Hilton Results

Hilton Raises Full Year Outlook

System-wide comparable RevPAR increased 1.8 percent on a currency neutral basis for the second quarter compared to the prior year

Hilton

Hilton Worldwide Holdings Inc. (NYSE: HLT) today reported its second quarter 2017 results. All results herein present the performance of Hilton giving effect to the spin-offs of Park Hotels & Resorts Inc. and Hilton Grand Vacations Inc. on January 3, 2017, with the historical financial results of Park and HGV reflected as discontinued operations. Additionally, all historical share and share-related information presented herein have been retrospectively adjusted to reflect the 1-for-3 reverse stock split of Hilton's outstanding common stock that occurred on January 3, 2017 . Highlights include:

  • Diluted EPS from continuing operations for the second quarter was $0.51 and diluted EPS, adjusted for special items, was $0.52, an increase of 30 percent from the second quarter of 2016 on a pro forma basis
  • Net income for the second quarter was $167 million
  • Adjusted EBITDA for the second quarter was $519 million, an increase of 10 percent from pro forma Adjusted EBITDA for the second quarter of 2016
  • Adjusted EBITDA margin was 57.0 percent, an increase of 340 basis points from pro forma Adjusted EBITDA margin for the second quarter of 2016
  • System-wide comparable RevPAR increased 1.8 percent on a currency neutral basis for the second quarter compared to the prior year
  • Added 13,400 net rooms in the second quarter, representing approximately 30 percent growth from the same period in 2016
  • Approved 27,400 new rooms for development during the second quarter, growing Hilton's development pipeline to a record 332,000 rooms, representing 15 percent growth from June 30, 2016
  • Repurchased 4.5 million shares of Hilton common stock for an aggregate cost of $282 million during the second quarter, and 6.8 million shares at an aggregate cost of $425 million since share repurchases began in March 2017
  • Raised Adjusted EBITDA guidance for full year 2017 to between $1,880 million and $1,920 million, an increase of $20 million at the midpoint
  • Raised cash available for capital return guidance for full year 2017 to between $1.0 billion and $1.1 billion, an increase of $100 million at the midpoint

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "We had another successful quarter, exceeding the high end of our guidance for Adjusted EBITDA and diluted EPS, adjusted for special items, and as a result, we are increasing our full year outlook, including our expectations for capital return. Fundamentals remain largely stable around the world, and we maintain our expectations for full year RevPAR growth of 1.0 percent to 3.0 percent. Development activity continues to be strong with nearly 1 in 4 rooms under construction globally set to become part of our portfolio. Additionally, we expect to increase our luxury distribution by approximately 15 percent this year, including openings in the quarter, such as the Waldorf Astoria Beverly Hills, Conrad Osaka, Conrad Guangzhou and Conrad San Luis Potosi."

For the three months ended June 30, 2017, system-wide comparable RevPAR grew 1.8 percent primarily from increased ADR, benefiting from strength at our international hotels. Management fee and franchise fee revenues increased as a result of increases in RevPAR of 1.7 percent at comparable managed and franchised hotels, as well as from the addition of new managed and franchised properties to Hilton's portfolio.

For the six months ended June 30, 2017, system-wide comparable RevPAR grew 2.4 percent from both increased occupancy and ADR. Management fee and franchise fee revenues increased as a result of increases in RevPAR of 2.3 percent at comparable managed and franchised hotels, as well as from the addition of new managed and franchised properties to Hilton's portfolio.

2017 vs. 2016 Pro Forma Results

For the three months ended June 30, 2017, diluted earnings per share ("EPS") from continuing operations was $0.51 compared to $0.40 on a pro forma basis for the three months ended June 30, 2016, and diluted EPS, adjusted for special items, was $0.52 for the three months ended June 30, 2017 compared to $0.40 on a pro forma basis for the three months ended June 30, 2016. Income from continuing operations, net of taxes was $167 million for the three months ended June 30, 2017 compared to $137 million on a pro forma basis for the three months ended June 30, 2016. Adjusted EBITDA increased 10 percent to $519 million for the three months ended June 30, 2017 compared to $472 million on a pro forma basis for the three months ended June 30, 2016. Management and franchise fees increased 11 percent compared to the pro forma three months ended June 30, 2016.

