Market Overview

Hilton Reports First Quarter Results; Raises Full Year Outlook

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Hilton Worldwide Holdings Inc. ("Hilton" or the "Company") (NYSE:HLT)
today reported its first quarter 2018 results. All results herein,
including prior year, reflect the adoption of new accounting standards,
including Accounting Standards Update ("ASU") No. 2014-09, Revenue
from Contracts with Customers (Topic 606)
("ASU 2014-09").
Highlights include:

This press release features multimedia. View the full release here:
https://www.businesswire.com/news/home/20180426005320/en/

Hilton Announces Q1 2018 Earnings (Graphic: Business Wire)

Hilton Announces Q1 2018 Earnings (Graphic: Business Wire)

  • Diluted EPS was $0.51 for the first quarter, and diluted EPS,
    adjusted for special items, was $0.55, a 45 percent increase from the
    first quarter of 2017
  • Net income for the first quarter was $163 million
  • Adjusted EBITDA for the first quarter was $445 million, an increase
    of 9 percent from the same period in 2017
  • System-wide comparable RevPAR increased 3.9 percent on a currency
    neutral basis for the first quarter from the same period in 2017
  • Approved 25,700 new rooms for development during the first quarter,
    growing Hilton's development pipeline to 355,000 rooms as of March 31,
    2018, representing 9 percent growth from March 31, 2017
  • Opened 10,600 rooms in the first quarter, a 7 percent increase from
    the same period in 2017, adding 7,100 net rooms
  • Repurchased 1.3 million shares of Hilton common stock for an
    aggregate cost of $110 million during the first quarter
  • In April 2018, repurchased 16.5 million shares of Hilton common
    stock from HNA for $1.17 billion in connection with HNA's full
    divestiture of its investment in Hilton
  • In April 2018, issued $1.5 billion aggregate principal amount of
    5.125% Senior Notes due 2026 to facilitate the stock buyback from HNA
    and to repay approximately $500 million of Hilton's senior secured
    term loan facility
  • Raised guidance for full year 2018 system-wide comparable RevPAR
    growth to between 2.0 percent and 4.0 percent, an increase of 100
    basis points at the mid point
  • Raised Adjusted EBITDA guidance for full year 2018 to between
    $2,060 million and $2,100 million
  • Raised capital return guidance for full year 2018 to between $1.7
    billion and $1.9 billion

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton,
said, "We are thrilled with the strong start to the year, reporting
first quarter results that exceeded the high end of our guidance for
system-wide RevPAR, Adjusted EBITDA and diluted EPS, adjusted for
special items. As a result of our strong performance and positive
outlook for the remainder of the year, we are raising guidance for the
full year. We also continue to deliver on our capital return strategy
through share repurchases and dividends, returning more than $1.3
billion so far this year."

For the three months ended March 31, 2018, system-wide comparable RevPAR
grew 3.9 percent, driven by increases in both ADR and occupancy. In
particular, strength at Hilton's international hotels benefited results,
particularly in the Europe and Asia Pacific regions. Management and
franchise fee revenues increased 12 percent as a result of RevPAR growth
of 3.8 percent at comparable managed and franchised hotels, license fees
and the addition of new properties to Hilton's portfolio.

For the three months ended March 31, 2018 diluted EPS was $0.51 and
diluted EPS, adjusted for special items, was $0.55 compared to $0.14 and
$0.38, respectively, for the three months ended March 31, 2017. Net
income and Adjusted EBITDA were $163 million and $445 million,
respectively, for the three months ended March 31, 2018 compared to $48
million and $410 million, respectively, for the three months ended March
31, 2017.

Development

In the first quarter of 2018, Hilton opened 75 hotels totaling 10,600
rooms, a 7 percent increase from the same period in 2017, and achieved
net unit growth of 7,100 rooms.

As of March 31, 2018, Hilton's development pipeline totaled more than
2,340 hotels consisting of approximately 355,000 rooms throughout 106
countries and territories, including 38 countries and territories where
Hilton does not currently have any open hotels. Nearly 187,000 rooms in
the pipeline, or more than half, are located outside the U.S.
Additionally, approximately 184,000 rooms in the pipeline, or more than
half, are under construction.

Balance Sheet and Liquidity

As of March 31, 2018, Hilton had $6.7 billion of long-term debt
outstanding, excluding deferred financing costs and discount, with a
weighted average interest rate of 4.25 percent. Excluding capital lease
obligations and other debt of Hilton's consolidated variable interest
entities, Hilton had $6.4 billion of long-term debt outstanding as of
March 31, 2018, with a weighted average interest rate of 4.17 percent.

Total cash and cash equivalents were $683 million as of March 31, 2018,
including $73 million of restricted cash and cash equivalents. No
borrowings were outstanding under the $1.0 billion revolving credit
facility as of March 31, 2018.

During the first quarter of 2018, Hilton repurchased 1.3 million shares
of its common stock at a cost of approximately $110 million and an
average price per share of $84.01. From the inception of Hilton's share
repurchase plan in March 2017 through March 31, 2018, Hilton repurchased
14.8 million shares for approximately $1.0 billion at an average price
per share of $67.37.

