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Investor Contact
7930 Jones Branch Drive
Jill Slattery
McLean, VA 22102
+1 703 883 6043
ir.hilton.com
 
 
Media Contact
 
Nigel Glennie
 
+1 703 883 5262
 

Hilton Reports Third Quarter Results

MCLEAN, VA (October 24, 2018) - Hilton Worldwide Holdings Inc. ("Hilton" or the "Company") (NYSE: HLT) today reported its third 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:
 
Diluted EPS was $0.54 for the third quarter, a 10 percent increase from the same period in 2017, and diluted EPS, adjusted for special items, was $0.77, a 38 percent increase from the same period in 2017

Net income for the third quarter was $164 million, a modest increase from the same period in 2017

Adjusted EBITDA for the third quarter was $557 million, an increase of 9 percent from the same period in 2017

System-wide comparable RevPAR increased 2.0 percent on a currency neutral basis for the third quarter from the same period in 2017

Approved 29,200 new rooms for development during the quarter, growing Hilton's development pipeline to more than 371,000 rooms as of September 30, 2018, representing 11 percent growth from September 30, 2017

Opened 16,100 rooms in the third quarter and achieved net unit growth of 14,800 rooms, which was a 24 percent increase from the same period in 2017

Launched urban, lifestyle micro-hotel brand, Motto by Hilton

Repurchased over 1.5 million shares of Hilton common stock for an aggregate cost of $122 million during the third quarter

Returned $1.7 billion to stockholders through October in the form of share repurchases and dividends

Full year 2018 system-wide RevPAR is expected to increase between 3.0 percent and 3.5 percent on a comparable and currency neutral basis compared to 2017; Full year 2018 Adjusted EBITDA is expected to be between $2,075 million and $2,095 million

Full year 2019 system-wide RevPAR is expected to increase between 2.0 percent and 4.0 percent on a comparable and currency neutral basis compared to 2018; net unit growth is expected to be approximately 6 percent to 7 percent





q3brandbar.jpg

1


Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "We delivered solid third quarter results, as our resilient business model drove Adjusted EBITDA to the high end of guidance and diluted EPS, adjusted for special items, above expectations. Calendar shifts and weather impacts tempered reported RevPAR growth, but fundamentals remain strong. We continue to feel optimistic about overall demand trends for the balance of the year and into 2019. Additionally, we are excited to expand our global presence with the launch of Motto by Hilton, our new urban, lifestyle micro-hotel brand."

For the three and nine months ended September 30, 2018, system-wide comparable RevPAR grew 2.0 percent and 3.3 percent, respectively, primarily driven by increased ADR. In particular, strength at Hilton's international hotels benefited results in both periods, particularly in the Europe and Asia Pacific regions. Management and franchise fee revenues increased 10 percent and 11 percent during the three and nine months ended September 30, 2018, respectively, as a result of RevPAR growth of 1.8 percent and 3.2 percent, respectively, at comparable managed and franchised hotels, increased license and other fees and the addition of new properties to Hilton's portfolio.

For the three months ended September 30, 2018, diluted EPS was $0.54 and diluted EPS, adjusted for special items, was $0.77 compared to $0.49 and $0.56, respectively, for the three months ended September 30, 2017. Net income and Adjusted EBITDA were $164 million and $557 million, respectively, for the three months ended September 30, 2018 compared to $160 million and $511 million, respectively, for the three months ended September 30, 2017.

For the nine months ended September 30, 2018, diluted EPS was $1.76 and diluted EPS, adjusted for special items, was $2.01 compared to $1.08 and $1.45, respectively, for the nine months ended September 30, 2017. Net income and Adjusted EBITDA were $544 million and $1,557 million, respectively, for the nine months ended September 30, 2018 compared to $359 million and $1,425 million, respectively, for the nine months ended September 30, 2017.

Development

In the third quarter of 2018, Hilton opened 113 new hotels totaling 16,100 rooms and achieved net unit growth of 14,800 rooms, which was a 24 percent increase from the same period in 2017. Conversions from non-Hilton brands represented more than 20 percent of the new rooms opened during the quarter.

As of September 30, 2018, Hilton's development pipeline totaled nearly 2,420 hotels consisting of more than 371,000 rooms throughout 108 countries and territories, including 38 countries and territories where Hilton does not currently have any open hotels. Additionally, 202,000 rooms in the pipeline were located outside the U.S., and 196,000 rooms, or more than half, were under construction.

