MCLEAN, VA (October 28, 2015) - Hilton Worldwide Holdings Inc. ("Hilton," "Hilton Worldwide" or the "Company") (NYSE: HLT) today reported its third quarter 2015 results.
Highlights include:
• EPS, adjusted for special items, for the third quarter was $0.23, a 28 percent increase from the same period in 2014; without adjustments, EPS was $0.28
• Net income attributable to Hilton stockholders for the third quarter was $279 million, an increase of $96 million from the same period in 2014
• Adjusted EBITDA for the third quarter increased 13 percent from the same period in 2014 to $758 million, and Adjusted EBITDA margin increased 290 basis points
• System-wide comparable RevPAR increased 5.8 percent for the third quarter on a currency neutral basis from the same period in 2014 • Management and franchise fees for the third quarter increased 14 percent from the same period in 2014 to $438 million
• Net unit growth was 13,000 rooms in the third quarter, a 16 percent increase from the same period in 2014
• Approved 26,000 new rooms for development during the third quarter, a 29 percent increase from the same period in 2014, growing Hilton's development pipeline to 1,555 hotels, consisting of 260,000 rooms
• Reduced long-term debt by $350 million during the third quarter; additional $100 million prepayment on senior secured loan facility borrowings in October 2015, for a total reduction of $850 million year-to-date through October 2015
• Increased outlook for full year Adjusted EBITDA to between $2,840 million and $2,870 million, an increase of $10 million at the midpoint
• Full year 2016 RevPAR expected to increase between 4.0 percent and 6.0 percent and net unit growth expected to be 45,000 rooms to 50,000 rooms.
Overview
For the three months ended September 30, 2015, earnings per share ("EPS") was $0.28 compared to $0.19 for the three months ended September 30, 2014, and EPS, adjusted for special items, was $0.23 for the three months ended September 30, 2015 compared to $0.18 for the three months ended September 30, 2014.
Adjusted EBITDA increased 13 percent to $758 million for the three months ended September 30, 2015, compared to $669 million for the three months ended September 30, 2014, and net income attributable to Hilton stockholders was $279 million for the three months ended September 30, 2015 compared to $183 million for the three months ended September 30, 2014.
For the nine months ended September 30, 2015, EPS was $0.60 compared to $0.52 for the nine months ended September 30, 2014, and EPS, adjusted for special items, was $0.60 for the nine months ended September 30, 2015 compared to $0.53 for the nine months ended September 30, 2014. Adjusted EBITDA increased 15 percent to $2,134 million for the nine months ended September 30, 2015, compared to $1,851 million for the nine months ended September 30, 2014, and net income attributable to Hilton stockholders was $590 million for the nine months ended September 30, 2015 compared to $515 million for the nine months ended September 30, 2014.
Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We had yet another strong quarter with Adjusted EBITDA exceeding the high end of guidance. The fundamentals of our business remain strong, particularly in the United States, where demand growth continues to exceed historically low levels of supply.
New supply disproportionately favors our brands given the leading economic returns they deliver for hotel owners, resulting in accelerating net unit growth for our system."
Segment Highlights
Management and Franchise
Management and franchise fees were $438 million in the third quarter of 2015, an increase of 14 percent compared to the same period in 2014. RevPAR at comparable managed and franchised hotels in the third quarter of 2015 increased 5.8 percent on a currency neutral basis (a 3.7 percent increase in actual dollars) compared to the same period in 2014. The increase in RevPAR at comparable managed and franchised hotels and addition of new units have yielded continued strong fee growth during the third quarter of 2015.
Ownership
Revenues from the ownership segment were $1,089 million in the third quarter of 2015, and ownership segment Adjusted EBITDA was $281 million, an increase of 10 percent(1) from the same period in 2014. Adjusted EBITDA margin(2) increased 186 basis points(1). RevPAR at comparable hotels in the ownership segment increased 6.0 percent on a currency neutral basis (a 0.4 percent increase in actual dollars) in the third quarter of 2015 compared to the same period in 2014.
(1) Excluding $7 million of Adjusted EBITDA and $22 million of revenues in the third quarter of 2014 related to the Hilton Sydney.
(2) Calculated as ownership segment Adjusted EBITDA divided by ownership segment revenues.
