Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Photo/Multimedia, Conference Call, Webcast

Hilton Reports Third Quarter Results; Exceeds Expectations


Hilton Worldwide Holdings Inc. ("Hilton" or the "Company") (NYSE: HLT) today reported its third quarter 2022 results. Highlights include:

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "The third quarter marked an important milestone in our recovery as system-wide RevPAR exceeded the same period in 2019 for the first time since the pandemic began. Our diluted EPS, adjusted for special items and Adjusted EBITDA exceeded the high end of our guidance. Improved performance reflected the continued strength in leisure travel, as well as recovering business transient and group demand. We expect these strong trends to continue throughout the fourth quarter with system-wide RevPAR once again exceeding prior peaks."

For the three months ended September 30, 2022, system-wide comparable RevPAR increased 29.9 percent compared to the same period in 2021, due to increases in both occupancy and ADR, and fee revenues increased 33 percent. For comparison to pre-pandemic results, system-wide comparable RevPAR for the three months ended September 30, 2022 was up 5.0 percent compared to the same period in 2019.

For the nine months ended September 30, 2022, system-wide comparable RevPAR increased 49.6 percent compared to the same period in 2021, due to increases in both occupancy and ADR, and fee revenues increased 51 percent. For comparison to pre-pandemic results, system-wide comparable RevPAR for the nine months ended September 30, 2022 was down 4.0 percent compared to the same period in 2019.

For the three months ended September 30, 2022, diluted EPS was $1.26 and diluted EPS, adjusted for special items, was $1.31 compared to $0.86 and $0.78, respectively, for the three months ended September 30, 2021. Net income and Adjusted EBITDA were $346 million and $732 million, respectively, for the three months ended September 30, 2022, compared to $240 million and $519 million, respectively, for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, diluted EPS was $3.32 and diluted EPS, adjusted for special items, was $3.31 compared to $0.94 and $1.36, respectively, for the nine months ended September 30, 2021. Net income and Adjusted EBITDA were $924 million and $1,859 million, respectively, for the nine months ended September 30, 2022, compared to $259 million and $1,117 million, respectively, for the nine months ended September 30, 2021.

Development

In the third quarter of 2022, Hilton opened 80 new hotels contributing 12,900 additional rooms to Hilton's system and achieved net unit growth of 12,100 rooms. During the quarter, Hilton opened the 25,000th room under the Curio Collection by Hilton brand and the 600th Hilton Hotels & Resorts property. Further, Hilton continued to expand its luxury portfolio with the opening of the Waldorf Astoria Kuwait, the brand's first property in the country.

As of September 30, 2022, Hilton's development pipeline totaled more than 2,810 hotels representing nearly 416,000 rooms throughout 112 countries and territories, including 29 countries and territories where Hilton does not currently have any existing hotels. Additionally, of the rooms in the development pipeline, 204,200 of the rooms were under construction and 242,600 of the rooms were located outside the U.S.

Balance Sheet and Liquidity

As of September 30, 2022, Hilton had $8.8 billion of long-term debt outstanding, excluding the deduction for deferred financing costs and discount, with a weighted average interest rate of 4.29 percent. Further excluding finance lease liabilities and other debt of Hilton's consolidated variable interest entities, Hilton had $8.6 billion of long-term debt outstanding with a weighted average interest rate of 4.28 percent and no scheduled maturities until 2025. No debt amounts were outstanding under Hilton's $1.75 billion senior secured revolving credit facility as of September 30, 2022, which had an available borrowing capacity of $1,690 million after considering $60 million of outstanding letters of credit. Total cash and cash equivalents were $1,362 million as of September 30, 2022, including $80 million of restricted cash and cash equivalents.

During the third quarter of 2022, Hilton repurchased 4.0 million shares of its common stock at a cost of $497 million and an average price per share of $124.85. During the nine months ended September 30, 2022, Hilton repurchased 8.5 million shares of its common stock at a cost of $1,107 million and an average price per share of $130.47. Year-to-date through October 2022, Hilton repurchased 9.6 million shares of its common stock for $1,242 million and the amount remaining under Hilton's stock repurchase program was $994 million.

In September 2022, Hilton paid a quarterly cash dividend of $0.15 per share of common stock, for a total of $41 million. In October 2022, Hilton's board of directors authorized a regular quarterly cash dividend of $0.15 per share of common stock to be paid on or before December 30, 2022 to holders of record of its common stock as of the close of business on November 10, 2022.

Outlook

Share-based metrics in Hilton's outlook include actual share repurchases to date, but do not include the effect of potential share repurchases hereafter.

Full Year 2022

Fourth Quarter 2022

Conference Call

Hilton will host a conference call to discuss third quarter 2022 results on October 26, 2022 at 10:00 a.m. Eastern Time. Participants may listen to the live webcast by logging on to the Hilton Investor Relations website at https://ir.hilton.com/events-and-presentations. A replay and transcript of the webcast will be available within 24 hours after the live event at https://ir.hilton.com/financial-reporting.

Alternatively, participants may listen to the live call by dialing 1-888-317-6003 in the United States ("U.S.") or 1-412-317-6061 internationally using the conference ID 1181552. Participants are encouraged to dial into the call or link to the webcast at least fifteen minutes prior to the scheduled start time. A telephone replay will be available for seven days following the call. To access the telephone replay, dial 1-877-344-7529 in the U.S. or 1-412-317-0088 internationally using the conference ID 1320953.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to the expectations regarding the recovery of the travel and hospitality industry from the coronavirus ("COVID-19") pandemic (the "pandemic"), the performance of Hilton's business, financial results, liquidity and capital resources and other non-historical statements. In some cases, these forward-looking statements can be identified by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond Hilton's control, such as inflation, changes in interest rates and challenges due to labor shortages and supply chain disruptions, risks related to the impact of the pandemic, including as a result of new strains or variants of the virus and uncertainty of the acceptance and continued effectiveness of the COVID-19 vaccines, competition for hotel guests and management and franchise contracts, risks related to doing business with third-party hotel owners, performance of Hilton's information technology systems, growth of reservation channels outside of Hilton's system, risks of doing business outside of the U.S., risks associated with the Russian invasion of Ukraine and Hilton's indebtedness. Additional factors that could cause Hilton's results to differ materially from those described in the forward-looking statements can be found under the section entitled "Part I?Item 1A. Risk Factors" of Hilton's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and "Part II ?Item 1A. Risk Factors" of Hilton's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, filed with the Securities and Exchange Commission (the "SEC"), as such factors may be updated from time to time in Hilton's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release and in Hilton's filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Definitions

See the "Definitions" section for the definition of certain terms used within this press release, including within the schedules.