For the six months ended June 30, 2017, diluted EPS from continuing operations was $0.73 compared to $1.08 on a pro forma basis for the six months ended June 30, 2016, and diluted EPS, adjusted for special items, was $0.90 for the six months ended June 30, 2017 compared to $0.65 on a pro forma basis for the six months ended June 30, 2016. Income from continuing operations, net of taxes was $242 million for the six months ended June 30, 2017 compared to $360 million on a pro forma basis for the six months ended June 30, 2016. Adjusted EBITDA increased 12 percent to $943 million for the six months ended June 30, 2017 compared to $839 million on a pro forma basis for the six months ended June 30, 2016. Management and franchise fees increased 9 percent compared to the pro forma six months ended June 30, 2016.

2017 vs. 2016 Actual Results

For the three months ended June 30, 2017, diluted EPS from continuing operations was $0.51 compared to $0.29 for the three months ended June 30, 2016, and diluted EPS, adjusted for special items, was $0.52 for the three months ended June 30, 2017 compared to $0.29 for the three months ended June 30, 2016. Income from continuing operations, net of taxes was $167 million for the three months ended June 30, 2017 compared to $100 million for the three months ended June 30, 2016. Adjusted EBITDA was $519 million for the three months ended June 30, 2017 compared to $412 million for the three months ended June 30, 2016.

For the six months ended June 30, 2017, diluted EPS from continuing operations was $0.73 compared to $0.87 for the six months ended June 30, 2016, and diluted EPS, adjusted for special items, was $0.90 for the six months ended June 30, 2017 compared to $0.44 for the six months ended June 30, 2016. Income from continuing operations, net of taxes was $242 million for the six months ended June 30, 2017 compared to $291 million for the six months ended June 30, 2016. Adjusted EBITDA was $943 million for the six months ended June 30, 2017 compared to $727 million for the six months ended June 30, 2016.

Development

In the second quarter of 2017, Hilton opened 107 hotels consisting of 15,600 rooms, achieving net unit growth of 13,400 rooms, which is nearly 30 percent higher than in the second quarter of 2016.

As of June 30, 2017, Hilton's development pipeline totaled approximately 332,000 rooms at 2,153 hotels throughout 104 countries and territories, including 36 countries and territories where Hilton does not currently have any open hotels. Of the rooms in the pipeline, 169,000 rooms, or more than half of the pipeline, were located outside the U.S., and over 169,000 rooms were under construction.

Hilton opened the first Tapestry Collection by Hilton in Syracuse, New York in May 2017, just four months after the brand's launch, and as of July 2017, 78 Tapestry hotels were in the pipeline or in various stages of approval. In the second quarter of 2017, Tru by Hilton, which launched in 2016, opened its first three hotels and, as of July 2017, had 420 hotels in the pipeline or in various stages of approval.

Balance Sheet and Liquidity

As of June 30, 2017, Hilton had $6.7 billion of long-term debt outstanding, excluding deferred financing costs and discount, with a weighted average interest rate of 4.1 percent.

Total cash and cash equivalents were $909 million as of June 30, 2017, including $125 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of June 30, 2017.

During the second quarter of 2017, Hilton repurchased 4.5 million shares of common stock at a cost of approximately $282 million at an average price per share of $63.31. Since repurchases began in March 2017 through July 2017, Hilton repurchased 6.8 million shares for approximately $425 million.

In June 2017, Hilton paid a quarterly cash dividend of $0.15 per share on shares of its common stock, for a total of $49 million. In July 2017, 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 29, 2017 to holders of record of its common stock as of the close of business on August 18, 2017.

Outlook

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

Full Year 2017

  • System-wide RevPAR is expected to increase between 1.0 percent and 3.0 percent on a comparable and currency neutral basis compared to 2016.
  • Diluted EPS, before special items, is projected to be between $1.61 and $1.68.
  • Diluted EPS, adjusted for special items, is projected to be between $1.78 and $1.85.
  • Net income is projected to be between $534 million and $559 million.
  • Adjusted EBITDA is projected to be between $1,880 million and $1,920 million.
  • Management and franchise fee revenue is projected to increase between 8 percent and 10 percent compared to 2016 on a pro forma basis.
  • Capital expenditures, excluding amounts reimbursed by hotel owners, are expected to be between $150 million and $200 million.
  • Cash available for capital return is projected to be between $1.0 billion and $1.1 billion.
  • General and administrative expenses are projected to be between $430 million and $440 million, including approximately $30 million of transaction-related costs.
  • Net unit growth is expected to be approximately 50,000 rooms to 55,000 rooms.

