Good morning, and welcome to the Hilton Grand Vacations First Quarter 2020 Earnings Conference Call. A telephone replay will be available for seven days following the call. The dial-in number is 844-512-2921 and enter pin number 13697041. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. I would now like to turn the call over to Mark Melnyk, Vice President of Investor Relations. Please go ahead sir.

Thank you, operator, and welcome to the Hilton Grand Vacations first quarter 2020 earnings call. Before we get started, please note that we have prepared slides that are available to download from a link on our webcast and also on the main page of our website at investors.hgv.com. We may refer to these slides during the course of our call or question-and-answer session. 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 10-K, as well as similar sections of our 10-Q, which we expect to file soon after the conclusion of this call and in any other applicable SEC filings. We will 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. As a reminder, our reported results for both periods in 2020 and 2019 reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we are 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. To help you make more meaningful period-to-period comparisons, you can find details of our current and historical deferrals and recognitions in table T1 in our earnings release. Also, 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. Finally, unless otherwise noted, results discussed today refer to first quarter 2020 and all comparisons are accordingly against the first quarter of 2019. In a moment Mark Wang, our President and Chief Executive Officer will provide highlights from the quarter in addition to an update of our current operations and company strategy. After Mark's comments, our Chief Financial Officer, Dan Mathewes will go through the financial details for the quarter. Mark and Dan will then make themselves available for your questions. With that, let me turn the call over to our President and CEO, Mark Wang.