Non-GAAP Financial Measures

The Company refers to certain financial measures that are not recognized under U.S. generally accepted accounting principles ("GAAP") in this press release, including: net income (loss), adjusted for special items; diluted EPS, adjusted for special items; EBITDA; Adjusted EBITDA; Adjusted EBITDA margin; net debt; and net debt to Adjusted EBITDA ratio. See the schedules to this press release, including the "Definitions" section, for additional information and reconciliations of such non-GAAP financial measures.

About Hilton

Hilton (NYSE: HLT) is a leading global hospitality company with a portfolio of 18 world-class brands comprising more than 7,000 properties and more than 1.1 million rooms, in 123 countries and territories. Dedicated to fulfilling its founding vision to fill the earth with the light and warmth of hospitality, Hilton has welcomed more than 3 billion guests in its more than 100-year history, earned a top spot on Fortune's 100 Best Companies to Work For list and been recognized as a global leader on the Dow Jones Sustainability Indices for five consecutive years. Hilton has introduced several industry-leading technology enhancements to improve the guest experience, including Digital Key Share, automated complimentary room upgrades and the ability to book confirmed connecting rooms. Through the award-winning guest loyalty program Hilton Honors, the nearly 146 million members who book directly with Hilton can earn Points for hotel stays and experiences money can't buy. With the free Hilton Honors app, guests can book their stay, select their room, check in, unlock their door with a Digital Key and check out, all from their smartphone. Visit stories.hilton.com for more information, and connect with Hilton on facebook.com/hiltonnewsroom, twitter.com/hiltonnewsroom, linkedin.com/company/hilton, instagram.com/hiltonnewsroom and youtube.com/hiltonnewsroom.

HILTON WORLDWIDE HOLDINGS INC.

EARNINGS RELEASE SCHEDULES

TABLE OF CONTENTS

 

Condensed Consolidated Statements of Operations

Comparable and Currency Neutral System-Wide Hotel Operating Statistics

Property Summary

Capital Expenditures and Contract Acquisition Costs

Reconciliations of Non-GAAP Financial Measures

Definitions

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share data)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

Revenues

 

 

 

 

 

 

 

Franchise and licensing fees

$

573

 

 

$

451

 

 

$

1,531

 

 

$

1,062

 

Base and other management fees

 

76

 

 

 

49

 

 

 

206

 

 

 

116

 

Incentive management fees

 

52

 

 

 

26

 

 

 

132

 

 

 

60

 

Owned and leased hotels

 

295

 

 

 

199

 

 

 

727

 

 

 

376

 

Other revenues

 

28

 

 

 

18

 

 

 

71

 

 

 

56

 

 

 

1,024

 

 

 

743

 

 

 

2,667

 

 

 

1,670

 

Other revenues from managed and franchised properties

 

1,344

 

 

 

1,006

 

 

 

3,662

 

 

 

2,282

 

Total revenues

 

2,368

 

 

 

1,749

 

 

 

6,329

 

 

 

3,952

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Owned and leased hotels

 

263

 

 

 

200

 

 

 

705

 

 

 

452

 

Depreciation and amortization

 

39

 

 

 

46

 

 

 

123

 

 

 

143

 

General and administrative

 

93

 

 

 

107

 

 

 

287

 

 

 

302

 

Other expenses

 

13

 

 

 

12

 

 

 

35

 

 

 

31

 

 

 

408

 

 

 

365

 

 

 

1,150

 

 

 

928

 

Other expenses from managed and franchised properties

 

1,337

 

 

 

944

 

 

 

3,589

 

 

 

2,339

 

Total expenses

 

1,745

 

 

 

1,309

 

 

 

4,739

 

 

 

3,267

 

 

 

 

 

 

 

 

 

Loss on sale of assets, net

 

?

 

 

 

(8

)

 

 

?

 

 

 

(8

)

 

 

 

 

 

 

 

 

Operating income

 

623

 

 

 

432

 

 

 

1,590

 

 

 

677

 

 

 

 

 

 

 

 

 

Interest expense

 

(106

)

 

 

(98

)

 

 

(295

)

 

 

(302

)

Gain on foreign currency transactions

 

?

 

 

 

?

 

 

 

4

 

 

 

1

 

Loss on debt extinguishment

 

?

 

 

 

?

 

 

 

?

 

 

 

(69

)

Other non-operating income, net

 

10

 

 

 

6

 

 

 

32

 

 

 

16

 

 

 

 

 

 

 

 

 

Income before income taxes

 

527

 

 

 

340

 

 

 

1,331

 

 

 

323

 

 

 

 

 

 

 

 

 

Income tax expense

 

(181

)

 

 

(100

)

 

 

(407

)

 

 

(64

)

 

 

 

 

 

 

 

 

Net income

 

346

 

 

 

240

 

 

 

924

 

 

 

259

 

Net loss attributable to noncontrolling interests

 

1

 

 

 

1

 

 

 

3

 

 

 

4

 

Net income attributable to Hilton stockholders

$

347

 

 

$

241

 

 

$

927

 

 

$

263

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

273

 

 

 

279

 

 

 

277

 

 

 

278

 

Diluted

 

275

 

 

 

281

 

 

 

279

 

 

 

281

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

1.27

 

 

$

0.86

 

 

$

3.35

 

 

$

0.94

 

Diluted

$

1.26

 

 

$

0.86

 

 

$

3.32

 

 

$

0.94

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

$

0.15

 

 

$

?

