UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

For the quarterly period ended ~~September 30, 2017~~

March 31, 2023

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

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

For the transition period from_________ to ________

Commission file number 001-37794

Hilton Grand Vacations Inc.

(Exact Name of Registrant as Specified in Its Charter)

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


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

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

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

HGV

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒x No ☐

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


Large Accelerated Filer		☐ x		Accelerated Filer		☐ o

Non-Accelerated Filer	☒ ~~(Do not check if a smaller reporting company)~~ o		Smaller Reporting Company		☐ o

Emerging Growth Company	☐ o

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

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

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of ~~October 27, 2017~~April 21, 2023 was ~~99,088,973.~~

111,404,258.

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HILTON GRAND VACATIONS INC.

FORM 10-Q TABLE OF CONTENTS

Table of Contents

PART I ~~FINANCIA~~LFINANCIAL INFORMATION

~~Item 1.~~

Item 1. Financial Statements

HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	September 30,		December 31,
	2017		2016			March 31, 2023		December 31, 2022
	(unaudited)					(unaudited)
ASSETS					ASSETS
Cash and cash equivalents	$	226	$	48	Cash and cash equivalents	$	389	$	223
Restricted cash		58		103	Restricted cash	363		332
Accounts receivable, net of allowance for doubtful accounts of $10 and $6		104		123
Accounts receivable, net of allowance for doubtful accounts of $68 and $52					Accounts receivable, net of allowance for doubtful accounts of $68 and $52	503		511
Timeshare financing receivables, net		1,055		1,025	Timeshare financing receivables, net	1,754		1,767
Inventory		475		513	Inventory	1,300		1,159
Property and equipment, net		266		256	Property and equipment, net	797		798
Investment in unconsolidated affiliate		41		—
Operating lease right-of-use assets, net					Operating lease right-of-use assets, net	71		76
Investments in unconsolidated affiliates					Investments in unconsolidated affiliates	75		72
Goodwill					Goodwill	1,416		1,416
Intangible assets, net		72		70	Intangible assets, net	1,244		1,277

Other assets		51		42	Other assets	566		373
TOTAL ASSETS (variable interest entities - $500 and $258)	$	2,348	$	2,180
TOTAL ASSETS (variable interest entities - $1,084 and $948)					TOTAL ASSETS (variable interest entities - $1,084 and $948)	$	8,478	$	8,004
LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other	$	324	$	231	Accounts payable, accrued expenses and other	$	1,089	$	1,007
Advanced deposits		102		103	Advanced deposits	174		150
Debt		484		490
Non-recourse debt		612		694
Debt, net					Debt, net	2,940		2,651
Non-recourse debt, net					Non-recourse debt, net	1,095		1,102
Operating lease liabilities					Operating lease liabilities	88		94
Deferred revenues		119		106	Deferred revenues	304		190
Deferred income tax liabilities		374		389	Deferred income tax liabilities	656		659
Total liabilities (variable interest entities - $484 and $245)		2,015		2,013
Commitments and contingencies - see Note 15
Total liabilities (variable interest entities - $1,097 and $1,005)					Total liabilities (variable interest entities - $1,097 and $1,005)	6,346		5,853
Commitments and contingencies - see Note 17					Commitments and contingencies - see Note 17
Equity:					Equity:
Preferred stock, $0.01 par value; 300,000,000 authorized shares, none issued or outstanding as of September 30, 2017 and December 31, 2016		—		—
Common stock, $0.01 par value; 3,000,000,000 authorized shares, 99,088,973 issued and outstanding as of September 30, 2017 and 98,802,597 issued and outstanding as of December 31, 2016		1		1
Preferred stock, $0.01 par value; 300,000,000 authorized shares, none issued or outstanding as of March 31, 2023 and December 31, 2022					Preferred stock, $0.01 par value; 300,000,000 authorized shares, none issued or outstanding as of March 31, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value; 3,000,000,000 authorized shares, 112,515,473 shares issued and outstanding as of March 31, 2023 and 113,628,706 shares issued and outstanding as of December 31, 2022					Common stock, $0.01 par value; 3,000,000,000 authorized shares, 112,515,473 shares issued and outstanding as of March 31, 2023 and 113,628,706 shares issued and outstanding as of December 31, 2022	1		1
Additional paid-in capital		160		138	Additional paid-in capital	1,559		1,582
Accumulated retained earnings		172		28	Accumulated retained earnings	543		529
Accumulated other comprehensive income					Accumulated other comprehensive income	29		39
Total equity		333		167	Total equity	2,132		2,151
TOTAL LIABILITIES AND EQUITY	$	2,348	$	2,180	TOTAL LIABILITIES AND EQUITY	$	8,478	$	8,004

See notes to unaudited condensed consolidated financial statements.

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HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in millions, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2023		2022
Revenues													Revenues
Sales of VOIs, net	$	145		$	130		$	406		$	359		Sales of VOIs, net	$	318	$	269
Sales, marketing, brand and other fees		127			136			401			382		Sales, marketing, brand and other fees	158		119
Financing		38			34			109			100		Financing	74		64
Resort and club management		37			33			108			98		Resort and club management	131		125
Rental and ancillary services		45			41			138			135		Rental and ancillary services	158		136
Cost reimbursements		34			33			102			94		Cost reimbursements	95		66
Total revenues		426			407			1,264			1,168		Total revenues	934		779
Expenses													Expenses
Cost of VOI sales		40			44			107			110		Cost of VOI sales	50		40
Sales and marketing		171			157			492			443		Sales and marketing	301		243
Financing		11			8			32			24		Financing	24		19
Resort and club management		12			9			32			25		Resort and club management	42		36
Rental and ancillary services		30			30			88			86		Rental and ancillary services	152		132
General and administrative		23			24			75			61		General and administrative	42		42
Acquisition and integration-related expense													Acquisition and integration-related expense	17		13
Depreciation and amortization		7			6			21			17		Depreciation and amortization	51		60
License fee expense		22			22			65			61		License fee expense	30		25
Impairment expense													Impairment expense	—		3
Cost reimbursements		34			33			102			94		Cost reimbursements	95		66
Total operating expenses		350			333			1,014			921		Total operating expenses	804		679
Gain on foreign currency transactions		1			1			1			2
Allocated Parent interest expense		—			(7	)		—			(20	)
Interest expense		(7	)		—			(21	)		—		Interest expense	(44)		(33)
Equity in earnings from unconsolidated affiliate		1			—			1			—
Other loss, net		—			—			—			(1	)
Equity in earnings from unconsolidated affiliates													Equity in earnings from unconsolidated affiliates	3		3
Other gain, net													Other gain, net	1		1
Income before income taxes		71			68			231			228		Income before income taxes	90		71
Income tax expense		(28	)		(33	)		(87	)		(98	)	Income tax expense	(17)		(20)
Net income	$	43		$	35		$	144		$	130		Net income	$	73	$	51
Earnings per share:⁽¹⁾
Earnings per share:													Earnings per share:
Basic	$	0.43		$	0.35		$	1.45		$	1.31		Basic	$	0.65	$	0.42
Diluted	$	0.43		$	0.35		$	1.44		$	1.31		Diluted	$	0.64	$	0.42

⁽¹⁾	For the three and nine months ended September 30, 2016, basic and diluted earnings per share was calculated based on shares distributed to Hilton Grand Vacations’ stockholders on January 3, 2017. See Note 12: ~~Earnings Per Share~~ ~~for additional information.~~

See notes to unaudited condensed consolidated financial statements.

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HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

Nine Months Ended September 30,

2017

2016

Operating Activities

Net income

$
144

$
130

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

21

17

Amortization of deferred financing costs and other

4

3

Provision for loan losses

45

37

Other loss, net

—

1

Gain on foreign currency transactions

(1
)

(2
)
Share-based compensation

13

—

Deferred income (benefit) taxes

(5
)

12

Equity in earnings from unconsolidated affiliate

(1
)

—

Net changes in assets and liabilities:

Accounts receivables, net

19

(28
)
Timeshare financing receivables, net

(75
)

(52
)
Inventory

38

(10
)
Other assets

(11
)

(7
)
Accounts payable, accrued expenses and other

96

17

Advanced deposits

(1
)

6

Deferred revenues

13

10

Other

—

(1
)
Net cash provided by operating activities

299

133

Investing Activities

Capital expenditures for property and equipment

(25
)

(16
)
Software capitalization costs

(12
)

(5
)
Investment in unconsolidated affiliate

(40
)

—

Net cash used in investing activities

(77
)

(21
)
Financing Activities

Issuance of non-recourse debt

350

—

Repayment of non-recourse debt

(428
)

(85
)
Repayment of debt

(7
)

—

Debt issuance costs

(5
)

(6
)
Allocated Parent debt activity

—

111

Net transfers to Parent

—

(114
)
Proceeds from stock option exercises

1

—

Net cash used in financing activities

(89
)

(94
)
Net increase in cash, cash equivalents and restricted cash

133

18

Cash, cash equivalents and restricted cash, beginning of period

151

79

Cash, cash equivalents and restricted cash, end of period

$
284

$
97


	Three Months Ended March 31,
	2023		2022
Net income	$	73	$	51

Derivative instrument adjustments, net of tax	(10)		22
Other comprehensive (loss) income, net of tax	(10)		22
Comprehensive income	$	63	$	73

See notes to unaudited condensed consolidated financial statements.

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HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS (UNAUDITED)

(in millions)


	Three Months Ended March 31,
	2023		2022
Operating Activities
Net income	$	73	$	51
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	51		60
Amortization of deferred financing costs, acquisition premiums and other	7		12
Provision for financing receivables losses	30		31
Impairment expense	—		3
Other gain, net	(1)		—
Share-based compensation	10		11

Equity in earnings from unconsolidated affiliates	(3)		(3)
Net changes in assets and liabilities:
Accounts receivable, net	8		(107)
Timeshare financing receivables, net	(24)		(11)
Inventory	(101)		26
Purchases and development of real estate for future conversion to inventory	(2)		(1)
Other assets	(244)		(264)
Accounts payable, accrued expenses and other	84		290
Advanced deposits	24		14
Deferred revenues	114		158
Net cash provided by operating activities	26		270
Investing Activities

Capital expenditures for property and equipment (excluding inventory)	(5)		(8)
Software capitalization costs	(6)		(6)
Net cash used in investing activities	(11)		(14)
Financing Activities
Proceeds from debt	438		—
Proceeds from non-recourse debt	175		155
Repayment of debt	(153)		(3)
Repayment of non-recourse debt	(182)		(277)

Repurchase and retirement of common stock	(85)		—
Payment of withholding taxes on vesting of restricted stock units	(14)		(8)

Proceeds from stock option exercises	5		1
Other	(1)		(1)
Net cash provided by (used in) financing activities	183		(133)
Effect of changes in exchange rates on cash, cash equivalents & restricted cash	(1)		(1)
Net increase in cash, cash equivalents and restricted cash	197		122
Cash, cash equivalents and restricted cash, beginning of period	555		695
Cash, cash equivalents and restricted cash, end of period	752		817
Less: Restricted cash	363		303
Cash and cash equivalents	$	389	$	514

Additional

Accumulated

Common Stock

Paid-in

Retained

Total

Shares

Amount

Capital

Earnings

Equity

Balance as of December 31, 2016

99

$
1

$
138

$
28

$
167

Net income

—

—

—

144

144

Deferred intercompany transaction ⁽¹⁾

—

—

9

—

9

Activity related to share-based compensation

—

—

11

—

11

Other

—

—

2

—

2

Balance as of September 30, 2017

99

$
1

$
160

$
172

$
333

⁽¹⁾	~~Refer to Note 10:~~ ~~Income Taxes~~ ~~for further discussion.~~

See notes to unaudited condensed consolidated financial statements.

Table of Contents

HILTON GRAND VACATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in millions)


	Common Stock			Additional Paid-in Capital		Accumulated Retained Earnings		Accumulated Other Comprehensive Income		Total Equity
	Shares	Amount
Balance as of December 31, 2022	113	$	1	$	1,582	$	529	$	39	$	2,151
Net income	—	—		—		73		—		73
Activity related to share-based compensation	1	—		3		—		—		3


Derivative instrument adjustments, net of tax	—	—		—		—		(10)		(10)
Repurchase and retirement of common stock	(2)	—		(26)		(59)		—		(85)
Balance as of March 31, 2023	112	$	1	$	1,559	$	543	$	29	$	2,132

	Common Stock			Additional Paid-in Capital		Accumulated Retained Earnings		Accumulated Other Comprehensive Income		Total Equity
	Shares	Amount
Balance as of December 31, 2021	120	$	1	$	1,630	$	357	$	—	$	1,988
Net income	—	—		—		51		—		51
Activity related to share-based compensation	—	—		4		—		—		4
Derivative instrument adjustments, net of tax	—	—		—		—		22		22
Balance as of March 31, 2022	120	$	1	$	1,634	$	408	$	22	$	2,065

See notes to unaudited condensed consolidated financial statements.

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HILTON GRAND VACATIONS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization and Basis of Presentation

Our ~~Spin-off from Hilton Worldwide Holdings Inc.~~

~~On January 3, 2017, the previously announced spin-off was completed by way of a pro rata distribution of~~ Business

Hilton Grand Vacations Inc.’s (“Hilton Grand Vacations,” “we,” “us,” “our,” “HGV” or the “Company”) common stock to Hilton Worldwide Holdings Inc. (“Hilton”) stockholders. Each Hilton stockholder received one share of our common stock for every ten shares of Hilton common stock. As a result of the spin-off, we became a separate publicly-traded company on the New York Stock Exchange under the ticker symbol “HGV,” and Hilton did not retain any ownership interest in our company.

In connection with the completion of the spin-off, we entered into agreements with Hilton (who at the time was a related party) and other third parties, including licenses to use the Hilton brand. The unaudited condensed consolidated financial statements reflect the effect of these agreements. For the three months ended September 30, 2017 and 2016, we incurred $39 million and $46 million, respectively, and for the nine months ended September 30, 2017 and 2016, we incurred $137 million and $150 million, respectively, in costs relating to the agreements entered with Hilton. See ~~Key Agreements Related to the Spin-Off~~ ~~section in~~ ~~Part I - Item 1. Business~~ ~~of our Annual Report on Form 10-K for the year ended December 31, 2016 for further information.~~

~~Prior to the spin-off, Hilton maintained a share-based compensation plan for the benefit of its officers, directors and employees which was presented as a component of~~ ~~Net transfers (to) from Parent,~~ a financing activity, on the condensed consolidated statements of cash flows. Subsequent to the spin-off, share-based compensation expense is presented as a component of operating activities on the condensed consolidated statements of cash flows.

~~Our Business~~

~~Hilton Grand Vacations~~ is a global timeshare company engaged in developing, marketing, selling, managing and ~~managing~~operating timeshare resorts, timeshare plans and ancillary reservation services, primarily under the Hilton Grand Vacations brand. Our operations primarily consist ~~of:~~of selling vacation ownership intervals ~~(“VOIs”~~and vacation ownership interests (collectively, “VOIs” or “VOI”) for usourselves and third parties; ~~operating resorts;~~ financing and servicing loans provided to consumers for their VOI purchases; operating resorts and timeshare ~~purchases;~~plans; and managing our points-based Hilton Grand Vacations Club and Hilton Club exchange ~~program (the “Club”)~~programs and Diamond points-based multi-resort timeshare clubs and exchange programs. During 2022, we began offering a new club membership called HGV Max across certain of our sales centers. For any customer who purchases a VOI, this membership provides the ability to use points across all properties within our network. The membership provides new destinations for existing club owners and broader vacation opportunities for new buyers. Our club offerings, including HGV Max, are collectively referred to as “Clubs”.

As of ~~September 30, 2017,~~March 31, 2023, we had ~~48 timeshare~~over 150 properties ~~comprised of 8,101 units,~~ located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada and ~~Europe.~~

Japan. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia.

Basis of Presentation

The unaudited condensed consolidated financial statements presented herein include ~~100 percent~~100% of our assets, liabilities, revenues, expenses and cash flows ~~and~~as well as all entities in which we have a controlling financial interest. ~~Through the date of the spin-off, the~~Our accompanying unaudited condensed consolidated financial statements ~~presented herein were prepared on~~reflect all adjustments, including normal recurring items, considered necessary for a ~~stand-alone basis~~fair presentation of the interim periods. All material intercompany transactions and ~~were derived from the unaudited consolidated financial statements and accounting records of Hilton.~~

balances have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect our financial position, results of operations and cash flows as prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Although we believe the disclosures made are adequate to prevent information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2016,~~2022, included in our Annual Report on Form 10-K filed with the SEC on March ~~2, 2017.~~

1, 2023.

The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of rights held by other interests. If the entity is considered to be a variable interest entity (“VIE”), we determine whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interests in the entity. We consolidate entities when we own more than 50% of the voting shares of a company or otherwise have a controlling financial interest.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Interim results are not necessarily indicative of full year performance.

Note 2: Summary of Significant Accounting Policies

Adopted Accounting Pronouncements

On January 1, 2023, we adopted Accounting Standards Update 2022-02 (“ASU 2022-02”), Financial Instruments— Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 provides, under Issue 2 - Vintage Disclosures, that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. For financing receivables, the vintage disclosure is to present the amortized cost basis by credit quality indicator and class of financing receivable for the year of origination. The ~~accompanying unaudited~~vintage disclosures are to be applied prospectively. The impact of adoption of ASU 2022-02 was in disclosure only and did not have an impact on our condensed consolidated financial ~~statements,~~statements. See Note 5: Timeshare Financing Receivables for additional information.

Table of Contents

Note 3: Revenue from Contracts with Customers

Disaggregation of Revenue

The following tables show our disaggregated revenues by product and segment from contracts with customers. We operate our business in the following two segments: (i) Real estate sales and financing and (ii) Resort operations and club management. Please refer to Note 16: Business Segments below for more details related to our ~~opinion, reflect all adjustments, including normal recurring items, considered necessary~~segments.


($ in millions)	Three Months Ended March 31,
Real Estate Sales and Financing Segment	2023		2022
Sales of VOIs, net	$	318	$	269
Sales, marketing, brand and other fees	158		119
Interest income	66		55
Other financing revenue	8		9
Real estate sales and financing segment revenues	$	550	$	452


($ in millions)	Three Months Ended March 31,
Resort Operations and Club Management Segment	2023		2022
Club management	$	51	$	51
Resort management	80		74
Rental(1)	147		124
Ancillary services	11		12
Resort operations and club management segment revenues	$	289	$	261

(1)Excludes intersegment eliminations. See Note 16: Business Segments for ~~a fair presentation~~additional information.

Contract Balances

Our accounts receivable that relate to our contracts with customers includes amounts associated with our contractual right to consideration for completed performance obligations and are settled when the related cash is received. Accounts receivable are recorded when the right to consideration becomes unconditional and is only contingent on the passage of ~~the interim periods. All material intercompany transactions and balances have been eliminated~~time.

The following table provides information on our accounts receivable from contracts with customers which are included in ~~consolidation.~~

~~We review~~Accounts receivable, net on our ~~estimate~~condensed consolidated balance sheets:


($ in millions)	March 31, 2023		December 31, 2022
Receivables	$	341	$	322

Contract liabilities include payments received or due in advance of ~~the expected redemption of expired~~satisfying our performance obligations. Such contract liabilities include advance deposits received on prepaid ~~discounted~~ vacation packages ~~(“packages”) on an ongoing basis. We only reduce~~for future stays at our resorts, deferred revenues related to sales of VOIs of projects under construction, Club activation fees and annual dues and the liability for ~~expired packages when a package is~~Bonus Points awarded to our customers for purchase of VOIs at our properties or properties under our fee-for-service arrangements that may be redeemed ~~or the likelihood of redemption is remote. This review considers factors such as historical experience, current business practices for pursuing individuals to redeem~~

expired packages and the sufficiency and reliability of data available following a change in those redemption business practices. Previously, we concluded that redemption of an expired package was remote once a package had been expired for six months and therefore retained the liability until six months after expiration. During the review in the second quarter of 2017, we determined we then had sufficiently reliable updated information under current business practices to revise our estimate of expired packages that we expect to redeem. As a result during the second quarter of 2017, we changed our accounting estimate for expected redemptions of expired packages to relieve a portion of the remaining liability post expiration and recorded an $11 million reduction to the ~~Advanced Deposits~~ ~~liability, with corresponding increases to~~ ~~Sales, marketing, brand~~future, deferred maintenance fees and other ~~fees~~ ~~revenue~~deferred revenue.

Table of ~~$10~~Contents

The following table presents the composition of our contract liabilities:


($ in millions)	March 31, 2023		December 31, 2022
Contract liabilities:
Advanced deposits	$	174	$	150
Deferred sales of VOIs of projects under construction	—		3
Club dues and Club activation fees	172		76
Bonus Point incentive liability(1)	103		106
Deferred maintenance fees	40		14
Other deferred revenue	41		42

(1)As of March 31, 2023, the balance includes $52 million ~~and~~ of bonus point incentive liabilities included in Accounts payable, accrued expenses and other for the related sales tax liability of $1 million. As a result, for the nine months ended September 30, 2017, our net income increased by $10 million and basic and diluted earnings per share increased by $0.10.

~~Note 2: Significant Accounting Policies~~

~~Investments in Unconsolidated Affiliates~~

We account for investments in unconsolidated affiliates under the equity method of accounting when we exercise significant influence, but do not maintain a controlling financial interest over the affiliates. We evaluate our investments in affiliates for impairment when there are indicators that the fair value of our investment may be less than our carrying value.

