10-QPeriod: Q2 FY2017

Hilton Worldwide Holdings Inc. Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 26, 2017For Securities:HLT

Summary

Hilton Worldwide Holdings Inc. reported its second quarter and first half results for 2017, marked by significant strategic changes including the spin-offs of its timeshare business (Hilton Grand Vacations) and its hotel portfolio (Park Hotels & Resorts) which were completed in January 2017. Consequently, the financial results presented reflect continuing operations, with the spun-off entities classified as discontinued operations. For the second quarter of 2017, Hilton reported total revenues of $2.35 billion, an increase from $1.95 billion in the prior year's quarter. Net income attributable to Hilton stockholders was $166 million, or $0.51 per diluted share, a decrease from $239 million or $0.72 per diluted share in the second quarter of 2016, largely due to the impact of discontinued operations in the prior year. The company highlights strong growth in its management and franchise segment, driven by new property additions and increased RevPAR. Adjusted EBITDA for the quarter was $519 million, up from $412 million in Q2 2016, reflecting the benefits of the strategic repositioning and operational performance.

Financial Highlights

49 data points
Beta

Revenue

$2.08B

Net Income

$150.00M

7.2% Net Margin

EPS (Diluted)

$0.46

Total Assets

$14.27B

Cash & Equivalents

$784.00M

Free Cash Flow

$285.00M

Financial Statements
Beta
Revenue$2.08B
Operating Expenses$1.75B
Operating Income$324.00M
Interest Expense$86.00M
Net Income$150.00M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)327.00M
Shares Outstanding (Diluted)329.00M

Key Highlights

  • 1Completed spin-offs of Hilton Grand Vacations (HGV) and Park Hotels & Resorts (Park) in January 2017, with their results now classified as discontinued operations.
  • 2Total revenues for Q2 2017 increased by 20.3% year-over-year to $2.35 billion, driven by growth in the management and franchise segment.
  • 3Net income attributable to Hilton stockholders decreased to $166 million ($0.51/share) in Q2 2017 from $239 million ($0.72/share) in Q2 2016, impacted by the absence of discontinued operations' income in the current year.
  • 4Adjusted EBITDA rose significantly by 26% to $519 million in Q2 2017, indicating improved operational performance and profitability post-spin-offs.
  • 5Management and Franchise segment revenues increased by 25.7% to $523 million in Q2 2017, reflecting the addition of new hotels and improved RevPAR.
  • 6The company repurchased $352 million of its common stock in the first six months of 2017 under a $1 billion repurchase program authorized in February 2017.
  • 7Long-term debt remained stable at approximately $6.7 billion, with strategic debt refinancing activities undertaken in the first half of 2017.

Frequently Asked Questions

The spin-offs, completed in January 2017, resulted in the historical financial results of Hilton Grand Vacations and Park Hotels & Resorts being presented as 'discontinued operations.' This means that the current period's results primarily reflect Hilton's ongoing 'continuing operations,' while the prior year's comparative period includes the results of the spun-off entities. This presentation can make year-over-year comparisons of net income appear lower in the current period due to the absence of these significant businesses.

Total revenues increased by 20.3% to $2.35 billion in the second quarter of 2017 compared to the same period in 2016. This growth was primarily driven by a 25.7% increase in revenues from the management and franchise segment, which benefited from new property additions and improved Revenue Per Available Room (RevPAR). While owned and leased hotel revenues saw a slight decrease, the overall company revenue growth was strong.

The significant increase in Adjusted EBITDA from $412 million in Q2 2016 to $519 million in Q2 2017 is a key indicator of improved operational profitability and efficiency. This growth, achieved after the strategic spin-offs, suggests that the remaining core Hilton business is performing well and generating higher earnings before interest, taxes, depreciation, and amortization, adjusted for certain non-recurring items. It reflects the successful execution of the company's strategy to focus on its asset-light management and franchise model.

Hilton demonstrated a commitment to returning capital to shareholders by repurchasing $352 million of its common stock in the first half of 2017 under a $1 billion share repurchase program authorized in February 2017. The company aims to maintain adequate liquidity through existing cash and operating cash flow to meet its short-term and long-term financial requirements. Long-term debt remained stable around $6.7 billion, with active debt management and refinancing activities undertaken during the period.