 

 

$

0.30

 

 

$

?

 

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY REGION, BRAND AND SEGMENT

(unaudited)

 

 

Three Months Ended September 30,

 

Occupancy

 

ADR

 

RevPAR

 

2022

 

vs. 2021

 

2022

 

vs. 2021

 

2022

 

vs. 2021

Region

 

 

 

 

 

 

 

 

 

 

 

U.S.

74.5

%

 

6.0

% pts.

 

$

163.32

 

12.1

%

 

$

121.71

 

22.0

%

Americas (excluding U.S.)

71.4

 

 

17.6

 

 

 

147.08

 

31.2

 

 

 

104.99

 

74.2

 

Europe

77.4

 

 

18.5

 

 

 

159.10

 

45.9

 

 

 

123.15

 

91.7

 

Middle East & Africa

63.9

 

 

11.7

 

 

 

128.39

 

18.7

 

 

 

82.10

 

45.2

 

Asia Pacific

63.6

 

 

13.7

 

 

 

104.50

 

14.9

 

 

 

66.46

 

46.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Brand

 

 

 

 

 

 

 

 

 

 

 

Waldorf Astoria Hotels & Resorts

55.3

%

 

9.7

% pts.

 

$

422.47

 

6.1

%

 

$

233.50

 

28.6

%

Conrad Hotels & Resorts

63.3

 

 

17.0

 

 

 

268.59

 

40.8

 

 

 

169.98

 

92.6

 

Canopy by Hilton

66.2

 

 

9.9

 

 

 

192.83

 

16.7

 

 

 

127.68

 

37.0

 

Hilton Hotels & Resorts

69.3

 

 

17.8

 

 

 

184.48

 

18.5

 

 

 

127.83

 

59.4

 

Curio Collection by Hilton

66.7

 

 

11.0

 

 

 

228.11

 

15.4

 

 

 

152.24

 

38.2

 

DoubleTree by Hilton

69.5

 

 

11.4

 

 

 

141.53

 

14.0

 

 

 

98.37

 

36.4

 

Tapestry Collection by Hilton

70.6

 

 

8.3

 

 

 

175.99

 

11.0

 

 

 

124.26

 

25.8

 

Embassy Suites by Hilton

73.3

 

 

10.5

 

 

 

178.81

 

11.7

 

 

 

131.05

 

30.5

 

Hilton Garden Inn

73.4

 

 

7.3

 

 

 

144.89

 

12.8

 

 

 

106.34

 

25.3

 

Hampton by Hilton

75.3

 

 

4.2

 

 

 

135.64

 

9.3

 

 

 

102.10

 

15.8

 

Tru by Hilton

75.1

 

 

3.0

 

 

 

131.31

 

7.7

 

 

 

98.67

 

12.2

 

Homewood Suites by Hilton

82.0

 

 

1.9

 

 

 

157.42

 

15.4

 

 

 

129.01

 

18.1

 

Home2 Suites by Hilton

81.3

 

 

0.3

 

 

 

139.68

 

12.0

 

 

 

113.62

 

12.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment

 

 

 

 

 

 

 

 

 

 

 

Management and franchise

73.2

%

 

8.4

% pts.

 

$

154.97

 

14.1

%

 

$

113.46

 

28.8

%

Ownership(1)

70.4

 

 

27.6

 

 

 

209.81

 

31.8

 

 

 

147.62

 

116.6

 

 

 

 

 

 

 

 

 

 

 

 

 

System-wide

73.2

%

 

8.7

% pts.

 

$

155.86

 

14.5

%

 

$

114.04

 

29.9

%

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS (continued)

BY REGION, BRAND AND SEGMENT

(unaudited)

 

 

Nine Months Ended September 30,

 

Occupancy

 

ADR

 

RevPAR

 

2022

 

vs. 2021

 

2022

 

vs. 2021

 

2022

 

vs. 2021

Region

 

 

 

 

 

 

 

 

 

 

 

U.S.

70.5

%

 

10.3

% pts.

 

$

157.50

 

22.1

%

 

$

111.09

 

42.9

%

Americas (excluding U.S.)

63.0

 

 

23.1

 

 

 

138.05

 

31.4

 

 

 

87.04

 

107.7

 

Europe

65.9

 

 

29.4

 

 

 

147.18

 

51.5

 

 

 

97.02

 

173.2

 

Middle East & Africa

63.9

 

 

17.2

 

 

 

146.86

 

28.3

 

 

 

93.83

 

75.5

 

Asia Pacific

52.3

 

 

2.5

 

 

 

102.22

 

11.3

 

 

 

53.46

 

16.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Brand

 

 

 

 

 

 

 

 

 

 

 

Waldorf Astoria Hotels & Resorts

53.5

%

 

16.7

% pts.

 

$

489.29

 

12.0

%

 

$

261.90

 

62.8

%

Conrad Hotels & Resorts

55.5

 

 

16.8

 

 

 

259.54

 

40.7

 

 

 

144.01

 

101.9

 

Canopy by Hilton

61.8

 

 

17.8

 

 

 

193.99

 

23.7

 

 

 

119.91

 

73.8

 

Hilton Hotels & Resorts

61.4

 

 

20.0

 

 

 

181.23

 

26.9

 

 

 

111.32

 

88.3

 

Curio Collection by Hilton

62.1

 

 

16.1

 

 

 

227.21

 

21.0

 

 

 

141.13

 

63.2

 

DoubleTree by Hilton

63.5

 

 

15.2

 

 

 

137.07

 

21.3

 

 

 

87.00

 

59.4

 

Tapestry Collection by Hilton

64.7

 

 

15.4

 

 

 

166.75

 

18.8

 

 

 

107.91

 

55.9

 

