Hilton Grand Vacations, Inc. Stock

Good morning and welcome to the Hilton Grand Vacations Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Hilton Grand Vacations Third Quarter 2026 Earnings Call. Our discussion 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. 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.

Our reported results for all periods reflect accounting 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. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals and recognitions.

Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals and recognitions, which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to view these slides on our website at investors.hgv.com.

During the third quarter of 2026, we obtained a certificate of occupancy for our Ka Haku project. The receipt of that certificate triggered the recognition of previously deferred revenues and direct expenses associated with prior sales of the project's inventory resulting in a net recognition for the period. On Slide 2 of these materials, you can see the recognition adjusted metrics that we'll be referring to on today's call. Reported results for this quarter reflect $536 million of net contract sales recognitions under ASC 606, which had the effect of increasing reported GAAP revenue.

Also shown on Slide 2, we recognized a net $240 million of direct expenses associated with these revenues. Adjusting for both of these items would decrease the adjusted EBITDA to shareholders reported in our press release by net of $296 million to $313 million.

With that, let me turn the call over to our CEO, Mark Wang. Mark?

Good morning, everyone, and thank you for joining our third quarter earnings call. This was a challenging quarter for us and our results in Q3 fell short of our expectations and outlook provided on our last call. Although the underlying business model, recurring revenue streams and cash flow generation of the business remained resilient; the 11% reduction in contract sales was below our forecast for a mid-single-digit decline.

When we implemented a series of initiatives at the end of Q2 to address sales execution, primarily at our Bluegreen locations, and we expected those efforts would take time to drive significant improvement; trends at both our legacy and Bluegreen brands weakened further in August before gaining traction across the business late in the quarter. To be clear, we're not satisfied with this outcome and we're moving with an increased sense of urgency to return to sales growth and deliver long-term shareholder value. The contract sales decline in the quarter was driven by sales execution challenges, particularly our closing rates.

We've identified key drivers of that conversion rate softness, namely the need for incentive alignment to drive higher transactions along with a more dynamic headcount environment in certain markets requiring enhanced recruiting and retention programs. And while they have taken longer to ramp, our initiatives are designed to address those underlying drivers. From a macro perspective, while travel intentions remain resilient, we believe that sustained elevated pressure on the consumer are having marginally more impact on the purchase decisions versus a quarter ago.

We also faced final difficult comparisons of 17% from our successful Bluegreen Max launch period this quarter although those were headwinds that we anticipated and not an incremental driver of softness. Importantly, we don't see this as an issue of willingness to travel. Tour flow for the quarter was consistent with our expectations as it's been all year and our arrivals on the books, occupancy levels and package pipelines remain favorable; but we didn't convert those tours into transactions at the level we should have.

We continue to have the strongest value proposition, product and inventory that we've ever had and we need to execute more consistently across the system to take advantage of those strengths. That said, in light of our Q3 results, we're reducing our guidance to reflect a more realistic view on the timing and ramp of the near-term sales and EBITDA growth. Last quarter we discussed targeted initiatives around incentive alignment, training and recruiting along with organizational initiatives with the goal of improving our execution and conversion rates. Here are some of the direct actions we took.

In Bluegreen Orlando property: we put a new leader in place, rebuilt the team and returned to growth in September. In Bluegreen's Myrtle Beach property: we also made leadership changes that stabilize the business and while it will take time to ramp, we're encouraged by their progress. And we tested updated incentive plans that generated a positive outcome and we're in the process of delivering them to other key markets based on these early results. As I mentioned earlier, the cadence of the quarter demonstrated some early signs of positive traction from those initiatives.

August marked a low point for sales. And in September, we narrowed the gap considerably with several of our key sales centers returning to positive growth for the month demonstrating a trend of measured improvement that continued into October. And controlling for the effect of those tougher year-over-year comparisons, contract sales growth trends improved materially in each month of the quarter on a 2-year stack basis. So while the monthly trends give us confidence that we're on the right track, our results make it clear that we still have more work to do.

As a result, we're expediting our pace of rollout across our brands. We made further incentive changes to enhance alignment across the business ensuring we're positioned competitively in key markets. We brought additional sales talent into the organization through productive recruiting efforts, including a mix of former HGV team members and new employees. And we've seen further improvements in October as a result. And in a separate release this morning, we announced a change to our sales leadership.

Mike has a track record of driving growth throughout his career, including 15 years of consistent execution at HGV across multiple markets and brands, and I'm confident he's the right leader to renew our sales momentum and oversee our next phase of growth. In addition, we have an opportunity to dedicate additional energy toward improving conversions in our new buyer channel, which is critical to the long-term value creation in our industry.

First, our robust tour flow and diversity of lead channels provides us with the opportunity to further focus our resources on channels with the highest profitability as well as the customers with the highest propensity to close. By improving our channel efficiencies, we'll generate higher transactions and higher profit contribution from a smaller set of tours.

Second, we've identified areas where we have the ability to provide additional value and enhance accessibility to certain segments of our customer base with new products and price tiers, further improving our value proposition and driving transactions, which will enable us to continue to adapt our product and our approach to meet the customers where they are and with a product that fits their needs while preserving their future upgrade path as owners.

These additional actions are about making every tour count, driving improved conversion rates and increasing the transactions that are critical to growing embedded value as the majority of a member's lifetime value is generated within the first 5 to 10 years of ownership. That embedded value extends beyond our real estate business, fueling our recurring club and resort and financing business that represents well over half of our segment profit. For the quarter, our financing business revenues grew 16% while expanding margins and our club and resort business continues to demonstrate consistent growth while producing our highest margins.

That performance has been aided by the 20% growth of our HGV Max member base, which has now surpassed 300,000 members. These are high margin predictable earnings streams anchored by our Max membership base and they have supported EBITDA and cash flow generation despite the pressure on contract sales. And they demonstrate the resilience of our operating model as a whole, supporting our robust cash flow generation and capital returns.

This quarter, we repurchased another 2.4 million shares for $110 million as part of our ongoing commitment to returning excess cash flow to shareholders and we continue to expect to meet our target of returning $600 million for the full year.

So in summary, we're taking an honest assessment of our performance and we're determined to improve our execution. While we're optimistic about early signs of progress from our initiatives, today's guidance reset presents a more conservative and achievable view of how quickly these changes will translate into improved results. Our confidence in the business model, products, inventory position and the quality of our brand and level of service remains unwavering. And our current priorities are clear: improve our sales execution by increasing our conversion rates and return the business to consistent and profitable growth.

With that, I'll turn it to Dan for more details on the numbers. Dan?

Thank you, Mark, and good morning, everyone. As Mark mentioned, our sales performance this quarter fell short of the outlook provided on our last call and we're not satisfied with the results. The corrective actions taken in the summer produced some improvement in results late in the quarter, but the pace of that progress was slower than expected. Despite a meaningful benefit of our provision for bad debt stemming from an accounting methodology change and the continuation of our cost of product at the low end of our long-term range, the contract sales performance during the summer months ultimately led us to reduce our guidance for the year.

Turning to our results for the quarter. Total revenues before cost reimbursements was flat with the prior year at $1.3 billion. Adjusted EBITDA to shareholders grew 4% to $313 million with margins excluding reimbursements of 25%, up 80 basis points over the prior year. I'd note that EBITDA for the period includes the benefit from a lower provision of 12.5%, which I will address shortly. Within our real estate business, contract sales of $807 million were down 11% from the prior year and below the mid-single-digit decline we anticipated on our last call. The declines were driven by VPG and were felt across the system.

Bluegreen saw the steepest decline owing to the difficult comparisons from our HGV Max launch while our legacy business experienced inconsistent performance, particularly in the month of August. New buyer contract sales represented 28% of total volume, up 30 basis points against the prior period driven by continued growth in new buyer transactions. Tours in the period grew 2% to 236,000, consistent with the growth expectations laid out on our prior call and driven by continued growth in our new buyer channel. VPG declined 12% to approximately $3,400 in the quarter reflecting continued execution challenges.

Looking at the makeup of the quarter. We did see sequential improvements in the year-over-year VPG growth as we progressed through the quarter, but the initiatives were slower to take hold than originally anticipated. Our provision in the quarter was 12.5% of owned contract sales compared to 16.8% in the prior year. The quarter benefited from both improving credit performance driven by the underwriting actions we implemented last year, particularly at Bluegreen, and the consolidation of our allowance methodology resulting from the continued integration of our acquired businesses.

The consolidation of our allowance methodology led to a $55 million change in estimate to our allowance for our originated portfolio. The methodology update reflects a meaningful improvement in our credit performance that we've been highlighting for over a year now and our view that future owner performance will be representative of the combined portfolio and resulted in a prospective reduction in our loan loss allowance and provision expense. As a result, the reported provision rate was below our long-term target range.

Although the provision will continue to fluctuate based on financing propensity, owner and new buyer mix and other underwriting factors; the combination of the consolidation in our provision methodology as well as the continuation of the strong credit performance gives us increased confidence in our expectation that our provision will center around the mid-teens going forward. Cost of product in the period was 9.4% owing to a higher mix of trust product sales of recaptured deeded inventory.

Real estate sales and marketing expense for the quarter was $408 million or 51% of contract sales, 440 basis points higher than the prior year substantially driven by operating deleverage from lower contract sales. Real estate profit for the quarter grew 2% to $182 million with margins expanding 150 basis points to 28% as the provision benefit more than offset the sales deleverage. In our financing business, revenue grew 16% to $149 million and profit was $94 million. Excluding the amortization items associated with our acquired receivables portfolios, financing margins were 64%, up 300 basis points from the prior year.

Looking at our portfolio metrics. Our weighted average interest rate for our originated loans was 14.2%. Combined gross receivables for the quarter were $5 billion. Our total allowance for bad debt was $1.37 billion on that $5 billion receivable balance or 27.2% of the portfolio. The portfolio remains in great shape overall with delinquencies stable to last quarter and down from year-end. As of last week, our 31- to 60-day delinquency trends remained stable for all 3 portfolios, most notably for Diamond and Bluegreen. In fact in early October, Bluegreen 31- to 60-day delinquencies were at 2022 levels and Diamond remains at a 5-year low.

In our resort and club business, our consolidated member count was 716,000 as we continue to add new HGV Max members balanced by additional inventory recapture. Revenue grew 2% to $196 million for the quarter and profit was $136 million with margins of 69%. Rental and ancillary revenues were up 4% versus the prior year to $194 million. Revenue growth for the quarter was driven by growth in RevPAR offset by slightly lower available rental room nights versus the prior year. Developer maintenance fees continued to remain the largest driver of our rental and ancillary business profitability trends and drove the $7 million loss in the period.

This was the first full quarter following the close of our disposition transaction and we continue to expect that it will reduce the fee burden on our EBITDA by $10 million to $12 million on a run rate basis although with minimal contribution this year. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA; JV EBITDA was $1 million, license fees were $57 million and EBITDA attributable to noncontrolling interest was $8 million. Corporate G&A was $42 million and remained steady at 3% of pre-reimbursement revenue.

Our adjusted free cash flow in the quarter was $63 million, a conversion rate from EBITDA of 20%. This includes inventory spending of $53 million in the quarter. I'd also highlight we now expect spend of approximately $285 million on inventory this year, which is $90 million lower than our prior estimate. And despite our reduced outlook, we continue to expect our conversion rate for this year will remain in the lower half of our long-term target range of 55% to 65% demonstrating the resilience of our cash flow in different operating environments.

During the quarter, company repurchased 2.4 million shares of common stock for $110 million. This was below our targeted run rate of $150 million per quarter although, as Mark mentioned, we fully intend to meet our annual goal of repurchasing $600 million worth of shares. As of October 22, we had $617 million of remaining availability under our consolidated share repurchase plans. Turning to our outlook. As you saw in today's release, we are reducing our EBITDA guidance for the year to $1,165 million to $1,180 million from our prior $1,225 million to $1,265 million.

As I mentioned, the driver of today's guidance reduction is our weaker-than-expected sales performance coupled with the slower ramp of our initiatives to improve our execution. As we look at our components for our sales for the year, we continue to expect that tours will be in the positive low to mid-single digits for the year despite the channel efficiency initiatives Mark mentioned. That initiative will focus on driving lower overall volume of tours that are ultimately more profitable, particularly as we look to 2027.

Regarding VPG, we now expect VPG for the year to decline in the high single digits. In the fourth quarter specifically, we now expect VPG to decline in the mid-single digits. As a result, we now expect contract sales for the year to be down in the mid-single digits, which implies fourth quarter sales down in the low to mid-single digits. Moving to our liquidity. As of September 30, our liquidity position was $684 million consisting of $227 million of unrestricted cash and $457 million in availability under our revolving credit facility.

Our debt balance at the quarter was comprised of corporate debt of $4.9 billion and a nonrecourse debt balance of approximately $2.9 billion. At quarter end, we had $450 million of remaining capacity on our $1 billion warehouse facility. We also had $1.3 billion of notes that were current on payments, but unsecuritized. Of that figure, approximately $851 million could be monetized through the combination of a warehouse borrowing and securitization. We anticipate another $383 million will become available following certain customary milestones such as first payment, deeding and recording. Turning to our credit metrics. At the end of the quarter, the company's total net leverage on a pro forma TTM basis was 3.87x.

We'll now turn the call over to the operator for your questions. Operator?

[Operator Instructions] And our first question we will hear from David Katz with Jefferies.

Dan, I have and I heard the commentary with respect to the change in provision and I apologize for sort of leading off with a very specific question. But if we could have just a bit more like historical context for where the provision sort of sits today. And again, I heard your comment about looking for a mid-teens target level over time. But just a little more maybe backward-looking on that would be helpful, please.

David, it's an important question. So when you look at our static pools that have been driving our provision rate over the course of for a long time now, we've been running 3 disparate static pools starting with the acquisition of Diamond and supplementing with Bluegreen. So each static pool operated off of a different lookback period. Only one of those static pools took into consideration FICO scores and actual equity down at the table. So we've been making changes over the course of the past few years in the back of the house from a collections perspective and also from a consolidation of the underwriting methodology.

And the most recent and material change that we made was, as we've talked about I think a litany of times now, last year where we eliminated the incremental down payment for upgrades on the Bluegreen side. And now that that has been in excess of a year old, we had a lot more data points and we took the opportunity to consolidate the methodology. And what we did was now we have one static pool with a 10-year look-back period across all of the products that we sell and they all take into consideration FICO and equity.

Now there's a number of variables that are going to come into play that impact the ultimate provision, the least of which is not the propensity to borrow or the equity down, but this change better underwrites the risk that we are taking as we issue loans. Going forward, we do believe it's going to sit around mid-teens. It could be as low as 14%. It could be as high as 18%. Again, propensity to borrow has a meaningful impact on that. The good news is if the propensity to borrow goes up, that means long term we'll recognize interest income, greater interest income than we originally expected, but you take the provision upfront.

If you were to look at this item and we talked about a $55 million number being the change from a provision perspective. But if you were to apply the new methodology to this quarter in particular, the rate would have been just under 18%. If you just adjust for the $55 million, you'll get to a provision rate of 20% and that just underscores the fact that we were not getting credit for the additional equity that we were taking down.

Now that's at the higher end of what we would expect the range to be, but that is also underscored by some financing promotions that we ran during the quarter that drove a sequential increase in the propensity to borrow by over 400 basis points in the quarter. So there's a lot of variables that come into play. But ultimately, the end game is on a prospective basis we expect to be centered around that mid-teens range and we are better provisioning for the actual risk that we are underwriting as we issue loans to the consumer. Hopefully, that's helpful. I know that's a lot of data for you.

And next we'll move to Patrick Scholes with Truist Securities.

Mark, can you talk a little bit more with granularity about what specifically are these initiatives you put in place over the summer to improve execution? And with the change in the sales leadership, what improvements would you hope to see come out of that?

Yes. So Patrick, I think number one, we've been actively investing back into our sales organization, which means we've taken action to ensure that we're competitive in the market. And so we've improved incentives to meet the market norm and at the same time, we've been taking actions to find costs in other areas of the business to offset that. So net-net, we're better off now and staffing levels are in a much better position than they were when we started the quarter.

And so just to give you a few data points here. We brought in over 430 new salespeople over the last 4 months, all experienced. We had an additional 350 that came in that had real estate experience. And of those, 165 were previous HGV sales representatives. So importantly, we have really done a great job ramping up our recruiting. Our teams have done a really good job with that. And so look, at the end of the day, tour flow matters in this business. Salespeople move where the tour flow is. We're generating significant tour flow.

And we've talked about this before and I talked about it on the last call. In any given quarter, there's a certain amount of turnover within a sales organization and we experienced turnover levels that were above these historical norms. So the good news is the trend has stabilized as we exited the third quarter and we started seeing material improvements in our execution as we went through September and we're also seeing that in October.

And as a follow-up, can you remind us when you're taking in new -- replacing and taking in new sales staff, is it fair to think it will take 3 to 6 months to get them up to -- with training and just familiarity with the products and whatnot, 3 to 6 months to get them to a level that you would think where they're I guess fully operational?

Yes. I mean look, the good news is, as I said, over 160 of these were experienced in HCV, but you're right. When you bring in a new sales rep, a new sales professional and you invest in them, it does take some time to ramp up. And there was a lot of movement during the quarter so a lot of disruption that we experienced and the good news is those people are settling in, a lot of training going on involved. And we've made some I think really good moves from a retention and compensation standpoint that I think gets us in a much more competitive position now.

And next we'll move on to Michael Hirsh with JPMorgan.

In the third quarter, your adjusted free cash flow was -- or free cash flow conversion, I believe was 20%. So I guess could you speak through the building blocks in the fourth quarter that could allow you to reach your target for the year, which is around 55% I believe?

Yes. That's a great question. So it's a function of a couple of things from a building block perspective. Predominantly it's timing of securitizations. We anticipate closing 2 transactions in Q4 that will materially drive that up. In addition, you probably recall during my prepared remarks, our inventory spend for the year we originally had estimated it would be in the range of $375 million and we've modified those plans and we're going to be close to $90 million lower than that. So all of those benefits are rolling through Q4, 2 securitization deal. We've been talking about our second one in Japan, we anticipate that closing in Q4. And then we'll do another domestic deal of a material size between $450 million and $500 million in Q4.

And then for my follow-up on capital allocation. Given where your stock is currently trading, how do you rank buybacks against M&A, debt paydown and maybe any other uses of capital?

Yes. It's also a great question. So we've been fairly vocal for some time now that we were not going to simply lever up the balance sheet in order to buy back shares. And at the same time, we've also been very vocal about the use of capital from a capital allocation strategy. No real M&A out there for us. We feel the best use of capital is buying back our shares and that was at prices that obviously have decreased over the past 90 days. So do we think it's a good investment? Absolutely. We're very cognizant of the leverage level.

And as you'll note, in Q3 we bought less than our programmatic $150 million that we've been buying for about 18 months. We still expect to hit $600 million for the full year. We did decelerate those share repurchases as we saw the performance in contract sales in July and August underperform our expectations. But given where we see the year playing out even with the materially decreased outlook for the balance of the year, we feel that we're in a good spot to still execute on $600 million in share repurchases. But no M&A in our line of sight and we feel the best use of capital right now is still repurchasing of shares.

And next we'll move on to Chris Woronka with Deutsche Bank.

So I guess, guys, if we could drill back a little bit on the sales center and things that are going on there. It's kind of a 2-part question. One is are there any initiatives you have to kind of make sure that these folks, assuming they deliver as you expect them to, to retain them? So I think we hear about a lot of kind of back and forth with some other operators. And then the second part of it is, is this new I guess incentive structure at the sales centers, does that have any implications longer term for your overall margins? And then I have a follow-up.

Yes. So look, I think we're about 30% of the industry. So we have a significantly large sales and marketing organization, right? And I think we've taken the actions required to, number one, attract and retain the talent that we're looking for and we're going to continue. I mean this is an ongoing process, right? And we've talked about there's always movement with talent across the industry. And I think we've done a good job with what we've done around our retention program.

We strengthened our recruiting incentives and we significantly increased the recruiting efforts across the company, including adding staffing in our recruiting side. So we feel comfortable that we're in a much better place. When you think about the cost, the changes to the comp plans, there'll be some pressure on our sales and marketing costs, but we're also confident that we're going to be able to offset the impact with savings in other parts of the business.

Yes. Chris, just to jump in there and just to underscore Mark's last point. In the short term, clearly, it has an impact on our sales and marketing rate. As you saw in Q3, our sales and marketing rate year-over-year was up almost 400 basis points. I envision that rate to be fairly consistent in Q4 given the fact that we've lowered our contract sales, there's no longer a ramp that we anticipated in Q4. So in the short term, yes, it will have a rate impact. On the longer term, we believe there's going to be benefits on the contract sales side, which will help drive volume. And as Mark just alluded to, we will be more than offsetting any cost pressures associated with the investment in sales and marketing with cost savings across the balance of the business.

Okay. Super helpful. And just as a follow-up. What does the pipeline -- I know it's kind of difficult to look at it at a specific point in time, but what does the pipeline maybe look like for additional inventory recapture? Have those recapture trends been in line with greater or less than you maybe thought at the beginning of the year? And is there anything to kind of inform your thinking as to how recaptures will play out over '27?

Yes. I think recapture obviously has become a much bigger piece of our inventory sourcing strategy, right, especially since we did these acquisitions. And I think as systems mature, as people are aging out, they're traveling less and it really gives us more opportunities on the recapture side. So it's really a natural part of the system to evolution and it's I think a real advantage for our model going forward especially from a ability to recapture that inventory at a good rate and it's good for our long-term free cash flow and that we don't have to go out and necessarily build inventory at the same rate we have in the past. And so anyways, I think there's opportunity to cycle that inventory and our focus continues to be driving new members and creating new lifetime value creation and using that inventory to create that lifetime value creation.

Yes. And just to jump in there as well. We are truly capitalizing on the recapture of inventory. If you were to look at HCV prior to any of the acquisitions, our cost of product is between 25% and 30%. After the acquisition of Diamond, we expected that cost of product to be in the low 20s. And after a few years of owning Diamond and fine-tuning that recapture program, it dropped into the high teens. And with the acquisition of Bluegreen, we bolstered that even more and immediately following Bluegreen, we were in the mid-teens. And now we think that longer range view is in the low single digits to low teens to [ mid ] obviously come into play, but in that 10% to 12%, maybe 13% range, which is meaningful.

And it clearly will have an impact, as Mark just stated, with inventory spend patterns. We talked about just a few minutes ago about inventory spend patterns this year going from an original expectation of $375 million and reducing that by $90 million to $285 million. We've also talked previously about the long-term run rate being closer to $300 million. Now that $90 million deceleration this year is not simply getting pushed into next year. We still anticipate being below $300 million next year in that inventory spend. But that is just underscoring what Mark was just talking about with that recaptured inventory process.

