Operator
Good morning and welcome to the Hilton Grand Vacations 4th Quarter 2024 earnings conference call. A telephone replay will be available for 7 days following the call. The dial-in number is 844-512-2921 and enter PIN, hash or pound, 13751065. 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. If you should require operator assistance, please press star zero. If using a speakerphone, please lift your handset to allow the signal to reach our equipment. I would now like to turn the call over to Mark Melnick, Senior Vice President of Investor Relations.
Please go Before we begin, I'd note that we've uploaded slides to our IR website detailing our Financing Business Optimization Program, which are available for download at investors.hgb.com. As a reminder, our digital results could differ. These statements are effective only as it's day. We undertake no obligation to publicly update or revise these statements. For discussion of some of the factors that could cause actual results to differ, please see the risk factors section of our SEC filings. We'll also be referring to certain non-GAAP financial measures. You can find definitions and components of such non-GAAP numbers, as well as reconciliations of non-GAAP and GAAP financial measures discussed. And on our website, reported results for all ASC 606 required to defer and then hold off on recognizing those revenues for ease of comparability and to suggest that EBITDA and our real estate results excluding the net impact of construction related deferrals and recognitions for all reporting periods to help you make more meaningful period to period comparisons you can find details of our current and historical deferrals and recognitions in table t1 of our earnings release and a complete accounting of our historical also be found in Excel for our chief executive after Mark's comments our EVP of finance and acting CFO Aaron day will go through the financial details for the quarter Mark and Aaron will then make themselves available for your questions with that let me turn the call over to our CEO, Mark Wang. Mark?
Good morning, everyone, and welcome to our fourth quarter earnings call. I want to give a special thank you to our team members across the globe for making 2024 another productive year for HCV. We closed our blue-green acquisition and completed a significant amount of integration work, adding nearly 200,000 members and expanded properties. We made substantial progress. We made meaningful organizations. We launched HEV MAX to our blue-green members, providing properties and more destinations. And we generated records. This was on top of the work we've been doing to continuously enhance the value of HEV ownership. The teams have a lot to be proud of, and while our path in 2024 was not without its challenges, I'm pleased that we finished on a strong note in the fourth quarter. Our new organizational structure and strategic initiatives have been producing further results. As a result, we saw growth in transactions, BPGs, and contract sales even after adjusting as we saw during the fourth quarter of both 23. The consumer environment remains, but we're pleased to see that travel intentions have remained strong, and we're optimistic that our operational adjustments and initiatives will help to insulate us from those two broad macro factors. As we look ahead, our 25 guidance reflects the view that these initiatives will further enable growth in contract sales and EBITDA, along with strong recash flow generation, as we continue to build on those improvements, despite the addition of $25 million of additional consumer finance interest expense associated with HEV for success in 25 and beyond. Turning to an overview of the fourth quarter, Trek sales were able to offset a decline in tours, along with our initiatives to improve tour efficiency and the removal of a new buyer channel on the blue-green side that we made earlier. Our channel trends continue to see strength in our owner tours, aided by our launch of HEV Max for blue-green new buyer tour, along with the removal of a third-party channel on the blue-green side. We expect these trends to continue throughout the year, which should drive further with VPG of $4,026, over 20% ahead of Proforma 19, and at the best levels since the highs we saw in 22. Geographically, it's worth noting that we saw high-demand sales launch of Kahaku will be our first Hilton Club offering in Hawaii. This boutique luxury property will include exclusive amenities for detail slightly up in the quarter. Our rental arrivals in the first quarter and our package pipeline also remains robust at over 710,000 packages. huge pool of quality customers to enable us to continue to continue to be optimistic about the leisure travel turning to our non-real estate business our member accounts 24,000 at the end of the quarter and NOG was 1.1 percent the max member overall NOG as we continue to see strong owner upgrade demand with our max member base growing 34 percent this year the top line trend and the addition will unlock additional cash flow this year and will allow us to return a we provide an update on we achieved some significant milestones strong initial reception 5,000 new hv max members in less than two months post-launch which was a quicker uptake than we saw with the initial launch of max in early 22 participation building ahead of the launch and we're pleased to see that excitement we even split our tour scoring models with additional filters and data points focus on improving our what will drive and per we started energy 25 and 25 additional store the results in these first locations and we're seeing an incredible projected expectations to solidify our long-term partnership with choice hotels in the fourth quarter historically choice was a material source of new buyer tours for blue green and we see further potential to grow lead flow as we expand our existing marketing channels and launch new channels, partnership model, and we continue to scout for new solid line of sight on H-E-V Max on today's call.
