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Good morning, and welcome to the Hilton Grand Vacations' First Quarter 2019 Earnings Conference Call. Today's call is being recorded and will be available for replay beginning at 2:00 PM Eastern today. The dial-in number is 888-203-1112, and enter PIN number is 6391101. [Operator Instructions]
I'd now like to turn the call over to Mr. Robert LaFleur, Vice President of Investor Relations. Please go ahead, sir.
Thank you, Lean, and welcome to the Hilton Grand Vacations' first quarter 2019 earnings call. Before we get started, we'd like to remind you that our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements, and the forward-looking statements made today 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 previously filed 10-K or our 10-Q, which we expect to file later today.
We will also refer to certain non-GAAP financial measures in our call this morning. You can find definitions and components of such non-GAAP numbers, as well as reconciliations of non-GAAP and GAAP financial measures discussed today in our earnings press release, and on our website at investors.hgv.com.
As a reminder, our reported results for both periods in 2019 and 2018 reflect the accounting rules under ASC 606 that we adopted last year. Under ASC 606, we are required to defer certain revenues and expenses related to sales made in a period when a project is under construction, and then hold off on recognizing those revenues and expenses until the period when construction is completed.
To help you make more meaningful period-to-period comparisons, you can find details of our current and historical deferrals and recognitions in Table T1 in our earnings release. Also for ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results will refer to results excluding the net impact of construction-related deferrals and our recognitions for all reporting periods. Finally, unless otherwise noted results discussed today referred to first quarter 2019 and all comparisons are against first quarter 2018.
In a moment, Mark Wang, our President and Chief Executive Officer will provide highlights from the quarter in addition to an update of our current operations and company strategy. After Mark's comments, our Chief Financial Officer, Dan Matthews, will go through the financial details for the quarter and our expectations for the balance of the year. After that we will be available for questions.
With that, let me turn the call over to Mark.
All right, well thank you, Bob and good morning everyone and thank you for joining us today.
In Q1, Hilton Grand Vacations continue to lay the groundwork for strong future growth and significant value creation. This is most evident in the following ways. First, we demonstrated the consistency of our business model with solid EBITDA of 102 million driven by contractual recurring revenues in our resorts, club and financing business volumes.
We embedded meaningful value into enterprise with Net Owner Growth of 6.7% which is at the high end of our long-term range and we're well on our way towards delivering positive NOG for the 27th consecutive year. And our owners remain highly engaged and satisfied.
We originated new loans with a weighted average FICO score of 751 above our current portfolio average of 738 and we continue to leverage our long-term relationship with Hilton to drive healthy Tour flow growth of 6.4%.
And finally, we executed on our dynamic capital allocation framework, completing $200 million of share repurchase under the program we launched in December and yesterday announced an additional $200 million of repurchase capacity. These actions demonstrate our focus on the overall return to our shareholders.
Looking forward, we remain very confident in our long-term strategy. When we went public, we gained access to capital to accelerate growth while maintaining strong returns. Our experience in Q1 reinforces our conviction and our strategy to invest in inventory to support the scale and growth, we've laid out in Investor Day. While we began the investment cycle towards the end of '17 and end of '18, it's critical to understand that the vast majority of the new inventory we've identified is not yet available for sale.
Only two properties were the result of investments we've made after the spin. And these two projects represent less than 10% of the $3 billion in contract sales we've logged during this timeframe. And that's why we're so excited about what's coming online, as these properties will improve flexibility at the sales table, ignite demand across the entire base, and allow us to build momentum throughout '19 and '20.
In New York, we just started sales at the central at 5th, which is the new branding for our just-in-time project on 48th Street. Initial response has been very positive. Additionally, we'll start sales of the Quin, which remains on track to begin in Q4. We're very optimistic about what these properties will do going forward.
On top of that, we started sales of our Downtown Chicago property through our direct sales teams. In this effort will be complemented later this summer when we open our Chicago sales center. And finally, we'll start off-site sales of our Liberty Place in Charleston property this year. With onsite sales opening next year.
Looking ahead to 2020, we expect to start selling Cabo the next phase of Ocean Tower, and our new properties in Maui and Waikiki. Another source of confidence is that we're exhibiting strong performance in our recurring businesses which are doing exactly what they're supposed to do, namely generating consistent earnings fueled by industry leading NOG over many years.
