Hilton Grand Vacations Inc. Q2 FY2022 Earnings Call

Good morning, and welcome to the Hilton Grand Vacations’ Second Quarter 2022 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 137-26010. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. I would now like to turn the call over to Mr. Mark Melnyk, Senior Vice President of Investor Relations, G&A and Productivity. Please go ahead, sir.

Thank you, Operator, and welcome to the Hilton Grand Vacations’ Second quarter 2022 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 10-Q and 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. Our reported results for all periods 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 of our earnings release. For ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results, we will refer to results excluding the net impact of construction-related deferrals and recognitions for all reporting periods. A complete accounting of our historical deferral and recognition activity can be found in Excel format on the Financial Reporting section of our Investor Relations website. 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. Mark.

Good morning, everyone and welcome to our second quarter earnings call. I’m happy to report that we produced another set of strong results for the quarter with contract sales and margins well ahead of our pro forma combined 2019 numbers and EBITDA over 50% ahead of 2019. Our performance was consistent in each month of the quarter, which highlights both the compelling nature of our new offerings and the hard work that the integration teams have done. Our members and consumers remain very much in a travel mindset, despite the risk posed by higher fuel prices and recent travel disruptions. While these macroeconomic forces may create risks to consumer spending, we continue to see high demand for vacation packages, particularly at our new resorts and recently rebranded Hilton Vacation Club properties. Our close rates remain near the record levels we saw last quarter, underscoring the value proposition of vacation ownership. We are deepening our relationship with Hilton through the addition of the Hilton Vacation Club collection, allowing us to engage with a wider customer base of high-quality Hilton Honors members. We have strengthened our business with the integration of Diamond, adding marketing scale, product flexibility, and portfolio diversification that will help us serve the travel preferences of our guests in every environment. Importantly, these factors continue to support solid trends and forward indicators today, giving us confidence in our outlook throughout the rest of the year. Before I provide highlights for the quarter, let me start with an update on our strategy and integration progress. On our last call, we talked about our new HGV Max membership program. We are excited about the increased level of access and new benefits providing a streamlined way for our members to engage. This is an important step in our journey to evolve what it means to be an HGV member and provide an even greater value proposition through membership. We are meeting the expectations of today’s travelers through enhanced benefits, simplicity, omni-channel engagement, and focus on experiences, and our strong VPG and sales performance confirm these offerings are resonating with our members and guests. So today, I want to expand on two important capabilities that support these strong results, our Ultimate Access events platform and our virtual sales channel. HGV Ultimate Access is a collection of premier experiences exclusively for Hilton Grand Vacations members and guests, including a private concert series, access to sporting events, culinary experiences, and more. We believe these events deepen the relationship between our members and the HGV brand, because we have seen that engaging experiences inspire our members to create more memories, build relationships, and enhance the overall travel and hospitality experience we offer. I’m really proud of how our teams have expanded on this events platform. This year, we are on track to deliver a 15% participation rate from members we have offered this experience to, with a goal of achieving over 25% in the coming years and growing from there. All properties are expected to participate in the program, and we are conducting successful events in major cities to maintain our owners' connection to HGV even when they are not traveling or staying in one of our properties. We are also seeing a high correlation between member VPG and Ultimate Access participation. As we expand, we are collecting significant amounts of data that will allow us to further sharpen our ability to engage with more members. Additionally, we are already running successful tests with prospects who are Hilton Honors members, expanding our universe of potential customers. The other new capability where we have made significant progress is in virtual sales, diversifying how we reach our customers, a critical function, especially as we expand our suite of products and experiences. It has become an integral part of how we engage with our members and prospects as a way to drive incremental sales outside of our traditional sales channels. We are re-engineering the approach