Cuộc họp báo cáo kết quả kinh doanh Q3/2026 của Hilton Grand Vacations (HGV): Hạ dự báo khi doanh số hợp đồng giảm 11%

Điểm tin chính

• Hilton Grand Vacations đã báo cáo doanh số hợp đồng quý 3/2026 đạt 807 triệu USD, giảm 11% so với cùng kỳ năm ngoái, trái ngược với kỳ vọng giảm ở mức một chữ số tầm trung trước đó của ban lãnh đạo. VPG giảm 12% xuống còn khoảng 3.400 USD, trong khi số lượt tham quan tăng 2% lên 236.000 lượt.
• Doanh thu trước khi hoàn chi phí đi ngang ở mức 1,3 tỷ USD. EBITDA điều chỉnh thuộc về cổ đông tăng 4% lên 313 triệu USD, với biên lợi nhuận tăng 80 điểm cơ bản lên 25%.
• HGV đã hạ dự báo EBITDA điều chỉnh cả năm xuống 1,165 tỷ - 1,180 tỷ USD từ mức 1,225 tỷ - 1,265 tỷ USD, với lý do doanh số hợp đồng yếu hơn và hiệu quả bán hàng cải thiện chậm hơn dự kiến.
• Các mảng kinh doanh thường xuyên vẫn duy trì sự ổn định. Doanh thu tài trợ tăng 16% lên 149 triệu USD, trong khi doanh thu từ khu nghỉ dưỡng và câu lạc bộ tăng 2% lên 196 triệu USD. Số lượng hội viên HGV Max tăng 20% và vượt mốc 300.000.
• Tỷ lệ dự phòng 12,5% được báo cáo đã hưởng lợi từ khoản thay đổi ước tính trị giá 55 triệu USD sau khi hợp nhất các phương pháp trích lập dự phòng tổn thất cho vay. Ban lãnh đạo kỳ vọng tỷ lệ dự phòng sẽ xoay quanh mức khoảng 15% theo thời gian.
• HGV đã mua lại 2,4 triệu cổ phiếu với giá 110 triệu USD trong quý và giữ nguyên mục tiêu mua lại 600 triệu USD cổ phiếu cho cả năm.

Dữ liệu tài chính quan trọng

Quý này bao gồm khoản ghi nhận ASC 606 liên quan đến dự án Ka Haku. Doanh thu GAAP được báo cáo bao gồm 536 triệu USD ghi nhận doanh số hợp đồng ròng và 240 triệu USD chi phí trực tiếp liên quan. Nếu loại bỏ khoản lợi ích ròng 296 triệu USD này, con số EBITDA điều chỉnh sẽ là 313 triệu USD như thảo luận của ban lãnh đạo.

Kết quả hoạt động kinh doanh

Điểm yếu chính nằm ở khả năng chuyển đổi bán hàng chứ không phải việc tạo ra cầu thị trường. Ban lãnh đạo cho biết lượng khách tham quan đạt kỳ vọng, trong khi lượt khách đến, tỷ lệ lấp đầy và nguồn khách theo gói dịch vụ vẫn khả quan. Tuy nhiên, tỷ lệ chốt hợp đồng thấp hơn đã ảnh hưởng đến cả hoạt động kinh doanh truyền thống của HGV lẫn Bluegreen, trong đó tháng 8 là tháng yếu nhất trong quý.

Kết quả hoạt động đã cải thiện trong tháng 9 và tiếp tục mạnh lên trong tháng 10. Bất động sản của Bluegreen tại Orlando đã tăng trưởng trở lại vào tháng 9 sau khi thay đổi nhân sự lãnh đạo và tái cấu trúc đội ngũ. Ban lãnh đạo cũng báo cáo tiến triển tại Myrtle Beach và bắt đầu mở rộng các kế hoạch thưởng sửa đổi sang các thị trường khác.

HGV đã tuyển dụng hơn 430 nhân viên bán hàng trong vòng bốn tháng, bao gồm các nhân viên có kinh nghiệm trong ngành bất động sản và 165 đại diện bán hàng cũ của HGV. Ban lãnh đạo thừa nhận rằng nhân sự bán hàng mới cần thời gian đào tạo để đạt hiệu suất tối đa.

Doanh số hợp đồng từ người mua mới chiếm 28% tổng sản lượng, tăng 30 điểm cơ bản, nhờ sự tăng trưởng của các giao dịch từ người mua mới. Ban lãnh đạo cho biết các giao dịch người mua mới của Bluegreen đã tăng 18% trong quý mặc dù phải đối mặt với mức nền so sánh cao do đợt ra mắt HGV Max trước đó.

Các hoạt động kinh doanh thường xuyên đã giúp bù đắp áp lực từ mảng bất động sản. Cơ sở hội viên HGV Max tăng 20% lên hơn 300.000, trong khi tổng số hội viên hợp nhất đạt 716.000. Biên lợi nhuận tài trợ được cải thiện khi lãi suất bình quân trọng số của các khoản vay mới phát hành đạt 14,2% và xu hướng tín dụng duy trì ổn định.

Công ty cũng tiếp tục mở rộng việc sử dụng hàng tồn kho thu hồi. Chi phí sản phẩm chiếm 9,4% trong quý 3, trong khi ban lãnh đạo mô tả khoảng dài hạn vào khoảng 10%-13%. Chiến lược này làm giảm nhu cầu xây dựng hàng tồn kho mới và hỗ trợ dòng tiền tự do.

