10-QPeriod: Q2 FY2018

Hilton Worldwide Holdings Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 25, 2018For Securities:HLT

Summary

Hilton Worldwide Holdings Inc. reported solid financial performance for the second quarter and first half of 2018. Total revenues increased to $2.29 billion for the quarter and $4.37 billion for the six months ended June 30, 2018, driven by strong growth in franchise fees and owned/leased hotel revenues. Net income attributable to Hilton stockholders rose to $217 million ($0.71 diluted EPS) for the quarter and $378 million ($1.21 diluted EPS) for the six months. The company demonstrated effective cost management, with operating income growing across both its management and franchise, and ownership segments. Significant debt refinancing activities occurred, including the issuance of new senior notes and repayment of existing debt, contributing to a strengthened balance sheet and improved leverage. Key operational highlights include continued system growth with a substantial development pipeline and a notable increase in Hilton Honors membership. The company's financial health appears robust, supported by strong operating cash flow and proactive capital management, including share repurchases. Management's outlook remains positive, emphasizing continued global expansion and enhanced shareholder returns. Investors should note the ongoing impact of new accounting standards and the company's continued focus on strategic initiatives to drive long-term value.

Financial Highlights

51 data points
Beta

Revenue

$2.29B

Net Income

$217.00M

9.5% Net Margin

EPS (Diluted)

$0.71

Total Assets

$13.99B

Cash & Equivalents

$423.00M

Free Cash Flow

$271.00M

Financial Statements
Beta
Revenue$2.29B
Operating Expenses$1.89B
Operating Income$406.00M
Interest Expense$95.00M
Net Income$217.00M
EPS (Basic)$0.72
EPS (Diluted)$0.71
Shares Outstanding (Basic)301.00M
Shares Outstanding (Diluted)303.00M

Key Highlights

  • 1Total revenues for the second quarter of 2018 increased by 10.4% to $2.29 billion, compared to $2.08 billion in the prior year period.
  • 2Net income attributable to Hilton stockholders increased to $217 million for the second quarter, up from $150 million in the same period last year.
  • 3Diluted earnings per share (EPS) were $0.71 for the second quarter of 2018, a significant increase from $0.46 in the second quarter of 2017.
  • 4The company generated strong operating cash flow, with net cash provided by operating activities totaling $532 million for the first six months of 2018, a substantial increase from $344 million in the prior year.
  • 5Hilton completed a significant debt issuance, raising $1.5 billion in 5.125% Senior Notes due 2026, and used proceeds to repay outstanding debt and repurchase shares.
  • 6The development pipeline remained robust, with 2,373 hotels and 362,000 rooms under construction or approved for development as of June 30, 2018.
  • 7Hilton Honors membership grew by 20% to approximately 78 million members as of June 30, 2018.

Frequently Asked Questions

Revenue growth was primarily driven by increases in franchise fees and revenues from owned and leased hotels. This was supported by strong RevPAR (Revenue per Available Room) growth across comparable hotels, particularly in the Americas, Europe, and Asia Pacific regions, along with the addition of new managed and franchised properties to the portfolio.

Hilton actively managed its debt by issuing $1.5 billion in 5.125% Senior Notes due 2026. The proceeds were used to repay $500 million of its senior secured term loan facility and repurchase shares. This proactive approach likely improved its debt maturity profile and financial flexibility.

The adoption of ASU 2014-09 (Revenue from Contracts with Customers) has impacted revenue recognition, particularly for items like application/initiation fees, contract acquisition costs, incentive management fees, and the Hilton Honors loyalty program. The company applied the standard retrospectively and has adjusted prior period financials accordingly. This adoption ensures revenue is recognized when control of goods or services transfers to customers, providing a more accurate reflection of performance.

Hilton's primary growth strategies include expanding its global network through management and franchise contracts with minimal capital investment from Hilton itself. The company also focuses on growing its fee-based business and increasing its development pipeline. The expansion of the Hilton Honors loyalty program and strategic share repurchases also support its shareholder value creation strategy.