Hilton Grand Vacations's (NYSE:HGV) Q4 Earnings Results: Revenue In Line With Expectations
Timeshare vacation company Hilton Grand Vacations (NYSE:HGV) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 2.7% year on year to $1.02 billion. It made a non-GAAP profit of $1.01 per share, improving from its profit of $0.67 per share in the same quarter last year.
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Hilton Grand Vacations (HGV) Q4 FY2023 Highlights:
- Revenue: $1.02 billion vs analyst estimates of $1.02 billion (small miss)
- EPS (non-GAAP): $1.01 vs analyst estimates of $0.93 (8.6% beat)
- Free Cash Flow was -$28 million, down from $257 million in the previous quarter
- Gross Margin (GAAP): 41.1%, up from 36.4% in the same quarter last year
- Members: 529,000
- Market Capitalization: $5.25 billion
“We closed out the year on a positive note, with a solid margin performance enabling us to deliver annual adjusted EBITDA slightly ahead of our revised guidance,” said Mark Wang, president and CEO of Hilton Grand Vacations.
Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE:HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.
Hotels, Resorts and Cruise Lines
Hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Hilton Grand Vacations's annualized revenue growth rate of 14.8% over the last five years was decent for a consumer discretionary business. 
Within consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That's why we also follow short-term performance. Hilton Grand Vacations's annualized revenue growth of 30.5% over the last two years is above its five-year trend, suggesting some bright spots.
We can better understand the company's revenue dynamics by analyzing its number of members, which reached 529,000 in the latest quarter. Over the last two years, Hilton Grand Vacations's members averaged 16.7% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company's monetization has risen. 
This quarter, Hilton Grand Vacations grew its revenue by 2.7% year on year, and its $1.02 billion of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 3.6% over the next 12 months, an acceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Hilton Grand Vacations has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 10.4%, slightly better than the broader consumer discretionary sector.
Hilton Grand Vacations burned through $28 million of cash in Q4, equivalent to a negative 2.7% margin, increasing its cash burn by 69.6% year on year.
Key Takeaways from Hilton Grand Vacations's Q4 Results
It was good to see Hilton Grand Vacations beat analysts' EPS expectations this quarter. On the other hand, its operating margin missed and its members fell short of Wall Street's estimates. Overall, this was a mixed quarter for Hilton Grand Vacations. The stock is flat after reporting and currently trades at $48.64 per share.
Hilton Grand Vacations may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