Embassy Suites by Hilton

68.9

 

 

13.9

 

 

 

174.14

 

22.0

 

 

 

119.98

 

53.0

 

Hilton Garden Inn

68.3

 

 

11.0

 

 

 

138.51

 

21.8

 

 

 

94.57

 

45.2

 

Hampton by Hilton

69.8

 

 

7.2

 

 

 

130.08

 

17.7

 

 

 

90.77

 

31.1

 

Tru by Hilton

71.0

 

 

7.6

 

 

 

124.70

 

17.9

 

 

 

88.55

 

32.0

 

Homewood Suites by Hilton

79.3

 

 

5.7

 

 

 

149.64

 

22.2

 

 

 

118.68

 

31.6

 

Home2 Suites by Hilton

78.9

 

 

4.5

 

 

 

134.41

 

18.9

 

 

 

106.08

 

26.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment

 

 

 

 

 

 

 

 

 

 

 

Management and franchise

67.8

%

 

11.6

% pts.

 

$

150.10

 

22.8

%

 

$

101.76

 

48.1

%

Ownership(1)

57.7

 

 

31.4

 

 

 

202.64

 

36.1

 

 

 

116.89

 

199.0

 

 

 

 

 

 

 

 

 

 

 

 

 

System-wide

67.6

%

 

11.9

% pts.

 

$

150.86

 

23.2

%

 

$

102.02

 

49.6

%

____________

(1) Includes hotels owned or leased by entities in which Hilton owns a noncontrolling financial interest.

HILTON WORLDWIDE HOLDINGS INC.

PROPERTY SUMMARY

As of September 30, 2022

 

 

Owned / Leased(1)

 

Managed

 

Franchised

 

Total

 

Properties

 

Rooms

 

Properties

 

Rooms

 

Properties

 

Rooms

 

Properties

 

Rooms

Waldorf Astoria Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

12

 

4,488

 

?

 

?

 

12

 

4,488

Americas (excluding U.S.)

?

 

?

 

2

 

252

 

?

 

?

 

2

 

252

Europe

2

 

463

 

4

 

898

 

?

 

?

 

6

 

1,361

Middle East & Africa

?

 

?

 

6

 

1,432

 

?

 

?

 

6

 

1,432

Asia Pacific

?

 

?

 

6

 

1,259

 

?

 

?

 

6

 

1,259

LXR Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

?

 

?

 

3

 

522

 

3

 

522

Americas (excluding U.S.)

?

 

?

 

?

 

?

 

1

 

76

 

1

 

76

Europe

?

 

?

 

1

 

70

 

1

 

307

 

2

 

377

Middle East & Africa

?

 

?

 

1

 

41

 

1

 

234

 

2

 

275

Asia Pacific

?

 

?

 

?

 

?

 

1

 

114

 

1

 

114

Conrad Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

6

 

2,227

 

2

 

1,730

 

8

 

3,957

Americas (excluding U.S.)

?

 

?

 

3

 

787

 

?

 

?

 

3

 

787

Europe

?

 

?

 

4

 

1,155

 

1

 

107

 

5

 

1,262

Middle East & Africa

1

 

614

 

3

 

1,569

 

?

 

?

 

4

 

2,183

Asia Pacific

1

 

164

 

22

 

7,077

 

1

 

659

 

24

 

7,900

Canopy by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

?

 

?

 

25

 

4,296

 

25

 

4,296

Americas (excluding U.S.)

?

 

?

 

2

 

272

 

?

 

?

 

2

 

272

Europe

?

 

?

 

1

 

123

 

4

 

917

 

5

 

1,040

Middle East & Africa

?

 

?

 

1

 

200

 

?

 

?

 

1

 

200

Asia Pacific

?

 

?

 

4

 

614

 

?

 

?

 

4

 

614

Signia by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

2

 

1,814

 

?

 

?

 

2

 

1,814

Hilton Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

59

 

44,175

 

184

 

57,844

 

243

 

102,019

Americas (excluding U.S.)

1

 

405

 

29

 

11,298

 

26

 

7,826

 

56

 

19,529

Europe

39

 

11,514

 

45

 

15,135

 

43

 

11,280

 

127

 

37,929

Middle East & Africa

5

 

1,992

 

38

 

13,501

 

3

 

1,565

 

46

 

17,058

Asia Pacific

5

 

2,999

 

115

 

40,075

 

9

 

3,557

 

129

 

46,631

Curio Collection by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

10

 

3,990

 

62

 

13,582

 

72

 

17,572

Americas (excluding U.S.)

?

 

?

 

2

 

99

 

16

 

2,171

 

18

 

2,270

Europe

?

 

?

 

6

 

516

 

25

 

3,269

 

31

 

3,785

Middle East & Africa

?

 

?

 

4

 

741

 

2

 

557

 

6

 

1,298

Asia Pacific

?

 

?

 

4

 

773

 

2

 

248

 

6

 

1,021

DoubleTree by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

32

 

10,585

 

346

 

78,794

 

378

 

89,379

Americas (excluding U.S.)

?

 

?

 

3

 

587

 

36

 

7,238

 

39

 

7,825

Europe

?

 

?

 

14

 

3,580

 

109

 

18,635

 

123

 

22,215

Middle East & Africa

?

 

?

 

18

 

4,711

 

6

 

825

 

24

 

5,536

Asia Pacific

?

 

?

 

79

 

21,187

 

6

 

1,568

 

85

 

22,755

HILTON WORLDWIDE HOLDINGS INC.

PROPERTY SUMMARY (continued)

As of September 30, 2022

 

 

Owned / Leased(1)

 

Managed

 

Franchised

 

Total

 

Properties

 

Rooms

 

Properties

 

Rooms

 

Properties

 

Rooms

 

Properties

 

Rooms

Tapestry Collection by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

?

 

?

 

74

 

8,839

 

74

 

8,839

Americas (excluding U.S.)

?

 

?

 

1

 

138

 

7

 

740

 

8

 

878

Europe

?