Dự báo của Ban lãnh đạo

HGV đã hạ dự báo EBITDA điều chỉnh cả năm xuống 1,165 tỷ - 1,180 tỷ USD từ mức 1,225 tỷ - 1,265 tỷ USD.

Ban lãnh đạo hiện kỳ vọng:

• Doanh số hợp đồng cả năm giảm ở mức một chữ số tầm trung.
• Doanh số hợp đồng quý 4 giảm ở mức từ một chữ số thấp đến tầm trung.
• VPG cả năm giảm ở mức một chữ số cao.
• VPG quý 4 giảm ở mức một chữ số tầm trung.
• Số lượt tham quan cả năm tăng ở mức từ một chữ số thấp đến tầm trung.
• Tỷ lệ chuyển đổi dòng tiền tự do điều chỉnh cả năm duy trì ở nửa dưới phạm vi dài hạn 55%-65% của công ty.
• Chi tiêu cho hàng tồn kho năm 2026 đạt khoảng 285 triệu USD, thấp hơn 90 triệu USD so với ước tính trước đó.
• Chi tiêu cho hàng tồn kho năm 2027 tiếp tục duy trì dưới 300 triệu USD.

Ban lãnh đạo kỳ vọng kết quả hoạt động mảng tài trợ, cho thuê, khu nghỉ dưỡng và câu lạc bộ sẽ tiếp tục nhất quán với các kỳ vọng trước đó. Áp lực lên biên lợi nhuận trong ngắn hạn dự kiến chủ yếu đến từ chi phí đầu tư bán hàng và tiếp thị tăng cao cùng với doanh số hợp đồng giảm.

Đối với năm 2027, ban lãnh đạo cho biết khuôn khổ tăng trưởng dài hạn vẫn có thể đạt được, dựa trên mức tăng trưởng số lượt tham quan từ một chữ số thấp đến tầm trung và mức tăng trưởng VPG ở mức một chữ số thấp. Điều này được đưa ra như một góc nhìn sớm thay vì là dự báo chính thức hàng năm.

Rủi ro và các điểm cần theo dõi

Hiệu quả bán hàng vẫn là rủi ro hoạt động chính. Các thay đổi về chính sách thưởng, công tác tuyển dụng và sự điều hành của ban lãnh đạo đã mang lại sự cải thiện vào cuối quý 3, nhưng ban lãnh đạo cho biết các sáng kiến này mất nhiều thời gian hơn dự kiến để phát huy hiệu quả.

Chi phí bán hàng và tiếp thị đã tăng lên 51% doanh số hợp đồng do giảm đòn bẩy hoạt động và tăng đầu tư vào thù lao cũng như giữ chân nhân sự. Ban lãnh đạo dự kiến tỷ lệ tương tự trong quý 4 nhưng có kế hoạch bù đắp các chi phí này bằng việc tiết kiệm ở những mảng khác theo thời gian.

Áp lực tiêu dùng có tác động lớn hơn một chút đến các quyết định mua hàng, mặc dù ban lãnh đạo cho biết ý định du lịch, tỷ lệ lấp đầy và lượng khách đặt trước vẫn duy trì tích cực. Chi phí nhiên liệu và vé máy bay tăng cao cũng được thảo luận, nhưng hơn 90% chủ sở hữu của HGV sống trong phạm vi bốn giờ lái xe đến khu nghỉ dưỡng.

Sự chuyển giao vị trí lãnh đạo bán hàng tạo ra rủi ro về mặt thực thi. Ban lãnh đạo cũng lưu ý rằng lãi suất biến động có thể làm tăng chi phí chứng khoán hóa, mặc dù các giao dịch dự kiến tại Nhật Bản được kỳ vọng sẽ cung cấp nguồn vốn giá rẻ hơn so với đợt phát hành tương đương tại Mỹ.

Điểm nhấn phần Hỏi & Đáp với chuyên gia phân tích

Dự phòng tổn thất cho vay: Tỷ lệ dự phòng được báo cáo đã giảm xuống 12,5% từ mức 16,8%, nhờ vào khoản thay đổi ước tính 55 triệu USD. Theo phương pháp cũ, ban lãnh đạo cho biết dự phòng của quý sẽ vào khoảng 20%; nếu áp dụng phương pháp mới mà không có tác động từ khoản ước tính một lần này thì tỷ lệ sẽ ở mức dưới 18% một chút. Ban lãnh đạo kỳ vọng phạm vi tương lai vào khoảng 14%-18%, xoay quanh mức khoảng 15%.

Dòng tiền tự do: Ban lãnh đạo kỳ vọng tỷ lệ chuyển đổi trong quý 4 sẽ hưởng lợi từ hai đợt chứng khoán hóa, bao gồm một giao dịch thứ hai tại Nhật Bản và một giao dịch trong nước trị giá khoảng 450 triệu - 500 triệu USD. Chi tiêu cho hàng tồn kho thấp hơn cũng được kỳ vọng sẽ hỗ trợ việc tạo ra dòng tiền.

Phân bổ vốn: HGV cho biết họ không có kế hoạch tăng đòn bẩy chỉ để tài trợ cho việc mua lại cổ phiếu. Do hiện chưa có thương vụ thâu tóm nào nằm trong kế hoạch, ban lãnh đạo coi việc mua lại cổ phiếu là phương án ưu tiên để sử dụng vốn thặng dư và tiếp tục hướng tới mục tiêu 600 triệu USD cho cả năm. Hạn mức mua lại còn lại là 617 triệu USD tính đến ngày 22 tháng 10.