Good morning, everyone. Earlier today, we released our first quarter results. I'd like to start by saying that this call is going to feel very different from the ones before and that's because we're in a very different environment. While I'll discuss the performance of the business, I believe it's also critical to address what we're facing today. It's clear that the impact of coronavirus has been sudden and significant and that this period of disruption remains uncertain. While we saw minimal effects from the virus in January and February, it should come as no surprise that we saw a significant falloff in trends in March as the effects of the virus spread to the U.S. Health and travel advisories began to appear in late January and February in our major markets, which cascaded into a full lockdown and self-quarantine orders, as we moved through March in markets such as New York, California, Hawaii and Florida. We took immediate action to ensure the safety of our team members, owners and guests by shutting all of our sales centers and suspending operations at most of our U.S. resorts. It was clearly an unprecedented decision that I never contemplated having to make particularly over the span of just a few short weeks. Fortunately, we entered this period with a strong business model, engaged owner base and solid balance sheet and we took further steps to ensure those strengths will carry us through this time of uncertainty. Today, I'd like to talk to you about three things. First, I'll provide more context about what we've done to address the urgent needs of the business and our people. Second, how we view the industry and its relative resilience during these times and our position within it. And last, I'll share four strategic priorities we are committed to and I believe will position us for success today and as we exit these restrictions and enter a new period of recovery. First, let me walk you through some of the swift actions we've taken already. In mid-March, we paused our on-site sales operations to protect our staff and guests. We waived all cancellation penalties for our guests who plan to stay with us prior to the end of May and refunded all reservation fees associated with those days. And we waived online transaction fees for owners, who book a stay by the end of May for travel in 2020 and 2021. We've kept our customer service centers fully operational to answer questions, take future bookings and continue to provide our owners with a high level of service. And we made temporary changes to our booking rules and we will continue to evaluate and adjust them as necessary to ensure owners' travel is protected. At the same time, we took immediate steps to safeguard our future marketing pipeline post-recovery. Our IT teams moved quickly to transition our call center staff to work-from-home and maintain continuity with our Hilton call transfer program along with the ability to service our customers booking future vacations. We also built out infrastructure to allow our top sales directors to work remotely, enabling them to begin sales to our top clients. At the resort level, we worked with our HOAs to keep our properties in pristine condition during the pause. Prior to the shutdown, the rooms and common areas were deep cleaned and many resorts took advantage of the slowdown to get ahead of planned maintenance projects that will allow us to have more rooms in service in the latter half of the year. We also acted quickly to protect the business with additional steps to defend our cash flow by adjusting our operating expenses and inventory spend. Nearly 60% of our total operating costs are variable providing a natural hedge against periods of reduced business activity. And our Hilton license fee is almost entirely variable. To lower our fixed costs, we implemented cost controls including a pause in our discretionary spending, a hiring freeze and a temporary halt to our 401(k) match. To adjust to the suspension of operations, we made the difficult decision to furlough approximately 6,100 of our valuable team members representing nearly 70% of our employee base. And in addition, we reduced salaries for all team members and management across all levels of the organization. On the inventory side, we identified over $200 million of budgeted spend for the year that can be deferred with minimal impact to the planned sales launch schedule for our new projects, representing over 50% of the previously budgeted spend over the next three quarters. As the situation evolves, we'll continue to revisit our planned spend as we balance cash needs against the availability of new inventory. In addition, we also drew down our revolver and warehouse to strengthen our cash position and Dan will speak to those in more detail. Collectively, these actions have significantly reduced our fixed cost burden, minimized our cash burn rate and strengthened our balance sheet to enable our business to weather an extended period of slowdown. Next, I'd like to highlight the strength of our sector. The timeshare industry has both business model and product advantages not shared by other parts of the hospitality industry. Our business model is differentiated by a solid foundation of owners that provides a stable source of recurring EBITDA and protection from fluctuation in asset utilization. For example, approximately 40% of our segment EBITDA last year was generated from financing and resort and club divisions and 90% of our member fees for this year have already been collected. Our business is fortunate in that these maintenance fees fund all the operational costs of our resorts. This reduces the fixed asset burden commonly seen in other areas of hospitality industry. Further the timeshare product is better positioned to recover from a pandemic. Owners often return to familiar unit resorts, which truly makes it feel like their home away from home. Because of this, they know the HGV staff and have a comfort level that is closer to a second home than a