And next, we'll move on to Trey Bowers with Wells Fargo.

This is Nick Weichel on for Trey. I know you guys are undergoing a lot of different initiatives right now, but I was curious if you had any early thoughts on what 2027 might look like? And just any color would be great.

Yes. So I'd say, number one, I think when you think about our long-term algorithm, we think that getting past this year, getting past these very difficult comps that we had from last year that our long-term algorithm is achievable as we go into next year. We've shown that EBITDA and cash flow are resilient in the face of softer sales trends. But as we look at on a go-forward basis, we think we're going to be able to balance VPG and tour costs and drive consistent EBITDA growth. And we're not looking at double-digit tour flow growth to drive our business. It's really about more of a low to mid-single-digit tour flow growth with a low to single-digit VPG growth. So anyways, I think we're moving to a pattern of consistent growth on a go-forward basis and it's very aligned with our thinking around our long-term algorithm.

And we'll move on to Stephen Grambling with Morgan Stanley.

I may have missed this in some of the opening commentary. But just given the interest rate environment, are you seeing any changes as you're having conversations around the securitization market or your borrowing costs in the financing segment? And how would you generally think about approaching if rates were to move higher, trying to pass that on to the consumer versus maybe using it as a sales tool?

Yes, it's a bit of a balancing act when it comes to interest rates. We constantly debate that internally. What I would tell you with pressure on interest rates just given the dynamics of what the Fed is doing. Will we always match what the Fed does? No, absolutely not. Will we move the needle where we can? Definitely. We do balance that with sales table initiatives though. So it's not going to be necessarily -- like I said, it's not going to be a one-for-one. So a bit of a balancing act there. From a benchmark perspective, that clearly works against us when we go and execute on a securitization.

We, much like others in the industry, are trying to be a very robust issuer of securitization. We try to make sure that we meet the commitments to those bondholders so they know what they're walking into to have a high level of liquidity in those notes and help us drive the best pricing we possibly can. And we've been very successful in that in the past. We're also looking at different avenues to capitalize on that. Clearly, we've talked about our Japan initiative where we've been able to securitize receivables for the first time last year in Japan that had a rate that was sub 1.5%.

We will do a second deal this year. The rates in Japan, as you've probably seen, have also gone up; but they're going to be materially lower than the recent securitization in the timeshare market that you saw from one of our competitors recently. Japan markets would still have a 2% handle on it, which is substantially better than what you see in the U.S. So ultimately, I've said this before, we're changing the collateral mix and the securitization that we do in Japan and ultimately, we're looking to be a more robust issuer even in the Japanese market, which should help us mitigate the pressure that you see on rates in the U.S. And at the very least, it allows for a competitive environment.

That's a lot of helpful detail. One unrelated follow-up. There's been a bit of a spike here in airfare. Are you seeing that impact specific markets at this point? And are there tools or things that you're seeing that may help alleviate that if you are seeing any kind of change in travel behavior from either your owners or prospective owners?

We really haven't seen a lot of pressure as it relates to airfare movement and cost of moving around or flying. Obviously fuel costs are high, much higher than they have been with all the Middle East activity that's going on right now. But despite all of that, people continue to travel and people continue to move their discretionary spend toward leisure travel and so it's remained very resilient. Our demand indicators remain very positive. Arrivals for Q4 and through the first half of next year are positive year-over-year. Occupancy levels are steady. We maintain a very strong package pipeline. And importantly, our new buyer transactions continue to grow. And while our main pressure this year has been Bluegreen owner comps, we did have 18% higher new buyer transactions in Bluegreen last quarter. So I think that's a really good signal that our product continues to resonate with these new buyers that are coming through the door.

Right. And not to be remotely dismissive of higher fuel prices because that's obviously adding pressure to the consumer. But one of the benefits of the acquisitions over the course of the past 5 years is the fact that in excess of 90% of our owners do live within a 4-hour drive of one of our resorts. So even if you do see pressure from a flight perspective, we have a number of options to accommodate a tougher environment for the consumer.

And Patrick Scholes with Truist Securities will have our next question.

A follow-up question here. Mark, I may have missed it earlier. With the new methodology for the provision coming in at 12.5%, what would have an apples-to-apples provision result under the prior methodology have been just so we can compare it to what we were expecting?

Yes, absolutely. So if we had not changed the methodology, simply adding the $55 million back to the provision would have gotten you a provision rate of roughly 20%. That is a function of a couple of factors, most notably mix, higher mix of trust and higher loan loss provisions associated with some deeded products coupled with a sequential increase in propensity to borrow by, I think I mentioned this, north of 400 basis points. So adjusting for those 2 items alone accounted for over 150 basis points, 200 basis points of that move. So it would have been at the higher end of that longer-term range, but that would be under the previous methodology. If we would have adopted the new methodology, you probably already heard me say this, it would have been at just under 18%. But again, the propensity to borrow drives that up by about 100 basis points.

Okay. And lastly here, would you be kind to give us a bit of a guidance walk here as it remains for the rest of the year?

Yes. So let me maybe take the first part of that and I'll let Dan give you a little bit more color on it. But look, first, we realize that comps get easier in November and December, right? But the reality is and we talked about this, we've made a major leadership change to address the execution. And while we're very confident in Mike Riley and what he's going to do to lead our sales organization, there's always some risk involved in that, but we know it's best for the long-term interest of the business. And so as we think about the rest of the quarter, we expect sales to really be in that kind of low to mid-single digits in line with what we saw in October.

And I think, Patrick, just to do more of a walk, clearly we're very disappointed with the ultimate performance, but there are some things to take into consideration, which the underlying resiliency of a number of factors in the business. We see that continuing. The rental business we believe will be in line with last year, which is very consistent with our previous expectations for the year. Our resort and club business will continue to benefit from a strong seasonal Q4, again in line with prior year, probably slightly a hair up and also consistent with our previous expectations on the financing business despite contraction in contract sales that's still performing in line with our previous expectations.

So when you look at the walk, it's really geared around the real estate segment. Mark has talked ad nauseam about the compression in contract sales, but what does that translate to in the bottom line? There are some good guys. Bad debt year-over-year, as you may recall, last year was at an elevated level given the upgrade into HGV Max scenario. So there should be some benefits on the bad debt side. But that's going to be more than offset in the investment that we're making in the sales and marketing team. So that is going to be driving your SG&A rate, which is going to be the detriment, which is causing the contraction in margins that we're projecting in our EBITDA walk.

Now again we believe that increase in sales and marketing rate should be short-lived, short term. And as we progress forward, we should be able to capitalize by increasing contract sales and also ultimately lowering costs in other areas of the business to more than offset that pressure.

Okay. And then just lastly, while I have the microphone here. Can you just confirm that the licensing fee percentage for next year should be at or about 5% for modeling purposes? And then related to that, remind us after that, it seems that that has stepped up to sort of its ongoing run rate for the next, let's say, for 2028 modeling. Is that correct, that 5%? Just want to clear the error on that.

Yes. Remember, the 5% -- different elements of the business pay a different license fee. So it's not just a flat 5%. But to your point the ramp-up, we just passed the last ramp of Diamond. Bluegreen still has one more ramp that happens on January 1. So we will be at a normalized run rate starting January 1 outside of rebranding some of the properties because as you would expect, we do not pay a licensing fee if the property does not bear the Hilton name, et cetera. And the rate is 5%.

I know investors have some questions on those so I appreciate you just clarifying everything.

There are no further questions at this time. I would like to turn the floor back to Mark Wang for closing remarks.

All right. Well, thank you again for joining the call today. To our members and our team members round the globe, thank you for making HGV a part of your story and we look forward to updating you on our next call. Have a great day.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.

Good morning, good afternoon, everyone. Thanks for being here. We are going to kick off our timeshare segment here with Hilton Grand Vacations. We're thrilled to have Dan Mathewes here, CFO of Hilton Grand. Thanks for being here, Dan.

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

Awesome. So let's open up with your transformation. HGV has gone from a single-brand vacation ownership company into a much broader platform following the Diamond and Bluegreen acquisitions. And so as you think about the business today versus, let's say, 5 years ago, excluding COVID, of course, what do you believe has changed the most meaningfully about HGV and what's still underappreciated?

That's a great question. I think HGV has really transformed over the past 5 to 6 years. It's a different organization than it was when I joined the organization back in 2019. We've 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.

But also most notably, it's 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've tried to make it very simple from a consumer standpoint. We effectively sell 3 products. The vast majority of what we sell is 3 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. And then we also sell Hilton Club, which is more of a luxury product. So we've added more scale and more breadth to what we offer the consumer.

We've also -- 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. And that translates into a very low, if positive -- 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% to 65%, where we expect to be this year as well.

So 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 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 F1. We also host a number of events with NASCAR. And if you talk to our 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.

Okay. Before we get into some of the specific initiatives on your docket here, I do want to take a step back and ask about the general volatility we're seeing in the geopolitical environment and how you're feeling about the consumer given gas prices that are kind of back to the highs of the year, inflation pressures weighing on consumers' wallets, airfare prices and the like. What are you seeing there?

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, and the consumer has held up well. Travel domestically, travel even in Europe and Japan -- to Japan, rather, is still fairly robust.

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. I mean, well in excess of 75% of our owners live within a 4-hour drive of one of our resorts. So 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 derisk 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 use the system, you probably defaulted right after we paid the sales exec their commission. So we've eliminated that program to enhance the credit underwriting.

And 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 0 down as an existing owner when you're 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.

It kind of derisked that portfolio. So when we look at the leading indicators for defaults, which in our case is early-stage delinquencies, 30 to 60 days, we've seen improvement on the Bluegreen portfolio outpace the improvement that we've seen on Diamond. And we've seen -- HGV always required -- well, always, always in recent years required the 10% down, incremental down, hold steady. So we're really pleased with that.

So you're improving delinquencies on the Bluegreen side based on direct action. Diamond side is steady. Just thinking about the overall portfolio, how sensitive are delinquencies to the geopolitical events that we're kind of going through now? And how are you feeling about the portfolio overall?

So when we look -- I think a good litmus test for that is when you take a step back and you look at the acquired portfolio, the most recent acquired portfolio that we have of material size is Bluegreen. And that acquired portfolio at this point is well in excess of 2.5 years seasoned.

And when we compare that to the originated portfolio of the Bluegreen Trust product that we sell -- that's any sales post January of 2024, so 2.5 years or less -- we see the originated portfolio outperforming the acquired portfolio. Which I think just speaks volumes not only to the changes that we've made from a product delivery standpoint, but also the enhancements to the credit risk.

Okay. Back to the top of the funnel, you are in a large new owner tour/sales cycle right now. We all know that new owners are tomorrow's upgrade, high-margin sales. So that's important, of course.

How do you think about this from a longer-term operational or financial planning perspective? And I guess, asked another way, should we kind of expect sort of these waves of new owners and then waves of harvesting those new owners with repeat sales? Or are you trying to get this new, large integrated business into something more algorithmic and balanced between new owners and sales -- and repeat sales going forward?

Over the past few years, you've seen us introduce HGV Max to two unbranded timeshare companies, both Diamond and Bluegreen. And that comes with some ups and downs, some variability, obviously. As a reference point, our VPGs to our Bluegreen existing owner base were up 45% in Q2 of 2025. So obviously, a tough comp.

To your point -- and I think it's really embedded in our DNA. We -- I think we're the ones who coined the phrase net owner growth. And we've been very focused on growing new buyers for a long time, ever since even the great financial crisis.

And one of our key aspects today is to drive new buyer transactions. Both Q1 and Q2, we had high single-digit growth in new buyer transactions. And that's critical for the long-term success of the business. It is ultimately translating into the high-margin future sales.

But how do we drive that? We're trying to get into a more algorithmic cadence. So we've talked about this for some time, but the introduction of HGV Max obviously introduces a level of variability. But as we move in and transition into 2027, it's -- in our mind, it's a more normalized comp year where we expect that long-term growth model to come into fruition. So low single-digit tour flow growth. VPG growth, probably modestly trailing that, which will translate into low single-digit to mid-single-digit contract sales growth, allowing us to leverage off the fixed cost side of the business for EBITDA growth to be mid-single digits plus.

That all, coupled with cash flow inflection points. I talked about the heavy inventory spend that the company has had over the past few years, $400-plus million. This year, we're on track for $375 million in inventory spend. Next year, that drops to a high watermark of $300 million. So a compression in inventory spend.

And also over the past few years, we've had material integration spend. 2025, we've spent $200 million. 2026, we'll spend $150 million. Next year, that will drop by $75 million to $75 million. And then in 2028, it becomes more of a finalization and more of a rounding there. So the combination of that more steady growth combined with the cash flow inflection points, I think, presents an interesting opportunity.

Okay. Okay. That's helpful. And then I want to go a little more near term. We're 1 month on from the second quarter print. You highlighted execution issues at Bluegreen in just 2 markets, but 2 of your larger markets. And you said those issues have been identified and fixed. And it was implied to us that those issues were mostly on the personnel side.

Would you characterize those as operational missteps by local leadership, local leadership leaving, rank and file leaving, a combination of all of the above? How would you sort of give us a little bit more description on what exactly is going on in those 2 markets?

Well, I would start by saying going into Q2, we were very aware of the tough comp that we had ahead of us. As I already alluded to, HGV Max on the Bluegreen owner side had VPGs up 45% prior year.

But going into Q2, I think there are a couple of missteps. One, we could have executed better, just generally speaking. So we underperformed our expectations when it came to even going up against that comp. In addition to that, we definitely had some execution-specific related issues related to Myrtle Beach and Orlando. Some self-inflicted where we had to make a leadership change, and some probably more attuned to the competitive nature of the existing market in timeshare today.

I don't think there's any need to point specific fingers. I think it's -- in my mind, we could have executed better. We've made leadership changes specifically in those markets. Unfortunately, whenever you make a leadership change, it's not turning on a light switch. These things take time.

And we said on the call, we reported late July. So I think that gives you a direct reference for Q3. We talked about the revenue side coming down for the full year. We were able to maintain EBITDA guidance for the full year, but that was on the back of cost-saving initiatives, most notably bad debt and cost of product.

So do we have a fix identified? Yes. Is it fixed? No. It's an evolution. It's a process. So obviously, disappointing for Q2 and clearly, Q3. I mean, Q2, our VPGs were down 8.6%. And I would tell you to expect similar, if not more, decrease in Q3.

Okay. Your only branded competitor -- I guess that we all know that would be -- is executing against a pretty steep operational turnaround in some of your markets. Has there been a fundamental shift in the competition over talent in some of those larger markets? And what steps have you taken against that? Are other markets at risk that haven't shown up yet, from what we can see?

That's a great question. I would tell you this. Any given year, it's not uncommon for there to be a lot of back and forth, especially in the sales executive side, between timeshare companies. It's not uncommon. You can walk through any of our sales distribution centers today and find people who have a resume that's filled with Holiday Inn, Marriott, Travel and Leisure, et cetera. And I'm sure the same is for their sales distribution centers.

Before, there was a change in leadership at our branded competitor down the street. Last year, we lost 4 of our top salespeople in the New York market to that competitor. And within 90 days, 3 of those individuals came back. So going back and forth is not unusual.

What I'd say is a little bit different about 2026 is you do have someone who worked at one of the acquisitions that -- one of our acquisitions now as a senior leader at that competitor. So I'd say it's probably more robust. These things tend to have a way of playing out over 6 to 18 months. So I think we're halfway through it.

Are we sitting by and just letting things happen? Absolutely not. It's not unusual for us to change comp plans on a regular basis. But in situations like this, we'll obviously take action where it's merited.

Okay. Okay. Great. And then maybe taking a step back. For guidance this year, not dependent on any one specific factor, but what hinges the top end versus the bottom end of your top line implied guidance, just sort of normal close rate variability? Or would you say you've built in cushion for other factors?

I'd say it's normal close rate variability.

Okay. That's helpful. Maybe moving on to HGV Max. You mentioned that earlier in your comments. One of the headwinds -- and this is well known for everyone, and '26 is the lapping of the rollout of HGV Max. But I do want to understand the mix dynamics of sort of lapping that. And is it really more selling less Max or more about you selling less repeat guests and more new owner? And is that really one of the same things? So maybe you could break that out for us.

Yes. No, absolutely. So HGV Max, I think an important thing to take into consideration is the way we rolled it out under the Bluegreen acquisition and to contrast with how we rolled it out under the Diamond acquisition.

So Diamond was the first acquisition the company had made in its 30-year history. And the process was a little bit more systematic, a little bit more methodical in the sense that as we rebranded sales centers, they were done not necessarily one at a time, but throughout the course of a 12- to 15-month period.

Part of that is a function of us wanting to get things right, part of it is a function of Hilton. Obviously, we use Hilton's name under our license agreement. They were approving each sales center as we were rebranding it. And also, a function of what Diamond was. Through the culmination of multiple roll-ups, there was a lack of consistency across their sales centers. So we also wanted to make it more organic in nature.

Now contrast that with Bluegreen. And given the result of our sales rebranding of Diamond, Hilton was comfortable with us rebranding all sales centers on day 1 of the HGV Max launch. So it was more of a big bang, if you will. So from that standpoint, I think it really emphasizes what the comp comparison is. And it's really close rate associated with existing owners on the Bluegreen side where you see most of the pressure.

Now that being said, HGV Max is still selling extremely well. Today, that is all we sell. If you come into any of our sales centers and you do not own and you're a new buyer, you will be sold HGV Max. And if you're an existing owner, you will be sold HGV Max.

The other thing to take into consider is HGV Max is not a membership that you buy online. You do not log on to hgv.com and buy HGV Max. It is a process. You go through a tour, your average transaction price is equivalent of an upgrade, so circa $25,000 and -- but it is selling well.

To date, north of 20% of the existing Bluegreen owner base has upgraded into HGV Max. And when you contrast that compared to HGV and Diamond, they're well north of 40%. Will we ever get 100% of everyone? No. High watermark is probably about 2/3. But it is a multiyear process, and I think we've got a good trajectory on that front.

Historically, the Hilton relationship has been the company. It's one of the company's greatest advantages, and we've written about that. Increasingly, you've also discussed Bass Pro a lot. You have airline partnerships, other distribution channels you've mentioned. And so now you have a range of channels, though I think your audience is probably most familiar with Hilton.

Can you just paint a picture for us, sort of after all these deals, how you profile your owner base? It seems like from this conversation that you kind of think about them in different buckets, but I want to understand if there's starkly different behavior across these different cohorts or if all these customers are generally more similar than different? And if your longer-term vision slowly sort of migrates them toward a similar operating field?

I think when you look at the owner base, there is a segregation today more so than there was in the past, but it's really driven off of the individual consumer themselves. Not necessarily the -- to some extent, the lead source, but predominantly, it's driven by net worth and household income.

Today, we provide a product that is really a true aspirational product. You have Hilton Vacation Club, which is your entry-level product, your core product being Hilton Grand Vacations and Hilton Club being your luxury level product. Once -- regardless of the lead source, once you're into the system, we are trying to encapsulate you in the Hilton family and get you to move up that chain scale as appropriate.

Will you act different? Absolutely. And again, it's driven by individual demographics more so than anything else. But our goal is to get everyone to -- and I'm sure -- I don't know if anyone from Hilton today is here today, but I'm sure they'd love for me to say this, but our goal is to get them to become a Hilton Honors member. Our goal is for them to open a Hilton American Express Card. And our primary goal is to deliver an amazing vacation experience for them and make them a long-time member of our system.

Okay. Ultimate Access is a program that's been running for many years now. You inherited that program from your acquisition of Diamond. It feels like it is a powerful program, and we -- and one of your peers is launching a similar program from scratch today. Where is that program in its life cycle for you? Is there more value to be built or mined from expanding that? And what are the economics beyond that program?

Definitely more runway in that program. We'll start with the economics. If you were to look at VPGs of a standard owner coming through the door who is not involved in Ultimate Access, they can be anywhere from 20% to 100% less than someone involved in Ultimate Access.

So while the Ultimate Access program does come at a cost -- and I've already talked about us hosting an LPGA event. We also sponsor an F1 event. We also host bespoke concerts. There is a cost associated with that, but it's more than offset by higher VPGs.

Have we fully scaled that out yet? No, I don't think so. Predominantly today, it is an existing owner program. Is there an opportunity for new buyers to participate in that for us to leverage some of the fixed costs associated with Ultimate Access? I think the answer is yes. It's got to be done with balance. It's got to be done intentionally, making sure that if it is offered to new buyers, it's -- those that fall into a high propensity to buy with us, we do not want to restrict owner access of a potentially lower close rate individual. So -- but we've enhanced it since we acquired Diamond, and we will continue to enhance it as we go forward.

Okay. You mentioned earlier, some numbers around inventory spend. A few years ago, the discussion around inventory was largely securing enough supply to drive growth. And you took us back to 2018, when it was a totally different company from that respect.

Now the focus is inventory optimization, it seems. So as you become much more large -- much larger and become more mature, what is the philosophy around the right level of inventory spend to support the growth that you want? And what is the mix of that inventory spend ideally in terms of types?

So when you think about our inventory spend today, it is definitely dramatically different than it was in 2019. And what I mean by that is it is very much focused on reacquired inventory more so than it used to be. It's not to say that we will not have new build projects. It's not to say that we're not looking for interesting dots on the map, so to speak, for our owners to experience or have the opportunity to experience new things.

If you dig through our Qs and Ks, which I'm sure you've done, you'll see we recently disclosed a project in Nashville. But I think this underscores our philosophy, especially even on new builds. The Nashville project is structured as such where we can take delivery of that project as early as 2028, or we can defer taking delivery and importantly, paying for the product until 2033. So really trying to match cash outflows with cash inflows, i.e., supply and demand, basic economics.

That being said, with the trust product, we are -- and the level of inventory we have today, we are also extremely focused on reacquired inventory that we can purchase for amounts that are, in some cases, well below 5% of retail value. So from an inventory spend level, not only is it coming down from the peak levels of inventory spend of that $400 million mark to circa $300 million mark, roughly 1/3 of that, if not more, will be focused on reacquired inventory. Where if you go back to 2018-2019, it was sub-$25 million.

Okay. Let's talk a little bit about Elara. That transaction is clearly more than just the incremental EBITDA benefit that you get by owning it. Those owners largely operated within a separate ecosystem. Now they can upgrade to the broader HGV platform, and then existing HGV members can use Elara. So how should we think about the strategic value of such -- of that acquisition in terms of increasing the connectivity across the system?