Thu hồi hàng tồn kho: Ban lãnh đạo kỳ vọng hàng tồn kho thu hồi vẫn sẽ là nguồn cung sản phẩm ngày càng quan trọng, hỗ trợ giảm giá vốn bán hàng và giảm chi tiêu vốn. Công ty không cho rằng khoản giảm 90 triệu USD trong chi tiêu hàng tồn kho năm 2026 sẽ dịch chuyển hoàn toàn sang năm 2027.

Phí cấp phép: Mức tăng phí cấp phép theo lịch trình cuối cùng của Bluegreen sẽ có hiệu lực từ ngày 1 tháng 1. Ban lãnh đạo cho biết tỷ lệ chuẩn hóa là 5%, mặc dù phí thực tế thay đổi theo từng bộ phận kinh doanh và chỉ áp dụng cho các bất động sản mang thương hiệu Hilton.

Toàn văn biên bản cuộc họp báo cáo kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good morning and welcome to the Hilton Grand Vacations Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir.

Mark Melnyk

Thank you, operator, and welcome to the Hilton Grand Vacations Third Quarter 2026 Earnings Call. Our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements and these statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our SEC filings.

Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we're required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses until the period when construction is completed. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals and recognitions.

Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals and recognitions, which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to view these slides on our website at investors.hgv.com.

During the third quarter of 2026, we obtained a certificate of occupancy for our Ka Haku project. The receipt of that certificate triggered the recognition of previously deferred revenues and direct expenses associated with prior sales of the project's inventory resulting in a net recognition for the period. On Slide 2 of these materials, you can see the recognition adjusted metrics that we'll be referring to on today's call. Reported results for this quarter reflect $536 million of net contract sales recognitions under ASC 606, which had the effect of increasing reported GAAP revenue.

Also shown on Slide 2, we recognized a net $240 million of direct expenses associated with these revenues. Adjusting for both of these items would decrease the adjusted EBITDA to shareholders reported in our press release by net of $296 million to $313 million.

With that, let me turn the call over to our CEO, Mark Wang. Mark?

Mark Wang

Good morning, everyone, and thank you for joining our third quarter earnings call. This was a challenging quarter for us and our results in Q3 fell short of our expectations and outlook provided on our last call. Although the underlying business model, recurring revenue streams and cash flow generation of the business remained resilient; the 11% reduction in contract sales was below our forecast for a mid-single-digit decline.

When we implemented a series of initiatives at the end of Q2 to address sales execution, primarily at our Bluegreen locations, and we expected those efforts would take time to drive significant improvement; trends at both our legacy and Bluegreen brands weakened further in August before gaining traction across the business late in the quarter. To be clear, we're not satisfied with this outcome and we're moving with an increased sense of urgency to return to sales growth and deliver long-term shareholder value. The contract sales decline in the quarter was driven by sales execution challenges, particularly our closing rates.

We've identified key drivers of that conversion rate softness, namely the need for incentive alignment to drive higher transactions along with a more dynamic headcount environment in certain markets requiring enhanced recruiting and retention programs. And while they have taken longer to ramp, our initiatives are designed to address those underlying drivers. From a macro perspective, while travel intentions remain resilient, we believe that sustained elevated pressure on the consumer are having marginally more impact on the purchase decisions versus a quarter ago.

We also faced final difficult comparisons of 17% from our successful Bluegreen Max launch period this quarter although those were headwinds that we anticipated and not an incremental driver of softness. Importantly, we don't see this as an issue of willingness to travel. Tour flow for the quarter was consistent with our expectations as it's been all year and our arrivals on the books, occupancy levels and package pipelines remain favorable; but we didn't convert those tours into transactions at the level we should have.

We continue to have the strongest value proposition, product and inventory that we've ever had and we need to execute more consistently across the system to take advantage of those strengths. That said, in light of our Q3 results, we're reducing our guidance to reflect a more realistic view on the timing and ramp of the near-term sales and EBITDA growth. Last quarter we discussed targeted initiatives around incentive alignment, training and recruiting along with organizational initiatives with the goal of improving our execution and conversion rates. Here are some of the direct actions we took.

In Bluegreen Orlando property: we put a new leader in place, rebuilt the team and returned to growth in September. In Bluegreen's Myrtle Beach property: we also made leadership changes that stabilize the business and while it will take time to ramp, we're encouraged by their progress. And we tested updated incentive plans that generated a positive outcome and we're in the process of delivering them to other key markets based on these early results. As I mentioned earlier, the cadence of the quarter demonstrated some early signs of positive traction from those initiatives.

August marked a low point for sales. And in September, we narrowed the gap considerably with several of our key sales centers returning to positive growth for the month demonstrating a trend of measured improvement that continued into October. And controlling for the effect of those tougher year-over-year comparisons, contract sales growth trends improved materially in each month of the quarter on a 2-year stack basis. So while the monthly trends give us confidence that we're on the right track, our results make it clear that we still have more work to do.

As a result, we're expediting our pace of rollout across our brands. We made further incentive changes to enhance alignment across the business ensuring we're positioned competitively in key markets. We brought additional sales talent into the organization through productive recruiting efforts, including a mix of former HGV team members and new employees. And we've seen further improvements in October as a result. And in a separate release this morning, we announced a change to our sales leadership.

Mike has a track record of driving growth throughout his career, including 15 years of consistent execution at HGV across multiple markets and brands, and I'm confident he's the right leader to renew our sales momentum and oversee our next phase of growth. In addition, we have an opportunity to dedicate additional energy toward improving conversions in our new buyer channel, which is critical to the long-term value creation in our industry.