hotel. Additionally, our product is structured to allow us to reduce the reliance on communal features. For example, most units include in-room kitchens and laundry facilities. Rather than needing to dine at a common restaurant our owners and guests can prepare meals for themselves in the comfort and safety of their accommodations. Within the industry, we are starting from a strong position because of our NOG strategy, flexible inventory sourcing and the strength of our balance sheet. We entered the year with nearly $1 billion in liquidity and we've managed a conservative balance sheet with very low leverage and significant cash on hand, which provides a staying power and the ability to protect our customers' interest. And while we can't be sure when the turn will come or what the path to normalcy will look like, one structural advantage that we've always enjoyed at HGV is the strength of our owners. Our 27 years of positive NOG has built a high-quality base of owners who have an elevated level of connection to our brand. This provides us with historic levels of embedded, upgraded sales yet to be materialized. And 70% of our owners own their intervals outright and have made a material financial commitment to HGV. They're leisure travelers and they have both a desire to travel frequently and a prepaid vacation waiting for them when this disruption passes. Our just-in-time and fee-for-service structure provides us with operational flexibility to tweak our pipeline for shifting needs and market conditions. We think it's important to not only consider the impact of the pandemic, but also the resulting recession. While we can't say what the shape or duration of the recovery will look like, we believe the best comparison we have is the past financial crisis. As we've discussed before HGV demonstrated the strength of our model during and after the last crisis. And we feel we're even in better position to weather the storm and rebound now than we were in 2008. To give a few data points, our owner base today is two times larger. The Hilton Honors loyalty program has grown its members by four times and we're entering with more liquidity. As we've done in the past, we'll continue to manage our business conservatively through this period of uncertainty and take steps to prepare for a return to a new normal as travel restrictions lift and markets recover. Finally, I'd like to briefly discuss our four strategic priorities. The first three are focused on winning the fight today, while the fourth is designed to position the business to win as we come out of these travel restrictions and enter a period of recovery. I will cover every initiative we have planned, but for your reference you can find them on page two of the materials we provided for this call. The first priority is to safeguard the safety and well-being of our team members our owners and guests. When able we'll reopen our resorts and sales offices complying fully with local regulations and CDC guidance. To ensure the highest level of cleanliness, we created the HGV Clean initiative in alignment with Hilton which we will implement in our properties as we bring them back online. The second priority is to streamline our spending to maintain our strong liquidity position and optimize our inventory assets. We'll continue to manage variable costs, flexing them up and down to meet the demands of our business. We'll carefully monitor inventory demand and leverage our flexible inventory sourcing models to ensure appropriate supply, while minimizing the exposure of our balance sheet. The third priority is to protect our recurring revenue streams and embedded value. We said before our owners are one of the foundational strengths of our business. To protect this foundation, we're ensuring owner points and vacations are not lost during these constrained travel periods. We're also planning to promote the return of travel to owners as restrictions allow through drive-to offers and other incentives. The final priority is to grow demand and implement opportunities to create incremental value. The two key factors to create demand in our system are tour flow and inventory. To generate tour flow and relaunch sales, we will focus on our owners and the over 400,000 new buyers we have in our package pipeline with enhanced promotions and marketing offers. Our new inventory investments should create incremental demand for both owners and upgrades and NOG sales as these audiences begin touring again. We'll also continue to grow our new buyer package pipeline through direct marketing and digital channels with Hilton and other partners to ensure we have a robust pipeline of tours going forward. And we've developed a new prepaid term product that was originally scheduled to launch in April that we will now plan to pilot as soon as conditions allow. And finally, in 2008's financial crisis, we benefited from being opportunistic with distressed properties. We'll continue to monitor the market and work with our fee-for-service partners to do the same as opportunities present themselves. To wrap up, clearly this is a time of unprecedented challenges. We acted quickly and decisively to secure our business and control the things that we can control. While this disruption is fundamentally different from others we've seen before, we're confident that leisure travel will recover and that timeshare owners will be at the leading edge of that recovery. And we're using this period of reduced business activity to position our business and leverage our strategic drivers to ensure we emerge as a stronger business ready to engage our owners. Before I turn it over to Dan, I want to say how proud I am of the efforts of our team who've been working around the clock to adapt to this situation in real-time and take the necessary steps for us to get ahead of it. And I want to extend our best wishes to all of those affected either directly or indirectly by this pandemic and thank the frontline workers around the globe who are saving lives.