across the marketing sales process. For example, we now use AI to provide real-time support to our agents, drive consistency, and adhere to our compliance standards. We are thinking about this channel as both additive and supportive of the strength of our sales centers, and we expect to drive over $50 million of contract sales to our virtual channels this year. Turning to our rebranding, we continue to make excellent progress. The vast majority of our sales network has now been rebranded and it is selling the HGV Max offering, and we expect this work to be completed by the end of the third quarter, which is ahead of schedule. Since our last call, we completed the rebranding of nine more sales centers, seven of which are in markets that are new to HGV. On the property rebrand side, we added several additional properties to the Hilton Club collection in Scottsdale, Lake Tahoe, and Virginia Beach, bringing our total property rebrands to eight this year. We are on track to deliver on our target of having one-third of our legacy Diamond room keys rebranded by year-end. Along with rebranding our physical assets, we are also continuing to improve our service standards at our resorts, ensuring we provide a high-quality and consistent guest experience across our portfolio that our HGV members and guests expect from us. We are also executing on our cost synergy capture. We will get into more details, but we remain confident in our ability to realize the anticipated $150 million of cost synergies that we laid out on our last call. So overall, I’m very pleased with the progress of our integration. Now, let me turn to our performance for the quarter. Contract sales were $617 million or 105% of 2019 pro forma combined sales. First, it is great to set a new milestone moving us past referencing 2019 as a prior peak, but we are also pleased with the quality of the growth we saw this quarter. We had broad-based improvements in tour flow recovery pace across all segments and geographies, led by the mainland region and new buyer demand. We maintained close rates within 60 basis points of the record close rates we produced last quarter. As I mentioned earlier, we saw consistency in our sales with a steady cadence of growth in each month of the quarter. I’m encouraged that our product continues to resonate with our tour guests despite negative macroeconomic news flow. Turning to our demand indicators, occupancy for the quarter was 83% versus 75% in the first quarter, and at the highest levels since the end of 2019. In another positive sign of returning to a more normal business cadence, we witnessed typical seasonal trends through Q2 with April stronger than May and June having the highest occupancy of the quarter. Looking out to the rest of the year, our owner arrivals continue to show solid trends through the fall. Our rental arrivals are showing a similar trend with particular strength in the fourth quarter. Total room nights on the books for the rest of the year are on par with where we were in 2019. We also continue to see exceptionally strong package sales demand giving us visibility into our future new buyer tour flow. In fact, despite converting some of our pipeline in Q2 to drive improvements in new buyer tours, we still grew our package pipeline for the quarter, which is now up to 500,000 packages. This is a great indicator that travel demand continues to be robust in the face of economic headwinds and it should support our investment efforts to drive additional new buyer growth in the second half of the year. VPG of nearly $4,500 remains strong, even as we saw some normalization of our owner new buyer mix. New buyers drove growth in our member base, which is now nearly 508,000. Our HGV NOG was 3.2% with Diamond adding 1,400 net new members in the quarter. Those members fuel steady performance in our club resort business, which, alongside our financing business, contributed nearly half of our EBITDA. Our rental business had strong growth in the quarter fueled by higher travel volumes and continued strength in ADRs. The combination of those consistent segment results along with our synergies and efficiency initiatives produced EBITDA of $277 million with margins ahead of last quarter and well ahead of 2019. Overall, we had a solid quarter, we saw consistent improvement across the organization, and a return to a more normal cadence of business. The strength of our offering helped us deliver great results and gives me confidence that we are well positioned to withstand macroeconomic noise. We just added new high-quality inventory at HGV, we have a very strong new buyer pipeline, we have diversified our portfolio with the addition of 92 Diamond resorts, and we have a loyal base of dedicated members who have prepaid for their future vacations. Last week marked the one-year anniversary of our acquisition. I’m thrilled with the progress we have made to date, and I’m proud of how hard our teams have worked to get us here. Looking forward, we are focused on making further progress, ramping Hilton Grand Vacations Club collection, HGV Max, and our Ultimate Access program—all of which are strong catalysts for continued growth. With that, I will turn it over to Dan to walk you through the numbers. Dan.