During the quarter, Hilton added two notable properties to its luxury portfolio with the completed conversion of the Waldorf Astoria Las Vegas and the opening of the Waldorf Astoria Bangkok.

In October 2018, Hilton launched its newest brand, Motto by Hilton, an urban-affordable, lifestyle product featuring efficiently designed, adaptable rooms and local food and beverage offerings. The first property is expected to open next year.

Balance Sheet and Liquidity

As of September 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 4.40 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, excluding deferred financing costs and discount, with a weighted average interest rate of 4.34 percent.

Total cash and cash equivalents were $700 million as of September 30, 2018, including $79 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of September 30, 2018.

During the third quarter of 2018, Hilton repurchased over 1.5 million shares of its common stock at a cost of approximately $122 million and an average price per share of $78.81. To date, Hilton has repurchased approximately 35.3 million shares of its common stock for approximately $2.5 billion at an average price per share of $70.38; the amount remaining under Hilton's previously announced stock repurchase program is approximately $688 million.

In September 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 $137 million. In October 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 December 28, 2018 to holders of record of its common stock as of the close of business on November 9, 2018.


2


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 September 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 nine months ended September 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 3.5 percent on a comparable and currency neutral basis compared to 2017.
Diluted EPS, before special items, is projected to be between $2.42 and $2.47.
Diluted EPS, adjusted for special items, is projected to be between $2.67 and $2.72.
Net income is projected to be between $743 million and $757 million.
Adjusted EBITDA is projected to be between $2,075 million and $2,095 million, growing 9 percent to 10 percent from 2017, 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.

Fourth Quarter 2018

System-wide RevPAR is expected to increase between 2.0 percent and 3.0 percent on a comparable and currency neutral basis compared to the fourth quarter of 2017.
Diluted EPS, before special items, is projected to be between $0.66 and $0.71.
Diluted EPS, adjusted for special items, is projected to be between $0.66 and $0.71.
Net income is projected to be between $199 million and $213 million.
Adjusted EBITDA is projected to be between $518 million and $538 million.
Management and franchise fee revenue is projected to increase between 9 percent and 11 percent compared to the fourth quarter of 2017.


3


Conference Call

Hilton will host a conference call to discuss third quarter 2018 results on October 24, 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 1065924. 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 10124398.

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, these forward-looking statements can be identified 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 15 world-class brands comprising more than 5,500 properties with nearly 895,000 rooms, in 109 countries and territories. Dedicated to fulfilling its mission to be the world's most hospitable company, Hilton earned a spot on the 2018 world's best workplaces list and has welcomed more than 3 billion guests during its nearly 100 year history. Through the award-winning guest loyalty program, Hilton Honors, nearly 82 million members who book directly with Hilton have access to instant benefits including digital check-in with room selection, Digital Key and Connected Room. 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.


4



HILTON WORLDWIDE HOLDINGS INC.
EARNINGS RELEASE SCHEDULES
TABLE OF CONTENTS

 
 
Page
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
 


5



HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share data)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
Franchise fees
$
407

 
$
358

 
$
1,142

 
$
995

Base and other management fees
80

 
84

 
241

 
246

Incentive management fees
57

 
53

 
171

 
159

Owned and leased hotels
373

 
383

 
1,099

 
1,052

Other revenues
27

 
21

 
72

 
78

 
944

 
899

 
2,725

 
2,530

Other revenues from managed and franchised properties
1,309

 
1,192

 
3,893

 
3,533

Total revenues
2,253

 
2,091

 
6,618

 
6,063

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Owned and leased hotels
331

 
340

 
1,003

 
935

Depreciation and amortization
81

 
83

 
242

 
252

General and administrative
109

 
106

 
328

 
330

Other expenses
10

 
7

 
36

 
41

 
531

 
536

 
1,609

 
1,558

Other expenses from managed and franchised properties
1,337

 
1,223

 
3,939

 
3,632

Total expenses
1,868

 
1,759

 
5,548

 
5,190

 
 
 
 
 
 
 
 
Operating income
385

 
332

 
1,070

 
873

 
 
 
 
 
 
 
 
Interest expense
(99
)
 
(85
)
 
(277
)
 
(260
)
Gain (loss) on foreign currency transactions
(6
)
 
2

 
(7
)
 
3

Loss on debt extinguishment

 

 

