10-QPeriod: Q3 FY2018

Hilton Worldwide Holdings Inc. Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 24, 2018For Securities:HLT

Summary

Hilton Worldwide Holdings Inc. reported solid financial performance for the third quarter of 2018, with total revenues increasing by 7.7% year-over-year to $2,253 million, and net income attributable to stockholders rising to $162 million. This growth was primarily driven by the management and franchise segment, which saw a 9.8% increase in revenues, bolstered by new property additions and strong RevPAR (Revenue Per Available Room) growth across its global portfolio. The company also continued its share repurchase program, demonstrating a commitment to returning capital to shareholders. The balance sheet shows a robust asset base, though liabilities increased due to debt issuance, primarily to fund share repurchases. The company's outlook remains positive, supported by its extensive development pipeline and strong brand recognition.

Financial Highlights

50 data points
Beta

Revenue

$2.25B

Net Income

$162.00M

7.2% Net Margin

EPS (Diluted)

$0.54

Total Assets

$14.14B

Cash & Equivalents

$621.00M

Free Cash Flow

$359.00M

Financial Statements
Beta
Revenue$2.25B
Operating Expenses$1.87B
Operating Income$385.00M
Interest Expense$99.00M
Net Income$162.00M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)297.00M
Shares Outstanding (Diluted)300.00M

Key Highlights

  • 1Total revenues increased by 7.7% to $2,253 million for the three months ended September 30, 2018.
  • 2Net income attributable to Hilton stockholders was $162 million for the third quarter of 2018, a slight increase from $158 million in the prior year.
  • 3Management and franchise segment revenues grew by 9.8% to $561 million, driven by new property additions and RevPAR growth.
  • 4System-wide RevPAR increased by 2.0% year-over-year, with international markets like Europe and Asia Pacific showing particularly strong performance.
  • 5The company repurchased $1.56 billion of common stock during the nine months ended September 30, 2018, funded by borrowings and available cash.
  • 6Long-term debt increased significantly to $7,559 million as of September 30, 2018, primarily due to the issuance of new senior notes.

Frequently Asked Questions

Revenue growth was primarily driven by the management and franchise segment, which benefited from the net addition of managed and franchised properties to the system and increases in RevPAR (Revenue Per Available Room) at comparable managed and franchised hotels. System-wide RevPAR also contributed positively, with strong performance observed in international markets, particularly Europe and Asia Pacific.

Hilton's long-term debt increased to $7,559 million as of September 30, 2018, largely due to the issuance of $1.5 billion in 5.125% Senior Notes due 2026. A portion of these proceeds, along with other borrowings and cash, were used to repurchase common stock and repay outstanding term loans. The company also continued to manage its debt maturities and credit facility availability.

Hilton has a robust development pipeline with 2,418 hotels (over 371,000 rooms) under construction or approved for development globally. The company's strategy focuses on expanding its global network and fee-based business, which requires minimal capital investment from Hilton itself as the capital is typically provided by third-party owners. This pipeline suggests a strong potential for future growth in management and franchise fees.

Hilton adopted ASC 606 (Revenue from Contracts with Customers) using the full retrospective approach, which required adjustments to prior period balances. This led to changes in how certain fees (like application and initiation fees) and contract acquisition costs are recognized. Additionally, the company adopted ASU 2017-07, which changed the presentation of net periodic pension cost. These adoptions are reflected throughout the financial statements, with detailed explanations provided in the 'Basis of Presentation and Summary of Significant Accounting Policies' note.