Together, the adjusted EBITDA contributed by resort club rental and financing grew by 8% this quarter. Historically, these business lines represent almost 60% of our total EBITDA. Now as you saw in our earnings release, we're making some updates to our '19 guidance to reflect first quarter contract sales down 2%, as well as timing related to our Cabo project. However, none of the changes to our guidance impacts our long-term growth outlook, strategy or overall operations.
We're adjusting '19 guidance as follows. We're moving contract sales growth to a range of 5% to 8%, adjusted EBITDA moves down 5 million with a new range of 445 million to 465 million. And diluted earnings per share moves to a range of $2.61 to $2.77. And we are reiterating our cash flow guidance.
Now I'd like to provide a bit more detail on the dynamics reflected in our updated guidance. Our continued Net Owner Growth creates a strong need for inventory. But it's not as simple as looking at the total volume of inventory available, it's about the mix in the range of the inventory available across all unit types and geographies. This is part of the reason you've heard us consistently beating the drum last year about the need to bring additional inventory online.
Q1 of '18 is a great example of what happens when you have the optimal mix of unit types, which appeal to the broadest spectrum of customers. This includes owners wanting to upgrade and potential new owners looking at an entry point.
Phase one of Ocean tower fits that description and help to drive contract sales growth of 14.6% in Q1 of '18. During that same period on our close rates and VPGs were amongst the highest in my 20 years at HGV.
Heading into '19, we knew, our inventory mix deferred from the beginning of '18. So we expected a lower growth rate in Q1 compared to the rest of the year. Our forecast was tracking through the first two months of the quarter, however, sales in March, which are typically stronger than January and February were lighter than expected, especially in markets impacted by less available upgraded inventory. However, as more inventory comes online throughout 2019, we expect to see improved traction and year-over-year comps will become less challenging.
Another driver of the new guidance relates to our Cabo project, which we plan to open in Q4 of '19 but will now shift into '20 due to timing changes related to regulatory approval processes. This is a relatively short delay across these calendar years. We still expect Cabo to be in high demand once available so the shift does not impact the projects expected rate of returns.
Before I turn the call over to Dan, I want to reiterate that HGV remains positioned for long-term growth adhering to the strategy, we outlined at Investor Day. We're executing on that strategy and investing in the business to bring an optimal mix of inventory to the market. At the end of this investment cycle, we will have embedded significantly more value into the enterprise and permanently reset the business to a higher level of earnings of free cash flow production. And when we succeed in that, we will succeed in creating meaningful value for our team members, owners, and shareholders for many years to come.
I'll now turn things over to Dan to walk you through our financial results. Dan?
Thank you, Mark, and good morning everyone.
Before getting into the numbers, just a quick reminder that last year's first quarter results reflect $37 million of net construction related deferrals, $66 million in revenues, and $29 million in expenses. At that, this year's first quarter results reflect no deferrals or recognitions. You can see the detail on table T1 in the earnings release.
Deferrals affect three line items in the real estate section of our P&L, Sales of VOI net, cost of VOI sales and sales and marketing expenses. Financing, resort, club and rental are not affected by deferrals. Because deferrals create meaningful distortions to year-over-year comparisons, my comments today on net income, adjusted EBITDA and real estate results will exclude the net impact of construction-related deferrals. This is the way we look at the business, and we believe it provides better perspective on period over period trends.
Taking this into consideration, the base for our comparisons to 2018 are as follows; Q1 2018 reported revenues were $367 million adding back the deferrals of $66 million resulting in base for comparison of $433 million. On adjusted EBITDA, adding back the net deferrals of $37 million to reported adjusted EBITDA of $62 million resulted in $99 million. As previously mentioned, the net deferrals only impact our real estate results.
Now let's get into the number. Total first quarter revenue increased 3.9% to $450 million, reflecting growth in the resort, club, rental and finance areas offset by a modest decline in real estate. Real estate and finance segment revenues were flat at $307 million and segment adjusted EBITDA decreased 1% to $80 million and segment margin declined 30 basis points to 26.1%.
Our recurring management and club fees helped drive a 12% increase in resort and club segment revenues this quarter. Segment adjusted EBITDA increased 10% to $65 million and segment margin increased slightly to 59.1%. The strong performance in resort and clubs segment offset a modest decline in the real estate and finance segment, resulting in adjusted EBITDA of $102 million or an increase of 3% on revenue growth of 3.9%. Net income was $55 million and diluted earnings per share was $0.58.