First, our robust tour flow and diversity of lead channels provides us with the opportunity to further focus our resources on channels with the highest profitability as well as the customers with the highest propensity to close. By improving our channel efficiencies, we'll generate higher transactions and higher profit contribution from a smaller set of tours.

Second, we've identified areas where we have the ability to provide additional value and enhance accessibility to certain segments of our customer base with new products and price tiers, further improving our value proposition and driving transactions, which will enable us to continue to adapt our product and our approach to meet the customers where they are and with a product that fits their needs while preserving their future upgrade path as owners.

These additional actions are about making every tour count, driving improved conversion rates and increasing the transactions that are critical to growing embedded value as the majority of a member's lifetime value is generated within the first 5 to 10 years of ownership. That embedded value extends beyond our real estate business, fueling our recurring club and resort and financing business that represents well over half of our segment profit. For the quarter, our financing business revenues grew 16% while expanding margins and our club and resort business continues to demonstrate consistent growth while producing our highest margins.

That performance has been aided by the 20% growth of our HGV Max member base, which has now surpassed 300,000 members. These are high margin predictable earnings streams anchored by our Max membership base and they have supported EBITDA and cash flow generation despite the pressure on contract sales. And they demonstrate the resilience of our operating model as a whole, supporting our robust cash flow generation and capital returns.

This quarter, we repurchased another 2.4 million shares for $110 million as part of our ongoing commitment to returning excess cash flow to shareholders and we continue to expect to meet our target of returning $600 million for the full year.

So in summary, we're taking an honest assessment of our performance and we're determined to improve our execution. While we're optimistic about early signs of progress from our initiatives, today's guidance reset presents a more conservative and achievable view of how quickly these changes will translate into improved results. Our confidence in the business model, products, inventory position and the quality of our brand and level of service remains unwavering. And our current priorities are clear: improve our sales execution by increasing our conversion rates and return the business to consistent and profitable growth.

With that, I'll turn it to Dan for more details on the numbers. Dan?

Daniel Mathewes

Thank you, Mark, and good morning, everyone. As Mark mentioned, our sales performance this quarter fell short of the outlook provided on our last call and we're not satisfied with the results. The corrective actions taken in the summer produced some improvement in results late in the quarter, but the pace of that progress was slower than expected. Despite a meaningful benefit of our provision for bad debt stemming from an accounting methodology change and the continuation of our cost of product at the low end of our long-term range, the contract sales performance during the summer months ultimately led us to reduce our guidance for the year.

Turning to our results for the quarter. Total revenues before cost reimbursements was flat with the prior year at $1.3 billion. Adjusted EBITDA to shareholders grew 4% to $313 million with margins excluding reimbursements of 25%, up 80 basis points over the prior year. I'd note that EBITDA for the period includes the benefit from a lower provision of 12.5%, which I will address shortly. Within our real estate business, contract sales of $807 million were down 11% from the prior year and below the mid-single-digit decline we anticipated on our last call. The declines were driven by VPG and were felt across the system.

Bluegreen saw the steepest decline owing to the difficult comparisons from our HGV Max launch while our legacy business experienced inconsistent performance, particularly in the month of August. New buyer contract sales represented 28% of total volume, up 30 basis points against the prior period driven by continued growth in new buyer transactions. Tours in the period grew 2% to 236,000, consistent with the growth expectations laid out on our prior call and driven by continued growth in our new buyer channel. VPG declined 12% to approximately $3,400 in the quarter reflecting continued execution challenges.

Looking at the makeup of the quarter. We did see sequential improvements in the year-over-year VPG growth as we progressed through the quarter, but the initiatives were slower to take hold than originally anticipated. Our provision in the quarter was 12.5% of owned contract sales compared to 16.8% in the prior year. The quarter benefited from both improving credit performance driven by the underwriting actions we implemented last year, particularly at Bluegreen, and the consolidation of our allowance methodology resulting from the continued integration of our acquired businesses.

The consolidation of our allowance methodology led to a $55 million change in estimate to our allowance for our originated portfolio. The methodology update reflects a meaningful improvement in our credit performance that we've been highlighting for over a year now and our view that future owner performance will be representative of the combined portfolio and resulted in a prospective reduction in our loan loss allowance and provision expense. As a result, the reported provision rate was below our long-term target range.

Although the provision will continue to fluctuate based on financing propensity, owner and new buyer mix and other underwriting factors; the combination of the consolidation in our provision methodology as well as the continuation of the strong credit performance gives us increased confidence in our expectation that our provision will center around the mid-teens going forward. Cost of product in the period was 9.4% owing to a higher mix of trust product sales of recaptured deeded inventory.

Real estate sales and marketing expense for the quarter was $408 million or 51% of contract sales, 440 basis points higher than the prior year substantially driven by operating deleverage from lower contract sales. Real estate profit for the quarter grew 2% to $182 million with margins expanding 150 basis points to 28% as the provision benefit more than offset the sales deleverage. In our financing business, revenue grew 16% to $149 million and profit was $94 million. Excluding the amortization items associated with our acquired receivables portfolios, financing margins were 64%, up 300 basis points from the prior year.

