Market Overview

Hilton Reports Second Quarter Results, Achieves High End of RevPAR Guidance

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Hilton Worldwide Holdings Inc. ("Hilton" or the "Company") (NYSE:HLT)
today reported its second quarter 2018 results. All results herein,
including prior year periods, 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/20180725005129/en/

Hilton Reports FY18 Q2 Results (Graphic: Business Wire)

Hilton Reports FY18 Q2 Results (Graphic: Business Wire)

  • Diluted EPS was $0.71 for the second quarter, a 54 percent increase
    from the same period in 2017, and diluted EPS, adjusted for special
    items, was $0.70, a 37 percent increase from the same period in 2017
  • Net income for the second quarter was $217 million, an increase of
    44 percent from the same period in 2017
  • Adjusted EBITDA for the second quarter was $555 million, an
    increase of 10 percent from the same period in 2017, exceeding the
    high end of guidance
  • System-wide comparable RevPAR increased 4.0 percent on a currency
    neutral basis for the second quarter from the same period in 2017,
    driven by U.S. RevPAR growth of 3.5 percent and international RevPAR
    growth of 5.9 percent
  • Approved 28,800 new rooms for development during the second
    quarter, growing Hilton's development pipeline to 362,000 rooms as of
    June 30, 2018, representing 9 percent growth from June 30, 2017
  • Opened 17,100 rooms in the second quarter and achieved net unit
    growth of 15,800 rooms, which was an 18 percent increase from the same
    period in 2017
  • Repurchased 18.5 million shares of Hilton common stock for an
    aggregate cost of $1.3 billion during the second quarter, including
    shares repurchased from HNA and Blackstone in connection with their
    full divestitures of their investments in Hilton
  • Returned nearly $1.6 billion to shareholders through July, in the
    form of share repurchases and dividends

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton,
said, "We had another strong quarter with fundamentals driving
system-wide RevPAR growth of 4.0 percent, achieving the high end of
guidance. This growth coupled with continued net unit growth resulted in
Adjusted EBITDA growth of 10 percent, exceeding our expectations."

For the three and six months ended June 30, 2018, system-wide comparable
RevPAR grew 4.0 percent and 3.9 percent, respectively, 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 11
percent and 12 percent during the three and six months ended June 30,
2018, respectively, as a result of RevPAR growth at comparable managed
and franchised hotels of 3.9 percent for both periods, increased license
fees and the addition of new properties to Hilton's portfolio.

For the three months ended June 30, 2018, diluted EPS was $0.71 and
diluted EPS, adjusted for special items, was $0.70 compared to $0.46 and
$0.51, respectively, for the three months ended June 30, 2017. Net
income and Adjusted EBITDA were $217 million and $555 million,
respectively, for the three months ended June 30, 2018 compared to $151
million and $504 million, respectively, for the three months ended June
30, 2017.

For the six months ended June 30, 2018, diluted EPS was $1.21 and
diluted EPS, adjusted for special items, was $1.24 compared to $0.60 and
$0.89, respectively, for the six months ended June 30, 2017. Net income
and Adjusted EBITDA were $380 million and $1,000 million, respectively,
for the six months ended June 30, 2018 compared to $199 million and $914
million, respectively, for the six months ended June 30, 2017.

Development

In the second quarter of 2018, Hilton opened 123 hotels totaling 17,100
rooms and achieved net unit growth of 15,800 rooms, which was an 18
percent increase from the same period in 2017.

As of June 30, 2018, Hilton's development pipeline totaled more than
2,370 hotels consisting of 362,000 rooms throughout 105 countries and
territories, including 38 countries and territories where Hilton does
not currently have any open hotels. Additionally, 194,000 rooms in the
pipeline, or more than half, were located outside the U.S., and 186,000
rooms, or more than half, were under construction.

Balance Sheet and Liquidity

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 from an affiliate of HNA Tourism Group Co., Ltd. ("HNA") and
repay approximately $500 million outstanding under its senior secured
term loan facility.

As of June 30, 2018, Hilton had $7.7 billion of long-term debt
outstanding, excluding deferred financing costs and discount, with a
weighted average interest rate of 4.37 percent. Excluding capital lease
obligations and other debt of Hilton's consolidated variable interest
entities, Hilton had $7.4 billion of long-term debt outstanding with a
weighted average interest rate of 4.31 percent.

