10-QPeriod: Q1 FY2017

Hilton Worldwide Holdings Inc. Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 2, 2017For Securities:HLT

Summary

Hilton Worldwide Holdings Inc. (HLT) reported its first-quarter results for 2017, a period marked by significant corporate restructuring. The company successfully completed the spin-offs of its real estate portfolio into Park Hotels & Resorts Inc. (PK) and its timeshare business into Hilton Grand Vacations Inc. (HGV) in January 2017. These spin-offs are reflected in the financial statements as discontinued operations, allowing investors to assess the performance of Hilton's core, retained business. Financially, for the three months ended March 31, 2017, Hilton reported total revenues of $2.16 billion, a notable increase driven by strong performance in its management and franchise segment. Operating income from continuing operations stood at $277 million, up from $170 million in the prior year. However, net income attributable to Hilton stockholders significantly decreased to $74 million from $309 million in the prior year, largely due to the impact of discontinued operations and a substantial loss on debt extinguishment related to the early repayment of senior notes. The company also announced a new $1 billion stock repurchase program, signaling confidence in its ongoing strategy and financial health.

Financial Highlights

49 data points
Beta

Revenue

$1.90B

Net Income

$47.00M

2.5% Net Margin

EPS (Diluted)

$0.14

Total Assets

$14.29B

Cash & Equivalents

$862.00M

Free Cash Flow

$41.00M

Financial Statements
Beta
Revenue$1.90B
Operating Expenses$1.68B
Operating Income$217.00M
Interest Expense$89.00M
Net Income$47.00M
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)330.00M
Shares Outstanding (Diluted)331.00M

Key Highlights

  • 1Completion of spin-offs of Park Hotels & Resorts Inc. (PK) and Hilton Grand Vacations Inc. (HGV), with their historical results presented as discontinued operations.
  • 2Total revenues increased by 25.2% to $2.16 billion, primarily driven by a 22.1% increase in the Management and Franchise segment.
  • 3Operating income from continuing operations rose to $277 million, a significant improvement from $170 million in the prior year.
  • 4Reported a substantial $60 million loss on debt extinguishment related to the redemption of $1.5 billion in Senior Notes.
  • 5Net income attributable to Hilton stockholders decreased to $74 million from $309 million in the prior year, primarily due to the impact of discontinued operations and the debt extinguishment loss.
  • 6Announced a new $1 billion stock repurchase program in February 2017, with $70 million repurchased in the first quarter.
  • 7System-wide RevPAR (Revenue Per Available Room) increased by 3.0% driven by growth in occupancy, particularly in Europe and Asia Pacific.

Frequently Asked Questions

The spin-offs of Park Hotels & Resorts Inc. (PK) and Hilton Grand Vacations Inc. (HGV) were completed in January 2017. Their historical financial results are presented as 'discontinued operations' in Hilton's condensed consolidated financial statements for the period. While this cleans up the ongoing business for investors, it means that the reported net income attributable to Hilton stockholders for the first quarter of 2017 ($74 million) is significantly lower than the comparable period in 2016 ($309 million) because the strong results from these former divisions are no longer included in continuing operations.

Hilton reported a $60 million loss on debt extinguishment in the first quarter of 2017. This was primarily due to the company's decision to redeem its $1.5 billion of 5.625% Senior Notes due 2021. The loss includes a redemption premium of $42 million and the accelerated recognition of $18 million in unamortized debt issuance costs associated with those notes.

The Management and Franchise segment showed robust growth, with revenues increasing by 22.1% to $436 million and operating income up by the same percentage. This was driven by the addition of new managed and franchised properties and improved RevPAR at comparable properties. In contrast, the Ownership segment saw a revenue decrease of 6.0% to $300 million, primarily due to foreign currency impacts, although operating income for this segment saw a significant increase to $21 million from $4 million, driven by a decrease in operating expenses.

Hilton announced a new $1 billion stock repurchase program in February 2017. During the first quarter of 2017, the company repurchased $70 million worth of its common stock under this program, with $930 million remaining available. This indicates management's confidence in the company's financial position and its strategy to return capital to shareholders.