Timeshare vacation company Hilton Grand Vacations (NYSE:HGV) reported Q1 CY2024 results beating Wall Street analysts' expectations, with revenue up 23.8% year on year to $1.16 billion. It made a non-GAAP profit of $0.95 per share, improving from its profit of $0.64 per share in the same quarter last year.

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“We started the year on a positive note, and we’re very encouraged by the momentum we built as we progressed through the quarter,” said Mark Wang, 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

Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Hilton Grand Vacations's annualized revenue growth rate of 15.1% 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 20.8% 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 718,000 in the latest quarter. Over the last two years, Hilton Grand Vacations's members averaged 14.8% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company's monetization of its consumers has risen.

This quarter, Hilton Grand Vacations reported remarkable year-on-year revenue growth of 23.8%, and its $1.16 billion of revenue topped Wall Street estimates by 2.8%. Looking ahead, Wall Street expects sales to grow 21.9% over the next 12 months, a deceleration from this quarter.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because 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 11.2%, slightly better than the broader consumer discretionary sector.

Hilton Grand Vacations burned through $19 million of cash in Q1, equivalent to a negative 1.6% margin. This caught our eye as the company shifted from cash flow positive in the same quarter last year to cash flow negative this quarter.

Key Takeaways from Hilton Grand Vacations's Q1 Results

We were impressed by how significantly Hilton Grand Vacations blew past analysts' operating margin expectations this quarter. We were also glad its number of members outperformed Wall Street's estimates. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock is flat after reporting and currently trades at $43.41 per share.

Hilton Grand Vacations may have had a good quarter, but does that mean you should 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.