~~Cash and Cash Equivalents~~

~~Cash and cash equivalents include all highly liquid investments with original maturities of three months or less.~~

~~Recently Issued Accounting Pronouncements~~

~~Adopted Accounting Standards~~

~~In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09 (“ASU 2016-09”),~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~. ASU 2016-09 includes provisions intended to simplify several aspects of the accounting and presentation of share-based payments. These provisions include the recognition of the income tax effects of awards in the consolidated statement of operations when the awards vest or are settled, permitting an employer to withhold shares in an amount up to the employee’s maximum individual tax rate without resulting in liability classification of the award, permitting entities to make a policy election to account for forfeitures as they occur, and changes to the classification of tax-related cash flows resulting from share-based payments and cash payments made to taxing authorities on the employee’s behalf on the statement of cash flows. This ASU 2016-09 was effective for reporting periods beginning after December 15, 2016. We adopted ASU 2016-09 retrospectively as of January 1, 2017 and have applied to all periods herein with no material impact to our unaudited condensed consolidated financial statements.

~~In November 2016, the FASB issued ASU No. 2016-18, (“ASU 2016-18”)~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash.~~ This ASU is intended to provide guidance on the presentation of restricted cash or restricted cash equivalents and reduce the diversity in practice. This ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement of cash flows. We elected, as permitted by the standard, to early adopt ASU 2016-18 retrospectively as of January 1, 2017 and have applied it to all periods presented herein. The adoption of ASU 2016-18 did not have a material impact to our unaudited condensed consolidated financial statements. The effect of the adoption of ASU 2016-18 on our condensed consolidated ~~statements of cash flows~~balance sheets. This liability is for incentives from VOI sales and sales and marketing expenses in conjunction with our fee-for-service arrangements.

Revenue earned for the three months ended March 31, 2023, that was ~~to include restricted cash balances~~included in the ~~beginning and end of period balances of cash and cash equivalent and restricted cash. The change in restricted cash~~contract liabilities balance at December 31, 2022 was ~~previously disclosed in operating activities and financing activities in the condensed consolidated statements of cash flows.~~

~~In January 2017, the FASB issued ASU No. 2017-01 (“ASU 2017-01”),~~ ~~Business Combinations (Topic 804): Clarifying the Definition of a Business. This ASU clarifies the definition of a business with the objective of adding guidance~~approximately $56 million.

Contract assets relate to ~~assist entities with evaluating whether transactions should~~incentive fees that can be ~~accounted~~earned for as acquisitions or disposals of assets or businesses. We elected, as permitted by the standard, to early adopt ASU 2017-01 prospectively as of January 1, 2017. The adoption of ASU 2017-01 did not have a material impact to our unaudited condensed consolidated financial statements.

~~Accounting Standards Not Yet Adopted~~

~~In May 2014, the FASB issued ASU No. 2014-09 (“ASU 2014-09”),~~ ~~Revenue from Contracts with Customers (Topic 606). This ASU supersedes the revenue recognition requirements in~~ ~~Revenue Recognition (Topic 605), and requires entities to recognize revenue~~

~~in a way that depicts the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. Subsequent to ASU 2014-09, the FASB has issued several related ASUs amending the original ASU.~~

The provisions of this ASU are to be applied retrospectively or using a modified retrospective approach for reporting periods beginning after December 15, 2017. A determination as to whether we will apply the retrospective or modified retrospective adoption method will be made once our quantitative evaluation is complete and we commence quantifying the expected impacts later this year.

~~We are currently evaluating the effect that this ASU will have~~meeting certain targets on our consolidated financial statements by analyzing both transactional and analytical data for each of our revenue streams. The following is a status of our evaluation of impacts by significant revenue stream:

~~Sales of VOIs, net~~ ~~– We expect to recognize~~ ~~Sales of VOI, net~~ when control of the VOI passes to the customer, which generally occurs shortly after the expiration of the purchaser’s period to cancel for a refund. We do not expect that this timing change will have a material impact on our accounting for ~~Sales of VOIs, net. We expect our accounting for uncollectible timeshare financing receivables to remain unchanged.~~

~~We are still evaluating the impact on revenue recognition for~~ sales of VOIs ~~that are~~at properties under ~~construction.~~

~~Sales, marketing, brand~~our fee-for-service arrangements; however, our right to consideration is conditional upon completing the requirements of the annual incentive fee period. There were no contract assets as of March 31, 2023 and ~~other fees~~ ~~- We expect changes to the gross versus net presentation~~$9 million contract assets as of ~~certain sales incentives as sales incentives provided where we are acting as the agent (e.g., Hilton Honors) will be recognized on a net basis in~~ ~~Sales, marketing, brand and other fees. We expect this classification change to reduce~~ ~~Sales, marketing, brand and other fees~~ ~~and the related expenses by $29.7 million for the year ended~~ December 31, ~~2016.~~

2022.

~~We plan~~

Transaction Price Allocated to ~~recognize the expected breakage~~Remaining Performance Obligations

Transaction price allocated to remaining performance obligations represents contract revenue that has not yet been recognized. Our contracts with remaining performance obligations primarily include (i) sales of VOIs under construction, (ii) Club activation fees paid at closing of a VOI purchase, (iii) customers’ advanced deposits on prepaid ~~discounted~~ vacation packages ~~(“packages”) as revenue proportionately when our customers redeem their packages rather than when the likelihood of redemption is remote as we are entitled to the breakage amount. We are currently~~and (iv) Bonus Points that may be redeemed in the ~~process~~future.

The following table presents the deferred revenue, cost of ~~assessing~~VOI sales and direct selling costs from sales of VOIs related to projects under construction as of March 31, 2023 and December 31, 2022.


($ in millions)	March 31, 2023		December 31, 2022
Sales of VOIs, net	$	—	$	3
Cost of VOI sales	—		1
Sales and marketing expense	—		1

As of March 31, 2023, we have recognized all revenue, costs of VOI sales and direct selling costs previously in deferral as all projects under construction were completed in the ~~impact~~first quarter of ~~this expected change.~~

~~We do not expect material changes~~2023.

The following table includes the remaining transaction price related to ~~our accounting for our commissions, brand~~Advanced deposits, Club activation fees and ~~other fees under fee-for-service arrangements.~~

Bonus Points incentive liability as of March 31, 2023:

($ in millions)

Remaining
Transaction Price

Recognition Period

Recognition Method

Advanced deposits

174

18 months

Upon customer stays

Club activation fees

7 years

Straight-line basis over average inventory holding period

Bonus Points incentive liability

103

18 - 30 months

Upon redemption

~~Financing~~ ~~- We do not expect material changes to our accounting for financing revenues, as these revenues are out~~

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Note 4: Accounts Receivable

Accounts receivable within the scope of ~~Topic 606.~~

ASC 326 are measured at amortized cost. The following table represents our accounts receivable, net of allowance for credit losses:


($ in millions)	March 31, 2023		December 31, 2022
Fee-for-service commissions	$	96	$	91
Real estate and financing	35		59
Resort and club operations	210		179
Tax receivables	73		84
Insurance claims receivable	82		81
Other receivables	7		17
Total	$	503	$	511

~~Resort~~Our accounts receivable are generally due within one year of origination. We use delinquency status and economic factors such as credit quality indicators to monitor our receivables within the scope of ASC 326 and use these as a basis for how we develop our expected loss estimates. We have various allowances for our accounts receivable to account for fee-for-service commissions, expected losses related to sales of VOIs, trade accounts receivable, marketing packages, club ~~management~~ ~~- We do not expect material changes to our accounting for ongoing management fees from our homeowners’ association management agreements~~dues and ~~the fees earned from our Club members.~~

activation fees.

~~Rental and ancillary services~~ ~~- We do not expect significant changes to our revenue recognition of transient guest transactions, including rental and ancillary services.~~

~~Cost reimbursements~~ ~~- While we do not expect significant changes to the timing of recognition of cost reimbursements, we are still evaluating potential impacts to changes in presentation.~~

~~We expect immaterial impacts from changes to (i) timing of service fees charged on packages and (ii) classification of contract acquisition costs paid to fee-for-service customers.~~

~~We will continue to evaluate and disclose expected impacts that ASU 2014-09 will have on our unaudited condensed consolidated financial statements as more information becomes available.~~

~~In August 2016, the FASB issued ASU No. 2016-15 (“ASU 2016-15”),~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The provisions of this ASU are effective for reporting periods beginning after December 15, 2017; early adoption is permitted. We are currently evaluating the effect that this ASU will have on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-03 (“ASU 2017-03”),~~ ~~Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323)~~. ASU 2017-03 requires registrants to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. The SEC staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies that the registrant expects to apply, if

determined, and a comparison to the registrant’s current accounting policies. In addition, a registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. ASU 2017-03 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We are currently evaluating the effect that this ASU will have on our consolidated financial statements.

~~Note 3: Restricted Cash~~

~~Restricted cash was as follows:~~

September 30,

December 31,

($ in millions)

2017

2016

Escrow deposits on VOI sales

$
36

$
81

Reserves related to non-recourse debt⁽¹⁾

22

22

$
58

$
103

⁽¹⁾	~~See Note 8:~~ ~~Debt & Non-recourse debt~~ ~~for further discussion.~~

Note 4:5: Timeshare Financing Receivables

~~Timeshare~~

We define our timeshare financing receivables ~~were~~portfolio segments as ~~follows:~~

(i) originated and (ii) acquired. On August 2, 2021, (the “Acquisition Date”), we acquired Dakota Holdings, Inc., the parent of Diamond Resorts International (“Diamond” or “Legacy-Diamond”) (the “Diamond Acquisition”). Our originated portfolio represents timeshare financing receivables that existed both prior to and following the Acquisition Date, excluding Legacy-Diamond (“Legacy-HGV”) and timeshare financing receivables originated by Legacy-Diamond subsequent to the Acquisition Date. Our acquired portfolio includes all timeshare financing receivables acquired from Legacy-Diamond as of the Acquisition Date.

September 30, 2017

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Timeshare financing receivables

$
506

$
687

$
1,193

Less: allowance for loan loss

(29
)

(109
)

(138
)

$
477

$
578

$
1,055

The following table presents the components of each portfolio segment by class of timeshare financing receivables:

December 31, 2016

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Timeshare financing receivables

$
253

$
892

$
1,145

Less: allowance for loan loss

(9
)

(111
)

(120
)

$
244

$
781

$
1,025


	Originated				Acquired
($ in millions)	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Securitized	$	731	$	788	$	234	$	262
Unsecuritized(1)	1,066		971		429		447
Timeshare financing receivables, gross	$	1,797	$	1,759	$	663	$	709
Unamortized non-credit acquisition premium(2)	—		—		37		41
Less: allowance for financing receivables losses	(418)		(404)		(325)		(338)
Timeshare financing receivables, net	$	1,379	$	1,355	$	375	$	412

(1)Includes amounts used as collateral to secure a non-recourse revolving timeshare receivable credit facility (“Timeshare Facility”) as well as amounts held as future collateral for securitization activities.

(2)Non-credit premium of $97 million was recognized at the Acquisition Date, of which $37 million and $41 million remains unamortized as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023 and December 31, 2022, we had timeshare financing receivables with a carrying value of $180 million and $105 million, respectively, securing the Timeshare Facility.

We record an estimate of variable consideration for estimated defaults as a reduction of revenue from VOI sales at the time revenue is recognized on a VOI sale. We record the difference between the timeshare financing receivable and the variable consideration included in the transaction price for the sale of the related VOI as an allowance for financing receivables and record the receivable net of the allowance. During the three months ended March 31, 2023 and 2022, we recorded an adjustment to our estimate of variable consideration of $30 million and $31 million, respectively.

We recognize interest income on our timeshare financing receivables as earned. As of both March 31, 2023 and December 31, 2022, we had interest receivable outstanding of $13 million on our originated timeshare financing receivables. As of both March 31, 2023 and December 31, 2022, we had interest receivable outstanding of $4 million on our acquired timeshare financing receivables. Interest receivable is included in Other Assets within our condensed

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consolidated balance sheets. The interest rate charged on the notes correlates to the risk profile of the ~~borrower~~customer at the time of purchase and the percentage of the purchase that is financed, among other factors. As of ~~September 30, 2017,~~March 31, 2023, our originated timeshare financing receivables had interest rates ranging from ~~5.3 percent~~1.5% to ~~20.5 percent,~~25.8%, a ~~weighted average~~weighted-average interest rate of ~~12.1 percent,~~14.5%, a ~~weighted average~~weighted-average remaining term of ~~7.7~~8.2 years and maturities through ~~2028.~~

~~We pledge a portion of our~~2038. Our acquired timeshare financing receivables ~~as collateral~~had interest rates ranging from 2.0% to ~~secure~~25.0%, a ~~non-recourse revolving timeshare receivable credit facility (“~~weighted-average interest rate of 15.6%, a weighted-average remaining term of 7.3 years and maturities through 2033.

Acquired Timeshare ~~Facility”)~~Financing Receivables with ~~a borrowing capacity of $450 million. As of September 30, 2017 and December 31, 2016, we had $143 million and $509 million, respectively, of gross~~Credit Deterioration

Our acquired timeshare financing receivables ~~securing~~were deemed to be purchased credit deteriorated financial assets. These notes receivable were initially recognized at their purchase price, represented by the ~~Timeshare Facility. We recognize interest income on~~acquisition date fair value, and subsequently “grossed-up” by our ~~timeshare~~acquisition date assessment of the allowance for credit losses. The difference over which par value of the acquired purchased credit deteriorated assets exceeds the purchase price plus the initial allowance for financing ~~receivables~~receivable losses is reflected as ~~earned. We record an estimate of uncollectibility~~a non-credit premium and is amortized as a reduction to interest income under the effective interest method.

The fair value of ~~revenue from VOI sales at the time revenue is recognized on a VOI sale.~~

In March 2017, we completed a securitization of approximately $357 million of gross timeshare financing receivables and issued approximately $291 million of 2.66 percent notes and approximately $59 million of 2.96 percent notes, which have a stated maturity date of December 2028. The securitization transactions did not qualify as sales and, accordingly, no gain or loss was recognized. The transaction is considered a secured borrowing; therefore, the proceeds from the transaction are presented as non-recourse debt (collectively, the “Securitized Debt”). See Note 8: ~~Debt & Non-recourse debt~~ ~~for further discussion.~~

~~Our~~our acquired timeshare financing receivables as of ~~September 30, 2017~~the Acquisition Date was determined using a discounted cash flow method, which calculated a present value of expected future risk-adjusted cash flows over the remaining term of the respective timeshare financing receivables. Consequently, the fair value of the acquired timeshare financing receivables recorded on our consolidated balance sheet as of the Acquisition Date included an estimate of expected financing receivable losses which became the historical cost basis for that portfolio going forward.

The allowance for financing receivable losses for our acquired timeshare financing receivables is remeasured at each period end and takes into consideration an estimated measure of anticipated defaults and early repayments. We consider historical Legacy-Diamond timeshare financing receivables performance and the current economic environment in the re-measurement of the allowance for financing receivable losses for our acquired timeshare financing receivables. Subsequent changes to the allowance for financing receivable losses are recorded as additions to or reversals to the provision.

Our gross acquired timeshare financing receivables as of March 31, 2023 mature as follows:

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Year

2017 (remaining)

$
19

$
28

$
47

2018

76

56

132

2019

75

60

135

2020

72

65

137

2021

67

70

137

Thereafter

197

408

605

506

687

1,193

Less: allowance for loan loss

(29
)

(109
)

(138
)

$
477

$
578

$
1,055


	Acquired Timeshare Financing Receivables
($ in millions)	Securitized		Unsecuritized		Total
Year
2023 (remaining nine months)	$	28	$	38	$	66
2024	31		41		72
2025	32		46		78
2026	33		50		83
2027	34		53		87
Thereafter	76		201		277
Total	$	234	$	429	$	663

Originated Timeshare Financing Receivables

Our originated timeshare financing receivables as of March 31, 2023 mature as follows:


	Originated Timeshare Financing Receivables
($ in millions)	Securitized		Unsecuritized		Total
Year
2023 (remaining nine months)	$	70	$	62	$	132
2024	94		75		169
2025	94		85		179
2026	94		94		188
2027	91		105		196
Thereafter	288		645		933
Total	$	731	$	1,066	$	1,797

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Allowance for Financing Receivables Losses

The changes in our allowance for financing receivables losses were as follows:


($ in millions)	Originated		Acquired
Balance as of December 31, 2022	$	404	$	338
Provision for financing receivables losses(1)	30		—
Write-offs	(17)		(16)
Inventory recoveries	—		4
Upgrades(2)	1		(1)
Balance as of March 31, 2023	$	418	$	325



($ in millions)	Originated		Acquired
Balance as of December 31, 2021	$	280	$	482
Provision for financing receivables losses(1)	31		—
Write-offs	(25)		(6)
Inventory recoveries	—		1
Upgrades(2)	16		(16)
Balance as of March 31, 2022	$	302	$	461

(1)Includes incremental provision for financing receivables losses, net of activity related to the repurchase of defaulted and upgraded securitized timeshare financing receivables.

(2)Represents the initial change in allowance resulting from upgrades of Acquired loans. Upgraded Acquired loans and their related allowance are included in the Originated portfolio segment.

Credit Quality of Timeshare Financing Receivables

Legacy-HGV Timeshare Financing Receivables

We evaluate this portfolio collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables which are individually immaterial. We monitor the ~~credit quality~~collectability of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for estimating expected defaults and determining our ~~loan loss reserve requirements~~allowance for financing receivables losses on our timeshare financing receivables. For the static pool analysis, we use certain key dimensions to stratify our portfolio, including FICO scores, equity percentage at the time of sale and certain other factors. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.

Our gross balances by average FICO score of our Legacy-HGV timeshare financing receivables ~~balances by~~were as follows:


	Legacy-HGV Timeshare Financing Receivables
($ in millions)	March 31, 2023		December 31, 2022
FICO score
700+	$	770	$	763
600-699	274		270
<600	36		37
No score(1)	176		174
Total	$	1,256	$	1,244

(1)Timeshare financing receivables without a FICO score ~~were~~are primarily related to foreign borrowers.

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The following table details our gross Legacy-HGV timeshare financing receivables by the origination year and average FICO score as ~~follows:~~

of March 31, 2023:

	September 30,		December 31,
($ in millions)	2017		2016		($ in millions)	2023		2022		2021		2020		2019		Prior		Total
FICO score					FICO score
700+	$	763	$	725	700+	$	96	$	292	$	126	$	45	$	80	$	131	$	770
600-699		224		211	600-699	27		103		47		16		29		52		274
<600		28		28	<600	3		13		7		2		4		7		36
No score⁽¹⁾		178		181	No score(1)	18		53		26		16		24		39		176
Total					Total	$	144	$	461	$	206	$	79	$	137	$	229	$	1,256
	$	1,193	$	1,145
Current period gross write-offs					Current period gross write-offs	$	—	$	2	$	3	$	2	$	3	$	5	$	15

⁽¹⁾	~~Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.~~

(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.

We apply payments we receive for loans, including those in non-accrual status, to amounts due in the following order: servicing fees; interest; principal; and late charges. Once a loan is 91 days past due, we cease accruing interest and reverse the accrued interest recognized up to that point. We resume interest accrual for loans for which we had previously ceased accruing interest once the loan is less than 91 days past due. We fully reserve for a timeshare financing receivable in the month following the date that the loan is 121 days past due and, subsequently, we write off the uncollectible note against the reserve once the foreclosure process is complete and we receive the deed for the foreclosed unit.

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of ~~$47~~$77 million and ~~$38~~$76 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:


	Legacy-HGV Timeshare Financing Receivables
	March 31, 2023
($ in millions)	Securitized		Unsecuritized		Total
Current	$	585	$	573	$	1,158
31 - 90 days past due	10		11		21
91 - 120 days past due	4		3		7
121 days and greater past due	4		66		70
Total	$	603	$	653	$	1,256


	Legacy-HGV Timeshare Financing Receivables
	December 31, 2022
($ in millions)	Securitized		Unsecuritized		Total
Current	$	631	$	520	$	1,151
31 - 90 days past due	9		8		17
91 - 120 days past due	3		2		5
121 days and greater past due	4		67		71
Total	$	647	$	597	$	1,244

Legacy-Diamond Timeshare Financing Receivables

We evaluate these portfolios collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables ~~balance:~~

September 30, 2017

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Current

$
498

$
635

$
1,133

31 - 90 days past due

5

8

13

91 - 120 days past due

2

2

4

121 days and greater past due

1

42

43

$
506

$
687

$
1,193

December 31, 2016

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Current

$
248

$
847

$
1,095

31 - 90 days past due

3

9

12

91 - 120 days past due

1

4

5

121 days and greater past due

1

32

33

$
253

$
892

$
1,145

~~The changes in~~which are individually immaterial. We monitor the collectability of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for estimating expected defaults and determining our allowance for ~~loan loss~~financing receivables losses on our timeshare financing receivables. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.

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Our gross balances by average FICO score of our Legacy-Diamond acquired and originated timeshare financing receivables were as follows:

September 30, 2017

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Balance as of December 31, 2016

$
9

$
111

$
120

Write-offs

—

(27
)

(27
)
Securitization

28

(28
)

—

Provision for loan loss⁽¹⁾

(8
)

53

45

Balance as of September 30, 2017

$
29

$
109

$
138


	Legacy-Diamond Acquired Timeshare Financing Receivables
($ in millions)	March 31, 2023		December 31, 2022
FICO score
700+	$	345	$	373
600-699	250		265
<600	53		55
No score(1)	15		16
Total	$	663	$	709

September 30, 2016

($ in millions)

Securitized
and Pledged

Unsecuritized

Total

Balance as of December 31, 2015

$
17

$
89

$
106

Write-offs

—

(27
)

(27
)
Provision for loan loss⁽¹⁾

(6
)

43

37

Balance as of September 30, 2016

$
11

$
105

$
116

(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.