Looking at our portfolio metrics. Our weighted average interest rate for our originated loans was 14.2%. Combined gross receivables for the quarter were $5 billion. Our total allowance for bad debt was $1.37 billion on that $5 billion receivable balance or 27.2% of the portfolio. The portfolio remains in great shape overall with delinquencies stable to last quarter and down from year-end. As of last week, our 31- to 60-day delinquency trends remained stable for all 3 portfolios, most notably for Diamond and Bluegreen. In fact in early October, Bluegreen 31- to 60-day delinquencies were at 2022 levels and Diamond remains at a 5-year low.

In our resort and club business, our consolidated member count was 716,000 as we continue to add new HGV Max members balanced by additional inventory recapture. Revenue grew 2% to $196 million for the quarter and profit was $136 million with margins of 69%. Rental and ancillary revenues were up 4% versus the prior year to $194 million. Revenue growth for the quarter was driven by growth in RevPAR offset by slightly lower available rental room nights versus the prior year. Developer maintenance fees continued to remain the largest driver of our rental and ancillary business profitability trends and drove the $7 million loss in the period.

This was the first full quarter following the close of our disposition transaction and we continue to expect that it will reduce the fee burden on our EBITDA by $10 million to $12 million on a run rate basis although with minimal contribution this year. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA; JV EBITDA was $1 million, license fees were $57 million and EBITDA attributable to noncontrolling interest was $8 million. Corporate G&A was $42 million and remained steady at 3% of pre-reimbursement revenue.

Our adjusted free cash flow in the quarter was $63 million, a conversion rate from EBITDA of 20%. This includes inventory spending of $53 million in the quarter. I'd also highlight we now expect spend of approximately $285 million on inventory this year, which is $90 million lower than our prior estimate. And despite our reduced outlook, we continue to expect our conversion rate for this year will remain in the lower half of our long-term target range of 55% to 65% demonstrating the resilience of our cash flow in different operating environments.

During the quarter, company repurchased 2.4 million shares of common stock for $110 million. This was below our targeted run rate of $150 million per quarter although, as Mark mentioned, we fully intend to meet our annual goal of repurchasing $600 million worth of shares. As of October 22, we had $617 million of remaining availability under our consolidated share repurchase plans. Turning to our outlook. As you saw in today's release, we are reducing our EBITDA guidance for the year to $1,165 million to $1,180 million from our prior $1,225 million to $1,265 million.

As I mentioned, the driver of today's guidance reduction is our weaker-than-expected sales performance coupled with the slower ramp of our initiatives to improve our execution. As we look at our components for our sales for the year, we continue to expect that tours will be in the positive low to mid-single digits for the year despite the channel efficiency initiatives Mark mentioned. That initiative will focus on driving lower overall volume of tours that are ultimately more profitable, particularly as we look to 2027.

Regarding VPG, we now expect VPG for the year to decline in the high single digits. In the fourth quarter specifically, we now expect VPG to decline in the mid-single digits. As a result, we now expect contract sales for the year to be down in the mid-single digits, which implies fourth quarter sales down in the low to mid-single digits. Moving to our liquidity. As of September 30, our liquidity position was $684 million consisting of $227 million of unrestricted cash and $457 million in availability under our revolving credit facility.

Our debt balance at the quarter was comprised of corporate debt of $4.9 billion and a nonrecourse debt balance of approximately $2.9 billion. At quarter end, we had $450 million of remaining capacity on our $1 billion warehouse facility. We also had $1.3 billion of notes that were current on payments, but unsecuritized. Of that figure, approximately $851 million could be monetized through the combination of a warehouse borrowing and securitization. We anticipate another $383 million will become available following certain customary milestones such as first payment, deeding and recording. Turning to our credit metrics. At the end of the quarter, the company's total net leverage on a pro forma TTM basis was 3.87x.

We'll now turn the call over to the operator for your questions. Operator?

Operator

[Operator Instructions] And our first question we will hear from David Katz with Jefferies.

Phần hỏi đáp

David Katz

Dan, I have and I heard the commentary with respect to the change in provision and I apologize for sort of leading off with a very specific question. But if we could have just a bit more like historical context for where the provision sort of sits today. And again, I heard your comment about looking for a mid-teens target level over time. But just a little more maybe backward-looking on that would be helpful, please.

Daniel Mathewes

David, it's an important question. So when you look at our static pools that have been driving our provision rate over the course of for a long time now, we've been running 3 disparate static pools starting with the acquisition of Diamond and supplementing with Bluegreen. So each static pool operated off of a different lookback period. Only one of those static pools took into consideration FICO scores and actual equity down at the table. So we've been making changes over the course of the past few years in the back of the house from a collections perspective and also from a consolidation of the underwriting methodology.

And the most recent and material change that we made was, as we've talked about I think a litany of times now, last year where we eliminated the incremental down payment for upgrades on the Bluegreen side. And now that that has been in excess of a year old, we had a lot more data points and we took the opportunity to consolidate the methodology. And what we did was now we have one static pool with a 10-year look-back period across all of the products that we sell and they all take into consideration FICO and equity.

Now there's a number of variables that are going to come into play that impact the ultimate provision, the least of which is not the propensity to borrow or the equity down, but this change better underwrites the risk that we are taking as we issue loans. Going forward, we do believe it's going to sit around mid-teens. It could be as low as 14%. It could be as high as 18%. Again, propensity to borrow has a meaningful impact on that. The good news is if the propensity to borrow goes up, that means long term we'll recognize interest income, greater interest income than we originally expected, but you take the provision upfront.

If you were to look at this item and we talked about a $55 million number being the change from a provision perspective. But if you were to apply the new methodology to this quarter in particular, the rate would have been just under 18%. If you just adjust for the $55 million, you'll get to a provision rate of 20% and that just underscores the fact that we were not getting credit for the additional equity that we were taking down.