Timeshare
Timeshare segment revenues for the third quarter of 2015 were $334 million, an increase of 13 percent from the same period in 2014, and timeshare Adjusted EBITDA was $99 million, an increase of 24 percent. Overall timeshare sales volume increased 19 percent in the third quarter of 2015, compared to the same period in 2014, driven by increased tour flow of nearly 12 percent and increased net volume per guest of over 6 percent. Commissions recognized from the sale of third-party developed timeshare intervals increased $42 million during the third quarter of 2015 from the same period in 2014, resulting from higher sales volume, and sales revenue on owned inventory decreased $11 million.
During the three and nine months ended September 30, 2015, 62 percent and 66 percent of intervals sold were developed by third parties, respectively. Hilton Worldwide's overall supply of timeshare intervals as of September 30, 2015 was approximately 131,000 intervals, or about six years of sales at current pace, of which 109,000, or 83 percent, were developed by third parties.
Development
Hilton Worldwide opened 91 hotels and achieved net unit growth of 13,000 rooms during the third quarter of 2015, over 25 percent of which were conversions from non-Hilton brands, making Hilton the largest global hotel company(3) as of September 30, 2015. As of September 30, 2015, Hilton Worldwide had the largest rooms pipeline in the lodging industry(4), with approximately 260,000 rooms at 1,555 hotels throughout 85 countries and territories, including 33 countries and territories where Hilton Worldwide does not currently have any open hotels. Approximately 136,000 rooms, or 53 percent of the pipeline, were located outside of the United States.
All of the development pipeline is in the capital light management and franchise segment, and over half, or approximately 130,000 rooms, were under construction. At over 19 percent, Hilton Worldwide also has the largest share of rooms under construction globally(4). Including all agreements approved but not signed, Hilton Worldwide's pipeline totaled approximately 270,000 rooms.
(3) Source: Smith Travel Research, Inc. ("STR") Global Census, October 2014 (adjusted to September 2015).
(4) Source: STR Global New Development Pipeline (September 2015).
Balance Sheet and Liquidity
During the third quarter of 2015, Hilton made prepayments of $350 million on its senior secured term loan facility, using the net proceeds from the sale of the Hilton Sydney. In October 2015, Hilton made an additional $100 million prepayment on its senior secured term loan facility. As of September 30, 2015, Hilton had $10.1 billion of outstanding indebtedness with a weighted average interest rate of 4.2 percent, excluding $755 million of non-recourse debt.
Total cash and cash equivalents were $904 million as of September 30, 2015, including $276 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of September 30, 2015.
In September 2015, Hilton Worldwide paid its first quarterly cash dividend of $0.07 per share on shares of its common stock, for a total of $69 million.
Outlook
Full Year 2015 • System-wide RevPAR is expected to increase between 5.0 percent and 6.5 percent on a comparable and currency neutral basis, with ownership segment RevPAR expected to increase between 4.0 percent and 6.0 percent on a comparable and currency neutral basis, as compared to 2014. • Adjusted EBITDA is projected to be between $2,840 million and $2,870 million, an increase of $10 million at the midpoint.
• Management and franchise fees are projected to increase approximately 12 percent to 14 percent.
• Timeshare segment Adjusted EBITDA is projected to be between $335 million and $350 million.
• Corporate expense and other is projected to be flat to moderately down compared to prior year.
• Diluted EPS, adjusted for special items, is projected to be between $0.81 and $0.83.
• Capital expenditures, excluding timeshare inventory, are expected to be between $375 million and $400 million. • Net unit growth is expected to be approximately 40,000 rooms to 45,000 rooms. 4 Fourth Quarter 2015
• System-wide RevPAR is expected to increase between 4.0 percent and 6.0 percent on a comparable and currency neutral basis compared to the fourth quarter of 2014, with U.S. RevPAR growth consistent to modestly better than the third quarter, and international RevPAR growth meaningfully lower due to tougher comparisons.
• Adjusted EBITDA is expected to be between $706 million and $736 million.
• Management and franchise fees are expected to increase approximately 5 percent to 7 percent. • Diluted EPS, adjusted for special items, is projected to be between $0.21 and $0.23.
Full Year 2016 For 2016, system-wide RevPAR is expected to increase between 4.0 percent and 6.0 percent on a comparable and currency neutral basis compared to 2015.