⁽¹⁾	~~Includes activity related to repurchase of defaulted and upgraded securitized timeshare financing receivables, net of incremental provision for loan loss.~~


	Legacy-Diamond Originated Timeshare Financing Receivables
($ in millions)	March 31, 2023		December 31, 2022
FICO score
700+	$	332	$	321
600-699	177		163
<600	27		26
No score(1)	5		5
Total	$	541	$	515

(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.

The following tables detail our gross Legacy-Diamond acquired and originated timeshare financing receivables by the origination year and average FICO score as of March 31, 2023:


	Legacy-Diamond Acquired Timeshare Financing Receivables
($ in millions)	2023		2022		2021		2020		2019		Prior		Total
FICO score
700+	$	—	$	—	$	61	$	74	$	89	$	121	$	345
600-699	—		—		42		47		63		98		250
<600	—		—		10		12		11		20		53
No score(1)	—		—		—		4		2		9		15
Total	$	—	$	—	$	113	$	137	$	165	$	248	$	663

Current period gross write-offs	$	—	$	—	$	1	$	2	$	6	$	7	$	16

(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.


	Legacy-Diamond Originated Timeshare Financing Receivables
($ in millions)	2023		2022		2021		2020		2019		Prior		Total
FICO score
700+	$	55	$	210	$	67	$	—	$	—	$	—	$	332
600-699	25		113		39		—		—		—		177
<600	3		16		8		—		—		—		27
No score(1)	1		3		1		—		—		—		5
Total	$	84	$	342	$	115	$	—	$	—	$	—	$	541

Current period gross write-offs	$	—	$	1	$	1	$	—	$	—	$	—	$	2

(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.

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For our Legacy-Diamond timeshare financing receivables, we apply payments we receive for loans, including those in non-accrual status, to amounts due in the following order: servicing fees; interest; principal; and late charges. Once a loan is 91 days past due, we cease accruing interest and reverse the accrued interest recognized up to that point. We resume interest accrual for loans for which we had previously ceased accruing interest once the loan is less than 91 days past due. We fully reserve for a timeshare financing receivable in the month following the date that the loan is 121 days past due and, subsequently, we write off the uncollectible note against the reserve once the foreclosure process is complete and we receive the deed for the foreclosed unit.

As of March 31, 2023 and December 31, 2022, we had ceased accruing interest on Legacy-Diamond timeshare financing receivables with an aggregate principal balance of $397 million and $377 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:


	Legacy-Diamond Timeshare Financing Receivables
	March 31, 2023
($ in millions)	Securitized		Unsecuritized		Total
Current	$	330	$	438	$	768
31 - 90 days past due	14		25		39
91 - 120 days past due	5		7		12
121 days and greater past due	13		372		385
Total	$	362	$	842	$	1,204

	Legacy-Diamond Timeshare Financing Receivables
	December 31, 2022
($ in millions)	Securitized		Unsecuritized		Total
Current	$	373	$	442	$	815
31 - 90 days past due	13		19		32
91 - 120 days past due	4		8		12
121 days and greater past due	13		352		365
Total	$	403	$	821	$	1,224

Note 5:6: Inventory

Inventory was ~~as follows:~~

comprised of the following:

	September 30,		December 31,
($ in millions)	2017		2016		($ in millions)	March 31, 2023		December 31, 2022
Completed unsold VOIs	$	206	$	233	Completed unsold VOIs	$	1,293	$	1,096
Construction in process		11		20	Construction in process	6		62
Land, infrastructure and other		258		260	Land, infrastructure and other	1		1
	$	475	$	513
Total					Total	$	1,300	$	1,159

~~We benefited from $4 million in~~

The table below presents costs of sales true-ups relating to VOI products ~~for~~and the ~~nine months ended September 30, 2017, which resulted in a $4 million increase~~related impacts to the carrying value of ~~inventory as of September 30, 2017. We benefited from $10 million in~~inventory.


	Three Months Ended March 31,
($ in millions)	2023		2022
Cost of sales true-up(1)	$	16	$	7

(1)For the three months ended March 31, 2023 and 2022, respectively, the costs of sales ~~true-ups relating to~~true-up decreased costs of VOI ~~products for the year ended December 31, 2016, which resulted in a $10 million increase to the carrying value of inventory as of December 31, 2016. Shown~~sales and increased inventory.

The table below ~~are~~presents expenses incurred, recorded in Cost of VOI sales,, related to granting credit to customers for their existing ownership when upgrading into ~~fee-for-service projects.~~

fee-for service projects:


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	2017		2016		2017		2016		($ in millions)	2023		2022
Cost of VOI sales related to fee-for-service upgrades	$	8	$	18	$	28	$	42	Cost of VOI sales related to fee-for-service upgrades	$	3	$	2

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During the three months ended March 31, 2023, we acquired a property in New York for $136 million from a third-party developer for inventory. Under the purchase agreement, there are no further inventory commitments related to this property.

Note 6:7: Consolidated Variable Interest Entities

As of ~~September 30, 2017 and December~~March 31, ~~2016,~~2023, we consolidated ~~three and two variable interest~~9 VIEs. The activities of these entities ~~(“VIEs”), respectively, that issued Securitized Debt, backed by pledged assets consisting~~are limited primarily ~~of a pool of~~to purchasing qualifying non-recourse timeshare financing receivables ~~which~~from us and issuing debt securities and/or borrowing under a debt facility to facilitate such purchases. The timeshare financing receivables held by these entities are not available to our creditors and are not our legal assets, nor is ~~without recourse~~the debt that is securitized through these entities a legal liability to us.

We have determined that we are the primary beneficiaries of these VIEs as we have the power to direct the activities that most

significantly affect their economic performance. We are also the servicer of these timeshare financing receivables and we ~~are required to~~often replace or repurchase timeshare financing receivables that are in default at their outstanding principal amounts. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. Only the assets of our VIEs are available to settle the obligations of the respective entities.

Our condensed consolidated balance sheets included the assets and liabilities of these entities, which primarily consisted of the following:

	September 30,		December 31,
($ in millions)	2017		2016		($ in millions)	March 31, 2023		December 31, 2022
Restricted cash	$	19	$	10	Restricted cash	$	50	$	48
Timeshare financing receivables, net		477		244	Timeshare financing receivables, net	1,015		883
Non-recourse debt⁽¹⁾		484		244
Non-recourse debt, net					Non-recourse debt, net	1,095		1,003

⁽¹⁾	~~Net of deferred financing costs.~~

During the nine months ended September 30, 2017 and 2016, we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.

Note ~~7: Investment~~8: Investments in Unconsolidated ~~Affiliate~~

~~On July 18, 2017,~~Affiliates

As of March 31, 2023, we ~~entered into an agreement with BRE Ace Holdings LLC, a Delaware limited liability company (“BRE Ace Holdings”), an affiliate of The Blackstone Group L.P. (“Blackstone”)~~have 25% and ~~formed BRE Ace LLC. Pursuant to the agreement, we contributed $40 million in cash for a 25 percent interest~~50% ownership interests in BRE Ace LLC and 1776 Holding LLC, respectively, which owns a 1,201-key timeshare resort property and related operations, commonly known as “Elara, by Hilton Grand Vacations,” located in Las Vegas, Nevada. Our investment interest in and equity earned fromare VIEs. We do not consolidate BRE Ace LLC and 1776 Holding LLC because we are not the primary beneficiary. For both VIEs, our investment interests are included in the condensed ~~consolidated~~ balance sheets as ~~Investment~~Investments in unconsolidated ~~affiliate~~affiliates, and equity earned is included in the condensed ~~consolidated~~ statements of operations as Equity in earnings from unconsolidated ~~affiliate, respectively.~~

~~BRE Ace LLC had~~affiliates.

Our two unconsolidated affiliates have aggregated debt balances of ~~$207~~$380 million and ~~non-recourse debt of $235~~$393 million as of ~~September 30, 2017.~~March 31, 2023 and December 31, 2022, respectively. The debt ~~and non-recourse debt are~~is secured by ~~its~~their assets and ~~are~~is without recourse to us. Our maximum exposure to loss as a result of our investment ~~interest~~interests in ~~BRE Ace LLC~~the two unconsolidated affiliates is primarily limited to (i) the carrying amount of the ~~investment~~investments, which ~~totals $41~~totaled $75 million and $72 million as of ~~September 30, 2017, as well as~~March 31, 2023 and December 31, 2022, respectively, and (ii) receivables for commission and other fees earned under a fee-for-service ~~arrangement.~~arrangements. See Note ~~13:~~ 15: Related Party Transactions for additional information.

Note 8:9: Intangible Assets

Intangible assets and related accumulated amortization were as follows:


	March 31, 2023
($ in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade name	$	18	$	(18)	$	—
Management contracts	1,340		(260)		1,080
Club member relationships	139		(42)		97
Capitalized software	171		(104)		67
Total	$	1,668	$	(424)	$	1,244

	December 31, 2022
($ in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade name	$	18	$	(17)	$	1
Management contracts	1,340		(230)		1,110
Club member relationships	139		(37)		102
Capitalized software	163		(99)		64
Total	$	1,660	$	(383)	$	1,277

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Amortization expense on intangible assets was $40 million and $48 million for the three months ended March 31, 2023 and 2022, respectively.

Note 10: Debt & Non-recourse ~~debt~~

Debt

The following table details our outstanding debt balance and its associated interest rates:

September 30,

December 31,

($ in millions)

2017

2016

Debt⁽¹⁾

Senior secured credit facilities:

Term loan with an average rate of 3.48%, due 2021

$
193

$
200

Senior notes with a rate of 6.125%, due 2024

300

300

493

500

Less: unamortized deferred financing costs and discount⁽²⁾⁽³⁾

(9
)

(10
)

$
484

$
490


($ in millions)	March 31, 2023		December 31, 2022
Debt(1)
Senior secured credit facility
Term loan with a rate of 7.840%, due 2028	$	1,281	$	1,284
Revolver with a rate of 6.697%, due 2026	328		40
Senior notes with a rate of 5.000%, due 2029	850		850
Senior notes with a rate of 4.875%, due 2031	500		500
Other debt	31		29
Total debt, gross	2,990		2,703
Less: unamortized deferred financing costs and discounts(2)(3)	(50)		(52)
Total debt, net	$	2,940	$	2,651

⁽¹⁾	~~For the nine months ended September 30, 2017 and year ended December 31, 2016, weighted average interest rates were 5.092 percent and 4.851 percent, respectively.~~

(1)As of March 31, 2023 and December 31, 2022, weighted-average interest rates were 6.396% and 6.143%, respectively.

(2)Amount includes unamortized deferred financing costs related to our term loan and senior notes of $25 million and $19 million, respectively, as of March 31, 2023 and $26 million and $19 million, respectively, as of December 31, 2022. This amount also includes unamortized original issuance discounts of $6 million and $7 million as of March 31, 2023 and December 31, 2022, respectively.

(3)Amount does not include unamortized deferred financing costs of $4 million as of March 31, 2023 and December 31, 2022, respectively, related to our revolving facility which are included in Other assets in our condensed consolidated balance sheets.

Senior secured credit facilities

As of March 31, 2023, we had $1 million of letters of credit outstanding under the revolving credit facility and $1 million outstanding backed by cash collateral. We were in compliance with all applicable maintenance and financial covenants and ratios as of March 31, 2023. As of March 31, 2023, we have $671 million remaining borrowing capacity under the revolver facility.

We primarily use interest rate swaps as part of our interest rate risk management strategy for our variable-rate debt. These interest rate swaps are associated with the remaining available LIBOR based senior secured credit facility. Therefore, as of March 31, 2023, these interest rate swaps convert the LIBOR based variable rate on our Term Loan to average fixed rates of 1.32% per annum with maturities between 2023 and 2028, for the balance on this borrowing up to the notional values of our interest rate swaps. As of March 31, 2023, the notional values of the interest rate swaps under our Term Loan was $705 million. Our interest rate swaps have been designated and qualify as cash flow hedges of interest rate risk and recorded at their estimated fair value as an asset in Other assets in our condensed consolidated balance sheets. As of March 31, 2023 and December 31, 2022, the estimated fair value of our cash flow hedges are $51 million and $63 million, respectively. We characterize payments we make in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income for presentation purposes. The following table reflects the activity in Accumulated other comprehensive income related to our derivative instruments during the three months ended March 31, 2023.

⁽²⁾	~~Amount includes deferred financing costs of $2 million and $7 million as of September 30, 2017 and $2 million and $8 million~~
		Net unrealized gain on derivative instruments
Balance as of December 31, ~~2016, relating~~2022		$	48
Other comprehensive income before reclassifications, net		(6)
Reclassification to ~~our term loan and senior notes, respectively.~~ net income		(4)
Balance as of March 31, 2023		$	38

⁽³⁾	~~Amount does not include deferred financing costs of $2 million as of September 30, 2017 and December 31, 2016, relating to our revolving facility included in~~ ~~Other Assets~~ ~~in our condensed consolidated balance sheets.~~

Senior Notes due 2029 and 2031

The Senior Unsecured Notes are guaranteed on a senior unsecured basis by certain of our subsidiaries. We ~~were~~are in compliance with all applicable financial covenants as of ~~September 30, 2017.~~

March 31, 2023.

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Non-recourse Debt

The following table details our outstanding non-recourse debt balance and ~~its~~ associated interest rates:

September 30,

December 31,

($ in millions)

2017

2016

Non-recourse debt⁽¹⁾

Timeshare Facility with an average rate of 2.54%, due 2019

$
129

$
450

Securitized Debt with an average rate of 2.43%, due 2028

489

246

618

696

Less: unamortized deferred financing costs⁽²⁾

(6
)

(2
)

$
612

$
694

⁽¹⁾	~~For the nine months ended September 30, 2017 and year ended December 31, 2016, weighted average interest rates were 2.453 percent and 1.946 percent, respectively.~~

⁽²⁾	Amount relates to Securitized Debt only and does not include deferred financing costs of $2 million as of September 30, 2017 and $3 million as of December 31, 2016, relating to our Timeshare Facility included in ~~Other Assets~~ ~~in our condensed consolidated balance sheets.~~


($ in millions)	March 31, 2023		December 31, 2022
Non-recourse debt(1)
Timeshare Facility with an average rate of 5.890%, due 2025(3)	$	175	$	98
HGV Securitized Debt with a weighted average rate of 2.711%, due 2028	37		42
HGV Securitized Debt with a weighted average rate of 3.602%, due 2032	89		98
HGV Securitized Debt with a weighted average rate of 2.431%, due 2033	92		101
HGV Securitized Debt with a weighted average rate of 4.304%, due 2034	152		168
HGV Securitized Debt with a weighted average rate of 4.826%, due 2037	242		251
HGV Securitized Debt with a weighted average rate of 3.658%, due 2039	122		134
Diamond Resorts Owner Trust 2019 with a weighted average rate of 3.255%, due 2032	77		87
Diamond Resorts Owner Trust 2021 with a weighted average rate of 2.160%, due 2033	119		134
Total non-recourse debt, gross	1,105		1,113
Less: unamortized deferred financing costs(2)	(10)		(11)
Total non-recourse debt, net	$	1,095	$	1,102

(1)As of March 31, 2023 and December 31, 2022, weighted-average interest rates were 4.026% and 3.539%, respectively.

(2)Amount relates to securitized debt only and does not include unamortized deferred financing costs of $4 million as of March 31, 2023 and December 31, 2022, respectively, relating to our Timeshare Facility included in Other Assets in our condensed consolidated balance sheets.

(3)In connection with the amended and restated Timeshare Facility executed in May 2022, the revolving commitment period of the Timeshare Facility terminates in May 2024, however the repayment maturity date extends 12 months beyond the commitment termination date to May 2025.

The Timeshare Facility is a non-recourse obligation ~~and is~~ payable solely from the pool of timeshare financing receivables pledged as collateral and related assets.

In As of March ~~2017, we completed~~31, 2023, our Timeshare Facility has a ~~securitization~~remaining borrowing capacity of approximately $357 million of gross timeshare financing receivables and issued approximately $291 million of 2.66 percent notes and $59 million of 2.96 percent notes due December 2028. The Securitized Debt is backed by pledged assets, consisting primarily of a pool of timeshare financing receivables secured by first mortgages or deeds of trust on timeshare interests. The Securitized Debt is a non-recourse obligation and is payable solely from the pool of timeshare financing receivables pledged as collateral to the debt.

$575 million.

We are required to deposit payments received from customers on the timeshare financing receivables securing the Timeshare Facility and Securitized Debt into depository accounts maintained by third parties. On a monthly basis, the depository accounts are utilized to make required principal, interest and other payments due under the respective loan agreements. The balances in the depository accounts were ~~$22~~$50 million as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively, and were included in Restricted cash in our condensed consolidated balance sheets.

Debt Maturities

The contractual maturities of our debt and non-recourse debt as of ~~September 30, 2017~~March 31, 2023 were as follows:

($ in millions)

Debt

Non-recourse
Debt

Total

Year

2017 (remaining)

$
3

$
30

$
33

2018

10

134

144

2019

10

228

238

2020

10

120

130

2021

160

32

192

Thereafter

300

74

374

$
493

$
618

$
1,111


($ in millions)	Debt		Non-recourse Debt		Total
Year
2023 (remaining nine months)	$	13	$	196	$	209
2024	16		215		231
2025	15		333		348
2026	342		126		468
2027	13		91		104
Thereafter	2,591		144		2,735
Total	$	2,990	$	1,105	$	4,095

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Note 9:11: Fair Value Measurements

The carrying amounts and estimated fair values of our financial assets and liabilities were as follows:

September 30, 2017

Hierarchy Level

($ in millions)

Carrying
Amount

Level 1

Level 3

Assets:

Timeshare financing receivables⁽¹⁾

$
1,055

$
—

$
1,394

Liabilities:

Debt⁽²⁾

484

329

197

Non-recourse debt⁽²⁾

612

—

617

December 31, 2016

Hierarchy Level

($ in millions)

Carrying
Amount

Level 1

Level 3

Assets:

Timeshare financing receivables⁽¹⁾

$
1,025

$
—

$
1,147

Liabilities:

Debt⁽²⁾

490

314

200

Non-recourse debt⁽²⁾

694

—

696

⁽¹⁾	~~Carrying amount net of allowance for loan loss.~~

⁽²⁾	~~Carrying amount net of unamortized deferred financing costs and discount.~~


	March 31, 2023
			Hierarchy Level
($ in millions)	Carrying Amount		Level 1		Level 3
Assets:
Timeshare financing receivables, net(1)	$	1,754	$	—	$	1,880
Liabilities:
Debt, net(2)	2,940		2,435		369
Non-recourse debt, net(2)	1,095		898		173


	December 31, 2022
			Hierarchy Level
($ in millions)	Carrying Amount		Level 1		Level 3
Assets:
Timeshare financing receivables, net(1)	$	1,767	$	—	$	1,910
Liabilities:
Debt, net(2)	2,651		2,413		76
Non-recourse debt, net(2)	1,102		957		97

(1)Carrying amount net of allowance for financing receivables losses.

(2)Carrying amount net of unamortized deferred financing costs and discount.

Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values. The table above excludes cash and cash equivalents, restricted cash, accounts receivable, accounts payable, advance deposits and accrued liabilities, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

The estimated fair values of our originated and acquired timeshare financing receivables were determined using a discounted cash flow model. Our model incorporates default rates, coupon rates, credit quality and loan terms respective to the portfolio based on current market assumptions for similar types of arrangements.

The estimated fair ~~values~~value of our Level 2 derivative financial instruments was determined utilizing projected future cash flows discounted based on an expectation of future interest rates derived from observable market interest rate curves and market volatility. Refer to Note 10: Debt and Non-recourse Debt above.

The estimated fair value of our Level 1 debt ~~was~~and non-recourse debt were based on prices in active debt markets. The estimated fair value of our Level 3 debt and non-recourse debt were ~~as follows:~~

based on the following:

•Debt -– based on indicative quotes obtained for similar issuances and projected future cash flows discounted at risk-adjusted ~~rates.~~

rates

•Non-recourse debt -– based on projected future cash flows discounted at risk-adjusted rates.

Note ~~10:~~12: Income Taxes

~~At the end of each quarter, we estimate the effective tax rate expected to be applied for the full year.~~

The effective ~~income tax rate is determined by the level and composition of pre-tax income or loss, which is subject to federal, foreign, state and local income taxes. The effective income~~ tax rate for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was approximately ~~38 percent~~19% and ~~43 percent, respectively, which decreased~~28%, respectively. The effective tax rate decrease year over year is due to the change in earnings mix of our worldwide income and discrete items in the quarter, primarily unrecognized tax benefits. The difference between our effective tax rate as compared to the U.S. statutory federal tax rate of 21% is primarily due to ~~a decrease~~the benefit of discrete items including share-based compensation and unrecognized tax benefits in ~~cumulative installment sale interest liability.~~

~~The Company was a party to several intercompany asset transfers with Hilton prior to~~ the ~~spin-off. As required under U.S. tax regulations,~~quarter, which offset the ~~gain resulting from the intercompany transfer~~impact of ~~these assets should be deferred~~state and no deferred tax asset or liability should be recognized until a recognition event occurs. On January 3, 2017, Hilton executed a tax-free spin-off of the Company, which met the requirement of a recognition event. On the spin-off date, for the assets transferred, we recognized a stepped up tax basis, re-measured the asset by applying applicable tax rate changes and evaluated the realizability of the asset. This resulted in a reduction to our net deferred tax liability and an increase in our ~~Additional paid-in capital~~ ~~of $9 million on our condensed consolidated balance sheet as of September 30, 2017.~~

foreign income taxes.