Thank you, Mark, and good morning, everyone. We have a lot of ground to cover today. And given the unique environment our format will be different from our prior calls. After a walk-through of our Q1 results, I will spend more time talking about our actions to preserve our cash flow during these unprecedented times followed by additional detail on our liquidity, credit position and covenants. As Mark Melnyk mentioned in his introduction to our call, our Q1 results did include deferrals, specifically $47 million in revenue deferrals and net deferrals of $27 million impacting adjusted EBITDA and net income. All references to net income adjusted EBITDA and real estate results on this call for current and prior periods will exclude the impact of deferrals and recognitions. A complete accounting for our historical deferral and recognition activity can be found in Excel format on the Financial Reporting section of our Investor Relations site. Let's turn to a quick review of the results for the quarter. Total first quarter revenue declined $52 million to $398 million reflecting declines in our real estate and rental and ancillary segments that more than offset the growth in our resort and club and finance businesses. This decline in revenue was primarily the result of COVID-19 and its global impact on consumer activity. Q1 adjusted EBITDA came in at $60 million versus $102 million last year. In addition to lost sales and rentals during the month of March, Q1 2020 was impacted by incremental bad debt accrual of $23 million, which I will discuss in a few minutes, as well as $11 million in one-time payroll-related expenses incurred in connection with operational closures and a refund of $2.2 million in reservation fees for those impacted by our resort closures. Net income was $35 million and diluted earnings per share was $0.40 compared to net income of $55 million and diluted earnings per share of $0.58 in the first quarter of 2019. With real estate, Q1 contract sales declined 24.2%, driven by a reduction in both tours and VPG. Through the first two months of the quarter, tour growth of 6% was tracking in line with our expectations, reflecting gains from both owners and new buyers. However, as we moved through March, the impact of COVID-19-related disruptions resulted in tours declining 19% for the quarter. Close rate was up three basis points in the quarter as gains in January and February were partially offset by a decline in March. A highlight I'd like to note is that our owner close rate was up every single month of the quarter underscoring both the strength of our owner base and the connection that they have with HGV. Our fee-for-service mix for the quarter was 53.3%. On the consumer lending side, our provision for bad debt was $37 million. I'd like to pause here to talk through the increase in our provision this quarter. The charge of $37 million can be broken down into effectively two parts. First, an ordinary course of business bad debt expense of $14 million which is similar in magnitude to the one that we made in the first quarter of last year. Second, we recorded a charge of an incremental $23 million associated with the potential impact that coronavirus could have on our portfolio. This has increased our overall allowance on the balance sheet to $212 million or 15.9% of the gross financing receivables. I say potential impact because our stack pool models require us to make an estimate about the expected performance of our portfolio and recognize any potential future defaults in the current period. So, as a reminder, our provision is based on credit modeling and future expectations of losses. It is not on a loss as incurred basis. As of today, we have less than 60 days of data indicating how COVID-19 will impact our portfolio. With such limited data, we have not seen an increase in our default rates to date. However, we have seen an increase in delinquency rates over the past quarter from 2.5% at the end of Q4 to 3.2% at the end of Q1 and 3.5% through the end of April. Turning back to real estate expenses. Product costs were 23.7% of our owned contract sales. SMG&A was 54.1% of contract sales as a result of deleverage associated with the decline in revenues. Real estate margin was $25 million down 63.8% versus last year driven by the $23 million accrual as well as payroll costs associated with operational closures. Margin percentage was 14%. In our financing business first quarter margin was $31 million with a margin percentage of 70.5% versus a margin of $28 million and a margin percentage of 68.3% last year. As I mentioned our credit trends were stable through the end of the quarter aided by recent improvements to our collection standards. We have seen an uptick in delinquencies in April and anticipate them to increase in the coming months as a result of the elevated levels of unemployment owing to COVID-19 endemic. Looking at the portfolio balance gross receivables stood at just over $1.3 billion. Our average down payment year-to-date is 12.4%. Our average interest income rate increased to 12.5% from 12.3% last year. Turning to our resort and club business, NOG was 5.3% for the quarter which drove a 4.8% increase in revenue to $44 million. EBITDA for Q1 was $32 million with margins of 72.7%, down 108 basis points versus last year. The decrease in margin percentage was driven by the refund of reservation fees during the quarter. Rental and ancillary revenues were $52 million versus $59 million last year due to a combination of lower supply of rooms at the Quin and lower occupancy levels as the pandemic progressed through the quarter. Expenses were $2 million higher at $37 million owing to larger subsidy requirements for newly opened properties. Our EBITDA was $15 million with margins of 28.8% and impacted by deleverage over a relatively fixed cost base. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA first quarter G&A decreased $3 million, license fees were down $1 million, and EBITDA from JVs was up $2 million. Now I want to spend a few minutes talking through our operations and some of the adjustments that we've made due to the impact of COVID-19. During the course of the last 45 days, we have significantly changed our expense structure to adapt to a reduced level of business with a focus on preserving our cash flow. We expect that these cost-saving measures which include furloughing close to 70% of our employees, salary reductions for the remaining active employees, elimination of all discretionary spending and a hiring freeze among others further reduced our cost base by over $100 million. As business returns, we have the ability to add back costs in a methodical manner to maintain our flexibility in what we anticipate will be an uneven recovery path. Regarding inventory, prior to the coronavirus outbreak, we planned to spend just under $400 million this year with the largest spend associated with our new projects; Maui Ka Haku and The Central. Given the impact that COVID-19 has on construction in New York, The Central will be further delayed and our initial contractual payment will be shifted to 2021. We have slowed our spend in Maui, completely paused our development activity at Ka Haku, as well as Cabo and adjusted the amount of inventory repurchases we will make this year. These actions will result in us reducing inventory investment by just under $200 million without having a material impact to our prior planned sales launches. That said, Ka Haku will now begin sales in the first quarter of 2021 rather than the back half of 2020 as previously expected. In the first quarter we spent $30 million on inventory which indicates that we've cut over half of our previously planned inventory spend for the balance of the year. It is important to note that the vast majority of our planned inventory spend pertains to owned projects. The contractual level of inventory spend for the balance of the year is limited to $26 million. So we have additional flexibility to further adjust our spending as we progress through this year and balance our cash needs against our planned sales launches. We also took several proactive steps during the quarter to ensure the strength of our balance sheet. We substantially drew down the remainder of our revolving credit facility and raised additional cash by borrowing against receivables collateralized through our warehouse facility. In 2018 we amended our credit facility and were able to increase our revolver from $200 million to $800 million. This amendment combined with the focus on maintaining relatively low leverage levels have allowed us to be in a strong financial position as the COVID-19 crisis unfolded. As of March 31 our liquidity position consisted of $670 million of unrestricted cash, $39 million of availability under revolving credit facility and $255 million of capacity in the warehouse. With regards to our warehouse facility, our existing timeshare receivable collateral would allow for a $120 million draw on the remaining capacity of $255 million. On the debt front, we had corporate debt of $1.3 billion and nonrecourse debt of $885 million. Turning to our credit metrics. At the end of Q1 our net leverage stood at 1.45 times. Our interest coverage at the end of the quarter was 9.56 times. Our nearest debt maturities are the warehouse facility in 2022, the credit facility in November of 2023 and our senior notes in December of 2024. Our warehouse facility is a key funding advantage for us providing a cash advance against our pledged collateral at attractive rates. The facility was set up in the wake of the global financial crisis to insulate us from disruptions to the term securitization markets. If necessary, we're in a position to borrow another $120 million or $315 million in total on the warehouse facility. Currently, our cash position combined with the availability on our revolver as well as the warehouse facility provides us with ample liquidity. We have sufficient liquidity even in the event that business remains paused for the next 22 months. While we maintain low leverage ratios and have great access to capital via our warehouse facility and the ABS markets our covenant thresholds are nevertheless at levels that are lower than those of our peers. With the advent of COVID-19 we have been in active negotiation with our lenders to amend our covenant thresholds to provide more flexibility as we navigate through the crisis. We feel good about the progress we've made in our request and remain very comfortable with our strong liquidity and deliberately conservative leverage positions.

