10-QPeriod: Q1 FY2019

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 10, 2019For Securities:MAR

Summary

Marriott International reported solid performance in the first quarter of 2019, demonstrating resilience despite varied global economic conditions. The company's net income stood at $375 million, a decrease from $420 million in the prior year's comparable quarter, with diluted earnings per share at $1.09. Fee revenues, a key indicator of Marriott's asset-light model, saw a healthy 7% increase to $881 million, driven by growth in base, franchise, and incentive management fees. This growth was primarily fueled by unit expansion across its brands and improved profitability at managed hotels. While owned, leased, and other revenue saw a decline, the overall performance reflects the strength of its franchise and management contracts. The company continues to execute its growth strategy, adding 114 new properties (18,842 rooms) in the quarter, expanding its global footprint to over 7,000 properties. A significant development was the adoption of the new lease accounting standard (ASU 2016-02), which brought operating leases onto the balance sheet, increasing assets and liabilities but not impacting the income statement or cash flows. While facing ongoing costs and potential liabilities related to the 2018 data security incident, management remains confident in the company's long-term financial health and liquidity, supported by a strong credit facility and capital markets access.

Financial Highlights

46 data points
Beta

Revenue

$5.01B

Net Income

$375.00M

7.5% Net Margin

EPS (Diluted)

$1.09

Total Assets

$24.75B

Cash & Equivalents

$258.00M

Free Cash Flow

$85.00M

Financial Statements
Beta
Revenue$5.01B
Operating Expenses$4.50B
Operating Income$510.00M
Interest Expense$97.00M
Net Income$375.00M
EPS (Basic)$1.10
EPS (Diluted)$1.09
Shares Outstanding (Basic)339.60M
Shares Outstanding (Diluted)342.80M

Key Highlights

  • 1Net income for the first quarter of 2019 was $375 million, with diluted EPS of $1.09.
  • 2Net fee revenues increased by 7% to $881 million, driven by unit growth and improved management fees.
  • 3Marriott added 114 new properties (18,842 rooms) in Q1 2019, reflecting continued system expansion.
  • 4The company adopted the new lease accounting standard (ASU 2016-02), bringing operating leases onto the balance sheet.
  • 5General, administrative, and other expenses decreased by $25 million, largely due to lower retirement plan contributions from the prior year.
  • 6The company reported a decrease in provision for income taxes, reflecting favorable tax adjustments compared to the prior year.
  • 7Available borrowing capacity under the credit facility was $1.34 billion at March 31, 2019.

Frequently Asked Questions

Marriott International reported a 7% increase in net fee revenues to $881 million for the first quarter of 2019, compared to $827 million in the same period of 2018. This growth was driven by increases in base management fees ($9 million), franchise fees ($33 million), and incentive management fees ($8 million), primarily due to unit growth and improved profitability at managed hotels.

Marriott adopted ASU 2016-02 in the first quarter of 2019. This standard requires lessees to recognize a lease liability and a right-of-use asset for most leases on the balance sheet. Adoption resulted in the recording of $1,013 million in operating lease assets and $1,053 million in operating lease liabilities as of January 1, 2019. Importantly, the adoption did not impact the Income Statements or Statements of Cash Flows.

Marriott acknowledged the ongoing expenses and potential liabilities related to the 2018 data security incident. While they have recorded $44 million in expenses and $46 million in accrued insurance recoveries in the first quarter, they are unable to estimate the total possible financial impact. However, the company stated they do not believe the incident will impact their long-term financial health. They anticipate significant future expenses related to legal proceedings, regulatory investigations, IT security enhancements, and increased insurance costs.

Marriott continues to expand its global presence, adding 114 properties (18,842 rooms) in the first quarter of 2019, while 15 properties (2,693 rooms) exited its system. This brought the total number of properties to 7,003. At the end of the quarter, the company had approximately 475,000 rooms in its development pipeline, with about half of these rooms located outside of North America.