Total cash and cash equivalents were $505 million as of June 30, 2018,
including $82 million of restricted cash and cash equivalents. No
borrowings were outstanding under the $1.0 billion revolving credit
facility as of June 30, 2018.

Hilton repurchased 18.5 million shares of its common stock during the
second quarter of 2018 at a cost of approximately $1.3 billion and an
average price per share of $72.01, which included 1.25 million shares
repurchased from affiliates of The Blackstone Group L.P. ("Blackstone")
and 16.5 million shares repurchased from HNA. To date, Hilton has
repurchased 33.7 million shares of its common stock for approximately
$2.4 billion at an average price per share of $70.05; the amount
remaining under Hilton's previously announced stock repurchase program
is approximately $814 million.

In June 2018, Hilton paid a quarterly cash dividend of $0.15 per share
on shares of its common stock, for a total of $45 million, bringing year
to date dividends to $92 million. In July 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 September 28, 2018 to
holders of record of its common stock as of the close of business on
August 10, 2018.

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.
Refer to Hilton's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2018, which is expected to be filed on or about the date of
this press release, for the effect of the adoption on the Company's
unaudited condensed consolidated financial statements for the three and
six months ended June 30, 2017.

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 3.0 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 $2.61
    and $2.68.
  • Diluted EPS, adjusted for special items, is projected to be between
    $2.64 and $2.71.
  • Net income is projected to be between $804 million and $826 million.
  • Adjusted EBITDA is projected to be between $2,070 million and $2,100
    million, growing 8 percent to 10 percent, respectively.
  • 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 $1.8
    billion and $1.9 billion.
  • General and administrative expenses are projected to be between $420
    million and $440 million.
  • Net unit growth is expected to be approximately 6.5 percent.

Third Quarter 2018

  • System-wide RevPAR is expected to increase between 2.5 percent and 3.0
    percent on a comparable and currency neutral basis compared to the
    third quarter of 2017.
  • Diluted EPS, before special items, is projected to be between $0.71
    and $0.76.
  • Diluted EPS, adjusted for special items, is projected to be between
    $0.71 and $0.76.
  • Net income is projected to be between $215 million and $229 million.
  • Adjusted EBITDA is projected to be between $540 million and $560
    million.
  • Management and franchise fee revenue is projected to increase between
    8 percent and 10 percent compared to the third quarter of 2017.

Conference Call

Hilton will host a conference call to discuss second quarter 2018
results on July 25, 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/financial-reporting/quarterly-results/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 4089932. 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 10121446.

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.

About Hilton

Hilton (NYSE:HLT) is a leading global hospitality company, with a
portfolio of 14 world-class brands comprising more than 5,400 properties
with nearly 880,000 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

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 Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Revenues
Franchise fees $ 404 $ 355 $ 735 $ 637
Base and other management fees 84 81 161 162
Incentive management fees 59 57 114 106
Owned and leased hotels 392 373 726 669
Other revenues 22   20   45   57  
961 886 1,781 1,631
Other revenues from managed and franchised properties 1,330   1,190   2,584   2,341  
Total revenues 2,291 2,076 4,365 3,972
 
Expenses
Owned and leased hotels 352 327 672 595
Depreciation and amortization 79 83 161 169
General and administrative 115 118 219 224
Other expenses 12   11   26   34  
558 539 1,078 1,022
Other expenses from managed and franchised properties 1,327   1,213   2,602   2,409  
Total expenses 1,885 1,752 3,680 3,431
 
Operating income 406 324 685 541
 
Interest expense (95 ) (86 ) (178 ) (175 )
Gain (loss) on foreign currency transactions (12 ) 5 (1 ) 1
Loss on debt extinguishment (60 )
Other non-operating income (loss), net (1 ) 7   13   9  
 
Income before income taxes 298 250 519 316
 
Income tax expense (81 ) (99 ) (139 ) (117 )
 
Net income 217 151 380 199
Net income attributable to noncontrolling interests   (1 ) (2 ) (2 )
Net income attributable to Hilton stockholders $ 217   $ 150   $ 378   $ 197  
 
Weighted average shares outstanding:
Basic 301   327   308   328  
Diluted 303   329   311   330  
 
Earnings per share:
Basic $ 0.72   $ 0.46   $ 1.22   $ 0.60  
Diluted $ 0.71   $ 0.46   $ 1.21   $ 0.60  
 
Cash dividends declared per share $ 0.15   $ 0.15   $ 0.30   $ 0.30  
 
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING
STATISTICS
BY REGION
(unaudited)
 
Three Months Ended June 30,
Occupancy   ADR   RevPAR
2018   vs. 2017 2018   vs. 2017 2018   vs. 2017
U.S. 80.9 % 0.9 %

pts.