 

?

 

?

 

?

 

6

 

360

 

6

 

360

Asia Pacific

?

 

?

 

1

 

266

 

1

 

175

 

2

 

441

Embassy Suites by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

38

 

10,121

 

215

 

48,458

 

253

 

58,579

Americas (excluding U.S.)

?

 

?

 

2

 

354

 

6

 

1,649

 

8

 

2,003

Motto by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

?

 

?

 

3

 

871

 

3

 

871

Hilton Garden Inn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

5

 

527

 

736

 

101,752

 

741

 

102,279

Americas (excluding U.S.)

?

 

?

 

13

 

1,992

 

51

 

7,664

 

64

 

9,656

Europe

?

 

?

 

19

 

3,696

 

61

 

9,849

 

80

 

13,545

Middle East & Africa

?

 

?

 

17

 

3,555

 

3

 

474

 

20

 

4,029

Asia Pacific

?

 

?

 

52

 

11,401

 

3

 

495

 

55

 

11,896

Hampton by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

24

 

3,115

 

2,299

 

227,371

 

2,323

 

230,486

Americas (excluding U.S.)

?

 

?

 

12

 

1,537

 

115

 

13,932

 

127

 

15,469

Europe

?

 

?

 

16

 

2,697

 

108

 

16,765

 

124

 

19,462

Middle East & Africa

?

 

?

 

4

 

1,238

 

?

 

?

 

4

 

1,238

Asia Pacific

?

 

?

 

?

 

?

 

261

 

42,027

 

261

 

42,027

Tru by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

?

 

?

 

224

 

21,855

 

224

 

21,855

Americas (excluding U.S.)

?

 

?

 

?

 

?

 

3

 

333

 

3

 

333

Homewood Suites by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

9

 

1,131

 

497

 

56,875

 

506

 

58,006

Americas (excluding U.S.)

?

 

?

 

3

 

406

 

24

 

2,688

 

27

 

3,094

Home2 Suites by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

?

 

?

 

2

 

210

 

536

 

56,235

 

538

 

56,445

Americas (excluding U.S.)

?

 

?

 

?

 

?

 

7

 

753

 

7

 

753

Asia Pacific

?

 

?

 

?

 

?

 

15

 

2,198

 

15

 

2,198

Other

?

 

?

 

3

 

1,343

 

5

 

1,217

 

8

 

2,560

Total hotels

54

 

18,151

 

759

 

238,958

 

6,175

 

841,496

 

6,988

 

1,098,605

Hilton Grand Vacations

?

 

?

 

?

 

?

 

73

 

12,542

 

73

 

12,542

Total system

54

 

18,151

 

759

 

238,958

 

6,248

 

854,038

 

7,061

 

1,111,147

____________

(1) Includes hotels owned or leased by entities in which Hilton owns a noncontrolling financial interest.

HILTON WORLDWIDE HOLDINGS INC.

CAPITAL EXPENDITURES AND CONTRACT ACQUISITION COSTS

(unaudited, dollars in millions)

 

Three Months Ended

 

 

 

September 30,

 

Increase / (Decrease)

 

2022

 

2021

 

$

 

%

Capital expenditures for property and equipment(1)

$

8

 

$

8

 

?

 

 

?

 

Capitalized software costs(2)

 

18

 

 

12

 

6

 

 

50.0

 

Total capital expenditures

 

26

 

 

20

 

6

 

 

30.0

 

Contract acquisition costs

 

20

 

 

45

 

(25

)

 

(55.6

)

Total capital expenditures and contract acquisition costs

$

46

 

$

65

 

(19

)

 

(29.2

)

 

 

Nine Months Ended

 

 

 

September 30,

 

Increase / (Decrease)

 

2022

 

2021

 

$

 

%

Capital expenditures for property and equipment(1)

$

19

 

$

17

 

2

 

 

11.8

 

Capitalized software costs(2)

 

43

 

 

28

 

15

 

 

53.6

 

Total capital expenditures

 

62

 

 

45

 

17

 

 

37.8

 

Contract acquisition costs

 

61

 

 

160

 

(99

)

 

(61.9

)

Total capital expenditures and contract acquisition costs

$

123

 

$

205

 

(82

)

 

(40.0

)

____________
(1)

Represents expenditures for hotels, corporate and other property and equipment, which include amounts indirectly reimbursed by hotel owners of less than $1 million and $2 million for the three months ended September 30, 2022 and 2021, respectively, and $2 million and $3 million for the nine months ended September 30, 2022 and 2021, respectively. Excludes expenditures for FF&E replacement reserves of $13 million and $15 million for the three months ended September 30, 2022 and 2021, respectively, and $40 million and $30 million for the nine months ended September 30, 2022 and 2021, respectively.

(2)

Includes $17 million and $11 million of expenditures that were indirectly reimbursed by hotel owners for the three months ended September 30, 2022 and 2021, respectively, and $40 million and $25 million for the nine months ended September 30, 2022 and 2021, respectively.

HILTON WORLDWIDE HOLDINGS INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS

(unaudited, in millions, except per share data)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

Net income attributable to Hilton stockholders, as reported

$

347

 

 

$

241

 

 

$

927

 

 

$

263

 

Diluted EPS, as reported

$

1.26

 

 

$

0.86

 

 

$

3.32

 

 

$

0.94

 

Special items:

 

 

 

 

 

 

 

Net other expenses (revenues) from managed and franchised properties

$

(7

)

 

$

(62

)

 

$

(73

)

 

$

57

 

Purchase accounting amortization(1)

 

11

 

 

 

11

 

 

 

34

 

 

 

35

 

FF&E replacement reserves

 

13

 

 

 

15

 

 

 

40

 

 

 

30

 

Asset dispositions(2)

 

?

 

 

 

8

 

 

 

?

 

 

 

8

 

Loss on debt extinguishment(3)

 

?

 

 

 

?

 

 

 

?