In March 2018, Hilton paid a quarterly cash dividend of $0.15 per share
on shares of its common stock, for a total of $47 million. In April
2018, Hilton's board of directors authorized a regular quarterly cash
dividend of $0.15 per share of common stock to be paid on or before June
29, 2018 to holders of record of its common stock as of the close of
business on May 11, 2018.

In April 2018, Hilton repurchased 16.5 million shares of Hilton common
stock from an affiliate of HNA Tourism Group Co., Ltd. ("HNA") for $1.17
billion at a price of $70.9925 per share, bringing total share
repurchases by Hilton to over 31 million shares. HNA also sold 66.0
million shares of Hilton common stock in an underwritten, public
offering and no longer has any beneficial ownership interest in Hilton.
Additionally, in April 2018, Hilton issued $1.5 billion aggregate
principal amount of 5.125% Senior Notes due 2026 and used a portion of
the net proceeds from the issuance, together with borrowings under its
senior secured revolving credit facility and available cash to fund the
stock repurchase and repay approximately $500 million outstanding under
its senior secured term loan facility.

Adoption of ASUs

The Company adopted ASU 2014-09 and ASU No. 2017-07 ("ASU
2017-07"), Compensation-Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost
, on January 1, 2018 on a full
retrospective basis in the condensed consolidated financial statements.
The provisions of ASU 2014-09 affected the Company's revenue recognition
as follows:

  • Application, initiation and other fees charged are recognized over the
    term of the franchise contract, rather than upon execution of the
    contract;
  • Certain contract acquisition costs related to management and franchise
    contracts are recognized over the term of the contracts as a reduction
    to revenue, instead of as amortization expense;
  • Incentive management fees are recognized to the extent that it is
    probable that a significant reversal will not occur as a result of
    future hotel profits or cash flows, as opposed to recognizing amounts
    that would be due if the management contract was terminated at the end
    of the reporting period;
  • Revenue related to the Hilton Honors guest loyalty program is deferred
    as points are awarded and recognized upon point redemption, net of any
    reward reimbursement paid to a third party, as opposed to recognized
    on a gross basis at the time points are issued in conjunction with the
    accrual of the expected future cost of the reward reimbursement.
    Additionally, points issued at owned and leased hotels are accounted
    for as a reduction of revenue from owned and leased hotels, as opposed
    to expenses of owned and leased hotels; and
  • Reimbursable fees related to management and franchise contracts are
    recognized as they are billed, as opposed to when Hilton incurs the
    related expenses.

The provisions of this ASU will not affect the Company's cash flow or
cash available for capital return. The changes in revenue recognition
for contract acquisition costs will not affect the Company's net income,
and the changes for incentive management fees will not affect the
Company's net income for any full year period.

The provisions of ASU 2017-07 include presenting: (i) the service cost
component of net periodic pension cost in owned and leased hotels
expense and general and administrative expense; and (ii) the other
components of net periodic pension cost in other non-operating income
(loss), net in the condensed consolidated statements of operations.
Prior to adoption, all net periodic pension cost was presented in owned
and leased hotels expense and general and administrative expense. The
adoption of this ASU did not have a material effect on the Company's
consolidated statements of operations.

Refer to "New Accounting Standard Adoption - Effect on the Three Months
Ended March 31, 2017" in the schedules to this press release for
additional information.

Outlook

Share-based metrics in Hilton's outlook include actual share repurchases
to date and do not include the effect of potential share repurchases.

Full Year 2018

  • System-wide RevPAR is expected to increase between 2.0 percent and 4.0
    percent on a comparable and currency neutral basis compared to 2017.
  • Diluted EPS, before special items, is projected to be between $2.57
    and $2.66.
  • Diluted EPS, adjusted for special items, is projected to be between
    $2.62 and $2.71.
  • Net income is projected to be between $794 million and $823 million.
  • Adjusted EBITDA is projected to be between $2,060 million and $2,100
    million, growing 8 percent to 10 percent.
  • Management and franchise fee revenue is projected to increase between
    9 percent and 11 percent compared to 2017.
  • Capital expenditures and contract acquisition costs, excluding capital
    expenditures reimbursed by hotel owners, are expected to be between
    $175 million and $200 million.
  • Cash available for capital return is projected to be between $1.7
    billion and $1.9 billion.
  • General and administrative expenses are projected to be between $400
    million and $425 million.
  • Net unit growth is expected to be approximately 6.5 percent.

Second Quarter 2018

  • System-wide RevPAR is expected to increase between 3.0 percent and 4.0
    percent on a comparable and currency neutral basis compared to the
    second quarter of 2017.
  • Diluted EPS, before special items, is projected to be between $0.66
    and $0.70.
  • Diluted EPS, adjusted for special items, is projected to be between
    $0.66 and $0.70.
  • Net income is projected to be between $202 million and $216 million.
  • Adjusted EBITDA is projected to be between $530 million and $550
    million.
  • Management and franchise fee revenue is projected to increase between
    7 percent and 9 percent compared to the second quarter of 2017.