I think it's fairly robust. I mean, when you're talking about 30,000 owners having access to the remainder of the system and being able to upgrade out of Elara, it's pretty powerful.

And meaningfully so, the Elara property also, just given its breadth and scale, also operates extremely efficiently. So from a maintenance fee perspective, it is also very desirable by existing owners and other projects who are looking to upgrade into a project to maximize the point maintenance fee ratio. So it's a relatively low maintenance fee that provides an opportunity for individuals to upgrade into Elara.

So you get -- to your point, it's both sides of the coin. So I think it's a very interesting opportunity. And the fact that we were able to acquire it from Blackstone for net cash outflow of about $45 million, I think it's going to be a very good investment for us. It's also -- despite being an acquisition, it's deleveraging in the first year and EBITDA positive in the first year. So we're very pleased with that.

Remind us what the mix of your customer in the U.S. is in terms of drive-to versus fly-to? Do you have that data? And with all the volatility between gas prices and airfare, have you seen any shifts in behavior differential between those two subsets?

No material shift. I mean, the majority of our destinations -- and I may have alluded to this earlier, well in excess of 75% of our owners live within a 4-hour drive. So having those drive-to markets, that transformation that really came with the Diamond acquisition that was expanded with the Bluegreen acquisition, I think, really behooves us in a dynamic that we see ourselves in today.

I'd say from a travel perspective, the one notable item -- and I wouldn't put this associated with the price of fuel. I think this has been a detriment to us for some time now, and it's more yen-based than anything else. But the new buyer construct in Japan traveling to Hawaii is still not back to where it was pre-COVID. But again, I think that's more yen-based than anything else. Hawaii seems to be holding up well.

Would you correlate that Japanese inbound with currency movements? I know that was one thing we were watching for a couple of years there. We haven't heard much about it recently. What's the last 12 months look like in terms of Japanese inbound?

Japanese inbound, over the last 12 months, relatively -- from our perspective, relatively consistent. But that means no real improvement.

Okay. Got it. Okay. I want to talk about capital allocation. If you could run through the way that you think about capital allocation and especially, M&A. And we've seen some M&A in timeshare this year, smaller stuff than what you guys are used to. You guys did some very large deals.

Where is your appetite now for M&A? Where does it slot in, in your capital allocation priorities, if at all? And what kind of deals over the next handful of years would be interesting for you at this point in the company's life cycle?

Sure. When we think about capital allocation, we basically try to bucket it into three different areas: one, M&A; two, organic growth, which would be, in our case, primarily inventory spend; and then obviously, return of capital to shareholders.

From a traditional -- and when you look at M&A, really bifurcated into two segments. You have the Elara type of M&A, and that's where we have a partner that is the developer on a project that we are selling on their behalf. It behooves us to actually acquire the tail of those type of investments at some point. I wouldn't say that's traditional M&A, but that's exactly what Elara was.

Are there other opportunities with us like that? There are. We have a partner that operates out of South Carolina that is a developer on a number of projects in Myrtle Beach. Would there be an opportunity there? Maybe at some point, but not in the next handful of years. Then you have your more traditional M&A, what we've done in the past, Bluegreen, Diamond, et cetera.

When you think about the large opportunities that are out there or the large players that are out there, nothing really fits the bill of what we're looking to do. I mean, if you look at Westgate, if you look at Holiday Inn, we have -- I hate to say 0, but I will say 0 appetite from that standpoint. And even on the regional player basis, I think we're in a position now from an inventory standpoint that we do not need any additional robust increase in our inventory base. So we're happy where we're at. I would say, very limited, if any, and that's just me hedging appetite for M&A.

So you've given us a longer-term algorithm to think about for the business. You've given us a summary of longer-term free cash flow generation and your priorities for capital uses. If you want to -- if you could leave the audience with sort of one takeaway about HGV -- I already said the underappreciated question, so I can't say that again. But what would you want to leave the audience with regarding the company's outlook and proposition for owning shares here?

There's a myriad of things, Brandt.

We have got a couple of minutes, I guess.

Yes. So what I would say in timeshare in general, what we hear consistently these days is the K-shaped economy. And what I think is lost on individuals -- and this will rapidly translate into a Hilton Grand Vacations-specific comment.

But I think what is lost on individuals is the way you can modulate amongst our product, right? Our product, once you are our owner, if you're having an amazing year, you can fly to Hawaii, you can do every excursion under the sun and spend $50,000 on a family-based vacation. At the same time, if you're not having a good year and you're already [indiscernible] Myrtle Beach, you can use the kitchen for every meal, you can sit by the pool, sit on the beach and have a very economical vacation, all by -- all at the same time without having to do any transaction with us. That is a user that has got full utility of the system.

And I can't think of another product that allows you to do that. If you go this year and you're having a great year and you stay at the Four Seasons and next year, you're not having a great year, the Four Seasons is not going to change their rate for you. You can change the product that you have to buy, but it's just not the same.

Now when it comes to Hilton Grand Vacations, the -- one of the outstanding benefits that we have is our partnership with Hilton. It's by far our most valuable partnership and the Hilton name. There is no one who protects the brand name more than Chris Nassetta than ourselves. We take that very seriously. That gives a level of trust to the consumer, and it drives a high propensity to buy us over regional players for sure.

Outside of that, when you think from an investment standpoint, Hilton Grand Vacations is at a very interesting crossroads at this front. We've talked about it already, but it's worth repeating. We've got a declining inventory spend level from $375 million to $300 million. We've got a declining integration spend level from $150 million to $75 million just over the next year.

That, coupled with the variability of the introduction of HGV Max being more normalized and being more algorithmic, that more consistent growth in future years, I think, drives a very compelling story, especially with the backdrop of a very robust share repurchase program that's already returned in excess of $2 billion to our shareholders. And it's very programmatic spending, with us spending close to $600 million on share repurchases annually today. I think that sums it up.

Excellent. Well done. Thank you, Dan, for being here.

Thanks for the time.

Appreciate it.

Good morning, and welcome to the Hilton Grand Vacations Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Hilton Grand Vacations Second Quarter 2026 Earnings Call. Our discussion 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. 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.

Our reported results for all periods reflect accounting 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 these revenues and expenses until the period when construction is completed. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals.

Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to review these slides on our website at investors.hgv.com.

On Slide 2 of these materials, you can see the deferral adjusted metrics we'll refer to on the call. Reported results for this quarter do not reflect $54 million of net contract sales deferrals under ASC 606, which had the effect of reducing reported GAAP revenue and were related to presales of our Kahaku project. Also on Slide 2, we deferred net $26 million of direct expenses associated with those revenues. Adjusting for both of these items would increase the adjusted EBITDA to shareholders reported in our press release by a net $28 million to $293 million. With that, let me turn the call over to our CEO, Mark Wang. Mark?

Good morning, everyone, and welcome to our second quarter earnings call. Our results for the quarter highlighted the strength of our business in several key areas. We generated 239,000 tours in the quarter, an increase of 6% versus the prior year, marking our fourth consecutive quarter of consolidated tour growth and demonstrating the continued demand across the platform. We also grew our adjusted EBITDA 5% to $293 million, while expanding our margins to 23%, underscoring the resiliency of our operating model, along with the effectiveness of our cost efficiency programs. That said, our contract sales declined versus the prior year, reflecting several factors. First, we observed faster than predicted VPG moderation at Bluegreen as we lapped the difficult comparisons from the successful launch period of HGV Max. Second, sales execution fell short of our expectation, which weighed on overall sales productivity. This was most pronounced in the back half of the quarter at a couple of our higher volume locations.

Third, results reflected a higher mix of trust transactions and new buyer sales during the quarter. While these generally carry a lower average VPG than owner sales, they're an important driver to long-term embedded value. As a result, we're taking decisive action to improve our sales execution as we move through the balance of the year in order to better capitalize on the strong tour flow we're generating. While these initiatives have only recently rolled out, we believe that they'll help to drive improved execution in the back half.

Importantly, we don't believe this softness was demand related. Occupancy levels remained healthy with on-the-book arrivals in the back half remaining ahead of prior year, tour growth across our footprint has been strong for both owners and new buyers, and we've seen sustained growth of HGV Max from new and existing members.

Overall, the fundamentals of the business remain solid. Performance at our legacy business remains steady. We're generating strong tour flow, maintaining healthy profitability, and we continue to see significant long-term value creation from the Bluegreen integration and ongoing evolution of Max.

Given the underlying strength of the business and confidence in the actions we're taking, we're maintaining our full year EBITDA guidance, and we remain committed to driving improved sales productivity and delivering long-term cash flow and value creation to our shareholders. Beyond our near-term efforts to drive sales productivity, we're focused on executing strategic priorities that support our long-term algorithm of sustainable growth, margin expansion and strong free cash flow generation. We also remain successful at attracting new buyers to our sales centers.

New buyer tours increased at a high single-digit rate compared to the prior year, maintaining the strong pace we've seen since the last fall. And we also produced high single-digit new buyer transaction growth, which remains critical to growing our embedded value and supporting the long-term health of the business. This success was supported by the investments we made across our marketing platform over the past year, along with the strength of our lead generation channels. We also continue to focus on enhancing lifetime value. We've seen the benefits of the investments we made in HGV Max and our broader member ecosystem, which are helping to deepen member engagement and member satisfaction by reinforcing the value proposition of ownership.

Nearly 300,000 or 40% of our base are Max members today, growing 24% versus the prior year. As it relates to innovation, we continue to invest in our industry-leading experience platform. HGV Ultimate Access is operating at scale, hosting over 137,000 guests at our events this past year and generating strong contract sales. Given the positive response from our members in both satisfaction scores and upgrade sales, we'll keep our foot firmly on the gas to grow and expand on it become a core component of our offering. And it was another successful quarter of programming for HGV Ultimate Access. We hosted our members at a series of events at World Cup matches in New York, Miami and L.A. LPGA Hall of Famer and Legend Annika Sorenstam joined our events at the American Century Open to provide one-on-one coaching tips to our members at the practice range, and we expanded our popular concert series with artists such as Ashley Cooke, Tucker Wetmore, and Don Felder of the Eagles. In addition, we also recently launched new tools to provide members with greater flexibility and easier access to HGV Ultimate Access, allowing them to further tailor their vacation plans around our industry-leading portfolio of experiences.

Overall, Ultimate Access has grown to become a central pillar of our strategy as a vacation experience company, adding to the member value proposition and strengthening our engagement with the HGV brand. Finally, operational excellence remains at the core of how we manage our business. The teams did an excellent job managing costs, meeting our adjusted EBITDA targets through strong margin expansion and delivering robust free cash flow. And we used that cash flow to maintain our commitment to returning excess capital to our shareholders, repurchasing another 150 million of shares during the quarter. Year-to-date, we purchased more than 300 million of shares, representing over 10% of our float entering the year. We also continue to execute our inventory optimization strategy, closing on the agreement we discussed last quarter to dispose of a group of noncore assets, removing them from our system. This transaction fits into our overall optimization strategy, providing us with an avenue to recycle capital, improve portfolio quality, reduce inventory carrying costs and enhancing long-term returns.

In summary, our confidence in the long-term value creation algorithm of the business remains unchanged. We're taking targeted actions to improve our sales execution while continuing to build on the strength of our business, enhance our value proposition and drive operating efficiencies. Collectively, these initiatives support our goals of delivering sustainable growth, expanding margins and generating strong free cash flow to create long-term shareholder value. With that, I'll turn it to Dan for more details on the numbers. Dan?

Thank you, Mark, and good morning, everyone. As Mark mentioned, we delivered EBITDA in line with our target, aided by a disciplined cost focus and the benefits of our ongoing efficiency initiatives. Although sales didn't meet our expectations, we're already taking corrective actions to improve our execution. More broadly, we continue to strategically invest in our products and our people while maintaining a focus on cost discipline to generate strong cash flow and drive overall profitability, which we demonstrated this quarter. As we look to the second half of 2026, we remain confident in our ability to achieve our full year EBITDA and adjusted free cash flow outlook.

Turning to our results for the quarter. Total revenue before cost reimbursements grew 3% to $1.3 billion. Adjusted EBITDA to shareholders grew 5% to $293 million, with margins, excluding reimbursements of 23%, up 40 basis points over the prior year. Within our real estate business, contract sales of $810 million were down 3% from the prior year. The decline was primarily due to the moderation of Bluegreen's elevated VPGs due to the successful launch of HGV Max in the prior year, along with the execution challenges and mix shifts Mark mentioned.

New buyer contract sales represented 28% of total volume, up 70 basis points against the prior period. This was supported by another quarter of high single-digit transaction growth, reflecting tour strength aided by last year's marketing investment, along with stable close rates as compared to the prior period. Tours in the period grew 6% to 239,000 with both our owner and new buyer channels contributing to the growth. VPG was down 9% to approximately $3,400 in the quarter, reflecting the factors that I mentioned earlier. Cost of product in the period was 10%, consistent with the first quarter and down 130 basis points from the prior year. The higher mix of trust sales was the primary driver of the cost of product performance, which helped offset the lower VPG typically associated with the trust transactions.

Real estate sales and marketing expense for the quarter was $397 million or 49% of contract sales, 40 basis points lower than the prior year. Real estate profit for the quarter grew 7% to $173 million with margins expanding 220 basis points to 28%, demonstrating the resilience of the model along with the benefits of our focus on cost discipline and operating efficiency. In our financing business, revenue was $144 million and profit was $86 million. Excluding the amortization items associated with our acquired receivables portfolio, financing margins were 62%, up 100 basis points from the prior year. Looking at our portfolio metrics, our weighted average interest rate for originated loans was 14.4%. Combined gross receivables for the quarter were $5 billion. Our total allowance for bad debt was $1.4 billion on that $5 billion receivable balance or 28% of the portfolio.

The portfolio remains in great shape overall. As of last week, our 31- to 60-day delinquency trends remained stable for all 3 portfolios, notably at Bluegreen, which continues to improve, driven by our focus on increased equity at point of sale implemented last year.

You will see when we file our 10-Q an abbreviated delinquency table, making it easier to see on a combined basis, 31- to 90-day delinquencies as a percent of current were down 9 basis points from year-end. Our provision in the second quarter was 17% of owned contract sales, which increased versus the prior year, but remained within our targeted mid-teen range.

The increase was related to a combination of higher financing propensity, along with a higher mix of trust and new buyer sales in the quarter, which are provisioned higher than needed or owned sales. That said, we remain confident in our mid-teens provision expectation for the year and expect the back half to be marginally better as higher equity loans begin to comprise a higher proportion of our loan pool. And as I mentioned, our early-stage delinquency remains stable as does the performance of our portfolio overall. In our resort and club business, our consolidated member count was 722,000 as we continue to add new HGV Max members balanced by additional inventory recapture.

Revenue grew 3% to $189 million for the quarter and profit was $128 million with margins of 68%. Expense remains slightly elevated in our club business due to the timing of program-related headcount additions, but we expect margins to approach last year's levels as we exit the year. Rental and ancillary revenues were up 8% versus the prior year to $210 million. Revenue growth for the quarter was driven by growth in RevPAR versus the prior year, along with increased room nights. Developer maintenance fees continue to remain the largest driver of our rental and ancillary business profitability trends and were responsible for the $10 million loss in the period.

Reducing the burden of those fees remain a key focus for us, and I'm happy to announce that we closed the disposition transaction that we referenced on our prior call on June 30. Owing to the timing of maintenance fee payments, most of which were paid at the start of the year, we continue to expect the contribution to EBITDA this year will be minimal. But we continue to expect that on a run rate basis, it will reduce the fee burden on our EBITDA by $10 million to $12 million, all else being equal. As a result of the transaction, we recorded a noncash loss of $48 million associated with the disposition.

As a reminder, the third party that stepped into our future obligations as manager and developer is also actively marketing these properties for sale, and we will participate in the proceeds from any such transaction.

Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $2 million, reflecting the Elara transaction. License fees were $58 million and EBITDA attributable to noncontrolling interest was $4 million.

Corporate G&A was $40 million, remains consistent at 3% of pre-reimbursement revenue. Our adjusted free cash flow in the quarter was $180 million, a conversion rate from EBITDA of 61%. This includes inventory spend of $58 million in the quarter. As I mentioned earlier, we continue to expect our conversion rate for this year will remain in the lower half of our long-term target range of 55% to 65%.

During the quarter, the company repurchased 3.1 million shares of common stock for $150 million. From July 1 through July 23, we repurchased an additional 488,000 shares for $25 million. And as of July 23, we had $103 million of remaining availability under our current share repurchase plan. We remain committed to capital returns as a primary use of our free cash flow in 2026, and we remain on track to continue repurchasing our shares at a pace of approximately $150 million per quarter, subject to the repurchase activity not increasing our net leverage for the full year.

Turning now to our outlook. We are reiterating our 2026 guidance of adjusted EBITDA before deferrals to be between $1.225 billion and $1.265 billion. We expect the initiatives put in place to improve our execution as we move through the balance of the year, allowing us to make up some of the gap on sales. In addition, our continued disciplined approach to costs as well as a focus on efficiencies will support margins and enables us to remain within our guidance range.

Regarding sales, we expect to growth for the year to be positive low to mid-single digits, which remains unchanged from our prior view. In Q3 specifically, we expect to see low single-digit to growth. In light of the second quarter's results, we now expect VPG for the year to decline in the low to mid-single digits versus our prior expectation of flat to down slightly. In Q3, we expect VPG to decline in the high single digits. As a result, we now believe that contract sales for the year will be flat to down slightly versus the prior year expectation for a slight gain. Q3 specifically, we expect contract sales to be down in the mid-single digits.

Moving to our liquidity. As of June 30, our liquidity position was $735 million, consisting of $272 million of unrestricted cash and $463 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.9 billion and a nonrecourse debt balance of approximately $2.9 billion. At quarter end, we had $755 million of remaining capacity in our $1 billion warehouse facility. We also had $1.3 billion of notes that were current on payments but unsecuritized. Of that figure, approximately $719 million could be monetized through a combination of warehouse borrowing and securitization. We anticipate another $372 million will become available following certain customary milestones such as first payment, [ gaming ] and recording. Turning to our credit metrics. At the end of the quarter, the company's total net leverage on a pro forma TTM basis was 3.8x, which was consistent with year-end levels and down 0.1 turns compared to Q1. We will now turn the call over to the operator and look forward to your questions. Operator?

And our first question today will come from Patrick Scholes with Truist Securities.

Question on the loan loss provision. As I calculated, it looks like it jumped up about 400 basis points year-over-year. Am I thinking about that apples-to-apples correctly? And can you help me bridge why that increase? And then related to that, are you still thinking mid-teens for the full year for the provision?

Patrick, your numbers are accurate. So our provision for the quarter was roughly 17%, which is definitely at the high end of our mid-teens range. But nearly actually a little bit just at a point is associated with a higher propensity to borrow that we saw with the buyers coming through the door as well as a mix to a higher percent of product being sold under the trust product. As we've probably spoken about before, I'm sure we have, when we look at the 3 products that we sell, Deed has the lowest provision and both Bluegreen and Diamond have a substantially higher provision. You benefit from a lower cost of product. But from a provision perspective, it is higher. So that drove a good piece of the increase.

Now that is not -- the increase wasn't driven by a deterioration in the portfolio itself. If you -- I talked about delinquencies in my prepared remarks, but just to underscore that, if you look at the 3 portfolios, the HGV portfolio held steady year-over-year as well as sequentially. And then both Diamond and Bluegreen improved materially both year-over-year as well as sequentially, almost 30 basis points year-over-year and then sequentially north of 40 and in the Bluegreen case, north of 50 basis points. was driven by the underwriting changes that we made last year, which are really coming to fruition with down payments on Bluegreen in particular, being 800 basis points higher than they were just a year ago.

We expect that trend to continue. So despite the higher propensity, which is obviously a good thing, more people borrowing money from us. Unfortunately, you take the provision upfront. But even with a higher propensity held steady for the balance of the year, we would see bad debt provision year-over-year for the back half improve, which would keep us healthily in that mid-teens range.

Okay. And then one last question here regarding the VPG, I believe -- I'm sorry, juggling a number of earnings calls this morning. I believe the VPG was pressured specifically by the Bluegreen portfolio. Can you just talk a little bit more color on that? And then when I think about sort of your acquisitions and your legacy portfolio that VPG -- I'm sorry, the customer financial demographic is probably lowest for Bluegreen. Are you seeing any differences in performance between various financial demographics between the acquired portfolio and the legacy...

Yes. Patrick, this is Mark. So look, on the VPG headwinds, a number of things there. We -- Dan talked about the mix, and I think I mentioned in prepared remarks, right, and some of the execution issues. But the performance for legacy business was solid. Where we saw the headwinds was with Bluegreen. And it's important to note that the miss was not related to consumer demand. Tour flow for Bluegreen was up 10%. New buyer transactions were up 16% to prior year for Bluegreen. And the Max member count more than doubled versus the prior year to nearly 22,000. So the real pressure came from really 2 things that were Bluegreen related, the owner VPGs and the execution challenges at a handful of the sites. And I'll talk about both of those here a little bit. As it relates to the owner VPGs, as you recall, last year, we had a very successful launch of Max to Bluegreen base. If you look at VPGs, they were up 45% in Q2 of '25.

So we're seeing a moderation of a very elevated launch period. So that was one. And that said, the owner VPGs even as they came back and moderated, the VPGs for Bluegreen were the second highest in the history of the company. So as it relates to execution, in particular, the underperformance was due to execution challenges to a handful of the Bluegreen operations and primarily in Orlando and Myrtle Beach. So anyways, we've taken decisive actions toward the end of the quarter. We put new leadership in place. We've identified the issues, and we're making and working to rectify the performance there. So...

And our next question today will come from Ben Chaiken with Mizuho Securities.

Maybe just double-clicking on the VPG side again, just so kind of I'm clear. You've got 2 buckets. It sounds like owner VPG and execution. I guess on the execution side, understanding that you've identified kind of Orlando and Myrtle Beach, but what were the actual issues? Is this like a sales personnel dynamic? Maybe just if you don't mind, like give us a tad bit more color on what the issue was and kind of what you have fixed? And then on the comp dynamic, totally appreciate that it's a difficult comp. I think that makes sense. It's also consistent with kind of the message you've had before. But I guess my question would be like you probably knew that it was a hard comp. So maybe what changed? Like you mentioned that last year, I think you said VPGs were up 45% for that customer. You knew that going in. So I'm just curious maybe what was slightly different this quarter versus, versus the expectation?