Thank you, Mark, and good morning, everyone. Before we start, note that our reported results for this quarter include $90 million of sales deferrals, which reduced reported gap revenue and were related to pre-sales of our newest project, Kahaku. We also recorded $41 million of associated direct expense deferrals. Adjusting for these two items would increase the EBIT of reported in our press release by a net 49 million to 289 million. In my prepared remarks, I'll only refer to metrics as including net deferrals, which more accurately reflect the cash flow dynamics of our financial performance during the period. As Mark mentioned, this was a very impactful year for HGV. We ended the year on a strong note, exceeding our prior expectations and finishing in the upper half of our revised guidance range. We generated contract sales of 3 billion and adjusted EBITDA of $1.1 billion. And we converted 76% of that EBITDA into a record $837 million of adjusted free cash flow, enabling us to repurchase a record $432 million of stocks, reducing our diluted share count by 10%. Now let's turn to our results for the quarter. Total revenue excluding cost reimbursements in the quarter was $1.2 billion, and adjusted EBITDA was $289 million, with margins excluding reimbursements of 23%. EBITDA included just over $17 million of blue-green cost synergies recognized during the quarter for a run rate of $75 million annualized, on target with our plan for $100 million of cost synergies within 24 months. Turning to our segments, within real estate, contract sales grew to $837 million for the quarter, up 9% year-over-year on a pro forma basis, with blue-green contributing $208 million of sales and new buyers comprising 25% of total contract sales. If you recall, we faced several headwinds in the fourth quarter of 2023, including the continued impact of the Maui fires, along with a system outage impacting our ability to convert tours into contracts. In the quarter, we also experienced a significant impact from the dual hurricanes that affected the southern states and cost us nearly $23 million in lost contract sales and $11 million in EBITDA. Adjusting for these one-time impacts in both periods, I'm pleased to note that we returned to solid contract sales growth for the quarter, including double-digit year-over-year growth from BlueGreen, which benefited from the launch of HGV Max in early November. Tours were nearly $207,000, with BlueGreen contributing just over $54,000 tours for the quarter. If we adjust for the one-time impacts of Q4, both this year and last, tours declined roughly 1%, which reflects efforts made during the quarter to focus on tour efficiency. As Mark mentioned earlier, this will continue to be a key focal area for us in 2025 as we push to drive improvements in our BPG. On a performa basis, BPG for the quarter rose 13% to 4,026, which was over 20% ahead of performa 2019 level. Both our owner and new buyer channels showed strong growth during the quarter, and we still experienced high single-digit BPG growth even after adjusting for the one-time headwinds experienced this and last year. The introduction of HGV Maxx to our blue-green members and the launch of sales at Kahaku were significant drivers of BPG during the quarter, reducing our highest close rate since the record levels of 2022 and enabling us to drive solid transaction growth despite towards being slightly lower year-over-year. Cost of product was 15% of net VOI sales for the quarter and our provision for bad debt as a percent of owned contract sales was 13% in the quarter. Real estate sales and marketing expense was $387 million for the quarter or 46% of contract sales. Real estate profit for the quarter was $167 million with margins of 26%. In our financing business, fourth quarter revenues was $153 million and segment profit was $93 million with margins of 61%. I'd like to take a moment here to highlight the slides that we have on the IR website detailing our financing business optimization that we launched in the fourth quarter. That initiative aims to increase both the level and consistency of our non-recourse borrowing activity, generating additional adjusted free cash flow during the program ramp and enabling incremental shareholder value creation from both capital return and business reinvestment. The goal is to increase the amount of current receivables that we are regularly securitizing to between 70 and 80 percent from the historical run rate, which was closer to mid-50s. We began the first stage of the program late in the fourth quarter and will continue to ramp it over the next 18 months. Our business is well positioned today to execute on this initiative. We have significant excess liquidity of over $2 billion. We've become a programmatic ABS issuer with a record of strong execution, which will support our access to the securitization market. And we've recently completed extensive work to enhance our credit and consolidate our warehouse facilities, providing us with additional flexibility and a solid platform for this optimization effort. As shown on slide 5, our goal in 2025 is to increase our non-recourse rate to between 65% and 70%, with the ultimate goal of holding our rate in a range of between 70% and 80%. When comparing to our baseline, at full run rate, this will unlock an additional $700 million of cash versus our prior securitization strategy, which we can use for additional capital returns and business reinvestment. At full run rate, we anticipate the program will result in a step-up in our consumer financing interest expense of $39 million versus our pre-optimization level, which reduces our adjusted EBITDA due to being reported as an operating expense. Importantly, however, the tax yield and incremental securitization activity to maintain our new higher rate means the optimization will have minimal impact to our underlying cash flow while still being highly accretive to our equity value. We'll use that incremental cash to support additional capital returns, increasing our share repurchase goal by 50% to $600 million, or an average of $150 million per quarter. As I mentioned, we expect to take roughly 18 months for us to fully achieve full run rate where we're holding our 70% to 80% target range throughout the year. And in 2025, our current expectation is that we'll achieve an average securitization rate between 65% and 70%. which will increase our consumer financing interest expense by $25 million and consequently reduce our adjusted EBITDA by that same amount. That $25 million impact is currently included in the guidance range to be issued this morning. Turning back to our portfolio metrics, our originated weighted average interest rate was 14.95%. Combined gross receivables for the quarter were $4 billion or $2.9 billion net of allowance. Our total allowance for bad debt was $1.1 billion on that $4 billion receivable balance, or 27% of the portfolio. Our annualized default rate for our consolidated portfolios, inclusive of blue-green, stood at 10.8% for the quarter. Our provision was 13.3% of owned contracts sales in the quarter. Finally, I note that our other financing expense increased this quarter, owing in part to an additional reserve of $13 million, primarily on the acquired blue-green portfolio. This is similar to the approach we used with Diamond, where we acquired a portfolio of mortgage receivables that will continue to pay off over time, and we've taken a reserve against it as we work over time to migrate the underwriting and sales processes to legacy HGV. Also similar to Diamond, early indications are the originated portfolio is performing better in the acquired portfolio, reflecting the higher value proposition of HCV's network, HCV max, and improved underwriting standards. In our resort and club business, our consolidated member count was approximately $724,000, and our NOG was 1.1% at the end of the quarter. Revenue was $206 million for the quarter, and segment profit was $147 million, with margins of 71%. Rental and ancillary revenues were $174 million in the quarter, with segment loss of $11 million. Revenue growth was driven by the addition of blue-green, along with an increase in available room nights at our legacy business, offset by a mixed-driven decline in REF PAR. The mixed impact on REF PAR was driven by an increased number of room nights in our Hawaii markets, being dedicated to member stays rather than rental this quarter, as we lapped the wildfire related to disruption in the region. Given that Hawaii carries the highest ADR in our portfolio, this created a negative mixed impact when looking at system-wide REVPAR. But when looking at same market basis, our REVPARs increased versus the prior year in each of our major markets during the quarter. Expenses in the period were elevated primarily due to the addition of Blue Green's rental business, which operated at a loss along with continued elevated developer maintenance fees associated with our unsold inventory. During the fourth quarter, we also saw strong usage of points for stays at Great Wolf Lodge through our new partnership program, with associated point conversion expense showing up in our rental segment. Over time, we expect annual segment profitability to improve, mainly as a result of selling through our unsold inventory, which reduces the burden of developer maintenance fees. But the addition of Blue Green's business will continue to weigh on segment profits and rental, mainly in the seasonally slower first and fourth quarters bridging the gap between segment adjusted EBITDA and total adjusted EBITDA JV EBITDA was six million corporate GNA was forty six million license fees were forty seven million and EBITDA attributable to non-controlling interest was five million our adjusted pre-cash flow in the quarter was eight hundred and eighty three million which included inventory spend of $159 million. I note that this is materially higher than our initial expectations. We elected to take advantage of tax deferrals in the U.S. and Japan at the end of the year, coupled with a timing shift on some of our anticipated inventory spend in the quarter. We expect that both of these items will instead be paid in 2025. In addition, we had a significant level of securitization activity in Q4, which contributed to the strong cash flow in the quarter. For the year, we produced adjusted free cash flow of $837 million, or 76% of our adjusted EBITDA, which was materially higher than our long-term target range of 55 to 65%. Excluding the deferral items I mentioned above, our conversion rate in the quarter would have been in the high 50. Looking forward, our cash conversion rate will also be elevated as we ramp our financing optimization program before reverting back to our long-term target range of 55 to 65%. As we look at 2025 specifically, by the inclusion of the tax deferrals and deferred inventory payment, our optimization benefits will still enable our cash conversion rate for the full year to be in a range of 65 to 75%. During the quarter, the company repurchased 3.15 million shares of common stock for $125 million. And through February 20th, we repurchased