Thank you. Our first question comes from the line of Jared Shojaian with Wolfe Research. Please proceed with your question.

Hi, good morning everyone. Thanks for taking my question and I appreciate all the color and commentary here today. Could you just talk about how you decided the new 15.9% allowance rate is the right number? And what's your level of confidence there? And then I appreciate the commentary on the delinquencies. It doesn't seem like much of an increase so far, but it's also only been 45 days since the shutdown. So if you have it maybe a better stat would be what percentage of people are late on their monthly loan payments right now versus what you might normally see?

Hey Jared, it's Dan. Good morning and thanks for the question. With regards to the additional bad debt expense that we accrued getting to that allowance of 15.9%, it's a really tough estimate to make. Because to your point very limited data it's been less than 60 days. So what we did was we looked back to the last shop that we sold to the portfolio and that dates back to the Great Recession. We're very cognizant that this crisis is going to be different than - potentially different than that crisis. But that's the best thing that we had to look to. So what we did was we looked at the increase in defaults during that period applied that same increase in default to every single bucket in our static pool and assumed that impact negatively impacted us for about 15 months. So effectively rolling out until August of 2021 and then it starts to more normalize. And once you do that it - the additional reserve you would need is roughly $23 million. Now the level of delinquencies that we see today at just north of 3% are also below the level of delinquencies that we saw during the Great Recession if you will. And they were more at the level of 4.2%, which is more in line with what that bad debt expense expects over the course of this period. Now how comfortable are we with that? We have a limited set of data points. It could clearly extend longer than that and it could clearly extend less than that. This is going to be a bit of an evolution process. But given the fact that we have to-date, you can see that we've assumed a higher delinquency rate than we're currently seeing. And we're also tying it back to the last major shop that we sell to our portfolio. Hopefully that's helpful?

Yes. Jared this is Mark. And I'll just add to that. As Dan alluded to, it's just too early still to really get your arms around this one. But we have been as you know over the last decade since the financial crisis – we've been originating our loans at around 740 FICO score. In a pre-financial crisis we were originated around 700. So hopefully the quality – well, obviously the quality has improved but hopefully that quality will hold up.

And just another point to add on the quality standpoint that we did not take into consideration. During the Great Recession, the credit process here has improved materially not only from a FICO score perspective. But back in 2008, 2009, we actually did not do credit reporting either. That is in place today, so that should help mitigate that to some extent. But that was not taken into consideration when we came up with our accruals.

Thank you. That's really helpful. And I guess just the second part of that question. I mean have you seen anything unusual in terms of people that are not necessarily delinquent because they're not in that 60-day window but maybe they missed a payment? I mean have you seen anything unusual there?