 
(60
)
Other non-operating income, net
13

 
7

 
26

 
16

 
 
 
 
 
 
 
 
Income before income taxes
293

 
256

 
812

 
572

 
 
 
 
 
 
 
 
Income tax expense
(129
)
 
(96
)
 
(268
)
 
(213
)
 
 
 
 
 
 
 
 
Net income
164

 
160

 
544

 
359

Net income attributable to noncontrolling interests
(2
)
 
(2
)
 
(4
)
 
(4
)
Net income attributable to Hilton stockholders
$
162

 
$
158

 
$
540

 
$
355

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
297

 
322

 
305

 
326

Diluted
300

 
325

 
307

 
328

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.55

 
$
0.49

 
$
1.77

 
$
1.09

Diluted
$
0.54

 
$
0.49

 
$
1.76

 
$
1.08

 
 
 
 
 
 
 
 
Cash dividends declared per share
$
0.15

 
$
0.15

 
$
0.45

 
$
0.45






6


HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY REGION
(unaudited)
 
Three Months Ended September 30,
 
Occupancy
 
ADR
 
RevPAR
 
2018
 
vs. 2017
 
2018
 
vs. 2017
 
2018
 
vs. 2017
U.S.
79.1
%
 
(0.5
)%
pts.
 
$
149.52

 
1.7
 %
 
$
118.34

 
1.0
%
Americas (excluding U.S.)
76.1

 
0.8

 
 
126.99

 
3.9

 
96.58

 
5.0

Europe
82.7

 
1.1

 
 
151.22

 
5.5

 
125.03

 
6.9

Middle East & Africa
71.7

 
1.1

 
 
141.90

 
(0.3
)
 
101.75

 
1.3

Asia Pacific
76.5

 
1.9

 
 
131.77

 
2.3

 
100.74

 
5.0

System-wide
78.9

 
(0.1
)
 
 
147.29

 
2.1

 
116.29

 
2.0


 
Nine Months Ended September 30,
 
Occupancy
 
ADR
 
RevPAR
 
2018
 
vs. 2017
 
2018
 
vs. 2017
 
2018
 
vs. 2017
U.S.
77.6
%
 
0.6
%
pts.
 
$
149.81

 
1.7
 %
 
$
116.30

 
2.5
%
Americas (excluding U.S.)
72.4

 
1.6

 
 
129.07

 
4.0

 
93.43

 
6.3

Europe
77.4

 
2.3

 
 
150.03

 
3.5

 
116.15

 
6.7

Middle East & Africa
71.6

 
3.3

 
 
151.37

 
(2.5
)
 
108.37

 
2.3

Asia Pacific
73.2

 
3.7

 
 
135.68

 
2.2

 
99.38

 
7.6

System-wide
76.9

 
1.1

 
 
148.01

 
1.9

 
113.84

 
3.3


7


HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY BRAND
(unaudited)
 
Three Months Ended September 30,
 
Occupancy
 
ADR
 
RevPAR
 
2018
 
vs. 2017
 
2018
 
vs. 2017
 
2018
 
vs. 2017
Waldorf Astoria Hotels & Resorts
67.3
%
 
2.2
 %
pts.
 
$
310.51

 
3.5
%
 
$
208.95

 
7.0
 %
Conrad Hotels & Resorts
75.7

 
1.2

 
 
248.86

 
5.7

 
188.34

 
7.3

Hilton Hotels & Resorts
79.2

 
0.5

 
 
171.09

 
3.0

 
135.57

 
3.6

Curio - A Collection by Hilton
73.7

 
(0.3
)
 
 
199.37

 
4.6

 
146.96

 
4.2

DoubleTree by Hilton
77.9

 
0.3

 
 
134.40

 
2.3

 
104.68

 
2.7

Embassy Suites by Hilton
79.9

 
(1.4
)
 
 
162.21

 
1.0

 
129.58

 
(0.7
)
Hilton Garden Inn
79.4

 
0.4

 
 
135.52

 
1.2

 
107.66

 
1.6

Hampton by Hilton
78.3

 
(0.7
)
 
 
127.04

 
1.1

 
99.45

 
0.2

Homewood Suites by Hilton
83.9

 
(0.3
)
 
 
142.38

 
1.3

 
119.47

 
1.0

Home2 Suites by Hilton
81.3

 
(0.2
)
 
 
120.66

 
1.5

 
98.13

 
1.3

System-wide
78.9

 
(0.1
)
 
 
147.29

 
2.1

 
116.29

 
2.0


 
Nine Months Ended September 30,
 
Occupancy
 
ADR
 
RevPAR
 
2018
 
vs. 2017
 
2018
 
vs. 2017
 
2018
 
vs. 2017
Waldorf Astoria Hotels & Resorts
71.2
%
 
1.9
 %
pts.
 
