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

MCLEAN, Va.--(BUSINESS WIRE)--Jul 25, 2018--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)

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.

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180725005129/en.