$ 152.49 2.3 % $ 123.38 3.5 %
Americas (excluding U.S.) 73.4 1.1 128.52 5.0 94.37 6.5
Europe 79.0 2.0 157.62 3.7 124.46 6.3
Middle East & Africa 69.1 3.6 155.52 (5.3 ) 107.49 (0.1 )
Asia Pacific 72.6 3.8 133.55 1.7 96.93 7.3
System-wide 79.5 1.3 150.76 2.3 119.89 4.0
 
 
Six Months Ended June 30,
Occupancy ADR RevPAR
2018 vs. 2017 2018 vs. 2017 2018 vs. 2017
U.S. 76.7 % 1.0 % pts. $ 149.76 1.8 % $ 114.89 3.2 %
Americas (excluding U.S.) 70.5 1.9 129.99 4.1 91.66 7.0
Europe 74.6 2.9 148.97 2.5 111.11 6.7
Middle East & Africa 71.5 4.4 156.20 (3.6 ) 111.73 2.7
Asia Pacific 71.4 4.6 137.13 2.0 97.88 9.1
System-wide 75.7 1.6 148.14 1.8 112.20 3.9
 
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING
STATISTICS
BY BRAND
(unaudited)
 
Three Months Ended June 30,
Occupancy   ADR   RevPAR
2018   vs. 2017 2018   vs. 2017 2018   vs. 2017
Waldorf Astoria Hotels & Resorts 73.3

%

1.1 % pts. $ 348.22 3.2 % $ 255.29 4.8 %
Conrad Hotels & Resorts 72.2 4.2 257.77 1.7 186.06 8.1
Canopy by Hilton 90.1 1.0 327.13 (2.5 ) 294.81 (1.4 )
Hilton Hotels & Resorts 79.2 1.4 177.51 2.6 140.54 4.4
Curio - A Collection by Hilton 77.0 0.8 215.87 4.6 166.21 5.8
DoubleTree by Hilton 77.5 1.0 138.02 2.6 107.01 3.9
Embassy Suites by Hilton 82.3 0.5 167.09 1.7 137.52 2.4
Hilton Garden Inn 80.0 1.8 138.10 2.0 110.49 4.4
Hampton by Hilton 79.1 1.3 126.94 1.7 100.45 3.4
Homewood Suites by Hilton 84.6 0.8 143.66 2.2 121.51 3.2
Home2 Suites by Hilton 82.5 2.9 122.13 2.6 100.80 6.4
System-wide 79.5 1.3 150.76 2.3 119.89 4.0
 
 
Six Months Ended June 30,
Occupancy ADR RevPAR
2018 vs. 2017 2018 vs. 2017 2018 vs. 2017
Waldorf Astoria Hotels & Resorts 73.2 % 1.8 % pts. $ 363.53 3.7 % $ 265.96 6.3 %
Conrad Hotels & Resorts 72.4 7.1 253.59 183.51 11.0
Canopy by Hilton 90.5 0.1 311.16 2.4 281.56 2.5
Hilton Hotels & Resorts 76.0 1.9 174.77 1.7 132.84 4.3
Curio - A Collection by Hilton 74.9 2.2 218.98 4.2 164.05 7.3
DoubleTree by Hilton 74.1 1.3 135.62 2.2 100.49 4.0
Embassy Suites by Hilton 79.1 0.3 164.91 1.5 130.42 1.9
Hilton Garden Inn 76.2 1.9 133.52 1.4 101.76 4.0
Hampton by Hilton 74.1 1.2 123.42 1.3 91.45 3.0
Homewood Suites by Hilton 81.0 1.6 140.48 1.9 113.82 3.9
Home2 Suites by Hilton 78.6 4.5 118.06 2.2 92.77 8.4
System-wide 75.7 1.6 148.14 1.8 112.20 3.9
 
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING
STATISTICS
BY SEGMENT
(unaudited)
 
Three Months Ended June 30,
Occupancy   ADR   RevPAR
2018   vs. 2017 2018   vs. 2017 2018   vs. 2017
Management and franchise 79.5 %

1.3

%

pts.

