Hilton | May 02, 2017

MCLEAN, Va. – Hilton Worldwide Holdings Inc. ("Hilton" or the "Company") (NYSE: HLT) today reported its first quarter 2017 results. The Company completed the spin-offs of Park Hotels & Resorts Inc. ("Park") and Hilton Grand Vacations Inc. ("HGV") on January 3, 2017 (the "spin-offs"). All results herein present the performance of Hilton giving effect to the spinoffs, with the historical financial results of Park and HGV reflected as discontinued operations. Additionally, all share and sharerelated information presented herein have been retroactively adjusted to reflect the 1-for-3 reverse stock split of Hilton's outstanding common stock that occurred on January 3, 2017 (the "Reverse Stock Split"). Highlights include:

  • Diluted EPS from continuing operations for the first quarter was $0.22 and diluted EPS, adjusted for special items, was $0.38
  • Net income for the first quarter was $75 million
  • Adjusted EBITDA for the first quarter was $424 million, an increase of 16 percent from pro forma Adjusted EBITDA for the first quarter of 2016
  • Adjusted EBITDA margin was 55.4 percent, an increase of 550 basis points from pro forma Adjusted EBITDA margin for the first quarter of 2016
  • System-wide comparable RevPAR increased 3.0 percent on a currency neutral basis for the first quarter compared to the prior year, achieving high end of guidance
  • Added 7,800 net rooms in the first quarter, representing 20 percent growth from the same period in 2016
  • Approved 27,000 new rooms for development during the first quarter, growing Hilton's development pipeline to a record 325,000 rooms, representing 16 percent growth from March 31, 2016
  • Initiated a stock repurchase program in March and repurchased 1.2 million shares of Hilton common stock for an aggregate cost of $70 million during the first quarter, and 2.1 million shares at an aggregate cost of $123 million through April 2017
  • Executed financing transactions during the first quarter that collectively lowered weighted average cost of debt by 25 basis points, reduced interest rate risk and extended weighted average debt maturities by nearly 1.5 years
  • Raised Adjusted EBITDA guidance for full year 2017 to between $1,860 million and $1,900 million, an increase of $20 million at the midpoint

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "We are extremely pleased with our first quarter as a simplified, fee-driven business following completion of the spin-offs of Park and HGV. We exceeded the high end of our Adjusted EBITDA and diluted EPS, adjusted for special items, guidance in the quarter and, as a result, we are raising these guidance ranges for the full year. Strong development momentum continued into 2017, and we expect another record year for construction starts, openings and net unit growth. We opened nearly 10,000 rooms in the quarter and approved nearly 27,000 rooms for development, a third of which are for our newest brands."

As a result of the January 2017 spin-offs of Park and HGV, Hilton stockholders of record as of the close of business on December 15, 2016 received one share of Park common stock for every five shares of Hilton common stock and one share of HGV common stock for every ten shares of Hilton common stock.

In March 2017, HNA Tourism Group Co., Ltd. and certain of its affiliates acquired 82.5 million shares of Hilton common stock, or a 25 percent equity interest, from affiliates of The Blackstone Group L.P., establishing a long-term strategic investment in Hilton.

For the first quarter of 2017, system-wide comparable RevPAR grew 3.0 percent primarily from increased occupancy. Management fee and franchise fee revenues increased as a result of increases in RevPAR of 2.7 percent and 2.9 percent, respectively, at comparable managed and franchised hotels, as well as from the addition of new managed and franchised properties to Hilton's portfolio.

Q1 2017 vs. Q1 2016 Pro Forma Results

For the three months ended March 31, 2017, diluted earnings per share ("EPS") from continuing operations was $0.22 compared to $0.68 on a pro forma basis for the three months ended March 31, 2016, and diluted EPS, adjusted for special items, was $0.38 for the three months ended March 31, 2017 compared to $0.24 on a pro forma basis for the three months ended March 31, 2016. Income from continuing operations, net of taxes was $75 million for the three months ended March 31, 2017 compared to $223 million on a pro forma basis for the three months ended March 31, 2016. Adjusted EBITDA increased 16 percent to $424 million for the three months ended March 31, 2017 compared to $367 million on a pro forma basis for the three months ended March 31, 2016. Management and franchise fees increased five percent and eight percent, respectively, compared to the pro forma three months ended March 31, 2016.