Thank you, Mark, and good morning, everyone. Before we start, note that our reported results for this quarter included $10 million of sales deferrals impacting reported revenue related to pre-opening sales of our Maui project. We also recorded an associated $6 million of deferred direct expenses from those sales, resulting in a net deferral impact of $4 million. In my prepared remarks, I will only refer to metrics excluding the impact of deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period. Let’s review the results for the quarter. Total revenue in the second quarter was $958 million, excluding the deferrals I mentioned. We saw strong sequential growth in our real estate and rental business as trends continued to improve from Q1 levels, while our recurring finance and club businesses were in line with the first quarter’s performance. Q2 reported adjusted EBITDA of $277 million was 51% ahead of a 2019 pro forma combined level. EBITDA margins of 29% were nearly 800 basis points better than pro forma in 2019 and a record for the second quarter performance. We continue to realize margin improvements from our synergy capture and efficiency initiatives, elevated VPGs, and a favorable buyer mix along with provision below our normalized rate. For the quarter, our cost synergy run rate is $140 million versus $120 million reported last quarter, with a target of an annualized $150 million in cost synergies. We are really encouraged by the consistency of the results through the quarter, which underscores both the inherent synergies of the acquisition as well as the attractiveness of our new product offerings. Now let’s talk through the segment detail. Within real estate, total contract sales were $617 million and have fully recovered to 2019 pro forma combined levels, as Mark noted. Owners made up 70% of contract sales for the quarter compared to 73% for Q1. We saw strong improvement in our new buyer tour flow and contract sales in the quarter, with sequential growth from Q1 outpacing the growth that we saw in our owner metrics. We are encouraged by the early results from the investment in new buyer channels that I mentioned last quarter, and we expect continued improvement into the second half, driving buyer mix toward our 60% owner sales target and embedding additional value into the enterprise through new buyer growth. VPG was nearly $4,500 for the quarter; while this is elevated from the post-acquisition levels we had in the second half of 2021, it was down from the historic record from Q1, owing largely to the mix shift towards new buyers. We anticipate this trend will continue in the coming quarters as we see more results from our new buyer initiatives. As Mark noted, close rates held at the record levels we saw in Q1. Cost of product was 19% of net VOI sales, which was just under our low to mid-20 target range. Real estate sales and marketing expense of $213 million for the quarter was 35% of gross contract sales, which is 300 basis points lower than the first quarter ratio. Real estate profit was $187 million for the quarter with margins of 40% at the highest level we have ever produced in our real estate segment. We continue to expect that margins in the second half of the year will normalize from these levels due to our investment in new buyer channels and an anticipated higher mix of new buyer sales, which carry lower margins than owner sales. In our financing business, second quarter segment profit was $42 million with margins of 66%. Combined gross receivables for the quarter were $2.4 billion or $1.7 billion net of an allowance. Our interest income was $54 million. Our originated portfolio has a weighted average interest rate of 13.9%, while our acquired portfolio had a weighted average interest rate of 15.6% and includes an $11 million contra revenue for the amortization of a non-cash premium associated with the portfolio receivables that we acquired from Diamond during the acquisition. Our allowance for bad debt was $753 million on that $2.4 billion receivables balance. Of these amounts, the acquired Diamond portfolio, which used their underwriting standards, was $405 million on a portfolio balance of $855 million. Delinquencies remain at very low levels, reflecting continued strength of the consumer, which has benefited from stimulus and other government programs, rising home equity, and ample access to credit. However, we expect a normalization of credit trends into 2023. Our annualized default rate for our originated portfolios was 4.26%. Our provision for bad debt was $40 million or 9% of owned contract sales. This was up almost a full point from Q1's provision due to another quarter of seasoning being reflected in the Diamond receivables portfolio and our related credit modeling. But it remains lower than our target provision rate of the mid to high teens, owing to better than expected consumer performance, portfolio amortization, lower bankruptcies, and lower impairments than anticipated. We are also still seeing a higher mix of full cash transactions, which lowers our provision for bad debt. We continue to expect these trends to normalize and provision to begin working its way towards our mid to high teens target. In our resort and club business, our consolidated member count was 508,000. Looking at HGV’s legacy business, NOG was 3.2% at the end of the quarter while Diamond added 1,400 net new members during the quarter. Revenue was $124 million for the quarter and segment profit was $87 million in the quarter with margins of 70%. Turning to rental and ancillary revenues, they were $171 million in the quarter. Rental revenues were up 25% from Q1 levels and built upon the strong uptick we saw in the latter half of Q1. Segment profit was $21 million with margins of 12%. The strong improvement in margins from the first quarter was due to lower seasonal expense loads combined with sell-through of our new project inventory, which carries a headwind from developer maintenance fees. Bridging the GAAP between segment adjusted EBITDA and total adjusted EBITDA, corporate G&A was $36 million, license fees were $32 million, and JV income was $4 million. Our adjusted free cash in the quarter was $103 million, which included inventory spending of $71 million and excludes acquisition-related costs of $37 million. Our conversion rate of EBITDA to free cash flow was 37% for the quarter. This was below our target range due solely to the timing of a payment for the next phase of our Sesoko project, along with the timing of repayments of our warehouse facility associated with the spring securitization. Year-to-date, our EBITDA to cash flow conversion rate is 52% and we still feel confident about being well within our guidance of 50% to 60% for the year. During the quarter, we repurchased nearly two million shares of our common stock at an average price of $43.14. At June 30th, our remaining purchase authorization was $417 million of the approved $500 million repurchase plan. Turning to our outlook, we are maintaining our guidance for the year of $960 to $990 million, which we raised last quarter. Owing to the strong results we produced this quarter, we feel comfortable with the upper half of this range. As I mentioned, we expect conversion of adjusted EBITDA to free cash flow to fall well within the target range of 50% to 60%. At June 30th, our liquidity position consisted of $374 million of unrestricted cash and $824 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $2.8 billion and a non-recourse debt balance of $1 billion. At quarter end, we had $874 million of remaining capacity in our warehouse facilities, of which we had $242 million of notes available to securitize and another $225 million of mortgage notes. We anticipate being eligible following certain customary milestones, such as first payment, deeding, and recording. Turning to our credit metrics, at the end of Q2, the Company’s total net leverage on a pro forma TTM basis was 2.1 times, not giving effect to anticipated synergies, including all anticipated synergies, our leverage on a pro forma TTM basis was two times. We will now turn the call over to the operator and we look forward to your questions.