Third Quarter 2017

  • System-wide RevPAR is expected to increase between 0.0 percent and 2.0 percent on a comparable and currency neutral basis compared to the third quarter of 2016.
  • Diluted EPS, before special items, is projected to be between $0.47 and $0.51.
  • Diluted EPS, adjusted for special items, is projected to be between $0.47 and $0.51.
  • Net income is projected to be between $156 million and $169 million.
  • Adjusted EBITDA is projected to be between $490 million and $510 million.
  • Management and franchise fee revenue is projected to increase between 7 percent and 9 percent compared to the third quarter of 2016 on a pro forma basis.

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; net debt to Adjusted EBITDA ratio; and trailing twelve month financial information. See the schedules to this press release including the "Definitions" section for additional information and reconciliations of such non-GAAP financial measures.

Pro Forma Financial Information

This press release includes pro forma financial information for Hilton adjusted to reflect the spin-offs, including: unaudited pro forma condensed consolidated statements of operations; pro forma net income and diluted EPS, adjusted for special items; pro forma Adjusted EBITDA; pro forma Adjusted EBITDA margin; and pro forma net debt to Adjusted EBITDA ratio. The unaudited pro forma financial information has been prepared to reflect the spin-offs as if they had occurred on January 1, 2016. See “Definitions—Pro Forma Adjustments” for additional details. The unaudited 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 the spin-offs occurred on the date indicated or what Hilton's results of operations will be after giving effect to the completion of the spin-offs.

In addition to the pro forma financial information herein, refer to Hilton's Current Report on Form 8-K filed with the SEC on January 4, 2017 for additional information.

About Hilton

Hilton (NYSE: HLT) is a leading global hospitality company, with a portfolio of 14 world-class brands comprising more than 5,000 properties with over 825,000 rooms in 103 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.

 
HILTON WORLDWIDE HOLDINGS INC.
EARNINGS RELEASE SCHEDULES
TABLE OF CONTENTS
 
 

Condensed Consolidated Statements of Operations and Pro Forma Condensed Consolidated Statements of Operations

Comparable and Currency Neutral System-Wide Hotel Operating Statistics
Property Summary
Capital Expenditures
Non-GAAP Financial Measures Reconciliations
Definitions
 
 
HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share data)
 
Three Months Ended June 30,
2017   2016
(as reported) (as reported)  

(pro forma

adjustments(1))

  (pro forma)
Revenues  
Franchise fees $ 372 $ 311 $ 22 (a) $ 333
Base and other management fees 85 60 22 (a) 82
Incentive management fees 56 33 16 (a) 49
Owned and leased hotels 377 398 398
Other revenues 20   18     18  
910 820 60 880
Other revenues from managed and franchised properties 1,436   1,130   289   (b) 1,419  

Total revenues

2,346 1,950 349 2,299
 
Expenses
Owned and leased hotels 330 349 349
Depreciation and amortization 87 91 91
General and administrative 117 97 97
Other expenses 11   11     11  
545 548 548
Other expenses from managed and franchised properties 1,436   1,130   289   (b) 1,419  
Total expenses 1,981 1,678 289 1,967
 
Gain on sales of assets, net 1 1
 
Operating income 365 273 60 333
 
Interest expense (100 ) (99 ) (99 )
Gain (loss) on foreign currency transactions 5 (14 ) (14 )
Other non-operating income, net 5   3     3  
 
Income from continuing operations before income taxes 275 163 60 223
 
Income tax expense (108 ) (63 ) (23 ) (c) (86 )
 
Income from continuing operations, net of taxes 167 100 37 137
Income from discontinued operations, net of taxes   144     144  
Net income 167 244 37 281
Net income attributable to noncontrolling interests (1 ) (5 )   (5 )
Net income attributable to Hilton stockholders $ 166   $ 239   $ 37   $ 276  
 
Weighted average shares outstanding(2)
Basic 327   329   (d) 329  
Diluted 329   330   (d) 330  
 
