UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________ to ________

Commission file number 001-37794

Hilton Grand Vacations Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	81-2545345
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

6355 MetroWest Boulevard, Suite 180,
Orlando, Florida	32835
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code (407) 613-3100

(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	HGV	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of November 5, 2021 was 119,837,039.

HILTON GRAND VACATIONS INC.

FORM 10-Q TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.		Financial Statements	1
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.		Controls and Procedures	56
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		57
Item 1A.	Risk Factors		57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
Item 3.	Defaults Upon Senior Securities		62
Item 4.	Mine Safety Disclosures		62
Item 5.	Other Information		62
Item 6.	Exhibits		63
	Signatures		65

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	September 30,		December 31,
	2021		2020
	(unaudited)
ASSETS
Cash and cash equivalents	$	334	$	428
Restricted cash		230		98
Accounts receivable, net of allowance for doubtful accounts of $44 and $20		278		119
Timeshare financing receivables, net		1,767		974
Inventory		1,461		702
Property and equipment, net		822		501
Operating lease right-of-use assets, net		76		52
Investments in unconsolidated affiliates		56		51
Goodwill		820		—
Intangible assets, net		1,953		81
Land and infrastructure held for sale		41		41
Other assets		259		87
TOTAL ASSETS (variable interest entities - $1,113 and $800)	$	8,097	$	3,134
LIABILITIES AND EQUITY
Accounts payable, accrued expenses and other	$	707	$	252
Advanced deposits		116		117
Debt, net		2,929		1,159
Non-recourse debt, net		1,290		766
Operating lease liabilities		93		67
Deferred revenues		270		262
Deferred income tax liabilities		798		137
Total liabilities (variable interest entities - $1,190 and $771)		6,203		2,760
Commitments and contingencies - see Note 21
Equity:
Preferred stock, $0.01 par value; 300,000,000 authorized shares, none    issued or outstanding as of September 30, 2021 and December 31, 2020		—		—
Common stock, $0.01 par value; 3,000,000,000 authorized shares,   119,803,728 shares issued and outstanding as of September 30, 2021 and   85,205,012 shares issued and outstanding as of December 31, 2020		1		1
Additional paid-in capital		1,611		192
Accumulated retained earnings		282		181
Total equity		1,894		374
TOTAL LIABILITIES AND EQUITY	$	8,097	$	3,134

See notes to unaudited condensed consolidated financial statements.

1

HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in millions, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues
Sales of VOIs, net	$	488		$	24		$	597		$	80
Sales, marketing, brand and other fees		118			52			252			171
Financing		53			40			127			127
Resort and club management		99			39			192			122
Rental and ancillary services		112			20			198			77
Cost reimbursements		58			33			131			105
Total revenues		928			208			1,497			682
Expenses
Cost of VOI sales		130			8			154			21
Sales and marketing		234			79			432			297
Financing		19			13			43			39
Resort and club management		26			9			45			27
Rental and ancillary services		84			24			151			85
General and administrative		41			22			92			65
Acquisition and integration-related expense		54			—			83			—
Depreciation and amortization		48			11			71			34
License fee expense		24			11			57			39
Impairment expense		1			—			2			—
Cost reimbursements		58			33			131			105
Total operating expenses		719			210			1,261			712
Interest expense		(42	)		(10	)		(74	)		(32	)
Equity in earnings (losses) from unconsolidated affiliates		1			(1	)		7			3
Other (loss) gain, net		(20	)		1			(22	)		—
Income (loss) before income taxes		148			(12	)		147			(59	)
Income tax (expense) benefit		(49	)		5			(46	)		12
Net income (loss)	$	99		$	(7	)	$	101		$	(47	)
Earnings (loss) per share:
Basic	$	0.92		$	(0.08	)	$	1.08		$	(0.55	)
Diluted	$	0.90		$	(0.08	)	$	1.07		$	(0.55	)

See notes to unaudited condensed consolidated financial statements.

2

HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Nine Months Ended September 30,
	2021			2020
Operating Activities
Net income (loss)	$	101		$	(47	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		71			34
Amortization of deferred financing costs, acquisition premiums and other		19			13
Provision for financing receivables losses		77			57
Impairment expense		2			—
Other loss, net		7			—
Share-based compensation		32			10
Deferred income tax expense (benefit)		9			(50	)
Equity in earnings from unconsolidated affiliates		(7	)		(3	)
Return on investment in unconsolidated affiliates		2			—
Net changes in assets and liabilities, net of effects of acquisition:
Accounts receivable, net		(102	)		65
Timeshare financing receivables, net		(36	)		87
Inventory		(11	)		(59	)
Purchases and development of real estate for future conversion to inventory		(25	)		(27	)
Other assets		62			(25	)
Accounts payable, accrued expenses and other		5			(48	)
Advanced deposits		(5	)		4
Deferred revenues		(165	)		75
Net cash provided by operating activities		36			86
Investing Activities
Acquisition of Diamond, net of cash and restricted cash acquired		(1,585	)		—
Capital expenditures for property and equipment		(11	)		(6	)
Software capitalization costs		(14	)		(16	)
Investments in unconsolidated affiliates		—			(2	)
Net cash used in investing activities		(1,610	)		(24	)
Financing Activities
Issuance of debt		2,650			495
Issuance of non-recourse debt		96			495
Repayment of debt		(843	)		(62	)
Repayment of non-recourse debt		(234	)		(403	)
Debt issuance costs and discounts		(61	)		(8	)
Repurchase and retirement of common stock		—			(10	)
Payment of withholding taxes on vesting of restricted stock units		(5	)		(3	)
Proceeds from employee stock plan purchases		1			1
Proceeds from stock option exercises		10			—
Other financing activity		(2	)		(2	)
Net cash provided by financing activities		1,612			503
Net increase in cash, cash equivalents and restricted cash		38			565
Cash, cash equivalents and restricted cash, beginning of period		526			152
Cash, cash equivalents and restricted cash, end of period	$	564		$	717
Supplemental disclosure of non-cash operating activities:
Non-cash transfer from Property and Equipment to Inventory	$	—		$	301
Supplemental disclosure of non-cash investing activities:
Non-cash issuance of stock(1)	$	1,381		$	—

(1) Non-cash issuance of stock related to our acquisition of Diamond. See Note 3: Diamond Acquisition for additional information.

3

HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in millions)

					Additional		Accumulated
	Common Stock				Paid-in		Retained			Total
	Shares		Amount		Capital		Earnings			Equity
Balance as of December 31, 2020		84	$	1	$	192	$	181		$	374
Net loss		—		—		—		(7	)		(7	)
Activity related to share-based compensation		—		—		2		—			2
Balance as of March 31, 2021		84	$	1	$	194	$	174		$	369
Net income		—		&#