Note ~~11:~~13: Share-Based Compensation

Stock Plan

We issue ~~time-vesting~~ restricted stock units (“Service RSUs”) ~~and~~, nonqualified stock options (“~~options”~~Options”), and time and performance-vesting restricted stock units (“Performance RSUs”) to certain ~~employees. All performance shares that were issued under the stock plan of Hilton, were converted to RSUs as of December 31, 2016.~~employees and directors. We recognized ~~share-based~~share-

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based compensation expense of $5$10 million and $2$11 million ~~during~~for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively and $13 million and $7 million during the nine months ended September 30, 2017 and 2016,~~2022, respectively.

As of ~~September 30, 2017,~~March 31, 2023, unrecognized compensation costs for unvested awards were approximately ~~$13~~$70 million, which is expected to be recognized over a weighted average period of ~~2.0~~1.8 years. As of ~~September 30, 2017,~~March 31, 2023, there were ~~7,961,151~~1,818,645 shares of common stock available for future ~~issuance.~~

issuance under this plan.

Service RSUs

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, we issued ~~530,674~~491,426 Service RSUs ~~with a weighted average grant date fair value of $29.15, which generally vest 25 percent in the first year, 25 percent in the second year and 50 percent in the third year from the date of grant.~~

~~Options~~

~~During the nine months ended September 30, 2017~~, ~~we issued 669,658 options~~ with a grant date fair value of ~~$8.66 and~~$49.14, which generally vest in equal annual installments over three years from the date of grant.

Options

During the three months ended March 31, 2023, we granted 301,215 Options with an exercise price of ~~$28.30,~~$49.14, which generally vest ~~25 percent in the first year, 25 percent in the second year and 50 percent in the third year~~over three years from the date of the grant.

The weighted-average grant date fair value of ~~each of~~ these ~~option grants~~options was $24.78, which was determined using the Black-Scholes-Merton option-pricing model with the ~~following assumptions:~~

assumptions included in the table below. Expected volatility is calculated using the historical volatility of our share price. Risk-free rate is based on the Treasury Constant Maturity Rate closest to the expected life as of the grant date. Expected term is estimated using the vesting period and contractual term of the Options.

~~Expected volatility~~⁽¹⁾	~~26.3~~	%
~~Dividend yield~~⁽²⁾ Expected volatility	46.8			—	%
~~Risk-free rate~~⁽³⁾ Dividend yield (1)	—			~~2.3~~	%
Risk-free rate	4.2		%
Expected term (in years)⁽⁴⁾					6.0

⁽¹⁾

Due to limited trading history for Hilton Grand Vacations’ common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used a weighted-average of the implied volatility and the average historical volatility of our peer group over a time period consistent with its expected term assumption. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark its executive compensation.

⁽²⁾	~~At the date of grant we had no plans to pay dividends during the expected term of these options.~~

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

⁽³⁾	~~Based on the yields of U.S. Department of Treasury instruments with similar expected lives.~~

⁽⁴⁾	~~Estimated using the average of the vesting periods and the contractual term of the options.~~

As of ~~September 30, 2017,~~March 31, 2023, we had ~~169,926 options~~1,824,886 Options outstanding that were exercisable.

Performance RSUs

During the three months ended March 31, 2023, we issued 119,887 Performance RSUs with a grant date fair value of $49.14. The Performance RSUs are settled at the end of a 3-year performance period, with 50% of the Performance RSUs subject to achievement based on the Company’s adjusted earnings before interest expense, taxes and depreciation and amortization further adjusted for net deferral and recognition of revenues and related direct expenses related to sales of VOIs of projects under construction. The remaining 50% of the Performance RSUs are subject to the achievement of certain contract sales targets.

Compensation expense will be recorded through the end of the performance period if it is deemed probable that the performance goals will be met. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed.

Employee Stock Purchase Plan

In March 2017, the Board of Directors adopted the Hilton Grand Vacations Inc. Employee Stock Purchase Plan (the “ESPP”), which became effective during 2017. In connection with the ESPP, we issued 2.5 million shares of common stock which may be purchased under the ESPP. The ESPP allows eligible employees to purchase shares of our common stock at a price per share not less than 95% of the fair market value per share of common stock on the purchase date, up to a maximum threshold established by the plan administrator for the offering period. During the three months ended March 31, 2022, we recognized less than $1 million of compensation expense related to this plan.

During fourth quarter of 2022, the Board of Directors amended the ESPP plan to allow eligible employees to purchase shares of our common stock at a price per share not less than 85% of the fair market value per share of common stock on the first day of the Purchase Period or the last day of the Purchase Period, whichever is lower, up to a maximum threshold established by the plan administrator for the offering period. The amendment became effective in 2023. During the three months ended March 31, 2023, we recognized less than $1 million of compensation expense related to this plan.

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Note ~~12:~~14: Earnings Per Share

The following ~~table presents~~tables present the calculation of our basic and diluted earnings per share (“EPS”)~~. The~~ and the corresponding weighted average shares outstanding ~~for the three and nine months ended September 30, 2016 reflect 98,802,597 shares distributed on January 3, 2017, our spin-off date, to our stockholders. See Note 1:~~ ~~Organization and Basis of Presentation~~ ~~for further discussion. The weighted average shares outstanding used to compute basic EPS and diluted EPS~~referenced in these calculations for the three months ended ~~September 30, 2017 is 98,981,557~~March 31, 2023 and ~~99,730,483, respectively and for the nine months ended September 30, 2017 is 98,916,894 and 99,530,534,~~2022, respectively.


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ and shares outstanding in millions, except per share amounts)	2017		2016		2017		2016		($ and shares outstanding in millions, except per share amounts)	2023		2022
Basic EPS:									Basic EPS:
Numerator:									Numerator:
Net Income⁽¹⁾	$	43	$	35	$	144	$	130
Net income									Net income	$	73	$	51
Denominator:									Denominator:
Weighted average shares outstanding		99		99		99		99	Weighted average shares outstanding	113		120
Basic EPS	$	0.43	$	0.35	$	1.45	$	1.31
Basic EPS(1)									Basic EPS(1)	$	0.65	$	0.42
Diluted EPS:									Diluted EPS:
Numerator:									Numerator:
Net Income⁽¹⁾	$	43	$	35	$	144	$	130
Net income									Net income	$	73	$	51
Denominator:									Denominator:
Weighted average shares outstanding		100		99		100		99	Weighted average shares outstanding	114		122
Diluted EPS	$	0.43	$	0.35	$	1.44	$	1.31
Diluted EPS(1)									Diluted EPS(1)	$	0.64	$	0.42

⁽¹⁾	Net income for the three months ended September 30, 2017 and 2016 was $42,700,978 and $34,597,597, respectively, and for the nine months ended September 30, 2017 and 2016 was $143,742,500 and $129,727,071, respectively.

(1)Earnings per share amounts are calculated using whole numbers.

The dilutive effect of outstanding share-based compensation awards is reflected in diluted earnings per common share by application of the treasury stock method using average market prices during the period.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, and 2022, we excluded ~~224,783~~699,357 and 338,109, respectively, of share-based compensation awards, because their effect would have been anti-dilutive under the treasury stock method. ~~For~~

Share Repurchases

On May 4, 2022, our Board of Directors approved a share repurchase program authorizing the ~~three months ended September 30, 2017,~~Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period. The following table summarizes stock repurchase activity under the share repurchase program as of March 31, 2023:


(in millions)	Shares	Cost
As of December 31, 2022	7	$	272
Repurchases	2	85
As of March 31, 2023	9	$	357

From April 1, 2023 through April 21, 2023, we ~~did not exclude any share-based compensation awards.~~

repurchased 1.3 million shares for $60 million. As of April 21, 2023, we had $83 million of remaining availability under the share repurchase program.

Note ~~13:~~15: Related Party Transactions

~~Relationship Between HGV and Hilton after the Spin-Off~~

On January 3, 2017, when the spin-off was completed, Hilton and Park Hotels & Resorts Inc. ceased to be related parties of HGV. In connection with the spin-off, we entered into certain agreements with Hilton (who at the time was a related party) and other third parties. See ~~Key Agreements Related to the Spin-Off~~ ~~section in~~ ~~Part I - Item 1. Business~~ ~~of our Annual Report on Form 10-K for the year ended December 31, 2016 for further information.~~

~~HNA Tourism Group Co., Ltd.~~

On March 15, 2017, Blackstone completed the previously announced sale of 24,750,000 shares of our common stock to HNA Tourism Group Co., Ltd. (“HNA”), representing approximately 25 percent of the outstanding shares of our common stock.

In connection with the consummation of the sale, we adopted our amended and restated by-laws, effective March 15, 2017, to remove references to Blackstone’s ownership of at least 40 percent of the total voting power of our common stock and revised certain provisions referencing the Blackstone Stockholders Agreement, as appropriate, to include references to the HNA Stockholder Agreement.

~~The Blackstone Group~~

As of March 31, 2017, Blackstone held 15,008,689 shares, or approximately 15 percent of our outstanding common stock. On May 25, 2017, Blackstone filed a Registration Statement on Form S-1 and registered all of our common stock held by them. On June 14, 2017, Blackstone entered into an underwriting agreement with J.P. Morgan Securities LLC pursuant to which J.P. Morgan

Securities LLC agreed to purchase from Blackstone 9,650,000 shares of our common stock at a price of $35.40 per share. The sale was completed on June 20, 2017. Subsequently, on September 25, 2017, Blackstone completed the sale of substantially all of the remaining shares of our common stock held by them to several institutional investors and ceased to be a related party of HGV. We did not receive any proceeds from either of these sales. As of September 30, 2017, Blackstone holds only a nominal number of shares of our common stock.

The following table summarizes amounts included in our condensed consolidated statements of operations related to a fee-for-service arrangement with Blackstone affiliates to sell VOIs on their behalf through September 30, 2017:

Three Months Ended
September 30,

Nine Months Ended
September 30,

($ in millions)

2017

2016

2017

2016

Commission and other fees

$
42

$
54

$
135

$
142

~~Also related to the fee-for-service agreement, as of September 30, 2017 and December 31, 2016, we have outstanding receivables of $8 million and $20 million, respectively.~~

BRE Ace LLC

~~On July 18, 2017, we entered into an agreement with BRE Ace Holdings, an affiliate of Blackstone, to form BRE Ace LLC. In conjunction with this agreement we acquired~~ and 1776 Holding, LLC

We hold a ~~25 percent~~25% ownership interest in BRE Ace ~~LLC. During the nine months ended September 30, 2017, we recorded $1 million~~LLC, a VIE, which owns a timeshare resort property and related operations, commonly known as “Elara, by Hilton Grand Vacations.”

We hold a 50% ownership interest in ~~equity~~1776 Holding, LLC, a VIE, which owns a timeshare resort property and related operations, known as “Liberty Place Charleston, by Hilton Club.”

We record Equity in earnings from our unconsolidated affiliates~~, included~~ in our condensed consolidated statements of operations. See Note 7: ~~Investment~~8: Investments in Unconsolidated ~~Affiliate~~Affiliates for additional information. ~~In addition,~~Additionally, we earn commissions and other fees related to a fee-for-service ~~agreement~~agreements with the investees to sell VOIs at Elara, by Hilton Grand ~~Vacations.~~Vacations and Liberty Place Charleston, by Hilton Club. These amounts are summarized in the following table and are included inSales, marketing, brand, and other fees on our condensed consolidated statements of operations as of the date they became a related ~~party.~~

parties.

Three Months Ended
September 30,

Nine Months Ended
September 30,

($ in millions)

2017

2016

2017

2016

Commission and other fees

$
43

$
—

$
43

$
—

~~Also~~

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	Three Months Ended March 31,
($ in millions)	2023		2022
Equity in earnings from unconsolidated affiliates	$	3	$	3
Commissions and other fees	$	52	$	33

We also had $27 million and $23 million of outstanding receivables related to the fee-for-service ~~agreement,~~agreements included in Accounts receivable, net on our condensed consolidated balance sheets as of ~~September 30, 2017 we have outstanding receivables of $29 million.~~

March 31, 2023 and December 31, 2022, respectively.

Note ~~14:~~16: Business Segments

We operate our business through the following two segments:

•Real estate sales and financing – We market and sell VOIs that we own. We also source VOIs through fee-for-service agreements with third-party developers. Related to the sales of the VOIs that we own, we provide consumer financing, which includes interest income generated from the origination of consumer loans to customers to finance their purchase of VOIs and revenue from servicing the loans. We also generate fee revenue from servicing the loans provided by third-party developers to purchasers of their VOIs.

•Resort operations and club management – We manage the ~~Club,~~Clubs and earn activation fees, annual dues and transaction fees from member exchanges for other vacation products. We also earn fees for managing the timeshare properties. We generate rental revenue from unit rentals of unsold inventory and inventory made available due to ownership exchanges under our Club ~~program.~~programs. We also earn revenue from food and beverage, retail and spa outlets at our timeshare properties.

The performance of our operating segments is evaluated primarily based on adjusted earnings before interest expense (excluding non-recourse debt), taxes, depreciation and amortization (“EBITDA”). We define Adjusted EBITDA as EBITDA, ~~which has been~~ further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) other gains, including asset ~~dispositions; (ii)~~dispositions and foreign currency transactions; ~~(iii)~~(ii) debt restructurings/retirements; ~~(iv)~~(iii) non-cash impairment losses; ~~(v) reorganization costs, including severance and relocation costs; (vi)~~(iv) share-based and other compensation expenses; ~~(vii)~~and (v) other items, including but not limited to costs ~~related to the spin-off;~~associated with acquisitions, restructuring, amortization of premiums and ~~(viii)~~discounts resulting from purchase accounting, and other items. During the first quarter of 2017, we revised our definition of EBITDA to exclude the adjustment of interest expense relating to our non-recourse debt as a reconciling item to arrive at net income (loss) in order to conform to the presentation of the timeshare industry following the consummation of the spin-off from Hilton. This adjustment was retrospectively applied to prior period(s) to conform with the current presentation.

non-cash and one-time charges.

We do not include equity in earnings (losses) from unconsolidated ~~affiliate~~affiliates in our measures of segment ~~revenues.~~operating performance.

The following table presents revenues for our reportable segments reconciled to consolidated amounts:

Three Months Ended
September 30,

Nine Months Ended
September 30,

($ in millions)

2017

2016

2017

2016

Revenues:

Real estate sales and financing⁽¹⁾

$
310

$
301

$
916

$
843

Resort operations and club management⁽²⁾

90

81

270

251

Total segment revenues

400

382

1,186

1,094

Cost reimbursements

34

33

102

94

Intersegment eliminations^(1)(2)(3)

(8
)

(8
)

(24
)

(20
)
Total revenues

$
426

$
407

$
1,264

$
1,168

⁽¹⁾

Includes charges of $1 million and $2 million to the resort operations and club management segment for billing and collection services provided by the real estate sales and financing segment for the three and nine months ended September 30, 2016. There were no charges for the three and nine months ended September 30, 2017.

⁽²⁾

Includes charges to the real estate sales and financing segment from the resort operations and club management segment for discounted stays at properties resulting from marketing packages. These charges totaled $7 million for each of the three months ended September 30, 2017 and 2016, and $23 million and $18 million for the nine months ended September 30, 2017 and 2016, respectively.


	Three Months Ended March 31,
($ in millions)	2023		2022
Revenues:
Real estate sales and financing	$	550	$	452
Resort operations and club management(1)	302		268
Total segment revenues	852		720
Cost reimbursements	95		66
Intersegment eliminations(1)	(13)		(7)
Total revenues	$	934	$	779

⁽³⁾

Includes charges to the real estate sales and financing segment from the resort operations and club management segment for the rental of model units to show prospective buyers. These charges totaled $1 million for each of the three and nine months ended September 30, 2017. There were charges of less than $1 million for each of the three and nine months ended September 30, 2016

(1)Includes charges to the Real estate sales and financing segment from the Resort operations and club management segment for fulfillment of discounted marking package stays at resorts. These charges totaled $13 million and $7 million for the three months ended March 31, 2023 and 2022, respectively.

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The following table presents Adjusted EBITDA for our reportable segments reconciled to net income:

Three Months Ended
September 30,

Nine Months Ended
September 30,

($ in millions)

2017

2016

2017

2016

Adjusted EBITDA:

Real estate sales and financing⁽¹⁾

$
81

$
85

$
263

$
250

Resort operations and club management⁽¹⁾

50

42

153

139

Segment Adjusted EBITDA

131

127

416

389

General and administrative

(23
)

(24
)

(75
)

(61
)
Depreciation and amortization

(7
)

(6
)

(21
)

(17
)
License fee expense

(22
)

(22
)

(65
)

(61
)
Other loss, net

—

—

—

(1
)
Gain on foreign currency transactions

1

1

1

2

Allocated Parent interest expense⁽²⁾

—

(7
)

—

(20
)
Interest expense

(7
)

—

(21
)

—

Income tax expense

(28
)

(33
)

(87
)

(98
)
Equity in earnings from unconsolidated affiliate⁽³⁾

1

—

1

—

Other adjustment items

(3
)

(1
)

(5
)

(3
)
Net income

$
43

$
35

$
144

$
130

⁽¹⁾	~~Includes intersegment eliminations. Refer to our table presenting revenues by reportable segment above for additional discussion.~~

⁽²⁾	~~This amount represents interest expense on an unconditional obligation to guarantee certain Hilton allocated debt balances which were released in November 2016.~~


	Three Months Ended March 31,
($ in millions)	2023		2022
Adjusted EBITDA:
Real estate sales and financing(1)	$	169	$	153
Resort operations and club management(1)	109		101
Segment Adjusted EBITDA	278		254
Acquisition and integration-related expense	(17)		(13)
General and administrative	(42)		(42)
Depreciation and amortization	(51)		(60)
License fee expense	(30)		(25)
Other gain, net	1		1
Interest expense	(44)		(33)
Income tax expense	(17)		(20)
Equity in earnings from unconsolidated affiliates	3		3
Impairment expense	—		(3)
Other adjustment items(2)	(8)		(11)
Net income	$	73	$	51

⁽³⁾	~~This amount represents our 25 percent interest in BRE Ace LLC. See Note 7:~~ ~~Investment in Unconsolidated Affiliate~~ ~~for additional information.~~

(1)Includes intersegment transactions. Refer to our table presenting revenues by reportable segment above for additional discussion.

(2)For the three months ended March 31, 2023 and 2022, this amount includes costs associated with stock-based compensation, restructuring, one-time charges and othernon-cash items included within our reportable segments.

Note ~~15:~~17: Commitments and Contingencies

Commitments

We have entered into certain arrangements with developers whereby we have committed to purchase vacation ownership units or other real estate at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of ~~September 30, 2017,~~March 31, 2023, we were committed to purchase approximately ~~$208~~$57 million of inventory ~~and land~~ over a period of ~~five years.~~two years and $12 million of other commitments in the normal course of business. We are also committed to an agreement to exchange parcels of land in Hawaii, subject to the successful completion of zoning, land use requirements and other applicable regulatory requirements. The ~~ultimate~~actual amount and timing of the acquisitions isare subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances.

During the ~~nine~~three months ended ~~September 30, 2017 and 2016,~~March 31, 2023, we ~~purchased $9~~fulfilled $136 million ~~and $11 million, respectively,~~ of ~~VOI inventory as~~purchases required under our inventory commitments. As of ~~September 30, 2017,~~March 31, 2023, our remaining ~~obligation~~obligations pursuant to these arrangements ~~was~~were expected to be incurred as follows: ~~$3 million~~


($ in millions)	2023		2024		2025		2026		2027		Thereafter		Total
Inventory purchase obligations(1)	$	—	$	57	$	—	$	—	$	—	$	—	$	57
Other commitments(2)	8		4		—		—		—		—		12
Total	$	8	$	61	$	—	$	—	$	—	$	—	$	69

(1)Includes commitments for properties in ~~2018, $187 million in 2019, $9 million in 2020,~~South Carolina and ~~$9 million in 2021.~~

Japan.

(2)Primarily relates to commitments related to information technology and sponsorships.

Litigation Contingencies

We are involved in litigation arising from the normal course of business, some of which ~~includes~~include claims for substantial sums. ~~Management has also identified certain other~~We evaluate these legal ~~matters where we believe~~proceedings and claims at each balance sheet date to determine the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to reasonably ~~possible and/or for which no~~ estimate the amount of ~~possible losses~~loss. We record a contingent litigation liability when it is determined that it is probable that a liability has been incurred and the amount of the loss can be ~~made.~~ reasonably estimated.

As of March 31, 2023, we accrued liabilities of approximately $118 million for all legal matters. Approximately $98 million of these accrued liabilities relate to a judgment entered against Diamond in March 2022 in connection with a

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case filed in 2015 that was not deemed probable and estimable as of the Acquisition Date. This matter is subject to insurance coverage, and as a result, we recorded an insurance claim receivable of $81 million within Accounts receivable, net in our condensed consolidated balance sheet.

