveraging cost to drive.

Uh, hopefully higher EA growth.

Very helpful. Thank you.

Our next question comes from Stephen Grambling with Morgan Stanley.

Hey, thanks. Just wanted to to follow up on some of the

inventory and, and sales, um, details and and specifically maybe digging into Hawaii, um, and, and some of that, that I'm into a specifically, I guess, how would you compare and contrast the mix of, you know, the inventory that's left to kind of sell specifically in Hawaii. And, and when you think you'd be kind of sold through that over the rest of, you know, as we think about next year and even maybe Beyond thank you.

Yeah, Stephen, we know we're, uh, as far as a mixed standpoint, we have been.

you know, we we we've been doing this for a long time and it's really we're very, very focused on a balanced mix and uh,

You know, so you know we're I think when you we think about it, we're we're very much on track uh, to be able to utilize the benefit of kahaku for a number of years. And uh and I'd say the same thing uh around Maui and and also on the big island, you know, we we we're still converting uh parts of that hotel into into units. So we're going to

A really good position from a deeded standpoint. Um, you know, ideally on a long-term basis, we want to be at about 2 and a half years of deeded inventory. Um, and right now we're running a little bit over that, so we're we're in a good position there. Um, you know, in the long run, uh, you know, our goal is to, uh, to to bring our our Coop down and bring our balances down and, and uh, as Dan alluded to earlier. Uh, that'll benefit our rental segments. So, um, so all in all, I think we're in a really good position from an inventory standpoint, uh, and especially that high-end inventory. That has a lot of demand across the the whole network. We're very measured in how we release that inventory to make sure it's it's balanced over a number of years.

That's great. That's it for me. Thank you.

Moving on to Danny Assad, with Bank of America.

We're reading about, you know, subprime Auto delinquencies, ratcheting up and, and like Brands to to Brands point, you know, other pockets of the consumer struggling. Um, so I guess how do you square? You know, specifically how like you know, the sub 650 bands, um of of of you know, time share loans are are stable here and there's no from a delinquency standpoint and and then you know, other places where it's it's kind of not

Yeah, no look. That's a great question. I think there's a 2-fold answer there. First and foremost, I would say, uh, we are very focused on, um, when it comes to the consumer's mindset on the design maximizing, their desire to pay, right? And that comes down to how we interact with them, from the, the starting point of the sales table, actually from selling them, a package, to the sales table and the experience they receive at that property. So there is a certain, you know, emotional attachment to uh time share and vacationing. So I think that element holds strong and then you know, to be, you know, quite blunt, uh, you know, the subprime ficos are not our core either. So we probably have just to a degree uh lesser exposure than some of the, some of our counterparties who are having larger problem with it. But, um, you know, sequentially, we've we've held up well. Uh, and the trending is positive on that below 650. And then, even when I think about,

Realized the fault rates again, in total, but annualized default rates sequentially have improved from even last quarter, and year over year, they've actually improved more than they improved sequentially. So, as we sit here today, we're seeing.

uh, everything holds stable to positive.

Yeah, Danny. I said I just had too, I think. Yeah. And and I think uh Dan touched on this a little bit and and I mentioned it earlier, look, our Max owners are reporting much higher satisfaction rates in engagement scores. And uh, you know, I think it, you know, it's a testament to our club team and, and all of those that are touching our customers, uh, across the network. Not just the, you know, the UPS upfront, sales process. And, and, as I mentioned, I, I gave some stats on, you know, the tenure within the max program and it's, uh, it's pretty impressive. How, um, how young a base we have in the max program and I think you you can't uh, you know, you can't I can't underestimate or uh over uh State the fact that high satisfaction and engagement scores are super important and people's willingness to want to pay.

Got it and and just as a follow-up you know in the past, you've talked about a mid teens expectation for loan loss, Provisions, based on kind of what you're looking at. And those Trends is that still where we're trending right now for either like Q4, or or 2026.

Yeah. No, I think that's accurate and I think we're we're effectively there at this point.

Got it. Thank you very much.

And that does conclude our question and answer session. Before we end, I will turn the call back over to Mark Wang for any closing remarks. Mr. Wang.

All right. Thank you Carrie. And, and thanks everyone for joining us. Today, I want to thank all of our team members,

But a special shout-out to our resort operations teams that are 200 resorts for delivering heartfelt hospitality and elevated experiences to our members and guests.

And to our members for trusting, hcv with what matters most moments with friends and family and experiences designed to inspire and connect you to the world.

Thank you, everyone.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.