Well, I think the best stat to tell you – and this is a bit anecdotal. But when we talk to the portfolio team and we analyze the calls that are coming through the doors, the number of individuals who are calling to cancel something and just completely default and they just want to get out has not increased from Q3 last year to Q4 last year till today. So that's been a very static number. What we have seen is an increase in the number of calls of individuals asking for some level of deferment. And to-date we're just over 1,000 individuals in aggregate who have reached out to ask for some level of deferment. So out of the people that have loans with us that's just under 2% of the portfolio. And some of these calls are individuals who – obviously, some of the larger banks are allowing deferments on mortgages. So they're just looking to say 'Hey look they're doing it you should be doing it too.' And then there's other individuals who obviously have been directly impacted by COVID-19. These are all being handled on a one-off basis. But again it's less than 2% of our portfolio to-date.

Okay. That's really helpful. I appreciate that. And then just for my second question. What do you think that – if I look back to Slide 5, which is really helpful on the liquidity and the cash burn, what do you think that $38 million monthly burn looks like when you start to reopen? Assuming you're at very low volume levels initially and you start to bring back those costs, do you think you're still burning cash initially? And if so should we assume that any burn is definitely going to be less than the $38 million?

Look I think it's a great question. It's all how we bring things back. We've done – we've obviously readjusted the business as something that you’ve never planned for, right? So we've really pulled back that expense quite dramatically. And it's all how we come back. I mean there's a scenario where you bring individuals back who are selling packages sooner than you actually open up sales centers. So while you would have a cash, hopefully neutral standpoint you would have compression on your margins. But I don't want to get into a level of prediction at this point just – since we're so early into this. The $38 million is really trying to be just an example of if we're where we are today for the balance of this crisis how long can we last. I just don't want to get into anything predictive at this point.

Okay. That’s helpful. Thank you very much. I appreciate it.

Hey, good morning. Thanks for taking the questions and all the details well. As a follow-up to Jared's last question I know you don't want to be predictive. But is there any additional detail you can provide on how you generally are thinking about or evaluating reopening of the sales centers? How you may be shifting to target existing owners differently? And is there a level of contract sales that you would need to get to free cash flow positive?

Yes, Stephen, this is Mark. Good morning. Initially, our primary focus for the first few weeks was resizing and recalibrating the business. Since then, we've been preparing to reopen, anticipating that our sales centers will align closely with our resort openings. Key factors influencing this include the timing of government mandates and public sentiment around traveling. Currently, we cannot predict when restrictions will be lifted, but we expect that many of our markets will likely reopen towards the end of this quarter and into summer. However, this timeline is subject to change. In terms of markets, we started from a strong position. Our top eight markets last year attracted over 300 million visitors, indicating robust demand. Additionally, 70% of our markets are drive-to, reachable by around 60% of the U.S. population within a 300-mile radius. Each market is expected to recover on its own schedule based on demand, particularly influenced by shelter-in-place orders. Our portfolio can be categorized into urban, resort theme, and mountain regions. We anticipate that urban markets, especially New York, will take longer to recover due to their density and impact. In contrast, locations like Orlando and Vegas are projected to have strong pent-up demand, reliant on the reopening of theme parks and casinos, which we are monitoring closely. Our beach locations, such as Myrtle Beach, Hilton Head, and Southern California, are expected to recover more quickly due to lower density and high demand during the summer. Similarly, our fly-to markets like Hawaii and Barbados show promising demand. Hawaii, in particular, holds about 18% of our product and is currently experiencing strong demand from both U.S. and Japanese customers, viewed as a safe destination. However, it's still too early to determine how Hawaii will manage inbound travel and how airlines will perform, though they are striving to resume operations. Overall, this situation is very dynamic and will remain fluid for some time. We are developing plans accordingly and will be ready to reopen quickly once we get the go-ahead.

Thanks. And I guess as a follow-up on the demand side. I'm sorry I guess maybe I cut you off there. But just I'll sneak it in real quick if you want to address it afterwards. On slide nine you have some good statistics on, owner arrivals, rental arrivals, marketing and sampler package arrivals, year-over-year. Is there any color you can give on postponements deferrals or cancellations on those? Thanks.