$ 149.46 2.2 % $ 118.81 3.9 %
Ownership(1) 80.4 1.3 196.81 2.7 158.27 4.5
System-wide 79.5 1.3 150.76 2.3 119.89 4.0
 
 
Six Months Ended June 30,
Occupancy ADR RevPAR
2018 vs. 2017 2018 vs. 2017 2018 vs. 2017
Management and franchise 75.7 % 1.6 % pts. $ 147.00 1.7 % $ 111.31 3.9 %
Ownership(1) 76.2 1.4 188.66 2.7 143.73 4.6
System-wide 75.7 1.6 148.14 1.8 112.20 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 June 30, 2018
 
Owned / Leased(1) Managed Franchised Total
Properties   Rooms Properties   Rooms Properties   Rooms Properties   Rooms
Waldorf Astoria Hotels & Resorts
U.S. 1 215 12 5,455 13 5,670
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 2 402
Europe 4 1,155 4 1,155
Middle East & Africa 1 614 2 993 3 1,607
Asia Pacific 1 164 17 5,034 1 654 19 5,852
Canopy by Hilton
U.S. 4 655 4 655
Europe 1 112 1 112
Hilton Hotels & Resorts
U.S. 67 48,760 176 53,615 243 102,375
Americas (excluding U.S.) 1 405 25 9,240 17 5,661 43 15,306
Europe 53 14,421 49 15,440 39 10,636 141 40,497
Middle East & Africa 5 1,998 43 13,409 2 605 50 16,012
Asia Pacific 7 3,437 86 31,475 7 2,826 100 37,738
Curio - A Collection by Hilton
U.S. 4 1,981 30 6,397 34 8,378
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 1 50 3 498
DoubleTree by Hilton
U.S. 37 12,274 309 72,719 346 84,993
Americas (excluding U.S.) 4 809 22 4,463 26 5,272
Europe 12 3,347 85 14,850 97 18,197
Middle East & Africa 10 2,350 5 597 15 2,947
Asia Pacific 51 14,772 2 965 53 15,737
Tapestry Collection by Hilton
U.S. 9 1,112 9 1,112
Embassy Suites by Hilton
U.S. 42 11,145 199 45,019 241 56,164
Americas (excluding U.S.) 3 667 6 1,491 9 2,158
Hilton Garden Inn
U.S. 5 537 641 88,802 646 89,339
Americas (excluding U.S.) 10 1,406 37 5,834 47 7,240
Europe 20 3,683 42 6,888 62 10,571
Middle East & Africa 8 1,777 1 175 9 1,952
Asia Pacific 24 5,096 24 5,096
Hampton by Hilton
U.S. 46 5,639 2,117 207,154 2,163 212,793
Americas (excluding U.S.) 13 1,677 91 10,827 104 12,504
Europe 16 2,602 58 8,995 74 11,597
Asia Pacific 40 6,327 40 6,327
Tru by Hilton
U.S. 33 3,171 33 3,171
Homewood Suites by Hilton
U.S. 21 2,261 424 48,366 445 50,627
Americas (excluding U.S.) 3 358 20 2,188 23 2,546
Home2 Suites by Hilton
U.S. 2 198 232 23,873 234 24,071
Americas (excluding U.S.) 3 317 3 317
Other     3   1,450   1   250   4   1,700
Hotels 71 21,717 662 210,231 4,672 639,034 5,405 870,982
Hilton Grand Vacations         51   8,367   51   8,367
Total 71   21,717   662   210,231   4,723   647,401   5,456   879,349
____________
(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        
June 30,

Increase / (Decrease)

2018     2017 $ %
Capital expenditures for property and equipment(1) $ 18 $ 9 9 NM(3)
Capitalized software costs(2)   23   20 3 15.0
Total capital expenditures 41 29 12 41.4
Contract acquisition costs   24   19 5 26.3
Total capital expenditures and contract acquisition costs $ 65 $ 48 17 35.4
 