an additional 1.6 million shares for $66 million, leaving us with $361 million of remaining availability under our share repurchase plan. Turning to our outlook, we are establishing our 2025 adjusted EBITDA guidance to be in a range of $1,125 to $1,165. When contemplating this range, there are several important expense items embedded into the guidance that should be noted. The first is the $25 million increase in our consumer financing interest expense due to our financing optimization program. Excluding this expense, our guidance would have been in the range of $1150 to $1190. But as I detailed earlier, we believe this program will be accretive to our cash flow and our equity value. The second item is regarding our license fees. The overlap of our final license fee rate step-up on our diamond sales and our first rate step-up on our blue-green sales makes 2025 uniquely high with respect to year-over-year change in our license fee rate. If we assume no change in sales from 2024 levels, this change in rate would be a $30 million EBITDA headwind in 2025. As it relates to our liquidity, as of December 31st, our position consisted of $328 million of unrestricted cash and $715 million of availability under a revolving credit facility. Our debt balance at Quarter End was comprised of corporate debt of $4.6 billion and non-recourse debt balance of approximately $2.3 billion. At quarter end, we had $423 million of remaining capacity on our warehouse facility. We also had $1.2 billion of notes that were current on payments but unsecuritized. Of that figure, approximately $749 million could be monetized through either warehouse borrowings or securitization, while another $291 million of mortgage notes we anticipate being eligible following certain customary milestones such as first payment, being M&A. recording. Turning to our credit metrics at the end of Q4 and inclusive of all anticipated cost synergies, the company's total net leverage on a TTM basis was 3.7. Finally, I'm happy to announce that we've remediated the material weakness that we previously disclosed in our 2023 Form 10-K. We will now turn the call over to the operator and look forward to your questions.
Operator
Operator? thank you ladies and gentlemen if you would like to ask a question please press star 1 on your touchstone phone to enter the queue if at any point your question has been answered you may remove yourself from the queue by pressing star 2 please limit yourself to one question and one follow-up to allow the opportunity for everyone to ask questions you may then re-enter the queue to ask additional questions. One moment, please, while we poll for questions. The first question comes from the line of Patrick Scholes from Truist Securities. Please go ahead. Great.
Thank you. Good afternoon or good morning. A number of questions here for you. How should we think about some of the puts and takes as far as growth rates between balancing off of tour flow and BPG as it relates to your 2025 outlook? You know, certainly in the most recent quarter, solves this massive year-over-year acceleration in BPG. You know, does that flow through? If you give a little more color on that, thank you. And then I'll have a follow-up question or two.
Yeah, sure. Thank you. Maybe I'll have Aaron provide a little bit more detail here. But, look, I think, as you saw with finish the year strong with really good momentum, teams did a great job, improved execution from, you know, all the initiatives that strong top-line revenue driven by growth in contract sales this year. And, you know, we've talked about the rollout of MAX and, importantly, Ultimate Access. We're going to be rolling that out. that will continue to benefit from the launch of kahaku especially in our APAC region so and about it not just around the quality of the tour but our staffing ratios getting our staffing ratios and the teams have done a great job our recruiting done a good job getting us in a better position there so um to kind of get into what we're thinking here and what we're guiding to is tours we see in this low to mid single digit and we think that VPG will be in kind of the same range. We do have some unique expense headwinds impacting EBITDA this year. Aaron covered off and talked about it in our prepared remarks. So you're going to see revenue will outpace EBITDA this year but expect solid growth in our underlying business including strong free cash flow. So if you'd like, you can try to provide you a little bit more detail on that.
Yeah, thanks, Mark. So as Mark mentioned on the top line, if you take that TOR flow at that low to mid and the VPG at mid single digit, we really expect to be mid to high single digit overall. As Mark mentioned, we are going to see a slight margin contraction, primarily related to items I mentioned in my prepared remarks. So that's around the additional interest expense from our financing optimization business, as well as a license fee headwind and some rental pressures around recovered inventory. So from a cadence standpoint, just thinking about the year, Q1 will be the lowest from a growth and margin perspective. And that's mainly due to some of those cost headwinds lapping throughout the year. But on the sales side, we also had easier comps. We'll have easier comps in second quarter, third quarter. So, we really should see some better flow through in those quarters. And then, once Mark mentioned as well, on the cash flow side, we're expecting 65% to 75% conversion rate. And that's really that benefit of the financing optimization program we announced today.