Now, let's go through the rest of the details on the quarter. First quarter real estate results reflect the challenging comparison against the Phase 1 launch of Ocean Tower last year. Given the extraordinary level of early demand for Ocean Tower, contract sales increased by 14.6% in Q1 last year.
Despite solid customer traffic this year, limited inventory availability in key markets, cut our ability to maintain the record close rates we achieved last year. As a result VPGs were down and Q1 contract sales declined by 2.1%. We saw a strong performance from fee-for-service projects like Grand Islander in Hawaii, Elara in Las Vegas, and our Myrtle Beach properties resulting in fee-for-service contract sales increasing by 12%. This brought our fee-for-service mix to 59% for the quarter, up from 51% last year and above our 58 - excuse me 48% to 54% guidance range.
Typically, Q1 is our highest quarter for fee for service sales. So we expect the mix to tilt back toward owned as the year unfolds. It's also worth noting that last year was unusually low as Ocean Tower captured some of the demand that otherwise would have gone to fee projects.
In our real estate business line Q1 revenues declined 2.5% to $236 million. The mix of our sales helped drive commission revenues and mitigate the decrease in owned contract sales. We have some degree of variability in our real estate expense structure, which also help mitigate lower contract sales.
Sales and marketing expense declined 2.2% essentially keeping pace with contract sales. Product costs increased slightly as a percent of the home sales. However, given the mix between owned and fee revenue, real state expenses declined more than revenues, producing 1 million of incremental real estate margin, and modest expansion in our real estate margin percentage.
Turning to the finance business, Q1 margin increased $1 million to $28 million as the benefits of a larger receivables portfolio, higher average interest rates and increased servicing revenue offset the incremental interest expense from our 2018 ABS deal. The higher interest expense did contribute to 280 basis points of margin compression but our financing margin percentage still stood at a healthy 68.3%.
Looking at the consumer portfolio at quarter-end, gross financing receivables were down 12 million from year-end to 1.28 billion as we continue to clear out foreclosure backlogs. Our average down payment has increased to 13% from 12.2% last quarter, as we continue to see the effects of requiring higher equity contributions and upgrade transaction.
Our average interest rate increased by 13 basis points to 12.31% as the rate increases we put in place last year continue to work their way through the broader portfolio. And finally, our long-term allowance was 13.2% down from 13.3% last quarter, reflecting a smaller foreclosure backlog.
Turning to resort and club business, NOG was 6.7%, which helped drive a 7.7% revenue increase in the quarter to $42 million. About three quarters of the growth was driven by new members and the rest was driven by pricing. Margin increased 10.7% to $31 million and margin percentage expanded 200 basis points to 73.8%.
Q1 rental and ancillary revenues increased 16% to $59 million and margin increased 4.3% to $24 million. Margin percentage contracted 440 basis points to 40.7%. Results reflect system growth and the mid 2018 addition of the Quin which we are operating as a hotel until we convert it to timeshare used later this year.
While the Quin did have a net positive impact, the first quarter is a shoulder season in New York making the Quin less impactful to our results, than it was in Q3 and Q4 of last year. As we start renovations, the impact from Quin will diminish in the back half of the year. Rental also picked up some additional developers subsidy expense as new properties opened. Overtime club sales and rental income will help offset these expenses.
Bridging the gap for Q1 segment adjusted EBITDA to total adjusted EBITDA, G&A increased $2 million, license fees were flat, and our JVs generated $2 million of adjusted EBITDA.
Onto the balance sheet, as Mark touched on, we successfully completed the $200 million first phase of our share repurchase authorization last month, and yesterday, we announced that the Board has approved an additional $200 million under our authorization. We continue to view return of capital as an important component of improving shareholder returns.
In Q1, and that drove $175 million on the revolver funded buybacks and project spending, repurchased 3 million shares in Q1 for $97 million at an average price of $31.92 per share. In April, we purchased an additional 925,000 shares for $30 million at an average price of $32.55 to complete the initial authorization. We funded those repurchases with additional draws from the revolver.
In total, to complete the initial authorization, we purchased approximately 6.5 million shares since December for $199 million at an average price of $30.73 per share. This represents about 6.4% of what our market cap was at the time that we announced the program back in November.
At the end of Q1, net leverage stood at 1.4 times, while this is close to our target range of 1.5 to 2 times given timing expectations for cash flows and anticipated liquidity events such as ABS transactions throughout the year, there is ample room for additional repurchases within our leverage guidelines.