Yes. So as I mentioned, the primary markets were Orlando and Myrtle Beach, and those are bigger markets. And then when you remove the noise on the comps, we had a number of Bluegreen markets that performed well. So in both of the impacted markets, occupancy and tour flow were up. So really, when you looked at it, the divergence from what you're seeing from the demand that's being created in those markets from the rest really gives us confidence that this was an execution issue in a couple of those bigger markets. Now it's worth noting that we have large HCV operations in both Orlando and Myrtle Beach, and we saw positive year-over-year growth. So which again points to the execution. It's not a market issue or an integration issue. It really was a leadership issue.

And we've identified the issue. We've addressed the situation with the leadership changes. We've got a deep bench here, and we're very confident that the changes that we've made from a leadership standpoint, the added recruiting investments we've made and training investments we've made in those markets are already making a difference. And we expect that the performance will improve as we move through the third quarter and get back up to the level of expectation that we expect from that -- from those sales distribution centers by Q4.

Okay. All right. That's helpful. And then just on the asset streamlining, I guess, do you expect to close -- it sounds like you closed the transaction. Do you anticipate there being more facilities that you streamline? And then part 2 of the question is, I think you mentioned some proceeds from the initial batch. How do I -- even just like mental -- how do I conceptualize what your portion of the proceeds would be? Is it just the -- would it be the unsold VOI units? Or is it some portion of that number? How do I think about your economics even just kind of like some type of mental framework?

Ben, I'll take the last part of your question first. So when you think about the existing deal that we recently closed, the third party that took stepped into our developer role, our management of the property role, they're also actively selling those -- actively marketing those properties for sale. So upon disposition, we will take a significant portion of those proceeds, but it's a contractual arrangement with that third party where they also share. And then to the extent that there are remaining owners in those properties, they will also benefit to the extent that they own. It's a waterfall. I can't tell you exactly what those properties will sell for. We're treating this as a standard gain contingency. So as things happen, we'll obviously address it on future calls.

With regards to future dispositions, yes, there's definitely an opportunity. I think we talked about this last time. The process of identifying properties and working through a structure does take time. So we do not anticipate identifying or announcing is probably a better word, announcing any future deals in 2026. But as things come to fruition, we'll obviously speak on future calls.

And next, we'll move to [ Trey Bowers ] with Wells Fargo.

This is Nick on for Trey. I guess as we're looking at the VPG miss this quarter, I guess going behind the mechanics of it, there's obviously the closeout rates and then the average transaction size. Which part of that missed your expectations? I understand there's a leadership issue, but with those 2 components, which came in light?

Yes. So look, we had higher trust sales, which carries a lower ATP and VPG than traditional data transactions. So which, in our case, is very positive as it reflects the strength of the product because we have a good supply of trust inventory. We also saw a higher mix in new buyer transactions, which also puts pressure on ATP. And when you look at your mix and transaction mix being higher, it has a lower VPG too.

So really, the pressure on VPG was from a mix standpoint, moving to more trust and moving to more new buyer transactions. But this puts short-term pressure but has attractive long-term value for us because we're bringing in new members into the MAX ecosystem. We're expanding our upgrade opportunities and recurring revenue streams. And then we've talked about the comp already on the Bluegreen members. So -- and we talked about the execution issues. So those 4 things really combined are what drove the VPG pressure in the quarter.

And next, we'll hear from Stephen Grambling with Morgan Stanley.

Sorry if I missed this on the call, but 2 clarifying questions. First, on the you cited the efficiencies that you're hoping to get in the second half. Is that entirely related to some of the property closures? Are there other things that you're doing? And it looks like the cost of product is where maybe we saw the biggest benefit in the quarter. Any way to -- I don't know maybe -- again, I may have missed this on the call, but did you quantify how much of the closures hit in the quarter and how to think about the cost of VOI going forward?

So there's a lot in there. So let me just try to respond. So when you think about the dispositions, they closed on June 30. So those properties are no longer in the mix, either from an inventory standpoint, management fees obviously starts to go away. And then to a certain extent, it's a little tricky when it comes to maintenance fees because maintenance fees are paid at the beginning of the year.

So there's some marginal benefit in the back half of the year associated with that, not to the extent of the normalized run rate that you'll see with the dispositions that we quantified last quarter is 10% to 12% on an annualized basis. It's not pro rata this year. It's, like I said, marginal. That being said, when you think about the back half of the year, we've talked about the VPG compression that we saw in the latter part of Q2, we expect that to continue into Q3. So when you think about the back half, how is that going to play out, how do we maintain guidance? It's really driven by cost discipline and some of the efforts that we've made in the prior year, in particular, on the bad debt side, changing the underwriting. We now have a full year's worth of data in 6 additional months versus our original guidance for the year. So we feel very confident that we'll see the provision come down in the back half of the year.

To your point, cost of product is also a benefit. For the first 2 quarters, we were right at just slightly less than 10%. We think it will be a little bit higher than that in the back half of the year, but still benefiting from a higher trust mix than originally anticipated, and that will also drive COP year-over-year to be down. Then in addition to that, we see some -- and I kind of hit on this with the dispositions and just from a rental perspective. Just from a performance perspective, that's more marginal than anything else. Now with the pressures on VPG in Q3 because like I said, some of these actions that we've taken do take time to roll into place. So we would expect SG&A to be a little pressure in Q3 and then start to normalize in Q4. But hopefully, that gives you some insight to how we see the year playing out.

Yes. That's helpful. One other one from me. Have you seen any change in the effectively attrition rate of your owners, even as you think about those who have already paid down their receivable balance?

Sorry, say that one more time, Grambling. It was attrition rate associated with owners who have paid down the balance.

Yes. So I think, Stephen, we spoke previously about recapture becoming a bigger piece of our inventory sourcing strategy, especially with these acquisitions. And so as the system matures, you have people that are traveling less and leaving the system. And it's giving us an opportunity to recapture inventory. So it's kind of a natural part of the system and evolution.

For HGV, it wasn't as big a part of the system evolution. But with the acquired companies, they are more mature than us. And so we are seeing -- and when you look at absolute number, you're seeing a little bit more attrition. As a percentage, it is about what you would expect. And -- but it's one of the advantages of the timeshare business model, right? It's good COP. It's good for long-term free cash flow since we don't have to go rebuild inventory. So the opportunity to recycle inventory and create additional full lifetime value with new customers is really strong. So...

Yes. No, absolutely. And that's a good point, Mark. That's also contributing some of the benefit that we see to COP in the back half of the year, the recapture from the inventory that was driven by the M&A transaction that we obviously completed and.

[Operator Instructions]

Next, we'll move to Alex [ Hano ] with Jefferies.

Maybe just switching gears here, if we could revisit the Elara acquisition and talk about your expectations, what you put out there for this year as well as some of the earnings benefit in the medium to long term?

Yes. No, absolutely. So we closed on Elara as we talked last time on April 30, and we anticipated that, that would be a benefit to EBITDA in Q3 of about $3 million and for the full year this year, about $20 million on a run rate basis. Well, run rate is a loose term because it is a finite cash flow stream. But for next year, we expect it on an annualized basis for that $20 million to accelerate to closer to between $25 million and $30 million. All that being said, the performance we've seen since close has been strong. It's been in line, slightly better than our expectations.

For the full year, I would tell you that would account for a shift from fee-for-service to own contract sales of close to 3% this year, but we're right on track to be in line, perhaps slightly ahead of that performance that we quoted last time. So we've seen good upgrades into Elara because of advantageous maintenance fees and solid upgrades out of Elara, which is all part of the thesis.

And our next question we will hear from Chris Woronka with Deutsche Bank.

So you guys have spent a lot of time kind of covering some of the issues in Orlando and I think Myrtle Beach that you called out. I'm curious as to whether any of those relate to just kind of turnover in staffing or poaching from other timeshare companies. I think we've heard about some movement within the industry back and forth. And maybe you could just give us a kind of bigger state of the union update on how you see staffing at some of these key sales centers and whether turnover is running better or worse than you would hope.

Yes. So I think, first of all, as I said in prepared remarks, and I think in some of my comments on the Q&A, demand remains healthy, right? And Q2 is really more of an operational, not a structural issue here for us. As it relates to talent, competition for talent has always been part of the industry and people move between companies, and that's been happening for decades. And it's always encouraging when we see talent develop. And so I would say talent management is part of the nature of the business rather than an underlying risk.

And look, our sales and marketing organization is one of our greatest competitive advantages, and they introduce more customers to our brand than any company in our space, and they're committed to teamwork, innovation and importantly, integrity. And they continue to lead the industry and shape the future. So I feel really good about the team we have. We had some execution misses in a couple of our markets. As we've talked about, we've identified it, we've taken action, and we're already starting to see improvement.

Okay. Maybe just as a follow-up. I think we've seen Hilton recently talk about a couple of higher profile conversions on the, I guess, luxury lifestyle side. Do you think that, that to any degree, helps you with kind of the way that your customer flow might work? I mean, is that -- if they're going to, I guess, -- I don't want to use the word accelerate, but accelerate kind of what they might do on the luxury lifestyle side, do you guys plan for any kind of benefit that, that might roll through to you through the loyalty program and other kind of connections you have?

Yes. Well, our brand and relationship with Hilton is an incredibly important part of our strategy and our growth, right? And Hilton has consistently delivered and ranked among the top brands -- hotel brands in hospitality, right? And if you look at the -- you look at their nug, you look at the amount of hotels in the system, you look at the span and width of their brands and the way luxury lifestyle and luxury has continued to grow. All of that is beneficial because remember, not only do we have a license for the brand, but we have real deep connection with the customers within Hilton. We have access to the Hilton customer base, and that is an important part of our overall strategy, and it's an important part of how we leverage to become the largest timeshare company in the world. And when you look at our tour flow, we have leveraged that relationship better than any brand out there.

So we appreciate all the great work that Hilton is doing. And as they continue to build a bigger base of brands and properties, they're generating more new customers and those new customers become great opportunities for HGV.

There are no further questions at this time. I would like to turn the floor back to Mark Wang for closing remarks.

All right. Well, thank you again for joining us on the call today. I'd like to say a special thanks to our team members for their incredible work taking care of our members and guests. We look forward to speaking with you on our next call. Have a great day.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Well, this is going to be the last fireside of the day and who better to round it out than Hilton Grand Vacations and President and CFO, Dan Mathewes. So Dan, thanks for doing this.

Thanks for having me. Really appreciate it.

Just from a long-term standpoint, you've articulated an algorithm, people always use algorithm for consistent top line growth, EBITDA growing faster and strong free cash flow conversion. What are some of the major puts and takes to think about within that, as we look at 2026 and the guidance that you've outlined, I think it's 8% at the midpoint after you raised your expectations after 1Q versus the kind of typical algorithm? Or is this -- is 2026, would you say a kind of normal year?

No, 2026 is definitely not a normal year. I think when you roll into '27, that's when we get to a more normalized algorithm. I think when you think about Hilton Grand Vacations, I think it's a very interesting time for us. This year, we're lapping the launch of HGV Max to the Bluegreener -- excuse me, the Bluegreen organization that we launched November 8, 2025.

So relatively tough comps, the first 3 quarters and then returning to growth into Q4 when you think about from a VPG perspective. But also just from an organization standpoint, over the past 5 or 6 years, we've acquired 2 organizations had a very robust inventory spend and coupled with a heavy level of integration work. So when you think about the organization today, the company has almost tripled in size, more stable environment. We're in an environment where the inventory spend is coming down materially from the neighborhood of $400 million to closer to $300 million.

In addition to that, integration spend, which last year was roughly $200 million is coming down to $150 million. Next year will drop to $75 million and then completely disappear. So this return to algorithm as well as a substantial source of cash flow from less investment in both inventory and integration, I think, is pretty meaningful. And I think it's a good time to look at HGV.

Yes, inflection in free cash flow sounds good. What -- when you think outside just the financials, what are some of the differences that you would describe or ascribe to Hilton Grand Vacations versus others in the timeshare industry or even if you look maybe more broadly at the lodging ecosystem?

Sure. Look, I would like to think about it more of the vacation space in general. And when you think about our project -- our product, I think we're uniquely positioned. People constantly or at least in the last year, I mean, the rhetoric about the K-shaped economy has been fairly robust. And our product is uniquely positioned to allow you to modulate between the high arc or the low arc. If it's a great year, you have the ability to fly lay flats all the way to Hawaii, stay in a great resort, go out to eat every night, spend money on every short version you possibly can think of and spend that $40,000 family vacation.

At the same time, if it is not that robust of a year for you and you're an existing owner, drive to Myrtle Beach, you use the kitchen, 90% of our units have kitchens, use the kitchen, have a very economical stay, sit by the swimming pool or the beach, have a great time, and you can do that year after year without changing your ownership whatsoever. So the value proposition and the flexibility and the optionality that our product provides, I think, puts us in a unique perspective within the industry itself, vacation industry itself. Within the industry, I think we're able to capitalize on our ultimate access, our experiential programs that we have out there to really provide a unique offering to our owner base.

So that all sounds good. So we went through the algorithm free cash flow inflection, sitting at the- top of the K-shape we can kind of pivot between different brands. What keeps you up at night? Or what do you think are the general risks or competitive threats that you try to think about facing the business and work around?

So naturally, I mean, I think people think about sales, right? I think as investors, they naturally look what is sales going to do? And I would tell you that our sales force is the best in the industry, and it's amazing what they can produce. When people ask me what keeps me up at night, it's really more tour flow than anything else. Where are those leads going to come from? And we have an amazing partnership with Hilton. The partnership is 100% variable. So what is good for us, it's good for them. So when we come with an idea that will help drive tour flow from that partnership, they are all ears.

We are also looking to expand partnerships. With the acquisition of Bluegreen, we acquired a JV with Bass Pro. We also acquired a sales and marketing agreement with Bass Pro. We're in virtually every Bass Pro store out there. That provides us another touch point with the consumer. This one, not a call transfer program, which is very much akin to what we have at Hilton, but an opportunity to see people face-to-face and sell them a package, which is also very consistent with the program that we run with Hilton.

If you go to a Hilton in a location where we're not located, in some cases, it's locations that we do have product, but you go to the concierge, it's not unlikely that at some point during that conversation after they help you getting a dinner reservation or whatever it might be, that they will attempt to sell you a package. That's because that's a Hilton Grand Vacation employee sitting in a Hilton hotel, driving another touch point.

We have other partnerships that are meaningful, Japanese airlines, Hawaii Airlines through Alaska Airlines now, also Great Wolf, but really expanding the opportunity to drive tour flow, in particular, new buyer tour flow to get more people into the system. That's a real focal point that we've had kind of in our DNA, so to speak.

I think you're a little over 70% existing owners in terms of contract sales currently. What is the right mix? And as you're thinking about that tour flow, should we anticipate that you're going to go after more of these partnerships? Or is it more about monetizing what you have?

Combination of both. So when you think about the mix, we're looking -- we would be happier with a mix of new buyers approaching 35% versus the 30% that we sit today. From a tour flow growth perspective, we are always looking for opportunistic partnerships that make sense on both ends. But again, we will look to monetize our existing owner base where it makes sense. And a great example of that is the recent transaction that we did with Blackstone, where we acquired Elara that came with 38,000 owners who had a lot of equity in that project itself.

In Elara, there was $1.9 billion worth of equity in that fee-for-service deal. With the closing of that transaction, those owners now have the ability to upgrade out. And just as importantly, we have owners outside of that ecosystem that can upgrade in. So holistically, it creates an interesting environment for us. So that's just another focal point of us.

Do you generally view that as kind of a better return profile than greenfield development? Are there other opportunities that look like that, that are out there that you could?

So that particular relationship, we had structured the deal to always allow us to step in and buy the tail of that -- that transaction, we stepped into that traction back in 2011. We own 25% of the entity. They own 75%. And as you can imagine, Blackstone is -- while they were in the business of timeshare using our name as a brand name, being in timeshare in perpetuity is not their core business. So it naturally made sense for us to step in and buy that.

Are there other opportunities like that? We do have other fee-for-service partners that we would probably look to buy out just given where they are in their life cycle, it's probably 5, 7 years away before we -- so there's a little bit of runway.

A lot of runway.

Yes. But I mean, today, fee-for-service makes up a dramatically smaller piece of our business than it did pre-COVID. Pre-COVID, it was closer to 50% today, prior to the Elara transaction, it was just under 20% post Elara transaction. It will be in the low double digits.

Are there opportunities to improve costs or even conversion rates as we think about existing versus new buyers?

Yes. No, absolutely. I mean that's part of some of the initiatives that we've kind of honed since the acquisition of Diamond in particular. But I think this speaks heavily to ultimate access. Ultimate Access is the experiential platform that we are using to curate and drive higher owner demand. Effectively, we provide an opportunity for owners to have a great experience. And when people come and stay with us and have a great experience, they tend to buy more. And the VPGs on owners that tour that have experience in Ultimate Access significantly outperform owners who tour who have not come on our experimental platforms.

Is there an upper bound in terms of how much -- how many upgrades you could have in the system or how to think about where you are in that life cycle of upgrades?

Sure. There's always a balancing act. I mean at some point, you can sell timeshare to someone to the point where it just doesn't economically make sense. So we try to be very cognizant of that. We're trying to sell a balance. When you come in, we cannot dictate what you're going to buy. We try to analyze what your position is in our particular ecosystem, what your likes are, what your dislikes are, and we sell you what you believe is the most opportune product for you or in many cases, of an owner, experience owner, they know exactly what they want to buy and happy to provide that.

How would you characterize the demand environment today? There's a lot of questions and concerns around fuel prices, interest rates, et cetera. Is that spilling over? I realize you're at the higher end of the K shape, there's probably some exposure to, as you said, higher airfare. But what are you seeing from a demand environment now? And then how might that compare as you think about it longer term?

Sure. So from a demand environment, what I would tell you is I think the acquisitions of both Diamond and to a lesser degree, Bluegreen have been very helpful from a risk perspective, in particular, on oil -- when I think about it and I think about oil going, pick your mark $3 -- gas going from $3 a gallon to $5 a gallon, is that impactful? I think it is. I'm not trying to be tone-deaf to it. But I do -- I am a big believer in the fact that if prices go up $2 per gallon, does that change your decision to take a vacation in particular to a drive-to market?

I think the answer is no. We're fortunate that about 70% of our owners live within a 4-hour drive of one of our properties, which I think is very helpful. Does it change your perspective? Does it allow you to modulate to get back to that first comment that we were talking about to change your perspective on do I go to Hawaii versus do I go to Gatlinburg or Virginia Beach or Myrtle Beach, Maybe. But it's all about optionality, and that's why we think we're...

One of the other announcements that you had was around inventory optimization. And this is something that one of your peers has also talked to. And I guess there's a little bit of a back and forth that I think about. One is that this has been a segment, think about club management that has been viewed as high visibility recurring. Then at the same time, we're removing some of these from the base, but it seems like it's a positive from an EBITDA standpoint. So help us understand kind of what drove that review and how you think about maybe the ideal portfolio composition from here?

Well, I think when you look at Hilton Grand Vacations over the last 5 years, we've been dealing with a lot of integration with the 2 right? One of -- part of that narrative that we've had since the beginning of the acquisition of Diamond is we acquired 92 resorts. Diamond was a culmination of, I believe, roughly 12 acquisitions. Not all of those resorts were of the same stature. Not all of those resorts were going to be rebranded. We've always talked about almost a couple of dozen not being rebranded. Some of those due to the fact that they just need -- the investment required to put the Hilton brand on that just did not make sense financially from our perspective.

So when we have a chance to breathe, doing a little bit more focal work on the inventory portfolio. And the first thing we did was, okay, let's look at properties that from a cash flow perspective, negative. Rental cannot offset rental combined with the resort management fee cannot offset the developer maintenance fees. We have any of those negative properties. Are they branded Hilton or are they not branded Hilton? If they're not, move up the chain on a decision point.

Is there a potential for a special assessment for those who actually do own those properties? Because in that kind of scenario, it doesn't really behoove them as well, those individual owners. Is it a property that is highly utilized by our owner base? If not, you also move up that decision -- so we identified 8 resorts that were kind of lack of a better term, low-hanging fruit, the easy ones to identify. And we've entered into an agreement with a third party to step into our shoes and ultimately sell those.

Now to avoid any confusion, this is not a growth strategy. This is truly an inventory optimization strategy. Cash flow beneficial to us, ultimately beneficial to owners, no special assessment. They're not being heavily utilized. So trying to maximize the experience for everybody involved. And again, these are properties that were not rebranded already and had no plans for future rebranding. So it's a specific subset when it comes to our particular...

You talked about having some of the best sales folks in the industry. There's been some commentary back and forth about, a, is there peers that are trying to get -- be more aggressive with getting salespeople? And are you seeing that impact your retention metrics? Or are you seeing any change in compensation structure associated with sales folks in the industry?

So are they in the room here because they are here somewhere at the conference. There has been one competitor...

Raise your hand.

Yes, exactly. There's been one competitor who's been very vocal about it. And look, what I would tell you is you can walk through any of our sales centers, and you'll find individuals who've worked for travel and leisure, who've worked for Marriott vacations. And I'm sure the same is if you walk through we want to protect and do we want to retain our best salespeople without a doubt. Will we take initiatives to do so? Of course, we will. But at the end of the day, ultimately, you see movement across the spectrum in any given day. So something that we focus on, of course, but it's normal course.

You talked to trying to drive incremental new tour flow, new owner flow. How distribution channels changed over time? And are there new ways that you're thinking about trying to go after the new owners that you see the biggest opportunities to improve?

So I think that goes back to our earlier conversation around driving new partnerships, et cetera. Now if you want to focus on one of our -- one of the most important partnership we have, which is with Hilton, if you go back to 2008 and progressed nicely through time frame, but just call transfer program with Hilton was very robust, a game changer in the industry without a doubt. But I'd also -- if I were to wager, I imagine everybody in this room, when is the last time we actually called a hotel. It's probably a lot fewer today than it was 5 years ago, definitely 10 years ago, et cetera.

So how do you capture those call transfers? Some of those methods are going to new forms or digital focused on that. And another way is looking at different ways to attack the same footprint. Back in 2015, we were not doing field package sales with Hilton. That's where we sit as their concierge. So you enhance programs like that to maximize package sales as well as the partnership program.

A follow-up to the -- making a call to a hotel, which is one of the last time anybody has called a hotel and not had to say representative almost immediately to try to get a human on the phone very quickly. Maybe -- turning to margins. What are the primary opportunities, both near term and long term to improve the real estate contribution margins as we think about cost of product versus marketing versus other costs?