Earnings per share
Basic:
Net income from continuing operations per share $ 0.51 $ 0.29 $ 0.40  
Net income from discontinued operations per share   0.44  
Net income per share $ 0.51   $ 0.73  
 
Diluted:
Net income from continuing operations per share $ 0.51 $ 0.29 $ 0.40  
Net income from discontinued operations per share   0.43  
Net income per share $ 0.51   $ 0.72  
 
Cash dividends declared per share(2) $ 0.15   $ 0.21   $ 0.21  
 
 
HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share data)
 
  Six Months Ended June 30,
2017   2016
(as reported) (as reported)  

(pro forma

adjustments(1))

  (pro forma)
Revenues  
Franchise fees $ 666 $ 564 $ 40 (a) $ 604
Base and other management fees 168 120 41 (a) 161
Incentive management fees 108 69 30 (a) 99
Owned and leased hotels 677 717 717
Other revenues 57   35     35  
1,676 1,505 111 1,616
Other revenues from managed and franchised properties 2,831   2,171   587   (b) 2,758  
Total revenues 4,507 3,676 698 4,374
 
Expenses
Owned and leased hotels 602 656 656
Depreciation and amortization 176 183 183
Impairment loss 15 15
General and administrative 222 180 180
Other expenses 34   29     29  
1,034 1,063 1,063
Other expenses from managed and franchised properties 2,831   2,171   587   (b) 2,758  
Total expenses 3,865 3,234 587 3,821
 
Gain on sales of assets, net 1 1
 
Operating income 642 443 111 554
 
Interest expense (204 ) (189 ) (189 )
Gain (loss) on foreign currency transactions 1 (26 ) (26 )
Loss on debt extinguishment (60 )
Other non-operating income, net 6   5     5  
 
Income from continuing operations before income taxes 385 233 111 344
 
Income tax benefit (expense) (143 ) 58   (42 ) (c) 16  
 
Income from continuing operations, net of taxes 242 291 69 360
Income from discontinued operations, net of taxes   263     263  
Net income 242 554 69 623
Net income attributable to noncontrolling interests (2 ) (6 )   (6 )
Net income attributable to Hilton stockholders $ 240   $ 548   $ 69   $ 617  
 
Weighted average shares outstanding(2)
Basic 328   329   (d) 329  
Diluted 330   330   (d) 330  
 
Earnings per share
Basic:
Net income from continuing operations per share $ 0.73 $ 0.88 $ 1.08  
Net income from discontinued operations per share   0.79  
Net income per share $ 0.73   $ 1.67  
 
Diluted:
Net income from continuing operations per share $ 0.73 $ 0.87 $ 1.08  
Net income from discontinued operations per share   0.79  
Net income per share $ 0.73   $ 1.66  
 
Cash dividends declared per share(2) $ 0.30   $ 0.42   $ 0.42  
 
 
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY REGION
(unaudited)
 
  Three Months Ended June 30,
Occupancy   ADR   RevPAR
2017   vs. 2016 2017   vs. 2016 2017   vs. 2016
U.S. 80.3 %

(0.5

)%

 

pts.

$ 149.27 1.1 % $ 119.89 0.5 %
Americas (excluding U.S.) 74.0 2.5 123.27 2.9 91.24 6.5
Europe 78.2 2.6 145.41 2.9 113.69 6.5
Middle East & Africa 64.1 4.5 171.44 2.0 109.96 9.6
Asia Pacific 71.9 5.2 136.15 (0.9 ) 97.89 6.9
System-wide 78.8 0.4 147.37 1.2 116.09 1.8
 
Six Months Ended June 30,
Occupancy ADR RevPAR
2017 vs. 2016 2017 vs. 2016 2017 vs. 2016
U.S. 76.2 %

0.2

%

pts.