While ~~the ultimate results of claims and litigation cannot be predicted with certainty,~~ we ~~expect~~currently believe that the ultimate ~~resolution~~outcome of ~~all pending or threatened claims~~these proceedings, individually and ~~litigation as of September 30, 2017,~~in the aggregate, will not have a material effect on the Company’s financial condition, cash flows, or materially adversely affect overall trends in our ~~condensed consolidated~~ results of operations, legal proceedings are inherently uncertain and unfavorable rulings could, individually or in aggregate, have a material adverse effect on the Company’s business, financial ~~position~~condition or ~~cash flows.~~

results of operations.

Surety Bonds

We utilize surety bonds related to the sales of VOIs in order to meet regulatory requirements of certain states. The availability, terms and conditions and pricing of such bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity and our corporate credit rating. We have commitments from surety providers in the amount of $344 million as of March 31, 2023, which primarily consist of escrow and subsidy related bonds.

Note ~~16:~~18: Subsequent Events

~~On October 13, 2017, we acquired an 83-unit, ski-in mountain lodge~~

Management has evaluated all subsequent events through April 27, 2023, the date the condensed consolidated financial statements were available to be issued. The results of management’s analysis indicated no significant subsequent events have occurred that required consideration or adjustments to our disclosures in ~~Park City, Utah, known as “The Sunrise Lodge, a Hilton Grand Vacations Club.” Prior to~~ the ~~acquisition, HGV was providing marketing, sales and resort management services to the seller Sunrise Park City, LLC under a fee-for-service agreement.~~

unaudited financial statements.

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~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2022.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) ~~that~~. Forward-looking statements convey management’s expectations as to the future of HGV, and are based on ~~our~~ management’s beliefs, ~~and~~expectations, assumptions and onsuch plans, estimates, projections and other information ~~currently~~ available to ~~our management. Forward-looking statements include, but are not limited to, statements related to our expectations regarding~~management at the performance of our business, our financial results, our liquidity and capital resources, the benefits resulting from our spin-off, the effects of competition and the effects of future legislation or regulations and other non-historicaltime HGV makes such statements. Forward-looking statements include all statements that are not historical facts and ~~can~~may be identified by ~~the use of forward-looking~~ terminology such as the words “outlook,” ~~“believes,~~“believe,” ~~“expects,~~“expect,” “potential,” “goal,” “continues,” “may,” “will,” “should,” “could,” “would,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” ~~“anticipates”~~“anticipates,” “future,” “guidance,” “target,” or the negative version of these words or other comparable ~~words.~~

~~Forward-looking~~words, although not all forward-looking statements may contain such words. The forward-looking statements contained in this Quarterly Report on Form 10-Q include statements related to HGV’s revenues, earnings, taxes, cash flow and related financial and operating measures, and expectations with respect to future operating, financial and business performance, and other anticipated future events and expectations that are not historical facts.

HGV cautions you that our forward-looking statements involve known and unknown risks, uncertainties and ~~assumptions. Actual~~other factors, including those that are beyond HGV’s control, which may cause the actual results, ~~may~~performance or achievements to be materially different from the future results. Any one or more of these risks or uncertainties could adversely impact HGV’s operations, revenue, operating profits and margins, key business operational metrics discussed under “—Operational Metrics” below, financial condition or credit rating.

For additional information regarding factors that could cause HGV’s actual results to differ materially from those expressed or implied in ~~these forward-looking statements. You should not put undue reliance on any~~the forward-looking statements in this Quarterly Report on Form ~~10-Q. We do not intend to update any of these forward-looking statement or publicly announce~~10-Q, please see the ~~results of any revisions to these forward-looking statements, other than as is required under the federal securities laws.~~

~~The~~ risk factors discussed in “Part ~~I-Item~~I—Item 1A. Risk Factors” and the Summary of Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022, as supplemented and updated by the risk factors described from time to time in ~~“Part II-Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q for~~other periodic reports that we file with the ~~quarter ended September 30, 2017 could cause our results to differ materially from those expressed in forward-looking statements.~~SEC. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. ~~Any such risks could cause our results~~Except for HGV’s ongoing obligations to ~~differ materially from those expressed in forward-looking statements. We~~disclose material information under the federal securities laws, we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, changes in management’s expectations, or ~~otherwise, except as required by law.~~

otherwise.

Terms Used in this Quarterly Report on Form 10-Q

Except where the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Hilton Grand Vacations,” “HGV,” “the Company,” “we,” “us” and “our” refer to Hilton Grand Vacations Inc., together with its consolidated subsidiaries. Except where the context requires otherwise, references to our “properties” ~~and “rooms”~~or “resorts” refer to the timeshare properties ~~managed,~~

~~franchised, owned~~that we manage or ~~leased by us.~~own. Of these ~~properties~~resorts and ~~rooms,~~units, a portion ~~are~~is directly owned ~~or leased~~ by us or joint ventures in which we have an ~~interest~~interest; and the remaining ~~properties~~resorts and ~~rooms~~units are owned by our third-party owners.

Investment funds associated with or designated by The Blackstone Group L.P. and their affiliates, former majority owners of Hilton Worldwide Holdings, Inc. (together with its then consolidated subsidiaries, “Hilton”), are referred to herein as “Blackstone.”

~~Investment funds associated with or designated by HNA Tourism Group Co., Ltd. and their affiliates are referred to herein as “HNA.”~~

“Developed” refers to VOI inventory that is sourced from projects developed by HGV.

“Fee for service” refers to VOI inventory that we sell and manage on behalf of third-party developers.

“Just-in-time” refers to VOI inventory that is primarily sourced in transactions that are designed to closely correlate the timing of the acquisition by us with our sale of that inventory to purchasers.

“Points-based” refers to VOI sales that are backed by physical real estate that is contributed to a trust.

“VOI” refers to vacation ownership ~~intervals.~~

intervals and interests.

"Collections" refers to the acquired portfolio of resort properties included in Diamond's single- and multi-use trusts.

Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q includes discussion of terms that are not recognized terms under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), and financial measures that are not calculated in accordance with U.S. GAAP, including ~~contract sales, sales revenue, real estate margin, tour flow, volume per guest, capital efficiency ratio, transient rate,~~ earnings before interest expense (excluding interest expense relating to our non-recourse debt), taxes and depreciation and amortization (“EBITDA”), and Adjusted ~~EBITDA~~EBITDA.

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Operational Metrics

This Quarterly Report on Form 10-Q includes discussion of key business operational metrics including contract sales, sales revenue, real estate profit, tour flow, and ~~segment Adjusted EBITDA.~~ volume per guest (“VPG”).

See ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key~~“Key Business and Financial Metrics and Terms Used by Management” and ~~“-Results~~“Results of Operations” for a discussion of the meanings of these terms, the Company’s reasons for providing non-GAAP financial measures, and reconciliations of non-GAAP financial measures to measures calculated in accordance with U.S. GAAP.

Overview

~~Spin-Off Transactions~~

On January 3, 2017, the previously announced spin-off was completed by way of a pro rata distribution of the Company’s common stock to Hilton stockholders. Each Hilton stockholder received one share of our common stock for every ten shares of Hilton common stock. As a result of the spin-off, we became a separate publicly-traded company on the New York Stock Exchange under the ticker symbol “HGV” and Hilton did not retain any ownership interest in us.

~~In connection with the completion of the spin-off, we entered into agreements with Hilton (who at the time was a related party) and other third parties, including licenses to use the Hilton brand. See~~ ~~Key Agreements Related to the Spin-Off~~ ~~section in~~ ~~Part I – Item 1. Business~~ ~~of our Annual Report on Form 10-K for the year ended December 31, 2016 for further information.~~

On March 15, 2017, Blackstone completed the previously announced sale of 24,750,000 shares of our common stock to HNA, representing approximately 25 percent of the outstanding shares of our common stock. Blackstone retained 15,008,689 shares, or approximately 15 percent of our common stock upon the completion of the sale.

On May 25, 2017, Blackstone filed a Registration Statement on Form S-1 and registered all of our common stock held by them. On June 14, 2017, Blackstone entered into an underwriting agreement with J.P. Morgan Securities LLC pursuant to which J.P. Morgan Securities LLC agreed to purchase from Blackstone 9,650,000 shares of our common stock at a price of $35.40 per share. The sale was completed on June 20, 2017. Subsequently, on September 25, 2017, Blackstone completed the sale of substantially all of the remaining shares of our common stock held by them to several institutional investors. We did not received any proceeds from either of these sales. As of September 30, 2017, Blackstone holds only a nominal number of shares of our common stock.

~~Tax Matters Agreement~~

Subsequent to the spin-off, we have no unrecognized taxes that, if recognized, would have impacted our effective tax rate. As a large taxpayer, Hilton is continuously under audit by the IRS and other taxing authorities. HGV has joined in the Hilton U.S. Federal tax consolidated filing for prior tax years up to the date of the spin-off. Although we do not anticipate that a significant impact to our unrecognized tax balance will occur during the next fiscal year as a result of these audits, it remains possible that the amount of our liability for unrecognized taxes could change over that time period. Pursuant to the Tax Matters Agreement, Hilton is liable and shall pay the relevant tax authority for all taxes related to the taxable income prior to the spin-off. HGV will be responsible for its portion of any amounts Hilton is deemed liable by a taxing authority according to the Tax Matters Agreement. HGV is responsible for tax years subsequent to the spin-off.

Our Business

We are a ~~rapidly growing~~global timeshare company ~~that markets~~engaged in developing, marketing, selling, managing and ~~sells VOIs, manages~~operating timeshare resorts, ~~in top leisure~~timeshare plans and ~~urban~~ancillary reservation services, primarily under the Hilton Grand Vacations brand. Our operations primarily consist of: selling vacation ownership intervals and vacation ownership interests (collectively, “VOIs” or “VOI”) for us and third parties; financing and servicing loans provided to consumers for their timeshare purchases; operating resorts and timeshare plans; and managing our points-based Hilton Grand Vacations Club and Hilton Club exchange programs and the Diamond points-based multi-resort timeshare clubs and exchange programs.

During 2022, we began offering a new club membership called HGV Max across certain of our sales centers. For any customer who purchases a VOI, this membership provides the ability to use points across all properties within our network. The membership provides new destinations for existing club owners and ~~operates a points-based~~broader vacation ~~club.~~ opportunities for new buyers. It also combines the best benefits from our existing programs, new travel benefits, Hilton hotel discounts and benefits and alternative experiential options available to HGV Max owners. Our club offerings, including HGV Max, are collectively referred to as “Clubs”.

As of ~~September 30, 2017,~~March 31, 2023, we have ~~48 resorts, representing 8,101 units, which are~~over 150 properties located in ~~iconic vacation destinations such as~~ the ~~Hawaiian Islands, New York City, Orlando~~United States (“U.S.”), Europe, Mexico, the Caribbean, Canada, and ~~Las Vegas,~~Japan. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia and feature spacious, condominium-style accommodations with superior amenities and quality service. As of ~~September 30, 2017,~~March 31, 2023, we ~~have~~had approximately ~~284,000 Hilton Grand Vacations~~519,000 members across our club offerings. Based on the type of Club ~~(the “Club”) members. Club~~membership, members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations resort, or any property in the Hilton system of 1419 industry-leading brands across ~~more than 5,000~~approximately 7,000 properties, or affiliated properties, as well as numerous experiential vacation options, such as cruises and guided ~~tours.~~

tours, or they have the option to exchange their VOI for various other timeshare resorts throughout the world through an external exchange program.

Our Segments

We operate our business across two segments: (1) ~~real~~Real estate sales and financing; and (2) ~~resort~~Resort operations and club management.

Real Estate Sales and Financing

Our primary product isincludes the marketing and selling of fee-simple VOIs deeded in perpetuity and right to use real estate interests, developed either by us or by third parties. This ownership interest is an interest in real estate generally equivalent to one week ~~annually~~on an annual or biennial basis, at the timeshare resort ~~where~~in which the VOI ~~was purchased.~~is located. Traditionally, timeshare operators have funded ~~100 percent~~100% of the investment necessary to acquire land and construct timeshare properties. ~~In 2010, we began sourcing~~We source VOIs through developed properties and fee-for-service and just-in-time agreements with third-party developers and have ~~successfully transformed from a capital-intensive business to one that is highly capital-efficient.~~focused our inventory strategy on developing an optimal inventory mix. The fee-for-service agreements enable us to generate fees from the sales and marketing of the VOIs and Club memberships and from the management of the timeshare properties without requiring us to fund acquisition and construction costs. The just-in-time agreements enable us to source VOI inventory in a manner that allows us to correlate the timing of acquisition of the inventory ~~by us~~ with the sale to purchasers. Sales of owned, ~~inventory,~~ including ~~purchased~~ just-in-time, inventory generally result in greater Adjusted EBITDA contributions, while fee-for-service sales require less initial investment and allow us to accelerate our sales growth. Both sales of owned inventory and fee-for-service sales generate long-term, predictable fee streams, by adding to the Club membership base and properties under management, that generate strong returns on invested capital.

Another one of our products is the marketing and selling of beneficial interests in one of our Collections, which are represented by an annual or biennial allotment of points that can be utilized for vacations at any of the resorts in that Collection. In general, purchasers of a VOI in a collection do not acquire a direct ownership interest in the resort properties in the Collection. Rather for each Collection, one or more trustees hold legal title to the deeded fee simple real estate interests or the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Collection’s association members in accordance with the applicable agreements.

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For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, sales from fee-for-service and just-in-time inventory were 33%, and ~~developed inventory sources were 54 percent, 20 percent and 26 percent, respectively,~~17% of contract ~~sales.~~sales, respectively. See ~~“-Real~~“Key Business and Financial Metrics and Terms Used by Management — Real Estate Sales ~~Metrics”~~Operating Metrics” for additional discussion of contract sales. ~~Based on~~The estimated contract sales value related to our ~~trailing twelve months sales pace, we have access to approximately five years of~~inventory that is currently available for sale at open or soon-to-be open projects and inventory at new or existing projects that will become available for sale in the future ~~inventory, with capital~~upon registration, delivery or construction is $11.7 billion at current pricing. Capital efficient arrangements, ~~representing~~comprised of our fee-for-service and just-in-time inventory, represented approximately ~~88 percent~~38% of that supply. We believe that the visibility into our long-term supply allows us to efficiently manage inventory to meet predicted sales, reduce capital investments, minimize our exposure to the cyclicality of the real estate market and mitigate the risks of entering into new markets.

We ~~originate loans~~sell our vacation ownership products primarily through our distribution network of both-in-market and off-site sales centers. Our products are currently marketed for sale throughout the United States, Mexico, Canada, Europe, and Japan. We operate sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership. We have over 50 sales distribution centers in various domestic and international locations. Our marketing and sales activities are based on targeted direct marketing and a highly personalized sales approach. We use targeted direct marketing to reach potential members who are identified as having the financial ability to pay for our products, are frequent leisure travelers, and have an affinity with our brands. Tour flow quality impacts key metrics such as close rate and VPG, defined in “Key Business and Financial Metrics and Terms Used by Management—Real Estate Sales Operating Metrics.” Additionally, the quality of tour flow impacts sales revenue and the collectability of our timeshare financing receivables. For the three months ended March 31, 2023, 69% of our contract sales were to our existing owners, compared to 73% for the three months ended March 31, 2022.

We provide financing for members purchasing our developed and acquired inventory ~~which~~and generate interest ~~income.~~income on the loans. Our ~~loans~~timeshare financing receivables are collateralized by the underlying VOIs and are generally structured as 10-year, fully-amortizing loans that bear a fixed interest rate typically ranging from ~~9 percent~~2.5% to ~~18 percent~~25% per annum.

Financing propensity was 59% and 65% for the three months ended March 31, 2023 and 2022, respectively. We calculate financing propensity as contract sales volume of financed contracts originated in the period divided by contract sales volume of all contracts originated in the period.

The interest rate on our loans is determined by, among other factors, the amount of the down payment, the borrower’s credit profile and the loan term. The ~~weighted average~~weighted-average FICO score for ~~new~~ loans to U.S. and Canadian borrowers at the time of origination were as follows:

Nine Months Ended September 30,

2017

2016

Weighted average FICO score

738

736


	Three Months Ended March 31,
	2023	2022
Weighted-average FICO score	737	740

Prepayment is permitted without penalty. When a member defaults, we ultimately return their VOI to inventory for resale and that member no longer participates in our ~~Club.~~

Clubs.

Some of our ~~loans~~timeshare financing receivables have been pledged as collateral in our securitization transactions, which have in the past and may in the future provide funding for our business activities. In these securitization transactions, special purpose entities are established to issue various classes of debt securities which are generally collateralized by a single pool of assets consisting of timeshare financing receivables that we service and related cash deposits. For additional information see Note 4: 5: Timeshare Financing Receivables in our ~~unaudited~~ condensed consolidated financial statements.

In addition, we earn fees from servicing our securitized ~~loan portfolio~~timeshare financing receivables and the loans provided by third-party developers of our fee-for-service projects to purchasers of their VOIs.

Resort Operations and Club Management

We enter into a management ~~agreement~~agreements with the ~~homeowners’ association (“HOA”)~~HOAs of the ~~VOI owners for~~ timeshare resorts developed by us or a third party. Each of the HOAs is governed by a board of directors ~~comprising~~comprised of owner and developer representatives that are charged with ensuring the resorts are well-maintained and financially stable. Our ~~management~~ services include day-to-day operations of the resorts, maintenance of the resorts, preparation of books and financial records including reports, budgets and projections, arranging for annual audits and ~~employee~~maintenance fee billing and collections and personal employment training and oversight. Our HOA management agreements provide for a cost-plus management fee, which means we generally earn a fee equal to ~~10 percent~~10% to ~~15 percent~~15% of the costs to operate the applicable resort. ~~The~~As a result, the fees we earn are highly predictable due to the relatively fixed nature of resort operating expenses and our management fees are unaffected by changes in rental rate or occupancy. We are also reimbursed for the costs incurred to perform our services, principally related to personnel providing on-site services. The ~~initial term~~original terms of our management agreements typically ~~ranges from~~range from three to five years and

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the agreements are subject to periodic renewal for one to ~~three year~~three-year periods. Many of these agreements renew automatically unless either party provides advance notice of termination before the expiration of the term.

Since our inception, none of the management agreements relating to our owned or fee-for-service properties have been terminated or lapsed.

We also manage and operate the ~~points-based Hilton Grand Vacations Club~~Clubs and ~~Hilton Club~~ exchange ~~programs, which provide exclusive exchange, leisure travel and reservation services to our Club members.~~programs. When ~~an owner purchases~~owners purchase a VOI, ~~he or she is~~they are generally ~~automatically~~ enrolled in ~~the~~a Club ~~and given an annual allotment of points that allow~~which allows the member to exchange ~~his or her annual usage rights in the VOI that they own~~their points for a number of vacation ~~and travel~~ options. In addition to an annual membership fee, Club members pay incremental fees depending on exchanges they choose within the Club system.

We rent unsold VOI inventory, third-party inventory and inventory made available due to ownership exchanges through our ~~Club~~club programs. We earn a fee from rentals of third-party inventory. Additionally, we provide ancillary offerings including food and beverage, retail and spa offerings at these timeshare properties.

Key Business and Financial Metrics and Terms Used by Management

Real Estate Sales Operating Metrics

~~The~~

We measure our performance using the following ~~are not recognized terms under U.S. GAAP:~~

key operating metrics:

•Contract sales represents the total amount of VOI products (fee-for-service, just-in-time, developed, and points-based) under purchase agreements signed during the period where we have received a down payment of at least ~~10 percent~~10% of the contract price. ~~Contract sales is not a recognized term under U.S. GAAP and should not be considered in isolation or as an alternative to~~ ~~Sales of VOIs, net~~ ~~or any other comparable operating measure derived in accordance with U.S. GAAP.~~ Contract sales differ from revenues from the Sales of VOIs, net that we report in our condensed consolidated statements of operations due to the requirements for revenue recognition, as well as adjustments for ~~incentives and other administrative fee revenues. We consider~~incentives. While we do not record the purchase price of sales of VOI products developed by fee-for-service partners as revenue in our condensed consolidated financial statements, rather recording the commission earned as revenue in accordance with U.S. GAAP, we believe contract sales to be an important ~~operating measure because it reflects~~operational metric, reflective of the overall volume and pace of sales in our ~~business.~~

business and believe it provides meaningful comparability of our results to the results of our competitors which may source their VOI products differently.

We believe that the presentation of contract sales on a combined basis (fee-for-service, just-in-time, developed and points-based) is most appropriate for the purpose of the operating metric; additional information regarding the split of contract sales, is included in “—Real Estate” below.

•Sales revenue represents ~~sale~~Sales of VOIs, net ~~and~~, commissions and brand fees earned from the sale of fee-for-service intervals.

•Real estate ~~margin~~ profit represents sales revenue less the cost of VOI sales, ~~and~~ sales and marketing costs, net of marketing revenue. Real estate margin percentage is calculated by dividing real estate margin by sales revenue. We consider this to be an important operating measure because it measures the efficiency of our sales and marketing spending and management of inventory costs.

•Tour flow represents the number of sales presentations given at our sales centers during the period.

•Volume per guest (“VPG”) represents the sales attributable to tours at our sales locations and is calculated by dividing ~~Contract~~contract sales, excluding telesales, by tour flow. We consider VPG to be an important operating measure because it measures the effectiveness of our sales process, combining the average transaction price with the closing rate.

•

~~Capital efficiency ratio~~ represents the ratio of cost of VOI sales to VOI inventory spend, including fee-for-service upgrades. We consider this to be an important operating measure because capital efficiency allows us to reduce inventory investment requirements while continuing to generate growth in revenues and cash flows.

~~Resort and Club Management and Rental Metrics~~

~~Transient rate~~ represents the total rental room revenue for transient guests divided by total number of transient room nights sold in a given period and excludes room rentals associated with marketing programs, owner usage and the redemption of Club Bonus Points.