Conference Call

Hilton will host a conference call to discuss first quarter 2018 results
on April 26, 2018 at 10:00 a.m. Eastern Time. Participants may listen to
the live webcast by logging on to the Hilton Investor Relations website
at http://ir.hilton.com/events-and-presentations.
A replay and transcript of the webcast will be available within 24 hours
after the live event at http://ir.hilton.com/events-and-presentations/2018.

Alternatively, participants may listen to the live call by dialing
1-888-317-6003 in the United States or 1-412-317-6061 internationally.
Please use the conference ID 5738665. Participants are encouraged to
dial into the call or link to the webcast at least fifteen minutes prior
to the scheduled start time. A telephone replay will be available for
seven days following the call. To access the telephone replay, dial
1-877-344-7529 in the United States or 1-412-317-0088
internationally using the conference ID 10118377.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include, but are not limited to, statements related to the
expectations regarding the performance of Hilton's business, financial
results, liquidity and capital resources and other non-historical
statements, including the statements in the "Outlook" section of this
press release. In some cases, you can identify these forward-looking
statements by the use of words such as "outlook," "believes," "expects,"
"potential," "continues," "may," "will," "should," "could," "seeks,"
"projects," "predicts," "intends," "plans," "estimates," "anticipates"
or the negative version of these words or other comparable words. Such
forward-looking statements are subject to various risks and
uncertainties, including, among others, risks inherent to the
hospitality industry, macroeconomic factors beyond Hilton's control,
competition for hotel guests and management and franchise contracts,
risks related to doing business with third-party hotel owners,
performance of Hilton's information technology systems, growth of
reservation channels outside of Hilton's system, risks of doing business
outside of the United States of America ("U.S.") and Hilton's
indebtedness. Additional factors that could cause Hilton's results to
differ materially from those described in the forward-looking statements
can be found under the section entitled "Part I—Item 1A. Risk Factors"
of Hilton's Annual Report on Form 10-K for the fiscal year ended
December 31, 2017, filed with the Securities and Exchange Commission
("SEC"), as such factors may be updated from time to time in Hilton's
periodic filings with the SEC, which are accessible on the SEC's website
at www.sec.gov.
Accordingly, there are or will be important factors that could cause
actual outcomes or results to differ materially from those indicated in
these statements. These factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements
that are included in this press release and in Hilton's filings with the
SEC. The Company undertakes no obligation to publicly update or review
any forward-looking statement, whether as a result of new information,
future developments or otherwise, except as required by law.

Non-GAAP Financial Measures

The Company refers to certain financial measures that are not recognized
under U.S. generally accepted accounting principles ("GAAP") in this
press release, including: net income, adjusted for special items;
diluted EPS, adjusted for special items; Adjusted EBITDA; Adjusted
EBITDA margin; net debt; and net debt to Adjusted EBITDA ratio. See the
schedules to this press release, including the "Definitions" section,
for additional information and reconciliations of such non-GAAP
financial measures. This press release includes pro forma financial
information to reflect the financing and equity transactions that
occurred in April 2018 as if they occurred on March 31, 2018. This pro
forma financial information is provided for informational purposes only
and is not necessarily indicative of what Hilton's results of operations
would actually have been had these transactions occurred on the date
indicated.

About Hilton

Hilton (NYSE:HLT) is a leading global hospitality company, with a
portfolio of 14 world-class brands comprising more than 5,300 properties
with more than 863,000 rooms, in 106 countries and territories. Hilton
is dedicated to fulfilling its mission to be the world's most hospitable
company by delivering exceptional experiences - every hotel, every
guest, every time. The Company's portfolio includes Hilton Hotels &
Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts,
Canopy by Hilton, Curio Collection by Hilton, DoubleTree by Hilton,
Tapestry Collection by Hilton, Embassy Suites by Hilton, Hilton Garden
Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2
Suites by Hilton and Hilton Grand Vacations. The Company also manages an
award-winning customer loyalty program, Hilton Honors. Hilton Honors
members who book directly through preferred Hilton channels have access
to instant benefits, including a flexible payment slider that allows
members to choose exactly how many Points to combine with money, an
exclusive member discount that can't be found anywhere else and free
standard Wi-Fi. Visit newsroom.hilton.com
for more information, and connect with Hilton on facebook.com/hiltonnewsroom,
twitter.com/hiltonnewsroom,
linkedIn.com/company/hilton,
instagram.com/hiltonnewsroom
and youtube.com/hiltonnewsroom.

 

HILTON WORLDWIDE HOLDINGS INC.