$
346.63

 
3.6
%
 
$
246.73

 
6.5
%
Conrad Hotels & Resorts
73.5

 
5.1

 
 
251.95

 
2.1

 
185.14

 
9.7

Hilton Hotels & Resorts
77.2

 
1.4

 
 
173.54

 
2.2

 
133.90

 
4.1

Curio - A Collection by Hilton
74.5

 
1.4

 
 
212.44

 
4.4

 
158.28

 
6.3

DoubleTree by Hilton
75.6

 
1.0

 
 
135.51

 
2.2

 
102.41

 
3.6

Embassy Suites by Hilton
79.4

 
(0.3
)
 
 
164.05

 
1.3

 
130.31

 
1.0

Hilton Garden Inn
77.3

 
1.4

 
 
134.24

 
1.3

 
103.82

 
3.2

Hampton by Hilton
75.6

 
0.7

 
 
124.78

 
1.2

 
94.37

 
2.1

Homewood Suites by Hilton
82.1

 
1.0

 
 
141.24

 
1.7

 
115.91

 
2.9

Home2 Suites by Hilton
79.5

 
2.9

 
 
118.96

 
1.9

 
94.58

 
5.8

System-wide
76.9

 
1.1

 
 
148.01

 
1.9

 
113.84

 
3.3


8


HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY SEGMENT
(unaudited)
 
Three Months Ended September 30,
 
Occupancy
 
ADR
 
RevPAR
 
2018
 
vs. 2017
 
2018
 
vs. 2017
 
2018
 
vs. 2017
Management and franchise
78.8
%
 
(0.1
)%
pts.
 
$
146.03

 
2.0
%
 
$
115.13

 
1.8
%
Ownership(1)
82.8

 
0.9

 
 
189.70

 
4.4

 
157.16

 
5.4

System-wide
78.9

 
(0.1
)
 
 
147.29

 
2.1

 
116.29

 
2.0


 
Nine Months Ended September 30,
 
Occupancy
 
ADR
 
RevPAR
 
2018
 
vs. 2017
 
2018
 
vs. 2017
 
2018
 
vs. 2017
Management and franchise
76.9
%
 
1.1
%
pts.
 
$
146.82

 
1.8
%
 
$
112.87

 
3.2
%
Ownership(1)
78.4

 
1.2

 
 
189.03

 
3.3

 
148.25

 
4.9

System-wide
76.9

 
1.1

 
 
148.01

 
1.9

 
113.84

 
3.3

____________
(1) 
Includes owned and leased hotels, as well as hotels owned or leased by entities in which Hilton owns a noncontrolling interest.


9


HILTON WORLDWIDE HOLDINGS INC.
PROPERTY SUMMARY
As of September 30, 2018
 
Owned / Leased(1)
 
Managed
 
Franchised
 
Total
 
Properties
 
Rooms
 
Properties
 
Rooms
 
Properties
 
Rooms
 
Properties
 
Rooms
Waldorf Astoria Hotels & Resorts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
1

 
215

 
13

 
5,844

 

 

 
14

 
6,059

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

 

 
4

 
895

 

 

 
4

 
895

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

 
48,774

 
176

 
53,683

 
243

 
102,457

Americas (excluding U.S.)
1

 
405

 
25

 
9,240

 
17

 
5,661

 
43

 
15,306

Europe
53

 
14,424

 
49

 
15,440

 
39

 
10,757

 
141

 
40,621

Middle East & Africa
5

 
1,998

 
43

 
13,409

 
3

 
1,609

 
51

 
17,016

Asia Pacific
7

 
3,437

 
87

 
32,028

 
7

 
2,826

 
101

 
38,291

Curio - A Collection by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
4

 
1,981

 
32

 
6,774

 
36

 
8,755

Americas (excluding U.S.)

 

 

 

 
10

 
1,629

 
10

 
1,629

Europe

 

 
2

 
189

 
9

 
943

 
11

 
1,132

Middle East & Africa

 

 
2

 
255

 
1

 
356

 
3

 
611

Asia Pacific

 

 
2

 
448

 
1

 
50

 
3

 
498

DoubleTree by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
35

 
11,791

 
312

 
73,370

 
347

 
85,161

Americas (excluding U.S.)