~~For further information see Item 8. Financial Statements and Supplementary Data - Note 2:~~ ~~Basis of Presentation and Summary of Significant Accounting Policies~~ ~~in our Annual Report on Form 10-K for the year ended December 31, 2016.~~

EBITDA and Adjusted EBITDA

EBITDA, presented herein, is a financial measure that is not recognized under U.S. GAAP that reflects net income, ~~(loss),~~ before interest expense (excluding non-recourse debt), a provision for income taxes and depreciation and amortization. During the first quarter of 2017, we revised our definition of EBITDA to exclude the adjustment of interest expense relating to our non-recourse debt as a reconciling item to arrive at net income (loss) in order to conform to the presentation of the timeshare industry following the consummation of the spin-off from Hilton. The revised definition was applied to prior period(s) to conform with current presentation.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) other gains, including asset ~~dispositions; (ii)~~dispositions and foreign currency transactions; ~~(iii)~~(ii) debt restructurings/retirements; ~~(iv)~~(iii) non-cash impairment losses; ~~(v) reorganization costs, including severance and relocation costs; (vi)~~(iv) share-based and ~~certain~~ other compensation expenses; ~~(vii)~~and (v) other items, including but not limited to costs ~~related to the spin-off;~~associated with acquisitions, restructuring, amortization of premiums and ~~(viii)~~discounts resulting from purchase accounting, and other ~~items.~~

non-cash and one-time charges.

EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income ~~(loss)~~ or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

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We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income, ~~(loss),~~ cash flow or other methods of analyzing our results as reported under U.S. GAAP. Some of these limitations are:

•EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

•EBITDA and Adjusted EBITDA do not reflect our interest expense (excluding interest expense on non-recourse debt), or the cash requirements necessary to service interest or principal payments on our indebtedness;

•EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;

•EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations;

•EBITDA and Adjusted EBITDA do not reflect any cash requirements for future replacements of assets that are being depreciated and amortized; and

•EBITDA and Adjusted EBITDA may be calculated differently from other companies in our industry limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

~~Recent Events~~

~~On July 18, 2017, we entered into an agreement with BRE Ace Holdings LLC, a Delaware limited liability company (“BRE Ace Holdings”), an affiliate~~Table of Blackstone and formed BRE Ace LLC. Pursuant to the agreement, we contributed $40 million in cash for a 25 percent interest in BRE Ace LLC, which owns a 1,201-key timeshare resort property and related operations, commonly known as “Elara, by Hilton Grand Vacations,” located in Las Vegas, Nevada.

On September 10, 2017, Hurricane Irma hit the Florida Keys as a Category 4 hurricane, weakening somewhat as it made landfall along Florida’s southwest shoreline. Although certain of our managed Florida properties were temporarily closed during the aftermath of Hurricane Irma, neither HGV’s operations nor financial performance were significantly impacted by this storm. In the aftermath of Hurricane Irma, the IRS has granted an automatic extension to individuals and businesses affected by the hurricanes, which extends tax filing and payment deadlines beginning September 4, 2017. As a result, we have delayed our third quarter Federal income tax payment.

Contents

Results of Operations

Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2023 Compared with the Three ~~and Nine~~ Months Ended ~~September 30, 2016~~

March 31, 2022

Segment Results

The following tables present our revenues by segment. We do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment operating performance.


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$		%
Revenues:
Real estate sales and financing	$	550	$	452	$	98	21.7
Resort operations and club management	302		268		34		12.7
Total segment revenues	852		720		132		18.3
Cost reimbursements	95		66		29		43.9
Intersegment eliminations(1)	(13)		(7)		(6)		85.7
Total revenues	$	934	$	779	$	155	19.9

(1)Refer to Note 16: Business Segments in our condensed consolidated financial statements for details on the intersegment eliminations.

We evaluate our business segment operating performance using segment Adjusted EBITDA, as described in Note ~~14:~~ 16: Business Segments in our ~~unaudited~~ condensed consolidated financial statements. ~~We do not include equity in earnings from unconsolidated affiliate in our measures of segment revenues.~~ For a discussion of our definition of EBITDA and Adjusted EBITDA, how management uses itthem to manage our business and material limitations on ~~its~~their usefulness, refer to “—Key Business and Financial Metrics and Terms Used by Management—EBITDA and Adjusted EBITDA.” The following table ~~sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amount, including net income, our most comparable U.S. GAAP financial measure:~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Revenues:

Real estate sales and financing

$
310

$
301

$
9

3.0
%

$
916

$
843

$
73

8.7
%
Resort operations and club management

90

81

9

11.1

270

251

19

7.6

Segment revenues

400

382

18

4.7

1,186

1,094

92

8.4

Cost reimbursements

34

33

1

3.0

102

94

8

8.5

Intersegment eliminations⁽¹⁾

(8
)

(8
)

—

—

(24
)

(20
)

(4
)

(20.0
)
Total revenues

$
426

$
407

$
19

4.7

$
1,264

$
1,168

$
96

8.2

⁽¹⁾	~~Refer to Note 14:~~ ~~Business Segments~~ ~~in our unaudited condensed consolidated financial statements for details on the intersegment eliminations.~~

~~The following table~~ reconciles net income, our most comparable U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA:

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Net Income

$
43

$
35

$
8

22.9
%

$
144

$
130

$
14

10.8
%
Interest expense

7

—

7

NM⁽¹⁾

21

—

21

NM⁽¹⁾

Allocated Parent interest expense

—

7

(7
)

(100.0
)

—

20

(20
)

(100.0
)
Income tax expense

28

33

(5
)

(15.2
)

87

98

(11
)

(11.2
)
Depreciation and amortization

7

6

1

16.7

21

17

4

23.5

Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliate

2

—

2

NM⁽¹⁾

2

—

2

NM⁽¹⁾

EBITDA

87

81

6

7.4

275

265

10

3.8

Other loss, net

—

—

—

—

—

1

(1
)

(100.0
)
Gain on foreign currency transactions

(1
)

(1
)

—

—

(1
)

(2
)

1

(50.0
)
Share-based compensation expense

5

2

3

NM⁽¹⁾

13

7

6

85.7

Other adjustment items⁽²⁾

3

11

(8
)

(72.7
)

7

21

(14
)

(66.7
)
Adjusted EBITDA

$
94

$
93

$
1

1.1

$
294

$
292

$
2

0.7

⁽¹⁾	~~Fluctuation in terms of percentage change is not meaningful.~~

⁽²⁾	~~For the three and nine months ended September 30, 2017, amounts represent $2 million and $5 million, respectively, of costs associated with the spin-off transaction.~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Adjusted EBITDA:

Real estate sales and financing⁽¹⁾

$
81

$
85

$
(4
)

(4.7
)%

$
263

$
250

$
13

5.2
%
Resort operations and club management⁽¹⁾

50

42

8

19.0

153

139

14

10.1

Segment Adjusted EBITDA

131

127

4

3.1

416

389

27

6.9

Adjustments:

Adjusted EBITDA from unconsolidated affiliate

3

—

3

NM⁽¹⁾

3

—

3

NM⁽¹⁾

License fee expense

(22
)

(22
)

—

—

(65
)

(61
)

(4
)

6.6

General and administrative⁽²⁾

(18
)

(12
)

(6
)

50.0

(60
)

(36
)

(24
)

66.7

Adjusted EBITDA

$
94

$
93

$
1

1.1

$
294

$
292

$
2

0.7

⁽¹⁾	~~Includes intersegment eliminations and other adjustments.~~


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$		%
Net income	$	73	$	51	$	22	43.1
Interest expense	44		33		11		33.3
Income tax expense	17		20		(3)		(15.0)
Depreciation and amortization	51		60		(9)		(15.0)

EBITDA	185		164		21		12.8
Other gain, net	(1)		(1)		—		—
Share-based compensation expense	10		11		(1)		(9.1)
Impairment expense	—		3		(3)		(100.0)
Acquisition and integration-related expense	17		13		4		30.8
Other adjustment items(1)	7		12		(5)		(41.7)
Adjusted EBITDA	$	218	$	202	$	16	7.9

⁽²⁾	~~Excludes share-based compensation and other adjustment items.~~

(1)These amounts include costs associated with restructuring, one-time charges, the amortization of premiums resulting from purchase accounting and other non-cash items.

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The following table reconciles our segment Adjusted EBITDA to Adjusted EBITDA:


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$		%
Adjusted EBITDA:
Real estate sales and financing(1)	$	169	$	153	$	16	10.5
Resort operations and club management(1)	109		101		8		7.9
Adjustments:
Adjusted EBITDA from unconsolidated affiliates	3		3		—		—
License fee expense	(30)		(25)		(5)		20.0
General and administrative(2)	(33)		(30)		(3)		10.0
Adjusted EBITDA	$	218	$	202	$	16	7.9

(1)Includes intersegment transactions, share-based compensation, depreciation and other adjustments attributable to the segments.

(2)Excludes segment related share-based compensation, depreciation and other adjustment items.

Real Estate Sales and Financing

~~Real~~

In accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), revenue and the related costs to fulfill and acquire the contract (“direct costs”) from sales of VOIs under construction are deferred until the point in time when construction activities are deemed to be completed. The real estate sales and financing segment ~~revenues increase for~~is impacted by construction related deferral and recognition activity. In periods where Sales of VOIs and related direct costs of projects under construction are deferred, margin percentages will generally contract as the ~~three months ended September 30, 2017, compared to~~indirect marketing and selling costs associated with these sales are recognized as incurred in the ~~same period~~current period. In periods where previously deferred Sales of VOIs and related direct costs are recognized upon construction completion, margin percentages will generally expand as the indirect marketing and selling costs associated with these sales were recognized in ~~2016, primarily due to a $4 million increase in sales revenue, a $2 million increase in marketing~~prior periods.

The following table represents deferrals and recognitions of Sales of VOI revenue and a $4 million increased in financing revenues. The increase in sales revenue was primarily due to higher sales of VOIs, net, due to sales at our newly developed project beginning in the fourth quarter of 2016. The increase in marketing revenues was primarily due to an increase in title related services. The increase in financing revenues was primarily due an increase in interest income from higher outstanding timeshare financing receivables balance. Real estate sales and financing segment Adjusted EBITDA decreased by $4 milliondirect costs for the three months ended September 30, 2017, compared to the same period in 2016, primarily due to a $14 million increase in sales and marketing expense as well as a decrease in commission and brand fees.

properties under construction:
Three Months Ended March 31, Variance
($ in millions) 2023 2022 $
Sales of VOIs (deferrals) $ — $ (42) $ 42
Sales of VOIs recognitions 4 — 4
Net Sales of VOIs (deferrals) recognitions 4 (42) 46
Cost of VOI sales (deferrals) — (13) 13
Cost of VOI sales recognitions 1 — 1
Net Cost of VOI sales (deferrals) recognitions 1 (13) 14
Sales and marketing expense (deferrals) — (7) 7
Sales and marketing expense recognitions 1 — 1
Net Sales and marketing expense (deferrals) recognitions 1 (7) 8
Net construction (deferrals) recognitions $ 2 $ (22) $ 24

Real estate sales and financing segment revenues increased by $98 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016,~~2022, primarily due to ~~a $44~~an $87 million increase in VOI sales ~~revenue, a $22 million increase in marketing revenue~~ and ~~a $9 million increased in financing revenues. The increase in sales revenue was primarily due to a $47 million increase in~~commissions earned on sales of ~~VOIs, net, due to sales at our newly developed project beginning in the fourth quarter~~fee-for-service properties resulting from increased tours and availability of ~~2016. The increase in marketing revenue was primarily due to (i) a $10 million reduction of our expected redemptions of expired discounted vacation packages, (ii) a $8 million~~

increase in the actual redemption of discounted vacation packages and (iii) a $3 million increase in title related service revenue. The increase in financing revenues was primarily due an increase in interest income from higher outstanding timeshare financing receivables balance. Real estate sales and financing segment Adjusted EBITDA increased by $13 million for the nine months ended September 30, 2017,new inventory compared to the same period in ~~2016,~~2022. In addition, there was a $10 million increase in financing revenue primarily ~~due~~related to an increase in ~~revenues associated with the segment, partially offset by a $49 million~~our loan portfolio and an increase in the weighted average interest rate.

Real estate sales and ~~marketing expense as well as a decrease~~financing Adjusted EBITDA increased by $16 million for the three months ended March 31, 2023, compared to the same period in ~~commission and brand fees.~~

2022, primarily due to the revenue increases discussed above.

Refer to “—Real Estate” and “—Financing” for further discussion on the revenues and expenses of the ~~real~~Real estate sales and financing segment.

Table of Contents

Resort Operations and Club Management

Resort operations and club management segment revenues increased by $34 million for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, compared to the same ~~periods~~period in ~~2016,~~2022, primarily due to ~~(i)~~ an increase ~~of $4 million and $10 million, respectively,~~ in ~~resort~~rental revenue. The rental revenue increase was driven primarily by an increase in the average nightly rates charged as well as an increase in occupied room nights compared to the same period in 2022. The additional increase in Resort operations and club management ~~revenues from the launch of new properties subsequent~~revenue was due to ~~the third quarter of 2016 and (ii)~~ an increase ~~of $4 million and $3 million, respectively,~~ in ~~rental and ancillary services revenues as a result of higher transient room and club inventory rentals at our developed and fee-for-service properties.~~ resort management revenue, primarily driven by an increase in fees.

Resort operations and club management segment ~~Adjusted~~adjusted EBITDA increased by $8 million for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, compared to the same ~~periods~~period in ~~2016,~~2022, primarily due to ~~increases~~the increase in Resort and club management and rental revenues ~~associated with the segment,~~described above, partially offset by ~~increases of $3 million~~an increase in resort and ~~$9 million, respectively, in segment expenses.~~

club management expenses due to personnel-related costs incurred to service increased arrivals and transaction activity.

Refer to “— Resort and Club Management” and “—Rental and Ancillary Services” for further discussion on the revenues and expenses of the ~~resort~~Resort operations and club management segment.

Real Estate Sales and Financing Segment

Real Estate

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions, except Tour flow and VPG)

2017

2016

$

%

2017

2016

$

%

Sales of VOIs, net

$
145

$
130

$
15

11.5
%

$
406

$
359

$
47

13.1
%
Adjustments:

Fee-for-service sales⁽¹⁾

169

181

(12
)

(6.6
)

508

512

(4
)

(0.8
)
Loan loss provision

19

14

5

35.7

45

37

8

21.6

Reportability and other⁽²⁾

(7
)

(19
)

12

(63.2
)

(23
)

(49
)

26

(53.1
)
Contract sales

$
326

$
306

$
20

6.5

$
936

$
859

$
77

9.0

Tour flow

87,346

79,817

7,529

9.4

246,865

230,362

16,503

7.2

VPG

$
3,555

$
3,602

$
(47
)

(1.3
)

$
3,590

$
3,504

$
86

2.5

⁽¹⁾	~~Represents contract sales from fee-for-service properties on which we earn commissions and brand fees.~~

⁽²⁾	Includes adjustments for revenue recognition, including percentage-of-completion deferrals and amount in rescission, and sales incentives, as well as adjustments related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects.


	Three Months Ended March 31,				Variance (1)
($ in millions, except Tour flow and VPG)	2023		2022		$		%
Contract sales	$	523	$	509	$	14	2.8
Adjustments:
Fee-for-service sales(2)	(174)		(129)		(45)		34.9
Provision for financing receivables losses	(30)		(31)		1		(3.2)
Reportability and other:
Net recognition of sales of VOIs under construction(3)	4		(42)		46		NM
Fee-for-service sale upgrades, net	5		4		1		25.0
Other(4)	(10)		(42)		32		(76.2)
Sales of VOIs, net	$	318	$	269	$	49	18.2
Tour flow	130,268		98,601		31,667
VPG	$	3,969	$	4,849	$	(880)

(1)NM - fluctuation in terms of percentage change is not meaningful.

(2)Represents contract sales from fee-for-service properties on which we earn commissions and brand fees.

(3)Represents the net recognition of revenues related to the Sales of VOIs under construction that are recognized when construction is complete.

(4)Includes adjustments for revenue recognition, including amounts in rescission and sales incentives.

Contract sales increased by $14 million for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016,~~2022, primarily due to the increase in tour flow, partially offset by a decrease in VPG, and new inventory available for sale at our resorts during 2023.

Table of Contents


	Three Months Ended March 31,						Variance
($ in millions)	2023			2022			$		%
Sales, marketing, brand and other fees	$	158		$	119		$	39	32.8
Less:
Marketing revenue and other fees	51			50			1		2.0
Commissions and brand fees	107			69			38		55.1
Sales of VOIs, net	318			269			49		18.2
Sales revenue	425			338			87		25.7
Less:
Cost of VOI sales	50			40			10		25.0
Sales and marketing expense, net(1)	240			186			54		29.0
Real Estate expense	$	290		$	226		$	64	28.3
Real Estate profit	$	135		$	112		$	23	20.5
Real Estate profit margin	31.8		%	33.1		%

(1)Includes revenue recognized through our marketing programs for existing owners and prospective first-time buyers and revenue associated with sales incentives, title service and document compliance.

Real estate profit increased by $23 million for the three months ended March 31, 2023, compared to the same period in 2022, driven by an increase of $87 million in Sales revenue and offset by an increase in Real estate expense of $64 million.

These increases are primarily due to an increase in ~~tour flow which correlates to~~Sales of VOIs, net, driven by the recognition of deferred properties under construction and an increase in ~~marketing expense. VPG decreased~~commissions and brand fees earned on sales of fee-for-service properties for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016 due to a 1.4 percent decrease~~2022. Real estate expenses increased in ~~close rate, partially offset~~line with the increases in the related revenues.

Financing


	Three Months Ended March 31,						Variance
($ in millions)	2023			2022			$		%
Interest income	$	66		$	55		$	11	20.0
Other financing revenue	8			9			(1)		(11.1)
Financing revenue	74			64			10		15.6
Consumer financing interest expense	11			7			4		57.1
Other financing expense	13			12			1		8.3
Financing expense	24			19			5		26.3
Financing profit	$	50		$	45		$	5	11.1
Financing profit margin	67.6		%	70.3		%

Financing profit increased by ~~a 0.8 percent increase in average transaction price.~~

~~Contract sales increased~~$5 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016,~~2022, driven by an increase of $10 million in financing revenue, partially offset by an increase in financing expense of $5 million.

Financing revenue increased primarily due to interest income driven by an increase in our loan portfolio and an increase in the weighted-average interest rate. Financing expense increased in line with the related revenues and due to the increased costs associated with loan servicing.

Table of Contents

Resort Operations and Club Management Segment

Resort and Club Management


	Three Months Ended March 31,						Variance
($ in millions)	2023			2022			$		%
Club management revenue	$	51		$	51		$	—	—
Resort management revenue	80			74			6		8.1
Resort and club management revenues	131			125			6		4.8
Club management expense	15			10			5		50.0
Resort management expense	27			26			1		3.8
Resort and club management expenses	42			36			6		16.7
Resort and club management profit	$	89		$	89		$	—	—
Resort and club management profit margin	67.9		%	71.2		%

Resort and club management profit for the three months ended March 31, 2023 remained consistent with the same period in 2022. The increase in Resort management revenues were driven by an increase in fee revenue. The increase in Resort and club management expenses is primarily due to personnel related costs incurred to service the increased transactions for the period.

Rental and Ancillary Services


	Three Months Ended March 31,						Variance
($ in millions)	2023			2022			$		%
Rental revenues	$	147		$	124		$	23	18.5
Ancillary services revenues	11			12			(1)		(8.3)
Rental and ancillary services revenues	158			136			22		16.2
Rental expenses	143			122			21		17.2
Ancillary services expense	9			10			(1)		(10.0)
Rental and ancillary services expenses	152			132			20		15.2
Rental and ancillary services profit	$	6		$	4		$	2	50.0
Rental and ancillary services profit margin	3.8		%	2.9		%

Rental and ancillary services profit increased by $2 million for the three months ended March 31, 2023, compared to the same period in 2022, driven by an increase of $22 million in rental and ancillary services revenue, partially offset by an increase of $20 million in rental and ancillary expenses.

Rental and ancillary services revenue was primarily due to an increase in ~~tour flow which correlates to~~rental revenue driven by an increase in the ~~increases~~average nightly rates charged as well as increase in ~~marketing expense and VPG. VPG increased for the nine months ended September 30, 2017,~~occupied room nights compared to the same period in ~~2016 due to a 0.5 percent~~2022. Rental and ~~2.1 percent~~ancillary services expense increased consistent with the aforementioned increase in ~~close rate~~rental revenue.

Other Operating Expenses


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$		%
General and administrative	$	42	$	42	$	—	—
Depreciation and amortization	51		60		(9)		(15.0)
License fee expense	30		25		5		20.0
Impairment expense	—		3		(3)		(100.0)

General and ~~average transaction price, respectively.~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Sales of VOIs, net

$
145

$
130

$
15

11.5
%

$
406

$
359

$
47

13.1
%
Sales, marketing, brand and other fees

127

136

(9
)

(6.6
)

401

382

19

5.0

Less:

Marketing revenue and other fees

34

32

2

6.3

109

87

22

25.3

Sales revenue

238

234

4

1.7

698

654

44

6.7

Less:

Cost of VOI sales

40

44

(4
)

(9.1
)

107

110

(3
)

(2.7
)
Sales and marketing expense, net⁽¹⁾

142

125

17

13.6

394

356

38

10.7

Real estate margin

$
56

$
65

$
(9
)

(13.8
)

$
197

$
188

$
9

4.8

Real estate margin percentage

23.5
%

27.8
%

28.2
%

28.7
%

⁽¹⁾	~~Includes revenue recognized through our marketing programs for existing owners and prospective first-time buyers.~~

~~Sales revenue increased~~administrative expenses for the three months ended ~~September 30, 2017,~~March 31, 2023 remained consistent with the same period in 2022. Depreciation and amortization decreased by $9 million, primarily due to decreased amortization expense of intangible assets. License fee expense increased by $5 million, primarily due to increased applicable revenues.