$ 147.19 1.2 % $ 112.13 1.5 %
Americas (excluding U.S.) 70.8 2.1 125.80 1.5 89.10 4.6
Europe 73.0 3.5 135.26 2.1 98.75 7.3
Middle East & Africa 65.4 3.7 162.86 (2.7 ) 106.58 3.1
Asia Pacific 70.7 5.7 138.21 (2.3 ) 97.70 6.3
System-wide 74.9 1.1 144.89 0.9 108.58 2.4
 
 
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY BRAND
(unaudited)
 
 

Three Months Ended June 30,

Occupancy   ADR   RevPAR
2017   vs. 2016 2017   vs. 2016 2017   vs. 2016
Waldorf Astoria Hotels & Resorts 72.2 % 1.3 %   pts. $ 328.29 5.6 % $ 237.07 7.6 %
Conrad Hotels & Resorts 71.0 2.4 240.66 (0.5 ) 170.87 3.0
Hilton Hotels & Resorts 78.0 1.5 170.64 0.9 133.10 2.9
Curio - A Collection by Hilton 76.3 4.7 193.61 0.9 147.76 7.5
DoubleTree by Hilton 77.5 1.0 137.11 1.0 106.20 2.4
Embassy Suites by Hilton 82.2 (0.6 ) 165.61 1.1 136.16 0.4
Hilton Garden Inn 79.0 (0.5 ) 136.60 0.9 107.86 0.2
Hampton by Hilton 78.5 (0.4 ) 124.59 1.2 97.84 0.7
Homewood Suites by Hilton 83.9 0.6 138.45 0.8 116.15 1.6
Home2 Suites by Hilton 82.4 1.4 120.35 1.4 99.22 3.2
System-wide 78.8 0.4 147.37 1.2 116.09 1.8
 
Six Months Ended June 30,
Occupancy

ADR

RevPAR
2017 vs. 2016

2017

vs. 2016 2017 vs. 2016
Waldorf Astoria Hotels & Resorts

71.8

%

0.7

%

pts.

$

342.93

3.5 % $ 246.16 4.5 %
Conrad Hotels & Resorts 70.0 2.6

 

244.66

(2.9 ) 171.27 0.9
Hilton Hotels & Resorts 74.7 1.8

 

167.68

0.7 125.18 3.2
Curio - A Collection by Hilton 71.1 6.0

 

197.76

(0.1 ) 140.69 9.1
DoubleTree by Hilton 74.0 1.4

 

134.58

0.9 99.58 2.9
Embassy Suites by Hilton 79.4 0.6

 

163.66

1.2 129.93 1.9
Hilton Garden Inn 75.2 0.5

 

132.44

0.7 99.63 1.3
Hampton by Hilton 73.6 0.4

 

121.36

1.0 89.36 1.5
Homewood Suites by Hilton 79.8 1.4

 

136.18

0.5 108.65 2.3
Home2 Suites by Hilton 78.1 2.9

 

116.36

1.3 90.86 5.2
System-wide 74.9 1.1

 

144.89

0.9 108.58 2.4
 
 
HILTON WORLDWIDE HOLDINGS INC.
PROPERTY SUMMARY
As of June 30, 2017
 

By Brand

           
Americas Middle East &
U.S. (excluding U.S.) Europe Africa Asia Pacific Total
Prop.   Rooms Prop.   Rooms Prop.   Rooms Prop.   Rooms Prop.   Rooms

Prop.

 

Rooms

Waldorf Astoria Hotels & Resorts 13 5,670 2 1,126 6 1,361 3 703 2 434 26 9,294
Conrad Hotels & Resorts 4 1,316 2 428 4 1,155 4 1,693 18 5,570 32 10,162
Canopy by Hilton 1 112 1 112
Hilton Hotels & Resorts 243 101,366 43 15,121 140 40,137 52 17,155 94 35,883 572 209,662
Curio - A Collection by Hilton 28 6,935 5 973 4 485 1 201 1 266 39 8,860
DoubleTree by Hilton 331 82,336 22 4,400 90 16,312 13 2,600 48 14,050 504 119,698
Tapestry Collection by Hilton 1 58 1 58
Embassy Suites by Hilton 227 53,207 8 1,989 235 55,196
Hilton Garden Inn 618 85,253 41 6,248 56 9,626 7 1,561 19 4,149 741 106,837
Hampton by Hilton 2,108 206,956 97 11,693 57 8,743 15 2,443 2,277 229,835
Tru by Hilton 3 288 3 288
Homewood Suites by Hilton 416 47,213 19 2,139 435 49,352
Home2 Suites by Hilton 155 16,054 3 317 158 16,371
Other 3 1,155 3 400 1 366 7 1,921
Hilton Grand Vacations 43   7,856       5   245           48   8,101
Total properties 4,193   615,663   242   44,434   366   78,576   81   24,279   197   62,795   5,079   825,747
 

By Ownership

Prop.