We are pleased with the trends we are seeing in the data. Currently, we are operating at about 80% of the levels from the same period last year, while our owners are at approximately 90%. A snapshot taken on April 28 shows that this has been consistent with previous slowdowns. The pre-paid ownership model of the business significantly drives demand. However, there is still considerable uncertainty regarding market openings and airlift. Nevertheless, the behavior we are observing aligns well with past patterns, which gives me confidence that we will see a good return of our owners as we continue to recover. Regarding cancellations, about 92% of those who canceled in our package pipeline have rebooked for a later date, indicating that the percentage of cancellations is relatively small.

Regarding adjusted free cash flow, the best way to approach it is by considering similar comments made by some of our peers. If we assume the current pause remains for the rest of the year, achieving a neutral adjusted free cash flow is largely contingent on our inventory spending. If we adhere to the contractual spending levels of around $25 million to $26 million, along with our previous expenditures, we can reach a neutral adjusted free cash flow easily. Even if our spending approaches just under $200 million, it would still be approximately neutral. We are within that range, and I hope this perspective is helpful.

Okay. That's great. Thanks so much.

And even if we spend closer to what we've indicated, just under $200 million, it would be neutral-ish, so to speak. So we're in that ballpark. Hopefully, that's helpful just from a prospective basis. There's one additional point to mention. We are very aware of our inventory spending and are managing it carefully, just like everyone else, on a daily basis. If we are unable to operate for the rest of the year, we will definitely reduce that spending significantly. Our focus on not cutting spending immediately is because we have several large projects we are currently invested in, including Maui, Ka Haku, Quin, and Ocean Tower. These projects represent over $5.5 billion in future sales value. This is why we aren't just shutting everything down automatically. However, if necessary, we can make those cuts and will manage it wisely.

Good morning, everyone. Thank you for addressing my questions and for the detailed information today. I have a quick question regarding slide 5 on the cash burn analysis. I'm curious about any assumptions included in that related to recapturing defaulted inventory.

This, from a cash burn perspective, this assumes a very minimal repurchase of defaulted inventory.

Could you clarify what you would be viable for? I understand this is nonrecourse debt, but is there a possibility that you might enter the market since it is a strong business? What could that look like as part of your forward modeling regarding loan loss provisions?

Yes. No, sure. So the financing cash inflow that you see here takes into consideration the level of defaults that we've discussed earlier. It also, from a liquidity perspective, when you look at the warehouse availability, clearly, we already mentioned that the remaining capacity is at $255 million. What you see here is $120 million. What's driving a large part of the delta is us holding back loans for substitutions if we were to remain shuttered. So we've tried to capture those elements in this cash burn analysis.

Got it. That's really helpful. I wanted to ask about the drive-to versus fly-to statistics, which were very useful. I'm curious how you would quantify the proportion of your sales that comes from drive-to customers. I think we can agree that the first group to return would likely be your existing owners who can easily travel to their market and are potential candidates for upgrades. What percentage of your current sales mix does that represent? Additionally, do you anticipate a shift toward repeat business becoming a larger part of your sales mix?

Brandt, this is Mark. Yes. Our drive-to market's about 65% of our overall real estate revenue. And I'm sorry, the second part of that question?

Well, I was just curious because if you do see a shift to repeat business, which is arguable that it will be easier to get repeat customers in for tours versus new customers, that obviously comes with a higher VPG, a higher close rate. So that would be something for us to consider when we're looking to model forward. So just curious if you think that, that mix will shift towards repeat customers.

Yes, right. Okay. Yes, we're definitely going to lean on our owners coming out of this. And historically, we run at about a 50-50 mix. And but we're going to leverage our owners coming out of this. As you can see, there's a fairly strong demand, as I talked about a few minutes ago, and in the back half of this year from a bookings standpoint, but more importantly, we think that's going to continue into next year, that behavior. Fact that we've been able to double our owner base in the last 10 years and the fact that we've been driving positive NOG, we've got a lot of pent-up, unmaterialized embedded value in sales for our owners. So you should expect that, that mix is going to shift. I can't give you an exact number, but 60-40 for the next 12 months wouldn't surprise me, as I think our owners will be more confident to travel and, again, the prepaid nature of it. But yes, so we will definitely lean heavier on our owners. And as you know, that's a much more efficient sale.

Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

Hi. Morning, everyone. You've covered a lot and all the questions and so forth. I appreciate that. With respect to the construction of inventory, I think, Dan, you showed you're sort of cutting that back by half. Just to follow-up on that point. When it comes time to ramp that back up again, what kind of trajectory should we expect? I mean, is there kind of a several month ramp-up period to it, or can you turn it back on with the same speed you shut it off?