Table of Contents

Acquisition and Integration-Related Expense


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$		%
Acquisition and integration-related expense	$	17	$	13	$	4	30.8

Acquisition and integration-related costs include direct expenses related to the Diamond Acquisition including integration costs, legal and other professional fees. Integration costs include technology-related costs, fees paid to management consultants, rebranding fees and employee-related costs such as severance and retention. For the three months ended March 31, 2023, acquisition and integration-related costs increased by $4 million due to rebranding fees incurred, compared to the same period in 2022.

Non-Operating Expenses


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$		%
Interest expense	$	44	$	33	$	11	33.3
Equity in earnings from unconsolidated affiliates	(3)		(3)		—		—
Other gain, net	(1)		(1)		—		—
Income tax expense	17		20		(3)		(15.0)

The change in non-operating expenses for the three months ended March 31, 2023, compared to the same period in ~~2016,~~2022 was primarily as a result of a $15 million increase in Sales of VOIs, net due to sales at our newly developed projects beginning in the fourth quarter of 2016, in Washington, DC and New York, NY. The increase in sales revenues was partially offset by (i) a decrease in commission and brand fees primarily due to a shift in sales mix from fee-for-service to developed projects, (ii) a decrease in commission rate received on fee-for-service due to project mix and (iii) higher sales and marketing expense due to an increase in ~~contract sales volume and research and development costs to evaluate new markets.~~

~~Sales revenue increased for~~interest expense of $11 million, partially offset by a $3 million decrease in income tax expense. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, Interest expense increased by $11 million driven by an increase in interest rates and net proceeds from debt, compared to the same period in ~~2016, primarily as a result of (i) a $47 million increase in Sales of VOIs, net~~2022. Income tax expense decreased due to sales at our newly developed projects beginning in the fourth quarter of 2016, in Washington, DC and New York, NY, (ii) a $10 million reduction of our expected redemptions of expired discounted vacation packages, (iii) an $8 million increase in the actual redemption of discounted vacation packages and (iii) a $3 million increase in title related service revenue. The increase in sales revenues was partially offset by (i) a decrease in commission and brand fees primarily due to a shift in sales mix from fee-for-service to developed projects, (ii) a decrease in commission rate received on fee-for-service due to project mix and (iii) higher sales and marketing expense due to an increase in contract sales volume and research and development costs to evaluate new markets.

~~Real estate margin and real estate margin percentage decreased~~discrete items for the three months ended ~~September 30, 2017,~~March 31, 2023, primarily unrecognized tax benefits, compared to the same period in 2016, primarily as a result of an increase in our marketing costs as a percentage of revenue and additional research and development costs to evaluate new markets. Real estate margin increased for the nine months ended September 30, 2017, compared to the same period in 2016, primarily as a result of the increases in segment revenues, partially offset by the aforementioned sales and marketing expenses. Real estate margin percentage was flat for the nine months ended September 30, 2017, compared to the same period in 2016.

2022.

~~Financing~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Interest income

$
33

$
31

$
2

6.5
%

$
97

$
91

$
6

6.6
%
Other financing revenue

5

3

2

66.7

12

9

3

33.3

Financing revenue

38

34

4

11.8

109

100

9

9.0

Consumer financing interest expense

6

3

3

100.0

16

9

7

77.8

Other financing expense

5

5

—

—

16

15

1

6.7

Financing expense

11

8

3

37.5

32

24

8

33.3

Financing margin

$
27

$
26

$
1

3.8

$
77

$
76

$
1

1.3

Financing margin percentage

71.1
%

76.5
%

70.6
%

76.0
%

Financing revenue increased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to an increase of $2 million and $6 million, respectively, in interest income resulting from a higher outstanding timeshare financing receivables balance during the three and nine months ended September 30, 2017. Financing margin percentage decreased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to higher non-recourse debt balance associated with the additional drawdown on our timeshare facility in December 2016. See Note 8: ~~Debt & Non-recourse debt~~ ~~in our unaudited condensed consolidated financial statements for additional information.~~

~~Resort Operations and Club Management Segment~~

~~Resort and Club Management~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Club management revenue

$
22

$
21

$
1

4.8
%

$
63

$
60

$
3

5.0
%
Resort management revenue

15

12

3

25.0

45

38

7

18.4

Resort and club management revenues

37

33

4

12.1

108

98

10

10.2

Club management expense

7

5

2

40.0

18

15

3

20.0

Resort management expense

5

4

1

25.0

14

10

4

40.0

Resort and club management expenses

12

9

3

33.3

32

25

7

28.0

Resort and club management margin

$
25

$
24

$
1

4.2

$
76

$
73

$
3

4.1

Resort and club management margin percentage

67.6
%

72.7
%

70.4
%

74.5
%

Resort and club management revenues increased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to (i) an increase in resort management revenue from the launch of new properties subsequent to the third quarter of 2016 and (ii) an increase of approximately 19,000 in Club members resulting in higher annual dues and transaction fees. These increases were partially offset by higher resort and club management expenses due to an increase in costs for servicing additional Club members and properties. In addition, for the nine months ended September 30, 2017, the increases were partially offset by a one-time fee earned in 2016 on a prepaid contract.

Resort and club management margin increased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to the aforementioned increases in segment revenues, partially offset by an increase in segment expenses as a result of customer and company related initiatives. Resort and club management margin percentage decreased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to an increase in segment expenses as a result of customer and company related initiatives, partially offset by the aforementioned increases in segment revenues.

~~Rental and Ancillary Services~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Rental revenues

$
39

$
35

$
4

11.4
%

$
120

$
116

$
4

3.4
%
Ancillary services revenues

6

6

—

—

18

19

(1
)

(5.3
)
Rental and ancillary services revenues

45

41

4

9.8

138

135

3

2.2

Rental expenses

25

23

2

8.7

73

67

6

9.0

Ancillary services expense

5

7

(2
)

(28.6
)

15

19

(4
)

(21.1
)
Rental and ancillary services expenses

30

30

—

—

88

86

2

2.3

Rental and ancillary services margin

$
15

$
11

$
4

36.4

$
50

$
49

$
1

2.0

Rental and ancillary services margin percentage

33.3
%

26.8
%

36.2
%

36.3
%

Rental and ancillary services revenues increased for the three months ended September 30, 2017, compared to the same period in 2016, primarily due to an increase of $4 million in rental revenues as a result of higher transient room and club inventory rentals at our developed and fee-for-service properties. Rental expenses increased by $2 million, offset by a decrease in ancillary expense.

Rental and ancillary services revenues increased for the nine months ended September 30, 2017, compared to the same period in 2016, primarily due to an increase of $4 million in rental revenues as a result of higher transient room and club inventory rentals at our developed and fee-for-service properties. The increases were partially offset by (i) a net increase of $2 million in rental expenses due to additional owners and new properties, (ii) a one-time insurance claim payment of $2 million received in 2016, and (iii) a reduction in access fees received due to higher quantity of access fees sold in 2016.

Rental and ancillary services margin increased for the three months ended September 30, 2017, compared to the same period in 2016, due to aforementioned increases in segment revenues and lower property subsidy expenses from operational savings. Rental and ancillary services margin was flat for the nine months ended September 30, 2017, compared to the same period in 2016.

~~Other Operating Expenses~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Unallocated general and administrative

$
23

$
17

$
6

35.3
%

$
75

$
44

$
31

70.5
%
Allocated general and administrative

—

7

(7
)

(100.0
)

—

17

(17
)

(100.0
)
General and administrative

$
23

$
24

(1
)

(4
)

$
75

$
61

$
14

23.0

Unallocated general and administrative expenses increased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to an increase in expenses relating to regulatory filings, professional fees and other costs as a result of becoming an independent publicly traded company. Allocated general and administrative were expenses allocated to us from Hilton relating to the spin-off which was completed on January 3, 2017.

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Depreciation and amortization

$
7

$
6

$
1

16.7
%

$
21

$
17

$
4

23.5
%
License fee expense

22

22

—

—

65

61

4

6.6

Depreciation and amortization expense increased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to asset transfers from Hilton during the fourth quarter of 2016, some of which we hold as property and equipment for future conversion into inventory. The increase in license fee expense for the nine months ended September 30, 2017 was as a result of the increase in revenues.

~~Non-Operating Expenses~~

Three Months Ended
September 30,

Variance

Nine Months Ended
September 30,

Variance

($ in millions)

2017

2016

$

%

2017

2016

$

%

Gain on foreign currency transactions

$
(1
)

$
(1
)

$
—

—

$
(1
)

$
(2
)

$
1

(50.0
)%
Allocated Parent interest expense

—

7

(7
)

(100.0
)

—

20

(20
)

(100.0
)
Interest expense

7

—

7

NM⁽¹⁾

21

—

21

NM⁽¹⁾

Other loss, net

—

—

—

—

—

1

(1
)

(100.0
)
Income tax expense

28

33

(5
)

(15.2
)

87

98

(11
)

(11.2
)
Equity in earnings from unconsolidated affiliate

(1
)

—

(1
)

NM⁽¹⁾

(1
)

—

(1
)

NM⁽¹⁾

⁽¹⁾	~~Fluctuation in terms of percentage change is not meaningful.~~

~~The Allocated Parent interest expense relates to an unconditional obligation to guarantee certain Hilton allocated debt balances which was released in November 2016.~~

The increase in interest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016 is directly related to the financing transactions closed during and subsequent to the fourth quarter of 2016.

Income tax expense decreased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to a decrease in the cumulative installment sale interest liability.

~~Equity in earnings from unconsolidated affiliate relates to our 25 percent interest in BRE Ace LLC. See Note 7:~~ ~~Investment in unconsolidated affiliate~~ ~~in our unaudited condensed consolidated financial statements for additional information.~~

Liquidity and Capital Resources

Overview

~~Prior~~

Our cash management objectives are to maintain the ~~fourth quarter~~availability of ~~2016, any net cash generated by our business has been transferred to Hilton, where it has been centrally managed. Transfers of cash to~~liquidity, minimize operational costs, make debt payments and ~~from Hilton have been reflected as a component of~~ ~~Net transfers (to) from Parent~~ ~~in our condensed consolidated statements of cash flows.~~

~~As of September 30, 2017, we had total cash~~fund future acquisitions and cash equivalents of $284 million, including $58 million of restricted cash. The restricted cash balance relates to escrowed cash from our sales of our VOIs and consumer financing receivables pledged to our non-recourse revolving timeshare receivable credit facility or securitizations.

development projects. Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including payroll and related benefits, legal costs, operating costs associated with the operation of our resorts and sales centers, interest and scheduled principal payments on our outstanding indebtedness, inventory-related purchase commitments, and capital expenditures for renovations and maintenance at our offices and sales centers. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, inventory-related purchase commitments and costs associated with potential acquisitions and development ~~projects.~~

projects, including rebranding.

We finance our ~~business activities~~short- and long-term liquidity needs primarily ~~with existing~~through cash and cash equivalents, cash generated from our operations, draws on our revolver credit facility, our non-recourse revolving timeshare credit facility (“Timeshare Facility”), and through periodic securitizations of our timeshare financing receivables.

•During the three months ended March 31, 2023, we acquired a property in New York for $136 million from a third-party developer for inventory.

•As of March 31, 2023, we had total cash and cash equivalents of $752 million, including $363 million of restricted cash.

•As of March 31, 2023, we had $671 million remaining borrowing capacity under the revolver facility.

•As of March 31, 2023, we had an aggregate of $575 million remaining borrowing capacity under our Timeshare Facility. Of this amount, we have $312 million of mortgage notes that are available to be securitized and another $279 million of mortgage notes that we expect will become eligible as soon as they meet typical milestones including receipt of first payment, deeding, or recording.

We believe that ~~this cash will~~our capital allocation strategy provides adequate funding for our operations, is flexible enough to fund our development pipeline, securitizes the optimal level of receivables, and provides the ability to be ~~adequate~~strategically opportunistic in the marketplace. We have made commitments with developers to ~~meet anticipated requirements for operating expenses~~purchase vacation ownership units at a

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future date to be marketed and ~~other expenditures, including payroll and related benefits, legal costs and capital expenditures for the foreseeable future. The objectives~~sold under our Hilton Grand Vacations brand. As of March 31, 2023, our cash management policy are to maintain the availability of liquidity, minimize operational costs, make debt payments and fund future acquisitions and development projects. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments.

inventory-related purchase commitments totaled $57 million over 2 years.

Sources and Uses of Our Cash

The following table summarizes our net cash flows and key metrics related to our liquidity:

Nine Months Ended September 30,

Variance

($ in millions)

2017

2016

$

%

Net cash provided by (used in):

Operating activities⁽²⁾

$
299

$
133

$
166

NM⁽¹⁾

Investing activities

(77
)

(21
)

(56
)

NM⁽¹⁾

Financing activities⁽²⁾

(89
)

(94
)

5

(5.3
)

⁽¹⁾	~~Fluctuation in terms of percentage change is not meaningful.~~

⁽²⁾	~~Reflects the adoption of Accounting Standards Update (“ASU”) No. 2016-18, (“ASU 2016-18”)~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash.~~ ~~See Note 2:~~ ~~Significant Accounting Policies~~ ~~in our unaudited condensed consolidated financial statements for further discussion.~~


	Three Months Ended March 31,				Variance
($ in millions)	2023		2022		$
Net cash provided by (used in):
Operating activities	$	26	$	270	$	(244)
Investing activities	(11)		(14)		3
Financing activities	183		(133)		316

Operating Activities

Cash flow provided by operating activities is primarily generated from (1) sales and financing of VOIs and (2) net cash generated from managing our resorts, Club operations and providing related rental and ancillary services. Cash flows ~~used in~~provided by operating activities primarily include ~~spending for the acquisition of inventory, development of new phases of existing resorts and~~ funding our working capital ~~needs.~~needs and purchase of VOI inventory, including the purchase and development of real estate for future conversion to inventory. Our cash flows from operations generally vary due to the following factors related to the sale of our ~~VOIs:~~VOIs; the degree to which our owners finance their purchase and our owners’ repayment of timeshare financing receivables; the timing of management and sales and marketing services provided; and cash outlays for VOI inventory acquisition and development. Additionally, cash flow from operations will also vary depending upon our sales mix of VOIs; over time, we generally receive more cash from the sale of an owned VOI as compared to that from a fee-for-service sale.

Net cash ~~flows~~ provided by operating activities ~~increased by $166~~was $26 million ~~during~~for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to $270 million in the same 2022period in ~~2016, primarily as a result of improved operating results~~ in the ~~real estate sales~~prior year. The change was primarily due to our purchase of inventory from a third party developer, and ~~financing segment and increased sources of~~increases in cash utilized for working capital, ~~requirements. In addition, as permitted~~which is partially offset by an increase in net income during the ~~federal government pursuant to a tax relief program for regions impacted by Hurricane Irma, we deferred our estimated federal tax payment until the first quarter of 2018.~~

Capital efficiency allows us to reduce inventory investment requirements and to generate growth in revenues and cash flows. Over a short-term period, depending on the timing of inventory spend, our capital efficiency may vary; however, over the long-term, we generally target a 50/50 mix of owned and fee-for-service inventory, which we expect will allow us to expand partner relationships and to provide a strong inventory supply without the upfront capital investment. In addition, we continue to move towards more just-in-time owned inventory sourcing arrangements that we expect to also drive capital efficiency. The change for the ninethree months ended September 30, 2017, compared to the same period in 2016, is primarily due to reduced inventory spending while maintaining a consistent sales pace and fewer fee-for-service upgrades. However, over the long-term, we consider a ratio of VOI inventory spend to cost of VOI sales of 1:1 to be indicative of capital efficiency.

~~The following is a summary of our Capital Efficiency Ratio:~~

Nine Months Ended September 30,

($ in millions)

2017

2016

VOI spending - owned properties

$
31

$
62

VOI spending - fee-for-service upgrades

41

65

Total VOI inventory spending⁽¹⁾

$
72

$
127

Cost of VOI sales⁽¹⁾

$
107

$
110

Capital Efficiency Ratio

1.5

0.9

⁽¹⁾	Includes costs of VOI sales related to the cost of reacquiring inventory that we have developed from existing owners upgrading into fee-for-service projects. Excludes non-cash asset transfers from Hilton and non-cash inventory accruals.

March 31, 2023.

~~Investing Activities~~

The following table summarizes our ~~net cash used~~VOI inventory spending:


	Three Months Ended March 31,
($ in millions)	2023		2022
VOI spending - owned properties(1)	$	146	$	11
VOI spending - fee-for-service upgrades(2)	4		3
Purchases and development of real estate for future conversion to inventory	2		1

Total VOI inventory spending	$	152	$	15

(1)For the three months ended March 31, 2023 and 2022, our VOI inventory spending on owned properties relates to deeded properties that are classified as Inventory on our unaudited condensed consolidated balance sheets.

(2)Includes expense related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects from developed projects of $3 million and $2 million recorded in ~~investing activities:~~

Costs of VOI sales for the three months ended March 31, 2023 and 2022, respectively.

Nine Months Ended September 30,

Variance

($ in millions)

2017

2016

$

%

Capital expenditures for property and equipment

$
(25
)

$
(16
)

$
(9
)

56.3
%
Software capitalization costs

(12
)

(5
)

(7
)

NM⁽¹⁾

Investment in unconsolidated affiliate

(40
)

—

(40
)

NM⁽¹⁾

Net cash used in investing activities

$
(77
)

$
(21
)

$
(56
)

NM⁽¹⁾

Investing Activities

⁽¹⁾	~~Fluctuation in terms of percentage change is not meaningful.~~

Our capital expenditures include spending related to technology and buildings and leasehold improvements used to support sales and marketing locations, resort operations and corporate activities. We believe the renovations of our existing assets are necessary to stay competitive in the markets in which we operate.

~~Financing Activities~~

~~The following table summarizes our net~~

Net cash used in investing activities was $11 million for the three months ended March 31, 2023 compared to $14 million for the three months ended March 31, 2022. The decrease was due to decreased capital expenditures.

Financing Activities

Net cash provided by financing ~~activities:~~

Nine Months Ended September 30,

Variance

($ in millions)

2017

2016

$

%

Issuance of non-recourse debt

$
350

$
—

$
350

NM⁽¹⁾

Repayment of non-recourse debt

(428
)

(85
)

(343
)

NM⁽¹⁾

Repayment of debt

(7
)

—

(7
)

NM⁽¹⁾

Debt issuance costs

(5
)

(6
)

1

(16.7
)%
Allocated Parent debt activity

—

111

(111
)

(100.0
)
Net transfers to Parent⁽²⁾

—

(114
)

114

(100.0
)
Proceeds from stock option exercises

1

—

1

NM⁽¹⁾

Net cash used in financing activities

$
(89
)

$
(94
)

$
5

(5.3
)

⁽¹⁾	~~Fluctuation in terms of percentage change is not meaningful.~~

⁽²⁾	~~All transactions between HGV and Hilton have been settled in connection with the spin-off.~~

~~The change in~~activities for the three months ended March 31, 2023 was $183 million compared to net cash used in financing activities of $133 million for ~~the nine months ended September 30, 2017, compared to~~ the same period in ~~2016,~~2022. The change is an increase of $316 million. The increase was primarily due to ~~our financing transactions that occurred~~an increase the net proceeds from debt of $288 million and lower repayments of

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non-recourse debt of $115 million compared to 2022, partially offset by $85 million of share repurchases in the first quarter of 2017. During the nine months ended September 30, 2017, we issued $350 million in non-recourse securitized debt and paid $5 million in debt issuance costs. The proceeds received from the non-recourse securitized debt were usedcurrent year.

Contractual Obligations

Our commitments primarily relate to ~~pay down a portion of our timeshare facility. We also paid $7 million of the principal amount of the senior secured term loan. See Note 8:~~ ~~Debt & Non -recourse debt~~ ~~in our unaudited condensed consolidated financial statements for further discussion. Additionally, following the spin-off date we no longer receive transfers from Hilton.~~

~~Contractual Obligations~~

~~The following table summarizes our significant contractual obligations as of September 30, 2017:~~

Payments Due by Period

($ in millions)

Total

Less Than 1
Year

1-3 Years

3-5 Years

More Than 5
Years

Debt⁽¹⁾

$
650

$
35

$
69

$
206

$
340

Non-recourse debt⁽¹⁾

652

147

348

100

57

Purchase commitments

208

3

196

9

—

Total contractual obligations

$
1,510

$
185

$
613

$
315

$
397

⁽¹⁾	~~Includes principal, as well as estimated interest payments. For our variable-rate debt, we have assumed a constant 30-day LIBOR rate of 1.23 percent as of September 30, 2017.~~

As of September 30, 2017, our contractual obligations relating to our operating leases have not materially changed from what was reported in our Annual Report on Form 10-K for the year ended December 31, 2016.