EARNINGS RELEASE SCHEDULES

TABLE OF CONTENTS

 
 
Condensed Consolidated Statements of Operations
New Accounting Standard Adoption - Effect on the Three Months Ended
March 31, 2017
Comparable and Currency Neutral System-Wide Hotel Operating
Statistics
Property Summary
Capital Expenditures and Contract Acquisition Costs
Non-GAAP Financial Measures Reconciliations
Definitions
 
 

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share data)

 
 
    Three Months Ended
March 31,
2018     2017
Revenues
Franchise fees $ 331 $ 282
Base and other management fees 77 81
Incentive management fees 55 49
Owned and leased hotels 334 296
Other revenues   23     37  
820 745
Other revenues from managed and franchised properties   1,254     1,151  
Total revenues 2,074 1,896
 
Expenses
Owned and leased hotels 320 268
Depreciation and amortization 82 86
General and administrative 104 106
Other expenses   14     23  
520 483
Other expenses from managed and franchised properties   1,275     1,196  
Total expenses 1,795 1,679
 
Operating income 279 217
 
Interest expense (83 ) (89 )
Gain (loss) on foreign currency transactions 11 (4 )
Loss on debt extinguishment (60 )
Other non-operating income, net   14     2  
 
Income before income taxes 221 66
 
Income tax expense   (58 )   (18 )
 
Net income 163 48
Net income attributable to noncontrolling interests   (2 )   (1 )
Net income attributable to Hilton stockholders $ 161   $ 47  
 
Weighted average shares outstanding:
Basic   316     330  
Diluted   319     331  
 
Earnings per share:
Basic $ 0.51   $ 0.14  
Diluted $ 0.51   $ 0.14  
 
Cash dividends declared per share $ 0.15   $ 0.15  
 
 

HILTON WORLDWIDE HOLDINGS INC.

NEW ACCOUNTING STANDARD ADOPTION - EFFECT ON THE THREE MONTHS
ENDED MARCH 31, 2017

(unaudited, in millions, except per share data)

 
 
   

As Previously

Reported

    ASU 2014-09     ASU 2017-07     As Adjusted
Revenues
Franchise fees $ 294 $ (12 ) $ $ 282
Base and other management fees 83 (2 ) 81
Incentive management fees 52 (3 ) 49
Owned and leased hotels 300 (4 ) 296
Other revenues   37             37  
766 (21 ) 745
Other revenues from managed and franchised properties   1,395     (244 )       1,151  
Total revenues 2,161 (265 ) 1,896
 
Expenses
Owned and leased hotels 272 (4 ) 268
Depreciation and amortization 89 (3 ) 86
General and administrative 105 1 106
Other expenses   23             23  
489 (7 ) 1 483
Other expenses from managed and franchised properties   1,395     (199 )       1,196  
Total expenses 1,884 (206 ) 1 1,679
 
Operating income 277 (59 ) (1 ) 217
 
Interest expense (104 ) 15 (89 )
Loss on foreign currency transactions (4 ) (4 )
Loss on debt extinguishment (60 ) (60 )
Other non-operating income, net 1 1 2
                       
Income before income taxes 110 (44 ) 66
 
Income tax expense (35 ) 17 (18 )
                       
Net income 75 (27 ) 48
Net income attributable to noncontrolling interests   (1 )           (1 )
Net income attributable to Hilton stockholders $ 74   $ (27 ) $   $ 47  
 
Earnings per share:
Basic $ 0.22   $ 0.14  
Diluted $ 0.22   $ 0.14  
 
 

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING
STATISTICS

BY BRAND, REGION AND SEGMENT

(unaudited)

 
 
    Three Months Ended March 31,
Occupancy     ADR     RevPAR
2018     vs. 2017 2018     vs. 2017 2018     vs. 2017
U.S. 72.4 % 1.1 % pts. $ 146.61 1.2 % $ 106.09 2.8 %
Americas (excluding U.S.) 67.2 2.6 131.14 3.2 88.15 7.3
Europe 70.1 3.9 138.94 1.2 97.39 7.1
Middle East & Africa 73.6 5.1 156.56 (2.1 ) 115.28 5.3
Asia Pacific 70.4 5.5 142.39 2.3 100.18 11.0
System-wide 71.8 1.8 145.21 1.2 104.27 3.9
 
 
Three Months Ended March 31,
Occupancy ADR RevPAR
2018 vs. 2017 2018 vs. 2017 2018 vs. 2017
Waldorf Astoria Hotels & Resorts 73.0 % 2.4 % pts. $ 379.11 4.1 % $ 276.76 7.7 %
Conrad Hotels & Resorts 72.3 9.9 249.54 (1.6 ) 180.39 14.1
Canopy by Hilton 90.9 (0.9 ) 295.14 8.3 268.17 7.2
Hilton Hotels & Resorts 72.8 2.3 171.91 0.8 125.11 4.2
Curio - A Collection by Hilton 72.8 3.6 222.31 3.6 161.86 8.9
DoubleTree by Hilton 70.5 1.6 132.97 1.8 93.81 4.1
Embassy Suites by Hilton 75.6 (0.1 ) 162.32 1.3 122.64 1.1
Hilton Garden Inn 72.3 2.0 128.25 0.6 92.70 3.5
Hampton by Hilton 68.9 1.1 119.44 0.8 82.27 2.5
Homewood Suites by Hilton 77.2 2.2 136.70 1.6 105.52 4.5
Home2 Suites by Hilton 74.6 6.1 113.51 1.8 84.65 10.8
System-wide 71.8 1.8 145.21 1.2 104.27 3.9
 