Rooms

Owned and leased(1)

74

22,334

Managed

633

202,476

Franchised

4,324

 

592,836

Total hotels

5,031

817,646

Timeshare

48

 

8,101

Total properties

5,079

 

825,747

 

HILTON WORLDWIDE HOLDINGS INC.

CAPITAL EXPENDITURES

(unaudited, dollars in millions)

 
  Three Months Ended

June 30,

  Increase / (Decrease)
2017   2016 $   %
Capital expenditures for property and equipment(1) $ 9 $ 13 (4 ) (30.8 )
Capitalized software costs(2) 20 21 (1 ) (4.8 )
Contract acquisition costs   19   9 10   NM(3)
Total capital expenditures $ 48 $ 43 5   11.6
 
Six Months Ended

June 30,

Increase / (Decrease)
2017 2016 $ %
Capital expenditures for property and equipment(1) $ 18 $ 29 (11 ) (37.9 )
Capitalized software costs(2) 29 32 (3 ) (9.4 )
Contract acquisition costs   32   18 14   77.8
Total capital expenditures $ 79 $ 79  
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS AND

PRO FORMA NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS

(unaudited, in millions, except per share data)

 
  Three Months Ended

June 30,

  Six Months Ended

June 30,

2017   2016 2017   2016
Income from continuing operations attributable to Hilton stockholders, net of taxes, as reported $ 166 $ 96 $ 240 $ 288
Diluted EPS from continuing operations, as reported $ 0.51 $ 0.29 $ 0.73 $ 0.87
Special items:
Loss on debt extinguishment $ $ $ 60 $
Transaction costs(1) 5 15
Financing transactions(2) 5
Asset dispositions(3) 2 1 9 2
Impairment loss 15
Tax-related adjustments(4)             (153 )
Total special items before tax 7 1 89 (136 )
Income tax expense on special items   (2 )     (33 )   (6 )
Total special items after tax $ 5   $ 1 $ 56   $ (142 )
 
Net income, adjusted for special items $ 171   $ 97 $ 296   $ 146  
Diluted EPS, adjusted for special items $ 0.52   $ 0.29 $ 0.90   $ 0.44  
 
Net income, adjusted for special items, including pro forma adjustments(5) $ 134 $ 215  
Diluted EPS, adjusted for special items, including pro forma adjustments(5) $ 0.40 $ 0.65  
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

ADJUSTED EBITDA AND PRO FORMA ADJUSTED EBITDA

(unaudited, dollars in millions)

 
  Three Months Ended June 30,
2017   2016
(as reported) (as reported)   (pro forma)
Income from continuing operations, net of taxes $ 167 $ 100 $ 137
Interest expense 100 99 99
Income tax expense 108 63 86
Depreciation and amortization   87     91     91  
EBITDA 462 353 413
Gain on sales of assets, net (1 ) (1 )
Loss (gain) on foreign currency transactions (5 ) 14 14
FF&E replacement reserve 15 16 16
Share-based compensation expense 34 23 23
Other adjustment items(1)   13     7     7  
Adjusted EBITDA $ 519   $ 412   $ 472  
 
Six Months Ended June 30,
2017 2016
(as reported) (as reported) (pro forma)
Income from continuing operations, net of taxes $ 242 $ 291 $ 360
Interest expense 204 189 189
Income tax expense (benefit) 143 (58 ) (16 )
Depreciation and amortization   176     183     183  
EBITDA 765 605 716
Gain on sales of assets, net (1 ) (1 )
Loss (gain) on foreign currency transactions (1 ) 26 26
Loss on debt extinguishment 60
FF&E replacement reserve 21 28 28
Share-based compensation expense 59 39 40
Impairment loss 15 15
Other adjustment items(1)   39     15     15  
Adjusted EBITDA $ 943   $ 727   $ 839  
 
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

ADJUSTED EBITDA MARGIN AND PRO FORMA ADJUSTED EBITDA MARGIN

(unaudited, dollars in millions)

 
 