In April, we amended our warehouse facility. We maintained its current size at 450 million, extended the maturity to 2021 and negotiated more favorable terms. Looking at our liquidity position, we ended the quarter with 158 million of unrestricted cash and capacity of $509 million on the revolver, and $330 million on the warehouse. Corporate debt was $800 million and our non-recourse debt balance was $720 million. Adjusted Q1 free cash flow was negative $36 million, compared to negative $32 million in the prior year.
As Mark discussed Q1 results, coupled with the shift in timing for Cabo resulting in a reduction for a full-year contract sales growth target to 5% to 8% from our previous guidance of 9% to 11%.
The impact on adjusted EBITDA will be mitigated through continued strong performance from resort, club and rental, cost controls and more favorable inventory product mix. Given this, we are taking our adjusted EBITDA guidance down by $5 million to $445 million to $465 million.
Walking through a few other line items in our guidance, we are increasing interest expense by 10 million to reflect incremental borrowings used to fund share repurchases, the Maui acquisition and other projects.
We are also increasing share-based compensation expense by $10 million. This change is driven by updated long-term performance tracking and modification to our performance based RSU awards that require the acceleration of expense recognition.
For clarification, the modification does not impact the quantum of any awards or the timing of any investing requirement. The guidance reflects no additional share repurchases and is based on 92 million fully diluted shares. Taken together, our revised earnings per share guidance range is now $2.61 to $2.77 compared to our prior range of $2.74 to $2.89. We are maintaining our adjusted free cash flow guidance of $60 million $120 million.
One other item that will help you as you update your models. Our 2019 guidance does not assume any full year deferrals or recognitions. However, on our February call, we discussed the possibility to enter quarter deferrals. We have started selling some inventory that will be deferred until construction is complete. In the case of just in time projects until we take title.
So we are expecting some deferrals in Q2 and Q3 that will be recognized in the fourth quarter. Currently, we expect net deferrals to be between 25 million and 27 million in the second quarter and 12 million and 13 million in the third quarter, then net recognition in Q4 would offset the cumulative deferrals from Q2 and Q3.
Finally, similar to what we discuss last quarter, we expect earnings to be back-end loaded with approximately 53% of our full-year adjusted EBITDA coming in the second half of the year, excluding the impact of deferrals. As always, feel free to give Bob a call to go through the details.
This completes our prepared remarks. We will now turn the call over to the operator and look forward to your questions. Lean.
[Operator Instructions] And we'll take our first question from Brian Dobson with Nomura Instinet.
So at this point, what gives you confidence in your revised outlook given unexpected weakness in March? And can you walk us through the methodology used in determining that outlook?
Yeah, Brian, this Mark anyways. Thanks. First, I know you've heard me say this, and I know many on the call today heard me talk about the high degree of confidence that that we have in our business and in particular our outlook, and so why do we have this confidence?
First, when you think about our business, we built it at minimum around three to five-year plan, which has allowed us to drives stable long-term value creation and this was the case when we were under the Hilton umbrella and when we were sponsored by Blackstone and as we've illustrated the first couple of year as a standalone company.
One of the things we don't do is we don't manage the business to any particular quarter. And so, and far more important, we don't panic or lose any focus, when a quarter doesn't fall in line, but we don't, because we know our business, we adapt, we remain flexible, because we've been through this many times and when I say we know our business, I'm referring to, it's just a decade we've been in the business, whether it's financial crisis or weather phenomena, we've seen it all.
So we don't get side track, then we make the necessary adjustments that can continue delivering the value. This business is really about a quarter cycle, as I look at it and particular quarter is not going to make a break. So I'm confident we're going to get the revised numbers we put forth. And I'm confident we'll meet the longer-term goals that we laid out. So I think there was a second part of that question, you were looking at?
Yeah, that's right. I was -- in addition to the methodology you may have used in determining guidance I was interested in how you saw that big cadence of contract sales moving through the balance of the year if there is some seasonal strength in particular quarters rather than others?
Yeah. Now, that's a fair question. I think first -- As far as sales guidance goes, the update really reflects a few factors -- the first is, as we said in our prepared remarks were impacted, availability of inventory, but again we have plenty of inventory and we had when you look at the actual absolute results for the quarter at $3,700 VPG that's the fifth best of VPG we've had in the last 12 quarters, so it wasn't like we had a major fall off in, that VPG leads the industry. So but we don't see it being able to recoup, what we lost in Q1.