Now that's at the higher end of what we would expect the range to be, but that is also underscored by some financing promotions that we ran during the quarter that drove a sequential increase in the propensity to borrow by over 400 basis points in the quarter. So there's a lot of variables that come into play. But ultimately, the end game is on a prospective basis we expect to be centered around that mid-teens range and we are better provisioning for the actual risk that we are underwriting as we issue loans to the consumer. Hopefully, that's helpful. I know that's a lot of data for you.

Operator

And next we'll move to Patrick Scholes with Truist Securities.

Charles Scholes

Mark, can you talk a little bit more with granularity about what specifically are these initiatives you put in place over the summer to improve execution? And with the change in the sales leadership, what improvements would you hope to see come out of that?

Mark Wang

Yes. So Patrick, I think number one, we've been actively investing back into our sales organization, which means we've taken action to ensure that we're competitive in the market. And so we've improved incentives to meet the market norm and at the same time, we've been taking actions to find costs in other areas of the business to offset that. So net-net, we're better off now and staffing levels are in a much better position than they were when we started the quarter.

And so just to give you a few data points here. We brought in over 430 new salespeople over the last 4 months, all experienced. We had an additional 350 that came in that had real estate experience. And of those, 165 were previous HGV sales representatives. So importantly, we have really done a great job ramping up our recruiting. Our teams have done a really good job with that. And so look, at the end of the day, tour flow matters in this business. Salespeople move where the tour flow is. We're generating significant tour flow.

And we've talked about this before and I talked about it on the last call. In any given quarter, there's a certain amount of turnover within a sales organization and we experienced turnover levels that were above these historical norms. So the good news is the trend has stabilized as we exited the third quarter and we started seeing material improvements in our execution as we went through September and we're also seeing that in October.

Charles Scholes

And as a follow-up, can you remind us when you're taking in new -- replacing and taking in new sales staff, is it fair to think it will take 3 to 6 months to get them up to -- with training and just familiarity with the products and whatnot, 3 to 6 months to get them to a level that you would think where they're I guess fully operational?

Mark Wang

Yes. I mean look, the good news is, as I said, over 160 of these were experienced in HCV, but you're right. When you bring in a new sales rep, a new sales professional and you invest in them, it does take some time to ramp up. And there was a lot of movement during the quarter so a lot of disruption that we experienced and the good news is those people are settling in, a lot of training going on involved. And we've made some I think really good moves from a retention and compensation standpoint that I think gets us in a much more competitive position now.

Operator

And next we'll move on to Michael Hirsh with JPMorgan.

Michael Hirsh

In the third quarter, your adjusted free cash flow was -- or free cash flow conversion, I believe was 20%. So I guess could you speak through the building blocks in the fourth quarter that could allow you to reach your target for the year, which is around 55% I believe?

Daniel Mathewes

Yes. That's a great question. So it's a function of a couple of things from a building block perspective. Predominantly it's timing of securitizations. We anticipate closing 2 transactions in Q4 that will materially drive that up. In addition, you probably recall during my prepared remarks, our inventory spend for the year we originally had estimated it would be in the range of $375 million and we've modified those plans and we're going to be close to $90 million lower than that. So all of those benefits are rolling through Q4, 2 securitization deal. We've been talking about our second one in Japan, we anticipate that closing in Q4. And then we'll do another domestic deal of a material size between $450 million and $500 million in Q4.

Michael Hirsh

And then for my follow-up on capital allocation. Given where your stock is currently trading, how do you rank buybacks against M&A, debt paydown and maybe any other uses of capital?

Mark Wang

Yes. It's also a great question. So we've been fairly vocal for some time now that we were not going to simply lever up the balance sheet in order to buy back shares. And at the same time, we've also been very vocal about the use of capital from a capital allocation strategy. No real M&A out there for us. We feel the best use of capital is buying back our shares and that was at prices that obviously have decreased over the past 90 days. So do we think it's a good investment? Absolutely. We're very cognizant of the leverage level.

And as you'll note, in Q3 we bought less than our programmatic $150 million that we've been buying for about 18 months. We still expect to hit $600 million for the full year. We did decelerate those share repurchases as we saw the performance in contract sales in July and August underperform our expectations. But given where we see the year playing out even with the materially decreased outlook for the balance of the year, we feel that we're in a good spot to still execute on $600 million in share repurchases. But no M&A in our line of sight and we feel the best use of capital right now is still repurchasing of shares.

Operator

And next we'll move on to Chris Woronka with Deutsche Bank.

Chris Woronka

So I guess, guys, if we could drill back a little bit on the sales center and things that are going on there. It's kind of a 2-part question. One is are there any initiatives you have to kind of make sure that these folks, assuming they deliver as you expect them to, to retain them? So I think we hear about a lot of kind of back and forth with some other operators. And then the second part of it is, is this new I guess incentive structure at the sales centers, does that have any implications longer term for your overall margins? And then I have a follow-up.

Mark Wang

Yes. So look, I think we're about 30% of the industry. So we have a significantly large sales and marketing organization, right? And I think we've taken the actions required to, number one, attract and retain the talent that we're looking for and we're going to continue. I mean this is an ongoing process, right? And we've talked about there's always movement with talent across the industry. And I think we've done a good job with what we've done around our retention program.