 

 
4

 
809

 
23

 
4,632

 
27

 
5,441

Europe

 

 
12

 
3,347

 
88

 
15,192

 
100

 
18,539

Middle East & Africa

 

 
10

 
2,350

 
5

 
598

 
15

 
2,948

Asia Pacific

 

 
51

 
14,530

 
3

 
1,071

 
54

 
15,601

Tapestry Collection by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 

 

 
9

 
1,112

 
9

 
1,112

Embassy Suites by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
42

 
11,110

 
200

 
45,193

 
242

 
56,303

Americas (excluding U.S.)

 

 
3

 
667

 
6

 
1,491

 
9

 
2,158

Hilton Garden Inn
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
5

 
537

 
650

 
89,995

 
655

 
90,532

Americas (excluding U.S.)

 

 
11

 
1,526

 
38

 
5,944

 
49

 
7,470

Europe

 

 
21

 
3,826

 
45

 
7,386

 
66

 
11,212

Middle East & Africa

 

 
9

 
1,925

 
1

 
175

 
10

 
2,100

Asia Pacific

 

 
25

 
5,351

 

 

 
25

 
5,351

Hampton by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
46

 
5,640

 
2,133

 
208,679

 
2,179

 
214,319

Americas (excluding U.S.)

 

 
13

 
1,677

 
92

 
10,923

 
105

 
12,600

Europe

 

 
17

 
2,716

 
60

 
9,303

 
77

 
12,019

Middle East & Africa

 

 
1

 
420

 

 

 
1

 
420

Asia Pacific

 

 

 

 
50

 
7,879

 
50

 
7,879

Tru by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 

 

 
42

 
3,997

 
42

 
3,997

Homewood Suites by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
21

 
2,261

 
430

 
49,115

 
451

 
51,376

Americas (excluding U.S.)

 

 
3

 
358

 
20

 
2,188

 
23

 
2,546

Home2 Suites by Hilton
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.

 

 
2

 
198

 
252

 
26,055

 
254

 
26,253

Americas (excluding U.S.)

 

 

 

 
4

 
423

 
4

 
423

Other

 

 
3

 
1,450

 
2

 
484

 
5

 
1,934

Hotels
71

 
21,720

 
670

 
211,854

 
4,768

 
652,217

 
5,509

 
885,791

Hilton Grand Vacations

 

 

 

 
51

 
8,367

 
51

 
8,367

Total
71

 
21,720

 
670

 
211,854

 
4,819

 
660,584

 
5,560

 
894,158

____________
(1) 
Includes hotels owned or leased by entities in which Hilton owns a noncontrolling interest.


10



HILTON WORLDWIDE HOLDINGS INC.
CAPITAL EXPENDITURES AND CONTRACT ACQUISITION COSTS
(unaudited, dollars in millions)
 
Three Months Ended
 
 
 
September 30,
 
Increase / (Decrease)
 
2018
 
2017
 
$
 
%
Capital expenditures for property and equipment(1)
$
23

 
$
18

 
5

 
27.8
Capitalized software costs(2)
24

 
16

 
8

 
50.0
Total capital expenditures
47

 
34

 
13

 
38.2
Contract acquisition costs
44

 
19

 
25

 
NM(3)
Total capital expenditures and contract acquisition costs
$
91

 
$
53

 
38

 
71.7
 
Nine Months Ended
 
 
 
 
 
September 30,
 
Increase / (Decrease)
 
2018
 
2017
 
$
 
%
Capital expenditures for property and equipment(1)
$
51

 
$
36

 
15

 
41.7
Capitalized software costs(2)
62

 
45

 
17

 
37.8
Total capital expenditures
113

 
81

 
32

 
39.5
Contract acquisition costs
82

 
51

 
31

 
60.8
Total capital expenditures and contract acquisition costs
$
195

 
$
132

 
63

 
47.7
____________
(1) 
Includes expenditures for hotels, corporate and other property and equipment, of which $4 million and $8 million were reimbursed by hotel owners for the three months ended September 30, 2018 and 2017, respectively, and $8 million and $13 million were reimbursed for the nine months ended September 30, 2018 and 2017, respectively.
(2) 
Includes $22 million and $13 million of expenditures that were reimbursed by hotel owners for the three months ended September 30, 2018 and 2017, respectively, and $47 million and $28 million for the nine months ended September 30, 2018 and 2017, respectively.
(3) 
Fluctuation in terms of percentage change is not meaningful.