 

 

 

69

 

Tax-related adjustment(4)

 

?

 

 

 

(8

)

 

 

?

 

 

 

(38

)

Other adjustment items(5)

 

1

 

 

 

9

 

 

 

(9

)

 

 

10

 

Total special items before taxes

 

18

 

 

 

(27

)

 

 

(8

)

 

 

171

 

Income tax benefit (expense) on special items

 

(4

)

 

 

5

 

 

 

4

 

 

 

(52

)

Total special items after taxes

$

14

 

 

$

(22

)

 

$

(4

)

 

$

119

 

 

 

 

 

 

 

 

 

Net income, adjusted for special items

$

361

 

 

$

219

 

 

$

923

 

 

$

382

 

Diluted EPS, adjusted for special items

$

1.31

 

 

$

0.78

 

 

$

3.31

 

 

$

1.36

 

____________
(1)

Amounts represent the amortization expense related to finite-lived intangible assets that were recorded at fair value in 2007 when the Company became a wholly owned subsidiary of affiliates of Blackstone Inc. The majority of the related assets that were remaining as of September 30, 2022 will be fully amortized during 2023.

(2)

Amounts relate to the loss on the sale of one of the Company's owned hotels, which was recognized in loss on sale of assets, net.

(3)

The amount relates to the redemption of senior unsecured notes and includes a redemption premium of $55 million and the accelerated recognition of unamortized deferred financing costs related to those senior unsecured notes of $14 million.

(4)

Amounts include income tax benefits recognized related to changes in effective tax rates, which did not have an effect on cash paid for taxes in the periods.

(5)

The amount for the nine months ended September 30, 2022 primarily includes a gain related to certain of Hilton's investments in unconsolidated affiliates, which was recognized in other non-operating income, net. Amounts for the three and nine months ended September 30, 2021 include costs recognized for certain legal settlements, which were recognized in general and administrative expenses.

HILTON WORLDWIDE HOLDINGS INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

(unaudited, dollars in millions)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

Net income

$

346

 

 

$

240

 

 

$

924

 

 

$

259

 

Interest expense

 

106

 

 

 

98

 

 

 

295

 

 

 

302

 

Income tax expense

 

181

 

 

 

100

 

 

 

407

 

 

 

64

 

Depreciation and amortization expenses

 

39

 

 

 

46

 

 

 

123

 

 

 

143

 

EBITDA

 

672

 

 

 

484

 

 

 

1,749

 

 

 

768

 

Loss on sale of assets, net

 

?

 

 

 

8

 

 

 

?

 

 

 

8

 

Gain on foreign currency transactions

 

?

 

 

 

?

 

 

 

(4

)

 

 

(1

)

Loss on debt extinguishment

 

?

 

 

 

?

 

 

 

?

 

 

 

69

 

FF&E replacement reserves

 

13

 

 

 

15

 

 

 

40

 

 

 

30

 

Share-based compensation expense

 

42

 

 

 

52

 

 

 

126

 

 

 

144

 

Amortization of contract acquisition costs

 

10

 

 

 

9

 

 

 

28

 

 

 

23

 

Net other expenses (revenues) from managed and franchised properties

 

(7

)

 

 

(62

)

 

 

(73

)

 

 

57

 

Other adjustments(1)

 

2

 

 

 

13

 

 

 

(7

)

 

 

19

 

Adjusted EBITDA

$

732

 

 

$

519

 

 

$

1,859

 

 

$

1,117

 

____________
(1)

Amount for the nine months ended September 30, 2022 primarily includes a gain related to certain of Hilton's investments in unconsolidated affiliates. Amounts for the three and nine months ended September 30, 2021 include costs recognized for certain legal settlements. All periods include severance and other items.

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

Total revenues, as reported

$

2,368

 

 

$

1,749

 

 

$

6,329

 

 

$

3,952

 

Add: amortization of contract acquisition costs

 

10

 

 

 

9

 

 

 

28

 

 

 

23

 

Less: other revenues from managed and franchised properties

 

(1,344

)

 

 

(1,006

)

 

 

(3,662

)

 

 

(2,282

)

Total revenues, as adjusted

$

1,034

 

 

$

752

 

 

$

2,695

 

 

$

1,693

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

732

 

 

$

519

 

 

$

1,859

 

 

$

1,117

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

70.8

%

 

 

69.0

%

 

 

69.0

%

 

 

66.0

%

HILTON WORLDWIDE HOLDINGS INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO

(unaudited, dollars in millions)

 

 

September 30,

 

December 31,

 

2022

 

2021

Long-term debt, including current maturities

$

8,731

 

 

$

8,766

 

Add: unamortized deferred financing costs and discount

 

77

 

 

 

87

 

Long-term debt, including current maturities and excluding the deduction for unamortized deferred financing costs and discount

 

8,808

 

 

 

8,853

 

Less: cash and cash equivalents

 

(1,282

)

 

 

(1,427

)

Less: restricted cash and cash equivalents

 

(80

)

 

 

(85

)

Net debt

$

7,446

 

 

$

7,341

 

 

Nine Months Ended

 

Year Ended

 

TTM Ended

 

September 30,

 

December 31,

 

September 30,

 

2022

 

2021

 

2021

 

2022

Net income

$

924

 

 

$

259

 

 

$

407

 

$

1,072

 

Interest expense

 

295

 

 

 

302

 

 

 

397

 

 

390

 

Income tax expense

 

407

 

 

 

64

 

 

 

153

 

 

496

 

Depreciation and amortization expenses

 

123

 

 

 

143

 

 

 

188

 

 

168

 

EBITDA

 

1,749

 

 

 

768

 

 

 

1,145

 

 

2,126

 

Loss on sales of assets, net

 

?

 

 

 

8

 

 

 

7

 

 

(1

)

Loss (gain) on foreign currency transactions

 

(4

)

 

 

(1

)

 

 

7

 

 

4

 

Loss on debt extinguishment

 

?

 

 

 

69

 

 

 

69

 

 

?