Well, I think when you think about our inventory strategy going forward and you contrast that sharply to where we were in 2017 and 2018, at that point in time, we were an organization that did about $400 million in EBITDA, and we had an inventory program that at the time in 2018, we made a commitment to about $1.8 billion in inventory, all through construction and/or conversion.

What you see us focus on very much today is looking for a very capital-efficient doesn't mean that we're going to focus only on recaptured inventory, although that will be a very large component going forward. We still do new builds or conversions. One excellent example of that is a property that we've entered into an agreement with in Nashville. We've structured it. It's a just-in-time transaction where we can match cash inflows and outflows based on demand that we see for the product.

In this particular instance, we've also built in additional flexibility and where we can take that inventory as early as 2028 or defer it all to 2033. So having that kind of flexibility, I think, is -- again, focus on the recaptured inventory also drives a lower cost of product. Recaptured inventory, generally speaking, will have a cost of product in the neighborhood of 5%. Depending on certain nuances, it could be just south of 10%, but it's in that ballpark versus new construction, which typically speaking, in our experience, it has been closer to 25% to even as high as 30%.

What's like the natural churn of the owner base at this point?

Well, if you look at our annualized default rate, it's meaningfully higher than it was prior to acquisition, but that's very consistent with what the acquisitions were meant to accomplish. We have entry price point now, which is clearly geared towards a lower net worth, a lower household income demographic. That also comes with a higher delinquency and a higher default rate.

So it's part of the business. But when you think about the natural churn, I think about the annualized default rate. And prior to any acquisition, it was as high as 6%. And today, it's just slightly over 10%.

But that -- you have a large percentage of your owners have already paid off.

Yes, for sure. Including just the natural attrition. It's the natural attrition with legacy HCV was in the neighborhood of 2% to 3%, and it's probably north of 5% plus with the acquisitions.

You get to recapture?

And on that front, just to remind the audience, I mean, we are in a period of accelerated capture right now just because during COVID, both Diamond and to a lesser degree, Bluegreen paused their recapture. So we are catching up on those that were halted.

That's helpful. Since you're talking about defaults, let's turn to the financing portfolio a little bit. There's been some debate, it seems like over the trend line of delinquencies, even I think investors might be reading the Wall Street Journal and hearing about delinquencies for credit cards moving higher. What are you seeing in your portfolio that helps you think about the health of the consumer and the health of the financing receivables?

When you look at the environment today, I think you see a lot of a lot of strength in the consumer more so than I think you would have assumed you would have seen given all the dynamics that are going on today. But construction is strong. Unemployment is still low.

We -- as we talked about on our last call, we saw delinquencies. Typically, what we look for to be a leading indicator of future performance is that 30- to 60-day bucket. We saw those stable to even improving year-over-year.

We saw our annualized default rate year-over-year improve modestly, but an improvement nonetheless. So we see strength. We also are very focused on improving the underlying dynamics of that portfolio. So during the course of the last 12 months, we've actually changed our underwriting practices to enhance the equity at the table. One of the --

It's more?

It's been more. So not uncommon in the industry, but there was a program that Bluegreen was running where they allowed people to upgrade without any additional equity down. We eliminated that late last year Q2, and we're now requiring additional equity down. So...

Slippery slope with no equity down.

It's a slippery slope. You definitely see an increase in defaults. You'll see optics on the contract sales, but we'll pay for it later.

Yes, EBITDA with no free cash flow potential.

Exactly. So really requiring that extra equity down has helped us. In fact, cash down at the table for Bluegreen is 50% higher than where it was in 2024.

So with that all in mind, I guess there's the legacy portfolio, the new portfolio where you're changing things versus where it was before. What is the implication then for what the right kind of provision is for this combined portfolio and how that might evolve over time?

I think if you looked at the 3 companies separately and just did the math that what would the weighted average loan loss provision be on a basis or on an annualized basis rather, you would have seen that the combined entity would probably be close to 20%, plus or minus. Given the changes in the underwriting practices that we've made at both Diamond and Bluegreen, coupled with some enhancements from a sales practice standpoint, we feel that the appropriate loan provision is that mid-teens.

Great. You also articulated a financing optimization program where you're going to be targeting a 70%, 80%, I believe, securitization of receivables. Just remind us of how that structure works. What drove the change there and how it impacts liquidity and access to cash?

Yes. No, we historically at Hilton Grand Vacations not been as robust of an ABS issuer as some of our competitors. That started to change at the time of spend, and we've got a very robust platform now. Even today, we've been one of the innovators in particular, with -- you probably saw last year, we introduced timeshare securitizations to the Japanese financial market.

It was effectively creating a new financial instrument in Japan. And it was a healthy offering, JPY 9.5 billion or JPY billion USD 85 million. sounds better when you say than yes. But the interest rate is extremely favorable to the U.S. The interest rate on that deal is 1.4%. The most recent transaction that we did in the U.S., the $500 million deal in April, and that was at 5.13%. So clearly, the interest rate arbitrage on that front. And I'm sorry, I think I dodged your question completely.

No, no. So how does that lie?

The finance business optimization. So we're much more of a serial issuer today than we were, and we're actually at 70%, a little north of 70% of receivables securitized today. And it was really trying to annualize that where we're consistently at that level. And we've used that cash to fund integration as well as share repurchases. And we're effectively at that run rate. And by the end of the second quarter, we'll have that fully finalized.

When we think about -- so clearly, you can get a little bit more consistency in terms of tapping that cash flow. Is there any change in terms of how to think about the cyclicality of your free cash flow then because of this? Like does this actually reduce cyclicality.

In the long term, it ultimately will. In the short term, you still have a nuance in between timing.

Is there any cost differential for this relative to just tapping the...

There is. And that's why we indicated when we originally launched this that this would cost us around $25...

And going back to the Japan comment because that's a lower cost structure. One, do you have to hedge that? And two, is that something that you'll pursue simultaneously with this and there's still opportunity to continue to build on it?

There's still an opportunity to build on it. We have about 75,000 owners in Japan. So we're well positioned to do that. What I would tell you is it's a bit of a competitive advantage today being able to tap that market, but that's not what we want it to be. We really want our peer set and group to issue securitizations in Japan. The more liquidity, the more knowledge about the product, the healthier it will be for all of us.

Now that being said, we recognize we have to be the pioneers just given our structure versus our competitive set. So we'll be back in the Japanese market this year. We're changing the structure of the original transaction. The original transaction was Japanese owners and borrowers for -- with Japanese asset backing that facility.

The next deal will be Japanese owners that have Japanese collateral as well as U.S. collateral. And ultimately, we're looking to bring in U.S. borrowers and U.S. collateral into that mix, too. And by the time we do the third or fourth deal, hopefully, some of our competitors will be coming into the market, too. The more liquidity, the better. So we're very excited about the opportunity.

Great. We haven't touched on the rental side of the house yet. Still running at a loss on that segment specifically. It used to be positive, but I know there's been some changes in terms of the dynamics there. So -- what should we be thinking about in terms of the trajectory of that business? What could profitability look like or even getting to breakeven?

Yes. No, I mean we're focused on getting to breakeven at this point. Most of the loss is associated with the developer maintenance. So things like asset dispositions will help optimize that. But the true driver of that is really selling through the available inventory that we have available for sale because that lowers obviously our obligation and becomes the owner's obligation. That's what will drive that.

Other elements that will help that is rebranding some of the properties. We're still in the process of rebranding some of the Diamond properties. To Hilton, those are predominantly European-based. But when we put the Hilton name on a property, we see an ADR lift. We also see a benefit from the cost side. We'll move away from OTAs and typically move towards hilton.com that has a lower cost structure for us. That all goes through the rental side of things.

And we acquired 50 properties with Bluegreen. To date, we've only rebranded 11. I think we're on #12 now. So there's still a lot of work to do on that front, too. I would look for the rental business to still run at a loss this year and probably next as well. But it's really the developer maintenance obligation that loss more so than anything.

What's the potential timing on additional conversions or how many conversions do you think you have left? And what's the decision process for...

Conversions from?

Sorry, converting to Hilton brand.

We will continue to convert to the Hilton brand through all of '27 and a few properties will slip into '28. There's several dozen left to go.

And that sounds like that's one of the big swing factors for the rental.

It's one of the swing factors. The biggest swing factor is the amount of inventory we have available. Look, when we acquired Diamond, we walked in with eyes open and we knew we acquired excess inventory, 4 years of excess inventory. So it takes selling through that and optimizing the inventory too.

What is your current owner occupancy and rental occupancy?

So when you look at our annualized occupancy rates, generally speaking, assume a resort has occupancy of 85 points. Owners will account for about 50 points of that 85 points. Out of the 35 points left, oversimplify it a bit, but roughly half are going to be associated with marketing packages, assuming it's a property with a sales center and the other half is basically FIT, typical hotel rent.

What do you think is like optimal occupancy for both?

No, I think that is where we're running. You can tweak it perhaps to a little bit more owner to drive owner sales, but it ebbs and flows between 45 and 50 -- but it depends on the market. Some markets without a sales center, you'll have more opportunity to rent rooms, but at the same time, if it's a desired location, you want to make sure the utility of the owner is there as well.

You just talked about this reduction in inventory, selling through the inventory over time. What's the right level? You kind of talked about this in the very beginning, but thinking about maintenance inventory spend, we look long term.

So we believe to support $3.5 billion in contract sales and growing that, that $300 million mark on average is probably where we would expect to be which again is obviously materially lower than where we were in 2018 and with a dramatically smaller entity at the time and clearly lower than where we've been in the past few years.

So turning to artificial intelligence has been a topic across this entire conference. How do you think about what the implications are for your business? And what are the ways that you're trying to leverage AI to either drive revenue, drive margins and which is a bigger opportunity?

I think there's opportunities on both fronts. Which one to talk about first? Part of it is also just lowering the friction with our owners, maintaining maximum utility of the product. What I would tell you is we're making a lot of investments. Part of the integration that we're doing, a lot of that investment is associated with technology infrastructure. And while this -- this is an example that I've probably given for about a year because I think it's very meaningful.

But a year ago, if you logged into our website and you wanted to go to Orlando week July 15, type it in, say, okay, book, can't go. And then you would have to randomly find a location. Today, if you do the same thing, it gives you Slide 15, you have x number of points, here's your top 3 suggestion.

The next opportunity is going to be, hey, we also have access to your Hilton Honors database. We know where you travel. We should be able to ascertain what is for vacation, what is for work travel. Those start to populate recommendation. And then at some point in time, assuming people opt in, we'll have access to social media, even love the golf.

That will properties with golf courses start to populate. So it's elements like that, to help drive utility for the owner, which I think will help decrease default rates, which will be hugely meaningful. There's clearly the opportunity on the cost side as well. What does the chatbot do today versus what does it do next week? How can you maximize that? I think it will be a bit of an evolution because I think to your point, I mean, you mentioned it earlier, how many people call and immediately say, agent, try to get a real person, right?

Now with AI handling some of the calls where you may very well be able to tell the operator is an agent, but they're actually being productive and solving a problem. I think the evolution you'll see is people being more willing to call in because their answers are being responded to, which will drive demand for that call, which will allow real people to handle the more complicated problems until such time AI can handle it all. So there will be efficiencies over time. I think it's an evolution.

Awesome. we're just about at time unless anybody wants to throw in a question. Brave Souls. All right. Well, please join me in thanking Dan and all the insights on Hilton Grand Vacations. Thank you.

Thanks. Appreciate the time.

Good morning, and welcome to the Hilton Grand Vacations First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Hilton Grand Vacations First Quarter 2026 Earnings Call. Our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements. The 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.

Our reported results for all periods reflect accounting 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. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals.

Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to view these slides on our website at investors.hgv.com.

On Slide 2 of these materials, you can see the deferral adjusted metrics that we'll be referring to on today's call. Reported results for the quarter do not reflect $25 million of net contract sales deferrals under ASC 606, which had the effect of reducing reported GAAP revenue and were related to presales of our Ka Haku project, partially offset by a recognition associated with our Kyoto project, which opened in March.

Also on Slide 2, we defer a net $7 million of direct expenses associated with these revenues. Adjusting for both these items would increase the adjusted EBITDA to shareholders reported in our press release by a net of $18 million to $267 million.

With that, let me turn the call over to our CEO, Mark Wang. Mark?

Good morning, everyone, and welcome to our first quarter earnings call. We're off to a strong start this year. And overall, we're pleased with how the quarter came together. The results we delivered in Q1 reflect disciplined execution by our teams across the business and a consistent focus on our strategic initiatives.

Contract sales met the expectations we laid out on our prior call and adjusted EBITDA exceeded expectations, growing 8% versus the prior year with 130 basis points of margin expansion. In addition, we drove great new buyer growth, along with cost efficiencies that supported healthy EBITDA flow-through.

These results reinforce our confidence that we're on track to achieve our long-term algorithm of consistent growth in sales and EBITDA, and strong free cash generation, along with a commitment to returning capital to our shareholders. We repurchased an additional $150 million of stock during the quarter, bringing the total to nearly $2.3 billion we've returned since becoming a standalone public company.

Next, taking a look at our consumer environment. Leisure travel demand among our members remained healthy. Arrivals were strong in the first quarter, and we see trends improving through the fall. And March was our strongest sales month of the quarter with momentum carrying into April.

At the same time, we're carefully monitoring the impact of the conflict in the Middle East and the potential broader effects on the leisure travel landscape. But our business model carries several advantages that should help us to navigate the environment.

Our members have prepaid their vacations for the year, making them less sensitive to travel costs and new buyers are attracted by the value proposition of our marketing package offerings. In addition, the efficiency initiatives that we already have underway, combined with the variable nature of our cost structure, leaves us well positioned.

So while we keep a close eye on the external risks, our focus remains on executing our strategic initiatives and controlling what we can control. Given the results of the first quarter and our purchase of the remainder of the Elara JV to take full control of the project, which I'll cover shortly, I'm pleased to report that we're raising our adjusted EBITDA guidance for the full year.

More broadly, the quarter and guidance reinforced the progress we're making as an integrated business and the consistency of our execution against our strategic priorities, which are operational excellence, attracting new customers, product evolution and innovation, and enhancing member lifetime value.

Operational excellence drove strong execution in the quarter. While tours outpaced VPG and we saw a higher mix of new owners, our teams effectively managed costs to drive improved EBITDA contribution, and we remain confident in our guidance to grow EBITDA for the full year.

We also did a great job of adding new buyers. The investments we made in our marketing pipeline last year supported high single-digit new buyer tour growth in Q1, maintaining the strong pace that we saw in the fourth quarter. In addition, solid conversion of those tours led to the highest level of first quarter new buyer transactions since 2023, up 8% versus the prior year, which is key to driving improved efficiency as well as growing our embedded value. Those new buyers helped to support 29% growth in our HGV Max member base over the prior year to 277,000 members.

On the product front, I'm happy to announce that we reached an agreement to purchase the development rights of Elara, our flagship resort in Las Vegas, allowing us to take full control of the project by moving it from a fee-for-service JV to an owned property.

As part of the natural progression with our fee-for-service projects, it provides us several significant benefits, including receiving the full economics of the real estate business as well as assuming the existing and future financing business associated with the project, along with providing additional inventory flexibility.

Elara has always been very popular with new buyers. But this transaction also unlocks our ability to better sell the project across our entire sales distribution network outside of Las Vegas, enabling owners to upgrade out of the project while simultaneously allowing any of our members to upgrade into Elara.

We're also making great progress with our inventory optimization initiative. We've identified a set of 8 properties that no longer fit with our portfolio. And we recently entered into an agreement with a third party for the disposition of our interest in these assets. At high level, dispositions allow us to proactively manage aging and noncore inventory, reduce long-term carry risk and ensure capital is continually recycled into higher-performing opportunities.

This discipline helps us to balance between growth, flexibility and profitability. From a strategic standpoint, dispositions support our broader goals by improving the mix and quality of inventory over time, creating capacity to reinvest into priority markets, products and experiences, and reinforcing a proactive rather than reactive approach to inventory management. Taken together with the financial benefits Dan will outline, these dispositions help us to optimize the portfolio and position the business for sustained growth.

Turning to the embedded value. We're continuing to expand our industry-leading HGV Max and HGV Ultimate Access offerings to enhance our value proposition and drive member engagement. We recently introduced additional enhancements to Hilton Honor points conversions within the MAX program to complement the suite of benefits that have proven so popular with our Max members.

Lastly, our Ultimate Access teams continue to expand our best-in-class experiential platform. In just the past few months alone, our members have enjoyed private concerts with #1 billboard artist Ella Langley, the legendary Beach Boys, and Grammy Award winner Kelly Clarkson. Our partnership with the LPGA provided members in-person access to our tournament and champions to see this year's winner, Nelly Korda, which was televised on NBC and the Golf Channel. HGV will also continue as an official event partner of Formula 1's Heineken Las Vegas Grand Prix, where members have access to exclusive trackside HGV Clubhouse suites and entertainment at Elara.

So HGV Ultimate Access is already the biggest and most comprehensive program of its kind, and this year will be even bigger and better. We've got new events planned for new members, including FIFA World Cup events, NASCAR and expanded summer concert series lineup and we'll also be announcing additional exciting programming to further enhance member experiences throughout the year.

So to sum it up, I'm happy with the performance at the start of the year. Owners and new buyers continue to respond well to our value proposition. We delivered on our target that we laid out, which allowed us to increase our full year EBITDA guidance. We're continuing to make incremental progress in our evolution as an integrated entity, and we're focused on consistent execution against our strategic priorities as we move through the rest of the year. None of this would be possible without the dedication of our team members and leadership who have built such a strong, innovative and people-first culture.

With that, I'll turn it to Dan for more details on the numbers. Dan?

Thank you, Mark, and good morning, everyone. We had great results in the quarter, achieving our contract sales forecast while also exceeding our expectations for EBITDA growth through cost controls that drove margin expansion. As Mark mentioned, the strong performance, along with the momentum that we're carrying into the second quarter, gave us the confidence to raise our full year adjusted EBITDA guidance.

Turning to our results for the quarter. Total revenue before cost reimbursements in the quarter grew 2% to $1.2 billion. Adjusted EBITDA to shareholders grew 8% to $267 million with margins, excluding reimbursements of 23%, up 130 basis points over the prior year.

Within our real estate business, contract sales of $719 million were down slightly, performing in line with the expectations we laid out on our prior call. The decline was the result of tough comparisons for our Bluegreen business as it normalized against a strong HGV Max launch period last year.

New buyer contract sales were over 26% of the total for the quarter, an increase of approximately 160 basis points from the prior year, as we benefited from continued strength in new buyer tours, along with solid execution from our sales teams that drove new buyer transactions to their best first quarter performance since 2023.

Tours grew 8.5% during the quarter to more than 189,000 with growth coming from both our new buyer and owner channels. Conversion of the package pipeline we built over the past year fueled new buyer growth, while the strong value proposition of HGV Max continues to drive owner to demand. VPG was nearly $3,800 for the quarter, declining 8% and in line with the expectations of a high single-digit decline we discussed last quarter.

As we indicated, the decline was driven by the normalization of owner close rates at Bluegreen due to the lapping of the record HGV Max launch period comparisons, along with higher mix of new buyer sales in the quarter, which carry lower VPGs. Cost of products in the period was 10%, which benefited from higher-than-expected sales mix of lower cost inventory during the quarter.

Real estate sales and marketing expense for the quarter was $352 million or 49% of contract sales, 260 basis points lower than the prior year. The strong margin performance was primarily the result of our efficiency initiatives, which the team did a great job executing against.

Real estate profit for the quarter was $152 million with margins of 28%, up 350 basis points versus the prior year. Overall, I'm very pleased with our performance this quarter as our focus on efficiency was able to more than offset the margin dilutive effect of lower VPG and higher new buyer mix.

In our financing business, first quarter revenue was $138 million and profit was $87 million. Excluding the amortization items associated with our acquired receivables portfolio, financing margins were 65%, up 510 basis points from the prior year.

Looking at our portfolio metrics, our weighted average interest rate for originated loans was 14.5%. Combined gross receivables for the quarter were $4.4 billion. Our total allowance for bad debt was $1.3 billion on that $4.4 billion receivable balance or 29% of the portfolio.

The portfolio remains in great shape overall. Our annualized default rate for our consolidated portfolios was 10.1% for the quarter, reflecting a slight improvement against the first quarter of the prior year. And as of quarter end, our 31 to 60-day delinquencies expressed as a percentage of the total portfolio remains broadly unchanged relative to the prior year at 1.48% compared with 1.49% a year ago.

When measured as a percentage of the total portfolio net of fully reserved loans, delinquency performance reflects a similar trend at 1.7% versus 1.72% in the prior year. Our provision in the first quarter declined sequentially to 14.9%, in line with the expectation we laid out on our prior call, and we continue to feel confident in our expectation of provision remaining in the mid-teens for the full year.

In our resort and club business, our consolidated member count was just over 720,000, reflecting strong new buyer additions offset by continued recaptured activity in the period. Revenue grew 1% to $185 million for the quarter and profit was $126 million with margins of 68%.

Our expenses were slightly elevated owing to program-related headcount additions, which reduced our margins when combined with our seasonally lower Q1 revenue. However, we expect those effects to diminish as we move into our seasonally stronger quarters of the year.

Rental and ancillary revenues were up 5% versus the prior year to $197 million. Revenue growth in the period was driven by higher available room nights and a slight increase in our overall portfolio RevPAR, reflecting continued healthy trends for our rental business.

Developer maintenance fees remain the largest driver of our rental and ancillary business profitability trends and were responsible for the $19 million loss in the period. Reducing the burden of developer maintenance fees is a key objective that we'll achieve through both consistent sales growth as well as our inventory optimization initiatives.

As Mark mentioned, regarding our inventory optimization, we have signed an agreement with a third party to begin the process for a set of properties that we've selected for disposition. Broadly speaking, we will trade off several revenue streams we currently receive from property HOAs and owners in exchange for savings on the associated carrying cost of the inventory with the net result being a positive contribution to adjusted EBITDA. There are minimum sales generated at these resorts and by transferring that torque flow to other sites within our sales distribution network, we don't expect to sacrifice any sales revenue.

We will lose property management fees from the resorts, along with the associated rental income from inventory available for monetization. However, more than offsetting that revenue loss will be a reduction in our developer maintenance fee expense that we are currently paying on unsold inventory at these properties. Our initial estimate for the net of these items is that on a run rate basis, they will benefit our adjusted EBITDA by $10 million to $12 million on an annual basis.

I'd note that the agreement is subject to customary closing conditions, and there remains work to be done to get to closing. Therefore, our 2026 adjusted EBITDA guidance does not currently include any contribution from these dispositions. This is subject to change as we move through the process. And in the coming months, we look forward to providing additional financial and timing-related details as they are finalized.

Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $5 million, license fees were $53 million and EBITDA attributable to noncontrolling interest was $2 million. Corporate G&A was $40 million or 3% of pre-reimbursement revenue, in line with our run rate over the past year.

Our adjusted free cash flow in the quarter was a use of $37 million, including inventory spending of $71 million, reflecting the timing of our ABS deal activity in the year. We continue to expect our conversion rate for this year will remain in the lower half of our long-term range of 55% to 65%.

During the quarter, the company repurchased 3.3 million shares of common stock for $150 million. From April 1 through April 23, we repurchased an additional 904,000 shares for $41 million. And as of April 23, we had $237 million of remaining availability under our current share repurchase plan.

We remain committed to capital returns as a primary use of our free cash flow in 2026, and we remain on track to continue repurchasing our shares at a pace of approximately $150 million per quarter, subject to the repurchase activity not increasing our net leverage for the full year.

Turning to our Elara transaction. As Mark mentioned, we entered into an agreement to purchase the inventory tail of our Elara JV. This agreement is effective as of today. Given the scale of our Elara project versus prior tail purchases, I think it's important to lay out the effects on our financials in Q2 and beyond.

We have been a 25% owner of the JV, and thus, historically, we haven't consolidated their financials into ours. Rather, we reported our share of the JV's income through our EBITDA from unconsolidated affiliates line in our financial statements.

In addition, from a revenue perspective, we recognized fee-for-service commission package sales and other fees on our consolidated income statement. And on a KPI basis, contract sales from the project were classified as fee-for-service sales in our real estate business.

Given the transaction, as we fully consolidate Elara and recognize the project as owned in Q2 and beyond, you'll notice a reduction in each of those line items, which will be offset by additional sales of VOI, along with the benefits of a new stream of portfolio income in our financing business.

Our total initial outflow for the remaining 75% of the entity is approximately $130 million. The acquisition included approximately $85 million from the combination of unpledged eligible ABS collateral and short-term working capital, which we will monetize and will ultimately result in a net cash use of $45 million. This will be a deleveraging transaction and should slightly reduce our corporate net leverage level.

We currently expect Elara to contribute approximately $20 million for the remainder of the year, which was not included in our prior 2026 guidance. As Mark mentioned, Elara has been one of the marquee projects for many years and having full control of the asset will be a positive for HGV on a go-forward basis.

Turning to our outlook. For the quarter, we outperformed our prior guidance for Q1 adjusted EBITDA growth to be flat to down slightly by approximately $20 million. Due to our strong performance this quarter, along with the additional contribution of Elara, I'm pleased to announce that we're increasing our 2026 guidance for adjusted EBITDA before deferrals to be $1.225 billion and $1.265 billion from the prior $1.185 billion to $1.225 billion for an increase of $40 million at the midpoint. To be more specific, outside of the contribution of Elara's EBITDA, our performance and adjusted EBITDA assumptions in the second, third and fourth quarters remain the same as what was embedded in our initial guidance for the year.

From a sales perspective, our prior full year 2026 top line targets remain in place. As a reminder, those include low single-digit contract sales growth with low to mid-single-digit tour growth and VPG down slightly. On a quarterly basis, our expectation for VPG growth for the remainder of the year remain unchanged. We continue to expect VPG to be down slightly for the full year with Q2 and Q3 seeing low to mid-single-digit declines and returning to solid growth in the fourth quarter as we fully lap the Bluegreen Max launch period.

In addition, we continue to expect that our 2026 conversion rate will be in the lower half of our target 55% to 65% range as we wrap up spending on Ka Haku projects ahead of its anticipated opening later this year. In addition, despite Q1 outperformance, we still expect that our adjusted EBITDA on a dollar basis will increase sequentially each quarter. For the second quarter specifically, we expect to grow our adjusted EBITDA in the low to mid-single-digit range versus the prior year, which includes approximately $3 million contribution from Elara.

Moving on to our liquidity. As of March 31, our liquidity position was $852 million, consisting of $261 million of unrestricted cash and $591 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.8 billion, and a nonrecourse debt balance of approximately $2.6 billion.

At quarter end, we had $150 million of remaining capacity in our warehouse facility. We also had $929 million of notes that were current on payments but unsecuritized. Of that figure, approximately $370 million could be monetized through a combination of warehouse borrowings and securitization, while we anticipate another $367 million will become available following certain customary milestones such as first payments, dating and recording.

Turning to our credit metrics. At the end of the quarter, the company's total net leverage on a TTM basis was 3.9x. As you may have seen, just after the end of the first quarter, we also completed our first securitization of the year, an oversubscribed $500 million deal, upsized from $400 million as a result of stronger investor demand. The deal priced with an advance rate of 98% and an average coupon rate of 5.13%, which included a tranche. So despite some of the geopolitical noise, the securitization markets remain open and healthy, and we look forward to completing several more deals later this year.

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

[Operator Instructions] The first question is from Patrick Scholes from Truist Securities.

Dan, I think you made it pretty clear regarding trends in the loan loss provision and propensity to pay really no instability or whatever I think your [indiscernible]. Any additional color you'd like to provide of what you've seen with the new issuances?

And then secondly, a follow-up. If you can give us a little color on expectations compare and contrast tour growth versus VPG for 2Q and/or the rest of the year.

Yes. No, absolutely. So I'll jump in on the portfolio, and then I'm sure Mark has some thoughts on VPG and tour trends. But with regards to portfolio, we're really pleased with the performance. I mean, we have a very consistently strong performing portfolio. And if you think about the balance of the portfolio, it's increased year-over-year by almost 8%. The annualized default rates have decreased by about 10 basis points.

And as we talked about in our prepared remarks, the early-stage delinquencies are stable to improving. Specifically, even post quarter close, when we look at our early-stage delinquency rates by portfolio, HGV is performing even better. It's down 7% from a delinquency perspective. Diamond is down 10%. Bluegreen is stable and their early, early-stage delinquencies, that 0 to 30-day mark, is actually at a 4-year low and has improved 11% subsequent even quarter end. So that's with all the geopolitical noise, which is very encouraging.

And as you probably recall, mid-year last year, we changed the underwriting process for Bluegreen to allow for an enhancement in equity being put down initially. So the actual Bluegreen equity at the table is up 50% compared to 2024 levels. So really pleased with all that performance. So when we look at the provision, sequentially, we dropped from 18% to just under 15%, right in line with our expectations. We're right in that mid-teens level where we expect it to be. So we're really pleased with how that's all coming together.

Yes. And Patrick, on the VPG front, say, first of all, the teams are -- I think they're doing a great job and really in the right direction on the demand front. As we called out on the last call, we expected -- and we saw our VPG headwinds as we lap Max for Bluegreen. So any -- pretty much all of the VPG pressure was related to the Max and Bluegreen launch. So -- but importantly, the teams drove nice growth in new buyer sales and transactions through tour flow. We were up 8% year-over-year on new buyer transactions.

So anyways, VPG headwinds were offset by that healthy offset with the foot traffic. So -- and importantly, what we saw is margin expansion, which is really encouraging, especially in a quarter where some of the real estate KPIs would have suggested margin deterioration.

So as we focus for Q2 and beyond, our focus is really balancing healthy tour growth with sustainable VPG growth over time, and we expect that balance to improve as we move through the year with headwinds really until we lap the tough comps at the end of Q3. So all in all, pleased with how the teams have managed through the expected headwinds that we anticipated on our VPGs.

The next question is from Ben Chaiken from Mizuho.

This is Rita Chen going in for Ben. Could you please elaborate on the inventory optimization initiatives? And do you see more opportunities beyond the 8 resorts that's currently identified? And then as our follow-up, could you also elaborate on Elara, which adds $20 million to the '26 guide? And we would have thought there's a longer term inventory play from -- just benefiting from the mix of own inventory from fee-for-service. Any color there would be helpful.

Okay. Yes, definitely didn't sound like Ben, so thanks for introducing yourself. Look, very -- we're in a really strong inventory position following a decade of building quality and scale into our portfolio. And as we've talked about in the past, we picked up a lot of really good inventory in acquisitions in a lot of great markets. And the optimization that we laid out today and what we'll talk through today is really driven by financial considerations. It's driven by the rebranding, the ability to rebrand these properties, the investments required there that didn't make sense and market overlap. So consistent with what we said in the past, we knew that some of the acquired inventory in these acquisitions wouldn't fit.

From a deal standpoint, we've mentioned we entered an agreement on the disposition of the 8 properties. And there's a number of closing conditions, but we're confident that we'll get that achieved in Q3. The economic benefits really is about transferring the ongoing developer maintenance obligation, and Dan covered off on that $10 million to $12 million being run rate and net EBITDA benefit once completed. So that's -- again, that's run rate, and these deals won't be -- we won't get this finalized until probably sometime in the third quarter.

So yes, all in all, pleased with this. As far as talking about any future opportunities, we're really focused on executing this transaction, which will have a significant benefit for us. And we're going to continue to be very deliberate in our steps to optimize our portfolio. And this is not about shrinking. It's about upgrading the portfolio. We're monetizing lower quality inventory well, improving the margin and cash flow.

So on the Elara front, and I'll let Dan touch on the numbers here. But Elara is -- it's our flagship property in Las Vegas. And we have 38,000 owners and we operate and it's been super productive for us in a very productive and strategic market for us. And Las Vegas has been a core growth engine for the company for multiple decades. And we're excited about this. This is a classic tail acquisition at the right point in the asset's life cycle. And it strategically aligns tightly with our owner-centric and new buyer strategies. So -- and Elara has been very popular with new buyers.

And importantly, when you think about what this does, okay, this transaction allows us to unlock all those owners that are sitting within the Elara ownership base. And now they have the potential to upgrade out of that project because historically, over the last 15 years, they've been upgrading within the Elara project. Now they can upgrade outside of it. And simultaneously, it allows our members to upgrade into Elara. So anyways, super excited about this one.

And Dan, I don't know if you want to touch on any of the details on the numbers.

Yes. No, I can definitely add some color on that. I mean we talked about the benefit for the year being close to $20 million. But when you think about the transaction in general, we're also picking up from -- included in that $20 million, clearly, but we're also picking up a consumer note portfolio net of impaired that's north of $400 million. So a material increase to the portfolio balance.

When you think about other projects that are out there, we -- this is not our only fee-for-service transaction. But to Mark's earlier point, this is a single site transaction. We do have a partner that we've been working with for over a decade at this point in South Carolina with a series of resorts in Myrtle Beach, Charleston, South Carolina, even one here in Orlando. It's a different environment, though. So we're not close to acquiring the tail on that. That's probably anywhere from 4 to 7 years out, just depending on how that runs through. But it will change our fee-for-service percentage. We were in the mid-teens, and it will bring us below 10% with us closing on Elara.

The next question is from David Katz from Jefferies.

Recognizing that sometimes the press reports can overstate these things, but there definitely was some weather late in 1Q and early 2Q in Hawaii. How -- what are you seeing and/or hearing? Is some of that overstated? Is there some impact that we should be noting?

Yes. Look, definitely some unusual weather in the quarter for Hawaii. And look, I lived in Hawaii for 27 years. It's called the Kona Low, and you get these type of storms about every 20 years. But I can tell you, our teams did a really good job managing through the challenges to minimize the impact. The impact was larger on arrivals than it was for sales. And for instance, if you look at Maui, Maui, which got hit pretty hard, was actually one of our strongest performing sales markets this quarter. So again, the teams did a really good job.

But if you look at overall, the weather impact between the ice storms in the Northeast, some of the colder temperatures in Florida and Hawaii, the impact was about $5 million of revenue with the majority of that being contract sales and the balance in rentals. So -- yes, so I'd say not material for us, but I think the teams did a good job managing through it.

And just following that up, I assume that's -- that minimal impact is reflected in whatever guidance and you're not preparing for anything further or anything ongoing, it was a onetime thing?

That's correct. Yes.

The next question is from Trey Bowers from Wells Fargo.

This is Nick Weichel on for Trey. I just had a really strong new owner performance in the quarter. I was kind of just curious what's driving that? What are you guys doing that's resonating with your owner base, new buyers? And with this and the inventory optimization program and the rebranding cycle you're going through, do you think you're approaching a period where maybe you could put up like sustained positive NOG? Any detail would be great.

Yes. No. Well, first of all, really pleased with how the new buyer trends have been playing out. And we have consistently talked about that being a key focus of ours, and it's critical to the long-term health of the business. And so the trends we saw having 8% increase in transactions and our mix moving up 3 percentage points are all very, very positive. And then we've also talked about just absolute new buyers coming in the system. Over the course of the last 4 years, it has been pretty impressive on a relative basis when you look across the industry. One of the things that we've really been striving on and the teams have been doing a good job is around tour quality. And on the other side, the value proposition. And so all in all, I feel really good about that.

I think on NOG, NOG in the near term is more a mechanical outcome of recapture. And ultimately, that's going to improve our cash flow and returns. And what matters for us is EBITDA and lifetime value creation and both of which we continue to grow. So we'll get back to positive NOG at some point, but some of this recapture is healthy, but the trend on new buyers is -- we're pleased with.

The next question is from Stephen Grambling from Morgan Stanley.

Just wanted to go back to the -- effectively the disposition or the optimization of the clubs. Is this something that we should be thinking about more consistently going forward? Or is this more of a one-off? And when you were looking at these clubs, was the reason to think about the dispositions mainly because of changes in the individual market? Or is there something when you just think through the structural dynamic of the way these are set up where the HOAs just won't kind of cover the maintenance CapEx over time?

Yes. Look, there's a lot of considerations, a lot of analysis that goes into this, Stephen. And I'd say, first of all, the average age of these properties are 38 years old, right? And that in itself doesn't drive the decision. But when you look at the overlap, 4 of the 8 are in Orlando. And we have 19 properties in Orlando and some of those were picked up through the acquisitions. And so these are, I would say, are the smaller properties and the older properties that when you look from a rebranding perspective, just did not financially make sense.

And so -- and then when you look at just kind of the makeup of the inventory or the base of owners in here, the mass majority of the owners were in the trust. So they remain in the trust. So there is not a lot of legacy owners. There's less than 300 legacy owners in these properties. And we're going to be offering them. It's a compelling opportunity to remain into the club, but -- or join the club that these are legacy members and are not part of the club today. So really not a lot of work that had to be done to get past that.

I don't know, Dan, if you have anything to add.

Yes. I mean I think the only thing I'd add is very similar to Mark's earlier comments. We always viewed a number of resorts that were not going to be rebranded. So when you think about this, hey, is this a one-off or is this something that we're consistently going to be doing? I'd say it's somewhere in between in the sense that this is an initial set of properties that we've identified. But it's not something that you'll hear from us every single quarter on. Will there be more? Yes. Probably at some point in the next 12 or 24 months, there'll be more. But it's not something that you'll see us do on an annual basis consistently going forward.

Yes. And just to maybe finish up on this particular question. I think we're in a very good inventory position. We're above our long-term targets, which will support a lot of strong free cash flow going forward. But importantly, when you look at our brand stack and the way we're structured now, when you go from luxury, which with our Hilton Club brands, if you look at the property that we're selling right now in Ka Haku, we're getting $175,000 average per week. Now you go down to the other side of it, and that is really being sold to a much more mature customer, I'd say, bloomers, portions of the Gen X. These are people that have higher net worth.

And then we have the Bluegreen acquisition really gives us a really good product where we are attracting a lot of new younger buyers into the system. So we like our branding position. We like our inventory position. This is really -- as I mentioned before, it's not about cleaning. It's not about shrinking. It's about upgrading the overall portfolio to better fit on our strategy.

Got it. So maybe one quick follow-up just to make sure I understand. So if we think about the club and resort management side then, do you generally expect that segment to grow going forward over the long term? Because I guess this is always a segment that I think was touted as kind of, I don't want say bulletproof, but effectively a perpetuity because you just kind of have inflationary growth every single year. Is any of that changing? Or should we think that this as static?

No, I don't think you should think of this as static. This is going to be a segment that will continue to grow over time. I think we had a couple of onetime things this first quarter. But I don't know, Dan, if you want to jump into any of that. But we're expecting to grow this segment, and it's a high-margin part of our business. And so -- and we're very pleased with the way the teams that are managing that business for us.

Yes. No, I think that's right, Mark. I mean -- we don't look at this being static. We look at growth opportunities. The net result of this impacting resort club and rental is clearly a positive from a cash flow basis, and it's making the organization not only from a portfolio's perspective, but also from an owner's perspective, healthier and stronger position.

The next question is from Chris Woronka from Deutsche Bank.

I was hoping we could maybe zoom in for a minute on some of the issues that will impact your margins, which I think were maybe a little bit better than you expected in Q1. And really talk about kind of staffing levels and marketing. And maybe if you can just give us a few words on each of those? Are you satisfied with where the budgets are? Is there anything that you -- concerns you with staff attrition or turnover? Or is marketing in line with where you thought based on demand levels? And then I have a follow-up.

Sure. No, I mean when -- I think when you think about Q1 and you think about the outperformance and the margin expansion, there was some element of timing of certain expenses, but we had really strong performance, both in sales and marketing expense as well as the financing business. So some of that trending does carry forward into Q2, 3 and 4. What I would say is you also have -- there is a bit of a mix. So things are going to come in like we originally expected, just in a different way. Clearly, on the financing side, I think everyone would readily recognize that when we gave guidance, we did not anticipate the conflict that we currently see in Iran and its impact on interest rates. So that clearly is priced into our ABS deals going forward, a little bit higher than we originally anticipated this year. But we feel we're in a good strong position there. And from a personnel perspective, I also feel that we're in a good spot.

Okay. Perfect. And then maybe if we could just circle back for a moment to some of the LLP. I know you've answered a lot of questions on it. I think it all makes sense. But is there any way to maybe if we drill down a little bit to get more granularity on, are you seeing any change in trends, whether it's legacy Bluegreen or legacy Diamond, legacy HGV, are you seeing any trends with demographics or geographic areas? Just curious as to whether we can maybe put to bed some of these concerns about things that are concerns that are out there that haven't yet materialized or any trends you would call out on a more granular level?

Yes. I mean, look, I think there's 2 things worth highlighting here. One, it wouldn't be timeshare if it wasn't a little bit complicated. So when you think about our loan loss provision, it's always going to be dependent upon -- if you ignore macro for a second, for us and specifically, it's going to be dependent upon the mix of the product that we sell. So the more trust we sell, the higher the actual provision will be because that's our entry-level product, and that bears a higher provision. The more deed we sell, the lower the provision will be.

In this particular quarter, we had a higher mix of trust being sold, which led to a slightly higher provision especially if you look year-over-year. Sequentially, directionally and absolutely, it landed right in line where we expected it to be. So that always has a little give and take. Now you get a little benefit because the more trust we sell, it has a lower cost of product. So you'll see that we had a lower cost of product in Q1 year-over-year as well. So there's that dynamic.

But when you think about trending and the overall stats that we're seeing in the new originations as well as our historical originations, like I said, we are very -- our portfolio is performing extremely well. No deterioration. It's solid performance. And I think that is also well received in the ABS markets. The deal that we closed just a few weeks ago happened to be on one of the days that Trump was saying X, Y and Z, and we still increased the actual offering from $400 million to $500 million and had strong investor demand. Even with the D tranche, we priced just at 5.13 in that kind of environment. So that is all, in our minds, extremely encouraging.

This concludes the 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. Well, thank you again for joining the call today to our members and team members around the globe. Thank you for making HGV a part of your story. We look forward to updating you on our Q2 call. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good morning, and welcome to the Hilton Grand Vacations Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to Hilton Grand Vacations Fourth Quarter 2025 Earnings Call. Our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements and the 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. Our reported results for all periods reflect accounting 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 to the period when projects construction is completed. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals.

Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to view these slides on our website on investors.hgv.com.

On Slide 2 of these materials, you can see the deferral adjusted metrics that we'll be referring to. Reported results for the quarter do not reflect $61 million of contract sales deferrals under ASC 606, which had the effect of reducing reported GAAP revenue and were related to presales of our Ka Haku and Kyoto projects. Also as shown on Slide 2, we recorded deferred $29 million of direct expenses associated with these revenues. Adjusting for both of these items would increase the adjusted EBITDA to shareholders reported in our press release by a net $32 million to $324 million.

With that, let me turn the call over to our CEO, Mark Wang. Mark?

Good morning, everyone, and welcome to our fourth quarter earnings call. Before we begin, I'd like to take a moment to thank our team members around the world for their hard work and dedication over the past year to create memorable vacation experiences for our members and guests.

2025 was a year of meaningful progress for HGV. We consistently delivered against our strategic initiatives during the year, driving material growth in package sales, significantly improving our execution and further enhancing our HGV Max offering. As a result, we grew contract sales 10%, representing the highest growth since 2022, with EBITDA above the midpoint of our guidance.

We also made investments in our lead generation capabilities, opening 41 new marketing sites with our partners at Hilton, Bass Pro and Great Wolf to support our future tour flow. We grew HGV Max memberships by 35% through the recent introduction of Max to our Bluegreen members, along with the continued demand from new buyers and upgrades in our legacy member base; optimized our financing business to structurally improve our industry-leading cash flow generation, including opening a new low-cost financing market in Japan, the first of its kind for any U.S. timeshare operator. And it enabled us to return $600 million of capital to our shareholders, achieving the target we laid out.

Over the past 2 years, we returned over $1 billion to investors through share repurchases, and we remain committed to capital returns as the primary use of our free cash flow. Our strong 2025 results not only demonstrate the progress we made in integrating our business but they also underscore the advantages of our business model, backed by the strength of the Hilton brand with nearly 60% recurring segment EBITDA, a highly engaged base of over 720,000 members, including 266,000 Max members with substantial embedded value and an established differentiated experience platform in our HGV Ultimate Access.

As we look forward to the year ahead, we continue to see a stable consumer environment overall, one where travel remains a top priority within consumer discretionary spending. With that consistent backdrop and much of the integration work behind us, we're carrying significant momentum into '26, putting us further down the path to achieve our long-term algorithm of resilient, profitable growth and material recurring cash flow generation to enhance our shareholder value.

Our guidance today represents another step toward that goal, reflecting low single-digit contract sales with mid-single-digit EBITDA growth, along with strong cash flow conversion, which Dan will get into shortly.

Next, I'd like to provide an update on our strategic priorities and the progress we've made on our integration work. Our strong results were achieved through disciplined execution against our 4 strategic priorities, which continue to guide the organization as we've moved into the new year. First, attracting new customers in a cost-efficient manner; second, enhancing the lifetime value of our member base; third, product evolution and innovation; and finally, driving operational excellence.