    

11



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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Net income attributable to Hilton stockholders, as reported
$
162

 
$
158

 
$
540

 
$
355

Diluted EPS, as reported
$
0.54

 
$
0.49

 
$
1.76

 
$
1.08

Special items:
 
 
 
 
 
 
 
Net other expenses from managed and franchised properties
$
28

 
$
31

 
$
46

 
$
99

Asset dispositions(1)
1

 
3

 
4

 
12

Loss on debt extinguishment

 

 

 
60

Transaction costs(2)

 
2

 

 
17

Financing transactions(3)

 

 
7

 
5

Tax-related adjustments(4)
52

 

 
41

 

Other adjustments(5)
(6
)
 

 
(12
)
 

Total special items before tax
75

 
36

 
86

 
193

Income tax expense on special items
(5
)
 
(13
)
 
(9
)
 
(73
)
Total special items after tax
$
70

 
$
23

 
$
77

 
$
120

 
 
 
 
 
 
 
 
Net income, adjusted for special items
$
232

 
$
181

 
$
617

 
$
475

Diluted EPS, adjusted for special items
$
0.77

 
$
0.56

 
$
2.01

 
$
1.45

____________
(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, net.
(4) 
Includes adjustments to the provisional amount recognized in relation to the Tax Cuts and Jobs Act enacted in December 2017, as well as deferred tax expense recognized in connection with a distribution of stock out of one of Hilton's controlled foreign corporations, none of which had an effect on cash paid for taxes in the period.
(5) 
Includes a gain on the early repayment of a loan we issued that financed the construction of a hotel that Hilton manages and, for the nine months ended September 30, 2018, also includes a gain on the refinancing of that loan.

12



HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(unaudited, dollars in millions)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
164

 
$
160

 
$
544

 
$
359

Interest expense
99

 
85

 
277

 
260

Income tax expense
129

 
96

 
268

 
213

Depreciation and amortization
81

 
83

 
242

 
252

EBITDA
473

 
424

 
1,331

 
1,084

Loss (gain) on foreign currency transactions
6

 
(2
)
 
7

 
(3
)
Loss on debt extinguishment

 

 

 
60

FF&E replacement reserves
12

 
16

 
39

 
37

Share-based compensation expense
35

 
32

 
103

 
91

Amortization of contract acquisition costs
6


4

 
20

 
12

Net other expenses from managed and franchised properties
28

 
31

 
46

 
99

Other adjustment items(1)
(3
)
 
6

 
11

 
45

Adjusted EBITDA
$
557


$
511

 
$
1,557

 
$
1,425

____________
(1) 
Includes adjustments for severance and other items and, for the three and nine months ended September 30, 2017, also includes transaction costs.
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Total revenues, as reported
$
2,253

 
$
2,091

 
$
6,618

 
$
6,063

Add: amortization of contract acquisition costs
6

 
4

 
20

 
12

Less: other revenues from managed and franchised properties
(1,309
)
 
(1,192
)
 
(3,893
)
 
(3,533
)
Total revenues, as adjusted
$
950

 
$
903

 
$
2,745

 
$
2,542

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
557

 
$
511

 
$
1,557

 
$
1,425

 
 
 
 
 
 
 
 
Adjusted EBITDA margin
58.6
%
 
56.6
%
 
56.7
%
 
56.1
%



13



HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO
(unaudited, dollars in millions)
 
September 30,
 
December 31,
 
2018
 
2017
Long-term debt, including current maturities
$
7,574

 
$
6,602

Add: unamortized deferred financing costs and discount
86

 
81

Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount
7,660

 
6,683

Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs
15

 
13

Less: cash and cash equivalents
(621
)
 
(570
)
Less: restricted cash and cash equivalents
(79
)
 
(100
)
Net debt
$
6,975

 
$
6,026


 
Nine Months Ended
 
Year Ended
 
TTM(1)
 
September 30,
 
December 31,
 
September 30,
 
2018
 
2017
 
2017
 
2018
Net income
$
544

 
$
359

 
$
1,089

 
$
1,274

Interest expense
277

 
260

 
351

 
368

Income tax expense (benefit)
268

 
213

 
(336
)
 