Q1 2017 vs. Q1 2016 Actual Results

For the three months ended March 31, 2017, diluted EPS from continuing operations was $0.22 compared to $0.58 for the three months ended March 31, 2016, and diluted EPS, adjusted for special items, was $0.38 for the three months ended March 31, 2017 compared to $0.15 for the three months ended March 31, 2016. Income from continuing operations, net of taxes was $75 million for the three months ended March 31, 2017 compared to $191 million for the three months ended March 31, 2016. Adjusted EBITDA was $424 million for the three months ended March 31, 2017 compared to $315 million for the three months ended March 31, 2016.

Development

Hilton opened 70 hotels consisting of 9,900 rooms in the first quarter of 2017. Hilton achieved net unit growth of 7,800 rooms during the first quarter of 2017, which is 20 percent higher than in the first quarter of 2016.

As of March 31, 2017, Hilton's development pipeline totaled approximately 325,000 rooms at 2,084 hotels throughout 99 countries and territories, including 34 countries and territories where Hilton does not currently have any open hotels. Approximately 166,000 rooms, or more than half of the pipeline, were located outside of the United States. Additionally, approximately 168,000 rooms in Hilton's pipeline were under construction, with construction starts in the first quarter of 2017 up nearly 50 percent from the same period in 2016.

In January 2017, Hilton launched its 14th brand, Tapestry Collection by Hilton, with the first property expected to open in the second quarter of 2017. Tru by Hilton, launched in 2016, had nearly 425 hotels in the pipeline or in various stages of approval as of April 17, 2017, and the first Tru opened in Oklahoma City in April.

Balance Sheet and Liquidity

During the first quarter of 2017, Hilton:

  • issued $900 million aggregate principal amount of 4.625% Senior Notes due 2025 and $600 million aggregate principal amount of 4.875% Senior Notes due 2027 and used the net proceeds along with available cash to repay $1.5 billion aggregate principal amount of 5.625% Senior Notes due 2021; and
  • amended $750 million of its outstanding senior secured term loan facility (the "Term Loans") to extend the maturity date, such that the entire outstanding balance of the Term Loans of $3,959 million matures in October 2023, and amended the entire outstanding balance to provide for a reduced interest rate.

As of March 31, 2017, Hilton had $6.7 billion of long-term debt outstanding, excluding deferred financing costs and discount, with a weighted average interest rate of 4.0 percent, a decrease of 25 basis points from December 31, 2016. As a result of the financing transactions, Hilton extended its weighted average debt maturities by nearly 1.5 years, with no material maturities until 2023.

Total cash and cash equivalents were $986 million as of March 31, 2017, including $124 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of March 31, 2017.

In February 2017, Hilton's board of directors authorized a stock repurchase program of up to $1 billion of the Company's common stock. During the first quarter of 2017, Hilton repurchased 1.2 million shares of common stock at a cost of approximately $70 million at an average price per share of $57.67. Through April 2017, Hilton repurchased 2.1 million shares for approximately $123 million at an average price per share of $57.62.

In March 2017, Hilton paid a quarterly cash dividend of $0.15 per share on shares of its common stock, for a total of $50 million. In May 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 June 2, 2017 to holders of record of its common stock as of the close of business on May 12, 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 from continuing operations, before special items, is projected to be between $1.58 and $1.65.
  • Diluted EPS, adjusted for special items, is projected to be between $1.73 and $1.81.
  • Net income is projected to be between $529 million and $554 million.
  • Adjusted EBITDA is projected to be between $1,860 million and $1,900 million.
  • Management and franchise fee revenue is projected to increase between 7 percent and 9 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 $900 million and $1 billion.
  • General and administrative expenses are projected to be flat compared to 2016.
  • Net unit growth is expected to be approximately 50,000 rooms to 55,000 rooms.

Second Quarter 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 the second quarter of 2016.
  • Diluted EPS from continuing operations, 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 $173 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 second quarter of 2016 on a pro forma basis.

To view full financial release and corresponding tables please click the PDF icon or visit: http://newsroom.hilton.com/assets/HWW/docs/2017/Q2/2017_Q1EarningsRelease_HLT.PDF