SHARE-BASED COMPENSATION

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock Plan

On May 3, 2023, the 2023 Omnibus Incentive Plan (“2023 Plan”) was approved by our shareholders to replace the 2017 Omnibus Incentive Plan and the 2017 Plan for Non-Employee Directors (the “2017 Plans”). The 2023 Plan authorizes the issuance of restricted stock units (“Service RSUs”), nonqualified stock options (“Options”), time and performance-vesting restricted stock units (“Performance RSUs”), and stock appreciation rights (“SARs”) to certain employees and directors. Pursuant to the 2023 Plan, 5,240,000 shares of our common stock are reserved for issuance. The 2017 Plans remain in place until all of the awards previously granted thereunder have been paid, forfeited or expired. Shares underlying awards that are canceled or forfeited under the 2017 Plans without the issuance of any shares are added to the 2023 Plan share pool. However, the shares which remained available for issuance under the 2017 Plans are no longer available for issuance, and all future awards will be granted pursuant to the 2023 Plan. As of June 30, 2023, there were 5,266,105 shares of common stock available for future issuance under the 2023 plan. We recognized share-based compensation expense of $15 million for the three months ended June 30, 2023 and 2022, respectively, and $25 million and $26 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, unrecognized compensation costs for unvested awards was approximately $53 million, which is expected to be recognized over a weighted average period of 1.8 years.

Service RSUs

During the six months ended June 30, 2023, we issued 517,478 Service RSUs with a grant date fair value of $48.81, which generally vest in equal annual installments over three years from the date of grant.

Options

During the six months ended June 30, 2023, we granted 301,215 Options with an exercise price of $49.14, which generally vest over three years from the date of the grant.

The weighted-average grant date fair value of these Options was $24.78, which was determined using the Black-Scholes-Merton option-pricing model with the assumptions included in the table below. Expected volatility is calculated using the historical volatility of our share price. Risk-free rate is based on the Treasury Constant Maturity Rate closest to the expected life as of the grant date. Expected term is estimated using the vesting period and contractual term of the Options.


Expected volatility	46.8	%
Dividend yield (1)	—	%
Risk-free rate	4.2	%
Expected term (in years)	6.0

(1)At the date of grant we had no plans to pay dividends during the expected term of these options.

As of June 30, 2023, we had 1,726,413 Options outstanding that were exercisable.

Performance RSUs

During the six months ended June 30, 2023, we issued 119,887 Performance RSUs with a grant date fair value of $49.14. The Performance RSUs are settled at the end of a 3-year performance period, with 50% of the Performance RSUs subject to achievement based on the Company’s adjusted earnings before interest expense, taxes and depreciation and amortization further adjusted for net deferral and recognition of revenues and related direct expenses related to sales of VOIs of projects under construction. The remaining 50% of the Performance RSUs are subject to the achievement of certain contract sales targets. We determined that the performance conditions for our Performance RSUs are probable of achievement and, for the three and six months ended June 30, 2023, we recognized compensation expense based on the number of Performance RSUs we expect to vest.

Employee Stock Purchase Plan

In March 2017, the Board of Directors adopted the Hilton Grand Vacations Inc. Employee Stock Purchase Plan (the “ESPP”), which became effective during 2017. In connection with the ESPP, we issued 2.5 million shares of common stock which may be purchased under the ESPP. The ESPP allows eligible employees to purchase shares of our common stock at a price per share not less than 95% of the fair market value per share of common stock on the purchase date, up to a maximum threshold established by the plan administrator for the offering period. During the three and six months ended June 30, 2022, we recognized less than $1 million of compensation expense related to this plan, respectively.

During fourth quarter of 2022, the Board of Directors amended the ESPP plan to allow eligible employees to purchase shares of our common stock at a price per share not less than 85% of the fair market value per share of common stock on the first day of the Purchase Period or the last day of the Purchase Period, whichever is lower, up to a maximum threshold established by the plan administrator for the offering period. The amendment became effective in 2023. During the three and six months ended June 30, 2023, we recognized less than $1 million of compensation expense related to this plan.