Yes, it's Mark. We've slowed down the Maui project, which is horizontal and consists of multiple smaller buildings. We are still making progress there. For Ka Haku, we received all the necessary permits to improve the land but have paused the project entirely. We can restart it in a relatively short time as we'll need to remobilize the equipment that was moved off-site, which may take about 60 to 90 days. Ocean Tower is another phased project where we are converting hotel rooms, and we've also slowed that down; however, we can ramp it up quickly. We have a lot of flexibility, and there isn’t anything that will take a long time to get back on track. For instance, most renovations in Cabo are completed, but we've decided to pause and conserve cash for early next year. While we can restart projects, keep in mind that development takes a significant amount of time, and even when we restart Ka Haku, it will take a couple of years to complete. This will delay our original sales target from the latter half of this year to later in 2021. Thank you.

Our next question comes from Patrick Scholes with SunTrust. Please proceed with your question.

Hi. Good morning everyone.

Good morning, Patrick.

You folks are quite possibly the best capitalized timeshare company out there both public and private. And I'm wondering, how are you thinking down the road here opportunities for distressed acquisitions? I think back the Elara was one. I don't know if it might have been Centerbridge who did that, but certainly you own it now. What are your preliminary thoughts in that regard?

Yes, that’s a great question. Over the past couple of years, we have built a strong pipeline of inventory. At this time, we're not looking to invest our capital. However, as you mentioned, the last crisis pushed us to seek third-party capital, and we successfully established and expanded our fee-for-service model. We have completed ten deals so far with excellent partners, including Centerbridge, Goldman, Strand, and Blackstone. We anticipate a significant amount of market dislocation. We also believe that timeshare will be the most effective use for many of these assets. We are definitely keeping an eye out for opportunities. Importantly, we have strong partners and have already received some inbound inquiries. Although it's still early, we expect some prospects and, like in the previous crisis, we plan to be prudent in selecting quality assets that align with our brand standards and portfolio, ensuring we have reliable partners collaborating with us.

Okay. To clarify, in addition to potential acquisitions of existing timeshare locations, we might also consider converting existing hotels or those that are currently in development. Is that correct?

Absolutely. I think it could be hotel. We've recently been doing a number of hotel conversions. We did the units in Chicago with the DoubleTree. We did the number of floors in the Embassy Suites in Washington, D.C. We've done floors in Hawaii and New York. And so we think it's a really efficient model and in some cases it improves the hotel asset and that it reduces the overall size. So the overall yield and performance of hotel improves. And in some cases just converting the entire hotel over is an opportunity for us too.

Hi. Thanks again for taking my follow-up here. So just to tag on a little bit to that comment. You are pretty well capitalized here. But do you have any desire to raise unsecured debt right now? I know we've seen a lot of other companies who don't really need capital, just go out and raise capital just because the credit markets have reopened. And then I guess along those lines too, can you talk about what you're seeing in the securitization market right now both public and private? Judging by Wyndham's terms this morning, it would seem that the private market is still quite good. But can you just help us think about that and maybe the timing on when you guys would do a transaction?

Hi, Jared, it's Dan. Thank you for your follow-up. I’ll address your second question first. In terms of the ABS market, we continue to see strong support for our ABS-backed paper, both in the private and public sectors. It's well-known that S&P paused on ratings recently, but we've had discussions with them, and they plan to resume. They might adjust their loss factors, similar to the adjustments we've made. We are confident that we can complete a deal. We currently have ample capacity under our warehouse facility to match our historical order of magnitude. Additionally, we’ve received several inquiries from private institutions interested in deals similar to the one Wyndham announced today. We are pursuing both public and private opportunities and are optimistic about getting this done, likely by late Q2 or early Q3. As for raising either senior unsecured or senior secured debt, we are consulting various advisers and considering the available opportunities. With 22 months of liquidity, this is not at the top of our agenda, but we will continue to evaluate it regularly. We will leave it at that for now.

Okay. Thank you. That’s really helpful.

Well, thanks everyone for joining us this morning. Stay safe and we look forward to speaking with you over the coming weeks and updating you on our next call.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.