 

FF&E replacement reserves

 

40

 

 

 

30

 

 

 

48

 

 

58

 

Share-based compensation expense

 

126

 

 

 

144

 

 

 

193

 

 

175

 

Amortization of contract acquisition costs

 

28

 

 

 

23

 

 

 

32

 

 

37

 

Net other expenses (revenues) from managed and franchised properties

 

(73

)

 

 

57

 

 

 

110

 

 

(20

)

Other adjustments(1)

 

(7

)

 

 

19

 

 

 

18

 

 

(8

)

Adjusted EBITDA

$

1,859

 

 

$

1,117

 

 

$

1,629

 

$

2,371

 

 

 

 

 

 

 

 

 

Net debt

 

 

 

 

 

 

$

7,446

 

 

 

 

 

 

 

 

 

Net debt to Adjusted EBITDA ratio

 

 

 

 

 

 

 

3.1

 

____________
(1)

Amounts for all periods include severance and other items. Amount for the nine months ended September 30, 2022 also includes a gain related to certain of Hilton's investments in unconsolidated affiliates. Amounts for the nine months ended September 30, 2021 and year ended December 31, 2021 also include costs recognized for certain legal settlements.

HILTON WORLDWIDE HOLDINGS INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

OUTLOOK: NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS

(unaudited, in millions, except per share data)

 

 

Three Months Ending

 

December 31, 2022

 

Low Case

 

High Case

Net income attributable to Hilton stockholders

$

295

 

 

$

316

 

Diluted EPS(1)

$

1.08

 

 

$

1.15

 

Special items(2):

 

 

 

Purchase accounting amortization

$

11

 

 

$

11

 

FF&E replacement reserves

 

15

 

 

 

15

 

Total special items before taxes

 

26

 

 

 

26

 

Income tax expense on special items

 

(6

)

 

 

(6

)

Total special items after taxes

$

20

 

 

$

20

 

 

 

 

 

Net income, adjusted for special items

$

315

 

 

$

336

 

Diluted EPS, adjusted for special items(1)

$

1.15

 

 

$

1.23

 

 

 

Year Ending

 

December 31, 2022

 

Low Case

 

High Case

Net income attributable to Hilton stockholders

$

1,222

 

 

$

1,243

 

Diluted EPS(1)

$

4.40

 

 

$

4.48

 

Special items(2):

 

 

 

Net other revenues from managed and franchised properties

$

(73

)

 

$

(73

)

Purchase accounting amortization

 

45

 

 

 

45

 

FF&E replacement reserves

 

55

 

 

 

55

 

Other adjustment items

 

(9

)

 

 

(9

)

Total special items before taxes

 

18

 

 

 

18

 

Income tax expense on special items

 

(2

)

 

 

(2

)

Total special items after taxes

$

16

 

 

$

16

 

 

 

 

 

Net income, adjusted for special items

$

1,238

 

 

$

1,259

 

Diluted EPS, adjusted for special items(1)

$

4.46

 

 

$

4.54

 

____________

(1) Does not include the effect of potential share repurchases.

(2) See "?Net Income and Diluted EPS, Adjusted for Special Items" for details of these special items.

HILTON WORLDWIDE HOLDINGS INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

OUTLOOK: ADJUSTED EBITDA

(unaudited, in millions)

 

 

Three Months Ending

 

December 31, 2022

 

Low Case

 

High Case

Net income

$

295

 

 

$

316

 

Interest expense

 

116

 

 

 

116

 

Income tax expense

 

126

 

 

 

135

 

Depreciation and amortization expenses

 

40

 

 

 

40

 

EBITDA

 

577

 

 

 

607

 

FF&E replacement reserves

 

15

 

 

 

15

 

Share-based compensation expense

 

32

 

 

 

32

 

Amortization of contract acquisition costs

 

12

 

 

 

12

 

Other adjustments(1)

 

5

 

 

 

5

 

Adjusted EBITDA

$

641

 

 

$

671

 

 

 

Year Ending

 

December 31, 2022

 

Low Case

 

High Case

Net income

$

1,219

 

 

$

1,240

 

Interest expense

 

411

 

 

 

411

 

Income tax expense

 

533

 

 

 

542

 

Depreciation and amortization expenses

 

163

 

 

 

163

 

EBITDA

 

2,326

 

 

 

2,356

 

Gain on foreign currency transactions

 

(4

)

 

 

(4

)

FF&E replacement reserves

 

55

 

 

 

55

 

Share-based compensation expense

 

158

 

 

 

158

 

Amortization of contract acquisition costs

 

40

 

 

 

40

 

Net other revenues from managed and franchised properties

 

(73

)

 

 

(73

)

Other adjustments(1)

 

(2

)

 

 

(2

)

Adjusted EBITDA

$

2,500

 

 

$

2,530

 

____________

(1) Includes adjustments for severance and other items. See "?Adjusted EBITDA and Adjusted EBITDA Margin" for details of these adjustments.

HILTON WORLDWIDE HOLDINGS INC.
DEFINITIONS

Trailing Twelve Month Financial Information

This press release includes certain unaudited financial information for the trailing twelve months ("TTM") ended September 30, 2022, which is calculated as the nine months ended September 30, 2022 plus the year ended December 31, 2021 less the nine months ended September 30, 2021. This presentation is not in accordance with GAAP. However, the Company believes that this presentation provides useful information to investors regarding its recent financial performance, and it views this presentation of the four most recently completed fiscal quarters as a key measurement period for investors to assess its historical results. In addition, the Company's management uses TTM information to evaluate the Company's financial performance for ongoing planning purposes.

The pandemic had an adverse impact on certain of the Company's results for the TTM period ended September 30, 2022 when compared to periods prior to the onset of the pandemic. While the Company has experienced strong signs of economic recovery since early 2021, this TTM period, as well as upcoming periods, are not considered comparable, and no periods affected by the pandemic are expected to be comparable to future periods. As such, TTM information may not be useful for projecting future operating results.

