10-QPeriod: Q1 FY2018

Hilton Worldwide Holdings Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 26, 2018For Securities:HLT

Summary

Hilton Worldwide Holdings Inc. (HLT) reported solid financial results for the first quarter of 2018, showcasing strong revenue growth and improved profitability compared to the prior year. Total revenues increased by 9.4% to $2.07 billion, driven by a significant 17.4% rise in franchise fees and a 12.8% increase in owned and leased hotel revenues. This top-line growth translated into a substantial improvement in net income, which soared to $161 million, or $0.51 per diluted share, a significant increase from $47 million, or $0.14 per diluted share, in the same period last year. The company's expanded portfolio of managed and franchised properties, coupled with positive RevPAR (Revenue per Available Room) growth across all regions, contributed to this robust performance. Management's focus on expanding its global network and fee-based business model continues to yield positive results, demonstrating effective execution of its strategic priorities.

Financial Highlights

51 data points
Beta

Revenue

$2.07B

Net Income

$161.00M

7.8% Net Margin

EPS (Diluted)

$0.51

Total Assets

$14.26B

Cash & Equivalents

$610.00M

Free Cash Flow

$233.00M

Financial Statements
Beta
Revenue$2.07B
Operating Expenses$1.79B
Operating Income$279.00M
Interest Expense$83.00M
Net Income$161.00M
EPS (Basic)$0.51
EPS (Diluted)$0.51
Shares Outstanding (Basic)316.00M
Shares Outstanding (Diluted)319.00M

Key Highlights

  • 1Total revenues increased by 9.4% year-over-year to $2.07 billion.
  • 2Net income attributable to Hilton stockholders significantly increased to $161 million, up from $47 million in Q1 2017.
  • 3Diluted Earnings Per Share (EPS) rose to $0.51, compared to $0.14 in the prior year's first quarter.
  • 4Franchise fees saw substantial growth of 17.4%, indicating successful expansion of the franchised hotel portfolio.
  • 5Owned and leased hotel revenues grew by 12.8%, supported by favorable foreign currency exchange rates and improved RevPAR.
  • 6RevPAR demonstrated positive growth across all geographic regions, with Europe and Asia Pacific showing particularly strong performance.
  • 7The company repurchased 1.3 million shares of common stock for $110 million during the quarter, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Hilton's revenue growth was primarily driven by a combination of factors: the addition of new managed and franchised properties to its portfolio, an increase in licensing and other fees, and a 3.1% increase in RevPAR at comparable franchised hotels. Additionally, owned and leased hotel revenues saw a significant increase, partly due to favorable foreign currency exchange rates and a 5.8% increase in RevPAR at comparable owned and leased hotels.

Hilton adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the full retrospective approach. This adoption led to adjustments in revenue recognition for items like application, initiation, and other fees, which are now recognized over the term of the franchise contract rather than upon execution. It also impacted the recognition of certain contract acquisition costs and how revenue related to the Hilton Honors guest loyalty program is recognized (upon point redemption instead of issuance). The prior period financial information was restated to reflect these changes, resulting in a cumulative adjustment to accumulated deficit and reclassifications within deferred revenues.

Hilton continues to focus on expanding its global network and fee-based business. As of March 31, 2018, the company had a development pipeline of 2,343 hotels, representing approximately 355,000 rooms. The strategy emphasizes growth with minimal capital investment, as third-party owners typically provide the capital for new hotel construction. Management believes that increasing management and franchise contracts will enhance overall return on invested capital and cash available for shareholders.

Favorable foreign currency exchange rates had a positive impact on Hilton's results. Owned and leased hotel revenues increased by $29 million due to these favorable rates. Similarly, owned and leased hotel expenses were impacted by foreign currency exchange rates by $27 million. The company actively manages foreign currency risk through derivative instruments, but some exposure remains.