The second part is that how we got to our forecast is we now -- we've adjusted our expectations based on what we know coming out of Q1 and that's mainly again due to the lack of upgradable inventory.
And the third one is around timing of Cabo, we've moved Cabo, we've shifted out from late 19 to 20. So as, these are -- these things could happen, especially when you're working across borders and they the delay, there is really related to get into the economy unionization, done at the property.
So again, the shift is timing and we expect strong demand once it comes online. So as far as how you break the impact up, it's roughly a third, a third, and a third just to keep it at a high level, so and as far as guidance on EBITDA for the quarter. When we look at EBITDA, the guidance that we've moved that down $5 million, I think demonstrates the resiliency of our business model that we are able to manage, many of our cost that especially the costs that are aligned with contract sales. So all in all, we're pretty confident that number is something we're going to be able to achieve.
And we'll take our next question from Stephen Grambling with Goldman Sachs.
I guess with the volatility of inventory availability in contract sales what can smooth that out, is that scale that will help that over time or do you need to have a more pure points system versus a points overlay or do you need to have a seasoning of your customer base?
No, Stephen, I think first, as far as smoothing that out. Again, I think if you look at our performance over four to eight quarters, you're going to see that the performance is at the top in the sectors. So, it smooth itself out casino, we're in a business, we are unlike many of our competitors today where we're actually net, we have this net on a growth which is consuming inventory.
So we're going to have, and everyday we're burning off inventory and we're constantly putting new inventory, and so there is no exact science on getting that exactly right. As far as the product form goes, we like our products. We know our customers like it. We think it provides the best of both worlds it and when I say that you get the security of the deal which you also get in a pure point trust program, but importantly you get this priority reservation window.
And then as far as the utility of the product goes, we have a point based system that's tied to each piece of inventory. So you get the same flexibility from a consumer standpoint, but you get more certainty on the reservation and that's really critical in markets like New York and Hawaii, and we would be doing a disservice to our customers, for example, if we were selling the dream of Hawaii to our Japanese customers, and then they were going to have to compete for a reservation with over 300,000 members. That's just quite frankly that's just wouldn't work for our customers, and there's other benefits to.
I think first, again coming back to this point, but if you normalize our VPGs we're generating 20% to 80% higher VPGs across the sector. And so essentially, our product forms working really well, we're yielding a lot from each customer. We're talking to.
Other really important factor is the kind of play out here is with the trust system it would be almost impossible for us to utilize our fee-for-service program because our trust product you're basically putting points in for one particular project at a time. It also make it more difficult for us to do multiple just in time deals. And today as you know, we've got over a dozen properties that sit on our third parties balance sheets. And we're selling those things simultaneously. So that's a big advantage for us. I think affordability pretty much becomes a loss.
So look at the end of the day, there are some benefits with the Trust and the Trust product does moves some things out there is less peaks and valleys. But I think we're willing to put in the extra work to achieve the higher absolute yields and odd both the real estate and higher returns. And importantly, I think the most important thing, our long-term expectations that we want to provide to our customers, is it really a priority here.
So all in all, it's not a perfect science. We're never going to get it smooth. We're going to have more peaks and valleys, but at the end of the day when you add it all up, I think it shows that we've got the best product form for our particular company.
But just to clarify, it sounds like there can be periods where demand for certain products is ahead of the supply. But I would think that as you gain scale and the customer base seasons. In other words, more inventory comes back to you that lumpiness would theoretically even out over time?
You're right that should even out over time. And I think as we kind of we went into the spin there was moderated investment coming into HGV, coming into the spin. We had our own dedicated balance sheets starting in January 2017 it took us a while to put these projects together. So I think once we get, I know once we get out towards the end of 2019 as we begin into 2020 and then into 2021.
We're going to have a lot more inventory available and we're going to have a lot more variety of inventory in the mix will benefit across the overall spectrum of customers that we're talking to. We do risk in some cases with these peaks and valleys some potential lost sales, but that's more with our first time customers because our owners are still there, and our owners will wait and they'll be patient.
So one last and just given that the availability can be important, how can you get comfortable with that, the trend that you saw in March wasn't just because of the availability versus something going on the macro. Do you see that in the conversion rates or is there something else from a tourist standpoint?