We strengthened our recruiting incentives and we significantly increased the recruiting efforts across the company, including adding staffing in our recruiting side. So we feel comfortable that we're in a much better place. When you think about the cost, the changes to the comp plans, there'll be some pressure on our sales and marketing costs, but we're also confident that we're going to be able to offset the impact with savings in other parts of the business.

Daniel Mathewes

Yes. Chris, just to jump in there and just to underscore Mark's last point. In the short term, clearly, it has an impact on our sales and marketing rate. As you saw in Q3, our sales and marketing rate year-over-year was up almost 400 basis points. I envision that rate to be fairly consistent in Q4 given the fact that we've lowered our contract sales, there's no longer a ramp that we anticipated in Q4. So in the short term, yes, it will have a rate impact. On the longer term, we believe there's going to be benefits on the contract sales side, which will help drive volume. And as Mark just alluded to, we will be more than offsetting any cost pressures associated with the investment in sales and marketing with cost savings across the balance of the business.

Chris Woronka

Okay. Super helpful. And just as a follow-up. What does the pipeline -- I know it's kind of difficult to look at it at a specific point in time, but what does the pipeline maybe look like for additional inventory recapture? Have those recapture trends been in line with greater or less than you maybe thought at the beginning of the year? And is there anything to kind of inform your thinking as to how recaptures will play out over '27?

Mark Wang

Yes. I think recapture obviously has become a much bigger piece of our inventory sourcing strategy, right, especially since we did these acquisitions. And I think as systems mature, as people are aging out, they're traveling less and it really gives us more opportunities on the recapture side. So it's really a natural part of the system to evolution and it's I think a real advantage for our model going forward especially from a ability to recapture that inventory at a good rate and it's good for our long-term free cash flow and that we don't have to go out and necessarily build inventory at the same rate we have in the past. And so anyways, I think there's opportunity to cycle that inventory and our focus continues to be driving new members and creating new lifetime value creation and using that inventory to create that lifetime value creation.

Daniel Mathewes

Yes. And just to jump in there as well. We are truly capitalizing on the recapture of inventory. If you were to look at HCV prior to any of the acquisitions, our cost of product is between 25% and 30%. After the acquisition of Diamond, we expected that cost of product to be in the low 20s. And after a few years of owning Diamond and fine-tuning that recapture program, it dropped into the high teens. And with the acquisition of Bluegreen, we bolstered that even more and immediately following Bluegreen, we were in the mid-teens. And now we think that longer range view is in the low single digits to low teens to [ mid ] obviously come into play, but in that 10% to 12%, maybe 13% range, which is meaningful.

And it clearly will have an impact, as Mark just stated, with inventory spend patterns. We talked about just a few minutes ago about inventory spend patterns this year going from an original expectation of $375 million and reducing that by $90 million to $285 million. We've also talked previously about the long-term run rate being closer to $300 million. Now that $90 million deceleration this year is not simply getting pushed into next year. We still anticipate being below $300 million next year in that inventory spend. But that is just underscoring what Mark was just talking about with that recaptured inventory process.

Operator

And next, we'll move on to Trey Bowers with Wells Fargo.

Nicholas Weichel

This is Nick Weichel on for Trey. I know you guys are undergoing a lot of different initiatives right now, but I was curious if you had any early thoughts on what 2027 might look like? And just any color would be great.

Mark Wang

Yes. So I'd say, number one, I think when you think about our long-term algorithm, we think that getting past this year, getting past these very difficult comps that we had from last year that our long-term algorithm is achievable as we go into next year. We've shown that EBITDA and cash flow are resilient in the face of softer sales trends. But as we look at on a go-forward basis, we think we're going to be able to balance VPG and tour costs and drive consistent EBITDA growth. And we're not looking at double-digit tour flow growth to drive our business. It's really about more of a low to mid-single-digit tour flow growth with a low to single-digit VPG growth. So anyways, I think we're moving to a pattern of consistent growth on a go-forward basis and it's very aligned with our thinking around our long-term algorithm.

Operator

And we'll move on to Stephen Grambling with Morgan Stanley.

Stephen Grambling

I may have missed this in some of the opening commentary. But just given the interest rate environment, are you seeing any changes as you're having conversations around the securitization market or your borrowing costs in the financing segment? And how would you generally think about approaching if rates were to move higher, trying to pass that on to the consumer versus maybe using it as a sales tool?

Daniel Mathewes

Yes, it's a bit of a balancing act when it comes to interest rates. We constantly debate that internally. What I would tell you with pressure on interest rates just given the dynamics of what the Fed is doing. Will we always match what the Fed does? No, absolutely not. Will we move the needle where we can? Definitely. We do balance that with sales table initiatives though. So it's not going to be necessarily -- like I said, it's not going to be a one-for-one. So a bit of a balancing act there. From a benchmark perspective, that clearly works against us when we go and execute on a securitization.

We, much like others in the industry, are trying to be a very robust issuer of securitization. We try to make sure that we meet the commitments to those bondholders so they know what they're walking into to have a high level of liquidity in those notes and help us drive the best pricing we possibly can. And we've been very successful in that in the past. We're also looking at different avenues to capitalize on that. Clearly, we've talked about our Japan initiative where we've been able to securitize receivables for the first time last year in Japan that had a rate that was sub 1.5%.

We will do a second deal this year. The rates in Japan, as you've probably seen, have also gone up; but they're going to be materially lower than the recent securitization in the timeshare market that you saw from one of our competitors recently. Japan markets would still have a 2% handle on it, which is substantially better than what you see in the U.S. So ultimately, I've said this before, we're changing the collateral mix and the securitization that we do in Japan and ultimately, we're looking to be a more robust issuer even in the Japanese market, which should help us mitigate the pressure that you see on rates in the U.S. And at the very least, it allows for a competitive environment.