 
Three Months Ended March 31,
Occupancy ADR RevPAR
2018 vs. 2017 2018 vs. 2017 2018 vs. 2017
Management and franchise 71.8 % 1.8 % pts $ 144.26 1.2 % $ 103.58 3.8 %
Ownership(1) 71.9 1.4 179.44 2.7 129.02 4.8
System-wide 71.8 1.8 145.21 1.2 104.27 3.9
 
____________

(1)

  Includes owned and leased hotels, as well as hotels owned or leased
by entities in which Hilton owns a noncontrolling interest.
 
 

HILTON WORLDWIDE HOLDINGS INC.

PROPERTY SUMMARY

As of March 31, 2018

 
 
    Owned / Leased(1)     Managed     Franchised     Total
Properties     Rooms Properties     Rooms Properties     Rooms Properties     Rooms
Waldorf Astoria Hotels & Resorts
U.S. 1 215 12 5,451 13 5,666
Americas (excluding U.S.) 1 142 1 984 2 1,126
Europe 2 463 4 898 6 1,361
Middle East & Africa 4 949 4 949
Asia Pacific 3 723 3 723
Conrad Hotels & Resorts
U.S. 4 1,289 1 319 5 1,608
Americas (excluding U.S.) 2 402 1 294 3 696
Europe 4 1,155 4 1,155
Middle East & Africa 1 614 3 1,076 4 1,690
Asia Pacific 1 164 16 4,920 2 768 19 5,852
Canopy by Hilton
U.S. 2 352 2 352
Europe 1 112 1 112
Hilton Hotels & Resorts
U.S. 66 48,391 178 54,161 244 102,552
Americas (excluding U.S.) 1 405 25 9,240 17 5,661 43 15,306
Europe 53 14,421 48 15,269 40 10,776 141 40,466
Middle East & Africa 5 1,998 43 13,411 2 605 50 16,014
Asia Pacific 7 3,438 83 30,412 7 2,826 97 36,676
Curio - A Collection by Hilton
U.S. 4 1,981 27 5,795 31 7,776
Americas (excluding U.S.) 7 1,271 7 1,271
Europe 2 189 8 866 10 1,055
Middle East & Africa 1 201 1 201
Asia Pacific 2 448 2 448
DoubleTree by Hilton
U.S. 37 12,133 304 72,080 341 84,213
Americas (excluding U.S.) 4 809 22 4,463 26 5,272
Europe 11 2,915 83 14,364 94 17,279
Middle East & Africa 10 2,350 5 597 15 2,947
Asia Pacific 49 14,219 2 965 51 15,184
Tapestry Collection by Hilton
U.S. 5 524 5 524
Embassy Suites by Hilton
U.S. 42 11,144 198 44,868 240 56,012
Americas (excluding U.S.) 3 667 5 1,329 8 1,996
Hilton Garden Inn
U.S. 4 430 635 87,911 639 88,341
Americas (excluding U.S.) 10 1,406 37 5,783 47 7,189
Europe 20 3,680 40 6,555 60 10,235
Middle East & Africa 8 1,777 1 175 9 1,952
Asia Pacific 23 4,915 23 4,915
Hampton by Hilton
U.S. 46 5,639 2,100 205,199 2,146 210,838
Americas (excluding U.S.) 13 1,677 90 10,729 103 12,406
Europe 15 2,439 53 8,146 68 10,585
Asia Pacific 29 4,470 29 4,470
Tru by Hilton
U.S. 17 1,632 17 1,632
Homewood Suites by Hilton
U.S. 22 2,353 416 47,472 438 49,825
Americas (excluding U.S.) 3 358 18 2,018 21 2,376
Home2 Suites by Hilton
U.S. 212 21,876 212 21,876
Americas (excluding U.S.) 3 317 3 317
Other 3 1,450 1 250 4 1,700
Hotels 71 21,718 650 206,908 4,570 626,513 5,291 855,139
Hilton Grand Vacations 48 8,102 48 8,102
Total 71 21,718 650 206,908 4,618 634,615 5,339 863,241
 
____________

(1)

  Includes hotels owned or leased by entities in which Hilton owns a
noncontrolling interest.
 
 

HILTON WORLDWIDE HOLDINGS INC.

CAPITAL EXPENDITURES AND CONTRACT ACQUISITION COSTS

(unaudited, dollars in millions)

 
 
    Three Months Ended    

Increase /

March 31,

(Decrease)

2018     2017 $     %
Capital expenditures for property and equipment(1) $ 10 $ 9 1 11.1
Capitalized software costs(2)   15   9 6 66.7
Total capital expenditures 25 18 7 38.9
Contract acquisition costs   14   13 1 7.7
Total capital expenditures and contract acquisition costs $ 39 $ 31 8 25.8
 
____________

(1)

  Includes expenditures for hotels, corporate and other property and
equipment.

