10-QPeriod: Q3 FY2020

Hilton Worldwide Holdings Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 4, 2020For Securities:HLT

Summary

Hilton Worldwide Holdings Inc. (HLT) reported its third-quarter 2020 results, demonstrating resilience amidst the significant challenges posed by the COVID-19 pandemic. The company experienced a substantial decline in revenues and net income compared to the prior year, primarily driven by widespread travel restrictions and a subsequent reduction in hotel occupancy and average daily rates across all regions. Despite these headwinds, Hilton has taken proactive measures to preserve liquidity, including drawing down its revolving credit facility, suspending dividends and share repurchases, and implementing stringent cost-saving initiatives. Financially, the company reported a net loss attributable to stockholders of $79 million ($0.28 per diluted share) for the third quarter ended September 30, 2020, a significant decrease from the net income of $288 million ($1.00 per diluted share) in the same period of 2019. Total revenues also saw a considerable drop, falling to $933 million from $2,395 million year-over-year. However, the company highlighted a recovery trend, with system-wide occupancy increasing month-over-month since April and nearly all previously suspended hotels having reopened by September 30, 2020.

Financial Highlights

50 data points
Beta

Revenue

$933.00M

Net Income

-$79.00M

-8.5% Net Margin

EPS (Diluted)

$-0.29

Total Assets

$17.13B

Cash & Equivalents

$3.47B

Free Cash Flow

-$108.00M

Financial Statements
Beta
Revenue$933.00M
Operating Expenses$922.00M
Operating Income$11.00M
Interest Expense$116.00M
Net Income-$79.00M
EPS (Basic)$-0.29
EPS (Diluted)$-0.29
Shares Outstanding (Basic)277.00M
Shares Outstanding (Diluted)277.00M

Key Highlights

  • 1Revenue significantly decreased by 61.1% to $933 million for the three months ended September 30, 2020, compared to $2,395 million in the prior year period, largely due to the impact of COVID-19 on travel.
  • 2The company reported a net loss attributable to Hilton stockholders of $79 million for the third quarter of 2020, compared to a net income of $288 million in the same period of 2019.
  • 3Despite the severe downturn, system-wide occupancy showed a recovery trend, increasing month-over-month from April to September 2020.
  • 4As of September 30, 2020, Hilton had $3,468 million in cash and cash equivalents, bolstered by proactive liquidity management strategies.
  • 5The company incurred impairment losses totaling $9 million in the third quarter and $136 million for the nine months ended September 30, 2020, primarily related to leased properties and contract acquisition costs due to COVID-19's impact on expected future performance.
  • 6General and administrative expenses decreased by 38.3% for the three months ended September 30, 2020, reflecting cost-saving actions implemented in response to the pandemic.
  • 7The company's management and franchise segment operating income decreased to $281 million from $596 million year-over-year, while the ownership segment reported an operating loss of $52 million compared to an operating income of $39 million in the prior year.

Frequently Asked Questions

The COVID-19 pandemic had a significant negative impact on Hilton's financial performance. Revenues decreased by 61.1% to $933 million for the three months ended September 30, 2020, compared to $2,395 million in the prior year period. This was primarily driven by substantial decreases in occupancy and average daily rates across all regions due to travel restrictions and reduced demand. Consequently, the company reported a net loss attributable to Hilton stockholders of $79 million for the quarter, a stark contrast to the $288 million net income recorded in the same period of 2019.

Hilton implemented several proactive measures to secure its liquidity. These included fully drawing down its $1.75 billion revolving credit facility, suspending dividend payments and share repurchases, implementing strict cost management measures such as workforce reductions and salary cuts, consummating a pre-sale of Hilton Honors points for $1 billion, and issuing $1 billion in senior notes. As a result of these actions, the company maintained a strong cash position, with $3,468 million in cash and cash equivalents as of September 30, 2020.

Yes, there are indications of recovery. While still significantly below 2019 levels, system-wide occupancy showed a month-over-month increase from April to September 2020. By September 30, 2020, nearly all hotels that had temporarily suspended operations had reopened. The Asia Pacific region, which experienced the pandemic's impact earliest, showed notable occupancy recovery, followed by the U.S. and Europe. However, management cautioned that re-imposed travel restrictions in late October could pose further challenges.

The owned and leased hotel segment experienced a more severe decline. Its revenues dropped by 74.0% year-over-year, and it reported an operating loss of $52 million for the third quarter, compared to an operating income of $39 million in the prior year. In contrast, the management and franchise segment, which is more fee-based and less capital-intensive, saw a decrease in operating income to $281 million from $596 million, but remained profitable. This highlights the relative resilience of the asset-light management and franchise model during the downturn.