    Three Months Ended June 30,
2017     2016
(as reported) (as reported)     (pro forma)
Total revenues, as reported $ 2,346 $ 1,950 $ 2,299
Less: other revenues from managed and franchised properties   (1,436 )   (1,130 )   (1,419 )
Total revenues, excluding other revenues from managed and franchised properties $ 910   $ 820   $ 880  
 
Adjusted EBITDA $ 519 $ 412 $ 472
 
Adjusted EBITDA margin   57.0 %   50.2 %   53.6 %
 
 
Six Months Ended June 30,
2017 2016
(as reported) (as reported) (pro forma)
Total revenues, as reported $ 4,507 $ 3,676 $ 4,374
Less: other revenues from managed and franchised properties   (2,831 )   (2,171 )   (2,758 )
Total revenues, excluding other revenues from managed and franchised properties $ 1,676   $ 1,505   $ 1,616  
 
Adjusted EBITDA $ 943 $ 727 $ 839
 
Adjusted EBITDA margin   56.3 %   48.3 %   51.9 %
 
                 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

NET DEBT, PRO FORMA NET DEBT TO ADJUSTED EBITDA RATIO AND

NET DEBT TO ADJUSTED EBITDA RATIO

(unaudited, in millions)

 

 

June 30, December 31,
2017 2016
Long-term debt, including current maturities $ 6,620 $ 6,616
Add: unamortized deferred financing costs and discount   86     90  
Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount 6,706 6,706
Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs 13 12
Less: cash and cash equivalents (784 ) (1,062 )
Less: restricted cash and cash equivalents   (125 )   (121 )
Net debt $ 5,810   $ 5,535  
 
 

PRO FORMA RESULTS:

 
Six Months Ended Year Ended TTM(1)
June 30, December 31, June 30,
2017 2016 2016 2017
(as reported) (pro forma) (pro forma) (pro forma)
Income from continuing operations, net of taxes $ 242 $ 360 $ 127 $ 9
Interest expense 204 189 394 409
Income tax expense (benefit) 143 (16 ) 647 806
Depreciation and amortization   176     183     364     357  
EBITDA 765 716 1,532 1,581
Gain on sales of assets, net (1 ) (8 ) (7 )
Loss (gain) on foreign currency transactions (1 ) 26 16 (11 )
Loss on debt extinguishment 60 60
FF&E replacement reserve 21 28 55 48
Share-based compensation expense 59 40 83 102
Impairment loss 15 15
Other adjustment items(2)   39     15     70     94  
Adjusted EBITDA $ 943   $ 839   $ 1,763   $ 1,867  
 
Net debt $ 5,810
 
Net debt to Adjusted EBITDA ratio   3.1  

____________

(1) Trailing twelve months ("TTM") June 30, 2017 on a pro forma basis is calculated as the six months ended June 30, 2017 plus the pro forma year ended December 31, 2016 less the pro forma six months ended June 30, 2016.

(2) Includes adjustments for severance and other items and, for the six months ended June 30, 2017, also includes transaction costs.

 
 

ACTUAL RESULTS:

 
Six Months Ended Year Ended TTM(1)
June 30, December 31, June 30,
2017 2016 2016 2017
Income (loss) from continuing operations, net of taxes $ 242 $ 291 $ (8 ) $ (57 )
Interest expense 204 189 394 409
Income tax expense (benefit) 143 (58 ) 564 765
Depreciation and amortization   176     183     364     357  
EBITDA 765 605 1,314 1,474
Gain on sales of assets, net (1 ) (8 ) (7 )
Loss (gain) on foreign currency transactions (1 ) 26 16 (11 )
Loss on debt extinguishment 60 60
FF&E replacement reserve 21 28 55 48
Share-based compensation expense 59 39 81 101
Impairment loss 15 15
Other adjustment items(2)   39     15     70     94  
Adjusted EBITDA $ 943   $ 727   $ 1,543   $ 1,759  
 
Net debt $ 5,810
 
Net debt to Adjusted EBITDA ratio   3.3  

____________

(1) TTM June 30, 2017 is calculated as the six months ended June 30, 2017 plus the year ended December 31, 2016 less the six months ended June 30, 2016.

(2) Includes adjustments for severance and other items and, for the six months ended June 30, 2017, also includes transaction costs.