Okay, thank you. And then, my follow-up question really just relates to this optimization program. It seems pretty straightforward. I guess it's a very simplified way of describing it. It's essentially just picking up the pace of securitizations. And because you're doing that, you'll receive less immediate income from that. But the tradeoff is you get more cash infusion from doing the actual securitizations, which you could use for share repurchases. Is that a very simplified way of high level of describing it?
Yes, Patrick, I think that's a good way of describing it. I think one thing to know is just that, remember, the program is going to ramp over the next 18 months to get to that full $700 million we announced, so probably when you just think about 2025, if we focus there, we really anticipate generating $800 million at the midpoint of our cash flow guidance for the year in 2025, and that also includes absorbing those timing impact of that Q4 cash benefit. And then of that $800 million, we're going to commit $600 million to the share repurchase program that we upped from $100 to $150 per quarter. So overall, we're targeting our non-recourse borrowing in 25 to be in that 65% to 70% range. I think we ended Q3 right around 55%. We did start this program a little bit in Q4, so you see a little bit of benefit there, both on the non-recourse borrowing side and then consequently on the share repurchase. But this will ultimately ramp to 70% to 80% as we ramp over the next 18 months.
Yeah, and just to maybe finish off on that, look, our priority is the return cash to our shareholders. And when ramped, the program is really going to have minimal impact and we be accretive to our free cash flow in the near term as well as...
Okay, that makes sense. And I've certainly found over time, shareholders like the cash infusion used for share repurchases as the preference. I have more questions, but I'll hop into the queue. Thank you.
Operator
Thank you. The next question comes from the line of Brand Amontor from Barclays. Please go ahead. Good morning, everybody.
Thanks for taking my question. So maybe for Aaron, the loan loss provision, you did give a lot of detail, and I apologize if I missed this, but the percentage of owned, it did bounce around a fair amount last year, and I know there was some volatility market-wide in terms of delinquencies. But maybe you could just help us understand, you know, how to think about 25, at least qualitatively, versus the numbers that we saw in 24.
Yeah, so you're right. It did bounce around a bit. So if you remember Q1, we were around 12%, and that started picking up in 2Q and 3Q. So we did mention on last November's call that we always expect seasonally it's a bit lower in Q4 and so that pretty much came in as expected. Overall, book is holding up really well. Delinquencies are stable. So we look into next year. I think you're going to see some headwind in Q1 as we we talked about that mid teens and we still think that's a good number. So we're going to see that stabilized in that area. And it's really going to be like on an annualized basis. So if you think about it from a cadence perspective, the provision typically takes up throughout the year with a decline in Q4. So Q1, you're going to see a little bit of headwind. We still expect to be on an annualized basis in that mid-teens when we're looking at 25 and what we've assumed in our guidance.
Okay. That's super helpful. Thank you for that. Okay. And then maybe for Mark, You know, the blue-green HG Max sort of pent-up demand where they were waiting for that to roll out, and they were kind of waiting all year. And it sounds like you saw what you wanted to see in November when you launched that to all those folks in the blue-green system that were waiting for it. Can you help us understand a little bit about the sales cycle length, meaning that, you know, we're sitting here in February. Have you gotten through to all those folks that were waiting, or does that take a lot longer, and is that a tailwind for the next few quarters?
Oh, yeah. So, a great question. Actually, I'm glad you – look, super excited about the launch, and the uptick is much stronger. These people – the members were kind of waiting to find out what the benefit of the Kilton ground vacations. What we saw is we saw this great. So you think about the cadence here. It will take us a good 18 to 24 months really to get in front of all the members. So when we talk about a launch, this isn't, you know, we're mailing out or emailing or doing a lot of transactions telephonically or digitally.
Operator
What we're doing, you know, 18 to 24 months to really, I think, get to a good meaningful amount of these great thanks everybody thank you the next question comes from the line of stephen grambling from morgan stanley please go ahead hey thank you um
you may have addressed a little bit of this in the opening remarks but i guess what have you seen in terms of uh changes in customer behavior across the different segments that you now have across the portfolio kind of post-election and maybe another way of asking this is if we were to have the guidance conversation a quarter ago, you know, what would have changed?