Well, it's interesting. From a consumer standpoint, yeah our consumers are behaving very good in markets where we have inventory. Great example, we just launched central toward the middle of March that's our new property in New York, consumers behaving really good. We're exceeding expectations there. Orlando, where we have ample inventory again another really strong market and what we're starting to see this pickup in Myrtle Beach, as we will be opening the Enclave here.
And so in markets where we have inventory, the consumers behaving better and markets where in APAC, in particular, where we've exhausted most of Ocean Tower. And we don't have that high-end upgrade inventory that's a market that we are struggling with. And so it's hard for me to really quantify and kind of judge the consumer based on that. So I guess what I'm saying is where we have ample inventory we're good, where we don’t we're seeing some more we're seeing lower commitment levels.
And our next question comes from Patrick Scholes with SunTrust.
Looks like in the – good morning, looks in the quarter the fee-for-service contract sales mix jumped up quite a bit year-over-year. How would you see that fee for service mix, what the trajectory of that throughout the year? Thank you.
Patrick it's Dan speaking. Fee-for-service was up year-over-year quite substantially. One of those items driving that was Ocean Tower's success story last year at this time. It took a lot of the volume that you typically see go to fee-for-service project. So last year is probably a little bit understated. And as we go out through the course of 2019, you'll see that coming down, one just from seasonality, but two, as more owned projects come online. And then as you look to the out-years, we would look for that to drop below 50% in 2020, and then again below 40% in 2021.
And our next question comes from Brandt Montour with JPMorgan.
So on the inventory availability topic and I think we all have a pretty good handle of what's coming online in terms of new projects. But can you talk about which projects are rolling off soon and I guess, more importantly, how much of these larger projects or how many large projects you have there either in or near kind of in that dangers zone in terms of low inventory availability. So I'm asking is, can this inventory availability issue become more of an issue, before the new project come on in a big way?
No, Brandt, it's Mark. And I think we've adjusted our forward guidance. And if you can only imagine, we've looked very, very closely in our inventory. We feel comfortable that the inventory that we have on hand, and that we’ll need to be materializing this year will meet the guidance that we put forward. So, I don't think that this will be – this conversation that we're having this quarter will be the same going forward.
And from a project perspective, I think when you look at year-over-year, the only significant difference is really Ocean Tower Phase I where it essentially sold out. We have multiple phases left to come online, as those will be coming online starting in 2020. So that's probably the main difference there.
Just a follow-up, Dan, on your comments, I think you were bridging us from the contract sales guidance lowering but EBITDA obviously doesn't come down at the same extent. So I guess I think you mentioned the resorts, the other half of the house the resort segment as well as Mark you mentioned cost. Could you maybe just walk us through the different levers that you are going to be able to pull to ease the pain there and parse them out between them and for us that will be helpful? Thank you.
Sure, I'll give you a little extra color on that. I mean, I think when you take a step back and you look at the change in guidance for contract sales. Looking at the midpoint, that's roughly a reduction of close to $50 million. So when you flow that through using real estate margins just north of 20%, it gets you just the north about $10 million to $11 million give or take. And we're obviously lowering EBITDA by $5 million. Where you see that the bridge if you will, from that $10 million to $5 million GAAP is truly the outperformance that we've seen in the rental club and resort business.
We expect that to continue for the balance of the year, coupled with some cost controls that we have internally and to a certain extent mix and product sales are lower costs of product. And it's probably in that order of magnitude.
And we'll take our next question from Jared Shojaian with Wolfe Research.
So can you tell us contract sales and VPG growth in April to give us some more confidence that, March was more of an anomaly, especially now that the new Manhattan property is up and running. I realize it's a bit myopic but anything quantitative you can really share to just help us get more comfort that March is really past us and now you got some inventory that's been coming online?
Yes, Jared, we can't provide anything specific on that, but again I'll kind of go back to one thing I can say that we think its passed us because the March phenomenon is one we think was really mainly driven by inventory. There's anecdotally a few other things that you could swell in there but at the end of the day, I can tell you that I think we're past that because our closing percentage from new buyers, it was actually up in April. So that is a turnaround for us, and so we're really pleased with that. So I think some of that new inventory slightly bleeding into the system and particularly the property in New York.
And then, can you tell us how much of the full-year contract sales guidance reduction was due to the first quarter miss as well as Cabo shipping forward into next year, it seems to me, correct me if I'm wrong, that you didn't really meaningfully change your assumption very much for the second, and the third quarter.