Thank you. Our first question comes from Patrick Scholes with Truist Securities. Please go ahead with your question.

Hi, good morning everyone. I think now you actually did some share repurchases in the quarter, did those continue into 3Q?

Yes. Just to touch base on capital allocation. As you recall, we have focused historically on organic growth and then secondarily on returning capital to shareholders and then obviously looking at M&A transactions that are materially accretive to our shareholders as a third leg of the stool, so to speak. So through the end of the quarter, we committed to $83 million in share repurchases; cash going out the door actually translated into $78 million just because of where the cash left our bank accounts. But through July, we continued, and we are right at about $120 million through July 31st. And when you think about capital allocation going forward, we do see returning capital to shareholders via that share purchase plan as the primary use of capital as of today. So I think, last quarter, we talked about that $500 million being spread rather evenly across the two-year period, which was $62.5 million per quarter. So we clearly exceeded that in the first quarter of it being available to us. I would anticipate exceeding that mark going forward as well.

Okay. Thank you. You had given some encouraging thoughts about the back half of the year. Anything you can speak to about how, say, the first half of 2023 is trending at this point? Thank you.

First half of 2023. What I would say Patrick is, look, we are watching the pace and position, and all of our key metrics really well. I would say room nights and positions on the books continue to look very strong especially among our owners, and one of the advantages we have in this sector is that we have a further sideline around compared to lodging around our owners booking out. They book on average 200 days out compared to 75 days out for typical rentals. So we have got a really good sideline, and owners continue to book up very well. I would say on the recurring revenue side, things are holding up very well. Now, as far as 2023 goes, our expectation is that our club and management fees will be collected at the beginning of the year, like they were this year. So our expectations are that will hold up very well. I think in Dan’s remarks, he mentioned delinquencies and defaults remain low on our portfolio. So that is good. We are seeing owners upgrade at record levels. Especially with very strong interest in HGV Max. Our expectation is that we are going to have about 75,000 new HGV Max members this year in total, so that rollout has gone really well. New buyer traffic continues to pick up; we had a 45% increase in tour flow from Q1 to Q2, and the back half of the year looks better in that regard than the first half from a growth standpoint. So that is the mix shift that we are looking at. That is going to put some pressure on VPG and our margins. But overall leisure travel looks really good, and our mainland contract sales were 120% of where they were in 2019. So the mainland business continues to look really strong. We are just still waiting for the Japanese to come back, and we are about 80% in APAC right now, but our expectations are that hopefully by the middle of next year we will start seeing a more normal cadence with the Japanese. So all-in-all, I feel good about where things are going.