Yeah, so, Steve, I'd say, number one, I think trends remain broadly the same. And we talked about it throughout 24. We saw that pressure, especially in our new, you know, the KPIs for the bottom third net worth. That bottom third for that bottom third is definitely still. The performance across VPGs, I think what we've been able to be improved. If you look at who was the company, it was APAC. Hawaii had, we saw it in Oahu. We also saw growth in Japan as our new buyer tour flow is rampant. I guess to answer your question, people are engaged in travel. I think what's important and what we can control has improved. So all in all, I feel good we came out of that.
That's great, Collar, on what's going on in Hawaii. An unrelated follow-up, and I know you talked a little bit about the free cash flow conversion, but maybe if we can just drill down into the inventory investment that you're anticipating in 2025. I may have missed that. Thank you.
Yeah, so thinking about 2025 on the inventory side, we are looking at – So I think when we had HGV as a standalone company, we were talking $250 to $350 million, and that was roughly to support, you know, $2.5 billion or so of sales. So Blue Green, when we bought them, they operated right around the run rate of $100 million. So they're being invested every year a little bit because they came with a bit lower inventory than we had with the diamond acquisition. So for $25 and $26, we expect to be at the high end of the combined range. so the combined rates being 350 to 450 so when you think about 25 it's going to be circa 450 give or take a little bit um we did talk about a bit of inventory spend that got delayed from q4 into 25. so and mainly that's really finishing off these pre-covid projects primarily in the hawaii market mark just talked about kahaku that's going vertical right now so that's a big portion of the spend um so uh we're gonna see um we're gonna see it ebb and flow a little bit throughout the year. But, you know, as we last over the next two years, we expect a longer term outlook to be more near the low end of that combined range of 350 to 450.
Yeah. And then, Stephen, I'll just add that, look, I think we're in a very good availability. So we haven't spent this elevated spend.
Excellent. I'll jump back in the queue. Thank you.
Operator
Thank you. The next question comes from the line of Ben Chaikin from Mizuho Securities. Please go ahead.
Hey, thanks for taking my question um the the uh the legacy blue green ownership does that convert at one-to-one or is it on a case-by-case basis when people are um uh upgrading to hgb max and then are consumers proactively uh seeing that that value proposition or do you do you need to flag it to them to your point around this taking 18 to 24 months um ramping up and then and then i have one or two quick follow-ups thanks yeah i'm not sure ben i understand the first part of the question sure um yeah so so i would assume that i well i maybe i'll ask the question when when blue green customers purchase when legacy blue green customers upgrade to hdb max does their legacy
ownership in blue green also now apply at some exchange ratio to the hdb max system oh i i get it okay yeah so look we have a we have a conversion uh as far as our points go in blue green so they own uh they own points at blue green uh in the blue green club they will continue to have those benefits and be able to use that within that system but there's a conversion rate as a max member so the benefit point hdv max you have to upgrade into you know additional purchase But you get cross-booking activities, so now you can go 40-some-odd blue-green properties across 200 properties within MAX. You also get Hilton Honor staff. You get dishes, flights, rental cars, et cetera. So, yeah, so you don't lose. It's like a few minutes ago. The introduction of MAX was introduced into our sale for people to learn about HEV MAX. Now, of course, it comes in there on the website. We talk about it there. But to really purchase it and upgrade, it's done at the sales table. So, again, it's going to take a good 18 to 24 months before we can get this presented in front of you.
Got it. And have you done any work on similar transactions regarding the potential upgrade propensity or proportion of the owner base over time, maybe looking at past transactions in the industry?
Yeah, look, we track that, you know, daily and monthly. We have a static pool on upgrade propensity. And so one of the things that we really liked about Blue Green is their upgrade propensity wasn't or hasn't been historically at the same level as HCV nor at the levels that Diamond had. And we think part of it is because there really wasn't a new – well, we underwrote it to be lower than the propensity at HGV legacy. We still see the VPGs right around $2,000 to $2,500, still below historic HGV.
Got it. And then just squeezing one more quick one in, the securitization financing update is very straightforward and appreciated. I guess the question would be, why not do the securitization all at once? Is it just a market demand dynamic that takes, you know, 18 months or so to move the ratio higher?