(2)

Includes $7 million and $4 million of expenditures that are
reimbursed by hotel owners for the three months ended March 31, 2018
and 2017, respectively.
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS

(unaudited, in millions, except per share data)

 
 
    Three Months Ended
March 31,
2018     2017
Net income attributable to Hilton stockholders, as reported $ 161 $ 47
Diluted EPS, as reported $ 0.51 $ 0.14
Special items:
Net other expenses from managed and franchised properties $ 21 $ 45
Asset dispositions(1) 2 7
Loss on debt extinguishment 60
Transaction costs(2) 10
Financing transactions(3) 5
Other adjustments(4)   (6 )    
Total special items before tax 17 127
Income tax expense on special items   (3 )   (49 )
Total special items after tax $ 14   $ 78  
 
Net income, adjusted for special items $ 175   $ 125  
Diluted EPS, adjusted for special items $ 0.55   $ 0.38  
 
____________

(1)

  Includes severance costs related to the 2015 sale of the Waldorf
Astoria New York that were recognized in general and administrative
expenses.

(2)

Includes expenses related to the January 2017 spin-offs of Park
Hotels & Resorts Inc. and Hilton Grand Vacations Inc. that were
recognized in general and administrative expenses.

(3)

Includes expenses incurred in connection with the refinancing of the
senior secured term loan facility that were recognized in other
non-operating income, net.

(4)

Includes a gain related to the refinancing of a loan that financed
the construction of a hotel that Hilton manages, which was
recognized in other non-operating income, net.
 
       

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

(unaudited, dollars in millions)

 
 
Three Months Ended
March 31,
2018 2017
Net income $ 163 $ 48
Interest expense 83 89
Income tax expense 58 18
Depreciation and amortization   82     86  
EBITDA 386 241
Loss (gain) on foreign currency transactions (11 ) 4
Loss on debt extinguishment 60
FF&E replacement reserve 12 6
Share-based compensation expense 28 25
Amortization of contract acquisition costs 7 3
Net other expenses from managed and franchised properties 21 45
Other adjustment items(1)   2     26  
Adjusted EBITDA $ 445   $ 410  

____________

(1)  Includes adjustments for severance, transaction
costs and other items.

 
 
Three Months Ended
March 31,
2018 2017
Total revenues, as reported $ 2,074 $ 1,896
Add: amortization of contract acquisition costs 7 3
Less: other revenues from managed and franchised properties   (1,254 )   (1,151 )
Total revenues, as adjusted $ 827   $ 748  
 
Adjusted EBITDA $ 445 $ 410
 
Adjusted EBITDA margin   53.8 %   54.8 %
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO

(unaudited, dollars in millions)

 
 
            March 31,     December 31,
2018 2017
Long-term debt, including current maturities $ 6,605 $ 6,602
Add: unamortized deferred financing costs and discount   78     81  
Long-term debt, including current maturities and excluding
unamortized deferred financing costs and discount
6,683 6,683
Add: Hilton's share of unconsolidated affiliate debt, excluding
unamortized deferred financing costs
15 13
Less: cash and cash equivalents (610 ) (570 )
Less: restricted cash and cash equivalents   (73 )   (100 )
Net debt $ 6,015   $ 6,026  
 
Pro forma adjustments(1)   1,190  
Pro forma net debt(1) $ 7,205  
 
 
Three Months Ended Year Ended TTM(2)
March 31, December 31, March 31,
2018 2017 2017 2018
Net income $ 163 $ 48 $ 1,089 $ 1,204
Interest expense 83 89 351 345
Income tax expense (benefit) 58 18 (336 ) (296 )
Depreciation and amortization   82     86   336     332  
EBITDA 386 241 1,440 1,585
Loss (gain) on foreign currency transactions (11 ) 4 (3 ) (18 )
Loss on debt extinguishment 60 60
FF&E replacement reserve 12 6 55 61
Share-based compensation expense 28 25 121 124
Amortization of contract acquisition costs 7 3 17 21
Net other expenses from managed and franchised properties 21 45 172 148
Other adjustment items(3)   2     26   47     23  
Adjusted EBITDA $ 445   $ 410 $ 1,909   $ 1,944  
 
Net debt $ 6,015
 
Net debt to Adjusted EBITDA ratio   3.1  
 
____________

(1)

  Includes the effect of the stock buyback from HNA and the senior
notes offering and use of proceeds therefrom, each of which occurred
in April 2018, as if they had occurred on March 31, 2018.

(2)

Trailing twelve months ("TTM") March 31, 2018 is calculated as the
three months ended March 31, 2018 plus the year ended December 31,
2017 less the three months ended March 31, 2017.