Okay. Thank you.

Thank you. Our next question is from the line of Brandt Montour with Barclays. Please proceed with your question.

Hey, good morning everybody, and thanks for taking my questions. So, maybe just on the back of that, we can dig in a little bit more on the VPG in the quarter and the outlook. Your VPGs were down a tiny bit sequentially and a little bit year-over-year, and I get it is a mix shift. Maybe what would be helpful is just to break out sort of close rate trends near-term between new and repeat as well as between legacy HGV and Diamond.

Yes, Brandt, so actually, VPGs for Q2 while sequentially were down, they were still at 39% against 2019 versus Q1, which was up 35% against 2019. So seasonality created some of that pressure downward on VPG. We don’t have a breakdown available to go through the legacy HGV and Diamond, but I would say, across the board, owners are upgrading at record paces. I mentioned HGV Max, I think it has substantial value to our members. So we are seeing a lot of trading up at significant levels. I think in today’s environment, this inflationary environment, is creating - it is enhancing or accentuating our value proposition as people are hedging the cost of their future vacations. Overall, I think today’s environment is really helping us in that regard. As far as new buyers go, we are really pleased with what we are seeing and on the new buyer’s side. Importantly, we have opened up a number of the markets to the Hilton customer base and we have booked over 32,000 packages to date from Hilton customers going to the legacy Diamond locations, which are now being rebranded. Overall, great VPG performance and continued improvement in sequential tour flow.

Okay, great, thanks. If I was to interpret that as well as your reiteration of guidance for the back half of the year for the full year, it does seem like you are baking in some mix shift. The question would be, I guess, do you think it is going to show up more in VPGs going a little bit softer sequentially, or is it going to show up more in the sales and marketing line as a percentage of gross contract sales?

Hey, Brandt, it’s Dan. It is actually going to be a combination of both. You are going to see compression on the VPG side due primarily to that mix. With the mix, new buyer tours are more costly. So what we would expect is a compression in the margin in the back half of the year, not material, but a couple hundred basis points potentially. When you think about our guidance, we came out at the beginning of the year with a midpoint of $925 million. We upped that to $975 million at the midpoint. And that is where we sit today. We have heard in my prepared comments that we feel there is some modest upside to that that gets us comfortable saying $975 million to $990 million in that ballpark, but just to walk you through our thought process there.

Super helpful. Thanks so much, guys.

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

Hi, good morning. Thanks for taking my question, and I apologize up front for doubling back on some of the stuff you just talked about, but we have sort of had it come up a bunch this morning about looking into that back half of the year and it is entirely a function of mix shift and margin that is sort of the driver of a beat. And then keeping the back half of the year flattish, there is nothing in sort of loan loss or any other sort of one-off items in there. Just to make sure the issue is really beaten.

No problem. Outside of the VPG on the real estate side, the other thing that you do see and what we have anticipated, which we have tried to reiterate this multiple times, is that from a loan loss provision, we are well below historical averages for legacy HGV, let alone the combined entity. We are sub 10% on that provision level, and we expect to be at some point in the mid-teens and high teens, and we expect that to ramp. That would probably ramp over the next 12 to 18 months. Part of that is driven by pure accounting reasons. For instance, we acquired the Diamond portfolio; at the time of that opening balance sheet, we put a large reserve against those existing loans. So we are not - that provision does not hit our PNL today. As we continue to sell Hilton Vacation Club and legacy Diamond products, it will start to impact the provision. What we have seen over the last three quarters now, is a lower propensity to borrow from, in particular, new buyers and to a certain extent, owners. We feel that is driven by a lot of the government stimulus that has been ramping down from COVID. So as that continues to ramp down, we believe that propensity to borrow will increase, but at lower levels, you obviously have lower loans, which also lower your provision as a percentage of owned contract sales. Those two dynamics will come into the back half of the year from a financing perspective. But that combined with real estate is really what it is. Effectively, David, the same story we have been saying for the last three quarters.