Yeah. So we're really thinking about the – remember we talked about, you know, we kind of started this in Q4, but we're thinking about the ramp from a couple different reasons. But the ramp really will allow us to continue to execute a tighter spread versus doing it all at once. So the ramp's really somewhat – the timing's a little bit dependent it on the securitization markets, but we do expect to be there at the run rate as we, you know, the first half of 2026. So, you know, the ramp is just a, we want to do it over time. And so, for this year, we're going to be that 65%. So, we're going to get a lot of it this year, and then we'll, you know, finish up with the expectation that's in that first half of 2026 when the full non-recourse percent will be there on a kind of a stabilized basis.
Operator
Thank you. The next question comes from the line of David Katz from Jefferies. Please go ahead.
Good morning. Appreciate all the copious detail and the prepared remarks and the deck, and appreciate you taking my question. So, look, I do want to get a sense for your updated geographic distribution and how you look at it on a combined basis. Just remembering some of the concentration that was Hawaii early on, looking at sort of where the company is able to touch today and where might be future places for you to grow into. Thank you.
2019, when you think about just our platform and when you look at, you know, what a much wider reach we have geographically, I would say when you're looking, you know, we were very regional markets. You know, we still have those four core markets that are, but we now have new regional market so geographically and virginia beach and sedona and scottsdale and palms desert and lake toss so we have dynamics of the value proposition from excited about that now as far as how we uh and i can tell you jv and our east teams did a really good job so all in all uh you know performances and the opportunity now for us when you think about nashville uh the opportunity to expand in nashville is a great opportunity for us there's 12 hilton branded hotels we have a small footprint through the acquisition of blue green in san antonio third largest members uh for hgv combined so texas is another market that went and then last quarter and uh we think domestic we're almost sold out sold out ahead of uh our under right there's going to be good domestic demand for us in japan and we see a lot of greenfield opportunities in japan so this whole new platform gives us the opportunity to really expand in some of these regional markets now when i talk about expansion you know these will not be vegas markets they won't be orlando markets but these are incremental markets that i think where we can grow you know in the high single digits to low double digits uh whereas our big big core markets are probably you know more uh going to be more restrained to to mid single digits so take time for us to unlock this um but uh you know what will we to uh focus on how that expansion will work and importantly look at the investment in those markets will be much more incremental uh we're not going to be building necessarily big towers. We'll also look to do capital-efficient deals on a just-in-time basis.
Operator
Thank you very much.
Operator
The next question comes from the line of Chris Voronka from Deutsche Bank. Please go ahead.
Hey, good morning. Thanks for taking my question. Mark, you talked earlier about improving the efficiency, right, the close rates, And I'm curious as to whether that's going to have any potential impact on the financing business in terms of either propensity to finance or, you know, maybe lower LLPs. Is this a higher quality customer that you think you can get the higher close rates on?
You know, that's an interesting question. We haven't seen any material to finance. You know, it's, you know, when we are seeing a higher, I would say today that we have not seen any.
Fair enough. And then, yeah, I know you mentioned, I think you kind of re-upped with choice. Can you maybe, without going into any specifics you don't want to go into, can you let us know if there's any difference in economics there or how much uplift you expect from the renegotiated relationship?
No, thanks. Look, please, we've solidified our partnership with Choice. Look, this is part of our new buyer lead source. It's performed well, and where we see the opportunity, marketing opportunities. So it took a while for us to get it, you know, get things figured out. When you're dealing with, you know, the choice customers will be focused on and will not be focused on the Hilton product. So going forward, we need to be mindful, and so we'll have dedicated.
Super helpful. That's it for me.
Operator
Thank you. The next question comes from the line of Patrick Scholes from Truist Securities. Please go ahead.
Great. Thank you. Just a quick follow-up question. On an earnings call this morning, one of your peers had some somewhat cryptic comments about softness in sales beginning in February, which subsequently stabilized. I'm curious if you saw anything similar along those lines.
Yeah. We haven't seen anything similar to that. We had very similar momentum that we saw in the fourth quarter roll through January. And so right now, you know, that momentum continues, so we haven't seen that.
Operator
Thank you. Ladies and gentlemen, this concludes the question and answer session, and before we end, I will turn the call back over to Mark Wang for any closing remarks.
All right. Well, thanks everyone for joining us today. I also want to thank all of our team members again for going above and beyond to provide outstanding vacation experiences for our members, and we look forward to speaking with you on our next call. So, thank you.
Operator
Thank you. Ladies and gentlemen, the conference of Hilton Grand Vacations has now concluded. Thank you for your participation. You may now disconnect your lines.