Net Income (Loss), Adjusted for Special Items, and Diluted EPS, Adjusted for Special Items

Net income (loss), adjusted for special items, and diluted earnings (loss) per share ("EPS"), adjusted for special items, are not recognized terms under GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. In addition, the Company's definition of net income (loss), adjusted for special items, and diluted EPS, adjusted for special items, may not be comparable to similarly titled measures of other companies.

Net income (loss), adjusted for special items, and diluted EPS, adjusted for special items, are included to assist investors in performing meaningful comparisons of past, present and future operating results and as a means of highlighting the results of the Company's ongoing operations.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA, presented herein, reflects net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization expenses. Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses, revenues and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings and retirements; (iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (v) share-based compensation; (vi) reorganization, severance, relocation and other expenses; (vii) non-cash impairment; (viii) amortization of contract acquisition costs; (ix) the net effect of reimbursable costs included in other revenues and other expenses from managed and franchised properties; and (x) other items.

Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues, adjusted to exclude the amortization of contract acquisition costs and other revenues from managed and franchised properties.

The Company believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors about the Company's financial condition and results of operations for the following reasons: (i) these measures are among the measures used by the Company's management team to evaluate its operating performance and make day-to-day operating decisions and (ii) these measures are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in the industry. Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within the Company's industry. For instance, interest expense and income taxes are dependent on company specifics, including, among other things, capital structure and operating jurisdictions, respectively, and, therefore, could vary significantly across companies. Depreciation and amortization expenses, as well as amortization of contract acquisition costs, are dependent upon company policies, including the method of acquiring and depreciating assets and the useful lives that are used for accounting purposes. For Adjusted EBITDA, the Company also excludes items such as: (i) FF&E replacement reserves for leased hotels to be consistent with the treatment of capital expenditures for property and equipment, where depreciation of such capitalized assets is reported within depreciation and amortization expenses; (ii) share-based compensation, as this could vary widely among companies due to the different plans in place and the usage of them; (iii) the net effect of the Company's cost reimbursement revenues and reimbursed expenses, as the Company contractually does not operate the related programs to generate a profit over the terms of the respective contracts; and (iv) other items, such as amounts related to debt restructurings and debt retirements and reorganization and related severance costs, that are not core to the Company's operations and are not reflective of the Company's operating performance.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered as alternatives, either in isolation or as a substitute, for net income (loss) or other measures of financial performance or liquidity, including cash flows, derived in accordance with GAAP. Further, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, may not be comparable to similarly titled measures of other companies and should not be considered as other methods of analyzing the Company's results as reported under GAAP.

Net Debt and Net Debt to Adjusted EBITDA Ratio

Net debt and net debt to Adjusted EBITDA ratio, presented herein, are non-GAAP financial measures that the Company uses to evaluate its financial leverage. Net debt is calculated as: long-term debt, including current maturities and excluding the deduction for unamortized deferred financing costs and discount; reduced by: (i) cash and cash equivalents and (ii) restricted cash and cash equivalents. Beginning as of March 31, 2022, the Company has modified its definition of net debt to no longer include Hilton's share of unconsolidated affiliate debt. Since this debt is not consolidated by the Company, the modified definition more accurately reflects how the Company and the Company's investors evaluate Hilton's financial leverage, as well as its indebtedness.

Net debt should not be considered as a substitute to debt presented in accordance with GAAP, and net debt to Adjusted EBITDA ratio should not be considered as an alternative to measures of financial condition derived in accordance with GAAP. Net debt and net debt to Adjusted EBITDA ratio may not be comparable to similarly titled measures of other companies. The Company believes net debt and net debt to Adjusted EBITDA ratio provide useful information about its indebtedness to investors as they are frequently used by securities analysts, investors and other interested parties to compare the indebtedness between companies.

Comparable Hotels

The Company defines comparable hotels as those that: (i) were active and operating in the Company's system for at least one full calendar year as of the end of the current period, and open January 1st of the previous year; (ii) have not undergone a change in brand or ownership type during the current or comparable periods reported; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results were not available. Of the 6,988 hotels in the Company's system as of September 30, 2022, 5,847 hotels were classified as comparable hotels. The 1,141 non-comparable hotels included 260 hotels, or less than four percent of the total hotels in the Company's system, that were removed from the comparable group during the last twelve months because they have sustained substantial property damage, business interruption, undergone large-scale capital projects or comparable results were otherwise not available.

When considering business interruption in the context of the Company's definition of comparable hotels, no hotel that had completely or partially suspended operations on a temporary basis at any time as a result of the pandemic was excluded from the definition of comparable hotels on that basis alone. Despite these temporary suspensions of hotel operations, the Company believes that including these hotels within the hotel operating statistics of occupancy, average daily rate ("ADR") and revenue per available room ("RevPAR"), if they would have otherwise been included, reflects the underlying results of the business for the three and nine months ended September 30, 2022 and 2021.

Occupancy

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels for a given period. Occupancy measures the utilization of the hotels' available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable ADR pricing levels as demand for hotel rooms increases or decreases.

ADR

ADR represents hotel room revenue divided by the total number of room nights sold for a given period. ADR measures the average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and management uses ADR to assess pricing levels that the Company is able to generate by type of customer, as changes in rates charged to customers have different effects on overall revenues and incremental profitability than changes in occupancy, as described above.

RevPAR

RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of the Company's performance as it provides a metric correlated to two primary and key drivers of operations at a hotel or group of hotels, as previously described: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.

References to occupancy, ADR and RevPAR throughout this press release are presented on a comparable basis, based on the comparable hotels as of September 30, 2022, and references to ADR and RevPAR are presented on a currency neutral basis, unless otherwise noted. As such, comparisons of these hotel operating statistics for the three and nine months ended September 30, 2022 and 2021 or 2019, use the foreign currency exchange rates used to translate the results of the Company's foreign operations within its unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, respectively.


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