Got it. okay I think that is it for me. I may jump back in the queue. Thanks.

Okay. Thanks.

Our next question is from the line of Ben Chaiken with Credit Suisse. Please proceed with your question.

Hey, thanks for taking my question. I guess, for the - you kind of gave some color on the 32—I think you said 32,000 packages sold to Hilton Honors members. But I guess just stepping back a little bit, is there for the sales centers you have rebranded, can you talk about some of the early results of selling HGV Max? Like are you seeing that the product, but I guess also the sales centers resonate with the Diamond customers, and I’m kind of talking about a Diamond customer upgrading into the HGV Max portfolio? Then I have one or two others.

Yes. So I would say that we are seeing very positive results across the board from sales, both in HGV legacy and Diamond legacy or those that have been converted over. One of the things, Ben, is that we have not moved on doing a lot of cross-selling. That is something we will be doing down the road. Obviously, we have had a significant amount of change for the organization in propping all this up and getting Max started up, and all the technology. We have kept our teams focused on what they have been doing best historically. Both deed and trust are selling very well. We are seeing a little bit of cross-selling, and where we are allowing some of that to happen, and we are noticing a strong desire to upgrade into deeded product. On the other side, we are seeing some really strong demand on the trust product from our HGV legacy sales centers, but we are only testing that in a few areas. If you think about it, we moved everything into a single currency earlier in the year before we launched HGV Max. Our points work great across both deed and the trust products right now. Overall, I think the product is resonating very well with each of our guests. As we get farther out into 2023 and 2024, when we allow more cross-selling to occur, we think that will be another potential tailwind for us.

Got you. And then this may be a little bit hard to pinpoint, but I think you mentioned 32,000 packages being sold to Hilton Honors members, primarily to the legacy Diamond product. Is there any way to think about—just help us maybe like bracket the timeframe that is likely to be used over and then how to think about, I guess, like package conversion? I don’t know if that is possible, but.

Sure, yes. We saw just on the package side, the 32,000 were into eight markets. Those are markets that have been rebranded and typically the travel time after you sell the packages is around six months, so it is still very early on. We haven’t seen that many of those Hilton customers coming through the door yet. But we are confident that the sales centers have been upgraded, the technology has been upgraded, and is pretty much identical to what your HGV legacy sales centers offer, and the product that has been rebranded is a bit of a step down in some cases, but still really meets the Hilton Vacation Club quality that we put out there. Our expectations are that sales are going to go well to those customers. Our package pipeline now sits at a record amount of 500,000. Activations continue to pick up. As I mentioned, we saw new buyer tour flow was up 45% in Q2 versus Q1, and all indications from what we can see are that momentum continues to pick up throughout the back half of the year, which is part of the mix shift that we talked about earlier today.

Got you, and then one very quick one, I think you mentioned new owners were 70% of the mix versus 73% in Q1. Just to be clear, is that sales dollars or is that transactions?

Yes, that is sales dollars. If you think about where we are, HGV Legacy is historically used to run around 50/50, and it was running more around 60/40 before the pandemic; that has come back pretty well. We are still running about 55/35 with legacy Diamond; when we acquired Diamond, they were running about 80/20. The opportunity there is again, those 32,000 packages and as we sell additional packages every month, and as we start propping up new marketing opportunities to drive new customers, new Hilton-type customers through those sales centers, that mix will shift. Our goal is to get back to 60/40 across the company, but we are pleased with the NOG we had in HGV Legacy; we are back up to 3.2%. Net, we gained about 1,400 Diamond new members through the legacy sales centers.

And hey, Ben, just for clarification, I think you said 70% new buyers; it is actually 70% owners, just to make sure.

Got it. Thank you very much.

Thank you. Before we end, now I will turn the call back over to Mr. Mark Wang for any closing remarks.

Alright. Well, thanks everyone for joining us today. I want to give a special thanks to our team members for going above and beyond to meet our owners’ needs by delivering outstanding vacation experiences. I also want to thank our owners who make vacations a priority and trust us, allowing us to create memorable experiences for themselves and their families. So have a great day.

This concludes the conference call. You may disconnect your lines at this time. Thank you for your participation.