 
Six Months Ended
June 30, Increase / (Decrease)
2018 2017 $ %
Capital expenditures for property and equipment(1) $ 28 $ 18 10 55.6
Capitalized software costs(2)   38   29 9 31.0
Total capital expenditures 66 47 19 40.4
Contract acquisition costs   38   32 6 18.8
Total capital expenditures and contract acquisition costs $ 104 $ 79 25 31.6
 
____________
(1)   Includes expenditures for hotels, corporate and other property
and equipment. Also includes $2 million and $4 million of
expenditures that were reimbursed by hotel owners for the three
months ended June 30, 2018 and 2017, respectively, and $4 million
and $5 million for the six months ended June 30, 2018 and 2017,
respectively.
(2) Includes $18 million and $11 million of expenditures that were
reimbursed by hotel owners for the three months ended June 30, 2018
and 2017, respectively, and $25 million and $15 million for the six
months ended June 30, 2018 and 2017, respectively.
(3) Fluctuation in terms of percentage change is not meaningful.
   
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 Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Net income attributable to Hilton stockholders, as reported $ 217 $ 150 $ 378 $ 197
Diluted EPS, as reported $ 0.71 $ 0.46 $ 1.21 $ 0.60
Special items:
Net other expenses (revenues) from managed and franchised properties $ (3 ) $ 23 $ 18 $ 68
Asset dispositions(1) 1 2 3 9
Loss on debt extinguishment 60
Transaction costs(2) 5 15
Financing transactions(3) 7 7 5
Tax-related adjustments(4) (11 ) (11 )
Other adjustments(5)     (6 )  
Total special items before tax (6 ) 30 11 157
Income tax expense on special items (1 ) (11 ) (4 ) (60 )
Total special items after tax $ (7 ) $ 19   $ 7   $ 97  
 
Net income, adjusted for special items $ 210   $ 169   $ 385   $ 294  
Diluted EPS, adjusted for special items $ 0.70   $ 0.51   $ 1.24   $ 0.89  
____________
(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. (the
"spin-offs") that were recognized in general and administrative
expenses.
(3) Includes expenses incurred in connection with the April 2018
and March 2017 refinancings of the senior secured term loan facility
that were recognized in other non-operating income (loss), net.
(4) Includes a tax benefit to adjust a provisional amount
recognized in relation to the Tax Cuts and Jobs Act enacted in
December 2017, which did not have an effect on cash paid for taxes
during the quarter.
(5) 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 (loss), net.
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

(unaudited, dollars in millions)

 
    Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
Net income $ 217 $ 151 $ 380 $ 199
Interest expense 95 86 178 175
Income tax expense 81 99 139 117
Depreciation and amortization   79     83     161     169  
EBITDA 472 419 858 660
Loss (gain) on foreign currency transactions 12 (5 ) 1 (1 )
Loss on debt extinguishment 60
FF&E replacement reserves 15 15 27 21
Share-based compensation expense 40 34 68 59
Amortization of contract acquisition costs 7 5 14 8
Net other expenses (revenues) from managed and franchised properties (3 ) 23 18 68
Other adjustment items(1)   12     13     14     39  
Adjusted EBITDA $ 555   $ 504   $ 1,000   $ 914  
 

____________

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

 
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Total revenues, as reported $ 2,291 $ 2,076 $ 4,365 $ 3,972
Add: amortization of contract acquisition costs 7 5 14 8
Less: other revenues from managed and franchised properties   (1,330 )   (1,190 )   (2,584 )   (2,341 )
Total revenues, as adjusted $ 968   $ 891   $ 1,795   $ 1,639  
 
Adjusted EBITDA $ 555 $ 504 $ 1,000 $ 914
 
Adjusted EBITDA margin   57.3 %   56.6 %   55.7 %   55.8 %
 
   
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO
(unaudited, dollars in millions)
 