(3)

Includes adjustments for severance, transaction costs and other
items.
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

OUTLOOK: NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS

FORECASTED 2018

(unaudited, in millions, except per share data)

 
 
   

Three Months Ending

June 30, 2018

Low Case     High Case
Net income attributable to Hilton stockholders, before special items $ 201 $ 215
Diluted EPS, before special items $ 0.66 $ 0.70
 
Net income, adjusted for special items $ 201   $ 215  
Diluted EPS, adjusted for special items(1) $ 0.66   $ 0.70  
 
 
 

Year Ending

December 31, 2018

Low Case High Case
Net income attributable to Hilton stockholders, before special items $ 790 $ 819
Diluted EPS, before special items $ 2.57 $ 2.66
Special items(2):
Net other expenses from managed and franchised properties $ 21 $ 21
Asset dispositions 2 2
Other adjustments   (6 )   (6 )
Total special items before tax 17 17
Income tax expense on special items   (3 )   (3 )
Total special items after tax $ 14   $ 14  
 
Net income, adjusted for special items $ 804   $ 833  
Diluted EPS, adjusted for special items(1) $ 2.62   $ 2.71  
 
____________

(1)

  Does not include the effect of potential share repurchases.

(2)

See "—Net Income and Diluted EPS, Adjusted for Special Items" for
details of these special items.
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

OUTLOOK: ADJUSTED EBITDA

FORECASTED 2018

(unaudited, in millions)

 
 
   

Three Months Ending

June 30, 2018

Low Case     High Case
Net income $ 202 $ 216
Interest expense 97 97
Income tax expense 85 91
Depreciation and amortization   81     81  
EBITDA 465 485
FF&E replacement reserve 17 17
Share-based compensation expense 41 41
Amortization of contract acquisition costs   7     7  
Adjusted EBITDA $ 530   $ 550  
 
 

Year Ending

December 31, 2018

Low Case High Case
Net income $ 794 $ 823
Interest expense 380 380
Income tax expense 324 335
Depreciation and amortization   326     326  
EBITDA 1,824 1,864
Gain on foreign currency transactions (11 ) (11 )
FF&E replacement reserve 55 55
Share-based compensation expense 133 133
Amortization of contract acquisition costs 27 27
Net other expenses from managed and franchised properties 21 21
Other adjustment items(1)   11     11  
Adjusted EBITDA $ 2,060   $ 2,100  
 
____________

(1)

  Includes adjustments for severance and other items.
 
 

HILTON WORLDWIDE HOLDINGS INC.

DEFINITIONS

 

Trailing Twelve Month Financial Information

This press release includes certain unaudited financial information for
the TTM period ended March 31, 2018, which is calculated as the three
months ended March 31, 2018 plus the year ended December 31, 2017 less
the three months ended March 31, 2017. This presentation is not in
accordance with GAAP. However, the Company believes that this
presentation provides useful information to investors regarding its
recent financial performance, and it views this presentation of the four
most recently completed fiscal quarters as a key measurement period for
investors to assess its historical results. In addition, the Company's
management uses TTM information to evaluate the Company's financial
performance for ongoing planning purposes.

Net Income and EPS, Adjusted for Special Items

Net income, adjusted for special items, and EPS, adjusted for special
items, are not recognized terms under GAAP and should not be considered
as alternatives to net income (loss) or other measures of financial
performance or liquidity derived in accordance with GAAP. In addition,
the Company's definition of net income, adjusted for special items, and
EPS, adjusted for special items, may not be comparable to similarly
titled measures of other companies.

Net income, adjusted for special items, and EPS, adjusted for special
items, are included to assist investors in performing meaningful
comparisons of past, present and future operating results and as a means
of highlighting the results of the Company's ongoing operations.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

Earnings before interest expense, taxes and depreciation and
amortization ("EBITDA"), presented herein, reflects net income (loss),
excluding interest expense, a provision for income taxes and
depreciation and amortization.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as
previously defined, further adjusted to exclude certain items, including
gains, losses, revenues and expenses in connection with: (i) asset
dispositions for both consolidated and unconsolidated investments; (ii)
foreign currency transactions; (iii) debt restructurings and
retirements; (iv) furniture, fixtures and equipment ("FF&E") replacement
reserves required under certain lease agreements; (v) reorganization
costs; (vi) share-based compensation expense; (vii) non-cash impairment
losses; (viii) severance, relocation and other expenses; (ix)
amortization of contract acquisition costs; (x) the net effect of
reimbursable costs included in other revenues and expenses from managed
and franchised properties; and (xi) other items.

Beginning with the three months ended March 31, 2018, the Company has
modified the definition of Adjusted EBITDA to also exclude the
amortization of contract acquisition costs and the net effect of
reimbursable costs included in other revenues and expenses from managed
and franchised properties. Management believes that excluding these
impacts is useful for the reasons set forth below and has applied the
modified definition of Adjusted EBITDA to all periods for which Adjusted
EBITDA is presented in this release.

Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
total revenues, as adjusted, to exclude the amortization of contract
acquisition costs and other revenues from managed and franchised
properties.