Starting with the first priority of cost-efficient new member growth. We drove strong tour growth in the fourth quarter while expanding margins and maintaining our sales and marketing cost ratios. Consolidated tours grew nearly 9%, supported by strong package sales over the last several quarters, along with strong local arrival. Importantly, we surpassed our pro forma consolidated 2019 tour flow levels, which is a nice milestone. We continue to focus on tour quality as we leverage the strength of the Hilton brand across our portfolio, added new lead gen partners like Bass Pro and executed against our acquisition, integration and efficiency initiatives.

We also sharpened our data analytics and processes with a focus on optimizing cost per tour by customer segment and channel to maximize flow-through. And we continue to expect to drive new buyer growth in '26, which is embedded in our guidance. That new member focus ties directly into our second strategic priority, which is to grow the lifetime value of our member base.

The introduction of HGV Max has exceeded our expectations with sustained adoption that has driven a greater than 20% increase in lifetime value of a Max member versus a non-Max member. In the fourth quarter, we saw material growth from Bluegreen new buyers and owner upgrades. And importantly, 4 years after our initial launch, we've also continued to see our legacy club members upgrade into Max as well. We expect that demand to continue as we introduce new guests to our offerings and further enhance the value proposition of Max membership.

In addition, we strengthened our customer service and rolled out new AI-based tools to drive engagement and help members make the most of their ownership and vacation experiences.

Our third strategic priority is product evolution and innovation to position our brand for sustainable growth. One area where we're continuing to evolve is our scaled differentiated experience platform, HGV Ultimate Access. 2025 was our biggest and most successful year of Ultimate Access. We hosted over 137,000 attendees, a more than 15% increase in participation from the prior year. In 2026, you'll see us introduce several innovations across new categories of events, enhanced booking options and new pricing tiers to broaden accessibility to the Ultimate Access platform. In addition, we'll continue to enhance our HGV offerings with new features and benefits throughout the year.

The final strategic priority is driving operational excellence, which is at the core of everything we do at HGV. This focus was a driver of our performance in the fourth quarter and building upon that success to drive incremental operational and asset efficiencies will be a key focal point in '26 and beyond. Operational excellence also extends to our integration efforts. I'm happy to say we reached our $100 million in cost synergy target during the fourth quarter, several months ahead of schedule. It's a great achievement for our teams, and I'm proud of their hard work to hit that goal. And we remain committed to managing costs and further improving our efficiencies from here.

Branding front, we've now rebranded our targeted Bass Pro locations, including more than 125 this past year. In addition, we're well underway with the rebranding process for our Bluegreen Resorts with 8 properties completed in '25. We're on track to have roughly 10 additional rebrands completed this year and the remaining 10 in '27.

So in summary, I'm happy with our performance this past year. We continue to demonstrate the strength of our differentiated model, and we made a lot of progress on the path towards our long-term algorithm. Our teams are all executing well in the field. We continue to innovate and evolve our offerings, which is showing in our results. As I look forward to the year ahead, our focus is on growth, innovation and efficiency to drive additional progress this year.

So with that, I'll turn it to Dan for more details on the numbers. Dan?

Thank you, Mark, and good morning, everyone. 2025 was a year of strong progress for Hilton Grand Vacations. Contract sales grew by 10% for the full year with both our owner and new buyer channels contributing to a positive sales growth. Additionally, the growth was driven by a mix of both strong VPGs and tour flow growth, driving 140 basis points of margin expansion in our real estate business.

We achieved our goal of realizing $100 million of run rate cost synergies associated with the Bluegreen acquisition, slightly ahead of our 24-month post-close target. These factors, coupled with a strong fourth quarter performance, put us well into the upper half of our guidance range with adjusted EBITDA of $1.15 billion, growing 4% over the prior year.

In addition to our operating performance, we augmented the long-term cash flow generation of the business by executing on our finance business optimization. We ended the year with 73% of our current receivables securitized within our target range of 70% to 80% and compared to a 55% run rate prior to the program's inception.

As part of our optimization, we introduced timeshare ABS to the Japanese market, unlocking a new funding source at an attractive cost of capital. For the year, we generated adjusted free cash flow of $756 million or more than $8.25 per share, and we returned $600 million or 79% of that cash flow to our shareholders, repurchasing nearly 15 million shares to reduce our float by over 20%.

Turning to our results for the quarter. Total revenue before cost reimbursements in the quarter grew 1% to $1.3 billion. Adjusted EBITDA to shareholders grew 12% to $324 million with margins, excluding reimbursements of 26%, up 250 basis points over the prior year.

Within our real estate business, contract sales grew 2% to $852 million. We did a great job during the quarter of converting the package pipeline that we have built over the course of the year. Tours were up 9% year-over-year to 225,000, driven by growth in our new buyer as well as our owner channels. Our strong fourth quarter tour performance also enabled us to surpass our pro forma 2019 tour flow levels for the first time.

So I'm really pleased with the result of our efforts. New buyers represented 24% of contract sales mix in the quarter. As we anticipated, VPG of nearly $3,800 declined against the prior year, owing to a difficult comparison from the launch of HGV Max to Bluegreen owners as well as the strong performance of our Ka Haku project during the initial introduction. Cost of product was 12% of net VOI sales in the quarter, down 290 basis points from the prior year, but consistent with levels we've seen throughout 2025.

Real estate sales and marketing expense was 46% of contract sales, which improved slightly against the prior year. This reflects the monetization of some of the tour flow pipeline investments we made earlier this year as a portion of that expense was recognized when packages were actually sold in prior periods, but it also reflects the efficiency efforts the team has made during the quarter.

Given the increased contribution from tours this quarter, which carries higher marginal expense, I'm really proud that the teams were able to manage costs so effectively to maintain our cost ratio against the prior year. Real estate profit was $177 million in the quarter with margins of 28%, up 150 basis points over the prior year to the highest level we achieved since 2023.

In our financing business, fourth quarter revenues were $134 million and profit was $81 million with margins of 60%. Excluding the amortization items associated with our acquired receivables portfolio, financing margins were 63%.

Looking at our portfolio metrics, our weighted average interest rate for originated loans was 14.6%. Combined gross receivables for the quarter were $4.3 billion. Our total allowance for bad debt was $1.2 billion on that $4.3 billion receivables balance or 28.6% of the portfolio. The portfolio remains in great shape overall. Our annualized default rate for our consolidated portfolios was 9.86% for the quarter, reflecting another 24 basis points of improvement from the third quarter and marking our third straight quarter of sequential improvement in our default rate.

And as of year-end, our legacy HGV and DRI 31- to 60-day delinquencies are level with prior year, and our Bluegreen delinquencies are actually 28 basis points lower than the prior year, continuing the trend of credit outperformance on our originated platform.

In late summer, we made meaningful changes to strengthen and streamline our underwriting processes, focusing more on equity at the point of sale, which we see as the primary driver of defaults. The result has significantly increased the equity and cash from both new buyer and upgrades, which should further improve our loan portfolio performance as we look into 2026.

Fourth quarter provision of 18.1% of contract sales was slightly above our long-term target for a mid-teens rate and sequentially higher than Q3's level of just under 17%. This was largely a function of fourth quarter seasonally strong owner upgrade trends, particularly on the Bluegreen portfolio, where upgrades accounted for 76% of sales during the quarter. As owners upgrade out of the acquired portfolio, the provision release for the old loan shows up in the financing segment, which was the primary driver of margins in the finance segment being up over 700 basis points year-over-year despite an interest headwind from our previously disclosed financing business optimization program.

Assuming similar mix and economic backdrop, we expect the provision to be down sequentially in the first quarter of this year and feel good about the provision in mid-teens as a percent of contract sales for the full year of 2026. As a reminder, our expectations for the financing optimization program was that it would drive an increase in our consumer interest expense during both 2025 and 2026 as we achieve our run rate securitization target of 70% to 80%.

We have several ABS deals slated for the first half of this year, including another offering in the Japanese market, which will help us achieve our full targeted run rate of term securitization receivables on an annualized basis.

In our resort and club business, our consolidated member count was over 720,000. Revenue grew 6% to $219 million for the quarter, and segment profit was $160 million with margins of 73%, growing 170 basis points versus the prior year, reflecting the consistency of our recurring resort and club business.

Rental and ancillary revenues were up 2% versus the prior year to $178 million with a loss of $8 million driven by developer maintenance fees. Revenue growth in the period was driven by higher available room nights and an increase in our overall portfolio RevPAR. While we continue to see solid demand from our stand-alone rental business, developer maintenance fees remain the largest driver of our rental ancillary business segment profitability trends.

Inventory management is a priority for our teams this year. We're focused on reducing the burden of those developer maintenance fees by working down our inventory balance through a combination of organic as well as inorganic means.

Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $3 million, license fees were $57 million and EBITDA attributable to noncontrolling interest was $5 million. Corporate G&A was $42 million or 3% of pre-reimbursement revenue, down slightly from the prior year. Our adjusted free cash flow in the quarter was $414 million, which included inventory spending of $103 million, representing an adjusted EBITDA conversion rate of 128%.

For the full year 2025, we converted 66% of our adjusted EBITDA into adjusted free cash flow or over $8.25 per share. As we discussed at this time last year, with the launch of our financing optimization, 2025's conversion rate would be above our target long-term rate of 55% to 65% before returning to that long-term range in 2026.

During the quarter, the company repurchased 3.5 million shares of common stock for $150 million to achieve our targeted $600 million of repurchases in 2025. January 1 through February 9, 2026, we repurchased an additional 1.9 million shares for $89 million. As of February 19, we had $339 million of remaining availability under our current share repurchase plan. We remain committed to capital returns as the primary use of our free cash flow in 2026 and believe our shares continue to represent a compelling value.

As we look at 2026, we expect to maintain a robust pace of repurchases of approximately $150 million per quarter with the aim of not increasing our leverage through those repurchases. This will enable us to continue to return capital to shareholders without adding additional corporate leverage to the business.

Turning to our outlook. We are establishing 2026 guidance of adjusted EBITDA before deferrals to be between $1.185 billion and $1.225 billion. Two important expense headwinds are taken into consideration in our 2026 guidance. The first item is regarding our license fees. During 2026, we will experience the annualization of the final rate step-up on our Diamond business as well as our second rate step-up on our Bluegreen business. We estimate that these items combined will be approximately $15 million to $20 million for the full year. With the Diamond step-up being fully realized by August, the majority of the headwind will be realized in the first 3 quarters of the year.

The second is the annualization of our finance business optimization. Consistent with our original expectations when we initiated the program, we expect that this will negatively impact the year by approximately $10 million to $15 million, with the majority of the impact being felt during the first half of the year. Our full year guidance also embeds low single-digit contract sales growth. As Mark mentioned, we expect this growth to be driven by tour flow this year. Specifically, our current expectation is that VPG for the full year will be down slightly as we lap the elevated growth rates from 2025. However, despite that increased mix of tours, which generally deliver lower flow-through than pure VPG changes, we still expect to maintain adjusted EBITDA margins consistent with where we ended 2025 due to continued execution against our efficiency initiatives.

In regards to the cadence of the year, our current expectation is that contract sales and EBITDA in the first quarter will be flat to slightly down as we lap the near-record VPGs in Q1 of the prior year that were driven by the strong initial launch periods for HGV Max and Ka Haku, along with the anticipated expense headwinds associated with the expected step-up in rates for our license fees as well as consumer finance interest expense as we analyze the ramp of our finance optimization program. We expect EBITDA to improve sequentially in each successive quarters, consistent with sales growth, execution against our efficiency initiatives and as the expense headwinds subside.

As I mentioned, our adjusted free cash flow conversion this year will fall within the long-term range of 55% to 65%. We expect that our 2026 conversion rate will be in the lower half of that range as we wrap up the spending on our Ka Haku project ahead of its anticipated opening later this year. But as our level of annual inventory spend trends towards a maintenance level in the upcoming years, we expect to move higher within that target range.

Moving to our liquidity. As of December 31, our liquidity position was over $1 billion, consisting of $239 million of unrestricted cash and $809 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.5 billion and nonrecourse debt balance of $2.7 billion. At quarter end, we had $235 million of remaining capacity in our warehouse facilities. We also had $943 million of notes that were current on payments but unsecuritized. Of that figure, approximately $374 million could be monetized through a combination of warehouse borrowing and securitization. While we anticipate another $388 million will become available following certain customary milestones such as first payment, deeding and recording.

Turning to our credit metrics. At the end of the quarter and inclusive of all anticipated cost synergies, the company's total net leverage on a TTM basis was 3.78x.

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

[Operator Instructions] The first question is from Patrick Scholes from Truist Securities.

Question, then I'll have a follow-up question here. You did briefly talk about quarterly cadence for 1Q, but I'm wondering if you could touch on, if possible, quarterly cadence expectations for the other quarters and also specifically within that expectations by quarter for tour growth and VPG.

Sure. Thanks, Patrick. Yes, let me kind of frame it up a little bit, and then I'll have Dan kind of jump into some of the details here. But I think, first, I'd say we made really good progress in '25 on both operational and from a financial perspective. When you think about the investments we made in our lead flow, that gives us a lot of confidence about our tour flow coming in this year, controlled our costs, especially you saw that in the second half of the third quarter and fourth quarter, grew both contract sales and EBITDA and grew both our tours and MVPGs and our real estate margins, which really led to this leading industry cash flow generation over $756 million.

So -- and then as we've been talking about, we continue to buy back shares, and we had a record $600 million last year. So as I take just a step back here, as you look at how we're tracking against our targeted algorithm of consistent top line growth with EBITDA growing a bit faster and strong free cash flow, I think we're on a really good path. I'd say in '25, we were a bit below that algorithm with strong contract sales growth, but EBITDA growing more slowly due to the investments we put in the business. But as we look into '26, our guidance today really reflects us tracking better and closer to that algorithm with EBITDA that we expect to grow slightly ahead of sales for the year. So -- and that really is about the tour flow generation.

And with that, we expect strong cash flow generation. So anyways, so I think we're tracking really well towards unlocking our earnings and cash flow power of the business and getting us set up on the right path toward that long-term algorithm we've been working on. I don't know, Dan, if you want to hit on some specifics on the VPG and EBITDA for the year.

Yes. No, absolutely, Patrick. I know we talked about it a little bit in our prepared remarks. But when you think about Q1 specifically, we're looking at high single-digit growth on the tour flow side, mitigated by high single-digit decline on the VPG side, which is as expected and very consistent with what we saw in Q4 given the tough comps.

As we look on the cost side, there are some pressures. I mentioned the license fee pressure as well as the financing business optimization. The one thing I'd also point out is from a provision perspective, we look to return to that mid-teens level for the full year of 2026. And if you look at year-over-year, Q1 was favorable to that last year. So there's a little pressure on that side. Those components really yield to that slightly down EBITDA in Q1.

But when you think about it sequentially throughout the year, we're really going to capitalize on all the package pipeline work that we did last year. You'll recall, we saw some outsized package performance, in particular, in Q2 and Q3 last year. Those will be playing out this year. And we see strong tour flow growth, coupled with easier comps as we progress out the year. Clearly, Q1 being the toughest comp with the first full quarter launch of HGV Max to the Bluegreen owner base.

And as we progress throughout the year, those headwinds, in particular, the license fee with the Diamond being fully ramped starts to fall away in Q3. And then the optimization of the financing business should be fully annualized by the time we hit midyear. So it helps sequential growth for EBITDA from quarter-to-quarter to quarter-to-quarter throughout the year. So that's how we see it playing out. So a lot of details in there. So if you have any follow-up, happy to address those.

Okay. And then actually, my follow-up question is to you, Dan. Just with that uptick in the 4Q loan loss provision, you called out it having to do with upgrades to legacy existing Bluegreen owners. Can you -- there, I say, talk a little bit more about the sausage making into that. There's definitely a little bit of confusion out there of why such a step up. And if you could just help clear the air a little more color and detail around that.

Yes. No, absolutely. Very important question. And it's one of those scenarios where purchase accounting still is coming into play since that acquisition is relatively recent. First, though, what I would like to say is the portfolio in general is performing extremely well. I talked about in my prepared remarks, about us making meaningful changes from the underwriting process. A little bit of an oversimplification, but a key aspect of that was eliminating a program that Bluegreen had in place. We've accomplished this about midyear in 2025, where we're now requiring additional capital down -- additional deposits down from the consumer as they upgrade in particular.

Previously, Bluegreen allowed for a no cash upgrade option. And what we've seen is material upticks in the deposits, especially in the Bluegreen side that have yielded strong performance on those originated loans. So those are -- that performance is improving. We talked about the 31- to 60-day delinquency rates. On the HGV and the Diamond side, they're holding steady year-over-year, even sequentially, and the Bluegreen has actually improved by 20 basis points, which is good to see. And we expect that improvement to continue, especially with the change in the underwriting.

Now from just a geography purchase accounting item and how you saw an uptick in Q4, the -- how it works from an accounting perspective is when someone in the acquired portfolio upgrades into an originated portfolio, the release of the reserve associated with that original loan actually goes through financing to the extent there's not already a reserve in place. And then you fully reserve the new loan into the real estate business, and that goes into the percentage count. So you're effectively reserving a full balance on the new loan even though you're only recognizing incremental contract sales, which yielded an optic -- uptick to that provision rate.

But just to avoid any confusion, we're very happy where our portfolio sits and fully expect to be in that mid-teens range in 2026. So we'll see that tick down in Q1 and remain lower throughout the year in 2026, obviously, assuming no material deterioration in the macro environment.

The next question is from Ben Chaiken from Mizuho.

I think maybe stepping back a little bit, excess inventory has been a headwind on the rental side for you guys, but also the entire industry broadly driven by the developer maintenances. If I caught you correctly, I think you mentioned there were -- and maybe I'm conflating 2 comments you made, but I think you were referencing some organic and inorganic ways to bring down that inventory again, if I caught you. One of your peers recently took some strategic action. Would it make sense to streamline some of your assets and locations? Why or why not? And then again, did I hear you correctly?

Yes. No, I think you heard us correctly. we've got through a very thorough financial brand and market analysis on the properties that we have in our portfolio. And we picked up a lot of really good inventory in the acquisitions and a lot of great markets. But ultimately, we're looking to try to optimize the portfolio for both our members and our shareholders. And as we've discussed in the past, some of the inventory that we acquired just doesn't align with our long-term vision for the portfolio.

So I think as we get closer to making a final decision on our plans, we'll provide a lot more detail. But I think you've heard it from our competitors and you're hearing it from us. This is really nothing related to legacy HGV. That product is in great shape, and we feel like we've put the best new product in the market within our sector over the last decade. So that's in great shape. It's just really when you acquire 2 companies like that, there are properties that just meet the portfolio requirements. So we're looking at it, and we'll give you an update as soon as we have a final plan.

Got it. And recognizing you may not want to bite on this one, but any way you could maybe ballpark a range of number of assets?

No, I think we're still in the middle of the analysis. Look, we've been working on this for a while, but I prefer to wait and give you the bigger picture and a more concise program that we're looking to move on.

Okay. And then just as a quick follow-up, just any thought process on -- or maybe more color on your philosophy around buybacks. Is $150 million a quarter kind of the right number? Why not more, just given kind of the amount of free cash flow generated and your valuation?

That's definitely a fair question. It clearly is our primary directive when it comes to -- well, primary choice of use of capital these days as the stock is a compelling value at these levels. And we anticipate continuing at $150 million per quarter. What I would say from our mindset is we're not of the mindset that we want to increase our leverage ratio to repurchase shares. We're very comfortable with the leverage that we're operating at today, which is actually a downtick from where we were prior quarter and year-over-year. But at the same time, levering up the company to buy back shares, given the robust level of the share repurchase program that we currently have in place is not what we're looking to do. That's why we are very comfortable at the $150 million level per quarter.

The next question is from Stephen Grambling from Morgan Stanley.

I may have missed this in some of the opening remarks, so apologies. But I think this is the first year where NOG turned slightly negative. And that was kind of like a hallmark, I think, of the story relative to some of the peers. Maybe if you could just shed some light on some of the underlying dynamics there. Obviously, on the last comment about maybe club management, does that have any impact on owner growth that we should be anticipating? And do you expect it to maybe stabilize at some point going forward?

Yes. No, Steve, this is Mark. First, I'd say that I think when you look at our business right now, and it got a lot mature with these acquisitions, right? With the Diamond acquisition, that was -- the strategy was a roll-up strategy, and they acquired 11 companies over time and some of those companies go way back and -- as far as 40, 45 years back. And so you have a situation where some of these owners, some of these members have been in the system for a long time. And we continue to work with them to exit them out appropriately based on a one-by-one analysis of that. So we have some pressure on that side.

I'd say the good news is we have generated -- when you look at Max since we rolled out, we've got 266,000 new Max members in less than 4 years. And of that, 175,000 are new buyers, meaning they bought within the last 4 years. So we continue to bring new members in the system. And we've talked about it, I think, on the last call, a new member, the lifetime value is 6x what a member that's been in the system for 15 years. So -- and when you look at our Max membership base, 50% of that base is -- the tenure of ownership or membership with us is 5 years or less and nearly 70% are 10 years or less. So we continue to build lifetime value into the business and more recurring revenue. And so it's just part of the equation. It's part of the business.

And for HGV, when we were stand-alone before the acquisitions, we were a younger company, I'd say, only in the business for around 30 years versus we acquired some of these companies that have owners that have been in the system longer. So look, our focus continues to be on driving new buyers on an absolute basis. We believe we've been driving more new buyers on an absolute basis into our system than anybody in our sector, and we'll continue to stay focused on that.

The next question is from David Katz from Jefferies.

I wanted to just talk about the sales force a bit. Such an important driver in this business. Where are you, would you say, in terms of having the force where you want it? Are there any sort of strategic changes or personnel changes or anything like that, compensation structures, et cetera? Give us a kind of lay of the land there, please.

Yes. So first of all, a big shoutout to our sales force because they do an amazing job. If you think about 2024, we broke through a barrier, $3 billion barrier in contract sales, and that wasn't good enough. They grew at 10% last year, right? So I don't know of any other company that's ever hit $3 billion nor grew at 10% at that level. So we got a great sales force. Dusty Tonkin leads our team there. We've got great leadership with Mike Reilly under him, a great team out there. So we feel really good about our teams.

It's -- are we exactly where we want to be? Absolutely not. You always want to be improving. One of the things that you have to think about for us, and we're still continuing to evolve is -- we went from a business back in 2019, where 85% of our business was generated out of 7 markets. Now we're in 40 markets. So we historically were very focused on large markets, and I think we continue to dominate in those large markets. But we also are now -- have developed a lot of mid and small markets. And so those are markets where we continue to build our teams and our capabilities, but I'm very, very pleased with the progress we're making. We've got a great team, and they continue to drive results.

