Hilton Grand Vacations Inc. Common Stock Barclays 19th Annual Global Consumer Conference

No, thanks for the opportunity. It is great to be here.

That is a great question. I think HGV is really transformed over the past five to six years. It is a different organization than it was when I joined the organization back in 2019. We have gone from a timeshare company that had 60 properties to a timeshare company that has over 200 properties. Most of that growth has been inorganic through those acquisitions of both Diamond and Bluegreen. Most notably, it is a change in the consumer base as well. Both the acquisition of Diamond and Bluegreen expanded the breadth of our product. It created a more entry-level product, if you will, and the opportunity for us to better harvest leads from our Hilton Honors relationship with, obviously, Hilton Corp. When you think about the organization today, we have tried to make it very simple from a consumer standpoint. We effectively sell three products.

The vast majority of what we sell is three products. It's Hilton Vacation Club, which is an entry price point, Hilton Grand Vacations, which is the legacy business before any of the acquisitions. Most of the acquisitions fit into the Hilton Vacation Club. Then we also sell Hilton Club, which is more of a luxury product. We've added more scale and more breadth to what we offer the consumer. From an investor standpoint, I think it's a material shift, most notably in the cash flow story of the business. Back in 2018, as an organization that was doing circa $400 million in EBITDA, we made inventory commitments of close to $1.8 billion. That translates into a very low, if even positive, adjusted free cash flow conversion rate.

Today, we're doing close to $1.2 billion in EBITDA, with an EBITDA conversion rate target in the range of 55%-65%, where we expect to be this year as well. It's much less focused on building new inventory and much more focused on capitalizing on more efficient just-in-time inventory from reacquired inventory. So a complete change in both the offerings, the reach, the cash flow story. It's really expanded the product offering, not just from price points. The average interval before the acquisitions was roughly $50,000. With the acquisition of Diamond and Bluegreen, that introduced an average interval, a median interval, if you will, of $25,000. But we've also really enhanced the product offering by expanding upon experiences with our HGV Ultimate Access platform, where we offer our guests the opportunity to participate in once-in-a-lifetime experiences. Most notably, we kick off the LPGA Tour event in early January.

We also sponsor the Formula 1. We also host a number of events with NASCAR, and if you talk to our HGV Ultimate Access team, they'll tell you the thousands of events we host annually to give our owners more than just a simple room and a vacation destination. It is also about experiences today.

I was saying this earlier. I find it very interesting that we sit here today and we're in a literal shooting conflict with Iran, the consumer has held up well. Travel domestically, travel even in Europe and Japan, to Japan rather, is still fairly robust.

Sure. Not trying to be dismissive.

Gas going from $4 to $5 a gallon is meaningful to anyone. But at the same time, I think the structure of our organization has mitigated that risk to some degree. Well in excess of 75% of our owners live within a four-hour drive of one of our resorts. Gas going from $3 or $4 to $4 to $5 a gallon, does that change the decision to take a vacation with us?

I don't think so. From a credit standpoint, we've taken a number of actions to de-risk our mortgage portfolio, and what I mean by that is it dates back to as early as 2022. Post the Diamond transaction, we eliminated heavy risk credit opportunities. Diamond had a program where they had a low down payment program where you could literally come in, pay 1%, get access to the system, and ironically, by the time you used the system, you probably defaulted right after we paid the sales exec their commission.

We've eliminated that program to enhance the credit underwriting. Also what we've seen from that is a material decrease in the defaults on the Diamond side. The defaults have improved by almost 700 basis points.

Some of it is actions like that. Some of it is also sales practices enhancing the product that we offer, capital investment in the various resorts. In addition to that, most recently, as recent as Q2 last year, we changed the underwriting practice, most notably on Bluegreen, but system-wide. On Bluegreen, they had a practice that was very similar, something that you see throughout the industry. You could come in and put zero down as an existing owner when you were upgrading, as long as your combined equity on the new ownership was in excess of 10%. Today, we've eliminated that program, so you are required to put an additional 10% down.