So I guess, first, is that true? And then can you just help me get comfortable with the idea that contract sales are going to meaningfully ramp in the second and third quarter. Again, I think you're still up against some pretty tough comparison, so maybe you can flush out some color there for me?
Yeah, again I think I said this earlier, it's roughly a third of our contract sales guidance is pulled down from Q1. So we don't see pulling that we don't see recapturing that. So and then another third is based on what we've learned in Q1, around the inventory and the upgradable inventory and then another third is around Cabo being shifted.
So again, I kind of go back to, I really feel like if we did not - if we weren't comping against the best quarter, we've added in 12 quarters, we had a very solid quarter with $3,700 VPG. Now that being said, we've got, we've still got to put up some numbers for the rest of the year and we think we've, as we look at the rest of the year it will shape up more for less opposite at how 2018 came about, where we started off stronger with the launch of Ocean Tower, in this case as the year goes on Chicago sales center opens, Charleston comes into play, New York Central expands out and gets registered in additional states. And we have the Quin that we're going to be bringing on in Q4. So all of those things should help us and gives us confidence that demand will move up as we move through the year.
And one more if I may, you ramped up the prior $200 million buyback over the course of only a few months. Is that your expectation for the next round of the $200 million and are there any restrictions, I mean how soon can you start to deploy capital there?
Hi, it's Dan. Just to give you a little color on that. I think stepping back to our conversation that we had on Investor Day. When it comes to capital allocation, our initial focus obviously was on investing in inventory, which we've obviously done.
The second focus was deploying that capital in other ways primarily to this share repurchase program and to lever up to our desired leverage range, which was at 1.5 to two times. So what you saw us do in December and obviously in Q1 and to a certain extent in April is really drive that. And we drove that through the 200 million share repurchase quite aggressively and we did it through open market purchases under 10b-18 and 10b-5-1, which I think you can see as we were buying in April post quarter end, which clearly indicates we were in the 10b-5-1 program.
Going forward, we will look to use those same options and we will look to purchase stock as long as it makes financial sense to us. And when we look at our stock price we compare to our view of intrinsic value and if there is a return there we will make that investment.
At some level, it does, it obviously behooves us to look at other options for that capital. Right now, we've got a lot of inventory coming on the line in the next 24 to 36 months. With that in mind, this is where we see the best use of capital at this particular time.
[Operator Instructions] Our next question comes from David Katz with Jefferies.
I know we've had a lot of discussion about the timing and placement of earnings and sort of getting our numbers lined up correctly. But what I wanted to do was just see if we can have a discussion about sort of a long-term un-timed opportunity or earnings power for the company, and how you think about the white space that's available and what could really be accomplished in the next three to five years in terms of capturing that and we can figure out sort of the timing in the past there over time as we go?
Look, I think, this is Mark. We are continuing to with our strategy, we feel that there is tremendous opportunity for continued organic growth in our business, and I say that because we are working closer than we ever have with Hilton. And Hilton is continuing to invest in their digital platform and we're continuing to invest in our digital platform and we're seeing some really good opportunities there and I'm starting with that because that's an opportunity that as we continue to build that platform will potentially allow us to move into some additional type of product forms.
And so those product forms that I'm not willing to discuss in more detail now, but I think when it does is it allows us some more flexibility to move in some to not only some more geographic markets here in the U.S., but also explore some opportunities for expansion internationally. So I don't know if that's answering your question, I don't have any specific timetable that I can attach to that.
I mean I think the only thing I'd add to that, David, is when you think about blank slate. I think that's what we are essentially faced with the last 24 months and where we pulled together our capital allocation strategy and decided to invest in this inventory and that's what you see coming across over there 24 to 36 months.
And as Mark said earlier in the call, we obviously are disappointed having the pullback contract sales in 2019, but this in no way changes our view from those projections and expectations that we had on the Investor Day. So looking out to 2021, we're focused on adjusted EBITDA north of $550 million. I mean we are still in our mind on track to get there and we are very confident about that.
Ladies and gentlemen, at this time we will conclude the question-and-answer session. I would now like to turn the call back to Mr. Mark Wang for any additional comments and closing remarks.
Well, thanks again everyone for dialing in this morning. We're moving forward in 2019 and remain confident in our business and our long-term strategy that we've laid out. And as always, we appreciate your continued interest in HGV and look forward to speaking with everybody again next quarter. Thank you.
And this concludes today's call. Thank you for your participation. You may now disconnect.