[Operator Instructions] There are no further questions at this time. Before we end, I will turn the call back over to Mark Wang for any closing remarks. Mr. Wang?

All right. Well, thank you for joining the call today and another thank you to our team members for the strong year of execution and, most importantly, for taking care of our members and guests. I'm extremely proud of what you've accomplished, and we look forward to updating you on our Q1 call.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good morning, and welcome to Hilton Grand Vacations Third Quarter 2025 Earnings Conference Call. A telephone replay will be available for 7 days following the call. The dial-in number is (844) 512-2921 and enter pin number 13751068. [Operator Instructions]

I would now like to turn the call over to Mark Melnyk, 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 and these statements are effective only as of today. We undertake no obligation to publicly update or revise these statements.

For a discussion of some of the factors that could cause actual results to differ, please 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 reflect accounting 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.

For ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results will refer to results excluding the net impact of construction-related deferrals and recognitions for all reporting periods. To help you make more meaningful period-to-period comparisons, you can find details of our current and historical deferrals and recognitions on Table T1 of our earnings release and the complete 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.

With that, let me turn the call over to our CEO, Mark Wang. Mark?

Good morning, everyone, and welcome to our third quarter earnings call. We had strong operational and financial execution this quarter with 17% growth in our contract sales driving material improvements in our real estate business profitability versus the prior year. Those results enabled a near double-digit growth in our EBITDA 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 in 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 our lead flow, improve our execution and enhance our value proposition, and 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 EBITDA guidance for the year, along with our expectation of achieving high single-digit contract sales growth.

Turning to the results for the quarter. Reported contract sales were up 17% to $907 million, which was a record for the business on a pro forma basis. Adjusted EBITDA was $302 million with margins, excluding reimbursements of 24%. And as I mentioned, I'm encouraged by the composition of our sales in the quarter. Consolidated tour growth of 2% continued the consistent trend of improvement we've seen this year with both owner and new buyer channels contributing to the growth.

We grew new buyer tours at our legacy and Bluegreen 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 one of our Mainland regions.

Looking at our forward demand indicators, which also remained healthy. Occupancy in the quarter was equal to the prior year at 83%. Consolidated arrivals in the fourth quarter are ahead of 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 HGV 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 HGV Max over the past 12 months. And in doing so, we achieved an important milestone, surpassing 0.25 million HGV Max members, including nearly 30,000 legacy Bluegreen members now enrolled in the program. So we continue to see robust demand for the Max program and the compelling value proposition it offers.

In our rental business, continued travel demand supported growth in much of our portfolio. While the Las Vegas FIT rental market remained 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 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.

Turning next to an update on our initiatives and integration. We continue to make progress with our lead generation initiatives to drive package sales and activations. The packages we sold in the first 6 months of the year are starting to convert into tours and were a key contributor to our return to positive 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 those packages convert into tours and ultimately into contract sales, we'll see the benefit of new buyers entering the system and adding additional lifetime value.

Regarding our product enhancement initiatives, HGV and HVC Resorts began receiving Max members from Bluegreen this month with those members now able to easily use their points for stays at our resorts across all of our brands. And we plan to launch additional Hilton benefits for our newest Max members 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 Bluegreen integration, we continue to make good progress. We reached $94 million in our run rate cost synergies this quarter and remain on track with the targeted $100 million 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 Grand Vacations quality of product and service backed by the Hilton brand. On the property front, we've rebranded our first 7 Bluegreen properties with the goal of having our targeted rebrands completed over the next 3 years.

Our technology teams also continue to make great progress on our digital transformation path, rolling out additional tools for our teams while also introducing new enhancements to improve our member experience. This quarter, we've upgraded our proprietary -- my explorer chatbot 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 Choice and Great 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 results. 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.

So with that, I'll turn it over to Dan for more details on the numbers. Dan?

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 reduced reported GAAP revenue and were related to presales of our Ka Haku and Kyoto projects. We also recorded $42 million of associated direct expense deferrals. Adjusting for these two items would increase the adjusted EBITDA to shareholders reported in our press release by a net $57 million to $302 million. In my prepared remarks, I'll 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 to contract sales growth of 17%. That fueled an acceleration in both our top line and EBITDA growth with strength in our real estate, financing and club and resort businesses. Real estate margins had their second consecutive quarter of meaningful expansion and our recurring finance and club and resort businesses 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.

We finished the quarter with 69% of our current receivables securitized as we continue to execute against our financing business optimization. And while our cash generation was lower 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 cost reimbursement in the quarter grew 12% to $1.3 billion, and adjusted EBITDA to 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 $907 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. New buyer mix remained 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.

Turning to VPG, our tour efficiency initiatives, HGV Max and Ka Haku launches underpinned an acceleration in growth to $3,900, 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.

Cost of product 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, a 300 basis point improvement from the prior year. Similar to last quarter, we outperformed our package sales estimates, which will help support future tour growth. Due to the nature of timeshare marketing, the expenses related to that outperformance are realized upfront and will convert to EBITDA as we tour those package 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.

In 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, our 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.

In our Resort and Club business, our consolidated member count was nearly 722,000, reflecting recapture activity during the quarter. And as Mark mentioned, we crossed over 250,000 members in HGV Max, which is a great milestone. Revenue grew 8% to $193 million for the quarter due to fee increases and stable member activity rates and 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 in RevPAR across the portfolio as a whole. The Las 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 in 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 VPGs.

Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $5 million, license fees were $56 million, and EBITDA attributable to noncontrolling interest was $4 million. Corporate G&A 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 EBITDA 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'll generate $8 to $9 of adjusted free cash flow per share for the year, and we'll continue to return the majority of that cash flow to shareholders. During the quarter, the company repurchased 3.3 million shares of common stock for $150 million. From October 1 through October 23, we repurchased an additional 1.1 million shares for $47 million. Including these shares, we've repurchased a total of 12.4 million shares year-to-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 compelling value. As of October 23, we had $531 million of remaining availability under our current share repurchase plan.

Turning to 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 30, our liquidity position consisted of $215 million of unrestricted cash and $632 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.7 billion and a nonrecourse debt balance of approximately $2.5 billion. At 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 unsecuritized. Of that figure, approximately $586 million could be monetized through a combination of our warehouse borrowing and securitization. But we anticipate another $358 million will become available following certain customary milestones such as first payment, deeding and recording.

Despite volatility in some portions of the credit market, our 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 a TTM basis was 4.0x.

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

[Operator Instructions]. And our first question comes from Patrick Scholes with Truist Securities.

I wonder if it's possible you could give us some initial high-level expectations or thoughts for 2026? And then specifically within that, talk about 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, given that, that seems to be going the other way, I'd like to hear just sort of high level for financing as well. If you can.

Sure. Yes. Patrick, thanks. Of course, we want -- we're very focused on finishing the year strong. So that's first and foremost. But -- and as usual, we'll provide guidance on our first call next year. But at a high level, I think we're really well set up with momentum heading into '26 and expect to get to the growth a bit differently than we did this year from a top line standpoint. We're continuing to see solid demand for leisure travel despite some of the noise out there and we expect good tour flow growth next year, resulting from the investments we made during the year and which is going to be the primary driver for contract sales growth next year.

You have to remember, we're lapping the Max launch with Bluegreen and the Ka Haku property that we opened up or launched in launch sales in Hawaii. So -- and then, of course, the new buyer tour flow growth is going to weigh a little bit on our VPG. So it will be less of a driver on contract sales growth next year. But we're going to stay very focused on leveraging our fixed cost and expect some operational cost improvements. All of that said, we believe we're going to be able to continue to drive strong free cash flow. 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 financing profitability that you asked on the second part of that question.

Thanks, Mark. And Patrick, yes, absolutely. I mean, as Mark underscored, I think we're well positioned for 2026. When it comes to the financing business, one element that we will see in 2026 is some headwinds on that front just as we continue to maximize our finance business optimization program. As you recall, we expected that to take about 18 months, so that will run into next year. Now that will be slightly offset by a growing portfolio.

And as you will recall, last quarter, we announced the first securitization in the Japanese market. We'll be looking to attack that market again next year, too. So hopefully, with the combination of all those things, you'll see margin hold despite the headwind and potentially grow seeing how rates play out but you can expect us to take full advantage of all those opportunities.

And if I can ask just a follow-up question here, actually has to do with the VPG -- the very strong VPG results in 3Q, up 15%. Certainly, I follow a lot of travel and leisure companies, and we don't see much of anything growing 15% at the moment. If you had to -- and you kind of did this in your prepared remarks. But just boil it down and summarize how you're doing something that's growing 15% versus sort of the rest of the travel world not growing much of anything? Boil it down for me.

Yes. So Patrick, first of all, I'd say our team did a great job, great execution. And when you look at where and how we accomplished this. It's really a similar story from a geographic perspective. East, West, Mid-Atlantic, South, Vegas was even up 10% in a market that's struggling from an FIT standpoint. Orlando, New York, Hawaii, all double-digit gains across the business.

And so why do we think we're seeing this? I think it really is a testament to the new club that we launched. We innovated and launched a brand-new club. And it was a reinvention of what we've done, and Max is performing extremely well. And it's been a catalyst for both owners and new buyers. We reached 250,000 members in just over 4 years. if you go back and you look at HGV legacy club, it took us 25 years to reach that mark, right?

So -- and what's happening is -- and most importantly, is our Max owners are reporting higher satisfaction rates and engagement scores. And our sales advisers continue to deliver on great vacation solutions. So owners are upgrading earlier and more frequent than we have in the past and driving record VPGs.

So -- and we're seeing that from our legacy club members upgrading into Max, and we're also seeing existing Max members who've joined over the last 3 to 4 years upgrade. In fact, I talked about the 250,000 Max members. We actually have 360,000 transactions in Max. So -- so I really attribute a lot of the performance to the great work our teams did rolling out this new membership program. It really has improved our value proposition. We've added a lot more Hilton benefits to connect our members to the broader Hilton ecosystem.

And when you look at our base of members in Max, just above 50% of our Max members have a tenure 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, the rapid growth in Max space really bodes well for our business and just great execution.

Our next question comes from Ben Chaiken with Mizuho Securities.

I would love to touch on flow-through. You kind of -- you touched on it in the prepared remarks, but I want to dig in a little further. So top line was strong, but it just feels like there's a couple of things working against you. You mentioned higher tour packages. I think you said this was worth $7 million. So essentially, just to confirm, these are expenses incurred in the quarter, of which you get revenue in the future. And the $7 million would be the amount above the normal course of business. I guess, is that fair?

And then it also looks like you had higher precision and reportability and other adjustments. Just anything you would flag in the P&L. And then to the extent you could quantify it, that would be great.

Yes. Let me touch on some of that, and then I'll let Dan jump in with some more detail here. But there's always a level of investment in the business for growth, right? And we continue to invest in high-tech and high-touch solutions really to reach a bigger audience. And -- and '25 has been a year of above-average investment in future customer acquisition. And that was by design.

On the high-touch side, we've got great partners, right? We added 41 new marketing sites across Hilton, Great Wolf and Bass Pro this year. And we continue to invest in our digital channels. So these initiatives require upfront investment in staffing, technology. So the results have been great. 10% year-over-year package sales growth for 2 consecutive quarters.

Now 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 one of our properties. And we're going to start seeing that growth in Q4 and beyond. So anyways, we expect the upfront investment will bring us some steady level growth in the future. And more importantly, as we move more forward out and we go into next year, we want to get on a more consistent cadence between our package sales and tour flow. And our expectations next year is that the level of investment will be more closely matched to the revenue.

And then Dan, I think there's probably a couple of other...

Yes. No, definitely, Ben, I’ll just address some of your specific questions. To your point, the marketing packages activity, that $6 million or $7 million it rounds to $7 million is above the ordinary course of business. As you'll recall, those are packages that will be traveling in the future. That's when we'll recognize the package revenue, but the cost is upfront. And obviously, as they come to the properties, their tour and we will recognize contract sales to the extent we sell them. So that's a piece of it.

To your question on reportability, there is a piece associated with reportability. 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 this year compared to last year. That's roughly $8 million. So that's really effectively timing, just getting past that rescission period that consumers have.

And then in addition to that, and this is part of the investment as well, from an FDI perspective, we have rolled out some of the higher cost FDIs to the entire system. That yielded a elevated level of FDIs in Q3. As you know, it's one 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 1 point to 1.5 points. So all of those things yielded some compression on the flow-through.

Got it. That's helpful. And then the rescission, that $8 million, that basically drops straight to EBITDA. Is that fair? Or how do I think about that 8 and the flow-through associated with it?

There's some deferral, but we'll recognize all that as we flow into Q4.

Got it. And 1 to 2 points on the FDI side, is that $1 million to $2 million? Or when you say points, I didn't totally call that.

So that's FDI as a percentage of owned contract sales or contract sales, call it. That would equate to between $9 million and on the higher end, $15 million for the quarter.

Okay. 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? I think we've talked about in the past maybe reducing some inventory spend, which obviously is a good guide for free cash flow conversion. And then I'm not sure if you have any big beautiful bill benefits. But just again as a percentage of EBITDA, so EBITDA free cash flow conversion in '26. What's kind of like -- is that a good ballpark?

Look, I'll start with the taxes. Obviously, like every other operator out there, we're trying to take full advantage of 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 EBITDA, so call it, 13% to 16%, somewhere in that realm.

To the degree we can take advantage, we will. From a cash flow and an investment perspective on inventory, last time I think we've talked about this, it's worth highlighting again. Right after the Bluegreen acquisition, we expected to be in a position where we would need to invest between $350 million and $450 million in inventory on an annualized basis. Since then, we're obviously capitalizing to a great degree on recaptured inventory, and that's going to allow us to lower that long-term level of investment from $350 million to $450 million down to roughly $300 million.

Now we've been talking about this for a few years because we did push off inventory investments during COVID. So we're still wrapping up some of those larger investments, most notably Ka Haku and Maui and Hawaii. So this year, we will spend just under $400 million. 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 Woronka with Deutsche Bank.

I was hoping we could 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 -- I know you said that all the metrics are up for first timers. But is there any difference you see between maybe a Bluegreen sourced first-time buyer and HGV depending on how you source them? Just thinking about in terms of close rate or VPG or things like that. Is there any way to segment any kind of trends for first-time buyer versus an existing buyer?

Yes. So, I've got a few data points here I'll share with you that -- as you know we're fully committed to new buyers, right? And really pleased with the progress the teams are making. On an absolute basis, we're sourcing more new buyer tours to our sales centers and driving more transactions than anybody in our sector. And that's really been the case for the last 15 years.

So, we continue to be very, very focused. And we talked about the investment. I talked earlier about the investments we've made this year to even bolster that going into '26. And so, what I'd say is, number one, on the VPG front, new buyer close rate reached its highest level since Q2 of '23, and we're really pleased to see that movement there. From a generational standpoint, 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, close rates were steady in the low net worth tier, and they increased in the middle and high-tier net worth customers. So, we're seeing it right now, the consumer is stable and we're very focused on executing on all the things that we can control.

Okay. Very helpful. And then a follow-up question. How should we think about kind of getting that rental business back to 0 or better from a EBITDA standpoint? I know some of the challenges in unsold inventory. Maybe you could give us a little bit of a walk-through in terms of what has to happen and timing and how we should think about that for the next couple of years, if it's a step function or more of a grind?

Yes. No, absolutely. So, 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 lower the developer maintenance fee. That will contribute heavily to improvement on the rental side.

Now we've talked about this last quarter to some degree. From a recaptured inventory standpoint, that is going to yield lower net owner growth over the next 24 to even 36 months. As you saw this quarter, it's relatively flat and it will go negative. But that's a big component of it. The other component that should help drive margin improvement, holding [all else equal], which I know is a big assumption, especially when you think about ADR rates, but it's converting properties over to the Hilton brand. We do realize ADR benefits from that standpoint, and we also realize cost benefits from an OTA perspective. But it's really a combination of all those components, and it is a long-term process to get there.

Yes. And then I'd just add on to that, that I think our teams have done a really thorough job this year in the resort operations side, really looking for improved efficiencies in our operations. And I think we're going to see our members are going to see that the increases that we're looking for next year are by average standard we're going to be below what we've historically seen.

And then 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 quite frankly, there's just not 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 what I mean by that, where we have maybe oversupply or a product that doesn't really fit the portfolio, where in the future, we can figure out a way to move that inventory off our balance sheet and move along to somebody else that can better utilize it.

And moving next to Brandt Montour with Barclays.

So, there's been a lot of talk across consumer land this earnings season and as well as in travel, right, about the high end versus low end and you're seeing it on the strip and you're seeing it in elsewhere in different travel verticals. Mark, you gave some great stats and you kind of cut it up a bunch of different ways. It doesn't sound like you're seeing anything. But if you just look at close rates for new owner sales across your properties and you look at the smaller properties, a lot of those were legacy Diamond versus maybe some of the bigger ones in Orlando or other markets. Do you see any divergence based that would sort of track that theme at all?

Well, I think Brandt, I think the divergence really is more execution than it is from a consumer standpoint. Like I said, our new buyer close rate reached its highest amounts or highest rate since the second quarter of '23. And I talked about it a number of quarters ago around the low net worth tier customers. That tier has really stabilized. It really hasn't come back to the historical levels.

But what we've seen, Brandt, is that middle to higher net worth tier really improve. And we have spent a lot of time this year on optimizing our tour. And we continue to evolve how we use our data and analytics and our marketing to drive new buyers and really sharpening our qualifications and the discovery process to just gather better information early on.

So, at the end of the day, we're trying to be much more effective in sourcing our customers. And so we're really focused on trying to steer trying to put our money and our focus to that mid- to higher tier net worth customer than the lower tier right now. And like I said, they've stabilized, but they really haven't recovered to the levels we've historically seen.

And the only thing I'd add to that, just from a performance standpoint is when we look at our portfolio, as you can imagine, one of the things we look at on an almost daily basis is delinquency rates between 31 and 60 days is a leading indicator from a standpoint. And we slice that data to the end degree, but just to oversimplify it to some extent, if we look at those with FICO scores greater than 650 versus those with lower than 650, what I can tell you is sequentially and generally speaking, it's been trending actually positive greater than 650 and below 650 has been very stable. So even on that front, we see positive trends in totality.

David Katz with Jefferies has our next question.

I appreciate all the detail around some of the momentary or pedestrian investments and growth as well as some of the timing issues that seemed a bit more momentary also. How do we think about, in a general sense, 2026, right? Are -- is that an investment year to some degree also? Or should we think about modeling this as kind of a year to reap what you've invested here?

Yes. David, I think as I mentioned just a few minutes ago, I think what you're going to see next year is the big lift in investment for really broadening and building out our new buyer marketing channels and on the digital side, there'll be some investment there, but it won't be at the same level and -- that we put into this year. And so our expectations are next year, we're going to be looking at tour flow growth that exceeds what we had this year. And we're looking more in that kind of low to mid-single-digit tour flow growth and with a little bit more moderated VPG next year.

And so the investments 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 start seeing the revenue generation more closely match up to the expense side. And so that's our expectation next year. And our goal for next year is -- our goal is to see -- is to be able to exceed bottom line growth rate or grow the bottom line at a faster rate than our top line.

Yes. I mean another way to think about it is just from '25 to '26, it's kind of bridging to that long-term algorithm that we've historically talked about. Low single-digit tour flow growth, low single-digit growth in VPG to mid -- would translate into mid single growth in contract sales and then a focus on leveraging cost to drive hopefully higher EBITDA growth.

Our next question comes from Stephen Grambling with Morgan Stanley.

Just wanted to follow up on some of the inventory and sales details, and specifically maybe digging into Hawaii and some of that inventory specifically. I guess how would you compare and contrast the mix of the inventory that's left to kind of sell specifically in Hawaii? And when you think you'd be kind of sold through that over the rest of -- as we think about next year and even maybe beyond?

Yes, Stephen, no, we're -- as far as a mix standpoint, we've been doing this for a long time, and it's -- we're very, very focused on a balanced mix. And so we're -- I think when we think about it, we're very much on track to be able to utilize the benefit of Ka Haku for a number of years. And I'd say the same thing around Maui and also on the Big Island. We're still converting parts of that hotel into units. So we're in a really good position from a deeded standpoint. Ideally, on a long-term basis, we want to be at about 2.5 years of deeded inventory. And right now, we're running a little bit over that. So we're in a good position there.

In the long run, our goal is to bring our COP down and bring our balances down. And as Dan alluded to earlier, that will benefit our rental segment. So all in all, I think we're in a really good position from an inventory standpoint and especially that high-end inventory that has a lot of demand across the whole network. We're very measured in how we release that inventory to make sure it's balanced over a number of years.

Moving on to Danny Asad with Bank of America.

Dan, and I think it was to Brandt's question, you called out or you mentioned that the delinquencies when it comes to the FICOs that are below 650 have been stable. Look, at the same time, we're reading about subprime auto delinquencies ratcheting up and like to Brandt's point, other pockets of the consumer is struggling. So I guess how do you square specifically how like the sub-650 bands of timeshare loans are stable here and there's no -- from a delinquency standpoint and then other places where it's kind of not.

Yes. No, look, that's a great question. I think there's a twofold answer there. First and foremost, I would say, we are very focused on, when it comes to the consumers' mindset, on maximizing their desire to pay, right? And that comes down to how we interact with them from the starting point at 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 emotional attachment to timeshare and vacationing. So I think that element holds strong.

And then to be quite blunt, the subprime FICOs are not our core either. So we probably have, just to a degree, lesser exposure than some of the -- some of our counterparties who are having a larger problem with it. But sequentially, we've held up well and the trending is positive on that below 650. And then even when I think about annualized default 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 we're seeing -- as we sit here today, we're seeing everything hold stable to positive.

Yes, Danny, I'd just add too. I think Dan touched on this a little bit. And I mentioned it earlier. Look, our Max owners are reporting much higher satisfaction rates and engagement scores. And I think it's a testament to our club team and all of those that are touching our customers across the network, not just the upfront sales process. And as I mentioned, I gave some stats on the tenure within the Max program. And it's pretty impressive how young a base we have in the Max program. And I think you can't -- I can't underestimate or overstate the fact that high satisfaction and engagement scores are super important in people's willingness to want to pay.

Got it. And just as a follow-up, 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 2026?

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

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 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 at our 200 resorts for delivering heartfelt hospitality and elevated experiences to our members and guests and to our members for trusting HGV 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.