Stephen Grambling

That's a lot of helpful detail. One unrelated follow-up. There's been a bit of a spike here in airfare. Are you seeing that impact specific markets at this point? And are there tools or things that you're seeing that may help alleviate that if you are seeing any kind of change in travel behavior from either your owners or prospective owners?

Mark Wang

We really haven't seen a lot of pressure as it relates to airfare movement and cost of moving around or flying. Obviously fuel costs are high, much higher than they have been with all the Middle East activity that's going on right now. But despite all of that, people continue to travel and people continue to move their discretionary spend toward leisure travel and so it's remained very resilient. Our demand indicators remain very positive. Arrivals for Q4 and through the first half of next year are positive year-over-year. Occupancy levels are steady. We maintain a very strong package pipeline. And importantly, our new buyer transactions continue to grow. And while our main pressure this year has been Bluegreen owner comps, we did have 18% higher new buyer transactions in Bluegreen last quarter. So I think that's a really good signal that our product continues to resonate with these new buyers that are coming through the door.

Daniel Mathewes

Right. And not to be remotely dismissive of higher fuel prices because that's obviously adding pressure to the consumer. But one of the benefits of the acquisitions over the course of the past 5 years is the fact that in excess of 90% of our owners do live within a 4-hour drive of one of our resorts. So even if you do see pressure from a flight perspective, we have a number of options to accommodate a tougher environment for the consumer.

Operator

And Patrick Scholes with Truist Securities will have our next question.

Charles Scholes

A follow-up question here. Mark, I may have missed it earlier. With the new methodology for the provision coming in at 12.5%, what would have an apples-to-apples provision result under the prior methodology have been just so we can compare it to what we were expecting?

Daniel Mathewes

Yes, absolutely. So if we had not changed the methodology, simply adding the $55 million back to the provision would have gotten you a provision rate of roughly 20%. That is a function of a couple of factors, most notably mix, higher mix of trust and higher loan loss provisions associated with some deeded products coupled with a sequential increase in propensity to borrow by, I think I mentioned this, north of 400 basis points. So adjusting for those 2 items alone accounted for over 150 basis points, 200 basis points of that move. So it would have been at the higher end of that longer-term range, but that would be under the previous methodology. If we would have adopted the new methodology, you probably already heard me say this, it would have been at just under 18%. But again, the propensity to borrow drives that up by about 100 basis points.

Charles Scholes

Okay. And lastly here, would you be kind to give us a bit of a guidance walk here as it remains for the rest of the year?

Mark Wang

Yes. So let me maybe take the first part of that and I'll let Dan give you a little bit more color on it. But look, first, we realize that comps get easier in November and December, right? But the reality is and we talked about this, we've made a major leadership change to address the execution. And while we're very confident in Mike Riley and what he's going to do to lead our sales organization, there's always some risk involved in that, but we know it's best for the long-term interest of the business. And so as we think about the rest of the quarter, we expect sales to really be in that kind of low to mid-single digits in line with what we saw in October.

Daniel Mathewes

And I think, Patrick, just to do more of a walk, clearly we're very disappointed with the ultimate performance, but there are some things to take into consideration, which the underlying resiliency of a number of factors in the business. We see that continuing. The rental business we believe will be in line with last year, which is very consistent with our previous expectations for the year. Our resort and club business will continue to benefit from a strong seasonal Q4, again in line with prior year, probably slightly a hair up and also consistent with our previous expectations on the financing business despite contraction in contract sales that's still performing in line with our previous expectations.

So when you look at the walk, it's really geared around the real estate segment. Mark has talked ad nauseam about the compression in contract sales, but what does that translate to in the bottom line? There are some good guys. Bad debt year-over-year, as you may recall, last year was at an elevated level given the upgrade into HGV Max scenario. So there should be some benefits on the bad debt side. But that's going to be more than offset in the investment that we're making in the sales and marketing team. So that is going to be driving your SG&A rate, which is going to be the detriment, which is causing the contraction in margins that we're projecting in our EBITDA walk.

Now again we believe that increase in sales and marketing rate should be short-lived, short term. And as we progress forward, we should be able to capitalize by increasing contract sales and also ultimately lowering costs in other areas of the business to more than offset that pressure.

Charles Scholes

Okay. And then just lastly, while I have the microphone here. Can you just confirm that the licensing fee percentage for next year should be at or about 5% for modeling purposes? And then related to that, remind us after that, it seems that that has stepped up to sort of its ongoing run rate for the next, let's say, for 2028 modeling. Is that correct, that 5%? Just want to clear the error on that.

Daniel Mathewes

Yes. Remember, the 5% -- different elements of the business pay a different license fee. So it's not just a flat 5%. But to your point the ramp-up, we just passed the last ramp of Diamond. Bluegreen still has one more ramp that happens on January 1. So we will be at a normalized run rate starting January 1 outside of rebranding some of the properties because as you would expect, we do not pay a licensing fee if the property does not bear the Hilton name, et cetera. And the rate is 5%.

Charles Scholes

I know investors have some questions on those so I appreciate you just clarifying everything.

Operator

There are no further questions at this time. I would like to turn the floor back to Mark Wang for closing remarks.

Mark Wang

All right. Well, thank you again for joining the call today. To our members and our team members round the globe, thank you for making HGV a part of your story and we look forward to updating you on our next call. Have a great day.

Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.