(281
)
Depreciation and amortization
242

 
252

 
336

 
326

EBITDA
1,331

 
1,084

 
1,440

 
1,687

Loss (gain) on foreign currency transactions
7

 
(3
)
 
(3
)
 
7

Loss on debt extinguishment

 
60

 
60

 

FF&E replacement reserves
39

 
37

 
55

 
57

Share-based compensation expense
103

 
91

 
121

 
133

Amortization of contract acquisition costs
20

 
12

 
17

 
25

Net other expenses from managed and franchised properties
46

 
99

 
172

 
119

Other adjustment items(2)
11

 
45

 
47

 
13

Adjusted EBITDA
$
1,557

 
$
1,425

 
$
1,909

 
$
2,041

 
 
 
 
 
 
 
 
Net debt
 
 
 
 
 
 
$
6,975

 
 
 
 
 
 
 
 
Net debt to Adjusted EBITDA ratio
 
 
 
 
 
 
3.4

____________
(1) 
Trailing twelve months ("TTM") September 30, 2018 is calculated as the nine months ended September 30, 2018 plus the year ended December 31, 2017 less the nine months ended September 30, 2017.
(2) 
Includes adjustments for severance and other items and, for the nine months ended September 30, 2017 and year ended December 31, 2017, also includes transaction costs.


14



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
 
December 31, 2018
 
Low Case
 
High Case
Net income attributable to Hilton stockholders, before special items
$
198

 
$
212

Diluted EPS, before special items(1)
$
0.66

 
$
0.71

 
 
 
 
Net income, adjusted for special items
$
198

 
$
212

Diluted EPS, adjusted for special items(1)
$
0.66

 
$
0.71


 
Year Ending
 
December 31, 2018
 
Low Case
 
High Case
Net income attributable to Hilton stockholders, before special items
$
738

 
$
752

Diluted EPS, before special items(1)
$
2.42

 
$
2.47

Special items(2):
 
 
 
Net other expenses from managed and franchised properties
$
46

 
$
46

Asset dispositions
4

 
4

Financing transactions
7

 
7

Tax-related adjustments
41

 
41

Other adjustments
(12
)
 
(12
)
Total special items before tax
86

 
86

Income tax expense on special items
(9
)
 
(9
)
Total special items after tax
$
77

 
$
77

 
 
 
 
Net income, adjusted for special items
$
815

 
$
829

Diluted EPS, adjusted for special items(1)
$
2.67

 
$
2.72

____________
(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.

15



HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK: ADJUSTED EBITDA
FORECASTED 2018
(unaudited, in millions)
 
Three Months Ending
 
December 31, 2018
 
Low Case
 
High Case
Net income
$
199

 
$
213

Interest expense
101

 
101

Income tax expense
80

 
86

Depreciation and amortization
82

 
82

EBITDA
462

 
482

FF&E replacement reserves
14

 
14

Share-based compensation expense
27

 
27

Amortization of contract acquisition costs
7

 
7

Other adjustment items(1)
8

 
8

Adjusted EBITDA
$
518

 
$
538


 
Year Ending
 
December 31, 2018
 
Low Case
 
High Case
Net income
$
743

 
$
757

Interest expense
378

 
378

Income tax expense
348

 
354

Depreciation and amortization
324

 
324

EBITDA
1,793

 
1,813

Loss on foreign currency transactions
7

 
7

FF&E replacement reserves
53

 
53

Share-based compensation expense
130

 
130

Amortization of contract acquisition costs
27

 
27

Net other expenses from managed and franchised properties
46

 
46

Other adjustment items(1)
19

 
19

Adjusted EBITDA
$
2,075

 
$
2,095

____________
(1) 
Includes adjustments for severance and other items.


16



HILTON WORLDWIDE HOLDINGS INC.
DEFINITIONS

Trailing Twelve Month Financial Information

This press release includes certain unaudited financial information for the TTM period ended September 30, 2018, which is calculated as the nine months ended September 30, 2018 plus the year ended December 31, 2017 less the nine months ended September 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 cost reimbursement revenues and reimbursed 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

17



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 5,509 hotels in the Company's system as of September 30, 2018, 4,257 hotels were classified as comparable hotels. The 1,252 non-comparable hotels included 203 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 nine months ended September 30, 2018 and 2017 use the exchange rates for the three and nine months ended September 30, 2018.


18

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