June 30, December 31,
2018 2017
Long-term debt, including current maturities $ 7,575 $ 6,602
Add: unamortized deferred financing costs and discount 90   81  
Long-term debt, including current maturities and excluding
unamortized deferred financing costs and discount
7,665 6,683
Add: Hilton's share of unconsolidated affiliate debt, excluding
unamortized deferred financing costs
15 13
Less: cash and cash equivalents (423 ) (570 )
Less: restricted cash and cash equivalents (82 ) (100 )
Net debt $ 7,175   $ 6,026  
 
 
Six Months Ended Year Ended TTM(1)
June 30, December 31, June 30,
2018   2017 2017 2018
Net income $ 380 $ 199 $ 1,089 $ 1,270
Interest expense 178 175 351 354
Income tax expense (benefit) 139 117 (336 ) (314 )
Depreciation and amortization 161   169   336   328  
EBITDA 858 660 1,440 1,638
Loss (gain) on foreign currency transactions 1 (1 ) (3 ) (1 )
Loss on debt extinguishment 60 60
FF&E replacement reserves 27 21 55 61
Share-based compensation expense 68 59 121 130
Amortization of contract acquisition costs 14 8 17 23
Net other expenses from managed and franchised properties 18 68 172 122
Other adjustment items(2) 14   39   47   22  
Adjusted EBITDA $ 1,000   $ 914   $ 1,909   $ 1,995  
 
Net debt $ 7,175
 
Net debt to Adjusted EBITDA ratio 3.6  
 
____________
(1)  

Trailing twelve months ("TTM") June 30, 2018 is calculated as
the six months ended June 30, 2018 plus the year ended December
31, 2017 less the six months ended June 30, 2017.

(2)

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
September 30, 2018
Low Case   High Case
Net income attributable to Hilton stockholders, before special items $ 214 $ 228
Diluted EPS, before special items $ 0.71 $ 0.76
 
Net income, adjusted for special items $ 214   $ 228  
Diluted EPS, adjusted for special items(1) $ 0.71   $ 0.76  
 
 
Year Ending
December 31, 2018
Low Case High Case
Net income attributable to Hilton stockholders, before special items $ 800 $ 822
Diluted EPS, before special items $ 2.61 $ 2.68
Special items(2):
Net other expenses from managed and franchised properties $ 18 $ 18
Asset dispositions 3 3
Financing transactions 7 7
Tax-related adjustments (11 ) (11 )
Other adjustments (6 ) (6 )
Total special items before tax 11 11
Income tax expense on special items (4 ) (4 )
Total special items after tax $ 7   $ 7  
 
Net income, adjusted for special items $ 807   $ 829  
Diluted EPS, adjusted for special items(1) $ 2.64   $ 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
September 30, 2018
Low Case   High Case
Net income $ 215 $ 229
Interest expense 97 97
Income tax expense 88 94
Depreciation and amortization 81   81
EBITDA 481 501
FF&E replacement reserves 13 13
Share-based compensation expense 36 36
Amortization of contract acquisition costs 7 7
Other adjustment items(1) 3   3
Adjusted EBITDA $ 540   $ 560
 
 
Year Ending
December 31, 2018
Low Case High Case
Net income $ 804 $ 826
Interest expense 374 374
Income tax expense 313 321
Depreciation and amortization 324   324
EBITDA 1,815 1,845
Loss on foreign currency transactions 2 2
FF&E replacement reserves 53 53
Share-based compensation expense 132 132
Amortization of contract acquisition costs 28 28
Net other expenses from managed and franchised properties 18 18
Other adjustment items(1) 22   22
Adjusted EBITDA $ 2,070   $ 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 June 30, 2018, which is calculated as the six
months ended June 30, 2018 plus the year ended December 31, 2017 less
the six months ended June 30, 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.

During the first quarter of 2018, the Company modified the definition of
Adjusted EBITDA to 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 items 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 reserves 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 contractually does not operate the related
programs to generate a profit over the terms of the respective
agreements; 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 5,405 hotels in the Company's system as of June 30, 2018, 4,306
hotels were classified as comparable hotels. The 1,099 non-comparable
hotels included 194 hotels, or approximately four percent of the total
hotels in the system, that were removed from the comparable group during
the last twelve months because they sustained substantial property
damage, business interruption, underwent large-scale capital projects or
comparable results were not available.

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 pricing
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 and six
months ended June 30, 2018 and 2017 use the exchange rates for the three
and six months ended June 30, 2018, respectively.

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