10-QPeriod: Q3 FY2020

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 6, 2020For Securities:MAR

Summary

Marriott International, Inc. (MAR) reported its third-quarter 2020 results, significantly impacted by the ongoing COVID-19 pandemic. While revenues and profits declined substantially compared to the prior year, the company demonstrated some sequential improvement from the second quarter. Fee revenues, a key indicator of Marriott's asset-light model performance, saw a sharp decrease, largely attributable to lower RevPAR and co-brand credit card fees. The company has taken aggressive cost-saving measures and has strengthened its liquidity position through various financing activities, including senior note issuances and amendments to its credit facility, to navigate the challenging operating environment. The company's outlook suggests continued material impact from COVID-19 through at least 2021, with recovery dependent on the pandemic's duration and the availability of effective treatments or vaccines. Demand remains primarily driven by leisure travel, with limited recovery in business and group travel. Marriott continues to focus on system growth and managing its development pipeline, though new additions are expected to be lower than initially budgeted.

Financial Highlights

44 data points
Beta

Revenue

$2.25B

Net Income

$100.00M

4.4% Net Margin

EPS (Diluted)

$0.31

Total Assets

$25.15B

Cash & Equivalents

$1.58B

Free Cash Flow

$100.00M

Financial Statements
Beta
Revenue$2.25B
Operating Expenses$2.00B
Operating Income$252.00M
Interest Expense$113.00M
Net Income$100.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31
Shares Outstanding (Basic)325.90M
Shares Outstanding (Diluted)326.80M

Key Highlights

  • 1Net income for the three months ended September 30, 2020, was $100 million, a significant decrease from $387 million in the same period of 2019.
  • 2For the nine months ended September 30, 2020, the company reported a net loss of $103 million, compared to a net income of $994 million in the prior year.
  • 3Total revenues for the third quarter of 2020 were $2.25 billion, down from $5.28 billion in the third quarter of 2019.
  • 4Gross fee revenues decreased by 58% year-over-year for the first nine months of 2020, reflecting the severe impact of COVID-19 on travel demand.
  • 5Marriott's liquidity position was strengthened through new senior note issuances totaling $3.6 billion and amendments to its credit facility, including a waiver of the leverage covenant.
  • 6The company reported approximately 6% of its hotels were closed as of November 4, 2020, a significant improvement from May 2020, indicating a gradual recovery in operations.
  • 7Despite the downturn, Marriott expects net rooms growth of 2.5% to 3% for full year 2020, with a development pipeline of over 496,000 rooms.

Frequently Asked Questions

The primary driver of Marriott's financial performance in Q3 2020 was the ongoing COVID-19 pandemic, which significantly reduced travel demand and, consequently, fee revenues and revenues from owned and leased properties. While there was some sequential improvement from Q2, the year-over-year comparisons remained substantially negative.

Marriott took several actions to enhance liquidity and manage debt. These included substantially reducing corporate costs, suspending share repurchases and dividends, drawing on its credit facility, issuing $3.6 billion in senior notes, repurchasing $853 million of existing senior notes, and raising $920 million through amendments to its co-brand credit card agreements. The company also amended its credit facility to waive the leverage covenant through Q1 2021.

Marriott expects the material impact of COVID-19 to continue through at least 2021. The pace of recovery is dependent on the duration of the pandemic and the availability of effective treatments or vaccines. While leisure travel demand has shown some recovery, business and group travel demand has seen limited return. The company anticipates prior levels of business will not return until at least after 2021.

The Starwood data security incident continues to involve litigation and government investigations. The UK's Information Commissioner's Office (ICO) issued a final decision imposing a fine of £18.4 million, which Marriott does not intend to appeal. The company has recorded accruals for contingencies and insurance recoveries related to the incident, and while it expects significant future expenses, it does not believe the incident will impact its long-term financial health. However, it acknowledges that insurance may not cover all expenses or losses.