The Company believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA
margin provide useful information to investors about the Company and its
financial condition and results of operations for the following reasons:
(i) these measures are among the measures used by the Company's
management team to evaluate its operating performance and make
day-to-day operating decisions; and (ii) these measures are frequently
used by securities analysts, investors and other interested parties as a
common performance measure to compare results or estimate valuations
across companies in the industry. Additionally, these measures exclude
certain items that can vary widely across different industries and among
competitors within the Company's industry. For instance, interest
expense and the provision for income taxes are dependent on company
specifics, including, among other things, capital structure and
operating jurisdictions, respectively, and, therefore could vary
significantly across companies. Depreciation and amortization, as well
as amortization of contract acquisition costs, are dependent upon
company policies, including the method of acquiring and depreciating
assets and the useful lives that are used. For Adjusted EBITDA, the
Company also excludes items such as: (i) FF&E replacement reserve to be
consistent with the treatment of FF&E for its owned and leased hotels
where it is capitalized and depreciated over the life of the FF&E; (ii)
share-based compensation expense, as this could vary widely among
companies due to the different plans in place and the usage of them;
(iii) the net effect of the Company's reimbursable revenues and related
expenses, as the Company does not operate the related programs to
generate a profit over the terms of the agreement; and (iv) other items
that are not core to the Company's operations and are not reflective of
the Company's performance.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized
terms under GAAP and should not be considered as alternatives, in
isolation or as a substitute, to net income (loss) or other measures of
financial performance or liquidity derived in accordance with GAAP. The
Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA
margin may not be comparable to similarly titled measures of other
companies and may have limitations as analytical tools.

Net Debt

Net debt, presented herein, is a non-GAAP financial measure that the
Company uses to evaluate its financial leverage. Net debt is calculated
as (i) long-term debt, including current maturities and excluding
unamortized deferred financing costs and discount; and (ii) the
Company's share of unconsolidated affiliate debt, excluding unamortized
deferred financing costs; reduced by (a) cash and cash equivalents; and
(b) restricted cash and cash equivalents. Net debt should not be
considered as a substitute to debt presented in accordance with GAAP.
Net debt may not be comparable to a similarly titled measure of other
companies.

The Company believes net debt provides useful information about its
indebtedness to investors as it is frequently used by securities
analysts, investors and other interested parties to compare the
indebtedness of companies.

Net Debt to Adjusted EBITDA Ratio

Net debt to Adjusted EBITDA ratio, presented herein, is a non-GAAP
financial measure and is included as it is frequently used by securities
analysts, investors and other interested parties to compare the
financial condition of companies. Net debt to Adjusted EBITDA ratio
should not be considered as an alternative to measures of financial
condition derived in accordance with GAAP, and it may not be comparable
to a similarly titled measure of other companies.

Comparable Hotels

The Company defines comparable hotels as those that: (i) were active and
operating in the Company's system for at least one full calendar year as
of the end of the current period, and open January 1st of the previous
year; (ii) have not undergone a change in brand or ownership type during
the current or comparable periods reported, excluding the hotels
distributed in the spin-offs; and (iii) have not sustained substantial
property damage, business interruption, undergone large-scale capital
projects or for which comparable results are not available.

Of the 5,291 hotels in the Company's system as of March 31, 2018, 4,343
hotels were classified as comparable hotels. The 948 non-comparable
hotels included 211 hotels, or approximately four percent of the total
hotels in the system, that were removed from the comparable group during
the last twelve months.

Occupancy

Occupancy represents the total number of room nights sold divided by the
total number of room nights available at a hotel or group of hotels for
a given period. Occupancy measures the utilization of the hotels'
available capacity. Management uses occupancy to gauge demand at a
specific hotel or group of hotels in a given period. Occupancy levels
also help management determine achievable average daily rate levels as
demand for hotel rooms increases or decreases.

Average Daily Rate ("ADR")

ADR represents hotel room revenue divided by total number of room nights
sold for a given period. ADR measures average room price attained by a
hotel, and ADR trends provide useful information concerning the pricing
environment and the nature of the customer base of a hotel or group of
hotels. ADR is a commonly used performance measure in the industry, and
management uses ADR to assess pricing levels that the Company is able to
generate by type of customer, as changes in rates have a different
effect on overall revenues and incremental profitability than changes in
occupancy, as described above.

Revenue per Available Room ("RevPAR")

RevPAR is calculated by dividing hotel room revenue by total number of
room nights available to guests for a given period. Management considers
RevPAR to be a meaningful indicator of the Company's performance as it
provides a metric correlated to two primary and key drivers of
operations at a hotel or group of hotels: occupancy and ADR. RevPAR is
also a useful indicator in measuring performance over comparable periods
for comparable hotels.

References to RevPAR, ADR and occupancy throughout this press release
are presented on a comparable basis and references to RevPAR and ADR are
presented on a currency neutral basis, unless otherwise noted. As such,
comparisons of these hotel operating statistics for the three months
ended March 31, 2018 and 2017 use the exchange rates for the three
months ended March 31, 2018.

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