~~Off-Balance Sheet Arrangements~~

~~Our off-balance sheet arrangements as of September 30, 2017 consisted of $208 million of certain commitments~~agreements with developers ~~whereby we have committed~~ to purchase or construct vacation ownership units, ~~at a future date~~operating leases, and obligations associated with our debt, non-recourse debt and the related interest. As of March 31, 2023, we were committed to approximately $5,111 million in contractual obligations over 9 years, $363 million of which will be ~~marketed and sold under~~fulfilled in the ~~Hilton Grand Vacations brand.~~remainder of 2023. The ultimate amount and timing of ~~the acquisitions~~certain commitments is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances. See Note ~~15:~~ 17: Commitments and Contingencies and Note 10: Debt and Non-recourse Debt in our ~~unaudited~~ condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for ~~a discussion~~additional information.

~~Subsequent Events~~

~~On October 13, 2017, we acquired~~corporate credit rating. We have commitments from surety providers in the amount of $344 million as of March 31, 2023 which primarily consist of escrow and subsidy related bonds.

Guarantor Financial Information

Certain subsidiaries, which are listed on Exhibit 22 of this Quarterly Report on Form 10-Q, have guaranteed our obligations related to our senior unsecured 2029 Notes and 2031 Notes (together, “the Notes”). The 2029 Notes were issued in June 2021 with an ~~83-unit, ski-in mountain lodge~~aggregate principal balance of $850 million, an interest rate of 5.000%, and maturity in ~~Park City, Utah, known as “The Sunrise Lodge, a~~June 2029. The 2031 Notes were issued in June 2021 with an aggregate principal balance of $500 million, an interest rate of 4.875%, and maturity in July 2031.

The Notes were co-issued by Hilton Grand Vacations ~~Club.” Prior~~Borrower LLC and Hilton Grand Vacations Borrower Inc. (the “Issuers”) and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Hilton Grand Vacations Inc. (the “Parent”), Hilton Grand Vacations Parent LLC, the Issuers, and each of the Issuer’s existing and future wholly owned domestic restricted subsidiaries (all entities that guarantee the Notes, collectively, the “Obligor group”).

The Notes rank equally in right of payment with all of the Issuers’ and each guarantor’s existing and future senior indebtedness, are subordinated to all of the Issuers’ and guarantors’ existing and future secured indebtedness to the ~~acquisition, HGV was providing marketing, sales~~extent of the value of the collateral securing such indebtedness, including the Senior Secured Credit Facilities, rank senior in right of payment to all of the Issuers’ and ~~resort management services~~guarantors’ future subordinated indebtedness and other obligations that expressly provide for their subordination to the ~~seller Sunrise Park City, LLC under~~notes and the related guarantees, and are structurally subordinated to all existing and future indebtedness claims of holders of preferred stock and other liabilities of the Issuer’s subsidiaries that do not guarantee the Notes.

The guarantee of each guarantor subsidiary is limited to a ~~fee-for-service agreement.~~

maximum amount, subject to applicable U.S. and non-U.S. laws. The guarantees can also be released upon the sale or transfer of a guarantor subsidiary’s capital stock or substantially all of its assets, becoming designated as an unrestricted subsidiary, or upon its consolidation into a co-Issuer or another subsidiary Guarantor.

The following tables provide summarized financial information of the Obligor group on a combined basis after elimination of (i) intercompany transactions and balances between the Parent and the subsidiary Guarantors and (ii) investments in and equity in the earnings of non-Guarantor subsidiaries and unconsolidated affiliates:

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Summarized Financial Information


($ in millions)	March 31, 2023
Assets
Cash and cash equivalents	$	269
Restricted cash	241
Accounts receivable, net - due from non-guarantor subsidiaries	79
Accounts receivable, net - due from related parties	27
Accounts receivable, net - other	379
Timeshare financing receivables, net	547
Inventory	1,141
Property and equipment, net	767
Operating lease right-of-use assets, net	69
Investments in unconsolidated affiliates	75
Goodwill	1,416
Intangible assets, net	1,244

Other assets	453
Total assets	$	6,707

Liabilities
Accounts payable, accrued expenses and other - due from non-guarantor subsidiaries	$	79
Accounts payable, accrued expenses and other - other	988
Advanced deposits	170
Debt, net	2,940
Operating lease liabilities	87
Deferred revenues	213
Deferred income tax liabilities	588
Total liabilities	$	5,065


($ in millions)	Three Months Ended March 31, 2023
Total revenues - transactions with non-guarantor subsidiaries	$	4
Total revenues - other	804
Operating income	74
Net income	24

Subsequent Events

Management has evaluated all subsequent events through April 27, 2023, the date the unaudited consolidated financial statements were available to be issued. The results of management’s analysis indicated no significant subsequent events have occurred that required consideration or adjustments to our disclosures in the unaudited financial statements.

Critical Accounting Policies and Estimates

The preparation of our ~~unaudited~~ condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts and related disclosures. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year ended December 31, ~~2016. Since the date of our Annual Report on Form 10-K, there have been no material changes to our critical accounting policies or the methods or assumptions we apply under them.~~

2022.

~~ITEM 3.~~

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates and currency exchange ~~rates and debt prices.~~rates. We manage our exposure to these risks by monitoring available financing alternatives and through pricing policies that may take into

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account currency exchange rates. Our exposure to market risk has not materially changed from what we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Interest Rate Risk~~

We are exposed to interest rate risk on our variable-rate debt, comprised of the term loans and our timeshare facility, of which the timeshare facility is without recourse to us. The interest rate is based on one-month LIBOR and we are most vulnerable to changes in this rate.

We intend to securitize timeshare financing receivables in the asset-backed financing market periodically. We expect to secure fixed rate funding to match our fixed rate timeshare financing receivables. However, if we have floating rate debt in the future, we will monitor the interest rate risk and evaluate opportunities to mitigate such risk through the use of derivative instruments.

To the extent we utilize variable rate indebtedness in the future, any increase in interest rates beyond amounts covered under any corresponding derivative financial instruments, particularly if sustained, could have an adverse effect on our net income, cash flows and financial position. Hedging transactions we enter into may not adequately mitigate the adverse effects of interest rate increases or that counterparties in those transactions will honor their obligations.

The following table sets forth the contractual maturities, weighted average interest rates and the total fair values as of September 30, 2017, for our financial instruments that are materially affected by interest rate risk:

Maturities by Period

($ in millions)

Weighted
Average
Interest
Rate⁽¹⁾

2017

2018

2019

2020

2021

There-
after

Total⁽²⁾

Fair
Value

Assets:

Fixed-rate securitized timeshare
financing receivables

11.901
%

$
19

$
76

$
75

$
72

$
67

$
197

$
506

$
595

Fixed-rate unsecuritized timeshare
financing receivables

12.272
%

28

56

60

65

70

408

687

799

Liabilities:⁽³⁾

Fixed-rate debt

3.836
%

30

134

99

120

32

374

789

817

Variable-rate debt⁽⁴⁾

3.103
%

3

10

139

10

160

—

322

326

⁽¹⁾	~~Weighted average interest rate as of September 30, 2017.~~

2022.

⁽²⁾	~~Amount excludes unamortized deferred financing costs.~~

⁽³⁾	~~Includes debt and non-recourse debt.~~

⁽⁴⁾	~~Variable-rate debt includes principal outstanding debt of $193 million and non-recourse debt of $129 million as of September 30, 2017. See Note 8:~~ ~~Debt & Non-recourse debt~~ ~~in our unaudited condensed consolidated financial statements for additional information.~~

~~Foreign Currency Exchange Rate Risk~~

Though the majority of our operations are conducted in United States dollar (“U.S. dollar”), we are exposed to earnings and cash flow volatility associated with changes in foreign currency exchange rates. Our principal exposure results from our timeshare financing receivables denominated in Japanese yen, the value of which could change materially in reference to our reporting currency, the U.S. dollar. A 10 percent increase in the foreign exchange rate of Japanese yen to U.S. dollar would increase our gross timeshare financing receivables by less than $1 million.

~~ITEM 4.~~

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) or our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of the controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of effectiveness of controls and procedures to future periods are subject to the risk that the controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the controls and procedures may have deteriorated.

In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q, ~~we evaluated,~~an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, ~~the effectiveness~~ of the ~~design and operation~~effectiveness of our disclosure controls and ~~procedures (as such term~~procedures. Based on that evaluation, and due to the previously identified material weakness in our internal controls over financial reporting that is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures,described below, which by their nature, can provide only reasonable assurance about management’s control objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving the desired control objectives. However, you should note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon the foregoing evaluation,still being remediated, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2023.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023, we identified a material weakness in our internal controls over financial reporting for the year ended December 31, 2022 due to Diamond. Diamond, which was privately owned prior to our acquisition in August 2021 and, ~~operating to provide reasonable assurance that we record, process, summarize and report the information we are required to disclose in the reports that we file or submit~~accordingly, not a reporting company under the Exchange Act, ~~within~~did not adequately identify, design and implement the process-level controls for its significant processes that are necessary for compliance with the requirements for reporting companies pursuant to the Exchange Act and Diamond did not have appropriate information technology controls for its information technology systems or such controls did not operate for a sufficient period of time ~~periods specified in~~prior to the ~~rules and forms~~assessment date. These deficiencies neither pertained to, nor impacted, any of the ~~SEC,~~processes, controls or procedures related to the historical business of the Company outside of Diamond. Additionally, the material weakness did not result in any identified misstatements to our financial statements, and there were no changes to ~~provide reasonable assurance that we accumulate and communicate such information~~previously released financial results.

Notwithstanding the previously identified material weakness, which continues to ~~our~~be remediated, management, including our Chief Executive Officer and Chief Financial Officer, believes the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Ongoing Remediation Efforts to Address the Previously Identified Material Weakness

Management has enhanced, and will continue to enhance, the risk assessment process and design and implementation of internal controls over financial reporting at Diamond. The remediation measures to correct the previously identified material weakness include enhancing the design and implementation of existing controls and creating new controls as needed to address identified risks and providing additional training to personnel including the appropriate level of documentation to ~~allow timely decisions about required disclosure.~~

be maintained to support internal controls over financial reporting.

The previously identified material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the material weakness will be remediated by the end of 2023.

Changes in Internal ~~Control~~Controls Over Financial Reporting

~~There~~

Other than with respect to the remediation efforts described above in connection with the previously identified material weakness, there were no changes in our internal ~~control~~controls over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

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PART II OTHER INFORMATION

~~Item 1.~~

Item 1. Legal Proceedings

~~We are involved~~

Information with respect to this item may be found in litigation arising from the normal course of business, some of which includes claims for substantial sums. Management has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. While the ultimate results of claimsNote 17: Commitments and ~~litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of September 30, 2017 will not have a material effect on~~Contingencies, to our condensed consolidated ~~results of operations,~~ financial ~~position or cash flows.~~

statements included in this Quarterly Report on Form 10-Q.

~~Item 1A.~~

Item 1A. Risk Factors

~~Set forth below are the~~

As of March 31, 2023, there have been no material changes tofrom the risk factors ~~discussed~~previously disclosed in Item 1A of Part 1I of ~~the~~our Annual Report on Form 10-K for the year ended December 31, ~~2016. In addition~~2022. These risk factors may be important to ~~the other information set forth~~understanding statements in ~~this Quarterly Report on~~the Form 10-Q ~~you~~and should ~~carefully consider~~be read in conjunction with the ~~risk factors discussed below~~condensed consolidated financial statements and related notes in Part I, Item ~~1A of~~1, "Financial Statements" and Part 1, Item 2, "Management's Discussion and Analysis of ~~the Annual Report on~~Financial Condition and Results of Operations" of this Form ~~10-K for the year ended December 31, 2016, which could materially and adversely affect our business, financial condition, results of operations and stock price.~~ 10-Q.

The risks described below and in the Annual Report on Form 10-K are not the only risks facing HGV. Additional risks and uncertainties not presently known to management or that management presently believes not to be material may also result in material and adverse effects on our business, financial condition, results of operations and stock price.

Partnership or joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on partners’ or co-venturers’ financial condition, disputes between us and our partners or co-venturers and our obligation to guaranty certain obligations beyond the amount of our investments.

We may co-invest in the future with other third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in, or sharing responsibility for managing the affairs, of a timeshare property, partnership, joint venture or other entity. For example, we recently entered into the Joint Venture Agreement with BRE Ace Holdings, an affiliate of Blackstone, pursuant to which we acquired a non-managing 25 percent interest in BRE Ace LLC, which owns a 1,201-key timeshare resort property and related operations, commonly known as “Elara, by Hilton Grand Vacations,” located in Las Vegas, Nevada (the “Elara Joint Venture.”) Consequently, with respect to any such third-party arrangements, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity, and may, under certain circumstances, be exposed to risks not present if a third party were not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, and we may be forced to make contributions to maintain the value of the property. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer may have full control over the partnership or joint venture. We and our respective partners or co-venturers may each have the right to trigger a buy-sell right or forced sale arrangement, which could cause us to sell our interest, or acquire our partners’ or co-venturers’ interest, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. In addition, a sale or transfer by us to a third party of our interests in the partnership or joint venture may be subject to consent rights or rights of first refusal in favor of our partners or co-venturers, which would in each case restrict our ability to dispose of our interest in the partnership or joint venture. For example, our joint venture partner in the Elara Joint Venture generally has exclusive authority to manage the business and affairs of the Elara Joint Venture, and has the discretion to call for additional capital contributions at any time. In addition, it has certain rights to transfer or sell some or all of its interests in the Elara Joint Venture and/or the Property without our consent or, in certain situations, require us to sell our interests at the same time, while we are not permitted to sell or transfer our interest without their consent. Any or all of these factors could adversely affect the value of our investment, our ability to exit, sell or dispose of our investment at times that are beneficial to us, or our financial commitment to maintaining our interest in the joint ventures.

Our joint ventures may be subject to debt and the refinancing of such debt, and we may be required to provide certain guarantees or be responsible for the full amount of the debt in certain circumstances in the event of a default beyond the amount of our equity investment. Our joint venture partners may take actions that are inconsistent with the interests of the partnership or joint venture, or in violation of the financing arrangements and trigger our guaranty, which may expose us to substantial financial obligation and commitment that are beyond our ability to fund. In addition, partners or co-venturers may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take action or withhold consent contrary to our policies or objectives. In some instances, partners or co-venturers may have competing interests in our markets that could create conflict of interest issues. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers from focusing their time and effort on our business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting assets owned by the partnership or joint venture to additional risk. In addition, we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.

A significant percentage of our revenue is derived from our fee-for-service agreements with respect to two properties that are owned by a third party, and any termination of such arrangements could have a materially adverse impact on our revenues and financial results.

We derived approximately 20 percent and 14 percent of our revenues for the quarter and nine months ended September 30, 2017, respectively, from fee-for-service fees with respect two of our properties that are owned single third party and for which we have entered into fee-for-service agreements. If these fee-for-service agreements are terminated by the property owner, if one or both properties are sold to another party without the continuation of such arrangement, or if there is any occurrence or existence of any adverse economic development, adverse acts of natural or manmade disasters, or any other conditions (as more fully described in our Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, ~~2017, as updated~~2022, contain forward-looking statements, and they may not be the only risks facing the Company. The future business, results of operations and financial condition of the Company can be affected by the risk factors described in such reports and by other factors currently unknown, that management presently believes not to be material, that management has made certain forward-looking projections, estimates or assumptions on, or that may rapidly evolve, develop or change. Any one or more of such factors could, directly or indirectly, cause our actual financial condition and results of operations to vary materially and adversely from ~~time to time) that negatively~~past, or ~~disproportionately adversely affects either or both~~from anticipated future financial condition and results of operations. Any of these ~~two properties,~~factors, in whole or in part, could materially and adversely affect our ~~revenues,~~business, results of operations and financial condition and the trading price of our common stock. Because of these factors affecting our financial condition, key business operational metrics, and operating results, ~~and our~~past financial performance ~~could~~should not be ~~materially adversely impacted.~~

considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On May 4, 2022, our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period. The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements and other market and economic conditions. The shares are retired upon repurchase. The stock repurchase program may be suspended or discontinued at any time and will automatically expire at the end of the two-year term.

During the three months ended March 31, 2023, we repurchased the following shares:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan
January 1 – January 31, 2023	878,640	$	43.43	878,640	$	189,807,235
February 1 – February 28, 2023	896,281	47.01		896,281	147,669,929
March 1 – March 31, 2023	95,000	47.78		95,000	143,131,119
Total	1,869,921	$	45.37	1,869,921

~~Item 3.~~

Item 3. Defaults Upon Senior Securities

None.

~~Item 4.~~

Item 4. Mine Safety Disclosures

Not applicable.

~~Item 5.~~

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

~~Item 6.~~

E~~xhibits~~

~~Exhibit~~ ~~No.~~	~~Description~~
Exhibit No.		Description
~~3.1~~
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the ~~Company’s~~Registrant’s Current Report on Form 8-K (File No. 001-37794) filed on March 17, 2017).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the ~~Company’s~~Registrant’s Current Report on Form 8-K (File No. 001-37794) filed on March 17, 2017).

~~10.1~~ 3.3		~~Amended and Restate Limited Liability Company Agreement~~Certificate of ~~BRE Ace LLC, a Delaware limited liability company, dated as~~Designation of ~~July 18, 2017~~Series A Junior Participating Preferred Stock of Hilton Grand Vacations Inc. (incorporated by reference to Exhibit ~~10.1~~3.1 to ~~Hilton Grand Vacation Inc.’s~~the Registrant’s Current Report on Form 8-K (File No. 001-37794) filed on ~~July 21, 2017)~~April 16, 2020).

~~11.1~~ 10.1		~~Statement regarding computation of earnings per share. See condensed consolidated statements of operations~~Hilton Grand Vacations Inc. Incentive Program (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on ~~page 3 of this~~ Form ~~10-Q.~~8-K (File No. 001-37794) filed on March 10, 2023).

~~31.1~~ 10.2*		Form of Nonqualified Stock Option Agreement (for the CEO) under Hilton Grand Vacations Inc. 2017 Omnibus Incentive Plan.

10.3*		Form of Nonqualified Stock Option Agreement (for all participants other than the CEO) under Hilton Grand Vacations Inc. 2017 Omnibus Incentive Plan.

22*		List of Issuer Subsidiaries of Guaranteed Securities and Guarantor Subsidiaries

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~ 31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~ 32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~ 32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~ 101.NS		Inline XBRL Instance ~~Document.~~ Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document.

Table of Contents



104











		The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

*	~~Denotes management contract or compensatory plan or arrangement.~~

_____________________

*Filed herewith

Table of Contents ~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 2^nd27th day of ~~November, 2017.~~

April 2023.


		HILTON GRAND VACATIONS INC.

~~By:~~		By:	/s/ Mark D. Wang
~~Name:~~		Name:	Mark D. Wang
~~Title:~~		Title:	President and Chief Executive Officer

		By:	/s/ Daniel J. Mathewes
~~By:~~		~~/s/ James E. Mikolaichik~~ Name:	Daniel J. Mathewes
~~Name:~~		~~James E. Mikolaichik~~
Title:	Senior Executive Vice President and Chief Financial Officer


PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	2 1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33 37
Item 4.	Controls and Procedures	34 38

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	35 40
Item 1A.	Risk Factors	35 40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37 40
Item 3.	Defaults Upon Senior Securities	37 40
Item 4.	Mine Safety Disclosures	37 40
Item 5.	Other Information	37 40
Item 6.	Exhibits	38 41
	Signatures	43


					Additional		Accumulated
	Common Stock				Paid-in		Retained		Total
	Shares		Amount		Capital		Earnings		Equity
Balance as of December 31, 2016		99	$	1	$	138	$	28	$	167
Net income		—		—		—		144		144
Deferred intercompany transaction ⁽¹⁾		—		—		9		—		9
Activity related to share-based compensation		—		—		11		—		11
Other		—		—		2		—		2
Balance as of September 30, 2017		99	$	1	$	160	$	172	$	333

	September 30, 2017
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Timeshare financing receivables	$	506		$	687		$	1,193
Less: allowance for loan loss		(29	)		(109	)		(138	)
	$	477		$	578		$	1,055

	December 31, 2016
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Timeshare financing receivables	$	253		$	892		$	1,145
Less: allowance for loan loss		(9	)		(111	)		(120	)
	$	244		$	781		$	1,025

	September 30, 2016
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Balance as of December 31, 2015	$	17		$	89		$	106
Write-offs		—			(27	)		(27	)
Provision for loan loss⁽¹⁾		(6	)		43			37
Balance as of September 30, 2016	$	11		$	105		$	116

($ in millions)	Debt		Non-recourse Debt		Total
Year
2017 (remaining)	$	3	$	30	$	33
2018		10		134		144
2019		10		228		238
2020		10		120		130
2021		160		32		192
Thereafter		300		74		374
	$	493	$	618	$	1,111

	Payments Due by Period
($ in millions)	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Debt⁽¹⁾	$	650	$	35	$	69	$	206	$	340
Non-recourse debt⁽¹⁾		652		147		348		100		57
Purchase commitments		208		3		196		9		—
Total contractual obligations	$	1,510	$	185	$	613	$	315	$	397

				Maturities by Period
($ in millions)	Weighted Average Interest Rate⁽¹⁾			2017		2018		2019		2020		2021		There- after		Total⁽²⁾		Fair Value
Assets:
Fixed-rate securitized timeshare financing receivables		11.901	%	$	19	$	76	$	75	$	72	$	67	$	197	$	506	$	595
Fixed-rate unsecuritized timeshare financing receivables		12.272	%		28		56		60		65		70		408		687		799
Liabilities:⁽³⁾
Fixed-rate debt		3.836	%		30		134		99		120		32		374		789		817
Variable-rate debt⁽⁴⁾		3.103	%		3		10		139		10		160		—		322		326