 
   
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK: NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS
FORECASTED 2017
(unaudited, in millions, except per share data)
 
 

Three Months Ending

September 30, 2017

Low Case High Case
Net income attributable to Hilton stockholders $ 154 $ 167
Diluted EPS, before special items $ 0.47 $ 0.51
 
Net income, adjusted for special items $ 154   $ 167  
Diluted EPS, adjusted for special items(1) $ 0.47   $ 0.51  
 
 

Year Ending

December 31, 2017

Low Case High Case
Net income attributable to Hilton stockholders $ 528 $ 553
Diluted EPS, before special items $ 1.61 $ 1.68
Special items(2):
Loss on debt extinguishment $ 60 $ 60
Transaction costs 15 15
Financing transactions 5 5
Asset dispositions   9     9  
Total special items before tax 89 89
Income tax expense on special items   (33 )   (33 )
Total special items after tax $ 56   $ 56  
 
Net income, adjusted for special items $ 584   $ 609  
Diluted EPS, adjusted for special items(1) $ 1.78   $ 1.85  
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

OUTLOOK: ADJUSTED EBITDA

FORECASTED 2017

(unaudited, in millions)

 
 
           

Three Months Ending

September 30, 2017

Low Case     High Case
Net income $ 156 $ 169
Interest expense 99 99
Income tax expense 96 103
Depreciation and amortization   87     87  
EBITDA 438 458
FF&E replacement reserve 15 15
Share-based compensation expense 32 32
Other adjustment items(1)   5     5  
Adjusted EBITDA $ 490   $ 510  
 
 

Year Ending

December 31, 2017

 
Low Case High Case  
Net income $ 534 $ 559
Interest expense 403 403
Income tax expense 320 335
Depreciation and amortization   350     350  
EBITDA 1,607 1,647
Gain on foreign currency transactions (1 ) (1 )
Loss on debt extinguishment 60 60
FF&E replacement reserve 51 51
Share-based compensation expense 117 117
Other adjustment items(1)   46     46  
Adjusted EBITDA $ 1,880   $ 1,920  

____________

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

 

HILTON WORLDWIDE HOLDINGS INC.

DEFINITIONS

Pro Forma Adjustments

The unaudited pro forma condensed consolidated statements of operations are based on Hilton's unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2016 and have been adjusted to reflect the spin-offs of Park and HGV as if they had occurred on January 1, 2016. The unaudited pro forma adjustments are based on estimates, accounting judgments and currently available information and assumptions that Hilton management believes are reasonable. The pro forma adjustments include the following:

Refer to pro forma financial information included in the Current Report on Form 8-K filed with the SEC on January 4, 2017 for additional details on the pro forma adjustments.

The adjustments in the unaudited pro forma condensed consolidated statements of operations do not include general and administrative expenses that do not meet the requirements to be presented in discontinued operations as they are not specifically related to Park or HGV. Accordingly, the pro forma general and administrative expenses are not necessarily indicative of future general and administrative expenses of Hilton. The unaudited pro forma condensed consolidated statements of operations also do not reflect any cost savings that Hilton believes could have been achieved had the spin-offs been completed on the date indicated.

Trailing Twelve Month Financial Information

This press release also includes certain unaudited financial information for the TTM period ended June 30, 2017, which is calculated as the six months ended June 30, 2017 plus the actual or pro forma year ended December 31, 2016 less the actual or pro forma six months ended June 30, 2016. 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 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 and EPS, adjusted for special items, may not be comparable to similarly titled measures of other companies.

Net income 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 income (loss) from continuing operations, net of taxes, 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 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; and (ix) other items.

Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues, excluding 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, the Company's capital structure and operating jurisdictions, respectively, and, therefore could vary significantly across companies. Depreciation and amortization 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) share-based compensation expense, as this could vary widely among companies due to the different plans in place and the usage of them; (ii) 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 and (iii) 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 (b) the Company's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs; reduced by (a) cash and cash equivalents; and (ii) 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 5,031 hotels in the Company's system as of June 30, 2017, 4,012 hotels were classified as comparable hotels. The 1,019 non-comparable hotels included 234 hotels, or approximately five 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 (all periods presented use the actual exchange rates for the three and six months ended June 30, 2017, as applicable), unless otherwise noted.



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